NO. 94-022

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

IN RE THE MARRIAGE OF

SANDY J. MALQUIST,

Petitioner/Respondent,

and

DALE H. MALQUIST,

Respondent/Appellant.

APPEAL FROM: District Court of the First Judicial District,

In and for the County of Lewis and Clark,

The Honorable Thomas C. Honzel, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Dale H. Malquist, Lincoln, Montana (pro se)

For Respondent:

Donald A. Garrity, Helena, Montana

For Amicus:

Daniel Minnis, Montana Legal Services, Helena,

Montana

Submitted on Briefs: July 12, 1994

Filed:

Decided: September 20, 1994

Cl;%rk
Justice James C. Nelson delivered the Opinion of the Court.

Dale Malquist (Dale) appeals from the Findings of Fact,

Conclusions of Law and Order entered by First Judicial District

court, Lewis and Clark County on November 15, 1993. The order

awarded Sandy Malquist (Sandy) a judgment in the amount of

$2,429.74, and attorney fees in the amount of $300. The order also

denied Dale's motion for sanctions. We affirm in part and remand

for further proceedings consistent with this opinion.

Dale raises four issues on appeal:

1'. Whether the District Court erred when it refused to

offset the minor child's accrued medical bills by her

Social Security Disability benefits.

2 . Whether the District Court erred by failing to credit

Dale's medical costs arrearage by the money Sandy

received from the benefit auction held by the Snow

Warriors Snowmobile Club.

3 . Whether the District Court erred by not compelling

Sandy to comply with Dale's discovery requests.

4. Whether the District Court erred by granting attorney

fees.

BACKGROUND

The decree ending Dale and Sandy's marriage was entered on

November 3, 1986. The parties had two minor children, Darcy and

Sara, at the time the decree was entered, and Dale was ordered to

pay child support in the amount of $125 per month for each child.

Dale was also ordered to provide medical insurance for the children

and to pay for any medical expenses not covered by insurance.

In May of 1990, Dale began receiving Social Security

disability benefits. As a result of Dale's disability, Sara, who

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was still a minor, was also awarded monthly Social Security

benefits in the amount of $488 retroactive to October 1, 1988.

Sara received a lump sum payment of $7,900 from the retroactive

benefit award.

On December 5, 1990, Dale filed a petition asking the District

Court to review the child support order contained in the decree.

Dale requested that he be relieved from having to pay the child

support obligation for Sara, as a result of her receiving Social

Security benefits. Dale also requested that he be relieved from

his obligation to provide health insurance for Sara, and that he be

relieved from having to pay all health care costs retroactive to

October 1, 1988. In a written order dated January 22, 1991, the

District Court relieved Dale of his child support obligation, and

ordered that Dale be responsible for one-half of any medical costs

incurred by Sara. The court did not retroactively relieve Dale of

his obligation to pay medical expenses from the date of the decree

to the date of the order.

On April 12, 1993, Sandy filed a motion requesting, among

other things, that Dale be required to pay all past due medical

bills that he was responsible for according to the District Court's

prior rulings. The District Court granted the motion, and found

that Dale was responsible for $888.98 as a result of a previous

judgment, and $2,429.74 for his portion of health care costs

accruing after that judgment. Dale appeals from this ruling.

Other facts will be presented as necessary for discussion of the

issues.

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1 . OFFSET FOR SOCIAL SECURITY BENEFITS

gale argues that the District Court should have credited the

lump sum payment Sara received from the Social Security

Administration against his medical costs arrearages. Dale states

that he presumed the benefits paid to Sara were replacing any

payments required of him. However, the District Court concluded

that Dale was responsible for all of Sara's medical costs under the

terms of the original decree, and one half of Sara's medical bills

under the terms of its January 22, 1991 order. This Court reviews

conclusions of law to determine whether the district court's

interpretation of the law was correct. Burris v. Burris (1993),

258 Mont. 265, 269, 852 P.2d 616, 619. We conclude that the

District Court was correct in concluding that Dale was responsible

for accrued medical costs according to the terms of its prior

rulings.

