WINER v JONAL CORP

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No. 13020 I N THE SUPREME COURT O THE STATE O M N A A F F OTN 1975 JULIUS H. WINER, M.D., MARTIN M. EVEN, M.D., and P l a i n t i f f s and A p p e l l a n t s , JQNAL CORPORATION, a Montana c o r p o r a t i o n ; MIDWEST PACIFIC DEVELOPMENT COMPANY, a Montana C o r p o r a t i o n ; WESTERN STATES SALES COMPANY, a Montana C o r p o r a t i o n ; WILLIAM K. STRICKFADEN and FRANCIS G. STRICKFADEN, husband and w i f e ; ALLEN R. BLUM; J O H N G. SWINFORD; ROBERT PAULIN; DOROTHY JEAN PAULIN; and PAUL KALLMAN, Defendants and Respondents, Appeal from: D i s t r i c t Court o f t h e T h i r t e e n t h J u d i c i a l D i s t r i c t , Honorable R o b e r t Wilson, Judge p r e s i d i n g . Counsel o f Record: For Appellants : P e d e r s e n , Herndon and H a r p e r , B i l l i n g s , Montana Bruce Harper a r g u e d , B i l l i n g s , Montana S c h u l h o f e r and Bramble, B e v e r l y H i l l s , C a l i f o r n i a F o r Respondents: Towe, Neely and B a l l , B i l l i n g s , Montana Kallman & Levenberg, T,os Angeles , C a l i f o r n i a A l l e n R. Blum, B e v e r l y H i l l s , C a l i f o r n i a James N. B a r b e r , S a l t Lake C i t y , Utah Submitted : Decided : December 3 , 1975 FEB - 5 1976 M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e Court. + This appeal i s from an award g r a n t i n g a t t o r n e y f e e s a r i s i n g o u t of an a c t i o n on an agreement between J u l i u s H. Winer, M.D. and Martin M. Even, M.D., p l a i n t i f f s and a p p e l l a n t s h e r e i n , and t h e J o n a l Corporation, an e n t i t y organized under t h e laws of Montana, i t s p r e s i d e n t Allen R. Blum, and i t s v i c e p r e s i d e n t John G. Swinford, defendants and respondents h e r e i n . S e v e r a l o t h e r p a r t i e s were named and j o i n e d t o t h e a c t i o n f o r v a r i o u s r e a s o n s , among them defendants William K. and F r a n c i s G. S t r i c k f a d e n ; a t t o r n e y Paul Kallman r e p r e s e n t i n g Blum and app e a r i n g pro s e ; and two o t h e r Montana c o r p o r a t i o n s , Midwest P a c i f i c Development Company and t h e Western S t a t e s S a l e s Company. Two o t h e r s , Robert and Dorothy Jean P a u l i n were p a r t i e s t o a r e l a t e d c o n t r a c t w i t h t h e J o n a l Corporation, and were j o i n e d a s defendants a s n e c e s s a r y and proper p a r t i e s . On March 1 0 , 1970, Winer and Even executed a w r i t t e n agreement providing f o r a loan t o t h e J o n a l Corporation i n t h e amount of $51,000 on a f i v e y e a r promissory n o t e . The n o t e was t o b e secured by an undivided one-half i n t e r e s t i n c e r t a i n r e a l p r o p e r t y l o c a t e d i n B i l l i n g s , Montana. A t about t h e same time, Robert and Dorothy P a u l i n agreed t o loan J o n a l Corporation $52,500 on an i d e n t i c a l n o t e secured by t h e remaining undivided one-half i n t e r e s t i n t h a t same r e a l p r o p e r t y . I n l a t e 1971, Winer and Even were c o n t a c t e d by Blum and informed t h e J o n a l Corporation was e x p e r i e n c i n g s e r i o u s f i n a n c i a l difficulty. T h i s began a s e r i e s of n e g o t i a t i o n s which, on February 25, 1972, culminated i n an agreement c a n c e l l i n g t h e promissory n o t e s of 1970 and r e p l a c i n g them w i t h a promissory n o t e i n t h e amount of $137,500. This n o t e r e p r e s e n t e d an o b l i g a t i o n owed by Western S t a t e S a l e s Company t o William K. S t r i c k f a d e n . The n