No. e?-566 

IN THE SUPREME COTJRT OF THE STATE OF 

1989 

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/ . UNITED STATES FIDELITY and GIJARANTY I' ' , \ ., ' . .i. 

COMPANY, a Maryland corporation, C ,? 

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I 

PI-aintiff and Appell-ant, 

RICHARD CROMWELTJ, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Fifteenth Judicial District, 

In and for the County of Daniels, 

The Honorable M. James Sorte, Judge presiding. 

COTJNSETI OF RECORD : 

For Appellant: 

William P. Driscoll, Gough, Shanahan, Johnson 

and Waterman; Helena, Montana 

For Respondent: 

Jerrold L. Nye, Nye and Meyer; Billings, Montana 

Submitted on Briefs: March 23, 1989 

Decided: April 13r 1989 

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.. . " Clerk 

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Mr. Chief Justice J. A. Turnage delivered the Opinion of the Court. 

Plaintiff, United States Fidelity and Guaranty Company 

(USF&G), is a bond surety appealing a judgment by the District 

Court, Fifteenth Judicial District, Daniels County, which denied 

recovery from defendant Cromwell for monies paid out by USF&G on 

a performance bond. The District Court sitting without a jury 

found that the plaintiff had not carried its burden of proof in 

proving that a signed and duly executed contract existed between 

the parties which could be enforced against Cromwell. USF&G 

appeals. 

The sole issue on appeal is whether the District Court's 

findings and conclusions are clearly erroneous because USF&G argues 

that the record contains substantial credible evidence requiring 

recovery on the bond for the plaintiff. We affirm the District 

Court. 

The standard of review for a judge sitting without a jury 

pursuant to Rule 52 (a) , M.R. Civ. P. , is that the court s findings 

shall not be set side unless clearly erroneous. Thus, when the 

District Court's findings are based on substantial credible 

evidence, they are not clearly erroneous. Parker v. Elder (Mont. 

1988), 758 P.2d 292, 45 St.Rep. 1305. 

Defendant Richard Cromwell and Terry Forchak were farmers in 

Scobey, Montana. In 1983 they leased farm land owned by Howard 

Smith, Randy G. Smith and Debra K. Hersel (lessors). Cromwell and 

Forchak both signed the farm lease dated February 3, 1983; however, 

each maintained separate farming operations and were not business 

partners. The existence and the terms of the farm lease are not 

disputed. 

The annual rent payment under the lease was $10,543 per 

lessee, for a yearly total of $21,086. On June 13, 1984, Cromwell 

and Forchak entered into an addendum to the farm lease which 

required both Cromwell and Forchak to furnish the lessors "a 

performance bond in the amount of the annual lease payment . . .It 
On May 1, 1984, Cromwell and Forchak executed an IvApplication 

for License and Miscellaneous Bondsn1 with USF&G. The application 

was signed by both parties and offered into evidence at trial. The 

purpose of the application was to obtain the issuance of a bond 

from USF&G as surety with Cromwell/Forchak as principals to the 

lessors as obligees, in the amount of $10,543 which would assure 

the annual payments under the farm lease. 

The terms of the application stated that Cromwell and Forchak 

would : 

indemnify [USF&G] against all losses, damages, 

claims, suits, costs, and expenses whatever, 

including court costs and counsel fees at law 

or in equity or liability therefor which 

[USF&G] may sustain or incur by reason of: 

executing or procuring said bond, or making 

an investigation on account of same, or evidence thereof from same, or procuring its 

release or evidence thereof from same, or 

defending, prosecuting or settling any claim, 

suit or other proceedings which may be brought 

or threatened by or against any of the undersigned or [USF&G] in connection with the same 

or any other agreements herein contained. 

On June 25, 1984, USF&G claimed it issued bond number 28-0130- 

10341-84-6 with USF&G as surety and allegedly with Cromwell/Forchak 

as principals; lessors were named as obligees for the amount of 

$10,543. On August 29, 1984, Cromwell individually executed an 

"Application for License and Miscellaneous Bondsvv (rider) from 

USF&G to increase the previous bond from $10,543 to $21,086 so that 

the entire annual amount due under the farm lease would be protected. Cromwell identified his signature on the second application offered into evidence at trial. 

On September 10, 1984, USF&G issued the rider to the previous 

bond increasing the total amount to $21,086. The remaining terms 

and parties were identical to the original bond. 

Cromwell paid his one-half of the rent in 1985 in the amount 

of $10,543. Forchak did not pay the remaining rent. He subse- 
quently declared bankruptcy and was discharged from this obligation 

leaving an unpaid balance of $10,543 due the lessors. 

The lessors notified USF&G of the default and made a claim 

against the bond in the fall of 1985 in the amount of $10,543. 

