07/01/2025
DA 24-0320 Case Number: DA 24-0320
IN THE SUPREME COURT OF THE STATE OF MONTANA
2025 MT 140
BUCK KRATZER, d/b/a KRATZER CONSTRUCTION,
Plaintiff and Appellee,
v.
HARDY CONSTRUCTION CO., INC.,
Defendant and Appellant.
APPEAL FROM: District Court of the Sixteenth Judicial District, In and For the County of Carter, Cause No. DV 2023-9 Honorable Nickolas C. Murnion, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Brandon Hoskins, Bryce Burke, Moulton Bellingham PC, Billings, Montana
For Appellee:
Alex W. Hamman, Calton Hamman & Wolff, P.C., Billings, Montana
Submitted on Briefs: February 5, 2025
Decided: July 1, 2025
Filed: ' ,--6••--•f __________________________________________ Clerk Justice Jim Rice delivered the Opinion of the Court.
¶1 Hardy Construction Co., Inc. (Hardy) appeals the order of the Sixteenth Judicial
District Court, Carter County, granting summary judgment to Plaintiff Buck Kratzer
(Kratzer), and denying summary judgment to Defendant Hardy. The dispute arose out of
a construction subcontract (the Subcontract) between Hardy, as contractor, and Kratzer, as
subcontractor, under which Kratzer was to perform work related to Hardy’s contract to
construct a building addition for the Ekalaka Public Schools (the Project). We address the
following issues:
1. Whether the District Court erred by granting summary judgment to Kratzer, including requiring Hardy to pay Kratzer interest and attorney fees, and by failing to grant summary judgment to Hardy.
2. Whether the District Court erred in establishing the amount owed by Hardy under the Subcontract.
We affirm in part, reverse in part, and remand for further proceedings consistent herewith.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 On March 23, 2021, Kratzer and Hardy entered into the Subcontract, under which
Kratzer agreed to complete work for Hardy related to the Project, including site demolition,
earthwork, utility installation, and concrete work. Kratzer began the contemplated work
and, in March and April, submitted to Hardy two “pay applications” for progress payments,
which Hardy timely paid. Construction quality issues thereafter developed with Kratzer’s
work, related to hot and dry wind conditions at the time Kratzer poured concrete, which
caused uneven drying and dips in the concrete surfaces and required repair work to bring
2 the concrete slab up to industry standards. This issue affected the work of other trade
subcontractors and delayed Hardy’s overall progress on the Project.
¶3 On October 24, 2021, Kratzer submitted Pay Application 3 for the amount of
$92,856.45, which included change orders in the amount of $28,852.94 that had not been
approved by Hardy. Hardy notified Kratzer that it disapproved of Pay Application 3. On
November 12, 2021, Kratzer texted Adam Petersen (Petersen), the project manager for
Hardy, and demanded that Pay Application 3 be paid in full, including the unapproved
change orders, by the end of the month or he would file suit. Petersen responded, stating
“[u]nfortunately that is not how we see it or understand it. Please call us Monday and we
can discuss and come to a resolution.” After some discussion by the parties, on
November 23, 2021, Kratzer submitted to Hardy a reduced amount of $25,332.94 for his
change orders. Petersen verbalized his disapproval with that amount as well, and asked
Kratzer for additional supporting documentation related to the amount requested, as
Kratzer had submitted only line-item amounts.
¶4 On December 6, 2021, Hardy submitted its final pay application to Ekalaka Public
Schools for payment on the entire Project. In the meantime, Kratzer provided some of the
information requested by Hardy pertaining to the change orders included in Pay
Application 3. Hardy promptly requested further information about items contained within
Kratzer’s change orders—specifically, breakdowns of the days and hours Kratzer had
worked. After Kratzer provided these, Hardy notified Kratzer on December 15, 2021, that
Kratzer’s breakdowns were incorrect because they conflicted with the daily progress
reports prepared on the Project. On December 22, 2021, Petersen emailed Kratzer
3 regarding Pay Application 3, stating that Hardy would agree to an additional $4,275 for the
change orders, denying the remaining change order charges because they were for work
that was already within Kratzer’s scope of work under the Subcontract, and that, upon
Kratzer signing a release and waiver, Hardy would issue final payment to Kratzer in the
amount of $81,153. This figure included the amounts for the remaining work under the
Subcontract ($69,878), the approved change orders ($4,275), and retainage ($7,000).
Petersen’s email included an attached “Release and Waiver” and specified that the sum of
$80,341.471 would be paid to Kratzer upon Kratzer’s signing the release and waiver.
Petersen’s correspondence did not require a release and waiver form signed by Kratzer’s
subcontractors and suppliers.
¶5 Six months later, in May 2022, Jason Arrowsmith (Arrowsmith), president of
Hardy, emailed Kratzer, stating “I haven’t heard back from you in months, and would like
to get you paid the $80,341.47 we owe you. Please sign the release and waiver and we’ll
get the check sent out immediately.” Kratzer requested Hardy resend the release form with
the corrected amount of $81,153, which Hardy did. However, Kratzer ultimately
responded that he would not sign the release and waiver, and requested, through legal
counsel, payment of the full amount he had submitted in Pay Application 3, or $92,856.45.
More time passed, and in October 2022, Kratzer conveyed to Hardy that he was waiving
disputed amounts he had requested in Pay Application 3, and instead demanding payment
1 This amount was initially utilized by Hardy as the amount Kratzer was owed. As noted herein, Kratzer later indicated that the correct calculation would be $81,153. Hardy acknowledged that Kratzer was correct and that it had made a math error. It thereafter utilized $81,153 as its calculation of the amount it believed Kratzer was owed. 4 of $81,153 plus 18% per annum interest commencing November 21, 2021, or $13,326.66,
for a total amount of $94,479.66.
¶6 On January 17, 2023, Hardy sent Kratzer a check for $81,153 along with a release
and waiver for Kratzer to sign, but maintained that Kratzer was not owed the requested
interest. On January 24, 2023, Kratzer again declined payment, reiterating that he was
entitled to the interest. On January 26, 2023, Hardy once again tendered payment to
Kratzer for $81,153, and this time indicated that Kratzer’s acceptance of the payment was
not conditioned upon his signing of a release and waiver, and that, further, Hardy would
not view Kratzer’s acceptance of the payment as a waiver of his claim to interest. However,
Kratzer again rejected the proffered payment.
¶7 On February 17, 2023, Kratzer filed this action to collect the amount owed under
the Subcontract, as well as interest and attorney fees, alleging breach of contract. As the
matter progressed, Hardy’s counsel argued that Kratzer’s pleadings improperly utilized
statements made by Hardy’s employees to establish the amount owed, in contravention of
M. R. Evid. 408, because the referenced statements were part of settlement offers Hardy
had conveyed. Kratzer amended the allegations of his complaint, and in subsequent
discovery, Hardy agreed that, upon satisfaction of the conditions of the Subcontract for
provision of waiver and release of his subcontractors, Kratzer would be entitled to $81,153,
less recoverable damages under Hardy’s counterclaims for breach of contract for work
defects, and attorney fees. Hardy continued to oppose Kratzer’s claims for interest and
attorney fees.
5 ¶8 Both parties moved for summary judgment on their respective claims. The District
Court granted Kratzer’s motion and denied Hardy’s motion, holding that “Kratzer was
entitled to payment of the sum of $81,153 by January 5, 2022, which was 30 days after
Hardy received final completion and acceptance of the project and full payment from the
Ekalaka Schools.” Regarding interest, the District Court ruled that Hardy had delayed the
payment by over 30 days in contravention of the Subcontract, and therefore
§ 28-2-2104(2), MCA, required payment to Kratzer to include 18% interest from
January 6, 2022, until January 26, 2023—approximately $15,407. Lastly, the District
Court ruled that, under the Subcontract’s attorney fee provision, whereby “the prevailing
party shall be entitled to recover a reasonable sum for attorney fees from the other party,”
Kratzer was the prevailing party on the main issue in controversy and therefore was entitled
to attorney fees.
