Opinion ID: 879244
Heading Depth: 1
Heading Rank: 2

Heading: should the district court have granted separate trials on the contract and tort issues?

Text: The District Court declined to bifurcate the trials so as to determine in separate trials (1) whether Britton intentionally caused the fire and (2) whether FIG committed a breach of good faith. FIG claims prejudice from the denial because of (a) the preclusion of evidence regarding the polygraph examinations, and the prior insurance claims for fire losses; (b) a finding of intentional burning by the insured would preclude further proceedings; (c) error in the order of presentation in the evidenceFIG claiming that it was entitled to present its evidence first because of its affirmative defenses of intentional burning and misrepresentation; and, (d) commingling of the evidence regarding FIG's affirmative defenses with evidence of unfair claims settlement practices and the wealth of FIG. The District Court denied the motion for separate trials upon the mistaken impression that the district judge earlier in jurisdiction had denied bifurcation of the issues. Several times during the trial the District Court made off-the-cuff comments that the case should have been severed for purposes of trial. In its order denying the post-trial motions made by FIG, the District Court noted that the earlier district judge had decided not to bifurcate the trial and that while this judge questions the wisdom of combining the claims because of very obvious problems that arise in the proof, it will not disturb Judge Henson's order. Although no order by District Judge Henson can be found in the record denying bifurcation, it is clear from the record that all parties assumed that he had done so and it was never brought to the attention of District Judge McPhillips that District Judge Henson had in fact not so ordered a denial. In Klaudt v. Flink (1983), 202 Mont. 247, 658 P.2d 1065, 40 St.Rep. 64, we held that a third party to the insurance contract could join his cause of action against the insurer for violation of the unfair claims settlements act of our code with the underlying action against the insured individual in a liability case. In 1985, the legislature enacted section 33-18-241, MCA, effective October 1, 1985, to the effect that the trial of a claim against an insurer for lack of good faith in its handling or settlement of a claim could not be consolidated with the trial of the underlying claim if the lack of good faith claim is against a party different from the party against whom the underlying claim is made without stipulation of counsel. Section 3, Ch. 504, Laws of Montana (1985). That statute does not apply to this case, both because of the effective date and because this case involves a first party claim. In deciding this issue, we must keep in mind the status of the pleadings in this case. As we indicated, Ronan State Bank started a foreclosure action against Britton, FIG and others by filing its complaint for foreclosure on May 10, 1982. Britton answered the Bank's foreclosure complaint by answer on July 19, 1982 in which Britton included a cross-claim against codefendant FIG. Britton's cross-claim does not allege a cause of action in contract, but rather one in tort for violation of the unfair claims settlement practices act, section 33-18-201, MCA. FIG responded to the Bank's complaint of foreclosure by filing its own cross-claim against the remaining defendants for foreclosure of its partial interest in the mortgage, and then set out ten defenses against Britton's claim in tort. The third defense alleged that Britton had failed to meet the terms and conditions of the policy for recovery; FIG's fourth defense alleged that Britton had intentionally caused the fire; FIG's fifth defense alleges willful concealment by Britton of material facts involving his interest in the insured property by fraud and by false swearing and by failure to submit a proper proof of loss within the time required by the policy; its sixth defense is one that Britton refused to submit to sworn statements and refused to produce records; the seventh defense raises estoppel, failure of consideration and fraud; its eighth defense is a claim for mitigation of Britton's damages; its ninth defense is that punitive damages are not permitted under applicable law; and its tenth defense is that Britton's claims are barred by section 50-63-405, MCA. On April 12, 1984, FIG moved for a separate trial, stating in its motion: ... [moves the Court] to order a separate trial of the defenses raised by Farmers in their answer to Plaintiff's Cross-Claim (including the defenses of failure to meet the terms and conditions of the insurance policy, intentional setting of fire, willful concealment, misrepresentation, fraud, false swearing, failure to submit a proper Proof of Loss and failure of the insured's son to properly submit to a sworn statement) and further directing that the trial of the remaining issues raised by the Plaintiff in his Cross-Claim be postponed until after final determination of the separate trial of the said issues.... . . . . . Defendant Farmers further moves that the trial of the allegations of Plaintiff's Cross-Claim, if required, follow immediately the trial on the affirmative defenses of Farmers, and be tried before the same jury. In a supporting brief, FIG argued for a separate trial, because its case would take a lesser amount of trial time and if decided in its favor would negate Britton's cross-claim. Here, Britton, having a choice of two remedies, one in contract and one in tort, elected to pursue his claim in tort. Recovery by him on his claim in tort would have the effect of barring his claim for breach of contract. Massett v. Anaconda Company (Mont.1981), 630 P.2d 736, 38 St.Rep. 961. If the District Court had granted FIG's motion for separate trials, it would have then converted Britton's claim for tort to one for breach of contract. Britton would then have been precluded from presenting any evidence as to consequential damages for the tort, let alone any evidence relating to punitive damages in the first trial. His right to a trial by jury of his tort