                                 No. 81-97
                 IN THE SUPREME COURT OF THE STATE OF MONTANA
                                    1981


LEN ANDERSON, d/b/a LEN ANDERSON
CONSTRUCTION COMPANY,
                                 Plaintiff and Respondent,


NORMAN D. HOBBS, individually and NORMAN
D. HOBBS, d/b/a C. D. VENTURES,
                                 Defendant and Appellant.


Appeal from:          District Court of the Fifth Judicial District,
                      In and for the County of Beaverhead.
                      Honorable Frank Blair, Judge presiding.
Counsel of Record:
     For Appellant:
         Harrison, Loendorf and Poston, Helena, Montana
     For Respondent:
          Drysdale, McLean, Screnar        &   Cok, Bozeman, Montana


                                   Submitted on briefs: August 27, 1981


Filed: gkc. -   'T   [h!8;i




                                       Clerk
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
        This appeal arises from a contract for construction
on appellant's nursing home in Dillon, Montana.                 The parties
entered into the written agreement in January 1977, and the
work was completed sometime in the late summer of 1977.
Respondent filed a mechanics' lien against appellant's
property on October 19, 1977.          After trial without a jury,
the District Court of the Fifth Judicial District upheld the
lien and issued a judgment for $15,687.92 plus interest and
attorney fees.      This appeal followed.
        In December       1976, at the request of appellant,
respondent,       a general     contractor    doing   business      as   Len
Anderson Construction Co., a sole proprietorship, began work
on Park View Acres in Dillon, Montana, a nursing home owned
by   appellant, Norman D. Hobbs, doing business as C. D.
Ventures.
       In January 1977 the parties entered into a written
contract    whereby     respondent would       renovate    the    existing
fifty-four-bed facility of Park View Acres and add a fifty-
four-bed wing to the building.         The contract provided appel-
lant would pay respondent all costs plus an eight percent
contractor's fee.         Costs    included all costs necessarily
incurred in the proper performance of work paid by the con-
tractor; all wages paid for labor in the direct employ of
the contractor; all salaries of contractor's employees; a
portion of reasonable transportation, traveling and hotel
expenses    of    the   contractor, its officers          and    employees
incurred in the discharge of their duties; the cost of all
materials,       supplies and     equipment    incorporated       into   the
work; all payments made by the contractor to subcontractors
for work performed      according to      subcontracts under          this
agreement; and costs, including transportation and main-
tenance, of all materials, supplies, equipment, temporary
facilities and hand tools not owned by the workmen, which
are consumed in the performance of the work, and the costs
less salvage value on such items used but not consumed which
remained property of the contractor.
         Respondent concluded construction on the project in
the summer of 1977.     On October 19, 1977, respondent filed a
lien in the amount of $31,218.27.         On the lien application
respondent    stated   his    final day   of   performance       on   the
project was July 21, 1977.        At trial respondent testified
his last full-time work on the project was in the middle of
August   1977.    Respondent also introduced a "punch list"
prepared by appellant's employees and dated September 23,
1977.    Respondent argued the "punch list" established the
last day     respondent spent any      time    on   the     job was    in
September.    The costs claimed by respondent were supported
almost exclusively at trial by cancelled checks.
         The District Court found the lien was filed within
the ninety-day period        required by Montana         statute.     The
court also found respondent's lien valid and enforceable and
made the following determination of the amount owing:
    Costs for Anderson's
         out-of-pocket expenses.       . . . . .    .$150,362.72
    Defendant's payments
         to date for expenses.      .......              139,633.00
                                                     $    10,729.72
    Due Plaintiff for costs.      .......           .$    10,729.72
    Contractor's fee as a portion
         of 8% of contract and
         total costs on contract .        ....      .$366,977.56
    Contractor's fee equals 8%
         of $366,977.56, for a
         total of.     .. .
                         . .      ..
                                  .       .....           29,358.28
    Defendant's payment to date
         for contractor's fee. . .     . . . . .     12,600.00
    Due Plaintiff for contractor's
         fee     ...............                . $ 16,758.28

