Unpublished Disposition, 912 F.2d 469 (9th Cir. 1988)

MEMORANDUM^* 

Plaintiffs Eldon Kuhns ("Kuhns"), his wife, and his daughter filed suit against defendants Montana Bancsystem, Inc. ("MBI") and several of its officers, directors, and employees, alleging in part breach of contract, breach of the covenant of good faith and fair dealing implied in an employment relationship, and violations of the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. ("ERISA").

Kuhns purchased twelve small banks in Montana in 1973, consolidating them and in 1981 forming MBI, a multibank holding company headquartered in Billings, Montana, which was structured as a closely held corporation with a small number of shareholders. Kuhns served as chief operating officer (1981-84), chairman of the board (1981-December 31, 1985), and chairman (January 1982-December 31, 1985) and member (January-February 21, 1986) of the Employee Stock Option Plan ("ESOP") Advisory Committee. Kuhns was also a director and shareholder from 1981 onward.

In July 1977 MBI's predecessor-in-interest provided Kuhns with a deferred compensation plan, designated an "Employment Agreement," which MBI ratified and continued throughout the remainder of Kuhns' employment. The plan furnished a liquidity advantage for MBI and a tax savings for Kuhns. Under the plan from 1982 onward, interest was to accrue on the deferred balance at between eight and ten percent, with additional accruals to the plan determined annually based on MBI's performance.

In April 1982 the shareholders adopted a "Shareholder Agreement," which provided that shareholders who wanted to sell their shares would first have to offer the shares to MBI and its ESOP. If both declined to purchase the offered shares, MBI would then have to circulate the offer to the other shareholders. If the other shareholders also declined to purchase the offered shares, the shareholder could then sell the shares to a third party. The Agreement also provided for its own termination upon the private sale of MBI to another corporation.

On December 20, 1983 on Kuhns' earlier suggestion, MBI's board of directors converted a two million dollar term-life insurance policy on Kuhns, which MBI had pledged as collateral on its own obligations, to a whole-life insurance policy. Pursuant to the parties' informal agreement, MBI paid the policy premiums, with Kuhns providing reimbursement from the monthly deferred compensation plan payments he would receive upon his departure; thus, the policy would cost MBI nothing. To cover the interest due on the premium payments, the plan's interest rate was reduced from ten to seven percent. The premium payments were recorded as receivables from Kuhns under the plan. Kuhns was to have the right to designate the policy's owner and beneficiary, but from this date until September 1986, Kuhns' repeated attempts to get MBI, because it was not his own personal responsibility, to transfer the policy's ownership to his wife and to designate his wife as beneficiary failed. During that time MBI remained the owner and beneficiary of the policy, using it as its own and pledging it as collateral on its own obligations.

On October 4, 1984 Kuhns signed an agreement, on behalf of MBI and its board of directors, to sell all of MBI's stock to Security Banks of Montana, Inc. ("SBM"). Pursuant to this agreement, Kuhns assumed that there would be an immediate redesignation of his wife as owner and beneficiary of the life insurance policy. Kuhns and a majority of the shareholders subsequently executed a "Letter of Acceptance," accepting SBM's offer to purchase MBI's stock, but the Federal Reserve Board subsequently disapproved the proposed sale, and MBI remained owner and beneficiary of the policy.

On December 21, 1984 the board of directors formally adopted the parties' December 20, 1983 agreement regarding Kuhns' deferred compensation plan and life insurance policy. The board also adopted a schedule showing the accrual balance of the plan and proposed payments. The schedule calculated the plan's balance as of June 30, 1986, Kuhns' departure date, to be $671,541, with an offset of $214,424 for the policy premiums, resulting in a final balance of $457,117, to be paid monthly over the ten years following Kuhns' departure. As Chairman of the Board, Kuhns signed the minutes, which formally adopted the agreement and schedule.

In April 1985 Kuhns, experiencing serious financial problems, submitted a written offer to sell 100,000 shares of his stock to MBI and the ESOP, pursuant to the Shareholder Agreement. In response to this and other offers to sell large blocks of shares, MBI attempted to formulate a workable proposal for these purchases. MBI also began experiencing serious financial problems, which continued throughout 1985, and never agreed to purchase or redeem Kuhns' shares. However, on June 28 the ESOP approved a stock purchase in the amount available funds would allow; in August of 1985 the ESOP actually purchased 12,500 shares from Kuhns.

In November of 1985 MBI, still facing serious financial difficulties, analyzed its operations and structure, including a committee review of executive salaries. This committee recommended the resignation of President Bruce Ellis and reinstatement of Kuhns as CEO, also recommending certain severance benefits for Ellis, including the possible liquidation of Ellis' shares. Also in November on the 13th, Kuhns notified MBI that he did not believe he should be held liable for the entire cost of the policy premiums because, despite his repeated requests, MBI had not transferred the policy's ownership to his wife.

On December 18, 1985 at the board of directors meeting, Kuhns, to the surprise of the board, voluntarily and unconditionally orally resigned as chairman of the board. Kuhns subsequently signed the minutes, which contained his resignation, sent a letter to shareholders announcing his resignation, and sent a letter to the subsidiary bank presidents and MBI's staff that unequivocally stated that he had resigned as chairman. Kuhns did, however, continue to perform regular services for MBI until June 30, 1986, when his phone was disconnected and the locks on his door were changed, and did not receive outside director's fees.

On January 9, 1986 Kuhns wrote MBI regarding his termination and his ownership of 181,645 shares (4,942 of which were owned by his wife), as well as 19,814 shares in his daughter's name, hoping to liquidate these holdings. He also hoped to receive separation pay in the amount of $450,000 and a consulting and non-compete agreement for five years with a minimum annual salary of $12,000 to $24,000, a free office and free office services, and an hourly rate of $175 to $200, to be offset against the minimum salary. He also calculated his deferred compensation plan balance to be $671,541, not allowing for any offset of policy premiums. Furthermore, as MBI had full use of the life insurance policy, which Kuhns estimated would have cost $32,000, he suggested that the plan balance be set at $700,000.

On January 24, 1986 the board of directors discussed Kuhns' separation package and agreed that the repurchase of Kuhns' stock was not feasible at that time. The board also decided that because Kuhns had voluntarily resigned, instead of being terminated, he should not receive any severance pay. However, because Kuhns stepped down for the good of the company, the board decided to pay Kuhns his salary through June as a severance benefit. The board, in accordance with the December 21, 1984 schedule, offset Kuhns' deferred compensation plan balance by $286,859.50, $214,424 of which represented a lump-sum offset of the policy premiums. On advice of tax specialists, the entire amount of the offset was reported as income to Kuhns in 1986 on the W-2 form filed with the Internal Revenue Service ("IRS").

In mid-1986, on the advice of outside counsel, MBI filed a declaratory judgment action in Montana state court to determine the validity and interpretation of the Shareholder Agreement. The state court ruled on summary judgment, before the present case was tried, that "when the Board of Directors and a majority of the shares decided to sell as they did [the SBM-MBI agreement], the shareholder agreement terminated by its own terms." Montana Bancsystem, Inc. v. Winograd, No. DV 86-1728 at 2 (Mont.Jud.Dist.Ct. Dec. 16, 1987).

On July 1, 1986 MBI began paying Kuhns' wife, the beneficiary of the deferred compensation plan, monthly payments based on its calculation of the plan balance; in September 1986 MBI transferred the life insurance policy's ownership to her.

On October 2, 1986 Kuhns, his wife, and his daughter filed suit against MBI and several of its officers, directors, and employees. They alleged in part that MBI had agreed to purchase at least 100,000 of Kuhns' shares and that under Montana law MBI was contractually bound or equitably estopped from denying this obligation, that MBI had breached the terms of the Shareholder Agreement, that MBI had breached the covenant of good faith and fair dealing implied in its employment relationship with Kuhns, and that Kuhns' deferred compensation plan constituted an ERISA plan and MBI had breached its ERISA fiduciary duties.

After a trial on the merits, the district court ruled that MBI was not contractually obligated under Montana law to purchase Kuhns' shares. However, the court ruled that MBI breached the covenant of good faith and fair dealing, awarding $189,605 (13 months at $14,585/mo.) in severance pay, $18,961 in additions to Kuhns' ESOP, and $40,000 in compensatory damages. The court also ruled that Kuhns' deferred compensation plan constituted an ERISA plan and that MBI had breached its ERISA fiduciary duties in its manipulation of the plan, awarding the plan $214,424 in restoration of the premium offsets and $210,558 in lost accrued interest on these offsets from 1983 to September 1986 and ordering a new increased payment schedule, his wife $157,513 in lost accrued interest on withheld deferred compensation payments from July 1, 1986 through June 30, 1988, and Kuhns $40,000 in compensatory damages arising from the issuance of the W-2 form,¹  and $39,905.87 in attorney's fees on the ERISA claims pursuant to ERISA, 29 U.S.C. § 1132(g) (1).

