Shephard v. Widhalm , 367 Mont. 166 ( 2012 )

December 4 2012
DA 12-0140
IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 276ROSLYN SHEPHARD, PERSONAL REPRESENTATIVE
OF THE ESTATE OF PAUL F. WIDHALM; and ROSLYN
SHEPHARD, PERSONAL REPRESENTATIVE OF THE
ESTATE OF EVONNE WIDHALM,
Plaintiff, Appellant, and Cross-Appellee,
v.
ROBERT WIDHALM and DIANNA WIDHALM,
Defendants, Appellees, and Cross-Appellants.
APPEAL FROM: District Court of the Ninth Judicial District,
In and For the County of Pondera, Cause No. DV 09-52
Honorable Laurie McKinnon, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Richard F. Gallagher; Church, Harris, Johnson & Williams, P.C., Great Falls,
Montana
For Appellees:
Kirk D. Evenson and Sara Sexe; Marra, Sexe, Evenson & Bell, P.C., Great
Falls, Montana
Submitted on Briefs: September 19, 2012
Decided: December 4, 2012
Filed:
__________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.
¶1 Roslyn Shephard (“Shephard”) appeals an order from the Ninth Judicial District,
Pondera County, as Personal Representative of the estates of Paul Widhalm (“Paul”) and
Evonne Widhalm (“Evonne”). Robert Widhalm (“Robert”) and Dianna Widhalm
(collectively, “the Widhalms”) cross-appeal. We affirm.
¶2 The following issues are presented for our review:
¶3 Issue One: Whether the District Court correctly determined that the lease executed
on May 11, 2009, was valid without Shephard’s signature as the Personal Representative of
Paul’s estate.
¶4 Issue Two: Whether substantial evidence supports the District Court’s finding that
the Widhalms had not sublet the farm in violation of the lease.
¶5 Issue Three: Whether the District Court correctly determined that the terms of the
lease entitled the Widhalms to notice of their alleged breach and an opportunity to cure.
¶6 Issue Four: Whether the District Court abused its discretion by awarding attorney
fees to the Widhalms on an hourly basis.
¶7 Issue Five: Whether the District Court correctly determined that the Widhalms had
not proven that they suffered damages other than lost crop inputs by a preponderance of the
evidence.
PROCEDURAL AND FACTUAL BACKGROUND
¶8 Paul and Evonne owned a farm in Pondera County as tenants in common worth
$1,652,850. Paul and Evonne each executed a will that left their property first to each other
and then to their eight children. Paul and Evonne leased the farm to their eldest child,
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Robert, and his wife, Dianna, in 1998. Robert had helped Paul farm the land for most of his
adult life.
¶9 The term of the first lease ran from January 1, 1999, through December 31, 2003.
The lease included an option to re-lease the property for an additional five years, an option to
purchase the property for $400,000, and a prohibition against subletting the farm without
prior written permission from Paul and Evonne.
¶10 The Widhalms exercised their option to re-lease the land at the end of the first lease.
The parties executed a second lease on December 31, 2003. This second lease ran through
the end of 2008. The second lease mirrored the first lease in all respects other than the lease
term. The second lease included the same option to re-lease, the same option to purchase,
and the same prohibition against subletting.
¶11 Paul died on September 19, 2008. Evonne renounced her right to be Personal
Representative of Paul’s estate due to health concerns of her own. Roslyn Shephard,
Robert’s sister, was appointed Personal Representative by operation of Paul’s will.
¶12 The Widhalms notified Evonne a little over a month after Paul’s death that they
intended to re-lease the farm for another five-year period starting on January 1, 2009. The
parties failed to execute the third lease, however, until May 11, 2009. Robert delayed asking
his mother to sign the third lease to avoid troubling her with business while she was grieving
about Paul’s death. The third lease included the same option to re-lease, the same option to
purchase, and the same prohibition against subletting. Evonne signed the third lease as the
sole owner and lessor of the property.
