Case Title: SCHMIDT v COLONIAL TERRACE ASSOC

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1985-01-29T00:00:00Z

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No. 84-196 IN THE SUPREME COURT OF THE STATE OF MONTAYA F. W. SCHMIDT, a/k/a WILLIAM F. SCHMIDT, LEONARD KNUTSON AND ROBERTA KNUTSON, Plaintiffs and Respondents, COLONIAL TERRACE ASSOCIATES, et al., Defendants and Appellants. APPEAL FROM: District Court of the First Judicial District, In and for the County of Lewis & Clark, The Honorable Henry Loble, Judge presiding. COUNSEL OF RECORD: For Appellants: Worden, Thane & Haines; Ronald Bender, Missoula, Montana For Respondents: James A. Curnming, Columbia Falls, ?4ontana - - - - - . - - - - -- Submitted on Briefs: January 7, 1985 Decided: January 29, 1985 , , . . - i ' 2 , Filed:,! ,;. --.";3 Clerk M r . J u s t i c e L. C. Gulbrandson delivered t h e Opinion of t h e Court. This is an appeal from an order of t h e D i s t r i c t Court of t h e F i r s t J u d i c i a l D i s t r i c t , L e w i s and Clark County, Montana. The D i s t r i c t Court adopted t h e findings and conclu- s i o n s of a s p e c i a l master appointed t o determine t h e matter of o f f s e t s a g a i n s t a previous jury v e r d i c t awarding defendants damages on t h e i r counterclaim. The s p e c i a l master found o f f s e t s f o r s e r v i c e s performed by various c o n t r a c t o r s f o r t h e defendants b e n e f i t , but d i d not f i n d t h a t t a x e s and insurance payments made by p l a i n t i f f s w e r e t o be o f f s e t a g a i n s t t h e v e r d i c t . The D i s t r i c t Court a l s o awarded c o s t s and f e e s t o t h e defendants. W e affirm. This appeal i s a continuation of a remand we ordered i n Schmidt v. Colonial Terrace (Mont. 1982), 656 P.2d 807, 39 S t . Rep. 2318. W e w i l l not r e s t a t e a l l of t h e f a c t s leading t o t h i s case but r a t h e r incorporate t h e f a c t s a s s e t f o r t h i n our p r i o r opinion by reference herein. This case rests on a c o n t r a c t f o r t h e s a l e of real property, and a construction c o n t r a c t , entered i n t o i n 1977. Both p a r t i e s a l l e g e d t h a t t h e o t h e r breached t h e c o n t r a c t , and l i t i g a t i o n ensued. The case came t o t r i a l i n June of 1981. The jury, while d e l i b e r a t i n g , asked t h e D i s t r i c t Court whether they were t o determine o f f s e t s t o any v e r d i c t reached. The D i s t r i c t Court, with t h e agreement of t h e p a r t i e s , i n s t r u c t e d t h e jury t o reach a v e r d i c t only and t o leave t h e matter of o f f s e t s t o t h e court. The jury returned a v e r d i c t of $128,278 i n favor of t h e defendants. The defen- dants promptly obtained a judgment and executed thereupon. The p l a i n t i f f s moved t h e D i s t r i c t Court t o amend t h e judgment and hear and determine t h e matter of o f f s e t s . The D i s t r i c t Court denied plaintiffsq motion, and also awarded costs and fees to defendants. Plaintiffs appealed the District Court's denial of their motion to amend and determine offsets. We ordered that the judgment be vacated and remanded the case to the District Court for further proceedings to determine the offsets, if any. Schmidt v. Colonial Terrace, supra. Since the order remanding the case to the District Court, a special master Mr. Clayton Herron, an attorney from Helena, Montana, was appointed to determine the matter of offsets. As required by our previous opinion, the special master examined the record only and took no further evidence. He filed a report on November 28, 1983. In that report, he found an offset in the plaintiffs' favor for the amount of $74,363.39. Both parties filed objections to the report. The special master, and the District Court both heard and considered the objections, and both indicated that their conclusions remained the same. On January 17, 1984, the District Court entered its opinion, order and judgment adopt- ing the special master's report. In that order, the District Court also granted fees and costs to the defendants up to June 18, 1981, and costs of the previous appeal to the plaintiffs. On January 30, 1984, the defendants filed a motion to amend judgment to delete the portion of the judgment that found an offset in the plaintiffs' favor. On February 1, 1984, the defendants filed a motion to