### No. 14474 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979

STATE OF MONTANA, ACTING BY AND THROUGH THE DEPARTMENT OF HIGHWAYS OF THE STATE OF MONTANA, Plaintiff and Appellant,

-vsWILLIAM 

### K. BURLINGAME et al., Defendant and Respondent.

Appeal from: District Court of the Fourth Judicial District, Honorable E. Gardner Brownlee, Judge presiding. Counsel of Record: For Appellant: Terry Clausen argued,Helena, Montana For Respondent: 

### K. 

### M. Bridenstine argued, Polson,Montana Claude Burlingame, Plains, Montana

Submitted: February 1, 1979 Decided 

## 2 

## i279 Filed: !$- --Mr. JusticeJohn Conway Harrison delivered the Opinion of the Court.

The Stateof Montana, Department of Highways, appeals from thatportion of a judgment, awarding costs and attorney's fees inan eminent domain proceeding, entered by the Honorable E. Gardner Brownlee, Fourth Judicial 

### District, Missoula County. The Stateof Montana, Department of Highways, instituted eminent domain proceedings on January 26, 1977, after defendant refused 

### itsoffer toacquireby purchase 1.32

acres of defendant's land inMissoula County. By stipulation, a preliminary order of condemnation was entered February 25, 1977. Pursuant to section 93-9910, R.C.M. 1947, now section 70-30-205 MCA, defendant, on March 

### 14, 1977, filed

an answer, claiming $85,000 

### as fairand just compensation for the land taken and for damage to the remainder. A value commission heard thematter August 

### 10, 1977, and thereafter awarded defendant $53,900. Both parties appealed that determination. A jury 

### trial inDistrictCourt resulted ina verdict, issued June 21, 1978, for defendant inthe amount of $39,750, of which $31,530 

### was deemed thevalue of the land taken and $8,220 the value of damage tothe remainder. On June 27, 1978, defendant filed a memorandum of costs and disbursements, which the Statemoved tostrike. A hearing on the motion to strikewas held on July 11, 1978. Two days later the DistrictCourt entered an order denying the State's motion and awarding defendant costs and attorney's fees. The substance of thatorder 

### was incorporated into thejudgment awarding defendant $39,750, plus interestthereon 

### at 10 percent per annum inthe 

### sum of $5,865.51. Of the addi-

### tional $6,247.93 awarded as costs, $4,711.57 represents attorney's fees. No hearing on the reasonablenessof the attorney's fees had been held. The State raises two issues: 1. In an eminent domain proceeding where the District Court found the State's final offerwas $43,100 and the jury verdict was $39,750, was it error for the District Court to award attorney's fees and costs? 2. Was it error for the District Court to award attorney's fees without an evidentiary hearing to determine the reasonableness of the fees awarded? We find the trial court erred in awarding attorney's fees in this case because the private property owner did not prevail as required by law. In so holding, it is unnecessary to discuss the second issue. Defendantargues that the offer of $43,100 was not the "final offer"made by the State. The State contends that its final offer was made in a letter dated June 8, 

### 1978. The letter,addressed to K. 

### M. Bridenstine, counsel for defendant, and signed by Donald A. 

### Douglas, attorney for the Department of Highways, reads 

### -- in toto: "Dear K: 

### "This letter is to advise you that pursuant to the provisions of R.C.M., 1947, Section 92- 9921.1, the State of Montana, Department of Highways,makes an offer in the sum of $43,100.00 plus necessary expenses of the condemnee accrued to this date and interest for all interests in the property which is the subject matter of the above entitled condemnation suit,being Cause No. 45474 inMissoula County,Montana." Of significance is that the offer specifically includes "necessary expenses 

# .. . accrued to this date." Thus, defendant's expenditures for "engineer's fees," incurred oninstruction by the 

### District Court, would have been 

### reimbursed by the Statehad the offer been accepted. The other "necessary expenses," including costs and reasonable attorney's fees, likewisewould have been reimbursed. The statuteatthe focal point of thisdispute 

### is section 93-9921.1, R.C.M. 1947, now section 70-30-305 MCA: "The condemnor, shallwithin thirty (30) days after an appeal 

### isperfected from the commissioner's award or report, submit tocondemnee a written finaloffer of judgment for theproperty tobe condemned, together with necessary expenses of condemnee then accrued. "If atany 

