No. 81-97 INTHE SUPREMECOURTOF THE STATEOF MONTANA 1981

LEN ANDERSON, d/b/a LEN ANDERSON CONSTRUCTIONCOMPANY, Plaintiff and Respondent,

NORMAN D. HOBBS, individuallyand NORMAN D. HOBBS,d/b/a C. D. VENTURES, DefendantandAppellant.

Appeal from: DistrictCourt of the Fifth Judicial District, In and for the County of Beaverhead. Honorable Frank Blair, Judgepresiding. Counsel ofRecord: ForAppellant: Harrison,Loendorf and Poston,Helena,Montana For Respondent: Drysdale,McLean, Screnar & Cok,Bozeman,Montana

Submitted onbriefs: August 27, 1981

Filed:

## gkc.- 

## 'T [h!8;i

ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court. This appeal arises from a contract for construction on appellant's nursing home in Dillon,Montana. The parties entered into the written agreement in January 1977, and the work was completed sometime in the late summer of 1977. Respondent filed a mechanics' lien against appellant's property on October 19, 1977. After trial without a jury, theDistrictCourt of the Fifth Judicial District upheld the lien and issued a judgment for $15,687.92 plus interest and attorney fees. This appeal followed. In December 1976, at the request of appellant, respondent, a general contractor doing business as Len Anderson Construction Co., a soleproprietorship, beganwork

on Park View Acres in Dillon,Montana, a nursing home owned by appellant, Norman D. Hobbs, doing business as C. D. Ventures. In January 1977 the parties entered into a written contract whereby respondent would renovate the existing fifty-four-bed facility of Park View Acres and add a fiftyfour-bed wing to the building. The contractprovided appellant would pay respondent all costs plus an eight percent contractor's fee. Costs included all costs necessarily incurred in the proper performance of work paid by the contractor; all wages paid for labor in the direct employ of the contractor; all salaries of contractor's employees; a portion of reasonable transportation, traveling and hotel expenses of the contractor, its officers and employees incurred in the discharge of their duties; the cost of all materials, supplies and equipment incorporated into the work; all payments made by the contractor to subcontractorsfor work performed according to subcontracts under this agreement; and costs, including transportation and maintenance, of all materials, supplies, equipment, temporary facilities and hand tools not owned by the workmen, which are consumed in the performance of the work, and the costs less salvage value on such itemsused but not consumed which remained property of the contractor. Respondent concluded construction on the project in the summer of 1977. On October 19, 1977,respondent filed a lien in the amount of $31,218.27. On the lien application respondent stated his final day of performance on the project was July 21, 1977. At trial respondent testified his last full-timework on the project was in the middle of August 1977. Respondent also introduced a "punch list" prepared by appellant's employees and dated September 23, 1977. Respondent argued the "punch list" established the last day respondent spent any time on the job was in September. The costs claimed by respondent were supported almost exclusively at trialby cancelled checks. The District Court found the lien was filed within the ninety-day period required by Montana statute. The court also found respondent's lienvalid and enforceable and made the following determination of the amount owing: Costs for Anderson's out-of-pocket expenses. 

# ..

# . . . .$150,362.72 Defendant's payments to date for expenses.

# . . . . . .. 139,633.00 $ 10,729.72 Due Plaintiff for costs.

# . ..

# .. .. .$ 10,729.72 Contractor's feeasaportion of 8%of contract and total costson contract

# .

# .. . . .$366,977.56 Contractor's fee equals 8% of $366,977.56, for a totalof.

# .... .

# . ..

# . . .. . 29,358.28Defendant's payment to date for contractor's fee.

# ....... 12,600.00 Due Plaintiff for contractor's fee

# ............... .$ 16,758.28 Totaldue to Plaintiff by Defendant for costs

# ........10,729.72 Total due to Plaintiff by Defendant for fees. 

# ........16,758.20 TOTAL.

# .................$ 27,487.92 LESS THE FOLLOWINGOFFSETS: Liquidated damages.

# ........ 8,000.00 Lumber from personal stock.

# .... 3,800.00 TOTALOFFSETS.

# ..... .$11,800.00 TOTALDUETO PLAINTIFF

# .........$ 15,687.92 Four issuesarebefore thisCourt: 1. Was the lien filed by respondent within the statutory ninety-day period? 2. Are there gross and substantial exaggerations in claims made which constitute fraud and void the filed lien? 3. Did the District Court err in failing to make certain deductions to the amount of the lien? 

### 4. Did the District Court err in determining in the memorandum supporting its findings of fact and conclusions of law that Exhibit

### K was inadmissibleashearsay? To perfect a mechanics' lien itmust be filed within ninety days after material or machinery is furnished or work

or labor performed. Section 7-3-511(1), MCA. Appellant argues there is no credible evidence on the record to support the District Court's finding that the lien was filed within the statutory period. Respondent filed the lien on October 19, 1977, and on the lien stated the last work had been done on July 21, 1977. Appellant claims that the last work was performed by respondent on July 15, 1977, which was when the nursing home opened.At trial,respondent testified the date listed on the lien was incorrect and that, in fact,his last full time on the job was in the middle of August and that he returned in September to complete the project. Respondent also submitted into evidence a "punch list" prepared by appellant's employee containing the date September 23. The District Court found the lien had been filed within the ninety-day period and specified respondent's work

was completed on August 19, 1977. The standard of this Court on review is whether the District Court's findings and conclusions are supported by substantial credibleevidence. Toeckes v. Baker (1980),

## - Mont

# . , 611 P.2d 609, 37 St.Rep. 948. If substantial evidence exists, this Court willnot overturn the District Court. Schuman v. StudyComm'n of Yellowstone County (1978), 176Mont. 313, 578 P.2d 291. It is apparent from the record and the District Court's findings that the courtgave considerable weight to respondent's testimony attrialthathislastfull-time work

on the project was in mid-August 1977. In its supporting memorandum, theDistrictCourt choseAugust 19, 1977, asthe final date. The record makes no mention of that specific date inAugust. Therefore, the finding of August 19 cannot be affirned. ThisCourtwill, however, give credence tothe weight theDistrictCourt obviouslygave respondent's testimony. "The credibilityand weight given thewitnesses

# . . . isnot for thisCourt todetermine. This is a primary function of a trial judge sitting without a jury; it is of special consequence where the evidence is conflicting." Hellickson v. Barrett Mobile Home Transport, Inc. (1973),161 Mont. 455, 459, 507 P.2d 523, 525. Where the evidence indicates reasonable grounds for different conclusions, the findingsof the District Court will not be disturbed. Morgen & Oswood Const. Co. v. Big Sky of Mont. (1976), 171 Mont. 268, 274, 557 P.2d 1017, 1021; Morrison v. City of Butte (1967),150Mont. 106, 112, 431P.2d 79, 83. If respondent's lastwork on the project occurred any time in August or September, the filing of the lien was within the statutory ninety-day period. An exact date in August or September, however, is necessary for an accurate accounting of the $100-a-day offset allowed for late completion of the job. We therefore remand this matter for a hearing to establish the exact date in August or September

on which respondent completed his full-timework on the job. The next issue before us is appellant's contention that respondent's claim contained such gross and substantial exaggerations as to constitute fraud and invalidate the lien. Fraud must be plead affirmatively to be relied on as

a defense. Rule 8(c), M.R.Civ.P.; Ekestrand 

### v. Wunder (1933), 94 Mont. 57, 20 P.2d 622. In the case before us fraud was not plead in either the original or the amended

answer. Therefore, it cannot now be argued as a defense to the lien. Appellant also claims the District Court erred in failing to make reductions in the lien amount for three items. The first item appellant claims was erroneously allowed by the District Court is $2,558.60 of the $7,000 claimed paid to Simkins-Hallin. Respondent submitted 

### acancelled check for $7,000 in support of the Simkins-Hallin claim. However, the statement on Simkins-Hallin InvoiceNo. 6988 indicates that of the $7,000, $4,441.40 was appropriated torespondent's job inDillon. We therefore find there is not substantial evidence to support the entire $7,000 claim and that the lien amount should be reduced by $2,558.60. To evaluate the second item appellant claims was erroneously included by the District Court, we must first consider the evidentiary issuebefore us. Appellant argues there isa discrepancy between the amount respondent claimed

was paid toM & M Concrete and the amount actuallypaid. In support of that argument attrial, appellantpresented for admission into evidence a total account and a copy of invoices of the Dillon job with Anderson Construction from M & M Concrete. The document was prepared by the bookkeeper of M & M Concrete atthedirectionof the general manager and at the request of appellant's counsel. The account indicated a discrepancy between the amount received by M & M Concrete on the job and the amount respondent claimed had been paid. Respondent objected on the basis theoffered evidence

was hearsay and lacking proper foundation. The District Court overruled the objection and admitted the evidence as defendant's ExhibitK. At the conclusion of the trial, the District Court issued findings of fact and conclusions of law with a supportingmemorandum. The memorandum stated Exhibit K had been admitted subject to ruling as to its admissibility on the finalsubmissionof thecase and thaton further review,the court found it inadmissible ashearsay. Appellant argues the District Court's af ter-the-fact ruling on the admissibility of Exhibit K was prejudicial because it precluded him from calling other witnesses or otherwisepresenting proof. The transcript shows the court did not specifically reserve judgment regarding Exhibit K. The court's statement was: "Well, the objection is overruled and it will be admitted.

### " The court's later determination of Exhibit K as inadmissible was,however, correct. The document was a statement other than one made by the declarant while testifying at trial and was offered to prove the truth of the matter asserted. As such, itwas hearsay. Rule 801(c), M0nt.R.Evi.d. Since the account statement was made, not in the ordinary

course of business of M & M Concrete but at the request of appellant's counsel, it was not excepted from the hearsay rule and was inadmissible. Rule 803(6),Mont.R.Evid. While the District Court's final ruling on Exhibit K

was correct, the manner in which it was reached was procedurally irregular and resulted in substantial prejudice to appellant. Had he been aware of the court's determination

or its reservation of judgment during the trial, appellant could have presented and made available for cross-examination the witnesses who prepared the M & M Concrete account. To allow the District Court's exclusion of Exhibit K to stand in the face of such prejudice would be inherently unjust. We therefore remand this matter for reconsideration. The final item appellant claims was erroneously included in the lien is that amount claimed for respondent'spersonal wages as a carpenter. Appellant first argues that because there was no mention of the possibility of a personal claim in this agreement between the parties and respondent made no submission of such a charge to appellant prior to this suit, that respondent is not entitled to the claim. In support of this argument, appellant cites Article 10, Paragraph 10.1.6, of the parties1 contract which states as costs not to be reimbursed: "The cost of any item not specifically and expressly included in the items described inArticle 9." Article 9, Paragraph 9.1.1, however, specifies that costs include "[wlages paid for labor in the direct employ of the contractor.

# .." Sincewages for labor are expressly included in the contract and there is no specific limitation

on who performs the labor, the contract did not preclude Anderson from working on the project. Appellant also argues the hourly compensation the District Court allowed for Anderson's work was excessive and unsupported by credible evidence. The parties1 contract in Article 9, Paragraph 9.1, allows for reimbursement of costs necessarily incurred in the proper performance of the work. It further provides that "[sluch costs shall be at rates not higher than the standard paid in the locality of the work except with prior consent

# .

# .."

At trial Anderson, a carpenter with twenty years1 exerience, testified he charged $18 an hour for his labor. Of that amount, $14was for his work as a skilled carpenter and $4 for use of his tools. He testified the $14 amountwas based on costs in the area for his work. No other testimony was offeredby eitherparty regarding thevalue of thework of a carpenter of Anderson's skill. Based on Anderson's unrebutted testimony, the DistrictCourt found that the $14-an-hour wage portion of the chargewas reasonable. We agree. The $4-an-hour chargefor theuseof Anderson's tools is another matter, however. While Anderson testified asto what the $4 was for, he did not testify or provide evidence of any kind indicating what the figure was based on or whether it was reasonable. Without any supporting evidence

we are unable to uphold the District Court's judgment allowing $4anhour for theuse of tools. We remand this matter for a reaccounting of the costs. Atthe same time, we suggest a review of the calculations in the original findings of factand conclusions of law, since there appears to be an arithmetic error in the computation of Anderson's out-of-pocket expenses.

JusticesMr. Justice John C. Sheehy concurring:

I concur in the foregoing, but I also think the lien filed in this casewas timely under the facts.

Justice