Goodover v. Lindey's Inc.

NO. 92-118

IN THE SUPREME COURT OF THE STATE OF MONTANA

1992

PAT M. GOODOVER,

Plaintiff and Respondent,

-vs-

LINDEY'S INC., and the ESTATE

OF WILLIAM C. FORREST, deceased, DEC 10 2992

and the unknown heirs and unknown I 6:.

;

devisees of any Defendant above-

named who may be deceased; et al.,

Ld ._,.

OF

CLERK

?,;..;ti ri..ii-

~i.ii+lZ.t:Z COURX

STATE OF I>'ii)l<l&iU&

Defendants and Appellants.

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula,

The Honorable Jack L. Green, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Paul Neal Cooley, Skelton & Cooley, Missoula,

Montana

For Respondent:

John Larson, Attorney at Law, Missoula, Montana

Jerome T. Loendorf, Harrison, Loendorf & Poston,

Helena, Montana

Submitted on Briefs: September 24, 1992

Decided: December 10, 1992

Filed:

Clerk

Justice Karla M. Gray delivered the Opinion of the Court.

Appellant Lindey's, Inc. appeals from an order of the District

Court of the Fourth Judicial District, Missoula County, awarding

damages for loss of use of property, supplemental relief, costs and

attorney's fees. Lindey's also appeals from a subsequent order

setting the amount of attorney's fees and costs. We affirm in part

and reverse in part.

Appellant presents fourteen issues on appeal. We consolidate

these issues as follows:

1.) Did the District Court err in denying Lindeyls request

for a jury trial on the issue of damages?

2.) Did the District Court err in its award of damages to

enforce the 1987 determination of the boundary between Lots 1 and

2?

3.) Did the District Court err in ordering Lindey's to pay

for the transcription of a video-taped deposition?

4.) Did the District Court err in admitting hearsay evidence

of a reduction in the taxable value of Goodover's property?

5.) Can Lindey's raise issues that were raised or should have

been raised in an earlier appeal?

6. ) Did the District Court err in awarding costs to Goodover?

7.) Did the District Court err in awarding attorney Is fees to

Goodover?

The case before us is the third appeal stemming from a

protracted and bitter boundary dispute between two property owners

in Seeley Lake. The facts regarding the earlier stages of the

litigation are detailed in Goodover v. Lindey's, Inc. (1988), 232

Mont. 302, 757 P.2d 1290 [Goodover I] and Goodover v. Lindey's,

Inc. (1990), 246 Mont. 80, 802 P.2d 1258 [Goodover 111. Additional

facts will be set forth as appropriate in the discussion of the

issues. Briefly, respondent Pat M. Goodover (Goodover) owns Lot 2

of the Seeley Lake Shore Sites in Missoula County. Appellant

Lindey's, Inc., (Lindey's) owns adjoining Lot 1. In 1984, Goodover

filed an action for quiet title and declaratory judgment to locate

the disputed northeast corner marker of the lots. After a bench

trial in 1987, the District Court issued findings of fact,

conclusions of law and judgment which established the boundary

line. The court also bifurcated the issue of damages for later

determination. This Court affirmed in Goodover I. Shortly before

the 1987 trial, Lindey's constructed a restroom facility and

installed two underground fuel storage tanks in the disputed area.

After we affirmed the boundary determination, it was clear that the

restroom and a fence encroached on Goodover's property; although

the storage tanks lay below the surface, the position of the air

vents indicated an additional encroachment.

After failed negotiations to remove the encroachments,

Goodover moved the court for an order requiring Lindey's to show

cause why it should not be compelled to remove the encroachment.

Following a hearing, the District Court ordered Lindey's to move

the restroom at least three feet from the boundary and to locate

the underground storage tanks. It also expressly reserved

jurisdiction over the issue of damages. Lindey's appealed the

District court's jurisdiction to fashion such supplemental relief.

The District Court established a $5,000 bond on appeal to satisfy

any damages resulting from Lindey's encroachments.

On December 18, 1990, this Court affirmed the District Court's

decision on supplemental relief in Goodover 11. After the parties

received that decision, Goodover promptly filed a motion for

forfeiture of the appeal bond.

In March of 1991, the District Court ordered Lindey's to

submit a work plan detailing the removal of the restroom and the

location of the underground storage tanks and set a July 20, 1991,

deadline for all work to be completed. Lindey's submittedareport

locating the tanks, finding them within three feet of the

established boundary. On July 24, 1991, Lindey's moved the

restroom, but left the concrete foundation encroaching on

Goodover's property.

