SCHMIDT v COLONIAL TERRACE ASSOC
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No. 84-196 IN THE SUPREME COURT OF THE STATE OF MONTAYA F. W. SCHMIDT, a/k/a WILLIAM F. SCHMIDT, LEONARD KNUTSON AND ROBERTA KNUTSON, Plaintiffs and Respondents, COLONIAL TERRACE ASSOCIATES, et al., Defendants and Appellants. APPEAL FROM: District Court of the First Judicial District, In and for the County of Lewis & Clark, The Honorable Henry Loble, Judge presiding. COUNSEL OF RECORD: For Appellants: Worden, Thane Montana & Haines; Ronald Bender, Missoula, For Respondents: James A. Curnming, Columbia Falls, ?4ontana - -- Submitted on Briefs: . - January 7, 1985 Decided: January 29, 1985 , Filed:,! ,;. , . i .' 2 , - --.";3 Clerk - ---- J u s t i c e L. Court. Mr. C. Gulbrandson d e l i v e r e d t h e Opinion of the T h i s i s an a p p e a l from an o r d e r of t h e D i s t r i c t C o u r t of the Judicial First Montana. District, Lewis and Clark County, The D i s t r i c t C o u r t adopted t h e f i n d i n g s and c o n c l u - s i o n s of a s p e c i a l master appointed t o determine t h e matter of offsets against a previous jury verdict d e f e n d a n t s damages on t h e i r c o u n t e r c l a i m . awarding The s p e c i a l m a s t e r found o f f s e t s f o r s e r v i c e s performed by v a r i o u s c o n t r a c t o r s f o r t h e d e f e n d a n t s b e n e f i t , b u t d i d n o t f i n d t h a t t a x e s and insurance payments made against the verdict. by plaintiffs were to be offset The D i s t r i c t C o u r t a l s o awarded c o s t s W e affirm. and f e e s t o t h e d e f e n d a n t s . T h i s a p p e a l i s a c o n t i n u a t i o n o f a remand we o r d e r e d i n Schmidt v. S t . Rep. Colonial Terrace 2318. (Mont. 1 9 8 2 ) , 6 5 6 P.2d 807, 39 W e w i l l not r e s t a t e a l l of t h e f a c t s leading t o t h i s case but rather incorporate the f a c t s a s s e t forth i n o u r p r i o r o p i n i o n by r e f e r e n c e h e r e i n . This property, c a s e r e s t s on a contract for the s a l e of real and a c o n s t r u c t i o n c o n t r a c t , e n t e r e d i n t o i n 1977. Both p a r t i e s a l l e g e d t h a t t h e o t h e r b r e a c h e d t h e c o n t r a c t , and l i t i g a t i o n ensued. 1981. The c a s e came t o t r i a l i n J u n e o f The j u r y , w h i l e d e l i b e r a t i n g , a s k e d t h e D i s t r i c t C o u r t whether reached. parties, they The were to District determine Court, offsets with the to any agreement verdict of the i n s t r u c t e d t h e j u r y t o r e a c h a v e r d i c t o n l y and t o leave t h e matter of o f f s e t s t o t h e court. The j u r y r e t u r n e d a v e r d i c t o f $128,278 i n f a v o r of t h e d e f e n d a n t s . d a n t s promptly o b t a i n e d a judgment The d e f e n - and e x e c u t e d t h e r e u p o n . The p l a i n t i f f s moved t h e D i s t r i c t C o u r t t o amend t h e judgment and h e a r and d e t e r m i n e t h e m a t t e r o f o f f s e t s . The D i s t r i c t Court denied plaintiffsq motion, and also awarded costs and fees to defendants. Plaintiffs appealed the District Court's their motion to amend and determine offsets. denial of We ordered that the judgment be vacated and remanded the case to the District Court for further proceedings to determine the offsets, if any. Schmidt v. Colonial Terrace, supra. Since the order remanding the case to the District Court, a special master Mr. Clayton Herron, an attorney from Helena, Montana, was appointed to determine the matter of offsets. As required by our previous opinion, the special master examined the record only and took no further evidence. He filed a report on November 28, 1983. In that report, he found an offset in the plaintiffs' favor for the amount of $74,363.39. Both parties filed objections to the report. The special master, and the District Court both heard and considered the objections, and both indicated that their conclusions remained the same. On January 17, 1984, the District Court entered its opinion, order and judgment adopting the special master's report. In that order, the District Court also granted fees and costs to the defendants up to June 18, 1981, and costs of the previous appeal to the plaintiffs. On January 30, 1984, the defendants filed a motion to amend judgment to delete the portion of the judgment that found an offset in the plaintiffs' favor. On February 1, 1984, the defendants filed a motion to assess attorneys fees for