State Ex Rel. Montana Department of Transportation v. Skyline Broadcasters, Inc. , 351 Mont. 127 ( 2009 )

June 5 2009
DA 07-0281
IN THE SUPREME COURT OF THE STATE OF MONTANA
2009 MT 193
STATE OF MONTANA, ACTING BY
AND THROUGH THE MONTANA
DEPARTMENT OF TRANSPORTATION,
Plaintiff and Appellant,
v.
SKYLINE BROADCASTERS, INC., a Montana
Corporation, JOHN P. STOKES; Z-600, INC., a
Montana Corporation; QUESTA RESOURCES, INC.,
a Montana Corporation, WILLIAM E. MYTTY;
SANDRA F. MYTTY; QUALITY SUPPLY, INC.,
PROFIT SHARING PLAN AND TRUST; DOUGLAS
S. HADNOT; J. CHRISS CRAWFORD; MYRNA K.
CRAWFORD; STEPHEN S. ELLIS, M.D., P.C.,
EMPLOYEES AMENDED AND RESTATED PENSION
PLAN; and THOMAS H. BOONE, TRUSTEE OF THE
BOONE KARLBERG EMPLOYEES PROFIT SHARING TRUST,
Defendants, Appellees and Cross-Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV-2001-032B
Honorable Katherine R. Curtis, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
James A. Lewis, Robert Gentry, Timothy W. Reardon, Montana
Department of Transportation, Helena, Montana
For Appellees:
Christy L. Brandon, Brandon Law Firm, PLLC, Bigfork, Montana
John Stokes (Self-Represented), Kalispell, Montana
Submitted on Briefs: April 24, 2008
Decided: June 5, 2009
Filed:
__________________________________________
Clerk
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Justice James C. Nelson delivered the Opinion of the Court.
¶1 The Montana Department of Transportation (MDT), appeals from a judgment
entered by the Eleventh Judicial District Court, Flathead County, in favor of MDT after
the court determined the amount of attorney fees and costs to be awarded to the
defendants in this condemnation action. Defendants Questa Resources, Inc.; William E.
Mytty and Sandra F. Mytty; Quality Supply Inc. Profit Sharing Plan and Trust; Douglas
S. Hadnot; J. Chriss Crawford and Myrna K. Crawford; Stephen S. Ellis, M.D., P.C.,
Employees Amended and Restated Pension Plan; and Thomas H. Boone, Trustee of the
Boone, Karlberg Employees Profit Sharing Trust (collectively, the lender defendants)
cross-appeal on two issues relating to liability for and the amount of the judgment. We
affirm in part and reverse and remand in part.
¶2 The issues are:
¶3 1. Did the District Court err in setting the hourly rate of attorney fees to be
awarded to defense counsel Wade Dahood?
¶4 2. Did the District Court err in concluding the proper treatment of the May 2004
stipulation was to set off $30,000 from the attorney fee award?
¶5 3. Did the District Court err in ruling the lender defendants were jointly and
severally liable for the overage judgment?
¶6 4. Did the District Court err in its calculation of the final judgment amount?
BACKGROUND
¶7 MDT brought this action in 2001 to condemn the defendants’ property south of
Kalispell, Montana, for a highway project. Early on in the litigation, the defendants
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stipulated to the necessity for the taking and possession of a part of the property, and
MDT amended its complaint to reduce the size of the taking. In connection with that
stipulation and amendment, MDT agreed, in May of 2004, to pay the defendants $30,000
as a compromise amount for their “claim for necessary expenses of litigation.”
¶8 The condemnation action eventually was resolved on November 5, 2005, again by
agreement of the parties. MDT agreed to pay $400,000 for the property, along with the
defendants’ necessary expenses of litigation as defined under § 70-30-306, MCA.
Counsel for defendants Questa and Mytty moved for payment of their attorney fees and
other expenses of litigation in the amount of $3,665, which motion MDT did not oppose.
However, MDT moved to retax defense attorney Wade Dahood’s claim for fees and costs
in the amount of $667,891.
