No. 05-703
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 99
SHAWN JOHNSTON and STEVE JOHNSTON,
d/b/a AFM CONTRACTING,
Plaintiffs and Respondents,
v.
M. STACEY PALMER,
Defendant and Appellant.
APPEAL FROM: The District Court of the Eighteenth Judicial District,
In and For the County of Gallatin, Cause No. DV 2001-390,
Honorable Mike Salvagni, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Terry F. Schaplow, Terry F. Schaplow, P.C., Bozeman, Montana
For Respondents:
Robert J. Quinn, Attorney at Law, Bozeman, Montana
Submitted on Briefs: November 9, 2006
Decided: April 24, 2007
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 California resident M. Stacey Palmer (Palmer) owns real property in Gallatin
County, Montana. In 2000 she embarked on a project to develop, improve and subdivide
her property. In the fall of 2000 AFM Contracting (AFM) was asked to submit a bid
request to perform underground infrastructure work, i.e., installation of water, drain and
sewer systems. AFM submitted its bid and Palmer accepted it. AFM completed
approximately $169,000.00 worth of work before disputes arose resulting in Palmer
evicting them from the job site in June 2001. After Palmer refused to pay AFM’s invoice
for services performed, AFM filed a construction lien on Palmer’s property and
subsequently filed its Complaint.
¶2 The District Court for the Eighteenth Judicial District, Gallatin County, held a
bench trial in April 2005. Following the trial’s conclusion, it ordered Palmer to pay AFM
$162,525.26 plus prejudgment interest at a rate of 18% per annum dating from the date
the construction lien was filed. It also ordered Palmer to pay AFM’s attorney fees and
costs. Palmer appeals several rulings of the District Court. We affirm and remand to the
District Court for a determination of AFM’s reasonable attorney fees and costs incurred
on appeal.
ISSUES
¶3 A restatement of Palmer’s issues on appeal is:
¶4 Did the District Court abuse its discretion in denying Palmer’s motion to file a
second amended answer?
¶5 Did the District Court err in finding that AFM’s construction lien was valid?
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¶6 Did the District Court err in finding that Palmer had breached AFM’s contract?
¶7 Did the District Court err in awarding prejudgment interest at 18% per annum?
FACTUAL AND PROCEDURAL BACKGROUND
¶8 In 1995 Palmer purchased 23 lots contained in Blocks 8, 9 and 10 of the
Buttelman Addition to the Town of Three Forks, Montana (the Property). At the time of
purchase, Palmer intended to establish a partnership with Gary Perren (Perren), a
Montana resident, and develop the Property for residential housing. Beginning in 1996
Palmer worked extensively with the City of Three Forks (City) to have the Property
rezoned for residential use and to have “Kentucky Street,” a city street included on a plat
design, abandoned in favor of her use. She also commenced efforts to reconfigure the
Property from 23 to 29 lots.
¶9 Palmer and Perren entered into a partnership agreement in October 1996. Under
the agreement, in addition to other responsibilities, Perren was to act as Palmer’s local
representative for on-site decisions and interaction with contractors.
¶10 In July 1998 Palmer established the M. Stacey Palmer Profit Sharing Plan & Trust
(the Trust) funding it with monies from her former employment-related retirement
account. She designated herself as Trustee. It is undisputed that Palmer’s Trust is not
registered or licensed to do business in Montana, nor does it meet the requirements of
§ 35-5-201, MCA, which sets forth the steps a business trust must take before conducting
business in Montana.
¶11 At some time before August 1998, Palmer hired C & H Engineering (C & H) to
provide various short- and longer-term engineering services. C & H’s early services were
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to assist her with her dealings with the City of Three Forks; its later services were to aid
Palmer’s development of the Property.
¶12 In September 1998 the City notified Palmer that her Property had been rezoned for
residential use, and in November 1999 the City certified approval of a plat design
reconfiguring the Property to 29 lots. The City declined to abandon Kentucky Street at
that time but ultimately abandoned it in June 2001.
¶13 In February 2000 C & H created a detailed Bid Package for construction of water,
sewer, road and drainage facilities for the Property (Bid Package). Subsequently, in
September 2000 AFM submitted a $166,260.60 bid on Bid Form 00300 to Palmer to
perform the water, sewer and drainage services outlined in the Bid Package. The Bid
Form indicated that if AFM’s bid was accepted, it would enter into an agreement with
Palmer, utilizing an agreement form included in the Bid Package.
¶14 During the fall of 2000 Perren had between 25,000 and 50,000 yards of fill dirt
placed on the Property. Perren testified that some of the dirt was to be used to raise
portions of Palmer’s Property above the flood plain.
¶15 On March 12, 2001, Palmer revised the Bid Form she had received from AFM by
adding two line items. The first line item instructed AFM to “write up and propose a
contract for agreement by parties.” The second line item indicated that if Kentucky
Street was abandoned by the City, the quote for services would be amended accordingly.
She then returned the bid form to AFM.
¶16 In late March 2001 Palmer, as Trustee of her Trust, executed and transmitted three
documents to C & H—a “Notice of Award” indicating that AFM had been awarded the
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contract; a “Notice to Proceed” instructing AFM to proceed with the project on April 10,
2001; and a Section 00500 Agreement Form setting forth the terms and conditions
between the Palmer Trust and AFM Contracting. The Section 00500 Agreement was
signed by Palmer as Trustee. C & H delivered the documents to AFM. It is undisputed
that AFM did not sign the Section 00500 Agreement.
¶17 According to the testimony of one of AFM’s owners, Perren told him that Palmer
was confused by language in the Section 00500 Agreement. As a result, on April 13,
2001, AFM sent by facsimile a memorandum to Palmer enumerating six specific contract
terms and providing a break-down of the bid estimate totals for water, sewer and storm
services. The memorandum also specified payment conditions of “30 days net 1.5% on
everything unpaid after 30 days plus any cost incurred to collect past due amount.” AFM
intended this simpler document to replace the Section 00500 Agreement. Palmer made
handwritten revisions to the memorandum, signed it on behalf of her Trust, and returned
it to AFM on April 24. After receiving the signed memorandum, AFM ordered the
required materials.
¶18 AFM testified that before it began work on the site, it told Perren that the pile of
dirt on Palmer’s Property would hinder its completion of the project because some of the
dirt was on a portion of the Property that was to be improved.
¶19 AFM began work on the project early in May 2001. Around June 1 it had
completed as much of the work that could be done without removing the pile of fill dirt.
At that time, Perren and C & H designated the completed work as “Phase I.” AFM
consented to the project phasing and agreed to return and complete the remaining work,
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designated as “Phase II,” once the dirt pile was removed. AFM agreed to do this at the
original contract price.
¶20 On May 31, 2001, AFM contacted Palmer, told her the work was nearing
completion and requested payment of the scheduled progress payment of $30,000.00.
Palmer informed AFM that she had the money for the scheduled payment but was
concerned about ambiguities in the contract that she believed required resolution before
she made the payment. It is undisputed that Palmer never made that progress payment or
any other payment.
¶21 On June 5 Palmer sent a letter by facsimile to AFM, C & H and the City,
contending that the Palmer Trust’s contract with AFM was defective. She advised that
any additional work performed at the site by AFM would be at AFM’s risk. AFM
promptly replied with a handwritten explanation of the work completed, the cost of such
work, and the work yet to be done. Palmer responded by faxing a “Notification of
Breach of Contract” to AFM. Around this same time, the City of Three Forks inspected
and tested the work done by AFM, and accepted it without identifying any defects with
the materials or labor.
¶22 On or about June 7, 2001, AFM delivered an invoice to Palmer representing the
cost of the work performed and the materials used to complete Phase I. The total was
$162,525.26. Palmer did not pay AFM’s invoice. As a result, on July 13, 2001, within
ninety days of final furnishing of services and materials, AFM filed a Construction Lien
on the Property for $164,224.56 ($162,525.26 plus accrued interest to that date). It
subsequently filed its Complaint on October 11, 2001.
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¶23 Palmer answered the Complaint on December 6, 2001. In early February 2002
Palmer’s first attorney withdrew from the case and moved for substitution of counsel. On
February 19, 2002, via her second attorney, Palmer moved to amend her answer. Her
motion was granted and she filed her First Amended Answer and Counterclaim on March
19, 2002. After attempts at discovery were ostensibly frustrated by Palmer, AFM filed
motions to compel Palmer to respond to interrogatories and requests for admissions and
production. On August 5, 2002, Palmer’s second attorney was allowed to withdraw.
Also on August 5, 2002, AFM moved for summary judgment. Subsequently, Palmer’s
third attorney appeared in the case on September 13, 2002, and thereafter filed motions to
continue pretrial deadlines and revise scheduling orders. On December 20, 2002, Palmer
moved for leave to file a second amended answer, counterclaim and third party
complaint. On January 9, 2003, after AFM had opposed the motion, the District Court
denied it.
¶24 A bench trial was held on April 26 and 27, 2005. On September 8, 2005, the
District Court held that AFM’s construction lien was valid and that Palmer had breached
the contract with AFM. It ordered her to pay $162,525.26 plus prejudgment interest
beginning on July 13, 2001, as well as attorney fees and costs. The court then entered
Judgment on September 27, at which time it revised the amount Palmer was ordered to
pay to $160,655.43 plus prejudgment interest at the rate of 18% per annum beginning on
July 16, 2001, and ending on September 8, 2005. Palmer appeals. We affirm and
remand.
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STANDARD OF REVIEW
¶25 We review the granting or denial of a motion to amend a pleading for an abuse of
discretion. Denton v. First Interstate Bank of Commerce, 2006 MT 193, ¶ 17, 333 Mont.
169, ¶ 17, 142 P.3d 797, ¶ 17 (citation omitted). An abuse of discretion occurs only if the
district court “acted arbitrarily without employment of conscientious judgment or
exceeded the bounds of reason resulting in substantial injustice.” State v. Hendershot,
2007 MT 49, ¶ 19, 336 Mont, 164, ¶ 19, ___ P.3d ___, ¶ 19 (citation omitted).
¶26 We review a district court’s findings of fact to determine if they are clearly
erroneous. A district court’s findings are clearly erroneous if they are not supported by
substantial credible evidence, if the district court has misapprehended the effect of the
evidence, or if a review of the record leaves this Court with a definite and firm conviction
that a mistake has been made. Substantial evidence is “evidence that a reasonable mind
might accept as adequate to support a conclusion; it consists of more than a mere scintilla
of evidence but may be somewhat less than a preponderance.” Rossi v. Pawiroredjo,
2004 MT 39, ¶ 12, 320 Mont. 63, ¶ 12, 85 P.3d 776, ¶ 12 (internal citations omitted). We
review a district court’s conclusions of law de novo to determine whether they are
correct. Rossi, ¶ 13. We apply these standards to both the District Court’s ruling on the
validity of AFM’s construction lien and to its determination that Palmer breached her
contract with AFM. See Burns v. A Cash Const. Lien Bond, 2000 MT 233, ¶ 6, 301
Mont. 304, ¶ 6, 8 P.3d 795, ¶ 6, and Cut Bank School Dist. No. 15 v. Rummel, 2002 MT
248, ¶ 5, 312 Mont. 143, ¶ 5, 58 P.3d 159, ¶ 5 (citations omitted).
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¶27 Lastly, a district court’s award of prejudgment interest is a question of law;
therefore, this Court determines whether the district court correctly applied the law.
James Talcott Const. v. P & D, 2006 MT 188, ¶ 28, 333 Mont. 107, ¶ 28, 141 P.3d 1200,
¶ 28 (citation omitted).
DISCUSSION
¶28 Issue One: Did the District Court abuse its discretion in denying Palmer’s motion
to file a second amended answer?
¶29 Palmer argues that the District Court abused its discretion when it denied her
motion to file a second amended answer. However, the portion of her brief dedicated to
this issue fails to comply with the most basic requirements of M. R. Civ. P. 23(a)(4).
Other than a passing reference to M. R. Civ. P. 15(a), it is unsupported by authority, is
neither succinct nor clear, misrepresents the testimony cited to in the record, relies on
exhibits not contained in the record, and contains numerous conclusory assertions.
¶30 As we have stated on numerous occasions, relying on M. R. App. P. 23, it is not
this Court’s obligation to conduct legal research on behalf of a party, to guess at his or
her precise position, or to develop legal analysis that may lend support to that position.
In re Estate of Bayers, 1999 MT 154, ¶ 19, 295 Mont. 89, ¶ 19, 983 P.2d 339, ¶ 19. See
also Hallenberg v. General Mills Operations, 2006 MT 191, ¶ 45, 333 Mont. 143, ¶ 45,
141 P.3d 1216, ¶ 45. However, given that the District Court’s Order denying her motion
to amend succinctly sets forth the court’s rationale, we will review the court’s
justification for denying the motion to determine whether the court abused its discretion.
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¶31 The court noted: (1) Palmer waited nine months to file a motion for leave to file a
second amended answer; (2) AFM had filed a motion for summary judgment and to
compel Palmer’s discovery responses at least three months before Palmer moved to
amend; (3) Palmer did not present any new evidence that was not available to her at the
time she amended her answer the first time; (4) all previous extensions had been for the
sole benefit of Palmer; (5) granting the motion to amend would result in undue delay; (6)
if Palmer had obtained “new evidence” in July 2002, she did not act promptly upon
making that discovery; and (7) allowing a second amendment would impede the orderly
and expeditious progression of the case to final judgment. We conclude that the rationale
of the court was well-reasoned and appropriate given the case’s procedural history, and
that the court did not abuse its discretion in denying leave to amend. See Peuse v.
Malkuch, 275 Mont. 221, 228, 911 P.2d 1153, 1157 (1996) (court was within its
discretion in denying leave to amend after a motion for summary judgment had been filed
by the opposing party). We therefore affirm on this issue.
¶32 Issue Two: Did the District Court err in finding that AFM’s construction lien was
valid?
¶33 Palmer claims the lien contained multiple defects and that the District Court erred
in failing to expressly address each of the alleged defects in its ruling. She also maintains
that the court’s findings and conclusions pertaining to the validity of the lien were
incorrect and should be reversed. In response, and acknowledging that our case law
requires that the procedural requirements for construction liens be strictly followed, AFM
asserts that once the procedure has been fulfilled, the statutes will be liberally construed
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so as to give effect to the remedial nature of the lien statutes. Simkins-Hallin Lumber Co.
v. Simonson, 214 Mont. 36, 39, 692 P.2d 424, 425 (1984). AFM maintains that it strictly
adhered to the procedural requisites of the lien statutes, and that the District Court
rendered correct findings on all issues pertaining to the validity of the lien.
¶34 The District Court found that the procedural requirements of § 71-3-535, MCA,
were met in that the lien (1) was timely filed and served on Palmer; (2) listed AFM’s
name and address as claimant; (3) contained a “reasonably sufficient” description of the
property; (4) named Palmer as the contracting owner and owner of the Property; (5)
contained a description of the services and materials provided and the dates such
services/materials were first and last furnished; (6) showed a reasonable estimation of the
amount of unpaid services/materials owed to AFM; and (7) contained an explanation for
why a notice of right to claim a lien was not required. Based on these findings, the
District Court concluded that the lien complied with the statutory procedural
requirements found in §§ 71-3-534 and 535, MCA.
¶35 The lien statutes or statutory provisions relevant to our analysis are:
Section 71-3-523, MCA:
A person who furnishes services or materials pursuant to a real estate
improvement contract may claim a construction lien, only to the extent
provided in this part, to secure the payment of his contract price.
Section 71-3-534(2), MCA:
The [county] clerk may not file [a] lien unless it is accompanied by a
certification by the lien claimant or the claimant’s agent that a copy of the
lien has been served upon each owner of record of the property named in
the lien. . . .
Section 71-3-535, MCA:
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(1) A person’s lien does not attach and may not be enforced unless, after
entering into the contract under which the lien arises, the person has filed a
lien not later than 90 days after:
(a) he person’s final furnishing of services or materials; or
....
(2)(a) The lien must be filed with the county clerk and recorder of the
county in which the improved real estate is located, and the county clerk
and recorder may allow the lien to be filed electronically.
(b) The person claiming the lien shall certify to the county clerk and
recorder that a copy of the lien has been served on the owner of record as
provided in 71-3-534(2).
(3) The lien statement must contain:
(a) the name and address of the person claiming the lien;
(b) a description of the real property against which the lien is claimed
sufficient to identify it;
(c) the name of the contracting owner;
(d) the name and address of the party with whom the person claiming the
lien contracted to furnish services or materials;
(e) a description of the services or materials provided;
(f) the amount unpaid for services or materials or, if no amount is fixed by
the contract, a good faith estimate of the amount unpaid, designated as an
estimate;
(g)(i) the date on which the services or materials were first furnished; and
(ii) the date on which the services or materials were last furnished; and
(h) a declaration that a notice of a right to claim a lien was given to the
contracting owner or an explanation of why the notice was not required.
¶36 Palmer argues that AFM’s lien was defective because: (1) the absence of a written
contract under § 71-3-523, MCA, precludes AFM from claiming a construction lien; (2)
AFM failed to serve the lien on the City, as the owner of record of “Kentucky Street,”
and therefore its lien is invalid under §§ 71-3-534(2) and 535(2)(b), MCA; (3) the lien
inadequately described the property improved as required by § 71-3-535(3)(b); (4) the
lien incorrectly named the “person” entering into the contract in violation of § 71-3-
535(3)(c), MCA; (5) the lien incorrectly identified who requested the work; and (6) the
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lien’s statement that a notice of right to claim was not required under § 71-3-531, MCA,
was incorrect.
¶37 Palmer appears to argue that because AFM failed to sign the Section 00500
Agreement, no meeting of the minds occurred and therefore no contract existed.
However, Palmer once again fails to provide any substantive legal authority or analysis
for her argument. Rather, she makes conclusory statements and offers transcript
quotations that are misleading and taken out of context. AFM maintains that a contract
did exist between the parties and that under Maxwell v. Anderson, 181 Mont. 215, 220,
593 P.2d 29, 32 (1979), whether such an agreement is “written, oral, express or implied,”
it nonetheless supports a construction lien.
¶38 The District Court determined that a contract existed between Palmer and AFM.
Section 28-2-102, MCA, requires (1) identifiable parties capable of contracting; (2) their
consent; (3) a lawful object; and (4) a sufficient cause or consideration. The court
reviewed multiple contract-related documents generated and exchanged between the
parties and concluded that while not all of the documents were signed by both parties,
some were. The court noted also that Palmer testified that a contract existed, that she
asked for and wanted the work done by AFM, and that she intended to pay them for their
work. Whether or not a contract exists is a combined issue of fact and law. Austin v.
Cash, 274 Mont. 54, 59, 906 P.2d 669, 672 (1995). The court’s findings of fact
pertaining to the existence of a contract are supported by substantial credible evidence
and therefore are not clearly erroneous. Its conclusion of law, based on these facts, is
correct as well.
13
¶39 Palmer also claims that AFM’s lien is invalid under §§ 71-3-534(2) and 535(2)(b),
MCA, because AFM failed to serve the lien on the City, as the owner of record of
“Kentucky Street.” While the District Court did not address this alleged defect, we are
not persuaded by Palmer’s claim. AFM’s construction lien describes the real property
subject to the lien as:
Lots 1A, 2A, 3A, 4A, 5A, 6A, 7A, 8A and 9A of Block 8A; Lots 1A, 2A,
3A, 4A, 5A, 6A, 7A, and 8A of Block 9A; Lots 1A, 2A, 3A, 4A, 5A, 6A,
7A, 8A, 9A, 10A, 11A, and 12A of Block 10A, . . . formally known as
Block 8, 9 and 10 of the Buttleman Addition to the Town of Three Forks,
Montana . . . .
It is undisputed that Palmer owns this Property and that it is on this Property that AFM
performed work requested by Palmer. While the City of Three Forks may have had an
ownership or easement interest in the strip of land designated as the future location of
“Kentucky Street,” the evidence appears to support the conclusion that the City
abandoned that interest in favor of Palmer before AFM’s lien was filed. As a result,
AFM served the only “owner of record of the property named in the lien.”
¶40 Palmer also challenges the property description because it fails to refer to
“Kentucky Street” and fails to reflect that the final configuration of the parcel contained
31 lots rather than the 29 identified in the lien. We conclude, however, that AFM’s
description of the property subject to the lien “was sufficient to identify it.” Presumably
the property as described in the lien encompasses the entire “footprint” of Palmer’s
property, whether it is configured as 29 lots or 31. As we held in Swain v. Battershell,
1999 MT 101, ¶ 26, 294 Mont. 282, ¶ 26, 983 P.2d 873, ¶ 26, the procedural
requirements exist to notify the owner of real property that a lien has been filed against
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his or her property, and to protect all parties dealing with the property, including
subsequent purchasers. We conclude that AFM’s lien property description adequately
does so. As we also stated in Swain, ¶ 26, we will strictly construe the procedural
requirements of the construction lien statutes, but once the procedure has been fulfilled,
we will liberally construe the statutes so as to give effect to their remedial purpose.
