NO. 85-365 INTHE SUPREME COURT OF THE STATE OF MONTANA 1986

WILLIAM F. RAUCH, JR., individually and 

### as a partner of SierraMeadows and West Fork Ranch, Plaintiff and Respondent,

VIOLET MICHEL,Defendant and Appellant.

APPEAL FROM: District Court of theFirstJudicial District, In and forthe 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: 

# APR9

# -2986

8 

## */G$LL&-J ClerkMr. JusticeFred 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 inthe amount of $14,297.15. Weaffirm. The issues presented forreview are: 1. Was the District Court in error in finding that Mr. Rauch, theplaintiff, was not indefault on thepromissory note? 2. Was it proper for the DistrictCourt toaward punitivedamages toMr. Rauch? 3. Was the award of attorney fees toMr. Rauch proper? This matter 

### was triedbefore theDistrictCourt, sitting without a jury. The uncontroverted facts as found by the court are set outbelow. 

### InMarch 1982, Mr. Rauch, asa partner inSierraMeadows and WestFork 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 thegranary should be removed. The next month, Mr. Rauch agreed topurchase a sprinkler system from defendant for $9,000. He made a $1,000 down payment on the sprinkler and agreed topay the $8,000 balance at 15 percent interest. The sprinkler system was delivered to Mr. Rauch during the Latter part of April and firstpart 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 thenote. In mid-September, Mr. Rauch had not yet paid off the note. Hetold defendant thathe 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

### itsremoval from theproperty. 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 toldhim tomail toher. During thatconversation, 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 thatMr. Makuth arrange tomove 

### it. On October 11, defendant had not yet received the check. Mr. Maykuth, acting asdefendant's agent, enteredMr. Rauch's property and took the sprinkler. Atleast part of hismotivation was topressure Mr. Rauch intopurchasing the granary. In theprocess of removing the sprinkler, he damaged thedoor toa storage shed. Defendant received Mr. Rauch's check the next day. She made no efforttoinformMr. Rauch thatMr. Maykuth had taken the sprinkler. In addition, she did not offer toreturn the sprinkler, orthemoney 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 calledtheRauch phone number and toldMrs. Rauch thathe had taken the sprinkler and thathe would return it ifMr. Rauch agreed to purchase the granary for an appropriate price. Mr. Rauch then demanded the sprinkler's return. Itwas 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 inMay 1983tophotograph 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-ingrepeatedly 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 tophotograph 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 thatMr. Rauch was theprevailing party. 

### I Was the District Court in error in finding that Mr. Rauch, the plaintiff, was not indefault on thepromissory note? The record shows that theparties originally agreed that Mr. Makuth would pay off the purchase price of the sprinkler system during 1982. In June, atMr. Maykuthls request, Mr. Makuth signed a promissory note on the sprinkler. The note

was backdated toMay 1. Itprovided formonthly payments of $2,000 and interest at 15%per annum, but didnot specifythe 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. Nopayments were made orrequested inJuly. 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 ininterest. Mr. Rauch conveyed to defendant his intention to borrow money to pay off the entire amount due. On October 7, defendant toldMr. Rauch to mail thebalance due toher, 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 Courtmay 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 fromhis property, which he characterized as
a conversion. The DistrictCourt'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 allowMr. 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)

## , 181Mont. 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 inwhich 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-tpart ofMr. Maykuth'smotivation in entering the Rauch property and taking the sprinklerwas 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 notewas not entitled to repossess the sprinkler under any condition. Without right or justification, and only a 

### few days a.fterhaving 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 Courtdid not specifically find that the taking of the sprinkler constituted a conversion. Apparently, that was based upon the contractualarrangement under which final titlewas 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. Rauchlspropertywasmalicious. 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 forby contract,by statute,orby 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 reciprocityprovision at S 

### 28-3-704,MCA. Thepromissory 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 inany such action, whether by virtue of the express contractual right orby virtue of this section, shallbe entitledtorecoverhis reasonable attorney fees from the losingparty orparties. 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 representedby 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: