Engel v. Wagner ( 1997 )

No. 96-357
IN THE SUPREME COURT OF THE STATE OF MONTANA
1997
JOSEPH C. ENGEL,
Plaintiff, Counterclaim Defendant,
Respondent, and Cross-Appellant,
v.
DARLENE WAGNER, a/k/a DARLENE FRANSSON,
Defendant, Counterclaimant,
and Appellant.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable C. B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Anne Biby and Sean Hinchey;
Bottomly Law Offices; Kalispell, Montana
For Respondent:
James C. Bartlett; Hash, O'Brien
& Bartlett; Kalispell, Montana
Submitted on Briefs: January 16, 1997
Decided: March 25, 1997
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
Pursuant to Section I, Paragraph 3(c), Montana Supreme Court
1995 Internal Operating Rules, the following decision shall not be
cited as precedent and shall be published by its filing as a public
document with the Clerk of the Supreme Court and by a report of its
result to State Reporter Publishing Company and West Publishing
Company.
Joseph C. Engel filed a complaint for a declaratory judgment
in the District Court for the Eleventh Judicial District in
Flathead County. He asked the District Court to decide that he was
not Darlene Wagner's attorney, and that Wagner was not entitled to
any of the settlement proceeds he obtained during a prior lawsuit
against Glacier Log Homes. Wagner counterclaimed and alleged
breach of contract, breach of fiduciary duties, malpractice, and
misrepresentation. Prior to trial, the District Court granted
several of the parties' cross-motions for partial summary judgment.
For Engel, the District Court ruled that, as a matter of law, there
was no attorney-client relationship. Accordingly, it dismissed
Wagner's malpractice and misrepresentation counterclaims. For
Wagner, the District Court ruled that Engel had breached a contract
and his fiduciary duties. After a non-jury trial, the District
Court awarded Wagner damages for Engel's breach of contract.
Wagner appeals and Engel cross-appeals the judgment of the District
Court. We affirm in part, reverse in part, and remand to the
District Court for further proceedings consistent with this
opinion.
On appeal, Wagner raises the following issues:
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1. Did the District Court err when it granted summary
judgment to Engel regarding the attorney-client relationship issue?
2. Did the District Court err when it declined to award
Wagner damages for Engel's breach of fiduciary duties?
3. Did the District Court err when it held that Engel is
entitled to attorney fees and costs from Wagner's share of the
recovery from Glacier Log Homes?
4. Did the District Court err when it held that the
sanctions awarded for discovery abuses in a prior lawsuit against
Glacier Log Homes belong entirely to Engel, the attorney?
5. Did the District Court err when it excluded evidence of
tape-recorded conversations between the parties?
On cross-appeal, Engel raises the following issues:
1. Did the District Court err when it held that Engel
breached a contract?
2. Did the District Court err when it awarded Wagner
prejudgment interest?
3. Did the District Court err when it declined to hold that
Wagner's claim is void because against public policy on the grounds
of champerty and maintenance?
FACTUAL BACKGROUND
Darlene Wagner and William Shrewsbury were engaged in various
joint business enterprises in the Flathead Valley for a period of
time in the 1980s. One of their joint ventures involved the
promotion and sale of log homes manufactured by Glacier Log Homes,
Inc. Shrewsbury and Buck Foster, the owner of Glacier Log Homes,
agreed that Shrewsbury would receive a ten percent commission for
3
the log homes which were sold through his efforts. As a result of
Wagner's contributions, Shrewsbury assigned to her, in writing, the
rights to one-half of the commissions.
A dispute arose between Glacier Log Homes and Shrewsbury with
regard to the commissions. After they unsuccessfully attempted to
collect the commissions owed to them, Wagner and Shrewsbury had a
falling out.
Shrewsbury initiated a lawsuit against Glacier Log Homes.
When Wagner learned of the lawsuit, she contacted Shrewsbury. At
that time, Shrewsbury asked Wagner to locate a new attorney,
because his original attorney had health problems.
In January, 1990, Wagner contacted attorney Joseph Engel. She
met with him and provided him with information about the case.
Ultimately, Engel contacted Shrewsbury and they entered into a
contingency fee retainer agreement. Wagner was not a signatory to
the contingency fee retainer agreement and was not formally made a
party to the lawsuit. Engel advised her that she did not have
standing to be a party to the lawsuit, but that her rights were
adequately protected by the assignment from Shrewsbury.
On July 2, 1991, Shrewsbury, Engel, and Wagner entered into an
agreement which provides that the proceeds of the underlying
lawsuit against Glacier Log Homes are to be split equally between
Shrewsbury and Wagner, after Engel takes out his attorney fees (a
one-third contingency fee) and costs. The contract expressly
states, in relevant part, as follows:
After attorney fees, documented attorney expenses
incurred (such as travel expenses, deposition costs and
witness fees), documented necessary expenses for William
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Shrewsbury and Darlene Wagner, the balance of the
recovery in whatever form shall be split in half. At the
time Mr. Engel receives his fees and expenses, he shall
have authority to pay Darlene Wagner directly her portion
(50%) and William Shrewsbury his portion (50%). Darlene
Wagner will be paid directly by Joseph Engel from the
recovery without the recovery first going to William
Shrewsbury for distribution.
The contract also specifies that Wagner is to receive an additional
$1,500, from Shrewsbury's share, in order to repay her for a
preexisting debt.
Prior to trial, Engel successfully recovered sanctions from
Glacier Log Homes in the amount of $8,700 for discovery abuses.
Trial was scheduled to commence on May 4, 1992. However, shortly
before that date, Shrewsbury refused to travel to Montana to
testify. Therefore, on May 1, 1992, Engel settled the case. The
settlement package included: (1) $1,300 in cash; and (2) a log
home valued at $27,247. Glacier Homes also paid to Engel the
amount previously awarded for sanctions.
After the settlement, Engel received an assignment from
Shrewsbury of all of Shrewsbury's interest in the case. In return,
Engel paid Shrewsbury $5,000. Wagner did not receive any of the
proceeds.
Wagner subsequently learned of the settlement and demanded her
share of the proceeds. However, Wagner and Engel were unable to
negotiate a resolution. As a result, Engel filed a complaint for
a declaratory judgment in which he asked the District Court to
decide that Wagner was not his client and that she was not entitled
to any of the settlement proceeds. Wagner counterclaimed and
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alleged breach of contract, breach of fiduciary duties,
malpractice, and misrepresentation.
Both parties filed cross-motions for partial summary judgment.
The District Court held that as a matter of law there was no
attorney-client relationship. On that basis, the District Court
also dismissed Wagner's malpractice and misrepresentation
counterclaims. Furthermore, the District Court granted summary
judgment on Wagner's behalf with regard to her breach of contract
and breach of fiduciary duties counterclaims.
After a nonjury trial, the District Court awarded Wagner
damages for Engel's breach of contract, but no damages for his
breach of fiduciary duties. When the District Court calculated
Wagner's damages, it determined that the "recovery in whatever form
obtained by [Engell as Shrewsbury's attorney in the Glacier Log
Home case is the sum of $28,547.00 [the log home valued at $27,247
plus the $1,300 cash payment] .'I The District Court specifically
found that because the $8,700 sanctions award had been designated
as attorney fees, it should not be included in the settlement
amount.
As a result, the District Court made the following findings:
12. That pursuant to [Engel's] contingent fee agreement
with Shrewsbury, [Engell is entitled to one-third of the
amount of Shrewsbury's recovery [$28,547.00] which is the
sum of $9,515.00 and costs advanced in the sum of
$1,000.00.
13. That pursuant to the July 2, 1991 agreement between
[Engel], [Wagner] and Shrewsbury, [Engel] is entitled to
first deduct his attorney fee and costs owed by
Shrewsbury in the total amount of $10,515.00 from the
total recovery of $28,547.00 for Shrewsbury from Glacier
Log Homes, resulting in net proceeds of $18,032.00 to be
divided and paid according to the July 2, 1991 agreement.