Williams testified on behalf of USF&G that he notified Cromwell and 

Forchak of the claim. After receiving no satisfaction from either 

of them, Williams paid the claim in January 1986 in the amount of 

$10,543 plus interest as demanded by the lessors/bond obligees. 

USF&G filed suit against Cromwell and Forchak to recover on 

the bond for USF&Gts monies paid out and the cost of their lawsuit. 

Forchak was dismissed later from the suit because his debt was 

discharged under the bankruptcy proceeding. USF&G proceeded 

against Cromwell individually as a principal on the bond. The case 

went to trial on June 10, 1988. The trial court made several 

findings leading to the ultimate conclusion that USF&G did not 

prove that an indemnification contract existed between USF&G and 

Cromwell because the best evidence of the contract (the 

contract/bond itself) had not been admitted into evidence and all 

of the oral testimony offered to prove the contents of the contract 

was disputed. It is that conclusion and the findings leading up 

to it which USF&G cites as error by the District Court. 

We note here at the outset that this is not a question of 

suretyship law nor contract interpretation. The dispositive issue 

is whether the plaintiff followed the rules of evidence to prove 

that an indemnification contract existed such that the contract 

could be enforced against the defendant and the plaintiff would 

prevail. The District Court found that the plaintiff did not. 

Section 28-2-903, MCA, provides that a promise to answer for 

the debt, default or miscarriage of another must be in writing. 

The district judge concluded in Conclusion of Law #1 that no such 

written document was introduced in evidence in this case. We 

agree. 
I. Best Evidence 

At trial USF&G failed to introduce the original bond or the 

original rider. Instead, Williams, as custodian of the records for 

USF&G, introduced a sample form of the bond and the rider with the 

appropriate information typed into show the court what obligations 

the bond purported to impose. Williams testified that the originals were likely in the hands of the lessors. However, USF&G 

offered no certainty as to where the originals were and no reason 

as to why they were not produced. That is not acceptable under the 

Rules of Evidence. 

Rule 1004, M.R.Evid., states that the original writing is not 

required if it is 

(1) lost or destroyed; 

(2) not obtainable by judicial process; 

(3) in the hands of the opponent; or 

(4) if it relates only to a collateral matter. 

The District Court was not allowed to make a finding under this 

rule as to whether the original was necessary because the plaintiff 

offered no reason for its absence. 

Rule 1007, M.R.Evid., states that no accounting for the 

nonproduction of the original will be required if the contents of 

the writing (1) may be proved by testimony or (2) by written 

admissions of the party against whom it is offered. However, this 

rule is inapplicable to these facts because USF&G tried both 

approaches and failed. 

During discovery USF&G requested Cromwell to admit the 

authenticity of a copy of the bond. Cromwell declined, stating 

that he had no actual knowledge that a bond had been issued and did 

not recall ever signing a bond. During trial Cromwell testified 

that while he believed a bond may have been issued, he did not know 

if he was the named principal and had no recall of signing a bond 

charging him with its obligations. Cromwell stated that he only 

signed an application filled out by an insurance agent in order to 

fulfill his obligations under the farm lease. 
When Cromwell declined to admit to the authenticity of a copy 

of the bond during discovery, it became incumbent upon USF&G at 

trial to come forth and produce the bond, or put in evidence the 

reason why -the original bond was not produced and why secondary 

evidence should be allowed to prove that the contract existed, Rule 

1004, M.R.Evid. Those failures by USF&G were fatal to its case. 

The District Court had no evidence from which it could make 

a finding that Cromwell signed the bond, thus duly executing the 

contract, or that he was named as a co-principal on the bond in 

order to enforce it against him. Moreover, Williams testified that 

he did not know for certain to whom bond number 28-0130-10341-84- 

6 was paid. He brought no documentation or business records with 

him to trial to refresh his memory of the transaction, his 

recollection was only that $10,543 plus ''a couple hundred dollars1' 

interest was paid out on the bond to someone. 

USF&G argues that a conclusion that the contract existed is 

supported by the record because Cromwell signed an application to 

procure a bond and because on cross-examination Cromwell stated he 

believed a bond had been issued. Likewise, during discovery, 

Cromwell admitted that he believed a bond had been issued, although 

he had not signed one and had no record of one. From there, USF&G 

wishes us to fill in the blank spaces in its case because it, in 

fact, issued a bond and paid a claim against it to someone. But 

this Court cannot do that. The findings made by the court were 

not clearly erroneous in light of the evidence. 

Because the entire case turns on existence of the contract, 

we decline discussion on plaintiff's other citations of error by 

the District Court. The District Court was correct in ruling that 

the best evidence of a contract had not been received into evidence 

and that the existence of a contract enforceable against Cromwell 

had not been proved. 

Judgment affirmed. 

6 
We concur: