No. 83-512
I N THE SUPREME COURT OF TIIE STATE O F M N A A
O T N
1984
RUSTICS O LINDBERGH LAKE, I N C . ,
F
a Montana c o r p o r a t i o n ,
P l a i n t i f f and Respondent,
PAUL LEASE,
Defendant and Appellant.
APPEAL FROM: D i s t r i c t Court of t h e Fourth J u d i c i a l 3istrict,
I n a n d f o r t h e County o f M i s s o u l a ,
The H o n o r a b l e Douglas H a r k i n , J u d g e p r e s i d i n g .
COUNSEL O RECORD:
F
For Appellant:
S k e l t o n & C o o l e y , M i s s o u l a , Montana
For Respondent:
E l l i n g s o n , L o v i t t & Moe, M i s s o u l a , Montana
Submitted on B r i e f s : A u g u s t 1 7 , 1984
Decided: November 1 3 , 1984
gw*
Filed:
Clerk
Mr. Chief J u s t i c e Frank T . Haswell d e l i v e r e d t h e O p i n i o n of
t h e Court.
P a u l L e a s e a p p e a l s t h e judgment o f t h e M i s s o u l a County
District Court awarding plaintiff certain sums due on a
p r o m i s s o r y n o t e , a t t o r n e y f e e s and i n t e r e s t .
F.ppellant, Paul Lease, and respondent, Rusti-cs of
L i n d b e r g h Lake, Inc. (hereinafter Rustics) , e n t e r e d i n t o an
oral agreement Novemher 16, 1979, whereby Rustics was to
c h a r g e L e a s e 17 p e r c e n t i n t e r e s t on t h e u n p a i d ba.l.a.nce o f a n
a c c o u n t u n d e r which L e a s e p u r c h a s e d l o g s from R u s t i c s . Lease
continued t o purchase l o g s and f e l l f u r t h e r b e h i n d in his
payments. By agreement of the parties, t h e amount owed on
A p r i l 17, 1 9 8 0 , by L e a s e was r e d u c e d t o a p r o m i s s o r y n o t e .
The agreed balance and. interest due at that time was
$14,760.67. Lease signed a promissory note on A p r i l 17,
1980, f o r t h i s amount and t h e n o t e was t o b e p a i d in full
s i x t y d a y s l a t e r on J u n e 16, 1980. The n o t e c a r r i e d a 20
p e r c e n t p e r annum i n t e r e s t r a t e on i t s f a c e . The d i s c o u n t
rate on ninety-day commercial pa-per a t this time was 13
percent.
Payments t o t a l i n g $ 8 , 5 5 0 were made on t h e n o t e between
Play 5 , 1980, and August 2 1 , 1980. Rustics f i l e d s u i t f o r
c o l l e c t i o n o f t h e u n p a i d b a . l a n c e on August 1 9 , 1.980. Lease
c o u n t e r c l a i m e d a l l e g i - n g t h e n o t e was u s u r i o u s and t h a t p a s t
d e a . l i n g s between t h e p a r t i e s were t a i n t e d by u s u r y .
R u s t i c s moved f o r summary judgment and t h e t r i a l c o u r t
g r a n t e d L e a s e a p a r t i a l judgment a g a i n s t R u s t i c s o f $984.C4.
T h i s amount r e p r e s e n t e d t h e s t a t u t o r y u s u r y p e n a l t y p r o v i d e d
by s e c t i o n 31-1-108 (1), MCA. S u b s e c t i o n (1) o f t h i s s t a t u t e
provides :
"The t a k i n q , receiving, reserving, o r
charging a r a t e of i n t e r e s t g r e a t e r than
i s a l l o w e d by 31-1-107 s h a l l b e deemed a
f o r f e i t u r e o f a sum d o u b l e t h e amount o f
i n t e r e s t which t h e n o t e , b i l l , o r o t h e r
e v i d e n c e o f d e b t c a r r i e s o r which h a s
been a g r e e d t o b e p a i d t h e r e o n . "
The c o u r t f o u n d t h e n o t e c o n s t i t u t e d a f o r b e a r a n c e by
t h e c r e d i t o r and t h a t t h e i n t e r e s t w a s g r e z t e r t h a n a l l o w e d
by law. S e c t i o n 31-1-1.07, MCA, p r o v i d e d i n 1980 t h a t :
"On amounts u p t o $ 1 5 0 , 0 0 0 , p a r t i e s may
a g r e e i n w r i t i n g f o r t h e payment o f a n y
r a t e o f i n t e r e s t n o t more t h a n 1 0 % p e r
annum o r more t h a n 4 p e r c e n t a g e p o i n t s i n
e x c e s s o f t h e d i s c o u n t r a t e on 90-day
commercial p a p e r i n e f f e c t a t t h e f e d e r a l
r e s e r v e bank i n t h e n i n t h f e d e r a l r e s e r v e
d i s t r i c t , w h i c h e v e r i s g r e a t e r , and s u c h
i n t e r e s t s h a l l be allowed according t o
t h e t e r m s o f t h e agreement.."
The 2 0 p e r c e n t i n t e r e s t c h a r g e d on t h e n o t e was g r e a t e r t h a n
t h e 1 7 p e r c e n t a l l o w e d by t h e s t a t u t e a s t h e d i s c o u n t r a t e a t
this t i m e was 13 p e r c e n t . Thus, t h e usury p e n a l t y under
s e c t i o n 31-1-1 08 (1), MCA, was c a l c u l a t e d a s a sum t w i c e t h e
amount o f i n t e r e s t a p p e a r i n g on t h e n o t e . The c o u r t comput.ed
t h e i n t e r e s t o v e r t h e two-month t e r m of t h e note, from t h e
d z t e o f e x e c u t i o n t o t h e d a t e t h e n o t e v7as d u e , t o a r r i v e a t
t h e $984.04 p e n a l t y .
Lease then f i l e d h i s own motion f o r summary judgment
r e q u e s t i n g d o u b l e t h e amount o f u s u r i o u s i n t e r e s t p a i d on h i s
account, both before and a f t e r t h e t e r m o f t h e promissory
note. This usury penalty f o r i n t e r e s t a c t u a l l y paid a r i s e s
o u t of s e c t i o n 31-1-108 ( 2 ) , MCA.. The D i s t r i c t C o u r t d e n i e d
L e a s e ' s motion. The c o u r t b a s e d i t s r u l i n u on two g r o u n d s ,
t h a . t t h e a g r e e m e n t t o pay 17 percent i n t e r e s t on t h e open
a c c o u n t , d i s t i n g u i s h e d from t h e p r o m i s s o r y n o t e , was p a r t o f
a bona f i d e s a l e and p u r c h a s e a q r e e m e n t , and t h a t no c o u n t e r -
c l a i m wa.s f i l e d seeking t h e affirmative relief of section
31-1-108 ( 2 ) , MCA, w i t h i n t h e two-year s t a t u t e 04 l i m i t a t i o n s .
A f i n a l c o n s o l i d a t e d judgment was e n t e r e d by t h e D i s -
t r i c t C o u r t O c t o b e r 1 8 , 1983. T h i s judgment awarded p l a i n -
t i f f R u s t i c s $5,326.63 p l u s i n t e r e s t on t h e n o t e a n d f e e s o f
$1,136.11. The award was a p p a r e n t l y c a l c u l a t e d by o f f s e t t i n g
the $14,760.67 note with the $8,550 payments and $984.04
usury pena-lty. F e e s w e r e c a l c u l a t e d by a w a r d i n g d e f e n d a n t
Lease $1,000 for his successful partial summary judgment
concerning t h e u s u r i o u s n o t e and R u s t i c s $2,136.11 for its
fees on the collection claim. The p l a i n t i f f R u s t i c s was
t h e r e f o r e g r a n t e d $1,136.11 a s t h e n e t amount o f the total
f e e s awarded.
L e a s e and h i s w i f e f i l e d f o r b a n k r u p t c y u n d e r C h a p t e r
13 o f t h e U n i t e d S t a t e s B a n k r u p t c y Code on O c t o b e r 2 0 , 1983.
Rustics filed a proof of cl-aim f o r t h e f u l l amount o f its
judgment a g a i n s t L e a s e . L e a s e and h i s w i f e d i d n o t d i s p u t e
such proof a n d t h e amended C h a p t e r 13 p l a n , which was ap-
proved March 16, 1984, provides for full payment o f such
claims over a five-year period.
L e a s e a l l e g e s on a p p e a l t h a t t h e D i s t r i c t C o u r t f a i l e d
t o properly calculate t h e usury p e n a l t y on t h e promissory
note. H e contends t h a t t h e f o r f e i t u r e p r o v i s i o n s apply a f t e r
t h e due d a t e of t h e note. Rustics contends t h a t a p p e l l a n t
d i d n o t r a i s e t h i s i s s u e i n t h e l o w e r c o u r t a n d i s now p r e -
c l u d e d from r a i s i n g it on a p p e a l . Rustics a l s o argues t h a t
Lease's f a i l u r e t o o b j e c t t o t h e p r o o f o f c l a i m i n t h e hank-
ruptcy proceeding precludes appellate review. Appellant
r a i s e s t h e p r o p r i e t y of t h e a t t o r n e y f e e award a s a s e c o n d
issue.
W e h a v e r e v i e w e d t h e r e c o r d o f t h e p r o c e e d i n g below and
c a n f i n d no a l l e g a t i o n o r argument made by L e a s e t h a t t h e
u s u r i o u s i n t e r e s t p e n a l t y on t h e p r o m i s s o r y n o t e a p p l i e s from
the date of its execution to the time of trial. This argu-
ment has been made for the first time on appeal. in the wake
of our recent decision of E.C.A. Environ. Management v.
Toenyes (Mont. 1984), 679 P.2d 213, 41 St.Rep. 388. In
Toenyes, we held that assessment of a usury penalty on a
.
demand promissory note up to the date of trial was proper
where the lender did not abandon or cancel the rights it had
under the note after demand. Toenyes was based on this
Court's prior decision of Bermes v. Sylling (1978), 179 Mont.
448, 587 P.2d 377, which also construed a demand promissory
note. The demand promissory note in Bermes did not carry a
fixed rate of usury on its face.
We decline the opportunity to extend the rulings of
Toenyes and Bermes to the case at bar which concerns a note
due on a specified date. In any event, we note that the
issue was not raised nor argued before the trial court. As
such, the appellant cannot fault the lower court for failing
to reach the question. We hold that issues not raised in the
pleadings or otherwise at trial. v j 1 not be considered on
r.1
appeal. Huggans v. Weer (Mont. 19801, 615 P.2d 922, 925, 37
St.Rep. 1512, 1515.
The second issue raised by appellant concerns the award
of attorney fees. Lease contends that he should be consid-
ered the prevailing party for purposes of attorney fees. As
noted above, the District Court did find that Lease was
entitled to an offset to Rustics' fees for those fees associ-
ated with his successful counterclaim on the usurious note.
Beyond this award recognized by the lower court, we are
unable to find merit in appellant's contentions that he has
prevailed. The litigation viewed in its entirety resulted in
a substantial net judgment for the plaintiff Rustics. While
no o n e f a c t o r s h o u l d b e c o n s i d e r e d i n d e t e r m i n i n g t h e p r e -
v a i l i n g p a r t y , t h e p a r t y that s u r v i v e s a n a c t i o n i n v o l v i n g a
c o u n t e r c l a i m w i t h t h e n e t judgment s h o u l d g e n e r a l l y b e con-
sidered t h e successful party. See, Toenyes, supra. Accord-
ingly, we find no error in the lower court's award of
attorney fees.
The judgment of t h e D i s t r i c t Court i s affirmed. We
need not reach the contentions concerning the bankruptcy
p r o c e e d i n g a s it would n o t a f f e c t o u r d e c i s i o n .
L
Chief J u s t i c e
W e concur:
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.