No. 92-380 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

WILLIAM B. MALONEY and 

MARGARET N. MALONEY, 

Plaintiffs and Appellants, 

WILLIAM HEER and JOYCE I, HEER, 

Respondents and Appellants. 

APPEAL FROM: District Court of the Sixth Judicial District, 

In and for the county of Park, 

The Honorable Byron L. Robb, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Larry Jent, Williams, Jent & Dockins, Bozeman, 

Montana 

For Respondent: 

Joseph T. Swindlehurst, Huppert & Swindlehurst, 

Livingston, Montana 

Submitted on Briefs: January 14, 1993 

Decided: April 8, 1993 
Justice Fred J. Weber delivered the opinion of the Court. 

Plaintiffs William 3. Maloney and Margaret N. Maloney 

(Maloneys) appeal the decision of the District Court of the Sixth 

Judicial District, Park County, in their action for breach of a 

real estate contract which awarded damages to the Maloneys for 

their costs of a survey of the property but denied other damages 

and attorney's fees. Defendants William and Joyce I. Heer (Heers) 

cross-appealed, claiming there was no breach, that the Maloneys 

were precluded from pursuing this appeal, and that the claim was 

barred by the statute of limitations. We affirm in part, reverse 

in part, and remand. 

The restated issues for appeal are: 

1. Did the District Court err when it denied the defendantst 

motion for summary judgment on the basis of the statute of 

limitations? 

2. Were the plaintiffs precluded from pursuing this appeal by 

their acceptance of damages? 

3. Did the District Court err in finding a breach of contract 

which did not affect marketability of title? 

4. Did the District Court award the correct damages to the 

Maloneys? 

5, Did the District Court err by not awarding attorney's fees 

to the plaintiffs? 

The Heers and the Maloneys entered into an agreement for the 

sale of the Parkway Motel in Livingston, Montana on August 16, 

1985. The agreement provided, among other things, that the Heers 

would assign their Burlington Northern railroad lease to the 
Maloneys at closing. Subsequently, the parties executed a contract 

for deed on September 16, 1985. 

The contract for deed stated there was a Burlington Northern 

railroad lease held in connection with the premises which the Heers 

would assign to the Maloneys. Both the Maloneys and the Heers were 

mistaken about the area covered by the lease. Although the 

Maloneys inspectedthe property several times before closing on the 

contract for deed, they did not inspect a copy of the lease. The 

contract for deed also included a provision agreeing that the 

sellers made no representations not included in the agreement and 

that the purchasers relied on their own knowledge and inspection of 

the premises. 

On December 6, 1985, the railroad sent the Maloneys a lease 

application letter which stated that the Maloneys had "purchased 

the motel that encroaches on our property." The application 

described the same area as the prior lease. On January 14, 1986, 

the Maloneys returned the completed application to the railroad. 

In answering questions in the application, the Maloneys stated that 

the use to be made of the site was a motel encroachment and listed 

a 'Iportion of the motel" as a response to the question asking for 

a list of all buildings or structures presently on the site covered 

by the lease. The railroad returned executed leases on October 10, 

1986 for an indefinite term at the rate of $180 per year, reserving 

the right to change the lease rate in the future. 

Neither the buy/sell agreement nor the contract for deed 

specifically disclosed any encroachment of the motel building or 
appurtenances into the railroad right of way. The buy/sell 

agreement stated that, 'Itha real property is to be conveyed by 

warranty deed . . . Both the real and personal property shall be 

free and clear of all encumbrances except those described in this 

agreement. u The contract far deed provided that the property would 

be conveyed "by good and sufficient warranty deed, accompanied by 

a title insurance policy showing merchantable title.#' At the time 

the District Court issued its findings and conclusions on April 2, 

1992, both the Maloney-Heer contract for deed and the contract for 

deed between the Heers and the prior owners (Kovashes) were still 

in escrow. The Kovashes had transferred the railroad lease to the 

Heers on June 16, 1978 after selling the motel to the Heers in 

1977. That lease stated that it was for "maintaining and operating 

thereon a portion of a motel.tf An attached diagram indicated a 20' 

by 20' area. The Heersl subsequent lease dated June 16, 1978 makes 

no reference to the motel. Joyce Heer testified the Heers had been 

told by Mr. Kovash when they purchased the motel that the lease was 

for parking. 

