No. 88-337 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

SIDNEY E. WARD, 

Plaintiff and Respondent, 

-vsVIBRASONIC LABORATORIES, INC., 

a corporation, 

Defendant and Appellant. 

APPEAL FROM: District Court of the Fifth Judicial District, 

In and for the County of Jefferson, 

The Honorable Frank Davis, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Roger Tippy, Helena, Montana 

For Respondent : 

Jardine & Grauman; John J. Jardine, Whitehall, 

Montana 

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Submitted on Briefs: Dec. 9, 1988 

. . ~~~id~d: February 28, 1989 

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Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

Vibrasonic Labs. Inc., appeals from a judgment of the 

District Court for the Fifth Judicial District, Jefferson 

County. Trial was held April 6, 1988, without a jury. The 

District Court entered judgment for the plaintiff, Ward and 

awarded $2,500.00 punitive damages. This Court affirms the 

judgment of the District Court but remands the cause for 

specific findings with regard to punitive damages pursuant to 

§ 27-1-221, MCA. 

There are three issues for review: 

1) whether the District Court erred by allowing the 

plaintiff to amend his complaint to conform to the evidence 

presented at trial; 

2) whether the District Court erred by denying 

defendant's motion to vacate the trial setting; and, 

3) whether the District Court erred by not presenting 

findings pursuant to 5 27-1-221, MCA, regarding punitive 

damages. 

The plaintiff, Sidney E. Ward, entered into an 

purchase/lease agreement with Vibrasonic Laboratories, Inc. 

for the purchase of a hearing aid on July 31, 1986. The cost 

of the hearing aid was $499.00 plus $100.00 fitting fee for a 

total of $599.00. Ward made a downpayment of $180.00 leaving 

a balance of $419.00 to be paid in monthly installments of 

$20 over 36 months. As the District Court noted in its 

findings of fact, the agreement failed to comply with several 

provisions of the Montana Retail Installment Act. The 

agreement fails to give notice of the buyer's right to payoff 

in advance the full amount and obtain a partial refund of the 

finance charqe as required by 31-1-231 (2), MCA. The 
agreement is required to state, if a separate amount for 

insurance is paid, the specific types of coverage and 

benefits, 31-1-231 (5) (d) , MCA. It fails to state the 

amount of the finance charge as required by S 31-1-231(5)(g); 

and it fails to state the total amount of the time balance 

required by 5 31-1-231(5) (h), MCA. Finally, Vibrasonic 

itself violated S 31-1-233, MCA, by writing an insurance 

policy which it was not authorized to do by the state of 

Montana. 

Ward purchased this insurance from Vibrasonic's agent. 

Vibrasonic called the insurance a "the Ultimate Hearing Aid 

Protection Plan." The plan provided for loss against 

physical damage to the hearing aid caused by "external 

sources such as theft, fire, accidental hreakage, water, auto 

accident," plus loss by mysterious disappearance. This plan 

specifically states it is "separate and distinct from the 

factory warranty and -- does not cover repair service normallv 

covered by the factory warranty." 

The District Court found that "the Ultimate Hearing Aid 

Protection Plan" to be "insurance" within the meaning of the 

insurance code of the state of Montana because of terms used 

in the plan such as "insured's name, policies, coverage, and 

premiums." The District Court found that this was an attempt 

to write an insurance policy by an unlicensed insurer; that a 

premium of $20 was collected and constituted a fraudulent, 

deceptive and illegal act on the part of Vihrasonic. 

Ward became dissatisfied with the hearing aid despite 

attempts by Vihrasonic to make adjustments. Ward tried to 

rescind the contract but Vibrasonic would not return payments 

already made under the contract. Nonetheless, Ward returned 

the hearing aid in the summer of 1987 and stopped making 

payments. During this time, Ward was diagnosed as having 

terminal cancer in the facial area and brain. Ward ' s 
physician, Dr. Sacry, wrote a letter pursuant to paragraph 

three of the agreement between Vibrasonic and Ward which 

should have allowed Ward to rescind the contract. Paragraph 

three reads as follows: 

You may cancel this agreement if in one year after 

the delivery date you consult a licensed physician, 

or a non-competitive certified audiologist, that 

has no connections with a hearing aid dispenser, 

and such person advises you against the purchase or 

use of a hearing aid and specifies in writing the 

medical or audiological reasons for such advice. 