Kuhns appeals (1) the district court's ruling that MBI was not contractually obligated under Montana law to purchase Kuhns' shares and (2) the court's calculation of its ERISA attorney's fees award. MBI appeals (1) the court's ruling that it breached the covenant of good faith and fair dealing; (2) the court's ruling that Kuhns' deferred compensation plan constituted an ERISA plan and that MBI breached any ERISA fiduciary duty or duty under Montana law in its handling of the plan; and (3) the court's ERISA attorney's fees award.

The district court's findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses. Fed. R. Civ. P. 52(a); Rozay's Transfer v. Local Freight Drivers, 850 F.2d 1321, 1326 (9th Cir. 1988), cert. denied, 109 S. Ct. 1768 (1989). The district court's findings of law are reviewed de novo. Id.

Kuhns first argues that the district court erred in its findings regarding MBI's alleged breach of the Shareholder Agreement in its handling of his April 1, 1985 offer and an alleged January 9, 1986 offer to sell his shares. He contends that MBI was contractually obligated under Montana law to purchase his shares because the Agreement required MBI to either accept his offers or to reject his offers and circulate them to the other shareholders, that MBI failed to honor this obligation, and that he detrimentally relied on MBI, as the Agreement prohibited him from alternatively disposing of his shares.

Kuhns apparently raises the existence of an alleged January 9, 1986 offer contained in his letter of that date for the first time on appeal, having contended at trial that the letter created an obligation by MBI to purchase his shares as a severance benefit as per MBI's prior dealings with other employees. The district court rejected this argument, which Kuhns does not challenge, not addressing whether the letter was an offer to sell his shares.

Contrary to Kuhns' present position, the record shows that this letter does not contain an offer to sell shares; it merely offers proposals and alternatives regarding possible severance benefits related to his voluntary resignation the previous month. Furthermore, the record shows that the February-March 1986 correspondence cited as support for this position discusses his April 1, 1985 offer, not the alleged January 9, 1986 offer.

At trial Kuhns contended that MBI had accepted his April 1, 1985 offer or alternatively that MBI's failure to circulate his offer breached the Shareholder Agreement. The district court rejected the first part of this argument, which Kuhns does not challenge, and found that the Agreement had terminated by its own terms in January 1985 when a majority of MBI shareholders elected to sell their shares to SBM. Kuhns challenges this finding, contending that a savings clause in the SBM-MBI agreement restored MBI to its presale status, that the parties intended the Shareholder Agreement to be valid and binding after the failure of the SBM-MBI deal, and that the court improperly relied upon the state court declaratory judgment action.

The district court's interpretation of the Shareholder Agreement is a matter of law and is reviewed de novo. See Irwin v. Carpenters Health and Welfare Trust Fund, 745 F.2d 553, 555 (9th Cir. 1984). Although the court did not specifically address Montana contract law in its interpretation of the Agreement, its findings necessarily implicate such law. These implicit rulings on Montana contract law are also matters of law and are reviewed de novo. See Hutchinson v. United States, 841 F.2d 966, 967 (9th Cir. 1988).

Under Montana contract law, " [a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." Mont.Code Ann. Sec. 28-3-301. See also Mont.Code Ann. Sec. 28-3-302 (ascertainment of intention). Where the contract is written, "the intention of the parties is to be ascertained from the writing alone if possible." Mont.Code Ann. Sec. 28-3-303. See also Mont.Code Ann. Sec. 28-3-302. Where the language of a written contract is clear and unambiguous, there is nothing to construe; " [I]t is the court's duty to enforce it as made by the parties." Schulz v. Peake, 178 Mont. 261, 583 P.2d 425, 428 (1978) (citations omitted). See Kartes v. Kartes, 195 Mont. 383, 636 P.2d 272, 274. See also, Mont.Code Ann. Secs. 1-4-101 (role of judge); 28-1-103 (governing rules of interpretation).

The Shareholder Agreement provided in part:

Termination of Agreement. This Agreement shall terminate and the certificates representing the shares of stock and any insurance policies subject to this Agreement shall be released from the terms of this Agreement, on the occurrence of any of the following events ... (e) A determination by the Board of Directors of the Corporation and a majority of the holders of shares outstanding to sell or exchange such shares in a private offering to another corporation.

