No. 95-110
IN THE SUPREMECOURT OF THE STATE OF MONTANA
1995
THADDEUS SOLEM, KENNETHNICHOLSON,
and DAVID STEWART,
Plaintiffs and Respondents,
v.
KEN CHILCOTE,
Defendant and Appellant.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Douglas G. Harkin, Judge presiding
COUNSEL OF RECORD:
For Appellant:
Michael Sol, Sol & Wolfe,
Missoula, Montana
For Respondents:
John Rayburn Velk, Attorney at Law,
Missoula, Montana
Justice Charles E. Erdmann delivered the opinion of the Court.
This is an appeal of a decision of the Fourth Judicial
District Court, Missoula County, awarding damages and attorney fees
to Thaddeus Solem, Kenneth Nicholson, and David Stewart (the
tenants) against Ken Chilcote (the landlord). We affirm in part,
reverse in part, and direct the return of the landlord's appeal
bond.
We restate the issues as follows:
1. Did the District Court err in finding that the landlord
wrongfully withheld a portion of the tenants' security deposit?
2. Did the District Court err in determining there was an
illegal provision in the rental agreement and awarding damages?
3. Did the District Court err in awarding attorney fees to
the tenants?
4. IS the landlord entitled to the return of his appeal
bond?
Facts
The tenants rented a residential unit from the landlord. The
lease was a month-to-month agreement and required a $300 security
deposit. Prior to the tenants moving in, the landlord completed a
condition of premises statement which all three of the tenants
signed. On March 15, 1991, the tenants gave an oral 30-day notice
to terminate on April 15, 1991. Although the notice was not in
writing as required by the lease, the landlord accepted it.
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The landlord advised the tenants it was easier to lease the
apartment at the beginning of the month and, if they could vacate
by April 1, 1991, they would receive a prorated portion of their
rent back. The landlord started to run his advertisement to rent
the apartment on March 23, 1991. The tenants moved out by April 1,
1991.
On March 30, 1991, and prior to the tenants moving, The
landlord alleges that he and his wife conducted a cleaning
inspection and went through the apartment pointing out specific
items to the tenants that needed cleaning. The landlord also
alleges that later the same day he hand delivered a written notice
of general cleaning requirements to the tenants' mailbox. The
tenants deny any such cleaning inspection and delivery of notice.
The apartment was leased to a new tenant on April 8, 1991. On
April 17, 1991, the landlord prepared a written statement of
damages and cleaning and presented this statement to the tenants.
The landlord deducted $70.50 for cleaning charges, $126.67 of
prorated rent from April 1 through the date the premises were
re-let on April 8, and $18.00 in damages and repairs ($10 for a
missing smoke alarm and $8 for nail holes). He returned $84.83 of
the $300 deposit to the tenants.
The tenants objected to the deductions and filed suit in
Justice Court. Justice Court found that the landlord had agreed
orally to refund any rent due after April 1, and that the rent from
April 1 to Apri .l 8 was wrongfully withheld. The court then ordered
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double damages. The court also found that the landlord had
wrongfully withheld $10 for a smoke detector and had failed to give
a proper 4%hour notice for cleaning as required by the lease.
The landlord appealed the decision to the District Court for
a trial de nova. In its August 3, 1994, Judgment, the District
Court awarded the tenants withheld rent, double damages, damages
for an illegal provision in the lease, and attorney fees. From
this Judgment, the landlord appeals.
Standard of Review
Our review of a district court's finding of fact is set forth
in Y A Bar Livestock Company v. Harkness (1994), 269 Mont. 239, 887
P.2d 1211, as follows:
This Court reviews the findings of a trial court
sitting without a jury to determine if the court's
findings are clearly erroneous. Rule 52(a), M.R.Civ.P.
A district court's findings are clearly erroneous if they
are not supported by substantial credible evidence, if
the trial court has misapprehended the effect of the
evidence, or if a review of the record leaves this Court
with the definite and firm conviction that a mistake has
been committed.
Y A Bar Livestock, 887 P.2d at 1213 (citing Interstate Prod. Credit
AssIn v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d 1285, 1287.)
We have defined substantial evidence to mean "more than a
scintilla, but . . . less than a preponderance, of evidence."
State v. Shodair (Mont. 1995), 902 P.2d 21, 26, 52 St. Rep. 879,
882 (citing Miller v. Frasure (1991), 248 Mont. 132, 137, 809 P.2d
1257, 1261).
We review a district court's conclusion of law to determine if
the court's interpretation of the law is correct. Carbon County v.
Union Reserve Coal Co. (Mont. 1995), 898 P.2d 680, 686, 52 St. Rep.
529, 533.
Issue 1
Did the District Court err in finding that the landlord
wrongfully withheld a portion of the tenants' security deposit?
The landlord withheld $88.50 from the tenants' security
deposit fqr cleaning ($70.50) and for repairing damages
($18.00--nail holes and missing smoke alarm). The District Court
found that the landlord did not meet the burden of proving he gave
to the tenants a 48-hour notice of needed cleaning as required by
§ 70-25-201(3), MCA, and therefore held that this portion of the
tenants' security deposit was wrongfully withheld. Likewise, the
court found that the landlord could not withhold funds for
repairing the nail hole because he failed to provide the requisite
48-hour notice. In addition, the court found that the landlord
wrongfully charged the tenants for a smoke detector when there was
no credible evidence that a smoke detector was in the apartment
when it was leased to the tenants.
The landlord argues that the Residential Landlord and Tenant
Act and the Residential Security Deposits Act do not require a
notice of any kind to be given to repair damages. He points out
that the 48-hour notice requirement of § 70-25-201, MCA (1991),
refers exclusively to cleaning. The landlord also contends he
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properly provided the tenants with a list of damages and a partial
refund as required under § 70-25-202, MCA.
The tenants argue that damage to property, by nature, is very
similar to cleaning charges and therefore the tenants should be
allowed an opportunity to repair damages before money is withheld
from their security deposit. The tenants claim, in any event, the
landlord did not meet his burden of proving damages as required by
5 70-25-204(l), MCA.
The tenants' argument is incongruous. The District Court's
finding of fact stated "[tlenants have admitted liability for
causing damage to the property in the form of nail holes . . . .'I
However, the District Court's determination that the landlord is
still liable because prior notice of damages was required is
incorrect. There is no requirement in the Residential Security
Deposits Act that notice be given for repairs. The only action
that the landlord needed to take under § 70-25-202, MCA, was to
provide the tenant with a list of damages within 30 days of the
termination of tenancy or 30 days after a surrender of the
premises. The landlord did this in regard to the $8 nail holes,
and therefore, that amount was properly withheld from the security
deposit. We hold that the District Court erred in finding the
landlord incorrectly withheld funds for the nail holes.
The landlord, however, is required to give a 48-hour notice
for cleaning under § 70-25-201, MCA (1991). The landlord contends
that he and his wife inspected the apartment on March 30, 1991,
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pointed out to the tenants what needed to be cleaned, and then
delivered a written notice of cleaning to be done to the tenants'
mailbox. The landlord surmises that the tenants left without
checking their mailbox. The tenants deny that the inspection and
the delivery of the notice ever occurred.
The District Court found that the tenants never received
written notice as required by statute. See § 70-25-201, MCA
(1991). The tenants testified to the facts found by the District
Court. In Williams v. DeVinney (1993), 259 Mont. 354, 359, 856
P.2d 546, 549, we stated "[dlue regard is to be given the trial
court's ability to judge the credibility of the witnesses, and it
is not this Court's function to substitute its judgment for that of
the trier of fact. DeSave, 820 P.2d at 1287-88." The record
provides substantial evidence to support the District Court's
finding. We further determine that the court did not misapprehend
this evidence and we have no firm conviction that a mistake has
been made. We therefore conclude the District Court did not err in
awarding to the tenants the $70.50 withheld for cleaning.