The Maloneys have operated the motel since September of 1985. 

In 1988, when Mr. Maloney contacted a real estate office in 

Livingston, the realtor was unwilling to take the listing because 

of the encroachment. The Maloneys then hired a surveyor to survey 

the property, incurring survey fees of $3,895.50. The surveyor 

determined that the encroachments consist of a small triangular 

portion of the motel building (about 115 square feet), tiny parts 

of a planter/sign and of a swimming pool/garbage storage area 
(about eight and twelve square feet, respectively) in the central 

parking area, and a small part of the motel eaves on the south end 

of the building. 

The Maloneys unsuccessfully tried to negotiate a long-term 

lease with the railroad. After the Maloneys initiatedthis action, 

the Heers1 attorney assisted the Maloneys in obtaining a new 

railroad lease for a strip four times as large as the area covered 

by previous leases with an annual rent of $384. This lease 

commenced August 1, 1990 and will end July 31, 2020, with an option 

to renew for two succeeding ten year periods--a total of fifty 

years. The Heers expert testified that the new lease term exceeds 

the foreseeable thirty to forty-year useful life of the motel for 

ordinary real property depreciation purposes. 

The District Court determined that the present value of the 

lease assigned with the motel purchase and the present value of the 

new lease for fifty years differed by only $2,495.63, a nominal 

amount over that period of time and not a reasonable basis on which 

to award damages. Further facts will be provided throughout this 

opinion as necessary. 

I. 

Is the Maloneys' claim for breach of contract barred by the 

statute of limitations? 

The Heers raised this issue in a motion for summary judgment. 

Our standard of review for a District Court's conclusion of law is 

whether it is correct. Steer, Inc. v. Department of Revenue 

(1990), 245 Mont. 470, 803 P.2d 601. The Heers contend that the 
two-year limitations period for fraud and mistake under 27-2-203, 

MCA, applies to this action instead of 5 27-2-202, MCA, which 

allows an eight-year period for contract actions founded upon a 

written instrument. They claim that this case involves a mutual 

mistake relating to the railroad lease and is not a contract action 

governed by 1 27-2-202, MCA. 

This Court recently held that 5 27-2-202, MCA, governed an 

action on a contract for deed which affected real property 

boundaries. See Larson v. Undem (1990), 246 Mont. 336, 805 P.2d 

1318. In that case, the vendors breached the contract when they 

sold the property without first obtaining written consent from 

their vendor and by failing to provide an accurate legal 

description of the property. Larson, 805 P.2d at 1321. We 

conclude that the gravamen of the claim pursued here is a breach of 

contract action governed by the eight-year statute of limitations 

provided for in 5 27-2-202, MCA. See Erickson v. Croft (1988) , 233 

Mont. 146, 760 P.2d 706. 

We hold the Maloneys' breach of contract claim was not barred 

by the statute of limitations. 

Are the Maloneys precluded from pursuing this appeal by 

accepting damages paid to them from funds held by the court? 

The Maloneys deposited funds with the court rather than make 

their payments under the contract directly to the Heers pending 

disposition of this case. They accepted payment from these funds 

for survey costs awarded to them in this action. The Heers contend 
that by accepting the $1,895.50 from the court, the Maloneys cannot 

now appeal from the District Court's judgment because they have 

acquiesced in the judgment. 

The Heers cite Niles v. Carbon County (1977), 174 Mont. 20, 

568 P.2d 524; LeClair v. Reiter (1988), 233 Mont. 332, 760 P.2d 

740; and Peck v. Bersanti (1935), 101 Mont. 6, 52 P.2d 168, in 

support of their contentions. These cases do not support their 

argument. Niles and LeClair provide that a party who has a 

judgment entered auainst him and who allows the judgment to be 

executed against him or pays the judgment voluntarily cannot then 

appeal if his conduct is inconsistent with the appeal. && holds 

just the opposite of what the Heers have contended. 