o t e had been a s s i g n e d by S t r i c k f a d e n t o Midwest P a c i f i c Development Company, t h e p a r e n t of J o n a l Corporation a wholly owned s u b s i d i a r y . S e v e r a l days p r i o r t o t h e execution of t h i s new agreement, Striclcfaden f i l e d a s u i t i n f e d e r a l d i s t r i c t c o u r t t o g e t h e r w i t h a n o t i c e of l i s pendens, a g a i n s t J o n a l Corporation, Midwest P a c i f i c Development Company, Blum and Swinford. These documents r e f e r r e d t o t h e same p r o p e r t y a s t h a t d e s c r i b e d i n t h e o r i g i n a l agreement of March 10, 1970, and purported t o r e s t r a i n t h e s a l e o r t r a n s f e r of t h a t p r o p e r t y pending t h e outcome of t h e l i t i g a t i o n . The s u i t was s e t t l e d s e v e r a l months l a t e r by a s t i p u l a t i o n which a l s o t r a n s f e r r e d c o n t r o l of J o n a l Corporation t o S t r i c k f a d e n . O December 1 5 , 1972, Winer and Even and P a u l i n s i s s u e d n a s a t i s f a c t i o n of t h e mortgage s e c u r i n g t h e new agreement i n exchange f o r t h e sum of $100,000. O J u l y 28, 1972, Winer and Even f i l e d i n t h e d i s t r i c t n c o u r t , Yellowstone County, t h i s a c t i o n t o r e c o v e r damages f o r breach of c o n t r a c t and f o r f r a u d and conspiracy. Other forms of r e l i e f were a l s o r e q u e s t e d , among them r e s c i s s i o n , f o r e c l o s u r e of an e q u i t a b l e l i e n and l e g a l mortgage, s p e c i f i c performance and reformation. T r i a l was had on September 17 and 18, 1974, b e f o r e t h e c o u r t s i t t i n g without a j u r y . The c o u r t ' s f i n d i n g s of f a c t and c o n c l u s i o n s o f law supported defendants and denied a l l r e l i e f t o plaintiffs. Judgment was e n t e r e d on October 8 , 1974. Appellants Winer and Even a r e r e s i d e n t s of C a l i f o r n i a , a s a r e respondents Blum, Swinford, Kallman, and t h e P a u l i n s . Respondents S t r i c k f a d e n a r e r e s i d e n t s of Colorado. N conflicts o o f law i s s u e s have been r a i s e d . Appellants c h a l l e n g e c e r t a i n 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 d i s t r i c t c o u r t r e g a r d i n g t h e award of a t t o r n e y f e e s . In paragraph 10 of t h e s u b s t i t u t e d agreement of February 25, 1972, t h i s statement appears: "10. I n t h e event t h a t s u i t i s brought t o e n f o r c e t h i s Agreement o r any p r o v i s i o n t h e r e o f t h e p r e v a i l i n g p a r t y s h a l l r e c e i v e from t h e adverse p a r t y such a t t o r n e y ' s f e e s a s the Court deems reasonable. I1 I n t h e c o n t e x t of t h i s p r o v i s i o n , t h e d i s t r i c t c o u r t found r e a s o n a b l e a t t o r n e y f e e s and expenses i n c u r r e d by t h e s e a t t o r n e y s : Paul Kallman - $3,500; James N. Barber $1,000; Gary Wilcox - $675. - $1,250; Thomas Towe - The d i s t r i c t c o u r t i n i t s f i n d i n g o f f a c t No. 26 found: h hat t h e Defendant Paul Kallman, had he n o t been an a t t o r n e y h i m s e l f , would have had t o employ an a t t o r n e y t o defend him i n t h i s a c t i o n and t h a t he i s e n t i t l e d t o be paid ik 9: 3: even though he a c t e d a s h i s own a t t o r n e y . 11 Appellants f i r s t contend t h a t t h e award of a t t o r n e y f e e s t o respondent Paul Kallman, a l i c e n s e d C a l i f o r n i a a t t o r n e y , and r e p r e s e n t i n g Blum, was improper. They p o i n t o u t t h e g e n e r a l r u l e a s adopted by t h i s Court, t h a t i n t h e absence of c o n t r a c t u a l agreement o r s p e c i f i c s t a t u t o r y a u t h o r i t y , a t t o r n e y f e e s a r e n o t recove r a b l e a s c o s t s by t h e p r e v a i l i n g p a r t y . Nikles v. Barnes, 153 Mont. 113, 454 P.2d 608; S t a l c u p v. Montana T r a i l e r S a l e s & Equipment Co., 146 Mont. 494, 409 P.2d 542; Kintner v. Harr, 146 Mont. 461, 408 P. 2d 487; I n r e ~ i c k c h ' sE s t a t e , 114 Mont. 258, 136 P.2d 223. I t i s suggested by a p p e l l a n t s t h a t t h e i r a c t i o n a g a i n s t respondents Blum and Kallman sounds i n t o r t and n o t i n c o n t r a c t , s i n c e a p p e l l a n t s 1 claims a g a i n s t them were based on a l l e g a t i o n s of f r a u d . This c l a i m c l e a r l y has no m e r i t , n o r i s i t c o n s i s t e n t , e s p e c i a l l y i n view of a p p e l l a n t s ' c o n s i s t e n t r e q u e s t s f o r a t t o r n e y f e e s i n a l l counts of t h e i r pleadings a t t h e t r i a l level. The d i s t r i c t c o u r t ' s f i n d i n g s r e g a r d i n g t h e award of a t t o r n e y f e e s a r e a l s o challenged on grounds t h a t an a t t o r n e y who appears i n p r o p r i a persona may n o t b e awarded h i s own a t t o r n e y fee. I n s u p p o r t of t h i s p o s i t i o n , a p p e l l a n t s c i t e s e v e r a l C a l i f o r n i a cases: O'Connell v. Zimmerman, 157 Cal.App.2d 330, 321 P.2d 161; C i t y of Long Beach v. S t e n , 206 Cal. 473; 274 P. 968; C i t y of Los Angeles v. Hunt, 8 Cal.App.2d 401, 47 P.2d 1075. While t h e s e c a s e s support t h e r u l e f o r which t h e y a r e c i t e d , a p p e l l a n t s n e g l e c t t o comment upon t h e l i n e of c a s e s which stand f o r t h e exact opposite. The b e t t e r r u l e i s t h a t a p a r t y who appears f o r h i m s e l f , and i s himself an a t t o r n e y o r counselor a t law, i s e n t i t l e d t o be awarded t h e same c o s t s a s he would be e n t i t l e d t o had he employed a n o t h e r . The r u l e and s u p p o r t i n g a u t h o r i t y i s reviewed a t 5 Am.& Eng.Annot.Cases 834, and t h e r a t i o n a l e s t a t e d t h e r e i n d e r i v e s from t h e a p p l i c a t i o n of p l a i n common s e n s e : "* * * It can make no d i f f e r e n c e t o t h e d e f e a t e d p a r t y , who i s by law bound t o pay t h e c o s t s of t h e whether t h a t a t t o r n e y of t h e p r e v a i l i n g p a r t y JC a t t o r n e y i s t h e p r e v a i l i n g p a r t y himself o r a n o t h e r a t t o r n e y employed by him. He, l i k e any o t h e r prof e s s i o n a l man, i s paid f o r h i s time and s e r v i c e s , and i f he r e n d e r s them i n t h e management and t r i a l o f h i s own cause i t may amount t o a s much pecuniary l o s s o r damage t o him a s i f he paid a n o t h e r a t t o r n e y f o r doing i t , JC JC" ** * See a l s o 20 Am J u r 2d, Costs 978. The d i s t r i c t c o u r t ' s f i n d i n g No. 26 i s amply supported i n b o t h law and p o l i c y , and was t h e r e f o r e n o t e r r o r . Appellants a l s o a t t a c k t h e d i s t r i c t c o u r t ' s a c t i o n s r e g a r d i n g t h e award of a t t o r n e y f e e s a s b e i n g i n excess of i t s j u r i s d i c t i o n under s e c t i o n 93-2023, R.C.M. 1947, which provides: "It s h a l l b e unlawful f o r any c o u r t w i t h i n t h i s s t a t e t o allow a t t o r n e y s ' f e e s i n any a c t i o n o r proceeding b e f o r e s a i d c o u r t i n which a t t o r n e y s ' f e e s a r e allowed by law t o e i t h e r p a r t y t o such a c t i o n s o r proceeding, when such p a r t y i s r e p r e s e n t e d by anyone o t h e r than a duly admitted o r l i c e n s e d a t t o r n e y a t law. I' T h i s Court f i r s t construed t h e p r o v i s i o n c i t e d above i n 1923. It was h e l d t h a t an a t t o r n e y who has n o t been l i c e n s e d t o p r a c t i c e i n t h e s t a t e of Montana may n o t r e c o v e r a t t o r n e y f e e s , a l t h o u g h d i s t r i c t c o u r t s may s t i l l permit such a t t o r n e y s t o conduct a p a r t i c u l a r case. 301, 213 P. 446. V a i l l v. Northern P a c i f i c Railway Co., 66 Mont. This view h a s been examined and adopted by a number of o t h e r j u r i s d i c t i o n s . See Annot., 1 ALR3d 907. 1 A opposing view has evolved from Brooks v. Volunteer n Harbor No. 4 , 233 Mass. 168, 123 N.E. 511, 4 A.L.R. 1086, wherein i t was h e l d t h a t an a t t o r n e y l i c e n s e d i n one s t a t e may r e c o v e r f o r s e r v i c e s rendered i n a s t a t e i n which he i s n o t d u l y l i c e n s e d , i f he i n i t i a l l y d i s c l o s e s t h a t f a c t t o h i s c l i e n t and f u r t h e r informs him of t h e n e c e s s i t y t o a s s o c i a t e w i t h l o c a l counsel. i s a r u l e whikh, i n a l l f a i r n e s s , we f e e l impelled t o adopt. This W e f i n d t h a t such an i n t e r p r e t a t i o n i s b e t t e r s u i t e d t o t h e modern p r a c t i c e of law and i n t h e i n t e r e s t s of promoting comity between the s t a t e s . Such a r u l e i s p a r t i c u l a r l y a p p r o p r i a t e i n c a s e s such a s t h e i n s t a n t one, where t h e a t t o r n e y i n q u e s t i o n i s a member i n good s t a n d i n g of t h e C a l i f o r n i a Bar. Under t h e s e circumstances, n e i t h e r t h e s p i r i t n o r t h e i n t e n t of s e c t i o n 93-2023, r e g u l a t i n g t h e r i g h t t o p r a c t i c e law i n t h i s s t a t e , has been v i o l a t e d . These s t a t e m e n t s appear i n F r e e l i n g v. Tucker, 49 Idaho 475, 289 P. 85, 86, r e g a r d i n g t h e purpose of s t a t u t e s such a s ~ o n t a n a ' ss e c t i o n 93-2023: "* * * The s t a t u t e s above r e f e r r e d t o governing admission t o the bar i n t h i s s t a t e , requiring a license t o p r a c t i c e law i n t h i s j u r i s d i c t i o n and providing a p l t y f o r v i o l a t i o n of t h e i r p r o v i s i o n s , a r e obviously aimed a t persons who hold themselves out a s q u a l i f i e d t o , o r a c t u a l l y c a r r y on t h e b u s i n e s s of p r a c t i c i n g law i n t h i s j u r i s d i c t i o n without t h e proper c r e d e n t i a l s t o do s o , i n f l a g r a n t d i s r e g a r d of t h e requirements. Respondent h a s n o t offended t h e s p i r i t o r i n t e n t i o n of t h e s e s t a t u t e s , t h e f a c t s of t h i s c a s e showing i t t o be one c a l l i n g f o r t h e a p p l i c a t i o n of t h e r u l e p e r m i t t i n g an a t t o r n e y from a s i s t e r s t a t e , r e g u l a r l y admitted and l i c e n s e d t o p r a c t i c e t h e r e i n , t o make appearance i n t h e c o u r t s of t h i s s t a t e , a s a m a t t e r of comity, i n c i d e n t t o t h e d i s p o s i t i o n o f a p a r t i c u l a r m a t t e r i s o l a t e d from h i s u s u a l p r a c t i c e i n t h e s t a t e of h i s r e s i d e n c e . 11 V a i l l v. Northern P a c i f i c Railway Co., s u p r a , must be overruled. The judgment of t h e d i s t r i c t c o u r t i s a f f i r m e d .

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