Additionally, the District Court agreed with the tenants and
found that the smoke detector was not present when the tenants
moved into the apartment. The landlord introduced a condition of
premises statement signed by the tenants which lists a smoke
detector as present and working when the tenants signed the lease.
However, the landlord did not record the testing of the smoke
detector as was his practice and the District Court did not find
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his testimony credible. Again, we will defer to the District
Court's judgment of the witnesses' credibility. Williams, 856 P.2d
at 549. There was substantial credible evidence to support the
District Court's finding. This evidence was not misapprehended.
Nor do we have any conviction that a mistake has been made. We
thus conclude that the District Court did not err in awarding to
the tenants the $10.00 withheld for the smoke detector.
Finally, the landlord withheld $126.67 as prorated rent. The
lease provided for 30-days notice to terminate the tenancy. The
tenants asked the landlord if they could leave early, and he
apparently agreed. The District Court went on to hold, however,
that this attempted oral modification of the lease agreement was
not effective. The court concluded that for an oral agreement to
be effective, it must be fully executed on both sides. The court
held that if the tenants had vacated the premises by April 1, which
was done, and the landlord prorated the rent to April 1, which was
not done, there would have been a full execution of the oral
agreement and the lease would be modified. The court held,
however, that the oral modification was not fully executed by the
landlord and therefore was not effective.
The court's conclusion regarding the attempted oral
modification was not appealed by either party and so is not before
this Court. On appeal, we confine ourselves solely to the case as
it is appealed to us. Feely v. Lacey (1958), 133 Mont. 283, 293,
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322 P.2d 1104, 1109. Accordingly, we must accept the District
Court's holding on this issue.
Based on that holding, the District Court should have allowed
the landlord to prorate the April rent and charge the tenants for
the period of time for which the property was not re-leased. That
period of time was from April 1 through April 8 and was reflected
by the $126.67 that the landlord withheld from the security deposit
for unpaid rent. Thus, the landlord properly withheld $126.67 from
tenants' security deposit and the District Court erred in awarding
that amount to the tenants.
The landlord was authorized to withhold a total of $134.67
from the security deposit ($8 nail hole and $126.67 prorated rent).
The landlord wrongfully withheld the $70.50 for cleaning and the
$10 for the smoke detector for a total of $80.50. Under
§ 70-25-204, MCA, the tenants were entitled to double the amount
wrongfully withheld for the total of $161 in damages. We therefore
hold that the District Court erred in part in finding that the
landlord wrongfully withheld a portion of the tenants' security
deposit.
Issue 2
Did the District Court err in determining there was an illegal
provision in the rental agreement and awarding damages?
The lease contained a provision which stated: "Acceptance of
a refund of all or a portion of the deposit by tenant shall
constitute a full and final release of landlord from any claims of
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tenant of any nature whatsoever." The District Court relied on
§ 70-24-202(l), MCA, in concluding this provision of the landlord's
lease agreement was illegal. Section 70-24-202(l), MCA, states
that a rental agreement may not provide that a party agree to waive
or forego rights provided under the Residential Landlord and Tenant
Act. The District Court found that the contested provision in the
rental agreement was in conflict with the provisions of
5 70-24-442(l), MCA, which provides as follows:
In an action on a rental agreement or arising under this
chapter, reasonable attorney fees, together with costs
and necessary disbursements, may be awarded to the
prevailing party notwithstanding an agreement to the
contrary.
The tenants' first amended complaint alleged that the lease
agreement contained a provision prohibited by § 70-24-202(l), MCA.
The action constituted "an action on a rental agreement" and that
provision grants tenants the right to pursue attorney fees--a right
which the contested provision in the rental agreement attempted to
waive. Although the tenants requested and were awarded attorney
fees under the provisions of the Residential Security Deposits Act,
they also alleged that the contested provision in the lease
agreement was an attempt to waive the right to request attorney
fees under § 70-24-442(l), MCA.
The District Court went on to assess additional damages under
the provisions of § 70-24-403(2), MCA (1991), in the Residential
Landlord and Tenant Act for this illegal provision. Section
70-24-403, MCA (19911, provides:
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(1) A provision prohibited by 70-24-202 included in a
rental agreement is unenforceable.
(2) If a party purposefully uses a rental agreement
containing provisions known by him to be prohibited, the
other party may recover, in addition to his actual
damages, an amount up to three months' periodic rent.
The landlord argues that this is an action brought under
Chapter 25 of Title 70, the Residential Security Deposits Act, and
the court was therefore prohibited from relying on § 70-24-403, MCA
(1991), in the Residential Landlord and Tenant Act to award
additional damages. This argument ignores the allegations in the
first amended complaint that the contested provision was prohibited
by § 70-24-202(l), MCA. The District Court did not err in finding
that the contested provision in the rental agreement was prohibited
by § 70-24-202(l), MCA, or in awarding additional damages under
5 70-24-403(2), MCA (1991). We therefore affirm the District Court
on this issue.
Issue 3
Did the District Court err in awarding attorney fees to the
tenants?
The landlord questions why he must pay attorney fees when he
prevailed on the major part of his reason for this appeal--the
unexecuted oral agreement to prorate rent from April 1, 1991, was
held invalid. The landlord references cases where we have upheld
the reductions of attorney fees when the amount in controversy is
simply not worth such a fee. See Carkeek v. Ayer (1980), 188 Mont.
345, 348, 613 P.2d 1013, 1016. He argues it is unjustified for the
District Court to award attorney fees of $5253.68 for a $70.50
judgment.
Attorney fees are available under 5 70-25-204, MCA. That
section provides that any person who wrongfully withholds a
residential property security deposit, or any portion thereof,
shall be liable in damages to the tenant in a civil action, and
attorney fees may be awarded to the prevailing party at the
discretion of the district court. Section 70-25-204, MCA.
In E.C.A. Environmental Management Services, Inc. v. Toenyes
(1984), 208 Mont. 336, 679 P.2d 213, we discussed the proper
construction of "prevailing party" in regard to attorney fees. We
stated that
[nlo 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 that
have found the award of money to be an important item to
consider when deciding who, in fact, did prevail. Ocean
West Contractors v. Halec Const. Co. (1979), 123 Ariz.
470, 600 P.2d 1102. . The party that survives an
action involving a counterclaim, set-off, refund or
penalty with the net judgment should generally be
considered the successful or prevailing party.
E.C.A., 679 P.2d at 217-18. Although we have modified the District
Court's award to the tenants, the action involved a refund of
tenants' security deposit for a net judgment of $80.50 in favor of
the tenants. The tenants are therefore still the prevailing
parties on this issue and are entitled to their attorney fees at
the District Court's discretion.
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We will not reverse a district court's award of attorney fees
absent an abuse of the court's discretion. Sage v. Rogers (1993)
257 Mont. 229, 242, 848 P.2d 1034, 1042. The District Court
awarded attorney fees to the tenants for those fees associated with
the recovery of the tenants' security deposit. The court then
ordered the tenants to file an affidavit of those fees and provided
for a period of time in which the landlord may object to the
tenants' claim and request a hearing. We conclude the District
Court did not abuse its discretion in its award of attorney fees,
and therefore hold that the District Court did not err in awarding
attorney fees to the tenants.
Issue 4
Is the landlord entitled to the return of his appeal bond?
The landlord requests this Court to order the return of his
appeal bond in the amount of $2000. The District Court did not
respond to the landlord's motions to return the appeal bond to him
though the judgment had been executed, and thus, the appeal bond
has remained filed with the Justice Court. The tenants have
conceded the validity of the landlord's claim to the bond and we
conclude that the landlord is entitled to return of the bond.
We affirm in part, reverse in part, and direct the District
Court to order the Justice Court to return the $2000 bond to the
landlord.
Justice
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We concur:
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