Vibrasonic denied Ward's right to rescind under this clause 

of the contract. It was upon this basis that the District 

Court found that Vibrasonic breached the contract and ordered 

that Ward be refunded $440.00, the amount which he had paid. 

Ward filed a complaint on October 6, 1987. The 

complaint contained four counts upon which Ward based his 

claims for relief. Count I alleged the basis for recission; 

Count 11 was an alternative to Count I; Count I11 alleged 

usurious interest rates on the contract, this Count was later 

dropped; and Count IV alleged fraudulent misrepresentation in 

the sale of the insurance policy covering the hearing aid. 

Count IV reads as follows: 

That plaintiff was required to purchase "insurance" 

as set forth in said agreement, but plaintiff is 

unaware of the nature or extent of any such 

insurance coverage, nor was he ever furnished with 

a policy or other memorandum of insurance, nor was 

plaintiff advised that he may either accept or 

decline said insurance, and that the additional 

charge of $20.00 for "insurance" is unwarranted and 

unlawful and was obtained by false and fraudulent 

misrepresentations by defendants, and should be 

returned to plaintiff. 

That the actions of the defendants in requiring 

said "insurance" or in charging the plaintiff for 

the same, were false and fraudulent and oppressive 

and defendants should be assessed punitive damages 

in the amount of $10,000.00, or such amount as may 
be determined upon trial of this cause, by reason 

of said actions. 

Trial was set on February 17, 1988, for April 6, 1988, giving 

Vibrasonic seven week's notice to prepare for trial. On 

March 23, 1988, two weeks before trial, Vibrasonic moved for 

a continuance and asked to present argument on its motion for 

summary judgment on the trial date rather than try the case. 

On April 6, 1988 the plaintiff and his counsel appeared 

and were ready for trial; the defendant appeared only through 

counsel. Vibrasonic's motions for continuance and summary 

judgment were denied and the trial was held. The plaintiff 

presented the testimony of Ward. The defendant did not put 

on a case-in-chief. 

The District Court entered its findings on April 18, 

1988 and judgment was entered April 27, 1988 in favor of 

Ward. Vibrasonic moved for a new trial on the grounds of 

irregularities in the proceedings of the District Court and 

surprise. This motion was denied and the d-efendant, 

Vibrasonic, appeals to this Court. 

I 

Did the District Court err by allowing the plaintiff to 

amend his complaint to conform to the evidence presented at 

trial? 

First, the appellate procedural doctrine that matters 

not raised at trial will not be considered on appeal. applies 

here. 

It has long been the rule of this Court that on 

appeal we will not put a District Court in error 

for a ruling or procedure in which the appellant 

acquiesced, participated, or to which appellant 

made no objection. 

Green v. Green (1978), 176 Mont. 532, 536, 579 P.2d 1235, 

1237. When plaintiff's counsel made the motion to amend, 

defendant's counsel made no objection. 
Second, the rule with regard to amendments to the 

pleadings is well-settled. As early as 1905, the position of 

this Court has been: 

. . . the court has discretionary power to permit 

the amendment under such terms as it deemed just 

and proper. This it did. 

Dorais v. Doll (1905), 33 Mont. 314, 316-17, 83 P. 884, 885. 

The policy of the law is to permit amendments to 

the pleadings in order that litigants may have 

their causes submitted upon every meritorious 

consideration that may be open to them; therefore 

- it is the rule to allow amendments - and - the 

exceptionto - d'ieny_ them. (Emphasis added. ) 

Union Interchange, Inc. v. Parker (19601, 138 Mont. 348, 

353-54, 357 P.2d 339, 342. 

In addition to settled case law, Rule 15(b), M.R.Civ.P. 

provides: 

When issues not raised by the pleadings are tried 

by express or implied consent of the parties, they 

shall be treated in all respects as if they had 

been raised in the pleadings.. . . the court may 

allow the pleadings to be amended and shall do so 

freely when the presentation of the merits of the 

action will be subserved thereby . . . (Emphasis 

added. ) 

The purpose of Rule 15(b) allowing amendment of a complaint 

to conform to the evidence presented is to "put an end to 

wasteful and needless litigation and have trial on the merits 

of the case." Reilly v. Maw (1965), 146 Mont. 145, 156, 405 

P.2d 440, 447. 

