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                                                               No. 00-398

                          IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                               2001 MT 27



                                   IDAHO ASPHALT SUPPLY, an Idaho corporation;

                                    MONTANA REFINING COMPANY, a Montana

                                 corporation; and RIVERSIDE CONTRACTING, INC.,

                                                       a Montana corporation,

                                                      Plaintiffs and Appellants,

                                                                      v.

                                   THE STATE OF MONTANA, DEPARTMENT OF

                               TRANSPORTATION, an agency of the State of Montana,

                                                    Defendant and Respondent.

                             APPEAL FROM: District Court of the First Judicial District,

                                          In and for the County of Lewis and Clark,

                                       Honorable Dorothy McCarter, Judge Presiding

                                                     COUNSEL OF RECORD:

                                                             For Appellant:

                       Michael J. Uda and Matthew J. Quinn, Doney, Crowley, Bloomquist

                                                     and Uda, Helena, Montana


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                                                             For Respondent:

                        Stephen F. Harrison and Lyle Manley, Department of Transportation,

                                                            Helena, Montana

                                           Submitted on Briefs: November 16, 2000
                                                Decided: February 15, 2001

                                                                    Filed:

                                    __________________________________________

                                                                     Clerk



Justice W. William Leaphart delivered the Opinion of the Court.

¶1 This is an appeal from the judgment of the First Judicial District Court awarding pre-
judgment interest and costs to respondents following our remand and notice of remittitur
in a prior appeal. We reverse the District Court's award of prejudgment interest and affirm
its award of costs.

                                                          BACKGROUND

¶2 This suit arises out of a contract dispute between the Montana Department of
Transportation (Department) and a number contractors employed by the Department on a
highway construction project (Contractors). The Department withheld certain payments as
a penalty, and the Contractors sued to recover these payments. Following a bench trial, the
District Court entered judgment in favor of the Contractors in the amount of $319,823.00
for the withheld payments, attorneys' fees, costs and pre- and postjudgment interest. The
Department tendered full payment under protest and appealed the District Court's
judgment.

¶3 This Court reversed and issued notice of remittitur to the District Court. Thereafter, the
District Court entered judgment ordering the Contractors to reimburse the $319,823.00
and pay costs in the amount of $6,771.03. In addition, the District Court ordered the
Contractors to pay interest on the $319,823.00, accruing from the date the Department

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tendered payment. The Contractors reimbursed the $319,823.00 and paid $51,546.27 in
postjudgment interest and costs. They refused, however, to pay any prejudgment interest
for the period between August 7, 1998, when they received the money from the
Department, and January 6, 2000, when the District Court entered its final judgment
ordering them to make reimbursement. The Contractors appealed, seeking review of the
District Court's award of costs and prejudgment interest and raising the following issues:

¶4 1. Did the District Court err when it ordered the Contractors to pay prejudgment
interest on money they received from the Department?

¶5 2. Did the District Court err when it awarded presettlement offer costs to the
Department?

                                                             DISCUSSION

¶6 Issue 1. Did the District Court err when it ordered the Contractors to pay prejudgment
interest on money they received from the Department?

¶7 The Contractors argue, as a matter of law, that the District Court may not award
prejudgment interest on reimbursement payments. The Department characterized the
reimbursement payment as "damages" and argued to the District Court and to this Court
on appeal, that it is entitled to interest under § 27-1-211, MCA. We disagree and conclude
that the District Court erred when it ordered the Contractors to pay prejudgment interest
on the reimbursement.

¶8 We review a District Court's interpretation of the law for correctness. Carbon County v.
Union Reserve Coal Co. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686. The Department
argues that it is entitled to interest payments under § 27-1-211, MCA. That section
provides:

        Every person who is entitled to recover damages . . . is entitled also to recover
        interest thereon . . . . [Emphasis added.]

The question, then, is whether court-ordered reimbursement payments are "damages" for
the purpose of this section. We have previously held that they are not. Heine v. Siebert
(1985), 217 Mont. 224, 228, 703 P.2d 865, 868.

¶9 In Heine, we held that § 27-1-211, MCA, does not authorize an award of prejudgment

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interest on a reimbursement payment:

        The . . . issue is whether [the purchaser] should have been awarded prejudgment
        interest on the accounts payable which he had paid after his default, pursuant to § 27-
        1-211, MCA. . . . The District Court held, and correctly so, that prejudgment
        interest under that statute applies only to an award of damages, and that the award
        in this case to [the purchaser] was one of reimbursement, not damages. [Emphasis
        added.]


Heine, 217 Mont. at 228, 703 P.2d at 868. Like Heine, this case deals with reimbursement, not
damages. When it ordered reimbursement, the District Court was not making an award of damages. It
was merely ordering repayment of funds that, by virtue of our reversal of the original action, the
Contractors were no longer entitled to retain. Section 27-1-211, MCA, because it applies only to
damages, does not grant authority for the District Court to order payment of prejudgment interest on
reimbursements. We conclude, therefore, that the District Court incorrectly determined that the
Department was entitled to prejudgment interest on the reimbursement payment.

