NO. 83-65 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1984 

RAY E. EHLY, 

Plaintiff and Respondent, 

DOROTHY V. CADY, BRUCE M. CADY, 

and CASSANDRA JOANNE CADY, 

Defendants and Appellants, 

and 

JAMES A. USSIN, d/b/a U BAR S REAL ESTATE, 

Defendant, Cross-Claimant, and Respondent. 

Appeal from: District Court of the Fourteenth Judicial District 

In and for the County of Meagher 

Honorable Nat Allen, Judge presiding. 

Counsel of Record: 

For Appellants: 

Hooks and Budewitz, Townsend, Montana 

Patrick F. Hooks arqued, Townsend, Montana 

Moore, Rice, O'Connell & Refling, Bozeman, Montana 

For Respondents: 

McDougal, Meloche, Love & Eckis, El Cajon, California 

Lynn McDougal argued, (Ehly), El Cajon, California 

Huppert & Swindlehurst, P.C., Livinqston, Montana 

Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Montana 

George Dalthorpe argued, (USSIN), Billings, Montana 

Submitted: I'lay 24 r 1984 

Filed: duki 2 8 1984 

Clerk 
Mr. Chief Justice Frank I. Haswell delivered the Opinion of 

the Court. 

Dorothy, Bruce and Cassandra Cady appeal judgments 

entered in the District Court of the Fourteenth Judicial 

District, Meagher County, in favor of Ray Ehly and James 

Ussin. We affirm in part and reverse in part. 

Ehly filed a complaint seeking specific performance of a 

buy/sell agreement executed by the Cadys and him, an immediate preliminary restraining order restraining the Cadys from 

selling, encumbrancing or transferring the property involved, 

a hearing on the merits of the case, and $500,000 in general 

and special damages. The preliminary injunction was granted 

on September 15, 1981. An amended complaint filed October 8, 

1981, sought additional relief in the form of reformation of 

the contract and exemplary damages. A second amended complaint added James Ussin, the Cadys' realtor, as a defendant 

and a prayer for $500,000 in damages from Ussin in the event 

the court found that the Cadys were excused because of 

Ussin's conduct. 

Ussin cross-claimed in his answer against the Cadys, 

alleging entitlement to his commission. The Cadys, in response, made affirmative claims against Ehly and Ussin. 

Before the trial, Ehly abandoned his claim for specific 

performance. A nonjury trial was held July 26 through 30, 

1982. At the conclusion of Ehly's case-in-chief, the District Court granted the Cadys' motion to dismiss Ehly's claim 

for punitive damages and the injunction was vacated. 

The District Court filed findings of fact and conclusions of law on October 26, 1982, and adopted virtually 

verbatim Ehly's and Ussin's proposed findings and conclusions. Ussin was awarded his commission and judgment against 
the Cadys a.nd Ehly on the various other claims. The Cadys 

filed a notice of appeal of the Ussin judgment on November 

15, 1982. 

By judgment entered November 18, 1982, Ehly was awarded 

approximately $245,000 j-n damages from the Cadys and his 

attorney fees and expenses. A notice of appeal of this 

judgment was filed on December 8, 1982. 

After a hearing held December 8, 1982, the District 

Court filed supplemental findings and conclusions regarding 

attorney fees and expenses. Ehly was allowed almost $52,000 

in attorney fees and $350 in additional costs. Final judgment was entered on January 19, 1983, a-nd the Cadys appeal 

the judgments in favor of Ehly and Ussin. 

The Cadys own a livestock ranch located in Meagher 

County of approximately 10,000 acres. The property was 

I-isted for sale with James Ussin, d/b/a U Ba.r S Real Estate, 

early in April 1981. According to the listing agreement, the 

selling price was $2,250,000, 5 percent of which Ussin was to 

receive as a commission "upon effecting a sale of the whole 

or any part of said property." 

Bruce Cady holds a college degree in accounting, as well 

a.s one in psychology. Dorothy Cady received a business 

decree a.nd has done graduate work in business educa.tion. 

Bruce Cady worked as an accountant before he became a farmer, 

and Dorothy Cady worked as a legal secretary. 

Ray Ehly, a. contractor from California, was interested 

in buying a Montana ranch for investment and tax purposes. 

Ehly was shown the Cady ranch in early April 1981 by Ussin. 

Ehly's first two offers of $2,100,000 and $2,220,000 were 

summarily rejected by Cady as not providing the full purchase 

price. Ehly decided he wanted to make a final offer to the 
Cadys in person, so he arranged a meeting with Ussin in 

Harlowton on April 20, 1981. Ehly met Ussin and another 

realtor, Lewis, in Harlowton. As they were driving toward 

the Cady ranch, they stopped to prepare a written offer. As 

they were typing an earnest money receipt and agreement to 

sell and purchase in one of the vehicles, Ussin advised Ehly 

that Cady would not accept his offer of $2,230,000, but that 

Ussin would be willing to reduce his commission by $20,000 to 

make a sale. Ehly and Ussin did not work out the details of 

the commission reduction at that time, but agreed that the 

offer to Cady should read $2,250,000 and Ussin's reduction 

should make up the difference between what Ehly would pay and 

what Cady would get. Ehly signed the agreement which quoted 

a $2,250,000 purchase price, and provided a check for 

$100,000 earnest money. 