After numerous continuances, the District Court held a hearing

on damages on August 2, 1991. On August 5, 1991, Goodover filed a

petition for removal of the tanks, asserting that although they did

not lie on Goodover's property, they violated local fire codes

requiring underground storage tanks to be set back three feet from

any boundary. On January 2, 1992, the District Court entered

findings of fact, conclusions of law and order on damages.

Finally, on February 25, 1992, the District Court ordered Lindey's

to pay Goodover $10,761.86 in attorney's fees and $524.45 in costs.

Lindey's appeals from both orders.

I.

Did the District Court err in denying Lindey's request for a

jury trial on the issue of damages?

Goodover initially filed an action for quiet title and

declaratory judgment to locate the boundary between the lots. In

his second amended complaint, Goodover added a prayer for damages

of $500. In answering the second amended complaint on July 30,

1985, Lindeyqsdid not request a jury trial. Instead, it requested

a jury trial in its response to Goodover's motion to forfeit the

appeal bond on January 25, 1991, nearly six years later. The

District Court denied Lindeyfsrequest for a jury trial.

Lindeyts argues that because Goodoverfs second amended

complaint did not pray for damages over $500 (as were eventually

awarded), it had no notice of the potential for larger damages.

Therefore, it argues that it was unaware of the need to request a

jury trial in its answer to the second amended complaint,

violation of its due process rights. We disagree.

Although Lindeytsclaims it had no notice of the potential for

greater damages, each count of the second amended complaint

contains a request for "such other and further relief as the court

may seem [sic] appropriate.lt Furthermore, ~indey's cites no

authority for its argument. Rule 3 8 ( b ) of the Montana Rules of

Civil Procedure clearly provides:

Any party may demand a trial by jury of any issue triable

by right by a jury by sewing upon the other parties a

demand therefor in writing at any time after the

commencement of the action and not later than 10 days

after the service of the last pleading directed to such

issue.

Lindeyts should have demanded a jury trial in its answer to the

second amended complaint. Failure to serve this demand constitutes

a waiver of trial by jury. Rule 38 (d), M.R.civ.P. Lindeytswaived

its right to a jury trial by failing to comply with the

requirements of Rule 38(b) .

Lindey's also argues that Goodover should have been required

to amend his complaint to request larger damages, thereby giving

Lindey's the opportunity to request a jury trial. This argument is

without merit, because even if Goodover had amended the complaint

to include a request for more money damages and coercive relief,

Lindey's previous waiver of a trial by jury would not have been

revoked. Rule 38(d), M.R.Civ.P., provides in pertinent part:

A waiver of trial by jury is not revoked by an amendment

of a pleading asserting only a claim or defense arising

out of the conduct, transaction, or occurrence set forth

or attempted to be set forth in the original pleading.

Each damage claim that Lindey's finds objectionable arose out of

the same occurrence in the second amended complaint, the disputed

boundary between Lots 1 and 2. The District Court did not err in

denying Lindey's untimely motion for a trial by jury.

11.

Did the District Court err in its award of damages to enforce

the 1987 determination of the boundary between Lots 1 and 2?

At the hearing on damages, Goodover called Ken Hayes, an area

realtor, to testify as an expert witness. Hayes testified that the

value of Goodover's lot was $100,000 and the rental value of the

lot during the rental season was $350 per week. He also testified

that the presence of the encroachments decreased the value of the

lot by 10 to 20%.

Goodover testified that the value of his property ranged from

$150,000 to $175,000. Goodover also testified that the County Tax

Appeals Board had reduced his appraised property value by $10,000

due to the ongoing litigation.

Lindey's real estate expert, Jeff Macon, testified that an

undeveloped campsite in the Seeley Lake area rented for $160 per

month, but acknowledged that a lot with amenities similar to

Goodover's would yield higher rentals. He also testified that the

encroachments would not have a substantial effect on sales price.

Clarence Rich, a Seeley Lake real estate agent, also testified for

Lindey's. He testified that the underground tanks would increase

the sales value of adjacent property. He admitted, however, that

his experience with such appreciation occurred fifteen years ago.

Michael Pat Goodover, Jr., Goodover's son, also testified as

an expert realtor. As a member of the Montana Association of

Realtors Risk Reduction Task Force, he concluded that the

underground storage tanks decreased the sales value of the adjacent

lot.

The District Court determined that the reasonable rental value

of Goodover's property was $350 per week and that the encroachments

caused a 10% reduction in the value of the lot. Therefore, the

court calculated that 10% of $350 yielded damages of $35 per week

for loss of use of property. The court awarded $35 per week from

August 1986 through August 1991, arriving at a total damage award

of $9,100 for loss of use of property, and ordered $2,540 of that

amount forfeited from the appeal bond. The court also awarded $500

in supplemental relief for the fire code violation and $350 per

week coercive damages for every week the encroachments remained on

the property after the July 20, 1991, deadline for removal.

