Byers v. Cummings, 03-158.

• Docket Nº: No. 03-158.
• Citation: 2004 MT 69, 87 P.3d 465, 320 Mont. 339
• Case Date: March 23, 2004
• Court: United States State Supreme Court of Montana

87 P.3d 465
2004 MT 69
320 Mont. 339

Gary L. BYERS; Timothy W. Byers; Gary L. Byers Trust; Timothy W. Byers Trust; and G & T Holdings, LLP, Plaintiffs and Appellants,
v.
Steven E. CUMMINGS and Christensen, Moore, Cockrell, Cummings and Axelburg, P.C., Defendants and Respondents

No. 03-158.

Supreme Court of Montana.

Submitted on Briefs August 28, 2003.

Decided March 23, 2004.

87 P.3d 466

For Appellants: Norman L. Newhall and Stacy Tempel-St. John, Linnell, Newhall,

87 P.3d 467

Martin & Schulke, P.C., Great Falls, Montana

For Respondents: Gary L. Graham, Garlington, Lohn & Robinson, PLLP, Missoula, Montana.

Justice JIM REGNIER delivered the Opinion of the Court.

¶ 1 Gary Byers, Timothy Byers, Gary L. Byers Trust, Timothy W. Byers Trust, and G & T Holdings, LLP, (Byers) appeal from a jury verdict from the Eleventh Judicial District Court, Flathead County, finding Steven Cummings and Christensen, Moore, Cockrell, Cummings, and Axelburg, PC (Cummings), not negligent in their representation of the Byers during the sale of their company, Creative Sales and Manufacturing (CSM). We affirm. The issues presented on appeal are:

¶ 2 1. Whether substantial credible evidence existed to support a jury verdict of "no negligence."

¶ 3 2. Whether Cummings' change of testimony on a critical issue resulted in surprise which ordinary prudence could not have guarded against.

¶ 4 3. Whether the trial court erred in its failure to instruct on the duty mandated by Rule 1.4(b), Montana Rules of Professional Conduct.

¶ 5 4. Whether the trial court erred in its failure to instruct on Plaintiffs' theory of the case.

¶ 6 5. Whether the jury instructions, taken as a whole, were internally inconsistent and incomplete.

¶ 7 6. Whether the trial court erred in admitting evidence of third party fault.

¶ 8 7. Whether the trial court erred when it denied the Byers' Motion in Limine to exclude evidence regarding the Byers' repurchase of a portion of the assets from Finova and subsequent commencement of a new business.

BACKGROUND

¶ 9 The Byers owned CSM, a business that produced a variety of small products ranging from knife sharpeners to mirror extenders that were sold throughout the United States. They contracted with Geneva Financing Companies, Inc., to find a buyer for CSM. Geneva found a buyer referred to as Main Street Products (Main Street).

¶ 10 The Byers signed a letter of intent, dated April 6, 1998, proposing to sell CSM and associated patents to Main Street for $12,000,000; $4,000,000 payable at closing and $8,000,000 in future payments. They were not represented by Cummings when they signed the letter. The letter of intent set out general terms, including a section explaining Main Street's financing and potential subordination of the $8,000,000 to the main loan needed to purchase CSM. The letter explicitly stated that "a binding agreement will exist only upon execution of a definitive stock purchase agreement and consulting, non-compete and sales commission contracts on the Closing Date."

¶ 11 Cummings commenced representation of the Byers' interest on May 26, 1998. He testified that during the initial meeting with Gary, he read over the letter of intent and explained to Gary that he was not bound by this letter. He also noted that the $8,000,000 would be subordinate to Main Street's lender. He followed up with a letter dated May 28, 1998, spelling out his concerns including the possibility of the new company going into bankruptcy, the $8,000,000 being subordinate to Main Street's lender and the vagaries of bankruptcy laws. He informed his clients that they could potentially end up with nothing. He advised the Byers that future payments were subject to significant risks. Cummings viewed his responsibilities to the Byers as advising them of the risks involved in the transaction, explaining the transaction to them in order for them to make informed decisions, and completing legal paperwork.

¶ 12 On July 16, 1998, the Byers signed a document referred to as the "Commitment Letter" delineating the sale price and specifics about the Agreement of Purchase and Sale of Stock, Agreement of Purchase and Sale of Patents and the Lease. According to Cummings' testimony, the Commitment Letter did not set out the provisions of the anticipated subordination agreement because

87 P.3d 468

the terms were not determined at that point in time. He also testified that he thought the Byers could not be bound by this letter without signing the subordination agreement, as it was necessary to the transaction

¶ 13 When Cummings ultimately received the Subordination and Standstill Agreement (Subordination Agreement), he asked Tom Wynne, the Byers' financial consultant, to review the document, specifically the "financial covenants" which restricted Main Street from paying the Byers unless it complied with such conditions. Wynne informed Cummings that the covenants appeared reasonable to him. Cummings participated in negotiations of the Subordination Agreement for the benefit of his clients. Main Street and the lender entered into a collateral document, the Loan and Security Agreement, including its attached Schedule (Loan Agreement). It defined some terms that were in the Subordination Agreement and set forth additional covenants, however, the Byers were not a party to this document, therefore, Cummings testified that he did not participate in negotiations regarding the Loan Agreement nor did he review it prior to closing.

¶ 14 On July 27, 1998, the parties executed pertinent documents and closed the sale of CSM. The Byers received the first three quarterly payments, however, on May 7, 1999, Main Street notified them that it would be unable to make payments due to non-compliance with the financial covenants of the Loan Agreement. As a result of non-compliance, Main Street no longer paid the Byers the required quarterly payments.

¶ 15 On March 26, 2001, the Byers filed a complaint against Cummings maintaining numerous allegations of legal malpractice. The trial began on October 7, 2002. The Byers presented Kristen Juras as their expert and Cummings presented Thomas Boone as his expert; Juras and Boone both testified concerning the standard of care of an attorney in such a transaction. In response to the standard established by both experts, the Byers proposed a jury instruction based upon Rule 1.4(b), Montana Rules of Professional Conduct, however, the court refused to give the instruction. On October 11, 2002, the jury returned a verdict in favor of Cummings, finding he was not negligent in his representation of the Byers. It is from this verdict that the Byers appeal.

STANDARD OF REVIEW

¶ 16 This Court's scope of review of jury verdicts is necessarily very limited, and we will not reverse a jury verdict which is supported by substantial credible evidence. Satterfield v. Medlin, 2002 MT 260, ¶ 13, 312 Mont. 234, ¶ 13, 59 P.3d 33, ¶ 13. It is within the province of the jury to determine the weight and credibility afforded to the evidence, and it is not this Court's function to agree or disagree with the jury's verdict. Thus, we must view the evidence in the light most favorable to the prevailing party. Magart v. Schank, 2000 MT 279, ¶ 4, 302 Mont. 151, ¶ 4, 13 P.3d 390, ¶ 4.

¶ 17 The standard of review for a district court's refusal to issue a proposed jury instruction is whether the court abused its discretion. Finstad v. W.R. Grace & Co., 2000 MT 228, ¶ 37, 301 Mont. 240, ¶ 37, 8 P.3d 778, ¶ 37. In reviewing for abuse of discretion, the reviewing court does not determine whether it agrees with the trial court. Rather, it considers whether the trial court, in its exercise of discretion, acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason in view of all circumstances. Schuff v. A.T. Klemens & Son, 2000 MT 357, ¶ 27, 303 Mont. 274, ¶ 27, 16 P.3d 1002, ¶ 27.

DISCUSSION

ISSUE ONE

¶ 18 Whether substantial credible evidence existed to support a jury verdict of "no negligence."

¶ 19 In asserting there was insufficient evidence to support the no negligence verdict, the Byers argue Cummings had a duty to obtain and review all the relevant documents in order to explain the nature of the transaction to the extent that it was necessary in order to enable them to make an informed decision. In failing to perform this duty, the Byers maintain that Cummings was clearly negligent when he allowed them

87 P.3d 469

to make a binding commitment to sell CSM before he had adequately reviewed the pertinent documentation and subsequently explain the documents. Central to this argument is their contention that Cummings neglected to obtain and review the Loan Agreement which contained term definitions and additional financial covenants that the Subordination Agreement did not set forth, yet had a risk impact on the ability of the Byers' to receive their scheduled payments

¶ 20 Cummings counters that the evidence presented...