Kenyon-Noble Lumber Co. v. Dependant Foundations, Inc.

Justice Beth Baker delivered the Opinion of the Court.

APPEAL FROM: District Court of the Eighteenth Judicial District, In and For the County of Gallatin, Cause No. DV-14-199C Honorable John C. Brown, Presiding Judge COUNSEL OF RECORD: For Appellant: Jessica Penkal Hodges, Hodges Law Group PLLC, Bozeman, Montana Amanda R. Knuteson, Knuteson Law PLLC, Bozeman, Montana For Appellee: Matthew A. Dodd, Dodd Law Firm, P.C., Bozeman, Montana Roger James Dodd, Dodd and Burnham, P.C., Valdosta, Georgia Filed: /s/_________
Clerk Justice Beth Baker delivered the Opinion of the Court. ¶1 Kenyon-Noble Lumber Company ("Kenyon Noble") appeals an order of the Eighteenth Judicial District Court, Gallatin County, holding that Kenyon Noble had breached its contract with Dependant Foundations, Inc. ("DF Inc.") by allowing a former authorized agent to charge on DF Inc.'s credit account after DF Inc. notified Kenyon Noble that it had ceased operations. The court awarded DF Inc. attorney fees. Kenyon Noble argues that because it lacked notice of the agent's termination, it could not have breached the contract. Kenyon Noble also contests the award of attorney fees. We affirm and award the Defendants their attorney fees for this appeal.

¶2 Mark Markovich founded DF Inc. in Michigan. In 2007, Mark formed Dependant Foundations, LLC ("DF LLC") in Montana. At that time, Mark continued to operate DF Inc. in Michigan, and Shawn Karczewski operated DF LLC in Montana. Mark's son, Marco Markovich, worked for DF LLC. ¶3 Kenyon Noble operates a building supply store. It allows customers to establish credit accounts to purchase building materials and concrete on a credit basis. Kenyon Noble requires an individual personally to guarantee payment for the debts of companies that hold credit accounts. In 2007, DF LLC entered into a credit agreement with Kenyon Noble that allowed DF LLC to purchase building materials and concrete on credit. The contract included Mark's signed personal guaranty for the debts incurred. Inc.'s revocation of Marco's authority was valid pursuant to § 28-10-802(1), MCA, and the court ruled in favor of Mark and DF Inc. on their counterclaim for breach of contract. The court ruled against Mark and DF Inc. on their remaining counterclaims. It awarded Mark and DF Inc. attorney fees and costs as the prevailing parties.

¶10 On appeal from a bench trial, we review the district court's findings of fact for clear error. Roland v. Davis, 2013 MT 148, ¶ 21, 370 Mont. 327, 302 P.3d 91. Clear error exists if there is not substantial evidence to support the findings of fact, if the district court misapprehended the evidence, or if we have a definite and firm conviction that the district court made a mistake. Roland, ¶ 21. We review a district court's conclusions of law for correctness. Roland, ¶ 21. ¶11 If legal authority exists to award attorney fees, we review a district court's decision to grant or deny fees for abuse of discretion. James Talcott Const. Inc. v. P&D Land Enters., 2006 MT 188, ¶ 27, 333 Mont. 107, 141 P.3d 1200. We review for abuse of discretion a district court's prevailing party determination. Wohl v. City of Missoula, 2014 MT 310, ¶ 12, 377 Mont. 148, 339 P.3d 58.

¶12 1. Did the District Court err when it determined that DF Inc. was entitled to a presumption that Kenyon Noble received its letter terminating Marco's authority? ¶13 Section 26-1-602(24), MCA, establishes a disputable presumption that "[a] letter duly directed and mailed was received in the regular course of the mail." Direct evidence of actual mailing of the letter is not required for the presumption to arise. Crissey v. State Highway Comm'n, 147 Mont. 374, 378-79, 413 P.2d 308, 312 (1966). It is enough that § 28-3-704(1), MCA, this contractual right to attorney fees is reciprocal. The effect of the statute in this case is to give a reciprocal right to attorney fees to Mark and DF Inc. ¶22 Kenyon Noble argues that the District Court abused its discretion when it determined that Mark and DF Inc. were prevailing parties entitled to attorney fees because they did not prevail on four of their five counterclaims. Kenyon Noble maintains that even if Mark and DF Inc. were prevailing parties, the court abused its discretion in awarding $375 an hour for Roger Dodd's services.

