No. 80-302 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1981 

LENORA E. KAY, 

Plaintiff and Appellant, 

Defendant and Respondent. 

Appeal from: District Court of the Eighth Judicial District, 

In and for the County of Cascade. 

Honorable Fohn McCarvel, Judge presiding. 

Counsel of Record: 

For Appellant: 

Leaphart Law Firm, Helena, Montana 

C. W.Leaphart, Jr. argued, Helena, Montana 

For Respondent: 

Lawrence A. Anderson argued, Great Falls, Montana 

R. V. Bottomly, Great Falls, Montana 

Submitted: February 20, 1981 

Decided: APR 2 2 1981 

Filed: IBR 2 1 ';Pfjl 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

Appellant, Lenora E. Kay, appeals an order and 

judgment entered by the District Court of the Eighth 

Judicial District, County of Cascade, the Honorable John M. 

McCarvel presiding, wherein the court directed the clerk of 

court to enter an arbitration award in the judgment books in 

favor of respondent, R. V. Bottomly. 

Lenora E. Kay owned certain properties in Cascade 

County which she sold under a contract for deed to her two 

sons on October 15, 1975, for $40,000. The sons, Robert and 

Clarence Swartz, then assigned the contract for deed to a. 

corporation named Swartz Brothers Excavating, Inc. This 

assignment was made on or about January 1, 1976, and without 

the consent of Kay. 

Subsequent to the assignment, Swartz Brothers 

Excavating, Inc., became delinquent on the contract. 

Shortly afterwards, Kay closed the escrow and purportedly 

revested herself with all the right, title and interest in 

the property on August 22, 1977. 

Swartz Brothers Excavating, Inc., filed a petition 

for bankruptcy on October 27, 1977. The trustee in 

bankruptcy then filed an action against Kay, alleging that 

the August 22, 1977, revestment was a voidable transfer. 

The trustee requested the bankruptcy court to (1) declare 

the termination of the contract for deed null and void; (2) 

reinstate the contract for deed; (3) reinstate the trustee 

in bankruptcy with all of the bankrupt's right, title and 

interest in the property; and (4) compel Kay's specific 

performance. 

Lenora Kay retained the services of the law firm of 
Bottomly and Gabriel to represent her in the action brought 

by the trustee. On March 28, 1978, the parties entered into 

a contingent fee agreement whereby they agreed to the 

following: 

"IT IS MUTUALLY AGREED between the parties 

that Second Party [the firm of R. V. Bottomly 

and Robert W. Gabriel] will use its best 

services to obtain settlement or judgment on 

behalf of First Party [Lenora Kay] and First 

Party does hereby agree to reimburse Second 

Party for any and all costs and expenses that 

it may incur in the representation of First 

Party, limited to the amount of $2,000.00 

together with 50% of all monies or property 

or equities obtained for First Party by way 

of settlement and/or judgment as compensation 

for its services, no part of which shall be 

charged against the amount due First Party on 

the contract for sale of Swartz Brothers 

dated the 15th day of October, 1975. 

"IT IS AGREED that First Party shall take 

care of all taxes and insurance due on the 

property until the matter is finally settled 

and such items and costs will be defrayed out 

of rents and profits taken from the premises 

as obtained. It is agreed that from the 

determination of the issues in favor of 

plaintiff, parties [Kay and Bottomly] will 

have one year from the date thereof to 

dispose of the property by sale in order to 

satisfy attorney's fees and costs. The cost 

of sale shall be equally divided between 

First and Second Parties. " 

In attempting to resolve the litigation, Bottomly and 

the bankruptcy trustee worked out a settlement agreement 

wherein Kay would pay to the trustee $25,000 in exchange for 

the trustee's dismissal of his action and the release of any 

interest in the property. The property was then apparently 

appraised at $88,OOOI although appellant maintains the 

appraisal was for $82,000. 

To facilitate payment of the $25,000, the settlement 

agreement provided that Kay was to pay $5,000 down with the 

remaining balance of $20,000 to be paid on or before 

December 31, 1978, together with interest at a rate of 7-1/2 
percent per annum from July 1, 1978. The remaining balance 

was to be secured by a trust indenture of Kay against the 

property with the trustee as beneficiary. 

Kay paid the $5,000 down, but a dispute then arose 

over Bottomly's fee. Kay, in obtaining a loan to pay the 

remaining balance of $20,000 wanted to deduct 50 percent of 

the interest thereon from any fee owed. Bottomly apparently 

was unwilling to do so, and Kay discharged him as her 

attorney, refusing to finalize the settlement. 

After discharging Bottomly, Kay retained new counsel. 

Kay then entered into a settlement agreement with the 

bankruptcy trustee upon the exact same terms and conditions 

which Bottomly had previously negotiated on her behalf. 

On March 9, 1979, Kay requested the State Bar of 

Montana to arbitrate her fee dispute with Bottomly, 

alleging: 

"Mr. Bottomly's services were obtained to 

protect my property from seizure which he did 

not do. Instead, he agreed to a settlement 

which I didn't agree to. 

"Now he has filed a lien on property, and 

nothing has been settled therefore I would be 

willing to pay him $2,000.00 which is too 

much for what he has done and the hell he has 

put me through.'' 

Bottomly agreed to the binding arbitration, and a 

panel heard the testimony and evidence from the parties on 

May 1, 1979. On May 15, 1979, the panel concluded that the 

contingent fee agreement was valid and binding on the 

parties; that Kay had agreed to the settlement; and that 

Bottomly was entitled to a fee of $14,481.50. 

The panel, in setting Bottomly's fee, used the 

following formula: 

"The value of said real property was 
appraised at $88,800.00. From this was to be 

deducted what remained due on a Contract for 

Sale to Swartz Brothers ($31,530.35), taxes 

($809.14), interest ($2,497.51) and the sum 

required to settle with the Trustee 

($25,000). These deductions total 

$59,837.00. Subtracting the deductions from 

the appraised value ($88,800.00 - 59,837.00) 

there is a remaining balance of $28,963.00. 

It was agreed that the respondent was to have 

50% of the value of this sum. That means the 

respondent is entitled to a fee of 

$14,481.50." 

Under the terms of the fee agreement, Kay was given 

one year within which to liquidate the property to pay the 

attorney fees. When she failed to do so, Bottomly, on May 

16, 1980, had the arbitration decision filed in the District 

Court pursuant to section 27-5-103, MCA. In response, Kay 

had served on Bottomly a motion to vacate the award. The 

motion was filed on June 9, 1980, but was not set for 

hearing . 

On June 12, 1980, Bottomly filed a praecipe and 

affidavit with the clerk of the court, pursuant to section 

27-5-303, MCA, requesting that the arbitration panel's 

decision be entered in the judgment records. Ten minutes 

later Kay filed an order staying the entry of judgment and 

noted for hearing her motion to vacate. The hearing 

scheduled for June 17, 1980, however, was canceled, and the 

District Court entered an order on June 23, 1980, directing 

the clerk of the court to enter the arbitration award in the 

judgment book. This order was based on a finding that the 

clerk was required to enter the judgment pursuant to section 

27-5-303, MCA, in that Bottomly's affidavit and praecipe 

were filed prior to the order staying entry of judgment. 

The following issues are presented for our review: 

1. Did the District Court err in directing the clerk 
of the court to enter the arbitration award in the judgment 

books? 

2. Did the arbitration panel err in granting the 

award in favor of respondent? 

Section 27-5-202, MCA, specifically grants an 

arbitration panel the power to make an award after hearing 

the allegations and evidence of the parties. The 

arbitrators' award is then to be given the effect of a 

j udgment when : 

"After the expiration of 5 days from the 

filing of the award, upon the application of 

a party who also files an affidavit showing 

that notice of filing the award has been 

served on the adverse party or his attorney 

at least 4 days prior to such application and 

that no order staying the entry of judgment 

has been served, the clerk must enter the 

award in the judgment book and thereupon it 

has the effect of a judgment." Section 

27-5-303, MCA. 

Here, respondent has properly followed the abovemandated procedure, and the District Court committed no 

error in directing the clerk to enter the award in the 

judgment book. 

The second issue on appeal concerns appellant's 

assertion that had the District Court heard her motion to 

vacate, the court would have found that the award granted by 

the arbitration panel was improper. We must disagree by 

concluding that appellant has failed to assert a. legitimate 

basis upon which the District Court could grant her motion. 

As a consequence, there is now nothing for this Court to 

consider, and the judgment must be affirmed. 

In this regard, section 27-5-301, MCA, is pertinent 

and provides: 

"When court may vacate award. The court or 

judge, on motion, may vacate the award upon 
any of the following grounds and may order a 

new hearing before the same arbitrators or 

not, in its or his discretion: 

"(1) It was procured by corruption or fraud. 

"(2) The arbitrators were guilty of 

misconduct or committed gross error in 

refusing, on cause shown, to postpone the 

hearing or in refusing to hear pertinent 

evidence or otherwise acted improperly in a 

manner by which the rights of the party were 

pr e j ud iced. 

"(3) The arbitrators exceeded their powers in 

making the award, or they refused or 

improperly omitted to consider a part of the 

matters submitted to them. 

"(4) The award is indefinite or cannot be 

performed. " 

Here appellant has asserted in her motion that the 

award of attorney fees under the parties' contingent fee 

agreement was without merit. The stated grounds for the 

contention are twofold: (1) the appraisal value of the 

property should not be used in determining respondent's 

compensation because appellant could not sell the property 

for that amount; and (2) at the time of the settlement, 

appellant was already the legal and equitable owner of the 

property, and, thus, respondent never obtained any monies, 

properties or equities on her behalf. These grounds do not 

constitute a proper basis upon which to vacate the 

arbitration panel's award. 

Appellant, in her motion, has not alleged, nor can we 

find anything to indicate, that the award was granted as the 

result of fraud; that the arbitrators were guilty of 

misconduct; that they refused to postpone the hearing; that 

they refused to consider evidence or other matters submitted 

to the panel; that they exceeded their power in making the 

award; or that the award is indefinite and cannot be 
performed. The proper grounds upon which a motion to vacate 

can be heard have, thus, not been established. 

Since appellant failed to properly perfect her motion 

to vacate at the District Court level and, further, failed 

to supply a proper basis upon which to hear that motion, the 

judgment of the District Court, as enterpd; is affirmed. 

We concur: 

Chief ju'scice 
Mr. Justice John C. Sheehy dissenting: 

Lenora E. Kay has not had her day in court. She 

contended before the arbitration board, before the District 

Court, and now before this Court, that the contingent fee 

agreement, drawn up by the attorneys, fails to state a basis 

for which he owes an attorney fee. She has never had a 

legal determination of that legal issue. The majority here 

sidestepped the legal issue by (1) reading the statutes 

against her to determine that she has no right of appeal here, 

and (2) by deciding as a matter of law, without a record, 

that her grounds for review before the District Court are 

inadequate as a matter of law. 

At the time of the contingent fee contract was made with 

the attorneys, Lenora E. Kay was the legal and equitable owner 

of her property, subject only to a claim by a trustee in 

bankruptcy that her title was subject to a voidable preference 

in favor of herself. Yet, the attorneys, who drafted the 

contingent fee contract, provided compensation would include 

costs, and "50 percent of all monies or property or equities 

obtained for [Lenora] by way of settlement and/or judgment 

as compensation for [the attorneys'] services." Lenora's 

contention that the attorneys are entitled to nothing beyond 

a quantum meruit payment of this case has merit, if all we 

regard is the face of the contingent fee contract, which is 

all that is before this Court. If more is owed under that 

contract, is could arise only by virtue of some par01 evidence 

that would require some kind of hearing before some trier 

of fact vested with authority to hear the same. 

Lenora's contention before the arbitration board was 

that "Mr. Bottomly's services were obtained to protect my 

property from seizure, which he did not do . . ." That 
quotation is at least as logical from the face of the 

contingent fee contract as the attorney's contention that 

he is entitled to one-half of the value of her property, 

after the mortgage has been deducted. The majority gives 

short shrift to her contention. She is at least entitled to 

the benefits of the Montana Rules of Civil Procedure, to 

the spirit of which my colleagues are on occasion want to 

swear eternal allegiance, and particularly to Rule 8(f), 

which provides that "all pleadings shall be so construed as 

to do substantial justice." 

The second problem with the majority opinion relates to 

the majority's lack of interpretation of the arbitration 

award statutes. In setting up the "procedure following 

award", the legislature, in enacting sections 27-5-301 

through -304, MCA, established a very confusing set of 

procedures for action by the District Court, the clerk of 

the District Court, and this Court, with respect to such 

awards. Section 27-5-301, provides that a District Court 

"may vacate the - award . . . -- and may order a new hearing" -- 

when certain grounds appear. Section 27-5-302, on the other 

hand, provides that a District Court "may, on motion, modify 

or correct the award" when certain matters appear. 

The grounds upon which the court may vacate the award 

and order a new hearing under section 27-5-301, are different 

from the grounds upon which the court may modify of correct 

the award under section 27-5-302. It appears to me, in considering these two sections, that it was the purpose of the 

legislature to allow the court, under section 27-5-302, 

to modify or correct the award when it appeared from the 

-7- 

face of the record (the arbitration award) that a mistake 

had been made which could be corrected without a further 
hearing before arbitrators. Section 27-5-301, on the 

other hand, is so designed to provide for the vacation of 

the award and a new hearing where the hearing established 

that the arbitrators acted improperly, corruptly, fraudulently, 

or in excess of their powers. Therefore, when Lenora E. 

Kay contends, as she did before the arbitration board when 

she was unrepresented by counsel, that the arbitration board 

did not consider her legal objection to the contingency 

contract, she set forth the grounds that the arbitration 

board "otherwise acted improperly in a matter by which the 

rights of the party were prejudiced." This is a proper 

ground for vacation of the award and a new hearing under 

section 27-5-302(2), MCA. She has been denied that right to 

have the issue determined by the majority opinion. 

The right to obtain a vacation of the award and a new 

hearing when the arbitrators "otherwise acted improperly" 

is a broad umbrella which covers the contentions of Lenora 

Kay. It is not a ground mentioned by the majority. Indeed, 

the majority opinion fails to discuss the provisions of the 

statute in holding that she has not established grounds for 

such a vacation of award. What is the basis of that holding? 

The majority has further confused the appellate rights 

of a person involved in an arbitration procedure, when it 

determines that there is no appeal available from a judgment 

entered while there is a timely, pending motion before the 

District Court to vacate the award. 

The pertinent statutes are these: 

"27-5-302. When court may modify or correct 

award. The court or judge may, on motion, 
modify or correct the award where it appears 

that: 

"(1) there was a miscalculation in figures 

upon which it was made or that there is a 

mistake in the description of some persons 

or property therein; 

" (2) a part of the award is upon matters not 

submitted, which part can be separated from 

other parts and does not affect the decision 

on the matters submitted; 

" (3) the award, though imperfect in form, 

could have been amended if it had been a verdict, 

or the imperfection disregarded." 

"27-5-303. When award has effect of a judgment. 

After the expiration of 5 days from the filing 

of the award, upon the application of a party 

who also files an affidavit showing that notice 

of filing the award has been served on the 

adverse party or his attorney at least 4 days 

prior to such application and that no order staying 

the entry of judgment has been served, the clerk 

must enter the award in the judgment book and 

thereupon it has the effect of a judgment." 

An examination of the foregoing two statutes reveals 

that they do not cover the situation that occurred here. 

Lenora E. Kay timely filed a motion to vacate the award 

before the clerk entered judgment in this case. That 

motion was pending at the time that the clerk entered the 

judgment. That motion is still pending before the District 

Court. Under section 27-5-304, MCA, the right of appeal 

is not from the judgment but rather from the "decision upon 

the motion" to vacate the award. Under section 27-5-304, 

an appeal is granted to a party from a motion whether or 

not a judgment has been entered before the notion has been 

decided. 

The District Court did not pass upon the motion to 

vacate the award on the grounds stated. Instead, the 

District Court, because judgment had been entered by the 

clerk of the court, decided that the District Court was 

precluded from doing anything further with respect to the 

motion to vacate the arbitration award. Thus, we have a 
case before us where a right of appeal is granted to 

Lenora E. Kay on the motion to vacate the arbitration 

award, but the District Court has not yet acted on the 

grounds set out in that motion. 

Therefore, we have before us a situation where the 

question as to the legality of the attorney's fees under the 

language of the attorney's fees contract has not been decided 

upon an adversarial proceedings either in the District 

Court or in this Court, all because of the peculiar nature 

of the statutes providing for this appeal. 

I would therefore reverse the case and remand it to 

the ~istrict Court for a consideration of the issues raised 

by the motion to vacate the award. Otherwise, we have 

denied to Lenora E. Kay her right to appeal from a decision 

on her motion, a decision which the District Court has yet 

to make. 

I join in the dissent of