Title: RAUCH v MICHEL

State: montana

Issuer: Montana Supreme Court

Document:

NO. 85-365 I N THE SUPREME COURT O F THE STATE OF MONTANA 1986 WILLIAM F. RAUCH, J R . , i n d i v i d u a l l y and as a p a r t n e r of S i e r r a Meadows and West Fork Ranch, P l a i n t i f f and Respondent, VIOLET MICHEL, Defendant and Appellant. APPEAL FROM: D i s t r i c t Court o f t h e F i r s t J u d i c i a l District, I n and f o r t h e County o f Lewis & C l a r k , The Honorable Gordon Bennett, Judge p r e s i d i n g . COUNSEL O F RECORD: For Appellant: Charles Graveley, Helena, Montana For Respondent: Hughes, K e l l n e r , S u l l i v a n & Alke; John F. S u l l i v a n , Helena, Montana - Submitted on B r i e f s : D e c . 30, 1985 Decided: A p r i l 9, 1 9 8 6 F i l e d : APR 9 - 2986 8 */G$LL&-J Clerk M r . J u s t i c e Fred J. Weber d e l i v e r e d t h e Opinion o f t h e Court. Defendant V i o l e t Michel a p p e a l s from an o r d e r o f t h e L e w i s and Clark County D i s t r i c t Court e n t e r i n g judgment a g a i n s t h e r i n t h e amount o f $14,297.15. W e a f f i r m . The i s s u e s p r e s e n t e d f o r review a r e : 1. Was t h e D i s t r i c t Court i n e r r o r i n f i n d i n g t h a t M r . Rauch, t h e p l a i n t i f f , was n o t i n d e f a u l t on t h e promisso- r y note? 2. Was it proper f o r t h e D i s t r i c t Court t o award puni- t i v e damages t o M r . Rauch? 3 . Was t h e award o f a t t o r n e y f e e s t o M r . Rauch proper? This m a t t e r w a s t r i e d b e f o r e t h e D i s t r i c t Court, s i t t i n g without a jury. The uncontroverted f a c t s a s found by t h e c o u r t a r e set o u t below. I n March 1982, M r . Rauch, a s a p a r t n e r i n S i e r r a Meadows and W e s t Fork Ranch, purchased. land which had formerly been owned by d e f e n d a n t ' s son, M r . Maykuth. A granary owned by M r . Maykuth had been l e f t on t h e land. M r . Maykuth was informed t h a t t h e granary should be removed. The next month, M r . Rauch agreed t o purchase a s p r i n k l e r system from defendant f o r $9,000. H e made a $1,000 down payment on t h e s p r i n k l e r and agreed t o pay t h e $8,000 balance a t 15 p e r c e n t i n t e r e s t . The s p r i n k l e r system was d e l i v e r e d t o M r . Rauch d u r i n g t h e L a t t e r p a r t o f A p r i l and f i r s t p a r t of May. L a t e r , M r . Rauch signed a promissory n o t e f o r t h e $8,000 balance due on t h e s p r i n k l e r . M r . Rauch was t o re- c e i v e a b i l l o f s a l e and c l e a r t i t l e t o t h e s p r i n k l e r upon payment o f t h e note. I n mid-September, M r . Rauch had n o t y e t p a i d o f f t h e note. H e t o l d defendant t h a t he would borrow enough money t o pay o f f t h e e n t i r e balance due. H e a l s o o f f e r e d t o pay $1,000 f o r t h e qranary, as an a l t e r n a t i v e t o i t s removal from t h e property. O n October 6 , M r . Rauch wrote a check t o defendant f o r t h e t o t a l amount due on t h e s p r i n k l e r . The n e x t day he c a l l e d defendant and informed h e r o f t h e check, which she t o l d him t o m a i l t o her. During t h a t c o n v e r s a t i o n , defendant informed M r . Rauch t h a t h e r son, M r . Maykuth, considered t h e o f f e r t o buy t h e granary f o r $1,000 t o be an i n s u l t . M r . Rauch responded t h a t he d i d n o t r e a l l y want t h e granary, and asked again t h a t M r . Makuth a r r a n g e t o move it. O n October 11, defendant had n o t y e t received t h e check. M r . Maykuth, a c t i n g a s d e f e n d a n t ' s a g e n t , e n t e r e d M r . Rauch's p r o p e r t y and took t h e s p r i n k l e r . A t l e a s t p a r t o f h i s moti- v a t i o n was t o p r e s s u r e M r . Rauch i n t o purchasing t h e granary. I n t h e process o f removing t h e s p r i n k l e r , he damaged t h e door t o a s t o r a g e shed. Defendant r e c e i v e d M r . Rauch's check t h e next day. She made no e f f o r t t o inform M r . Rauch t h a t M r . Maykuth had t a k e n t h e s p r i n k l e r . I n a d d i t i o n , s h e d i d n o t o f f e r t o r e t u r n t h e s p r i n k l e r , o r t h e money which had been p a i d f o r it. M r . Rauch r e p o r t e d t o t h e s h e r i f f ' s o f f i c e t h a t t h e s p r i n k l e r had been s t o l e n . About a week l a t e r , M r . Maykuth c a l l e d t h e Rauch phone number and t o l d M r s . Rauch t h a t he had taken t h e s p r i n k l e r and t h