Sutey Oil Co. v. Monroe's High Country Travel Plaza, LLC

• Decision Date: 15 March 2022
• Docket Number: DA 21-0140
• Citation: 408 Mont. 69,506 P.3d 310
• Parties: SUTEY OIL COMPANY, INC., Plaintiff, Appellee, and Cross-Appellant, v. MONROE'S HIGH COUNTRY TRAVEL PLAZA, LLC, a Montana Limited Liability Company, and Marvin Monroe, Defendants and Appellants.
• Court: Montana Supreme Court

408 Mont. 69

506 P.3d 310

SUTEY OIL COMPANY, INC., Plaintiff, Appellee, and Cross-Appellant,

v.MONROE'S HIGH COUNTRY TRAVEL PLAZA, LLC, a Montana Limited Liability Company, and Marvin Monroe, Defendants and Appellants.

DA 21-0140

Supreme Court of Montana.

Submitted on Briefs: February 16, 2022

Decided: March 15, 2022

For Appellants: Dale Schowengerdt, Crowley Fleck PLLP, Helena, Montana, Gregory W. Duncan, Attorney at Law, Helena, Montana

For Appellee: Gregory A. McDonnell, Orr McDonnell Law, PLLC, Missoula, Montana, David Bjornson, Bjornson Jones Mungas, PLLC, Missoula, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 Monroe's High Country Travel Plaza and Marvin Monroe (collectively Monroe) appeal the First Judicial District Court's order denying their motion to vacate or modify an arbitration award to correct an "evident miscalculation of figures." Section 27-5-313(1)(a), MCA. Sutey Oil Company (Sutey) cross-appeals the court's refusal of its claim for attorney fees and costs because of Monroe's alleged unreasonable and vexatious actions multiplying the proceedings. Concluding that the District Court applied an overly narrow legal standard, we reverse for the court to submit the matter to the arbitrator for clarification of the amount of the award pursuant to § 27-5-217, MCA. We affirm the court's refusal to grant Sutey its attorney fees.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Sutey is a Conoco fuel distributor based in Butte, Montana. Monroe entered into an "Account Agreement" with Sutey soon after acquiring a Helena gas station and convenience store in the summer of 2010. The agreement provided that Monroe would pay Sutey's "applicable established price in effect on the date of purchase."

Consistent with industry practice, Monroe paid for its fuel purchases by transferring its daily credit card proceeds to Sutey, which applied the proceeds to Sutey's account with Conoco. When Monroe's credit card proceeds were insufficient to cover the cost of fuel that Sutey delivered, Sutey would request, and Monroe would approve, an Electronic Funds Transfer (EFT) from Monroe's bank account to Sutey's bank account.

¶3 It is undisputed that Monroe did not always have adequate funds to complete the requested EFT. There also were occasions when Monroe refused to authorize or delayed the EFT. By the summer of 2014, Monroe was unable to pay for a series of six loads of fuel that Sutey delivered. When Monroe resolved only one of the six invoices, Sutey filed a complaint in District Court in early 2015. Monroe changed to a new fuel supplier that summer. The parties stipulated to arbitration in September 2018, after three years of litigation.

¶4 The Arbitrator held a two-day hearing in August 2020. Sutey sought to recover the value of the unpaid fuel invoices, interest from June 2014 at the contractual rate of eighteen percent, and the value of "prompt pay" discounts it credited Monroe that were not earned because of untimely payment. Monroe had filed a seven-claim counterclaim but, after it voluntarily withdrew three claims and the Arbitrator dismissed two others, Monroe's claims proceeded on a theory of breach of contract and breach of the implied covenant of good faith and fair dealing. Monroe claimed that Sutey over-charged it for fuel throughout the term of their agreement and failed to provide an accounting for the debt Sutey claimed Monroe owed.

¶5 The Arbitrator entered his written determination approximately three months after the hearing.¹ He found that Monroe did not pay for five loads of fuel that Sutey delivered in the summer of 2014, totaling $220,750.43. The Arbitrator rejected Sutey's claim for recovery of prompt pay discounts it had given Monroe, concluding that "it became Sutey's ‘course of dealing’ with [Monroe] to extend those discounts, even if unearned." The Arbitrator also rejected Monroe's counterclaims, determining that Sutey did not over-charge Monroe for any fuel or refuse to provide an accounting. The Arbitrator finally rejected Sutey's claim for compound interest, ruling that the Account Agreement did not call for compound interest and Sutey therefore was entitled to simple interest at the agreed rate of eighteen percent. With the interest added through October 27, 2020, the total judgment amounted to $472,333.34.

¶6 The day after the Arbitrator issued his written decision, counsel for Monroe e-mailed Sutey and the Arbitrator to request a conference call to discuss a mathematical error Monroe believed the Arbitrator made in the final decision. Monroe represents that the Arbitrator spoke with the parties’ counsel that same day and told them he would review the underlying documents to evaluate whether he had made an error. But the next day, before the Arbitrator had responded to Monroe's request, Sutey moved the District Court to confirm the award and enter a judgment. A week later, the court entered judgment confirming the award and accrued interest, together with contractual post-judgment interest at the daily rate of $108.86.

¶7 Monroe then moved the District Court to either modify or vacate the arbitration award. The court granted Monroe's request for partial stay on execution of the judgment while the motion was pending. After considering both parties’ briefs, the District Court declined to modify or vacate the award. Noting the extremely narrow constraints on a court's review of arbitration rulings, the court refused to consider any evidence beyond the face of the Arbitrator's decision and concluded that it lacked power to review his rulings on the merits. The court determined that it was unable to find an evident miscalculation from the face of the Arbitrator's award without resorting to "extrinsic sources," which it could not consider. Whether Monroe was entitled to certain credits or discounts involved "legal and factual determinations by the arbitrator" on the merits that the court was not empowered to review. The District Court thus denied Monroe's motion and dissolved the stay of execution. It refused, however, to grant Sutey's request for attorney fees and costs on the asserted ground that Monroe had multiplied the proceedings unreasonably and vexatiously.

STANDARD OF REVIEW

¶8 Montana's Uniform Arbitration Act (UAA) strictly limits a district court's review of an arbitration award. Tedesco v. Home Sav. Bancorp, Inc. , 2017 MT 304, ¶ 11, 389 Mont. 468, 407 P.3d 289 (citing Paulson v. Flathead Conservation Dist. , 2004 MT 136, ¶ 24, 321 Mont. 364, 91 P.3d 569 ; Geissler v. Sanem , 285 Mont. 411, 415, 949 P.2d 234, 237 (1997) ). We review a district court decision on an arbitration award like any other district court decision, considering questions of law de novo. Tedesco , ¶ 11. We review for an abuse of discretion the court's ultimate decision to confirm an arbitration award. Tedesco , ¶ 11 (citing Colstrip Energy L.P. v. N.W. Corp. , 2011 MT 99, ¶ 18, 360 Mont. 298, 253 P.3d 870 ).

DISCUSSION

¶9 "When a matter has been submitted to binding arbitration, courts are not permitted to review the merits of the controversy, but may only confirm, vacate, modify, or correct an arbitration award pursuant to §§ 27-5-311, -312, and -313, MCA." Colstrip Energy , ¶ 17, (citing Dick Anderson Constr., Inc. v. Monroe Constr. Co., LLC , 2009 MT 416, ¶ 26, 353 Mont. 534, 221 P.3d 675 ). The party seeking to vacate, modify, or correct an arbitration award bears the burden to prove that one of the statutorily enumerated grounds exists. Colstrip Energy , ¶ 17 (citations omitted).

¶10 Section 27-5-313, MCA, allows the court to modify or correct an arbitration award in narrow and limited circumstances. As pertinent here, § 27-5-313, MCA, provides:

(1) Upon application made within 90 days after delivery of a copy of the award to the applicant, the district court shall modify or correct the award if: (a) there was an evident miscalculation of figures or an evident mistake in the description of any person, thing, or property referred to in the award[.]

¶11 Monroe does not dispute that its unpaid invoices totaled the $220,750.43 figure the Arbitrator awarded. It maintains, however, that the Master Report Sutey's Chief Financial Officer compiled—which the Arbitrator manifestly accepted as the basis for the award—identified undisputed corrections and credits that the Arbitrator evidently did not deduct in making the final mathematical calculation. Monroe insists that it is not challenging the Arbitrator's rejection of its defenses and counterclaims but seeking only to correct the evident miscalculation the Arbitrator made when he did not apply "the amount that Sutey's Master Report and experts acknowledged was a ‘reduction to the balance owed.’ "²

¶12 Sutey responds that both parties argued for credits or adjustments to the invoice total and that the Arbitrator found neither party entitled to any of the claimed discounts, credits, or unreconciled items. Sutey concludes that the principal award amount reflects the undisputed total of the five unpaid invoices, "was based on expert and lay testimony and substantial documentation," and was not a miscalculation.

¶13 This Court may consider Monroe's claim only if the Arbitrator's determination is an "evident miscalculation of figures." Section 27-5-313(1)(a), MCA. We have not interpreted this phrase of Montana's Uniform Arbitration Act, but a review of other authorities confirms that it sets a narrow standard. The District Court concluded that it could look only to the "face" of the Arbitrator's award and not to any other "extrinsic evidence." It thus declined to consider any of the documents Monroe submitted from the arbitration record.

¶14 Courts are uniform that an "evident miscalculation" is a mathematical error that must be "clear, conclusive, or undisputable." E.g. , Jones v. Summit Ltd. P'ship Five , 262 Neb. 793, 635 N.W.2d 267, 271-72 (2001). It is, not—for example—the "use of an incorrect formula to determine an award" ( N. Blvd. Plaza v. N. Blvd. Assocs. ...