Weinberg v. Farmers State Bank of Worden

• Decision Date: 04 April 1988
• Docket Number: No. 86-463,86-463
• Citation: 752 P.2d 719,45 St.Rep. 391,231 Mont. 10
• Parties: Thomas A. WEINBERG and Carolyn Weinberg, husband and wife, Plaintiffs and Respondents, v. FARMERS STATE BANK OF WORDEN, Montana, Defendant and Appellant.
• Court: Montana Supreme Court

Page 719

752 P.2d 719

231 Mont. 10

Thomas A. WEINBERG and Carolyn Weinberg, husband and wife, Plaintiffs and Respondents, v. FARMERS STATE BANK OF WORDEN, Montana, Defendant and Appellant.

No. 86-463.

Supreme Court of Montana.

Submitted Jan. 12, 1988.

Decided March 3, 1988.

Rehearing Denied April 4, 1988.

William Conklin argued, Conklin, Nybo & LeVeque, Great Falls, Pierre L. Bacheller, Inc., Billings, for defendant and appellant.

Michael J. Whalen argued, Whalen & Whalen, Billings, for plaintiffs and respondents.

Moulton Law Firm, Sidney R. Thomas argued for First Security Bank-Livingston, Billings, amicus curiae.

SHEEHY, Justice.

Farmers State Bank of Worden appeals from a judgment founded on a jury verdict in the District Court, Thirteenth Judicial District, Yellowstone County, awarding in favor of the Weinbergs compensatory damages in the amount of $104,790.75 and punitive damages of $100,000.00.

The Weinbergs have cross-appealed from the decision of the court awarding $12,500.00 in attorney fees, which the Weinbergs claim is inadequate.

We affirm the judgment against the Bank, and also affirm the award of attorney fees allowed by the District Court, but remand for an award of further attorney fees on appeal.

BANK'S APPEAL

Bank's Issues (Restated)

I. The District Court's special verdict form:

a. Adopted plaintiffs' view of disputed factual issues;

b. Concentrated on contract damages, and conflicted with instructions which related only to tort damages;

II. The evidence was insufficient to sustain the jury findings:

a. That the Bank breached its loan agreement;

b. That the Weinbergs were entitled to $104,790.00 in compensatory damages;

c. That the Bank breached an implied contract of good faith and fair dealing;

d. That any actual damages underlay the award of punitive damages;

e. That punitive damages were proper, and not the result of passion and prejudice.

Facts

In reviewing a jury verdict, our function is to determine whether substantial The Weinbergs began their farming career in the Bighorn River valley north of Hardin, Montana. Their operations were financed by the Production Credit Association (PCA) on notes that were endorsed by Weinberg's father. As their financial condition improved, they moved to a larger farm in the Yellowstone River valley, near Custer, Montana, in 1964. There they leased, on a crop share basis, a 2,200 acre farm consisting of 540 acres of irrigated land, 200 acres of dryland farmland, and the rest grazing land. In 1968, the Weinbergs began to finance with the Farmers Home Administration (FmHA) where their notes were not required to be co-endorsed. They operated on a direct farm operational loan from the FmHA until the FmHA felt they had sufficient collateral to obtain financing in the private market. At that point they began financing with the defendant, Farmers State Bank of Worden (Bank).

credible evidence in the record supports the jury verdict. We must view the evidence in the light most favorable [231 Mont. 15] to the prevailing party below, and if the record presents conflicting evidence which has been resolved by the jury, this Court is precluded from disturbing the verdict. Anaconda Company v. Whittaker (1980), 188 Mont. 66, 610 P.2d 1177. When the evidence is in conflict, we can only review testimony for the purpose of determining whether there is any substantial evidence in the record to support the verdict of the jury, and we must accept evidence there found as true, unless the evidence is so inherently impossible or improbable as not to be entitled to belief. Strong v. Williams (1969), 154 Mont. 65, 460 P.2d 90.

When the Weinbergs began doing business with the Bank, they owed virtually no money. They had a small herd of cattle and enough farm machinery to operate at the time.

In their farm operation near Custer, the Weinbergs raised more feed than they could use on the farm with their small herd of about 30 cows, a bull and a milk cow or two. They had discussions with Bud Lawrence of the Bank, who counseled them that they ought to expand their herd of cattle to use up the extra feed. The expanded operation would require an additional place in which to run the cattle. Accordingly, the Weinbergs made arrangements to lease a place near Bighorn for an expanded herd. On that basis, in 1974, the Bank advanced enough additional monies to expand the herd by 90 cows. The Bank had promised to advance the money necessary for the herd expansion.

The expanded operation was decidedly more expensive. The place that they rented for grass was 90 miles from the Custer operation and required trucking of cattle back and forth as the seasons demanded. There were veterinary bills, additional taxes, and the necessity to hire part-time help for the cattle. In the meantime, in 1974 and 1975, cattle prices dropped drastically. In the fall of 1975, the Weinbergs found themselves owing approximately $90,000.00.

In the fall of 1975, the Bank officers notified the Weinbergs that the Bank could no longer provide operating monies to the Weinbergs unless a guaranty of their debt from the FmHA could be obtained.

Accordingly, application was made to the FmHA for a Contract of Guarantee under the Emergency Livestock Credit Act of 1974 as amended. As part of the application, the Bank certified that it was unwilling to extend a line of credit to Weinbergs without the guaranty and that it would not refinance the existing loan balance without the guaranty. The Weinbergs signed the application, certifying that the statements of the Bank were true and also signed and submitted a separate application for the loan guaranty revealing their financial condition to show the necessity for the loan guaranty. On December 23, 1975, the FmHA issued its Contract of Guarantee to the Farmers State Bank of Worden, which guaranteed a line of credit up to a ceiling of $137,533.40 on loans made to Thomas A. Weinberg. The guaranty was for 90 percent of the difference owed on the total amount of principal and interest on any emergency livestock loan advances made within the line of credit ceiling and the value of any collateral or loan security at As part of the loan guaranty procedure, the Weinbergs had each signed a promissory note which was submitted as a part of the application. The note was dated November 14, 1975, due seven years later on November 14, 1982, for a face amount of $137,533.40, with an annual interest rate of 9.5 percent. (There were some additional finance charges unimportant here.)

the time of any foreclosure, unless sooner paid.

It was the contention of the Weinbergs that by the execution of the applications for the loan guaranty, the November 14, 1975 note, and the issuance of the loan guaranty, the Weinbergs and the Bank had agreed that for a period of seven years the Bank would extend to the Weinbergs loan advances on their cattle operation up to a ceiling limit of the face amount of the note at an annual rate of 9.5 percent. Any amounts advanced by the Bank over and above the face amount of the note would be subject to the prevailing rates of interest charged by the Bank at the time the additional loans were made.

The face amount of the November 14, 1975 note included about $93,000.00 for the refinancing of the existing indebtedness of the Weinbergs to the Bank, and a proposed amount of approximately $44,000.00 to be used for operational monies in the coming year. In connection with the loan, the Bank set up an escrow savings account into which all the monies received as income in 1976 from the farming operations of the Weinbergs were deposited, there to gain interest at approximately 5 percent per year. At the end of the year, the monies from the escrow account would be taken and applied on the indebtedness of the note.

In the fall of 1976, the Weinbergs had further discussions with officers of the Bank. They were told that the FmHA no longer required an escrow account to be kept and that it would be to the advantage of the Weinbergs to drop the escrow account, since thereafter, income received from farm operations would be applied directly to reduce the face amount of the loans outstanding. Thus, the monies, instead of lying in an escrow account at 5 percent, would be used to reduce the Weinberg indebtedness and so reduce the indebtedness which accrued interest at 9.5 percent. The Weinbergs were told, however, that in order to achieve this result, it would be necessary for them to sign a new note, a note they did sign on December 30, 1976, still in the face amount of $137,533.40, with interest at the rate of 9.5 percent but payable in one year, December 30, 1977. Thereafter, on each succeeding year, the Weinbergs signed successive notes as advances were made by the Bank and income was applied to the outstanding debt. However, in 1979 and 1980, interest rates had substantially increased and the successive notes signed by the Weinbergs were at rates of interest in excess of 9.5 percent, sometimes as high as 18 percent per year. The first interest rate increase occurred on April 3, 1979, when the Weinbergs were charged 11 percent.

In the Contract of Guarantee, issued by the FmHA, there is no specific date set for the expiration of the guaranty. All parties, and the FmHA, agree that the guaranty expired in the fall of 1982. The expiration date could only be gathered from the original note of November 14, 1975, which provided for a term of seven years. When the guaranty expired in the fall of 1982, the Bank notified the Weinbergs that it was unwilling to refinance the debt or to provide further operational monies. FmHA had indicated it would extend the guaranty for an additional ten years but on terms which were apparently unacceptable to the Bank. The Bank, therefore, required eventual liquidation of the collateral under the notes, which resulted in the sale of the entire Weinberg herd, some crops, and their farm machinery. More of the facts relating to the...