No. 94-413

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

HOWARD HICKINGBOTHAM and SANDRA

HICKINGBOTHAM, husband and wife,

Plaintiffs, Appellants

and Cross-Respondents,

v

PAT DUNCAN, an individual,

Defendant, Respondent and

Cross-Appellant,

v.

ASH-WATKINS INCORPORATED, a Montana ;;A ,TeJl ,&

corporation, GASPAP.D W. DESCHAMPS, JR., r,a,r;~!< OF GUC)REME Couw,

an individual d/b/a DESCHAMPS INDUSTRIES,

eS’f-RTg> 011 P,Kw?ANFi

and MICHAEL E. SELL, d/b/a C & M PAINTING,

Defendants

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula,

The Honorable John W. Larson, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

CHRISTOPHER B. SWARTLEY, DATSOPOULOS, MxDONALD h LIND,

Missoula, Montana

For Respondent:

MICHAEL SOL, SOL & VOLFE, MISSOULA, MONTANA

Filed:

Submitted on Briefs: May 11, 1995

Decided: July 6, 1995
Chief Justice J. A. Turnage delivered the Opinion of the court.

Howard and Sandra Hickingbotham appeal the decision of the

Fourth Judicial District Court, Missoula County, amending its

original findings of fact and conclusions of law. Pat Duncan

cross-appeals the decision of the District Court ordering him to

pay the Hickingbothams' attorney fees. We affirm in part and

reverse in part.

We find the following issues dispositive:

1 . Did the District Court err in amending its original

findings of fact, conclusions of law and judgment?

2 . Did the District Court err in failing to find that Duncan

had committed either actual or constructive fraud?

3 . Did the District Court err in awarding attorney fees to

the Hickingbothams?

Duncan owned a tract of land in Missoula County, Montana

(Tract 1-A). In December 1990, the Hickingbothams purchased a

portion of Tract 1-A (Tract l-A-1) on which they planned to build

a home. In exchange for $23,000, Duncan executed a warranty deed

transferring title to Tract l-A-1 to the Hickingbothams.

While the Hickingbothams were planning their home, they

discovered that Tract l-A-1 was not large enough to accommodate

their building plans. They therefore sought to purchase an

additional portion of Tract 1-A (Portion A) to thus enlarge the

total size of their lot. The Hickingbothams negotiated with Duncan

the purchase of additional adjoining land for a purchase price of

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$10,000. The parties' negotiations culminated in the execution of

a Receipt and Agreement to Sell and Purchase dated May 17, 1991.

During this same period of time, Duncan was having a house

constructed on his remaining portion of Tract 1-A. He contracted

with Ash-Watkins to construct a home for $100,000. A dispute

ensued over construction costs incurred in building Duncan's home.

Ash-Watkins sought additional money above and beyond the $100,000

negotiated construction price, but Duncan refused to pay the

increased amount. On June 6, 1991, Ash-Watkins filed a construction lien against Tract l-A, including Tract l-A-1 which had been

purchased by the Hickingbothams and Portion A which the Hickingbothams were negotiating to purchase. The Hickingbothams claim that

Duncan knew or should have known that Ash-Watkins would encumber

Tract l-A-1 and Portion A when he did not settle his construction

debt.

On June 19, 1991, the Hickingbothams tendered payment for

Portion A. Duncan refused to accept because he could not convey

clear title to the property due to the Ash-Watkins construction

lien.

Pursuant to a court order, Ash-Watkins released the construction lien on Tract l-A-1. The lien on the remainder of Tract l-A,

including Portion A, was not released. The Hickingbothams have

since rescinded their offer to purchase Portion A. The Hickingbothams likewise sold Tract l-A-1 in August of 1992 for a $17,000

profit.
The Hickingbothams filed suit against Duncan, claiming that he

breached the covenants contained in the warranty deed to Tract l-Al by allowing the construction liens to be placed on the property

and that he breached the Receipt and Agreement to Sell and Purchase

Portion A signed on May 17, 1991, by failing to convey Portion A to

them.

Following a bench trial, the District court issued its

findings of fact, conclusions of law and judgment. The court found

that Duncan had breached the express warranty against encumbrances

as well as implied covenants contained in the Tract 1-A-l warranty

deed. The court also found that Duncan breached the terms of the

Receipt and Agreement to Sell and Purchase Portion A by failing to

deliver title to the property to the Hickingbothams upon their

tender of payment. The court found Duncan and Ash-Watkins jointly

and severally liable for over $29,000 in damages, plus interest.