This Court has determined that Social Security benefits may be

treated as a contribution from the disabled obligor parent toward

the support of the children. In re Marriage of Durbin (1991), 251

Mont. 51, 58, 823 P.2d 243, 247. However, § 40-4-208(l), MCA,

provides "a decree may be modified by a court as to maintenance or

support only as to installments accruing subsequent to actual

notice to the parties of the motion for modification."

Accordingly, a court cannot credit a child's receipt of Social

Security benefits on behalf of a disabled parent toward that

parent's child support obligation until the parent moves to modify

the decree. Marriase of Durbin, 823 P.2d at 247.

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In the instant case, Dale moved to modify his child support

and medical care costs obligation on December 5, 1990. The

District Court by its order of January 22, 1991, relieved Dale of

his obligation to pay child support, and limited his obligation for

Sara's health care costs to one-half of such expenditures. Sara

received the lump sum award shortly before Dale filed his motion

for modification. Therefore, pursuant to 5 40-4-208(l), MCA,

Dale's child support and medical care costs obligation could only

be modified back to December 5, 1990, when Dale gave notice of his

motion for modification. In re Marriage of Bolt (1993), 259 Mont.

54, GO, 854 P.2d 322, 325.

We hold that the District Court was correct in concluding that

Sara's receipt of Social Security benefits did not automatically

relieve Dale from his obligation to pay his share of Sara's medical

bills that he was responsible for according to the terms of the

previous court orders.

2 . FUND RAISER OFFSET

In March of 1991, the Ponderosa Snow Warriors, a snowmobile

club located at Lincoln, Montana held a fund raiser to help pay for

Sara's medical expenses. As a result of the benefit, Sandy

received approximately $5,000. Sandy did not use the money to pay

for Sara's past medical expenses, and Dale argues that the District

Court abused its discretion by not ordering the money raised to

offset the medical costs arrearage.

According to the terms of the decree and the January 22, 1991

order of the District Court, Dale was responsible for a share of

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the medical costs. If Dale wanted to relieve himself of this

obligation, Dale was required by law to petition the court for

modification. Section 40-4-208, MCA. Because Dale failed to

petition the court for a modification subsequent to Sandy's receipt

of the fundraiser money, we hold that the District Court did not

abuse its discretion by refusing to offset the medical costs

arrearage by $5,000.

3 . DISCOVERY REQUESTS

The third issue Dale raises concerns whether the District

Court erred by not compelling Sandy to comply with Dale's discovery

requests. As stated earlier in the opinion, the District Court

modified the terms of the original decree concerning child support

and medical costs on January 22, 1991, and ordered Dale to pay onehalf of Sara's medical costs.

On April 12, 1993, Sandy moved the court for a hearing to

determine why Dale had not made the required payments under both

the original decree and the January 22, 1991 order, and to order

him to make immediate payment of the medical costs previously

incurred. On April 27, 1993, Dale served Sandy with a discovery

request. In response to the request, Sandy filed a motion for

sanctions under Rule 11, M.R.Civ.P., alleging that the discovery

request was prepared and served in response to Sandy's April 12,

1993 motion for an order to show cause. Dale then filed a motion

to compel discovery and noticed the matter for hearing on June lG,

1993. Although Dale appeared for the June 16 hearing, neither

Sandy nor her attorney appeared.

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On June 21, 1993, Dale moved for sanctions against Sandy for

her failure to appear at the June 16, 1993 hearing, pursuant to

Rule 37, M.R.Civ.P. Sandy responded to the motion on June 23,

1993, alleging that Dale's discovery requests were and are totally

irrelevant to the question of why Dale has failed to make payments

required by the decree and the January 22, 1991 order.

On November 15, 1993, the District Court issued its Findings

of Fact, Conclusions of Law and Order regarding the above motions.

