Terra West Townhomes, LLC v. Stu Henkel Realty

• Decision Date: 15 February 2000
• Docket Number: No. 99-130.,99-130.
• Citation: Terra West Townhomes, LLC v. Stu Henkel Realty, 2000 MT 43, 996 P.2d 866, 298 Mont. 344 (Mont. 2000)
• Parties: TERRA WEST TOWNHOMES, L.L.C., Plaintiff, Appellant, and Cross-Respondent, v. STU HENKEL REALTY, Defendant, Respondent, and Cross-Appellant, Dillon Management and Consulting, Inc. United Pacific Insurance Co., and Bradley Dillon, Robert Dillon, and Leona Dillon, Individually, Third-Party Defendants, Appellants, and Cross-Respondents.
• Court: Montana Supreme Court

996 P.2d 866

2000 MT 43

298 Mont. 344

TERRA WEST TOWNHOMES, L.L.C., Plaintiff, Appellant, and Cross-Respondent, v. STU HENKEL REALTY, Defendant, Respondent, and Cross-Appellant, Dillon Management and Consulting, Inc. United Pacific Insurance Co., and Bradley Dillon, Robert Dillon, and Leona Dillon, Individually, Third-Party Defendants, Appellants, and Cross-Respondents.

No. 99-130.

Supreme Court of Montana.

Submitted on Briefs September 30, 1999.

Decided February 15, 2000.

Rehearing Denied March 16, 2000.

T. Thomas Singer, Moulton, Bellingham, Longo & Mather, P.C.; Billings, Montana, For Appellants.

Damon D. Obie, Attorney at Law; Billings, Montana, For Respondent. Justice JIM REGNIER delivered the Opinion of the Court.

¶ 1 Terra West Townhomes, L.L.C., filed suit against Stu Henkel Realty in the Thirteenth Judicial District Court, Yellowstone County. Stu Henkel Realty answered the Complaint, filed a counterclaim against Terra West Townhomes, L.L.C., and initiated a third-party action against Dillon Management and Consulting, Inc., United Pacific Insurance Co., Bradley Dillon, Robert Dillon, and Leona Dillon. The parties subsequently agreed to submit the matter to arbitration. Upon motion by Stu Henkel Realty, the District Court confirmed the arbitration award. Terra West Townhomes, L.L.C., Dillon Management and Consulting, Inc., Bradley Dillon, Robert Dillon, and Leona Dillon appeal from the District Court's decision. Stu Henkel Realty cross-appeals. We affirm.

¶ 2 The issues presented on appeal are as follows:

¶ 3 1. Did the District Court abuse its discretion when it refused to vacate the arbitration award on the basis that the arbitrator had exceeded his powers?

¶ 4 2. Did the District Court abuse its discretion when it refused to vacate the arbitration award on the basis that the arbitrator had disregarded Montana law?

¶ 5 One issue is raised in the cross-appeal:

¶ 6 1. Did the District Court abuse its discretion when it refused to award Stu Henkel Realty its attorney fees incurred in confirming the arbitration award?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 In April and May 1995 several investors formed Terra West Townhomes, L.L.C., (Terra West), which started out as a joint venture (Terra West Joint Venture), for the purpose of purchasing, developing, and selling real property located in Billings, Montana. The members of Terra West at formation, along with their respective ownership interests, were as follows:

Dillon Management & Consulting, Inc. 40% William Ruff 10% Glenn and/or Lynnae Ehley 30% Stu Henkel Realty 20%

Bradley Dillon owns a 30 percent interest in Dillon Management and Consulting, Inc., and Robert and Leona Dillon own the other 70 percent jointly.

¶ 8 Terra West's Operating Agreement called for an initial capital contribution from the members in the amount of $1000 for each 1 percent of ownership, equaling a total capital contribution of $100,000. It appears from the record that the Ehleys and Mr. Ruff were the only members to make their entire capital contributions in cash.

¶ 9 The contributions of the other participants were represented by complicated transactions which are not necessarily germane to our opinion, but provide some insight into the complexity of the relationships which gave rise to this dispute. Dillon Management and Consulting, Inc.'s contribution was essentially derived from assets procured by its shareholder, Robert Dillon. Dillon purchased the lots for construction of the townhomes from Terra West's predecessor, the Terra West Joint Venture, for $35,000. Robert Dillon also purchased the foundation located on the lots from Stu Henkel Construction for $30,000 and was given the nonexclusive right to use the existing eight-plex or four-plex plans of Stu Henkel Construction for the site.

¶ 10 Following these transactions, Stu Henkel received $22,000 of the $30,000 purchase price for the foundation and $8000 was applied to Stu Henkel Realty's capital contribution in Terra West. Twenty percent of the $30,000 purchase price ($6000) for the foundation was also applied to Stu Henkel Realty's capital contribution for a total contribution of $14,000 with the remaining $6000 to be paid from sales commissions.

