No. 89-273
I N T H E SUPREME COURT O F T H E S T A T E O F MONTANA
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T H E S T A T E O F MONTANA, A C T I N G BY --5 7-;
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HIGHWAYS O F T H E S T A T E O F MONTANA,
P l a i n t i f f and R e s p o n d e n t ,
RONALD L . M c G U C K I N , B E T T Y S T E G E R W I C K E R ,
F R E D E R I C K C . JANDRON, C O L E T T E RENEE JANDRON,
and M I C H E L L E A . JANDRON, a l l o f w h o m c l a i m
s o m e i n t e r e s t i n t h i s a c t i o n , and BANK O F
COLUMBIA F A L L S , M o r t g a g e e ,
D e f e n d a n t s and A p p e l l a n t s .
A P P E A L FROM: D i s t r i c t C o u r t of t h e E l e v e n t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of F l a t h e a d ,
T h e H o n o r a b l e L e i f E r i c k s o n , Judge p r e s i d i n g .
COUNSEL O F RECORD:
For A p p e l l a n t :
D a l e L . M c G a r v e y , A l l a n M c G a r v e y argued; M c G a r v e y ,
H e b e r l i n g , Sullivan & McGarvey, K a l i s p e l l , Montana
For R e s p o n d e n t :
J a m e s A. L e w i s argued, D e p t . of H i g h w a y s , H e l e n a ,
Montana
Submitted: February 6 , 1 9 9 0
Decided: March 16, 1990
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Filed:
Clerk
Justice R. C. McDonough delivered the Opinion of the Court.
This appeal arises out of a condemnation action brought
before the Eleventh Judicial District Court, Flathead County.
Appellants are defendant landowners of commercial properties
located in Coram, Montana condemned by the Department of
Highways of the State of Montana (Department). A final
settlement of the amount of just compensation was reached
after some 24 years of negotiation and progress toward trial.
The landowners submitted an itemized Memorandum of Litigation
Expenses, including attorney fees, which the Department
opposed. A hearing was held on the litigation expense issue.
Landowners now appeal the February 1, 1989 order of the
District Court denying them an award of attorney fees
incurred to prove attorney fees. We affirm.
The landowners raise a sole issue on appeal: Did the
District Court err in denying the defendant landowners an
award of attorney fees for time and effort expended in
securing an award of necessary litigation expenses in the
condemnation action, including costs and attorney fees?
After making an initial offer of $69,800.00 which was
rejected by the landowners, the Department filed a
condemnation action and served a complaint upon the
landowners. The landowners answered demanding just
compensation in the amount of $700,000.00. To obtain
possession the Department deposited $321,000 and the
landowners withdrew the entire amount on March 4, 1985.
After various discovery and other proceedings the case
was set for jury trial. On April 6, 1987 the Department
served and filed a copy of its final settlement offer as
required by statute. The final settlement offer provided for
just compensation in the amount of $227,300.00 and included
an agreement to pay all of the landowners' litigation
expenses up until April 6, 1987, which was accepted by the
landowners.
The landowners filed their Memorandum of Litigation
Expenses, demanding a total of $145,137.62 in litigation
expenses. The Department opposed this amount and filed a
Motion to Retax Costs. A hearing was held to determine the
amount of necessary expenses of litigation. After the
evidentiary hearing the Department offered $63,000 to the
landowners for all litigation expenses. In their proposed
findings the landowners increased their claim for necessary
litigation expenses to $161,972.95.
The court entered its Findings, Conclusions and Order
awarding the landowners $76,540.12 as necessary expenses of
litigation. This amount included $3,359.50 as costs of
taking depositions incurred in proving costs of necessary
litigation expenses. The court denied the request for
attorney fees incurred in proving the necessary costs and
fees. Landowners moved to amend the Order to include
additional costs including attorney fees incurred as a
result of the dispute over litigation expenses. On February
1, 1989 the District Court denied this motion in part and
granted it in part. It increased the award by $4,897.00 to
$81,437.12 to include some additional costs and expenses.
The court again denied the request for attorney fees incurred
in proving the litigation expense. Landowners now appeal
the court's Order denying them attorney fees incurred in
proving the necessary expenses of litigation.
The State's power of eminent domain is controlled by
Article 11, Section 29 of the Montana Constitution which
provides :
Section 29. Eminent Domain. Private Property
shall not be taken or damaged for public use
without just compensation to the full extent of the
loss having been first made to or paid into court
for the owner. In the event of litigation, just
compensation shall include necessary expenses of
litigation to be awarded by the court when the
private property owner prevails.
The policy underlying the constitutional provision is to make
the landowner whole after the State takes his property. This
constitutional mandate is further embodied in the
condemnation statutes:
(1) The condemnor shall, within 30 days after an
appeal is perfected from the commissioner's award
or report or not more than 60 days after waiver of
appointment of condemnation commissioners, submit
to condemnee - written final offer of judgment for
- a
the property - - condemned, togzher - -
to be with- the
necessary expenses of condemnee - - accrued.
then . ..
(2.
. ) In the event of litisation and when the
private property owner prevails by receiving an
award in excess of the final offer of the
condemnor, the court shall award the necessary
expenses of litigation to the condemnee.
Section 70-30-305, MCA. (Emphasis added. ) Necessary
expenses of litigation are defined as:
. . . reasonable and necessary attorney fees,
expert witness fees, exhibit costs, and court
costs.
(2) Reasonable and necessary attorney fees
are the customary hourly rates for an attorney's
services in the county in which the trial is held.
Reasonable and necessary attorney fees shall be
computed on an hourly basis and may not be computed
on the basis of any contingent fee contract entered
into after July 1, 1977.
(3) Reasonable and necessary expert witness
fees may not exceed the customary rate for the
services of a witness of such expertise in the
county in which trial is held.
Section 70-30-306, MCA.
Both the statute, § 70-30-305(1), MCA, and the State's
final offer of settlement contemplate that the Department's
final offer will only include the landowners' necessary
expenses of litigation accrued until the date a settlement is
reached. The Department contends that this precludes the
landowners from receiving any award of costs and attorney
fees incurred in proving their litigation expense, since all
such expenses were incurred after April 6, 1987, the date the
Department served its final offer and allegedly terminated
the accrual of further expenses.
We disagree with this contention. In doing so we note
that the situation presented here is a novel one not
contemplated by the Constitution or the condemnation
statutes. For us to strictly construe the terms of the
settlement agreement as unequivocally precluding an award of
any expenses incurred after the date of settlement could
result in denying a landowner just compensation in direct
contravention of Article 11, Section 29 of the Constitution.
The question of whether to award costs and attorney fees
on proving litigation expenses is fraught with problems. For
example, two extreme situations can arise. First, the State
could object to every expense item claimed, as they did here,
even if all expenses claimed were reasonable, thereby forcing
the landowners to incur additional expenses in securing their
award. If they are precluded from recovering any additional
expenses after the date the initial settlement was reached,
there is nothing to deter the State from making such an
unreasonable objection in all cases and hope the Court might
agree with them. The end result could deny the landowner a
net recovery. On the other hand, the landowner and counsel
should not be allowed to benefit from making unreasonable
and inflated expense claims that force the State to object
and lead to further litigation upon which a landowner's
counsel can claim further fees. This would create an
incentive for a landowner's counsel to make unreasonable and
inflated claims in order to perpetuate litigation on which
they can claim fees and also place an additional unwarranted
cost burden on the State in defending overstated claims.
Here, we have a situation somewhere between the two
extremes illustrated above. Not only did the Department
object to each and every item listed in the landowners'
Memorandum of Litigation Expenses, but the Department
alleges, and the District Court agreed in part, that the
expenses claimed in the landowners' Memorandum were inflated
and unreasonable as shown by the court's initial award of
$76,540.12 out of the $145,137.62 initially claimed by the
landowners. Thus, while an award of litigation expenses may
be required under § 70-30-305, MCA, to afford the landowner a
net recovery, it is within the discretion of the district
court to determine what expenses are "necessary" and
"reasonable." - § 70-30-306, MCA.
See
With respect to attorney fees incurred in proving
attorney fees, it is apparent that a landowner's counsel is
acting primarily in his own interest rather than for the
benefit of his client. The landowner's condemnation award
already secured, the outcome of the litigation expense
hearing becomes important to the attorney as well as the
client, and with respect to attorney fees awarded, any result
secured by the services of the attorney would be for his
benefit rather than the client. - -
See, e.g. Glenview Park
District v. Redemptorists Fathers of Glenview (Ill. 1980),
We therefore conclude that an award of attorney fees
incurred in proving the amount of attorney fees incurred in
the litigation is generally not a necessary and reasonable
expense of the landowner. In this regard, we endorse the
District Court's reliance on this Court's decision in In re
the Marriage of Bliss (1980), 187 Mont. 331, 609 P.2d 1209,
where we stated:
F e reject the notion that the court may require
7
one party to pay opposing counsel for his time
spent in seeking justification of the fees he
desires. The practice of law has its burdens as
well as benefits, and this is one burden that
counsel - - -
must bear without an expectation of
compensation. (Emphasis by t h e District cut)
or.
Bliss, 609 P.2d at 1213. In applying Bliss to the case at
bar, the District Court also concluded:
Obviously, if it is counsel's burden to bear the
costs of proving attorney fees then it is not the
burden of the opposing party nor of the attorney's
own client. Thus, the amount awarded to the
Defendant landowners in this case will not [be]
diminished as they may not be charged by their
attorney for time spent by him to prove the amount
of his fees.
Order of February 1, 1989, p. 3. We also conclude that it
is counsel's burden to bear this expense and not the opposing
party in such cases. However, in order to achieve an
equitable result in extraordinary circumstances, the District
Court in its sound discretion may require the opposing party
to bear this expense. This would be a rare exception and not
the rule. Here, the State may not be charged for attorney
fees incurred by landownerst counsel in proving their
attorney fees. Nor may counsel charge this expense to his
client, as this could result in depriving landowner/client of
a net recovery.
However, we conclude that costs and attorney fees
incurred in proving necessary and reasonable litigation
expenses other than attorney fees are chargeable to the
client and to the other party, taking into consideration the
other party's litigation expenses in defending other costs
and attorney fees disallowed or unnecessary and unreasonable.
The duty of determination of necessary and reasonable
litigation expenses, is within the sound discretion of the
district court, and will not be disturbed upon review absent
an abuse of that discretion. Shors v. Branch (1986), 221
Mont. 390, 402, 720 P.2d 239, 246; Talmage v. Gruss (1983),
202 Mont. 410, 412, 658 P.2d 419, 420.
Here, the District Court's findings of fact and
conclusions of law contain an itemized analysis of each
expense claimed and an allowance for each expense to the
extent that it is "reasonable" and "necessary." The court
did not allow attorney fees incurred in proving attorney fees
based on o u r h o l d i n g in Bliss, b u t d i d a l l o w t h e c o s t s of
d e p o s i n g w i t n e s s e s f o r p r o v i n g t h e amount of a t t o r n e y f e e s .
W f i n d no abuse o f d i s c r e t i o n .
e
AFFIRMED.
Justice
W Concur:
e
" Chief J u s t i c e