claim, guaranteed by Art. II, § 26, 1972 Mont. Const. and the Seventh Amendment to the Federal Constitution would have been prejudiced. Under Britton's tort claim, the issues of fact regarding FIG's violations of the Unfair Claims Settlement Act are inextricably woven with FIG's claim of intentional burning. FIG made no attempt to sustain its other affirmative defenses. As we said in State ex rel. Fitzgerald v. District Court (1985), 703 P.2d 148, 42 St.Rep. 1061: It is clear to us that the issue of exemplary damages in any case is so interwoven with the proof first of negligence and secondly of willfulness, wantonness, malice or oppression, that their separation under Rule 42(b), M.R.Civ.P. for decision by a single jury seriatim or by different juries is an abuse of discretion by the District Court, which would result in extended and needless litigation. Moreover, FIG, having filed its motion for a separate trial while Judge McPhillips was in jurisdiction of the cause, failed to follow up on its motion to procure a written order or minute entry granting or denying separate trials. If Judge McPhillips orally denied the motion on the assumption that Judge Henson had earlier denied separate trials, it was the duty of counsel for FIG to alert the district judge as to his mistaken assumption. In those circumstances the district judge may not be put in error. FIG filed its motion for separate trials on April 12, 1984, and 11 days later, on April 23, 1984, the case came on for trial. What happened in the interim as to the motion for separate trials is not found in the record. FIG neither procured a written order granting or denying the motion, nor caused a minute entry to be made of the disposition of the motion. The case then went to trial without bifurcation. From the nature and extent of the motion made by FIG, it is clear that if the court had granted the motion it would have been reversible error. FIG's motion for separate trial was not directed simply to the issue of intentional burning by Britton. Rather, the motion requested that all of FIG's defenses be first tried before Britton's tort claim could be considered. FIG's affirmative defense of failure to meet the terms and conditions of the insurance policy would include the following issues of fact contended for by Britton and included in the pretrial order: That the damages caused by the fire claimed by Britton were exaggerated and in excess of the amounts indicated by FIG's investigation; that the bid of John Rody for $75,000 was reasonable and would completely repair the damaged structure; and that Britton refused to cooperate in identifying the location of Russell Britton. FIG's affirmative defenses of willful concealment, misrepresentation, fraud, and false swearing raised these issues of fact in the pretrial order: That Britton submitted a proof of loss for three saddles which were neither burned nor stolen at the time of the fire and were concealed for the purpose of fraud; and that his proof of loss for the three saddles was fraudulent. FIG's affirmative defense of Britton's failure to submit a proper proof of loss was intertwined as an issue of fact with Britton's claim that the failure of FIG to reject the proof of loss and to deny the claim constituted waiver and estoppel. FIG's further affirmative defense that the failure of the insured's son to properly submit to his sworn statement raised issues of both law and fact as to whether Russell Britton was an insured under the policy and whether he did in fact submit to a sworn statement. The issues of fact and law under FIG's defenses were inextricably intertwined with the issues and contentions of Britton that the damages caused by the fire exceeded the $75,000 which FIG paid to the Bank; that Britton had submitted a proof of loss in accordance with the stated value law and was entitled to payment of $116,000; that the actions of FIG were unreasonable in contending that it had a right to subrogation after paying the Bank, that Russell Britton was an insured under the policy, that Britton had intentionally burned the barn, that he had willfully concealed the saddles and had claimed insurance proceeds for their loss, and that FIG had never rejected his claim after proof of loss had been submitted, causing him emotional distress. Obviously it would have been impossible for the District Court to grant FIG a separate trial on the defenses claimed by FIG's without overlapping on issues raised by Britton in his tort claim. The policy of the law is to avoid multifariousness in litigation and to resolve all issues and lawsuits in one trial. Carlson v. Cain (Mont. 1985), 700 P.2d 607, 42 St.Rep. 695. Affirmative defenses which do not go to the merits of defendant's claim, as for example a defense of a statute of limitation or of lack of jurisdiction, may lend themselves to bifurcation, but affirmative defenses which dispute the merits of a claim on issues of fact do not. It is when plaintiff's issues of fact are interwoven and intertwined with the issues raised by the defendant that the rule we announced in State ex rel. Fitzgerald v. District Court (Mont.1985), 703 P.2d 148, 42 St.Rep. 1061, applies; a grant of FIG's motion for separate trials of its affirmative defenses in this case would have been an abuse of discretion, and reversible by us. Finally, as we stated earlier, all parties, including counsel for FIG, assumed that District Judge Henson had in fact entered an order denying bifurcation. This mistaken assumption continued past the time when District Judge McPhillips denied a new trial after the post-trial motions. It was not until this appeal that FIG raised the issue that District Judge Henson had not in fact so ruled. Thus Farmers is in the position of asking this Court to put District Judge McPhillips in error on a point not brought to his attention. This Court looks with disfavor on raising issues on appeal not addressed to the District Court in the underlying action. A trial court cannot be put in error, on its order denying a motion for a new trial, on matters not brought to its attention by notice or otherwise. See Gardiner v. Eclipse Grocery Company (1925), 72 Mont. 540, 234 P. 490.