NO. 85-365 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1986 

WILLIAM F. RAUCH, JR., individually 

and as a partner of Sierra Meadows 

and West Fork Ranch, 

Plaintiff and Respondent, 

VIOLET MICHEL, 

Defendant and Appellant. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis & Clark, 

The Honorable Gordon Bennett, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Charles Graveley, Helena, Montana 

For Respondent: 

Hughes, Kellner, Sullivan & Alke; John F. Sullivan, 

Helena, Montana 

- 

Submitted on Briefs: Dec. 30, 1985 

Decided: April 9, 1986 

Filed: APR 9 - 2986 

8 

*/G$LL&-J 

Clerk 
Mr. Justice Fred J. Weber delivered the Opinion of the Court. 

Defendant Violet Michel appeals from an order of the 

Lewis and Clark County District Court entering judgment 

against her in the amount of $14,297.15. We affirm. 

The issues presented for review are: 

1. Was the District Court in error in finding that 

Mr. Rauch, the plaintiff, was not in default on the promissory note? 

2. Was it proper for the District Court to award punitive damages to Mr. Rauch? 

3. Was the award of attorney fees to Mr. Rauch proper? 

This matter was tried before the District Court, sitting 

without a jury. The uncontroverted facts as found by the 

court are set out below. 

In March 1982, Mr. Rauch, as a partner in Sierra Meadows 

and West Fork Ranch, purchased. land which had formerly been 

owned by defendant's son, Mr. Maykuth. A granary owned by 

Mr. Maykuth had been left on the land. Mr. Maykuth was 

informed that the granary should be removed. 

The next month, Mr. Rauch agreed to purchase a sprinkler 

system from defendant for $9,000. He made a $1,000 down 

payment on the sprinkler and agreed to pay the $8,000 balance 

at 15 percent interest. The sprinkler system was delivered 

to Mr. Rauch during the Latter part of April and first part 

of May. Later, Mr. Rauch signed a promissory note for the 

$8,000 balance due on the sprinkler. Mr. Rauch was to receive a bill of sale and clear title to the sprinkler upon 

payment of the note. 

In mid-September, Mr. Rauch had not yet paid off the 

note. He told defendant that he would borrow enough money to 

pay off the entire balance due. He also offered to pay 
$1,000 for the qranary, as an alternative to its removal from 

the property. 

On October 6, Mr. Rauch wrote a check to defendant for 

the total amount due on the sprinkler. The next day he 

called defendant and informed her of the check, which she 

told him to mail to her. During that conversation, defendant 

informed Mr. Rauch that her son, Mr. Maykuth, considered the 

offer to buy the granary for $1,000 to be an insult. 

Mr. Rauch responded that he did not really want the granary, 

and asked again that Mr. Makuth arrange to move it. 

On October 11, defendant had not yet received the check. 

Mr. Maykuth, acting as defendant's agent, entered Mr. Rauch's 

property and took the sprinkler. At least part of his motivation was to pressure Mr. Rauch into purchasing the granary. 

In the process of removing the sprinkler, he damaged the door 

to a storage shed. 

Defendant received Mr. Rauch's check the next day. She 

made no effort to inform Mr. Rauch that Mr. Maykuth had taken 

the sprinkler. In addition, she did not offer to return the 

sprinkler, or the money which had been paid for it. 

Mr. Rauch reported to the sheriff's office that the 

sprinkler had been stolen. About a week later, Mr. Maykuth 

called the Rauch phone number and told Mrs. Rauch that he had 

taken the sprinkler and that he would return it if Mr. Rauch 

agreed to purchase the granary for an appropriate price. 

Mr. Rauch then demanded the sprinkler's return. It was 

not returned. Mr. Rauch's attorney told defendant that 

Mr. Maykuth was no longer welcome on the Rauch property. 

Mr. Maykuth was made aware of this. Nevertheless, he entered 

Mr. Rauch's property without permission in May 1983 to photograph the lock on Mr. Rauch's storage shed. 
The District Court, among its other detailed findings 

and conclusions, found that. defendant had waived strict 

enforcement of the promissory note by "fail-ing repeatedly to 

demand payment of the note in accordance with its terms." 

The court also found that defendant, throuqh her agent 

Mr. Maykuth, had interfered with Mr. Rauchls peaceable occupation of his home and property by entering the property to 

take the sprinkler and to photograph the lock on the storage 

shed. The District Court further awarded attorney fees to 

Mr. Rauch, finding that defendant1 s counter claim sounded in 

contract and that Mr. Rauch was the prevailing party. 

I 

Was the District Court in error in finding that 

Mr. Rauch, the plaintiff, was not in default on the promissory note? 

The record shows that the parties originally agreed that 

Mr. Makuth would pay off the purchase price of the sprinkler 

system during 1982. In June, at Mr. Maykuthl s request, Mr. 

Makuth signed a promissory note on the sprinkler. The note 

was backdated to May 1. It provided for monthly payments of 

$2,000 and interest at 15% per annum, but did not specify the 

dates on which payments were due. No payment was made or 

requested for the month of May. Mr. Maykuth requested a 

$2,000 payment on June 18, and payment was made a few days 

later. No payments were made or requested in July. A second 

$2,000 payment was requested on August 23 and received about 

a week later. On September 23, defendant requested a third 

$2,000 payment, plus $391.23 in interest. Mr. Rauch conveyed 

to defendant his intention to borrow money to pay off the 

entire amount due. On October 7, defendant told Mr. Rauch to 

mail the balance due to her, rather than deliver it person~l-- 

ly. She received the check for the balance on October 12. 
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 applicable. 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 occupation 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 property" 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 plaintiff 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 sprinkler 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 photograph 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 constituted 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 trespass 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 action, whether by virtue of the 

express contractual right or by virtue of 

this section, shall be entitled to recover his reasonable attorney fees from the 

losing party or parties. 

The effect of 8 28-3-704, MCA, is to give a reciprocal 

right to attorney fees to all parties to a contract which 

provides for attorney fees. Compton v. Alcorn (1976), 171 

Mont. 230, 235, 557 P. 2d 292, 296. Defendant's counterclaim 

was an action for damages for breach of the contract represented by the promissory note. The District Court found that 

this action was sufficiently within the realm of contract 

actions to qualify under 8 28-3-704, MCA, and held that 

Mr. Rauch, as the prevailing party, was entitled to attorney 

fees on that portion of the action. h7e affirm the decision 

of the District Court. 

Affirmed. 

We Concur: