Kenneth D. Collins Agency v. Hagerott, 83-506

• Decision Date: 16 July 1984
• Docket Number: No. 83-506,83-506
• Citation: 211 Mont. 303,684 P.2d 487,41 St.Rep. 1375
• Parties: KENNETH D. COLLINS AGENCY, a Montana corp., Plaintiff and Respondent, v. Leon R. HAGEROTT, Architect, a professional corp., Defendant and Appellant.
• Court: Montana Supreme Court

Page 487

684 P.2d 487

211 Mont. 303

KENNETH D. COLLINS AGENCY, a Montana corp., Plaintiff and Respondent, v. Leon R. HAGEROTT, Architect, a professional corp., Defendant

and Appellant.

No. 83-506.

Supreme Court of Montana.

Submitted April 20, 1984.

Decided July 16, 1984.

Lynaugh, Fitzgerald & Hingle; Thomas Lynaugh argued, Billings, for defendant and appellant.

Ralph Herriott argued, Billings, for plaintiff and respondent.

GULBRANDSON, Justice.

This case comes on appeal from an order of the District Court, Thirteenth Judicial District, Yellowstone County, granting the appellant, Leon Hagerott, $10,000 in architectural fees and holding Hagerott's lien on certain real estate invalid. The District Court also awarded the respondent, Kenneth D. Collins Agency, attorney's fees in the amount of $3,851.25. We affirm in part, vacate in part and remand.

The appellant is a North Dakota professional corporation (hereinafter referred to as Hagerott) with Leon Hagerott being the principal officer and stockholder. Hagerott is an architect licensed in the State of Montana. Respondent is a Montana corporation (hereinafter referred to as Collins) with Kenneth Collins being the principal officer and stockholder.

Collins is the owner of certain real property located in Custer County. During February, 1978, Collins and Hagerott contemplated application to the Farmers Home Administration (FHA) for authority to receive a loan to build twenty-four low-cost housing units. The cost of the units was to be subsidized by the FHA and the units were to be located on Collins' property in Custer County.

On July 27, 1978, Collins and Hagerott entered into a contract which provided that Hagerott would draw plans and specifications and perform other architectural services for construction of the twenty-four units. Section 5 of the architectural contract provided that Hagerott, as architect, would receive five percent of the construction cost of the project. Hagerott prepared plans and specifications which were approved by Collins and the FHA.

Costs of the project were prepared by Collins in conjunction with Hagerott and the total cost of construction was determined to be approximately $630,500. These costs were set forth in the basic loan application which was signed by Hagerott. The FHA approved the Collins' loan application in the amount of $570,000.

After further negotiations between the parties and an unsuccessful bid letting, no further progress was made on the project until March of 1980 at which time Hagerott with Collins' approval, procured a new bid on the project. On April 3, 1980 Collins prepared and submitted a new cost of the project to Hagerott and the FHA that raised the total cost of the project to $740,000.

On May 23, 1980 Hagerott wrote a letter to Collins reiterating his desire to continue with the project and stating his willingness to keep the project going. However, late that same month Collins decided to terminate the project and contacted John Ramage and Tom Fields in Miles City for the purpose of turning the project and loan application over to them. In late May, 1980, Ramage and Fields met with Hagerott and told him they were no longer interested and his services were terminated. Ramage and Fields never took over the project and abandoned the plans in the fall of 1980.

When Hagerott was notified his services were terminated he filed a lien against the real estate of the original project site. Eventually, the project was reduced in size and constructed on a different site.

Collins commenced this action to remove Hagerott's lien filed against Collins' real property at the original project site and for damages, attorney's fees and costs. Hagerott counterclaimed for the amount of architectural fees due under the contract or on the basis of quantum meruit.

On April 1, 1983, the District Court held that Hagerott was entitled to $10,000 on the basis of quantum meruit but concluded that the lien filed by Hagerott against the real property of Collins was invalid because Hagerott failed to show that he furnished materials for the enhancement of Collins' property. The District Court stated that, "[t]he burden of proof is on a lien claimant to establish his lien and support his burden; he must show not only that he furnished the materials, but also that they were used for the enhancement of the property to which he claims a right to resort as security for the debt thus created. In the absence of this showing, his equity does not arise." The District Court ordered Hagerott's lien expunged from the record and awarded Collins attorney's fees for time spent on litigating removal of the lien but awarded Hagerott $10,000 on the basis of quantum meruit. Hagerott appealed and a cross-appeal was filed by Collins.

Hagerott raises three issues on appeal:

(1) Did the District Court err in awarding Hagerott only $10,000 in architectural fees based upon quantum meruit?

(2) Did the District Court err in holding Hagerott's lien against Collins' real property invalid and expunging it from the record?

(3) Did the District Court err in the amount of attorney's fees awarded to Collins?

Initially, Hagerott asserts the District Court erred in awarding him only a $10,000 fee based upon quantum meruit. Collins contends the contract between the parties did not entitle Hagerott to any fee.

The District Court correctly held that Hagerott was entitled to an architectural fee based upon quantum meruit. However, the amount of the architectural fee found by the District Court to be appropriate is not supported by the record. In its finding of fact the District Court stated at Finding number 38: "[a]t the time his services were terminated, [Hagerott] had approximately 600 hours of time in the project. The hourly charge for his time in 1978 through 1980 was $30 per hour. However, even though [Hagerott] spent this number of hours, he is only entitled to a lesser amount [$10,000] due to the value of his services to the project." In Robertus v. Candee (Mont.1983), 670 P.2d 540, 40 St.Rep. 1391, this Court defined quantum meruit as the market value for the work done by the plaintiff. In this case, the quantum meruit amount would be the market value of the services rendered based upon the number of hours spent on the project. The evidence established the reasonable amount per hour and the number of hours expended. The evidence was incorporated into Finding number 38 by the District Court. There was no evidence to show any lesser value. In reviewing the District Court's order, this Court may not substitute its judgment for that of the District Court, but must determine if there was substantial evidence to support the District Court's findings. Bagnell v. Lemery (Mont.1983), 657 P.2d 608, 40 St.Rep. 58. Substantial evidence is evidence which:

"... will convince reasonable men and on which such men may not reasonably differ as to whether it establishes the Plaintiff's case and if all reasonable men must conclude that the evidence does not establish such case then it is not substantial evidence. The evidence may be inherently weak and still be deemed substantial." Olson v. Westfork Properties, Inc. (1976), 171 Mont. 154, 557 P.2d 821.

The value of Hagerott's services could be measured only by the number of hours and the reasonable value of those hours as indicated by the evidence. The...