Court Opinion

ID: 884408
Source: CourtListenerOpinion
Date Created: 2013-06-05 03:06:04.593737+00
Date Added: 2024-06-11T11:39:52.616948
License: Public Domain

No.    96-357
              IN THE SUPREME COURT OF THE STATE OF MONTANA

                                               1997

JOSEPH C. ENGEL,
              Plaintiff,         Counterclaim    Defendant,
              Respondent,         and Cross-Appellant,
         v.
DARLENE WAGNER, a/k/a             DARLENE FRANSSON,
              Defendant,     Counterclaimant,
              and Appellant.

APPEAL FROM:         District  Court of the Eleventh     Judicial   District,
                     In and for the County of Flathead,
                     The Honorable   C. B. McNeil,   Judge presiding.

COUNSEL OF RECORD:
              For   Appellant:
                     Anne Biby and Sean Hinchey;
                     Bottomly  Law Offices; Kalispell,                Montana
              For   Respondent:
                     James C. Bartlett;       Hash, O'Brien
                     & Bartlett;   Kalispell,      Montana

                                          Submitted      on Briefs:    January     16,     1997
                                                           Decided:    March     25,     1997
Filed:
Justice           Terry          N. Trieweiler                      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.

           Joseph           C. Engel               filed           a complaint                 for        a declaratory                      judgment

in       the      District               Court              for          the         Eleventh               Judicial             District                in

Flathead             County.            He asked                  the     District             Court          to decide               that       he was
not      Darlene            Wagner's               attorney,               and that             Wagner          was not              entitled            to

any      of     the      settlement                 proceeds                he obtained                   during          a prior              lawsuit

against              Glacier           Log          Homes.                 Wagner             counterclaimed                         and       alleged

breach          of      contract,               breach              of     fiduciary                duties,             malpractice,                    and
misrepresentation.                                 Prior           to      trial,             the        District              Court           granted

several          of     the      parties'              cross-motions                     for        partial             summary            judgment.
For      Engel,         the      District              Court             ruled        that,         as      a matter            of     law,          there

was      no      attorney-client                           relationship.                        Accordingly,                    it         dismissed

Wagner's              malpractice                    and          misrepresentation                           counterclaims.                            For

Wagner,          the        District           Court              ruled        that      Engel           had breached                  a contract
and      his         fiduciary               duties.                After            a non-jury                trial,           the          District

Court           awarded           Wagner               damages                 for      Engel's               breach            of         contract.

Wagner          appeals          and Engel                 cross-appeals                      the     judgment            of     the         District

Court.               We affirm                in      part,              reverse          in        part,           and        remand           to      the

District               Court           for          further               proceedings                      consistent                  with           this

opinion.

           On appeal,                 Wagner           raises             the        following              issues:

                                                                               2
        1.             Did     the      District        Court         err        when     it        granted          summary
judgment          to Engel regarding                 the attorney-client                   relationship                 issue?
        2.             Did     the     District        Court       err         when it          declined           to    award
Wagner damages for                      Engel's      breach        of fiduciary                duties?
        3.             Did     the District           Court        err      when it        held        that        Engel       is
entitled           to        attorney       fees      and costs             from     Wagner's              share        of    the
recovery          from Glacier              Log Homes?
        4.             Did     the      District         Court           err     when          it    held       that          the
sanctions              awarded for          discovery          abuses in a prior                     lawsuit         against
Glacier          Log Homes belong                  entirely        to Engel,            the attorney?
        5.             Did the District              Court      err       when it        excluded           evidence           of
tape-recorded                 conversations            between           the parties?
        On cross-appeal,                    Engel raises              the following                 issues:
        1.             Did     the      District        Court         err       when it             held      that       Engel
breached          a contract?
        2.             Did     the      District         Court           err     when          it    awarded            Wagner
prejudgment              interest?
        3.             Did the District              Court     err       when it        declined            to hold          that
Wagner's          claim        is void because against                      public      policy         on the grounds
of champerty                 and maintenance?
                                               FACTUAL BACKGROUND
        Darlene              Wagner and William               Shrewsbury             were engaged in various
joint      business             enterprises           in the Flathead                Valley          for     a period          of
time       in     the         1980s.         One of       their          joint       ventures              involved           the
promotion              and sale of log homes manufactured                               by Glacier             Log Homes,
Inc.       Shrewsbury                and Buck Foster,              the owner of Glacier                        Log Homes,
agreed          that     Shrewsbury           would receive               a ten percent               commission              for

                                                               3
the       log        homes which                  were         sold       through           his     efforts.                  As a result                of

Wagner's              contributions,                      Shrewsbury                assigned            to her,             in writing,                the

rights           to        one-half              of      the      commissions.

           A dispute                    arose         between          Glacier            Log Homes and Shrewsbury                                    with

regard           to        the     commissions.                       After        they      unsuccessfully                       attempted              to

collect              the         commissions               owed to             them,         Wagner          and Shrewsbury                      had a

falling              out.
           Shrewsbury                        initiated             a      lawsuit           against              Glacier                Log     Homes.

When Wagner                      learned           of     the      lawsuit,            she contacted                        Shrewsbury.                 At

that        time,                Shrewsbury                asked            Wagner           to     locate              a     new        attorney,

because              his         original             attorney              had health              problems.
           In January,                       1990,       Wagner contacted                     attorney              Joseph          Engel.             She

met       with            him          and     provided               him     with          information                  about           the     case.
Ultimately,                      Engel           contacted               Shrewsbury               and        they           entered            into          a

contingency                     fee      retainer              agreement.                 Wagner          was not             a signatory                to

the       contingency                    fee      retainer             agreement             and was not                    formally            made a

party           to        the      lawsuit.                    Engel        advised           her         that          she       did     not         have

standing                  to     be      a party           to      the        lawsuit,            but       that         her        rights            were

adequately                     protected              by the           assignment             from         Shrewsbury.
           On July                2,     1991,          Shrewsbury,                Engel,         and Wagner                entered            into      an

agreement                      which          provides             that         the         proceeds               of       the         underlying

lawsuit              against             Glacier           Log Homes are                     to     be split                equally            between
Shrewsbury                     and Wagner,                after         Engel         takes         out      his        attorney               fees      (a

one-third                      contingency                fee)         and         costs.            The         contract                expressly
states,              in        relevant           part,          as follows:

           After                 attorney            fees,                documented                attorney                 expenses
           incurred                 (such         as travel                expenses,              deposition                costs  and
           witness                fees),          documented                necessary             expenses               for William

                                                                               4
           Shrewsbury      and Darlene        Wagner,         the  balance      of   the
           recovery   in whatever       form shall     be split     in half.     At the
           time Mr. Engel receives          his fees and expenses,            he shall
           have authority      to pay Darlene Wagner directly             her portion
            (50%) and William      Shrewsbury      his portion        (50%).   Darlene
           Wagner will      be paid directly          by Joseph Engel        from the
           recovery    without      the recovery        first     going    to William
           Shrewsbury     for distribution.

The contract                    also          specifies                  that         Wagner           is     to receive                  an additional

$1,500,             from             Shrewsbury's                         share,               in     order             to       repay         her       for         a

preexisting                    debt.

           Prior           to        trial,                  Engel        successfully                      recovered                sanctions               from

Glacier            Log         Homes               in        the        amount            of        $8,700          for        discovery               abuses.
Trial         was scheduled                             to     commence               on May 4,               1992.              However,              shortly

before             that         date,               Shrewsbury                    refused               to         travel            to        Montana           to
testify.                 Therefore,                      on May 1,               1992,              Engel          settled           the       case.           The

settlement                 package                  included:                   (1)        $1,300            in     cash;              and       (2)     a log

home       valued               at        $27,247.                       Glacier               Homes         also            paid         to    Engel          the
amount         previously                      awarded                  for     sanctions.

           After              the          settlement,                        Engel             received                  an      assignment                 from

Shrewsbury                of        all       of        Shrewsbury's                      interest            in     the         case.          In return,

Engel         paid         Shrewsbury                         $5,000.             Wagner              did         not        receive           any      of     the

proceeds.

           Wagner             subsequently                         learned            of the           settlement                 and demanded                 her

share         of        the     proceeds.                          However,               Wagner            and         Engel        were       unable           to

negotiate                a resolution.                              As a result,                     Engel          filed           a complaint                for

a declaratory                         judgment                     in    which            he        asked          the         District           Court          to

decide         that           Wagner was not                            his     client              and that              she was not             entitled

to      any        of         the         settlement                     proceeds.                     Wagner                counterclaimed                    and

                                                                                      5
alleged              breach                of             contract,                         breach            of          fiduciary                 duties,
malpractice,                    and misrepresentation.

          Both        parties             filed             cross-motions                        for      partial               summary           judgment.

The     District                 Court               held          that              as      a matter               of        law      there         was      no

attorney-client                         relationship.                                On that            basis,            the       District              Court
also         dismissed                     Wagner's                       malpractice                          and            misrepresentation

counterclaims.                          Furthermore,                           the          District               Court         granted            summary
judgment             on Wagner's                     behalf           with                regard        to     her        breach           of      contract

and breach                 of     fiduciary                  duties                  counterclaims.

          After             a nonjury                     trial,               the           District               Court           awarded          Wagner
damages           for           Engel's              breach               of         contract,                but        no      damages            for     his
breach          of      fiduciary                    duties.                    When the                District                Court        calculated

Wagner's             damages,             it         determined                      that      the      "recovery                in whatever               form
obtained             by         [Engell              as      Shrewsbury's                        attorney                in      the       Glacier          Log

Home case             is        the     sum of              $28,547.00                       [the       log     home valued                  at     $27,247

plus      the        $1,300             cash          payment]                 .'I          The District                  Court           specifically

found      that            because             the         $8,700              sanctions                award            had been            designated

as     attorney                 fees,           it        should               not          be      included               in       the      settlement

amount.

