Case Name: NORTHWESTERN NATIONAL BANK OF GREAT FALLS, A NATIONAL BANKING ASSOCIATION, PLAINTIFF AND APPELLANT, v. WEAVER-MAXWELL, INC., a corporation, et al., Defendants and Respondents
Court: Montana Supreme Court
Jurisdiction: Montana
Decision Date: 1986-11-13
Citations: 224 Mont. 33
Docket Number: No. 85-419
Parties: NORTHWESTERN NATIONAL BANK OF GREAT FALLS, A NATIONAL BANKING ASSOCIATION, PLAINTIFF AND APPELLANT, v. WEAVER-MAXWELL, INC., a corporation, et al., Defendants and Respondents.
Judges: MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON and GULBRANDSON concur.
Reporter: Montana Reports
Volume: 224
Pages: 33–49

Head Matter:
NORTHWESTERN NATIONAL BANK OF GREAT FALLS, A NATIONAL BANKING ASSOCIATION, PLAINTIFF AND APPELLANT, v. WEAVER-MAXWELL, INC., a corporation, et al., Defendants and Respondents.
No. 85-419.
Submitted Aug. 12, 1986.
Decided Nov. 13, 1986.
Rehearing Denied Jan. 13, 1987.
729 P.2d 1258.
Church, Harris, Johnson & Williams, Milton Wordal argued, Great Falls, for plaintiff and appellant.
Graybill, Ostrem, Warner & Crotty; Turner C. Graybill argued, Great Falls, for defendants and respondents.

Opinion:
MR. JUSTICE WEBER
delivered the Opinion of the Court.
Norwest Bank of Great Falls, N.A. (the Bank) appeals a $2,659,671 judgment entered against it in Cascade County District Court after a jury trial. The Bank brought the action as a foreclosure suit and to obtain a deficiency judgment. Defendants prevailed on their counterclaims for breach of contract, tortious interference with their franchise agreement, fraud, negligent misrepresentation, and bad faith in liquidation of the Weavers' collateral. The Court also granted defendants equitable relief. We reverse and remand for a new trial.
The dispositive issue is whether the District Court erred in giving the jury a special verdict form which presented the issue of breach of contract in terms that adopted the defendants' view of substantial disputed facts. For the guidance of the court and counsel on remand, we will consider briefly the other issues raised on appeal. They are:
2. Did the District Court err in the manner in which it submitted the issue of tortious interference with contract to the jury?
3. Did the District Court err in entering judgment upon the special verdict:
a. by entering judgment on the jury's findings of damages both for breach of contract and for tort; and
b. because the special verdict's award of punitive damages conflicted with the jury's finding that the Bank had acted in good faith?
4. Did the District Court err in its resolution of the issues reserved for its decision by:
a. denying the Bank's claim for a deficiency judgment;
b. ordering the Bank to surrender to defendants the proceeds of liquidation of collateral;
c. awarding prejudgment interest at a rate of 18%; and
d. basing an award of attorney fees to defendants on their recovery on both their contract and torts claims?
Weaver-Maxwell, Inc. was an International Harvester (IH) truck and farm equipment dealership. Its stockholders are the other defendants in this action. Beginning in 1977, it entered a series of transactions with the Bank. As of April 1980 Weaver-Maxwell owed the Bank slightly over $700,000 in principal and accrued interest on two SBA guaranteed loans and on its floor plan and accounts receivable lines of credit. The banker in charge of the Weaver-Maxwell account was Paul Hoffman.
As is typical of floor plan financing, Weaver-Maxwell's floor plan arrangements with both IH and the Bank provided that the lenders had a security interest in all items of inventory financed and in the specific proceeds of sale of each item. Weaver-Maxwell had agreed to hold the proceeds of each sale, as well as the inventory, in trust for the respective lender, and it was required to remit a portion of these proceeds to the lender promptly upon receiving them without demand or notice. When Weaver-Maxwell failed to account for such proceeds, the sale was "out-of-trust."
