No. 14263 INTHE SUPREME COURT OF THE STATE OF MONTANA 1979

EUGENE HIGGINS et al.

## , Plaintiffs and Respondents,

-vsTHE MONTANA HOTEL CORPORATION etal., Defendants and Appellants.

Appeal from: DistrictCourt of the Third Judicial District, Honorable Robert J. Boyd, Judge presiding. Counsel of Record: For Appellants: McCaffery and Peterson, Butte, Montana John L. Peterson argued, Butte, Montana For Respondents: Poore, McKenzie, Roth, Robischon & Robinson, Butte,

Montana James A. Poore argued, Butte, Montana Michael J. McKeon, Anaconda, Montana

Submitted: February 13, 1979 Decided: 

### M4r(

## 12193 i\bb\i, 

## L i9-i3 Filed:Mr. Chief Justice Frank I. Haswell delivered the Opinion of the Court. This appeal is from a judgment entered in the District Court for Deer Lodge County, on March 20, 1978, in a tax title proceeding. Appellant appeals from the decree quieting title in respondent and respondent asserts that attorney fees should be awarded. On April 6,1964, the Montana Hotel Corporation, as owner of the Marcus Daly Hotel inAnaconda,Montana entered a construction contract with Thomas Lutey,doing business as Lutey ConstructionCompany. The contractprovided that Lutey Construction Company (Lutey)was to remodel the hotel and build amotel

on adj acent lots. Lutey completed work in 1965 and being unpaid for part of the contract, on October 25 of the sameyear, filed a mechanic's lien against the hotel and motel properties. Other contractors

were in the same position and also filed liens. In a foreclosure action commenced by the other contractors on April 19, 1967, Lutey, the Montana Hotel Corporation and others were named as defendants. Lutey cross-complained and his lien, in the amount of $56,070was foreclosed by a default judgment entered on March 2, 1977. The judgment recited that Lutey had a "firstvalid and subsisting lien upon the interest of the Montana Hotel Corporation." Meanwhile,Montana Hotel had leased the property upon which themotel was to be built from Torgerson Brothers, Inc. with the understanding that it would be built. The motel was built but the corporation did not pay its property taxes for 1967, 1968, 1969, 1971, 1972 or 1974 and theproperty was struck off to Deer Lodge County in the amounts assessed. On January 27, 1976,Eugene Higgins,a respondent in this action,paid the taxes, received a certificateof tax assignment on the hotel property, and published notice of intent to applyfor a tax deed to thatproperty. On May 12, 1976,Montana Hotel Corporation assigned its leasehold interest in the motel property to Higgins. On May 27, 1976,Higginspaid the back taxes,penalties and interest accrued which pertained to the buildings and improvements on themotel property. The county treasurer considered the motel building and improvements to be personal property and did not issue a certificate of tax assignment. On February 11, 1977,Higgins entered into a contract with Marouf Carpenter, a respondent in this action,whereby Carpenter obtained an option to purchase themotel property. The contract provided that Carpenter would not have to purchase until satisfied that Higgins' leasehold could be transferred free and clear of all liens and encumbrances. Carpenter began operation of the motel on February 15, 1977 and at the time of trialwas still running theMarcus Daly Motel. BetweenApril 6, 1977 and August 11, 1977,Higgins and Carpenter made expenditures totaling $33,840.66 which, for purposes of this decision, will be assumed to be expenses incurred inmaintaining and improving themotel property. OnAugust 18, 1977,Higgins filed his complaint in two counts seeking to quiet title in the hotel property (Count 

### I) and to procure a tax deed to and quiet title in the motel property (Count 11). A show cause hearing was subsequentlyheld and the court ordered that a payment of $56,756.32 was necessary to redeem the motel buildings and improvements. Lutey deposited this amountwith the clerk of court on October 6,1977 and filed his answer to the complaint. He asserted that he was,by the filing of his mechanic's lien and the foreclosurethereon which has remained unsatisfied, a lienholder and therefor a proper redemptioner. Lutey did not assert an interest in the hotel property.The trial court adopted Higgins' findings of fact and conclusions of law. Count I of the action is not included in this appeal. With regard to Count 11, the District Court held thatKigginswas entitled to a certificate of tax assignment under section 84-4138, R.C.M. 1947,now section 15-17-303MCA, and that because of laches,Luteywas estopped from redeeming theproperty. The court ordered that Lutey's deposit be returned to him and that a tax deed to themotel buildings and improvements be issued to Higgins. Although the complaintprayed for attorney fees,no evidence was produced at trial upon which to base an award and none were awarded. The following issues are raised on appeal:

(1)Whether laches will apply to bar a redemptioner in an action to procure a tax deed. (2)Whether in an action to procure a tax deed a redemptioner must reimburse the plaintiff for improvement and maintenance expenses incurred in addition to the taxes,penalties and interestpaid by the plaintiff. (3)Whether attorney fees are available when the issue ispleaded but not raised at trial ormade part of the trial court's judgment. Under Montana law,when property taxes are not paid, the property is sold at a tax sale pursuant to the procedure set forth in section 84-4117 et seq., R.C.M. 1947, now section 15-17- 101 et seq. MCA. When there is no purchaser at the salettheproperty is sold or struck off to the county for the amount of tax due. Section 84-4124,R.C.M. 1947,now section 15-17-207 MCA. After this has occurred the countymay assign its interest to anyone who pays the taxes due on theproperty plus penalties, costs and interest. It then issues the assignee a certificate of tax assignment. Section 84-4138,R.C.M. 1947,now section 15- 17-303MCA. In this case no certificatewas issued but it was agreed by the parties that Higgins, upon his payment of the amountsdue was entitled to one and we shallproceed as if it had in fact been issued. The assigneedoes not have title to the property; rather he has an inchoate rightwhich can ripen into

a title which is free from all encumbrances. Johnsonv. Silverbow County (1968), 151Mont. 283, 287, 443 P.2d 6; Jensen Livestock Co. 