Upon arrival at the Cady ranch, the parties discussed 

the agreement for approximately two hours. Following the 

discussion, Ehly left the Cady ranch to attend a wedding and 

the Cadys, Ussin and Lewis drove to Lewistown to meet with 

Marvin Stephens, the Cadys' accountant. Stephens first met 

with the Cadys, and later the realtors joined the meeting. 

For three to four hours the agreement was discussed and after 

certain changes were made, the Cadys signed and initialed the 

agreement. On April 21, 1981, Ehly agreed to the changes 

made at the Lewistown meeting. 

The agreement provided that Ehly pay $370,000 (including 

the $100,000 earnest money) as a downpayment upon closing of 

the chattel sale. He was to pay $50,000 on November 1, 1981, 

and $350,000 on January 8, 1982. Title to the livestock and 

other ranch chattels was to be transferred in May 1981, but 

title to the property was not to be transferred until January 
1982, to facilitate Ehly's income tax plans. It was known by 

the Cadys that Ehly was purchasing the ranch at least partially for income tax reasons. 

Ehly also agreed to transfer to the Cadys ten acres of 

land in the Gallatin Valley, with a value of $75,000. Ehly 

would assume a $60,000 mortgage on the Cady property and 

would be ready to pay $200,000 cash if the Cadys needed the 

money to make a tax-free exchange. There was no issue as to 

Ehly's ability to fulfill. his obligations under the 

agreement. 

The Cadys insisted that their attorney, Leonard 

McKinney, prepare the closing documents. When Ehly received 

the documents prepared by McKinney, Ehly's attorney, Jim 

McLean reviewed them and found that they contained terms 

substantially different from those in the April 20 agreement. 

On May 11, 1981-, McLean informed McKinney about the discrepancies and stated that Ehly was prepared to close the sale as 

soon as accurate documents were prepared. 

In anticipation of the sale, Ehly purchased livestock 

and ranch equipment. He arranged with Cady to place the 

livestock and equipment on the ranch, as well as to have his 

son and daughter-in-law move from California to the ranch. 

He also hired a ranch manager. 

On May 15, 1981, at a meeting attended by the parties in 

Lewistown, Ehly was given another set of closing documents. 

These also did not comply with the April 20 agreement. While 

discussing the agreement and sale of the ranch, Bruce Cady 

became angry and left the room. Testimony at trial indicated 

that before leaving the room, Cady made a comment about his 

not wanting to comply with the April 20 agreement and about 

there being no sale unless it was done his way. 
After a break, Cady returned to the meeting and the 

parties discussed the release clause of the agreement, which 

reads as foll-ows: 

"Buyer may request a release of a parcel of land 

for building purposes. Seller shall grant said 

release if buyer will pay the sum of $1,000.00 per 

acre for said release. 

"Principal payment shall apply towards the 

$1,000.00 per acre. Buyer shall have the right to 

release 320 acres as of the date of closing of the 

real property." 

As the Cadys were interpreting the language differently 

from Ehly, discussion was conducted and the differences were 

resolved. After agreeing that any release of land according 

to the above clause be limited to 320 acres, in no more than 

three parcels of not less than 40 acres each which would not 

affect the "economic integrity of the ranch," the meeting 

ended. This interpretation of the clause was not consistent 

with Ehly's initial interpretation, but he was eager to 

complete the sale and agreed. with the Cadys' interpretation. 

On May 20, 1981, Ehly received a third set of documents 

which did not accurately reflect the terms of the April 20 

agreement or the clarification of the release clause agreed 

upon at the May 15 meeting. Stephens withdrew the documents 

and promised to send Ehly the proper papers by June 1. Ehly 

did not receive any papers on June 1. On June 2, the parties 

met at the Cady ranch. Cady stated that he would not sell 

the ranch according to the buy/sell agreement and produced a 

list of new demands and terms on which he would sell. 

One of the new terms was transfer of the title to the 

real property in 1981, rather than 1982, thus destroyi.ng 

Ehl-y's planned income tax advantages. Cady claimed that such 

transfer was required to maintain the cattle grazing permits 

Cady held to Forest Service land adjacent to the Cady ranch. 
The Cadys claimed that Forest Service regulations prevented 

the transfer of the grazing permits to Ehly unless Ehly 

acquired title to the chattels and to the land in the same 

year. 