This clause is clear and unambiguous; it needs no construction and it is our duty to enforce it as written.²  See Schulz, 178 Mont. 261, 583 P.2d at 428. The record shows that the board on October 4, 1984 and the shareholders in January 1985 made such a determination to sell their shares to SBM. Therefore, although the record also shows that MBI handled various offers by its shareholders under the terms of the Agreement after January 1985, and even though the record also shows that several MBI officers, directors, and employees assumed that the Agreement was still in force, we agree with the district court's ruling and find that because the Agreement terminated by its own terms in January 1985, three months before Kuhns' April 1, 1986 offer, MBI's failure to circulate Kuhns' offer did not breach the Agreement.

Kuhns also argues that because MBI notified him on March 13, 1986 that "the corporation will proceed in accordance with the shareholders agreement," but failed in its obligation under the Agreement to either accept his offer or to reject his offer and circulate it to the other shareholders, MBI is estopped from denying its obligation to purchase his shares.

Although the district court did not specifically address Montana estoppel law in its ruling that MBI was not contractually obligated under Montana law to purchase Kuhns' shares, its findings necessarily implicate such law. These implicit rulings on Montana estoppel law are matters of law and are reviewed de novo. See Hutchinson, 841 F.2d at 967.

The essential elements of estoppel in Montana are:

(1) Conduct, acts, language, or silence amounting to a representation or concealment of material facts;

(2) the estopped party knows the facts at that time;

(3) the other party does not know of these facts;

(4) the estopped party's conduct must be done with the intention that it will be acted upon by the other party;

(5) the other party must rely upon and be led to act upon the estopped party's conduct; and

(6) the other party must suffer a detriment.

Sampson v. Broadway Yellow Cab Co., 226 Mont. 273, 735 P.2d 298, 300 (1987).

Kuhns claims that MBI's own March 7, 1986 letter represents that MBI had approved Kuhns' offer in accordance with the Agreement, that Kuhns did not know of MBI's true intention not to uphold the Agreement (as evidenced by the declaratory judgment action), that MBI knew Kuhns would rely on its representation, and that Kuhns did in fact rely to his own detriment.

Neither the district court's findings nor the record support Kuhns' argument. The court found, after considering all of the evidence, including the March 13th letter, that the board never committed or promised to purchase his shares and acted prudently, reasonably, and in good faith regarding its consideration of his offer. There is no record evidence showing that MBI ever accepted Kuhns' offer to sell his shares. The court also found that the board's decision to obtain a declaratory judgment regarding the Shareholder Agreement was a legitimate business decision and that the board acted in good faith and exercised reasonable business judgment, and were not motivated by malice or an intent to harm Kuhns. There is no record evidence showing that the board's action was improper.

Most importantly, the record shows that Kuhns, in his position as founder, chairman of the board through December 31, 1985 and director must have known that the acceptance of his April 1, 1985 offer and any resultant purchase would have to have formal board approval, that MBI was experiencing serious financial problems, that the ESOP was the only potential buyer of stock, and that MBI and the ESOP did not have the capability to purchase his shares. In short, it is inconceivable that Kuhns was ever misled, as he was intimately involved with every aspect of MBI, the board, and the ESOP.

Therefore, because we find that the district court's findings regarding MBI's alleged breach of the Shareholder Agreement regarding Kuhns' April 1, 1985 offer and alleged January 9, 1986 offer to sell his shares were not clearly erroneous, that the Agreement terminated as of January 1985, and that MBI was not estopped from denying that it had an obligation to purchase his shares, we affirm the court's ruling that MBI was not contractually obligated under Montana law to purchase Kuhns' shares.

2. Breach of the Implied Covenant of Good Faith and Fair Dealing

MBI contends that the district court erred in its ruling that MBI breached the covenant of good faith and fair dealing in its employment relationship with Kuhns and its award of severance pay, additions to Kuhns' ESOP, and compensatory damages. MBI argues that under Montana law the implied covenant of good faith and fair dealing is applicable only when an employee has been terminated, not when the employee has voluntarily resigned. See Frigon v. Morrison-Maierle, Inc., 233 Mont. 113, 760 P.2d 57, 60 (1988).

In Frigon, involving an employee resignation, the Montana Supreme Court stated, "Breach of the covenant of good faith and fair dealing [is] applicable only in cases of employee termination" and dismissed the employee's breach claim. Id. at 60. The court in its analysis specifically considered earlier Montana employee termination cases including Dare v. Montana Petroleum Mktg. Co., 212 Mont. 274, 687 P.2d 1015, 1020 (1984) and Gates v. Life of Montana, 196 Mont. 178, 638 P.2d 1063, 1066-67 (1982) ("Gates I "), both of which allowed such claims, distinguishing each as employee termination cases, not resignation cases.

