Dick Anderson Construction, Inc. v. Monroe Construction Co.

December 8 2009

DA 07-0361

IN THE SUPREME COURT OF THE STATE OF MONTANA

2009 MT 416

DICK ANDERSON CONSTRUCTION, INC.,
a Montana Corporation,

Plaintiff and Appellee,

v.

MONROE CONSTRUCTION COMPANY, L.L.C.,
a Nevada Limited Liability Company; and
MONROE PROPERTY COMPANY, L.L.C.,
a Delaware Limited Liability Company,

Defendants and Appellants.

APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DV 2001-710
Honorable Wm. Nels Swandal, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Randy J. Cox, Scott M. Stearns, Thomas J. Leonard, Boone Karlberg P.C.,
Missoula, Montana

For Appellee:

John H. Guin, Law Office of John H. Guin, PLLC, Spokane, Washington

Submitted on Briefs: August 6, 2008

Decided: December 8, 2009

Filed:

__________________________________________
Clerk
Justice James C. Nelson delivered the Opinion of the Court.

¶1 Monroe Construction Company, L.L.C. (Monroe Construction) and Monroe

Property Company, L.L.C. (Monroe Property) appeal an order of the District Court for

the Fourth Judicial District, Missoula County, granting Dick Anderson Construction,

Inc.’s (DAC) motion to confirm an arbitration award, and denying Monroe

Construction’s and Monroe Property’s motion to vacate or modify the award. Monroe

Construction and Monroe Property also appeal from the court’s Final Money Judgment

and Final Judgment Foreclosing Construction Lien. We affirm in part, reverse in part and

remand for further proceedings consistent with this Opinion.

¶2 Monroe Construction raises the following issue on appeal:

¶3 1. Whether the District Court abused its discretion in entering judgment on the

arbitrator’s award of attorney’s fees and costs, and in denying Monroe Construction’s

M. R. Civ. P. 59(g) motion to alter or amend judgment.

¶4 In addition, Monroe Property raises the following three issues on appeal:

¶5 2. Whether the District Court violated Monroe Property’s rights to due process

and to access to the courts by denying Monroe Property its day in court on its claims and

defenses.

¶6 3. Whether the District Court overlooked disputed issues of fact in entering

judgment in the lien foreclosure action.

¶7 4. Whether the District Court correctly included the arbitrator’s award of

attorney’s fees and costs in the construction lien matter to be enforced against Monroe

Property.

2
 Factual and Procedural Background

¶8 DAC is a Montana corporation engaged in the business of general construction

with offices in Helena and Great Falls. Monroe Construction is a Nevada limited liability

company, while Monroe Property is a Delaware limited liability company. Both

companies are registered to do business in Montana. Monroe Construction and Monroe

Property maintain that they are two separate and distinct entities.

¶9 Monroe Property owns approximately 10,000 acres in Greenough, Montana,

known as the Paws Up Ranch. On March 1, 2000, Monroe Construction entered into a

contract with DAC for the construction of certain improvements on the Paws Up Ranch.

These improvements included the construction of an equestrian center, a sale barn, a cook

shack, a guest lodge, a number of employee housing units, and various site utilities and

infrastructures. Monroe Property was not a party to this contract. Instead, Monroe

Construction entered into a separate contract with Monroe Property wherein Monroe

Construction would own the improvements until they were completed, at which time

Monroe Construction would transfer ownership of the improvements to Monroe Property.

¶10 DAC completed work on the project in the summer of 2001. DAC asserts that

when it requested final payment, Monroe Construction refused to pay. Hence, DAC filed

a construction lien against the property and the improvements on July 27, 2001, and, on

September 10, 2001, DAC filed a lien foreclosure action against Monroe Property and a

breach of contract action against Monroe Construction. In response to DAC’s actions,

Monroe Construction and Monroe Property filed a number of counterclaims against DAC

3
including claims for constructive fraud, misrepresentation, negligent construction and

breach of contract.

¶11 Following discovery, Monroe Property and Monroe Construction challenged the

validity of DAC’s lien, and all p arties moved for summary judgment on the

counterclaims. The District Court denied Monroe Property’s and Monroe Construction’s

motion regarding the validity of DAC’s lien. The court also granted DAC’s motion for

summary judgment on Monroe Construction’s and Monroe Property’s tort-based

counterclaims, but concluded that disputed issues of fact remained with respect to the

parties’ claims and counterclaims for breach of contract.

¶12 Monroe Construction and Monroe Property jointly moved to compel arbitration.

Initially, DAC opposed the motion on the basis that the Monroe companies had waived

the arbitration clause in the contract. DAC eventually withdrew its objection to

arbitration, and on November 23, 2004, DAC filed a Demand for Arbitration with the

American Arbitration Association (AAA). On March 11, 2005, the District Court

ordered Monroe Construction and DAC to arbitrate all claims arising out of the

construction contract. Although the court urged all parties to “involve themselves in

arbitration,” the court noted that Monroe Property could not be compelled to arbitrate

since it was not a party to the construction contract.

¶13 An arbitration hearing before a panel of arbitrators from the AAA was conducted

in Missoula, Montana, from November 7 through 18, 2005, and final arguments were

presented in Denver, Colorado, on November 29, 2005. On December 23, 2005, the

panel issued an Arbitration Award adverse to Monroe Construction and in favor of DAC.

4
The Arbitration Award set the contract balance due between DAC and Monroe

Construction along with the amount of pre- and post-award interest, and disposed of all

of Monroe Construction’s counterclaims. The Arbitration Award also set DAC’s

attorney’s fees and costs in the amount of $331,892 and its arbitration expenses in the

amount of $33,186. In addition, even though Monroe Property was not a party to the

arbitration, the arbitrator’s issued findings of fact regarding the construction lien issue

between DAC and Monroe Property.

¶14 In February 2006, DAC filed its “Motion: (1) to Confirm Arbitration Award; (2)

for Entry of Judgment on Award; and (3) for Summary Judgment Re: Construction Lien.”

For its part, on March 24, 2006, Monroe Construction filed a Motion to Vacate

Arbitration Award or, in the Alternative, Motion to Modify or Correct Award. In its

motion, Monroe Construction argued that the Arbitration Award should be vacated in its

entirety because the arbitrators exceeded their powers by entering findings and

conclusions relative to the construction lien claim and by awarding attorney’s fees to

DAC, not only for the attorney’s fees incurred by DAC during arbitration, but also the

attorney’s fees incurred by DAC during several years of district court proceedings prior

to arbitration. Monroe Construction argued in the alternative that should the District

Court decide not to vacate the Arbitration Award in its entirety, the court should modify

or correct the Arbitration Award to strike the award of attorney’s fees and to eliminate

the findings and conclusions related to the construction lien issue. Finally, Monroe

Construction argued that the Arbitration Award was not properly served because it was

5
not delivered to the parties “personally by certified mail” as required by § 27-5-216(1),

MCA.

¶15 On February 9, 2007, the District Court heard oral argument on the pending

motions. Along with the arguments already presented by DAC and Monroe Construction

in their motions, Monroe Property pointed out that it had not had the opportunity to

litigate its own claims and defenses against DAC, that there were disputed issues of fact

in that regard, and that it could not be held liable for legal fees and expenses incurred in

an arbitration to which it was not a party. Notwithstanding, on March 16, 2007, the

District Court entered an order granting DAC’s motions for summary judgment on the

construction lien issues. The court also entered an order granting DAC’s motion to

confirm the Arbitration Award and denying Monroe Construction’s motion to vacate the

Arbitration Award. In its orders, the court did not address whether it was appropriate to

include the attorney’s fees and costs awarded to DAC in the arbitration, in the

construction lien foreclosure action against Monroe Property, which was not a party to

the arbitration.

¶16 Thereafter, the District Court ordered DAC to prepare a final judgment for the

court’s consideration. Both Monroe Property and Monroe Construction objected to a

number of items included in the proposed judgment including a specific award of

attorney’s fees and costs in the amount of $365,078, which they contended was almost

$110,000 higher than the amount claimed by DAC during arbitration. Monroe

Construction and Monroe Property also objected to the fact that the District Court did not

hold an evidentiary hearing as to the accuracy or reasonableness of the attorney’s fees

6
claimed by DAC in the arbitration, or identify which fees were related to the lien

foreclosure action.

¶17 On May 1, 2007, the District Court entered a Final Money Judgment and Final

Judgment Foreclosing Construction Lien which included an award of the full amount of

attorney’s fees and expenses of $365,078. Thereafter, Monroe Property and Monroe

Construction jointly filed an M. R. Civ. P. 59(g) Motion to Alter or Amend Judgment

asking the court to correct the mathematical error related to the award of attorney’s fees.

The court summarily denied the motion.

¶18 Both Monroe Property and Monroe Construction appeal the various orders and

judgments of the District Court.

Standard of Review

¶19 We review a trial court’s refusal to modify an arbitration award to determine

whether the court abused its discretion. Terra West v. Stu Henkel Realty, 2000 MT 43,

¶ 22, 298 Mont. 344, 996 P.2d 866. Similarly, we review a trial court’s denial of a

motion to alter or amend judgment under M. R. Civ. P. 59(g) to determine whether the

court abused its discretion. Lee v. USAA Cas. Ins. Co., 2001 MT 59, ¶ 27, 304 Mont.

