NO. 89-104

IN THE SUPREME COURTOF THE STATEOF MONTANA 1990

GEORGEMADDUX,d/b/a MOM'S OLD FASHIONED GRAVY, Plaintiff,Appellant and CrossRespondent,-vsLYNN BUNCH, FBS INSURANCE MONTANAHOINESS LaBAR, INC., and UNITED STATES FIDELITYAND GUARANTEE COMPANY, Defendants,Respondents and Cross-. Appellants.

APPEAL FROM: ~istrict Court of theThirteenth~udicial ~ist.rict. Inand for theCounty 

### of Yellowstone, TheHonorable G. Todd Raugh,Judgepresiding.
COUNSEL OF RECORD:
ForAppellant:

JamesC. Capser, ~illings, Montana
For Respondent: Neil S. Keefer;Keefer,Roybal, Hanson, Stacey & Walen, ~illings, MontanabP- 

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## &- *),. submitted on ~riefs:Oct. 20, 1989 Lst Decidpd: January 10, 1990Justice John C. Sheehy delivered the opinion of the Court.

Plaintiff George Maddux filed suit in the District Court, ~hirteenthJudicial ~istrict,Yellowstone County, charging united States ~idelity and Guaranty Company

(hereinafterUSF & G) with breach of contract of insurance and unfair claim settlementpractices. The jury found that a contract of insurance existed at the time of plaintiff's loss, defendant breached the contract, and owed plaintiff $23,378.95 in damages. On post-trial motion, the judgment was reduced to $7,792.98. From that judgment,both parties appeal. We affirm. The issuesraisedby Maddux are: 1. Whether the District Court erred in granting USF & GIs motion for directed verdict on the issue of punitive damages. 2. Whether the District Court erred in refusing to amend the jury'sdamage award to include lostprofits. 3. Whether the District Court erred in red.ucingthe award to $7,792.98. 

### 4. Whether the District Court erred in denying pre-j-udgmentintereston the award. The issues raised on cross-appealby USF & G are: 

### 1. Whether the District Court erred in not grantingUSF & G's motion for a directedverdict. 2. Whether the court erred.in not reducing the award to
zero. Appellant George Madd-ux conceived the idea of a commercial gravy manufacturing and sales business in October of 1985. 

### is preparations forbusiness included thepurchase of a new building, ordering various pieces of equipment, including a freezer, and the electrical work necessary tomake the operation ready for business. In addition,Maddux contacted his insurance agent,Lynn Bunch, of Hoiness LaRar Agency, regarding insurance for the new operation. It is uncontested by the parties that due to problems with the refrigeration system, 2,748 cases of gravy product ultimately spoiled and had to be disposed of. Maddux was paid $39,078.08 by the insurance carrier of the electrical contractor for faulty wiring, $25,000 by the insurance carrier of the refrigeration supplier Brodie-Dohrman, for improper installation and defective product, and $5,000 by Hoiness LaBar, Inc. and Lynn Bunch. Maddux proceeded to trial against USF & G, the insurance carrier for the Maddux policy. Strongly contested at trialwaswhether coverage existed to insure against product spoilage and whether USF & G's refusal to pay constitutedbreach of contract and bad faith. The jury found that a contractexisted,thatUSF & 

### G breached the contract, and that the refusal to pay constituted bad faith. The jury awarded Maddux $23,378.95 for his losses, but declined to awardMadd.uxanything for emotionaldistress, despite the determinationof its existence. USF & 

### G made post-trial motions to reduce the jury verdict pro tanto to zero, and to tax costs. The court in its order stated: Now that the jury has rendered its verdict we have thehindsight toperceive thewhole situationas it should have been. We now know that there was an insurance contract and that defendant should have provided coverage for plaintiffIs damages for his loss of gravy in the amountof $23,378.95.

We have known all along that when the insurance company declined coverage that plaintiff went out and did what his insurance company should have, to wit: recovered his damages for his gravy loss. Apparently plaintiff also recovered other damages unrelated to the insurance coverage, but it cannotbe seriously contested that plaintiff was [not] paid for his gravy loss. Accordingly, the jury verdictmust be reduced (sic).
However, it is not proper to reduce the verdict to zero as requested by defendant because plaintiff incurred attorney fees in doing what we now know the insurance company shouldhave done. Those fees are apparently a one-third contingency and the verdict should be reduced to one-third or $7,792.98 in order that plaintiff recover his attorney fees on the amountwe now knowhe was damaged. Plaintiff's motions for prejudgment interest and to amend the jury verdict were denied. This appeal and cross-appeal followed.