          As a result,                     the         District                      Court       made the                following              findings:

          12.    That pursuant   to [Engel's]       contingent      fee agreement
          with Shrewsbury,     [Engell    is entitled      to one-third      of the
          amount of Shrewsbury's       recovery     [$28,547.00]      which is the
          sum of     $9,515.00    and costs       advanced       in   the   sum of
          $1,000.00.
          13.     That pursuant     to the July 2, 1991 agreement            between
           [Engel],      [Wagner] and Shrewsbury,        [Engel]   is entitled     to
          first       deduct    his   attorney       fee   and   costs     owed    by
          Shrewsbury        in the total     amount of $10,515.00          from the
          total     recovery    of $28,547.00     for Shrewsbury      from Glacier
          Log Homes, resulting         in net proceeds      of $18,032.00       to be
          divided      and paid according      to the July 2, 1991 agreement.

                                                                                      6
            14.    That  [Wagner]   is entitled     to 50% of said       sum, or
            $9,016.00,   plus the sum of $1,500.00       as provided     in said
            agreement,    for a total     of $10,516.00    which   should    have
            been paid by [Engel]      to [Wagner] within    a reasonable     time
            after    the settlement     of the Glacier    Log Homes lawsuit
            May 1, 1992.

            Wagner             appeals             and         Engel      cross-appeals                         the         judgment             of         the

District                Court.

                                                         STANDARDS OF REVIEW
            Rulings              on      summary                judgment                are      governed                   by        Rule       56(c),

M.R.Civ.P.,                    which         provides,             in     relevant               part:
            The judgment      sought     shall    be rendered       forthwith     if the
            pleadings,    depositions,         answers     to interrogatories,       and
            admissions    on file,     together     with the affidavits,        if any,
            show that    there     is no genuine         issue   as to any material
            fact   and that the moving party            is entitled      to a judgment
            as a matter     of law.

            The         purpose              of         summary         judgment                is       to          encourage               judicial
economy           through              the        elimination             of        any unnecessary                          trial;          however,

summary           judgment              is        not    a substitute                   for      trial          if     a genuine               factual

controversy                exists.                 Reaves v. Reinbold                           (1980),              189 Mont. 284,             288,

615 P.2d 896,      898
            It     is     well         established                 that           the        moving       party             must         prove             that

it     is    entitled             to     a judgment                as a matter                  of       law.          To do this,                    it      is

required            to      show a complete                       absence               of    any genuine                    factual           issues.

D'Ayostino                 v.     Swanson                (lPPO),          240 Mont. 435,           442,        784 P.2d 919,

924.             To defeat               the        motion,             the        nonmoving                 party           must        set      forth

facts            which           demonstrate                    that      a        genuine               factual                 issue         exists.
O'Bagy v. First                        Interstate                Bank of Missoula                             (1990),            241 Mont. 44,

46,     785 P.2d 190,     191.            All     reasonable                   inferences               that           may be drawn

from        the     offered             proof            must      be resolved                   in      favor          of       the      nonmoving

                                                                              7
party.                     D'Agostino,                        240              Mont.        at         442,           784                 P.2d         at          924.

Additionally,                       if     there             is      any doubt              regarding                the        propriety                     of     the

summary               judgment             motion,                  it         should      be denied.                     Whitehawk                     v.     Clark

(1989),               238 Mont. 14,         18,          776 P.2d 484,         486-87.

           Additionally,                             this           appeal              involves              issues             which                were           not

resolved               by summary                     judgment                  rulings.              Therefore,                     it     is        necessary

to      delineate                   the     other                 applicable               standards                 of     review.                      When we

review            a district                         court's               conclusions                  of      law,            the             standard               of

review        is        whether             those             conclusions                   are        correct.                 Carbon                County           v.

Union        Reserve                 Coal            Co.          (1995),           271 Mont. 459,         469,             898 P.2d 680,

686.          When we review                                 a district                    court's             findings                    of      fact,             the
standard              of     review             is        whether               those      findings             are        clearly                 erroneous.

Dairies          v.        Knight           (1995),                269 Mont. 320,         324,         888 P.2d 904,         906.

                                                                                ISSUE      1

           Did        the      District                   Court           err      when it            granted             summary                judgment              to

Engel       regarding                     the        attorney-client                           relationship                     issue?

           The District                         Court             ruled           that,         as     a matter                 of         law,         "[Engel]

was never               the         attorney                for          [Wagner]          at        any point             in        time."                  On that

basis,            the          District                     Court              granted           Engel's              motion                 for             summary
judgment               pertaining                    to      the         attorney-client                       relationship                           issue.