¶10 Issue 2. Did the District Court err when it awarded presettlement offer costs to the
Department?

¶11 Following our remand and remittitur, the Department filed a memorandum claiming
costs of $6,771.03. The Contractors did not object to payment of the Department's
legitimate costs of appeal but contested the District Court's authority, under Rule 68, M.R.
Civ.P., to impose any of the pretrial costs specified in the Department's memorandum.
They also argued that costs of certain depositions were not recoverable because these
depositions were never used at trial. After briefing on the issue, the District Court awarded
costs to the Department in the full amount requested.

¶12 Generally, courts may, in their discretion, impose and apportion allowable costs
between the parties. Section 25-10-103, MCA. However, the issue in this case is not
whether the District Court abused its discretion in awarding costs, but whether the
presettlement offer and deposition costs it awarded were of the type allowed. This is a
question of law which we review for correctness. Carbon County, 271 Mont. at 469, 898
P.2d at 686.

¶13 A. Does Rule 68, M.R.Civ.P., prohibit the District Court from imposing presettlement
offer costs against the Contractors?


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¶14 The Department made a pretrial offer of settlement on May 8, 1997. The Contractors
rejected this offer and were later subject to a less favorable judgment. They argue that,
under these circumstances, Rule 68, M.R.Civ.P., limits allowable costs to those incurred
after the offer of settlement. The Department counters that Rule 68, M.R.Civ.P., mandates
imposition of postoffer costs but does not preclude imposition of other preoffer costs of
the type at issue in this case. We agree.

¶15 Rule 68, M.R.Civ.P., does not restrict the court's ability to impose preoffer costs. The
rule provides only that where a settlement offer has been made and rejected prior to trial,
and the subsequent judgment was not more favorable to the offeree, then the offeree must
pay postoffer costs:

        At any time more than 10 days before the trial begins, a party defending against a
        claim may serve upon the adverse party an offer of judgment to be taken against the
        defending party. . . . If the judgment finally obtained by the offeree is not more
        favorable than the offer, the offeree must pay the costs incurred after the making of
        the offer. [Emphasis added.]

Mandating award of postoffer costs is not the same as prohibiting the award of preoffer
costs. An award of preoffer costs is within the general discretion of the court under § 25-
10-103, MCA, and the Contractors have made no argument suggesting that the District
Court abused that discretion. We conclude, therefore, that the Contractors' Rule 68, M.R.
Civ.P., argument is without merit.

¶16 B. Did the District Court impose costs that were not allowable as a matter of law?

¶17 The Department's memorandum of costs includes charges for depositions, copies of
videotapes, printing of the Department's appellate briefs and a transcript of the District
Court trial. The Contractors argue that the costs of certain depositions and exhibits are not
allowable, as a matter of law, because those items were not used at trial. They cite Fisher
v. State Farm Ins. Co. (1997), 281 Mont. 236, 239, 934 P.2d 163, 164, for the proposition
that unless an item is entered into evidence, used to impeach a witness, or somehow relied
upon by the court in making its decision, it is not a recoverable cost. The Department
argues that costs of the contested items are all allowable under § 25-10-201, MCA, and
points out that the contested items all satisfy the rule set out in Fisher. After examining the
record, we agree.



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¶18 Section 25-10-201, MCA, provides that a party to whom costs are allowed is entitled
to include in his bill of costs his necessary disbursements for the following items:

        (1) the legal fees of witnesses, including mileage, or referees and other officers;

        (2) the expenses of taking depositions;

        ...

        (4) the legal fees paid for filing and recording papers and certified copies thereof
        used in the action or on the trial;

        ...

        (7) the reasonable expenses of making transcript for the supreme court;

        ...

        (9) such other reasonable and necessary expenses . . . .


Section 25-10-201, MCA. With regard to deposition expenses, this Court has limited
recovery to the cost of those depositions used as evidence or for impeachment during trial.
Fisher, 281 Mont. at 239, 934 P.2d at 164. This Court's examination of the record
indicates that all of the depositions listed in the Department's memorandum of costs were
either used for impeachment purposes or introduced into evidence at trial and are,
therefore, consistent with the special limitation of Fisher. All of the other items listed in
the Department's memorandum of costs are allowable under § 25-10-201, MCA.
Therefore, we conclude that the District Court correctly applied the law when it awarded
the Department its costs in the amount of $6,771.03.

¶19 We reverse the order of the District Court awarding the Department prejudgment
interest on the reimbursement payment of $319, 823.00, affirm the District Court's award
of costs to the Department in the amount of $6,771.03 and remand for proceedings
consistent with this opinion.

                                               /S/ W. WILLIAM LEAPHART


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                                                              We concur:

                                                     /S/ KARLA M. GRAY

                                                   /S/ JAMES C. NELSON

                                                        /S/ JIM REGNIER

                                               /S/ TERRY N. TRIEWEILER




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