By letter dated June 3, 1981, Carl Fager, a Forest 

Service official informed Cady that, although a buyer usually 

satisfies the permit requirements by taking title to the base 

property and the chattels in the same year, alternatives 

existed. Ehly could (1) buy the livestock and execute a 

contract to purchase the real property; (2) not use the 

permits for one year; or (3) delay transfer of the title to 

the livestock until November 1981, when the grazing season 

ended. Ehly was willing to take any of these alternatives, 

but the Cadys demanded that both the livestock and land be 

transferred in 1981. Such a sale would cause Ehly to lose 

substantial investment tax credit on his income taxes. 

At the end of another meeting on June 5, Ehly's attorney 

was to prepare a contract based on the April 20 buy/sell 

agreement as modified by the June 5 agreements. McLean 

drafted the contract and on June 12, Ehly signed it and. 

attached a check for the remainder of the downpayment 

($270,000) and a deed for the Gallatin Canyon property. The 

Cadys refused to sign the contract, and this suit was filed 

July 2, 1982. 

Following a nonjury trial, the District Court found that 

the Cadys had refused to recognize the validity of the April 

20 huy/sell agreement, but that they had partially performed 

the agreement by accepting, through Ussin, the $100,000 

earnest money, by allowing Ehly's son to move onto the ranch, 

and by allowing Ehly to place livestock on the ranch. They 

had, by their conduct, led Ehly to believe that they intended 
to fulfill their obligations under the agreement, causing 

Ehly to make expenditures and incur damages. 

The District Court also found that the Cadys received at 

least one verbal offer of $2,500,000 for the ranch from 

another party and that they attempted to defeat the April 20 

agreement so they could take advantage of the verbal offer. 

The court further found that the executed agreement did not 

jeopardize the Forest Service grazing permits, given the 

existence of alternatives. 

The court concluded that the April 20 agreement was a 

valid enforceable contract upon which Ehly could sue for 

nonperformance. The Cadys understood the contract at the 

time of execution, and there was a meeting of the minds then 

and after the May 15 meeting. According to the District 

Court, the release clause was unambiguous and constituted a 

peripheral part of the contract because it was optional. 

Ehly was at all times ready, willing and able to perform his 

obligations, but the Cadys breached the contract by failing 

to perform. Thus, Ehly was entitled to the damages reasonably foreseeable and proximately caused by the Cadys' breach. 

As to Ussin, the District Court found that, through the 

efforts of Ussin and Lewis, U Bar S Real Estate performed its 

obligations under the listing agreement. It found that Ussin 

was not guilty of any wrongful act making him liable to 

either Ehly or Cady for any of the requested relief. It 

concluded that although Ussin did not tell the Cadys about 

the commission reduction agreement with Ehly, he acted in the 

Cadys' interest and did not violate any fiduciary duty owed 

them. Ussin was, therefore, entitled to his commission. 

This appeal considers the following issues: 
1. Was a valid and enforceable contract formed on April 

20, 1981? 

2. Was the agreement, if valid, impossible to perform 

given the limited methods by which the grazing permits could 

be transferred? 

3. Were the damages allowed by the District Court 

properly computed and based on substantial evidence? 

4. Is Ussin entitled to his real estate commission? 

April 20 Agreement 

The Cadys contend that there was no enforceable contract 

between the parties. Because the parties never agreed as to 

the meaning of the release clause and because Ehly never 

agreed to pay the $2,250,000 asking price, there was no 

meeting of the minds. As an alternative, the Cadys contend 

that Ehly breached the contract by not rendering the payment 

on May 15 as agreed. 

Ehly claims that the earnest money receipt and agreement 

to sell and purchase, signed by the parties on April 20, 

constituted an enforceable contract. He states that the 

evidence shows that the Cadys voluntarily signed the document, with ample opportunity to review it, and were fully 

capable of understanding the terms and t.he importance of 

their obligations. 

As to the release clause, Ehly maintains that the language was not ambiguous. If ambiguous, the ambiguity should 

not have defeated the contra.ct, as the cl-ause was not a 

material provision of the contract but collateral to the 

central subject matter. The Cadys' interests could not have 

been harmed by exercise of the clause. In addition, any 
ambiguities, in the April 20 agreement were cured during the 

May 15 meeting. The agreement reached then cleared up any 

differences in interpretation of the clause and the consent 

by the Cadys on May 15 ratified the April 20 agreement. 

Ussin's contentions are basically the same as Ehly's 

with regard to this issue. He claims a valid contract was 

formed, based on mutual consent to the terms and agreement on 

May 15 to the interpretation of the release clause. Ussin 

also contends that an agreement was reached as to the purchase price, as evidenced by the April 20 agreement stating 

that Ehly was obligated to pay $2,250,000. Ehly properly 

tendered performance of the contract, given his readiness, 

willingness a.nd ability to perform once the proper closing 

documents were provided. 