¶9 Hardy appeals.
STANDARDS OF REVIEW
¶10 We review summary judgment orders de novo, applying the same standards as
M. R. Civ. P. 56. A.M. Welles, Inc. v. Mont. Materials, Inc., 2015 MT 38, ¶ 5, 378 Mont.
173, 342 P.3d 987 (citing Albert v. City of Billings, 2012 MT 159, ¶ 15, 365 Mont. 454,
282 P.3d 704). “Summary judgment is appropriate when the moving party demonstrates
the absence of a genuine issue of material fact and the entitlement to judgment as a matter
of law.” M. R. Civ. P. 56; A.M. Welles, Inc., ¶ 5.
¶11 A district court’s construction and interpretation of a contract is a question of law
that is reviewed for correctness. Total Indus. Plant Servs. v. Turner Indus. Grp., LLC,
6 2013 MT 5, ¶ 22, 368 Mont. 189, 294 P.3d 363 (citing Richards v. JTL Group, Inc.,
2009 MT 173, ¶ 14, 350 Mont. 516, 212 P.3d 264). “A district court’s determination
whether legal authority exists for an award of attorney fees is a conclusion of law, which
we review for correctness.” Burns v. Cnty. of Musselshell, 2019 MT 291, ¶ 10,
398 Mont. 140, 454 P.3d 685. We review a district court’s prevailing party determination
regarding attorney fees for abuse of discretion. Kenyon-Noble Lumber Co. v. Dependant
Founds., Inc., 2018 MT 308, ¶ 11, 393 Mont. 518, 432 P.3d 133 (citing Wohl v. City of
Missoula, 2014 MT 310, ¶ 12, 377 Mont. 148, 339 P.3d 58).
DISCUSSION
¶12 1. Whether the District Court erred by granting summary judgment to Kratzer, including requiring Hardy to pay Kratzer interest and attorney fees, and by failing to grant summary judgment to Hardy.
¶13 The parties’ arguments center on interpretation of the Subcontract, an issue of law.
The disputed provision provides as follows:
Final payment shall become payable thirty (30) days after final completion and acceptance of the Project by Owner. Prior to final payment Subcontractor shall submit from each of its Subcontractors and suppliers written releases and waivers of claims and liens against the Project, the Owner, and the Contractor. . . .
No payment including the final payment, shall be evidence of the performance of this Subcontract by Subcontractor, either in whole or in part, and no payment shall be construed as an acceptance of defective or incomplete Work, and Subcontractor shall remain responsible and liable for its performance being in strict compliance with this Subcontract and the Prime Contract.
¶14 Hardy argues the District Court incorrectly interpreted the Subcontract, and that,
under its plain language, Kratzer failed to comply with the payment provisions and Hardy
7 was entitled to withhold payment until he complied. Specifically, Hardy contends the
payment provision constituted a condition precedent to Hardy’s issuance of a final
payment, that being, “[p]rior to final payment, Subtractor shall submit” releases from his
subcontractors and suppliers, which Kratzer failed to do. Kratzer answers that because the
Subcontract provided that the final payment was payable “thirty (30) days after final
completion and acceptance of the Project by Owner,” his payment was then due regardless
of his failure to comply with the condition requiring submission of releases because these
provisions conflicted with each other and created an ambiguity that must be resolved in his
favor. Kratzer further contends that, in any event, Hardy waived the condition precedent
by offering to make payment upon a general release signed by Kratzer, rather than signed
by his subcontractors, as provided in the Subcontract. Thus, in Kratzer’s view, Hardy was
“attempting to add a new condition not contained in the contract at all. . . . That is contract
modification.” The District Court agreed with Kratzer, reasoning that “Hardy waived any
right to request such a waiver [from Kratzer’s subcontractors] after [Hardy] closed out the
Project and requested a general release that was [not] required.” Hardy replies that it was
not required to re-request subcontractor releases because the Subcontract already
unambiguously required it, and that the offer it made conditioned on Kratzer’s signing of
a general release was an offer of compromise made to expedite resolution of the dispute
which did not forfeit the rights it held under the Subcontract until the parties agreed.