¶23 Kenyon Noble contends that because Mark and DF Inc. prevailed on only one of their five counterclaims, they should not be considered prevailing parties. Kenyon Noble argues further that Mark and DF Inc.'s fee award should be denied because they failed to segregate the time spent on the breach of contract claim from the other four counterclaims. ¶24 No one factor is conclusive in determining the prevailing party for the purpose of awarding attorney fees. See Doig v. Cascaddan, 282 Mont. 105, 112, 935 P.3d 268, 272 (1997). In a situation involving a contractual award of attorney fees, when a defendant counterclaims and succeeds in having the plaintiff's claims totally denied but recovers only a portion of the relief demanded in the counterclaims, the defendant is entitled to attorney fees and costs. Schmidt v. Colonial Terrace Assocs., 215 Mont. 62, 69-70, 694 P.2d 1340, 1345 (1985). Generally, the party receiving a net benefit from the judgment is the prevailing party. Rod & Rifle Inn v. Giltrap, 273 Mont. 232, 235, 902 P.3d 38, 40 (1995) (citing Schmidt, 215 Mont. at 69, 694 P.2d at 1345). unsuccessful counterclaims. The District Court removed additional claimed fees solely related to time spent on a motion related to unsuccessful counterclaims. The court did not abuse its discretion in ruling that the remaining fees and costs were inextricably intertwined because the breach of contract counterclaim was based on the same facts and witnesses as the unsuccessful counterclaims. Pursuant to the credit agreement, the prevailing party was entitled to attorney fees and costs. ¶28 When an entitlement to costs and attorney fees arises from contract, that entitlement includes costs and attorney fees on appeal. Gibson v. Paramount Homes, 2011 MT 112, ¶ 21, 360 Mont. 421, 252 P.3d 903. Mark and DF Inc. are the prevailing parties on appeal. They prevailed on the attorney fee issue, and they prevailed against Kenyon Noble's argument that it did not receive notice terminating Marco's authority or the account. Therefore, Mark and DF Inc. are entitled to attorney fees in connection with this appeal.

¶29 Mark and DF Inc. were represented at trial by Matthew Dodd and Roger Dodd. Matthew claimed a range from $150 to $215 per hour, and the more experienced Roger claimed a rate of $500 per hour. After considering Kenyon Noble's objection, the District Court reduced Roger's hourly rate to $375. Kenyon Noble argues that the District Court's reduction is unreasonable because it exceeds the prevailing rate for attorneys in "straightforward commercial contract disputes" in Montana. Kenyon Noble argues that Roger's rate should be reduced to no more than $250 per hour. Kenyon Noble relies on Blum v. Stenson, 465 U.S. 886, 895, 104 S. Ct. 1541, 1547 (1984), to argue that the defendants had the burden of producing evidence that the requested rate represents that the importance of the litigation to Mark and DF Inc. justified the number of hours billed. And even though Kenyon Noble described the litigation as "a routine collection matter," it was of significant importance to the parties, as the litigation impacted "not only [Mark's] sense of self but his relationships with his wife and his grown son." The court reasoned that the nature of the legal issues did not diminish "the professional skill and experience" necessary for Mark and DF Inc. to prevail at trial. The court emphasized that Kenyon Noble's expert conceded that "[g]iven the complexity of the matter," it was "prudent to have a second chair available in the Courtroom during trial." The court emphasized Roger's high standing in the profession, his forty-plus years of experience as a trial lawyer, and that he has lectured and taught nationwide and internationally for decades. The court also recognized that even though Mark and DF Inc. did not prevail on all of their counterclaims, they prevailed on what the parties agree was the most significant issue in dispute. Comparing Roger's claimed hourly rate to other recent attorney fee awards and the rates charged by highly skilled attorneys in the Bozeman community, the District Court concluded that $375 per hour for Roger's time billed was reasonable. ¶32 After a review of the full record, we conclude that Kenyon Noble has not shown the District Court's award to be arbitrary, without the employment of conscientious judgment, or in excess of the bounds of reason under the circumstances. The District Court did not abuse its discretion when it limited Roger's hourly rate to $375 per hour.

¶33 We affirm the District Court's judgment in favor of Mark Markovich and DF Inc. The case is remanded for the District Court to determine reasonable attorney fees to the Defendants in connection with this appeal.

/S/ BETH BAKER We Concur: /S/ MIKE McGRATH
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
/S/ DIRK M. SANDEFUR