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14. That [Wagner] is entitled to 50% of said sum, or
$9,016.00, plus the sum of $1,500.00 as provided in said
agreement, for a total of $10,516.00 which should have
been paid by [Engel] to [Wagner] within a reasonable time
after the settlement of the Glacier Log Homes lawsuit
May 1, 1992.
Wagner appeals and Engel cross-appeals the judgment of the
District Court.
STANDARDS OF REVIEW
Rulings on summary judgment are governed by Rule 56(c),
M.R.Civ.P., which provides, in relevant part:
The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment
as a matter of law.
The purpose of summary judgment is to encourage judicial
economy through the elimination of any unnecessary trial; however,
summary judgment is not a substitute for trial if a genuine factual
controversy exists. Reaves v. Reinbold (1980), 189 Mont. 284, 288,
615 P.2d 896, 898
It is well established that the moving party must prove that
it is entitled to a judgment as a matter of law. To do this, it is
required to show a complete absence of any genuine factual issues.
D'Ayostino v. Swanson (lPPO), 240 Mont. 435, 442, 784 P.2d 919,
924. To defeat the motion, the nonmoving party must set forth
facts which demonstrate that a genuine factual issue exists.
O'Bagy v. First Interstate Bank of Missoula (1990), 241 Mont. 44,
46, 785 P.2d 190, 191. All reasonable inferences that may be drawn
from the offered proof must be resolved in favor of the nonmoving
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party. D'Agostino, 240 Mont. at 442, 784 P.2d at 924.
Additionally, if there is any doubt regarding the propriety of the
summary judgment motion, it should be denied. Whitehawk v. Clark
(1989), 238 Mont. 14, 18, 776 P.2d 484, 486-87.
Additionally, this appeal involves issues which were not
resolved by summary judgment rulings. Therefore, it is necessary
to delineate the other applicable standards of review. When we
review a district court's conclusions of law, the standard of
review is whether those conclusions are correct. Carbon County v.
Union Reserve Coal Co. (1995), 271 Mont. 459, 469, 898 P.2d 680,
686. When we review a district court's findings of fact, the
standard of review is whether those findings are clearly erroneous.
Dairies v. Knight (1995), 269 Mont. 320, 324, 888 P.2d 904, 906.
ISSUE 1
Did the District Court err when it granted summary judgment to
Engel regarding the attorney-client relationship issue?
The District Court ruled that, as a matter of law, "[Engel]
was never the attorney for [Wagner] at any point in time." On that
basis, the District Court granted Engel's motion for summary
judgment pertaining to the attorney-client relationship issue.
Wagner, however, contends on appeal that there are genuine
issues of material fact and that, therefore, the District Court
erred when it granted Engel's motion for summary judgment. Wagner
first asserts, as a general proposition, that whether an attorney-
client relationship exists is a question of fact to be decided on
a case-by-case basis. She then delineates the following six
8
factors which she maintains should be considered when making a
determination as to whether an attorney-client relationship exists:
(1) the consulting party's intent to seek legal advice or services;
(2) the fact that the attorney actually gives legal advice; (3) the
existence of a contract between the parties; (4) payment by the
party to the attorney; (5) the receipt or disbursal of confidential
information to or from the person who asserts the existence of the
relationship; and (6) the consulting party's reasonable belief that
she was represented by the attorney.
We agree with Wagner's assertions. Whether an attorney-client
relationship exists in a particular case will necessarily depend on
the facts and circumstances of that case. Furthermore, while
Wagner's six-factor test is not exhaustive, we conclude that it
provides effective guidance in this case.
After a review of the record, we conclude that there are
genuine issues of material fact with regard to each of the
aforementioned six factors. Accordingly, we hold that the District
Court erred when it granted summary judgment on Engel's behalf with
regard to the attorney-client relationship issue.
Furthermore, we conclude that as a result of our holding the
District Court's dismissal of Wagner's malpractice,
misrepresentation, and punitive damages counterclaims must also be
reversed.