Did the District Court err by granting USF & G's motion for adirected verdict as to punitive damages? Maddux's claim for punitive damages is based on failure to conduct reasonable investigation of the claim. Madd.ux maintains that USF & G intentionally avoided learning facts pertaining to coverage, such as what coverage Maddux believed he had acquired. In conference, co.unsel, prior to jury deliberation, conceded that USF & G did not seek out this information. However, the court states that this lack of fact-finding did not create a high degree of risk of harm to the substantial interests of Madd.ux, as requiredby § 27-1-221(2),MCA. The courtwent on to state:



# ...plaintiff notes that the Court should let punitive damages go to the jury not only beca.use plaintiff thinks that is right but also because if it is wrong it would be a simple matter for the Supreme Court to subtractout anypunitivedamages.



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# . . [I]n the long run considering all the many cases these days in which punitive damages are sought this avenue is deceptive, misleading and inefficient. ~eviewing courts are loathe tooverturn juries and defendants should not have to run the risk that a jury will award punitive damagesand reviewing court (sic)will notoverturn a jury in cases where punitive damages should not have been considered by the jury in the first place. Judicial economy demands that the trial court not pass the buck. Judicial economy demands a trial court not present to a jury those issues forwhich insufficient evidenceexists.

It is evident from the record that the testimony of Maddux and Agent Lynn Bunch was hopelessly conflicting. Section 27-1-221(5), MCA, states that "all elements of the claim for punitive damages must be proved by clear and convincing evidence." Here, the district judge, after hearing the evidence and observing the witnesses,was in the best position to make a determination whether the requirements of proof of punitive damages had been met.. Tague v. John Caplice Co. (1903), 28 Mont. 51, 72 P. 297. Maddux next contends that the District Court erred in refusing to amend the jury findings to conform to evidence presented on amount of loss. At issue is simply whether Maddux was entitled to a 40percent markup from the value of the gravy. A breakdown of the figures ishelpful. 2,748 cases at $12.96 per case Less 40%
Plus: cleanup costs lostbar code Jury computation total From the testimony and evidence, it is reasonably clear that Maddux had neither sold nor contracted to sell any of his product when the loss occurred. With that in mind and instr-uctionson damages, the jury made its determination. Instructionno. 26 reads: Damages must be reasonable. If you should find that plaintiff is entitled to a verdict, y0.umay award him only such damages as will reasonablycompensate for such injury and damages asyou find from a preponderance of the evidence in the case, that he has sustained as a proximate result of the incident.

You are notpermitted to award speculativedamages. So you are not to include in any verdict compensation for any prospective loss, which although possible, 1s not reasonably certain to occur in the fut-ure.

An award of lost profits on a product with no proof of marketability might certainly be construed as speculative damage. From evidence and testimony presented, the jury determined what it thought to be reasonable damages. The District Court, presented with Madduxlsmotion to amend the jury's findings,did not see fit to substitute its judgment for that of the jury. Due to the speculativenature of lost profits, it was not error for the court to leave the jury verdict undisturbed. section 27-1-311,MCA. Swansonv. St. John's Lutheran ~ospital(1980),189Mont. 259,615 P.2d 883. Maddux's next contention is that the District Court erred in reducing the jurydamages to $7,792.98. Maddux argues that subrogation is not proper in this
case, as the insurance policy states that USF & 

### G will be subrogated to the insured's right of recovery "in the event ofpaymentunder thispolicy" and nopayment under thepolicy has taken place. Further,Maddux contends that subrogation is simply an acquisition of rights of the insured against other parties, and those parties were released,all afterUSF & G refused payment. As further argument against subrogation, Madd.ux cites Western ~edia,Inc. v. ~errick (1988), 757 P.2d 1308, 1311, 1312, 

### 45 St.Rep. 1212, 1216, which stated: It is the position of this Court that once a contract has been breached, its terms may not be unilaterally resumed. A non-breaching party has noduty to perform the terms of the contract once it has beenbreached.

