No. 89-273 INTHE SUPREME COURT OF THE STATE OFMONTANA



### -- --- $2 THE STATE OFMONTANA, ACTING BY --5 7-; AND THROUGH THE DEPARTMENT OF ,"" 3 .---

,. HIGHWAYS OFTHE STATE OFMONTANA, Plaintiff and Respondent,

RONALD L. McGUCKIN, BETTY STEGERWICKER, FREDERICK C. JANDRON, COLETTE RENEE JANDRON, and MICHELLE A. JANDRON, allof whom claim someinterest inthisaction, and BANK OF COLUMBIA FALLS, Mortgagee, Defendantsand Appellants.

APPEAL FROM: DistrictCourtof the EleventhJudicialDistrict, Inand for the Countyof Flathead, TheHonorableLeifErickson, Judgepresiding. COUNSEL OF RECORD: For Appellant: DaleL. McGarvey, AllanMcGarveyargued; McGarvey, Heberling, Sullivan & McGarvey, Kalispell, Montana For Respondent: JamesA. Lewisargued, Dept. of Highways, Helena, Montana

Filed: Submitted: February 6, 1990 Decided: March 16, 1990

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ClerkJustice R. C. McDonough delivered the Opinion of the Court.

This appeal arises out of a condemnation action brought before the Eleventh Judicial DistrictCourt,Flathead County. Appellants are defendant landowners of commercial properties located in Coram, Montana condemned by the Department of Highways of the State of Montana (Department). A final settlement of the amount of just compensation was reached after some 24 years ofnegotiation and progress toward trial. The landowners submitted an itemizedMemorandum ofLitigation Expenses, including attorney fees, which the Department opposed. A hearing washeld on the litigation expense issue. Landowners now appeal the February 1, 1989 order of the District Court denying them an award of attorney fees incurred toprove attorney fees. We affirm. The landowners raise a sole issue on appeal: Did the District Court err in denying the defendant landowners an award of attorney fees for time and effort expended in securing an award of necessary litigation expenses in the condemnation action, including costsand attorney fees? After making an initial offer of $69,800.00 which was rejected by the landowners, the Department filed a condemnation action and served a complaint upon the landowners. The landowners answered demanding just compensation in the amount of $700,000.00. To obtainpossession the Department deposited $321,000 and the landowners withdrew the entire amount onMarch 

### 4,1985. After various discovery and other proceedings the case

was set for jury trial. On April 6, 1987 the Department served and filed a copy of its final settlement offer as requiredby statute. The final settlement offerprovided for just compensation in the amount of $227,300.00 and included

an agreement to pay all of the landowners' litigation expenses up until April 6, 1987, which was accepted by the landowners. The landowners filed their Memorandum of Litigation Expenses, demanding a total of $145,137.62 in litigation expenses. The Department opposed this amount and filed a Motion to Retax Costs. A hearing was held to determine the amount of necessary expenses of litigation. After the evidentiary hearing the Department offered $63,000 to the landowners for all litigation expenses. In their proposed findings the landowners increased their claim for necessary litigation expenses to $161,972.95. The court entered its Findings, Conclusions and Order awarding the landowners $76,540.12 as necessary expenses of litigation. This amount included $3,359.50 as costs of taking depositions incurred in proving costs of necessary litigation expenses. The court denied the request for attorney fees incurred in proving the necessary costs andfees. Landowners moved to amend the Order to include additional costs including attorney fees incurred as a result of the dispute over litigation expenses. On February 1, 1989 the District Court denied this motion in part and granted it in part. It increased the award by $4,897.00 to $81,437.12 to include some additional costs and expenses. The court again denied the request for attorney fees incurred in proving the litigation expense. Landowners now appeal the court's Order denying them attorney fees incurred in proving thenecessary expensesof litigation.

The State's power of eminent domain is controlled by Article 11, Section 29 of the Montana Constitution which provides:Section 29. EminentDomain. PrivateProperty shall not be taken or damaged for public use without just compensationto 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 privateproperty ownerprevails.

Thepolicy underlying the constitutional provision is tomake the landowner whole after the State takeshisproperty. This constitutional mandate is further embodied in the condemnation statutes: (1) The condemnor shall,within 30 days after an appeal is perfected from the commissioner's award or report or not more than 60days after waiver ofappointment of condemnation commissioners, submit to condemnee a written final offer of judgment for 

### - - the property 

### - to 

### - be condemned, togzher 

## -- with-

## the necessary expenses of condemnee

### -- then accrued. 

# ... (2) In the event of litisation and when the

. . private property owner prevails by receiving an award in excess of the final offer of the condemnor, the court shall award the necessary expensesof litigationto the condemnee. Section 70-30-305, MCA. (Emphasis added.) Necessary expenses of litigation aredefined as:



# . . . reasonable and necessary attorney fees, expert witness fees, exhibit costs, and court costs. (2) Reasonable and necessary attorney fees are the customary hourly rates for an attorney's services in the county inwhich the trial isheld. Reasonable and necessary attorney fees shall be computedon anhourly basis andmay notbe computed on thebasis of any contingent fee contractentered into after July 1,1977. (3) Reasonable and necessary expert witness fees may not exceed the customary rate for the services of a witness of such expertise in the county inwhich trial isheld.

