Cornerstone, Inc. v. Cadieux et al

Filing 19

ORDER granting 14 Motion for Judgment on the Pleadings. Counts I and II of the Complaint are dismissed with leave to amend. An amended complaint shall be filed within 14 days of the date of this Order. IT IS FURTHER ORDERED that Cadieux's Motion for Extension of Time to File Reply Brief (Doc. 18 ) is DENIED as MOOT. Signed by Judge Donald W. Molloy on 3/19/2019. (NOS)

F1ieo
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION

MAR 19 2019
Clerk, U
Distr;ct
Courts
M1ssou1a !f.o_ntana
1v1sion

o-,S

CV 18-58-M-DWM

CORNERSTONE, INC., .
Plaintiff/Counterclaim Defendant,

ORDER

V.

JEFF CADIEUX, individually, and
JEFF CADIEUX, as trustee of the
Cadieux Family Trust,
Defendants/Counterclaimants.

This suit involves the construction of a home in Philipsburg, Montana and the
general contractor's filing of a construction lien. The general contractor Cornerstone,
Inc. sued homeowner Jeff Cadieux for breach of contract and foreclosure of the lien,
among other things. Cadieux has moved for judgment on the pleadings on
Cornerstone's claims for breach of contract (Count I) and foreclosure (Count II).
(Doc. 14.) For the following reasons, Counts I and II are dismissed, but Cornerstone
is granted leave to amend.
BACKGROUND

From February 2017 until at least April but perhaps as late as June 2017,
Cornerstone and Cadieux negotiated a written contract for the construction of a
residence in Philipsburg. (Compl., Doc. 3 at 2, ,r,r 8-9; Ans., Doc. 4 at 3, ,r,r 8-9.)

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Cornerstone claims the written contract was never executed but that the parties
entered an oral agreement in March 2017. (Compl., Doc. 3 at 3, ,r 10.) Cadieux
responds that the written contract was executed in late May or early June 2017.
(Ans., Doc. 4 at 3, ,r 10.) In any event, the parties agree Cornerstone's fee was 12%
of certain construction costs. (Compl., Doc. 3 at 3, ,r 13; Ans., Doc. 4 at 4, ,r 13.)
However, they dispute the projected total of those costs. (Compl., Doc. 3 at 3, ,r 12;
Ans., Doc. 4 at 4, ,r 12.)
In March 2017, Cadieux paid a $15,000 deposit to Cornerstone. (Compl., Doc.
3 at 4, ,r 14; Ans., Doc. 4 at 4, ,r 14.) Construction began in April or May 2017.
(Stip. Facts, Doc. 8 at 2.) Over time, Cadieux made additional payments of
$4,945.19, $6,075.14, and $15,042.37 for work on the home. (Id.) But in October
2017, Cadieux terminated Cornerstone from the project. (Id. at 3.) In December
2017, Cornerstone filed a construction lien on the property for $58,094.50. (Id.) The
amount represents $35,477.52 that Cornerstone claims in costs and $22,616.98 in
construction fees. (Compl., Doc. 3 at 5, ,r 22.)
On February 1, 2018, Cornerstone filed this action in state court for breach of
contract, foreclosure of the lien, unjust enrichment, promissory estoppel, and fraud,
among other things. (Compl., Doc. 3.) Cadieux removed to this Court on March 13,
2018. (Doc. 1.) On March 19, 2018, he filed an Answer and Counterclaim alleging
slander of title, breach of contract, fraud, negligent misrepresentation, and negligent

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construction. (Doc. 4.) On February 29, 2019, he filed the present motion. (Doc.
14.)
LEGAL STANDARD

Federal Rule of Civil Procedure 12(c) provides, "After the pleadings are
closed-but early enough not to delay trial-a party may move for judgment on the
pleadings." "Dismissal under Rule 12(c) is warranted when, taking the allegations in
the complaint as true, the moving party is entitled to judgment as a matter of law."

Daewoo Elec. Am. Inc. v. Opta Corp., 875 F.3d 1241, 1246 (9th Cir. 2017).
However, dismissal without leave to amend is inappropriate unless it is clear the
complaint cannot be saved. Harris v. Cty. of Orange, 682 F .3d 1126, 1131 (9th Cir.
2012).
When a party presents matters outside the pleadings on a Rule 12(c) motion, as
Cornerstone has done here, the court can either exclude those matters or treat the
motion as one for summary judgment. Fed. R. Civ. P. 12(d). Because Cadieux's
motion can be resolved on the pleadings alone, Cornerstone's outside materials are
excluded for present purposes.
ANALYSIS

Under Montana law, "[a]ll contracts may be oral except such as are specially
required by statute to be in writing." Mont. Code Ann. § 28-2-901. "An oral
contract, when expressly required to be in writing, is void." Mandell v. Ward, 3 77

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P.3d 1228, 1233 (Mont. 2016). Montana Code§ 28-2-2201 requires a residential
construction contract, defined as "a contract between a general contractor and an
owner for the construction of a new residence," to be in writing. Accordingly, as the
Montana Supreme Court explicitly held in Mandell, oral residential construction
contracts are void. 377 P.3d at 1233. Mandell also held that because a contractor's
right to a construction lien depends on a valid contract, a void contract invalidates the
corresponding lien. Id.; see also Mont. Code Ann.§ 71-3-523.
Here, Cornerstone has specifically alleged that the parties entered an oral
residential construction contract. The Complaint states, "Although the written
contract was never executed by the parties to it, on or about March 16, 201 7,
Defendants and Plaintiff entered into an oral agreement to construct the residence
.... " (Compl., Doc. 3 at 3, ,r 10.) Count I explicitly claims "Breach of Oral
Contract" and refers repeatedly to "the oral agreement." (Id. at 6--7, ,r,r 26--35.)
However, Cornerstone attached the written contract the parties allegedly negotiated
as Exhibit A to its Complaint, complicating the analysis. (See Doc. 3-1.) "When a
plaintiff has attached various exhibits to the complaint, those exhibits may be
considered in determining whether dismissal was proper without converting the
motion to one for summary judgment." See Parks Sch. ofBus., Inc. v. Symington, 51
F.3d 1480, 1484 (9th Cir. 1995).
It is unclear what Cornerstone meant to allege by attaching the unexecuted

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written contract to the Complaint. While parties can plead alternative or inconsistent
claims, Fed. R. Civ. P. 8(d), Cornerstone has not done so here. Even when construing
the pleadings in favor of Cornerstone, as required at this stage, Cornerstone has
exclusively alleged that the contract was oral. Cornerstone could have alternatively
alleged that the contract was written and oral. Or, Cornerstone could have pled a
general "breach of contract" claim, rather than "breach of oral contract," allowing an
interpretation of Exhibit A as an allegation that a written contract existed. Instead,
the Complaint's plain language alleges the parties entered an oral contract, and only
an oral contract. The alleged oral contract is void as a matter of law under Mandell
and therefore cannot form the basis of a breach of contract claim or a construction
lien. 377 P.3d at 1233 .
Cornerstone argues§ 28-2-2201 is akin to a statute of frauds, such that
equitable principles that take a contract out of the statute of frauds should apply here.
Montana's Statute ofFrauds, codified at§ 28-2-903 and §70-20-101, requires certain
contracts to be in writing. See Hayes v. Hartelius, 697 P.2d 1349, 1353 (Mont.
1985). Generally, though, the parties' admission that a contract exists or their partial
performance renders the Statute of Frauds inapplicable. Id. Both circumstances are
present here. Cornerstone thus contends that§ 28-2-2201 's writing requirement is
inapplicable.

Mandell did not address whether§ 28-2-2201 's writing requirement is subject

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to the same equitable exceptions as the Statute of Frauds. However, like in this case,
the parties in Mandell admitted the existence of an oral contract and had partially
performed. See 377 P.3d at 1230-31. Mandell's silence on those issues likely
reflects the different purposes of the Statute of Frauds and§ 28-2-2201. A statute of
frauds is meant to avoid fraud. Hayes, 697 P.2d at 1353. Mandell's passing
references to § 28-2-2201 's legislative history suggest its writing requirement is
meant to protect homeowners. 377 P.3d at 1233. That purpose is evident in the
substantive requirements§ 28-2-2201 imposes on residential construction contracts,
such as the requirement to include a payment schedule, a procedure for handling
change orders, and an express warranty. 1 While preventing fraud may be one aim of