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¶13 The Widhalms enlisted the help of their neighbor Kenneth Wheeler (“Wheeler”) in
May of 2009, to seed their crop. Robert went to the local Agricultural Stabilization and
Conservation Service (“ASCS”) office after the crop had been planted. There he attempted
to reconstitute the farm to list Wheeler as the operator of the Widhalm farm. Robert’s
attempt to reconstitute the farm would have entitled Wheeler to receive government
subsidies for the property. The reconstitution did not take effect, however, because Shephard
had not signed the documents as Personal Representative of her parents’ estates.
¶14 Evonne died on June 10, 2009. Shephard also was appointed Personal Representative
of Evonne’s estate. Shephard terminated the Widhalms’ lease on July 22, 2009, without
prior notice, effective immediately. Shephard claimed that the Widhalms incurably had
breached the terms of the lease by subletting the farm to Wheeler without prior written
permission.
¶15 Robert testified that he had tried to reconstitute the farm to ensure that Wheeler would
get paid for helping him seed the land. Shephard interpreted Robert’s efforts to mean that
the Widhalms had sublet the farm to Wheeler. Shephard leased the farm to Wheeler, herself,
on July 29, 2009, one week after Shephard had terminated the Widhalms’ lease. The
Widhalms notified Shephard the next day that they intended to exercise their option under
the lease to purchase the farm for $400,000.
¶16 Shephard sued the Widhalms on August 19, 2009, in her capacity as Personal
Representative of Paul’s and Evonne’s estates. Among other things, Shephard sought to
invalidate the Widhalms’ third lease due to the fact that she had not signed it on Paul’s
behalf. Shephard alternatively sought an order declaring that the Widhalms had breached the
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terms of the lease. The Widhalms counterclaimed. The Widhalms alleged that Shephard had
breached the terms of the lease by wrongfully terminating the lease and by failing to provide
notice to the Widhalms of the alleged breach. The Widhalms sought specific performance of
the lease and they sought separate monetary damages.
¶17 The District Court conducted a four-day bench trial. The court first upheld the
validity of the third lease even though Shephard had not signed it. The court next
determined that Shephard wrongfully had terminated the lease. Evonne owned Paul’s half
interest in the farm immediately upon his death and therefore Evonne had the authority to
lease the entire farm to the Widhalms. The court also found that the Widhalms had not
sublet the property to Wheeler. The court determined, in the alternative, that Shephard’s
termination of the lease would have been wrongful even if the Widhalms had sublet the
property due to Shephard’s failure to notify the Widhalms of the alleged breach and provide
the Widhalms an opportunity to cure the breach as required by the terms of the lease.
¶18 The District Court granted the Widhalms specific performance of the third lease. The
court’s order for specific performance gave the Widhalms the right to lease the property
under the terms of the third lease for the remainder of the lease term, or the right to exercise
their option to purchase the property under the terms of the third lease. The court further
awarded damages for the cost of their 2009 crop inputs. The court also awarded attorney
fees and costs to the Widhalms pursuant to a fee-shifting provision in the lease and pursuant
to the Uniform Declaratory Judgments Act, §§ 27-8-101 et seq., MCA. The court declined,
however, to award the Widhalms damages for lost farm income, auction expenses, lost
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equipment, taxes that they had incurred from selling property, and costs to replace their
cattle.
¶19 The Widhalms submitted an affidavit of attorney fees and costs on June 16, 2011, in
which they claimed that they had incurred attorney fees of $585,966.30 and $12,887.62 in
costs. The court held a hearing on attorney fees on August 8, 2011. Robert testified that he
and his counsel had agreed to a contingent fee arrangement. One of the Widhalms’ counsel
testified that they had used the court’s award of $13,324 for damages and interest, plus the
difference between the $1,652,850 fair market value of the farm and the lease’s $400,000
purchase price in the Widhalms’ option, to calculate attorney fees. Widhalms’ counsel’s
forty-percent share of this $1.2 million plus interest brought the total fee claim to
$585,966.30. The court rejected this amount as unreasonable. The court instead awarded
attorney fees on an hourly basis in the amount of $98,431.