assess attorneys fees for the period of June 19, 1981 to that time. Accompanying that motion was a bill of attorneys' fees and expenses. The next day, February 2, 1984, plaintiffs filed a motion to tax costs and an objection to defendants' inclusion of their share of the special master's fee in their cost bill. On February 21, 1984, the plaintiffs submitted their bill of attorneys' fees and expenses and a motion for attorneys1 fees and expenses for the post June 18, 1981 litigation. The plaintiffs also filed at that time a motion for restitution of funds, requesting the court to return to them all funds due under the contract. Defendants moved to strike plaintiffs' motion for restitution of funds. The motions were heard in District Court on February 24, 1984. On February 27, 1384, the District Court entered its order denying defendants' motion to amend judgment, stating: ". . . The issues presented in defendants' motion to amend have been previously decided by the Court. The Court accepts the master's report and his findings of offsets, and finds no new matters presented which would alter its decision." The District Court also entered an order, on March 19, 1984,denying plaintiffs' motion for restitution of funds. Defendants filed a notice of appeal on March 28, 1984 raising as issues the District Court's rulings granting plaintiffsr costs on appeal, adopting the special master's report, and the order denying the motion to amend. Several days later, on April 4, 1.984, plaintiffs filed their notice of appeal on the finding by the special master, and ruling by the District Court, that pl-aintiffs were not entitled to offsets for property tax and insurance payments allegedly paid. On March 8, 1984, we remanded the case to the District Court for a determination of attorneys' fees. The District Court entered an order granting costs and fees to the defen- dants for the period beginning June 19, 1981 until February I , 1.984, in the amount of $17,245.80. The defendants had included in their cost bill submitted to the District Court t h e amount of $1,444.37 a s t h e i r share of t h e special. mas- t e r ' s fee. The D i s t r i c t Court excluded t h i s amount i n t h e f i n a l order awarding c o s t s . The p a r t i e s then submitted b r i e f s , and we consider t h e matter on appeal. The p a r t i e s p r e s e n t t h e following i s s u e s f o r our consideration: ( 1 ) Was t h e D i s t r i c t Court i n e r r o r i n adopting t h e findings and conclusions of t h e s p e c i a l master? ( 2 ) Was t h e D i s t r i c t Court's o r d e r g r a n t i n g c o s t s and f e e s t o t h e defendants f o r t h e period of June 19, 1981 t o February 1, 1984, i n e r r o r ? This i s s u e includes t h e exclu- s i o n of t h e s p e c i a l m a s t e r ' s f e e from t h e defendants' c o s t b i l l . Rule 53 M.R.Civ.P. allows a d i s t r i c t c o u r t t o appoint a master i n complicated cases t o examine t h e matter and make a r e p o r t thereupon. Rule 52 ( a ) , M. R.Civ. P. provides t h a t " [ t l h e findings of a master, t o t h e e x t e n t t h a t t h e c o u r t adopts them, s h a l l be considered a s t h e findings of t h e court." Thus, we apply t h e same standard of review t o an adopted master's r e p o r t t h a t we do t o any o t h e r d i s t r i c t c o u r t order. W e w i l l only overturn such findings i f they a r e " c l e a r l y erroneous." SAS Partnership v. Schafer (Mont. 1982), 653 P.2d 834, 39 St.Rep. 1883. I n Wright and M i l l e r , Federal P r a c t i c e and Procedure, (1971 ed.) S2585, t h e authors, discussing t h e Federal Rule 5 2 ( a ) , which t h e Montana r u l e is patterned a f t e r , s t a t e t h e qeneral r u l e t h a t "a finding [is] c l e a r l y erroneous only i f t h e finding i s without adequate e v i d e n t i a r y support o r induced by an erroneous view of t h e law." The m a s t e r ' s r e p o r t , a s adopted by t h e D i s t r i c t Court, i s not c l e a r l y erroneous i n e i t h e r r e s p e c t , and must stand. The s p e c i a l master was appointed i n t h i s c a s e t o examine t h e record and make a r e p o r t a s t o whether t h e p l a i n - t i f f s w e r e e n t i t l e d t o any o f f s e t s a g a i n s t t h e jury v e r d i c t . Our o r d e r l i m i t e d h i s i n q u i r y t o t h e record. H i s t a s k was t o c u l l through it t o find. whether it contained any evidence t o support an o f f s e t f o r t h e p l a i n t i f f s . I n a v e r y comprehensive and a c c u r a t e r e p o r t , t h e master found t h a t t h e p l a i n t i f f s were e n t i t l e d t o an o f f s e t o f $74,363.39. H e reached t h i s conclusion w i t h t h e f i n d i n g t h a t t h e p a r t i e s had i m p l i c i t l y consented t o t r y i n g t h e i s s u e o f c e r t a i n o f f s e t s f o r r e p a i r work done, p a i d f o r and " c r e d i t e d " by t h e defendants. Under Rule 15, M.R.Civ.P., i s s u e s n o t s p e c i f i c a l l y r a i s e d i n t h e p l e a d i n g s may be t r i e d by implied consent i f t h e p a r t i e s allow evidence p e r t a i n i n g t o t h a t i s s u e t o be r a i s e d a t t r i a l . The master f u r t h e r found t h a t t h e i s s u e o f t a x e s and insurance payments a l l e g e d l y made by p l a i n t i f f s b u t due from t h e defendants, had not been s u f f i - c i e n t l y e n t e r e d i n t o evidence s o a s t o b r i n g them i n t o i s s u e . I n t h e r e p o r t , t h e master s t a t e d : " t h e r e c o r d does n o t d i s - c l o s e circumstances and proceedings which would i n d i c a t e t h a t i s s u e s r e l a t i n g t o o f f s e t s f o r such t a x e s o r such insurance w e r e t r i e d by t h e p a r t i e s w i t h t h e i r consent a s r e f e r r e d t o i n Rule 15 (b) , M.R.Civ.P." Defendants argue on appeal t h a t t h e p l a i n t i f f s a r e n o t e n t i t l e d t o any o f f s e t s because t h e jury v e r d i c t could have been based on t h e f r a u d o r negligence counterclaims, upon which no o f f s e t s can be allowed. Thus, they argue, t h e m a s t e r ' s r e p o r t and D i s t r i c t C o u r t ' s adoption t h e r e o f , was c l e a r l y erroneous a s a m a t t e r of law. That argument was considered, and decided, i n t h e previous a p p e a l , see Schmidt v. Colonial Terrace, 656 P.2d at 810, 39 St.Rep. at 2321, 2322. We will not consider it again. Plaintiffs argue on appeal that the master and the District Court erred in not taking judicial notice of the real estate taxes they paid in the amount of $59,583.21 and insurance payments in the amount of $12,388. They argue that the record is sufficient to support a finding that the plain- tiffs paid the taxes and insurance and that the contract called for the defendants to do so; and all that the master and the District Court needed to do was to judicially notice how much those payments were--an a.mount missing from the record. We do not need to consider plaintiffs' argument as to judicial notice of property, because it is irrelevant to the gist of the master's findings: that the issue of taxes and insurance was not tried with the parties express or - - implied consent. Plaintiffs cited the master and the District Court to portions of the transcript where they contend the issue of tax a . n d insurance payments was raised without objection by the defendants. In the words of the District Court, in its opinion adopting the master's report: ". . . after hearing the presentation of both parties and after having examined the objections of both parties to his report, [the master said] that he had considered all of the things the parties referred to in their objections and. in their arguments and that nothing he had heard changed his mind in any respect." Plaintiffs again direct us to the record and to their objec- tions. We have examined the record. and do not find that the master's report, or the District Court's adoption thereof was clearly erroneous. W e a g r e e w i t h t h e D i s t r i c t C o u r t ' s c h a r a c t e r i z a t i o n o f both p a r t i e s 1 o b j e c t i o n s : "[Tlhe p l a i n t i f f s and t h e defendants d i d not a g r e e w i t h t h e f i n d i n g s of t h e master upon t h e evidence, nor w i t h h i s conclu- s i o n s based thereon. Thev d i d n o t con- tend t h a t -- underlying they base added. ) ---- he had f a i l e d t o c o n s i d e r t h e - - - evidence and i s s u e s upon which t h e i r o b i e c t i o n s . " ( E m ~ h a s i s The proper i s s u e on appeal i s whether t h e f i n d i n g s of t h e master, a s adopted by t h e District Court, w e r e clea.rly erroneous. The i s s u e i n t h a t r e g a r d , a s s t a t e d by t h e D i s - t r i c t Court, i s whether t h e y were without adequate eviden- t i a - r y support. W e ha-ve examined t h e r e c o r d and f i n d t h a t t h e r e p o r t and judgment based thereupon was supported by adequate evidence and employs t h e c o r r e c t law. It is n o t c l e a r l y erroneous. P l a i n t i f f s next contend t h a t t h e District Court e r r e d i n a.warding a t t o r n e y s f e e s t o t h e defendants. The c o n t r a c t c a l l e d f o r f e e s and c o s t s t o he p a i d t o t h e " p r e v a i l i n g p a r t y " i n t h e e v e n t l i t i g a t i o n a r o s e from t h e c o n t r a c t . P l a i n t i f f s contend t h a t s i n c e they " p r e v a i l e d " i n t h e p r i o r appeal, and s i n c e t h e master found an o f f s e t i n t h e amount o f $74,363.39, which i s l a r g e r than t h e n e t amount now due t h e defendants, t h a t t h e y a r e t h e p r e v a i l i n g p a r t y under t h e c o n t r a c t . They argue t h a t i f w e uphold t h e District Court o r d e r and award c o s t s and f e e s t o a p a r t y who h a s l o s t t h e appeal, such an award would " c h i l l " t h e i n c e n t i v e f o r p a r t i e s t o appeal an adverse judgment. P l a i n t i f f s f o r g e t t h a t t h e y have a l r e a d y been c r e d i t e d i n t h e D i s t r i c t Court o r d e r t h e c o s t s o f t h e i r s u c c e s s f u l appeal-, under s e c t i o n 25-10-104, FICA. That s t a t u t e provides t h a t a D i s t r i c t Court s h a l l , i n most s i t u a t i o n s , award c o s t s t o t h e s u c c e s s f u l p a r t y on an appeal. This statute removes any disincentive to appeal presented by contractural provisions requiring costs to be paid to the prevailing party. In Jordan v. Elizabethan Manor (1979), 181 Mont. 424, 593 P.2d 1049, we stated the general rule as to who is to be considered the "prevailing party" within the terms of a contract that calls for the payment of costs and fees to the same: "A prevailing party is the one who has an affirmative judgment rendered in his favor at the conclusion of the entire case." 181 Mont. at 434, 593 P.2d at 1055. In - Jor- dan, the ca-se was not concluded, and we remanded it to the - trial court for further proceedings. In this case we are faced with a situation where there were claims and counterclaims, and. that presents the question of what an "affirmative judgment" is. In E.C.A. Environmen- tal Management v. Toenyes (Mont. 19841, 679 P.2d 213, 41 St.Rep. 388, we stated: "No one factor should be considered in determining the prevailing party for the purpose of attorney fees. The party that is awarded a money judgment in a lawsuit is not necessarily the successful or prevailing party. However, this Court agrees with those jurisdictions tha.t have found the award of money to be a.n impor- tant item to consider when deciding who, in fa.ct, did prevail. Ocean West Con- tractors v. Ha-lec Const. Co. (1979), 123 Ariz. 470, 600 P.2d 1102. Here, MMI brought suit to recover sums due it on a note usurious on its face. The usury penalty assessed MMI resulted not only in a denial of recovery, but an adverse award. The net judgment was in favor of defendants. The party that survives an action involving a counterclaim, setoff, refund or penalty with the net judgment should generally be considered the suc- cessful or prevailing party." 679 P.2d at 217, 218, 41 St.Rep. at 392, 393. In a subsequent case, we elaborated upon the general rule quoted above. In Knutsen v. Taylor (Mont. 1984), 685 P.2d 354, 4 1 St.Rep. 1490, w e construed s e c t i o n 70-17-112(5), MCA, which provides f o r an award of a t t o r n e y s ' f e e s t o t h e p r e v a i l i n g p a r t y i n an a c t i o n t o prevent encroachment upon c a n a l o r d i t c h easements. I n Knutsen, t h e p l a i n t i f f received a money judgment f o r damages i n h i s favor, b u t t h e defendant succeeded i n obtaining an i n j u n c t i o n allowing both p a r t i e s t h e use of t h e d i t c h . Because each of t h e p a r t i e s had re- ceived some a f f i r m a t i v e a c t i o n i n t h e i r favor, t h e D i s t r i c t Court d i d not award a t t o r n e y s ' f e e s t o t h e p l a i n t i f f who had requested it on t h e b a s i s t h a t he had received a n e t money judgment. W e affirmed t h e D i s t r i c t Court i n t h a t case, reasoning t h a t : "The i n j u n c t i v e order issued by t h e D i s t r i c t Court is a v i c t o r y and a l o s s f o r both s i d e s . [The p l a i n t i f f 1 pre- v a i l e d i n h i s contention t h a t t h e c u l v e r t must be of s u f f i c i e n t s i z e t o c a r r y f u l l y t h e water from t h e headgate passing through t h e E s t e r Ditch. [The defendant] prevailed i n t h a t h i s r i g h t t o i n s t a l l such crossing c u l v e r t s was recognized i n t h i s case. I n such circumstances, we determine t h a t t h e D i s t r i c t Court was c o r r e c t i n finding i n e f f e c t t h e r e was no p r e v a i l i n g p a r t y . . . " 685 P.2d a t 357, 4 1 St.Rep. a t 1493. 