¶9 The District Court held a hearing in June of 2006 to determine the amount of the
defendants’ necessary expenses of litigation. Dahood testified and submitted
documentation in support of his claim, which he had re-totaled at $681,907.75, including
paralegal fees, expenses, and 1,906 hours of work at an hourly rate of $250 for his own
services. Dahood supported this hourly rate with affidavits of eight other Montana
attorneys, who averred that the rate was appropriate for an attorney of his stature in a
complicated condemnation case. MDT, on the other hand, presented testimony that the
customary hourly rate for attorneys in Flathead County was $150. MDT also challenged
the total number of hours Dahood claimed, on several grounds. In its written judgment
filed November 14, 2006, the District Court reduced the number of hours for which it
allowed Dahood payment from the 1,906 hours he claimed to 1,205 hours. The court
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adopted the $250 hourly rate for Dahood’s services, and awarded the defendants
$301,250 for attorney fees, plus expert fees totaling $45,650 and costs of $4,488.23.
¶10 The District Court then determined the $750,500 deposit MDT had made with the
court pending this action, pursuant to §§ 70-30-308 and -311(5)(b), MCA, plus statutory
interest on that amount, was more than the total judgment against MDT. Dahood had
withdrawn all of the deposit in 2001 through 2003, using it to, among other things, pay
off the lender defendants’ mortgages in the amount of $293,930. The District Court ruled
the defendants are jointly and severally liable to repay MDT for that overage, plus
interest. As a result, on February 26, 2007, the court entered an order granting MDT a
net judgment of $98,960.69 plus interest at the rate of 10 percent. MDT appeals, and the
lender defendants cross-appeal.
¶11 After this appeal had been briefed and submitted to the Court, defendant John
Stokes filed for bankruptcy in the United States Bankruptcy Court for the District of
Montana. By order dated April 17, 2009, the Bankruptcy Court lifted the automatic
bankruptcy stay imposed pursuant to 11 U.S.C. § 362, to allow this appeal to go forward.
The stay remains in effect as to any efforts to enforce judgment against Stokes.
STANDARDS OF REVIEW
¶12 We review a district court’s interpretation and application of a statute for
correctness. State, ex rel. Montana Dept. of Transp. v. American Bank of Montana, 2008
MT 362, ¶ 7, 346 Mont. 405, 195 P.3d 844. The same standard applies to our review of
the construction and interpretation of written agreements and determinations as to
whether ambiguity exists in a contract; we review rulings on these matters to determine
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whether the district court’s conclusions of law are correct. See In re Marriage of
Holloway, 2000 MT 104, ¶ 5, 299 Mont. 291, 999 P.2d 980.
ISSUE 1
¶13 Did the District Court err in setting the hourly rate of attorney fees to be awarded
to defense counsel Wade Dahood?
¶14 Section 70-30-306, MCA, defines necessary expenses of litigation for purposes of
condemnation actions, including “reasonable and necessary attorney fees, expert witness
fees, exhibit costs, and court costs.” The statute provides that “[r]easonable and
necessary attorney fees are the customary hourly rates for an attorney’s services in the
county in which the trial is held.” Section 70-30-306(2), MCA.
¶15 After briefing was completed in this case, we construed the language of
§ 70-30-306, MCA, in American Bank. We held that reasonable and necessary attorney
fees awarded under § 70-30-306, MCA, must be computed based on hourly rates typical
or common for a non-specific attorney’s services in the county in which trial is held; they
are not to be computed pursuant to the “Forrester factors” which are applied when
computing attorney fees in other types of cases. American Bank, ¶¶ 9, 14.
¶16 As a result of timing, the District Court lacked the benefit of our decision in
American Bank. In its findings on this matter, the court began by stating it would set the
attorney fees at “the customary hourly rate in Flathead County,” but it then went on to
incorporate the Forrester factors into its analysis. Based on Dahood’s testimony and the
affidavits he presented—which addressed the Forrester factors—the court set Dahood’s
hourly rate for this action at $250 per hour. However, as we determined in American
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Bank, the Forrester factors do not apply in a condemnation action. For that reason, that
portion of the judgment of the District Court must be, and is, vacated.
¶17 At the District Court’s hearing on attorney fees, MDT introduced testimony by
two attorneys who have practiced law in Flathead County, Richard DeJana and Marshall
Murray. Both testified the usual and customary fee for an attorney’s services in Flathead
County in the year 2005 was $150 per hour; DeJana also filed an affidavit to that effect.
That is the evidence upon which the District Court should have relied in setting Dahood’s
hourly rate. On remand, the District Court is instructed to recalculate the attorney fees to
which the defendants are entitled, based on an hourly rate of $150 for Dahood.
