Court Opinion

ID: 9536469
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:00:21.432028+00
Date Added: 2024-06-11T14:54:31.417667
License: Public Domain

BOYLE, Justice.
Plaintiffs-appellants, Orvil and Faye Durrant and Kenneth W. Sellers, (hereafter “Durrant and Sellers”) bring this appeal challenging an order by the district court *72awarding attorney fees and costs to defendant. The defendant-respondent, cross-appellant, Ruby Christensen, (hereafter “Christensen”) cross-appeals on the issue of denial of certain costs and fees. All parties are residents of Bingham County, Idaho.
Durrant and Sellers are landowners whose irrigation water crosses property owned by L & R Christensen Investments Limited. They filed a complaint against Christensen seeking an adjudication of the respective parties’ water rights and a permanent restraining order prohibiting Christensen from interfering with their diversion and use of water. In her answer, Christensen asserted that she was not the owner of the property, denied all allegations, and the parties stipulated to entry of a temporary restraining order to maintain the status quo.
Thereafter, Christensen produced a certified copy of a quitclaim deed revealing that title to the real property in question was held by L & R Christensen Investments Limited and not Ruby Christensen. This resulted in the restraining order being vacated and the complaint was dismissed without prejudice.
Christensen’s memorandum of costs and attorney fees requested a total of $4,612.50 in attorney fees and $264.65 in costs. The district court awarded her $1,000.00 attorney fees for her efforts in dissolving the restraining order, and limited her cost award to $32.00 for the filing fee and copies of court documents. The district court denied Christensen’s other costs because they were not itemized as required by I.R. C.P. 54, and the additional expenses incurred were not necessary in her defense against the restraining order.
In ruling on Christensen’s motion for attorney fees, the district court found that neither party nor their attorneys proceeded in “bad faith,” and fees were not awarded under I.R.C.P. 11. The district court ruled that the case involved water rights and not a commercial transaction, thus did not award fees pursuant to I.C. § 12-120. The district court also concluded that Durrant and Sellers did not pursue their action frivolously, unreasonably or without foundation, and Christensen was not entitled to an award of attorney fees pursuant to I.C. § 12-121.
All parties have appealed the district court’s decision on the attorney fees and costs issues.
I.
Prevailing Party — Award of Costs and Fees.
Durrant and Sellers raise two arguments on appeal. First, they contend that Christensen is not the prevailing party, and second, that the proceedings amounted to an adjudication on the merits and therefore Christensen is not entitled to an award of costs and fees.
I.R.C.P. 54(d)(1) provides:
(A) Parties Entitled to Costs. Except when otherwise limited by these rules, costs shall be allowed as a matter of right to the prevailing party or parties, unless otherwise ordered by the court.
(B) Prevailing Party. In determining which party to an action is a prevailing party and entitled to costs, the trial court shall in its sound discretion consider the final judgment or result of the action in relation to the relief sought by the respective parties, ... (Emphasis added.)
As the above rule provides, determination of the prevailing party for purposes of an award of costs is committed to the sound discretion of the trial court. Gilbert v. City of Caldwell, 112 Idaho 386, 732 P.2d 355 (Ct.App.1987). The burden is on the party disputing the award to show an abuse of this discretion, Anderson v. Ethington, 103 Idaho 658, 651 P.2d 923 (1982), and absent an abuse of discretion, the district court’s award of costs will be upheld. Martsch v. Nelson, 109 Idaho 95, 705 P.2d 1050 (Ct.App.1985).
Durrant and Sellers contend that their objective in filing this action was to establish a water use rotation schedule, and although the temporary restraining order was vacated, it established a rotation scheme which the parties have continued to *73follow. Thus, Durrant and Sellers argue in effect that Christensen is not the prevailing party because she continues to follow the rotation scheme established in the temporary restraining order. We find this argument insufficient to show an abuse of discretion by the district court. Christensen was not the owner of the property, and the complaint against her was dismissed and the restraining order dissolved. The district court’s determination that Christensen is the prevailing party is affirmed.
Durrant and Sellers next contend that an award of attorney fees under I.R. C.P. 65(c) should not apply in this case. Rule 65(c) allows the trial court to award costs and reasonable attorney fees to any party who is found to have been wrongfully enjoined or restrained. Durrant and Sellers argue that the costs and fees awarded to Christensen were attributable in defending the merits of the case and therefore the provisions of I.R.C.P. 65(c) should not apply. They further contend because the parties continue to follow the water rotation scheme established in the temporary restraining order, that constituted an adjudication on the merits. Again, the argument is unconvincing. First, the complaint against Christensen was dismissed because she was not a proper party. If there is no valid claim to pursue, and the action was dismissed, there can be no adjudication on the merits as against the party in whose favor a dismissal was entered. Second, Idaho case law interpreting Rule 65(c) allows recovery of attorney fees if legal services necessary to defend the merits of the case were identical to services performed in dissolving a restraining order. Davidson Grocery Co. v. United States Fidelity & Guar. Co., 52 Idaho 795, 21 P.2d 75 (1933); McAtee v. Faulkner Land & Livestock, Inc., 113 Idaho 393, 744 P.2d 121 (Ct.App.1989); Devine v. Cluff, 110 Idaho 1, 713 P.2d 437 (Ct.App.1986). Thus, assuming there was an adjudication on the merits, recovery of attorney fees would be appropriate provided the trial court found the restraining order and merit issues were identical as in McAtee v. Faulkner. Finally, since Christensen was not a proper party to this action, any injunction or restraint against her would be wrongful and she would be entitled to an award of fees. I.R.C.P. 65(c).