¶20 Shephard appeals the court’s decision to uphold the third lease, the court’s finding
that the Widhalms had not sublet the farm, and the court’s determination that Shephard was
required to notify the Widhalms of their breach and to offer a chance to cure the breach. The
Widhalms cross-appeal the court’s failure to award the full amount of attorney fees that they
sought and the court’s findings that they had not proven damages other than lost crop inputs
by a preponderance of the evidence.
STANDARD OF REVIEW
¶21 We review for clear error a district court’s findings of fact. Karlson v. Rosich, 2006
MT 290, ¶ 7, 334 Mont. 370, 147 P.3d 196. We review for correctness a court’s conclusions
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of law. Karlson, ¶ 7. A finding is clearly erroneous if not supported by substantial evidence,
if the court misapprehended the effect of the evidence, or if we have a definite and firm
conviction that the district court made a mistake. Renner v. Nemitz, 2001 MT 202, ¶ 12, 306
Mont. 292, 33 P.3d 255. We review for an abuse of discretion a district court’s award of
attorney fees. Gullett v. Van Dyke Const. Co., 2005 MT 105, ¶ 12, 327 Mont. 30, 111 P.3d
220.
DISCUSSION
¶22 Issue One: Whether the District Court correctly determined that the lease executed
on May 11, 2009, was valid without Shephard’s signature as the Personal Representative of
Paul’s estate.
¶23 Shephard contends that Evonne lacked authority to lease the real property on her own.
Shephard cites the fact that probate had been opened on Paul’s estate before Evonne had
signed the third lease. Shephard further argues that Paul’s one-half interest in the real
property had not yet been deeded to Evonne. Shephard acknowledges that real property in
Montana devolves to a devisee immediately upon the testator’s death. Section 72-3-101(2),
MCA. She argues, however, that § 72-3-606, MCA, provides an exception to that general
rule.
¶24 Section 72-3-606(1), MCA, grants a personal representative the authority to take
possession or control of devised property when “necessary for purposes of administration.”
This limited right derives from the common law and predates its codification as part of the
Uniform Probate Code in 1974. See Rumney v. Skinner, 64 Mont. 75, 208 P. 895 (1922)
(describing a personal representative’s limited authority to possess estate assets solely for
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purposes of paying the decedent’s debts); In re Est. of Deschamps, 65 Mont. 207, 212 P. 512(1922); In re Armesworthey’s Est., 117 Mont. 602, 160 P.2d 472 (1945) (recognizing a
personal representative’s limited right to control estate property to pay debts of the decedent,
the expenses of administration, or the family allowance). Shephard submits that she had
taken control of the property for purposes of administering the estate by paying Paul’s bills
on his behalf before he died. She further argues that she had taken control of the property by
informing the Widhalms that she was unhappy with their performance under the lease.
Shephard argues that her exercise of control of Paul’s half interest in the property under §
72-3-606, MCA, invalidates Evonne’s signature on the lease.
¶25 This Court long has held that a personal representative possesses only a qualified right
to control property for purposes of administration. Rumney, 64 Mont. at 82, 208 P. at 897.
The statute authorizes the personal representative to assert the right to control property only
when it is necessary for purposes of administration of the estate. Section 72-3-606, MCA.
These necessary purposes include the need to pay creditors’ claims, administration expenses,
or a family allowance. In re Armesworthey’s Est., 117 Mont. at 609, 160 P.2d at 475; In re
Est. of Deschamps, 65 Mont. at 213, 212 P. at 513; Rumney, 64 Mont. at 82, 208 P. at 897.