Duncan moved the court to amend its findings of fact and

conclusions of law. Following briefing, the court granted Duncan's

motion and amended its initial findings of fact and conclusions of

law.

In its amended findings of fact and conclusions of law, the

court determined that Duncan had not breached the express and

implied covenants contained in the warranty deed to Tract l-A-1.

The court reasoned that, pursuant to the terms of the warranty

deed, Duncan promised to defend the Hickingbothams from all lawful

claims against the property. The court determined that the AshWatkins lien was unlawful and held in Duncan's favor in their

4
construction dispute. Therefore, Duncan had no obligation to

defend the Hickingbothams from such an unlawful claim.

The court also amended its ruling as to the Receipt and

Agreement to Sell and Purchase Portion A. In its amended findings

of fact and conclusions of law, the court determined that the only

damages available pursuant to the terms of the Receipt and

Agreement to Sel:L and Purchase was the return of the purchasers'

earnest money. Because no money had been exchanged, no other

damages were available.

The Hickingbothams appeal the District Court's amended

findings of fact, conclusions of law and judgment. Duncan crossappeals the District Court's award of attorney fees to the Hickingbothams. We affirm in part and reverse in part.

Issue 1

Did the District Court err in amending its original findings

of fact, conclusions of law and judgment?

We review trial court rulings such as a ruling on a motion to

amend findings of fact, conclusions of law and judgment to

determine whether the district court abused its discretion.

Montana Rail Link v. Byard (1993), 260 Mont. 331, 337, 860 P.2d

121, 125. We will not overturn a district court's findings of fact

unless they are clearly erroneous. Columbia Grain International v.

Cereck (1993), 258 Mont. 414, 417, 852 P.2d 676, 678. We review a

district court's conclusions of law to determine if its interpretation of the law is correct. Steer, Inc. v. Department of Revenue

(1990), 245 Mont. 470, 803 P.2d 601.

5
A district court may amend or alter its findings of fact,

conclusions of law and judgment pursuant to Rule 59(g), M.R.Civ. P.

Rule 59(g) states:

A motion to alter or amend the judgment shall be served

not later than 10 days after the service of the notice of

the entry of the judgment, and may be combined with the

motion for a new trial herein provided for. This motion

shall be determined within the time provided hereinabove

with respect to a motion for a new trial and if the court

shall fail to rule on the motion within the 45 day

period, the motion shall be deemed denied.

The Hickingbothams raise no procedural challenges to the District

Court's granting of Duncan's motion to amend, and a review of the

record reveals no procedural error. Likewise, the Hickingbothams

fail to allege that the court's amended findings are not supported

by substantial credible evidence or that the amended conclusions

are incorrect. The Hickingbothams' primary argument arises from

the court's failure to address the issue of fraud in its findings

of fact, conclusions of law and judgment. Because we treat this as

a separate issue below, we will address it in no further detail

here

We conclude that the District Court did not abuse its

discretion in granting Duncan's motion to amend the findings of

fact and conclusions of law. The court's amended findings of fact

are not clearly erroneous. Likewise, the court's amended conclusions of law are correct

Issue 2

Did the District Court err in failing to find that Duncan had

committed either actual or constructive fraud?

6
The Hickingbothams sued Duncan for breach of contract and

breach of warranty. At the close of trial, the Hickingbothams

moved the District Court to amend the pleadings to conform to the

evidence to include a claim for fraud. The District Court granted

the motion over Duncan's objection. However, the District Court

did not determine in its amended findings of fact and conclusions

of law that Duncan had committed fraud.

The Hickingbothams allege that Duncan committed actual fraud

by executing the Receipt and Agreement to Sell and Purchase Portion

A while knowing that an impending construction lien by Ash-Watkins

was imminent. The Hickingbothams claim that Duncan misrepresented

material facts concerning the future marketability of Portion A and

that such representations were justifiably relied upon.

We have set forth the elements that must be established in

order to prove the existence of actual fraud as follows:

1 .

2 .

3 .

4 .

5 .

6 .

7 .

8 .

9 .

a representation;

its falsity;

its materiality;

speaker's knowledge of the falsity or ignorance of its

truth;

speaker's intent that the representation be relied upon;

hearer's ignorance of the falsity;

hearer's reliance on the representation;

hearer's right to rely on the representation; and

hearer's consequent and proximate injury caused by the

reliance.

Barrett v. Holland and Hart (1992), 256 Mont. 101, 106, 845 P.Zd

714, 717.

Duncan agreed to sell Portion A to the Hickingbothams on May

17, 1991. Prior to May 17 Duncan had paid Ash-Watkins over

$104,000 on the agreed upon construction price of $100,000. Duncan
also knew that Ash-Watkins was seeking an additional $34,000.

