No. 88-55

IN THE SUPREME COURT OF THE STATE OF MONTANA

LEVIN DAVISAND SARADAVIS, PlaintiffsandAppellants,-vsCOURTV. SHERIFF, MARDI M. SHERIFF and THECOMMERCIAL UNION INSURANCE COMPANY,aMassachusetts corporation,
Defendantsand Respondents.

APPEAL FROM: District Court of the First JudicialDistrict, In and for the County of Lewis & Clark, TheHonorable Henry Loble,Judgepresiding.

COUNSELOF RECORD:

ForAppellant:
Mark P. Yeshe;Harrison,Yeshe & Murphy, Helena, Montana

For Respondent: PaulMeismer; Garlington,Lohn & Robinson, Missoula, Montana James L. Jones;Dorsey & Whitney, Billings,Montana

Submitted on Briefs: Aug. 18, 1988 Decided: September 26, 1988 Filed:

### SEp2 6

### 1988 

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ClerkMr. Chief Justice J. 

### A. Turnage delivered the Opinion of the Court.PlaintiffsLevin and Sara Davis (theDavises) brought a malicious prosecution action against Court and Mardi Sheriff

(the Sheriffs) and against Commercial Union Insurance Companies (Commercial). The Davises also filed first-party and third-party insurance bad faith claims against Commercial Union.The District Court of the First Judicial District, HonorableHenry Loble presiding,directed verdicts for defendants on the malicious prosecution claims and onMr. Davis's first-party bad faith claim. Trial was had on the remaining issue of third-party insurancebad faith. The jury returned

a verdict in favor of the plaintiff Davisesbut awarded them only one dollar compensatory damages and one dollar punitive damages. TheDavises' motion for a new trial on the issue of damages was denied December 16, 1987, and this appeal followed. We affirm. The Davises present the following issues on appeal: Did theDistrictCourt abuse its discretionby

(1) directing verdicts on the malicious prosecution claims in favor of Sheriffsand Commercial; (2) directing theverdict for Commercial on the firstparty insurancebad faith claim; (3) refusing to grant 

### a new trial as to compensatory damages; (4) refusing to grant a new trial as to punitive damages; and (5) refusing to admit plaintiffs' proposed exhibit number 45 ondamages. Thismalicious prosecution suit arises out of a series of events beginning with a fire in 1977. As of March 22,1977, the Davises were managing/leasing the Yacht Basin Bar and Restaurant from the Sheriffs until a fire on October 1, 1977, destroyed the premises, including property of the Davises. The Davises asserted that the cause of the firewas
a leaky roof which caused a short in the electrical system. The Davises lost roughly $10,000 due to the fire. They attempted to recover this sum from Commercial Union who insured the premises for the Sheriffs. Commercial Union refused to pay, saying that the cause of the firewas either

arson or negligence on the part of the Davises. It was determined that a burner had been left on either by the Davises or one of their employees. This,however, was disputed as the cause of the fire since at least one expert testified that the fire could not have started in the kitchen. However, Commercial Union then counterclaimed in the amount of $150,000 in damages for the building, which amount

was later reduced to $75,000. Eventually, that claim was dropped all together. It was that counterclaim that forms thebasis for this action. Trial was had on those issues which resulted in a verdict for the Davises for their loss of $10,000. (Levin and Sara Davis v. Court 

### V. and Mardi M. Sheriff, Cause No. 44240)

# . However, it cost the Davises $5,000 to recover that money due to them under the insurance policy because of Commercial Union's refusal to pay the claim, their counterclaim and their insistence on litigating the matter. Thus, the Davises suffered an out-of-pocket loss of $5,000, and this claim ofmalicious prosecution against the Sheriffs and their insurance company resulted. The Davises also claimed that they were listed as insured on the policy and they filed a first-party aswell as
a third-party insurance bad faith claim against Commercial Union. The first-party claims were dropped by the District

### Court on a motion for directed verdict. Likewise, verdicts on the malicious prosecution claims were directed in favor of both defendants. Davises assign those directed verdicts as abuse of discretion by the District Court. We disagree.

I. Standard of Review The standard for reviewinga trial court's judgmentwas set forthby this Court recently inMarriage of Watson (Mont. 1987), 739 P.2d 951, 44 

### St.Rep. 1167. There,we stated that a DistrictCourt's judgment, whenbased on substantial credible evidence, will not be altered unless a clear abuse of discretion is shown. Watson, 739 P.2d at 954, 44 St.Rep. at 1170. In In re Marriage of Stewart (Mont. 1988), 757 P.2d 765,45 St.Rep. 850,this Court specifically condemned previous language regarding the standard of review. Determinations of whether the district judge acted arbitrarily, without the employment of conscientious judgment or exceeded the bounds of reason were specifically rejected by this Court. We have defined substantial evidence as "such relevant evidence as a reasonablemind might accept as adequate to support a conclusion.

