No. 95-495

IN THE SUPREME COURT OF THE STATE OF MONTANA

1996

GERTRUDE L. GREEN and SCOTT R. GREEN,

Plaintiffs and Appellants,

v.

RICHARD C. PESCHEL, FLORENCE M. PESCHEL,

and MICHAEL E. HANWAY, d/b/a/ A TO Z

HOME INSPECTION SERVICE,

Defendants, Respondents,

and Cross-Appellants.

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula,

The Honorable John Larson, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Henry c. Crane, Attorney at Law,

Missoula, Montana

For Respondents:

Kathleen O'Rourke-Mullins, Attorney at Law,

Polson, Montana (for respondents Peschels)

Submitted on Briefs: April 11, 1996

Decided: May 17, 1996

Filed:
Justice Charles E. Erdmann delivered the opinion of the Court.

Pursuant to Section I, Paragraph 3 (c), Montana Supreme Court

1995 Internal Operating Rules, the following decision shall not be

cited as precedent and shall be published by its filing as a public

document with the Clerk of the Supreme Court and by a report of its

result to State Reporter Publishing Company and West Publishing

Company.

Plaintiffs Gertrude Green and Scott Green and defendants

Richard and Florence Peschel both appeal from an opinion and order

on costs and attorney fees entered by the Fourth Judicial District

Court, Missoula County. We affirm.

We restate the issues on appeal as follows:

1 . Were the Peschels entitled to recover attorney fees?

2 . Did the District Court abuse its discretion in awarding

attorney fees of $1,500.00 to the Greens and $16,450.10 to the

Peschels?

FACTS

On March 24, 1992, the Greens and Peschels executed a purchase

agreement contract for the Greens to purchase the Peschels' house

in Frenchtown for a sale price of $105,000. Nearly two years after

the Greens had purchased the home a dispute arose over alleged

structural defects and other problems with the home. The Peschels

offered to repurchase the property but the Greens refused that

offer.
On February 17, 1994, the Greens filed a complaint with the

District court alleging claims o f fraud, negligent

misrepresentation, constructive fraud, deceit, promissoryestoppel,

breach of the Consumer Protection Act, breach of the covenant of

good faith and fair dealing, breach of the implied warranty of

habitability, and negligence. The Greens attached the first page

of the purchase agreement to the complaint. On March 14, 1994, the

Peschels answered the complaint and stated that "Defendants fully

performed under their Buy-Sell Contract with the Plaintiffs," and

requested that "these Defendants be awarded their costs and fees

incurred in defending this action."

A jury trial was held between April 26-30, 1995. Prior to

trial the District Court granted summary judgment in favor of the

Peschels on the claim for breach of the warranty of habitability.

The court also determined during the pretrial settling of jury

instructions that it would not submit a jury instruction on the

promissory estoppel claim finding that "all arguments made prior to

the trial concerned issues of negligence or contracts."

On April 27, 1995, following the Greens' case-in-chief, the

Peschels moved the District Court to conform the pleadings to the

evidence in order to reflect a breach of contract claim. The

Greens did not oppose the motion and it was granted by the District

Court. The court also granted the Peschels' motion for a directed

verdict on the claims of actual fraud, deceit, and constructive

fraud. The remaining claims of negligence, breach of contract,

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breach of the covenant of good faith and fair dealing, and breach

of the Consumer Protection Act were submitted to the jury.

The jury returned a verdict in favor of the Greens on the

Consumer Protection Act claim, awarding them $400 in damages. The

jury found in favor of the Peschels on the claims for breach of

contract, breach of the covenant of good faith and fair dealing,

and negligence. After trial both parties submitted affidavits of

fees and costs. The District Court conducted a hearing on the

matter and on July 6, 1995, the court entered its order awarding

attorney fees to the Greens in the amount of $1,500.00 pursuant to

§ 30-14-133, MCA, and $16,450.10 to the Peschels pursuant to the

purchase agreement contract which provided for the award of

attorney fees to the prevailing party.

