06/06/2017
DA 16-0744
Case Number: DA 16-0744
IN THE SUPREME COURT OF THE STATE OF MONTANA
2017 MT 135N
SANDRA D. FOX,
Plaintiff and Appellee,
v.
ETHAN FAIRBROTHER and CHRISTINA FAIRBROTHER,
Defendants and Appellants.
APPEAL FROM: District Court of the Twentieth Judicial District,
In and For the County of Sanders, Cause No. DV 14-80
Honorable Deborah Kim Christopher, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Matthew H. O’Neill, O’Neill Law Office, PLLC, Polson, Montana
For Appellee:
Douglas G. Skjelset, Suzanne E. Geer, Skjelset & Geer, PLLP,
Missoula, Montana
Submitted on Briefs: May 3, 2017
Decided: June 6, 2017
Filed:
__________________________________________
Clerk
Justice Dirk M. Sandefur delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion and shall not be cited and does not
serve as precedent. Its case title, cause number, and disposition shall be included in this
Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana
Reports.
¶2 Ethan and Christina Fairbrother (Fairbrothers) appeal the order of the Montana
Twentieth Judicial District Court, Sanders County, which awarded Fairbrothers litigation
costs as the prevailing party in an action for rescission of a real estate contract, but denied
their motion for attorney’s fees. We affirm.
¶3 The parties do not dispute the facts detailed by the District Court findings. In April
2013, Sandra Fox (Fox) executed a hand-written agreement to sell Fairbrothers a five-acre
parcel in Noxon, Montana, for $45,000 plus interest. The structured payment arrangement
involved a $9,000 down payment; monthly contributions totaling $19,200 to an escrow
account for Fox’s benefit; and an unsecured promissory note requiring Fairbrothers to pay
Fox $24,000 over ten years in $200 monthly installments.
¶4 Fairbrothers executed a Montana Trust Indenture with Clark Fork Title Co., which
established the escrow account and secured the $19,200 to be paid over a ten-year period.
A promissory note accompanied the trust indenture and memorialized Fairbrothers’
$19,200 debt, interest at 3%, and the monthly payment schedule. As the beneficiary of the
trust indenture, Fox had no role in negotiating, drafting, or executing the agreement. At
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closing, Fox received copies of two trust documents executed by the Fairbrothers with the
title company: the one-page trust promissory note and the two-page Montana Trust
Indenture (short-form trust). The short-form trust stated that “provisions numbered 1
through 25 of the Trust Indenture recorded April 15, 2005” and filed separately with the
Sanders County Clerk and Recorder were “incorporated and made an integral part hereof
for all purposes as though set forth herein in their entirety.” Fairbrothers did not provide
Fox with a copy of the seven-page Montana Trust Indenture (long-form trust), which
contained the trust’s boilerplate provisions and was incorporated by reference in the
short-form trust.
¶5 Tensions over the construction of an access road to Fairbrothers’ property through
an easement across Fox’s adjacent land aggravated deteriorating relations between the
neighbors. On August 14, 2014, Fox filed a complaint in district court seeking rescission
of the agreement to sell the five acres to Fairbrothers, alleging mistake, fraud, and undue
influence. Fox attached a copy of the short-form trust to her complaint, together with other
documents related to the five-acre sale. By the time of her filing, Fox had received
approximately $13,000 on the real estate contract. Fox made no offer or attempt to return
any money to Fairbrothers. While the legal action was pending, Fairbrothers continued to
make monthly payments of $200 to Fox and $160 to the escrow account at Clark Fork Title
Co. When Fox refused to accept payment, Fairbrothers deposited her $200 monthly
payments in their attorney’s trust account.
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¶6 At trial, Fairbrothers sought to have the long-form trust admitted into evidence for
the purpose of showing “the provisions for attorney fees” for “the prevailing party [in]
litigation over trust indentures.” Fox objected on the grounds of unfair surprise because
the long-form trust had not been shared in discovery. Although the long-form trust may
have been filed with the county and available to the public-at-large, Fox argued the
document did not appear on Fairbrothers’ pretrial exhibit list and Fox had no prior notice
of Fairbrothers’ intent to offer the long-form trust into evidence. The District Court
reserved ruling on the admission of the long-form trust, pending final briefing by the
parties.
¶7 Following the two-day bench trial in June 2016, the District Court determined that
Fairbrothers agreed to pay fair market value for the five-acre parcel and did not
misrepresent any material facts, commit fraud, coerce, or exert undue influence over Fox.