356, 22 P.3d 631. The test for an abuse of discretion is “whether the trial court acted

arbitrarily, without employment of conscientious judgment, or exceeded the bounds of

reason resulting in substantial injustice.” In re Custody and Parental Rights of C.J.K.,

2005 MT 67, ¶ 13, 326 Mont. 289, 109 P.3d 232 (quoting In re K.C.H., 2003 MT 125,

¶ 11, 316 Mont. 13, 68 P.3d 788).

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¶20 On the other hand, we review a district court’s summary judgment ruling de novo

using the same M. R. Civ. P. 56 criteria applied by the district court. Eastgate Village

Water and Sewer v. Davis, 2008 MT 141, ¶ 18, 343 Mont. 108, 183 P.3d 873 (citing

Watkins Trust v. Lacosta, 2004 MT 144, ¶ 16, 321 Mont. 432, 92 P.3d 620). Summary

judgment is proper only when no genuine issues of material fact exist and the moving

party is entitled to judgment as a matter of law. Eastgate Village, ¶ 18. Furthermore, all

reasonable inferences which may be drawn from the offered proof must be drawn in favor

of the party opposing summary judgment. Eastgate Village, ¶ 18. If there is any doubt

regarding the propriety of the summary judgment motion, it should be denied. Eastgate

Village, ¶ 18 (citing 360 Ranch Corp. v. R & D Holding, 278 Mont. 487, 491, 926 P.2d

260, 262 (1996); Whitehawk v. Clark, 238 Mont. 14, 18, 776 P.2d 484, 486-87 (1989)).

¶21 In addition, we review a district court’s conclusions of law to determine whether

they are correct. Eastgate Village, ¶ 19 (citing Montana Pet. Tank Comp. Bd. v.

Crumleys, 2008 MT 2, ¶ 32, 341 Mont. 33, 174 P.3d 948; State Farm Mut. Auto. Ins. Co.

v. Gibson, 2007 MT 153, ¶ 9, 337 Mont. 509, 163 P.3d 387).

Issue 1.

¶22 Whether the District Court abused its discretion in entering judgment on the
arbitrator’s award of attorney’s fees and costs, and in denying Monroe
Construction’s M. R. Civ. P. 59(g) motion to alter or amend judgment.

¶23 Monroe Construction contends on appeal that the District Court abused its

discretion in entering judgment on the amount of attorney’s fees and costs awarded to

DAC when the award was significantly inflated due to a mathematical error and when no

hearing on the reasonableness of the attorney’s fees ever took place. Monroe

8
Construction also contends that the District Court abused its discretion by denying its

M. R. Civ. P. 59(g) motion to alter or amend judgment to correct the error. Thus,

Monroe Construction requests that we remand this matter to the District Court for an

evidentiary hearing on the reasonableness of DAC’s claimed fees and costs, or, in the

alternative, that we modify the Arbitration Award to correct the mathematical error in the

amount of attorney’s fees awarded.

¶24 In its response brief on appeal, DAC does not dispute that there was an over-award

of attorney’s fees in this case. Instead, DAC argues that the District Court acted within

its discretion when it refused to modify the Arbitration Award because Monroe

Construction’s motion to correct the mathematical error in the amount of attorney’s fees

awarded was untimely.

¶25 The Arbitration Award in this case states in relevant part:

[DAC’s counsel] has submitted an affidavit in acceptable form establishing
that DAC has incurred attorney fees in connection with this arbitration in
the amount of $331,892 . . . . We conclude that the attorney fees and costs
as claimed should be awarded to DAC and against Monroe. [Emphasis
added.]

However, the amount of attorney’s fees actually claimed in counsel’s affidavit was

$221,892.88. The arbitrators made an obvious typographical error in transferring the

amount of the attorney’s fees requested in the affidavit into the Arbitration Award.

Consequently, the amount of attorney’s fees awarded to DAC was $110,000 higher than

the amount of attorney’s fees claimed by DAC’s counsel. Nevertheless, we agree with

DAC that Monroe Construction’s various motions to correct this mathematical error in

the Arbitration Award are time barred.

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¶26 In Montana, judicial review of an arbitration award is strictly limited by statute.

Paulson v. Flathead Conservation Dist., 2004 MT 136, ¶ 18, 321 Mont. 364, 91 P.3d 569

(citing Terra West, ¶ 22; Nelson v. Livingston Rebuild Center, Inc., 1999 MT 116, ¶ 11,

294 Mont. 408, 981 P.2d 1185). Montana’s Uniform Arbitration Act (adopted in 1985

and codified at Title 27, chapter 5, MCA), provides that a district court must confirm an

arbitration award upon application of a party unless timely urged to vacate or modify the

award. May v. First Nat. Pawn Brokers, LTD., 269 Mont. 19, 22, 887 P.2d 185, 187

(1994) (citing § 27-5-311, MCA). Thus, when a matter has been submitted to binding

arbitration, courts are not permitted to review the merits of the controversy, but may only

confirm, vacate, modify, or correct an arbitration award pursuant to §§ 27-5-311, -312,

and -313, MCA. Paulson, ¶ 18 (citing Nelson, ¶ 11). Moreover, the party seeking to

vacate, modify, or correct an arbitration award bears the burden of proving that one of the

statutorily enumerated grounds exists. Duchscher v. Vaile, 269 Mont. 1, 6, 887 P.2d 181,

184 (1994).

¶27 The grounds for vacating an arbitration award are set forth in § 27-5-312, MCA:

Vacating an award. (1) Upon the application of a party, the district
court shall vacate an award if:
(a) the award was procured by corruption, fraud, or other undue
means;
(b) there was evident partiality by an arbitrator appointed as a
neutral or corruption in any of the arbitrators or misconduct prejudicing the
rights of any party;
(c) the arbitrators exceeded their powers;
(d) the arbitrators refused to postpone the hearing upon sufficient
cause being shown or refused to hear evidence material to the controversy
or otherwise conducted the hearing, contrary to the provisions of 27-5-213,
in a manner that substantially prejudiced the rights of a party;

10
 (e) there was no arbitration agreement and the issue was not
adversely determined in proceedings under 27-5-115 and the party did not
participate in the arbitration hearing without raising the objection; or
(f) a neutral arbitrator failed to make a material disclosure required
by 27-5-116. An award may be vacated because of a material
noncompliance with 27-5-116 no later than 90 days following discovery of
the failure to disclose.

And, the grounds for modifying or correcting an arbitration award are set forth in

§ 27-5-313, MCA:

Modification or correction of award by court. (1) Upon
application made within 90 days after delivery of a copy of the award to the
applicant, the district court shall modify or correct the award if:
(a) there was an evident miscalculation of figures or an evident
mistake in the description of any person, thing, or property referred to in
the award;
(b) the arbitrators awarded upon a matter not submitted to them and
the award may be corrected without affecting the merits of the decision
upon the issues submitted; or
(c) the award is imperfect in a matter of form not affecting the
merits of the controversy. [Emphasis added.]

¶28 In this case, although Monroe Construction did timely file its “Motion to Vacate

Arbitration Award or in the alternative, Motion to Modify or Correct Award,” that

motion was limited to challenging the arbitrator’s authority to award attorney’s fees; the

arbitrator’s authority to make findings of fact relating to the construction lien; and the

method of service of the Arbitration Award on the parties.1 Monroe Construction did not

challenge in its motion the amount of attorney’s fees awarded. Instead, Monroe

Construction waited more than a year after the Arbitration Award was issued to point out

the miscalculation in the amount of attorney’s fees. The Arbitration Award was mailed

1
As DAC pointed out in its brief on appeal, Monroe Construction waived all three of
these issues on appeal by failing to assign error to them in its opening brief. See Woodahl
v. Matthews, 196 Mont. 445, 453, 639 P.2d 1165, 1169-70 (1982).

11
to the parties on January 31, 2006. It was not until Monroe Construction filed its

“Response and Objection to Plaintiff’s Proposed Final Judgment” on April 19, 2007, that

Monroe Construction pointed out, for the first time, that there was a mathematical error in

the amount of attorney’s fees awarded to DAC.

¶29 As indicated, § 27-5-313(1)(a), MCA, provides for the modification or correction

of an award for an evident miscalculation of figures. Nelson, ¶ 11. However,

§ 27-5-313, MCA, also provides that a motion to modify or correct an award on these

grounds must have been made “within 90 days after delivery of a copy of the award to

the applicant.” Monroe Construction’s failure to challenge the calculation of attorney’s

fees within 90 days of the Arbitration Award, precludes Monroe Construction from

asserting this argument more than a year later.

¶30 Furthermore, in its M. R. Civ. P. 59(g) motion to alter or amend, Monroe

Construction makes the same argument regarding the miscalculation of attorney’s fees as

it does in its “Response and Objection to Plaintiff’s Proposed Final Judgment.” This

Court has repeatedly held that Rule 59(g) is not intended to give litigants “a second bite

at the apple.” Lee, ¶ 76; see also Nelson v. Driscoll, 285 Mont. 355, 360-61, 948 P.2d

256, 259 (1997) (a Rule 59(g) motion cannot be used as a vehicle to raise an issue that

was already raised, or should have been raised, earlier in the proceedings).

¶31 In addition, Monroe Construction argues that the District Court abused its

discretion when it failed to conduct an evidentiary hearing on the reasonableness of the

attorney’s fees. This Court has consistently held that, as a general rule, it is improper to

award attorney’s fees based solely on the affidavit of counsel. Rothing v. Kallestad, 2007

12
MT 109, ¶ 53, 337 Mont. 193, 159 P.3d 222 (citing Rossi v. Pawiroredjo, 2004 MT 39,

¶ 29, 320 Mont. 63, 85 P.3d 776; Stark v. Borner, 234 Mont. 254, 258, 762 P.2d 857, 860

(1988)).