the period of June 19, 1981 to that time. Accompanying that motion was a bill of attorneys' fees and expenses. The next day, February 2, 1984, plaintiffs filed a motion to tax costs and an objection to defendants' inclusion of their share of the special master's fee in their cost bill. On February 21, 1984, the plaintiffs submitted their bill of attorneys' fees and expenses and a motion for attorneys1 fees and expenses for the post June 18, 1981 litigation. The plaintiffs also filed at that time a motion for restitution of funds, requesting the court to return to them all funds due under the contract. Defendants moved to strike plaintiffs' motion for restitution of funds. The motions were heard in District Court on February 24, 1984. On February 27, 1384, the District Court entered its order denying defendants' motion to amend judgment, stating: ". . . The issues presented in defendants' motion to amend have been previously decided by the Court. The Court accepts the master's report and his findings of offsets, and finds no new matters presented which would alter its decision." The District 19, Court also entered 1984,denying plaintiffs' motion an order, on March for restitution of funds. Defendants filed a notice of appeal on March 28, 1984 raising as issues the District Court's rulings granting plaintiffsr costs on appeal, adopting the special master's report, and the order denying the motion to amend. Several days later, on April 4, 1.984, plaintiffs filed their notice of appeal on the finding by the special master, and ruling by the District Court, that pl-aintiffs were not entitled to offsets for property tax and insurance payments allegedly paid. On March 8, 1984, we remanded the case to the District Court for a determination of attorneys' fees. The District Court entered an order granting costs and fees to the defendants for the period beginning June 19, 1981 until February I, 1.984, in the amount of $17,245.80. The defendants had included in their cost bill submitted to the District Court t h e amount o f $1,444.37 a s t h e i r s h a r e o f t h e s p e c i a l . mas- ter's fee. The D i s t r i c t C o u r t e x c l u d e d t h i s amount i n t h e final order awarding costs. The parties then submitted b r i e f s , and we c o n s i d e r t h e m a t t e r on a p p e a l . The parties present the following issues for our consideration: (1) Was t h e D i s t r i c t Court i n e r r o r i n a d o p t i n g t h e f i n d i n g s and c o n c l u s i o n s o f t h e s p e c i a l m a s t e r ? ( 2 ) Was t h e D i s t r i c t C o u r t ' s o r d e r g r a n t i n g c o s t s and f e e s t o t h e defendants f o r t h e period of June 19, 1981 t o F e b r u a r y 1, 1984, i n e r r o r ? This i s s u e includes t h e exclu- sion of t h e special master's f e e from t h e d e f e n d a n t s ' cost bill. Rule 53 M.R.Civ.P. allows a d i s t r i c t c o u r t t o appoint a m a s t e r i n c o m p l i c a t e d c a s e s t o examine t h e m a t t e r and make a report thereupon. Rule " [ t l h e findings of adopts them, court." a master, shall be court order. considered report that t o the extent t h a t the court that we as the findings do to of the r e v i e w t o an any o t h e r d i s t r i c t W w i l l o n l y o v e r t u r n such f i n d i n g s i f t h e y a r e e erroneous." SAS Partnership 1 9 8 2 ) , 653 P.2d 834, 39 St.Rep. Federal provides Thus, we a p p l y t h e same s t a n d a r d o f adopted m a s t e r ' s "clearly 52 ( a ) , M. R.Civ. P. Practice and 1883. Procedure, v. Schafer (Mont. I n Wright and M i l l e r , (1971 ed.) S2585, the a u t h o r s , d i s c u s s i n g t h e F e d e r a l Rule 5 2 ( a ) , which t h e Montana rule is patterned after, state the qeneral rule that "a finding [ i s ] c l e a r l y erroneous only i f t h e finding i s without a d e q u a t e e v i d e n t i a r y s u p p o r t o r induced by a n e r r o n e o u s view of t h e law." The m a s t e r ' s r e p o r t , a s a d o p t e d by t h e D i s t r i c t C o u r t , i s n o t c l e a r l y e r r o n e o u s i n e i t h e r r e s p e c t , and must stand. The special master was in appointed this case to examine t h e r e c o r d and make a r e p o r t a s t o w h e t h e r t h e p l a i n t i f f s w e r e e n t i t l e d t o any o f f s e t s a g a i n s t t h e j u r y v e r d i c t . Our o r d e r l i m i t e d h i s i n q u i r y t o t h e r e c o r d . H i s t a s k was t o c u l l t h r o u g h i t t o find. w h e t h e r it c o n t a i n e d any e v i d e n c e t o support an o f f s e t f o r t h e p l a i n t i f f s . I n a v e r y c o m p r e h e n s i v e and a c c u r a t e r e p o r t , t h e m a s t e r found that the plaintiffs were entitled to an offset of H e reached t h i s conclusion with t h e f i n d i n g t h a t $74,363.39. t h e p a r t i e s had i m p l i c i t l y c o n s e n t e d t o t r y i n g t h e i s s u e o f c e r t a i n o f f s e t s f o r r e p a i r work d o n e , p a i d f o r and " c r e d i t e d " by t h e defendants. Under Rule 1 5 , M.R.Civ.P., issues not s p e c i f i c a l l y r a i s e d i n t h e p l e a d i n g s may b e t r i e d by i m p l i e d consent if the parties allow evidence i s s u e t o be r a i s e d a t t r i a l . pertaining to that The m a s t e r f u r t h e r found t h a t t h e i s s u e o f t a x e s and i n s u r a n c e payments a l l e g e d l y made by p l a i n t i f f s b u t d u e from t h e d e f e n d a n t s , had n o t b e e n s u f f i c i e n t l y e n t e r e d i n t o e v i d e n c e s o a s t o b r i n g them i n t o i s s u e . In the report, t h e master s t a t e d : " t h e record does n o t d i s - c l o s e c i r c u m s t a n c e s and p r o c e e d i n g s which would i n d i c a t e t h a t i s s u e s r e l a t i n g t o o f f s e t s f o r such t a x e s o r such insurance w e r e t r i e d by t h e p a r t i e s w i t h t h e i r c o n s e n t a s r e f e r r e d t o i n Rule 15 ( b ) , M.R.Civ.P." D e f e n d a n t s a r g u e on a p p e a l t h a t t h e p l a i n t i f f s a r e n o t e n t i t l e d t o any o f f s e t s b e c a u s e t h e j u r y v e r d i c t c o u l d h a v e been based which no on t h e offsets fraud o r and D i s t r i c t C o u r t ' s a d o p t i o n t h e r e o f , was clearly erroneous as a m a t t e r of Thus, law. they upon the report allowed. counterclaims, argue, master's can be negligence That a r g u m e n t was c o n s i d e r e d , and d e c i d e d , i n t h e p r e v i o u s a p p e a l , see Schmidt v. Colonial Terrace, 656 P.2d at 810, 39 St.Rep. at 2321, 2322. We will not consider it again. Plaintiffs argue on appeal that the master and the District Court erred in not taking judicial notice of the real estate taxes they paid in the amount of $59,583.21 and insurance payments in the amount of $12,388. They argue that the record is sufficient to support a finding that the plaintiffs paid the taxes and insurance and that the contract called for the defendants to do so; and all that the master and the District Court needed to do was to judicially notice how much record. those payments were--an a.mount missing from the We do not need to consider plaintiffs' argument as to judicial notice of property, because it is irrelevant to the gist of the master's findings: that the issue of taxes and insurance - - tried with the parties express or was not implied consent. Plaintiffs cited the master and the District Court to portions of the transcript where they contend the issue of tax a.nd insurance payments was raised without objection by the defendants. In the words of the District Court, in its opinion adopting the master's report: ". . . after hearing the presentation of both parties and after having examined the objections of both parties to his report, [the master said] that he had considered all of the things the parties referred to in their objections and. in their arguments and that nothing he had heard changed his mind in any respect." Plaintiffs again direct us to the record and to their objec- tions. We have examined the record. and do not find that the master's report, or the District Court's adoption thereof was clearly erroneous. W e agree with t h e D i s t r i c t Court's characterization of both p a r t i e s 1 objections: " [ T l h e p l a i n t i f f s and t h e d e f e n d a n t s d i d not agree with t h e findings of t h e master upon t h e e v i d e n c e , n o r w i t h h i s c o n c l u s i o n s based thereon. Thev d i d n o t conthe tend - - - f a i l e d t o consider t h a t h e had u n d e r l y i n g e v i d e n c e and i s s u e s upon which they base t h e i r obiections. " (Em~hasis added. ) ---- The p r o p e r i s s u e on a p p e a l i s w h e t h e r t h e f i n d i n g s of t h e master, a s a d o p t e d by t h e D i s t r i c t C o u r t , w e r e c l e a . r l y erroneous. The i s s u e i n t h a t r e g a r d , a s s t a t e d by t h e D i s - i s w h e t h e r t h e y were w i t h o u t a d e q u a t e e v i d e n - t r i c t Court, tia-ry support. W e ha-ve examined t h e r e c o r d and f i n d t h a t t h e r e p o r t and judgment b a s e d t h e r e u p o n was s u p p o r t e d by a d e q u a t e evidence a n d employs the correct law. is not It clearly erroneous. P l a i n t i f f s next contend t h a t t h e District Court e r r e d i n a.warding a t t o r n e y s called for party" in fees the and event fees t o t h e defendants. costs to he litigation paid arose to The c o n t r a c t the from the "prevailing contract. P l a i n t i f f s contend t h a t s i n c e they "prevailed" i n t h e p r i o r a p p e a l , a n d s i n c e t h e m a s t e r found a n o f f s e t i n t h e amount o f $74,363.39, defendants, contract. which i s l a r g e r t h a n t h e n e t amount now d u e t h e that they are the prevailing party under the They a r g u e t h a t i f w e u p h o l d t h e D i s t r i c t C o u r t o r d e r and award c o s t s and f e e s t o a p a r t y who h a s l o s t t h e a p p e a l , s u c h a n award would " c h i l l " t h e i n c e n t i v e f o r p a r t i e s t o a p p e a l a n a d v e r s e judgment. P l a i n t i f f s forget t h a t they h a v e a l r e a d y been c r e d i t e d i n t h e D i s t r i c t C o u r t o r d e r t h e costs of FICA. their s u c c e s s f u l appeal-, u n d e r section 25-10-104, That s t a t u t e provides t h a t a D i s t r i c t Court s h a l l , most s i t u a t i o n s , in award c o s t s t o t h e s u c c e s s f u l p a r t y on a n appeal. This statute removes any disincentive to appeal presented by contractural provisions requiring costs to be paid to the prevailing party. In Jordan v. Elizabethan Manor (1979), 181 Mont. 424, 593 P.2d 1049, we stated the general rule as to who is to be considered the "prevailing party" within the terms of a contract that calls for the payment of costs and fees to the same: "A prevailing party is the one who has an affirmative judgment rendered in his favor at the conclusion of the entire case." 181 Mont. at 434, 593 P.2d at 1055. In Jor- dan, - the ca-se was not concluded, and we remanded it to the trial court for further proceedings. In this case we are faced with a situation where there were claims and counterclaims, and. that presents the question of what an "affirmative judgment" is. tal Management v. Toenyes In E.C.A. Environmen- (Mont. 19841, 679 P.2d 213, 41 St.Rep. 388, we stated: "No one factor should be considered in determining the prevailing party for the purpose of attorney fees. The party that is awarded a money judgment in a lawsuit is not necessarily the successful or prevailing party. However, this Court agrees with those jurisdictions tha.t have found the award of money to be a.n important item to consider when deciding who, in fa.ct, did prevail. Ocean West Contractors v. Ha-lec Const. Co. (1979), 123 Ariz. 470, 600 P.2d 1102. Here, MMI brought suit to recover sums due it on a note usurious on its face. The usury penalty assessed MMI resulted not only in a denial of recovery, but an adverse award. The net judgment was in favor of defendants. The party that survives an action involving a counterclaim, setoff, refund or penalty with the net judgment should generally be considered the successful or prevailing party." 679 P.2d at 217, 218, 41 St.Rep. at 392, 393. In a subsequent case, we elaborated upon the general rule quoted above. In Knutsen v. Taylor (Mont. 1984), 685 1490, w e c o n s t r u e d s e c t i o n 70-17-112(5), P.2d 354, 4 1 St.Rep. MCA, which p r o v i d e s f o r an award o f a t t o r n e y s ' prevailing party fees t o the i n an a c t i o n t o p r e v e n t encroachment upon c a n a l o r d i t c h easements. I n Knutsen, t h e p l a i n t i f f r e c e i v e d a money judgment f o r damages i n h i s f a v o r , b u t t h e d e f e n d a n t succeeded i n o b t a i n i n g an i n j u n c t i o n a l l o w i n g b o t h p a r t i e s t h e use of t h e ditch. Because e a c h o f t h e p a r t i e s had re- c e i v e d some a f f i r m a t i v e a c t i o n i n t h e i r f a v o r , t h e D i s t r i c t C o u r t d i d n o t award a t t o r n e y s ' f e e s t o t h e p l a i n t i f f who had r e q u e s t e d i t on t h e b a s i s t h a t h e had r e c e i v e d a n e t money judgment. We affirmed the District Court in that case, reasoning t h a t : "The i n j u n c t i v e o r d e r i s s u e d by t h e D i s t r i c t C o u r t i s a v i c t o r y and a l o s s f o r both s i d e s . [The p l a i n t i f f 1 p r e vailed i n h i s contention t h a t t h e culvert must be o f s u f f i c i e n t s i z e t o c a r r y f u l l y t h e water from t h e h e a d g a t e p a s s i n g through t h e E s t e r Ditch. [The d e f e n d a n t ] prevailed i n t h a t h i s r i g h t t o i n s t a l l such c r o s s i n g c u l v e r t s was r e c o g n i z e d i n t h i s case. I n such c i r c u m s t a n c e s , we d e t e r m i n e t h a t t h e D i s t r i c t Court was c o r r e c t i n f i n d i n g i n e f f e c t t h e r e was no prevailing party. " 685 P.2d a t 357, 4 1 St.Rep. a t 1493. . . 1:n a 25-10-101, bar, case interpreting our costs statute, section MCA, w e c o n s i d e r e d a s i t u a t i o n , s u c h a s t h e one a t where counterclaim. a defendant received a money judgment on a I n Medhus v. D u t t e r ( 1 9 7 9 ) , 184 Mont. 437, 603 P.2d 669, we s t a t e d t h e f o l l o w i n g t o be t h e r u l e : " I f an a c t i o n i s f i l e d , t h e defendant c o u n t e r c l a i m s and s u c c e e d s i n h a v i n g t h e p l a i n t i f f ' s claims t o t a l l y denied b u t only recovers a p o r t i o n of t h e r e l i e f demanded i n t h e c o u n t e r c l a i m , t h e d e f e n dant should receive c o s t s . I f , however, a p a r t y i n i t i a t e s a law s u i t , t h e d e f e n dant counterclaims, and t h e judgment awards b o t h p a r t i e s p a r t o f t h e r e l i e f t h e y s e e k , t h e p a r t y p r e v a i l i n g on t h e main i s s u e i n c o n t r o v e r s y i n t h e c a s e must be allowed costs." 447, 603 P.2d at 674. 184 Mont. at A.1-thoughwe are dealing in this case with a contract term, and not a statutory award as in Medhus, we hold that the Medhus rule should be applied to the rule stated in E.C.A. Environmental v. Toynes, supra which also a-pplies here. This case falls into the latter of the Medhus rules because plaintiffs have received part of the relief they requested in their complaint. The main issue in controversy in this case was damages for breach of contract. Plaintiffs had also requested in their complaint that the District Court quiet title in their favor. relief. their They did not receive such The jury simply held "in favor of the Defendants on counterclaim complaint." and against the Plaintiffs on. their Defendants succeeded in realizing, at the end of the case, a net judgment in their favor, and thus prevailed on the main issue in controversy. The District Court also excluded $1,444.37 from defendants' cost bill as their share of the special master's fee. Rule 53 (a) M.R.Civ.P. provides that: "The compensation to be allowed to a master shall be fixed by the court, and shall be charged upon such of the parties or paid out of any fund or subject matter of the action, which is in the custody and control of the court as the court may direct. " This Court has not considered a situation such as this where a master's fee has been apportioned equally among the parties despite a contract clause that calls for costs to the prevailing party. The Montana rule is identical to the Federal rule, and we recognize that the Federal courts have held that a prevailing party is subject to reimbursement from the other party for its share of the special master's fee. See right and Miller, Federal Practice and Procedure (1971 ed.) S 2 6 0 8 , n. 72 and cases cited therein. otherwise. But here, the parties agreed In the order of June 25, 1984 assessing the master's fee equally between the parties, the District Court stated: "Finally, the plaintiffs contend the portion of the cost bill denominated Special Master's fee is improper because the Court has already ordered and required plaintiffs and defendants to share the cost bill equally. The plaintiffs are correct. By Order dated January 5, 1984, the Court ordered each party to pay one-half of the Special Master' s fee. The Court will not now alter that Order which was agreed to and followed by all parties. " (~rn~hasis added. ) I\iormaliy the District Courts should follow the federal rule and make the non-prevailing party pay, if that is what the contract calls for. Rut where, as here, the parties subsequently agree otherwise, in effect altering the contract, the District Court should honor that agreement. Fe J hold that the District Court did not err in excluding from the defendants' cost bill that amount attributable to their share of the special master' s fee. , I Affirmed. Justice /' / ' ,i We concur: 1
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