    Total due to Plaintiff by
         Defendant for costs     ........            10,729.72
    Total due to Plaintiff by
         Defendant for fees. .     . . . . . . .     16,758.20
    TOTAL.    . . . . . . . . . . . . . . . .   .$   27,487.92
    LESS THE FOLLOWING OFFSETS:
         Liquidated damages. . . . .     . . . .      8,000.00
         Lumber from personal stock.      . . . . 3,800.00
    TOTALOFFSETS.      .     .    .     .     . .$11,800.00
    TOTAL DUE TO     PLAINTIFF . . . . . . . . . $ 15,687.92
         Four issues are before this Court:
         1.    Was   the lien filed by    respondent within         the
statutory ninety-day period?
         2.   Are there gross and substantial exaggerations in
claims made which constitute fraud and void the filed lien?
         3.   Did the District Court err in failing to make
certain deductions to the amount of the lien?
         4.   Did the District Court err in determining in the
memorandum supporting its findings of fact and conclusions
of law that Exhibit K was inadmissible as hearsay?
         To perfect a mechanics' lien it must be filed within
ninety days after material or machinery is furnished or work
or labor performed.       Section 7-3-511(1), MCA.         Appellant
argues   there   is no    credible evidence on       the   record   to
support the District Court's finding that the lien was filed
within the statutory period.       Respondent filed the lien on
October 19, 1977, and on the lien stated the last work had
been done on July 21, 1977.      Appellant claims that the last
work was performed by respondent on July 15, 1977, which was
when the nursing home opened. At trial, respondent testified
the date listed on the lien was incorrect and that, in fact,
h i s l a s t f u l l t i m e o n t h e j o b was i n t h e m i d d l e o f A u g u s t

and t h a t he r e t u r n e d i n S e p t e m b e r t o c o m p l e t e t h e p r o j e c t .

Respondent a l s o s u b m i t t e d i n t o e v i d e n c e a "punch l i s t " p r e -

p a r e d by a p p e l l a n t ' s employee c o n t a i n i n g t h e d a t e S e p t e m b e r

23.

            The          District      Court     found     the     lien      had        been       filed

w i t h i n t h e n i n e t y - d a y p e r i o d and s p e c i f i e d r e s p o n d e n t ' s work

was c o m p l e t e d on A u g u s t 1 9 , 1 9 7 7 .

            The s t a n d a r d of        t h i s C o u r t on r e v i e w i s w h e t h e r t h e

D i s t r i c t C o u r t ' s f i n d i n g s and c o n c l u s i o n s a r e s u p p o r t e d by

s u b s t a n t i a l c r e d i b l e evidence.         T o e c k e s v . Baker ( 1 9 8 0 ) ,          -
Mont   .             ,    6 1 1 P.2d    609,    37 S t . R e p .   948.          If    substantial

evidence e x i s t s ,           t h i s Court w i l l n o t o v e r t u r n t h e D i s t r i c t

C o u r t . Schuman v . S t u d y Comm'n o f Y e l l o w s t o n e County ( 1 9 7 8 ) ,

176 Mont. 3 1 3 , 578 P . 2 d 291.

            It       is     apparent       from     the     record         and        the    District

C o u r t ' s f i n d i n g s t h a t t h e c o u r t gave c o n s i d e r a b l e weight t o

r e s p o n d e n t ' s t e s t i m o n y a t t r i a l t h a t h i s l a s t f u l l - t i m e work

on t h e p r o j e c t was             i n mid-August       1977.          In its supporting

memorandum, t h e D i s t r i c t C o u r t c h o s e A u g u s t 1 9 , 1 9 7 7 , a s t h e

final date.                The r e c o r d makes no m e n t i o n o f             that specific

d a t e i n August.              T h e r e f o r e , t h e f i n d i n g of August 19 c a n n o t

be a f f i r n e d .       T h i s C o u r t w i l l , however, g i v e c r e d e n c e t o t h e

weight t h e D i s t r i c t Court obviously gave r e s p o n d e n t ' s t e s t i -

mony.

            "The c r e d i b i l i t y and w e i g h t g i v e n t h e w i t n e s s e s           ...
is n o t f o r t h i s Court t o determine.                    T h i s is a p r i m a r y func-

tion       of    a       trial    judge    sitting        without      a    jury;           it    is   of

special          consequence            where     the     evidence         is     conflicting."