It is a maxim of jurisprudence that "no one can take advantage of his own wrong." § 1-3-208,MCA. A party who breaches a contract cannot take advantage of his own act or omission to escape liability thereon. (Cites omitted.) ~errick's breach may not have been willful or intentional. However, the breach occurred and the contract was severed.
Maddux arg-ues that the breach of the contract of insurance by USF & G severed the contract, and USF & G no longer has standing to assert any rights arising from the breached contract. Maddux's claim against USF & G was unquestionablybased

on insurance coverage for spoilage of gravy product. The damages awarded by the jury were directly related to damages for spoilage. There is testimony and evidence that the pretrial settlements amounting to $69,078.08 compensated Maddux forhis gravy loss. Maddux released those tortfeasors upon settlement, and then proceeded against USF C G for damages, including payment for gravy loss. The judge instructed the jury not to consider the settlements, that they should determine damages as if no settlements had occ.urred,and that the court would "make all adjustments to the award of damages as may be required by law.. 

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Those pretrial settlements prevented contribution or indemnity claimsby USF & G. InState ex rel.Deere & Co. v. ~istrictCourt (1986), 224 Mont. 384, 730 P.2d 396, this Court determined that a joint or concurrent tortfeasor who settles with a claimant before judgment on the claim is entered in District Court is not subject to claims for contrib.ution or indemnity from nonsettling joint orconcurrent tortfeasors againstwhom judgmentmay be rendered. With no possibility of indemnity, Maddux would stand to be paid forhis gravy loss twice. It has been the standard practice in Montana that a plaintiff's recovery is diminished pro tanto, that is,given

a dollar credit based on the consideration paid by the settling tortfeasor. This encourages compromise, lends finality to such compromises, and provides a single satisfaction for a single injury. Deere, supra; Azure 

### v. City of Billings (1979), 182 Mont. 234, 596 P.2d 460; Black

v. 

### arti in (1930),88Mont. 256,292 P. 577. We hold that the precepts of Deere, et al. were correctly found by the lower court to apply in this case. Maddux is entitled to but a single recovery for his gravy loss,which he received in his earlier settlements. The lower court's reduction of the award to $7,792.98 was proper. The $7,792.98 adequately and fairly compensatesMaddux forhis attorney fees and costs in pursuing the settlementsand this claim. Maddux's final claim is that the DistrictCourt erred in refusing prejudgment interestunder S 27-1-211,MCA. Section 27-1-211,MCA,provides as follows: ~ight to interest. Every person who is entitled to recover damages certain or capable of being made certain by calculation and the right to recover which is vested in him upon a particular day is entitled also to recover interest thereon from that day except during such times as the debtor is prevented by law orby the act of the creditor from paying the debt.
Maddux claimed a loss of $35,614.08. The jury awarded $23,378.95. Clearly,Maddux did not show damages capable of being made certain by calculation as required by S 27-1-211, MCA. As the amount of damages due upon breach was not clearly ascertainable until determined by the trial court, prejudgment interestwas not appropriate. Swensonv. BuffaloBldg. Co. (1981),

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## , 628P.2d 1106. 11. Issueson cross-appeal: USF & G's first contention is that the ~istrict Court erred in not reducing the jury verdict to zero. USF & G maintains that, under Deere, Maddux had been fully credited for his gravy loss prior to trial. As such, the verdict should have been adjusted to zero. USF & G is correct in asserting that Maddux was compensated for his loss of gravy product. However, the $7,792.98 does not representa portion of that loss. Rather, it is the court's determination of reasonable costs in the form of attorney fees. As the ~istrictCourt noted, those costs are proper "because plaintiff incurred attorney fees in doing what we now know the insurance company shouldhave done," i.e. investigate and pay the claim. As such, it was not error for the ~istrict Court to retain $7,792.98 in damages as reasonable attorney costs. The second contention is that the ~istrict Court erred in not granting USF & G's motion for a directed verdict. A motion for a directed verdict isproperly granted only in the complete absence of any evidence to warrant submissionto the jury. Britton v. Farmers Ins. Group (1986), 221 Mont. 67, 721 P.2d 303. The court must view the motion in a light most favorable to the non-moving party. Dieruf v. Gollaher (1971), 156 Mont. 440, 481 P.2d 322. Clearly, there was evidence in this case of the existence of an insurance contract covering the loss, and subsequent breach by the insurer. As such,a directedverdict isnotproper. Affirmed.We Concur: 

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