DREYER v BOARD OF TRUSTEES

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No. 80-486 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981 ELMO DREYER, et al., Applicants and Respondents, VS. THE BOARD OF TRUSTEES OF MID-RIVERS TELEPHONE COOPERATIVE, INC., et al., Respondents and Appellants. Appeal from: District Court of the Seventh Judicial District, In and for the County of McCone. Honorable Alfred B. Coate, Judge presiding. Counsel of Record: For Appellants: Church, Harris, Johnson & Williams, Great Falls, Montana For Respondents: Moses Law Firm, Billings, Montana Submitted on briefs: Decided: Filed: All! 2 2 19M .- I Clerk April 2, 1981 JUN 2 2 C h i e f J u s t i c e F r a n k I . Haswell d e l i v e r e d t h e O p i n i o n of t h e Court. Mr. T h i s is a n a p p e a l f r o m a judgment a g a i n s t d e f e n d a n t f o r $9,806.25 a t t o r n e y f e e s and $ 3 0 . 1 2 c o s t s i n a n a c t i o n w h e r e i n p l a i n t i f f members o f Mid-Rivers Telephone Cooperative, Inc. were g r a n t e d a n i n j u n c t i o n p e n d e n t e l i t e i n a s u i t to p r e v e n t t h e o f f i c e r s and Board o f T r u s t e e s of Mid-Rivers T e l e p h o n e Co-op from c o n d u c t i n g a s p e c i a l m e e t i n g and e l e c t i o n o n p r o p o s e d amendments t o t h e by-laws o f t h e Co-op. On May 1 4 , 1 9 7 9 , c e r t a i n members o f t h e Mid-Rivers T e l e p h o n e Co-op f i l e d a n a p p l i c a t i o n a g a i n s t t h e Board of T r u s t e e s o f t h e Co-op s e e k i n g i n j u n c t i o n , mandamus, and o t h e r a p p r o p r i a t e r e l i e f t o p r e v e n t t h e Board o f T r u s t e e s from h o l d i n g a s p e c i a l m e e t i n g and e l e c t i o n on May 1 6 , 1 9 7 9 and to compel them t o h o l d t h e 1 9 7 8 a n n u a l m e e t i n g o f t h e Co-op. The D i s t r i c t Court issued a temporary r e s t r a i n i n g o r d e r without n o t i c e prev e n t i n g t h e Board o f T r u s t e e s from c o n d u c t i n g t h e e l e c t i o n and s e t a show c a u s e h e a r i n g o n (1) w h e t h e r a p r e l i m i n a r y i n j u n c t i o n s h o u l d i s s u e ; ( 2 ) w h e t h e r a w r i t o f m a n d a t e s h o u l d i s s u e to compel t h e h o l d i n g of t h e 1978 a n n u a l meeting; ( 3 ) whether attorney f e e s s h o u l d be awarded a p p l i c a n t s from t h e f u n d s o f t h e Co-op; and ( 4 ) why a t t h e t r i a l o f t h e c a u s e t h e t e m p o r a r y r e s t r a i n i n g o r d e r s , p r e l i m i n a r y i n j u n c t i o n , and w r i t o f m a n d a t e s h o u l d n o t be made permanent. The Board of T r u s t e e s moved to q u a s h t h e t e m p o r a r y r e s t r a i n i n g o r d e r , t h e h e a r i n g was h e l d , and t h e D i s t r i c t C o u r t i s s u e d a n i n j u n c t i o n p e n d e n t e l i t e on A u g u s t 1 4 , 1 9 7 9 , p e n d i n g a h e a r i n g on t h e merits of t h e u n d e r l y i n g l i t i g a t i o n . N o f u r t h e r developments occurred u n t i l A p r i l 15, 1980, when p l a i n t i f f s ' a t t o r n e y s wrote a l e t t e r t o t h e j u d g e r e q u e s t i n g a h e a r i n g on a t t o r n e y f e e s . The Board o f T r u s t e e s moved to q u a s h t h e r e q u e s t f o r a t t o r n e y f e e s , a h e a r i n g was h e l d and on A u g u s t 25, 1 9 8 0 , t h e D i s t r i c t C o u r t h e l d t h a t p l a i n t i f f s w e r e e n t i t l e d t o a t t o r n e y f e e s and c o s t s . On S e p t e m b e r 5 , 1 9 8 0 , j u d g m e n t was e n t e r e d a g a i n s t t h e Board o f T r u s t e e s f o r $ 9 , 8 0 6 . 2 5 attorney fees a n d $ 3 0 . 1 2 c o s t s , w i t h i n t e r e s t a t 1 0 % f r o m d a t e of j u d g m e n t . The D i s t r i c t C o u r t f i l e d a memorandum o p i n i o n o n A u g u s t 2 9 , 1 9 8 0 , i n d i c a t i n g t h e c o u r t was t r e a t i n g t h e i n j u n c t i o n as a w r i t o f p r o h i b i t i o n , which t h e c o u r t c o n s i d e r e d t h e p r o p e r relief. The D i s t r i c t C o u r t h e l d t h a t s u b s t a n c e c o n t r o l s o v e r t h e f o r m o f r e l i e f and t h a t a l t h o u g h a t t o r n e y f e e s are n o t a l l o w e d b y s t a t u t e i n a n i n j u n c t i o n a c t i o n , p l a i n t i f f s s o u g h t and o b t a i n e d a c o u r t o r d e r p r e v e n t i n g t h e Board of T r u s t e e s from c o n d u c t i n g t h e s p e c i a l m e e t i n g and e l e c t i o n , t h e same r e l i e f t h e y would h a v e been e n t i t l e d t o i n an a c t i o n f o r a w r i t of p r o h i b i t i o n . The a m o u n t o f a t t o r n e y f e e s a w a r d e d w a s computed b y m u l t i p l y i n g t h e r e a s o n a b l e t i m e consumed i n f u r n i s h i n g t h e a t t o r n e y s 1 s e r v i c e s ( 1 3 0 . 7 5 h o u r s ) times t h e r e a s o n a b l e f e e per h o u r ( $ 7 5 . 0 0 ) f o r a t o t a l of $9,806.25. T h e r e i s no i s s u e o n t h e c o s t s o f $ 3 0 . 1 2 . A d d i t i o n a l l y t h e District C o u r t found t h a t t h e t r u s t e e s h a d n o t a c t e d i n good f a i t h and had i n t e r f e r e d w i t h p l a i n t i f f s 1 voting rights. The D i s t r i c t C o u r t f o u n d t h a t t h e award o f a t t o r - n e y f e e s was p r o p e r u n d e r e i t h e r t h e " s u b s t a n t i a l b e n e f i t " d o c t r i n e or t h e " p r i v a t e a t t o r n e y g e n e r a l " p r i n c i p l e . The case was n e v e r c a r r i e d to i t s u l t i m a t e c o n c l u s i o n , i . e . t o a h e a r i n g and award o f f i n a l j u d g m e n t o n t h e m e r i t s o f t h e l i t i g a t i o n i n c l u d i n g a permanent i n j u n c t i o n o r a w r i t of mandate. A c c o r d i n g to t h e d e f e n d a n t s t h i s i s s u e h a s become moot b y t h e p a s s a g e o f time. The sole i s s u e o n a p p e a l is w h e t h e r t h e Board of T r u s t e e s i s l i a b l e f o r a t t o r n e y f e e s from t h e f u n d s o f t h e Co-op. N o i s s u e concerning t h e reasonableness of t h e f e e awarded w a s raised in either brief. The Board o f T r u s t e e s a d v a n c e s f o u r a r g u m e n t s why t h e y a r e not liable for attorney fees: (1) a n award o f a t t o r n e y f e e s i s n o t a l l o w a b l e w h e r e t h e u n d e r l y i n g a c t i o n h a s n o t p r o c e e d e d to f i n a l judgment on t h e m e r i t s , ( 2 ) attorney fees a r e not allowable i n a n i n j u n c t i o n a c t i o n , ( 3 ) a n i n j u n c t i o n a c t i o n s h o u l d n o t be t r e a t e d as a n a p p l i c a t i o n f o r a w r i t of p r o h i b i t i o n i n o r d e r to p e r m i t a n award o f a t t o r n e y f e e s , and ( 4 ) t h e r e c o r d i s b a r r e n o f a n y f a c t s t h a t would s u p p o r t a n y r e