In March 1980, for the second time within a year, Weaver-Maxwell was in default of its payments on the two SBA loans. Mr. Weaver approached Mr. Hoffman at the Bank seeking another loan for Weaver-Maxwell. Mr. Hoffman refused to make a loan to Weaver- Maxwell. However, the Bank did agree to make a personal loan to Mr. and Mrs. Weaver in the amount of $84,291.69. The loan was secured by personal assets of the Weavers.
The terms of the loan were in dispute at trial. Mr. Hoffman testified that the amount was precisely calculated and all of its proceeds were earmarked for specific purposes. He testified that the $84,291.69 was to be applied as follows: $22,000 was to cover two IH trucks sold out-of-trust; $23,060 was to bring current delinquent payments to the Bank on an SBA-guaranteed loan; $17,492 was to bring the other SBA guaranteed Bank loan current; $21,669.04 was for the balance due the Bank on a 1979 individual loan to Mr. Weaver; and $70.65 was for interest. Mr. Weaver, on the other hand, testified that the loan was earmarked only to the extent necessary to cover the $22,000 in out-of-trust IH sales, and that the rest was to be used for Weaver-Maxwell's general business needs. The loan was documented March 24, 1980, in a promissory note from the Weavers to the Bank. There was nothing in writing signed by the Weavers which mentioned any specific purpose or purposes for the loan. The cash was not immediately advanced to the Weavers, pending filing of documents showing the Bank's security interest in Weaver assets.
On April 3, 1980, the Bank advanced $26,848.45 on the March 24 note, to cover the $22,000 IH out-of-trust previously disclosed and another $4,848.45 out-of-trust which had not been disclosed to the Bank previously and was not included in Mr. Hoffman's calculation. The next day, (a Friday) Mr. Weaver requested another $47,000 to cover yet another out-of-trust amount owed to IH on a sale made several months earlier. The Bank had not been informed of this out-of-trust sale before this time. Mr. Weaver was to return to the Bank on Monday, according to his testimony, to receive the $47,000 out of the sums available from the March 24 note. He testified that when he went to the Bank to pick up the $47,000 on Monday morning, Mr. Hoffman told him, "We're not going to advance you the money," and that Mr. Hoffman would not say more than that. Mr. Hoffman's testimony was substantially different. He testified that the $47,000 was a new loan request, and that he told Mr. Weaver a decision whether to grant it would be made by Monday. Mr. Hoffman testified that on Monday morning he concluded after talking with his supervisor that the $47,000 loan request should be declined because "I had lost my confidence in our borrower."
IH immediately notified Mr. Weaver that it was terminating Weaver-Maxwell's dealership because of the out-of-trust situation. To prevent IH from quickly repossessing Weaver-Maxwell's assets, Mr. Weaver signed a document entitled "Peaceful Possession of Collateral Property." The document allowed the Bank to take possession of the assets. The Bank viewed this as a means of protecting its security interests. That evening, the Bank changed the locks on the Weaver-Maxwell buildings. It thereafter excluded Mr. Weaver from the property except during business hours, when he was accompanied by bank representatives. After April 9, the Bank also seized and opened all mail addressed to Weaver-Maxwell. Defendants presented testimony that the Bank destroyed truckloads of Weaver-Maxwell records by hauling them to the Great Falls dump. Approximately two months later, the Bank held an auction of Weaver-Maxwell assets. The defendants argued that the auction was not well-run. The proceeds of the auction were applied to Weaver-Maxwell's debts to the Bank, but they did not cover all the debts. The Bank also collected personal assets of the Weavers in which it had security interests.
