No. 91-112 IN THE SUPREME COURT OF THE STATE OF MONTANA 1991

EDWARD L. OLSON, 

# . -.

-vsJACOBA. Plaintiff

PARCHEN,

Defendant and

and

APPEAL FROM: District Court of the Eighth Judicial District, In and for the County of Cascade, The Honorable Joel G. Roth, Judgepresiding.

COUNSEL OF RECORD: ForAppellant: Philip J. OtConnell:Thueson Law Office, Helena, Montana. For Respondent: Lon T. Holden: Jardine, Stephenson, Blewett & Weaver, Great Falls,Montana.

Filed: Submitted on Briefs: June 6, 1991 Decided: August 1, 1991

ClerkJustice Karla M. Gray delivered the Opinion of the Court.

Edward L. Olson appeals from a judgment of the District Court of the Eighth Judicial District, Cascade County, Montana, denying his xotion for summary judgment on the issue of liability and granting Parchen's motion to exclude evidence of certain economic damages suffered in an automobile collision. Olson also appeals from the jury verdict finding him contributorily negligent. We affirm in part and reverse in part. Olson presents the following issues: 1. Did the District Court err in denying Olson's motion for summary judgment on the issue of liability? 2. Did the District Court abuse its discretion by allo7hing the issue of contributory negligence to be submitted to tne jury?3. Did the District Courtproperly refuse topermit.Olson to present evidence at trial of economic damages relating to loss of rental income and loss of profits from the sales of rental property? On November 14, 1985, at approximately 4:15 p.m., vehicles operated by Edward L. Olson and Jacob A. Parchen collided at the intersection of First Avenue South and 18th Street in Great Falls, Montana. Olson was proceeding south on 18th Street as he approached the intersection, and Parchen was proceeding east on FirstAvenue South. Parchen failed to heed the yield right of way sign, and his 1977 GMC pickup truck collided with Olson's 1964Chevrolet Corvair on the passenger side. Both drivers stated that they were traveling at fifteen miles per hour Olson testified that a fewmoments prior to the collision he observed Parchen's vehicle approaching from the right,but thought that Parchen was goinq to stop. Olson looked to the left for traffic. When he glanced back to the right and realized that Parchen'spickup truck was not going to stop, Olson attempted to brake and turn to the left to avoid a collision, but was unsuccessful. Parchen said that he did not see Olson's car until it had entered the intersection moments before the collision. He applied his brakes,but his pickup truck skidded. Parchen also theorized that Olson had been blinded by the setting sun and didn't see him approaching the intersection. Parchenasserted that Olson did not properly watch for traffic and should have been traveling slowly enough to stop. The collision extensively damaged the right side of Olson's Corvair. Olson suffered a bruise over the right collar bone, broken upper dentures,abruise on the right sideof the scalp,and

a deep bruise over the outside of his right foot. Olson also clained economic losses resulting from his alleged inabiLity to complete rental property renovationsbecause of physical injuries sustained in the collision. Olson moved for partial summary judgment on the issue of liability. The District Court denied that motion, as well asOlson's subsequent motions for a directed verdict at the close of the evidence and fcr judgment notwithstanding the verdict. The District Court granted Parchen's motion in iimi~erc exclude econonicdamgesfor lossesassociated with Olson's rentalproperty from the jury's consideration. The District Court denied Olson's motion for a new trial to consider econoaic damages. The jury found that Parchenwas eighty per cent negligent and had proximately caused Olson's damages and injuries. Two thousand dollars in damages were awarded, of which Olson received $1,600.

