Court Opinion

ID: 880491
Source: CourtListenerOpinion
Date Created: 2013-06-05 00:11:12.01773+00
Date Added: 2024-06-11T15:26:02.739335
License: Public Domain

No. e ? - 5 6 6

                  IN THE SUPREME COTJRT OF THE STATE OF
                                            1989

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UNITED STATES FIDELITY and GIJARANTY                                             '
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                       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, 1 9 8 9
                                              Decided:   April 13r 1 9 8 9

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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 evi-
          dence 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 under-
          signed 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 pro-
tected. Cromwell identified his signature on the second applica-
tion 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&Gtsmonies 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 i n t o show the court what obligations
the bond purported to impose. Williams testified that the origi-
nals 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'
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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.

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We c o n c u r :