Hughes v. Hughes

• Decision Date: 06 August 2013
• Docket Number: No. DA 12–0464.,DA 12–0464.
• Citation: 305 P.3d 772,370 Mont. 499
• Parties: John Junior HUGHES, Shirley A. Hughes, Jason A. Hughes and J & S Family Limited Partnership, Plaintiffs and Appellants, v. John R. HUGHES, III, Defendant and Appellee.
• Court: Montana Supreme Court

370 Mont. 499

305 P.3d 772

John Junior HUGHES, Shirley A. Hughes, Jason A. Hughes and J & S Family Limited Partnership, Plaintiffs and Appellants,

v.John R. HUGHES, III, Defendant and Appellee.

No. DA 12–0464.

Supreme Court of Montana.

Submitted on Briefs April 10, 2013.

Decided July 2, 2013.

Rehearing Denied Aug. 6, 2013.

For Appellants: W. Scott Green, Patricia D. Peterman, Patten, Peterman, Bekkedahl & Green, PLLC; Billings, Montana.

For Appellee: Jonathan W. Stidham, Stidham & Stidham, P.A.; Bartow, Florida.

Justice BRIAN MORRIS delivered the Opinion of the Court.

[370 Mont. 500]¶ 1 The District Court for the Tenth Judicial District, Fergus County, consolidated multiple complaints. The dispute arose between Johnny Hughes (Johnny) and his parents, Jack and Shirley Hughes (Jack and Shirley), regarding borrowed money, the partition of jointly owned real property and accompanying water rights, and a contested pasture lease. The District Court ruled in favor of Johnny on all of the disputes except for the water rights. Jack and Shirley appeal and Johnny cross-appeals.

¶ 2 We affirm in part, reverse in part, and remand.

¶ 3 We address the following issues on appeal:

¶ 4 Whether Johnny's undesignated payments to Jack and Shirley restarted the statute of limitations on the 1989 promissory note?

¶ 5 Whether Jack and Shirley possess a life estate in the new house or a right to any of the insurance proceeds?

¶ 6 Whether Jack is entitled to an easement for stock water across Johnny's property?

¶ 7 Whether the arbitrator exceeded his authority or miscalculated damages?

PROCEDURAL AND FACTUAL BACKGROUND

¶ 8 Jack and Shirley loaned $104,375 to Johnny on January 1, 1989. Johnny executed a promissory note in favor of Jack and Shirley to evidence this loan. Johnny divorced his wife in 1997. Johnny asked Jack and Shirley for a loan of $180,000 to settle with his wife. Johnny had not yet made any payments on the 1989 promissory note. Jack and Shirley loaned Johnny an additional $180,000 to settle with his wife on September 24,1997. Johnny gave Jack and Shirley a second promissory note to evidence this 1997 loan.

¶ 9 Johnny made a series of payments to Jack and Shirley between 1999 and 2008 that totaled $155,000. Jack and Shirley filed an action to collect the unpaid debt on the two promissory notes after they had a falling out with Johnny. The District Court determined that the statute of limitations barred Jack and Shirley from collecting on the 1989 promissory note.

¶ 10 Johnny claimed, as a result, that 100% of his payments should be applied to the 1997 promissory note. Jack and Shirley argued that the payments should be divided between the two loans. A decision to divide the payments between the two loans would lead to a higher remaining balance on the 1997 promissory note. The court submitted the question of the proper division of the payments between the two promissory notes to the jury. The jury divided these payments on a pro-rata basis between the two promissory notes.

¶ 11 The District Court awarded attorney fees to Johnny as the prevailing party pursuant to a provision of the promissory notes. Jack and Shirley appeal the District Court's conclusion that the statute of limitations barred collection on the 1989 note. Jack and Shirley further appeal the District Court's determination that Johnny represented the prevailing party and the accompanying award of attorney fees to Johnny.

¶ 12 Jack and Shirley granted Johnny an undivided 56% interest in the Melby Ranch through three separate deeds in 1984, 1985, and 1986. Jack and Shirley reserved for themselves a life estate in the buildings and improvements on the property. Johnny has lived in a house on the Melby Ranch since 1977. A fire destroyed the house on the Melby Ranch in 2006. Johnny received an insurance payment of $123,156.56 for the house and $83,826.88 for his personal property. Johnny used insurance proceeds and several hundred thousand dollars of additional personal money to rebuild the house.

¶ 13 Jack and Shirley claimed a life estate in the new house, or an interest in the insurance payment. The District Court determined that the fire had extinguished any life estate in the house claimed by Jack and Shirley. The court furthered rejected their claim to a share of the insurance proceeds. Jack and Shirley appeal.

¶ 14 Jack, Shirley, and Johnny engaged three referees in 2011 to partition Melby Ranch. The parties at that point owned Melby Ranch as tenants in common based on the 56% interest granted to Johnny through the three separate deeds in 1984, 1985, and 1986. The referees considered an equitable division of the property after the District Court had issued its order regarding the fact that Jack and Shirley's life estate in the house on the Melby Ranch property had ended.

¶ 15 The parties agreed to the referees' proposed division of land. Johnny received the land where the new house sits as part of the partition. Johnny claims that Jack and Shirley's decision to accept the partition agreement extinguished whatever life estate that they may have retained in the new house.

¶ 16 The referees suggested, and the parties agreed, that Johnny would receive a section of land that included Flatwillow Creek. Jack possessed a water right to use the water from Flatwillow Creek for stockwater purposes. Jack owns a neighboring section of land that had not been subject to the partition. Jack claims that historically he had allowed his cattle free access to Flatwillow Creek across the section of land that Johnny now owns. The parties intend to fence the boundaries of their respective properties to reflect the partition agreement. Jack sought an easement from the District Court for a water gap in the fence to access the creek, or for a pipe to bring water from Flatwillow Creek to Jack's land.

¶ 17 The District Court first determined that it lacked jurisdiction over water issues. The District Court also granted, in the same order, a water gap to Jack. The parties asked the District Court to clarify its order. The District Court determined that it no longer possessed jurisdiction over the case due to the fact that Jack and Shirley already had filed a notice of appeal. The District Court declined to alter its decision. The District Court clarified that it did not believe that it possessed jurisdiction over the water issue, and, therefore, it should not have granted a water gap to Jack. Johnny appeals the District Court's order that granted the water gap.

¶ 18 Johnny and his brother, Jay Hughes (Jay), created P Standing X Cattle Company. Johnny and Jay, together and as partners in P Standing X Cattle Company, entered into a Pasture Lease with Jack and PX Cattle Company in 2000. Johnny and Jay dissolved the P Standing X Partnership in 2008. Jay assigned his interest under the Pasture Lease to Johnny. Jack attempted to terminate immediately the Pasture Lease with notice to Johnny. Jack prevented Johnny from accessing the pasture land after the termination notice. Jack and Jay seized hay that belonged to Johnny from the pasture land.

¶ 19 The parties submitted their dispute regarding the termination of the Pasture Lease to arbitration. The arbitrator determined the Pasture Lease still to be valid when Jack and Jay prevented Johnny from accessing the pasture land and when they seized Johnny's hay. The arbitrator awarded $195,110 in damages to Johnny and further determined that Jack and Jay must return Johnny's hay crop. Jack and Shirley appeal.

STANDARD OF REVIEW

¶ 20 We review de novo a district court's conclusions of law. Newman v. Scottsdale Ins. Co., 2013 MT 125, ¶ 22, 370 Mont. 133, 301 P.3d 348. We review for abuse of discretion a district court's refusal to modify or vacate an arbitration award. Paulson v. Flathead Conservation Dist., 2004 MT 136, ¶ 18, 321 Mont. 364, 91 P.3d 569.

DISCUSSION

¶ 21 Whether Johnny's undesignated payments to Jack and Shirley restarted the statute of limitations on the 1989 promissory note?

¶ 22 Johnny contends that Jack and Shirley had six years, under § 30–3–122(2), MCA, after they made a demand for payment in 1999 to commence an action to enforce the 1989 promissory note. Section 30–3–122(2), MCA, provides for a six-year statute of limitations in situations where a party demands payment from the maker of the promissory note. The six-year limitations period normally would have run in 2005.

¶ 23 Jack and Shirley argue, however, that Johnny had made partial payment of interest on the 1989 promissory note. Section 27–2–409, MCA, provides that “[a]n acknowledgment or the part payment of a debt is sufficient evidence to cause the relevant statute of limitations to begin running anew.” “Part payment” includes “any payment of principal or interest.” Section 27–2–409, MCA. An acknowledgment must be contained in a writing signed by the debtor. Section 27–2–409, MCA.

¶ 24 Johnny argues that the more specific statute, § 30–3–122, MCA, directly addresses a statute of limitations for a promissory note. Johnny argues that the six-year statute of limitations codified in § 30–3–122, MCA, would be rendered “irrelevant surplusage” if it were subjected to the qualifier in § 27–2–409, MCA. Further, Johnny argues that § 27–2–409, MCA, does not apply to commercial transactions governed by the Uniform Commercial Code.

¶ 25 Section 27–2–409, MCA, does not displace the statute of limitations described in § 30–3–122, MCA. Section 27–2–409, MCA, instead provides that “the relevant statute of limitations” will “begin running anew” if a party acknowledges or partially pays a debt. Section 30–3–122, MCA, provides the “relevant statute of limitations” for a promissory note. This statute of limitations would “begin running anew” if Johnny had partially paid on the note. Section 27–2–409, MCA.

¶ 26 Nothing in the language of § 27–2–409, MCA, precludes its application to contracts made pursuant to the Uniform Commercial Code, to specific types of debts, or to...