In Peck, we discussed the general rule on this issue that one 

cannot both accept the fruits of a judgment and appeal from it at 

the same time. Peck, 52 P.2d at 169. This Court has also 

recognized the exception to the general rule-- 

where the reversal of a judgment cannot possibly affect 

an appellant's right to the benefit accepted under a 

judgment, then appeal may be taken and will be sustained 

despite the fact that the appellant has sought and 

secured such benefit. 

After Peck, this Court again discussed the general rule and 

the exception in Ferguson v. Town Pump, Inc. (1978), 177 Mont. 122, 

580 P.2d 915. In Fercruson, the plaintiffs asked on appeal for 

damages to be mathematically increased. This Court stated that 

Where the only possible outcome of a successful appeal by 

a plaintiff is an increase in the damage award, then 

there is nothing inconsistent about accepting the fruits 

of the original judgment and appealing from it, and such 
an appeal may properly be taken. 

Fersuson, 580 P.2d at 918. Fersuson is directly on point here. 

The Maloneys have appealed to increase their damage award. 

Although the issue whether the District Court erred in granting the 

Maloneys damages for survey costs is before the Court, it is the 

Heers who cross-appealed that issue, not the Maloneys. 

We hold that the Maloneys are not precluded from pursuing this 

appeal by accepting damages for their costs of survey. 

Did the District Court err in finding a breach of contract 

which did not affect marketability of title? 

The Heers contend that there cannot be a breach of contract 

where the title was not rendered unmarketable and the plaintiffs 

suffered no damage to cure the breach of contract. They maintain 

that an encroachment which is minimal and does not expose the buyer 

to a reasonable prospect of litigation is not unmarketable. 

The District Court here found that the Heers breached the 

contract and awarded the Maloneys $1,895.50 for their costs to 

survey the property. The breach here is a contract breach of the 

covenant against encumbrances. The contract for deed provides in 

pertinent part: 

IT IS MUTUALLY UNDERSTOOD AND AGREED That Sellers shall 

execute and deliver a Bill of Sale and Bulk Sales 

Affidavit reflecting that the personal property is 

conveyed free and clear of all liens and encumbrances, 

with the exception of the amount owing Empire Federal 

Savings and Loan Association, of Livingston, Montana, on 

the Montana Trust Indenture hereinbefore referred to; and 

that the Sellers shall likewise execute a Warrantv Deed -- - 

to the Purchasers, of even date herewith. convevinq and 

assurinsthe said Purchasers title to the above-described 
property. free and clear of all encumbrances . . . (Emphasis supplied.) 

The contract further provided that the Heers would assign 

their lease to the Maloneys. Both parties agree that they 

understood that the purpose for the railroad lease was for parking. 

An earlier lease unseen by either party had stated its purpose as 

an I8encroachment of motel. I' 

Nonetheless, the contract provided that the property would be 

conveyed free of encroachments not specified in the contract. None 

of the instruments disclosed encroachments of the motel building on 

the railroad right of way. It appears that the Heers were not 

aware of this during the time of their ownership. The District 

Court determined that this was a l'technical" breach of the contract 

and of title because the Heers warranted that the title would be 

free of encumbrances. We agree with the conclusion of the District 

Court that this is a breach of the contract. 

Counsel for the Heers assisted the Maloneys in procuring a 

thirty-year long-term lease with options for two additional tenyear extensions. The District Court concluded that because of the 

motel's age, there would be no possibility that the problem would 

extend beyond the depreciable useful life of the motel. The 

District Court further justified its finding of marketable title as 

follows: 

Maloneys operation of and income from the motel has not 

been hindered or impaired by the encroachments . . . [Alny damage from this is so insubstantial and the 

likelihood of litigation so remote that it does not 

render title to the property unmarketable. . . . It is 

also significant that these encroachments and conditions 

have existed for forty years with no objections from the 
railroad or other adjoining owners . . . An encroachment on adjacent property does not necessarily make 

a title unmarketable. 

If A owns Blackacre, his title thereto is not bad by 

reason of a structure thereon that encroaches on 

adjoining premises. A's title is unmarketable, however, 

if the encroachment jeopardizes a buyer's peaceful 

possession by exposing the buyer to the possible 

necessity of removing the encroachment. . . . If the 

encroachment is by Blackacre, marketability depends upon 

two factors: (1) is the encroachment substantial? (2) may 

the encroachment, if substantial, remain undisturbed? 

1 M. Friedman, Contracts and Convevances of Real Pro~ertv (5th ed. 

Marketable title is a question of law for the court. While it 

is doubtful that the encroachment in this case could be classed as 

substantial under the above test from Friedman's Contracts and 

Convevances of Real ProDerty, it is clear that the encroachment may 

remain undisturbed during the remaining years of the potential 50- 

year duration of the current lease term. 

We hold that the District Court was correct in finding a 

breach of contract which did not render the title unmarketable. 

IV. 

Did the District Court correctly award damages? 

The District Court awarded the Maloneys $1,895.50 for their 

costs in obtaining a survey of the property. The court determined 

that any other costs presented by the Maloneys for determination 

were speculative, nominal over the period of time of the lease and 

did not form a reasonable basis on which to award damages. 

A1t:hough the annual lease payment has increased over the years, 
this could be expected as the lease agreement provided for such 

increases. The court further Sound that the Maloneysl operation of 

and income from the motel had not been hindered or impaired by the 

encroachments. In fact, their earnings from the operation were 

higher than they had expected and they had increased the revenues 

by 24% over the figures reported by the Heers, even though they had 

converted one of the motel bedrooms to their own personal family 

use. 

Both parties presented expert testimony relating to damages. 

The Maloneysi appraiser, Steven A. Hall, testified that it would 

cost $19,761.52 to cure the encroachments. He acknowledged that 

there was no reasonable possibility of litigation with the railroad 

with the fifty-year lease. Mr. Hall's calculation was based on a 

strip of right of way 20' by 264', the entire length of the 

property. Mr. Hall testified that he was not aware the original 

lease included part of the building and that this information would 

affect his calculations of the cost to cure. James E. Burke, a 

realtor and appraiser, testified for the Heers. He testified that 

the encroachments did not have any significant effect on the value 

or marketability of the property and that the gross revenues from 

the business were much more important in determining such fact. 

We review a district court's findings of fact to determine 

whether they are clearly erroneous. Interstate Prod. Credit Ass'n 

v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285. To determine if 

findings are clearly erroneous, we first review the record to 

determine whether they are supported by substantial evidence. 
Second, if the findings are supported by substantial evidence, we 

determine if the trial court has misapprehended the effect of the 

evidence. Third, if substantial evidence exists and the trial 

court has not misapprehended the effect of the evidence, this Court 

may still find clear error in a finding, despite evidence to 

support it, if a review of the record leaves it with a firm and 

definite conviction that a mistake has been committed. DeSave, 820 

P.2d at 1287. 

Although conflicts may exist in the evidence presented, it is 

the trial judge's duty to resolve them and due regard is given to 

the court's ability to judge the credibility of the witnesses. 

DeSave, 820 P.2d at 1287. The District Court's findings relating 

to damages are supported by substantial evidence in the record. 

The District Court explained why the testimony of the Heersl expert 

was more credible. The Heerst expert based his calculations upon 

credible mathematical calculations of differences in present values 

for annual rent over fifty years between the old lease and the new 

lease. That calculated difference was only $2,495.63 more for a 

new lease which covered an area four times larger than the old 

lease. Not only is this amount nominal when distributed over the 

fifty-year period, it is speculative. 

