April 27 2010
DA 09-0162
IN THE SUPREME COURT OF THE STATE OF MONTANA
2010 MT 90
IN RE THE MARRIAGE OF
AMBER E. SZAFRYK,
Petitioner and Appellee,
and
JOHN M. SZAFRYK,
Respondent and Appellant.
APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DR 01-699
Honorable Robert L. Deschamps, III, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Ryan A. Phelan; P. Mars Scott; P. Mars Scott Law Offices; Missoula,
Montana
For Appellee:
Kathleen O’Rourke-Mullins; Robert A. Terrazas; Terrazas Law
Office; Missoula, Montana
Submitted on Briefs: March 17, 2010
Decided: April 27, 2010
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 Respondent John Szafryk (John) appeals the ruling of the District Court for the
Fourth Judicial District, Missoula County, that pursuant to two divorce settlement
agreements, John forfeited his right to use property owned by his ex-wife Amber Szafryk
(Amber) by assigning an interest in his car dealership to a third person. John also appeals
the District Court’s award of rent and attorney’s fees to Amber. We affirm.
¶2 We address the following issues on appeal:
¶3 1. Whether the District Court erred in concluding that John forfeited his right to
use the dealership property by violating anti-assignment clauses contained in the parties’
settlement agreements.
¶4 2. Whether the District Court erred in requiring John to pay rent to Amber for
using her property after the date of the alleged transfer.
¶5 3. Whether the District Court erred in determining that John should pay Amber
monthly rent of $2,500.
¶6 4. Whether the District Court erred in awarding Amber attorney’s fees and costs.
FACTUAL AND PROCEDURAL BACKGROUND
¶7 Amber and John married in Dillon, Montana, in 1964. In 2001 Amber petitioned
to dissolve the marriage. The dissolution, Amber testified, was acrimonious. In 2003 the
District Court dissolved the marriage. The decree of dissolution incorporated two
settlement agreements, which divided the parties’ property and debts. Amber, believing
John to be in violation of the settlement agreements, initiated the present proceeding.
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¶8 In 1983 John started an automobile dealership, Country Ford Inc. (“Country Ford”
or “dealership”), in Plains, Montana. John at all relevant times has owned all shares of
Country Ford. The dealership consisted of new- and used-car sales departments and a
repair shop. John and Amber jointly owned the land and building where Country Ford is
located (dealership property). When they divorced, John was awarded the dealership,
and Amber received the dealership property. This arrangement is the center of the
present dispute.
¶9 In July 2002 the parties signed their initial settlement agreement (Settlement
Agreement), which allocated the dealership property to Amber
subject to husband[’]s right to possession and use of this property as a Ford
dealership (continuation of existing operation) for a maximum of 5 years.
Husband[’]s use right shall require husband to keep the improvements and
fixtures and property in good repair, normal wear and tear excepted and
capital improvements excepted. Husband shall pay all taxes, SIDS or other
assessments during his period of use. Husband shall pay all costs of
insurance (at current levels). Should husband sell, assign, transfer or
otherwise divest himself of his dealership his use right shall terminate
without compensation or abatement.
The Settlement Agreement allocated the dealership to John. The Settlement Agreement
contains a provision for attorney’s fees: “Should either party be required to enforce the
terms of this agreement, the prevailing party shall be entitled to his or her attorney[’]s
fees and costs incurred in such enforcement action.”
¶10 Apparently dissatisfied with the Settlement Agreement, the parties agreed to an
addendum (Addendum) a year later. The Addendum dealt mainly with the dealership and
the dealership property. It reads in part:
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On page 3 of the Settlement Agreement, it was agreed that husband would
be entitled to possession and use of the property as a Ford dealership for a
maximum of five (5) years. The parties have agreed to modify this
understanding and provide husband and his company, Country Ford, Inc.,
with the right to possess and use the property, rent free, through the 24th
day of July, 2008. No rent or other consideration is to be paid to wife or
her assignee or successor in interest for husband’s possession or use except
as provided herein. Such lease relationship is subject to the following
terms:
Any additional terms set forth in the original Settlement Agreement dated
July 24, 2002.
. . . .
The commitment set forth herein is non-assignable and personal to
husband. If husband sells his interest in Country Ford, Inc., in whole or in
part, or if he sells all of the assets of Country Ford, Inc., or otherwise ceases
to continue the existing businesses, the operation of the Ford dealership and
the used car dealership, the lease relationship shall immediately terminate.
The Addendum also provided for attorney’s fees: “To the extent that the wife finds it
necessary to retain an attorney to assist her in the enforcement of the terms and
conditions of the agreement (lease), then husband agrees to reimburse wife for said
attorney’s fees at the hourly rate of $175.00 per hour.” The present question is whether
John violated the anti-assignment clauses of the Settlement Agreement and Addendum.
¶11 Prompted by a series of events occurring in early 2006, Amber moved the District
Court to order John to remove Country Ford from her property for violating the anti-
assignment provisions of the Settlement Agreement and Addendum (collectively,
“settlement agreements”). The standing master assigned to the case held a hearing in
October 2007, and the parties and witnesses presented testimony. While only a partial
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transcript of this hearing (which includes none of the exhibits admitted) has been
presented to this Court, the dispositive facts are undisputed.
¶12 In November 2005 John and Wade Rehbein (Wade) began discussing the
possibility of Wade’s purchasing Country Ford. Wade owned Outback Automotive
Company (Outback Automotive), an automobile repair business in Plains. Upon John’s
suggestion, Wade asked Amber about leasing or purchasing the property. Amber allowed
Wade to inspect the dealership building. Amber consulted other renters in Plains to
determine an appropriate rent. She offered to rent the property to Wade for $3,300 per
month, then lowered the offer to $2,500. Since Wade stated that he could only afford
$1,000 per month, they did not reach a rental agreement. Wade then offered to buy the
dealership property, but he and Amber again failed to reach an agreement.
¶13 In March 2006 Wade contacted Ford Motor Company (Ford) about acquiring the
Country Ford franchise. He was advised that Ford required applicants to have two years
of experience as a general manager. Wade could not meet this prerequisite. Undeterred
by these setbacks, Wade hired an attorney to draft an asset purchase agreement (Asset
Purchase Agreement). Under this agreement, Wade would buy the dealership for
approximately $180,000, and the sale would close in July 2008 (conveniently, the same
date that John’s rent-free lease with Amber would end).
¶14 In the meantime, Wade would work as the general manager of Country Ford,
gaining the experience necessary to acquire the franchise from Ford. The Asset Purchase
Agreement provided that Wade would move the employees and equipment of Outback
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Automotive into the Country Ford building, leasing both to Country Ford in exchange for
one-hundred percent of Country Ford’s profits. The sale was to be contingent on various
conditions, including that Wade acquire the franchise from Ford and that Wade, as
general manager of the dealership, not be fired by John. Though the agreement was
originally dated May 2006, Wade and John did not sign the agreement until over a year
later, after the current proceedings began.
¶15 Coincidentally, in the spring of 2006 the mechanics who worked in the repair shop
at Country Ford quit. Shortly thereafter Outback Automotive moved into the dealership
building. Wade financed a number of modifications of and improvements to the
dealership building to accommodate his mechanics and equipment. In June 2006
Country Ford hired Wade to serve as the general manager of the dealership. As general
manager, Wade earned a monthly salary of $4,500 and received one-hundred percent of
Country Ford’s profits. Wade would work twelve-hour days at the dealership, overseeing
day-to-day operations. John decreased his time there to only a few hours each week.
Wade also paid John $40,000 for what he and John described as an earnest money down
payment towards the purchase of Country Ford. Still, John remained the sole stockholder
in Country Ford, at no time transferring stock to Wade. At the hearing, both John and
Wade testified that Wade was only the general manager of Country Ford, not an owner.
¶16 Following the hearing, the standing master issued findings of fact and conclusions
of law and an order. The standing master concluded, “By transferring control,
management and profits of Country Ford Inc., to Wade, John sold, transferred or assigned
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his interest in the Country Ford, Inc., to Wade within the meaning of the Settlement
Agreement and Addendum as of June 19, 2006.” Consequently, the standing master
reasoned, John’s right to use the property terminated. The standing master ordered John
to pay Amber rent of $2,500 per month from June 19, 2006, through July 24, 2008.
Finally, pursuant to the settlement agreements, the standing master awarded Amber
attorney’s fees and costs. The District Court adopted the standing master’s findings of
fact, conclusions of law, and order.
¶17 John appeals.