The court further determined that Fox was competent and fully capable of engaging in the
real estate sale. The court concluded that Fox failed to comply with the legal requirements
for rescission of a real estate contract pursuant to § 28-2-1713, MCA, by failing to act
promptly and failing to restore everything of value she had received from Fairbrothers.
Because the District Court found no evidence to support Fox’s claim for contract
rescission, the court held that Fox “takes nothing from her complaint.”
¶8 On November 18, 2016, in response to Fairbrothers’ M. R. Civ. P. 54(d) motion,
the District Court awarded litigation costs pursuant to § 25-10-501, MCA, but denied
attorney’s fees to Fairbrothers on the stated grounds that the “contract containing any
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requirement to pay attorney’s fees was not admitted during trial.” The stated reason for
the court’s refusal to admit the long-form Montana Trust Indenture was “because it was
not provided in discovery.”
¶9 The issues on appeal are whether the District Court abused its discretion by denying
admission of the long-form Montana Trust Indenture at trial and whether the court correctly
denied Fairbrothers’ request for attorney’s fees.
¶10 A district court has broad discretion to determine the admissibility of evidence.
Schuff v. Jackson, 2008 MT 81, ¶ 15, 342 Mont. 156, 179 P.3d 1169. Therefore, we review
a district court’s ruling on the admissibility of evidence for an abuse of discretion. West v.
Club at Spanish Peaks L.L.C., 2008 MT 183, ¶ 44, 343 Mont. 434, 186 P.3d 1228. We
review for correctness a district court’s conclusion regarding the existence of legal
authority to award attorney’s fees. Foss v. Melton, 2016 MT 232, ¶ 19, 385 Mont. 5, 386
P.3d 553.
¶11 Montana follows the general American Rule, which holds that a prevailing party is
not entitled to recover attorney’s fees unless expressly provided for by statute or contract.
Schuff v. A.T. Klemens & Son, 2000 MT 357, ¶ 97, 303 Mont. 274, 16 P.3d 1002. When
legal authority exists to award attorney’s fees, § 28-3-704, MCA, provides that the right to
recover attorney’s fees is reciprocal.
¶12 Two contract documents involved in the Fox-Fairbrother real estate transaction
contain attorney fee provisions. One was the promissory note that accompanied the
Montana Trust Indenture, which states:
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In the event of default of the payment of this note, it is agreed that the Holder
of this note may recover such necessary expenses as may be incurred in the
collection, including interest at the legal rate and a reasonable attorney’s fee.
The District Court determined that the promissory note, by its terms, applied only to
litigation on an alleged default. Because Fox never alleged a default pursuant to the
promissory note, the court determined that the attorney fee provision did not apply. We
agree.
¶13 The second document containing an attorney fee provision is the long-form
Montana Trust Indenture, which states, in pertinent part:
Except as may be otherwise provided herein, Grantor agrees to pay to
Beneficiary or Trustee the costs and expenses, including a reasonable
attorney’s fee, incurred by either of them in instituting, prosecuting or
defending any Court action in which Grantor does not prevail, if such action
involves the interpretation hereof or performance thereunder by a party
hereto of the breach of any provision hereof by a party hereto, including but
not limited to an action to obtain possession of the above described property
after exercise of the power of sale granted hereunder.
We agree that this provision for attorney’s fees would have applied if properly admitted
into evidence at trial. Fairbrothers claim the District Court abused its discretion by refusing
to admit the long-form trust into evidence pursuant to its admission of the properly
disclosed short form that expressly incorporated the long form by reference. Due to the
incorporation provision of the short form, Fairbrothers argue they had no duty to disclose
or produce the long form document in discovery.
¶14 Discovery promotes “the ascertainment of truth” by “assuring the mutual
knowledge of all relevant facts gathered by both parties which are essential to proper
litigation.” Richardson v. State, 2006 MT 43, ¶ 22, 331 Mont. 231, 130 P.3d 634 (quoting
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Massaro v. Dunham, 184 Mont. 400, 405, 603 P.2d 249, 252 (1979)). Modern discovery
rules and pretrial procedures “make a trial less a game of blindman’s buff and more a fair
contest with the basic issues and facts disclosed to the fullest practicable extent.”