The District Court determined that the Maloneys should be 

awarded costs fortheir survey. The Maloneys presented evidence of 

their costs of survey and the need for that survey. This too is 

supported by substantial evidence. After a thorough review of the 

record, we conclude that the District Court's findings regarding 
damages are not clearly erroneous. They are supported by 

substantial evidence in the record, the District Court did not 

misapprehend the effect of the evidence and we are not left with a 

firm and definite conviction that a mistake has been made. 

We hold that the District Court properly calculated the award 

of damages allowable to the Maloneys. 

v. 

Did the District Court err by not awarding attorney's fees to 

the plaintiffs? 

The Maloneys contend that they are the prevailing party in 

this action as the District Court found a breach of contract and 

awarded them damages for their survey costs. The general rule in 

Montana is that attorney's fees are not recoverable absent a 

statutory or contractual provision. Here, the contract for deed 

provides : 

IT IS FURTHER AGREED That, if it becomes necessary for either 

of the parties to bring suit to enforce any of the terms of 

this agreement, the prevailing party shall be entitled to 

reasonable attorney's fees, together with other costs 

attending the same, from the other party. 

The District Court found that because of the circumstances of this 

case, each side should pay their own attorney's fee. The court 

reasoned that although the contract provides for attorney's fees to 

the prevailing party in the event of a lawsuit, plaintiffs did not 

prove any real damages aside from the costs of surveying. The 

court noted that the Heers' counsel had assisted Maloneys in 

obtaining a ''very favorable new long term lease from the railroad." 
While the record shows that the Heers' counsel assisted the 

Maloneys in negotiating a new lease, this assistance was not 

forthcoming until after the Maloneys initiated this lawsuit. When 

the Maloneys were first told by a realtor that there was a possible 

marketability of title problem, they advised the Heers to that 

effect. They unsuccessfully tried to negotiate a more preferable 

long-term lease with the railroad. Again, it was only after their 

own efforts failed that they pursued this action against the 

Heers. As a result of this lawsuit, the Maloneys acquired a new 

lease and incurred survey costs--all of which required their time 

and effort. 

The contract is clear--the prevailing party is entitled to 

attorney's fees. We have previously concluded the Heers breached 

the contract. Under the terms of the contract, the Maloneys as the 

prevailing party are entitled to attorney's fees. However, the 

Heers contend that the Maloneys, having been awarded only 

$1,895.50, are hardly the prevailing party. 

The Heers cite Montana cases to support this argument, 

including Knudsen v. Taylor (1984), 211 Mont. 459, 685 P.2d 354, 

and Parcel v. Myers (1984), 214 Mont. 220, 697 P.2d 89. None are 

similar to this one. All other claims brought by the Maloneys were 

dismissed and the only issue remaining at the time of the bench 

trial was the contract issue, which the court found was technically 

breached by the Heers. The Heers make much of the District Court's 

use of "technical" to describe the breach. A technical breach is 

still a breach of contract, although the damages may be nominal. 
We conclude that the contract breach in this case entitled the 

Malaneys to reasonable attorney's fees as the prevailing party. 

The record shows that the Maloneys unsuccessfully attempted to 

negotiate a long-term lease to substitute for the indefinite term 

lease they had assumed. While the Maloneys benefitted from the 

assistance of the Heers' counsel, we are unable to determine 

whether this satisfies the contract term providing for reasonable 

attorney's fees to the prevailing party. This assistance 

demonstrates that the Heers tried to mitigate their damages, but it 

does not establish that such action can take the place of a 

"ireasonable" attorney's fee. 

The contract for deed requires an award of a reasonable 

attorney's fee to the prevailing party. Although the fixing of 

reasonable fees is within the discretion of the District Court, 

Smith v. Johnson (IggO), 245 Mont. 137, 798 P.2d 106, the record 

does not support the District Court's decision concerning 

attorney's fees. 

Affirmed in part, reversed in part and remanded to the 

District Court for a determination of reasonable attorney's fees. 

We Concur: A