Section 70-30-306,MCA. Both the statute, § 70-30-305(1),MCA, and the State's final offer of settlement contemplate that the Department's final offer will only include the landowners' necessary expenses of litigationaccrueduntil thedate a settlementis reached. The Department contends that this precludes the landowners from receiving any award of costs and attorney fees incurred in proving their litigationexpense, since all such expenseswere incurred afterApril 6,1987, thedate theDepartment served its final offer and allegedly terminated the accrual of furtherexpenses. We disagree with this contention. In doing sowe note that the situation presented here is a novel one not contemplated by the Constitution or the condemnation statutes. For us to strictly construe the terms of the settlement agreement as unequivocally precluding an award of any expenses incurred after the date of settlement could result in denying a landowner just compensation in direct contraventionofArticle 11, Section 29 of the Constitution. The question ofwhether to award costsand attorney fees

onproving litigation expenses is fraughtwithproblems. For example, two extreme situationscan arise. First, the State could object to every expense item claimed,as theydid here, even ifallexpenses claimed were reasonable,thereby forcing the landownersto incur additional expenses in securing their award. If they areprecluded from recovering any additional expenses after the date the initial settlementwas reached, there is nothing to deter the State from making such an unreasonable objection in all cases and hope the Courtmight agree with them. The end result could deny the landowner a net recovery. On the other hand, the landowner and counsel should not be allowed to benefit from making unreasonable and inflated expense claims that force the State to object and lead to further litigation upon which a landowner'scounsel can claim further fees. This would create an incentive for a landowner's counsel tomake unreasonable and inflated claims in order to perpetuate litigation on which they can claim fees and alsoplace an additional unwarranted cost burden on the State in defending overstated claims. Here, we have a situation somewhere between the two extremes illustrated above. Not only did the Department object to each and every item listed in the landowners' Memorandum of Litigation Expenses, but the Department alleges, and the District Court agreed in part, that the expenses claimed in the landowners' Memorandumwere inflated and unreasonable as shown by the court's initial award of $76,540.12 out of the $145,137.62 initially claimed by the landowners. Thus,while an award of litigation expensesmay be required under § 70-30-305,MCA, to afford the landownera net recovery, it is within the discretion of the district court to determine what expenses are "necessary" and "reasonable." 

### - See § 70-30-306,MCA. With respect to attorney fees incurred in proving attorney fees, it is apparent that a landowner's counsel is acting primarily in his own interest rather than for the benefit of his client. The landowner's condemnation award already secured, the outcome of the litigation expense hearing becomes important to the attorney as well as the client,andwith respect to attorney fees awarded,any resultsecured by the services of the attorney would be for his benefit rather than the client. 

### - See, 

### - e.g. Glenview Park District v. Redemptorists Fathers of Glenview (Ill. 1980),

We therefore conclude that an award of attorney fees incurred in proving the amount of attorney fees incurred in the litigation is generally not a necessary and reasonable expense of the landowner. In this regard, we endorse the District Court's reliance on this Court's decision in In re the Marriage of Bliss (1980), 187Mont. 331, 609 P.2d 1209, wherewe stated: F7e reject the notion that the court may require one party to pay opposing counsel for his time spent in seeking justification of the fees he desires. The practice of law has its burdens as well as benefits, and this is one burden that counsel 

### - must -- bear without an expectation of compensation. (Emphasis by theDistrict court.) Bliss, 609 P.2d at 1213. In applying Bliss to the case at bar, the District Court also concluded: Obviously, if it is counsel's burden to bear the costs of proving attorney fees then it is not the burden of the opposing party nor of the attorney's own client. Thus, the amount awarded to the Defendant landowners in this case will not [be] diminished as they may not be charged by their attorney for time spentby him toprove the amount of his fees. Order of February 1, 1989,p. 3. We also conclude that it is counsel's burden to bear this expense and not the opposing party in such cases. However, in order to achieve anequitable result in extraordinary circumstances, theDistrict Court in its sound discretion may require the opposing party tobear this expense. Thiswould be a rare exceptionand not the rule. Here, the State may not be charged for attorney fees incurred by landownerst counsel in proving their attorney fees. Nor may counsel charge this expense to his client, as this could result indepriving landowner/client of a net recovery. However, we conclude that costs and attorney fees incurred in proving necessary and reasonable litigation expenses other than attorney fees are chargeable to the client and to the otherparty, taking into consideration the other party's litigation expenses in defending other costs and attorney feesdisallowed or unnecessary and unreasonable. The duty of determination of necessary and reasonable litigation expenses, is within the sound discretion of the district court, and will not be disturbed upon reviewabsent an abuse of that discretion. Shors v. Branch (1986), 221 Mont. 390, 402, 720 P.2d 239, 246; Talmage 

### v. Gruss (1983), 202Mont. 410, 412, 658P.2d 419, 420. Here, the District Court's findings of fact and conclusions of law contain an itemized analysis of each expense claimed and an allowance for each expense to the extent that it is "reasonable" and "necessary." The court did not allowattorney fees incurred inproving attorney feesbased on our holding in Bliss, but did allow the costs of deposing witnesses for proving the amount of attorney fees. We findno abuse of discretion. AFFIRMED.

Justice We Concur:

" Chief Justice