a t he would r e t u r n it i f M r . Rauch agreed t o purchase t h e granary f o r an a p p r o p r i a t e p r i c e . M r . Rauch t h e n demanded t h e s p r i n k l e r ' s r e t u r n . I t was n o t returned. M r . Rauch's a t t o r n e y t o l d defendant t h a t M r . Maykuth was no longer welcome on t h e Rauch p r o p e r t y . M r . Maykuth was made aware of t h i s . Nevertheless, he e n t e r e d M r . Rauch's p r o p e r t y without permission i n May 1983 t o photo- graph t h e lock on M r . Rauch's s t o r a g e shed. The D i s t r i c t Court, among i t s o t h e r d e t a i l e d f i n d i n g s and conclusions, found that. defendant had waived s t r i c t enforcement of t h e promissory note by "fail-ing repeatedly t o demand payment of t h e note i n accordance with i t s terms." The c o u r t a l s o found t h a t defendant, throuqh her agent M r . Maykuth, had i n t e r f e r e d with M r . Rauchls peaceable occu- pation of h i s home and property by e n t e r i n g t h e property t o take t h e s p r i n k l e r and t o photograph t h e lock on t h e s t o r a g e shed. The D i s t r i c t Court f u r t h e r awarded a t t o r n e y f e e s t o M r . Rauch, finding t h a t defendant1 s counter claim sounded i n c o n t r a c t and t h a t M r . Rauch was t h e p r e v a i l i n g party. I Was t h e D i s t r i c t Court i n e r r o r i n finding t h a t M r . Rauch, t h e p l a i n t i f f , was not i n d e f a u l t on t h e promisso- ry note? The record shows t h a t t h e p a r t i e s o r i g i n a l l y agreed t h a t M r . Makuth would pay o f f t h e purchase p r i c e of t h e s p r i n k l e r system during 1982. I n June, a t M r . Maykuthl s r e q u e s t , M r . Makuth signed a promissory note on t h e s p r i n k l e r . The note was backdated t o May 1. I t provided f o r monthly payments of $2,000 and i n t e r e s t a t 15% per annum, but d i d not s p e c i f y t h e d a t e s on which payments were due. N o payment was made o r requested f o r t h e month of May. M r . Maykuth requested a $2,000 payment on June 1 8 , and payment was made a few days l a t e r . N o payments were made o r requested i n J u l y . A second $2,000 payment was requested on August 23 and received about a week l a t e r . O n September 23, defendant requested a t h i r d $2,000 payment, p l u s $391.23 i n i n t e r e s t . M r . Rauch conveyed t o defendant h i s i n t e n t i o n t o borrow money t o pay o f f t h e e n t i r e amount due. O n October 7 , defendant t o l d M r . Rauch t o mail t h e balance due t o h e r , r a t h e r than d e l i v e r it p e r s o n ~ l - - l y . She received t h e check f o r t h e balance on October 1 2 . Defendant is in the peculiar position of arguing that Mr. Rauch was in default on the note, when the evidence establishes that she had agreed to accept the check she received on October 12 as the final payment. The Uniform Commercial Code provisions on commercial paper are applica- ble. Section 30-3-604, MCA, provides that " [a] ny party making tender of full payment to a holder when or after it is due is discharged to the extent of all subsequent liability for interest, costs, and attorney's fees." The defendant agreed by phone to accept $4,391.23 as full payment of the note, and asked that payment be mailed rather than hand-delivered. Mr. Rauch sent her a check for the total amount agreed upon, $4,391.23. The District Court found that Mr. Rauch was not in default. We conclude that. the District Court may properly be affirmed on this issue. I1 Was it proper for the District Court to award punitive damages to Mr. Rauch? Defendant argues that the award of punitive damages is improper because this is a contract action. Mr. Rauch's amended complaint requested punitive damages for the removal of the sprinkler from his property, which he characterized as a conversion. The District Court's conclusions state that it awarded $5,000 in punitive damages as a punishment for the "breach of defendant's obligation, not arising from the contract she broke, to allow the Plaintiff peaceable occupa- tion of his home and property" and for "Defendant's refusal to return either the spray system or the money ($5,000) paid down on it , I ' both of which the court found "oppressive and malicious." Punitive damages are proper in an action for a breach of an obligation "not arising from contract where the defendant has been guilty of oppression, fraud, or malice." Section 27-1-221 (1) , MCA. The breach of defendant's obligation to allow Mr. Rauch "peaceable occupation of his home and proper- ty" does not arise from contract. This Court has approved the award of punitive damages in similar situations where there was malicious conduct. In Butcher v. Patranel-, (1979) , 181 Mont. 358, 593 P.2d 743, this Court affirmed a jury award of $20,000 in punitive damages. Where the defend-ant had maliciously rammed a pickup truck into plaintiff's horse and driven a road grader across a section of plaintiff's wheat field. This Court also upheld the award of punitive damages in a case in which the defendant maliciously destroyed a gate and approach on plaintiff's property and intimidated plain- tiff with threats of bodily harm. Toeckes v. Baker (1980) , 188 Mont. 109, 611 P.2d 609. The court found tha-t part of Mr. Maykuth's motivation in entering the Rauch property and taking the sprinkler was to force Mr. Rauch to buy the granary. The defendant did not hold a security interest on the sprinkler under the Uniform Commercial Code. As a result, defendant had no right under the UCC to repossess the sprinkler, even if the payment obligation had been delinquent. The defendant as the holder of a promissory note was not entitled to repossess the sprin- kler under any condition. Without right or justification, and only a few days a.fter having been told that full payment was in the mail, the defendant's agent went upon the R-auch property and tcok the sprinkler, damaging the door of Mr. Rauch's storage shed. The District Court awarded Mr. Rauch $300 for damages to the door. Even though she had received the final payment, the defendant did not offer to return either the sprinkler or the fina.1 payment. Additionally, when defendant's agent entered the Rauch property to photo- graph the shed lock, he was aware of the request that he stay off the property. It is true that the District Court did not specifically find that the taking of the sprinkler consti- tuted a conversion. Apparently, that was based upon the contractual arrangement under which final title was not to be passed to the Mr. Makuth until full payment had been made. The record contains substantial evidence to support the conclusion of the District Court that the defendant's tres- pass upon Mr. Rauchls property was malicious. We affirm the District Court's award of punitive damages. Was the award of attorney fees to Mr. Rauch proper? The District Court awarded attorney fees to Mr. Rauch in the amount of $4,246.12, representing the proportion of total attorney fees allocable to the sprinkler system issue. Defendant contends that this award of attorney fees is not provided for by contract, by statute, or by case law. The District Court's award of attorney fees is based on a provision in the promissory note for the sprinkler and on the reciprocity provision at S 28-3-704, MCA. The promissory note contained the language "[tlhe makers and endorsers . . . agree to pay reasonable attorney's fees in case of default on this note." Section 28-3-704, MCA, provides that: [w] henever, by virtue of the provisions of any contract . . . one party to such contract . . . has an express right to recover attorney fees from any other party to the contract . . . in the event the party having that right shall bring an action upon the contract . . . then in any action on such contract . . . all parties to the contract . . . shall be deemed to have the same right to recover attorney fees and the prevailing party in any such a c t i o n , whether by v i r t u e of t h e express c o n t r a c t u a l r i g h t o r by v i r t u e of t h i s s e c t i o n , s h a l l be e n t i t l e d t o recov- e r h i s reasonable a t t o r n e y f e e s from t h e l o s i n g p a r t y o r p a r t i e s . The e f f e c t of 8 28-3-704, MCA, i s t o give a r e c i p r o c a l r i g h t t o a t t o r n e y f e e s t o a l l p a r t i e s t o a c o n t r a c t which provides f o r a t t o r n e y f e e s . Compton v. Alcorn (1976), 171 Mont. 230, 235, 557 P. 2d 292, 296. Defendant's counterclaim was an a c t i o n f o r damages f o r breach of t h e c o n t r a c t repre- sented by t h e promissory note. The D i s t r i c t Court found t h a t t h i s a c t i o n was s u f f i c i e n t l y within t h e realm o f c o n t r a c t a c t i o n s t o q u a l i f y under 8 28-3-704, MCA, and held t h a t M r . Rauch, a s t h e p r e v a i l i n g p a r t y , was e n t i t l e d t o attorney f e e s on t h a t p o r t i o n of t h e a c t i o n . h7e a f f i r m t h e decision of t h e D i s t r i c t Court. Affirmed. W e Concur: