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 compensatory and punitive damages 

and attorney fees for defendants' breach of Daniels' commercial 

lease; for malicious and intentional defamation of 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 the premises extended 

2 
through September, 1993. In January, 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 leave his 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 for deed specifically provides that 

purchase of the property is subject to Danielst existing 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 

Daniels and presented himself to Daniels as representing the owners 

of the property. 

Contrary to the existing lease agreement, on January 11, 1991, 

Dean delivered a thirty day eviction notice 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 Danielst store obstructing entrance to the 

store and utilizing parking otherwise available to Danielst 

customers. There is evidence that Dean's son and an employee 

repeatedly threw gravel from their car tires against the storefront 
window where Daniels customarily displayed antique furniture 

outside. 

Danielst February 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 Danielst store. 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. Danielst testified 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' store to threaten, frighten and 

harass Daniels and his patrons. 

Following the parking lot confrontation, Dean removed the 

thermostat from Danielst store and Daniels' heat was cut off. When 

the owners refused to provide heat, Daniels attempted to heat his 

store with electric space heaters. Dean filed a complaint with the 

Missoula Fire Department alleging that Danielst use of the heaters 

was hazardous and that he was attempting to burn down the building. 

Following investigation, no charges were brought. Dean also filed 
a complaint with the Missoula City building inspector. 

After another parking lot confrontation Dean filed a criminal 

complaint against Daniels alleging that he was armed and 

threatening Dean. A Missoula 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, Daniels was notified by the United States Post Off ice that he 

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 

all matters could be adjudicated in the District Court suit. On May 

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 it was error for the District Court to 

suggest the submission of the matter for final adjudication at such 

an early stage of the lawsuit. They further suggest that the 

District Court improperly urged counsel to so stipulate. It is the 

Lakes1 contention that they should not be bound by the stipulation 
of 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's up 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 (counsel for Daniels) : Your Honor, I can 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 

stipulate to the determination of this as an evidence for 

the trial as well. 

Section 37-61-401, MCA, provides in part: 

Authority of Attorney. (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 the minutes of the court and not otherwise; 

We have held that a party is bound to stipulations made by 

counsel entered in open court. Counts v. Chapman (1979) , 180 Mont. 

102, 589 P.2d 151. We further note the stipulation here is entered 

upon the minutes of the court. In Counts, we rejected appellant's 

contention that she should not be bound to a stipulated waiver of 

rights because she did not have the opportunity to discuss it with 
her attorney beforehand. 

We conclude that when the stipulation was entered by Lakes1 

attorney, the Lakes voluntarily waived any right to discovery, jury 

trial or any other rights they claim to have lost. We further 

conclude there is no proof the court improperly "urged" the parties 

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 Conclusions No. XI1 above. 

Conclusion No. XI1 delineates the previously described acts 

colnmitted by the defendants 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 ofthe agency, including wrongful acts committed 

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 

committed by his agent than those mentioned 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 courtfs conclusion 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 the wrongful acts towards ~aniels, or whether they authorized or 

ratified Dean's actions is a question of fact. Findings of fact 

will not be set aside unless clearly erroneous, and due regard will 

be given the opportunity of the trial court to judge of the 

credibility of the witnesses. 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. 

In regards to Harold Lake, there is a lack of evidence that he 

was personally responsible or directly authorized Dean's actions; 

however, there is substantial evidence that he did ratify the 
wrongful 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 

Daniels vacate his lease, that he was unwilling to tolerate Daniels 

remaining on the property and that he would not have entered the 

deal had he thought Daniels would remain. Harold Lake clearly 

accepts the benefits of Deanf s attempts to induce Daniels to vacate 

the lease satisfying the first element of ratification. 

There is substantial evidence that Harold Lake was on notice 

that Danielsr lease 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 surrounding Danielsf lease. The record demonstrates 

that he was aware of the fact that Dean would and did refuse to 

accept rent from Daniels. It further shows that he was aware that 

the thirty day eviction notice was sent despite the lease 
agreement, 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 if f s off ice, the 

Missoula Fire Department, the Missoula City building inspector, and 

the United States Post Office and that such defamation was 

slanderous per se. The court further concluded that the defamation 

was done with malice and intent to harm and awarded Daniels $10,000 

in punitive damages. An additional $25,000 in punitive damages was 

awarded for btrnalicious and intentional actions in tortiously 

interfering with Plaintiff's valid lease and addendum". 

The Lakes argue that there is a distinction between 

compensatory and punitive damages such that one may be jointly and 

severally liable for the acts of his agent leading to compensatory 

damages but that in order to extend liability for punitive damages 

there must be clear and convincing evidence that each separate 

defendant acted with actual malice. 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 ratified 
Dean'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 language holds a principal liable for the wrongs 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 

contract where only contract damages are due. Tort type damages 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 that would entitle Daniels to punitive 

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 argue 

were awarded 

and tortious 

and Daniels 
concurs that generally interference can give 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 similar circumstance wherein we concluded that a person 

could be liable for breach of a contract to which they were a party 

and also be liable for the tort of intentional interference. We 

noted a distinction between the defendants1 actions which not only 

breached the contract but also separately and distinctly by their 

outrageous nature tortiously interfered with the business 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, separate and distinct from the subject matter and issue of 

breach of the lease itself. Moore v. Hardy (1988), 230 Mont. 158, 

748 P.2d 477. 

A prima facie case of interference with contractual or 

business relations requires: (1) intentional and willful acts, (2) 

calculated to cause damage to the plaintiff in his or her business, 

(3) done with the unlawful purpose of causing damage or loss, 

without justifiable cause on the part of the actor, and (4) actual 

damages and loss must result. Bolz, 200 Mont. at 295, citing 

Bemil Corp. v. Sawyer (Fla.App.3rd Cir. l977), 353 So.2d 579. The 

proven facts of this case establish that the defendants not only 
breached 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 with his customers entitling him to 

punitive damages. 

The District Court's conclusion that intentional and malicious 

interference had occurred was correct and it is immaterial what 

reasons the court gave for the conclusion. Bolz, 200 Mont. 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, 138 Mont. 

467, 358 P.2d 399. The District Court award of punitive damages is 

affirmed. 

IV. 

The District Court awarded Daniels free rent for the remainder 

of his lease term- The conclusion was based on the theory that the 

defendants were estopped from claiming any rent from Daniels 

because of their previous refusal of rent. The measure for damages 

for breach 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), 231 Mont. 10, 752 P.2d 719. There is no legal basis 

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 

We Concur: 
June 16, 1992 

CERTIFICATE OF SERVICE 

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

following named: 

John C. Schulte, Esq. 

Attorney at Law 

111 N. Higgins Ave., Ste. 502 

Missoula, MT 59802 

T. K. Botsford 

Attorney at Law 

P.O. Box 8213 

Missoula, MT 59807 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATEPF MONTANA A