Higgins v. Montana Hotel Corp.

• Decision Date: 19 March 1979
• Docket Number: No. 14263,14263
• Citation: 181 Mont. 149,592 P.2d 930,36 St.Rep. 531
• Parties: Eugene HIGGINS et al., Plaintiffs and Respondents, v. The MONTANA HOTEL CORPORATION et al., Defendants and Appellants.
• Court: Montana Supreme Court

Page 930

592 P.2d 930

181 Mont. 149

Eugene HIGGINS et al., Plaintiffs and Respondents, v. The MONTANA HOTEL CORPORATION et al., Defendants and Appellants.

No. 14263.

Supreme Court of Montana.

Submitted Feb. 13, 1979.

Decided March 19, 1979.

McCaffery & Peterson, John L. Peterson (argued), Butte, for defendants and appellants.

Poore, McKenzie, Roth, Robischon & Robinson, James A. Poore (argued), Butte, Michael J. McKeon, Anaconda, for plaintiffs and respondents.

HASWELL, Chief Justice.

This appeal is from a judgment entered in the District Court for Deer Lodge County, on March 20, 1978, in a tax title proceeding. Appellant appeals from the decree quieting title in respondent and respondent asserts that attorney fees should be awarded.

On April 6, 1964, the Montana Hotel Corporation, as owner of the Marcus Daly Hotel in Anaconda, Montana entered a construction contract with Thomas Lutey, doing business as Lutey Construction Company. The contract provided that Lutey Construction Company (Lutey) was to remodel the hotel and build a motel on adjacent lots.

Lutey completed work in 1965 and being unpaid for part of the contract, on October 25 of the same year, filed a mechanic's lien against the hotel and motel properties. Other contractors were in the same position and also filed liens.

In a foreclosure action commenced by the other contractors on April 19, 1967, Lutey, the Montana Hotel Corporation and others were named as defendants. Lutey cross-complained and his lien, in the amount of $56,070 was foreclosed by a default judgment entered on March 2, 1977. The judgment recited that Lutey had a "first valid and subsisting lien upon the interest of the Montana Hotel Corporation."

Meanwhile, Montana Hotel had leased the property upon which the motel was to be built from Torgerson Brothers, Inc. with the understanding that it would be built. The motel was built but the corporation did not pay its property taxes for 1967, 1968, 1969, 1971, 1972 or 1974 and the property was struck off to Deer Lodge County in the amounts assessed.

On January 27, 1976, Eugene Higgins, a respondent in this action, paid the taxes, received a certificate of tax assignment on the hotel property, and published notice of intent to apply for a tax deed to that property. On May 12, 1976, Montana Hotel Corporation assigned its leasehold interest in the motel property to Higgins. On May 27, 1976, Higgins paid the back taxes, penalties and interest accrued which pertained to the buildings and improvements on the motel property. The county treasurer considered the motel building and improvements to be personal property and did not issue a certificate of tax assignment.

On February 11, 1977, Higgins entered into a contract with Marouf Carpenter, a respondent in this action, whereby Carpenter obtained an option to purchase the motel property. The contract provided that Carpenter would not have to purchase until satisfied that Higgins' leasehold could be transferred free and clear of all liens and encumbrances. Carpenter began operation of the motel on February 15, 1977 and at the time of trial was still running the Marcus Daly Motel.

Between April 6, 1977 and August 11, 1977, Higgins and Carpenter made expenditures totaling $33,840.66 which, for purposes of this decision, will be assumed to be expenses incurred in maintaining and improving the motel property.

On August 18, 1977, Higgins filed his complaint in two counts seeking to quiet title in the hotel property (Count I) and to procure a tax deed to and quiet title in the motel property (Count II). A show cause hearing was subsequently held and the court ordered that a payment of $56,756.32 was necessary to redeem the motel buildings and improvements. Lutey deposited this amount with the clerk of court on October 6, 1977 and filed his answer to the complaint. He asserted that he was, by the filing of his mechanic's lien and the foreclosure thereon which has remained unsatisfied, a lienholder and therefor a proper redemptioner. Lutey did not assert an interest in the hotel property.

The trial court adopted Higgins' findings of fact and conclusions of law. Count I of the action is not included in this appeal. With regard to Count II, the District Court held that Higgins was entitled to a certificate of tax assignment under section 84-4138, R.C.M.1947, now section 15-17-303 MCA, and that because of laches, Lutey was estopped from redeeming the property. The court ordered that Lutey's deposit be returned to him and that a tax deed to the motel buildings and improvements be issued to Higgins. Although the complaint prayed for attorney fees, no evidence was produced at trial upon which to base an award and none were awarded.

The following issues are raised on appeal:

(1) Whether laches will apply to bar a redemptioner in an action to procure a tax deed.

(2) Whether in an action to procure a tax deed a redemptioner must reimburse the plaintiff for improvement and maintenance expenses incurred in addition to the taxes, penalties and interest paid by the plaintiff.

(3) Whether attorney fees are available when the issue is pleaded but not raised at trial or made part of the trial court's judgment.

Under Montana law, when property taxes are not paid, the property is sold at a tax sale pursuant to the procedure set forth in section 84-4117 et seq., R.C.M.1947, now section 15-17-101 et seq. MCA. When there is no purchaser at the sale, the property is sold or struck off to the county for the amount of tax due. Section 84-4124, R.C.M.1947, now section 15-17-207 MCA.

After this has occurred the county may assign its interest to anyone who pays the taxes due on the property plus penalties, costs and interests. It then issues the assignee a certificate of tax assignment. Section 84-4138, R.C.M.1947, now section 15-17-303 MCA. In this case no certificate was issued but it was agreed by the parties that Higgins, upon his payment of the amounts due was entitled to one and we shall proceed as if it had in fact been issued. The assignee does not have title to the property; rather he has an inchoate right which can ripen into a title which is free from all encumbrances. Johnson v. Silverbow County (1968), 151 Mont. 283, 287, 443 P.2d 6; Jensen Livestock Co. v. Custer County (1942), 113 Mont. 285, 295, 124 P.2d 1013.

Title to the property in the form of a tax deed may be obtained in either of two ways. The purchaser or his assignee may employ the statutory method as outlined in section 84-4151 et seq., R.C.M.1947, now section 15-18-202 MCA, whereby notice of the intention to procure a tax deed must be given to all potential redemptioners. The second method is to bring a civil action in the county where the property is located. Section 84-4162 et seq., R.C.M.1947, now section 15-18-301 et seq. MCA. Respondents used the judicial method and the code sections pertinent thereto to govern our decision.

In judicial proceedings to procure a tax deed all parties who have a recorded interest in the property are to be made defendants. Section 84-4163 et...