Did the District Court err in denying Olson's motion for sumn.ary judgment on the issue of liability? Olson claims that partial summary judgment should have been granted as a matter of law. When approaching a "yield" sign, the follo.wing rule appliss:

[Tlhe driver of a vehicle approaching the "Yield" sign shall slow to a speed of not more than 15miles per hour and yield right-of-way to all vehicles approaching from the right or left on the intersecting roads or streets which are so close as to constitutean immediate hazard. If a driver is involved ina collisionat an intersection or interferes with the movement of other vehicles after driving past a "Yield" sign, such collision cr interference shall be deemed evidence of the driver's failure to yield right-of-way. Section 61-8-342,MCA. A driver's failure to yield the riqht-ofway is both a "statutorily recognized duty and breach of that duty." DeTJernierov. Eby (1972), 159 Mont. 146, 151,496p.2d 290,

Parchen adnitted that he failed to yield the right-of--da:; toOlson's vehicle, but argued that he was unable to stop beca~se kis l~ehkle skidded, Parchen also conjecturedthatOlsoraayha-,;ebeen unable to see Parchen'spicku? truck because hewas blinded by the sun. This argument is irrelevant because Parchen, not Oiscn, had

a duty to yield. In addition, the skidding of Parchen's vehicle is not a defense; it suggests only that Parchen may have been driving too fast for conditions. As a matter of law, Parchen ,'$as negligent under 4 61-8-342,MCA. Nonetheless, Parchen maintains that the District Court properly denied Olson partial summary judgment accordi.ng to our holding in Reed v. Little (1984),209 Mont. 199,680 P.2d 937. He contends that

# m requires the issue of liability to be submi.tted to the jury if the defense of contributory negligence is asserted in a traffic violation case. The facts of this case can be distinguished from the facts forming the basis for ourholding in

### Reed. In

# m,the defendant ran into the plaintiff's car when the plaintiff allegedly made a suddenstop inheavy traffic for no apparent reason. Theplaintiff denied the sudden stop. Questions of fact regarding the speed and distances of the vehicles remained for the jury's deterxination. 

### Reed, 209 Mont. at 206, 680 P.2d at 940-41. As explained in our discussion below, under the facts of this case Olson could not be found contributorily negligent. Suniaary judgment is appropriate where no genuine issue of material fact exists and the moving party is entitled to judgxentas a matter of law. Rule 56(c), M.R.Civ.P.; First Security Bank of Bozeman v. Jones (1990),243 Mont. 301, 3C3, 734 P.22 679, 681. Since Parchenwas negligent as amatter of law, the court erred by denying partial summary judgment to Olson. I

I Did the District Court abuse its discretion by allowing the issue of contributory negligence to be submitted to the jury? Before the question of contributory negligence can be submitted to the jury, evidence must be presented not only showing plaintiff's negligence, but demonstrating that such negligence proximately caused the accident and resulting injuries. Stephens

v. Brown (1972), 160 Mont. 453, 457-58, 503 P.2d 667,669. No such factual evidence showing contributory negligence existed in this

case.Parchen argues that Olson violated the "basic rule" of 5 61- 8-303, MCA, by not properly watching for Parchen'svehicle at the intersection. Section 61-8-303 is entitled "Speed restrictiocs

## -

- basic rule" and provides in part that a driver shall drive "in a careful and prudent manner, and at a rate of speed no greater than is reasonable and proper under the conditions. 

## . . 

## ." According to the evidence, at the time of the collision Olson was traveling in a safe manner well below the speed limit. In Deb'erniero, the defendant alleged that because plaintiff did notproperlywatch fortheothervehicle,hewas contributorily negligent. We held that even though the plaintiff may have failedto Look,his failure to observe defendant approaching was not the proxinate cause of the accident: "Yad plaintiff looked it would not have affected defendant's driving or speed. Defendant testified that henever saw plaintiff till defenda~t waswithir.100 feet of the intersection. Unless plaintiff had been able to cast soine hypnotic spell over defendant his looking earlier would have had no effect on the collision." DeVerniero, 159 Mont. at 154, 496 P.2d at 294 (quoting Bates v. Burns (Utah1955), 281 P.2d 209, 213). Theproximate cause of the collision was defendant's breach of his duty to yield right-ofway. Plaintiff could not be contributorily negligent when his actionswere not theproximate cause of the accident. CeVerniero, 159 Mont. at 154, 496 P.2d at 294. The case before us is even clearer than DeVerniero on the issue of contributory negligence because Olson did not violate the basic rule. Parchen,on the otherhand,did breach the basic rule by failing to watch for traffic and by failing to drive at a speed allowing him to stop his vehicle in time to avoid the collision. According to Parchen, he did not see Olson's car in the intersection until moments before the collision. Olson said that he saw Parchen's pickup truck, but thought Parchen was going to stop and looked away momentarily. A driver of avehicle traveling