We find no abuse of discretion by the district court in its award of attorney fees and costs for Christensen’s efforts in dissolving the restraining order. We find that the amount of the award of attorney fees is reasonable, and affirm the district court’s decision awarding attorney fees and costs to Christensen in that regard.
II.
I.R.C.P. 11 — Attorney Fees.
On cross-appeal, Christensen argues that she should have been awarded all of her attorney fees and costs pursuant to I.C. § 12-120(3) and I.R.C.P. 11. In certain civil actions, I.C. § 12-120 provides for an award of reasonable attorney fees to the prevailing party, and subsection (3) allows an award of fees “in any commercial transaction.” The rule defines “commercial transaction” as “all transactions except transactions for personal or household purposes.” Christensen maintains that this suit involves a “commercial transaction” because it does not relate to a personal or household purpose, and claims she is entitled to an award of fees pursuant to I.C. § 12-120. We disagree. This legal action did not pertain to a transaction, commercial or otherwise, and we affirm the district court’s denial of costs and fees claimed under I.C. § 12-120(3).
Christensen next asserts that the district court applied an incorrect legal standard of “bad faith” in denying defendant’s motion for the imposition of sanctions under I.R.C.P. 11. We agree and remand to the district court for a determination of this issue pursuant to I.R.C.P. 11. Stevens v. Fleming, 116 Idaho 523, 777 P.2d 1196 (1989); State of Alaska ex rel. Sweat v. Hansen, 116 Idaho 927, 782 P.2d 50 (Ct.App.1989).
I.R.C.P. 11, as amended in 1985, is identical to the 1983 amendment of Fed.R.Civ.P. II. Our adoption of amended Rule 11, containing language identical to the Feder*74al Rule, presumably carries with it the interpretation placed upon that language by the federal courts. Chacon v. Sperry Corp., 111 Idaho 270, 723 P.2d 814 (1986). Both amended rules require that pleadings, motions and other papers meet certain criteria, and failure to comply may result in the imposition of sanctions. I.R.C.P. 11, as amended, provides in pertinent part:
The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information, and belief after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant. If a pleading, motion or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney’s fee. (Emphasis added.)
Recent federal court decisions regarding Fed.R.Civ.P. 11 hold that the “bad faith” standard is no longer applicable. Rather, the federal courts apply an objective standard of “reasonableness under the circumstances”. Zaldivar v. City of Los Angeles, 780 F.2d 823, 829 (9th Cir.1986); Rodgers v. Lincoln Towing Serv., Inc., 771 F.2d 194, 205 (7th Cir.1985); Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 253 (2d Cir.1985).
In Zaldivar, the Ninth Circuit Court of Appeals held that subjective bad faith is not an element to be proved under Rule 11, but sanctions shall be assessed if the pleading is frivolous, legally unreasonable, or without factual foundation. 780 F.2d at 829, 831. In Eastway Constr. Corp. v. City of New York, 762 F.2d 243 (2d Cir. 1985) the circuit court of appeals held that “the language of Rule 11 explicitly and unambiguously imposes an affirmative duty on each attorney to conduct a reasonable inquiry into the viability of a pleading before it is signed ... A showing of subjective bad faith is no longer required to trigger the sanctions imposed by the rule.” 762 F.2d at 253. (Emphasis added.)
In light of these federal decisions interpreting language that is identical to that contained in the Idaho version of I.R.C.P. 11, we hold that reasonableness under the circumstances, and a duty to make a reasonable inquiry prior to filing an action, is the appropriate standard to apply. A showing of subjective bad faith is no longer necessary for the imposition of sanctions, and we hold that the district court applied an incorrect legal standard when denying defendant’s motion for Rule 11 sanctions.
The trial court should examine Rule 11 sanctions in light of the foregoing authorities and determine whether the plaintiffs made a proper investigation upon reasonable inquiry. Accordingly, we remand for reconsideration the issue of Durrant and Sellers’ compliance with amended Rule 11 and the possible imposition of sanctions to be determined after further evaluation of the facts by the district court.
III.
Attorney Fees on Appeal.
Christensen has requested an award of attorney fees on Durrant and Sellers’ direct appeal as provided for by I.A.R. 41(a) and I.C. § 12-121. Such an award is appropriate when we are left with an abiding belief that the appeal has been brought or defended frivolously, unreasonably, or without foundation. Minich v. Gem State Developers, Inc., 99 Idaho 911, 591 P.2d 1078 (1979). We are of the opinion that the direct appeal by Durrant and Sellers falls within the Minich standard. The appellants, Durrant and Sellers, have presented *75no persuasive argument that the district court, in granting attorney fees, abused its discretion or misapplied the law, and we award attorney fees on appeal to Christensen in an amount to be determined as provided by I.A.R. 41(d).
The district court’s award of attorney fees and costs to Christensen is affirmed. We remand to the district court for further proceedings on the issue of Durrant and Sellers’ compliance with I.R.C.P. 11 in filing the action against Christensen. Costs and attorney fees on appeal to Christensen.
BAKES, C.J., and JOHNSON and McDEVTTT, JJ., concur.