### v. Custer County (1942), 113Mont. 285, 295, 124 P.2d 1013. Title to the property in the form of a tax deed may be obtained in either of two ways. Thepurchaser or his assignee may employ the statutory method as outlined in section 84-4151 et seq., R.C.M. 1947,now section 15-18-~&cA, whereby notice of the intention to procure a tax deed must be given to all potential redemptioners. The secondmethod is to bring a civil action in the countywhere the property is located. Section 84-4162 et seq., R.C.M. 1947, now section 15-18-301 et seq. MCA. Respondents used the judicialmethod and the code sectionsperto tinent thereto /govern our decision. In judicial proceedings to procure a tax deed all parties who have a recorded interest in the property are to be made deR.C.M. 1947 fendants. Section 84-4163 et seq./, now section 15-18-302 MCA. It is alsoprovided that: 

### " 

# ...Any defendant to the actionmay make redemption of the lands from the tax sale by paying the total amount of delinquent taxes and penalties which plaintiff has paid,with interest thereon at 8% a year fromdate of payment, togetherwith costs of the action. Upon suchpayment, a certificate of redemption shallbe issued by the county treasurer to the defendant so paying, and thereupon the action shallbe dismissed 

# ..."Section 84- 4166,R.C.M. 1947,now section 15-18-305 MCA. Respondents' contention that Lutey is barred by laches from redeeming the property ispremised on two sets of circumstances. They first assert that the delay between the filing of Lutey's mechanic's lien in 1965 and its foreclosure in 1977 constitutes laches. In effect, they urge this Court to ignoreLutey's "valid and subsisting lien" and would have us set aside the default judgmentwhich foreclosed that lien. ~espondent Higgins' interest in the motel property was obtained inMay 1976 when the Montana Hotel Corporation assigned its lease to him. Hewas thus in privity with a party to the foreclosure action, In re Smith's Estate (1921), 60Mont. 276, 299, 199 P. 696,and because his interestwas obtained after the commencement of the foreclosure action but before final judgmentwas rendered therein, the proper mode of attack is by appeal. Wight v. Chandler (10thCir. 1959), 264 F.2d 249, 253; Teisinger v. Hardy (1929), 86 Mont. 180, 190, 282 P. 1050. A collateral attack on a judgment, such as undertaken here, ispossible only if it is "void on its face and it appears affirmatively from the judgment role (sic) that the court did not have jurisdiction or committed an act in excess of jurisdiction." Moxley v. Vaughn (1966), 148Mont. 30, 34, 416 P.2d 536. No such showing has beenmade herein. The fact that this foreclosure was decreed by default is of little consequence; it "is as conclusive against collateral impeachmentas any other form of judgment." 49 C.J.S. Judgments S404. Respondents' second argumentwith regard to laches is that once Lutey was notified of Higgins' intent to procure a tax deed for the hotel property he delayed his attempt to redeem the motel property and thereby induced respondents to make expenditures. Notice of intent to apply for a tax deed to the hotel property was just that; it was not notice of intent as to the motel property. Once Lutey was notified of the judicialproceeding as to themotel property he did not delay in asserting his statutory right of redemption. Having determined that Lutey may redeem the property, we now turn to the question of the amount necessary to accomplish the redemption. Respondents argue that since this is an action toquiet title, section 81-4158,R.C.M. 1947, now section 15-18- 401 MCA, applies and Luteymust pay not only the delinquent taxes,penalties and interest,but also themaintenance and improvement expenses incurred. The respondents in this action have a certificate of tax assignment; this is not title to the property. Johnsonv. Silver Bow County (1968),151Mont. 283, 287, 443 P.2d 6. None of the expenses they incurred were under color of title and no reimbursement is necessary. This is a judicialproceeding to procure, not to protect, a tax deed. Thus, section 84-4166,R.C.M. 1947, now section 15-18-305MCA, governs and Lutey, as redemptioner must pay "the total amount of delinquent taxes and penalties which plaintiff has paid, with interest thereon at 8% a year from date of payment together with costs of the action." When a tax deed is sought through civil action, "the court shall allow the successfulparty his costs,to be fixed by the court including a reasonable attorney's fee." Section 84- 4167, R.C.M. 1947,now section 15-18-306MCA. Lutey is the successfulparty in this action. Niles v. Carbon County (1977), Mont

# . , 568 P.2d 524, 527, 34 St.Rep. 827. Respondents,

as the parties from whom redemption is made, are entitled to "costs of the action". Section 84-4166,R.C.M. 1947, now section 15-18- 305MCA. Because costs do not include attorney fees,Tomten

v. Thomas (1951), 125Mont. 159, 165, 232 P.2d 723, and because respondents were not successful parties, any award of attorney fees to themwould be improper. Since no evidence was offered on attorney fees at trial,

we remand the case for a determination of Lutey's costs and attorney feesunder section 84-4167,R.C.M. 1947,now section 15-18- 306 MCA, and also respondents' costs up until October 7, 1977, the date Lutey redeemed. Section&-4166, R.C.M. 1947,now

### 40C section 15-18-3436 MCA. Reversed and remanded.

Chief Justice