No. 93-349 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1994 

DeTIENNE ASSOCIATES LIMITED PARTNERSHIP 

and PARK PLAZA HOTEL, INC., 

Plaintiffs and Respondents, 

v. 

MONTANA RAIL LINK, INC., 

Defendant and Appellant. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Thomas C. Honzel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Edward A. Murphy, Datsopoulos, MacDonald 

& Lind, Missoula, Montana 

For Respondents: 

Patrick E. Melby, Luxan & Murfitt, 

Helena, Montana 

Submitted on Briefs: November 10, 1993 

Decided: February 17, 1994 
Justice William E. Hunt, Sr., delivered the opinion of the Court. 

Appellant, Montana Rail Link, Inc., appeals from that portion 

of a judgment of the First Judicial District Court, Lewis and Clark 

County, awarding damages to respondents, DeTienne Associates and 

Park Plaza Hotel, Inc., for business interruption losses in excess 

of reimbursed insurance proceeds which were caused by a prolonged 

power outage after an explosion caused by a collision between 

Montana Rail Link trains. 

Af f irmed . The issues are as follows: 

1. Did the District Court err when it disregarded several of 

Montana Rail Link's proposed exhibits in determining Park Plaza's 

business interruption losses? 

2. Was the District Court s finding that Park Plaza suffered 

$405,000 in business interruption losses clearly erroneous? 

Respondent, DeTienne Associates (DeTienne), is a Montana 

limited partnership with its principal place of business in Helena. 

Respondent, Park Plaza Hotel, Inc. (Park Plaza), is a Montana 

corporation also with its principal place of business and hotel in 

Helena. DeTienne owns the hotel and Park Plaza operates it. 

Farmers Union Mutual Insurance Company (FWMI) is a Montana 

insurance company operating out of Great Falls, which insured Park 

Plaza under a special multi-peril policy of insurance. Montana 

Rail Link, Inc. (MRL), operates a railroad with tracks and a rail 

yard in Helena. 
On February 2, 1989, MRL's rail cars, stopped on a mountain 

grade west of Helena, became uncoupled from the engine and rolled 

back toward Helena, colliding with MRL's yard engines. An 

explosion resulted which caused an extensive power outage in the 

Helena area. The power outage lasted four or more hours during 

extremely cold weather. During the power outage, Park Plaza's hot 

water heating system and reheat coils froze and broke. After heat 

was restored, water leaked from the broken pipes causing 

considerable damage to the hotel's ceilings, carpet, drywall, 

paneling, and a domestic hot water heater and tank. 

In November 1989, Park Plaza started a remodeling project on 

some previously planned additions which delayed the demolition and 

reconstruction processes of some of the hotel's damaged areas. 

On November 19, 1990, FUMI brought suit against MRL in Cascade 

County. On February 2, 1991, Park Plaza brought suit in Lewis and 

Clark County to recover damages. On May 31, 1991, FUMI intervened 

to assert its right of subrogation against MRL, and on October 22, 

1991, its suit against MRL was transferred to Lewis and Clark 

County. On November 7, 1991, the First Judicial District Court 

consolidated the two suits and dismissed FUMI's separate complaint 

in intervention. On August 11, 1992, the parties stipulated that 

the issue of negligence would not be tried and that trial would be 

limited to the issue of proximate cause and damages. On August 27, 

1992, the court granted partial summary judgment against MRL and in 
favor of Park Plaza and FUMI for damages caused by the power 

outage. 

Park Plaza and FUMI could not agree on the amount of the 

personal property and business interruption losses. Therefore, 

Park Plaza invoked the appraisal clause contained in its insurance 

policy with FUMI to determine the losses. Pursuant to the 

appraisal clause under the insurance policy, each party selected an 

appraiser, and those appraisers selected a third appraiser to serve 

as an umpire in the evaluation of claims at settlement 

negotiations. The appraisers found that Park Plaza's personal 

property loss was $24,006. But because the business interruption 

losses exceeded the $300,000 policy limit, FUMI1s appraiser did not 

calculate the loss because FUMI was not obligated to pay Park Plaza 

any excess. FUMI's appraiser determined a reasonable indemnity 

period to be February 2, 1989, through September 18, 1989. 

By order on October 15, 1992, the court granted Park Plaza and 

FUMI1s motion to exclude MRL from calling any witnesses at the 

trial on October 19 and 20, 1992. At trial, Park Plaza sought 

$491,11lin business interruption losses forthe period February 2, 

1989, through December 31, 1989. Park Plaza based this claim on 

1989 operating losses of $89,060, 1989 extraordinary income losses 

of $59,002, 1989 projected lost profits of $329,866, and 1990 bus 

tour losses of $13,183. 