Vibrasonic contends that to allow the amendment of the 

complaint on the insurance issue raises a new theory of 

recovery. This Court disagrees. Count IV of the complaint 

clearly contemplates the claim of tortious misrepresentation 

by Vibrasonic to Ward by requiring insurance on the hearing 

aid. The policy purchased by Ward was an insurance policy as 
defined by Montana law and not a guaranty or warranty as 

purported by Vibrasonic. The Montana Insurance Code, 

5 33-1-210, MCA, defines property insurance as: 

Property insurance is insurance on real or personal 

property of every kind and every interest therein, 

whether on land, water, or in the air, against loss 

or damage from any and all hazard or cause, and 

against loss consequential upon such loss or 

damage, other than noncontractual legal liability 

for any such loss or damage. (Emphasis added.) 

The contract presented to Ward was indeed insurance under 

this definition. Vibrasonic claims this policy was simply a 

warranty. We disagree: 

A warranty promises indemnity against defects in an 

article sold, while insurance indemnifies against 

loss or damage resulting from perils outside of and 

unrelated to defects in the article itself. 

State ex rel. Duffy v. Western Auto Supply Co. (0hio 1938), 

16 N.E.2d 256, 259. 

The contract refers to a standard factory warranty which 

lasts for one year. The insurance was sold separately by the 

Vibrasonic agent approximately three weeks after the contract 

was signed, and as set out above, protected against loss or 

damage, not defects in the hearing aid itself. 

This Court concludes that the District Court did not err 

by allowing the plaintiff to amend his complaint. to conform 

to the evidence presented. 

Did the District Court err by denying defendant's motion 

to vacate the trial setting? 

The thrust of Vibrasonic's argument with regard to this 

issue is that it was prejudiced and surprised because of the 

amendment to the plaintiff's complaint and because no 

continuance was granted to allow the defendant to prepare a 

defense. 
Count IV of the complaint, as set out above, contains 

many references to insurance. It expressly refers to the 

issuance of insurance, the unlawful collection of a premium, 

that it was obtained by false and fraudulent 

misrepresentations by Vibrasonic, and that punitive damages 

should he assessed. This pleading standing alone is enough 

to cover the unlawful activities of Vibrasonic in the 

insurance business. There was no surprise, there was no 

change in theory, there was no prejudice to Vibrasonic. 

Vibrasonic employees or agents did not appear at trial, after 

seven weeks notice of a trial date and over a year's notice 

of Count IV. It appears such motions were filed simply for 

delay. Ward died soon after trial and a continuance at the 

time would have been fatal to Ward's case. 

This Court concludes that the District Court did not err 

by denying Vibrasonic's motion to continue. 

Did the District Court err by not presenting findings 

pursuant to 5 27-1-221, MCA, regarding punitive damages? 

This Court agrees with both the plaintiff and defendant 

on the point that punitive damages were awarded without 

making all the required findings pursuant to S 

27-1-221 (7) (b) (i-ix) , MCA: 

When an award of punitive damages is made by the 

judge, he shall clearly state his reasons for 

making the award in findings of fact and 

conclusions of law, demonstrating consideration of 

each of the following matters: 

(i) the nature and reprehensibility of the 

defendant's wrongdoing; 

(ii) the extent of the defendant's wrongdoing; 

(iii) the intent of the defendant in committing the 

wronq ; 
(iv) the profitability of the defendant's 

wrongdoing, if applicable; 

(77) the amount of actual damaqes awarded by the 

jury; 

(vi) the defendant's net worth; 

(vii) previous awards of punitive or exemplary 

damages against the defendant based upon the same 

wrongful act; 

(viii) potential or prior criminal sanctions 

against the defendant based upon the same wrongful 

act; and 

(ix) any other circumstances which may operate to 

increase or reduce, without wholly defeating, 

punitive damages. 

Although the District Court did not specifically state 

in its findings with regard to punitive damages that the 

findings were being made pursuant to the above statute, the 

court did make partial findings in accordance with the 

statute. Findings of fact no. 9 and no. 10 state the 

District Court's findings as related to Count IV and the sale 

of insurance by Vibrasonic. The findings are set out as 

follows: 

9. That at the time of delivery of said hearing 

aid, the agent, Richards, sold Plaintiff an 

insurance policy thereon (which was provided for by 

written addition in the agreement) being called 

"The Ultimate Hearing Aid Protection Plan" 

(Plaintiff's Exhibit 3) . The policy provided for 

loss against physical damage to the aid caused by ". . . external sources such as theft, fire, 

accidental breakage, water, auto accident, plus 

many others." It also covers loss by mysterious 

disappearance. The "policy" also provides for a 

$75 deductible for the replacement of the hearing 

aid "in case of loss." The Court finds that "The 

Ultimate Hearing Aid Protection Plan" is 

"insurance" within the meaning of the insurance 

code of the state of Montana, there being many 
terms used that are indicative of insurance 

policies such as the application containing the 

"Insured' s Name, I' the terms "policies, coverage, 

premiums, uninsured shipping, protection," among 

others, all of which clearly spell out an attempt 

to write an insurance policy in the state of 

Montana by an unlicensed insurer; that a premium of 

$20 was collected and constituted an illegal act on 

the part of Defendant, and which was fraudulent and 

deceptive. 

10. That Richards, acting on behalf of the 

Defendant VIBRASONICS, falsely and fraudulently 

sold insurance to the Plaintiff and collected a 

premium therefor. This act was done with the 

knowledge that neither he nor Defendant were 

authorized to sell insurance in the state of 

Montana. This was a wrongful, tortious act, which 

justifies the imposition of punitive damages by way 

of example in an amount hereinafter fixed. 

These findings address (i) through (iv) of the statutory 

requirements. Section (v) relates to amount of actual 

damages awarded by the jury; although this was not a jury 

trial; actual damages in the amount of $440 were awarded by 

the judge. It was subdivisions (vi) through (ix) that were 

not addressed. In order to consider these statutory 

requirements, evidence must be presented for the court to 

consider. This Court remands on this issue so that evidence 

may be presented to the District Court for consideration and 

so that findings and conclusions may be made in accordance 

with S 27-1-221 (7) (b) (i-ix) , MCA. 

With respect to subdivision (vi) , as to the defendant's 

net worth, either party may present such evidence at trial. 

The plaintiff may want to introduce evidence of this kind in 

an effort to obtain a greater damage award and the defendant 

may want to present evidence of its wealth in an effort to 

mitigate the damage award. The purpose of punitive damages 

is to punish and deter the party found liable, but not to hit 

so hard as to bring about financial ruin. In the usual case 
"a defendant which presents no evidence of financial worth 

cannot complain that the jury did not have such evidence." 

Hicks v. Lilly Enterprises (0r.App. 1980), 608 P.2d 186, 189. 

Finally, the defendant argues that if indeed the sale of 

the insurance is a violation of the Montana Insurance Code, 

the State Auditor's office is the agency which should proceed 

against the defendant, not the plaintiff. This Court 

disagrees. The plaintiff has a common-law tort action 

against the defendant for fraud and misrepresentation. The 

State Auditor's office may also proceed against the defendant 

under its penalty provisions for violation of the insurance 

code. 

The award of compensatory damages is affirmed and the 

punitive damages judgment is reversed and remanded for 

proceedings in accordance with this Opinion. Costs of appeal 

to plaintiff. 

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We Concur: 

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Mr. Justice John C. Sheehy, in special concurrence: 

This case demonstrates how silly the results can be when 

the legislature, in the guise of "tort reform" interjects 

itself in matters that are properly in the province of the 

courts. In my opinion, the District Court was measurably 

conservative in assessing punitive damages against a company 

that took advantage of the ill and the elderly, and violated 

our state's insurance laws. It is safe to predict that 

punitive damages awards will be larger in the future because 

of the rites of passage now required by the legislature to be 

followed. The notion that torts can be handled in the 

legislative halls instead of in courts at law is prevalent 

now, and unfortunately it will keep muddying the legal 

waters. 

Justice