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Section 28-2-2201 requires all residential construction contracts to contain:
(a) a disclosure that the general contractor has a current general liability
policy;
(b) a disclosure that the general contractor has a workers' compensation
policy or is an independent contractor without employees;
(c) a provision setting out the billing cycle establishing the payment
schedule to be followed by the owner;
(d) a provision establishing procedures for handling change orders by the
owner;
(e) a statement of all inspections and tests that the general contractor will
perform or have performed prior to, during, or upon completion of
construction and a statement that the owner is entitled to receive the results
of any tests conducted by the general contractor or conducted at the
general contractor's request;
(f) a statement that the owner is entitled at the owner's expense to have
any inspections and tests conducted that the owner considers necessary;
and
(g) a statement that the general contractor is providing an express warranty
that is valid for a period of at least 1 year from completion of the
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§ 28-2-2201, these requirements show it also has different or additional purposes, like
providing transparency to homeowners during the construction process. And while
the Statute of Frauds and§ 28-2-2201 are similar in some respects, namely their
writing requirements, that does not mean the same equitable exceptions apply to both.
In any event, this Court will refrain from crafting equitable exceptions to a Montana
statute where the Montana Supreme Court declined to do so on analogous facts.
Next, Cornerstone argues the Montana Supreme Court abandoned Mandell in
Vintage Construction, Inc. v. Feigner, 394 P.3d 179 (Mont. 2017). Like this case,
Vintage involved a dispute between a homeowner and general contractor. See id. at

182. The parties did not execute a signed contract, but the general contractor
provided a written estimate. Id. When the homeowner refused to make payments
due to problems with the driveway, the general contractor filed a construction lien.
Id. at 184. Though the trial court did not enforce the lien, it awarded contract

damages to the general contractor. Id. On appeal, the Montana Supreme Court
determined that the written estimate formed the basis of a contract, thus contract
damages were appropriate. Id. at 186.

construction project. The warranty must provide detailed descriptions of
those components that are included or excluded from the warranty, the
length of the warranty, and any specialty warranty provisions or time
periods relating to certain components. The warranty provisions must also
clearly set forth the requirements that must be adhered to by the buyer,
including the time and method for reporting warranty claims, in order for
the warranty provision to become applicable.
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According to Cornerstone, this holding-finding a contract where there was no
signed writing-tacitly overruled Mandell. But Vintage never mentions Mandell or
§ 28-2-2201. At most, then, Vintage suggests that a written estimate satisfies§ 28-22201 's writing requirement. It does not call that requirement or Mandell into
question. Further, Cornerstone's statement in its Complaint that the parties entered
an oral contract is a binding judicial admission. See Am. Title Ins. Co. v. Lace/aw

Corp., 861 F.2d 224, 226 (9th Cir. 1988). The admission bars an inquiry into
whether some document might form the basis of a written contract like the estimate
did in Vintage. Governing law requires the residential construction contract to be in
writing, and Cornerstone has admitted that it was not. Accordingly, Cornerstone's
claims for breach of contract and foreclosure of the corresponding lien fail as a matter
of law.
Cornerstone further contends Cadieux should be estopped from arguing that no
written contract existed in light of the Answer's allegations that a written contract
was executed. (See Ans., Doc. 4 at 3, 1 10.) But as discussed above, Counts I and II
of the Complaint fail on their own terms, without regard to the Answer. Still,
allowing Cadieux to benefit from an argument that is inconsistent with his own
judicial admissions raises equitable concerns. Those concerns along with the Federal
Rules' instructions that "[p]leadings must be construed so as to do justice," Fed. R.
Civ. P. 8(e), and that leave to amend should be freely given "when justice so

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requires," Fed. R. Civ. P. 15(a)(2), counsel against dismissal with prejudice.
CONCLUSION

IT IS ORDERED that Cadieux's Motion for Judgment on the Pleadings (Doc.
14) is GRANTED. Counts I and II of the Complaint are dismissed with leave to
amend. An amended complaint shall be filed within 14 days of the date of this Order.
IT IS FURTHER ORDERED that Cadieux's Motion for Extension of Time to
File Reply Brief (Doc. 18) is DENIED as MOOT.
DATED this

_l!f!;ay

of March, 2019.

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