“An award of fees, like any other award, must be based on competent
evidence . . . . Furthermore, the proper determination of a legal fee is
central to the efficient administration of justice and the maintenance of
public confidence in the bench and bar.”

Rothing, ¶ 53 (quoting Rossi, ¶ 29); see also First Security Bank of Bozeman v. Tholkes,

169 Mont. 422, 429, 547 P.2d 1328, 1331-32 (1976).

¶32 Nevertheless, these cases address the procedure a trial court must follow in

awarding attorney’s fees; they do not address the procedures a private arbitration panel

may follow in awarding attorney’s fees. In this case, the record reflects that both parties

requested attorney’s fees in the arbitration proceedings and that both parties submitted

affidavits to the arbitration panel regarding attorney’s fees. Additionally, the record

indicates that counsel’s affidavits regarding attorney’s fees were received by the

arbitrators in time for the oral argument on November 29, 2005, and that the file

remained open for submissions until December 5, 2005. If Monroe Construction

disagreed with the amount of attorney’s fees requested by DAC’s counsel, it could have

objected at that time.

¶33 Moreover, § 27-5-217, MCA, provides, in pertinent part:

Change of award by arbitrators. On the application of a party . . .
the arbitrators may modify or correct the award upon the grounds stated in
27-5-313(1)(a) and (1)(c) or for the purpose of clarifying the award. The
application must be made within 20 days after delivery of the award to the
applicant.

13
Monroe Construction did not apply to the arbitrators to modify or correct the award under

§ 27-5-217, MCA.2

¶34 Neither can we vacate the Arbitration Award under § 27-5-312, MCA, which

provides that a district court may vacate an arbitration award if the arbitrators “exceeded

their powers,” § 27-5-312(1)(c), MCA, or if the arbitrators “refused to hear evidence

material to the controversy or otherwise conducted the hearing . . . in a manner that

substantially prejudiced the rights of a party,” § 27-5-312(1)(d), MCA. Even though the

attorney’s fees affidavit did not support the arbitrator’s determination of the amount of

“incurred” and “reasonable and necessary” attorney’s fees in this case, there is no

provision in the arbitration statutes for vacating a portion of an arbitration award; a plain

reading of Montana’s Uniform Arbitration Act indicates that the entire Arbitration Award

would have to be vacated in this case. However, to prevent vacating an entire award

based on an error in one part of that award (and presumably to have to incur additional

expenses by conducting a second arbitration hearing after the first award was vacated),

the Uniform Arbitration Act sets forth two procedures for correcting an error in an

arbitration award—§ 27-5-217, MCA, which provides for the modification or correction

of an award by the arbitrators if application is made within 20 days, and § 27-5-313,

MCA, which provides for the modification or correction of an award by a court if

2
A court may only assert equitable jurisdiction when there is no adequate remedy at law.
See 360 Ranch Corp, 278 Mont. at 493, 926 P.2d at 264 (citing Jeffries Coal Co. v.
Industrial Accident Board, 126 Mont. 411, 252 P.2d 1046 (1952)). Here, Monroe
Construction had, not one, but several adequate remedies at law that it failed to take
advantage of.

14
application is made within 90 days. Neither avenue was pursued in this case in a timely

manner.

¶35 And, as already indicated, Monroe Construction did not object to the amount of

the attorney’s fees awarded when it filed its original motion to vacate or modify the

Arbitration Award. Thus, we cannot vacate the Arbitration Award under § 27-5-312,

MCA, as it contains the same 90-day time constraints as does § 27-5-313, MCA. See

§ 27-5-312(3), MCA (“An application under this section must be made within 90 days

after delivery of a copy of the award to the applicant . . . .”).

¶36 This Court has recognized that arbitrators have discretion over the procedures for

conducting arbitration and that those procedures do not need to include the same

formalities as litigation. Wallace v. Hayes, 2005 MT 253, ¶ 34, 329 Mont. 23, 124 P.3d

110 (“arbitrators do not conduct their proceedings within the rigid formality of strict rules

of law”); Geissler v. Sanem, 285 Mont. 411, 417, 949 P.2d 234, 238 (1997) (“The parties

are generally free to contract regarding the procedural rules for arbitration.”)

¶37 In the Arbitration Award, the arbitrators stated the following regarding their

reasons for awarding attorney’s fees:

The written contract of the parties is silent on the matter of attorney
fees in the event of litigation or arbitration to enforce the agreement.
However, Montana has a statute stating that the prevailing party in any civil
action to enforce a construction contract is entitled to attorney fees and
costs. This statute also provides that if the parties use arbitration, the
arbitrators may award costs and fees as they may determine. MCA
§ 28-2-2105. In this case, DAC is clearly the prevailing party on the
construction contract claims. Monroe did not prevail on any of its claims or
defenses under the contract.
In addition, we conclude that the tort based claims advanced by
Monroe for defamation and fraud were so totally devoid of merit as to

15
 constitute bad faith under the circumstances of this case. These claims
appear to have been interposed only to hinder and delay the progress of this
case. Under Montana law, attorney fees not otherwise available may be
awarded if it is determined that the claims or counterclaims upon which the
fees were incurred were asserted in bad faith. We do so conclude here with
respect to the claims asserted by Monroe for defamation and fraud.

. . .

We conclude, therefore, that DAC is entitled to the entirety of its fees
and costs incurred in this matter, both in connection with its prosecution of
its claim under the contract and in connection with its defense of the tort
based counterclaims by Monroe.
. . . We have examined the affidavit and the supporting materials
submitted by [DAC’s counsel]. We conclude that the attorney fees for both
[DAC’s counsel] and his associates . . . are reasonable and necessary to the
litigation effort in this case. [Emphasis added.]

Section 28-2-2105, MCA, referred to by the arbitrators in the above quoted portion of the

Arbitration Award, provides:

Prevailing party entitled to costs and attorney fees. In a civil
action on a contract to enforce an obligation imposed by this part, the
prevailing party is entitled to reasonable attorney fees and costs, both for
trial and appeal. If the parties to a construction contract or subcontract use
arbitration, the arbitrator may award fees and costs as the arbitrator may
determine. [Emphasis added.]

Moreover, this Court has held that “an arbitrator may, under limited circumstances,

award attorney’s fees through his equity powers where bad faith or malicious behavior is

involved.” Langemeir v. Kuehl, 2001 MT 306, ¶ 17, 307 Mont. 499, 40 P.3d 343 (citing

Terra West, ¶ 40).

¶38 As DAC points out in its brief on appeal, arbitration confers significant benefits on

parties who agree to utilize this alternative dispute resolution process. Arbitration allows

parties to engage decision-makers who are technically skilled or trained in the specific

16
area of industry that is subject to dispute and to expedite the resolution of disputes by

avoiding many of the formalities inherent in civil litigation. Arbitration also provides a

more stringent finality to disputes than traditional litigation by limiting the scope of

judicial review of an arbitration award. To require the District Court in this case to

conduct its own evidentiary hearing on an issue previously submitted to binding

arbitration would undermine the finality and expediency provided by arbitration.

¶39 Accordingly, we hold that the District Court did not abuse its discretion in entering

judgment on the amount of attorney’s fees awarded to DAC even though the award was

significantly inflated due to a mathematical error. We also hold that the District Court

did not err in denying Monroe Construction’s Rule 59(g) motion to alter or amend

judgment.

Issue 2.

¶40 Whether the District Court violated Monroe Property’s rights to due process and
to access to the courts by denying Monroe Property its day in court on its claims
and defenses.

¶41 In its original Complaint in this matter, DAC brought a claim against Monroe

Construction for breach of contract, as well as a claim to foreclose on the construction

lien DAC previously filed against property owned by Monroe Property. In their Answer

and Counterclaim, Monroe Construction and Monroe Property brought claims against

DAC for breach of contract, misrepresentation, constructive fraud and negligence.

Sometime later, all parties moved for summary judgment on their various claims.

Monroe Property and Monroe Construction alleged in their motion that DAC had

breached the construction contract by failing to act as the construction manager on the

17
project and by converting their “hard bid” contract into a “time and materials” contract,

thereby causing significant cost overruns on the project.

¶42 In its May 3, 2004 Opinion and Order, the District Court denied Monroe

Property’s and Monroe Construction’s motion to declare the construction lien invalid;

granted DAC’s motion to dismiss Monroe Property’s and Monroe Construction’s

misrepresentation, constructive fraud and negligence causes of action; and denied all

parties’ motions on the breach of contract issues. Shortly after the District Court issued

its Opinion and Order, Monroe Construction and Monroe Property moved to compel

arbitration. After numerous motions, District Court orders and an appeal to this Court on

the question of arbitration,3 DAC and Monroe Construction entered into arbitration

proceedings. The District Court issued another order staying all remaining claims

between DAC and Monroe Property, but the court subsequently vacated that order.

Instead, the court pointed out that Monroe Property could not be compelled to arbitration

since it was not a party to the construction contract. Nevertheless, the court urged all

parties “to involve themselves in arbitration.”

¶43 While the arbitration proceedings resolved all of the claims and defenses between

DAC and Monroe Construction, certain claims and defenses between DAC and Monroe

Property still remained to be adjudicated. Monroe Property’s claims that survived the

court’s May 2004 order on motions for summary judgment and that could not be

3
This case was also transferred to the United States Bankruptcy Court for a time. The
District Court file, which had been sent to the Bankruptcy Court, was never returned and
apparently lost. The file eventually had to be reconstructed by the parties.