ISSUE 2
Did the District Court err when it declined to award Wagner
damages for Engel's breach of fiduciary duties?
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Prior to trial, the District Court granted summary judgment on
Wagner's behalf with regard to her breach of contract and breach of
fiduciary duties counterclaims. After a non-jury trial, however,
the District Court awarded her damages for Engel's breach of
contract, but dismissed her breach of fiduciary duties
counterclaim.
On appeal, Wagner contends that the District Court erred when
it dismissed her counterclaim and failed to award her damages for
Engel's breach of fiduciary duties. Specifically, she asserts that
the District Court arbitrarily and improperly reversed its prior
summary judgment ruling.
The District Court's summary judgment ruling established that
as a matter of law Engel owed Wagner fiduciary duties and that he
had, in fact, breached those duties. The ruling, however, did not
relieve Wagner of her obligation to prove that, as a result of the
breach, she had suffered any legally compensable damages. It is
well established that the "law does not require that for every
injury there must be a recovery of damages, but only imposes
liability for a breach of legal duty by defendant proximately
causing injury to plaintiff." Negaard v. Feda (1968), 152 Mont.
47, 52, 446 P.2d 436, 439-40.
At trial, Wagner had the opportunity to submit evidence and to
prove her damages. At the close of all the evidence, however, the
District Court concluded that she was entitled to damages for
Engel's breach of contract, but that she did not suffer any legally
compensable harm as the result of Engel's breach of fiduciary
10
duties. It was, therefore, proper for the District Court to
dismiss Wagner's breach of fiduciary duties counterclaim.
Accordingly, we hold that the District Court did not err when
it declined to award Wagner damages for Engel's breach of fiduciary
duties and instead dismissed her counterclaim.
ISSUE 3
Did the District Court err when it held that Engel is entitled
to attorney fees and costs from Wagner's share of the recovery from
Glacier Log Homes?
When the District Court calculated and awarded Wagner's
damages, it held that:
[Engel] is entitled to first deduct his attorney fee and
costs owed by Shrewsbury in the total amount of
$10,515.00 from the total recovery of $28,547.00 for
Shrewsbury from Glacier Log Homes, resulting in net
proceeds of $18,032.00 to be divided and paid according
to the July 2, 1991 agreement.
On appeal, Wagner contends that the District Court erred when
it held that Engel is entitled to attorney fees and costs from her
share of the recovery. Specifically, she asserts that when the
District Court allowed Engel to "first deduct his attorney fee and
costs," it expressly contradicted its prior summary judgment ruling
that Engel was not Wagner's attorney.
At the outset, we recognize that Wagner's argument could be
rendered moot if on remand it is established that there was, in
fact, an attorney-client relationship. However, even if it is
subsequently determined that there was not an attorney-client
relationship, we conclude that Engel is still entitled to "first
deduct his attorney fee and costs." The parties' July 2, 1991,
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contract expressly states, in relevant part, as follows: "After
attornev fees, documented attornev exoenses incurred . the
balance of the recovery in whatever form shall be split in half."
(Emphasis added.) Therefore, pursuant to the parties' contract,
Wagner's share of the recovery is to be calculated after Engel's
fees are first deducted.
Accordingly, we hold that the District Court did not err when
it determined that Engel is entitled to attorney fees and costs
from Wagner's share of the recovery from Glacier Log Homes.
ISSUE 4
Did the District Court err when it held that the sanctions
awarded for discovery abuses in a prior lawsuit against Glacier Log
Homes belong entirely to Engel, the attorney?
When the District Court calculated Wagner's damages, it held
that the "recovery in whatever form obtained by [Engel] as
Shrewsbury's attorney in the Glacier Log Home case is the sum of
$28,547.00 [the log home valued at $27,247 plus the $1,300 cash
payment]." The District Court specifically concluded that because
the $8,700 sanctions award against Glacier Log Homes had been
designated as attorney fees, it should not be included in the
amount of "recovery."
