AAR Const., Inc. v. Fergus Elec. Co-op., Inc.

• Decision Date: 15 February 1985
• Docket Number: No. 84-434,84-434
• Citation: 215 Mont. 102,695 P.2d 819
• Parties: AAR CONSTRUCTION, INC., Plaintiff and Appellant, v. FERGUS ELECTRIC COOPERATIVE, INC., et al., Defendants and Respondents.
• Court: Montana Supreme Court

Page 819

695 P.2d 819

215 Mont. 102

AAR CONSTRUCTION, INC., Plaintiff and Appellant, v. FERGUS ELECTRIC COOPERATIVE, INC., et al., Defendants and Respondents.

No. 84-434.

Supreme Court of Montana.

Submitted on Briefs Dec. 27, 1984.

Decided Feb. 15, 1985.

Clary & Clary, Great Falls, for plaintiff and appellant.

Ken Tolliver; Wright, Tolliver & Guthals, Billings, for defendants and respondents.

SHEEHY, Justice.

AAR Construction, Inc., appeals from an order of the District Court, Tenth Judicial District, Fergus County, dated August 31, 1984, allowing C.E. Rookhuizen a set-off of $5,823.83 against a judgment theretofore granted by the District Court in favor of AAR Construction, Inc. and against C.E. Rookhuizen.

AAR also appeals from the order of the District Court of the same date allowing AAR the sum of $1,000 additional attorney fees.

AAR's appeal raises two issues:

1. Did the District Court have jurisdiction to grant a set-off against the judgment in this case?

2. Did the District Court abuse its discretion by awarding AAR attorney fees of only $1,000?

On consideration of the issues, we affirm the District Court.

C.E. Rookhuizen of Billings, Montana, was the general contractor for the construction of the Fergus Electric Cooperative office and warehouse in Lewistown, Montana. AAR Construction, Inc., was a subcontractor to Rookhuizen on the job. A dispute arose between the general contractor and the subcontractor as to sums claimed by the subcontractor for the original contract and extras performed by the subcontractor, and for credits claimed by the general contractor for work allegedly done by the general contractor that should have been done by the subcontractor. The parties were unable to resolve their differences and the case was tried and judgment entered on September 8, 1983, which resulted in C.E. Rookhuizen being obligated to pay AAR a judgment of $13,319.

During the course of construction, the subcontractor, AAR, failed to make payments to unions for fringe benefits due its workers and also failed to make payments to the Internal Revenue Service of withholdings from the workers. The failure to make the union payments resulted in both AAR Construction and Rookhuizen being sued by Audit Services, Inc., for the collection of those unpaid fringe benefit costs. The Internal Revenue Service served notice of levy upon AAR, Rookhuizen, and their counsel for claimed unpaid tax payments owed by AAR. The notice of levy was served prior to any judgment being entered either in this case or the case brought by Audit Services, Inc., to recover the sums due under the union agreements.

Regarding the union fringe benefit payments, AAR was primarily liable for the payments because they applied to AAR's workers, but Rookhuizen was secondarily liable if AAR did not pay by virtue of Sec. 39-3-706, MCA. In the cause brought by AAR against Rookhuizen the parties entered into a stipulation signed by their counsel and set forth in the pretrial order in that cause which recited:

"It is stipulated between the parties that AAR Construction, Inc., has not made payments to the Intermountain Ironworkers' Trust, Intermountain Ironworkers' Pension Trust, and the Intermountain Ironworkers' Training Trust. By reason of AAR's failure to make payments, a claim has been advanced by Audit Services, Inc., the assignee of the Trust, against C.E. Rookhuizen in the amount $5,047.25. It is further stipulated that any sums actually paid by C.E. Rookhuizen by reason of the claim of the aforementioned trusts as set forth in Cause No. DV-82-775 [the number of the case in the Yellowstone County District Court] or in settlement thereof, in full or in part, shall be credited against any judgment in this case by AAR Construction, Inc., against C.E. Rookhuizen."

In this case, the District Court in Fergus County made findings of fact and conclusions of law on September 8, 1983. In finding of fact no. 21, the district judge referred to the failure of AAR to make the payments to the union trust funds and that the fact of nonpayment was agreed upon by both of the parties. The court in conclusion of law no. 11 determined that Rookhuizen was not entitled to reimbursement at that time because of lack of evidence of AAR's liability therefor and Rookhuizen's liability therefor. On September 8, 1983, the court also entered judgment in the matter, in favor of AAR and against Rookhuizen in the net amount of $13,319.22, the court having allowed set-offs to Rookhuizen for certain sums under the contract.

Audit Services, Inc., obtained a judgment in the Yellowstone County District Court case against Rookhuizen on April 19, 1984, as a result of which Rookhuizen eventually made payment to Audit Services for a total of $5,823.83. On such payment Audit Services' judgment against Rookhuizen and AAR was satisfied in the Yellowstone County District Court.

In the meantime, Rookhuizen had appealed the judgment against him in favor of AAR entered in the Fergus County District Court to the Montana Supreme Court. He did nothing further to perfect his appeal and, after failing to meet deadlines given by this Court to proceed with appeal, in May of 1984 he advised the Montana Supreme Court that he did not wish to proceed with the appeal and the appeal was dismissed with prejudice. Rookhuizen thereafter attempted to bring an interpleader action in the Yellowstone County District Court to determine which of various creditors of AAR were entitled to funds held by C.E. Rookhuizen. Apparently that action aborted.

With the dismissal of the appeal to the Montana Supreme Court, the judgment against Rookhuizen in the Fergus County District Court had become final. Nonetheless, on June 14, 1984, Rookhuizen filed a verified motion for an order granting set-off of the amount paid by Rookhuizen to Audit Services against the judgment in favor of AAR.

The District Court held a telephone conference on the motion on June 28, 1984. The minutes of the court reflect that the telephone conference was held on that date and that the motion was denied. On July 13, 1984, Rookhuizen filed a verified motion for reconsideration of its motion for set-off. The District Court ordered a hearing on the motion for reconsideration on July 30, 1984, and on August 31, 1984, the court signed its order, filed September 4, 1984, granting Rookhuizen set-off against the AAR judgment. The court also ordered the payment of $1,000 in attorney fees by Rookhuizen to AAR.

In making its order of August 31, 1984, the District Court said:

"The parties had stipulated before trial that any sums paid by Defendant on the Union Trust account would be credited against a judgment by Plaintiff against Defendant. That stipulation is not expressly limited to, nor does it require, payments made before judgment herein, of which there were none, and there appears to be no compelling reason for so interpreting that Stipulation. The Plaintiff will suffer no detriment by not doing so.

"The plain fact of this case is that the Plaintiff has received the full benefit of Defendant's payment to Audit Services: it got one of its debts paid, a debt for the payment of which the creditor has security, a lien on this Court's judgment. That the debt to Audit Services may not have had priority as against the IRS is not AAR's problem. That debt got paid and the Plaintiff is not entitled to double payment of that sum.

"The Defendant's motion is in the nature of a Motion for the court to declare that the judgment herein has been partially satisfied by its payment to Audit Services. Upon reconsideration of its previous Order, the Court agrees; the judgment has been partially so satisfied.

"This was not a Rule 60 motion; there was no...