No. 92-023 IN THE SUPREME COURT OF THE STATE OF MONTANA 1992

KELLY DANIELS, individually and d/b/a A. ABLE TRADING COMPANY,

JOHN DEAN, 

### STEVE BOLINGER, HAROLD LAKE and 

### MARY LAKE, Defendants and Appellants.

APPEAL FROM: District Court of the Fourth Judicial District, In and for the County of Missoula, The Honorable Jack L. Green, Judge presiding.

COUNSEL OF RECORD: For Appellant: John C. Schulte,Attorney at Law, Missoula,Montana For Respondent: T. K. Botsford, Attorney at Law, Missoula, Montana

Submitted on Briefs: ~pril 30, 1992 Filed:Justice R. C. McDonough delivered the Opinion of the Court.

This is an appeal from a judgment of the Fourth Judicial District, Missoula County. The District Court awarded Kelly Daniels (Daniels), $45,765.65 in compensatoryand punitive damages and attorney fees for defendants' breach of Daniels' commercial lease; formalicious and intentionaldefamationof Daniels;and for tortious and intentional interference with Daniels' commercial lease. Judgment was entered jointly and severally against all defendants. Defendant John Dean (Dean) filed an appeal which was dismissed upon his own motion. Defendants Harold Lake and Mary Lake (Lakes) filed this separate appeal. We affirm in part and

reverse in part. The Lakes raise four issues for our review which shall be addressed as follows: I. Did the District Court err by allowing the initial show cause hearing to be treated as a full and final trial on the issues? 11. Did the District Court err by finding Harold Lake and Mary Lake jointly and severally liable? 111. Did the District Court err by imposing punitive damages for defamation of Daniels and for the tortious interference with Daniels' rights under the commercial lease? IV. Did the District Court err by awarding Daniels free rent through September, 1993? Kelly Daniels operates a second hand store in premises he leased from Ben Bernatz. A written lease for thepremises extended 2through September, 1993. InJanuary, 1991, Steve Bolinger, John Dean and Harold Lake met with Bernatz and ~aniels to discuss the purchase of the property and Danielst lease. Bolinger, Lake and Dean expressed their desire that Daniels leavehis leased premises so that the building could be used to open a service area for a used car business operated by Dean and Bolinger. Negotiations to have Daniels vacate his lease failed. John Dean, Steve Bolinger, Harold Lake, and Mary Lake, purchased the property from Bernatz, as tenants in common, on January 11, 1991. The contract fordeed specifically provides that purchase of theproperty is subjecttoDanielstexisting commercial lease. A copy of the lease and an addendum to the lease were attached to the contract for deed. Harold Lake read the contract for deed prior to closing and agreed to all that it contained. Dean was authorized to manage the property and the lease with Danielsand presented himself to Danielsas representingthe owners of the property. Contrary to the existing lease agreement,onJanuary 11, 1991, Dean delivered a thirty day evictionnotice to Daniels ordering him off the premises without cause. Daniels refused to vacate. Thereafter, despite available parking elsewhere on the premises, Dean's son and an employee of Dean began to park vehicles immediately in front of Danielststore obstructing entrance to the store and utilizing parking otherwise available to Danielst customers. There is evidence that Dean's son and an employee repeatedlythrewgravel from their car tiresagainstthe storefrontwindow where Daniels customarily displayed antique furniture outside. DanielstFebruary rent check was returned to Daniels with a note demanding that he vacate the property by February 11, 1991. Dean advised Daniels that he would never accept any rent payment from him. On or about February 12, 1991, Harold Lake was on the property making measurements and pointing to the spot where a garage door was to be cut into the wall of Danielststore. Harold Lake had knowledge of both the intention to cut the hole in the wall and the refusal of Danielst rent. Lake testified that he would not have entered the deal had he known Daniels would remain. Further,he testified he was unwilling to tolerate Daniels having the right to remain on the property. About February 15, 1991, there was a confrontation in the parking lot. Danielsttestified that Dean and others swore at him and threatened to kill him if he refused to vacate. There is evidence that Dean's son,employees of Dean and others continually gathered near the front of Daniels' storeto threaten, frightenand harass Daniels and his patrons. Following the parking lot confrontation, Dean removed the thermostat from Danielststoreand Daniels'heatwas cut off. When the owners refused to provide heat, Daniels attempted to heat his store with electric spaceheaters. Dean filed a complaintwith the Missoula Fire Department alleging that Danielstuse of the heaters

was hazardous and thathewas attempting to burn down thebuilding. Following investigation,no chargeswere brought. Dean also filed

### a complaint with the Missoula City building inspector. After anotherparking lot confrontation Dean filed a criminal complaint against Daniels alleging that he was armed and threateningDean. AMissoula County sheriff's deputy responded and frisked Daniels in his store in front of his customers. After further investigation the officer apologized to Daniels and left taking no further action. Following another confrontation with Dean, Danielswas notifiedby theUnited States Post Off ice thathe

was accused of stealing Dean's mail. On February 20, 

### 1991, Dean filed an action in justice court seeking to evict Daniels. Despite Dean's refusal to accept rent, default notices were sent to Daniels for failure to pay March and April rent. On March 12, 1991, 

### Daniels filed this action in District Court. Dean dismissed the justice court action so that allmatters couldbe adjudicated in the District Court suit. OnMay 9 

### and 14, 1991, 

### an evidentiary hearing was held on Daniels1 application for an order to show cause. At the conclusion of the hearing, upon the court's inquiry, counsel stipulated that the hearing be considered the trial on the merits and be submitted to the court for final adjudication.

The Lakes contend that itwas error for the District Court to suggestthe submission of thematter for final adjudicationat such

an early stage of the lawsuit. They further suggest that the District Court improperly urged counsel to so stipulate. It isthe Lakes1contention that they should not be bound by the stipulationof their attorney because they were not informed and as a result have lost 'substantial and fundamental rights' such as a right to discovery and to trial by jury. The record provides the following discourse relevant to this issue: The Court: Could 

### I see counsel at the bench, please?

(Whereupon, a discussion took place at the bench) The Court: Very well. For the record, will counsel stipulate that this matter may be considered a trial on the merits? I think we have covered everything that it would be possible to bring out in a trial, and I can't see anything that we have missed that would add to this case one way or the other. But it'sup to you gentlemen if we 

## -- if you want to have a further hearing on it,we may do so. And what is your desire? Mr. Botsford (counselfor Daniels): Your Honor, Ican so stipulate for the Plaintiff, and we've represented what our damages are, if that's acceptable to the Court. The Court: Very well. And Mr. Modine? Mr. Modine (counsel for Dean and Lake): I would stipulateto thedetermination of this as an evidence for the trial as well. Section 37-61-401, MCA, provides in part: Authority ofAttorney. (1) An attorney and counselor has authority to:

(a) bind his client in any steps of an action or proceeding by his agreement filed with the clerk or entered upon theminutes of the court and not otherwise;

We have held that a party is bound to stipulations made by counsel entered in open court. Countsv. Chapman (1979)

### , 180Mont. 102, 589 P.2d 151. We further note the stipulationhere is entered upon theminutes of the court. In Counts,we rejected appellant's contention that she should not be bound to a stipulated waiver of rightsbecause she did not have the opportunity to discuss it withher attorney beforehand. We conclude that when the stipulation was entered by Lakes1 attorney,the Lakesvoluntarily waived any right to discovery, jury trial or any other rights they claim to have lost. We further concludethere isno proof the court improperly "urged"theparties to stipulate to submission of the matter for final adjudication. The District Court is affirmed.

The District Court in conclusion of law number XIV held: Defendants are jointly and severally liable for the respective actions of their fellow Defendants (Defendants,John Dean, Steve Bolinger, and Harold Lake) and are jointly and severally liable as principals of an agency relationship created by the Defendants, or as subsequently ratified with respect to the actions and conduct set forth in ConclusionsNo. XI1 above. Conclusion No. 

### XI1 delineates the previously described acts colnmittedby thedefendants against Daniels. The Lakes argue there is no substantial evidence that either of them had knowledge of, planned or personally took any action towards Daniels. Section 28-10-602,

### MCA, provides: Principalrs responsibility for agent's negligence, omissions, and wrongs. (1) Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business oftheagency, including wrongful actscommitted by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal.

(2) A principal is responsible for no other wrongs committedby his agentthanthosementioned in subsection

(1) unless he has authorized or ratified them, even though they are committed while the agent is engaged in his service.The Lakes do not dispute the courtfsconclusion that there existed

a principal and agent relationship between the named defendants. Instead, they contend that the evidence fails to prove that they

were personally responsible, authorized, or ratified any of the wrongful conduct alleged 

### in Daniels' complaint. Whether or not the Lakes were personally responsible for any of thewrongful acts towards ~aniels, orwhether they authorized 

### or ratified Dean's actions is a question of fact. Findings of fact will notbe setaside unless clearly erroneous, and due regard will be given the opportunity of the trial court to judge of the credibility of thewitnesses. Rule 52(a), M.R.Civ.P. A finding is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence or if after review of the record the Court is left with a firm conviction that

a mistake has been committed. Interstate Production Credit v. DeSaye (1991), 820 P.2d 1285, 48 St.Rep. 986. After careful review of the record, we conclude the finding that

### Mary Lake is jointly and severally liable is not supported by substantial evidence. The only evidence 

### in regard to Mary Lake is that she signed papers that were put before her and Daniels1 

### testimony that she never communicated,harassed or interfered with Daniels in any 

### manner. We conclude the District Court erred in holding Mary 

### Lake liable and reverse on 

### this point. Inregards toHarold Lake, there is a lack of evidence thathe

was personally responsible or directly authorized Dean's actions; however, there is substantial evidence that he did ratify thewrongful acts. Ratification of 

### an agent's actions requires 

### the

occurrence of three elements: (1) acceptance by the principal of the benefits of the agent's acts, (2) with full knowledge of the facts and (3) circumstances or an affirmative election indicating

an intention to adopt the unauthorized arrangement. Moore v. Adolph (lggo), 242 Mont. 221, 223, 789 P.2d 1239, 1241; Safeco Ins. Co. 

### v. Lovely Agency (l982), 200 Mont. 447, 453, 652 P.2d 1160, 1163. Harold Lake testified that it was important to him that Danielsvacatehis lease, thathe

### wasunwilling to tolerateDaniels remaining on the property and that he would 

### not have entered 

### the deal had he thought Daniels would remain. Harold Lake clearly acceptsthebenefits of Deanf sattempts to induce Daniels tovacate the lease satisfying the first element of ratification. 

### There is substantial evidence that Harold Lake was on notice that Danielsrlease did not expire until September, 1993 and that Daniels did not intend to leave early. Furthermore, there 

### is substantial evidence that Harold lake expected that Daniels could and 

### would be induced to vacate 

### his leasehold. We conclude Harold Lake had full knowledge of the facts such that 

### the second element of ratification is met. The third element requires that Harold Lake was aware of the circumstances surroundingDanielsflease. The record demonstrates that he 

### was aware of the fact that Dean would and did refuse to accept rent from Daniels. It further shows thathe was aware that the thirty day eviction notice was sent despite the leaseagreement, Furthermore Harold Lake was aware of and testified to the importance that was attached to getting Daniels to vacate. We conclude that the three elements of ratification are present 

### in the instant case. The District Court's conclusion that Harold Lake 

### is jointly and severally liable is affirmed.

The District Court concluded that Daniels was defamed 

### by the false claims made to the Missoula County 

### heri iff s 

### office, the Missoula FireDepartment,theMissoula Citybuilding inspector,and the United States Post Office and that such defamation was slanderous per 

### se. The court further concluded that thedefamation was donewith malice and intent toharm and awarded Daniels $10,000 

### inpunitivedamages. An additional $25,000 

### inpunitivedamages

### was awarded for btrnaliciousand intentional actions 

### in tortiously interfering with Plaintiff'svalid lease and addendum". The Lakes argue that there 

### is a distinction between compensatory and punitive damages 

### such that onemay be jointly and severally liable for the acts of his agent leading to compensatory damagesbut that in order to extend liability for punitive damages there must be clear and convincing evidence that each separate 

### defendant acted

### with actualmalice. 

### Authority is cited 

### from other jurisdictions for the proposition that principals should not be vicariously liable for punitive damages due to the intentional misconduct of an agent unless there is proof of fault on part of the principal. As discussed above, 

### we conclude that Harold Lake ratifiedDean's wrongful attempts to induce Daniels 

### to vacate and under S 28-10-602, MCA, is liable for damages. We find no authority to support Lakes' contention that in the absence of a showing of actual malice on the part of the principal, 5 28-10-602, MCA, applies exclusively to compensatory damages. Section 28-10-602, MCA,by its own languageholds aprincipal liable for thewrongs of



### an agent which have been ratified. The statute does not limit liability to wrongs other than intentional and malicious acts resulting in an award of punitive damages. Next, the Lakes argue that the award of 