¶26 A devisee’s title to the property does not depend upon receiving a deed or decree of
distribution. Rather, as § 72-3-101(2) indicates, title to the property vests in the devisee at
the moment of the testator’s death. In re Armesworthey’s Est., 117 Mont. at 609, 160 P.2d at
475; In re Est. of Deschamps, 65 Mont. at 212, 212 P. at 513. A deed of distribution merely
confirms that which already has taken place and releases the property from any conditions to
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which it was subject during probate. In re Armesworthey’s Est., 117 Mont. at 609, 160 P.2d
at 475; In re Est. of Deschamps, 65 Mont. at 213, 212 P. at 513.
¶27 Evonne’s title to Paul’s half interest in the real property vested immediately when he
died. Evonne’s right to use the property as she saw fit, including the right to continue to
lease the farm to the Widhalms, was not impeded because she had not received a deed of
distribution. Nothing in the record suggests that it was necessary for Shephard to take
control of the property for purposes of administering Paul’s estate. Shephard reasonably
may have thought that the Widhalms were not properly performing under the lease.
Shephard could not address that concern under § 72-3-606, MCA, however, in her capacity
as the Personal Representative of Paul’s estate.
¶28 Shephard further justifies her alleged control of the property for purposes of
administration based on her belief that the Widhalms had withheld rent that they owed Paul
and Evonne in the years preceding their deaths. Shephard claims that § 72-3-606, MCA,
authorized her to take control of the property to assert claims against the Widhalms on Paul’s
and Evonne’s behalf. Shephard’s allegations regarding nonpayment of rent have no bearing,
however, on whether the third lease was valid. These asserted claims do not change the fact
that Evonne was the sole owner of the property upon Paul’s death. Evonne subsequently
executed a valid lease with the Widhalms as sole owner of the property.
¶29 Issue Two: Whether substantial evidence supports the District Court’s finding that
the Widhalms had not sublet the farm in violation of the lease.
¶30 Shephard argues that conflicting evidence presented at trial undermines the District
Court’s finding that the Widhalms had not sublet the farm to Wheeler. Shephard points first
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to Robert’s attempt to reconstitute the farm at the ASCS office. Shephard next argues that
Wheeler testified on direct examination that he thought that Robert’s efforts to reconstitute
the farm meant that he was taking over the Widhalms’ lease. More importantly, Shephard
argues that regardless of what the Widhalms and Wheeler intended, the terms of the lease
prohibited the Widhalms’ agreement with Wheeler.
¶31 The District Court specifically considered Robert’s efforts to reconstitute the farm
with the ASCS when it found that he had not sublet the farm to Wheeler. Shephard ignores
Wheeler’s testimony that he never sublet the farm from Robert when directly asked if he had
done so. Robert also testified that he had not sublet the farm to Wheeler. Robert explained
that he had tried to reconstitute the farm to ensure that Wheeler got paid for helping seed his
crops. We will not disturb on appeal the factfinder’s determination of witness credibility.
State v. Thorp, 2010 MT 92, ¶ 24, 356 Mont. 150, 231 P.3d 1096. Likewise, we will not
disturb the weight that the factfinder has assigned to the testimony of each witness. Thorp,
¶ 24. Substantial evidence supports the District Court’s finding that the Widhalms had not
sublet the farm to Wheeler.
¶32 Issue Three: Whether the District Court correctly determined that the terms of the
lease entitled the Widhalms to notice of their alleged breach and an opportunity to cure.
¶33 Shephard next contends that the Widhalms’ inability to cure the breach excused her
from providing the Widhalms notice of their breach and an opportunity to cure as required
by the lease. Shephard premises this argument on a purported finding that the Widhalms had
breached the lease. The District Court specifically found, in fact, that the Widhalms had not
breached the lease through their dealing with Wheeler. Substantial evidence in the record
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supports this finding and also renders moot Shephard’s claim that she had no duty to provide
notice to the Widhalms of their alleged breach and an opportunity to cure the breach.
¶34 Issue Four: Whether the District Court abused its discretion by awarding attorney
fees to the Widhalms on an hourly basis.
¶35 The Widhalms argue that the District Court abused its discretion when it rejected as
unreasonable the full $585,966.30 in attorney fees that they had requested. The amount of an
award for attorney fees falls within the discretion of the District Court. Glaspey v. Workman,
234 Mont. 374, 377, 763 P.2d 666, 668 (1988). A court must base an award of attorney fees
on the unique circumstances of the case and competent evidence. Morning Star Enters. v.
R.H. Grover, Inc., 247 Mont. 105, 114, 805 P.2d 553, 558 (1991). We will disturb a district
court’s attorney fees award only if it acted arbitrarily without conscientious judgment or
exceeded the bounds of reason when it set the award. Glaspey, 234 Mont. at 377, 763 P.2d
at 668.
¶36 The court assessed the reasonableness of the attorney fees claim based on the factors
set forth most recently in Plath v. Schonrock, 2003 MT 21, ¶ 36, 314 Mont. 101, 64 P.3d
984. The court focused on the character and importance of the litigation. The court
characterized the litigation as having revolved around the validity of the lease since its
inception. The case presented no novel or complex legal issues. The litigation established
no new precedent. Most importantly, the court noted that the Widhalms had failed to present
any evidence that an attorney fees award of $585,966.30 was reasonable and customary for
this straight-forward type of claim that had been resolved through a four-day bench trial.
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¶37 The court implicitly declined to reduce the value assigned to the award for specific
performance of the lease so that it could apply the contingent fee agreement to arrive at a
more reasonable amount. The court balked at applying the contingent fee agreement because
the agreement failed to indicate how to value an order for specific performance of the lease.
The Widhalms’ counsel refused to submit a copy of the full contingent fee agreement to the
court. The Widhalms’ counsel testified, however, that the contingent fee agreement did not
specify how to value an award for specific performance of the lease.
¶38 The court instead multiplied the number of hours that the Widhalms’ counsel had
worked on the case by the $200 hourly rate that they usually charge their clients. The court’s
calculations resulted in an attorney fees award of $98,431. The court incorporated its
previous analysis of the reasonableness factors. The court deemed this amount reasonable
based on the nature of the case and the fact that the award related directly to the time and
labor required by counsel. The court’s careful consideration of the nature and complexity of
the litigation and its decision to base the award on the amount of time that the Widhalms’
counsel actually had worked on the case persuades us that it did not abuse its discretion.
¶39 Issue Five: Whether the District Court correctly determined that the Widhalms had
not proven that they suffered damages other than lost crop inputs by a preponderance of the
evidence.
¶40 Lastly, the Widhalms argue on their cross-appeal that the District Court ignored
evidence when it refused to award them compensatory damages other than for lost crop
inputs. The Widhalms claim specifically that the court overlooked evidence regarding
damages for lost farm income and various losses that they incurred from selling different
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assets. The District Court made findings, however, that the Widhalms had not proven those
damages by a preponderance of the evidence. The court determined that the Widhalms had
not presented sufficient evidence regarding replacement values, relevant offsets, the effect of
drought and adverse weather conditions, and the effect of the Widhalms’ precarious financial
situation. The court concluded that an award for the denied damages would have been
speculative based on the evidence presented at trial.
¶41 The court’s findings make it clear that it considered all of the evidence before it
determined that the Widhalms had not satisfied their burden of proving the claimed damages.
We decline to second guess on appeal the District Court’s assessment of the weight to be
afforded to evidence presented at trial. Hallenberg v. Gen. Mills Operations, Inc., 2006 MT
191, ¶ 33, 333 Mont. 143, 141 P.3d 1216.
¶42 Affirmed.
/S/ BRIAN MORRIS
We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ MICHAEL E WHEAT
/S/ JIM RICE
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