18
determined in arbitration included its claims regarding the construction lien (which will

be discussed in the next issue) and its claims regarding the construction contract.4

¶44 In its March 16, 2007 order granting DAC’s motion to confirm the arbitration

award, the District Court also determined that because Monroe Property was not a party

to the construction contract between DAC and Monroe Construction, Monroe Property

did not have standing to challenge that contract.

¶45 Monroe Property now claims on appeal that this was error because the issue of

standing had not been timely raised in the District Court. Nevertheless, Monroe Property

contends that it does have standing to challenge the construction contract between DAC

and Monroe Construction because, as the owner of the property on which the

improvements were constructed, Monroe Property is a third-party beneficiary to the

contract. DAC contends on the other hand that, contrary to Monroe Property’s claim that

“there is no question” that Monroe Property was a third-party beneficiary to the

construction contract, the contract expressly denies any intent to create third-party

beneficiary status.

¶46 Standing is a doctrine involving justiciability and, as such, it is a threshold

requirement in every case which we must address and decide sua sponte even if it is not

raised by a litigant. Armstrong v. State, 1999 MT 261, ¶ 4, 296 Mont. 361, 989 P.2d 364

(citing Matter of Paternity of Vainio, 284 Mont. 229, 235, 943 P.2d 1282, 1286 (1997);

Rieman v. Anderson, 282 Mont. 139, 144, 935 P.2d 1122, 1125 (1997)). Moreover, this

4
Because Monroe Property did not appeal the District Court’s dismissal, prior to
arbitration, of its tort-based claims, Monroe Property has waived consideration of these
claims. See Woodahl, 196 Mont. at 453, 639 P.2d at 1169-70.

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Court has held that “unless he is an intended third-party beneficiary of the contract, a

stranger to a contract lacks standing to bring an action for breach of that contract.”

Palmer v. Bahm, 2006 MT 29, ¶ 13, 331 Mont. 105, 128 P.3d 1031 (emphasis added); see

also Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts, vol. 13,

§ 37:1 (4th ed., West 2000).

¶47 Relying on the Restatement (Second) of Contracts § 302 (1981), we have

described an intended third-party beneficiary as follows:

(1) Unless otherwise agreed between promisor and promisee, a
beneficiary of a promise is an intended beneficiary if recognition of a right
to performance in the beneficiary is appropriate to effectuate the intention
of the parties and either
(a) the performance of the promise will satisfy an obligation of the
promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the
beneficiary the benefit of the promised performance.

Harman v. MIA Service Contracts, 260 Mont. 67, 72, 858 P.2d 19, 22-23 (1993).

¶48 In the case sub judice, the contract between DAC and Monroe Construction

identifies Monroe Construction as the “Owner” and DAC as the “Contractor.” Monroe

Property is not identified anywhere in the contract. In addition, the parties expressly

deny in their contract documents any intent to create a third-party beneficiary status when

they state:

The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto
and supersedes prior negotiations, representations or agreements, either
written or oral. . . . The Contract Documents shall not be construed to
create a contractual relationship of any kind (1) between the Architect and
Contractor, (2) between the Owner and a Subcontractor or Sub-
subcontractor or (3) between any persons or entities other than the Owner
and Contractor. [Emphasis added.]

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¶49 We conclude that this provision of the construction contract is unambiguous. See

§ 28-3-401, MCA (“The language of a contract is to govern its interpretation if the

language is clear and explicit and does not involve an absurdity.”). The construction

contract clearly precludes anyone, including Monroe Property, from claiming third-party

beneficiary status under the contract. “In the construction of an instrument, the office of

the judge is simply to ascertain and declare what is in terms or in substance contained

therein, not to insert what has been omitted or to omit what has been inserted.” Section

1-4-101, MCA.

¶50 Since Monroe Property was not a party to the construction contract between DAC

and Monroe Construction, nor was Monroe Property a third-party beneficiary to the

contract, we hold that Monroe Property does not have standing to challenge the contract.

¶51 Accordingly, we further hold that the District Court did not violate Monroe

Property’s rights to due process and to access to the courts by denying Monroe Property

its day in court on its breach of contract claim.

Issue 3.

¶52 Whether the District Court overlooked disputed issues of fact in entering judgment
in the lien foreclosure action.

¶53 In the Arbitration Award, the arbitrators made findings of fact regarding the

construction lien issue. Thereafter, the District Court, relying on these findings of fact,

granted summary judgment in favor of DAC on the construction lien.

¶54 Monroe Property argues that there are disputed issues of material fact which the

District Court ignored in entering judgment on DAC’s construction lien and that the

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outcome of such an adjudication could significantly alter the amount of the lien to be

foreclosed.

¶55 The arbitrators specifically stated that “all of the possible parties to a foreclosure

action are not parties to this arbitration” and that “[f]oreclosure of liens is a purely

judicial function, and is outside the authority or jurisdiction of the arbitration

proceeding.” Consistent with this determination, the arbitrators pointed out that they had

no jurisdiction to enter a decree of foreclosure, or to otherwise direct the
carrying out of any steps in connection thereto. These matters are
exclusively judicial functions, and are exclusively within the province of
the courts of Montana.

¶56 While the arbitration panel had authority to liquidate the breach of contract

damages, it had no authority to foreclose the construction lien or to make findings of fact

regarding foreclosure since Monroe Property was not a party to the arbitration

proceedings. An arbitration award binds only those parties obligated to participate in

arbitration. Tamini v. Jewon, 808 F.2d 978, 981 (2d Cir. 1987). However, because we

held in the previous issue that Monroe Property does not have standing to challenge the

construction contract itself, Monroe Property is limited to its statutory defenses on the

construction lien issue, that is, those defenses that involve whether a construction lien

meeting the requirements set out in Title 71, chapter 3, part 5, MCA, was properly and

timely filed against Monroe Property’s real property. Monroe Property may not

challenge DAC’s claims regarding the improvements which were arbitrated in DAC’s

favor under its construction contract with Monroe Construction.

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¶57 Accordingly, we hold that the District Court erred in entering judgment in the lien

foreclosure action. The matter of the lien and its foreclosure remain as issues to be

litigated or otherwise resolved in further proceedings.

Issue 4.

¶58 Whether the District Court correctly included the arbitrator’s award of attorney’s
fees and costs in the construction lien matter to be enforced against Monroe
Property.

¶59 Monroe Property asserts that it was made liable for attorney’s fees and costs

related to an arbitration proceeding over a contract to which it was not even a party, and

that it was never given any opportunity to dispute the reasonableness of DAC’s attorney’s

fees.

¶60 As we pointed out earlier in this Opinion, any challenge to the amount of

attorney’s fees awarded to DAC in arbitration is untimely. Even so, DAC obtained an

award for attorney’s fees against Monroe Construction only. Because Monroe Property

was not a party to the arbitration, the award of attorney’s fees cannot be enforced against

it. An arbitration award binds only those parties obligated to participate in arbitration.

Tamini, 808 F.2d at 981.

¶61 As a final matter, DAC requests attorney’s fees on appeal pursuant to the Montana

Rules of Appellate Procedure; the Montana Prompt Pay Act (§ 28-2-2105, MCA); and

Montana’s lien statutes (specifically, § 71-3-124, MCA).

¶62 Section 28-2-2105, MCA, provides in part: “In a civil action on a contract to

enforce an obligation imposed by this part, the prevailing party is entitled to reasonable

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attorney fees and costs, both for trial and appeal.” In addition, § 71-3-124(1), MCA,

provides in part:

In an action to foreclose any of the liens provided for in Title 71,
chapter 3, part 3, 4, 5, 6, 8, 10, or 16, 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.

Furthermore, M. R. App. P. 19(5) provides:

Sanctions. The supreme court may, on a motion to dismiss, a
request included in a brief, or sua sponte, award sanctions to the prevailing
party in an appeal, cross-appeal, or a motion or petition for relief
determined to be frivolous, vexatious, filed for purposes of harassment or
delay, or taken without substantial or reasonable grounds. Sanctions may
include costs, attorney fees, or such other monetary or non-monetary
penalty as the supreme court deems proper under the circumstances.

¶63 Here, Monroe Property prevailed on appeal on its claim that there were disputed

issues of material fact on the construction lien issue. And, while DAC prevailed on

appeal on Monroe Construction’s claim regarding the mathematical error in the

attorney’s fees and on Monroe Property’s claim regarding breach of contract, we are not

inclined to award additional attorney’s fees to DAC after DAC received a windfall of

more than $110,000 in attorney’s fees based on the mathematical error in the Arbitration

Award. A further award of attorney’s fees would not be “reasonable” under § 28-2-2105,

MCA, nor can we conclude that Monroe Construction’s and Monroe Property’s appeals

were frivolous, vexatious, filed for purposes of harassment or delay, or that they were

taken without substantial or reasonable grounds, M. R. App. P. 19(5).

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¶64 Affirmed in part, reversed in part, and remanded for further proceedings consistent

with this Opinion.

/S/ JAMES C. NELSON

We concur:

/S/ JIM RICE
/S/ JOHN WARNER
/S/ BRIAN MORRIS

/S/ RANDAL I. SPAULDING
District Court Judge Randal I. Spaulding
sitting for Justice Patricia O. Cotter

/S/JOHN C. McKEON
District Court Judge John C. McKeon
sitting for Justice W. William Leaphart

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