c o g n i z e d e q u i t a b l e d o c t r i n e of fee shifting. R e s p o n d e n t s a d v a n c e a number o f c o n t e n t i o n s as t o why t h e award o f a t t o r n e y f e e s was p r o p e r : ( 1 ) The C o u r t h a s i n h e r e n t e q u i t a b l e power t o compel t h e t r u s t e e s o f t h e Co-op t o f o l l o w p r o p e r p r o c e d u r e s i n c a l l i n g s p e c i a l m e e t i n g s and h o l d i n g elections, ( 2 ) t h e g i s t o f t h e a c t i o n is n o t o n l y t o s t o p t h e i m p r o p e r m e e t i n g and e l e c t i o n b u t t o compel t h e t r u s t e e s to cont i n u e t h e m e e t i n g s a c c o r d i n g t o l a w ; a c c o r d i n g l y t h e remedy of mandamus is p a r t and p a r c e l o f t h e r e l i e f s o u g h t and by s t a t u t e a t t o r n e y f e e s a r e a w a r d a b l e i n mandamus, ( 3 ) t h e f a c t s contained i n t h e a f f i d a v i t of t h e p l a i n t i f f s , coupled with t h e f i n d i n g t h a t t h e t r u s t e e s had n o t a c t e d i n good f a i t h and had i n t e r f e r e d w i t h plaintiffs' v o t i n g r i g h t s , d e m o n s t r a t e t h a t p l a i n t i f f s won t h e case and were e n t i t l e d to a t t o r n e y f e e s , ( 4 ) t h i s was a c l a s s a c t i o n and t h e b e n e f i t s s e c u r e d by p l a i n t i f f s e n u r e d to t h e benef i t o f a l l members o f t h e co-op e n t i t l i n g p l a i n t i f f s t o a t t o r n e y f e e s under t h e " s u b s t a n t i a l b e n e f i t " c o n c e p t of f e e s h i f t i n g , ( 5 ) t h e p r e s u m p t i o n is t h a t t h e d e c i s i o n of t h e D i s t r i c t C o u r t i s c o r r e c t a b s e n t a s h o w i n g t h a t i t s d e c i s i o n is c l e a r l y e r r o n e o u s w h i c h was n o t d o n e h e r e . R e s p o n d e n t s d r a w a n a n a l o g y b e t w e e n t h i s case and cases i n v o l v i n g a c t i o n s by u n i o n members a g a i n s t t h e u n i o n and i t s o f f i c e r s t o compel t h e u s e o f p r o p e r p r o c e d u r e s i n u n i o n a f f a i r s where a t t o r n e y f e e s have been awarded. S e e G i l b e r t v. H o i s t i n g & P o r t a b l e E n g i n e e r s ( 1 9 6 4 ) , 237 O r e . 1 3 0 , 390 P.2d 320; Weber v. M a r i n e Cooks C . A . 2d 3 2 7 , & S t e w a r d s A s s n . o f P a c i f i c Coast ( 1 9 4 9 ) , 93 208 P.2d 1 0 0 9 ; Anno: 9 ALR3d 1 0 4 5 , P r e v a i l i n g Union to Fe s or Member's R i g h t - R e c o v e r A t t o r n e y ' s -e-i n A c t i o n A g a i n s t Union - an election. The i s s u a n c e of t h e i n j u n c t i o n p e n d e n t e l i t e is n o t contested i n t h i s appeal. An award o f a t t o r n e y f e e s to a p a r t y who s e c u r e s a p r e l i m i n a r y i n j u n c t i o n is e r r o r i n t h e a b s e n c e o f s t a t u t o r y o r contract authorization. Masonovich e t a l . v . S c h o o l D i s t r i c t No. 1 et al. . (1978), Mont , 582 P.2d 1 2 3 4 , 3 5 S t . R e p . 1175. Here t h e r e i s n e i t h e r s t a t u t o r y n o r c o n t r a c t a u t h o r i t y f o r s u c h award. A p p l i c a n t s c i t e S t a t e ex r e l . B u t t e Teamsters U n i o n v. Dist. Ct. ( 1 9 6 2 ) , 1 4 0 Mont. 581, 374 P.2d 336, as a u t h o r i t y f o r t h e award o f a t t o r n e y f e e s h e r e . I n B u t t e T e a m s t e r s Union r e a s o n a b l e a t t o r n e y f e e s were a l l o w e d t h e u n i o n f o r t h e s e r v i c e s of its a t t o r n e y s i n d i s s o l v i n g a temporary r e s t r a i n i n g o r d e r a g a i n s t t h e u n i o n which had b e e n i s s u e d by t h e D i s t r i c t C o u r t i l l e g a l l y and i n e x c e s s of i t s j u r i s d i c t i o n . T h a t s i t u a t i o n is r e a d i l y d i s t i n g u i s h a b l e and b r i n g s it w i t h i n t h e p r i n c i p l e s a n n o u n c e d i n Foy v . A n d e r s o n ( 1 9 7 8 ) , 1 7 6 Mont. 507, 580 P.2d 1 1 4 . S u c h i s n o t t h e case h e r e . An award o f a t t o r n e y f e e s t o t h e a p p l i c a n t f o r a w r i t o f mandamus is i m p r o p e r w h e r e no w r i t of mandamus was i s s u e d . award o f a t t o r n e y f e e s i n An p r o h i b i t i o n is i m p r o p e r w h e r e no w r i t o f p r o h i b i t i o n w a s awarded. I t is n o t t h e p r o v i n c e o f e i t h e r t h e D i s t r i c t C o u r t o r t h e Supreme C o u r t o n a p p e a l t o d e t e r m i n e f i n a l l y m a t t e r s t h a t may a r i s e upon a t r i a l o n t h e merits. ( 1 9 2 3 ) , 66 Mont. 411, 214 P. 74. A t k i n s o n v. R o o s e v e l t County In g r a n t i n g temporary r e l i e f b y i n j u n c t i o n , c o u r t s o f e q u i t y s h o u l d i n no manner a n t i c i p a t e t h e u l t i m a t e d e t e r m i n a t i o n of q u e s t i o n s o f t h e r i g h t i n v o l v e d , Porter, supra. The f o l l o w i n g l a n g u a g e from a case d e c i d e d by t h i s C o u r t o n A p r i l 30, 1 9 8 1 , e x p r e s s e s t h e p r i n c i p l e s i n v o l v e d i n t h i s case. " . . . the l i m i t e d f u n c t i o n of a p r e l i m i n a r y i n j u n c t i o n is t o p r e s e r v e t h e s t a t u s quo and to m i n i m i z e t h e harm to a l l p a r t i e s p e n d i n g f u l l trial. I f a preliminary i n j u n c t i o n w i l l - not a c c o m p l i s h t h e s e p u r p o s e s , t h e n it s h o u l d n o t i s s u e . F i n d i n g s and c o n c l u s i o n s d i r e c t e d to t h e r e s o l u t i o n of t h e u l t i m a t e i s s u e s a r e p r o p e r l y r e s e r v e d f o r f i n a l t r i a l on t h e merits." Porter, supra. A t t h i s p o i n t i n t h e l i t i g a t i o n t h e p a r t i e s have n o t y e t g o n e t o t r i a l on t h e u l t i m a t e m e r i t s of t h e c o n t r o v e r s y . D e f e n d a n t s h a v e n o t had t h e i r d a y i n c o u r t on t h e s e i s s u e s . No t r i a l h a s b e e n h e l d and no f i n a l judgment a d j u d i c a t i n g t h e u l t i m a t e r i g h t s o f t h e p a r t i e s h a s b e e n made. A l l o t h e r con- s i d e r a t i o n s a s i d e , p l a i n t i f f s have n o t y e t p r e v a i l e d i n t h e a c t i o n so a s t o e n t i t l e them t o a t t o r n e y f e e s u n d e r any t h e o r y . Additionally there a r e policy considerations supporting this result. I f t h e members of a c o o p e r a t i v e c o r p o r a t i o n were a b l e t o f i l e a n a c t i o n a g a i n s t t h e t r u s t e e s f o r some real o r imagined g r i e v a n c e ; s e c u r e a p r e l i m i n a r y i n j u n c t i o n pending f i n a l d e t e r m i n a t i o n of t h e m e r i t s of t h e i r c o m p l a i n t ; a b a n d o n f u r t h e r p r o s e c u t i o n o f t h e i r a c t i o n ; and t h e n c o l l e c t t h e i r a t t o r n e y f e e s w i t h o u t a f i n a l judgment i n t h e i r f a v o r on t h e m e r i t s of t h e i r c o m p l a i n t , a n i n j u s t i c e would r e s u l t . The t r u s t e e s would h a v e b e e n d e n i e d a h e a r i n g on t h e u l t i m a t e r i g h t s o f t h e p a r t i e s and c o m p e l l e d to pay t h e i r o p p o n e n t s 1 a t t o r n e y f e e s w i t h o u t a d e t e r m i n a t i o n o f t h e m e r i t s of t h e c o m p l a i n t a g a i n s t them. T h i s v i o l a t e s t h e m o s t f u n d a m e n t a l r i g h t of d u e p r o c e s s - - t h e r i g h t t o a p p e a r and be h e a r d on t h e merits of t h e i r a d v e r s a r i e s 1 complaint. I t is no a n s w e r to s a y t h a t t h e t r u s t e e s 1 a c t i o n s i n c a l l i n g t h e s p e c i a l m e e t i n g and e l e c t i o n were n o t i n good f a i t h ; o r t h a t t h e t r u s t e e s 1 a c t i o n s were i m p r o p e r ; o r t h a t t h e p l a i n - t i £f s achieved t h e i r o b j e c t i v e i n preventing t h e s p e c i a l meeting and e l e c t i o n and t h u s p r e v a i l e d i n t h e i r a c t i o n . The u l t i m a t e r e s o l u t i o n o f t h e s e i s s u e s was n o t b e f o r e t h e D i s t r i c t C o u r t f o r a d j u d i c a t i o n a t t h e show c a u s e h e a r i n g and it was e r r o r to ad j u d i c a t e those issues a t t h a t hearing. The c a s e is n o t r e n d e r e d moot by t h e p a s s a g e of t i m e . The Union O f f i c e r s . R e s p o n d e n t s a l s o c i t e Foy v . A n d e r s o n ( 1 9 7 8 ) , 1 7 6 Mont. 507, 580 P.2d 1 1 4 , f o r t h e p r o p o s i t i o n t h a t t h i s C o u r t h a s sometimes awarded a t t o r n e y f e e s i n t h e a b s e n c e o f s t a t u t e o r contract. Respondents f u r t h e r p o i n t o u t t h a t a t t o r n e y f e e s have b e e n awarded t o t h e p r e v a i l i n g p a r t y who h a s s e c u r e d a r e s t r a i n i n g o r d e r , c i t i n g S t a t e ex r e l . B u t t e T e a m s t e r s v. D i s t . Ct. ( 1 9 6 2 ) , 1 4 0 Mont. 581, 374 P.2d 336. R e s p o n d e n t s a l s o c o n t e n d t h a t a w r i t o f p r o h i b i t i o n is c l e a r l y a p p l i c a b l e t o t h i s s i t u a t i o n , t h a t i t s f u n c t i o n is p r e v e n t i v e r a t h e r t h a n r e m e d i a l , and t h e c o u r t was c o r r e c t i n a l l o w i n g a t t o r n e y f e e s on t h i s b a s i s . W need n o t d i s c u s s a l l t h e c o n t e n t i o n s of t h e p a r t i e s i n e t h i s o p i n i o n i n o r d e r to a r r i v e a t a d e t e r m i n a t i o n o f t h e i s s u e on appeal. One c o n t e n t i o n is c o n t r o l l i n g . The award of a t t o r n e y f e e s i n t h i s c a s e is p r e m a t u r e a s no f i n a l judgment h a s b e e n e n t e r e d o n t h e merits o f t h e u n d e r l y i n g c o n t r o v e r s y i n f a v o r of respondents. N o p e r m a n e n t i n j u n c t i o n was a w a r d e d . mandate w a s i s s u e d . No w r i t of A l l other considerations aside, respondents are n o t e n t i t l e d to a judgment f o r a t t o r n e y f e e s w i t h o u t a f i n a l d e t e r m i n a t i o n of t h e u n d e r l y i n g c o n t r o v e r s y i n t h e i r f a v o r . I n t h i s case p l a i n t i f f s w e r e awarded a t e m p o r a r y i n t e r l o c u t o r y i n j u n c t i o n f o l l o w i n g t h e show c a u s e h e a r i n g . Its f u n c t i o n and e f f e c t was s i m p l y t o p r e s e r v e t h e s t a t u s q u o p e n d i n g t r i a l of t h e merits of p l a i n t i f f s ' c o m p l a i n t . P l a i n t i f f s , as a p p l i c a n t s f o r a p r e l i m i n a r y i n j u n c t i o n , were r e q u i r e d t o e s t a b l i s h a p r i m a f a c i e case o r show t h a t it was a t l e a s t d o u b t f u l w h e t h e r t h e y would s u f f e r i r r e p a r a b l e i n j u r y b e f o r e t h e i r r i g h t s c o u l d be fully litigated. (19811, Mont P o r t e r e t a l . v. K . , 6 2 7 P.2d & S Partnership et al. 8 3 6 , 38 S t . R e p . 648. The D i s t r i c t C o u r t r u l e d i n e f f e c t t h a t p l a i n t i f f s had made s u c h a s h o w i n g and i s s u e d a n i n j u n c t i o n p e n d e n t e l i t e p r e v e n t i n g t h e Board o f T r u s t e e s f r o m h o l d i n g a s p e c i a l m e e t i n g and c o n d u c t i n g i s s u e o f w h e t h e r t h e Board of T r u s t e e s is l i a b l e f o r t h e payment o f a p p l i c a n t s 1 a t t o r n e y f e e s r e m a i n s f o r t r i a l on t h e m e r i t s ; t o e q u a t e t h e " l i k e l i h o o d of s u c c e s s " t h a t j u s t i f i e s a p r e l i m i n a r y injunction with "success" i n the underlying l i t i g a t i o n ignores s i g n i f i c a n t p r o c e d u r a l d i f f e r e n c e s be tween p r e l i m i n a r y and perm a n e n t i n j u n c t i o n s ; and i n t h e g r a n t i n g of a p r e l i m i n a r y i n j u n c t i o n , t h e p a r t i e s g e n e r a l l y h a v e b e e n d e n i e d t h e b e n e f i t of a f u l l o p p o r t u n i t y t o p r e s e n t t h e i r c a s e s and a f i n a l d e c i s i o n b a s e d on t h e a c t u a l m e r i t s of t h e c o n t r o v e r s y . U n i v e r s i t y of T e x a s e t a l . v . Camenisch ( 1 9 8 1 ) , - .Ct. S 68 L.Ed.2d U.S. 1 I 175. The f i n d i n g s of f a c t s , c o n c l u s i o n s of law and judgment o f t h e D i s t r i c t C o u r t a w a r d i n g a t t o r n e y f e e s was p r e m a t u r e . T h e s e f i n d i n g s , c o n c l u s i o n s and judgment a r e v a c a t e d and s e t aside. The c a u s e i s remanded t o t h e D i s t r i c t C o u r t f o r f u r t h e r p r o c e e d i n g s t o d e t e r m i n e t h e u l t i m a t e r i g h t s of t h e p a r t i e s i n t h e underlying controversy following t r i a l thereon. We express n o o p i n i o n on s u c h r i g h t s n o r on t h e o t h e r a r g u m e n t s advanced h e r e i n i n f a v o r o r a g a i n s t a n award of a t t o r n e y f e e s to t h e p r e vailing party. Chief J u s t i c e Mr. J u s t i c e John C. Sheehy d i s s e n t i n g : I d i d n o t a g r e e w i t h t h e h o l d i n g i n P o r t e r v. K & S Partnership (1981), 648. - Mont. , 627 P.2d 836, 38 St.Rep. Here, t h e o r d e r f o r b i d d i n g t h e h o l d i n g o f t h e c o r p o r a t e m e e t i n g h a s become f i n a l , and t h e o r d e r of t h e c o u r t , p r o h i b i t o r y i n nature, i s t h e only r e l i e f t h a t w a s sought i n t h e cause. A c c o r d i n g l y , I would view t h e m a t t e r a s h a v i n g been d e t e r m i n e d by t h e D i s t r i c t C o u r t and would a l l o w t h e award of a t t o r n e y f e e s , which o t h e r w i s e s e e m f a i r . I/ f Justice

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