The Bank commenced this action to collect sums remaining due on its loans to Weaver-Maxwell and the Weavers. The defendants asserted counterclaims based on their contention that the Bank had breached its March 24, 1980 contract to loan money to Mr. and Mrs. Weaver. They also raised claims arising from the Bank's liquidation of their assets. The case was tried to a jury over a three-week period. The jury awarded damages to defendants of $300,000 for breach of contract, $800,000 on tort theories, and $40,000 for bad faith in the liquidation of the Weavers' personal assets. It also awarded the defendants $140,000 in punitive damages. The District Court entered judgment on both the breach of contract and tort damages. It denied the Bank's claim for a deficiency judgment of $377,702.73. It ordered the Bank to remit to defendants $729,073.74 from liquidation of the loan collateral. It also awarded defendants $266,597.26 in prejudgment interest and $384,000 in attorney fees, for a total judgment of $2,659,671 plus interest.
I
Did the District Court err in giving the jury a special verdict form which presented the issue of breach of contract in terms that adopted defendants' view of substantial disputed facts?
The evidence on whether Mr. Weaver's request for $47,000 should have been considered as part of the $84,291.69 loan was lengthy and conflicting. Both sides presented expert and lay opinion testimony on whether the Bank was obligated to advance the $47,000. The testimony of Mr. Weaver and of Mr. Hoffman also directly conflicted on whether Mr. Weaver requested the $47,000 as a disbursement of part of the $84,291.69 loan or as a new loan. This testimony was admitted into evidence without objection.
The jury was not asked whether Mr. Weaver was entitled to $47,000 cash out of the note for this application. Instead, the District Court adopted the defendants' proposed special interrogatory as jury instruction Number 1:
"1. A. On April 4 or 7, 1980 did Art Weaver request Northwestern National Bank to advance approximately $47,000 on the Weavers' note of March 24, 1980, in order to pay a debt of Weaver-Maxwell, Inc. to International Harvester?
"Answer:_(yes or no)
"B. If your answer to question No. 1 is 'yes,' please state the total amount of damages which the Bank's breach of contract proximately caused each of the defendants to suffer when the Bank refused to advance such funds?
Answer: Weaver Maxwell, Inc. $_
Art & Grace Weaver $_
Darlow & Ruth Maxwell $_
In substance, this required the jury to determine whether Mr. Weaver asked the Bank to advance $47,000 on the March 24 note. If they answered "yes" then the next determination was the amount of damages which the breach caused the defendants.
"While it is within the trial court's discretion to structure the form and frame the questions of a special verdict, the interrogatories must be adequate to enable the jury to determine the factual issues essential to judgment." Kinjerski v. Lamey (Mont. 1981), 635 P.2d 566, 567, 38 St.Rep. 1703, 1705, citing Glick v. Knoll (1959), 136 Mont. 176, 346 P.2d 987; Coburn Cattle Co. v. Small (1907), 35 Mont. 288, 88 P.953. We conclude that the special verdict submitted on this record was inadequate. In fact, the Bank agrees that Mr. Weaver was still entitled to $47,000 out of the $84,291.69 loan. However, it was the province of the jury to decide if Mr. Weaver was entitled to apply $47,000 on the new out-of-trust obligation' to IH. That central issue was not submitted to the jury. Under this record, it was essential that the judge leave the factual determination of the nature of the agreement to the jury. Instead, the District Court reached the conclusion that the Bank was obligated to loan the $84,291.69 for any purpose Mr. Weaver desired and therefore only left the jury to determine whether Mr. Weaver asked for the $47,000. This totally disregarded the conflict of the evidence.
The dissent suggests that the note and mortgage are facially clear and that no parol evidence should have been admitted which would contradict the instruments. As previously pointed out, no objections were made to the admission of the Bank's evidence in this regard. Further, the note and mortgage on their faces do not prove an obligation on the part of the Bank to deliver cash in any amount to Mr. Weaver. As an example, they would be appropriate as evidence of a debt already owed and past due. Clearly, it is necessary to go outside the terms of the instruments to determine what amount, if any, Mr. Weaver was entitled to apply on the $47,000 out-of-trust obligation to IH.