STANDARD OF REVIEW
¶18 The District Court’s order adopted the findings of fact and conclusions of law of
the standing master. We review findings of fact for clear error. Leichtfuss v. Dabney,
2005 MT 271, ¶ 20, 329 Mont. 129, 122 P.3d 1220. Under this deferential standard of
review, we will reverse a district court if its findings of fact are not based on substantial
evidence, if the district court has misapprehended the effect of the evidence, or if our
review of the record leaves us with “the definite and firm conviction that a mistake has
been committed.” Id. (quoting Interstate Prod. Credit Assn. of Great Falls v. DeSaye,
250 Mont. 320, 323, 820 P.2d 1285, 1287 (1991)). We review conclusions of law de
novo, according no deference to the district court. Id. at ¶ 21. We will uphold a district
court’s decision that reaches the correct result, though for the wrong reason. Wells Fargo
Bank v. Talmage, 2007 MT 45, ¶ 23, 336 Mont. 125, 152 P.3d 1275.
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¶19 We generally review awards of attorney’s fees for abuse of discretion. Mungas v.
Great Falls Clinic, LLP, 2009 MT 426, ¶ 42, 354 Mont. 50, 221 P.3d 1230. However,
when contractual language requires an award of attorney’s fees and the contract is
conscionable, a district court lacks discretion to deny attorney’s fees. In re Marriage of
Caras, 263 Mont. 377, 385, 868 P.2d 615, 620 (1994). We review a district court’s
construction and interpretation of a contract de novo. Kruer v. Three Creeks Ranch of
Wyo., L.L.C., 2008 MT 315, ¶ 37, 346 Mont. 66, 194 P.3d 634.
DISCUSSION
¶20 Issue 1: Whether the District Court erred in concluding that John forfeited his
right to use the dealership property by violating anti-assignment clauses contained in
the parties’ settlement agreements.
¶21 The District Court determined that John and Wade’s business relationship was too
“convenient”—so convenient that it violated the anti-assignment provisions of the
settlement agreements. John contends that since he retained all the dealership stock and
that the dealership sale was not scheduled to close until 2008, the District Court’s
conclusion was in error. We agree with the District Court.
¶22 The business relationship between John and Wade likely established a partnership
in fact. See MacArthur Co. v. Stein, 282 Mont. 85, 88-92, 934 P.2d 214, 216-19 (1997)
(presenting and applying test to determine whether a partnership formed). The evidence
may also be sufficient to establish Wade as a shareholder of Country Ford, even though
he did not formally purchase stock. See Bump v. Stewart, Wimer & Bump, P.C., 336
N.W.2d 731, 735-36 (Iowa 1983) (finding third parties to be shareholders in professional
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corporation even though they were not formally issued stock); cf. Hanson Sheep Co. v.
Farmers & Traders’ St. Bank, 53 Mont. 324, 338-39, 163 P. 1151, 1155 (1917) (looking
past ownership of stock to find third party’s “position as stockholder was only nominal”).
Neither the parties nor the District Court attempted to complete this portion of the John-
Wade-business-relationship jigsaw puzzle. Nevertheless, the language of the settlement
agreements is sufficient to resolve this issue.
¶23 Construction and interpretation of the settlement agreements is a question of law.
Edwards v. Cascade Co. Sheriff’s Dept., 2009 MT 451, ¶ 38, 354 Mont. 307, 223 P.3d
893. The Settlement Agreement allocated the dealership property to Amber, but allowed
John to use it to run the dealership for five years, a right which would terminate should
John “sell, assign, transfer or otherwise divest himself of his dealership.” The Addendum
clarified this relationship by granting John a rent-free lease of the dealership property
until July 24, 2008, to run the dealership. Again this right to use the dealership property
was subject to an anti-assignment provision that would terminate the lease if John “sells
his interest in Country Ford, Inc., in whole or part, . . . or otherwise ceases to continue the
existing businesses.” The lease in the Addendum remained subject to the “additional
terms set forth in the original Settlement Agreement.” The apparent purpose of these
provisions was to allow John to operate the dealership to earn his livelihood, but allow
Amber to use the property for her own advantage (through rent or sale) if John ceased
operating the businesses. This purpose is reflected in the catchall phrases in the
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Settlement Agreement (“or otherwise divest himself of his dealership”) and in the
Addendum (“or otherwise ceases to continue the existing businesses”).
¶24 Here, the District Court did not err in concluding that John’s right to use the
dealership property terminated. While the District Court focused on the “sell, assign, [or]
transfer” language from the Settlement Agreement, we conclude that the clause
“otherwise ceases to continue the existing businesses” from the Addendum is dispositive.
The intention of the settlement agreements was to allow John, personally, to earn profits
from the dealership without having to pay rent to Amber. John did not formally sell
shares in the dealership to Wade. However, John transferred his right to use the
dealership property rent-free to Wade. John “otherwise cease[d] to continue the existing
businesses” by allowing Wade to assume management and control of the dealership,
receive all profits from the dealership, move his repair business (Outback Automotive)
onto the dealership property, and finance modifications to the dealership building.
Effectively, John used his free-rent arrangement from the settlement agreements as a
bargaining chip to negotiate the sale to Wade. Assuming that $2,500 was a reasonable
monthly rent for use of the dealership, Wade stood to save $60,000, not an insignificant
sum, by taking over the remaining period of John’s rent-free lease of the dealership
property. However, because John’s right to use the property without paying rent was
personal to him, he could not transfer it to Wade. By doing so, John forfeited his right to
use the dealership property.
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¶25 John argues that he did not transfer any interest in the dealership to Wade because
he did not sell him any stock in Country Ford. This argument is an attempt to elevate
form over substance. See § 1-3-219, MCA (“The law respects form less than
substance.”). Further, because we conclude that operation of the dealership is the
dispositive issue, whether John formally transferred his stock in Country Ford to Wade is
immaterial. For these same reasons, John’s arguments that he did not transfer his interest
in the dealership because of the Asset Purchase Agreement and because of Wade’s
inability to meet statutory requirements are also without merit.
¶26 John also argues that the District Court erred by concluding generally that he
“sold, transferred or assigned his interest” in Country Ford. Citing Ballenger v. Tillman,
133 Mont. 369, 324 P.2d 1045 (1958), John asserts that the District Court should have
specified whether he sold or transferred or assigned his interest in the dealership.
Because we conclude that John forfeited his right to use the dealership property by
ceasing to personally operate Country Ford, we need not address this argument. Even
assuming that the District Court erroneously concluded that John transferred an interest in
Country Ford, it still reached the correct result (that John forfeited his use right). Wells
Fargo Bank v. Talmage, 2007 MT 45, ¶ 23, 336 Mont. 125, 152 P.3d 1275.
¶27 Issue 2: Whether the District Court erred in requiring John to pay rent to
Amber for using her property after the date of the alleged transfer.
¶28 John next argues that the District Court erred in requiring him to pay rent to
Amber from June 2006 through July 2008. John argues that if he transferred his interest
in the dealership, he should not be liable for the dealership’s rent.
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¶29 John’s argument misstates the District Court’s conclusion. The District Court did
not conclude that John had transferred all of his interest in Country Ford. Furthermore,
the testimony presented indicated that John retained some vestigial interest in the
dealership: he retained nominal ownership of stock and, ostensibly, the ability to fire
Wade.
¶30 Here, John’s actions violated the settlement agreements. For such breach of
contract, the appropriate remedy is damages in an amount “which will compensate the
party aggrieved for all the detriment which was proximately caused thereby.” Section
27-1-311, MCA. John’s breach of the settlement agreements prevented Amber from
earning a reasonable rent for the use of the dealership property. Accordingly, the District
Court did not err in requiring John to pay Amber rent for using the dealership property
after June 2006.
¶31 Issue 3: Whether the District Court erred in determining that John should pay
Amber monthly rent of $2,500.
¶32 Next, John contends that the District Court factually erred in finding that $2,500
was a reasonable rental value. John asserts that this finding was not supported by
substantial evidence.
¶33 At the hearing, Amber presented uncontradicted testimony that she consulted
various renters in Plains to determine the rental value of the dealership. She testified that
the monthly market rental value of the dealership would be $4,000 and that she originally
offered to rent the dealership to Wade for $3,300 per month. Eventually, she offered to
rent the dealership to Wade for $2,500 per month, but Wade refused. John presented no
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similar estimate of the rental value of the dealership. Accordingly, we conclude that
substantial evidence supported the District Court’s finding that $2,500 was a reasonable
monthly rent.
¶34 Issue 4: Whether the District Court erred in awarding Amber attorney’s fees
and costs.
¶35 Finally, John argues conditionally that pursuant to the settlement agreements and
§ 28-3-704, MCA, Amber should not be entitled to attorney’s fees unless she prevails in
all aspects of her case. Because Amber has prevailed in all aspects of her case, an award
of attorney’s fees is appropriate.
¶36 Affirmed.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ BRIAN MORRIS
/S/ PATRICIA O. COTTER
/S/ MICHAEL E WHEAT
/S/ JIM RICE
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