No. 12931 INTHE SUPREME COURT OF THE STATE OF MONTANA 

### 1975

MAURICE CRNCEVICH and NANCY L. CRNCEVICH, Plaintiffsand Respondents and Cross-Appellants,

GEORGETOWNRECREATION CORPORATION and EDWARD D. DUNN, Defendants andAppellants.

Appeal from: District Court of theThird Judicial District, Honorable James D. Freebourn, Judgepresiding Counsel of Record: ForAppellants: Radonich and Reardon, Anaconda, Montana John

### N. Radonich argued and TimW. Reardon argued,

Anaconda, Montana For Respondents: Hennessey andWinston, Butte, Montana McKeon and Skakles

# ,Anaconda, Montana Gregory J. Skakles argued, Anaconda, Montana

Submitted: September 12, 

### 1975 ~ecided :

## 02.7

# -, Filed: 

### 'I?'Mr. JusticeWesley Castles delivered the Opinion of the Court.
This is an appeal from a judgment in an action for collection of a promissory note and for damages arising under

a contract for deed rendered by the district court, third judicialdistrict, Deer Lodge County, Judge James D. Freebournpresidingwithout a jury. Respondents cross-appealed the district court's denial of attorney's fees and of damages to the property involved in the transaction. In the summer of 1966 the respondents,Maurice L. and Nancy L. Crncevich,negotiated the sale of a certainproperty known as the Brown Derby,a bar,motel and restaurant located

near Georgetown Lake for $72,800. The negotiationswere between the Crncevichesand the appellant,Edward D. Dunn. At the conclusion of the negotiations the latter signed a $20,000 promissory note onAugust 8,1966,a buy and sell agreement onAugust 15, 1966,and a contract for deed for deed for $52,800 on September 15, 1966. Thebuy and sell agreement and the contract for deed were signed by appellant as attorney-in-fact for a Georgetown Recreation Corporation. This corporation by appellant's own admissionwas never formed and was used only to hide his involvement in this transaction. One additional fact to this transactionwas that the respondents did not own all the land onwhich the Brown Derby

was situated. Approximately 1.9 acreswas leased from the U.S. Forest Service. Both the buy and sell agreementand the contract for deed referred to thisproblem. The buy and sell agreement stated that the 

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## * Sellers [respondents]have been reliably informed that the Forest Service is ready,willing, and able to trade other lands in exchange for a patent to the portion not owned

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## *." (Emphasis added) Both the buy and sell agreement and the contract for deed contained provisions thatwould giveappellant his expenses in effecting this trade. Possession of the Brown Derbywas transferred and a third party,WilliamMontgomery,began managing the operation. Montgomery alsomade payments on the note to the respondents through a Mr. Andre and payments on the contract for deed to the escrow agent, the FlintCreek Valley Bank in Philipsburg, during 1966 and 1967. The payments on both note and contract fordeed became delinquent in 1968 resulting in a meeting between appellant, respondentand Montgomery and a $1,200payment

on the note. After this 1968meeting, appellant and Montgomery worked out an arrangement whereby Montgomery transferred 35% of each days receipts to appellant in an effort to keep the payments on the note and contract for deed current. Despite this effort the payments again became delinquent although appellant did make regular interestpayments on the note until the Brown Derbywas vacated in September 1972. In the summer of 1972 respondentsmade another demand forpayment in a meeting with Montgomery and received $2,000. Finally a shortage of money forced Montgomery to close and vacate the Brown Derby. Respondents' relativeswent into possession of the Brown Derby operating it from November 1972 until respondents, who had returned from California, took over in October 1973. Montgomery had also been unsuccessful in effecting a trade of land with the Forest Service between 1966 and 1972. Instead a Mrs. Hartley had obtained the Forest Service lease for the 1.9 acreswhere the Brown Derby was located. She had then traded some other propertywhich she owned to the Forest Service for title to the 1.9 acre Brown Derby parcel. This actionwas commenced December 20, 1972, seeking the amounts due and owing under the note and contract for deed, taxes, attorney's fees and special damages from appellants. At the timeof trial the balance owing on the note plus interestwas $17,723.83 plus $60,176 owing on the contract for deed. Respondents amended their complaint at trial before District Judge JamesD. Freebourn to ask in the alternative for specific performance of the contract for deed or return of the land plus damages and expenses incurred, forbreach of contract for failure to procure the Forest Service land,and in the alternative for reliefbecause the appellantswere guilty of anticipatory breach of contract. On June 28, 1974, judgmentwas entered for the respondents awarding $17,723.83 on the note and $35,000 for breach of contract with respect to the 1.9 acres of Forest Service land. OnAugust 29, 1974,Judge Freebourn amended his judgment awarding respondents 