7

Lindey's raises a profusion of related arguments concerning

the District Court's determination and computation of damages.

Specifically, Lindey's claims that the District Court erred in

awarding damages in excess of those in the complaint and

supplemental petition, that it admitted and relied on expert

testimony in error, and that it erroneously computed the damages.

We address these three claims individually.

First, Lindey's claims that the District Court erred in

awarding damages beyond those requested in the second amended

complaint and the petition for supplemental relief, thereby denying

it "fair notice" of Goodover's damages. This argument is without

merit. Goodover brought this action to quiet title and for

declaratory relief. The Uniform Declaratory Judgments Act provides

for supplemental relief to enforce a declaratory judgment. Section

27-8-313, MCA, reads:

Further relief based on a declaratory judgment or decree

may be granted whenever necessary or proper. The

application therefor shall be by petition to a court

having jurisdiction to grant the relief. If the

application be deemed sufficient, the court shall, on

reasonable notice, require any adverse party whose rights

have been adjudicated by a declaratory judgment or decree

to show cause why further relief should not be granted

forthwith.

In this case, Goodover filed a motion to show cause,

requesting the court to order Lindey's to remove the encroachments.

Lindey's concedes that this motion served as a supplemental

petition under § 27-8-313, MCA. The District Court issued the

order to show cause pursuant to the statute and held a hearing. In

a corrective order issued after the hearing, the District Court

expressly reserved continuing jurisdiction over the issue of

damages. As we said in Goodover 11, this statute enables the

district court to retain jurisdiction and grant further relief as

it deems necessary and DroDer to enforce the declaratory judgment.

246 Mont. at 82, 802 P.2d at 1260 (emphasis added). We held that

in fashioning the remedy, the court is not bound by relief

requested in the complaint but may order any relief needed to

effectuate the judgment. Id. In this case, the District Court

retained jurisdiction to grant relief necessary to enforce its

judgment under the Uniform Declaratory Judgments Act and its

earlier orders. The District Court correctly determined that

monetary damages and coercive relief were necessary to provide

complete relief to Goodover.

Furthermore, Rule 54(c), M.R.Civ.P., states that every final

judgment shall grant the relief to which the party in whose favor

it is rendered is entitled, even if the party has not demanded such

relief in the party's pleadings. Goodover's failure to request

specific money damages or coercive damages does not hinder the

District Court's ability to order any relief necessary to

effectuate its judgment. We hold that the District Court did not

err in awarding damages in excess of those requested in the

complaint and petition for supplemental relief.

Second, Lindey's objects to the expert testimony relied on by

the District Court in computing damages. Lindey's claims that

Goodover's expert, Hayes, was not qualified as an expert and should

not have been allowed to testify about property values. The trial

court's determination that a witness is qualified to testify as an

expert will not be disturbed absent a showing of abuse. Price

9

Bldg. Service Inc. v. Christensen (1985), 215 Mont. 372, 375, 697

P.2d 1344, 1346. Hayes was a licensed realtor with over fifteen

years' experience in selling and renting property in Missoula

County. The District Court did not abuse its discretion in

allowing Hayes to testify as an expert.

Lindey's further argues that the trial court erred in choosing

Hayes' valuation over those of its experts, Macon and Rich. The

trial court is free to select and reject appraisal values, so long

as there is substantial credible evidence in support of the value

selected. In re Marriage of Williams (1986), 220 Mont. 232, 242,

714 P.2d 548, 554 (citations omitted). In this case, Hayes'

testimony provided substantial credible evidence to support the

court's valuations. We hold that the District Court did not err in

adopting the values testified to by Hayes.

Third, Lindey's challenges the amount of damages awarded for

loss of use of property, coercive relief, and the fire code

violation. Lindeyls begins by arguing that the District Court

erred in computing the damages for loss of use of property. The

detriment caused by the wrongful occupation of real property is

deemed to be the value of the use of the property for the time of

such occupation. Section 27-1-318, MCA. Reasonable rental value

is a proper estimation of the value of use of property. Smithers

v. Hagerman (lggo), 244 Mont. 182, 191, 797 P.2d 177, 183;

Pritchard Petroleum Co. v. Farmers Co-op (1947), 121 Mont. 1, 7,

190 P.2d 55, 58. Lindey's argues that the District Court should

have taken into account the appreciation of the property during

litigation when determining reasonable rental value. Lindey's

10

cites no authority for its position and, in any event, presented no

evidence on the effect of appreciation on rental value. The

District Court did not err in its computation of reasonable rental

value of the property encroached upon by Lindey's.

