No. 14664
IN THE SUPREhIE COURT OF THE STATE OF MONTANA
JOSEPH RUSSELL REALTY COMPANY,
A Montana Corporation,
Plaintiff and Respondent,
THOMAS F. KENNEALLY and MARY ANN RENNEALLY,
husband and wife,
Defendants and Appellants.
Appeal from: District Court of the Second Judicial District,
Honorable James D. Freebourn, Judge presiding.
Counsel of Record:
For Appellant:
William N. Geagan and D. L. Holland, Butte,
Montana
For Respondent :
Bolinger and Wellcome, Bozeman, Montana
Submitted on Briefs: September 19, 1979
Decided: JAN 16 19811
Mr. Chief Justice Frank I. Haswell delivered the Opinion of
the Court.
Defendants, Thomas and Mary Ann Kenneally, appeal from
a judgment in Silver Bow County District Court which quieted
title to a tract of land in plaintiff, Joseph Russell Realty,
Inc. Russell Realty cross-appeals, arguing it is entitled to
damages for slander of title and attorney fees.
Both parties assert title to real property which is part
of what is commonly called the Valley Addition in or near Butte,
Montana.
From the abstract of title, it appears the property in
dispute was owned by John and Mary Stewart in 1891. Russell
Realty bases its title on a quitclaim deed executed in 1925 by
the Stewarts. The deed conveyed to Russell Realty all the Stewart's
" ...right, title and interest in and to the
VALLEY ADDITION to the City of Butte, Montana,
according to the official plat and survey of the
said Addition now on file and of record in the
office of the County Clerk and Recorder of said
Silver Bow County, State of Montana, to which
plat for a further and particular description,
reference is hereby made."
The land was considered worthless and was not taxed from 1915 to
Thomas Kenneally, who at all pertinent times acted on be-
half of himself and his wife, became interested in the property
in 1964. Discovering no taxes had been paid on the property,
Kenneally contacted his attorney, William Geagan of Butte and
discussed different manners of obtaining the land. After review-
ing records in the offices of the county treasurer and the county
assessor in hopes of finding out who the owner of the land was,
it was determined the "property was in limbo." Geagan then advised
Kenneally to secure
" ..
. a Deed, a Quit Claim Deed, from any person
that would convey any right, title, and interest
that that person might have, not granting it but
merely quit claiming any right, title, and interest
to the property.
"And then to improve the property and pay the
taxes and have it assessed, and pay the taxes
for five years, and it would ripen into a good
title, adverse title." (Emphasis supplied.)
Kenneally testified that Geagan suggested he find a person named
Joseph Russell to execute the quitclaim. Geagan denied this,
claiming he had no knowledge that Russell Realty appeared in the
chain of title and that he did not so advise Kenneally. In any
event, one Joseph Russell, a customer at Kenneally's Butte gas
station, agreed to execute a quitclaim of all his right in the
property to Kenneally. Kenneally, with the knowledge that this
Joseph Russell had no interest whatsoever in the property, asked
attorney Geagan, to prepare a quitclaim naming Joseph Russell as
the party releasing his title and himself and his wife as the
parties obtaining title. Geagan, also with the knowledge that
Joseph Russell had no title at all to the property, drew up the
deed. In return for five gallons of gasoline, Joseph Russell,
who also knew he had no right to the property, executed the quit-
claim deed in April, 1967. The deed was recorded and the property
was entered on the tax roll of Silver Bow County. Taxes were paid
for the years 1968-1977 by Kenneally.
In 1970, Kenneally transferred the property to Mrs. Mary
Margaret Baker, his mother-in-law. A quiet title action was filed
in her name by attorney Geagan. In conjunction with that action,
an abstract of title was prepared which named both Joseph Russell,
the admitted stranger to title, and Joseph Russell Realty, the
plaintiff in this action, as parties with potential interests in
the land. Geagan testified this was the first time he became aware
of Russell Realty's connection with the property. Russell Realty
was named as a defendant in the 1970 quiet title action.
At this time, Russell Realty's corporate agent, within the
state was attorney Bolinger of Bozeman, Montana. He was duly
registered as such with the Secretary of State. Also on file
with the Secretary of State was the name and address of Joseph
Wirak, a director of Russell Realty and resident of Great Falls,
Montana.
Kenneally, acting through attorney Geagan, had purchased
a Bozeman gas station from Russell Realty in 1965. Attorney
Bolinger, the corporate agent, handled the transaction for Russell
Realty. In connection with that transaction, Geagan prepared an
abstract of title in which he stated:
"The corporate existence of the Joseph Russell
Realty Company would appear to have terminated.
But this examiner knows the contrary exists.
The Joseph Russell Realty Company should for
its protection secure and have recorded in
Gallatin County a certified copy of its extension
of corporate existence filed in Silver Bow County
... I1
Kenneally and Geagan both testified they did not connect the
Russell Realty of this transaction with the Russell Realty which
appeared as party defendant in the 1970 quiet title action.
Geagan testified he looked in the Butte city directory
and telephone book, but was unable to find any listing for Joseph
Russell Realty, Inc. He then contacted the Secretary of State whose
office allegedly informed him that Russell Realty's principal
office was in Butte, Montana and that there was no registered
agent within the state.
Service of process on Russell Realty in the 1970 quiet
title action was made under Rule 4 ( D ) (2) ( £ 1 , M.R.Civ.P. Basically,
that rule allows service of process to be made on the Secretary
of State if a defendant corporation cannot be located after a
reasonably diligent search for certain officers and the registered
agent has occurred. As required by the rule, the secretary mailed
service of process to Butte, Montana, the asserted last known ad-
dress of Russell Realty. It was returned undelivered.
The quiet title action proceeded without an appearance by
Russell Realty and resulted in title being quieted in Mary Baker.
The property was eventually transferred back to Kenneally.
In 1973, attorney Bolinger, acting on behalf of Russell
Realty, investigated the property, the transaction from Joseph
Russell to Kenneally and Mary Baker's quiet title action. The
result was the filing of this action for damages or alternatively
for return of the property, which Russell Realty contends right-
fully belongs to it. The court found:
"That through mistake and inadvertence of attorney
for Mrs. Mary Margaret Baker or the process serving
agent for the State of Montana, Joseph Russell
Realty Company, a corporation, was not before the
court and any decree quieting title to the parcels
of land as described in the complaint . . . was,
as to Joseph Russell Realty Company, a corporation,
null and void."
It concluded:
"That Joseph Realty Company, a corporation is the
true owner in fee simple of the property as des-
cribed in the pleadings; that defendants have no
right, title or interest in or to said property."
A judgment was entered accordingly and Kenneally was
ordered to convey the land back to Russell Realty. Russell Realty
was ordered to reimburse Kenneally for the taxes paid.
The following issues are presented on appeal:
1. Can Russell Realty maintain this action, which is
essentially a collateral attack on the 1970 judgment quieting
title in Kenneally's predecessor in interest?
2. Did Kenneally establish title by adverse possession
under color of title?
3. Is Russell Realty entitled to punitive damages for
slander of title?
4. Is Russell Realty entitled to attorney fees?
We are unable to agree with Kenneally that Russell Realty
is barred from bringing this suit by the 1970 judgment quieting
title in Kenneally's predecessor in interest. While it is a gen-
eral rule that a judgment cannot be attacked in a collateral action
such attack is permissible if the first judgment is void for lack
of jurisdiction. Hoffman's Estate (1957), 132 Mont. 387, 318
P.2d 230. It is axiomatic that if service of process on a party
is improperly made, the court acquires no jurisdiction over that
party, Haggerty v. Sherburne Merc. Co. (1947), 120 Mont. 386,
186 P.2d 884, and it may collaterally attack the judgment. This
is such a case.
Jurisdiction over Russell Realty in the 1970 action was
predicated on service of process made under Rule 4 (D)(2)(f),
M.R.Civ.P. That rule provides:
"When a claim for relief is pending in any court
of this state against a corporation ... that
has filed a copy of its charter in the office of
the secretary of state of Montana and qualified
to do business in Montana ... and none of the
persons designated in D(2) (e) immediately above
can with the exercise of reasonable diligence be
found within Montana, the party causing summons
to be issued shall exercise reasonable diligence
to ascertain the last known address of any such
person. Upon the filing with the clerk of court
in which the claim for relief is pending of an
affidavit reciting that none of the persons desig-
nated in D ( 2 ) (e) can after due diligence be found
within Montana upon whom service of process can
be made, and reciting the last known address of
any such person, or reciting that after the exer-
cise of reasonable diligence no such address for
any such person could be found, and there has also
been deposited with the said clerk the sum of $5.00
to be paid to the secretary of state as a fee for
each of said defendants for whom the secretary of
state is to receive said service, then the clerk
of court shall issue an order directing process
to be served upon the secretary of state of the
state of Montana .. .. Such affidavit shall be
sufficient evidence of the diligence of inquiry
made by affiant, if the affidavit recites that
diligent inquiry was made, and the affidavit need
not detail the facts constituting such inquiry."
We have recently construed the rule to require strict
compliance. Shields v. Pirkle Refrigerated ~reightlines (1979),
Mont. , 591 P.2d 1120, 1124, 36 St-Rep. 472, 477. The key
language in the rule commands that reasonable diligence be used
in locating the individuals listed in Rule 4 ( ~ ) (e), F4.R.Civ.P.
(2)
These persons include the corporation's registered agent and any
director of the corporation.
Keeping in mind that attorney Geagan and Kenneally
had dealt with Russell Realty through its registered agent and
should have been able to contact the company, and that the
secretary of state had the name and address of the agent and a
director on file, we are unable to find that a reasonably dili-
gent search occurred.
The explanation offered by Kenneally excusing personal
service is that the secretary of State supplied his attorney
with misinformation to the effect that Russell Realty had no
registered agent in the state. The receipt of such information
does not excuse or fulfill the due diligence requirement of Rule
4 (D)(2)(f) . Murdock v. Blake (1971), 26 Utah 2d 22, 484 P. 2d 164,
cited with approval by this Court in Shields v. Pirkle, Mont .
at , 591 P.2d at 1124, 36 St.Rep. at 477-478, supra. There
being no diligent search, service of process on the Secretary of
State was inadequate to confer jurisdiction over Russell Realty.
Russell Realty is not barred from collaterally attacking the
judgment where the court has never acquired jurisdiction over
it by valid service of process.
Kenneally's claim to the property arises out of adverse
possession under color of title. As a defendant in a quiet title
action, the burden of proving such assertion is on Kenneally.
Bearmouth Placer Co. v. Passerell (1925), 73 Mont. 306, 309, 236
Adverse possession under color of title is possession
based on a written instrument which purports to pass title but
which in reality does not. The Court has stated:
" ... for one who holds a land under a written
instrument, a statute or a judgment or decree
of court which appears to convey or confirm title,
but does not do so in fact, holds under 'color of
title'; that is to say he holds by virtue of some-
thing which gives him a colorable title only . . ."
"'What is meant by color of title? It may be
defined to be a writing, upon its face profession
to pass title, but which does not do it, either
from a want of title in the person making it, or
from the defective conveyance that is used--a
title that is imperfect, but not so obviously so
that it would be-apparent to one not skilled-in
the law.'" Morrison v. Lind (1915), 50 Mont 396,
under Montana law, "An instruction which purports to convey land
or the right to its possession is sufficient color of title as a
basis for adverse possession if the claim is made in good faith."
(Emphasis added.) Hentzy v. and an Loan & Inv. Co. (1955), 129
Mont. 324, 286 P.2d 325. See also Kuhn v. Chesapeake & 0. Ry. Co.
(4th Cir. 1941), 118 F.2d 400, 405; Sullivan v. Nee1 et al. (1937),
105 Mont. 253, 257, 73 P.2d 206; Fitschen Bros. Com. Co. v. Noyes
Estate (1926), 76 Mont. 175, 196, 246 P. 773; Burby Real Property
3d Ed., S111, p 272, 5 Thompson on Real Property S2553, p. 671.
.
Here, Kenneally's "title" is based on a quitclaim deed
from an individual who was known by all parties concerned to have
no interest whatsoever in the property. There is no trace of good
faith and there is no color of title. Jumping Rainbow Ranch v.
Conklin (1975), 167 Mont. 367, 371, 538 P.2d 1027, 1029.
Kenneally goes to great lengths to demonstrate the weak-
ness of Russell Realty's title. However, the party asserting ad-
verse possession must succeed on the strength of his own title
and cannot rely on the weakness of his adversary. Jumping Rain-
bow Ranch v. Conklin, supra; Diamond Investment Co. v. Geagan (1969),
154 Mont. 122, 124, 460 P.2d 760, 761. These arguments are of no
avail.
We turn next to Russell Realty's assertion that it is
entitled to punitive damages for slander of title. Under section
27-1-221, MCA, punitive damages are recoverable "where the defen-
dant has been guilty of oppression, fraud, or malice, actual or
presumed . . ." We have stated that malice is an essential ele-
ment in an action for slander of title and that it will be presumed.
Continental Supply Co. v. Price (1952), 126 Mont. 363, 376,
251 P.2d 553, 559. (Bottomly, J., specially concurring.)
As discussed above, we are of the opinion that Kenneally
did not fulfill the requirement of good faith for adverse posses-
sion under color of title. This is not to say however that his
actions were undertaken in bad faith, maliciously or with a will-
ingness to disparage Russell Realty's title. Continental Supply
Co. v. Price, 126 Mont. at 374, 251 P.2d at 558. The record dis-
closes the following: Kenneally testified he did not know of
Russell Realty's interest in the land when he took the quitclaim
deed from Joseph Russell. Both Kenneally and Geagan testified
they did not connect the Russell Realty with whom they had dealt
previously with the Russell Realty which appeared in the abstract
of title prepared for the 1970 quiet title action. Attorney Geagan
testified that, upon inquiry, the Secretary of State did not dis-
close the address or presence of Russell Realty's registered cor-
porate agent within the state. This testimony, if credible, suf-
ficiently rebuts the presumption of malice. As the credibility of
the witnesses is for the determination of the trial court, Voyta
v. Clonts (1958), 134 Mont. 156, 3$8 P.2d 655, we do not disturb
the finding of the District Court that Kenneally's actions were
not fraudulent or malicious.
We finally turn to Russell Realty's contention it is en-
titled to attorney fees. The general rule is that in the absence
of statute or contract, attorney fees will not be awarded. Bitney
v. School District No. 44 (1975), 167 Mont. 129, 535 P.2d 1273;
Nikles v. Barnes (1969), 153 Mont. 113, 454 P.2d 608.
There being no statutory or contractual provision for
attorney fees in this case, Russell Realty argues that if another's
fraudulent act is the cause of litigation, attorney fees will be
awarded. Assuming such an exception to the common law rule pro-
hibiting attorney fees to exist, Home Ins. Co. v Pinski Brothers
.
(1972), 160 Mont. 219, 227-228, 500 P.2d 945, 950. See comment
40 Mont. L.Rev. 308, 318 (1979), it is not applicable here.
Kenneally acted without good faith, but as explained above, we
are unable to hold he acted fraudulently, maliciously or with bad
faith toward Russell Realty. As such, attorney fees are not re-
coverable.
This Court has recognized the District Court's general
equity power to make the injured party whole and in some isolated
cases has upheld awards of attorney fees made in the exercise of
this power. Holmstrom Land Co. v. Hunter (1979), Mont . I
595 P.2d 360, 36 St.Rep. 926; Foy v. Anderson (1978), Mont .
, 580 P.2d 114, 35 St.Rep. 811. Such an award is within the
sound discretion of the trial court, Foy v. Anderson, 580 P.2d
at 116, 35 St-Rep. at 814, and in the absence of an abuse of
that discretion, we will not disturb a decision denying attorney
fees. See Porter v. Porter (1970), 155 Mont. 451, 457, 473 P.2d
538, 541, for standard of review on matters where the trial court's
discretion is involved. There is no abuse of discretion in this
case.
Affirmed.
Chief Justice
We cogcur:
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Justices
Mr. Justice John Conway Harrison dissenting:
This case is in my judgment on all fours factually with
Jumping Rainbow Ranch v. Conklin (1975), 167 Mont. 367, 538
P.2d 1027. In that case the attorney gave his secretary ten
dollars and a box of chocolates for a quitclaim; here Kenneally
gave a man named Anderson five gallons of gasoline for a
quitclaim deed knowing that Anderson had no interest whatsoever
in the property. The majority here decide to accept the
findings of the District Court in spite of the exact opposite
holding in Jumping Rainbow. I believe the trial court's
finding in the latter case, as we found, should be controlling
in this case. I would reverse the findings of the District
Court and return the case in light of our holding in Jumping
Rainbow Ranch v. Conklin, supra.