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## * $22,723.83 plus whatever is required to correct title to the land in dispute herein not to exceed $35,000.

## * * *" Appellant has appealed that judgment to this Court and respondents challenge the district court's denial of attorney's fees and denial of damages and costs of repairing the Brown Derby. These issues are presented for review: 

### I. Did the district court err in finding the appellant liable for the balance and interest due on the promissory note which he executed? 2. Was it error for the district court to refuse to grant respondents attorney's fees? 3. Was it error for the district court to fail to award respondents the cost of repairing the Brown Derby and the cost of replacing various itemswhich were part of the Brown Derby? As to appellant's liability on the note the district court specifically found: "That the Plaintiffs [respondents]and Defendant Edward D. Dunn [appellant] entered intonegotiations for thepurchase of the Brown Derbv

## * * * these negotiations culminated in three iGstruments-- a promissory note ofAuqust 8, 1966; a Buy andfor Deed of September 15, 1966. "That the GeorqetownRecreation Corporationwas nonexistent

## * * * and that Edward D. Dunn was the party responsible on these instruments.

"That the promissory note of August 8, 1966, was qiven as a down payment for the purchase of the Brown Derby, and the entireprincipal and interest is now due and owinq on such note in the sum of Seventeen Thousand Seven Hundred Twenty-Three and 83/100 ($17,723.83)Dollars." (Emphasisadded) Appellant argues that the district erred because the promissory notewas part of a single transactionand that since the respondent elected to recover the land rather than specific performance under the contract for deed, there can be no recovery
on the note. On appeal this Court must inquire only as to whether there is substantial credible evidence to support such a finding by the district court. See Richardson v. Howard Motor,Co. 163 Mont. 347, 351, 516 P.2d 1153; State Highway Comrn. v. West Great Falls Flood Control and Drainage District, 155Mont. 157, 468 P.2d 753, and Spencer v. Robertson, 151Mont. 507, 445 P.2d 48,and

cases cited therein. To determine the intention of the parties as to the independence of these instruments the district court had this evidence before it: (1)The note was signed by appellant and makes no reference to any other instrument. Itwas executed onAugust 8, 1966, in the amount of $20,000 at 

### 7% interest. (2)The contract for deed makes no reference to the note. It was executed on September 15, 1966, in the amount of $52,800 at 7% interest.

(3)The escrow instructions at the Flint CreekValley Bank in Philipsburgmade no reference to the note. (4)Both parties acknowledged the note was intended as a down payment. (5)Appellant took special pains to insure that respondentsreceived allinterestpayments on the note up until September 1972,while showing no such concern for thepayments under the contract for deed. We conclude that this amounts to sufficient credible evidence and that appellant's argument fails. Appellant advanced an alternative argument that a novation occurred during the meeting between respondents, appellant, and Montgomery in the summer of 1968 that released him from liability

on the note. It appears however, that appellant failed to submit a proposed finding to the district court to the effect that respondents had agreed to releasehim from liability on the note and to substitute Montgomery in appellant's place. Hence appellant cannot cite the district court for error based on a finding which he has not requested. SeeMahoney v. Lester, 118Mont. 551, 556, 168 P.2d 339 and cases cited therein; Bissell v. Bissell, 129Mont. 187, 199, 284 P.2d 264. Appellant also argued that the district court's findings

were erroneous because it found appellant liable on the note as a surety or guarantor of the Georgetown Recreation Corporation. We are franklybewildered by this claim since the district court specifically found that the Georgetown Recreation Corporation