In the present case the district court found that Kuhns voluntarily and unconditionally resigned at the December 18, 1985 board meeting, signing the board minutes, sending a letter to shareholders discussing his resignation, and sending a similar letter to subsidiary bank presidents and MBI staff. However, after discussing MBI's January 24, 1986 decision to give him six months of severance pay by continuing his salary through June 30, 1986 and his performance of regular services for MBI until June 30, 1986, the court found that the severance pay was "actually his regular compensation," also noting that Kuhns did not receive outside director's fees. The court then discussed the final termination of Kuhns' employment in July 1986 when his phone was disconnected and his locks were changed on his door and found that " [a]lthough [it had] previously found that Kuhns voluntarily and unconditionally resigned from MBI, the Court finds that the covenant of good faith and fair dealing was implied in Kuhns' employment relationship with MBI" and that Kuhns was "entitled to damages for MBI's breach of the covenant of good faith and fair dealing," citing Dare.

The court's finding that Kuhns voluntarily resigned and its conclusion that MBI breached the covenant of good faith and fair dealing raise an apparent conflict with the Frigon rule. Although the district court's findings were filed two months prior to Frigon, and its judgment was filed one month prior to Frigon, Frigon was brought to the attention of the court in MBI's post-judgment motion to amend, and MBI's brief acknowledges that it provided the court with a copy of Frigon. Therefore, we cannot conclude that the district court was unaware of the Frigon rule.

We refuse to believe that the court misconstrued or misapplied the clear rule enunciated in Frigon, and therefore must find that the district court, aware of Frigon, must have implicitly found, despite Kuhns' voluntary and unconditional resignation, that his employment continued until June 30, 1986, at which time MBI terminated him. We base this finding upon the court's own findings regarding Kuhns' continued performance of services for MBI, his receipt of salary, his non-receipt of outside director's fees, and the July lockout. Furthermore, we find that such an implicit finding is not clearly erroneous, as it is supported by the court's own findings and the record evidence, even though the court's specific finding that Kuhns voluntarily and unconditionally resigned is also supported by the record.

Therefore, because we find that the district court's implicit finding regarding Kuhns' continued employment beyond his resignation was not clearly erroneous, we affirm the court's ruling that MBI breached the duty of good faith and fair dealing implied in its employment relationship with Kuhns and its award of severance pay, additions to Kuhns' ESOP, and compensatory damages.

This Circuit has ruled, "The existence of an ERISA plan is a question of fact, to be answered in light of all the surrounding facts and circumstances from the point of view of a reasonable person." Kanne v. Connecticut Gen. Life Ins. Co., 859 F.2d 96, 98 (9th Cir. 1988) (emphasis added). Therefore, it is reviewed for clear error. See Rozay's Transfer, 850 F.2d at 1326.

MBI first contends that the district court erred in its ruling that Kuhns' deferred compensation plan constituted an ERISA plan, citing various authorities.

ERISA provides:

The terms "employee welfare benefit plan" and "welfare plan" mean any plan, fund, or program ... established or maintained by an employer ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits ... or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions).

29 U.S.C. § 1002(1).

Section 186(c) concerns money paid to trust funds for the purpose of pooled vacation, holiday, severance, or similar benefits. 29 U.S.C. § 186(c) (6).

In Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (en banc), the Eleventh Circuit held that

a "plan, fund, or program" under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits. To be an employee welfare benefit plan, the intended benefits must be health, accident, death, disability, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits; the intended beneficiaries must include union members, employees, former employees or their beneficiaries; and an employer or employee organization, or both, and not individual employees or entrepreneurial businesses, must establish or maintain the plan, fund, or program.

(emphasis in original).

This Circuit has adopted the Donovan analysis:

ERISA does not contain a clear definition of the word "plan." ... [we require facts that] would enable a reasonable person to "ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits."

Scott v. Gulf Oil Corp., 754 F.2d 1499, 1503-04 (9th Cir. 1985) (quoting Donovan, 688 F.2d at 1373).³ 

We find that in the present case neither the court's express or implicit findings or the record provide facts that would enable a reasonable person to ascertain such intended benefits of Kuhns' deferred compensation plan, which consisted of the parties' 1977 Employment Agreement and their December 20, 1983 agreement, formally adopted with schedule on December 21, 1984. The plan does not provide health, accident, disability, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services. Nor does the plan provide death or severance benefits.