Lindey's additionally argues that the District Court should

not have awarded damages for loss of use for the winter months

because Goodover did not use the property in the winter.

Therefore, Lindeytscontends, the court could not have attributed

any damages to the appeal bond prior to the second appeal because

that period of time fell during the winter. Based on Hayes'

testimony, Lindey's asserts that Goodover used his property for

only fourteen weeks in the summer of 1990. The transcript reads:

Q Now what is the rental season up in Seeley Lake,

generally speaking?

A From May through September.

Q Okay. And approximately how many weeks per summer if

you -

A Probably about 14 weeks would be prime time.

Hayes' testimony does not support Lindey's factual contention.

Rather, it refers to rental property in Seeley Lake in general, not

Goodover's property in 1990; it also refers to "prime time1#rental

season only.

Moreover, the encroachments continued year-round. Section 27-

1-318, MCA, authorizes damages for the wrongful occupation of

property for the time of the wronqful occupation. The District

Court did not err in applying the reasonable rental figure to each

week the encroachments existed.

Lindey's argues that the amount of coercive damages the

District Court awarded to Goodover was in error. As discussed in

Goodover 11, coercive damages are a proper tool to enforce a

declaratory judgment. 246 Mont. at 82, 802 P.2d at 1260. Here,

the coercive damages managed to accomplish what five years of

litigation could not--remove the encroachments. The District Court

did not err in awarding $350 per week for every week the

encroachments remained on Goodover's property.

F'inally, Lindey's claims that by awarding $500 in supplemental

relief for the fire code violation and $35 per week for loss of use

of property, the District Court put Lindey s in "double jeopardy.

We disagree. We note initially that double jeopardy is a term of

art not applicable to a civil proceeding. We assume Lindey's is

arguing that the court awarded double damages for the same

violation. That is not the case here.

The District Court computed the award of $35 per week by

figuring the loss of use of property caused by the encroachments

over the five year period. The court also awarded $500 in

supplemental relief for the fire code violation in lieu of removing

the underground storage tanks. The underground tanks posed

possible environmental and fire hazards that affected the property

value separately and distinctly; Hayes, Rich and Goodover, Jr. all

testified as to the impact of the storage tanks on the value of the

real estate. The court is not bound by the opinion of a particular

party or expert but remains free to adopt any reasonable valuation

that is supported by the record. In re Marriage of Dzivi (1991),

247 Mont. 165, 167, 805 P.2d 567, 568. The District Court did not

err in awarding a separate $500 damage award for the underground

12

storage tanks.

In sum, the District Court made extensive findings of fact

regarding damages and how they were computed. These findings are

not clearly erroneous under the three-part Itclearlyerroneous'' test

we enunciated in Interstate Prod. Credit Ass'n v. DeSaye (1991),

250 Mont. 320, 323, 820 P.2d 1285, 1287. First, the testimony of

Hayes, Goodover, Rich and Goodover, Jr. provides substantial

credible evidence supporting the District Court's valuations. In

addition, the District Court did not misapprehend the effect of the

evidence. Finally, we are not left with a definite and firm

conviction that a mistake has been made. We hold that the District

Court did not err in its determination and award of damages.

111.

Did the District Court err in ordering Lindey's to pay for the

transcription of a video-taped deposition?

Gary Johnson testified for Lindey's at a hearing on March 14,

1991. He was unable to complete his testimony that day and the

parties agreed to a perpetuation deposition pursuant to Rule 30,

M.R.Civ.P., to allow Johnson to complete his testimony. The

deposition was taken a few days later. Goodover subsequently moved

the court to order Lindeyls to provide a written transcript of the

video-taped deposition; the District Court granted the motion on

April 8, 1991. Lindey's filed its objection to Goodover's motion

on April 10, 1991. Lindey's now argues that the District Court

violated Rule 2 of the Uniform District Court Rules in issuing the

order.

Rule 30(h)(l)(c), M.R.Civ.P., specifically allows the court,

13

upon motion for good cause, to order the party who took the video

deposition to furnish a transcript of that deposition at that

party's expense, The expert testified on Lindey's behalf, and

s

Lindeyl took the deposition for the convenience of its expert.

Also, Lindey's original objection to Goodoverts motion was not

based on an asserted violation of U.D.C.R. 2. This Court will not

address on appeal an issue not presented to the district court.

Wyman v, DuBray Land Realty (2988), 231 Mont. 294, 299, 752 P.2d

196, 200. The ~istrictCourt did not err in ordering Lindey's to

pay for the transcription of Gary Johnsongsvideo-taped deposition.

Did the District Court err in admitting hearsay evidence of a

reduction in the taxable value of Goodover's property?

Lindeyts claims that the District Court erred by allowing

Goodover to testify to inadmissible hearsay. When asked whether he

had approached the local County Tax Appeal Board about the value of

his lot, Goodover responded "[tlhe Tax Appeal Board ruled during

the legislation [sic], the legal involvement, they would reduce my

property taxation value by $10,000.00. Lindey s objected that the

answer required hearsay, and the District Court overruled the

objection.

Under Rule 801 of the Montana Rules of Evidence, hearsay is

defined as a statement other than one made by the declarant while

testifying at trial or hearing, offered in evidence to prove the

truth of the matter asserted. Rule 602, M.R.Evid., states;

A witness may not testify as to a matter unless evidence

is introduced sufficient to support a finding that the

witness has personal knowledge of the matter. Evidence

to prove personal knowledge may, but need not, consist of

the witness' own testimony.

The term "hearsay," as used in the law of evidence, signifies all

evidence which is not founded upon the personal knowledge of the

witness from whom it is elicited. State v. Sharbono (1977), 175

Mont. 373, 387, 563 P.2d 61, 69, quoting State v. Crean (1911), 43

Mont. 47, 59, 114 P. 603, 607. Goodover's testimony established

his personal knowledge of the reduction. He personally participa-

ted in the tax reduction proceeding and has first-hand knowledge of

the reduction in the taxable value of his property. Therefore, his

testimony does not constitute hearsay. We hold that the District

Court did not admit hearsay evidence of the reduction in the

taxable value of Goodover's property.

Can Lindeytsraise issues that were raised or should have been

raised in an earlier appeal?

Lindey's claims the District Court's Conclusion of Law XI11 is

not supported by the record. The conclusion reads:

Current Fire Marshall regulations in effect since 1985,

require a set back of at least three feet from property

boundaries for underground fuel storage tanks. (Source,

Uniform Fire Code 79.601(a), Testimony of Sisk.)

This Conclusion of Law is a verbatim repetition of Conclusion of

Law VIII in the District Court's February 23, 1990 order appealed

to this Court in Goodover 11. Having failed to raise the issue in

Goodover 11, Lindeyrs cannot now raise the sufficiency of the

evidence to support this conclusion. Downs v. Smyk (1982), 200

Mont. 334, 343, 651 P.2d 1238, 1242.

Similarly, Lindey9s attempts to resurrect the argument that

the equitable doctrine of laches should defeat Goodover's claim of

encroachment, As Goodover points out, a careful look at Lindeyls

appellate brief in Goodover If reveals t h e same argument. We

stated in Goodover 11:

Lindeyfs raises a myriad of issues in an attempt to

relitigate the boundary-line question. W e refuse to

examine these arguments, however, because the boundary-

line issue was reviewed and finally decided during the

first appeal to this Court. The District Court s

determination of the boundary line is thus res judicata

and cannot be reconsidered on this appeal.

246 Mont. at 82, 802 P.2d at 1260. ~indey's again argues that

Goodovertsalleged delay in acquiring a survey should bar the claim

of encroachment. This argument has no more merit now than it did

when Lindeyts raised it in Goodover 11. All issues relating to the

boundary and the encroachments are res judicata.

Did the District Court err in awarding costs to Goodover?

Lindey9s makes several objections to the bill of costs

submitted by Goodover and approved by the District Court. Lindeyts

claims the District Court erred by awarding $570 to Goodover for

expert witness fees. W e agree.

Legal fees of witnesses, plus mileage, are allowable statutory

costs under § 25-10-201, MCA. By statute, an expert witness is a

witness and receives the same compensation as a witness, section

26-2-505, MCA. The statutory witness fee in a civil case is

limited to $10 per day. Section 26-2-501, MCA. A party may pay an

expert witness any fee he or she chooses, but a district court

cannot award costs in excess of $10 per day per witness. Witty v.

Pluid (l986), 220 Mont. 272, 274, 714 P.2d 169, 171. From our

review of the record of the hearing, Hayes, Gregory Martinsen and

Goodover, Jr., each testified one day for Goodover; thus, the total

witness fee awardable as costs for those witnesses is $30. We hold

that the District Court erred in the amount of witness fees awarded

as costs to Goodover.

Lindey's also asserts that the District Court erroneously

awarded Goodover the costs of the survey used to prepare the map

that located the storage tanks. We disagree. This map was

introduced through Goodover's expert Martinsen as Plaintiff's

Exhibit 1. Under 5 25-10-201(8), MCA, reasonable expenses for

making maps are allowed if required and necessary for use at trial

or hearing. Lindey's claims that Goodover's exhibit was not

necessary because Lindey's submitted a report locating the tanks in

July. However, Goodover's survey is more detailed than, and

different in result from, Lindey's report. Expenses incurred in

preparing maps for the express purpose of explaining the factual

situation to the court are allowed as recoverable costs. Funk v.

Robbin (1984), 212 Mont. 437, 449, 689 P.2d 1215, 1222. The

District Court did not err in awarding Goodover $524.45 in costs

for reasonable expenses in preparing the map.

VII.

Did the District Court err in awarding attorney's fees to

Goodover?

Lindey's argues that the District Court erred in awarding

Goodover attorney's fees. We agree.

To support its award of attorney's fees, the District Court

17

made the following findings of fact in its January 2, 1992, order:

[XXXI] Beginning with the hearings held on supplementary

relief, counsel for Lindey's, Inc., has attempted to

interject the relitigation of the original boundary

issue, exhibits related to the relitigation of the

boundary issue, and other extraneous matters rather than

to address the issues before the Court. Again, based on

this Court's extensive experience as a Trial Judge, these

efforts were transparent attempts to vex, obstruct, and

delay the proceedings in this case.

[XXXII] On April 8, 1991, this Court issued an Order

requiring the transcription of a deposition of one of

Lindey's, experts. The strategy employed by Lindey's,

Inc., and its counsel to delay and vex compliance with

this valid Court Order are as follows:

A. Telling the private Court Reporter who

reported at this deposition that they would

not guarantee payment.

B. Filing a premature Writ of Certiorari to

the Montana Supreme Court which was dismissed.

C. Maintaining that while they did not

possess the tape, they had not lost the video

tape which the Court Reporter's notes

indicated had been delivered to them ... and

which the Court records indicate had never

been filed.

D. only agreeing to guarantee payment for the

video tape after a Rule 37(b) Motion had been

filed by Plaintiff's counsel and a hearing

date set.

E. Finally acknowledging that the video tape

was in the possession of Mr. Lindemer in late

July 1991.

F. The deposition was finally transcribed on

July 31, 1991. A delay caused exclusively by

Lindeyls actions of approximately four months.

G. These actions by Lindey's, Inc., have also

delayed the determination of the Contempt

Issue which was submitted to this Court on

June 14, 1991, but couldn't be decided until

the transcript was prepared.

[XXXV] Based on the slow progress made in this case, due

in large measure to Defendant Lindey's frequent attempts

to relitigate this case, both at the District Court and

Supreme Court level, the number of extraneous exhibits

and issues which this Court often admitted over

objection, despite their minimal relevance, materiality

and/or weight, the Court finds that in this particular

case, the exercise of its equitable powers to award the

Plaintiff its reasonable attorney's fees is justified.

[XXXVI] Such actions by Lindey's during the pendency of

boundary litigation and its subsequent refusal to move

the encroachments even after the boundary dispute was

resolved are actions taken in bad faith and with malice

and are the factual basis for the Court's award of

attorney's fees to Plaintiff.

The District Court concluded that these factual circumstances

justifiedthe exercise of its equitable powers and awarded Goodover

reasonable attorney's fees.

The longstanding rule in Montana is that, absent statutory or

contractual authority, attorney's fees will not be awarded. Bitney

v. School Dist. No. 44 (1975), 167 Mont. 129, 137, 535 P.2d 1273,

1277; Ehly v. Cady (l984), 212 Mont. 82, 100, 687 P.2d 687, 696;

Joseph Russell Realty Co. v. Kenneally (1980), 185 Mont. 496, 505,

605 P.2d 1107, 1112. This rule, also called the American Rule,

prohibits fee shifting in most cases. Alyeska Pipeline Service Co.

v. Wilderness Society (l975), 421 U.S. 240, 247, 95 S.Ct. 1612,

1616, 44 L.Ed.2d 141, 147. The District Court did not rely on any

statute or rule of civil procedure in its award of attorney's fees.

Instead, the District Court first relied on a United States Supreme

Court decision that discussed the powers of the federal district

court to assess attorney's fees as an appropriate sanction under

the "bad faith" exception to the general rule. The District Court

then concluded that its general equity power to make a party whole

in some cases included the right to award attorney's fees, and that

Lindey's bad faith and malicious behavior towards Goodover merited

such an award.

In isolated instances, a district court may award attorney's

fees to make an injured party whole under its equity powers. Foy

v. Anderson (1978), 176 Mont 507, 511-12, 580 P. 2d 114, 116-17 ;

Holmstrom Land Co. v. Hunter (1979), 182 Mont. 43, 48-49, 595 P.2d

360, 363; Stickney v. State, County of Missoula (1981), 195 Mont.

415, 418, 636 P.2d 860, 862. We have invoked the "equitable"

exception to the general rule infrequently, however, and only in

cases with particularly limited facts.

In m,Eggan and Foy were passengers in a car struck from the

rear by Anderson. Eggan sustained only minor injuries and did not

file a claim against Anderson. Anderson filed a declaratory action

against his insurer and sought to bring in Eggan as a third party,

alleging that Eggan had asserted a claim against him. We held that

because Eggan asserted no claim against Anderson, and she was

forced to hire an attorney to write and argue her motion to dismiss

through no fault of her own, she would not be made whole without an

award of attorney's fees. 176 Mont. at 512, 580 P.2d at 117.

In Holmstrom, the district court issued an order to the water

commissioner, defendant Hunter, to charge all water flowing from

Newlan Creek to Holmstrom. Holmstrom refused to pay and Hunter

padlocked his headgates. Holmstrom then brought a civil action

against Hunter. We held that Hunter acted pursuant to a court

order, was forced to retain counsel, and as a matter of equity

required an award of attorney 's fees. 182 Mont. at 48, 595 P. 2d at

20

363. We reasoned that if water commissioners were required to

defend suits out of their personal funds for suits brought against

them for their official acts, no one would be willing to serve as

a water commissioner. Comparing the case to Foy, we stated,

'l[j]ust as Anderson had no reason or justification for dragging

Eggan into the lawsuit . . . , Holmstrom had no reason to sue

Hunter." 182 Mont. at 49, 595 P.2d at 363. Again, this award of

attorney's fees was based on our inherent equitable power to grant

the relief that justice requires.

We applied the Fov exception again in Sticknev with similar

limitations. In Sticknev, Justice of the Peace Jensen asked

several spectators in her courtroom to leave before a trial, they

refused, and she found them in contempt. 195 Mont. at 416, 636

P.2d at 861. The spectators sued Jensen in her personal capacity

for official misconduct in office. We held that the facts as

pleaded presented no basis for personal liability, therefore the

attorney's fees awarded by the district court were proper. As in

m, Jensen was forced to personally defend against a frivolous

action through no fault of her own. 195 Mont. at 418, 636 P.2d at

862.

This equitable exception to the general rule is available in

those unique factual situations in which a party is forced into a

frivolous lawsuit and must incur attorney's fees to dismiss the

claim. In such cases, equity requires an award of attorney's fees

to "make the party whole." We have rejected many efforts to expand

the limited application of Fov and its progeny. Indeed, two months

after the Fov decision, we sharply limited its applicability in

21

Masonovich v. School District No. 1 (1978), 178 Mont. 138, 582 P.2d

The plaintiff in Masonovich obtained a preliminary injunction

against the defendants and included attorney's fees in his

memorandum of costs. We distinguished m, stating:

In the instant case the plaintiff's position is entirely

different from the third party defendant's position in

m. Here, p l a i n t i f f obtained an attorney to i n s t i t u t e

legal action. He did not obtain an attorney to help him

defend against a claim against him as in m. Plaintiff

freely chose to obtain the services of a private attorney

to institute a suit against others. . . . is

distinguishable on this basis and is not controlling in

this case.

178 Mont. at 141, 582 P.2d at 1236 (emphasis added) . Goodover's

position as the plaintiff in this litigation, as we explained in

Masonovich, normally will. preclude an award of attorney's fees

under m.

We again explained the distinguishing characteristics of

in State ex r e l . Wilson. v. Dept. of Natural Resources (1982), 199

Mont. 189, 202, 648 P.2d 766, 772, stating:

The exception has been narrowly drawn and is

applicable only where the action into which the

prevailing party has been forced is utterly without merit

or frivolous.

Here, Goodover was not forced into wholly frivolous litigation

through no fault of his own; he filed suit against ~indey's.

Furthermore, if the losing party had a reasonable basis to believe

his cause might prevail, the exception is inapplicable. Id.

Lindey Is has prevailed at various points in this litigation, and we

did not determine its earlier appeals to be utterly without merit.

and i t s progeny are distinguishable from the present case and

do not form a basis for an award of attorney's fees

In addition to the equitable exception invoked to make a party

whole, some states and the federal courts have adopted a bad faith

exception to the American Rule. See Chambers v. NASCO, Inc. (1991)

- U.S. -t - I 111 S.Ct. 2123, 2133, 115 L.Ed.2d 27, 45.

Montana has not expressly adopted a malicious or bad faith

equitable exception to the American Rule and we decline to do so at

this time. In the present case, the District Court relied on

Joseph Russell Realtv Co. for the proposition that this Court

announced therein a "bad faith or malicious or fraudulent basis"

for the award of attorney's fees. This reliance is misplaced.