HOWeVer, Duncan believed that he owed Ash-Watkins no more money for

the construction of his home. Subsequent litigation proved Duncan

to be correct.

On May 17, 1991, when Duncan executed the Receipt and

Agreement to Sell and Purchase Portion A, there were no construction liens against his property and he had a clear and marketable

title to Portion A. Despite the ongoing dispute with Ash-Watkins,

Duncan could not have been reasonably expected to foresee the

unjust and unwarranted filing of a construction lien against his

property. Therefore, any representations made by Duncan on or

before May 17, 1991, concerning the clear title and marketability

of Portion A were not false representations.

The Hickingbothams also contend that Duncan committed

constructive fraud. Section 28-2-406, MCA, defines constructive

fraud as:

(1) any breach of duty which, without an actually

fraudulent intent, gains an advantage to the person in

fault or anyone claiming under him by misleading another

to his prejudice or to the prejudice of anyone claiming

under him; or

(2) any such act or omission as the law especially

declares to be fraudulent, without respect to actual

fraud.

Duncan had no duty to warn the Hickingbothams about a

potential, yet unfiled, warrantless and wrongful construction lien.

As discussed above, despite Ash-Watkins' dispute over construction

costs, Duncan cannot be charged with foreseeing that an unjustified

construction lien would be filed upon his property

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Secondly, the record reveals no advantage gained by Duncan by

entering into the Receipt and Agreement to Sell and Purchase

Portion A. Duncan accepted no money for the parcel, nor did he

gain any other advantage by entering into the agreement

We conclude that the District Court did not err in failing to

find that Duncan had committed actual or constructive fraud.

Issue 3

Did the District Court err in awarding attorney fees to the

Hickingbothams?

Attorney fees are not an element of damages unless expressly

provided for by statute or contract. Ehly v. Cady (1984), 212

Mont. 82, 687 P.2d 687. In its amended conclusions of law, the

District Court determined that Duncan was liable to the Hickingbothams for $781 in attorney fees. The court awarded the attorney

fees pursuant to § 27-l-3i4, MCA, as fees incurred in attempting to

remove the liens from Portion A in anticipation of purchase

Section 27-l-314, MCA, reads:

Breach of agreement to convey real property. The

detriment caused by the breach of an agreement to convey

an estate in real property is considered to be the price

paid and the expenses properlv incurred in examining the

title and preparins the necessarv papers, with interest

thereon. If the breach was in bad faith and the agreed

price was less than the value of the estate; the detriment is also considered to include the difference between

the agreed price and the value of the estate at the time

of the breach and the expenses properly incurred in

preparing to enter upon the land. [Emphasis added.]

The $781 award of attorney fees was not made in relationship to a

title search. Duncan was ordered to pay the Hickingbothams $125

for title search costs, an award that Duncan does not contest. The

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additional $781 was not a title search expenditure nor an expenditure properly incurred in preparing to enter upon the land and

therefore was not provided for under 5 27-l-314, MCA. The Hickingbothams have failed to establish that attorney fees under this

scenario are provided by any other code section.

Neither does the Agreement to Sell and Purchase Portion A

provide for an award of attorney fees; rather, it provides, as the

sole remedy, the return of money paid to Duncan by the Hickingbothams. Because the Hickingbothams had paid Duncan no money, no

money was therefore returned.

We conclude that the District Court misinterpreted § 27-l-314,

MCA, as providing for an award of attorney fees in favor of the

Hickingbothams. We hold that Duncan is not liable for attorney

fees to the Hickingbothams.

We affirm in part and reverse in part the decision of the

District Court.

We concur:
CERTIFICATE OF SERVICE

hat the following certified order was sent by United States mail, prepaid, to the

July 6, 1995

I hereby certify t

following named:

Michael Sol

SOL & WOLFE

300 Montana Building

101 E. Broadway

Missoula MT 59802

Christopher B. Swartiey, Esq.

DATSOPOULOS, MacDONALD & LIND, P.C.

201 W. Main, Suite 201

Missoula MT 59802

Harold Van Dye, Esq.

Dye Law Office

430 Ryman

Missoula MT 59802-4208

William T. Wagner, Esq.

GARLINGTON, LOHN Bc ROBINSON

Box 7909

Missoula MT 59807-7909

David E. Stenerson

Attorney At Law

Box 1667

Hamilton MT 59840-1667

ED SMITH

CLERK OF THE SUPREME

STATE OF MONTANA

BY: 6

Deputy

COURT