On appeal, Wagner contends that the District Court erred when
it determined that the sanctions should not be included in the
amount of "recovery." Specifically, she asserts that the $8,700
award is a part of the "recovery in whatever form" and that,
therefore, it should be distributed accordingly.
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We recognize that, when the District Court awarded sanctions
against Glacier Log Homes in the underlying lawsuit, it did, in
fact, designate them as "attorney fees." However, we conclude that
that fact is not dispositive of this issue and that, despite that
designation, the sanctions award does not belong entirely to the
attorney.
We agree with the reasoning of the D. C. Circuit Court in
Hamilton v. Ford Motor Co. (D. C. Cir. 1980), 636 F.2d 745. In
that case, the court initially recognized that "[ilt is elementary
that an attorney may not seek compensation from the client in
addition to that provided in the contract between the attorney and
the client . . [A]11 compensation . . . [is] to be covered by
the terms of the contract." Hamilton, 636 F.2d at 748 (citing
In re Laughlin (Il. C. Cir. 1959), 265 F.2d 377; Carmichael v. Iowa
State Highway Comm'n (Iowa 1974), 219 N.W.2d 658). Ultimately,
the court held:
[Albsent a provision in the [attorney-client] contract
allocating Rule 37(b) [discovery abuse sanctions] awards
of attorney's fees, the plain terms of the Retainer
Agreement in this case provide that the one-third
contingency fee is the sole source of compensation for
the attorneys.
Hamilton, 636 F.2d at 748.
With regard to the underlying lawsuit against Glacier Log
Homes, Shrewsbury and Engel entered into a retainer agreement.
With regard to Engel's compensation, their agreement stated as
follows:
One-third (33%) of the amount recovered if the case
is settled without the necessity of trial;
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Forty percent (40%) of the amount recovered upon
trial of this case;
Fifty percent (50%) of the amount recovered after a
successful trial verdict and the case is appealed and
upheld on appeal.
Their agreement limits compensation to the attorney to a
percentage of any amount recovered. It does not provide an
exception for amounts recovered as sanctions and designated by the
court as attorney fees. Therefore, pursuant to the principles
delineated in Hamilton, we conclude that Engel's compensation is
limited by the terms of the retainer agreement and, based on the
facts of this case, Shrewsbury (the client), and not Engel (the
attorney), is the proper recipient of the $8,700 sanctions award
after deduction of the appropriate costs and fees.
it necessarily follows that the $8,700 sanctions award paid by
Glacier Homes is a part of Shrewsbury's recovery and therefore, a
part of the settlement package entered into between Engel--on
Shrewsbury's behalf--and Glacier Log Homes. Furthermore, the
July 2, 1991, contract entered into by Wagner, Shrewsbury, and
Engel expressly requires "the dispersement of recovery, whether
from suit, settlement or other compensation." Concomitantly, when
the District Court enforces the terms of the July 2, 1991, contract
and calculates the amount to which Wagner is entitled, it is
required to include the $8,700 sanctions award as part of the
"balance of the recovery in whatever form."
Accordingly, we hold that the District Court erred when it
excluded the sanctions award from the settlement amount which is to
be distributed pursuant to the terms of the parties' July 2, 1991,
contract.
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ISSUE 5
Did the District Court err when it excluded evidence of
tape-recorded conversations between the parties?
When we review a district court's evidentiary ruling, the
standard of review is whether the district court abused its
discretion. Hislop v. Cady (19931, 261 Mont. 243, 247, 862 P.2d
388, 390. The test for abuse of discretion is "whether the trial
court acted arbitrarily without employment of conscientious
judgment or exceeded the bounds of reason resulting in substantial
injustice." Tanner v. Dream Island, Inc. (1996), 275 Mont. 414,
430, 913 P.2d 641, 651. Additionally, we note that questions
relating to the admissibility of evidence are "left to the sound
discretion of the trial court, subject to review only in the case
of manifest abuse." Mason v. Ditzel (1992), 255 Mont. 364, 370-71,
842 P.2d 707, 712.
Prior to trial, Wagner recorded several telephone
conversations between Engel and herself on her answering machine.
She recorded the conversations without Engel's knowledge or
consent. The tapes were transcribed and copies were provided to
Engel during discovery.
At trial, the District Court allowed Wagner to read into the
record a quote taken directly from the tapes "for the purpose of
showing that [Engel] has not told the truth." After counsel for
Wagner read the quote, counsel for Engel moved to strike the quoted
material and stated the following grounds for his objection:
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"Objection. Move to Strike. That's not impeachment. That's
exactly what he said." The District Court granted Engel's motion.
On appeal, Wagner contends that the District Court erred when
it granted Engel's motion to strike. Specifically, she asserts
that the evidence is admissible for impeachment purposes even if it
was illegally obtained. In support of her position, she cites
several federal court decisions which, in the criminal law context,
uphold the admission of illegally obtained evidence for impeachment
purposes. On that basis, she requests that we issue a ruling, at
this time, "that the transcriptions of the taped conversations may
be used for impeachment or other purposes."
Engel, on the other hand, maintains that § l-3-208, MCA, and
the Right of Privacy contained in Montana's Constitution preclude
the admission of illegally obtained evidence.
After a review of the record, however, we conclude that the
District Court's decision to exclude the evidence was not based on
such public policy arguments. Rather, the District Court merely
agreed with counsel for Engel that Wagner's proffered evidence was
not, in fact, offered for impeachment purposes, and did not, in
fact, constitute valid impeachment evidence.
Accordingly, we hold that the District Court did not abuse its
discretion when it granted Engel's motion to strike and excluded
evidence of the tape-recorded telephone conversations.
CROSS-APPEALISSUE 1
Did the District Court err when it held that Engel breached a
contract?
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Engel, Shrewsbury, and Wagner entered into a contract on
July 2, 1991, which described with particularity the manner in
which Engel was to distribute the proceeds of the underlying
lawsuit against Glacier Log Homes. Prior to trial, the District
Court determined that as a matter of law Engel breached that
contract when he failed to compensate Wagner in accordance with its
terms. After trial, the District Court awarded Wagner damages for
Engel's breach of contract.
On cross-appeal, Engel contends that the District Court erred
when it determined that he breached the July 2, 1991, contract. In
essence, he asserts that he filed his complaint for a declaratory
judgment in order to have the District Court determine the
respective rights of the parties, and that until those rights were
fully determined there could not be a breach of contract.
The District Court found that the July 2, 1991, contract
between Engel, Shrewsbury, and Wagner was valid and legally
binding. It further found that, pursuant to the unambiguous terms
of the contract, Wagner is entitled to fifty percent of the net
"recovery in whatever form" against Glacier Log Homes.
Furthermore, it is undisputed that Engel settled the case against
Glacier Log Homes on May 1, 1992; and, as we previously held, that
settlement included a $10,000 cash payment and a log home valued at
approximately $27,000.
The respective rights of the parties have now been established
and the District Court correctly concluded that, pursuant to their
contract, Engel is obligated to disperse to Wagner the money to
which she is entitled. Therefore, whether Engel breached the
17
contract is, at this point in time, irrelevant; either way, Wagner
is entitled, pursuant to the contract, to receive her fifty percent
share of the net recovery against Glacier Log Homes.
Although, as previously stated, the District Court erred when
it calculated the amount of the "recovery in whatever form" and,
concomitantly, the amount of Wagner's damages, we hold that the
District Court did not err when it determined that Engel breached
his contract and that Wagner is entitled to damages. Accordingly,
the judgment of the District Court is affirmed.
CROSS-APPEAL ISSUE 2
Did the District Court err when it awarded Wagner prejudgment
interest?
When the District Court awarded Wagner breach of contract
damages, it also awarded her prejudgment interest at the rate of
ten percent per annum from May 1, 1992--the date on which Engel
settled the case against Glacier Log Homes.
On cross-appeal, Engel contends that the District Court erred
when it awarded Wagner prejudgment interest from May 1, 1992. He
asserts that, if interest is to be awarded at all, it should only
be awarded from February 21, 1996--the date on which the District
Court entered its order.
In Montana, the right to prejudgment interest is governed by
5 27-l-211, MCA, which provides as follows:
Right to Interest. Every person who is entitled to
recover damages certain or capable of being made certain
by calculation and the right to recover which is vested
in him upon a particular day is entitled also to recover
interest thereon from that day except during such time as
the debtor is prevented by law or by the act of the
creditor from paying the debt.
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We have already concluded that Engel's failure to comply with
the terms of the parties' July 2, 1991, agreement constituted a
breach of contract and therefore, that Wagner is entitled to
damages for that breach. Furthermore, it is undisputed that Engel
settled the underlying lawsuit against Glacier Log Homes on May 1,
1992, and therefore, that the breach occurred on that date.
Furthermore, Wagner was entitled to her share of the settlement
proceeds at that time, which was in sum capable of being made
certain. Accordingly, we hold that the District Court did not err
when it awarded Wagner prejudgment interest from May 1, 1992.
CROSS-APPEAL ISSUE 3
Did the District Court err when it declined to hold that
Wagner's claim is void because against public policy on the grounds
of champerty and maintenance?
The District court neither addressed nor analyzed the
champerty or maintenance issues. However, on cross-appeal, Engel
contends that Wagner's entire claim should fail because it is void
as against public policy for champerty and maintenance.
Specifically, he alleges that Wagner, who was not a party to the
underlying lawsuit against Glacier Log Homes: (1) contributed money
to support the lawsuit; (2) is being compensated for her role as a
witness; and (3) is a stranger to the lawsuit.
The definition of maintenance is as follows:
[Mlaintenance involves the act of improperly, for the
purpose of stirring up litigation and strife, encouraging
others either to bring actions or to make defenses that
they have no right to make. In any event, maintenance is
an officious intermeddling in a suit which in no way
belongs to the intermeddler by maintaining or assisting
either party to the action, with money or otherwise, to
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prosecute or defend it. In other words it is the
intermeddling in a suit by a stranger, one having no
privity or concern in the subject matter and standing in
no relation of duty to the suitor.
14 Am. Jur. 2d Champerty and Maintenance 5 2 (1964).
The definition of champerty is as follows:
Champerty is a species of maintenance. It is . . . a
bargain by a champertor with a plaintiff or defendant for
a portion of the matter involved in a suit in case of a
successful termination of the action, which the
champertor undertakes to maintain or carry on at his own
expense.
14 Am. Jur 2d Champerty and Maintenance § 3 (1964).
In Schnabel v. Taft Broadcasting Co., Inc. (MO. App. 1975),
525 S.W. 2d 819, 825, the Missouri Court of Appeals concluded that
the doctrine of champerty "has been narrowed, tempered and mellowed
in modern times." The court went on to hold that "[tlhe doctrine
as now practiced takes out of the rule those who interfere in
litigation in which they have, or honestly believe they have, an
interest." Schnabel, 525 S.W.Zd at 825.
We agree with the Schnabel Court and find its reasoning to be
persuasive. After a review of the record, we conclude that Wagner
had, or at least honestly believed that she had, an interest in
this litigation. For example, prior to the litigation Shrewsbury
assigned to Wagner the rights to one-half of the commissions from
Glacier Log Homes; and the right to those commissions formed the
basis of Shrewsbury's underlying lawsuit against Glacier Log Homes.
Furthermore, Wagner testified that she believed Engel was her
attorney and that the lawsuit was protecting her interests.
Accordingly, we hold that the District Court did not err when it
20
failed to declare Wagner's claim void for champerty and
maintenance.
The judgment of the District Court is hereby reversed in part
and affirmed in part, and the case is remanded for further
proceedings consistent with this opinion.
We Concur:
Justices /
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March 25, 1997
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Sean Hinchey, Esq.
Bottomly Law Offices
P.O. Box 1976
Kalispell, MT 59903-1976
James C. Bartlett, Esq.
Hash, O’Brien & Bartlett
P.O. Box 1178
Kalispell, MT 59903-1178
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA