Dac v. Monroe Const.

• Decision Date: 08 December 2009
• Docket Number: No. DA 07-0361.,DA 07-0361.
• Citation: 2009 MT 416,221 P.3d 675,353 Mont. 534
• Parties: DICK ANDERSON CONSTRUCTION, INC., a Montana Corporation, Plaintiff and Appellee, v. MONROE CONSTRUCTION COMPANY, L.L.C., a Nevada Limited Liability Company; and Monroe Property Company, L.L.C., a Delaware Limited Liability Company, Defendants and Appellants.
• Court: Montana Supreme Court

221 P.3d 675

2009 MT 416

353 Mont. 534

DICK ANDERSON CONSTRUCTION, INC., a Montana Corporation, Plaintiff and Appellee, v. MONROE CONSTRUCTION COMPANY, L.L.C., a Nevada Limited Liability Company; and Monroe Property Company, L.L.C., a Delaware Limited Liability Company, Defendants and Appellants.

No. DA 07-0361.

Supreme Court of Montana.

Submitted on Briefs August 6, 2008.

Decided December 8, 2009.

For Appellant: Randy J. Cox, Scott M. Stearns, Thomas J. Leonard, Boone Karlberg P.C., Missoula, Montana.

For Appellee: John H. Guin, Law Office of John H. Guin, PLLC, Spokane, Washington.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Monroe Construction Company, L.L.C. (Monroe Construction) and Monroe Property Company, L.L.C. (Monroe Property) appeal an order of the District Court for the Fourth Judicial District, Missoula County, granting Dick Anderson Construction, Inc.'s (DAC) motion to confirm an arbitration award, and denying Monroe Construction's and Monroe Property's motion to vacate or modify the award. Monroe Construction and Monroe Property also appeal from the court's Final Money Judgment and Final Judgment Foreclosing Construction Lien. We affirm in part, reverse in part and remand for further proceedings consistent with this Opinion.

¶ 2 Monroe Construction raises the following issue on appeal:

¶ 3 1. Whether the District Court abused its discretion in entering judgment on the arbitrator's award of attorney's fees and costs, and in denying Monroe Construction's M.R. Civ. P. 59(g) motion to alter or amend judgment.

¶ 4 In addition, Monroe Property raises the following three issues on appeal:

¶ 5 2. Whether the District Court violated Monroe Property's rights to due process and to access to the courts by denying Monroe Property its day in court on its claims and defenses.

¶ 6 3. Whether the District Court overlooked disputed issues of fact in entering judgment in the lien foreclosure action.

¶ 7 4. Whether the District Court correctly included the arbitrator's award of attorney's fees and costs in the construction lien matter to be enforced against Monroe Property.

Factual and Procedural Background

¶ 8 DAC is a Montana corporation engaged in the business of general construction with offices in Helena and Great Falls. Monroe Construction is a Nevada limited liability company, while Monroe Property is a Delaware limited liability company. Both companies are registered to do business in Montana. Monroe Construction and Monroe Property maintain that they are two separate and distinct entities.

¶ 9 Monroe Property owns approximately 10,000 acres in Greenough, Montana, known as the Paws Up Ranch. On March 1, 2000, Monroe Construction entered into a contract with DAC for the construction of certain improvements on the Paws Up Ranch. These improvements included the construction of an equestrian center, a sale barn, a cook shack, a guest lodge, a number of employee housing units, and various site utilities and infrastructures. Monroe Property was not a party to this contract. Instead, Monroe Construction entered into a separate contract with Monroe Property wherein Monroe Construction would own the improvements until they were completed, at which time Monroe Construction would transfer ownership of the improvements to Monroe Property.

¶ 10 DAC completed work on the project in the summer of 2001. DAC asserts that when it requested final payment, Monroe Construction refused to pay. Hence, DAC filed a construction lien against the property and the improvements on July 27, 2001, and, on September 10, 2001, DAC filed a lien foreclosure action against Monroe Property and a breach of contract action against Monroe Construction. In response to DAC's actions, Monroe Construction and Monroe Property filed a number of counterclaims against DAC including claims for constructive fraud, misrepresentation, negligent construction and breach of contract.

¶ 11 Following discovery, Monroe Property and Monroe Construction challenged the validity of DAC's lien, and all parties moved for summary judgment on the counterclaims. The District Court denied Monroe Property's and Monroe Construction's motion regarding the validity of DAC's lien. The court also granted DAC's motion for summary judgment on Monroe Construction's and Monroe Property's tort-based counterclaims, but concluded that disputed issues of fact remained with respect to the parties' claims and counterclaims for breach of contract.

¶ 12 Monroe Construction and Monroe Property jointly moved to compel arbitration. Initially, DAC opposed the motion on the basis that the Monroe companies had waived the arbitration clause in the contract. DAC eventually withdrew its objection to arbitration, and on November 23, 2004, DAC filed a Demand for Arbitration with the American Arbitration Association (AAA). On March 11, 2005, the District Court ordered Monroe Construction and DAC to arbitrate all claims arising out of the construction contract. Although the court urged all parties to "involve themselves in arbitration," the court noted that Monroe Property could not be compelled to arbitrate since it was not a party to the construction contract.

¶ 13 An arbitration hearing before a panel of arbitrators from the AAA was conducted in Missoula, Montana, from November 7 through 18, 2005, and final arguments were presented in Denver, Colorado, on November 29, 2005. On December 23, 2005, the panel issued an Arbitration Award adverse to Monroe Construction and in favor of DAC. The Arbitration Award set the contract balance due between DAC and Monroe Construction along with the amount of pre- and post-award interest, and disposed of all of Monroe Construction's counterclaims. The Arbitration Award also set DAC's attorney's fees and costs in the amount of $331,892 and its arbitration expenses in the amount of $33,186. In addition, even though Monroe Property was not a party to the arbitration, the arbitrator's issued findings of fact regarding the construction lien issue between DAC and Monroe Property.

¶ 14 In February 2006, DAC filed its "Motion: (1) to Confirm Arbitration Award; (2) for Entry of Judgment on Award; and (3) for Summary Judgment Re: Construction Lien." For its part, on March 24, 2006, Monroe Construction filed a Motion to Vacate Arbitration Award or, in the Alternative, Motion to Modify or Correct Award. In its motion, Monroe Construction argued that the Arbitration Award should be vacated in its entirety because the arbitrators exceeded their powers by entering findings and conclusions relative to the construction lien claim and by awarding attorney's fees to DAC, not only for the attorney's fees incurred by DAC during arbitration, but also the attorney's fees incurred by DAC during several years of district court proceedings prior to arbitration. Monroe Construction argued in the alternative that should the District Court decide not to vacate the Arbitration Award in its entirety, the court should modify or correct the Arbitration Award to strike the award of attorney's fees and to eliminate the findings and conclusions related to the construction lien issue. Finally, Monroe Construction argued that the Arbitration Award was not properly served because it was not delivered to the parties "personally by certified mail" as required by § 27-5-216(1), MCA.

¶ 15 On February 9, 2007, the District Court heard oral argument on the pending motions. Along with the arguments already presented by DAC and Monroe Construction in their motions, Monroe Property pointed out that it had not had the opportunity to litigate its own claims and defenses against DAC, that there were disputed issues of fact in that regard, and that it could not be held liable for legal fees and expenses incurred in an arbitration to which it was not a party. Notwithstanding, on March 16, 2007, the District Court entered an order granting DAC's motions for summary judgment on the construction lien issues. The court also entered an order granting DAC's motion to confirm the Arbitration Award and denying Monroe Construction's motion to vacate the Arbitration Award. In its orders, the court did not address whether it was appropriate to include the attorney's fees and costs awarded to DAC in the arbitration, in the construction lien foreclosure action against Monroe Property, which was not a party to the arbitration.

¶ 16 Thereafter, the District Court ordered DAC to prepare a final judgment for the court's consideration. Both Monroe Property and Monroe Construction objected to a number of items included in the proposed judgment including a specific award of attorney's fees and costs in the amount of $365,078, which they contended was almost $110,000 higher than the amount claimed by DAC during arbitration. Monroe Construction and Monroe Property also objected to the fact that the District Court did not hold an evidentiary hearing as to the accuracy or reasonableness of the attorney's fees claimed by DAC in the arbitration, or identify which fees were related to the lien foreclosure action.

¶ 17 On May 1, 2007, the District Court entered a Final Money Judgment and Final Judgment Foreclosing Construction Lien which included an award of the full amount of attorney's fees and expenses of $365,078. Thereafter, Monroe Property and Monroe Construction jointly filed an M.R. Civ. P. 59(g) Motion to Alter or Amend Judgment asking the court to correct the mathematical error related to the award of attorney's fees. The court summarily denied the motion.

¶ 18 Both Monroe Property and Monroe Construction appeal the various orders and judgments of the District Court.

Standard of Review

¶ 19 We review a trial court's refusal to modify an arbitration award to determine whether the court abused its discretion. Terra West v. Stu Henkel Realty, 2000 MT 43, ¶ 22, 298 Mont. 344, 996 P.2d 866. Similarly, we review a trial court's denial of a motion to alter or amend judgment under M.R. Civ. P....