Richardson, ¶ 22 (citing United States v. Procter & Gamble Co., 356 U.S. 677, 682, 78
S. Ct. 983, 986-87 (1958)). M. R. Civ. P. 33 authorizes the use of interrogatories for the
purpose of pretrial discovery from an adverse party. We liberally construe this rule to make
all relevant facts available to parties in advance of trial and to reduce the possibilities of
surprise and unfair advantage. Perdue v. Gagnon Farms, Inc., 2003 MT 47, ¶ 15, 314
Mont. 303, 65 P.3d 570.
¶15 Although Fairbrothers assert that Fox never requested a copy of the long-form trust
indenture in discovery, the discovery requests indicate otherwise. By Interrogatory No.
14, Fox asked Fairbrothers to list any real property they have owned since January of 1995.
Interrogatory No. 15 sought specific information about each listed property. By Request
for Production No. 6, Fox asked Fairbrothers to provide “copies of all documents generated
in regard to any transactions described in response to Interrogatory No. 15.” Fairbrothers
neglected to produce a copy of the long-form Montana Trust Indenture.
¶16 Fairbrothers next argue that, because the long-form trust is a public record filed with
the county clerk and recorder, all parties had an equal ability to access the document and
Fairbrothers had no duty to specifically disclose the long form in discovery. The cases
cited in support of this proposition distinguish the duty to produce copies of public records
from the duty to disclose public documents prior to trial. See, e.g., Securities & Exchange
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Comm. v. Samuel H. Sloan & Co., 369 F.Supp. 994 (S.D.N.Y. 1973) (undue burden for
SEC to produce expensive copy of disclosed transcript of administrative proceedings,
which is a public record available to all at their own cost); Tequila Centinela, S.A. de C.V.
v. Bacardi & Co., 242 F.R.D. 1 (D.D.C. 2007) (courts may limit production of public
records when another source is more convenient, less burdensome, or less expensive).
While the cases cited by Fairbrothers offer authority allowing parties to avoid the cost and
inconvenience of producing copies of public documents in discovery, as provided by M. R.
Civ. P. 26(b)(2)(C)(i), neither ruling authorizes nondisclosure of public documents that are
within the permissible scope of a discovery request. In addition, the minimal cost and ease
of production for a seven-page contract does not justify Fairbrothers’ failure to provide Fox
the long-form trust prior to trial.
¶17 Disclosure of relevant information prior to trial is the essence of discovery. This
Court strictly adheres to the policy that dilatory discovery actions shall not be dealt with
leniently. Richardson, ¶ 56. The Court will generally defer to the decision of a trial court
regarding sanctions for failure to comply with discovery procedures because the trial court
is in the best position to know whether parties are disregarding the rights of opposing
parties in the course of litigation and which sanctions for such conduct are most
appropriate. McKenzie v. Scheeler, 285 Mont. 500, 506, 949 P.2d 1168, 1172 (1997).
M. R. Civ. P. 37(c)(1) sets forth various actions a district court may take to address a party’s
failure to disclose information requested during discovery, including disallowing the party
to use that information at trial.
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¶18 The interests of fairness and transparency demand that the complete contract, which
provides a legal basis for an attorney fee award, be disclosed to the opposing party prior to
trial. The District Court was in the best position to address the discovery failure, and the
court cited nondisclosure as the reason for denying the admission of the long-form Montana
Trust Indenture. Without the long-form trust before the court, the court concluded that
none of the contracts in evidence provided the necessary legal authority for an award of
attorney’s fees.
¶19 We conclude the District Court did not abuse its discretion when it declined to admit
the long-form Montana Trust Indenture into evidence for failure to share the document
with the opposing party in discovery. We further hold that the District Court correctly
determined that no legal basis exists in the record for an award of attorney’s fees to
Fairbrothers absent admission of the long-form Montana Trust Indenture. We affirm.
¶20 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our
Internal Operating Rules, which provides for memorandum opinions. In the opinion of the
Court, the case presents a question controlled by settled law or by the clear application of
applicable standards of review.
/S/ DIRK M. SANDEFUR
We concur:
/S/ MIKE McGRATH
/S/ JAMES JEREMIAH SHEA
/S/ LAURIE McKINNON
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Justice Jim Rice, concurring.
¶21 I believe the long-form Montana Trust Indenture was incorporated by reference
within the short form, was “part and parcel” to the original transaction, and thus should
have been admitted and considered in this matter. However, the language of the long form
did not, in my view, grant attorney fees to the prevailing party in the kind of action brought
here, for rescission, and therefore I would affirm the District Court’s denial of attorney fees
on that basis.
¶22 I concur.
/S/ JIM RICE
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Fox v. Fairbrother
Combined Opinion