Dick Anderson Constr. Inc. v. Monroe Prop. Co. Llc

• Decision Date: 14 June 2011
• Docket Number: No. DA 10–0440.,DA 10–0440.
• Citation: 361 Mont. 30,2011 MT 138,255 P.3d 1257
• Parties: DICK ANDERSON CONSTRUCTION, INC., a Montana corporation, Plaintiff and Appellant,v.MONROE PROPERTY COMPANY, LLC, a Delaware limited liability company, Defendant and Appellee.
• Court: Montana Supreme Court

361 Mont. 30

255 P.3d 1257

2011 MT 138

DICK ANDERSON CONSTRUCTION, INC., a Montana corporation, Plaintiff and Appellant,

v.MONROE PROPERTY COMPANY, LLC, a Delaware limited liability company, Defendant and Appellee.

No. DA 10–0440.

Supreme Court of Montana.

Submitted on Briefs April 6, 2011.Decided June 14, 2011.

For Appellant: John H. Guin, Law Office of John H. Guin, PLLC, Spokane, Washington.For Appellee: Jeffrey T. Dickson, Christian, Samson & James, PLLC, Missoula, Montana, Scott M. Stearns, Randy J. Cox, Thomas J. Leonard, Boone Karlberg, P.C., Missoula, Montana.Chief Justice MIKE McGRATH delivered the Opinion of the Court.

[361 Mont. 30] ¶ 1 Dick Anderson Construction (DAC) appeals from the order of the District Court of the Fourth Judicial District granting summary judgment to Monroe Property Company. We reverse.

BACKGROUND

¶ 2 This case arose over a decade ago when David Lipson, principal of the approximately 10,000–acre Paws Up Angus Ranch and Paws Up Horse Ranch in Missoula County, Montana, engaged DAC to construct buildings, roads and other improvements on the Ranch. Lipson projected that the work would cost approximately $10 million, and when DAC did not get paid for the last approximately $800,000 of billings, it filed a construction lien to secure its claim. DAC commenced a breach of contract and lien foreclosure action in 2001 and has spent the intervening years trying to bring this dispute to a conclusion and to collect the debt.

¶ 3 David Lipson has been described as a shrewd and experienced businessman. See e.g. Securities and Exchange Comm'n v. Lipson, 278 F.3d 656 (7th Cir.2002). When Lipson engaged DAC for the Paws Up construction project in April, 2000, he entered a written contract with DAC on behalf of Monroe Construction, a limited liability company formed under the laws of Delaware, with a home address in Chicago. Monroe Construction was a shell entity without any on-going assets, while the Ranch itself was owned by another Lipson entity called Monroe Property, an LLC organized under the laws of Nevada. Lipson controlled both entities and testified that his intent was that Monroe Construction would contract with DAC and pay for the cost of the improvements at the Ranch, using money drawn from various sources within the Lipson organization. Monroe Property owned the Paws Up ranch at all relevant times, and when each phase of the construction was substantially completed, Monroe Construction sold that phase to Monroe Property for cost plus a 5% “contractor's fee.”

¶ 4 At the time Lipson entered the construction contract with DAC, there was no written agreement between Monroe Construction and Monroe Property evidencing the arrangement that Monroe Construction would sell the phases of the DAC job as they were completed. In August, 2002, after this litigation was well under way, Monroe Construction and Monroe Property entered a written agreement purporting to memorialize the arrangement. It was “dated as of” March 9, 2000, and David Lipson signed the document as President of Monroe Property, LLC, and as President of Monroe Construction, LLC and as “manager” of DEL Investments Corporation. Lipson testified that DEL is the manager of Monroe Property; that Monroe Property is a single-member LLC; that the single member of Monroe Property is Monroe Capital Partners, LLC, and that he is the representative of the manager DEL. He also testified that he was not employed by Monroe Property and that neither it nor Monroe Construction has any employees or any ownership interest in the other entity. He testified that Monroe Property operates under the assumed names of Paws Up Angus Ranch, Paws Up Cattle Company and Paws Up Horse Ranch. It is clear that Lipson controlled Monroe Property, Monroe Construction, DEL Investments, and the Paws Up operations.

¶ 5 Neither Lipson nor the Monroe entities presented any explanation for the necessity or utility of the complicated structure of these entities. Whatever the effect of these intertwined entities may have been, one clear result was to isolate David Lipson, individually, and Monroe Property, as the titleholder of the Paws Up property, from direct contracts with contractors such as DAC. Monroe Construction by design had no discernable assets. They admitted in the District Court proceedings that one of the reasons for the structure was to make it judgment proof and to protect the Paws Up land itself from liens. This has been successful for a decade. Nevertheless, the individual that DAC dealt with throughout its project was David Lipson. Lipson had detailed discussions with DAC's representative leading up to execution of the construction contract. Lipson signed the contract with DAC on behalf of Monroe Construction, and the contract designated the “project” as “Paws Up Angus Ranch, Greenough, Montana,” the land owned by Monroe Property.

¶ 6 During the construction phase, DAC personnel dealt with Lipson regularly and often. One of the many proceedings that has been held in the effort to conclude the DAC claim was an arbitration that took place in November, 2005 and which included a nine-day evidentiary hearing. The arbitrators in their written decision found that there were never any complete or detailed plans for the work that DAC was to complete, and that the costs of the project were not detailed cost estimates that DAC could rely on but were just budget estimates provided by Lipson. After DAC began work, its representatives warned Lipson about the increase in the estimated costs caused by the absence of complete plans and the “many changes that were being directed by Lipson.” Lipson and his wife met with DAC representatives weekly to provide directions on what they wanted done, and DAC would direct its crews accordingly. DAC representatives testified that this led to inconsistent and untimely instructions from the Lipsons, and that meeting the Lipsons' changing expectations resulted in completed work being torn out and reconstructed. The evidence showed that between August, 2000 and March, 2001, Lipson directed 41 changes or additions to the plumbing and 113 pages of changes to the work done on the equestrian center. The arbitration panel found that the “skyrocketing costs” experienced toward the end of the project “were the result of the changes and expansions directed by Dave Lipson.”

¶ 7 Monroe Construction paid DAC through the April 30, 2001 invoice, a total of $10,339,223. Monroe did not pay DAC's June and July, 2001 invoices, which totaled $894,607. In July, 2001 DAC filed a construction lien against the property and in September, 2001 DAC sued Monroe Construction for breach of contract and Monroe Property to foreclose the lien. The Monroe entities responded with several counterclaims for constructive fraud, misrepresentation, negligence and breach of contract.

¶ 8 In 2002, the District Court denied Monroe's motion for summary judgment and upheld the validity of DAC's construction lien. In May, 2004, the District Court upheld the validity of the lien against further Monroe contentions that it was technically deficient. The District Court also dismissed all of Monroe's tort-based counterclaims, leaving only the breach of contract counterclaim by Monroe Construction. These rulings have not been appealed.

¶ 9 The Monroe entities then moved to compel arbitration under the construction contract, and in March, 2005 the District Court ordered that the parties participate in arbitration. The arbitration proceeded with DAC and Monroe Construction only and included the nine-day evidentiary hearing, the only one held in any proceeding connected with this matter. In December, 2005 the arbitrators awarded DAC $802,661 in damages; $309,729 in interest; $33,186 in costs and $331,892 in attorney fees against Monroe Construction. ¹

¶ 10 DAC returned to District Court and moved for an entry of judgment against Monroe Construction on the arbitration award and for summary judgment against Monroe Property on the foreclosure of the construction lien. The District Court entered two orders on March 16, 2007. The first granted DAC's motion to confirm the arbitration award in its favor and denied the motion of the Monroe entities to vacate or modify the award. The primary issue regarding the confirmation was the arbitration panel's award of attorney fees to DAC. In addition, the Monroe entities contended that the panel exceeded its authority by making findings and conclusions regarding the construction lien.

¶ 11 In the second March 16, 2007 order the District Court granted DAC's motion for summary judgment against Monroe Property on the construction lien. In doing so the District Court held in favor of DAC on the Monroe entities' arguments that there were absent necessary parties; that the lien did not properly identify the land at issue; and that the lien did not properly identify the improvements at issue.

¶ 12 In May, 2007, the District Court followed up on the March 16 orders and entered a final judgment against Monroe Construction on the arbitration award in the amount of $1,632,961.14. The District Court also entered a final judgment against Monroe Property foreclosing the lien and ordered that the real property of the Paws Up Ranch be sold to satisfy the claim.

¶ 13 Monroe appealed to this Court, and we affirmed in part and reversed in part. Dick Anderson Const., Inc. v. Monroe Construction, 2009 MT 416, 353 Mont. 534, 221 P.3d 675 ( DAC I ). First, this Court upheld the District Court's order confirming the amount of the arbitration award against Monroe Construction, including the attorney fees. Next this Court rejected Monroe Property's argument that it was a third party beneficiary of the Monroe Construction–DAC construction contract so as to be entitled to raise claims and defenses regarding the contract. Finally, this Court reversed the District Court's order foreclosing the construction lien on the ground that the order improperly...