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Cornerstone, Inc. v. Cadieux

United States District Court, D. Montana, Missoula Division

March 19, 2019

CORNERSTONE, INC., Plaintiff7Counterclaim Defendant,
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.


         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, ¶¶ 8-9; Ans., Doc. 4 at 3, ¶¶ 8-9.) Cornerstone claims the written contract was never executed but that the parties entered an oral agreement in March 2017. (Compl., Doc. 3 at 3, ¶ 10.) Cadieux responds that the written contract was executed in late May or early June 2017. (Ans., Doc. 4 at 3, ¶ 10.) In any event, the parties agree Cornerstone's fee was 12% of certain construction costs. (Compl., Doc. 3 at 3, ¶ 13; Ans., Doc. 4 at 4, ¶ 13.) However, they dispute the projected total of those costs. (Compl., Doc. 3 at 3, ¶ 12; Ans., Doc. 4 at 4, ¶ 12.)

         In March 2017, Cadieux paid a $15, 000 deposit to Cornerstone. (Compl., Doc. 3 at 4, ¶ 14; Ans., Doc. 4 at 4, ¶ 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, ¶ 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 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.


         Under Montana law, "[a] 11 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, 371 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, 2017, Defendants and Plaintiff entered into an oral agreement to construct the residence ... ." (Compl., Doc. 3 at 3, ¶ 10.) Count I explicitly claims "Breach of Oral Contract" and refers repeatedly to "the oral agreement." (Id. at 6-7, ¶¶ 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. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995).

         It is unclear what Cornerstone meant to allege by attaching the unexecuted 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. 377P.3datl233.

         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 of Frauds, 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 ...

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