           Wagner,              however,                    contends                on appeal                 that         there                are      genuine

issues           of        material                  fact          and          that,       therefore,                    the         District                 Court

erred       when it                 granted               Engel's               motion          for     summary             judgment.                        Wagner

first       asserts,                     as a general                     proposition,                  that         whether                an attorney-
client        relationship                           exists               is     a question              of      fact           to         be decided                  on

a       case-by-case                      basis.                    She          then       delineates                    the             following                  six

                                                                                    8
factors         which       she maintains                should          be considered                when making                a
determination              as to whether             an attorney-client                   relationship         exists:
(1) the consulting                  party's      intent          to seek legal             advice        or services;
(2) the fact            that      the attorney            actually            gives      legal    advice;          (3) the
existence          of     a contract           between           the        parties;        (4) payment            by the
party      to the attorney;               (5) the receipt                   or disbursal          of confidential
information             to or from the person                     who asserts             the existence             of the
relationship;              and (6) the consulting                      party's         reasonable         belief         that
she was represented                   by the attorney.
          We agree with             Wagner's          assertions.              Whether an attorney-client
relationship             exists      in a particular                case will            necessarily         depend on
the     facts       and circumstances                    of       that        case.        Furthermore,                 while
Wagner's          six-factor           test      is     not       exhaustive,             we conclude          that         it
provides          effective          guidance          in this           case.
          After      a review           of     the      record,             we conclude           that      there         are
genuine           issues       of     material            fact         with       regard         to    each        of     the
aforementioned              six     factors.           Accordingly,              we hold that            the District
Court      erred     when it         granted          summary judgment                 on Engel's         behalf         with
regard       to the attorney-client                       relationship                 issue.
          Furthermore,              we conclude           that      as a result             of our holding                the
District                Court's              dismissal                 of         Wagner's               malpractice,
misrepresentation,                  and punitive              damages counterclaims                      must also          be
reversed.
                                                        ISSUE 2
          Did the District                Court         err      when it         declined         to award Wagner
damages for             Engel's       breach          of fiduciary               duties?

                                                              9
            Prior          to trial,                the District                   Court            granted             summary           judgment              on

Wagner's             behalf            with         regard          to her             breach         of         contract            and breach                 of
fiduciary               duties              counterclaims.                         After            a non-jury                trial,          however,

the         District                Court           awarded                her         damages                 for       Engel's            breach              of

contract,                    but            dismissed                  her              breach                  of       fiduciary                 duties

counterclaim.

            On appeal,                 Wagner            contends                that         the     District              Court          erred             when

it     dismissed                 her        counterclaim                    and failed                    to     award        her         damages             for

Engel's          breach             of      fiduciary               duties.               Specifically,                      she asserts                     that

the      District                  Court        arbitrarily                      and improperly                          reversed           its         prior

summary             judgment                ruling.

            The District                     Court's            summary               judgment                 ruling       established                      that

as     a matter               of     law       Engel           owed Wagner                     fiduciary                 duties           and that              he

had,        in      fact,          breached              those         duties.                 The ruling,                  however,              did         not

relieve          Wagner              of      her        obligation                to prove                that,          as a result               of         the

breach,              she      had         suffered              any        legally              compensable                  damages.                   It      is

well         established                     that         the        "law         does          not            require          that        for         every

injury           there              must        be        a     recovery                 of         damages,              but        only         imposes

liability                  for       a breach                  of     legal             duty          by         defendant                proximately

causing              injury            to     plaintiff."                        Negaard             v.         Feda       (1968),           152 Mont.
47,      52,        446 P.2d 436,        439-40.

            At      trial,          Wagner had the                         opportunity                    to     submit         evidence            and to

prove          her      damages.                   At    the        close         of     all         the        evidence,              however,               the

District               Court              concluded                 that         she          was      entitled                 to     damages                for

Engel's           breach            of       contract,               but      that         she did               not      suffer          any legally

compensable                      harm         as        the     result             of         Engel's                breach          of      fiduciary

                                                                                 10
duties.                      It     was,            therefore,                    proper                 for        the         District                Court            to
dismiss            Wagner's                     breach         of     fiduciary                        duties            counterclaim.

           Accordingly,                           we hold           that          the        District                   Court         did     not        err          when

it     declined                   to award               Wagner damages                          for       Engel's             breach         of        fiduciary

duties          and instead                         dismissed                   her        counterclaim.

                                                                                ISSUE            3

           Did          the        District               Court        err         when it                 held         that        Engel          is    entitled

to attorney                       fees         and costs             from          Wagner's                    share       of       the      recovery                 from

Glacier            Log Homes?

           When               the             District              Court              calculated                       and         awarded              Wagner's
damages,                it         held         that:

            [Engel]   is entitled     to first     deduct his attorney     fee and
           costs    owed by       Shrewsbury        in   the  total     amount   of
           $10,515.00      from the total         recovery   of $28,547.00     for
           Shrewsbury      from   Glacier      Log Homes,     resulting     in net
           proceeds     of $18,032.00     to be divided      and paid according
           to the July      2, 1991 agreement.
           On appeal,                         Wagner        contends                  that           the       District               Court         erred             when

it     held        that             Engel           is    entitled                to       attorney                 fees         and costs                   from      her

share         of         the         recovery.                    Specifically,                              she        asserts             that         when          the

District                Court             allowed           Engel           to        "first             deduct            his        attorney                fee      and

costs,"            it         expressly                  contradicted                      its         prior        summary            judgment                ruling

that       Engel                  was not           Wagner's               attorney.

           At        the           outset,               we recognize                       that           Wagner's              argument                could           be

rendered                moot             if       on remand                it         is     established                       that         there            was,        in

fact,           an       attorney-client                             relationship.                                 However,               even          if       it      is

subsequently                         determined                     that          there                 was        not         an      attorney-client

relationship,                         we conclude                     that            Engel             is      still           entitled                to      "first

deduct           his              attorney               fee    and             costs."                  The        parties'                July         2,         1991,

                                                                                      11
contract               expressly                  states,                in      relevant                      part,           as     follows:                     "After

attornev               fees,         documented                         attornev                     exoenses                 incurred                                  .    the

balance           of     the         recovery                 in     whatever                        form           shall      be split                 in         half."

(Emphasis               added.)                   Therefore,                    pursuant                       to     the      parties'                 contract,

Wagner's               share         of      the         recovery                     is        to        be calculated                     after             Engel's
fees     are        first            deducted.

         Accordingly,                      we hold                 that         the             District               Court          did        not         err            when

it     determined                   that          Engel            is         entitled                    to        attorney            fees            and             costs

from     Wagner's                  share          of        the         recovery                     from           Glacier         Log Homes.
                                                                              ISSUE 4

         Did           the        District                  Court          err             when           it        held       that         the         sanctions

awarded           for        discovery                 abuses             in     a prior                   lawsuit             against            Glacier                    Log

Homes belong                    entirely               to         Engel,               the           attorney?

         When the                  District                 Court             calculated                       Wagner's             damages,                  it            held

that       the           "recovery                     in          whatever                      form           obtained               by          [Engel]                    as

Shrewsbury's                      attorney               in        the         Glacier                 Log Home case                        is      the            sum of

$28,547.00                   [the         log      home valued                             at        $27,247                plus      the         $1,300                    cash

payment]."                   The District                      Court            specifically                           concluded                 that         because

the     $8,700                 sanctions                 award                against                 Glacier                 Log      Homes             had                been

designated                   as      attorney                  fees,             it          should                 not       be      included                     in        the

amount       of         "recovery."

          On appeal,                  Wagner                contends                  that           the        District              Court            erred                when

it     determined                   that           the         sanctions                        should               not      be      included                     in        the

amount         of        "recovery."                          Specifically,                               she asserts                  that         the            $8,700

award        is         a part               of        the          "recovery                        in        whatever               form"             and             that,

therefore,                it        should          be distributed                                   accordingly.

                                                                                      12
        We recognize                  that,         when the District                 Court      awarded                sanctions
against        Glacier            Log Homes in                the underlying                lawsuit,               it      did,       in
fact,      designate            them as "attorney                   fees."         However,           we conclude                 that
that    fact     is not dispositive                         of this          issue     and that,                despite           that
designation,              the      sanctions              award does not belong                       entirely              to the
attorney.
        We agree               with        the      reasoning           of   the     D. C. Circuit                       Court        in
Hamilton        v.        Ford Motor                Co.     (D. C. Cir.            1980),       636 F.2d 745.         In

that    case,        the court              initially         recognized             that     "[ilt             is elementary
that      an attorney                 may not             seek      compensation            from            the         client        in
addition        to that           provided            in the contract                between the attorney                          and
the client            . .                  [A]11 compensation                 . . . [is]              to be covered                   by
the     terms        of     the       contract."                 Hamilton,           636 F.2d              at     748       (citing

In re Laughlin                 (Il. C. Cir.               1959),     265 F.2d 377; Carmichael                              v. Iowa

State      Highway          Comm'n (Iowa                   1974),       219 N.W.2d 658).                         Ultimately,

the court        held:
         [Albsent   a provision   in the [attorney-client]      contract
        allocating    Rule 37(b) [discovery   abuse sanctions]    awards
        of attorney's      fees,  the plain   terms of the Retainer
        Agreement     in this    case provide     that     the one-third
        contingency     fee is the sole source of compensation          for
        the attorneys.
Hamilton,        636 F.2d at 748.

        With         regard           to      the     underlying             lawsuit        against               Glacier          Log
Homes,        Shrewsbury               and Engel             entered          into      a retainer                  agreement.
With      regard          to      Engel's            compensation,             their        agreement                   stated        as
follows:
                 One-third    (33%) of the amount recovered                                           if        the case
         is    settled   without  the necessity  of trial;

                                                                   13
                 Forty    percent        (40%) of the amount recovered      upon
          trial   of this       case;
                 Fifty   percent       (50%) of the amount recovered   after    a
          successful      trial      verdict   and the case is appealed      and
          upheld     on appeal.

          Their            agreement                   limits                compensation                  to         the         attorney                  to          a

percentage                     of      any       amount               recovered.                     It      does                not       provide                 an
exception                for         amounts          recovered                as sanctions                     and designated                        by the

court          as        attorney               fees.                 Therefore,               pursuant                   to      the         principles

delineated                 in         Hamilton,             we conclude                   that            Engel's                compensation                      is

limited             by     the         terms          of     the        retainer              agreement                   and,          based         on the

facts          of     this            case,       Shrewsbury                     (the        client),                 and         not         Engel              (the

attorney),                 is         the      proper            recipient              of        the      $8,700                sanctions                 award

after          deduction                of      the        appropriate                  costs           and fees.
          it        necessarily                 follows               that      the      $8,700            sanctions                   award       paid            by

Glacier             Homes is                a part          of        Shrewsbury's                  recovery                   and therefore,                           a

part       of        the             settlement                  package             entered              into            between              Engel--on

Shrewsbury's                         behalf--and                  Glacier              Log        Homes.                    Furthermore,                         the
July       2,        1991,             contract              entered             into          by       Wagner,                  Shrewsbury,                     and
Engel          expressly                    requires              "the         dispersement                     of        recovery,                whether
from      suit,            settlement                 or other                compensation."                          Concomitantly,                         when
the     District                Court          enforces               the      terms         of     the     July            2,        1991,      contract

and       calculates                    the       amount                to     which           Wagner                is        entitled,               it          is

required              to            include           the        $8,700           sanctions                 award                as     part          of          the

"balance             of        the      recovery                 in     whatever             form."

          Accordingly,                         we hold                that      the      District                Court                erred       when             it

excluded             the            sanctions           award           from      the        settlement                   amount           which            is     to

be distributed                        pursuant              to        the     terms       of       the      parties'                   July      2,        1991,

contract.

                                                                                14
                                                                          ISSUE         5

           Did       the             District                Court          err         when            it       excluded                  evidence                  of
tape-recorded                        conversations                       between            the     parties?

           When we review                             a district                     court's                 evidentiary                   ruling,               the

standard             of          review               is         whether             the         district                   court              abused            its

discretion.                      Hislop              v.     Cady          (19931,            261 Mont. 243,           247,            862 P.2d
388,       390.            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."                      Tanner              v.     Dream          Island,               Inc.          (1996),              275 Mont. 414,

430,       913 P.2d 641,           651.           Additionally,                           we note               that              questions

relating            to          the        admissibility                    of       evidence                  are       "left            to         the     sound

discretion                 of        the     trial              court,       subject               to         review          only             in     the      case

of    manifest             abuse."                 Mason v. Ditzel                          (1992),             255 Mont. 364,             370-71,

842 P.2d 707,             712.

           Prior                to           trial,                Wagner               recorded                      several                        telephone
conversations                     between                 Engel          and herself                on her               answering                    machine.

She        recorded                   the        conversations                         without                  Engel's               knowledge                      or
consent.              The            tapes         were           transcribed                  and copies                    were          provided                  to

Engel       during              discovery.
         At       trial,              the       District                 Court        allowed                Wagner           to      read            into      the

record        a quote                  taken          directly              from           the      tapes             "for          the         purpose              of

showing            that          [Engel]              has         not      told        the        truth."                   After          counsel               for
Wagner        read         the         quote,              counsel          for       Engel         moved to                 strike                 the     quoted
material             and             stated               the       following                grounds                  for          his          objection:

                                                                                15
"Objection.                 Move to          Strike.               That's          not      impeachment.              That's
exactly          what he said."                The District                Court         granted     Engel's         motion.
         On appeal,            Wagner contends                    that     the District            Court       erred        when
it     granted        Engel's          motion         to        strike.            Specifically,              she asserts
that    the evidence               is admissible                 for      impeachment purposes                  even if       it
was illegally                 obtained.              In     support          of      her     position,          she cites
several          federal       court       decisions             which,       in the criminal                law context,
uphold          the admission           of illegally                obtained          evidence         for    impeachment
purposes.            On that         basis,          she requests              that         we issue         a ruling,        at
this     time,        "that        the transcriptions                     of the taped conversations                        may

be used for               impeachment          or other                purposes."
         Engel,           on the other              hand,        maintains           that     § l-3-208,          MCA, and
the Right           of Privacy             contained             in Montana's               Constitution          preclude
the admission               of illegally              obtained             evidence.
         After        a review          of the record,                    however,          we conclude           that       the
District          Court's          decision         to exclude             the evidence            was not based on
such public               policy       arguments.                 Rather,          the District              Court     merely
agreed with               counsel      for    Engel that                Wagner's           proffered         evidence        was
not,       in     fact,       offered         for     impeachment                  purposes,       and did           not,     in
fact,       constitute             valid      impeachment                 evidence.
         Accordingly,               we hold that                the District             Court did not abuse its
discretion            when it          granted         Engel's            motion         to strike           and excluded
evidence           of the tape-recorded                         telephone           conversations.
                                              CROSS-APPEALISSUE 1
         Did the District                    Court        err     when it          held that       Engel breached                  a
contract?

                                                                  16
          Engel,                Shrewsbury,                       and          Wagner              entered                 into            a     contract                on

July          2,     1991,              which             described                 with        particularity                              the        manner             in

which          Engel             was              to      distribute                   the         proceeds                    of       the           underlying

lawsuit            against                 Glacier               Log Homes.                     Prior               to     trial,               the       District

Court          determined                         that          as      a matter                of        law             Engel            breached               that

contract            when he failed                              to compensate                   Wagner               in        accordance                 with       its
terms.             After              trial,             the      District               Court           awarded                Wagner           damages             for
Engel's            breach               of        contract.

          On cross-appeal,                                   Engel          contends            that           the        District               Court           erred

when it            determined                      that         he breached                  the        July         2,        1991,           contract.                 In
essence,             he asserts                         that      he filed               his        complaint                     for          a declaratory
judgment              in          order                 to       have          the         District                      Court             determine                 the

respective                 rights                 of     the      parties,               and that               until               those        rights           were

fully          determined                      there           could         not       be a breach                        of      contract.

          The         District                         Court         found          that           the         July             2,      1991,             contract

between             Engel,                   Shrewsbury,                      and        Wagner                was             valid            and        legally

binding.              It         further                 found         that,         pursuant                  to        the      unambiguous                    terms

of      the        contract,                      Wagner          is        entitled               to     fifty                percent               of    the       net

"recovery                   in            whatever                     form"               against                   Glacier                    Log            Homes.
Furthermore,                     it       is       undisputed                  that          Engel         settled                   the        case       against

Glacier            Log Homes on May 1,                                      1992;        and,        as we previously                                 held,       that

settlement                 included                    a $10,000              cash       payment               and a log                   home valued                   at

approximately                         $27,000.

          The respective                               rights          of     the parties                 have now been established

and the            District                    Court           correctly              concluded                 that,             pursuant                to     their

contract,              Engel                 is        obligated               to      disperse                 to        Wagner               the        money          to

which          she         is          entitled.                       Therefore,                  whether                 Engel               breached              the

                                                                                    17
contract               is,         at         this        point        in           time,      irrelevant;                    either           way,         Wagner

is    entitled,                    pursuant                 to the             contract,              to receive                her         fifty       percent
share           of     the         net             recovery           against                Glacier              Log Homes.

           Although,                         as previously                      stated,             the     District             Court              erred      when

it    calculated                        the          amount          of        the          "recovery             in     whatever                   form"      and,

concomitantly,                               the         amount           of        Wagner's               damages,             we hold               that        the

District               Court                 did      not      err        when it              determined                that          Engel           breached

his     contract                   and that                 Wagner             is     entitled              to damages.                      Accordingly,

the     judgment                   of         the        District               Court          is     affirmed.

                                                              CROSS-APPEAL                      ISSUE         2
                Did     the         District                  Court            err      when it            awarded            Wagner prejudgment
interest?

           When              the         District                   Court            awarded              Wagner         breach               of       contract

damages,               it      also                awarded           her            prejudgment               interest                at       the      rate       of
ten     percent                per             annum           from            May 1,          1992--the                date          on which               Engel

settled               the      case                against           Glacier                Log Homes.

           On cross-appeal,                                  Engel          contends                that      the       District                Court        erred

when       it         awarded                 Wagner           prejudgment                     interest                from      May 1,              1992.         He

asserts               that,             if         interest           is        to      be awarded                 at    all,          it      should          only

be awarded                    from            February               21,        1996--the                  date        on which              the       District

Court           entered                 its          order.

           In Montana,                             the      right         to         prejudgment                  interest             is      governed            by

5 27-l-211,                    MCA, which                      provides                 as follows:
           Right    to Interest.         Every   person   who is entitled     to
           recover    damages certain      or capable   of being made certain
           by calculation      and the right      to recover   which is vested
           in him upon a particular         day is entitled    also to recover
           interest    thereon   from that day except during        such time as
           the debtor       is prevented      by law or by the act of the
           creditor     from paying    the debt.

                                                                                       18
           We have            already              concluded             that            Engel's                 failure               to      comply            with
the     terms           of        the       parties'             July          2,        1991,            agreement                     constituted                     a
breach           of         contract               and      therefore,                        that         Wagner                 is        entitled                to

damages          for         that        breach.               Furthermore,                     it        is      undisputed                    that         Engel

settled          the         underlying                lawsuit           against                Glacier                 Log Homes on May 1,

1992,           and         therefore,                  that           the         breach                 occurred                   on        that          date.

Furthermore,                      Wagner           was     entitled                 to         her        share             of       the        settlement

proceeds               at      that            time,      which              was         in      sum capable                           of      being             made

certain.               Accordingly,                    we hold           that            the         District                Court             did     not        err

when       it    awarded                 Wagner         prejudgment                  interest                     from           May 1,              1992.
                                                       CROSS-APPEAL                      ISSUE            3

           Did        the          District              Court          err         when             it        declined                   to     hold            that

Wagner's              claim         is    void         because          against                 public                policy           on the           grounds
of    champerty                   and maintenance?

           The         District                   court          neither                  addressed                         nor         analyzed                  the

champerty              or maintenance                      issues.                  However,                    on cross-appeal,                             Engel

contends              that         Wagner's            entire           claim            should                fail         because             it      is       void

as        against                  public              policy                for              champerty                      and            maintenance.

Specifically,                       he alleges              that         Wagner,                 who was not                         a party                to    the

underlying                  lawsuit            against          Glacier             Log Homes:                        (1)      contributed                   money

to    support               the      lawsuit;             (2)     is     being                compensated                      for      her          role        as a

witness;              and         (3)     is      a stranger                 to     the         lawsuit.

           The definition                         of     maintenance                     is     as follows:

            [Mlaintenance        involves       the act of improperly,            for    the
           purpose of stirring           up litigation       and strife,      encouraging
           others     either    to bring      actions      or to make defenses         that
           they have no right          to make.        In any event,     maintenance       is
           an officious        intermeddling           in a suit      which    in no way
           belongs      to the intermeddler            by maintaining       or assisting
           either     party   to the action,           with money or otherwise,            to

                                                                              19
          prosecute      or defend     it.    In other     words   it  is                                                                   the
          intermeddling       in a suit    by a stranger,      one having                                                                     no
          privity     or concern   in the subject   matter   and standing                                                                     in
          no relation      of duty to the suitor.

14 Am. Jur.               2d Champerty                        and Maintenance                       5 2 (1964).

          The definition                         of      champerty                 is     as follows:

          Champerty                 is a species     of maintenance.           It is . . . a
          bargain    by              a champertor    with a plaintiff        or defendant   for
          a portion                 of the matter     involved     in a suit      in case of a
          successful                   termination       of    the    action,       which   the
          champertor                 undertakes    to maintain      or carry     on at his own
          expense.

14 Am. Jur               2d Champerty                        and Maintenance                       § 3 (1964).

          In      Schnabel                 v.     Taft         Broadcasting                     Co.,         Inc.          (MO. App.           1975),

525 S.W. 2d 819,                825,        the      Missouri                 Court      of    Appeals                concluded            that

the     doctrine              of     champerty                "has       been narrowed,                       tempered             and mellowed

in     modern        times."                    The court               went         on to        hold        that          "[tlhe          doctrine

as      now       practiced                 takes            out        of      the        rule         those             who     interfere              in
litigation               in        which          they        have,           or        honestly             believe             they       have,        an

interest."                Schnabel,                    525 S.W.Zd                  at     825.

          We agree                 with         the     Schnabel              Court         and find                its     reasoning              to    be

persuasive.                   After             a review           of        the        record,         we conclude                  that     Wagner

had,      or        at        least         honestly               believed                that         she had,             an interest                 in

this      litigation.                       For        example,              prior         to     the        litigation                 Shrewsbury

assigned           to     Wagner                the      rights          to        one-half             of    the         commissions                from
Glacier           Log     Homes;                and      the       right            to     those         commissions                    formed          the

basis        of    Shrewsbury's                       underlying               lawsuit            against             Glacier           Log Homes.

Furthermore,                        Wagner             testified                that         she        believed                Engel        was        her

attorney             and            that          the         lawsuit               was         protecting                  her         interests.

Accordingly,                   we hold                that      the          District             Court         did        not       err     when        it

                                                                              20
failed       to     declare           Wagner's         claim          void     for     champerty      and
maintenance.
         The judgment       of the District                Court      is hereby      reversed   in part
and      affirmed      in     part,      and     the        case      is     remanded     for   further
proceedings         consistent         with    this        opinion.

We Concur:

               Justices       /

                                                      21
                                         March 25, 1997

                                  CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:

Sean Hinchey, Esq.
Bottomly Law Offices
P.O. Box 1976
Kalispell, MT 59903-1976

James C. Bartlett, Esq.
Hash, O’Brien & Bartlett
P.O. Box 1178
Kalispell, MT 59903-1178

                                                    ED SMITH
                                                    CLERK OF THE SUPREME COURT
                                                    STATE OF MONTANA