cn a street protected by a "yield" sign has a right to rely upcn the complianceof thedriver of avehiclewhichmust yield wit;?the yield right-of-way statutes. Olson cannot be contributorily negligent because his alleged failure to see Parchen's vehicle entering the intersection was not the proximate cause of thecollision. Since the questionof contributory negliqence should not have been subnitted to the jury, we reverse the jury's finding that olson was twenty per cent negligent and remand to the District Court for entry of judgment accordingly. I11 Did the District Court properly refuse to permit Olscn to present evidence at trial of economic damages relating to loss of rental income and loss of profits from the sales of rental property? Olson asserts that the District Court abused its discretion in refusing to admit evidence of certain economic losses on the ground that they were speculative. Tort damages are allowed "for all the detriment proximately caused" by the breach "whether [the detriment] could have been anticipated or not." Section 27-1-317, MCA. Although damages need not be proved with precision,daaaqes which are a matter of mere speculation cannot be the basis of recovery. Bottrell v. American Bank (1989), 237 Mont. 1, 22-23, 773 P.2d 694, 707-706. Thus,damages for lostprofits may be awarded if such loss is shown to be the "natural and direct result of the act of the defendant" and if the loss isnot speculative. Hostetterv. Donlar

(1?86), 221Hont. 380, 382, 719 P.2d 1243, 1245 (citing Cruse v. Clawson (1960), 137 Mont. 439, 448, 352 P.2d 989, 994). The prohibition against speculativeprofits does not necessarily applyto uncertainty about the amount of such profits, but applies tc uncertainty about "whether the loss of profits is the resxlt cf tbexrong and whether such profitwould have been derived at all." Stensvadv. Miners and Merchants Bank ofRoundup (1982), 196Mont. 193, 206, 640 P.2d 1303, 1310, cert. denied, 459 C.S. 831, iO2 S.Ct. 69, 74 L.Ed.2d 69;Hostetter, 221 Mont. at 382-83, 719 P.24 at 1245. Olson did not complete renovations on two rental buildings; they remained unoccupied for two years until he sold the properties. Olsonmaintained that alleged losses of rental income and alleged losses suffered when the rental properties xere sold were attributable to his physical inability, caused by injuries suffered in the collision, to complete renovation of the properties. Less than two per cent of the necessary renovations to the rental properties were finished prior to the collision in which Olson was injured. During part of the time that the rental proprties sat empty, Olson worked for Boeing Company as an electrician. All of the theories underlying Olson's damage claims for loss of rents and profits are speculative. Olson could show only that he intended to restore theproperties,thathemight have been able to rent the restored properties, and that he night have garnered greater profits on the sale of the restored rental properties. We agree with the District Court that a question arises in Olscn's

case about "whether such profitwould have been derived at all" andthat theprofitsOlson claine" he mould have made arespeculative. 

### (z~~~+' -Aor- .a sfadxissibilityof evidence areleftlargelytothe Eiscretion of the trial court. Zuqq v. Ramaqe (l989), 239 Xont. 292, 296, 779 P.2d 913, 915. The District Court didnot abuse its discretion in excluding evidence of losz profits as speculati~ie. The District Court shall enterjudqnent for the plaintiff in thetotala~.ount of $2,000, and thejudgment isotherwise affi.rmed.