### timeprior toten (10) days before 

### trial, the condemnee serves written notice that the offer 

### isaccepted, either party may then filethe offer and notice of acceptance together with proof of service thereof and thereupon judgment shallbe entered. An offer not accepted shallbe deemed withdrawn and evidence thereof 

### isnot admissible atthe trialexcept ina proceeding todetermine costs. The fact that an offer 

### ismade but not accepted does not preclude 

### a subsequent offer. 

### -- In the event of litigation, and when theprivate property ownerprevailsf 

### --- 

# a receiving an award 

### - inexcess of 

### -- the finalof- ferof the condemnor. the court shall award neces

### --- sary expenses of litigation 

### -- tothe condemnee.

### ' (Emphasis added.) This statute implements Article 11, Section 29 of the Montana Constitution, which inpartprovides that "[ilnthe event of litigation [inan eminent domain proceeding], just compensation shall include necessary expenses of 

### -litigation tobe awarded by the courtwhen the private property owner 

### -- -- 

### -- prevails." (Ehnphasis added.) Section 93-9921.1 was interpreted by this Court in StateDepartment of Highways 

### v. Olsen (1975), 166 Mont. 139, 531 P.2d 1330. There the Court quoted language from the Constitutional Convention notes: "'Retains provision in 1889 constitution [Art. 111, 

### sec. 141 on eminent domain and expands 

### its protection by guaranteeing that 

### a property owner who goes to court and 

### is awarded more money thanoffered for his property being condemned 

### willbe reimbursed for the necessary expenses of the lawsuit (such asappraiser and attorneys fees).'" 166Mont. at145, 531 P.2d at1333. Atissue inOlsen 

### was whether the new statutoryprovision applied toan actionpending atthe 

### time the right to costs, including attorney's fees, came intobeing. Although the issue differs from that inthe instant case, certain dictum from Olsen 

### ishelpful, e.g., "The right tonecessary costs of litigation provided by section 93-9921.1, R.C.M. 1947, does not arisewhen the suit

### is filed, but vests only when 

### -- theprivate property owner prevails, securing a ver- -- 

### diet higher than the State's finaloffer." 166Mont. at146, 

### -- 531 P.2d 

### at 1334. (Emphasis added.) It is clear that a private property owner, tobe entitled to "necessary expenses of litigation," must prevail. To prevail, he must receive "an award inexcess of the finaloffer of the condemnor," the State. Section 93-9921.1, R.C.M. 1947. The following excerpt from the record of the Constitutional Convention debates, Vol. VII, pp. 5638-40, confirms this:"DELEGATE HABEDANK: Mr. Dahood, for the purpose of the journal infuture litigation over the interpretation of this 

### term, 

### willyou please stateinto the record, what 

### ismeant by the words, prevailing party? "DELEGATE DAHOOD: By prevailing party I mean, for the record, the property owner, inthe event thathe 

### is the prevailing party. The only person intended by thisparticular section and the sentence that has been added 

## -- just compensation shallbe awarded by the court only 

### -- just compensation shall include expenses of litigation only when the prevailing party is the private property owner. "CHAIRMAN GRAYBILL: Mr. Habedank. "DELEGATE HABEDANK: Mr. Dahood, I failed 

### to ask thequestion properly. If the highway department offered the owner five thousand dollars for hisproperty and the owner refused it andwent into court and secured 

### a judgment from the jury for 

### less than five thousand dollars, would he then be a prevailing party? DELEGATE DAHOOD: Hewould not be a prevailing party

# . "DELEGATE HABEDANK: If he obtained five thousand and one dollars, would he be 

### a prevailing-- "DELEGATE DAHOOD: Hewould be a prevailing party. DELEGATE HABEDANK: Thank you, Mr. Dahood. "CHAIRMAN GRAYBILL: 

### Is there any other discussion of section twenty-nine? Mr. Harlow. "DELEGATE HARLOW: I merely wish to

### rise in support of this section. I want to ask Mr. Dahood the one question inbetween what Mr. Habedank 

## -- had and the party received only the five thousand dollars. Would he be prevailing? "DELEGATE DAHOOD: He 

### isnot the prevailing party inthat instance. "DELEGATE HARLOW: He's got toget one dollar more. "DELEGATE DAHOOD: Hehas toexceed the offer made 

### --- by the Stateof Montana." To determine if the award of costs and attorney's fees

was proper, the 

### letter from the Highway Department attorney todefendant's attorney, quoted above, must be deemed an offer, either a finaloffer or a subsequent offer which has become a finaloffer invirtue of 

### it being the lastmade by the State. Subsequent offers may be made, of course. Section 93-9221.1 includes this sentence: "The fact that an offer 

### ismade but not accepted does not preclude a subsequent offer." The DistrictCourt judge, inthe order dated July 13, 1978, deemed the offermade by the Stateinthat letter a "finaloffer." Inpart the order recites: "The matter 

### was then setfor trial by the Court for the 19thday of June, 1978. The Statewrote a letter tothe attorney representing the landowner and made an offer inthe sum of $43,100.00plus interestand plus necessary expenses. This offer was not accepted by the landowner and the matter went to

### trial. The jury trialresulted in a verdict infavor of the landowner for the 

### sum of $39,750.00. The landowner then filed 

### a Cost Billasking for:

"Appraiser's fees (witnessfees)---------- $964.11 "Engineer's fees (sewer design) 

# ----------$549.25

"The Statethen moved to strikethe Cost Billon the grounds and for the reason that the landowner did not getmore than $43,100.00 which was the 'final offer' made by the Stateof Montana.

"The 'final offer' made Q the Stateof Montana infact

### isinexcess of thejury verdictplus the 

## ---- -- -- costs and disbursementsrequested 

### -- by the Defen- dant inthis action. From the 

### time the appeal 

### --- was fileduntil about ten days before the actual 

### trial of the action the 

### state never offered the landowner more than the original sum of $25,600.00. The State's delay inmaking the 'final offer' of $43,100.00 resulted inthe landowner expending money for engineering fees for trialpreparation. The Court finds that thisdelay on the part of the Stateinraising their offer from $25,600.00 to $43,100.00 actually required the landowner to expend money for 

### trialpreparation. Inequity 

### it appears to this Court that the landowner should be entitled toallof his costs and disbursements inview of the factthat the total of the costs 

### - -- and disbursements and the jury award does not 

### -- 

### -- exceed the 'final offer' made 

### --- by the Stateof - Montana.

### " (Emphasis added.) The Statemaintains that the offer of June 8, 1978, 

### was

a finaloffer

### per - 

### se as contemplated by statute. Even if that offer 

### isnot inand of itself a "final offer," contends the State, then itis a subsequent offer as contemplated by section 93-9921.1 and became a final offer invirtue of 

### its being the lastmade by the State. The State

### cites State Department of Highways 

### v. Olsen, 166 Mont. at 148, 531P.2d 

### at 1334, quoting thatportion of section 93-9921.1 whichstates that the fact that an offer 

### ismade but not accepted does not preclude a subsequent offer. The language of Olsen immediately following this 

### is significant. The Court stated: "Thus, the Statecould have made an offer at

## qtimeprior 

### -- 

## - to

### trial. 

# .." The State asserts thatone of the principles - of Olsen isthat absent any subsequent offer, the State's offermade prior tothe filingof a condemnation action 

### will be deemed the State's finaloffer. Extrapolating from that principle, the State then contends that given the fact that 

### it didmake an offer subsequent to the one made before instituting the condemnation action, that 

### is, the offer of June 8, 1978, that offermust be regarded as the State's finaloffer forpurposes of determining whether defendant 

### is entitled tocosts and attorney's fees. We find that the lastoffermade, atleastunder the facts of this case, 

### is the finaloffer. 

# . Counsel for defendant maintains that the only offer made by the State

### was $25,600--this inthe face of acknowledging the June 8, 1978, 

### letter and rejecting the offer made therein. It iscontended that section 93-9921.1 requires that the State's finaloffer be made within thirty days after an appeal of the commissioner's award. The first sentence of that statute

### isrepeated here: "The condemnor, shallwithin thirty (30) days after an appeal 

### isperfected from the commissioner's award or report, submit to condemnee

a written final offer of judgment for the property tobe condemned, together with necessary expenses of condemnee then accrued." Defendant then argues 

### (1)that the State's offer cannot be deemed a "subsequent offer" because 

### it was not subsequent toone made within thirty days after an appealfrom the commissioner's award, and (2) that the June 8, 1978, offerwas not an offer of any sort, that 

### it was void ab initio, even though inrejecting 

### it, he treated 

### it 

### as an - offer

# . Defendant's counsel further charges that the "State can hardly hide its failure tofollow Statutorymandate, though 

### it seeks exculpation by terming 

### its letter of June 

### 8, 1978

a 'subsequent' offer." He then charges the Statewith taking "a lastmoment gamble on Attorney's fees and costs." Having anticipated theseremarks, the State asserts first that "fairness and common sense" dictate that an offer labeled 

### as a finaloffer, acted upon by the landowner as a finaloffer, 

### isinfacta finaloffer 

### as contemplated by section 93-9921.1. Secondly, the Stateargues that "constitutional provisions ought not tobe frustratedby inadvertentviolations of statutory procedure," citing Olsen in support of that declaration. Hidden inthese remarks 

### is the admission that the Stateinadvertently failed tomake an offer within the thirtydays after perfecting the appeal from the commissioner's award, but that it should not be penalized for such inadvertence, because the offer at

### least qualifies as

### a subsequent offerwhich became 

### a final offer invirtue of 

### itsbeing the final (last)one made. The concept of "final offer" 

### was discussed inRauser v. Toston Irrigation Dist. (1977), 

## -Mont

# . , 565 P.2d 632, 641, 34 St-Rep. 496, 506. The Court said that, while 

### itwas understandable that the District Court did not wish tofollow the statutory condemnation procedure in that case, thiscould notbe used todeny the landowners their attorney's fees. The Court implicitly found that the District had made a "final offer" even though there

### was no "offer"denominated as such or acted upon as such. The bid forwork tobe done tocure theproblem of water seepage, rejected by the District asbeing too costly, 

### was deemed the final offer forpurposes of determining whether the landowner prevailed. The Court found that indeed the landowner had prevailed, as thejury award of $100,000 exceeded the "final offer" of the Dis trict-condemnor

# . Although thiscase

### isnot relied on by either party, 

### it clearly supports the State's position. The lack of an offer within thirty days of perfecting appeal from the commissioner's award cannot be used to frustrate the intent of section 93-9921.1. The State, in the letter of June 

### 8, 1978, specifically denominated the offer as an offer. In rejecting the offer, counsel for defendant treated the offer

asan offer. TO prevail, the private property owner must have 

### received an award inexcess of the final offer of the condemnor. Defendant received an award of $39,750 from the jury; the State's finaloffer was $43,100. The former 

### is 

### less than the latter; thus defendant did not prevail as contemplated by the framers of the 1972 Constitution. That portion of the judgment awarding attorney's fees isreversed.

We concur:

Justices

### Mr. Justice John C. Sheehy dissenting:

It has seemed to me that this Court is reluctant to allow or award attorney fees. In this case, however, the Court swings with a doublebladed axe. Not only is the attorney pruned of his rightful fee,but the client, a condemnee supposedly guaranteed his costs under the 1972Montana Constitution, finds his constitutional recovery of costs cut to nothing. He must reach into his recovery in order to pay his expenses of litigation. "Just compensation" is defined in the 1972 Mont. Const. lit. 11, as follows: "Section 

### 29. Eminent domain. Private property shall not be taken or damaged for- pubiic use without just compensation to the full extent of the loss having been first made to or paid into court for the owner. In the 

### -- event of litigation, just compensation shall include necessary expenses of litigation to be awarded by the court when the private property owner prevails."

(Emphasisadded.) What is lacking in the decision of this Court in this

case is an understanding of the intention of the constitutional framers in adopting 1972Mont. Const. Art. 11, 529. Prior to 1972, there was no statutory provision for an offer during litigation by the Highway Department,because prior to 1972, each condemnee had to bear the considerable cost of litigation, including appraisers, engineers and attorney fees, out of any recovery he made. The landownerwas forced many times to inadequate settlementsbecause he couldn't win for losing, even though the previous constitution provided for "just compensation" for the owner (1889 Mont. Const. Art. 111, 814). 

### Before 1972, as now, the Highway Department followed the practice of issuing a letter designated a "finaloffer", stating

### separately the offer for land and for after-damage, before litigation was commenced. Before the "final offer" the State and landownerwere in contact many times, sometimes for several years while the proposed construction went through the long process from drawing board to contractletting. It was when the contract was about to be let that the State felt the compulsion to get out its letter of final offer, for litigation then became necessary. That background explains the dialogue of the delegates to the 1972 convention. The proposal in the condemnation provision of the new constitution of 1972 was that "just compensation" should include necessary costs of litigation to the "prevailing party". It was the contemplation of the delegates that if the landowner, by litigation,proved that the final offer received before litigation was insufficient, he was the prevailing party and entitled to his ccsts of litigation as 

### a part of his "just compensation". This background explains why the constitutional convention notes appended to 1972 Mont. Const. Art. 11, 829, state: "Retainsprovision in 1889 Constitution [Art. 111, sec. 141 on eminent domain and expands its protection by guaranteeing that a property owner who goes to court 

### --- and is awarded more money than offered for his property being condemned will be reimbursed for the necessary expenses of the lawsuit (suchas appraiser and attorneys fees)." (Emphasisadded.) In 1973, the State Highway Department (notthe landowners) went to the legislature to obtain the passage of Ch. 453, Laws of Montana (1973) codified as section 93-9921.1, R.C.M. 1947,which reads as follows: "Necessary expenses of litigation. The condemnor, shall within thirty (30)days after an appeal is perfected from the commissicner's award or report, submit to condemnee a written final offer of judgment for the property to be ~ondemnedyto~ether with necessary expenses of condemnee then accrued.

### "If at any time prior to ten (10)days before trial, the condemnee serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon judgment shall be entered. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible at the trial except in a prcceeding to determine costs. The fact that an offer is made but not accepted does not preclude a subsequentoffer. In the event-oflitigation, 

### ---- and when the private property owner prevails, by receiving an award in excess of the final offer of the condemnor, the court shall award necessary expenses of litigation to the condemnee."

(Emphasisadded.) Note especially that the only "finaloffer"described in section 93-9921.1, now section 70-30-305 MCA is the one which must occur within thirty days of the appeal of the comrnissi~ner's award. Any other later offer is a "subsequent offer". But it is the "final offer" under the statute that fixes the right of the condemnee to attorney fees and costs

as a part of his recovery in just compensation. One could assume that section 93-9921.1, now section 70-30-305 MCA is clear and unambiguous on its face, and needs no interpretation. In this decision, the Court abandons its rule of State Department of Highways v. Olsen (1975), 166 Mont. 139, 148, 531 P.2d 1330. In that case, the parties had waived by stipulation the commission hearing (provided in section 93-9912,R.C.M. 1947,now section 70-30-207 MCA) and proceeded straight to jury trial on the issues. The only offer made by the State was before the litigation commenced. The State claimed that since it had not made an offer within thirty days of a commission decision, no "final offer" existed and therefore, the prevailing condemnee could not collect attorney fees. The court rejected this contention saying: "To adopt such a theory here would contravene the intent of the statute and would violate the constitutional mandate. Article 11, Section 29, 1972 Constitution requires that a landowner be compensated for necessary expenses

### of litigation if he prevails. This constitutional directive cannot be frustrated by inadvertent or intentional violations of statutory procedure." 166 Mont. p. 147, 531 P.2d p. 1334. Statutes are made to be obeyed, by the servants of the State as well as by the general public. Here the condemnee is being punished because the State failed to follow the mandate of the statute as to when the final offer should be made. To reach that unlawful result the majority decision equates "subsequentoffer"with "finaloffer", but the "subsequent offer" here does not follow anything. Result: section 93-9921.1, now section 70-30-305 MCA, is tortured beyond recognition and the intent of the constitutional framers is thwarted. The majority opinion cites Rauser v. Toston Irrigation District (1977), Mont

# . , 565 P.2d 632, 641, 34 St.Rep. 496, 506, as authority for what it does in this case. Rauser is not authority for any issue in this case. In Rauser, there was involved an inverse condemnation,where no offers

were made. There the court merely implied that a rejected compromise sumwas an offer in order to award attorney fees to the prevailing party. Today's decision sounds the final knell for the purposes of section 93-9921.1, now section 70-30-305 MCA. Not only is the statutory thirty-day requirement thrown out the window, but the Highway Department is given carte blanche to defeat the condemnee's right to attorney fees and costs by allowing the Highway Department to make its offer (finalor subsequent,

as you will) at any time,perhaps even during the trial and gamble on the outcome. We have come full circle. The landowners are back where they were prior to 1972. Inmy opinion Judge Brownlee understood the situation perfectly. I

### would affirm his decision.

Justice