Blue Ridge Homes, Inc. v. Thein

• Decision Date: 29 July 2008
• Docket Number: No. DA 07-0267.,DA 07-0267.
• Citation: 2008 MT 264,345 Mont. 125,191 P.3d 374
• Parties: BLUE RIDGE HOMES, INC., and, Richard Carvalho, Plaintiffs and Appellees, v. Ronald J. THEIN, Rachel Thein, and First Security Bank, Defendants and Appellants.
• Court: Montana Supreme Court

191 P.3d 374

2008 MT 264

345 Mont. 125

BLUE RIDGE HOMES, INC., and, Richard Carvalho, Plaintiffs and Appellees, v. Ronald J. THEIN, Rachel Thein, and First Security Bank, Defendants and Appellants.

No. DA 07-0267.

Supreme Court of Montana.

Submitted on Briefs March 12, 2008.

Decided July 29, 2008.

Rehearing Granted July 29, 2008.

For Appellants (Thein): J. Robert Planalp, Landoe, Brown, Planalp, Braaksma & Reida, Bozeman, Montana.

For Appellees: Neil G. Westesen, Crowley Law Firm, Bozeman, Montana, William A. D'Alton, Brown Law Firm, Billings, Montana.

Justice BRIAN MORRIS delivered the Opinion of the Court.

¶ 1 Ronald J. Thein, Rachel Thein, and First Security Bank (collectively "Theins") appeal from orders of the Eighteenth Judicial District, Gallatin County, in favor of Blue Ridge Homes, Inc. and Richard Carvalho (collectively "Blue Ridge"). The orders arise from Blue Ridge's dispute with the Theins regarding construction of the Theins' house in Gallatin County. We affirm.

¶ 2 The Theins present the following issues for review:

¶ 3 Whether the District Court properly denied the Theins' motion for judgment as a matter of law regarding Blue Ridge's defamation claim.

¶ 4 Whether the District Court properly denied the Theins' motion for judgment as a matter of law regarding Blue Ridge's construction lien.

¶ 5 Whether the District Court properly denied the Theins' motion for judgment as a matter of law regarding Blue Ridge's claim for quantum meruit.

¶ 6 Whether the District Court properly denied the Theins' motion for a new trial.

¶ 7 Whether the District Court properly upheld the jury's award of punitive damages.

¶ 8 Whether the District Court properly awarded costs and attorney fees to Blue Ridge.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 9 The Theins contracted with Blue Ridge in October 2003 to design and build a custom house near Gallatin Gateway, Montana. The Theins agreed to pay Blue Ridge a total of $603,440 spread over ten payments. The contract provided that the Theins would pay Blue Ridge nine payments in the amount of $63,700, and a final progress payment of $30,140. The first payment became due upon signing the contract. The contract provided that the Theins would pay the remaining nine payments upon Blue Ridge's completion of specified portions of the house. The Theins made the first five payments.

¶ 10 The contract specified that the sixth payment became due upon completion of the exterior siding. Blue Ridge requested the sixth payment while a portion of the exterior siding remained incomplete pending the resurfacing of the garage slab. Blue Ridge reported at trial that it included a $1,000 credit in the Theins' invoice to reflect this discrepancy. The Theins refused to make the sixth payment, however, citing their dissatisfaction with Blue Ridge's work and the incomplete siding. Blue Ridge continued working despite the missed payment. Blue Ridge requested the seventh payment upon its completion of the rough-in plumbing, pursuant to the contract. The Theins again refused to pay. The Theins noted their dissatisfaction with Blue Ridge's work generally and with the rough-in plumbing specifically.

¶ 11 Ronald Thein sent several letters to Blue Ridge and Blue Ridge's owner, Richard Carvalho (Carvalho), during this period. Ronald Thein copied these letters to various people and business entities in Gallatin County. Ronald Thein stated in one letter that Carvalho and Blue Ridge "apparently have no integrity and [their] excuses are only a version of deception attempting to hide the truth." Ronald Thein copied this letter to his wife, Rachel Thein, First Security Bank, and JTP Inspection Services. In another letter, Ronald Thein asserted that "[Carvalho] has crossed over the line and is in violation of criminal fraud and criminal extortion [sic]." He further alleged that Blue Ridge "has misrepresented themselves [sic] to their [sic] customers and are attempting to extort additional funds by double charging their customers." Ronald Thein copied this letter to First Security Bank.

¶ 12 Ronald Thein accused Blue Ridge's staff of acting hostilely toward him and called their conduct "unprofessional" and "uncalled for" in yet another letter. He copied this letter to First Security Bank and State Farm Insurance. In another letter he accused Blue Ridge of violating its contractual obligation to use quality materials and craftsmanship. He further claimed that Blue Ridge had failed to meet the required building codes and industry standards in building the Theins' house. Ronald Thein copied this letter to First Security Bank, State Farm Insurance, and the Theins' attorney. Ronald Thein sent several other letters to Blue Ridge and Carvalho, copied to other people and businesses, that contained statements regarding Blue Ridge's professional conduct and Carvalho's character.

¶ 13 The Theins ultimately fired Blue Ridge. Blue Ridge timely filed a construction lien against the Theins on June 22, 2004. Blue Ridge filed the lien in the amount of $121,129 for unpaid services and materials. Blue Ridge then filed the present action in the District Court on August 5, 2004. Blue Ridge sought to foreclose the construction lien, damages for breach of contract, and damages pursuant to quantum meruit. Blue Ridge also asserted a defamation claim against the Theins arising from Ronald Thein's letters. The Theins filed a counterclaim that alleged breach of contract, negligence, violation of the Montana Consumer Protection Act, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, and constructive fraud.

¶ 14 The action proceeded to a jury trial. The parties presented competing evidence regarding whether Blue Ridge had met its contractual obligation to construct the house in a manner consistent with the current industry standards and customary practices for the area. Blue Ridge presented witness testimony to demonstrate that it had constructed the Theins' house to the standards agreed upon in the contract. The house framer who had worked on the Theins' house testified that the house had been built with quality materials and workmanship. A contractor who had contributed to the roofing, shingling, interior finish, and siding also testified to the construction's quality. A local lumber supplier testified that Blue Ridge had used lumber that met industry standards and custom.

¶ 15 Blue Ridge presented evidence that the State plumbing inspector who inspected the Theins' house had determined that Blue Ridge substantially had completed the rough-in plumbing and that the plumbing had met the intent of the plumbing code. The contractor whom the Theins had hired to complete the house after firing Blue Ridge testified that the house was "beautiful." An inspector whom the Theins had hired to inspect Blue Ridge's work reported that the structure was typical, that the house appeared satisfactory, and that Blue Ridge had met the intent of the building code.

¶ 16 The Theins presented testimony from three experts who had evaluated the property, including a house inspector and two engineers. The Theins' experts testified that Blue Ridge had driven nails in improper patterns, improperly had installed hardware, and had failed to include certain structural elements in the house. The Theins' experts testified that the house had possible structural problems and did not meet the State building code. The Theins' experts further testified that the house had not been built to current industry standards or to the customary practices for the area.

¶ 17 The parties also presented evidence regarding the defamation claim. Carvalho testified that the contents of the letters that Ronald Thein had copied to area business people were untrue. Carvalho asserted that he interacts on a regular basis with the people and businesses to whom Ronald Thein had copied the letter. Carvalho testified that he had suffered physically and emotionally as a result of the letters, and that Blue Ridge's growth had stalled after Ronald Thein's letters. Carvalho testified that the damage to his business had forced him to take out a second and third mortgage on his house to pay for materials, supplies, and vendors. Carvalho was unable to identify on cross-examination, however, the extent of his financial losses. He admitted that Blue Ridge actually made more money in each successive year following the Thein project. He also admitted on cross-examination that he did not bank at First Security Bank, and that he did not purchase insurance through State Farm. Carvalho did not identify any specific loss of income.

¶ 18 The Theins moved for judgment as a matter of law pursuant to M.R. Civ. P. 50(a), at the end of Blue Ridge's case. The District Court denied the motion. The jury returned a verdict in favor of Blue Ridge on all claims. The jury determined that Blue Ridge had met or exceeded the industry standards and customary practices for Gallatin County in building the Theins' house. The jury awarded Blue Ridge $146,800 for breach of contract, $166,000 pursuant to quantum meruit, $417,000 for defamation, and $41,700 as punitive damages. The jury rejected all of the Theins' counterclaims. The District Court determined as a matter of law that Blue Ridge had established its construction lien. Blue Ridge elected the breach of contract damages over the quantum meruit damages.

¶ 19 The Theins moved the District Court to alter or amend the judgment and for a new trial on the issue of the amount of damages, the introduction of improper evidence, and jury instructions. The Theins also renewed their motion for judgment as a matter of law. The Theins alleged that Blue Ridge had failed to prove all the elements of defamation, that Blue Ridge improperly had claimed damages pursuant to quantum meruit, that Blue Ridge did not support its claim for lien foreclosure, and that Blue Ridge did not support its claim for breach of contract. The District Court...