American Music Co. v. Higbee

• Decision Date: 07 December 2004
• Docket Number: No. 02-643.,02-643.
• Parties: AMERICAN MUSIC COMPANY, Plaintiff and Respondent, and Zollie Kelman, Plaintiff and Appellant, v. Dennis L. HIGBEE, Maeetta Higbee, and Higbee, Inc., Defendants, Respondents, and Cross-Appellants.
• Court: Montana Supreme Court

103 P.3d 518

2004 MT 349

324 Mont. 348

AMERICAN MUSIC COMPANY, Plaintiff and Respondent, and Zollie Kelman, Plaintiff and Appellant, v. Dennis L. HIGBEE, Maeetta Higbee, and Higbee, Inc., Defendants, Respondents, and Cross-Appellants.

No. 02-643.

Supreme Court of Montana.

Submitted on Briefs January 13, 2004.

Decided December 7, 2004.

For Appellants: Steven T. Potts, Thompson Potts & Donovan, Great Falls, Montana.

For Respondents: Gregory J. Hatley and James A. Donahue, Davis Hatley Haffeman & Tighe, Great Falls, Montana. Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Plaintiff and Appellant Zollie Kelman (Kelman) appeals the District Court's entry of summary judgment against him, and contends he was entitled to summary judgment. Defendants and Respondents Dennis and Maeetta Higbee and Higbee, Inc. (Higbees) cross-appeal the District Court's award of prejudgment interest to American Music Company (AMC). We reverse the District Court's grant of summary judgment in favor of Higbees and remand for further proceedings. In addition, we reverse the District Court's award of prejudgment interest to AMC.

¶ 2 This matter originally came before this Court in American Music Co. v. Higbee, 1998 MT 150, 289 Mont. 278, 961 P.2d 109 (AMC I). In that case, AMC and Kelman were seeking a declaratory judgment, preliminary and permanent injunctions, and specific performance of a gaming machine agreement (Agreement) entered into with Higbees. The Eighth Judicial District Court determined injunctive relief was not proper in a breach of contract action when pecuniary compensation was contemplated and would afford adequate relief. On that basis, the court dissolved a temporary restraining order it had previously issued. AMC appealed from the District Court's decision. We affirmed on June 16, 1998.

¶ 3 Thereafter, the case proceeded toward a jury trial in district court. On January 9, 2002, the District Court, relying on the language of the Agreement, granted Higbees' motion for summary judgment against Kelman, thereby precluding any personal recovery by him against Higbees. The District Court denied Kelman's motion for summary judgment as to Higbees' breach of the Agreement. On April 12, 2002, the jury found Higbees breached their Agreement with AMC and awarded AMC damages of $82,000. On August 21, 2002, the District Court awarded AMC prejudgment interest.

¶ 4 We address the following issues on appeal:

¶ 5 1. Did the District Court err in denying summary judgment to Kelman against Higbees, and in entering summary judgment in favor of Higbees against Kelman?

¶ 6 2. Did the District Court err when it awarded prejudgment interest to AMC?

BACKGROUND

¶ 7 We review only those facts which are necessary to address the relevant issues herein. For a more detailed factual and procedural background, see AMC I.

¶ 8 In August 1990, Dennis and Maeetta Higbee, Kelman, and Kelman's family's business, AMC, entered into a written Agreement concerning a casino Higbees planned to build and operate in Great Falls. Kelman agreed to personally guarantee Higbees' bank loan. In return, Higbees agreed to provide AMC an exclusive five-year right to place and maintain amusement and gambling machines in Higbees' casino. In addition, the Agreement provided that AMC was to receive 40 percent of the profits from the gaming machines and Higbees were to receive 60 percent. Kelman also sold Higbees a building site. Ultimately, a casino was built, and named "Thirsty's."

¶ 9 Both Kelman and AMC were parties to the Agreement with Higbees. Among other things, the Agreement provided a remedy to Kelman if Higbees purchased any machines for placement in Thirsty's from third parties other than AMC:

Should Higbee default under the terms and conditions of this paragraph or the following paragraph of this agreement, Higbee agrees to pay to Kelman the sum of $8,335.00 for each and every then remaining month of the term of this agreement as well as for each and every month thereafter until such time that it has obtained the unconditional release of Kelman's guaranty from [the] First Interstate Bank loan referred to above, which monthly sum is agreed upon and fixed by the parties as stipulated liquidated damages, without proof of loss and without waiver of American Music of any other damage, rights or remedies and American Music's obligation to place, maintain, repair and replace the games and devices referred to in this agreement in Thirsty's.

(Hereinafter "the exclusive agreement provision")

¶ 10 In 1993, the parties agreed in writing to extend the Agreement until August 10, 1998. Also, Higbees, Inc. was added as a party. In consideration of the extension, Kelman agreed to and did transfer an additional parcel of land to Higbees.

¶ 11 On April 18, 1996, Kelman was released from all obligations under his guaranty. A disagreement later ensued regarding the types of machines Higbees wanted in their casino and in April 1997, Higbees stopped paying AMC 40 percent of the gaming profits and instead began paying 20 percent. In June 1997, Higbees told Kelman to remove AMC's machines from the premises. When Kelman refused, Higbees removed AMC's machines and bought their own in July 1997. The Agreement expired by its terms in August, 1998.

STANDARD OF REVIEW

¶ 12 This Court reviews a district court's grant of summary judgment de novo, applying the same evaluation under Rule 56, M.R.Civ.P., as the district court. Motta v. Philipsburg Sch. Bd. Trs., 2004 MT 256, ¶ 11, 323 Mont. 72, ¶ 11, 98 P.3d 673, ¶ 11 (citation omitted). The party moving for summary judgment has the initial burden of proving there are no genuine issues of material fact that would permit a non-moving party to succeed on the merits of the case, and if the moving party meets that burden, then the non-moving party must provide substantial evidence that raises a genuine issue of material fact in order to avoid summary judgment in favor of the moving party. Once it is established that no genuine issues of material fact exist, the district court must then determine whether the moving party is entitled to judgment as a matter of law, and this Court reviews that determination to determine whether the district court erred. Motta, ¶ 11.

¶ 13 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. In re Marriage of DeBuff, 2002 MT 159, ¶ 15, 310 Mont. 382, ¶ 15, 50 P.3d 1070, ¶ 15.

DISCUSSION

ISSUE 1

¶ 14 Did the District Court err in denying summary judgment to Kelman against Higbees, and in entering summary judgment in favor of Higbees against Kelman?

¶ 15 Kelman argues the plain language of the Agreement obligates Higbees to pay liquidated damages to him upon default for the remainder of the term of their Agreement, regardless of whether he was released from his guaranty. He claims the existence of the release only discharges Higbees' obligation to make payment after the term of the contract, but not before. In support of this argument, Kelman relies on the natural signification and grammatical arrangement of the words used in the Agreement and the ordinary rule of construction that qualifying words and phrases refer only to the last antecedent.

¶ 16 Higbees argue against application of the "last antecedent rule" claiming it is merely an interpretation tool, not a steadfast rule, and does not apply when to do so would produce a result contrary to the intent of the contract. Higbees assert the entire Agreement, when read as a whole, clearly provides that Higbees' obligation to pay existed only until such time as Kelman was released from his guaranty, even if that occurred prior to the expiration of the contract term.

¶ 17 Language of contractual provisions is interpreted according to its plain, ordinary meaning. When the language of a contract is clear, unambiguous and, as a result, susceptible to only one interpretation, the duty of the court is to apply the language as written. State v. Asbeck, 2003 MT 337, ¶ 18, 318 Mont. 431, ¶ 18, 80 P.3d 1272, ¶ 18. An ambiguity exists where the wording of the contract, taken as a whole, is reasonably subject to two different interpretations. Asbeck, ¶ 18; Ophus v. Fritz, 2000 MT 251, ¶ 23, 301 Mont. 447, ¶ 23, 11 P.3d 1192, ¶ 23 (citation omitted). Hence, in interpreting a written contract, the intention of the parties is ascertained "first and foremost" from the writing alone. Asbeck, ¶ 18 (citation omitted).

¶ 18 This Court has followed the basic grammatical construction rule that, absent a contrary intention, qualifying words and phrases should be applied only to the words or phrases immediately preceding, or in other words, the last antecedent. See State ex rel. Hinz v. Moody (1924), 71 Mont. 473, 484, 230 P. 575, 579; State ex rel. Peck v. Anderson (1932), 92 Mont. 298, 302, 13 P.2d 231, 233; Butte-Silver Bow Local Govt. v. State (1989), 235 Mont. 398, 405, 768 P.2d 327, 331. This is in accordance with courts in other jurisdictions, including the Ninth Circuit Court of Appeals and the United States Supreme Court. Tondre v. Pontiac School Dist. (1975), 33 Ill.App.3d 838, 342 N.E.2d 290, 294; New Castle County v. National Union Fire Ins. Co. (3rd Cir.1999), 174 F.3d 338, 348; Bakery & Confectionary Union & Indus. Intl. Pension Fund v. Ralph's Grocery Co. (4th Cir.1997), 118 F.3d 1018, 1026; Northwest Forest Resource Council v. Glickman (9th Cir.1996), 82 F.3d 825, 832; Barnhart v. Thomas (2003), 540 U.S. 20, 27, 124 S.Ct. 376, 380-81, 157 L.Ed.2d 333, 340-41.

¶ 19 We now turn to the exclusive agreement provision at issue. The phrase in question states that Higbees, in the event of a default, shall pay Kelman "$8,335.00 for each and every then remaining month of the term of this agreement as well as for each and every month thereafter until such time that it has obtained the unconditional release of Kelman's guaranty...." First, we note...