The District Court's finding that the April 20 buy/sell 

agreement signed by the Cad.ys and EhJ-y was an enforceable 

contract is supported by substantial evidence. It is undisputed that the Cadys were capable of understanding the language of the agreement and were cognizant of their choice not 

to sell the property. It is also undisputed that there was 

much discussion of the agreement on April 20 before the Cadys 

signed the document. 

The buy/sell agreement contained the essential elements 

of a contract: identifiable parties capable of contracting; 

their consent; a lawful object; and a sufficient cause or 

consideration. Section 28-2-102, MCA. The Cadys raise an 

issue as to their consent to the contract based on the assertions that (1) the full purchase price was not to be paid by 

Ehly, and (2) the release clause of the contract was ambiguous, leaving the parties with varying interpretations. 
First, the fact that Ehly and Ussin made an agreement to 

reduce Ussin's commission did not affect Ehly's obligation 

under the written agreement to pay the purchase price of 

$2,250,000. In the end the Cadys would receive the same 

amount of money as if Ehly were to pay the full $2,250,000, 

as the reduction i.n Ussin's commission would not reduce the 

net selling price to be paid to the Cadys. 

Second, the language of the release clause must be 

interpreted by a court according to general contract rules. 

An interpretation which will make the contract lawful, operative, definite, reasonable and capable of being carried into 

effect is favored. Section 28-3-201, MCA. And the language 

is to govern the interpretation if it is clear and does not 

involve an absurdity. Section 28-3-401, MCA. 

Here we are concerned with the followi.ng language: 

"Buyer may request a release of a parcel of land 

for building purposes. Seller shall grant said 

release if buyer will pay the sum of $1,000.00 per 

acre for said release. 

"Principal payment shall apply towards the 

$1,000.00 per acre. Buyer shall have the right to 

release 320 acres as of the date of closing of the 

real property." 

Initially, the language appears unambiguous as to what 

the rights of the parties are with regard to releasing a 

portion of the property. There was testimony as to the varying interpretations of the clause by the Cadys, but they are 

not substantiated by evidence of misrepresentation by the 

realtors or Ehly. Furthermore, the evidence clearly shows 

that the differing interpretations were expressed during the 

Kay 15 meeting and that during that meeting, an agreement was 

reached as to how the clause should be interpreted. 

Section 28-2-304, MCA, provides that a "contract which 

is voidable solely for want of due consent may be ratified by 
a subsequent consent." The Cadys' claim that there was no 

consent to the contract based on varying interpretations of 

the release clause cannot stand given the evidence that the 

parties reached an agreement May 15. 

As to the alleged breach of the contract by Ehly, the 

District Court's finding is also supported. The evidence 

clearly shows that the parties initially planned to execute 

the closing documents on May 15. On that date, Ehly received 

a second set of documents which did not conform to the April 

20 agreement. He expressed his willingness and ability to 

perform as soon as conforming documents were delivered. 

After receiving another set of erroneous documents and another meeting, Ehly drew up a contract, signed it, and sent it 

to the Cadys with the remainder of the downpayment. In 

essence, Ehly's nonpayment on May 15 was not due to a lack of 

desire or ability to perform, but was due to the absence of 

the conforming documents promised by the Cadys. 

According to Rule 52 (a) , M.R.Civ.P., the District 

Court's findings regarding the existence of an enforceable 

contract is affirmed, since the findings are not clearly 

erroneous. 

I1 

Impossibility of Performance 

The Cadys claim that the April 20 agreement was impossible to perform because it would endanger transfer of the 

Forest Service grazing permits. Any transfer of the title to 

the land to facilitate transfer of the permits would not be 

according to the April 20 agreement. 

Ehly and Ussin maintain that any of the three alternatives described earlier, as allowed by Forest Service 
regulations, would have been consistent with the April 20 

agreement, and without risk or detriment to the Cadys' 

interests. 

The burden rested with the Cadys to prove that impossibility existed, and they must have demonstrated that they did 

everything within their powers to perform the contract. 

Miller v. Titeca (Mont. 1981), 628 P.2d 670, 38 St.Rep. 853; 

Smith v. Zepp (1977), 173 Mont. 358, 567 P.2d 923. The Cadys 

did not meet their burden here, as they did not show that 

they took every action they could to perform the contract. 

Rather, they rejected any of the alternatives available for 

transferring the grazing permits and insisted that title to 

the land be transferred in 1981. That was the one alternative which was inconsistent with the April 20 agreement, in 

terms of facilitating Ehly's plan to realize a tax credit. 

The District Court's finding that the contract was not 

impossible to perform because of t.he grazing permit requirements is affirmed. 