In Joseph Russell Realtv Co., the plaintiff argued that

attorney's fees should be awarded when another's fraudulent act is

the cause of litigation, citing Home Ins. Co. v. Pinski Brothers,

Inc. (1972), 160 Mont. 219, 500 P.2d 945. We stated that assuming

this exception exists, it was not applicable to the facts in that

case because the defendant had not acted fraudulently, maliciously

or in bad faith. Joseph Russell Realtv Co., 185 Mont. at 505, 605

P.2d at 1112.

Joseph Russell Realtv Co. cited Home Ins. Co. for the

possibility of a stfraudulent

exceptionftto the American Rule but

did n t rely on or apply such an exception. In Home Ins. Co., this

o:

Court awarded attorney's fees against an insurer based on its

breach of its duty to defend an insured, not on a fraudulent

exception to the American Rule. Home Ins. Co., 160 Mont. at 228,

500 P.2d at 950. Under the Home Ins. Co. rationale, we have

steadfastly refused to extend this narrow exception beyond those

cases in which an insurer breaches its duty to defend.

We recently refused to extend the Home Ins. Co. exception to

cover the situation in which an insurer wrongfully refused to

provide coverage to the insured. Yovish v. United Services Auto.

Ass'n (1990), 243 Mont. 284, 291, 794 P.2d, 682, 686. Although the

distinction between failing to defend and failing to provide

coverage may be slight, we hesitated to expand the exception to the

general rule without legislative authority. a. Similarly, we

will not expand the insurance exception to include the more general

exception for bad faith and malice relied on by the District Court

in this case. Montana's statutes and Rules of Civil Procedure,

together with the limited Fov exception, provide ample opportunity

for awarding attorney's fees when a party or an attorney abuses the

judicial system.

The District Court found that the slow progress in this

litigation was due in large measure to Lindey's attempts to re-

litigate the case both at the District Court and Montana Supreme

Court levels. While this may be true to some extent, we did not

determine Lindey's earlier appeals to be wholly without merit. Nor

do we agree that Lindey's should shoulder all of the blame for this

lengthy and bitter litigation. In any event, attorney's fees were

neither argued to, nor awarded by, the District Court under 9 3 7 -

61-421, MCA.

The awarding of attorney's fees is within the discretionary

power of the district court. Grenfell v. Duffy (1982), 198 Mont.

90, 96, 643 P.2d 1184, 1187. The general rule remains that

attorney's fees will not be awarded to the prevailing party absent

24

statute or contract. This action presents neither a statutory nor

a contractual basis for the award of attorney's fees, nor does it

fall within one of the narrow exceptions to the general rule

recognized in Montana. Yovish, 243 Mont. at 290, 794 P.2d at 686.

We hold, therefore, that the District Court abused its discretion

in awarding attorney's fees.

Affirmed in part, reversed in part and remanded for entry of

judgment in accordance with this opinion.

We concur:

Chief Justice J. A. Turnage did not participate.

Justice Terry N. Trieweiler concurring in part and dissenting in

part.

I concur with the majority's conclusions pertaining to

Issues I through VI.

I dissent from the majority's decision to reverse the District

Court's award of attorney fees. I would adopt an exception to the

so-called "American Rulen by allowing District Courts to assess

attorney fees when a party has acted in bad faith, vexatiously,

wantonly, or for oppressive reasons. The basis for an award under

such circumstances was set forth by the United States Supreme Court

in Chambers v Nasco, Inc. (1991), 111 S ct. 2123, 2133, 115 L. Ed. 2d

. .

27, 45. That Court gave the following explanation with which I

concur:

In this regard, if a court finds "that fraud has been

practiced upon it, or that the very temple of justice has

been defiled,'' it may assess attorney's fees against the

responsible party, Universal Oil [Products Co. v. Root

Refining Co. (1946), 328 US 575,] 580, 90 L Ed 1447, 66

S Ct 1176, as it may when a party "shows bad faith by

delaying or disrupting the litigation or by hampering

enforcement of a court order," Hutto [v. Finney (1978)],

437 US [678], 689, n 14, 57 L Ed 2d 522, 98 S Ct 2565.

The imposition of sanctions in this instance transcends

a court's equitable power concerning relations between

the parties and reaches a court's inherent power to

police itself, thus serving the dual purpose of

gWindicat[ing] judicial authority without resort to the

more drastic sanctions available for contempt of court

and mak[ing] the prevailing party whole for expenses

caused by his opponent's obstinacy."

Chambers, 115 L. Ed. 2d at 46.

Based on this exception to the mlAmerican Rule" regarding

assessment of a t t o r n e y fees, I would affirm the District Court's

award.

concurs i n t h e f o r e g o i n g concurrence

Justice John C. ~ a r r i s o n

and dissent of Justice Trieweiler.