RUSTICS OF LINDBERGH LAKE INC v

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No. 83-512 I N THE SUPREME COURT OF TIIE STATE O F M N A A O T N 1984 RUSTICS O LINDBERGH LAKE, I N C . , F 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 a n d f o r t h e County o f M i s s o u l a , The H o n o r a b l e Douglas H a r k i n , J u d g e p r e s i d i n g . COUNSEL O RECORD: F For Appellant: S k e l t o n & C o o l e y , M i s s o u l a , Montana For Respondent: E l l i n g s o n , L o v i t t & Moe, M i s s o u l a , Montana Submitted on B r i e f s : Decided: gw* Filed: Clerk A u g u s t 1 7 , 1984 November 1 3 , 1984 Chief J u s t i c e Frank T . t h e Court. Haswell d e l i v e r e d t h e O p i n i o n of Mr. P a u l L e a s e a p p e a l s t h e judgment o f t h e M i s s o u l a County District Court awarding plaintiff certain sums due on a p r o m i s s o r y 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, L i n d b e r g h Lake, Inc. oral Novemher agreement and respondent, (hereinafter Rustics) 16, 1979, , Rusti-cs of e n t e r e d i n t o an whereby Rustics was to c h a r g e L e a s e 17 p e r c e n t i n t e r e s t on t h e u n p a i d ba.l.a.nce o f a n a c c o u n t u n d e r which L e a s e p u r c h a s e d l o g s from R u s t i c s . Lease l o g s and f e l l f u r t h e r b e h i n d in his continued t o purchase By agreement of payments. A p r i l 17, The t h e amount owed on 1 9 8 0 , by L e a s e was r e d u c e d t o a p r o m i s s o r y n o t e . agreed balance and. Lease $14,760.67. 1980, the parties, interest signed a due promissory at time was on A p r i l 17, that note f o r t h i s amount and t h e n o t e was t o b e p a i d s i x t y d a y s l a t e r on J u n e 16, 1980. in full 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 i t s f a c e . The d i s c o u n t rate time on ninety-day commercial pa-per a t this was 13 percent. Payments t o t a l i n g $ 8 , 5 5 0 were made on t h e n o t e between Play 5 , 1980, and August 2 1 , 1980. Rustics f i l e d s u i t f o r c o l l e c t i o n o f t h e u n p a i d b a . l a n c e on August 1 9 , 1.980. Lease c o u n t e r c l a i m e d 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 d e a . l i n g s between t h e p a r t i e s were t a i n t e d by u s u r y . 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 L e a s e 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. T h i s amount r e p r e s e n t e d t h e s t a t u t o r y u s u r y p e n a l t y p r o v i d e d by s e c t i o n 31-1-108 (1), MCA. S u b s e c t i o n (1) o f t h i s s t a t u t e provides : "The t a k i n q , receiving, reserving, o r charging a r a t e of i n t e r e s t g r e a t e r than i s a l l o w e d by 31-1-107 s h a l l b e deemed a f o r f e i t u r e o f a sum d o u b l e t h e amount o f 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 e v i d e n c e o f d e b t c a r r i e s o r which h a s been a g r e e d t o b e p a i d t h e r e o n . " The c o u r t f o u n d t h e n o t e c o n s t i t u t e d a f o r b e a r a n c e 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 a l l o w e d by law. S e c t i o n 31-1-1.07, MCA, p r o v i d e d i n 1980 t h a t : "On amounts u p t o $ 1 5 0 , 0 0 0 , p a r t i e s may a g r e e i n w r i t i n g f o r t h e payment o f a n y r a t e o f i n t e r e s t n o t more t h a n 1 0 % p e r annum o r more t h a n 4 p e r c e n t a g e p o i n t s i n e x c e s s o f t h e d i s c o u n t r a t e on 90-day commercial p a p e r 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 , w h i c h e v e r i s g r e a t e r , and s u c h i n t e r e s t s h a l l be allowed according t o t h e t e r m s o f t h e agreement.." The 2 0 p e r c e n t i n t e r e s t c h a r g e d 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 a l l o w e d 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 this t i m e was 13 p e r c e n t . s e c t i o n 31-1-1 08 (1), MCA, Thus, t h e usury p e n a l t y under was c a l c u l a t e d a s a sum t w i c e t h e amount o f i n t e r e s t a p p e a r i n g on t h e n o t e . t h e i n t e r e s t o v e r t h e two-month The c o u r t comput.ed t e r m of t h e note, from t h e d z t e o f e x e c u t i o n t o t h e d a t e t h e n o t e v7as d u e , 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 d o u b l e t h e amount o f 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, both before and a f t e r t h e t e r m o f t h e promissory note. This usury penalty f o r i n t e r e s t a c t u a l l y paid a r i s e s o u t of s e c t i o n 31-1-108 ( 2 ) , L e a s e ' s motion. MCA.. The D i s t r i c t C o u r t d e n i e d The c o u r t b a s e d i t s r u l i n u on two g r o u n d s , t h a . t t h e a g r e e m e n t t o pay 17 percent i n t e r e s t on t h e open a c c o u n t , d i s t i n g u i s h e d from t h e p r o m i s s o r y n o t e , was p a r t o f a bona f i d e s a l e and p u r c h a s e a q r e e m e n t , and t h a t no c o u n t e r c l a i m wa.s f i l e d seeking t h e affirmative 31-1-108 ( 2 ) , MCA, w i t h i n t h e two-year relief of section 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 C o u r t O c t o b e r 1 8 , 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 a n d f e e s o f $1,136.11. the 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 $14,760.67 note $1,000 the $8,550 payments for his successful partial concerning t h e u s u r i o u s n o t e and R u s t i c s fees on the and $984.04 F e e s w e r e c a l c u l a t e d by a w a r d i n g d e f e n d a n t usury pena-lty. Lease with collection claim. t h e r e f o r e g r a n t e d $1,136.11 summary judgment $2,136.11 for its The p l a i n t i f f R u s t i c s was a s t h e n e t amount o f the total f e e s awarded. L e a s e and h i s w i f e f i l e d f o r b a n k r u p t c y u n d e r C h a p t e r 13 o f t h e U n i t e d S t a t e s B a n k r u p t c y Code on O c t o b e r 2 0 , Rustics filed a proof of judgment a g a i n s t L e a s e . such proof proved cl-aim f o r t h e f u l l 16, amount o f its L e a s e and h i s w i f e d i d n o t d i s p u t e a n d t h e amended C h a p t e r March 1983. 1984, provides 13 p l a n , for full which was ap- payment o f such claims over a five-year period. L e a s e a l l e g e s on a p p e a l t h a t t h e D i s t r i c t C o u r t f a i l e d t o properly note. calculate t h e usury p e n a l t y on t h e promissory 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. Rustics 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 l o w e r c o u r t a n d i s now p r e c l u d e d from r a i s i n g it on a p p e a l . Rustics a l s o argues 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 p r o o f o f c l a i m i n t h e hank- ruptcy proceeding precludes r a i s e s t h e p r o p r i e t y of appellate review. Appellant t h e a t t o r n e y f e e award a s a s e c o n d issue. W e h a v e r e v i e w e d t h e r e c o r d o f t h e p r o c e e d i n g below and c a n f i n d no a l l e g a t i o n o r argument made by L e a s e 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 p r o m i s s o r y 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. Toenyes (Mont. 1984), 679 P.2d Environ. Management v. 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 note. 377, which also construed a demand promissory 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 j 1 not be considered on r.1 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 associated 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 o n e f a c t o r s h o u l d b e c o n s i d e r e d i n d e t e r m i n i n g t h e p r e 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 a n a c t i o n i n v o l v i n g a c o u n t e r c l a i m w i t h t h e n e t judgment s h o u l d g e n e r a l l y b e considered t h e successful party. ingly, we find no error in See, Toenyes, supra. the lower court's Accordaward of attorney fees. The judgment need not reach of the t h e D i s t r i c t Court i s affirmed. contentions concerning the We bankruptcy p r o c e e d i n g a s it would n o t a f f e c t o u r d e c i s i o n . Chief J u s t i c e W e concur: -. . L

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