The court concluded that while the discovery requests concerning

the snowmobilers' fund raiser, did relate to the medical costs

issue, Dale had failed to move to modify the prior orders of the

court requiring him to pay for a portion of these costs. The court

found that the remaining discovery requests did not relate to the

issues before the court. Therefore, the court denied Dale’s motion

to compel and both parties' motions for sanctions.

In interpreting the trial court's rulings on discovery issues,

this Court will reverse the trial judge only when his or her

judgment may materially affect the substantial rights of the

appellant and allow the possibility of a miscarriage of justice.

Massaro v. Dunham (1979), 184 Mont. 400, 405, 603 P.2d 249, 252:

Granite County v. Komberec (1990), 245 Mont. 252, 261, 800 P.2d

166, 171.

The District Court has inherent discretionary power to control

discovery based on its authority to control trial administration.

State ex rel. Guar. Ins. v. District Court (1981), 194 Mont. 64,

67-68, 634 P.2d 649, 650. "Control over pretrial discovery is best

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exercised by the District Court which is in a better position than

this court to supervise the day to day operations of pretrial

discovery." State ex rel. Guar. Ins., 634 P.2d at 650.

In the instant case we conclude that the District Court's

denial of Dale's motion to compel did not materially affect his

substantial rights. Any discovery Dale might have received

concerning the fund raiser would not have changed his obligation to

pay medical costs under the original decree or the January 22, 1991

order. Dale was responsible for paying the accrued medical costs

regardless of the status of the fundraiser money. The remaining

discovery requests had nothing to do with issues before the court,

and therefore could not have affected his responsibility to pay for

the health care costs as previously ordered by the District Court.

We hold that the District Court's discovery ruling did not

materially affect Dale's substantial rights and that the court did

not abuse its discretion in denying his motion to compel discovery.

4 . ATTORNEY FEES

Finally, Dale argues that the District Court erred by granting

attorney fees to Sandy when she was represented by a pro bono

attorney who was representing her at the request of Montana Legal

Services Association. Sandy responds that Dale owns substantial

assets: receives full Social Security disability payments; has

forced her to enlist the aid of the court to collect small sums of

money that lawyers would not find economical to pursue: has failed

to pay her attorney fees awarded as a result of a previous court

appearance in this case: and that any attorney fees awarded should

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be paid directly to Montana Legal Services Association.

Dale's assertion raises two separate issues: (1) whether the

District Court abused its discretion by awarding attorney fees in

the first instance; (2) whether a pro bono attorney or Montana

Legal Services Association may seek and accept on behalf of an

indigent client attorney fees and costs under § 40-4-110, MCA.

As to the first issue, Sandy requested that she be awarded

$1,000 in attorney fees. The District Court stated that Sandy

failed to provide the court with evidence supporting the

reasonableness of the $1,000 fee, but awarded her $300 in attorney

fees, nevertheless. The court concluded that Sandy was entitled to

$300, in light of Dale's continuing failure to provide medical

insurance for the children or to pay his share of the medical

bills.

Section 40-4-110, MCA, allows the district court to

discretionarily award attorney fees and costs in certain domestic

relation matters. In re Marriage of Dzivi (1991), 247 Mont. 165,

167-68, 805 P.2d 567, 568. Section 40-4-110, MCA, provides:

The court from time to time, after considering the

financial resources of both parties, may order a party to

pay a reasonable amount for the cost to the other party

of maintaining or defending any proceeding under chapters

1 and 4 of this title and for attorney's fees, including

sums for legal services rendered and costs incurred prior

to the commencement of the proceeding or after entry of

judgment. The court may order that the amount be paid

directly to the attorney, who may enforce the order in

his name.

In interpreting that section, we have required that before a

court awards attorney fees under the statute, the petitioning party

must make a showing of necessity. In addition, the award must be

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reasonable and must be based on competent evidence. In re Marriage

of Barnard (1990), 241 Mont. 147, 154, 785 P.2d 1387, 1391: In re

Marriage of Laster (1982), 197 Mont. 470, 479, 643 P.2d 597, 602;

Wilson v. Bean (1981), 192 Mont. 427-28, 628 P.2d 287, 289. To

make a showing of reasonableness a hearing must be held allowing

for oral testimony, the introduction of exhibits, and the

opportunity to cross-examine. Marriase of Barnard, 785 P.2d at

1391. If the award of attorney fees is supported by substantial

evidence, we will not reverse the award upon appeal. Marriage of

Barnard, 785 P.2d at 1391-92.

In its Conclusions of Law, the District Court stated that

Sandy did not submit any evidence to support the amount of the

attorney fees requested or the reasonableness of the fees.

Therefore, under the rules set forth in our previous cases, we must

reverse the District Court's award of $300 in attorney fees and

remand for an evidentiary hearing in order to determine necessity,

in order to consider the statutory criteria, and for a

determination of the reasonableness of the fees requested.

In so doing, however, we must also address the second issue

mentioned above -- Dale's argument that Sandy is not entitled to an

award of attorney fees at all because she is represented by a pro

bono attorney at the request of Montana Legal Services Association.

Dale argues that pro bono attorneys and, presumably, Legal Services

attorneys, represent indigent litigants as a "community service"

and have, therefore, no expectation of payment or right to collect

attorney fees from the opposing party. Implicit in Dale's argument

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is the proposition that Sandy would receive a windfall if the court

awarded attorney fees to her when she did not incur any obligation

of payment or debt as a result of her obtaining legal

representation, Dale's position has support in our prior case law.

This Court has previously held that a trial court cannot award

attorney fees pursuant to 5 40-4-110, MCA, to a party represented

by a legal services attorney. Thompson v. Thompson (1981), 193

Mont. 127, 129, 630 P.2d 243, 244. In Thompson, we reasoned that

"the authority of the court to order the payment of an attorney's

fee in a divorce action does not exist for the protection of the

attorney, but is strictly for the benefit of the client."

Thompson, 630 P.2d at 244. Therefore, we affirmed the district

court's ruling which denied the award of attorney fees to the

former wife who was represented by Montana Legal Services

Association. Thompson, 630 P.2d at 244. In our decision we

reasoned that a party who was represented by a legal services

attorney could not show a personal necessity to seek payment from

the former spouse. Thompson, 630 P.2d at 244.

When this Court decided Thompson, the case law governing

awarding fees to legal services organizations was not fully

developed. Subsequent to our decision, however, the majority of

jurisdictions ruling on this issue have held that legal services

organizations are entitled to attorney fees both in family law

cases and in non-family law cases. See e.g., In re Marriage of

Ward (Cal.App. 1992), 4 Cal.Rptr.2d 365; Beeson v. Christian (Ind.

1992), 594 N.E.2d 441; In re Marriage of Gaddis (Mo.App. 1982), 632
S.W.Zd 326 (family law cases); shands v. Castrovinci (Wis. 1983),

340 N.W.2d 506 (landlord tenant): Kleine-Albrandt v. Lamb (Ind.App.

1992), 597 N.E.2d 1310 (wage claim).

We also conclude that policy considerations which were not

discussed in our opinion in Thomnson militate in favor of allowing

the district courts to discretionarily award attorney fees to pro

bono attorneys and to Montana Legal Services Association on behalf

of indigent clients, providing the statutory criteria of 5 40-4-

110, MCA, and the evidentiary requirements mentioned above are

otherwise satisfied. Accordingly, under the circumstances, it is

necessary that we reconsider our decision in Thomnson.

At the outset, we do not distinguish between litigants

represented by pro bono attorneys and those represented by Montana

Legal Services Association. The same considerations, discussed

hereafter, apply. The deciding factor is not the status of the

attorney providing the professional services, but that the indigent

client is financially unable to pay for legal representation in a

domestic relations proceeding where representation is a practical

requirement.

In Thompson, our decision to deny the award of attorney fees

to individuals represented by legal services agencies was based on

the concept of "personal necessity." Thompson, 630 P.2d at 244.

We reasoned that an award of fees was not necessary because the

wife who was awarded attorney fees did not incur a debt as a result

of obtaining legal representation. While true as far as it goes,

that is only one, but not necessarily, the most important or the

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determinative consideration in resolving this issue.

We live in a society where, next to health care, competent

legal service is likely the most essential, yet most costly,

professional service that most people from time to time require.

That is certainly no more evident than in domestic relations cases

wherein the court's decision will likely involve important property

questions and will forever alter the personal relationships and

obligations of the litigants to each other. More importantly,

however, at issue in many such cases are the relationships of

children to their parents and the fundamental rights of those

children to food, clothing, shelter, education, medical care,

support, and to a safe and reasonably stable home life. The

multiplicity of laws and often technical court rules and procedures

governing domestic relations cases combined with the emotionally

charged nature of such proceedings, present a mine field to the

litigant who is too poor to hire competent counsel.

Legal Services Corporation is a publicly funded agency whose

purpose is to ensure that economic barriers to legal assistance are

minimized and whose overall objective is to provide equal access to

our country's system of justice. 42 U.S.C. § 2996. In fulfilling

that mandate, Legal Services works to develop pro bono programs

which, presumably, will provide services to greater numbers of

eligible clients and thereby advance the purposes of the Legal

Services Corporation Act. See, 45 C.F.R. 1614(l)(a). To that end,

as in this case, Montana Legal Services Association refers many

domestic relations cases to attorneys willing to take the case

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without charging a fee to the indigent client.

It is important to point out that the regulations promulgated

pursuant to the Legal Services Corporation Act, permit legal

services agencies to request and accept a fee awarded or approved

by a court or administrative body. 45 C.F.R. 5 1609.5. This

regulation helps insure that eligible clients are able to obtain

appropriate and effective legal assistance. 45 C.F.R. 3 1609.1.

Unfortunately, the number of indigent litigants appears to be

growing, while the numbers of attorneys willing to do domestic

relations work for an affordable fee seem to be decreasing. The

net result of that unfortunate state of affairs is that already

financially strapped and understaffed legal services organizations

must deal with ever expanding case loads and, of necessity, must

increasingly rely on members of the bar who are willing to render

legal assistance to indigent domestic relations clients, pro bono,

to pick up the overflow.

Moreover, many attorneys, in fulfilling their professional

responsibilities to provide public interest legal service as

required by Rule 6.1 of Montana's Rules of Professional Conduct,

provide representation to indigent domestic relations clients at a

reduced charge or for no charge, without a request from Montana

Legal Services Association.

Section 40-4-110, MCA, broadly allows the trial court to

discretionarily award attorney fees in domestic relations cases

'I.. . after considering the financial resources of both parties."

Furthermore, our statute allows the court to 'I... order that the

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amount [awarded] be paid directly to the attorney, who may enforce

the order in his name." Importantly, there is nothing in the

statutory language which precludes a district court from awarding

attorney fees in an appropriate case merely because the attorney

representing the indigent party has agreed to not charge the client

for his or her professional services. Equally important, there is

nothing in the statute that makes the litigant who would,

otherwise, be required to pay attorney fees, the third party

beneficiary of the Legal Services or pro bono attorney's agreement

with the indigent client.

While awarding attorney fees to the indigent client

represented by Montana Legal Services Association or a m bono

attorney, would, in fact, be a windfall to the client, that result

can be easily avoided by the court simply awarding the fee directly

to Legal Services or to the attorney, as is permitted by § 40-4-

110, MCA. On the other hand, refusing to award attorney fees in

favor of the indigent client because of the status of his or her

attorney, where the opposing litigant is financially able and would

otherwise be charged with the indigent party's fees and costs under

the statute, represents a windfall to the non-indigent litigant.