1 : n a case i n t e r p r e t i n g our c o s t s s t a t u t e , s e c t i o n 25-10-101, MCA, w e considered a s i t u a t i o n , such a s t h e one a t b a r , where a defendant received a money judgment on a counterclaim. I n Medhus v. Dutter (1979), 184 Mont. 437, 603 P.2d 669, we s t a t e d t h e following t o be t h e r u l e : " I f an a c t i o n i s f i l e d , t h e defendant counterclaims and succeeds i n having t h e p l a i n t i f f ' s claims t o t a l l y denied b u t only recovers a p o r t i o n of t h e r e l i e f demanded i n t h e counterclaim, t h e defen- dant should receive c o s t s . I f , however, a p a r t y i n i t i a t e s a law s u i t , t h e defen- dant counterclaims, and t h e judgment awards both p a r t i e s p a r t of t h e r e l i e f they seek, t h e p a r t y p r e v a i l i n g on t h e main i s s u e i n controversy i n t h e case must be allowed costs." 184 Mont. at 447, 603 P.2d at 674. A.1-though we are dealing in this case with a contract term, and not a statutory award as in Medhus, we hold that the Medhus rule should be applied to the rule stated in E.C.A. Environmental v. Toynes, supra which also a-pplies here. This case falls into the latter of the Medhus rules because plaintiffs have received part of the relief they requested in their complaint. The main issue in controversy in this case was damages for breach of contract. Plaintiffs had also requested in their complaint that the District Court quiet title in their favor. They did not receive such relief. The jury simply held "in favor of the Defendants on their counterclaim and against the Plaintiffs on. their complaint." Defendants succeeded in realizing, at the end of the case, a net judgment in their favor, and thus prevailed on the main issue in controversy. The District Court also excluded $1,444.37 from defen- dants' cost bill as their share of the special master's fee. Rule 53 (a) M.R.Civ.P. provides that: "The compensation to be allowed to a master shall be fixed by the court, and shall be charged upon such of the parties or paid out of any fund or subject matter of the action, which is in the custody and control of the court as the court may direct. " This Court has not considered a situation such as this where a master's fee has been apportioned equally among the parties despite a contract clause that calls for costs to the pre- vailing party. The Montana rule is identical to the Federal rule, and we recognize that the Federal courts have held that a prevailing party is subject to reimbursement from the other party for its share of the special master's fee. See right and Miller, Federal Practice and Procedure (1971 ed.) S2608, n. 72 and cases cited therein. But here, the parties agreed otherwise. In the order of June 25, 1984 assessing the master's fee equally between the parties, the District Court stated: "Finally, the plaintiffs contend the portion of the cost bill denominated Special Master's fee is improper because the Court has already ordered and re- quired plaintiffs and defendants to share the cost bill equally. The plaintiffs are correct. By Order dated January 5, 1984, the Court ordered each party to pay one-half of the Special Master' s fee. The Court will not now alter that Order which was agreed to and followed by all parties. " (~rn~hasis added. ) I\iormaliy the District Courts should follow the federal rule and make the non-prevailing party pay, if that is what the contract calls for. Rut where, as here, the parties subsequently agree otherwise, in effect altering the con- tract, the District Court should honor that agreement. F J e hold that the District Court did not err in excluding from the defendants' cost bill that amount attributable to their share of the special master' s fee. , I Affirmed. - Justice /' / ' ,i We concur: 1