Opinion
No. 88-566
Submitted on Briefs March 23, 1989
Decided April 13, 1989 Rehearing Denied May 4, 1989
Appeal from the District Court of Daniels County. Fifteenth Judicial District. Hon. M. James Sorte, Judge Presiding.
William P. Driscoll, Gough, Shanahan, Johnson and Waterman, Helena, for plaintiff and appellant
Jerrold L. Nye, Nye and Meyer, Billings, for defendant and respondent
Plaintiff, United States Fidelity and Guaranty Company (USFG), 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 USFG 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. USFG appeals
The sole issue on appeal is whether the District Court's findings and conclusions are clearly erroneous because USFG 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), [ 233 Mont. 75,] 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 . . ."
On May 1, 1984, Cromwell and Forchak executed an "Application for License and Miscellaneous Bonds" with USFG. 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 USFG 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 [USFG] 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 [USFG] 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 [USFG] in connection with the same or any other agreements herein contained."
On June 25, 1984, USFG claimed it issued bond number 28-0130-10341-84-6 with USFG 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 Bonds" (rider) from USFG 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, USFG 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 subsequently declared bankruptcy and was discharged from this obligation leaving an unpaid balance of $10,543 due the lessors
The lessors notified USFG 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 USFG 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
USFG filed suit against Cromwell and Forchak to recover on the bond for USFG's 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. USFG 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 USFG did not prove that an indemnification contract existed between USFG 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 USFG 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
Best Evidence
At trial USFG failed to introduce the original bond or the original rider. Instead, Williams, as custodian of the records for USFG, introduced a sample form of the bond and the rider with the appropriate information typed in to show the court what obligations the bond purported to impose. Williams testified that the originals were likely in the hands of the lessors. However, USFG 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 USFG tried both approaches and failed
During discovery USFG 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 USFG 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 USFG 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 dollars" interest was paid out on the bond to someone
USFG 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, USFG 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
MR. JUSTICES HARRISON, SHEEHY, HUNT, McDONOUGH, GULBRANDSON and WEBER concur