Benintendi v. Hein , DA 11–0234.

• Docket Nº: No. DA 11–0234.
• Citation: 2011 MT 298, 265 P.3d 1239, 363 Mont. 32
• Case Date: November 29, 2011
• Court: United States State Supreme Court of Montana

2011 MT 298
265 P.3d 1239
363 Mont. 32

Julia BENINTENDI, Joey Perkerewicz, and Sarah Perkerewicz, f/k/a Sarah Bushnell, Plaintiffs and Appellants,
v.
Jesse HEIN and Tera Hein, Defendants and Appellees.

No. DA 11–0234.

Supreme Court of Montana.

Submitted on Briefs Nov. 2, 2011.Decided Nov. 29, 2011.

[265 P.3d 1240]

For Appellant: W. Scott Green, Patten, Peterman, Bekkedahl & Green, PLLC, Billings, Montana.

For Appellee: Jack E. Sands, Attorney at Law, Billings, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

[363 Mont. 33] ¶ 1 Jesse and Tera Hein rented a house from Julia Benintendi and Joey and Sarah Perkerewicz (hereinafter B & P). B & P alleged the Heins caused considerable damage to the property when they vacated the premises. The Heins countered that B & P unlawfully retained their security deposit and refused to reimburse the Heins for home and lawn improvements. B & P sued and obtained

[265 P.3d 1241]

a default judgment. Subsequently, the District Court set aside the default judgment and held a jury trial. B & P were awarded damages but not attorney fees or costs. They appeal. We affirm in part and reverse and remand in part.

ISSUES

¶ 2 A restatement of the issues on appeal is:

¶ 3 Did the District Court err in denying B & P's request for attorney fees?

¶ 4 Did the District Court err in not awarding costs?

¶ 5 Did the District Court abuse its discretion in setting aside the default judgment?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 6 On June 30, 2006, the Heins rented a house from B & P. With an extension of the rental agreement, the Heins were authorized to occupy the property until July, 1, 2008. The Heins vacated on March 31, 2008. B & P alleged the Heins caused considerable damage to the property. As a result they retained the $1,100 security deposit. The [363 Mont. 34] Heins countered that B & P's retention of their security deposit was unlawful and that B & P refused to reimburse the Heins for approximately $3,000 in home and lawn improvements. When agreement between the parties could not be reached, B & P filed a Complaint on April 1, 2009. Jesse was served with the Complaint on August 24, 2009, and Tera was served on August 26, 2009.

¶ 7 Jeff Walters, a non-lawyer family friend of the Heins, contacted Toby Alback, B & P's attorney, shortly after the Heins were served to see if a settlement could be reached. Alback assured Walters that he would not seek a default judgment while settlement negotiations were underway, and therefore the Heins did not yet need to hire an attorney to prepare and file their answer. Several weeks went by during which Walters tried to contact Alback on several occasions and Alback did not return his calls.

¶ 8 On October 16, 2009, Alback moved for default against the Heins. Alback did not serve the Heins with his affidavit or his request for default. The Clerk of Court entered a default for failure of either Tera or Jesse to appear or answer the Complaint. On October 23, Attorney Green filed a Notice of Appearance as new counsel for B & P and on October 28, Green filed an Application for Entry of Default Judgment. The Heins were not served with the Notice of Appearance or the Application for Entry of Default Judgment.

¶ 9 Subsequently, the Heins received notice of a hearing set for November 6, 2009, to establish damages on default. On November 2, Tera, acting pro se, sought a continuance of the hearing because Jesse was in the veteran's hospital in South Dakota. However, also on November 2 and before the November 6 hearing, the District Court, unaware of Tera's Motion for Continuance, issued Default Judgment against the Heins and awarded the sum of $10,907.40 to B & P, which included attorney fees and costs. The court did not serve the Default Judgment on the Heins and the November 6 hearing was not held.

¶ 10 B & P filed several writs of execution—one was served on January 6, 2010, upon Tera's employer, a company owned by Tera's parents. On April 11 and 12, 2010, the Heins were served with subpoenas to appear and testify concerning property and to produce property documents. The Heins engaged Attorney Sands who made an appearance for them on April 30, 2010, filing a motion to set aside the default judgment.

¶ 11 At some time between the dates Tera's parents received a writ of execution and the Heins moved to set aside the default, the Heins paid $1,465.96 to B & P toward the default judgment award. After the default judgment was set aside, Heins attempted to recover these [363 Mont. 35] funds but B & P did not reimburse the funds prior to trial.

¶ 12 Over B & P's objection and following a hearing, the District Court set aside the default judgment on July 6, 2010. The Heins filed their Answer and Counterclaim with request for jury trial on July 29, 2010. The trial was held on January 18 and 19, 2011. B

[265 P.3d 1242]

& P were awarded damages totaling $2,281.19.

¶ 13 Both parties raised the issue of attorney fees and costs in their pretrial briefs. The attorneys filed their bills of costs within five days of the verdict. B & P sought $20,680 in attorney fees and $1,148.19 in costs. Heins sought $5,000 in attorney fees and $763.72 in costs. Both parties claimed to be the “prevailing party” per the language of the rental agreement clause authorizing fees and costs. The court held a hearing on fees and costs on February 28, 2011. On March 22, 2011, the court issued its Order and Memorandum.

¶ 14 The District Court reviewed the “attorney fee” clause in the rental agreement and concluded it applied to eviction proceedings only and therefore was not applicable to the dispute before the court. Accordingly, it ruled that an award of attorney fees was not “specifically authorized” under the rental agreement. The court then considered its discretion to award attorney fees and concluded “[g]iven the totality of the circumstances in this case” awarding fees and costs to either party was inappropriate.

¶ 15 The District Court entered judgment on March 22, 2011, against B & P for $1,465.96 (the amount collected from the Heins before default judgment was set aside), and judgment against the Heins for the verdict amount of $2,281.19. Because B & P was holding the Heins' security deposit of $1,100 and had already collected $1,465.96 from the Heins earlier, the court ordered B & P to pay the Heins $284.77. B & P appeal.

STANDARD OF REVIEW

¶ 16 We review for correctness a district court's decision as to whether legal authority exists to award attorney fees. We review for an abuse of discretion a district court's order granting or denying attorney fees if legal authority exists for the fees. Hughes v. Ahlgren, 2011 MT 189, ¶ 10, 361 Mont. 319, 258 P.3d 439. We also review a district court's denial of costs for an abuse of discretion. Hansen v. Granite Co., 2010 MT 107, ¶ 55, 356 Mont. 269, 232 P.3d 409. An abuse of discretion occurs when the court acts arbitrarily without conscientious judgment or exceeds the bounds of reason. Harmon v. Fiscus Realty, Inc., 2011 MT 232, ¶ 7, 362 Mont. 135, 261 P.3d 1031.

[363 Mont. 36] ¶ 17 When a trial court grants a motion to set aside a default judgment, the court's ruling will be set aside only upon a showing of manifest abuse of discretion. Hoff v. Lake Co. Abstract & Title Co., 2011 MT 118, ¶ 18, 360 Mont. 461, 255 P.3d 137 ( citing Engelsberger v. Lake Co., 2007 MT 211, ¶ 8, 339 Mont. 22, 167 P.3d 902.). A manifest abuse of discretion is one that is “obvious, evident,...