Weconcur: 

## AJustice Terry N. Trieweiler concurring in part and dissenting in part.I concur with that part of the majority's opinion which relates to issues one and two; holds that plaintiff was entitled to judgment as amatter of law on the issue of liability,andholds that there was no evidence to support a finding of contributory negligence on the part of the plaintiff. I dissent from that part of the majority's opinion which affirms the District Court's refusal to permit the plaintiff to present evidence at trial of economic damage resulting from the loss of rental income and lost profits. The majority cavalierly dismissed Olson's damage claim with the following conclusion: All of the theoriesunderlying Olson's damage claims for loss of rents and profits are speculative. Olson could show only that he intended to restore the properties, that he might have been able to rent the restored properties, and that he might have garnered greater profits on the sale of the restored rental properties. We agree with the District Court that a question arises in Olson's case about "whether such profit would have been derived at allwand that the profits Olson claimed he would have made are speculative. To fully understand how inaccurate the majority's treatment of this issue is, it is necessary to set forth in full the complete text of the evidence plaintiff offered to present, had he been allowed to do so.In a written offer of proof filed with the District Court prior to trial, plaintiff offered to prove the following facts through the followingwitnesses: 1. Edward L. Olson will testify that before the automobile accident,hemade a livingby purchasing rundown homes and apartments,renovating the same, renting the homes and apartments and selling the renovated buildings at aprofit. Olson will testify that he performed virtually all of the renovation work himself, including: carpentry, plumbing, electrical, heating, plastering and painting. 

### By performing the renovations himself,Olson was able to earn a substantialprofit by addingvalue to the homes and apartments. 2. Olsonwill testify that before theNovember 14,1985 automobile accident, he owned theAlcoy Apartments located on 18thStreetand a singlefamilyresidence located at 2526 First Avenue South. Olson will testify that in October, 1985, he gutted the interior of ApartmentNo. 5 in theAlcoy Apartments and the home at 2526 First Avenue South. Olson intended to completely renovateApartmentNo. 5 and the single family home during the winter of 1985

# - 1986. He intended to relet the apartment and home in April, 1986 when the renovations had been completed. 3. Olson will testify that he anticipated charging a rent of $185 per month for Apartment No. 5 in the Alcoy aftertherenovationswere completed. Hewill testify that he anticipated charging a rent of at least $375 per month for the single family home. 4. Olson will testify that as a result of the automobile accident, he was physically unable to complete the renovations to the two rental units. He will testify that he and his physician, Dr. James D. Hinde, expected that hewould recover from the injuries suffered in the automobile accident within three to six months after the accident. However, he found that when he attempted to return to work, he suffered prolonged, debilitating pain andmuscle spasmswhen he attempted to do the heavy lifting involved in the renovations.5. Olson will testify that for more than two years following the accident, he expected that he would fully recover from his injuries and be able to complete the renovations and rent Apartment No. 5 in the Alcoy and the home at 2526 First Avenue South. His treating physician will also testify that he expected that [sic] Olson to recover from his injuries. However,by December,1987,itbecame clearto Olson and Dr. Hinde that Olsonwould likely continuetosufferfromchronic myofascialpain into the indefinite future. Accordingly, Olson decided that he would likely never be able to complete the renovations throughhis own efforts. Olson soldthe rental units at the first opportunity, in the early spring of 1988. 6. Olsonwill testify thathe soldtheAlcoyApartments toRick Sowers inApril, 1988 for $110,000. At the time of the sale, Apartment No. 5 was gutted, untenantable, and earning no income. The sales price of the Alcoy was reduced accordingly. Olson believes that the sales price was reduced by approximately 10% of the potential value of the Alcoy, or $11,000. 7. Olson will testify that he sold the single family home at 2526 First Avenue South to Don Bisgard and Mike Holland inJune,1988 for $30,000. Olson will testify that if he had been able to complete the renovationson the home,hewould have been able to sell it for approximately $45,000. Additionally, a vacant building lot adjoining the home at 2526 FirstAvenue South was included in the $30,000 sale to Bisgard and Holland. Olson believes that he would have been able to sell the building lot separate from the home for a profit of between $8,000and $12,000. 8* Rick Sowers, the present owner of the Alcoy Apartments will also testify. Sowerswill testify that he also makes a living by buying older, run down homes, remodeling them and either renting or sellingthehomes foraprofit. Sowerswill testify that he is only able to make 