ISSUE 2
¶18 Did the District Court err in concluding the proper treatment of the May 2004
stipulation was to set off $30,000 from the attorney fee award?
¶19 MDT argues it should have been granted more than a $30,000 credit against the
total attorney fees and costs as a result of the settlement by stipulation between the parties
in May of 2004. MDT contends the settlement was intended to encompass all litigation
expenses incurred up to the time the amended complaint was filed. MDT points out
Dahood had submitted a bill indicating he performed 462 hours of work at $250 per hour
up to the time of the stipulation, plus paralegal fees and expenses. As a result, MDT
contends it should have received a credit for a total of $176,785.57 in pre-settlement legal
fees, paralegal fees, and expenses, instead of just $30,000.
¶20 The May 2004 stipulation provided that “the ‘lump sum’ amount of $30,000” was
for a complete and total settlement of that certain claim for necessary
expenses of litigation as defined in § 70-30-306, MCA, and incurred as a
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result of the reduction in the area of the taking and attached to Mr.
Dahood’s letter of April 6, 2004. The taking was reduced by the Judge’s
Order Amending the Complaint dated December 18, 2001. This agreement
represents the settlement of a doubtful and disputed claim and neither party
is agreeing to validity or correctness of any particular item included within
that claim.
We agree with the District Court’s implied conclusion that this document is ambiguous.
Among other things, the stipulation makes no reference to either the number of hours or
the amount of claimed attorney fees settled by the $30,000 payment. When ambiguity
exists in a contract, the court may turn to extrinsic evidence to determine the intent of the
parties. Ophus v. Fritz, 2000 MT 251, ¶ 29, 301 Mont. 447, 11 P.3d 1192.
¶21 The District Court received additional evidence, including testimony by Dahood
and copies of letters between the parties, which supports the defendants’ position that the
settlement was only for fees relating solely to the original complaint, not for all fees up to
the date of the stipulation. Dahood testified the parties intended the $30,000 as payment
for 120 hours of his work relating to the initial complaint which had no relevance to the
amended complaint, at $250 per hour. Based on that evidence, the District Court
concluded the intent of the stipulation was to settle the claim for the defendants’ attorney
and paralegal fees relating solely to the original complaint, so that the proper treatment of
the $30,000 payment was to deduct that amount from the total attorney fees awarded to
Dahood.
¶22 The District Court having accepted the defendants’ evidence on the intent of the
stipulation, the court’s conclusion of law is correct. We hold the District Court did not
err in its treatment of the May 2004 stipulation.
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ISSUE 3
¶23 Did the District Court err in ruling the secured lenders were jointly and severally
liable for the overage judgment?
¶24 On cross-appeal, the lender defendants—all of whom are secured creditors with a
mortgage on the condemned property and a perfected UCC lien upon the condemnation
proceeds—contend they are not liable for excess proceeds withdrawn from MDT’s
$750,500 deposit with the District Court. The lender defendants admit they received
$293,930 through Dahood as payment on the mortgage debt on the property, but they
point out they did not participate in establishing the value of the land taken,
condemnation damages, or settling the case; they appear only as secured creditors with a
mortgage on the condemned property and a perfected UCC lien upon the condemnation
proceeds.
¶25 The District Court stated it would not enter judgment in favor of the lender
defendants because they had not filed any claim for relief against any other party to this
action. The court further found Dahood’s withdrawals from the money deposited with
the court were done in his role as counsel for all defendants.
¶26 Section 70-30-311(5), MCA, provides “the condemnee who has received all or
any part of the amount deposited is liable to the condemnor for any excess of the amount
received over the amount finally assessed[.]” We previously have determined under
§ 70-30-311(5), MCA, that, in a condemnation case, where more money has been
withdrawn from the deposit made with the district court than ultimately is awarded to the
landowner, a district court may issue an overage judgment ordering the landowner to
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repay the excess withdrawn, with interest, without requiring a separate legal action to be
brought. See State, by and through Dept. of Hwys. v. Helehan, 186 Mont. 286, 607 P.2d
537 (1980). We have not, however, addressed the issue presented here: whether secured
lenders are jointly and severally liable for any overage.
¶27 In Grand River Dam Auth. v. Jarvis, 124 F.2d 914 (10th Cir. 1942), the Tenth
Circuit Court of Appeals considered a similar question under a similar statute. Grand
River was a proceeding by the Grand River Dam Authority, a public corporation, to
condemn a tract of land owned by one A. M. Jarvis. The Authority deposited in court
$5,895, the appraised value of the property. At Jarvis’s request, that money was
disbursed to him, two mortgagees, and the county treasurer for payment of taxes. The
Authority then demanded a jury trial, which resulted in a verdict of $5,000. Thereafter,
the Authority filed a motion for, among other relief, judgment against Jarvis and the
mortgagees for $895, together with interest on that amount. The trial court refused to
enter judgment against the two mortgagees for a return of the $895 overpayment. On
appeal, the Tenth Circuit Court held the mortgagees were not required to repay any part
of what they received, reasoning they were entitled to receive all the proceeds until their
mortgage debt was paid and discharged. The court held the excess went to Jarvis and not
to the mortgagees, and Jarvis alone was required to repay. Grand River, 124 F.2d at
917-18.
¶28 Similarly, in State v. Teuscher, 761 P.2d 49 (Wash. 1988), the issue was the extent
to which lien creditors must repay the state for the difference between the amount which
the state had tendered for property while condemnation proceedings were pending—some
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of which had been withdrawn by the lien creditors—and the fair market value of the
condemned property as later determined by a jury. The Washington Supreme Court held
the lien creditors were liable to repay only those amounts, if any, which they had
withdrawn from the deposit in excess of their actual interest in the property. Teuscher,
761 P.2d at 493-94. The court remanded for the trial court’s determination of the amount
of each creditor’s interest in the property.
¶29 As MDT points out, Grand River and Teuscher were not decided under
§ 70-30-311(5), MCA. However, we conclude the language of § 70-30-311(5), MCA,
compels the same result as was obtained in those cases. Section 70-30-311(5), MCA,
provides for recovery “for any excess of the amount received over the amount finally
assessed,” thus limiting liability on an overage judgment to the amount of excess actually
received by a condemnee. The interpretation given the statute by the District Court leads
to an absurd result: if any condemnee receives proceeds from a condemnation case, that
condemnee will be jointly and severally liable for payment of an overage judgment,
regardless of the amount that condemnee actually received. Here, there was no showing
that the lender defendants received any excess over the amount of their mortgages. Had
MDT deposited with the District Court only the $400,000 later agreed upon as the value
of the property taken, the lender defendants still would have been entitled to the same
amount they received. If the property was overvalued or if Dahood withdrew from the
deposit more money than the land was worth, then the responsibility for repaying MDT
must fall on the landowners, not on the secured creditors.
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¶30 MDT argues that another reason the lenders should be held jointly and severally
liable is that the lenders’ attorney fees for Dahood’s services were paid through the
withdrawals Dahood made from the money MDT deposited with the court. It is true that,
at times, Dahood represented to the District Court that he appeared on behalf of all of the
defendants. However, we note his motion for an award of attorney fees states he
represented John Stokes, Skyline Broadcasters, Inc., and Z-600, Inc. In addition, the
lender defendants state they had no written fee agreement with Dahood. We conclude the
lender defendants do not bear responsibility for Dahood’s fees and costs.
¶31 We hold the District Court erred in ruling that the lender defendants are jointly and
severally liable for the overage judgment.
ISSUE 4
¶32 Did the District Court err in its calculation of the final judgment amount?
¶33 The lender defendants correctly point out that, in computing the judgment, the
District Court did not use the dates established by the settlement, awards, and findings
and, as a result, it incorrectly calculated the total judgment amount, thereby depriving the
defendants of just compensation. On remand, the District Court is instructed to
recalculate the total amount due using an updated version of Exhibit B to the lender
defendants’ “calculation of judgment re order and rationale dated 1/12/2007,” which
document appears in the District Court record as document number 309 and was filed
with the District Court on January 29, 2007.
¶34 Reversed and remanded for further proceedings consistent with this Opinion, after
the lifting of the bankruptcy stay which is now in effect as to John Stokes.
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/S/ JAMES C. NELSON
We Concur:
/S/ BRIAN MORRIS
/S/ PATRICIA COTTER
/S/ JOHN WARNER
/S/ JIM RICE
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