### punitive damages 

### is

erroneous 

### under the law as defined by this Court 

### in Story v. City 

### of Bozeman (1990), 242 Mont. 436, 791 P.2d 767. In Story,we held generally 

### that in the great majority of contracts,breach of the implied covenant of good faith and fair dealing is a breach of contractwhere only contract damages aredue. Tort typedamages

### may only be available 

### in contracts where a 'special relationshipt exists 

### or for traditional contract related torts 

### such as fraud, fraudulent inducement,and tortious interference with a contract. We agree with the Lakes that under the Story criterion, a special relationship does not exist thatwould entitle Daniels 

### topunitive damages for breach of the implied covenant of good faith and fair dealing. However, 

### the District Court did not award punitive damages 

### for breach 

### of the implied covenant. Punitive damages for the separate and independent torts of defamation interference with Danielst lease. The Lakes arguewere awarded and tortious

and Danielsconcursthatgenerally interferencecangive rise to tort liability only when one interferes with a contract to which one is a stranger. Phillips v. Montana 

### ducati ion ~ssociation(1980), 187 Mont. 419, 610 P.2d 154. 

### In Bolz 

### v. Meyers (l982), 200 Mont. 286, 651 P.2d 606,

### we addressed a similarcircumstance wherein

### we concluded thataperson could be liable forbreach of a contract to which theywere a party and also be liable for the tort of intentional interference. We noted a distinctionbetween the defendants1actions which not only breached the contractbut also separately and distinctly by their outrageousnaturetortiously interferedwith thebusiness relations between the plaintiff and his customers. Bolz 

### v. Meyers (1982), 200 

### Mant. 286, 651 P.2d 606;

### Mouser 

### v. city of Redmond (1978), 91 Wash. 2d 36, 586 P.2d 482, 485. We have also affirmed 

### an award of punitive damages against a defendant for breach of a duty to assign a lease, separateand distinct from the subject matter and issue of breach of 

### the lease itself. Moore v. Hardy (1988), 230Mont. 158, 748 P.2d 477. A prima facie case of interference with contractual or business relationsrequires: (1) intentional andwillful acts, (2) calculated to cause damage to theplaintiff inhis 

### or her business,

(3) done with the unlawful purpose of causing damage or loss, without justifiable cause on thepart of the actor,and (4) actual 

### damages and loss must result. Bolz, 200 Mont. at 295, citing BemilCorp. v. Sawyer (Fla.App.3rd Cir. l977), 353 So.2d 579. The proven facts of this case establish that the defendants not onlybreached the implied covenant of good faith and fair dealing, thereby breaching the contract and entitling Daniels to contract damages; but also went further and tortiously interfered with Daniels' business relationships withhis customersentitling

### him to punitive damages. TheDistrictCourt's conclusionthat intentionalandmalicious interference had occurred was correct and it is immaterial what



### reasons the courtgave for the conclusion. Bolz, 200Mont. at 295, 296, citing Fergus County 

### v. Osweiler (19381, 107 Mont. 466, 86 P.2d 410; 120 A.L.R. 1457; Johnstone

### v. Sanborn (19601, 138Mont. 467, 358 P.2d 399. The District Court award ofpunitive damages is affirmed. IV. The DistrictCourt awarded Daniels free

### rent for the remainder of his lease term-The conclusionwas based on the theory that the defendants were estopped from claiming any rent from Daniels because of theirprevious refusal of rent. Themeasure 

### fordamages forbreach 

### of a contract is 

### the compensatory amount for 

### all of the detriment proximately caused by 

### or likely to result therefrom 

### in the ordinary 

### course of things. Weinberg 

### v. Farmer State Bank 

### of Worden (l988), 231Mont. 10, 752 P.2d 719. There isno legalbasis for the court's award of free rent as an element of compensatory damages. There is no change 

### in position of the parties regarding future rents entitling Daniels 

### to such relief. The District Court 

### is reversed 

### on this point. Affirmed, reversed and remanded to the District 

### Court far

### entry of judgment in conformance wi-th 

### this 

### opinion.

Justice WeConcur:

### June 16,1992 CERTIFICATEOF SERVICE I

### herebycertifythatthefollowing orderwassentbyUnited Statesmail,prepaid,tothe following named:

JohnC.Schulte,

### Esq. AttorneyatLaw 111

### N.HigginsAve., Ste. 502 Missoula,

### MT 59802 T.

### K.Botsford AttorneyatLaw 

### P.O.Box 8213 Missoula,MT 

### 59807 

### EDSMITH CLERKOF

### THESUPREME COURT STATEPFMONTANA A