Presumably, if Montana Legal Services Association and pro bono

attorneys can recoup from the non-indigent litigant those fees and

costs for which he or she would, otherwise, be liable under the

statute, that organization and those attorneys will be financially

better able to provide more legal services to the increasing

numbers of indigent litigants who need such services. Moreover,

15
non-indigent litigants who might be encouraged to simply "run up

the other party's bill I1 with vexatious conduct and frivolous court

proceedings, might be less inclined to do so knowing that the court

has the statutory discretion to award the indigent party's attorney

fees and costs against the offending party.

Recognizing the validity of those considerations and the

legislature's grant to the district courts of broad discretion to

award attorney fees in domestic relations cases, we are also

persuaded by the post-Thompson decisions of other jurisdictions

that our focus in that case was, in retrospect, too narrow. Those

courts have concluded that the broader principle of providing equal

access of justice to all warrants the award of fees to individuals

represented by legal services organizations. See for example,

Marriage of Swink, (Colo.App. 1991), 807 P.2d 1245; Benavides v.

Benavides (Conn.App. 1987), 526 A.2d 536; In re Marriage of Gaddis

(Mo.App. 1982), 632 S.W.2d 326.

For example, the Connecticut court which considered this issue

in Benavides reasoned as follows:

We are aware that indigents are represented by legal

services attorneys in a large number of family relations

matters. It would be unreasonable to allow a losing

party in a family relations matter to reap the benefits

of free representation to the other party. A party

should not be encouraged to litigate under the assumption

that no counsel fee will be awarded in favor of the

indigent party represented by public legal services: or

as in this case, that a reasonable fee will be

discounted for the same reason. IPut in another way, the

public should be relieved from the financial burden of

obtaining an indigent plaintiff's divorce or successfully

defending against a husband's complaint, to the extent

that the husband is able to pay all or part of her

attorney's fees. The taxpayer has an interest in

recovering where possible a portion of the costs in these

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situations.'

An award of counsel fees that does not discriminate

against non profit legal service entities will encourage

non profit counsel to expend its resources in the

representation of those clients who are unable to afford

private counsel in disputed child custody and child

support enforcement litigation. The purposes of such

acts as the Uniform Child Custody Jurisdiction Act... are

advanced and are made more available to the poor where

there is an expectancy that the nonprofit legal services

will recoup at least part of its resources through an

award of counsel fees to its client. Furthermore, a

realization that the opposing party, although poor, has

access to an attorney and that an attorney's fee may be

awarded deters noncompliance with the law and encourages

settlements. (Citations omitted.)

Benavides, 526 A.2d at 538.

Similarly, in Marriase of Swink, 807 P.2d 1245, the Colorado

court addressed this same issue under a statute nearly identical to

5 40-4-110, MCA. The trial court denied the wife's request for

attorney fees as she wasrepresented by a pro bono attorney at the

request of a legal services agency. The appellate court overturned

the trial court holding that a showing of debt incurment was not

necessary since the statute allowed an award for "legal services

rendered." Marriage of Swink, 807 P.2d at 1247.

Simply stated, an award of attorney fees under § 40-4-110,

MCA, is authorized when, giving due consideration to the financial

resources of both parties, the requesting party shows necessity --

i.e. the inability to pay for legal representation -- and

reasonableness of the fees requested. Whether a party incurs debt

is irrelevant, and necessity is unrelated to the status of the

attorney who delivers the legal services.

Accordingly, for the reasons aforementioned, we conclude that

it is appropriate we overrule our decision in Thompson to the
extent our decision in that case prohibits a discretionary award of

attorney fees under 5 40-4-110, MCA, in favor of a party

represented by Montana Legal Services Association or a pro bono

attorney.

We hold that a district court may discretionarily award

attorney fees under the criteria set forth in § 40-4-110, MCA, to

either Montana Legal Services Association or to a pro bono attorney

representing the requesting party providing that such party

demonstrates the necessity for and reasonableness of the fees

requested.

Affirmed in part and remanded for further proceedings

consistent with this opinion w

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