Damages 

A. Tax losses and benefits 

General dama.ges in the amount of $183,080 were awarded 

by the District Court as income tax damages allegedly suffered by Ehly because of the breach of contract. The figure 

was arrived at by Ehly's accountant by first computing his 

federal and. Ca1.i.fornia tax obligations, then subtracting the 

depreciation on the ranch chattels, had they been bought. By 

claiming investment tax credits, he would have allegedly 

saved $80,688 in income taxes for 1981. Ehly then added an 

amount for the taxes he would have to pay on the damage award 
if he were successful in getting the award, coming up with a 

total of $181,321 due him. The District Court awarded him 

$183,080 on this basis. 

The Cadys contend that the award was improper because 

(1) the loss of tax benefit wa.s not foreseeable by the Ca.dys 

as damages for breach of the contract; (2) Ehly failed to 

mitigate his damages by purchasing similar property; and (3) 

the damage award was derived from and based on speculation, 

rather than ascertainable figures. 

Ehly claims that the loss of tax savings was foreseeable 

by the Cadys as they knew that Ehly's main reason for buying 

the ranch was to obtain tax savings. In response to the 

claim that he should have mitigated his da.mages by purchasing 

similar property, Ehly contends that (1) the Cady ranch is a 

unique and remarkable piece of property, which could not be 

replaced easily and (2) it was too late in the year (1981) 

for Ehly to search and negotia.te for another piece of 

property. 

Generally, the measure of damages in a breach of contract case is: 

". . . the amount which will compensate the party 

aggrieved for all the detriment which was proximately caused thereby or in the ordinary course of 

things would be likely to result therefrom. Damages which are not clearly ascertainable in both 

their nature and origin cannot be recovered for a 

breach of contract." Section 27-1-311, MCA. 

Certainty exists when evidence provides a reasonable basis 

for determining a specific amount. Cremer v. Cremer Rodeo 

Land and Livestock Co. (Mont. 1981), 627 P.2d 1199, 38 

St.Rep. 574; Smith v. Zepp (19771, 173 Mont. 358, 567 P.2d 

923. 

An examination of section 27-1-311, MCA, above, will 

reveal two kinds of damages recoverable for breach of 
contract. Damages "for all the detriment caused thereby" 

include all damages which in the ordinary and natural course 

of things are proximately caused by the breach itself. These 

damages are the natural result of the breach. Damages under 

the statute may also be recovered "which in the ordinary 

course of things would be likely to result therefrom." Our 

court, and courts everywhere, recognize this provision as 

permitting recovery for consequential damages within the 

contemplation of the parties when they entered into the 

contract, and such as might naturally be expected to result 

from its violation. Myers v. Bender (1913), 46 Mont. 497, 

508, 129 P. 330, 333. These damages are the contemplated 

result of the breach. 

All damages for breach of contract, whether natural or 

contemplated, are subject to limitations of causation, certainty and foreseeability. They must be clearly ascertainable in their nature and origin. Section 27-1-311, MCA. 

They must be reasonable. Section 27-1-302, MCA. 

We regard Ehly's gain of investment tax credit upon 

performance of the contract as within the contemplation of 

the parties and reasonably foreseeable. Ehly made no secret 

that a tax savings was one of his objectives in buying the 

property. The failure of the Cadys to perform their obligations under the contract negated the possibility of Ehly 

claiming the investment tax credits. It follows that the 

Cadys' nonperformance was the legal cause of the lost opportunity. This lost tax opportunity can be measured in dollars 

and cents as Ehly's accountant demonstrated. The original 

contract called for performance within a specific tax year: 

the ranch chattels upon which the tax credit were based were 

to be transferred in 1981. The tax credit was calculated on 
the basis of Ehly's tax liability for that year. In order to 

provide Ehly with the benefit of his bargain, we uphold the 

$80,688 damages based on his lost investment tax savings. 

These damages were reasonably foreseeable and ascertainable. 

Ehly also requested and received additional damages to 

offset taxes he claimed he would have to pay on the award. 

Ehly requested $181,321 so that when taxes based on his 

projected state and federal total tax rate of 55.5 percent 

were subtracted, his net return would be $80,688. 

We appreciate the concern of Ehly's counsel that his 

client be made whole. We also realize that the damages for 

breach of contract will potentially be considered taxable 

income. However, we know of no authority, nor has counsel 

provided us with any, whereby an award for lost tax savings 

may be ballooned in anticipation of additional taxation. We 

decline to create such precedent in this case. The additional monetary relief was erroneously granted. 

B. Interest and expenses 

The District Court also awarded Ehly prejudgment interest at the ra.te of 10 percent on: (1) Ehly's federal and 

state income tax obligation; (2) the $100,000 earnest money; 

and (3) Ehly's capital expenditures on the ranch. 

The District Court awarded Ehly expenses incurred after 

the lawsuit was filed and losses related to the legal action 

and not related to the legal action. 

As for Ehly's claim for interest, section 27-1-211, MCA, 

applies: 

"Every person who is entitled to recover damages 

certain or ca-pable of being made certain by calculations and the right to which is vested in him 

upon a particular day is entitled also to recover 

interest thereon from that day except during such 

time as the debtor is prevented by law or by the 

act of the creditor from paying the debt." 
Here, the interest on the earnest money of $100,000 is 

all that should be allowed as prejudgment interest. Interest 

should then be allowed on the judgment amount according to 

section 27-1-211, MCA. Prejudgment interest should be 6 

percent per annum, according to section 31-1-106, MCA, and 

interest on the judgment should be 10 percent per annum, 

according to section 25-9-205, MCA. 

The award for Ehly's refiling and postfiling expenses 

exceeded the amounts allowed by law. Section 25-10-101, MCA, 

outlines when costs are allowed to a plaintiff and section 

25-10-201, MCA, states what costs are allowable. The cost of 

depositions not used during trial a.s evidence or for impeachment are not allowed. Lovely v. Burroughs Corporation 

(1974), 165 Mont. 209, 527 P.2d 557. 

Ehly claimed as expenses capital expenditures made in 

anticipation of the sale of the ranch, such as the purchase 

of livestock. He also claimed various travel expenditures 

based on his trips from California, his son and daughter-inlaw's move from California and the wages paid to his son to 

manage the ranch. Some of these do not fall within the 

allowable costs as they would not have been chargeabl-e to the 

Cadys had the contract been performed. 

The portion of these expenses which should be allowed is 

any loss suffered by Ehly as a result of capital expenditures 

made from the time the buy/sell agreement was signed on April 

20, 1981, to the time of breach by the Cadys. The breach 

occurred after June 12, 1981, when Ehly tendered performance 

by drawing up a contract, signing it, and sending it, with 

the remainder of the downpayment, to the Cadys. The losses 

occurred because of Ehly's reliance on the buy/sell agreement 

and include the wages paid to Ehly's son as payment to insure 
care of the cattle and other livestock, listed as capital 

expenditures. 

C. Attorney fees 

After denying the Cadys' motion to abate the proceedings 

to determine attorney fees, the District Court held a hearing 

and heard testimony on the issues. A notice of appeal to 

this Court of the Ussin judgment had been filed previously 

and a notice of appeal of the Ehly judgment was filed the 

same day the hearing was held. Ehly was awa.rded $51,979.65 

in attorney fees. 

The Cadys claim that the attorney fees were improperly 

awarded as there was no provision in writing for attorney 

fees nor is there a ~tatute which applies to a.llow them. 

They also contend that, according to case law, the District 

Court had no jurisdiction at the time of the hearing on this 

issue, as the case had been appealed to this Court. 

Ehly contends that the court specifically retained 

jurisdiction to determine attorney fees. And Ehly claims 

that this case is an exception to the general rule regarding 

allowance of attorney fees in that the fees were a necessary 

and incidental cost of obtaining rightful possession of 

property. 

The attorney fees should not have been allowed. It is a 

well-settled rule that absent contractual or statutory grant, 

a.ttorney fees are not allowable as costs or as an element of 

damages. Foy v. Anderson (1978), 176 Mont. 507, 580 P.2d 

114. The case urged as applicable here involved a lessee 

attempting to take possession of the leased property. After 

stating the above rule of law, this Court stated: 

". . . This rule precludes recovery of attorneys' 

fees paid in an action for breach of contract, as a 

part of the damages for the breach. However, the 
small amount here claimed is not for attorneys' 

fees in the sense in which that term is used in the 

above rule; it is but an amount paid out, incidentally to attorneys, in plaintiff 's attempt to get 

possession of the land covered by his contract, and 

under a proper showing that such payment is an 

element of compensatory damages, is to be treated 

as one of the legal. consequences of the original 

wrongful act. " (Citations omitted.) Smith v. 

Fergus County (1934), 98 Mont. 377, 384, 39 P.2d 

193, 195. 

There was no evidence in this case that Ehly's claim for 

attorney fees should be allowed as compensatory damages and, 

thus, they should not be allowed a.t all. 

Ussin's Commission 

The Cadys contend that the 1a.nguage in the listing 

agreement between U Bar S Real Estate and them precludes 

payment of Ussin's commission, as there was no sale of the 

property. The pertinent language reads: 

"The Owner agrees to pay to the broker out of the 

first pa.rt of the purchase price, upon effecting 

the sale of the whole or any part of the property, 

as compensation for services 5% of the purchase 

price. " 

They argue that the two cond.itions of agreement., that there 

be a sale and that the purchase price be paid, were not 

fulfilled. 

In this case, there was not only a listing agreement, 

but. a clause in the buy/sell agreement which stated: 

"For valuable consideration I/we agree to sell and 

convey to the purchaser the above described property on the terms and conditions hereinabove stated 

and agree to pay to above named agent a commission 

amounting to 5 percent of the above mentioned 

selling price for services rendered in this 

transaction." 