### " State v. Lamb (1982)

### , 198 Mont. 323, 646 P.2d 516. Thus, for each issue raised by the Davises, this Court should defer to the discretion of the trial court unless this Court finds that the District Court's rulingwas notbased on substantial credible evidenceand was an abuse of discretion.

11. 

### Directed Verdicts We defined the standard for a directed verdict as follows: The test commonly employed to determine if the evidence is legally sufficientto withdraw cases and issues from the jury is 

### whether reasonable men could drawdifferent conclusions from the evidence. [Citations omitted.] If only one conclusion is reasonably proper, then the directedverdict isproper.
Semenze v. Leitzke (Mont. 1988), 754 P.2d 509, 511, 45 St.Rep. 829, 831. Thus, in this case the District Court granted the directed verdicts because it held there was insufficient evidence to support the claims of malicious prosecution and first-party insurancebad faith. We agree.

111. Malicious Prosecution The burden on plaintiffs asserting malicious prosecution is heavy. They may only recover damages when each of the six essential elements of the claim are fully "complied with." Orserv. State (1978), 178Mont. 126, 582 P.2d 1227. It is well settled that those six elements are as follows: (1) a judicialproceeding commenced and prosecuted against theplaintiff; (2) the defendant's responsibility for litigating, prosecuting,or continuing the proceeding; (3) lack ofprobable cause for the defendant's acts; (4) that thedefendantwas actuated by malice; (5) that theproceeding terminated in favor of theplaintiff; and (6) that the plaintiff suffered damages. See,Vehrs v. Piquette (1984), 210 Mont. 386, 390, 684 ~.2d 476, 478; Reece v. Pierce Flooring (Mont. 1981), 634 P.2d 640, 642, 38 St.Rep. 1655, 1657-1658. If one of these elements is not proved, verdictmay be directed for the defendant. Orser, 582 P.2d at 1232; St.

### Paul Mercury Insurance Co. v. Jeep Corp. (1977)

## , 175 Mont. 69, 71, 572 P.2d 204, 205. It is clear from the evidence in the case at bar that plaintiffs' case lacks evidence against both defendants on the issues of lack of probable cause and malicious intent. Evidence of the remaining elements is also weak. Because plaintiffs are not able to prove a prima facie case ofmalicious prosecution, their claim must fail as amatter of law and verdictwasproperly directed. The first issue is that of probable cause on which to base the.defendants' counterclaim. The record is clear that defense counsel acting for Sheriffshad probable causebefore instituting the counterclaim. Because the damages sought in the counterclaim arose out of the same transaction and same set of facts as theplaintiffs' suit,defense counselproperlyviewed his claim as a compulsory ormandatory counterclaim under Rule 13(a), M.R.Civ.P., and knew he must assert his clients' claim or it would be barred. That would be no 

### excuse for negligent factual investigation, but this fact coupled with the interviews conducted by counsel Drake defeats the claimof lack ofprobable cause. Most noteworthy inDrake's factual investigationis the following. Ed 

### Herzog,the insurance adjuster,filed a report that listed the cause of fire as arson. Drake reviewed this report and interviewed Herzog personally as to that report prior to filinghis counterclaim. Drake also interviewedDan Schulte, a prospective buyer of the Yacht Basin Bar and Restaurant. One week before the fire, Schulte had hired Deputy State Fire Marshall Matt Kunnary to inspect the electrical and wiring system on the premises. Drake confirmed with Schulte that Kunnary's report showed the electrical systemtohe "in goodworking order."

### Thus, there was a realdispute among the experts as to the cause of the fire and plaintiffs' claim of faulty electrical wiringwas discounted on at least two occasions. From the foregoing, one could reasonably find probable cause to assert the Sheriffs' counterclaim and plaintiffs' prima facie

case ofmalicious prosecution fails. Theverdictwasproperly directed in favorofdefendants. Because Davises fail on this element and their case against the Sheriffs fails, we will not discuss the other

areas revealed by the record of insufficient evidence for this claim. The Davises next allege malicious prosecution against Commercial Union under the same facts. However, probable cause existed for the insurance company just as for the Sheriffs, as discussed above, and plaintiffs' case fails. We find no reason to discuss the other issues on which plaintiffs' case against Commercial also fails. Verdict was properly directed in favor of Commercial Union on the malicious prosecution claim.

IV. First-Party InsuranceBad FaithClaim Plaintiff Mr. Davis next assigns error to the directed verdict on his claim of first-party insurance bad faith. Mr. Davis asserts that since he was listed on the policy as an insured, he should be afforded a status such that the statutory duty Commercial Union owed to the Sheriffswas likewise owed toMr. Davis. However,plaintiff's case failsboth in evidenceand by his conduct. Plaintiff failed tobring forth evidenceof any specific statutory violations by Commercial and even failed topresent evidence of general businesspractice. Additionally, Davis's conduct complicates his case. The only possible "duty" owed by Commercial to Davis would

### have been to provide a legal defense to Davis for the counterclaim and then indemnify if necessary in that suit. But the record clearly shows Davis retained his own counsel and at no time requested Commercialto defend. Thus,even though Commercial had knowledge of the suit pending, bad faith cannotbe found for not providing what has notbeen requested. Likewise,we will not stretch the contractual fiduciary duty of an insurer to cover this situation where Davismade no claimant contact with Commercial, no request for defense, and no request for indemnity. The status argument has been treated by Davisas an afterthought. From the foregoing want of evidence to support any existing theory of bad faith, verdict was properly directed.

V. New Trials Davises also appeal fromdenial of their request for a new trialon the issues of compensatory and punitive damages. Davises assert that both damages awards are inadequate, that they are contrary to the law as given to the jury, and contrary to the weight of the evidence. Davises argue that since the evidence of their damages was uncontroverted, they are somehow entitled to the amount alleged as a matter of right. We disagree. Although appeals as to damages usually occur because the amount awarded is alleged to be excessive rather than inadequate,the law in Montana as todamages iswell-settled. The amount ofdamages is committed first to thediscretion of the jury and next to the discretion of the trial judge who, in passing on the motion for 

### a new trial,may set aside the verdict if it is not just. Dahlin v. Rice Truck Lines

(1960)

## , 137 Mont. 430, 352 P.2d 801. "This Court will not substitute its judgment for that of the jury, especially where, as here, the trial court has approved the verdict bydenying the motion for a new trial." Dahlin, 137 Mont. at 438, 352 P.2d at 805, quoting McNair v. Berger (1932), 92 Mont. 441, 15 P.2d 834. Accord: Sullivan v. City of Butte

(1930), 87 Mont. 98, 285 P. 184; Teesdalev. Anschutz Drilling Co. (1960), 138 Mont. 427, 357 P.2d 4; Wyant v. Dunn (1962), 140 Mont. 181, 368 P.2d 917; Hurly v. Star Transfer Co. (1962), 141 Mont. 176, 376 P.2d 504; Vogel v. Fetter Livestock Co. (1964),144Mont. 127, 394 P.2d 766. Thus,the standard of review isnotwhether the nominal damages are inadequate, but rather,whether the trial court abused its discretion in refusing to grant a new trial. It is fundamental to our system of trial by jury that the factfinder who hears the evidence possesses the right to judge the credibility of the witnesses and may accept or reject the evidence offered. In the case at bar, after a week of testimony and lengthy explanation of the underlying years of litigation and previous damage awards made to the Davises, the jury determined the appropriate award for the Davises in this casewas twodollars. The trial judge, relying on the same evidence and the knowledge that damage awards are left first to the sound discretion of the jury, properly refused to upset that jury determination. It should be further noted that no plaintiff is ever entitled to exemplary damages as a matter of right, regardless of the situation or the sufficiency of the facts. Spackman 

### v. Ralph M. Parsons Co. (1966), 147 Mont. 500, 414 P.2d 918. Based on the law and the record in this case, Davises fail to convince this Court that the trial court abused its discretion.

### VI. Proposed Exhibit 45 Plaintiffs next assign as error the refusal of their proposed exhibitnumber 45. Exhibit 45was awritten summary which purported to show the financial arrangement between Davisesand their counsel and the disposition of funds recovered from the underlying tort action as evidence of Davises' damages. TheDistrict Courtproperly refused to admit Exhibit 45 because it was a writing containing hearsay. This writing did not fit into any hearsay exception under Rule 801, M.R.Evid. Further,itwas not the exclusive evidenceon this issue. The record reveals that the trial judge invited counsel to present oral testimony in lieu of Exhibit 45 to reach the same result, but counsel totally discontinued his line of questioning when Exhibit 45was refused. 

### A District Court's ruling on the admissibility of certain evidencewill notbe disturbed absent a showingof an abuse of discretipn. Cooper v. Rosston (Mont. 1988), 756 P.2d 1125, 45 St-Rep. 978. Under these facts, Davises fail toprove that the trial court abused its discretionby refusing to admit Exhibit 45, especially when the trial judge encouraged the evidence to come in through othermeans. Finding no abuse of discretion by the trial judge on any of the five issues raised by Davises, judgment is hereby affirmed. 

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# A* Chief JusticeWe concur: