Thermal Design v. Thorson

Citation: Not availableDocket: DA 21-0516

Court: Montana Supreme Court; October 4, 2022; Montana; State Supreme Court

Original Court Document: View Document

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Mark and Pam Duffy, along with Central Copters, Inc., appeal a judgment from the Eighteenth Judicial District Court regarding a construction lien and related issues. The court's decision encompasses several key points: 

1. The appeal challenges the court's discretion during voir dire.
2. The validity of Thermal Design, Inc.’s construction lien against Central Copters, as the contracting party, and the Duffys, as landowners, is contested.
3. The allowance of a crossclaim by TNT against Central Copters, which was not included in the pretrial order, is questioned.

The Supreme Court of Montana affirms the lower court's decisions. The background of the case involves the Duffys leasing property to Central Copters, where a pre-engineered steel building was ordered for use as a hangar. Central Copters hired TNT Building Systems, owned by Steve and Travis Thorson, to assemble the building. During planning, Mark Duffy expressed a preference for a specific insulation system, the “Simple 3 Saver System,” which was discussed following site visits to other completed projects.

On June 6, 2014, Steve proposed a $70,000 flat fee to Mark for erecting a pre-engineered building kit, which included installation of doors, with a stipulation of a ten percent markup on subcontractor invoices. Although the bid was not signed, Mark testified that an agreement was reached via the email. The bid lacked a completion date and did not specify costs for insulation. Throughout the summer, Mark and Central Copters prepared the job site, and when faced with contractor scheduling issues, Mark authorized TNT to hire C&H Engineering for re-engineering and Kruse Enterprises for the concrete foundation, with Central Copters promptly paying invoices that included the contractor markup.

On August 15, 2014, Mark inquired via email about the insulation order, which Steve interpreted as a request to purchase the Simple Saver System from Thermal Design. However, Steve delayed placing the order until early October, after the building had progressed. Thermal Design created an insulation system based on the building plans and shipped the materials, which arrived at the job site in early November. Mark, upon receiving the insulation, claimed he had not authorized its purchase and had never heard of Thermal Design. 

The pre-engineered building arrived in late August, and Kruse Enterprises completed the foundation by mid-September. By mid-October, with the building only 40 percent complete, TNT invoiced Central Copters for $62,520, including a $25,000 labor deposit and $37,520 for insulation materials. Mark expressed frustration over the slow progress, feeling unprepared to pay for incomplete work. Following a contentious meeting on November 13, 2014, where Mark requested a detailed project scope and timeline, Steve did not respond and TNT began removing equipment from the site. Subsequently, on November 20, Mark issued a termination notice to Steve, declaring the project finished due to TNT's lack of progress. On December 12, Mark contacted Thermal Design to inform them that TNT had abandoned the project and he was struggling to find an affordable installer.

Micah James, the regional sales manager for Thermal Design, communicated with TNT regarding a direct payment request from Brian Geary of Central Copters for insulation. James sought confirmation before submitting the bill and requested job site photos from Geary. On December 15, 2014, Geary expressed concerns over increased installation costs and indicated that TNT was no longer involved, describing the insulation as "their deal." Central Copters subsequently hired Steel Concepts, LLC for insulation installation at a cost of $79,025, but neither TNT nor Central Copters compensated Thermal Design for the Simple Saver System. On January 5, 2015, Thermal Design filed a construction lien, followed by a foreclosure complaint in May 2015 against the Duffys, Central Copters, TNT, Steel Concepts, and Steve Larson. Central Copters denied liability, while the Duffys counterclaimed against Thermal Design and crossclaimed against TNT. TNT's failure to respond resulted in a default judgment against them. TNT later filed a motion to set aside the default, claiming the Duffys owed them for labor and insulation. In March 2017, Thermal Design voluntarily dismissed Steel Concepts and Larson as defendants. The trial commenced in March 2020, during which a potential juror disclosed a conflict of interest due to a relationship with Thermal Design's counsel, Mark Evans. Despite concerns raised by opposing counsel about potential bias, the court declined to strike the juror based solely on comfort levels.

The court emphasized the necessity for evidence to fall under statutory exceptions. During voir dire, Sironi questioned juror Daines about his ability to objectively hear the case despite his respect for his attorney, to which Daines stated it would not affect him. He expressed uncertainty regarding the relevance of his attorney’s influence and confirmed he did not feel uncomfortable judging the case. Sironi subsequently moved to strike Daines for cause, but the District Court denied this motion. Additionally, two jurors acknowledged knowing the judge; one, Chere LeClair, was identified as the judge’s stepdaughter. The court dismissed concerns about the jurors’ familiarity with the judge, allowing voir dire to continue without objection.

Sironi exercised peremptory challenges against both Daines and LeClair, with the court acknowledging their potential disappointment. Following the close of Thermal Design's case, the Duffys and Central Copters filed a motion for judgment as a matter of law, arguing that Thermal Design had not proven a real estate improvement contract related to insulation. The court denied this motion, affirming that Central Copters had hired TNT for the building construction, which constituted a real estate improvement contract. The court ruled that Thermal Design's construction lien applied to both Central Copters and the Duffys, as Mark was aware of the improvements before construction. The jury concluded that Thermal Design's insulation was custom-fabricated for Central Copters, leading to joint and several liability of TNT and Central Copters for $31,266.12 in damages for breach of contract. Additionally, in a crossclaim, both TNT and Central Copters were found to have breached their agreement regarding the building, with TNT sustaining damages of $23,753.88 due to Central Copters’ breach.

In June 2020, the District Court ruled on posttrial motions regarding the foreclosure of Thermal Design’s construction lien, affirming that the contract between Central Copters and TNT constituted a real estate improvement contract, validating Thermal Design’s lien on the Duffys’ property and Central Copters’ building. On October 4, 2021, a judgment was entered awarding Thermal Design a total of $31,266.12 against the Duffys, Central Copters, and TNT, alongside prejudgment interest of $29,899.38 (accruing daily), costs of $5,050.20, and consequential damages of $32,449.30 against TNT. Additional attorney fees of $16,298.59 were awarded against TNT and $125,003.16 against the Duffys and Central Copters, along with postjudgment interest and foreclosure of the construction lien. TNT was awarded $23,753.88 against Central Copters with postjudgment interest.

The document outlines standards of review for various court decisions, emphasizing that discretionary rulings, such as voir dire management, are reviewed for abuse of discretion, while judgments as a matter of law are reviewed de novo. The District Court's decision not to grant a challenge for cause against a juror, Daines, was contested by the Duffys and Central Copters, who claimed bias due to Daines’ connection with the trial attorney's former law partner. They argued this required them to use a peremptory challenge, thus compromising their ability to challenge jurors equally and warranting a new trial. Thermal Design countered that no bias was proven. The document highlights the court's discretion in evaluating juror bias and maintaining that such decisions are generally upheld unless a clear abuse of discretion is demonstrated.

An ongoing attorney-client relationship between a prospective juror and trial counsel raises concerns of bias favoring the represented party. However, the court upheld the trial court's discretion in denying a challenge for cause against two jurors who considered the defense counsel their attorney but had no current business with him. One juror, Daines, testified about his respect for his attorney but asserted that this would not impact his impartiality. The record lacked evidence of an ongoing attorney-client relationship that would affect Daines' ability to serve as a juror. The Duffys and Central Copters contended they were compelled to use a peremptory challenge against juror LeClair, the judge's stepdaughter, after the court halted further questioning about potential bias. They cited case law affirming the right to a fair and impartial jury and to question jurors about bias. However, since the Duffys and Central Copters did not object to the voir dire limitations or challenge LeClair for cause, they waived their right to claim prejudice from the trial court's actions. The court emphasized that it will not presume prejudice from voir dire restrictions and noted the absence of an objection or evidence of bias in the record, concluding that the District Court acted within its discretion regarding the voir dire process.

The District Court's ruling on the validity of Thermal Design's construction lien against Central Copters and the Duffys is contested on multiple grounds. The Duffys and Central Copters argue that the court incorrectly categorized the contract for constructing a hangar as a real estate improvement contract, asserting that the relevant contract should solely pertain to the insulation purchase between TNT and Thermal Design. They further contend that Thermal Design, having contracted with Johns Manville for insulation fabrication, cannot claim a construction lien under Montana law (71-3-524, MCA). This statute specifies that a lien for materials can only be claimed if the materials were supplied for incorporation into a construction project and if proper intent and evidence of incorporation are established. 

Montana law defines a "real estate improvement contract" as an agreement to provide services or materials to change the physical condition of real estate. A construction lien can secure payment for materials or services under such a contract. Importantly, liens attached to improvements on leased property do not extend to the lessor's interest unless there was prior agreement or consent to the improvement. No direct contract between the property owner and the material supplier is necessary for a lien to attach if the owner has consented to or ratified the improvement. To establish a lien, a claimant must demonstrate a contractual link with the property owner, who must have authorized or permitted the improvement. This relationship is based on the implied agency between the contractor and the owner, allowing the contractor to engage material suppliers for necessary resources.

Central Copters entered into a real estate improvement contract with TNT to construct a pre-engineered steel building on leased property from the Duffys. This agreement qualifies under MCA 71-3-522(6)(a)(ii) as it involves services to change the physical condition of real estate. The District Court correctly determined that TNT purchased insulation from Thermal Design under its contract with Central Copters, with Thermal Design providing a Simple Saver System shipped directly to Central Copters without objection. The Duffys and Central Copters contested the District Court's Special Verdict Form, arguing that “fabricator” should refer to Johns Manville instead of Thermal Design. However, they failed to provide legal authority supporting this claim, and MCA 71-3-524(1)(b)(ii) does not require that all components be fabricated directly by the material supplier. Evidence established that Thermal Design’s proprietary system is fabricated specifically for its clients, and thus it satisfies the “fabricator” definition. The jury’s finding that the insulation kit was not readily resaleable in the ordinary course of business was supported by substantial evidence and was not implausible. The Duffys and Central Copters also argued insufficient evidence of agency between TNT and themselves regarding the insulation purchase; however, testimony and Mark’s earlier communications indicated that he consented to the improvement and later adopted the purchase by not rejecting the shipments and seeking assistance from Thermal Design. The District Court's ruling that the insulation was purchased under the real estate improvement contract was upheld.

The Duffys and Central Copters contend that the District Court wrongly permitted verbal testimony regarding the agency relationship due to the Uniform Commercial Code’s statute of frauds, which requires contracts related to the Simple Saver System to be in writing. However, the court found that Montana’s construction lien law implies an agency relationship between the contractor and owner, allowing the contractor to engage material suppliers. Substantial evidence, including testimonies from Steve and Travis about meetings discussing the Simple Saver System, supported the jury's finding of agency. Although Mark disputed details about the meetings and the receipt of materials, he acknowledged an agreement with TNT regarding insulation procurement.

The jury's verdict was deemed credible despite Mark’s alternative narrative, and the court affirmed that Thermal Design's construction lien correctly attached to Central Copters' building as an improvement to a leased property. Furthermore, the lien also attached to the Duffys' property since they consented to the improvement before it commenced. 

Central Copters challenged a $23,753.88 judgment favoring TNT Building Systems, arguing that a last-minute crossclaim for unpaid labor costs was improperly allowed since it was not part of the final pretrial order. The final pretrial order typically supersedes all pleadings and governs the trial proceedings unless modified. While Central Copters noted TNT's claim was absent from the pretrial order, they did not provide evidence of prejudice. The Montana Rules allow for modifications during trial at the court's discretion if no prejudice is shown.

The jury correctly determined that the Duffys agreed to the improvement prior to its commencement, making it unnecessary to address Thermal Design's argument regarding Mark's inaction after delivery. The final pretrial order did not encompass TNT’s crossclaim, rendering it unpreserved; however, the District Court noted that the Duffys and Central Copters had filed multiple documents related to the claim, indicating no surprise or prejudice since all parties were aware of TNT's pursuit of damages for unpaid invoices, including the Simple Saver System. The District Court acted within its discretion by amending pleadings to incorporate TNT’s crossclaim during trial, as Central Copters did not demonstrate any prejudice from this amendment. 

Additionally, the District Court did not err in denying the Appellants’ challenge for cause during voir dire or in limiting questions about a prospective juror's familial ties to the trial judge. The Appellants waived their argument concerning the necessity of a peremptory challenge by failing to object to the voir dire limitations or challenge the juror for cause. The court concluded, as a matter of law, that the Simple Saver System insulation kit was purchased under Central Copters' real estate improvement contract with TNT. The jury had sufficient evidence to determine that Thermal Design's construction lien applied to both Central Copters' building and the Duffys' property, as the Duffys, as lessors, consented to the improvement beforehand. The District Court’s decisions were affirmed.