We hold that special interrogatory #1 was fatally deficient, and we remand for a new trial. For the guidance of court and counsel on remand, we will briefly consider the other issues raised on appeal.
II
Did the District Court err in the manner in which it submitted the issue of tortious interference with contract to the jury?
Over the Bank's objection, the court instructed the jury that:
"The elements of interference with contract are that (1) there be a valid business relationship or reasonable expectation of economic advantage, (2) knowledge of the relationship on the part of the party interfering, (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy, (4) resultant damage."
The Bank contends that this instruction omits the element of unjustifiability or impropriety of the alleged tortious actions.
In Bolz v. Myers (Mont. 1982), 200 Mont. 286, 651 P.2d 606, 611, 39 St.Rep. 1747, 1752, this Court set forth the elements of interference with contract: on the part of the actor, and (4) that actual damage and loss resulted. Bermil Corp. v. Sawyer (Fla.App. 3rd Cir. 1977), 353 So.2d 579."
"In order to establish a prima facie case of interference with contractual or business relations, it must be shown that the acts (1) were intentional and willful, (2) were calculated to cause damage to the plaintiff in his or her business, (3) were done with the unlawful purpose of causing damage or loss, without right or justifiable cause
The instruction given to the jury omits the requirement that the act is done "without right or justifiable cause on the part of the actor." The instruction given ignores the Bank's position that its refusal of the $47,000 loan, which led to the termination of the IH franchise, was not tortious because the refusal was justified and within the Bank's rights. We conclude that an instruction on interference with contract must provide that the act is "without right or justifiable cause on the part of the actor."
Ill a.
Did the District Court err in entering judgment upon the special verdict by entering judgment on the jury's findings of damages both for breach of contract and for tort?
In addition to the special interrogatory mentioned in Issue I, the jury considered special interrogatories on several tort and statutory claims. The jury found that the Bank did not breach a duty of good faith and fair dealing to the defendants when it refused to advance $47,000. It found that the Bank did intentionally and wrongfully interfere with the franchise contract between Weaver-Maxwell and IH; that the Bank committed fraud, deceit, or constructive fraud causing Weaver-Maxwell loss of the IH franchise; that the Bank made negligent misrepresentations causing the loss of the franchise; and that the Bank liquidated Weaver assets in bad faith. The jury set the amount of damages to Weaver-Maxwell for the tort causes of action at $800,000. Under the contract theory, the jury found that damages to Weaver-Maxwell were $300,000. The Bank's position is that $800,000 should be awarded as the larger of the alternative damage findings. However, the District Court found that the contract and tort damages were cumulative.
We conclude that the jury's verdict on the tort claims is unclear because the special interrogatories do not state which acts of the Bank were considered under each theory. The instructions should be revised on remand to show which acts of the Bank should be considered under each theory. Then it can be determined which tort damages are cumulative to contract damages and which are alternative.
III b.
Did the District Court err in entering judgment upon the special verdict because the special verdict's award of punitive damages conflicted with the jury's finding that the Bank had acted in good faith?
The jury found that the Bank did not breach its duty to act in good faith and deal fairly when it refused to advance $47,000 to the Weavers, but it did find that the Bank omitted other torts — interference with contract, fraud, negligent misrepresentation, and bad faith in liquidating the Weavers' collateral. Punitive damages could have been awarded under any of the tort theories presented, if the Bank was found guilty of oppression, fraud, or malice, actual or presumed. Section 37-1-221(1), MCA. The jury instructions should be revised on retrial so that the jury can state under which tort theory or theories it awards punitive damages.
IV a.
Did the District Court err in its resolution of the issues reserved for its decision, by denying the Bank's claim for a deficiency judgment?