On August 4, 1995, the District Court entered an amended

opinion and order as final judgment of its July 6, 1995, opinion

and order. On August 29, 1995, the District Court denied the

Greens' motion for reconsideration. Both parties then filed a

notice of appeal from the July 6, 1995, order. Each party appeals

the District Court's apportionment of attorney fees and, in

addition, requests costs and attorney fees incurred in this appeal.

STANDARD OF REVIEW

We have stated that absent an abuse of discretion we will not

reverse the district court's decision concerning attorney fees.

Sage v. Rogers (19931, 257 Mont. 229, 242, 848 P.2d 1034, 1042

(citing Joseph Russell Realty Co. v. Kenneally (1980), 185 Mont.

4
496, 505, 605 P.2d 1107, 1112). The test for abuse of discretion

is whether the trial court acted arbitrarily without employment of

conscientious judgment or exceeded the bounds of reason resulting

in substantial injustice. Gaustad v. City of Columbus (1995), 272

Mont. 486, 488, 901 P.2d 565, 567.

ISSUE 1

Were the Peschels entitled to recover attorney fees?

The purchase agreement contract between the parties provided

for the recovery of attorney fees as follows:

In any action brought by the Buyer or the Seller to

enforce any of the terms of this agreement, the

prevailing party in such action shall be entitled to such

reasonable attorney fees as the court or arbitrator shall

determine just.

In its July 6, 1995, order the District Court stated that "the case

was amended during trial to include a breach of contract claim

which was agreed to by the parties during the trial." In awarding

attorney fees to the Peschels the court relied on the language of

the purchase agreement contract and the fact that the Peschels were

the prevailing party on the breach of contract claim.

The Greens argue that their lawsuit was based on tort

allegations and not on a breach of contract theory. They claim

that the contract was not intended to cover the many duties which

were separate and apart from the contract terms and that it was the

Peschels' breach of those duties which formed the basis of their

complaint. The Greens argue that the language of the contract

reinforces their position in that it only allows attorney fees to

5
the prevailing party in an action "to enforce any of the terms of

this agreement." They contend that the District Court erred in

awarding the Peschels attorney fees based on the contract when the

lawsuit alleged tortious conduct.

The Greens further argue that even if the Peschels were

entitled to attorney fees based on the language of the contract,

they were not the prevailing party in the lawsuit. They rely on

Lauderdale v. Grauman (1986), 223 Mont. 357, 725 P.2d 1199, Parcel

v. Myers (1984), 214 Mont. 220, 697 P.2d 89, and Knudsen v. Taylor

(1984), 211 Mont. 459, 685 P.2d 354, to argue that there is no

prevailing party when both parties gain a victory but also suffer

a loss. The Greens claim that since the jury found in their favor

on the Consumer Protection Act claim the Peschels were not the

prevailing party in the lawsuit. The Greens argue that the

Peschels should not be allowed to capitalize on their violation of

the Consumer Protection Act by recovering attorney fees.

The Peschels respond that even though the Greens' complaint

did not initially allege breach of contract, it resounded in

allegations supporting such a claim. The Peschels claim they

defended against what they believed was a breach of contract claim,

alleging that they had performed under the terms of the agreement.

The Peschels stress that both parties agreed at trial to conform

the pleadings to the evidence and to include the breach of contract

claim in the cause of action.

6
The Peschels contend that they were the prevailing party in

the lawsuit. They note that the Greens sued them on nine different

claims, not including the breach of contract claim, and rely on the

fact that they prevailed on all but one of the claims. The

Peschels argue that since the Greens prevailed in only one out of

ten claims and obtained $400 in damages when the requested relief

was $73,000, they cannot be considered the prevailing party.

The record reflects that the parties stipulated at trial to

add the breach of contract claim to the pleadings. That claim

became part of the cause of action when the pleadings were amended

and it was submitted to the jury for consideration. The jury

determined that the Peschels did not breach the terms of the

agreement and the District Court awarded attorney fees to the

Peschels based on their prevailing on the breach of contract claim.

The Greens reliance on Lauderdale, Parcel, and Knudsen is

misplaced. While each of these cases presents the general rule

that there is no prevailing party where both parties gain a victory

but also suffer a loss, in none of those cases did the court award

attorney fees to both parties. In the present case the District

Court awarded attorney fees to the Greens and to the Peschels. The

Greens' fee award was based on the jury finding in their favor on

the Consumer Protection Act claim, while the Peschels' fee award

was based on their successful defense of the breach of contract

claim. The Peschels prevailed on the contract claim and the clear

language of the contract entitled them to attorney fees.

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ISSUE 2

Did the District Court abuse its discretion in awarding

attorney fees of $l,SOO.OO to the Greens and $16,450.10 to the

Peschels?

The Greens sought $28,704.99 in attorney fees and the Peschels

requested fees in the amount of $23,500.15. The District Court

awarded fees to the Greens in the amount of $1,500.00 pursuant to

5 30-14-133(3), MCA (the attorney fees provision of Montana's

Consumer Protection Act), and awarded fees to the Peschels in the

amount of $16,450.10.

In awarding attorney fees to the Greens the District Court

stated as follows:

Based upon the Court's review of the file and after

sitting through the four-day trial in this matter, the

many counts advanced by the Greens which were

unsuccessful, and after consideration of the Verdict,

amount of real and personal property as issue, the

complexity of the case and the respective characters,

experience, and abilities of counsel, the Court finds the

issue of the violation of the Consumer Protection Act to

have been straight-forward and uncomplicated compared to

the complexity of the other issues presented, and,

therefore, awards attorney's fees of $1,500.00 to the

Greens and no additional damages pursuant to Section

30-14-133, MCA.

Section 30-14-133(3), MCA, states that 'I [iln any action brought

under this section, the court may award the prevailing party

reasonable attorney fees incurred in prosecuting or defending the

action."

In awarding attorney fees to the Peschels, the District Court

stated that the breach of contract claim "in reality was the focus

of 70% of this case" and explained its ruling as follows:
After considering the results obtained, the amount of

work involved and the jury's determination of this issue

as well as the amount of real and personal property at

issue, the complexity of the case and the respective

characters, experience, and abilities of counsel, the

Court exercises its discretion to award the Peschels

seventy percent (70%) of their attorney's fees or

$16,450.10.

The Greens argue that the breach of contract claim was "not

even close to 70% of the case," and note that it was only after

they presented their entire case-in-chief that the Peschels pursued

the breach of contract claim. The Greens argue that the Peschels'

fee award should be limited to the number of hours spent defending

against the contract claim and maintain that the Peschels' attorney

"expended little or no time in preparing for a defense of a breach

of contract claim."

The Peschels argue that the District Court's distribution of

attorney fees was more than equitable. They maintain that the

majority of time spent in defending the lawsuit was attributable to

the contract between the parties. The Peschels argue that they

could not have prevailed on the breach of contract claim without

proving to the jury that they did not misrepresent the character of

the property and that they were not negligent in its construction.

Thus, the Peschels claim that the District Court's determination

that the breach of contract claim constituted seventy percent of

the entire lawsuit was reasonable and that its corresponding award

of attorney fees was proper. The Peschels also rely on Morning

Star Enterprises v. R.H. Grover (1991), 247 Mont. 105, 805 P.2d

553, to argue that the District Court's fee award to the Greens was
excessive in light of the $400.00 damages award the Greens

received.

Both § 30-14-133(3), MCA, and the attorney fee provision of

the purchase agreement contract provide for "reasonable" attorney

fees to the prevailing party. In Mornins Star we stated that in

determining the reasonableness of attorney fees the trial court

should consider the following factors: (1) the amount and character

of the services rendered; (2) the labor, time, and trouble

involved; (3) the character and importance of the litigation in

which the services were rendered; (4) the professional skill and

experience required; (5) the character and standing of the

attorneys in their profession; and (6) the result secured by the

services of the attorneys. Morninq Star, 805 P.2d at 558 (citing

Majers v. Shining Mountains (1988), 230 Mont. 373, 379-80, 750 P.2d

449, 453). We also stated that the reasonableness of attorney fees

must be ascertained under the facts of each case and the "result

secured" factor is only one of the factors which the district court

should weigh at arriving at a reasonable fee. Morninq Star, 805

P.2d at 558.