### a profit remodeling older homes if he does all of the work himself. Sowerswill testify that if he isunable tomake the renovations himself,he is likely to loose money on a project.Sowerswill testify that after purchasing theAlcoy Apartments from Ed Olson, he completed the renovationsonApartmentNo. 5. Sowerswill testify that he invested between 160 and 200 hours of his time and approximately $2,000into the renovations. Sowers will testify that after completing the renovations,he immediately rented Apartment No. 5 at a rental of $250per month. Since first renting the apartment,ithas never been vacant even though four separate tenants have lived in the apartment. Sowers will also testify that he paid $110,000to purchase the Alcoy Apartments from Ed Olson. He will testify that theAlcoy would clearlyhave been worth more money had the renovations to Apartment No. 5 been completed, since Apartment No. 5 would then have been generating income which would have improved thecash flowof thebuilding. Sowerswill testify that he believes he would have paid $8,000 to $10,000more for the Alcoy had Apartment No. 5 been fully renovated at the time he purchased it. Don Bisgard will testify at trial. Bisgard will testify that he purchased the single family residence at 2526 First Avenue South from Ed Olson inthespring of 1988ata cost of $30,000. Bisgard will testify thathe and his partner, Mike Holland, are also in the business of remodeling and selling older homes. Bisgard will also testify that he is only able to make a profit in the remodeling business by doing the work himself. Bisgard will testify thatafter spending $30,000topurchase the home at 2526 First Avenue South, he invested approximately $8,860 in materials, $3,200 in labor and approximately $2,900 in miscellaneous costs. Bisgard sold the home at 2526 First Avenue South after completing renovations for $41,900. Additionally,Bisgard split off the adjoining vacant lot and sold that lot separately after building a new house on the lot. Forhis accountingpurposes, Bisgardassigns avalue of $5,000 tothevacant lot, separate and apart from the value of the renovated house. The foregoing is abrief summary of the evidence to be offered at trial regarding the economic losses suffered by Ed Olson as a consequence of the November 14, 1985 automobile accident.Plaintiff was never given an opportunity to offer the above evidence. However, for purposes of our review, we must presume that he was capable of proving what he offered to prove. In that event, there was nothing speculative about his damages. In fact, the proof that he would have offered exceeded all of the prior requirements established by this Court for the proof of lost profits and economic damages. We held in Crusev.Clawson (1960), 137Mont. 439, 448, 352 P.2d 989,994,that: [I]n Montana the rule is that a person may recover for loss of profits where it is shown that such loss is the natural and direct result of the act of the defendant complained of and that such amount is certain and not speculative. Plaintiffsatisfied theCm~e requirementby offering toprove through his own testimony and the testimony of his physician that he was unable to complete the renovation of his rental properties due to the injuryhe sustained inhis collisionwith thedefendant. In 

### i/inionv.

### Wood

### Yard,Inc. (1988), 232 Mont. 110, 113, 755 P.2d 31, 34,we reaffirmed "[tlhat the owner of propertymay testify as to its value." In this case, therefore, plaintiff was qualified to testify to the value of his property, with and without the improvements that he would have made, but for his injury. The DistrictCourtabused itsdiscretionbydisallowingthattestimony. In 

