PRUDENTIAL FEDERAL v. McDOUGALL

No. 13381

I N THE SUPREME COURT O THE STATE O F M N A A F O T N

PRUDENTIAL FEDERAL SAVINGS AND L A e t a l . , O N P l a i n t i f f and R e s p o n d e n t , -vs- GLENN McDOUGALL e t a l . , D e f e n d a n t s and R e s p o n d e n t s , -vs- BUILDING AGENCIES, I N C . , a corporation,

T h i r d - P a r t y Defendant and A p p e l l a n t .

Appeal from: D i s t r i c t Court of t h e F i f t h J u d i c i a l D i s t r i c t , IJonorable James D. F r e e b o u r n , J u d g e p r e s i d i n g .

C o u n s e l o f Record:

For Appellant:

Robert P. Ryan a r g u e d , B i l l i n g s , Montana

For Respondents:

McCaffery, P e t e r s o n and Murray, B u t t e , Montana W. D . Murray, J r . a r g u e d , B u t t e , Montana C h e s t e r L l o y d J o n e s a r g u e d , V i r g i n i a C i t y , Montana

Submitted: J u n e 6 , 1977

Decided: 4UG 2 1917

Filed: \!I6 ,j $n

Xr. d h i e i J u s ~ i c e!>aul G . H a t f i e l d d e l i v e r e d t h e Opinion of t h e Court . 3 u i l d i n g Agencies, I n c . , a p p e a l s from a judgment of t h e

d i s t r i c t c o u r t , Madison County, f o r $2,858.40 p l u s a t t o r n e y f e e s o f $250 and c o u r t c o s t s , and f o r a d d i t i o n a l a t t o r n e y f e e s of $250 adjudged upon a t h i r d p a r t y complaint.

Defendants McDougall a r r i v e d i n S h e r i d a n , Montana from Xegina, Saskatchewan, February 3 , 1967, and purchased a l o g house s o u t h of Sheridan.

I n J u l y 1967, t h e y were c o n t a c t e d by a salesman f o r B u i l d i n g Agencies, I n c . The s o l i c i t a t i o n by t h e Agencies' agent was t o r e f u r b i s h t h e e x t e r i o r of t h e log home by c o a t i n g i t w i t h a p l a s t i c

~ o a t i n g a r r y i n g t h e t r a d e name of Tex-Cote. c

O J u l y 26, 1967, McDougalls and Agencies e n t e r e d i n t o an n

~ g r e e r n e n t t o apply t h e c o a t i n g a s s p e c i f i e d f o r t h e agreed sum of 32,850 w i t h $50 p a i d i n advance.

As a p a r t of t h e agreement Agencies was t o s e c u r e f i n a n c i n g , which i t d i d , through P r u d e n t i a l F e d e r a l Savings and Loan Association. On August 7 , 1967, McDougalls signed a n o t e , t h e s u b j e c t $21: t h i s a c t i o n , running t o Agencies i n t h e amount of $2,998.80 t o be p a i d i n 96 monthly i n s t a l l m e n t s of $45.50, commencing October 7 , 1-967. Agencies immediately a s s i g n e d t h e n o t e t o P r u d e n t i a l ~11dP r u d e n t i a l i s s u e d i t s payment t o Agencies i n t h e amount of j2,800.

The work was completed by Agencies w i t h i n a few days and Xcihugalls made t h e f i r s t $45.50 payment on October 1 2 , 1967. Payments were made each month t h e r e a f t e r u n t i l January 1969, when

~ n i y $23. was p a i d ; March 1 0 , 1969 when $20 was p a i d ; March 20

when $20 was p a i d ; (oddly enough, according t o t h e e x h i b i t r e c e i v e d ~t t r i a l , his $40 was c r e d i t e d t o reduce p r i n c i p a l ) ; on May 26, 1969, $20 was p a i d and c r e d i t e d t o i n t e r e s t and t h e f i n a l payment of $20 was p a i d on June 1 8 , 1969, c r e d i t e d t o i n t e r e s t f o r a b a l a n c e owing on June 1 8 , 1969 of $2,684.71.