The Cadys breached this portion of the buy/sell agreement by 

not paying Ussin the stated commission "for services ren- 
dered." According to the agreement, Ussin is entitled to his 

commission and the obligation must be met. 

In Diehl & Associates, Inc. v. Houtchens (19771, 173 

Mont. 372, 377-379, 567 P.2d 930, 933-935; this Court stated: 

"It is generally accepted law that a real esta.te 

broker is entitled to commissions when he has, in 

pursuance of his employment and within the time 

specified in the contract of employment, procured a 

purchaser able, ready and will-ing to purchase the 

seller's property on the terms and conditions 

specified in the contract of empl.oyment. Roscow v. 

Bara, 114 Mont. 246, 135 P.2d 364; 12 Arn.Jur.2d 

921, Brokers Section 182. When the broker procures 

a buyer who makes a counteroffer or agrees to terms 

at variance to the terms specified in the employment contra.ct, the seller has the option of accepting or rejecting the counteroffer. If the seller 

accepts the counteroffer of the procured buyer, the 

seller is legally obligated to pay commissions to 

the broker, either under the terms of the contract 

of employment or the mutually agreed terms of a 

contract for sale. 

"The broker's ability to recover commissions is 

premised on the broker's ability to accomplish what 

he undertook to do in his contract of employment. 

32 A.L.R.3d 321, section 2. The broker is not 

entitled to compensation for unsuccessful efforts 

under his contract of employment, irrespective of 

how great his efforts were or how meritorious his 

services. Roscow v. Bara, supra. It is generally 

necessary to refer to the specific terms of the 

particular employment contract in order to determine whether or not the broker's duties have been 

performed. 

"We note the distinction between a brokerage contract which requires a broker to merely find a 

purchaser and a brokerage contract which requires a 

broker to sell, make or effect a sale. In the 

first case the broker earns his commission when he 

procures a buyer able, ready and willing to purchase on the seller's terms. A broker employed to 

sell or effect a sale does not earn his commission 

until he completes the sale. Completion of the 

sale, where real property is involved, amounts to 

payment of the purchase price and conveyance of 

title. O'Neill v. Wall, 103 Mont. 388, 62 P.2d 

672. " 

In Diehl, this Court found a breach by the buyer of the 

buy/sell agreement which defeated a sale. Since there was no 

sale, the realtor was not entitled to a commission. 
In the subsequent case of Associated Agency of Bozeman, 

Inc. v. Pasha (Mont. 1981), 625 P.2d 38, 43, 38 St.Rep. 344, 

348-349, this Court stated the following: 

"We acknowledge that this Court had stated that a 

broker empl-oyed to 'sell or effect a sale' and 

exchange (as is the case here) does not earn his 

commission until the purchase price is paid, title 

is conveyed and the sale is completed. See Diehl 

and Associates, Inc. v. Houtchens (1977), 173 Mont. 

372, 567 P.2d 930. In an expansion of this holding, however, we must also conclude that a broker 

is still entitled to his commission even if the 

sale is not completed if a rea.dy, willing and able 

buyer is procured and the failure to consummate was 

solely due to the wrongful acts or interference of 

the seller. See Taylor v. Gaudy (1980), 46 0r.App. 

235, 611 P.2d 336; Fender v. Brunken (Colo.App. 

1.975), 534 P.2d 347; Red Carpet Real Estate of 

Aloha, Inc. v. Huygens (1974), 270 Or. 860, 530 

P.2d 46; see also Ellsworth Dobbs, Inc. v. Johnson 

(1967), 50 N.J. 528, 236 A.2d 843. . . ." 

The Court went on to find the real-tor entitled to his commission, on the ground (not pertinent here) that the listing 

agreement allowed for payment of the commission in the event 

of wrongful termination by the buyer. 

In this case, both the listing agreement and the language from the buy/sell agreement assume that the real estate 

commission would be paid when a sale was effected. The 

District Court properly found. that a sale would have been 

consummated had the Cadys not wrongfully refused to comply 

with the buy/sell agreement. Thus, according to Associated 

Agency, supra, Ussin is entitled to his commission on this 

basis also. 

The Cadys also contend that Ussin is not entitled to a 

commission because he breached a fiduciary duty owed by him 

to the Cadys. The commission reduction agreement between 

Ussin and Ehly was not communicated to the Cadys; the Cadys 

assert tha.t this was a breach of Ussin's fiduciary duty. 

They cite Nardi v. Smalley (Mont. 1982), 643 P.2d 228, 39 
St.Rep. 606, and First Trust Co. v. McKenna (Mont. 1980), 614 

P.2d 1027, 37 St. Rep. 1026, as describing the appropriate 

standard for a broker-seller relationship. 

Ussin claims that he exercised good faith in trying to 

help the Cadys sell the ranch and that he breached no fiduciary duty owed to the Cadys by reducing his commission. He 

distinguishes fee-splitting arrangements, which have been 

declared void by some courts, from the commission reduction 

agreement in this case. He argues that the agreement was 

between Ehly and Ussin and thus did not affect the Cadys. He 

points out that the Cadys did not testify that they would not 

have signed the April 20 agreement had they known about Ussin 

and Ehly's agreement. 

The fiduciary duty owed to a seller by a broker is 

discussed in Nardi and First Trust - Co., supra. These cases 

stand for the propositions that the fiduciary duty is 

breached if (1) a seller is foiled or deceived by the contract or does not understand the contract, or (2) full disclosure of al-1 pertinent facts is not made by the broker. 

Neither of the cases are completely on point with this case. 

Arguably there was a breach of Ussin's duty to inform 

the Cadys of pertinent facts. More importantly, though, the 

Cadys have failed to prove any damage resulting from the 

failure to inform. As noted earlier, the Cadys would not 

have suffered monetarily or otherwise from the agreement 

between Ehly and Ussin. Ehly obligated himself to the 

$2,250,000 purchase by signing the buy/sell agreement. The 

flow of money to the Cadys would still be the same. Thus, 

there was arguably no prejudice suffered, and Ussin should 

not be denied his commission on this basis. 
The District Court properly limited Ussin ' s commission 

to $92,500, according to Ehly a.nd Ussin's agreement. 

We affirm the judgment of the District Court in favor of 

Ehly and Ussin; we remand the case for recalculation of 

Ehly's damages in accordance with Part I11 of this opinion. 

Each party shall bear his or her own costs of appeal. 

%&ce., 9d-&&4q Chief Just'ice 

We concur: 

Justices 
Mr. Justice John C. Sheehy, concurring and dissenting: 

I concur with nearly all that is said in the foregoing 

opinion, but its otherwise excellent content is flawed by 

determining the loss of an investment tax credit in this case 

by Ehly as reasonably foreseeable. As to that item of 

damages, I dissent. 

Loss of investment tax credit by reason of Ehly's breach 

fails here as an item of damages because it does not meet the 

tests of causation, certainty and foreseeability. Cady did 

not cause Ehly's income tax liability; his income tax 

liability arose from the fact that Ehly was making money in 

other places. The loss of investment tax credit is not an 

item of damages clearly ascertainable in nature and origin. 

The loss would depend on tax laws which frequently change, 

the taxpayer's circumstances, and a myriad of other 

possibilities. The injection of tax consequences as damages 

in such case as this present a quagmire. The District Court 

here was forced to consider possible tax shelters, 

exemptions, and complex tax laws which vary in result from 

year to year a.nd from taxpayer to taxpayer. This case, in 

effect, turned from an action for breach of contract to a tax 

case. The District Court had to consider the tax laws for 

the year of the breach, 1981., and in awarding additional 

damages to cover possible taxes on the judgment award, the 

tax laws in the year of the trial. It should be a matter of 

judicial notice that there can be no certitude, even as to a 

single taxpayer, as to the income tax consequences of a 

breach of contract for the purchase and sale of a farm ranch. 

No certain method of mitigating such tax loss could be 

produced by the defense to reduce the claimed damages. 
The first example of uncertainty is the fact that if 

Ehly had gained an interest in this property, even on a small 

downpayment in 1.981, he would have no investment tax credit 

available. It was necessary for him not to take title until 

1982. He never engaged in farming or ranching the Cady 

property so there can be no certainty as to whether Ehly 

would or would not have made a profit on the Cady ranch. 

Although the accountant in reaching the damage figure to 

which he testified on behalf of Ehly took into account a 

Montana income tax return, Ehly had never filed a Montana 

income tax return. The depreciation schedule propounded by 

the accountant on behalf of Ehly included 90 miles of fence 

at replacement cost, $270,000, although the existing fences 

were not replaced. The depreciation projections also took 

into account the projected building of four dams and their 

estimated cubic yardage and cost. The dams did not exist at 

the time of trial. Although Ehly had agreed to buy from Cady 

cow/calves at $600 per pair, the accountant used the figure 

of $800 per pair for his depreciation schedules, the highest 

price at which cattle had been sold in 1981. The accountant 

used $411 per yearling in his depreciation schedule, although 

the price to Ehly would have been $350 apiece. The total 

result of t.he accountant's testimony was that on the purchase 

price of $2,250,000, Ehly would have claimed total 

depreciation of $1,523,000. 

The accountant's testimony is the basis for the court's 

award of damages for loss of investment tax credit. I insist 

that the testimony is too vague, uncertain and speculative to 

be accorded any relevance. For that reason, I would disallow 

the damages claimed on that item.