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 & Haines; Ronald Bender, Missoula,
Montana
For Respondents:
James A. Curnming, Columbia Falls, ?4ontana
-- -- -. - - ----
Submitted on Briefs: January 7, 1985
Decided: January 29, 1985
, , . i
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.' 2 ,
Filed:,!,;. --.";3
Clerk
Mr. J u s t i c e L. C. Gulbrandson d e l i v e r e d t h e Opinion of the
Court.
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 First Judicial District, Lewis and Clark County,
Montana. 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 awarding
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 . 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 by plaintiffs were to be offset
against the verdict. The D i s t r i c t C o u r t a l s o awarded c o s t s
and f e e s t o t h e d e f e n d a n t s . W e affirm.
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. Colonial Terrace (Mont. 1 9 8 2 ) , 6 5 6 P.2d 807, 39
S t . Rep. 2318. 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 c a s e r e s t s on a contract for the s a l e of real
property, 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. The c a s e came t o t r i a l i n J u n e o f
1981. 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 they were to determine offsets to any verdict
reached. The District Court, with the agreement of the
parties, 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 . The d e f e n -
d a n t s promptly o b t a i n e d a judgment 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 denial of
their motion to amend and determine offsets. 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 adopt-
ing 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 Court also entered an order, on March 19,
1984,denying plaintiffs' motion 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 defen-
dants 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 52 ( a ) , M. R.Civ. P. provides that
" [ t l h e findings of a master, t o the extent t h a t the court
adopts them, shall be considered as the findings of the
court." Thus, we a p p l y t h e same s t a n d a r d o f r e v i e w t o an
adopted m a s t e r ' s report that we do to any o t h e r d i s t r i c t
court order. 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
"clearly erroneous." SAS Partnership v. Schafer (Mont.
1 9 8 2 ) , 653 P.2d 834, 39 St.Rep. 1883. I n Wright and M i l l e r ,
Federal Practice and Procedure, (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 appointed in 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
$74,363.39. H e reached t h i s conclusion with t h e f i n d i n g t h a t
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 pertaining to that
i s s u e t o be r a i s e d a t t r i a l . 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 on t h e fraud o r negligence counterclaims, upon
which no offsets can be allowed. Thus, they argue, the
master's report 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 law. 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 plain-
tiffs 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 those payments were--an a.mount missing from the
record. 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
s i o n s based thereon.
tend - - - f a i l e d t o consider -
- t h a t h e had
----
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 -
Thev d i d n o t con-
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
the
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 -
t r i c t Court, 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 -
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. It is not 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 fees t o t h e defendants. The c o n t r a c t
called for fees and costs to he paid to the "prevailing
party" in the event litigation arose from the 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, 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
defendants, that they are the prevailing party under the
contract. 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 their s u c c e s s f u l appeal-, u n d e r section 25-10-104,
FICA. 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 , in
most s i t u a t i o n s , 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-
- the ca-se was not concluded, and we remanded it to the
dan,
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. In E.C.A. Environmen-
tal Management v. Toenyes (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 impor-
tant item to consider when deciding who,
in fa.ct, did prevail. Ocean West Con-
tractors 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 suc-
cessful 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
P.2d 354, 4 1 St.Rep. 1490, w e c o n s t r u e d s e c t i o n 70-17-112(5),
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 ' fees t o the
prevailing party 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 case interpreting our costs statute, section
25-10-101, 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
bar, where a defendant received a money judgment on a
counterclaim. 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." 184 Mont. at
447, 603 P.2d at 674.
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. They did not receive such
relief. The jury simply held "in favor of the Defendants on
their counterclaim and against the Plaintiffs on. their
complaint." 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 defen-
dants' 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 pre-
vailing 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. But here, the parties agreed
otherwise. 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 re-
quired 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~hasisadded. )
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 con-
tract, 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