was a nonexistent fiction. Therefore we find no basis for appellant's argument and disregard it. As to the cross appeal by respondents for reasonable attorney feesprovided for in the promissory note,we are particularly concernedwith respondents' failure to present any proof to the district court on this issue. While no Montana case speaks directly to the case where the terms of a promissory note provide for the award of reasonable attorney's fees in case of a suit

on the note, this Court did set forth the following criteria for the award of attorney's fees in the early case of Forrester & MacGinniss v. B. & M. Co., 29 Mont. 397, 409, 74 P. 1088:"Theauthorities are unanimous in holding that the plaintiffs are entitled to recover a reasonable attorney fee, and for the purpose of determining the amount of such fee the following rule has been laid down: 'The circumstances to be considered in determining the compensation to be recovered are the amount and character of the services rendered, the labor, time and trouble involved, the character and importance of the litigation inwhich the serviceswere rendered, the amount ofmoney or the value of property to be affected, the professional skill and experience called for, the character and standing in the profession of the attorneys. 

## * * * The result securedby the servicesof the attorneysmay be considered as an important element in determining their value.'" Clearly this rule is based on the assumption that evidence will be introduced to the trial court. To be sure there is a split among the states as to the need forproof of a reasonable attorney's feewhen one is contracted for or appears on the face of a note. See 18A.L.R.3d 733, 736, 740. But in contested cases we are inclined to follow those states requiring the introduction of proof fromwhich a reasonable feemay be determined. To award a fee in such a case without proof would be to disregard the fundamental rules of evidence. An award of fees, like any other award, must be based

/ on competentevidence. See Lyle v. Lyle, (Fla. 1964) 167 So.2d 256, 257. Furthermore the proper determination of a legal fee is central to the efficient administration of justice and the maintenance of public confidence in the bench and bar. See Baruch v. Giblin, 122 Fla. 59, 164 SQ. 831, 833. Because of respondents' failure of proof the award of fees was properly denied. Respondents also find error in the district court's failure to award damages and costs to respondents for repairs and replacementof equipment connectedwith the Brown Derby. In reviewing the Judge's findings we need only determinewhether there is substantial evidence to support them and we will notreverse such findings unless there is a clearpreponderance of evidence against such findings. See Cope v. Cope, 158Mont. 388, 493 P.2d 336; Smithv. Krutar, 153Mont. 325, 457 P.2d 459, and Spencer v. Robertson, 151Mont. 507, 445 P.2d 48. We do not find the evidence clearly preponderates against the district court's finding. Respondents offered expert testimonybased

on inspection of the premises one day before trial and almost 18months after Montgomery vacated. This experthad no knowledge of the Brown Derby's condition in September 1972 or of its condition in 1966 leaving more than a little doubt as to its probative value. Even respondents' own testimony as tomissing itemswas based on a view made sometime after the Brown Derby had been vacated in September 1972. Respondents' cross appeal

on this issue cannot succeed based on the weak proof which they offered to the district court. One portion of the district court's award, Judge Freebourn's amended judgment ofAugust 29, 1974,granting respondents 

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## * whatever amount is required to correct title to the land in dispute herein,not to exceed $35,000.

## * * *" (Emphasis added) does trouble this Court. The land in dispute is about 1.9 acres in size,yet the only mention in the record concerning its $35,000 value was a reference toMrs. Hartley's proposed selling price for a 35-40 acre parcel which contained the disputed 1.9 acres. This is obviously insufficientproof upon which to base the award, and thereforewe must reverse thatportion of the judgment and remand thatportion of the judgment to the district court for more further proceedings if necessary. Such proceedingsmust be initiatedby the respondenthere within thirty days of remittitur

or shall be deemed abandoned. Finallywe address ourselves to a few technical corrections of Judge Freebourn's finding of fact and amended judgment.Respondents' findings of factVII and VIII are stricken to conform to Judge Freebourn's conclusion that no costs for repairs or damages for missing equipment etc. be awarded. Judge Freebourn's amended judgment ofAugust 29, 1974, is also corrected to allow respondents to recover $17,723.83 in order to conform to his denial of attorney's fees to the respondents. The district court's judgment is affirmed.

We concur:



### ................................ chiefJustice