Hellickson           v.     B a r r e t t M o b i l e Home T r a n s p o r t ,        Inc.       (1973),
161 Mont. 455, 459, 507 P.2d 523, 525.           Where the evidence
indicates reasonable grounds for different conclusions, the
findings of the District Court will not be disturbed. Morgen
&   Oswood Const. Co. v. Big Sky of Mont. (1976), 171 Mont.
268, 274, 557     P.2d 1017, 1021; Morrison v. City of Butte
(1967), 150 Mont. 106, 112, 431 P.2d 79, 83.
          If respondent's last work on the project occurred any
time in August or September, the filing of the lien was
within the statutory ninety-day period.           An exact date in
August or September, however, is necessary for an accurate
accounting of the $100-a-day offset allowed for late comple-
tion of the job.        We therefore remand this matter for a
hearing to establish the exact date in August or September
on which respondent completed his full-time work on the job.
          The next issue before us is appellant's contention
that respondent's claim contained such gross and substantial
exaggerations as to constitute         fraud    and   invalidate the
lien.
          Fraud must be plead affirmatively to be relied on as
a defense.       Rule   8(c),   M.R.Civ.P.;    Ekestrand   v.   Wunder
(1933), 94 Mont. 57, 20 P.2d 622.             In the case before us
fraud was not plead in either the original or the amended
answer.     Therefore, it cannot now be argued as a defense to
the lien.
         Appellant also claims the District Court erred             in
failing to make     reductions in the lien amount for three
items.
          The first item appellant claims was erroneously
allowed by the District Court is $2,558.60 of the $7,000
claimed paid     to Simkins-Hallin.       Respondent    submitted a
c a n c e l l e d check f o r $7,000 i n s u p p o r t of t h e S i m k i n s - H a l l i n

claim.         However, t h e s t a t e m e n t on S i m k i n s - H a l l i n I n v o i c e No.

6988 i n d i c a t e s t h a t o f             t h e $7,000,           $4,441.40        was a p p r o p r i -

a t e d t o respondent's job i n D i l l o n .                         W therefore find there
                                                                        e

is n o t        substantial            evidence            to    support       the      entire      $7,000

claim         and     that         the     lien       amount           should        be     reduced       by

$2,558.60.

              To    evaluate           the      second          item     appellant          claims      was

erroneously            included           by    the    D i s t r i c t Court,         we m u s t f i r s t

consider the evidentiary issue before us.                                        Appellant argues

t h e r e i s a d i s c r e p a n c y b e t w e e n t h e amount r e s p o n d e n t c l a i m e d

was p a i d t o M           &   M C o n c r e t e a n d t h e amount a c t u a l l y p a i d .
              I n s u p p o r t of t h a t argument a t t r i a l , a p p e l l a n t p r e -

sented        for     admission           i n t o evidence a t o t a l                account       and     a

copy of         invoices of              t h e D i l l o n j o b w i t h Anderson C o n s t r u c -

t i o n from M         &    M Concrete.              The document was p r e p a r e d by t h e

bookkeeper of M & M Co n c r e t e a t t h e d i r e c t i o n of t h e g e n e r a l

manager         and        at   the      request       of        appellant's         counsel.           The

a c c o u n t i n d i c a t e d a d i s c r e p a n c y b e t w e e n t h e amount r e c e i v e d

by M      &     M C o n c r e t e on           the    job        and    the    amount         respondent

c l a i m e d had been p a i d .

              R e s p o n d e n t o b j e c t e d on t h e b a s i s t h e o f f e r e d e v i d e n c e

was     hearsay         and       lacking        proper          foundation.              The D i s t r i c t

C o u r t o v e r r u l e d t h e o b j e c t i o n and a d m i t t e d t h e e v i d e n c e a s

d e f e n d a n t ' s E x h i b i t K.

              At    t h e conclusion of                the       trial,       t h e D i s t r i c t Court

issued         findings           of     fact        and        conclusions        of      law    with      a

s u p p o r t i n g memorandum.                The memorandum s t a t e d E x h i b i t K had

b e e n a d m i t t e d s u b j e c t t o r u l i n g a s t o i t s a d m i s s i b i l i t y on

t h e f i n a l s u b m i s s i o n o f t h e c a s e and t h a t on f u r t h e r r e v i e w ,
the court found it inadmissible as hearsay.
          Appellant argues the District Court's af ter-the-fact
ruling on the admissibility of Exhibit K was prejudicial
because it precluded him from calling other witnesses or
otherwise presenting proof.
          The transcript shows the court did not specifically
reserve judgment regarding Exhibit K.     The court's statement
was:      "Well, the objection is overruled and it will        be
admitted. "
       The court's later determination of Exhibit K as inad-
missible was, however, correct. The document was a statement
other than one made by the declarant while testifying at
trial and was offered to prove the truth of the matter as-
serted.    As such, it was hearsay.   Rule 801(c), M0nt.R.Evi.d.
Since the account statement was made, not in the ordinary
course of business of M    &   M Concrete but at the request of
appellant's counsel, it was not excepted from the hearsay
rule and was inadmissible. Rule 803(6), Mont.R.Evid.
       While the District Court's final ruling on Exhibit K
was correct, the manner in which it was reached was proce-
durally irregular and resulted in substantial prejudice to
appellant.     Had he been aware of the court's determination
or its reservation of judgment during the trial, appellant
could have presented and made available for cross-examina-
tion the witnesses who prepared the M     &   M Concrete account.
To allow the District Court's exclusion of Exhibit K to
stand in the face of such prejudice would be inherently
unjust. We therefore remand this matter for reconsideration.
       The final item appellant claims was erroneously
included in the lien is that amount claimed for respondent's
personal wages as a carpenter.            Appellant first argues that
because there was no mention of the possibility of a per-
sonal    claim   in   this    agreement    between   the   parties   and
respondent made no submission of such a charge to appellant
prior to this suit, that respondent is not entitled to the
claim.
          In support of this argument, appellant cites Article
10, Paragraph 10.1.6, of the parties1 contract which states
as costs not to be reimbursed:             "The cost of any item not
specifically and expressly included in the items described
in Article 9."
         Article 9, Paragraph 9.1.1, however, specifies that
costs include "[wlages paid for labor in the direct employ
of the contractor.     . ."    Since wages for labor are expressly
included in the contract and there is no specific limitation
on who performs the labor, the contract did not preclude
Anderson from working on the project.
         Appellant    also argues the hourly compensation the
District Court allowed for Anderson's work was excessive and
unsupported by credible evidence.
         The parties1 contract in Article 9 , Paragraph 9.1,
allows for reimbursement of costs necessarily incurred in
the proper performance of the work.              It further provides
that "[sluch costs shall be at rates not higher than the
standard paid in the locality of the work except with prior
consent    . . ."
         At trial Anderson, a carpenter with twenty years1
exerience, testified he charged $18 an hour for his labor.
Of that amount, $14 was for his work as a skilled carpenter
and $4 for use of his tools.          He testified the $14 amount
was b a s e d      on c o s t s     in the       area      for    h i s work.         No      other

t e s t i m o n y was o f f e r e d by e i t h e r p a r t y r e g a r d i n g t h e v a l u e o f
t h e work o f a c a r p e n t e r o f A n d e r s o n ' s s k i l l .

            Based      on A n d e r s o n ' s   unrebutted         testimony,          the Dis-
t r i c t C o u r t f o u n d t h a t t h e $14-an-hour            wage p o r t i o n o f t h e

c h a r g e was r e a s o n a b l e .     W agree.
                                           e
            The $4-an-hour              charge f o r t h e use of Anderson's t o o l s
i s a n o t h e r m a t t e r , however.           While Anderson t e s t i f i e d a s t o
w h a t t h e $4 was f o r , h e d i d n o t t e s t i f y o r p r o v i d e e v i d e n c e

of    any     kind      i n d i c a t i n g what     the    f i g u r e was     based      on    or
w h e t h e r i t was r e a s o n a b l e .     W i t h o u t any s u p p o r t i n g e v i d e n c e
we    are        unable     to     uphold       the     District        Court's        judgment
a l l o w i n g $ 4 a n hour f o r t h e u s e o f t o o l s .
            We     remand      this       matter      for     a   reaccounting           of     the
costs.       A t t h e same t i m e , w e s u g g e s t a r e v i e w o f           the calcu-

l a t i o n s i n t h e o r i g i n a l f i n d i n g s o f f a c t and c o n c l u s i o n s o f
l a w , s i n c e t h e r e a p p e a r s t o be a n a r i t h m e t i c e r r o r         in the
computation of Anderson's out-of-pocket                            expenses.




      Justices
Mr. Justice John C. Sheehy concurring:


     I concur in the foregoing, but I also think the lien

filed in this case was timely under the facts.




                                         Justice
