Title: RUSTICS OF LINDBERGH LAKE INC v

State: montana

Issuer: Montana Supreme Court

Document:

No. 83-512 I N T H E SUPREME COURT O F TIIE STATE OF M O N T A N A 1984 RUSTICS O F LINDBERGH LAKE, I N C . , a Montana c o r p o r a t i o n , P l a i n t i f f and Respondent, PAUL LEASE, Defendant and Appellant. APPEAL FROM: D i s t r i c t Court of t h e Fourth J u d i c i a l 3istrict, I n and f o r t h e County o f Missoula, The Honorable Douglas Harkin, Judge p r e s i d i n g . COUNSEL O F RECORD: For Appellant: Skelton & Cooley, Missoula, Montana For Respondent: E l l i n g s o n , L o v i t t & Moe, Missoula, Montana Submitted on B r i e f s : August 17, 1984 Decided: November 1 3 , 1984 gw* F i l e d : Clerk M r . Chief J u s t i c e Frank T . Haswell d e l i v e r e d t h e Opinion of t h e Court. Paul Lease appeals t h e judgment of t h e Missoula County D i s t r i c t Court awarding p l a i n t i f f c e r t a i n sums due on a promissory n o t e , a t t o r n e y f e e s and i n t e r e s t . F.ppellant, Paul Lease, and respondent, Rusti-cs of Lindbergh Lake, Inc. ( h e r e i n a f t e r R u s t i c s ) , e n t e r e d i n t o an o r a l agreement Novemher 16, 1979, whereby R u s t i c s was t o charge Lease 17 p e r c e n t i n t e r e s t on t h e unpaid ba.l.a.nce o f an account under which Lease purchased l o g s from R u s t i c s . Lease continued t o purchase l o g s and f e l l f u r t h e r behind i n h i s payments. By agreement of t h e p a r t i e s , t h e amount owed on A p r i l 17, 1980, by Lease was reduced t o a promissory n o t e . The agreed balance and. i n t e r e s t due a t t h a t t i m e was $14,760.67. Lease signed a promissory n o t e on A p r i l 17, 1980, f o r t h i s amount and t h e n o t e was t o be paid i n f u l l s i x t y days l a t e r on June 16, 1980. The n o t e c a r r i e d a 20 p e r c e n t p e r annum i n t e r e s t r a t e on its f a c e . The d i s c o u n t r a t e on ninety-day commercial pa-per a t t h i s t i m e was 13 percent. Payments t o t a l i n g $8,550 were made on t h e n o t e between Play 5, 1980, and August 2 1 , 1980. R u s t i c s f i l e d s u i t f o r c o l l e c t i o n of t h e unpaid ba.lance on August 19, 1.980. Lease counterclaimed a l l e g i - n g t h e n o t e was u s u r i o u s and t h a t p a s t dea.lings between t h e p a r t i e s were t a i n t e d by usury. R u s t i c s moved f o r summary judgment and t h e t r i a l c o u r t g r a n t e d Lease a p a r t i a l judgment a g a i n s t R u s t i c s o f $984.C4. This amount r e p r e s e n t e d t h e s t a t u t o r y usury p e n a l t y provided by s e c t i o n 31-1-108 (1) , MCA. Subsection (1) of t h i s s t a t u t e provides : "The t a k i n q , r e c e i v i n g , r e s e r v i n g , o r charging a r a t e o f i n t e r e s t g r e a t e r than is allowed by 31-1-107 s h a l l be deemed a f o r f e i t u r e o f a sum double t h e amount of i n t e r e s t which t h e n o t e , b i l l , o r o t h e r evidence of d e b t c a r r i e s o r which h a s been agreed t o be p a i d thereon." The c o u r t found t h e n o t e c o n s t i t u t e d a forbearance by t h e c r e d i t o r and t h a t t h e i n t e r e s t w a s g r e z t e r t h a n allowed by law. S e c t i o n 31-1-1.07, MCA, provided i n 1980 t h a t : "On amounts up t o $150,000, p a r t i e s may agree i n w r i t i n g f o r t h e payment o f any r a t e o f i n t e r e s t n o t more t h a n 10% p e r annum o r more t h a n 4 percentage p o i n t s i n excess of t h e d i s c o u n t r a t e on 90-day commercial paper i n e f f e c t a t t h e f e d e r a l r e s e r v e bank i n t h e n i n t h f e d e r a l r e s e r v e d i s t r i c t , whichever i s g r e a t e r , and such i n t e r e s t s h a l l b e allowed according t o t h e t e r m s of t h e agreement.." The 20 p e r c e n t i n t e r e s t charged on t h e n o t e was g r e a t e r t h a n t h e 1 7 p e r c e n t allowed by t h e s t a t u t e a s t h e d i s c o u n t r a t e a t t h i s t i m e was 13 p e r c e n t . Thus, t h e usury p e n a l t y under s e c t i o n 31-1-1 08 (1) , MCA, was c a l c u l a t e d a s a sum t w i c e t h e amount of i n t e r e s t appearing on t h e note. The c o u r t comput.ed t h e i n t e r e s t over t h e two-month t e r m o f t h e n o t e , from t h e d z t e of execution t o t h e d a t e t h e n o t e v7as due, t o a r r i v e a t t h e $984.04 p e n a l t y . Lease then f i l e d h i s own motion f o r summary judgment r e q u e s t i n g double t h e amount of u s u r i o u s i n t e r e s t p a i d on h i s account, b o t h b e f o r e and a f t e r t h e t e r m of t h e promissory note. T h i s usury p e n a l t y f o r i n t e r e s t a c t u a l l y p a i d a r i s e s o u t of s e c t i o n 31-1-108 ( 2 ) , MCA.. The D i s t r i c t Court denied L e a s e ' s motion. The c o u r t based i t s r u l i n u on two grounds, tha.t t h e agreement t o pay 1 7 p e r c e n t i n t e r e s t on t h e open account, d i s t i n g u i s h e d from t h e promissory n o t e , was p a r t of a bona f i d e s a l e and purchase aqreement, and t h a t no counter- claim wa.s f i l e d seeking t h e a f f i r m a t i v e r e l i e f of s e c t i o n 31-1-108 ( 2 ) , MCA, w i t h i n t h e two-year s t a t u t e 04 l i m i t a t i o n s . A f i n a l c o n s o l i d a t e d judgment was e n t e r e d by t h e D i s - t r i c t Court October 18, 1983. T h i s judgment awarded p l a i n - t i f f R u s t i c s $5,326.63 p l u s i n t e r e s t on t h e n o t e and f e e s of $1,136.11. The award was a p p a r e n t l y c a l c u l a t e d by o f f s e t t i n g t h e $14,760.67 n o t e w i t h t h e $8,550 payments and $984.04 usury pena-lty. Fees w e r e c a l c u l a t e d by awarding defendant Lease $1,000 f o r h i s s u c c e s s f u l p a r t i a l summary judgment concerning t h e u s u r i o u s n o t e and R u s t i c s $2,136.11 f o r i t s f e e s on t h e c o l l e c t i o n claim. The p l a i n t i f f R u s t i c s was t h e r e f o r e granted $1,136.11 a s t h e n e t amount of t h e t o t a l f e e s awarded. Lease and h i s w i f e f i l e d f o r bankruptcy under Chapter 13 of t h e United S t a t e s Bankruptcy Code on October 2 0 , 1983. R u s t i c s f i l e d a proof o f cl-aim f o r t h e f u l l amount of i t s judgment a g a i n s t Lease. Lease and h i s w i f e d i d n o t d i s p u t e such proof and t h e amended Chapter 13 p l a n , which was ap- proved March 16, 1984, provides f o r f u l l payment of such claims over a five-year period. Lease a l l e g e s on appeal t h a t t h e District Court f a i l e d t o p r o p e r l y c a l c u l a t e t h e usury p e n a l t y on t h e promissory note. H e contends t h a t t h e f o r f e i t u r e p r o v i s i o n s apply a f t e r t h e due d a t e of t h e note. R u s t i c s contends t h a t a p p e l l a n t d i d n o t r a i s e t h i s i s s u e i n t h e lower c o u r t and i s now pre- cluded from r a i s i n g it on appeal. R u s t i c s a l s o a r g u e s t h a t Lease's f a i l u r e t o o b j e c t t o t h e proof of c l a i m i n t h e hank- ruptcy proceeding p r e c l u d e s a p p e l l a t e review. Appellant r a i s e s t h e p r o p r i e t y of t h e a t t o r n e y f e e award a s a second i s s u e . W e have reviewed t h e r e c o r d of t h e proceeding below and can f i n d no a l l e g a t i o n o r argument made by Lease t h a t t h e u s u r i o u s i n t e r e s t p e n a l t y on t h e promissory n o t e a p p l i e s from the date of its execution to the time of trial. This argu- ment has been made for the first time on appeal. in the wake of our recent decision of E.C.A. Environ. Management v. Toenyes (Mont. 1984), 679 P.2d 213, 41 St.Rep. 388. In Toenyes, we held that assessment of a . usury penalty on a demand promissory note up to the date of trial was proper where the lender did not abandon or cancel the rights it had under the note after demand. Toenyes was based on this Court's prior decision of Bermes v. Sylling (1978), 179 Mont. 448, 587 P.2d 377, which also construed a demand promissory note. The demand promissory note in Bermes did not carry a fixed rate of usury on its face. We decline the opportunity to extend the rulings of Toenyes and Bermes to the case at bar which concerns a note due on a specified date. In any event, we note that the issue was not raised nor argued before the trial court. As such, the appellant cannot fault the lower court for failing to reach the question. We hold that issues not raised in the pleadings or otherwise at trial. v r j . 1 1 not be considered on appeal. Huggans v. Weer (Mont. 19801, 615 P.2d 922, 925, 37 St.Rep. 1512, 1515. The second issue raised by appellant concerns the award of attorney fees. Lease contends that he should be consid- ered the prevailing party for purposes of attorney fees. As noted above, the District Court did find that Lease was entitled to an offset to Rustics' fees for those fees associ- ated with his successful counterclaim on the usurious note. Beyond this award recognized by the lower court, we are unable to find merit in appellant's contentions that he has prevailed. The litigation viewed in its entirety resulted in a substantial net judgment for the plaintiff Rustics. While no one f a c t o r should be considered i n determining t h e pre- v a i l i n g p a r t y , t h e p a r t y that s u r v i v e s an a c t i o n i n v o l v i n g a counterclaim with t h e n e t judgment should g e n e r a l l y be con- s i d e r e d t h e s u c c e s s f u l p a r t y . See, Toenyes, supra. Accord- i n g l y , w e f i n d no e r r o r i n t h e lower c o u r t ' s award of a t t o r n e y f e e s . The judgment o f t h e D i s t r i c t Court i s affirmed. W e need n o t r e a c h t h e c o n t e n t i o n s concerning t h e bankruptcy proceeding a s it would n o t a f f e c t our d e c i s i o n . Chief J u s t i c e L W e concur: - . .