Heine v. Seibert

No. 84-395
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985

JOHN 0. HEINE and NANCY HEINE,
Plaintiffs, Counter-Defendants
and Appellants,

JAMES C. SEIBERT,
Defendant, Counter-Claimant and
Respondent.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Charles Luedke, Judge presiding.

COUNSEL OF RECORD:

For Appellants:
Towe, Ball, Enright 6 Mackey, Billings, Montana

For Respondent:
Peterson, Schofield & Leckie, Billings, Montana

Submitted on Briefs: July 11, 1985
Decided: August 5, 1985

Filed: AU6 5- f 985

Clerk
Mr. Justice William E. Hunt, Sr ., delivered the Opinion of
the Court.

John and Nancy Heine appeal a judgment of the
Yellowstone County District Court which granted them
liquidated damages, but denied them other damages in addition
thereto, following the sale of a business to James Seibert,
and Seibert's subsequent default in making payments to the
Heines. Seibert, as buyer, filed a counterclaim, seeking an
order that the Heines, as sellers, be held responsible for
the accounts payable of the business, inasmuch as the sellers
were entitled to the accounts receivable upon buyer's
default. The District Court reimbursed the buyer for monies
paid on behalf of the business, but denied his request for
damages to his credit and business reputation, and
intentional infliction of emotional distress. The buyer
appeals the judgment on his counterclaim.
Four issues are presented by this appeal. The first
issue is whether the liquidated damages provision in the
parties' contract also required the sellers to assume the
accounts payable as part of those liquidated damages. The
second is whether the District Court order overlooked and
should have included a finding that the sellers were
responsible for outstanding debts of the business incurred
under the buyer's operation of the business. The third issue
is whether the buyer was entitled to prejudgment interest at
the contract rate on the accounts payable which he paid after
he defaulted. The fourth issue is whether the buyer was
entitled to an award for damage to his credit and business
reputation and for intentional infliction of emotional
distress.
 We affirm issues one, three 2nd four and remand issue
two for further proceedings.
On October 16, 1979, the sellers entered into a valid
written contract with the buyer. The sellers sold a business
known as Billings Sweeping Service to the buyer at a total
purchase price of $155,000.00. The buyer put down
$45,000.00, and agreed to pay $2,005.00 per month for ten
years at 94% interest. After making several monthly
payments, the buyer failed to make the payment in June 1980,
and went into default. The sellers made an election,
pursuant to the contract, to retake possession of the
business, and to keep all the payments made to date, as
liquidated damages for the buyer's breach of the contract.
Those payments consisted of the $45,000.00 downpayment, and
$16,000.00 paid in monthly installments, and the business was
returned to the sellers on August 5, 1980.
However, a problem arose when the buyer turned the
business back over to the sellers. While they agreed that
the assets of the business included the accounts receivable,
they disagreed as to who should be liable for the accounts
payable. The sellers took the position that because those
debts were incurred by the buyer while he was operating the
business as a sole proprietor, he alone should retain
liability. The buyer argued the election to take the
business as liquidated damages meant the sellers should take
a l l the business, including assets and debts.

The District Court determined that liquidated damages
should consist of payments received, and return of the
assets, and on that basis, it granted the buyer's motion for
summary judgment.
 The first error the sellers assert is that the trial
court should not have included the accounts payable in the
liquidated. damages awarded to the sellers. The parties '
contract does not specifically establish which party should
be liable for the accounts payable upon default and surrender
of the business by the buyer and both parties acknowledge
that fact.
The written buy-sell agreement executed by the parties
contains a default provisions which was used by the Heines in
this case. They gave written notice and after the default
remained uncured, the agreement was terminated and Seibert
became obligated to surrender possession under the following
provisions of the agreement:
"In the event of such termination, Buyer will
surrender possession of the business and all of its
assets thereupon immediately and peaceably and
execute such documents and instruments as Seller
may require to evidence of record termination of
this Agreement and of Buyer's interest in the
business. In such case, Seller shal.1 be entitled
to retain all payments made hereunder as liquidated
damages for breach of this Agreement as rental for
the use of the business."
In addition, the District Court referred to paragraph 19 of
the written agreement which provided:
"19. Buyer agrees to fully pay and perform each,
every and all of the covenants contained herein and
further that he will operate and maintain said
&

business in a good and workmanlike manner rendering
full, completG, and thorough services to each of
its customers, and Buyer further agrees that he
will not assign any of the Seller's present
accounts or contracts and - - future accounts
that all
and contracts - -be kept -- business during
will with the
- - - - this agreement."
the term of (Emphasis added.)
The District Court pointed out that the Heines contended
that under the above-described provisi-ons of the contract,
they have a right to repossess all of the property including
the accounts receivable but are not obligated to pay the
accounts payable. The District Court pointed out that
Seibert relied upon the same contract provisions to conclude
that both accounts payable and receivable must go together
and fall within the proper definition of "assets" and
"accounts" and "contracts." The District Court received
evidence at trial in addition to the written agreement. The
District Court pointed out that the terms "assets,"
"accounts" and "contracts" are not words or concepts having a
one-sided meaning but a-re generic terms which in many
instances embrace both sides of a ledger since they involve
not only rights but responsibilities. Based upon the
evid-ence before it, the District Court concluded that as used
in the agreement, "accounts" and "contracts" could very well
actually be referring to customers of the business and the
terms of service and payment relating to customers, but in no
event could they be interpreted to mean that they refer to
only one side of the asset-liability relationship. The court
therefore concluded that Seibert correctly asserted that the
accounts receivable and accounts payable are indivisible so
that whichever party assumes one must also receive the other.
The District Court concluded that, in summary, Seibert is
entitled to judgment against the Heines for the amount of all
the business accounts payable which he had paid from funds
other than those coming from business accounts receivable,
whether voluntarily paid or paid through enforcement measures
exercised by creditors.
We conclude there is substantial evidence in the record
to support the findings and conclusions of the District
Court, and therefore affirm the order of the District Court
which provided that Seibert is entitled to judgment against
the Heines for the amount of all of the business accounts
pagra.ble which he had paid from funds other than those coming
from the business accounts receivable. There was no error
here.
The second issue, one raised by the buyer, j.s whether
the court should have made a finding that the sellers were
responsible for approximately $3,300.00 in debts, still owed
by Billings Sweeping Service, which debts were incurred
during the buyer's operation of the business. That figure
was discussed during the trial, but apparently was overlooked
by the court in its order. Further, the sellers did not
address the point in their reply brief.
It is possible the trial court considered those debts as
within its definition of the accounts payable. However, it
is not the role of this Court to speculate on the trial
court's intent. Therefore, we remand to the District Court
for a clarification concerning the d-isposition of those
outstanding debts.
The third issue is whether Seibert should have been
awarded prejudgment interest on the accounts payable which he
paid after his default, pursuant to S 27-1-211, MCA. Seibert
asserted the that the contractual rate of interest ( 9 . 5 % ) ,
should apply. The District Court held, and correctly so,
that prejudgment interest under that statute applies only to
an award of damages, and that the award in this case to
Seibert, was one of reimbursement, not damages. Section
27-1-211, MCA, provides, in pertinent part:
"Right to interest. Every person who is entitled
to recover damages certain or capable of being made
certain by calculation . . .
is entitled also to
recover interest thereon .. .I'

Nor does § 27-1-212, MCA, apply:
"When - - of interest discretionary.
award In an
action for the breach of an obligation not arising
from contract and in every case of oppression,
fraud, or malice, interest may be given . . ..
"
The monies Seibert paid in excess of the required amounts do
not represent a breach of any obligation on the part of the
Heines.
Rather, the trial court noted that the applicable
statute was S 31-1-106, MCA, which provides that for monies
lent or due on any settlement of accounts, the legal rate of
interest (6%) applied, and rendered judgment thereon. No
error.
In the fourth issue, the buyer asserts the court erred
in denying him damages to his business and credit reputation.
Again, the court correctly determined that the actions of the
sellers, in refusing to release the accounts receivable or
refusing to accept responsibility for the accounts payable,
were pursued through the legal process, not through self-help
measures. There was no basis to find. an intentional tort.
The sellers sought a hearing resulting in an injunction to
preserve the business pending a resolution of the dispute
between the parties. The buyer did not appear at the
hearing, and the injunction issued in the proper course. We
do not see how the sellers' utilization of the legal process
constitutes a basis for damages due to the buyer. We hold
there is no error.
We affirm the District Court's judgment, and remand for
clarification of the $3,300.00 debt noted above.
Affirmed as to issues one, three and four. Remanded as
to issue two for clarification of the $3,300.00 debt.

We Concur:
 f

C h i e f Justice