¶ 11 Dillon Management and Consulting's $40,000 capital contribution consisted of the contribution of the lots and foundation to Terra West, which were later given a value of $95,000. The additional $30,000 in value attributed to Dillon Management and Consulting's capital contribution stemmed from the value of a potential lien and lawsuit asserted by the Terra West Homeowners' Association for back-owed common expenses.

¶ 12 In addition, the Operating Agreement designated Dillon Management and Consulting as the operating manager of Terra West. The Operating Agreement specifically identified the duties Dillon Management and Consulting would be required to perform as operating manager of Terra West. The salary of the operating manager was set at 7 percent of Terra West's net profits.

¶ 13 Terra West hired Stu Henkel Realty as the exclusive real estate agent for the townhomes. The parties entered into a written listing agreement, which provided for Stu Henkel Realty to receive a commission upon the sale of each townhome procured as a result of Stu Henkel Realty's efforts. The parties orally agreed that Stu Henkel Realty would provide on-site supervision of the construction of the townhomes. Stu Henkel Realty asserts that it entered into an oral agreement with Robert Dillon of Dillon Management and Consulting for one-half of Dillon Management and Consulting's salary as operating manager of Terra West. Robert Dillon denies entering into any such agreement with Stu Henkel Realty on behalf of Dillon Management and Consulting.

¶ 14 The parties also orally agreed that Stu Henkel Realty would receive an additional 1 percent commission on each townhome sold. In its Complaint, Terra West acknowledged the existence of the oral agreement with Stu Henkel Realty for the receipt of an additional 1 percent commission on each townhome sold. Moreover, Stu Henkel Realty received the additional 1 percent commission for each townhome sold during the term of its listing agreement.

¶ 15 Stu Henkel Realty's exclusive listing agreement with Terra West expired on May 3, 1997, and Terra West elected not to renew the listing agreement with Stu Henkel Realty. At about the same time, Terra West made a call for a special contribution from its members pursuant to the terms of the Operating Agreement. Stu Henkel Realty did not pay the special contribution and instead filed a construction lien in the amount of $71,000 for duties performed while supervising the construction of the project.

¶ 16 On July 23, 1997, Terra West filed an action against Stu Henkel Realty for breach of contract, slander of title, and to quiet title to the property. Stu Henkel Realty filed an answer, which included numerous affirmative defenses, a counterclaim against Terra West Townhomes, L.L.C., and a third-party action against Dillon Management and Consulting, Inc., United Pacific Insurance Co., Bradley Dillon, Robert Dillon, and Leona Dillon.

¶ 17 On August 18, 1997, Stu Henkel Realty filed a Lis Pendens with regard to the three remaining townhomes. The following day, Stu Henkel Realty filed a Partial Release of Lis Pendens with regard to one of the townhomes. On October 17, 1997, Terra West filed a motion to expunge the lis pendens. Stu Henkel Realty filed a brief in opposition to Terra West's motion to expunge the lis pendens and filed an Application for Preliminary Injunction concerning Terra West. The District Court conducted a hearing on December 8, 1997, regarding the motion to expunge the lis pendens and the application for a preliminary injunction. At the conclusion of the hearing, the District Court took the matter regarding the lis pendens under advisement and reset the remainder of the hearing for a later date.

¶ 18 On April 14, 1998, the parties entered into a written agreement to submit the matter to binding arbitration. On April 15, 1998, the parties stipulated to stay the proceedings pending arbitration. Arbitration of the matter occurred on April 14 and 15, 1998. After a review of the documentation, depositions, exhibits, briefs and testimony presented by the parties, the arbitrator made his initial summary findings and award on April 29, 1998.

¶ 19 On May 18, 1998, Terra West made a request to the arbitrator pursuant to § 27-5-217, MCA (1997), for correction of the arbitration award on the basis that the award contained miscalculations and disregarded Montana law. Stu Henkel Realty opposed the request for correction. On June 5, 1998, the arbitrator conducted a formal hearing regarding Terra West's request for correction. On July 8, 1998, the arbitrator entered an amended award, adjusting the monetary award to Stu Henkel Realty and disposing of all claims.

¶ 20 Stu Henkel Realty moved the District Court for confirmation of the arbitrator's award on August 20, 1998. Conversely, Terra West, Dillon Management and Consulting, and the Dillons moved the District Court to vacate the arbitrator's award pursuant to § 27-5-312, MCA (1997), on the grounds that the arbitrator had exceeded his powers and had disregarded Montana law.

¶ 21 Once the matter had been fully briefed by the parties, the District Court conducted a hearing on October 14, 1998, regarding confirmation/vacation of the arbitrator's award. On October 23, 1998, the District Court issued its order granting Stu Henkel Realty's request for confirmation of the arbitration award and denying Terra West, Dillon Management and Consulting, and the Dillons' request for vacation of the award. In its order, the District Court also denied Stu Henkel Realty's request for attorney fees incurred in confirming the award. On October 27, 1998, the District Court entered judgment confirming the arbitrator's award and later amended the judgment on ...