### L%ziorz, we affirmed a verdict of damages for the plaintiff based solely upon his opinion testimony about the diminution invalue of his building which resulted from damage caused by the defendant, even though neither the plaintiff nor defendant's expertswere able to assess the impact of the structural damage on the value of the building. We held that: Wood Yard [defendant]admitted that itcaused the damages in this case. If it is reasonably certain that damages were sustained by the wrongful act or breach of the defendant, then reasonable damages rationally supported by the evidence will be upheld. Castillov. Frank (Mont. l984), 1213 Mont. 232,] 690 P.2d 425, 431, 41 St.Rep. 2071. %ion, 232 Mont. at 113, 775 P.2d at 34. In this case, theplaintiff offered specific opinion evidence regarding the diminution in the value of his building, due to his inability to complete the improvements he had started. He also offered qualified opinion evidence regarding the rental value of the property, had he been permitted to complete it. However, in addition to his own opinion, plaintiff went further than he was required to go by our previous case law when he offered the testimony of the people who purchased his rental properties to corroborate his own opinion testimony. Theproof in this casewas

=ore than was required by our previous decision in Cremerv. Cremer Rodeo Lnnd &Livestock Co. (1981)

## , 192 Mont. 208, 214, 627 P.2d 1199, 1202, where, when discussing proof of lost profits and rental proceeds, we held that: Recovery of damages will not be denied, even if the mathematical precision of the figure is challenged, provided the evidence is sufficient to afford areasonable basis for determining the specific amount awarded

## . Accord,Jacqueline's Washington,Inc.v.i2fercanhleStoresCo. (1972) 80 Wash.2d 784, 498 P.2d 870. 

### In Stensvad L. z%finers &.%firchants Bank (1982)

### , 196 Mont. 193, 206, 640 P.2d 1303, 1310,when discussing damages for lost profits,we held that: Damages for loss of profits may be awarded if not speculative. Silfiastv.Asplund (1935)' 99 Mont. 152, 161, 42 P.2d 452, 456. The rule that prohibits speculative profits does not apply to uncertainty as to the amount of such profits,but touncertainty or speculationas to whether the loss of profits is the result of the wrong and whether suchprofit would have been derived at all. Tri-TronIntern. v. Veko. (9th Cir. 1975), 525 F.2d 432, 437. Once liability is shown, that is the certainty that the damages are caused by the breach, then loss of profits on a reasonable basis for computation and the best evidence available under the circumstances will support a reasonably close estimate of the loss by a District Court. Smithv.Zepp (l977), 173 Mont. 358, 370, 567 P.2d 923, 930. But no damages are recoverable which are not clearlyascertainableboth innatureand origin,and only profits which are reasonably certain may be awarded. Smithv.FergruCo~mg~ (l934),98Mont. 377, 386, 39 P.2d 193, 195. The holding of the majority in this case is contrary to all precedent established by this Court during the past ten years for the proof of lost profits. The result of the majority's opinion is to create an impossible burden forany property ownerwho isput in the unfortunate position of having to prove the nature and extent of his damage when he is unable to maintain or improve his personal or real property, due to the negligence of another. As shown by the above offer of proof, there is nothing questionableabout plaintiff's ability to renthis propertyhad hecompleted its restoration. The subsequent owner did complete the restorationand immediatelyrented the property. Therewasnothing questionable about Olson's opinion that he would have sold the property for a greater profit had the improvements been completed. The purchaser of the property did complete the improvements and offered to testify that the propertyhad a greater value following the completion of those improvements. Istronglydisagreewith themajority's conclusionthat "[all1 of the theoriesunderlying Olson's damage claims for loss of rents and profits are speculative." There was absolutely nothing speculative about the evidence that plaintiff sought to present regardinghis loss of profits and business income. For these reasons, I conclude that the District Court abused its discretion by excluding plaintiff's proof that he economically damaged by loss of rental income and profits from sale of rental property. 

### I would reverse the District Court was the and remand this case for a new trial on the is ue of damages. 

## 5

We concur in the foregoing concurrence and dissent of Justice Trieweiler.

Justices