During t h e time January 1969 t o a t l e a s t May 25, 1969, Waneta McDougallls response t o P r u d e n t i a l ' s r e q u e s t s f o r payment was t h a t t h e McDougalls were having f i n a n c i a l problems b u t "we s h a l l g e t t h e s e p a i d a s soon a s p o s s i b l e . "

She t e s t i f i e d she complained of c r a c k i n g and p e e l i n g of t h e c o a t i n g t o P r u d e n t i a l , and P r u d e n t i a l on J u l y 9 , 1969, wrote McDougalls t h a t P r u d e n t i a l was "going t o g e t i n touch w i t h t h e d e a l e r r e g a r d i n g h i s workmanship." The t r i a l judge found t h a t w i t h i n a y e a r a f t e r a p p l i c a t i o n Agencies' work proved improperly performed.

I n t h e agreement of J u l y 26, 1967 Agencies agreed t o perform much p r e p a r a t o r y work. I n Agencies1 b r i e f t h i s i s s e t o u t :

"The c o n t r a c t c a l l e d f o r e x t e n s i v e p r e p a r a t i o n of t h e log s u r f a c e s , i n c l u d i n g s a n d b l a s t i n g , s i l i c o n e w a t e r - p r o o f i n g , s e a l e r c o a t and o t h e r measures and t h e n a f i n a l c o a t o f Tex-cote, a p l a s t i c m a t e r i a l .

'I* ** Tex-Cote1 s f u l l g u a r a n t e e , w i t h u n d e r l i n i n g added, r e a d s :

'"This i s t o c e r t i f y t h a t t h e Tex-Cote a p p l i e d on che above p r o p e r t y i s hereby g u a r a n t e e d f o r a t e n year p e r i o d a g a i n s t f l a k i n g , chipping o r p e e l i n g . This g u a r a n t e e i s t o be i n f o r c e f o r a p e r i o d of t e n y e a r s from t h e r e g i s t r a t i o n d a t e (Date of A p p l i c a t i o n ) and f u l l m a t e r i a l replacement s h a l l be made should t h i s replacement be n e c e s s a r y a s a r e s u l t of a d e f e c t i n t h i s product o n l y . ** >k

!f'. * i;* I '

"Building Agencies warranted t h e workmanship. The c o n ~ r a c t u a l r o v i s i o n ( u n d e r l i n i n g added) r e a d s : p

" ' ( 1 ) Tex-Cote i s guaranteed by Textured Coating - o f Americar,, I n c . and no warranty o r g u a r a n t y i s made by B u i l d i n g Agencies, I n c . ~ u i l d i n g ~ e n c i e ;I,n c does ~ . warrant t h e workmanship f o r a p e r i o d of one year from t h e

d a t e o f completion o f che work. The warranty o f workmanship i s e x p r e s s l y l i m i t e d t o c o r r e c - t i o n of t h e work which w i l l be done promptly a f t e r w r i t t e n n o t i c e of d e f e c t i v e work i s r e c e i v e d b y B u i l d i n g Agencies, I n c . B u i l d i n g Agencies, I n c . s h a l l have no l i a b i l i t y f o r c o n s e q u e n t i a l damages, o r any o t h e r l i a b i l i t y n o t h e r e i n expressed. I :I

McDougalls r e f u s e d f u r t h e r payments a f t e r June 18, 1969 a s s i g n i n g a s t h e i r reason Agencies' f a i l u r e t o perform t h e work and l a b o r s e t o u t i n t h e a g r e e m e n t . i n a s a t i s f a c t o r y manner.

P r u d e n t i a l f i l e d s u i t a g a i n s t McDougalls on December 1 8 , 1969. McDougalls answered and f i l e d a t h i r d p a r t y complaint a g a i n s t B u i l d i n g Agencies, I n c . The t h i r d p a r t y complaint and sunimons t h e r e o n was served on Agencies' p r e s i d e n t January 1 4 , 1971.

S h o r t l y t h e r e a f t e r Waneta McDougall r e t u r n e d home t o f i n d a "machine" i n h e r yard. According t o h e r testimony she d i d n o t know who i t belonged t o o r why i t was t h e r e . She c a l l e d t h e s h e r i f f t o have i t towed away. She l a t e r l e a r n e d t h e machine belonged t o Agencies and was t h e r e t o p a t c h up t h e work. Her u n c o n t r a d i c t e d testimony was: "He s a i d i t was t o p a t c h up t h e j o b , i s h i s words.'' She r e f u s e d .

The m a t t e r went t o t r i a l b e f o r e t h e c o u r t w i t h o u t a j u r y . i i t e r testimony, t h e c o u r t g r a n t e d summary judgment t o P r u d e n t i a l d g a i n s t McDougalls i n t h e amount of $2,858.40 p l u s $250 a t t o r n e y feds and c o s t s .

T h e t r i a l c o u r t f u r t h e r found:

'x ** t h a t t h e Defendants, GLENN and WANETA McDOUGALL, have judgment a g a i n s t t h e T h i r d P a r t y Defendant, BUILDING b~GENCIES, N C . , a s f o l l o w s : I

" ( I ) For t h e sum of Two Thousand E i g h t Hundred 4 1 i i t y Eight and 40/100 D o l l a r s ($2858.40) p l u s Two qundred F i f t y D o l l a r s ($250.00) and Court c o s t s a s provided f o r i n t h e Judgment a g a i n s t t h e Defendants [McDougalls ] above.

' ( 2 ) For a t t o r n e y f e e s i n t h e amount of Two HuriilreJ F i f t y D o l l a r s ($250.00) . ' I

'[he i s s u e s on a p p e a l a r e :

(1) \&ether Agencies' warranty l i m i t e d t o " c o r r e c t i o n of the work", l i m i t s t h e remedy of t h e purchaser t o c o r r e c t i o n

aP t h e work o n l y ?

(2) Can t h e purchaser p r e v e n t c o r r e c t i o n of t h e work and chen r e f u s e payment on t h e c o n t r a c t p r i c e on t h e ground t h e work i s u s e l e s s and t h e r e i s a f a i l u r e of c o n s i d e r a t i o n ?

Both p a r t i e s a g r e e t h a t Agencies warranted t h e work.

Agencies p r e s e n t e d no testimony. McDougallsl e x p e r t t e s t i -f i e d t h a t i n May 1970 he i n s p e c t e d t h e house and t h e c o a t i n g was d e t e r i o r a t i n g and coming o f f ; t h a t t h e " u n d e r p a r t of i t showed t h e b u i l d i n g had n o t been p r o p e r l y prepared f o r t h e product t o adhere t o i t . +C ** Due t o f o r e i g n m a t t e r underneath t h e product i s g e n e r a l reason f o r i t n o t adhering t o t h e b u i l d i n g " . Further,

i n h i s o p i n i o n , p r o p e r p r e p a r a t i o n was n o t done -- TI - Jc k M y there

w a s o t h e r f o r e i g n m a t t e r , p a i n t , g r e a s e o r something t h a t had n o t been c l e a n e d o f f s o t h a t p a i n t d i d n o t adhere t o i t and i t j u s t came o f f i n b i g f l a k e s and I assume t h a t t h a t was due t o some f o r e i g n m a t t e r b e i n g underneath t h e c o a t i n g . "

Agencies r e l i e s on s e c t i o n 878-2-719, R.C.M. 1947, Montana's Uniform Commercial code, a s t o whether t h e agreement may l i m i t t h e b u y e r ' s remedy and c i t e s M t . S t a t e s T e l . & T e l . Co. v . D i s -t r i c t Court, 160 Mont. 443, 503 P.2d 526 a s a u t h o r i t y f o r i t s

c o n t e n t i o n . See a l s o : Whitaker v. Farmhand, I n c . , Mont . - 9

P.2d 3 S t .Rep. , No. 13228, handed down by t h i s Court on August 2 , 1977 , and cases c i t e d therein.

The problem h e r e i s that no such i s s u e i s p r e s e n t e d .

The t r i a l judge found,based upon t h e o n l y evidence p r e s e n t e d , and t h i s Court f i n d s i t t o be s u b s t a n t i a l and c r e d i b l e , (McGuire v. American Honda Company, Mont . Y P.2d Y 34 S t . Rep. 632), t h a t Agencies warranted and guaranteed i t s work and t h e work was improperly performed. Further, a l l the dtidence i n t h e record i n d i c a t e s f a i l u r e t o properly prepare t h e l o g s u r f a c e was t h e cause of t h e Tex-Cote c o a t i n g t o c h i p , f l a k e , and p e e l . T h e r e f o r e , t h e q u e s t i o n of l i m i t a t i o n of remedies i n t h e c o n t r a c t i s n o t p r e s e n t e d on t h i s a p p e a l . The cause of t h e d e f e c t was t h e b r e a c h of t h e e x p r e s s warranty.

As t o whether Waneta McDougall prevented performance, a g a i n

a l i i s t h e evidence i s t h a t she d i d n o t . ~ c ~ o u g a l l expert s'

t e s t i f i e d i t would be n e c e s s a r y t o c l e a n t h e b u i l d i n g and c o a t i t w i t h a primer and s e a l e r and t h e n r e p a i n t . These a r e t h e e x a c t t h i n g s Agencies agreed t o do i n t h e o r i g i n a l agreement and, according t o t h e o n l y testimony p r e s e n t e d , i t d i d n o t do. There i s no testimony Agencies i n 1971 agreed t o s t a r t over and re-do t h e job. Therefore t h a t i s s u e f a i l s . M i t c h e l l v. C a r l s o n , 132 Mont. 1, 313 P.2d 717.

As a secondary i s s u e t h e amount of t h e judgment i s q u e s t i o n e d . The p r a y e r of P r u d e n t i a l was f o r $2,684.71, i n t e r e s t , c o s t s and

attorney fees. Summary judgment was g r a n t e d . N a p p e a l was o

t a k e n from t h e summary judgment. P l a i n t i f f s t a t e s a balance of $2,684.71 a s of June 1 8 , 1969. From t h e p l e a d i n g s , n o t amended, t h e most t h a t could be awarded would be $2,684.71 p l u s i n t e r e s t .

There was no testimony a s t o a t t o r n e y f e e s i n t h e s u i t by P r u d e n t i a l a g a i n s t McDougalls, and t h e r e i s no p l e a d i n g o r e v i -dence of a t t o r n e y f e e s by McDougalls a g a i n s t Agencies. Compton v .

A1cor11, ----- Mont . , 557 P.2d 292, 33 St.Rep. 118.5; F i r s t S e c u r i t y Bank of Bozeman v. Tholkes, IvIon t . 547 P.2d 1328,

33 St.Rep. 341.

T h e r e f o r e , t h e judgment of t h e t r i a l c o u r t i s a f f i r m e d a s

modified. The judgment f o r P r u d e n t i a l a g a i n s t McDougalls s h a l l > a .

b e i n t h e amount of $2,684.71, w i t h i n t e r e s t from June 1 8 , 1969 t o Yarch 1 9 , 1976, t o g e t h e r w i t h i n t e r e s t a t 6% on t h i s amount i l r ~ r i lp a i d .

Judgment s h a l l be e n t e r e d i n t h e same amount a g a i n s t t h i r d p a r t y defendant B u i l d i n g Agencies, I n c .

A

Chief J u s t i c e