¶15 The parties’ arguments encompass several principles of contract law. “A condition
precedent is one which is to be performed before some right dependent thereon accrues or
some act dependent thereon is performed.” Bender v. Rosman, 2023 MT 140, ¶ 14,
8 413 Mont. 89, 532 P.3d 855 (quoting § 28-1-403, MCA). “Before a party may require
another party to perform under an obligation, the requesting party must fulfill all conditions
precedent required of the requesting party.” Bender, ¶ 14 (citing § 28-1-406, MCA).
“[N]on-satisfaction of a condition precedent to performance generally ‘constitutes a breach
of an enforceable contract.’” Bender, ¶ 14 (quoting Davidson v. Barstad, 2019 MT 48,
¶ 21, 395 Mont. 1, 435 P.3d 640).
¶16 A waiver of a contract requirement is “a voluntary and intentional relinquishment
of a known right or claim,” which may be proved “by express declarations or by a course
of acts and conduct which induces the belief that the intent and purpose was waiver.”
Dodds v. Tierney, 2024 MT 48, ¶ 23, 415 Mont. 384, 544 P.3d 857 (quoting Edwards v.
Cascade Cnty., 2009 MT 229, ¶ 30, 351 Mont. 360, 212 P.3d 289). A party asserting a
waiver “has the burden of showing: (1) another’s knowledge of an existing right;
(2) conduct deliberately inconsistent with the right; and (3) resulting prejudice to the party
asserting the waiver if the other is allowed to reverse course and subsequently assert the
right.” Peeler v. Rocky Mountain Log Homes Can., Inc., 2018 MT 297, ¶ 22,
393 Mont. 396, 431 P.3d 911 (citations omitted).
¶17 “A novation occurs when parties intend to substitute a new obligation for an existing
one.” O’Brien v. O’Brien, 2022 MT 246, ¶ 22, 411 Mont. 101, 532 P.3d 831.
Section 28-1-1502, MCA, provides that a “[n]ovation is made by the substitution of: (1) a
new obligation between the same parties with intent to extinguish the old obligation.”
Section 28-1-1502, MCA. Further, a novation requires analysis of the intent of the
arrangement, and cannot be presumed:
9 In order to effect a novation there must be a clear and definite intention on the part of all concerned that such is the purpose of the agreement, for it is a well-settled principle that novation is never to be presumed; the point in every case, then, is, did the parties intend by their arrangement to extinguish the old debt or obligation and rely entirely on the new, or did they intend to keep the old alive and merely accept the new as further security, and this question of intention must be decided from all of the circumstances.
Waite v. Andreassi, 249 Mont. 149, 151, 813 P.2d 987, 989 (1991). Parties may modify a
written contract through a subsequent written contract. AAA Constr. of Missoula, LLC v.
Choice Land Corp., 2011 MT 262, ¶ 27, 362 Mont. 264, 264 P.3d 709 (citing § 28-2-1602,
MCA). Further, “[p]arties also may modify a written contract by an executed oral
agreement.” AAA Constr. of Missoula, LLC, ¶ 27 (citing § 28-2-1602, MCA).
¶18 The role of a court interpreting a contract is to effectuate the mutual intention of the
parties at the time of contracting. Section 28-3-301, MCA. “Where a contract has been
reduced to writing, the intention of the parties is to be ascertained, if possible, from the
writing alone.” Section 28-3-303, MCA. “If the terms of a contract are unambiguous, a
court must apply the language of the contract as written.” Kalispell Aircraft Co., LLC v.
Patterson, 2019 MT 142, ¶ 17, 396 Mont. 182, 443 P.3d 1100 (citing Est. of Irvine v. Oaas,
2013 MT 271, ¶ 22, 372 Mont. 49, 309 P.3d 986). “The whole of a contract is to be taken
together so as to give effect to every part if reasonably practicable, each clause helping to
interpret the other.” Section 28-3-202, MCA. “The language of a contract is to govern its
interpretation if the language is clear and explicit and does not involve an absurdity.”
Section 28-3-401, MCA. “Montana law compels us to reject a contract interpretation that
would lead to absurdities.” Rubin v. Hughes, 2022 MT 74, ¶ 43, 408 Mont. 219, 507 P.3d
10 1169 (citing First Nat’l Props., LLC v. Joel D. Hillstead Tr., 2020 MT 211, ¶ 30, 401 Mont.
59, 472 P.3d 134).
¶19 Starting with “the language of the [Subcontract] as written,” Kalispell Aircraft Co.,
LLC, ¶ 17, the first sentence of the disputed provision states that “[f]inal payment shall
become payable” within 30 days of acceptance of the Project by the Owner. Kratzer
interprets this provision to mean “shall become due” within 30 days of acceptance.
However, Black’s Law Dictionary notes the subtle difference between these terms in its
definition of “payable”: “Of a sum of money or a negotiable instrument that is to be paid.
An amount may be payable without being due.” Payable, Black’s Law Dictionary (7th ed.
1999). This definition fits the Subcontract provisions well, as the second sentence
continues by explaining, “[p]rior to final payment Subcontractor shall submit” releases
from his subcontractors. Taking the whole of the contract together to give effect to all
provisions, § 28-3-202, MCA, Hardy is correct that the provision requiring subcontractor
releases is a condition precedent that must be fulfilled before “a party to an obligation can
require another party to perform any act under it,” § 28-1-406, MCA—here, the contractual
obligation of Hardy to make final payment to Kratzer. “[E]ach clause helping to interpret
the other,” § 28-3-202, MCA, these provisions are not, as Kratzer argues, in conflict or
otherwise ambiguous such that courts are required to designate one as dispositive over the
other. Indeed, Kratzer’s interpretation would lead to an absurdity: a party could negate the
condition precedent by simply waiting to submit subcontractor releases until the 30-day
period had expired. See Rubin, ¶ 43 (We must “reject a contract interpretation that would
lead to absurdities.”). Consequently, Hardy would become obligated to perform—to make
11 final payment—upon satisfaction of the condition precedent. However, Kratzer never
fulfilled the condition precedent.
¶20 Alternatively, Kratzer argues, and the District Court concluded, that Hardy waived
the Subcontract’s condition precedent for final payment by way of Hardy’s December 2021
communication offering to make payment to Kratzer upon Kratzer’s signing of a release,
instead of releases signed by Kratzer’s subcontractors, because Hardy was then pursuing a
contract modification, or novation. Kratzer is correct on the last point—Hardy was indeed
offering to resolve the dispute in a manner other than provided in the Subcontract by
accepting Kratzer’s signed release instead of requiring releases signed by Kratzer’s
subcontractors. However, this proposed novation never occurred; the parties did not come
to an agreement “to extinguish the old obligation” and replace it with a new obligation.
Section 28-1-1502, MCA. A novation requires the intention of the parties, which “is never
to be presumed.” Waite, 249 Mont. at 151, 813 P.2d at 989. Neither did Hardy waive the
existing condition precedent—the “old obligation”—merely because it offered a
modification. Waiver requires conduct “deliberately inconsistent” with an existing right
(by Hardy) that ultimately results in “prejudice to the party asserting the waiver” (Kratzer)
“if the other is allowed to reverse course” (Hardy) and again assert the right. Peeler, ¶ 22.
Hardy did not engage in conduct inconsistent with an existing right; it merely offered to do
so if Kratzer would agree. Further, Kratzer was not prejudiced by Hardy’s offer to modify
the contract; Hardy’s offer was advantageously convenient to Kratzer, and Hardy’s
subsequent two settlement offers were increasingly beneficial to Kratzer’s position. Under
Kratzer’s argument, a mere offer to settle a dispute under terms departing from a written
12 contract could constitute a waiver of existing rights, a result that could severely chill
possible settlement discussions. Kratzer’s choice to reject these modification offers kept
he and Hardy in their original positions under the Subcontract, with Kratzer’s potential
claims and Hardy’s potential defenses intact. In the end, it is undisputed that Kratzer
neither satisfied the Subcontract’s condition precedent for final payment nor accepted
Hardy’s offers of modification.
¶21 We conclude the District Court erred by entering summary judgment in favor of
Kratzer. It was Hardy who was entitled to judgment as a matter of law. We thus reverse
the summary judgment order in favor of Kratzer and remand for the District Court to enter
judgment in favor of Hardy, which will include, as discussed below, Hardy’s obligation to
pay Kratzer what is owed to him under the Subcontract. Because we reverse summary
judgment on this basis, we need not reach Hardy’s further arguments presented related to
Kratzer’s other potential breaches of contract.2
¶22 Regarding interest, because we have concluded that Kratzer’s conduct breached the
Subcontract by failing to comply with the payment provision, final payment did not
become due on January 5, 2022, and Hardy lawfully withheld it. Thus, Kratzer is not
entitled to an award of interest.
2 Hardy also argued that it was entitled to withhold payment or to require Kratzer sign a release and waiver due to other breaches of the Subcontract, including that Kratzer had performed defective work; Kratzer failed to submit the final pay application in a satisfactory form; Kratzer stated an intention to sue Hardy; and Kratzer’s conduct allowed it to withhold payment under the Prompt Payment Act. 13 ¶23 Likewise, regarding attorney fees, Kratzer is not the prevailing party in the
litigation. Section 31 of the Subcontract contains the following provision regarding fees:
If Contractor or Subcontractor files suit against the other, which suit is in any way connected with this Subcontract, the prevailing party shall be entitled to recover a reasonable sum for attorney fees from the other party. In addition, in the event Contractor is required to defend any action arising out of relating to Subcontractor’s obligations hereunder, Subcontractor agrees to pay Contractor’s reasonable costs and attorney fees, including costs and fees on any appeal.
Because Kratzer failed to satisfy the condition precedent to final payment, Hardy was
entitled to withhold the payment. Hardy thus prevailed on the main issue in controversy—
who had breached the Subcontract. While Hardy remains obligated to pay Kratzer the
amount owed to him under the Subcontract, the central issue in controversy was resolved
in Hardy’s favor. Consequently, we reverse the District Court’s award of attorney fees to
Kratzer. As the prevailing party, Hardy may seek an award of reasonable fees upon
remand.
¶24 2. Whether the District Court erred in establishing the amount owed by Hardy under the Subcontract.
¶25 Hardy argues the District Court erred by “utilizing offers of compromise to establish
liability in contravention of Rule 408, Mont.R.Evid.” However, the District Court
determined that the undisputed evidence demonstrated that Hardy owed $81,153 for
Kratzer’s work under the Subcontract, an amount that Hardy does not ultimately contest,
and therefore, we conclude that this amount was correctly calculated and that it is
unnecessary to further analyze this issue.
14 CONCLUSION
¶26 We reverse the District Court’s Order granting summary judgment to Kratzer,
including the awards for interest and attorney fees, and remand for entry of judgment in
favor of Hardy. Under such judgment, Hardy must pay Kratzer $81,153 for services
rendered under the Subcontract, less reasonable attorney fees and costs incurred by Hardy
as determined by the District Court upon remand.
¶27 Affirmed in part, reversed in part, and remanded for further proceedings.
/S/ JIM RICE
We Concur:
/S/ CORY J. SWANSON /S/ JAMES JEREMIAH SHEA /S/ BETH BAKER /S/ INGRID GUSTAFSON