The Bank's suit was for sums remaining due on unpaid notes after sale of the collateral, together with costs of preparing and liquidating the collateral. The District Court concluded that the Bank's "liquidation of the assets and collateral . . . was not commercially reasonable and that the Bank is not entitled to any deficiency judgment." It concluded that the Bank was not entitled to declare a default in the indebtedness of Weaver-Maxwell because the Bank had breached its loan agreement and destroyed Weaver-Maxwell's franchise. It also concluded that because of its tortious acts toward the defendants, the Bank had no right to recover the principal amounts of its loans outstanding to Weaver-Maxwell. The court concluded that the rights of the Bank to any claim for a deficiency were extinguished.
The Bank argues that neither the amount remaining owing on the loans nor the fact that it had not been paid was disputed. It asserts that it was entitled as a matter of law to a judgment for the $377,702.73 remaining due.
We conclude there is nothing in the record to justify denial of a deficiency judgment to the Bank. The court's conclusion that the liquidation of collateral was not commercially reasonable contradicts the jury's finding in special interrogatory #4b that the liquidation of the assets was commercially reasonable. Whether the Bank breached the underlying loan agreements was never an issue before the court. No cases or statutes have been cited which lead reasonably to the conclusion that the Bank's tortious conduct prohibited it from collecting on the underlying loans. In the absence of facts or legal theory beyond those in the present record, it would appear that the Bank is entitled to a deficiency judgment.
IV b.
Did the District Court err in its resolution of the issues reserved for its decision by ordering the Bank to surrender to defendants the proceeds of liquidation of collateral?
The District Court concluded that these proceeds should be surrendered on equitable grounds. No issue was raised by the defendants and no evidence was presented on a theory that the Bank should be required to surrender the proceeds of liquidation of collateral. We conclude that the jury's verdict was intended to fully compensate the defendants for tortious actions of the Bank. The record demonstrates no basis to require that the Bank surrender the proceeds.
IV c.
Did the District Court err in its resolutions of the issues reserved for its decision by awarding prejudgment interest at a rate of 18 %?
The District Court awarded prejudgment interest on the $300,000 damages for breach of contract at a rate of 18%, the rate of interest on Weaver-Maxwell's loans. The Bank argues that no prejudgment interest should have been allowed because the amount of contract damages was not subject to calculation prior to judgment.
Section 27-1-211, MCA, provides:
"Right to interest. Every person who is entitled to recover damages certain or capable of being made certain by calculation and the right to recover which is vested in him upon a particular day is entitled also to recover interest thereon from that day except during such time as the debtor is prevented by law or by the act of the creditor from paying the debt."
The defendants argue that the amount of contract damages is reasonably certain of calculation. They assert that the amount the jury awarded represents the amount of working capital of Weaver-Maxwell. In their counterclaim, the defendants claimed contract damages of $2,000,000. At trial, they asked for $3,000,000. The jury awarded $300,000 in contract damages. We conclude these were not the type of damages which are "certain or capable of being made certain by calculation," and that therefore prejudgment interest is not available. See Swenson v. Buffalo Bldg. Co. (Mont. 1981), 635 P.2d 978, 985, 38 St.Rep. 1588, 1597.
IV d.
Did the District Court err in its resolutions of the issues reserved for its decision by basing an award of attorney fees to defendants on their recovery on both their contract and tort claims?
The parties' loan contracts provided for reasonable attorney fees in actions for their enforcement. Section 28-3-704, MCA, makes the right to attorney fees reciprocal. The District Court awarded defendants attorney fees of $384,000, or 30% of the total amount awarded by the jury.
Attorney fees are awardable only when statute or contract provides for their recovery. Sliters v. Lee (1982), 197 Mont. 182, 641 P.2d 475. In a lawsuit involving multiple claims or multiple theories, an award of attorney fees must be based on the time spent by the prevailing party's attorney on the claim or theory under which attorney fees are allowable. Kadillak v. Montana Dept. of State Lands (1982), 198 Mont. 70, 74, 643 P.2d 1178, 1181. We conclude that in this case, attorney fees are awardable only on the contract claim.
Reversed and remanded.
MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON and GULBRANDSON concur.