Although the life insurance policy relates to the deferred compensation plan, the record shows that the parties' agreement provided that Kuhns would pay for it, not MBI; MBI was not providing Kuhns with any benefit, as the policy would cost MBI nothing. Furthermore, the record shows that Kuhns did in fact pay for it, costing MBI nothing, through the agreed offsets.

Although the plan did not begin payment until after Kuhns' departure from MBI, Kuhns has not alleged, nor does he now allege, that the plan provided severance benefits. To the contrary, as discussed above, he has consistently (and successfully both below and on appeal) argued that MBI breached the covenant of good faith and fair dealing in its refusal to provide severance benefits. As the court found below, the only purpose of the plan was to provide Kuhns a tax advantage and MBI a liquidity advantage. This finding is supported by the record and is not clearly erroneous.

Therefore, because we find that the record in the present case would not enable a reasonable person to ascertain the intended benefits of Kuhns' deferred compensation plan,⁴  we reverse the district court's ruling that Kuhns' deferred compensation plan constituted an ERISA plan, vacate its ruling that MBI breached its ERISA fiduciary duty, and vacate its award of restorations and accrued interest to the plan, accrued interest to his wife, compensatory damages related to the issuance of the W-2 form to Kuhns, and ERISA attorney's fees, and its order of a new increased payment schedule.

Because the district court erroneously found that Kuhns' deferred compensation plan constituted an ERISA plan, it did not address whether MBI's handling of the plan violated Montana contract law. Although the parties' briefs both address this issue, we find that Kuhns did not raise the applicability of Montana law to MBI's handling of the plan in his complaint or at trial, alleging only an ERISA claim. While we generally will not address an issue for the first time on appeal, we make an exception where review is necessary to prevent a miscarriage of justice or to preserve the integrity of the judicial process. Jovanovich v. United States, 813 F.2d 1035, 1037 (9th Cir. 1987). The present case meets this exception.

MBI argues that the December 21, 1984 finalized agreement is clear and unambiguous regarding MBI's right to offset the insurance premiums against Kuhns' deferred compensation plan and therefore it did not breach its contract under Montana law. As we have previously discussed, we must interpret the parties' agreement so as to give effect to the mutual intention of the parties. See Mont.Code Ann. Sec. 28-3-301.

Under the agreement the parties did intend to allow MBI to offset the premium payments as a lump sum, but they also intended that as of December 1983 Kuhns would have the right to designate the policy's owner and beneficiary. The district court found that despite Kuhns' repeated requests, MBI failed to transfer the policy until September 1986. This finding is amply supported by the record and is not clearly erroneous. Therefore we find that under Montana law MBI's failure to transfer the policy from December 1983 until September 1986 breached the parties' agreement.

Kuhns arguably did not suffer any damages related to MBI's failure to transfer the policy because he did not die, nor did he suffer damages related to MBI's offset of the premium payments because in September 1986 when MBI transferred the policy to Kuhns, as noted by parties' counsel at argument, the policy had a cash value resulting from these past premium payments. However, MBI did have full use of the policy from 1983 until September 1986, remaining owner and pledging it for MBI obligations. Accordingly, Kuhns did not have use of the policy for that period, and thus suffered damages. While the record provides some indication of the value of this loss of use, because these damages were not adduced at trial, we remand to the district court for a determination of the damages Kuhns' suffered due to the loss of use of the insurance policy from December 1983 to September 1986 with instructions to award Kuhns these damages, plus accrued interest.

We affirm the district court's ruling that MBI had no contractual obligation to purchase Kuhns' stock and that MBI was not estopped from denying any such obligation. We also affirm its ruling that MBI breached the covenant of good faith and fair dealing and its award of severance pay, additions to Kuhns' ESOP, and compensatory damages. We reverse its ruling that Kuhns' deferred compensation plan constituted an ERISA plan and hold that it did not constitute an ERISA plan. We therefore vacate its ruling that MBI breached its ERISA fiduciary duty and its awards of restoration and accrued interest to the plan, lost accrued interest to his wife, compensatory damages arising from the issuance of the W-2 form, and ERISA attorney's fees. We also vacate the court's order of a new increased payment schedule. However, we hold that MBI breached its promise to transfer the insurance policy to Kuhns and remand for a determination of damages resulting from the loss of use of the policy. Each party shall bear its own costs.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.