¶41 Next, Palmer maintains that the lien incorrectly named her rather than the Palmer
Trust as the person entering into the contract and requesting the work. The District Court
found that there was “little, if any, appreciable difference between Palmer and the Trust.”
The record supports the court’s finding. Palmer was the sole trustor, beneficiary, and
trustee. She made all the decisions with regards to the management, direction, and
purpose of the Trust. The court also concluded, as a matter of law, that Palmer ratified
any agreements that may have existed between the Trust and AFM when she accepted the
benefits AFM bestowed upon the land she owned. Moreover, the District Court
concluded that Palmer’s Trust was not authorized to transact business in Montana under
§ 35-5-201, MCA.
¶42 Section 35-5-201, MCA, establishes the process by which a “foreign” (any trust
not organized under Montana laws) business trust becomes licensed to do business in the
State of Montana. Its requirements are precise and detailed. However, there is no need
to set forth the statute’s requirements here, as it is undisputed that Palmer’s Trust did not
comply with any of the requirements of the applicable statute. The record supports the
District Court’s findings and conclusion that the Palmer Trust was not authorized to
15
conduct business in the State of Montana. This being so, the District Court did not err in
concluding that it was Palmer who entered into the contract and requested the work.
¶43 Lastly, Palmer argues that the lien’s statement indicating that “no notice of right to
claim a lien was required to be given pursuant to Section 71-3-531(a), because services
and materials were furnished directly to the owner at his/her/its request” was incorrect
because the City was not served. As we held earlier, there is no evidence in the record
that “Kentucky Street” was owned by the City at the time the lien was filed, and therefore
no service of the lien to the City was necessary.
¶44 For the foregoing reasons, we conclude that the District Court’s findings vis-à-vis
the validity of AFM’s lien were supported by the evidence and its legal conclusions based
on these findings are not incorrect.
¶45 Issue Three: Did the District Court err in finding that Palmer had breached
AFM’s contract?
¶46 As we note above, the District Court’s conclusion that a contract existed between
Palmer and AFM was not erroneous. Therefore, we now address whether the court’s
determination that Palmer breached the contract was correct. Again, Palmer’s argument
on appeal lacks legal authority or analysis. She argues that no contract existed and
outlines the ways in which she perceives AFM “reneged on their obligations.”
¶47 The District Court’s rationale in concluding that Palmer breached the contract is
simple—“Palmer breached the contract with AFM by failing to pay AFM for the work
performed.” The court also determined that Palmer had failed to meet her burden of
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proof that AFM had breached the contract, trespassed on her property and caused her
emotional distress.
¶48 The District Court heard significant testimony regarding Palmer’s plans to develop
this Property. Evidence was presented that Palmer, or Perren on Palmer’s behalf, sought
a bid from AFM to perform services. It is undisputed that Palmer notified AFM that she
accepted its bid and it should proceed with the work. She told the court that she wanted
the services, intended to pay for them and had the money to do so. She testified that she
offered to pay the scheduled progress payment at the conclusion of the work but she
wished to resolve a few contract concerns first. It is further undisputed that, despite
knowing the work to be substantially complete, Palmer refused to pay AFM. AFM
argued to the District Court that this constituted a breach of the agreement between the
parties and resulted in unjust enrichment of Palmer.
¶49 Based on the District Court’s finding that AFM and Palmer both desired that the
project commence with a price certain and a firm completion date, and that Palmer
benefited from the labor and materials expended by AFM in its effort to complete the
project, the court’s conclusion that Palmer breached the contract by failing to pay the
agreed-upon price is not incorrect. Additionally, the court specifically determined that
the amount billed by AFM for the work performed was in accordance with its contract
bid and was reasonable and competitive. We therefore affirm the court on this issue.
¶50 Issue Four: Did the District Court err in awarding prejudgment interest at 18%
per annum?
17
¶51 The District Court, without explanation or analysis, awarded AFM 18%
prejudgment interest on the amount of damages it claimed. Palmer relies solely upon
§ 31-1-107, MCA, to support her claim that 18% interest exceeds the amount lawfully
allowed and is usurious. However, Palmer’s reliance on § 31-1-107, MCA, is misplaced.
Title 31, Part 1 of the MCA specifically addresses interest rates associated with loans of
money. The interest rate awarded by the District Court in the case before us is not for a
loan of money but rather is premised upon a contractually-agreed upon finance charge
owed on the balance of funds due and unpaid after thirty days.
¶52 One of the documents signed by both parties during contract development was a
simple memorandum on AFM letterhead setting forth six easily understood terms. The
sixth and last term stated in relevant part:
Payment Conditions:
30 days net 1.5% on everything unpaid after 30 days plus any cost incurred
to collect past due amount. We will deduct 10% off if paid within 10
working days after City of Three Forks final approval.
Palmer made a hand-written revision to these payment conditions essentially seeking the
10% offered reduction in the event she paid at least 80% of the outstanding balance
within ten days after the City’s final approval. She did not challenge the 1.5% per month
interest (i.e., 18% per annum), nor did she attempt to negotiate a lower interest rate. As
noted above, both she and AFM signed this document.
¶53 AFM directs us to E.C.A. Environ. Management v. Toenyes, 208 Mont. 336, 679
P.2d 213 (1984). There, the District Court concluded that a fuel bill provision allowing
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18% interest on unpaid balances more than thirty days old was usurious and awarded 6%
interest. On appeal, we reversed, stating:
The fuel transaction was not a subterfuge devised to conceal what was in
fact a loan. . . . Here, there was neither the intent to loan a sum of money
nor the intent to extract usurious interest. Terra-Spread took possession of
the goods without paying and received a significant benefit. For this
benefit, the seller is justified in imposing an additional charge. The
contractor on receiving the goods, signed and received an invoice that
contained an agreement providing for charging an annual interest rate of 18
percent on balances more than thirty days old. Without more, this
agreement constitutes a simple commercial charge agreement to which
usury laws are inapplicable. Empire Building Supply v. EKO Investments,
Inc. (1979), 40 Or.App. 739, 596 P.2d 593.
E.C.A., 208 Mont. at 342, 679 P.2d at 216.
¶54 While factually distinguishable from the case before us, the analysis in E.C.A. is
applicable. Palmer sought the services she received from AFM with the understanding
that she would pay for these services. She signed an agreement, even modifying part of
the agreement to her benefit, yet agreeing to 18% per annum interest on the unpaid
balance. Under E.C.A., this contractually-agreed upon rate is not usurious and the
District Court did not err in awarding it.
¶55 Finally, as argued by AFM, under § 71-3-124(1), MCA, a successful lien claimant
is entitled to recover attorney fees and costs incurred at trial and upon appeal. The statute
provides:
In an action to foreclose any of the liens provided for by part 3, 4, 5, 6, 8, or
10 of this chapter, the court shall allow as costs the money paid and
attorney fees incurred for filing and recording the lien and reasonable
attorney fees in the district and supreme courts. The costs and attorney fees
must be allowed to each claimant whose lien is established, and the
reasonable attorney fees must be allowed to the defendant against whose
property a lien is claimed if the lien is not established.
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As recognized above, AFM’s lien was filed under Title 71, Chapter 3, Part 5, and
therefore § 71-3-124(1), MCA, is applicable. AFM is therefore entitled to its reasonable
attorney fees incurred in both the district court and this Court. Accordingly, we remand
for a determination of AFM’s reasonable costs and attorney fees incurred on appeal,
pursuant to the requisites of Plath v. Schonrock, 2003 MT 21, ¶ 36, 314 Mont. 101, ¶ 36,
64 P.3d 984, ¶ 36.
CONCLUSION
¶56 For the foregoing reasons, we affirm the District Court’s Findings of Fact and
Conclusions of Law and Judgment. We remand to the District Court for a determination
of AFM’s reasonable attorney fees and costs incurred on appeal.
/S/ PATRICIA COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ BRIAN MORRIS
/S/ JIM RICE
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