In the present case, neither 5 30-l4-133(3), MCA, nor the

contractual provision limits the award of fees and both provisions

leave the final determination to the discretion of the District

Court. Here, the District Court received fee affidavits from the

parties, conducted a hearing on the matter, and explained its

reasons for awarding fees to each party. We conclude that under

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the circumstances of this case the District Court did not act

arbitrarily without the employment of conscientious judgment nor

did it exceed the bounds of reason resulting in substantial

injustice. We therefore hold that the District Court did not abuse

its discretion in apportioning reasonable attorney fees to the

parties in this case.

Finally, we address the parties' request for costs and

attorney fees incurred in this appeal. Costs are automatically

awarded to the successful party under Rule 33, M.R.App.P. Smith v.

Johnson (19901, 245 Mont. 137, 145, 798 P.2d 106, 111. With

respect to attorney fees, we have stated that " [wl here an award of

attorneys' fees is based on a contract, the award includes

attorneys' fees generated on appeal." Smith, 798 P.2d at 111

(quoting Lauderdale, 725 P.2d at 1200). We have also stated that

l'[i]nsomuch as there has been no reversal of the claims under which

the prevailing party is entitled to reasonable attorney's fees, the

plaintiffs are entitled to their fees to defend this appeal."

Baird v. Norwest Bank (19921, 255 Mont. 317, 329, 843 P.2d 327,

335.

In the present case, each party filed a notice of appeal from

the District Court's July 6, 1995, opinion and order. Each party

had to defend the other's allegations and had one or the other

prevailed in their appeal, that party would have been entitled to

attorney fees. However, we have affirmed the District Court and

conclude that neither party has prevailed over the other on appeal.

1 1
We therefore hold that each party should be responsible for their

own costs and attorney fees incurred in this appeal.

Affirmed. aa

Justice

We concur:

12
IN THE SUPREME COURT OF THE STATE OF MONTANA

No. 95-495

v.

GERTRUDE L. GREEN and SCOTT R. GREEN, ;&

Plaintiffs and Appellants,

;

,;,~;<RM ap ~~p~EM,E co:.:2

STATE or-' MCINIANI!

ORDER

)

!

;

)

)

RICHARD C. PESCHEL, FLORENCE M.,

PESCHEL, and MICHAEL E. HANWAY, d/b/a

A TO Z HOME INSPECTION SERVICE,

Defendants and Respondents.

This matter comes before the Court on respondent's petition

for rehearing filed on May 30, 1996.

After fully considering the briefs submitted by both parties

on the matter,

IT IS HEREBY ORDERED that the following language appearing in

the final paragraph on page eleven of this Court's Opinion dated

May 17, 1996, is stricken:

Each party had to defend the other's allegations and had

one or the other prevailed in their appeal, that party

would have been entitled to attorney fees. However, we

have affirmed the District Court and conclude that

neither party has prevailed over the other on appeal. We

therefore hold that each party should be responsible for

their own costs and attorney fees incurred in this

appeal.

The following language shall be inserted in place of the stricken

language:

On January 31, 1996, this Court dismissed Peschel's

appeal as untimely filed. Nevertheless, since we have

affirmed the District Court which held that each party

prevailed over the other on at least one claim, we

determine that each party should be responsible for their

own costs and attorney fees incurred in this appeal.

IT IS FURTHER ORDERED that Respondent's petition for rehearing

is DENIED.
The Clerk is directed to mail a true copy of this order to

counsel of record and to State Reporter Publishing Company and West

Publishing Company.

DATED this day of June, 1996.