On March 26, 1993, the court found that Park Plaza's total 

business interruption losses reasonably related to the power outage 
were $405,000, and awarded $105,000 to Park Plaza and $300,000 to 

FUMI. The court also found that the time period for purposes of 

determining the business interruption losses was February 2, 1989, 

through November 1, 1989. 

At trial, the court did not rule on the admissibility of the 

MRL's proposed Exhibits H and I at issue on appeal. However, the 

court effectively denied their admission when, in its conclusions 

of law, it stated that it had not used the exhibits in determining 

the amount of Park Plaza's business interruption losses. 

On April 23, 1993, MRL filed motions for a new trial or 

alternatively to amend the court's findings of fact. The court 

denied the motions. On July 2, 1993, MRL filed this appeal of the 

judgment for both Park Plaza and FUMI. 

Subsequently, Park Plaza and FUMI each filed cross-appeals 

against MRL asserting that the record supported a much higher award 

of damages for the loss of business than that found by the District 

Court. However, after MRL satisfied FUMI s judgment, both MRL and 

FUMI dismissed appeals against each other on August 16, 1993. 

Similarly, on appeal, after Park Plaza considered this Court's 

applicable standard of review, it withdrew its cross-appeal against 

MRL. Of the total damages of $533,596.49 found by the District 

Court, MRL appeals that part of the award related to business 

interruption losses, $405,000, and specifically that portion Park 

Plaza claims to be in excess of the insurance reimbursement, 

$lO5,OOO. 
ISSUE 1 

Did the District Court err when it disregarded several of 

Montana Rail Link's proposed exhibits in determining Park Plaza's 

business interruption losses? 

During cross-examination of FUMI's appraiser, MRL attemptedto 

introduce two exhibits over the objections of Park Plaza and FUMI. 

MRL's proposed Exhibits H and I were a spreadsheet and an attached 

cover letter which had been prepared by Park Plaza's appointed 

appraiser and sent to FUMI1s appointed appraiser during their 

settlement negotiations. The spreadsheet purported to show FUMI1s 

subrogation claim against MRL from the period February through 

December, 1989. The cover letter revised that claim figure and 

also indicated that it was part of settlement negotiations in 

resolving the claim between Park Plaza and FUMI. FUMI's appraiser 

testified that he had not relied on either document when he 

determined Park Plaza's business interruption losses. Park Plaza 

and FUMI objected to admission of both exhibits on three grounds: 

(1) that FUMIvs appraiser did not rely on the documents when he 

determined Park Plaza's business interruption losses; (2) that they 

were inadmissible as hearsay under Rule 802 of the Montana Rules of 

Evidence; and (3) that they were inadmissible as part of attempts 

to negotiate a compromise under Rule 408, M.R.Evid. 

MRL asserts that the exhibits support its analysis of Park 

Plaza's business interruption losses. FUMI's expert put the letter 

and spreadsheet into his report submitted to MRL's attorney in an 
attempt to generate some settlement discussions with MRL and to 

give the attorney an overview of the case's history. However, 

FUMI's expert testified that he did not rely on the exhibits to 

make his assessment of Park Plaza's business interruption losses. 

Thus, the evidence was not relevant to the issue of damages because 

it was not the basis upon which the expert formed his opinion. 

Rules 402 and 703, M.R.Evid. 

The rules of evidence define hearsay as "a statement, other 

than one made by the declarant while testifying at the trial or 

hearing, offered in evidence to prove the truth of the matter 

asserted." Rule 801(c), M.R.Evid. Hearsay is not admissible 

unless it falls under an exception in another of the rules of 

evidence. Rule 802, M.R.Evid. The cover letter and spreadsheet 

were prepared by Park Plaza's appraiser, the declarant who did not 

testify at trial. Under Rules 801(c) and 802, M.R.Evid., these 

proposed exhibits were hearsay and properly excluded. 

In the cover letter, Park Plaza's appraiser stated: ''1 hope we 

can make some progress on resolving this claim. . . . After you 

have had an opportunity to review this [attached spreadsheet], 

please give me a call so we can make settlement on this claim.8* 

MRL asserts that although Rule 408, M.R.Evid., excludes 

conduct or statements made in compromise negotiations, it does not 

exclude evidence otherwise discoverable. MRL argues that the 

appraiser's spreadsheet report and cover letter were a statement 
against interest of a party opponent under Rule 801(d) (2) (A) 

and (D), M.R.Evid., and thus discoverable. 

The rules of evidence specifically allow a trial court to 

exclude evidence of accepting or offering or promising to accept, 

a valuable consideration in compromising or attempting to 

compromise a claim which was disputed as to its amount. Rule 408, 

M.R.Evid. That rule reads in pertinent part: 

Evidence of . . . accepting or offering or promising 

to accept, a valuable consideration in compromising or 

attempting to compromise a claim which was disputed as to 

either validity or amount is not admissible to prove 

liability for or invalidity of the claim or its amount. 

Evidence of conduct or statements made in compromise 

negotiations is likewise not admissible. [Emphasis 

added]. 

The record indicates that although the early results of Park 

Plaza and FUMIVs negotiations concerning the amount of business 

interruption losses may otherwise have qualified as statements 

against their own interest, they were not made as independent 

statements of fact, but instead were made as offers for an amicable 

compromise between those parties. Lenahan v. Casey (1912), 46 

Mont. 367, 379, 128 P. 601; Gamble-Skogmo, Inc. v. McNair (1951), 

98 F. Supp. 440, 442; A. E. Korpela, Annotation, &lmissibilitv of 

Admissions Made in Connection With Offers or Discussions of 

Com~romise, 15 A.L.R.3d 29-30 (1967). Evidence of attempts to 

compromise a settlement are properly excluded based on the 

privilege grounded in public policy to encourage compromises and 

settlements. The court properly excluded the letter and 
spreadsheet as part of settlement negotiations under Rule 408, 

M.R.Evid. 

The standard of review for discretionary trial court rulings 

is whether the trial court abused its discretion. Steer, Inc. v. 

Department of Revenue (1990), 245 Mont. 470, 475, 803 P.2d 601, 

604. 

We hold that the evidence is not admissible, and the District 

Court did not abuse its discretion. We affirm the District Court 

on this issue. 

ISSUE 2 

Was the District Court's finding that Park Plaza suffered 

$405,000 in business interruption losses clearly erroneous? 

We will affirm the findings of a trial court sitting without 

a jury if the findings of fact are not clearly erroneous. 

Interstate Prod. Credit Ass'n v. DeSaye (1991), 250 Mont. 320, 322, 

820 P.2d 1285, 1287. However, we will substitute our judgment for 

that of the District Court if we find that it is not supported by 

substantial credible evidence, misapprehends the effect of the 

evidence, and leaves us with the definite and firm conviction that 

a mistake has been committed. Interstate Prod., 820 P.2d at 1287. 

As stated, at trial the court reserved ruling on the 

objections to MRL's proposed Exhibits H and I, and allowed FUMI's 

appraiser to testify about their contents. However, the court did 

not rely on the exhibits when it evaluated Park Plaza's business 
interruption losses, and so stated in conclusion of law number 

nine. 

MRL asserts that the record contained no evidence to support 

the court's award of $405,000, and that with evidence contained in 

Exhibits H and I, MRL could have established that Park Plaza's 

business losses were only $321,279. 

The record shows substantial credible evidence with which the 

court could support an award of $405,000 in business interruption 

losses to Park Plaza. Park Plaza's expert accounting witness on 

damages testified that for the period of February 2, 1989, through 

December 31, 1989, business interruption losses were at least 

$490,491. This expert testified from a schedule which he had 

prepared for his damage claim summary. That schedule actually put 

those losses at $491,111. In addition, DeTienne's general manager 

testified that the total business losses were $512,623 for the same 

period. Park Plaza's and FUMI's expert witnesses testified that 

DeTiennews general manager had made reasonable assumptions in 

determining the business interruption losses. DeTiennens general 

manager also testified that in November 1989, Park Plaza started a 

previously planned remodeling project. On these facts, the court 

had sufficient evidence with which to support its award for 

business interruption losses to Park Plaza in excess of MRL's claim 

of only $321,279. 

The court also determined that the business interruption 

losses award should cover the period from February 2, 1989, through 
November 1, 1989, instead of through December 31, 1989. The court 

also had sufficient evidence with which to make this determination 

because of Park Plaza's self-imposed business interruption losses 

attributable to delay caused by its November 1989 remodeling 

project. From the foregoing, it is clear that the first part of 

the three-part test in Interstate Prod. is satisfied because there 

is substantial credible evidence to support the court's findings. 

The second and third parts are satisfied because we hold that the 

District Court did not misapprehend the effect of the evidence, and 

we are not left with a firm and definite conviction that a mistake 

had been committed. 

We hold that the District Court's finding that Park Plaza 

suffered $405,000 in business interruption losses was not clearly 

erroneous and we affirm the District Court on this issue. 

Af f irmed. 

Justice 

We concur: 
February 17, 1994 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the 

following named: 

Edward A. Murphy 

DATSOPOLOUS, MacDONALD & LIND, PC. 

201 West Main, Suite 201 

Missoula, MT 59802 

Robert F. James 

JAMES, GRAY & McCAFFERTY 

P.O. Box 2885 

Great Falls, MT 59403 

Patrick E. Melby 

LUXAN & MURFITT 

P.O. Box 1144 

Helena, MT 59624-1144 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE PF MONTANA ,7 ,#