Houden v. Todd

• Decision Date: 29 April 2014
• Docket Number: No. DA 13–0311.,DA 13–0311.
• Citation: 375 Mont. 1,324 P.3d 1157
• Court: Montana Supreme Court
• Parties: Christopher A. HOUDEN and Jeffrey Houden, Plaintiffs and Appellees, v. Wayne S. TODD, Defendant and Appellant.

375 Mont. 1

324 P.3d 1157

Christopher A. HOUDEN and Jeffrey Houden, Plaintiffs and Appellees,

v.Wayne S. TODD, Defendant and Appellant.

No. DA 13–0311.

Supreme Court of Montana.

Submitted on Briefs Feb. 26, 2014.

Decided April 29, 2014.

For Appellant: John C. Doubek; Doubek, Pyfer & Fox, LLP; Helena, Montana.

For Appellees: Robert K. Baldwin; Spencer C. Thomas; Goetz, Baldwin & Geddes, P.C.; Bozeman, Montana.

Justice BETH BAKER delivered the Opinion of the Court.

¶ 1 Wayne Todd appeals the final judgment of the Twenty–Second Judicial District Court, Carbon County, finding in favor of Christopher and Jeffrey Houden (Houdens) and awarding attorneys' fees.

¶ 2 We address the following issues on appeal:

¶ 3 1. Whether the District Court erred in its entry of judgment in favor of the Houdens.

¶ 4 2. Whether the adoption of the Restated Covenants mooted the Houdens' claim for attorneys' fees and costs.

¶ 5 3. Whether the District Court abused its discretion in awarding the Houdens attorneys' fees and costs in the amount of $371,513.03.

¶ 6 We affirm the court's entry of judgment in favor of the Houdens. We affirm the award of attorneys' fees but reverse the amount of the fee award and remand for recalculation.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 7 This case arises from a dispute between property owners in Canyon Ranches, a subdivision developed by the Houdens in Carbon County, Montana. Canyon Ranches consists of twenty-six lots. On June 4, 2002, prior to selling any of the lots, the Houdens recorded a “Declaration of Covenants, Conditions, Restrictions and Reciprocal Easements for Canyon Ranches Subdivision” (the Original Covenants). The Houdens incorporated “Canyon Ranches Subdivision Homeowners' Association” (HOA) on June 11, 2002, in part to enforce the Original Covenants on all properties within Canyon Ranches.

¶ 8 The Original Covenants prohibited further subdivision of lots “[e]xcept for ... division of Lots containing twenty (20) or more acres....” This provision of the Original Covenants, referred to as the No Standing Provision, added, “[n]either the Association, nor any Owner, shall have standing to oppose the further division of any Lot containing twenty (20) or more acres as of the effective date of this Declaration, provided such division is proposed in accordance with all then-applicable statutes, ordinances, regulations, rules and orders of governmental entities with applicable jurisdiction....” The Houdens sold twenty-four lots, including Lot One to Todd. Only Lot Twenty–Six—retained by the Houdens—exceeded twenty acres.

¶ 9 The Original Covenants allowed for amendment of the covenants when at least seventy-five percent of the lot owners voted for an amendment. In December 2007, twenty-three lot owners voted to record an amendment to the Original Covenants, referred to as the Second Amendment.¹ The Second Amendment prohibited division of lots in excess of twenty acres absent approval of seventy-five percent of the lot owners. It also reversed the No Standing Provision, granting the HOA or any owner the right to oppose further subdivision of any lot.

¶ 10 On January 3, 2008, the Houdens filed a complaint against the lot owners (collectively referred to as Defendants) who voted for the Second Amendment. The complaint alleged that the changes imposed by the Second Amendment were invalid and “in contravention of the settled rights and expectations of the parties.” The Houdens sought injunctive relief to declare the Second Amendment invalid. They also asked for attorneys' fees pursuant to a provision in the Original Covenants. That provision allows a prevailing party to recover costs and reasonable attorneys' fees in any action to “enforce, enjoin any violation of, or to construe the provisions of [the Original Covenants].”

¶ 11 An extensive litigation process ensued. Defendants removed the action to federal court. Because there was not complete diversity of citizenship, the federal court later remanded the action to the District Court. The Defendants brought counterclaims against the Houdens and both parties filed motions. At Todd's suggestion and by agreement of the parties, the District Court appointed a Special Master to review the pending motions and make recommendations to the court.

¶ 12 On August 9, 2009, the Special Master recommended that the District Court grant the Houdens' summary judgment motion and invalidate the Second Amendment. Observing that the issue was one of first impression in Montana, the master adopted the view of jurisdictions holding that an amendment—even one validly adopted—may not take away the settled rights and expectations of the parties under a contract. Because the Original Covenants gave the Houdens a reasonable expectation that they could subdivide their twenty-plus acre parcel, the Second Amendment could not be applied to deprive them of a settled right that existed as part of the expectation of their ownership of the property. The District Court adopted the master's findings and recommendations in whole on December 14, 2009.

¶ 13 Unbeknownst to the court, before its adoption of the master's findings and recommendations, the lot owners passed another amendment (Third Amendment) to the Original Covenants. The Third Amendment purported to revoke the Second Amendment by reinstating the right of the Houdens to subdivide Lot Twenty–Six as allowed by the Original Covenants. It retained, however, the elimination of the No Standing Provision, allowing lot owners to oppose the division of Lot Twenty–Six in the subdivision review process.

¶ 14 Following the court's adoption of the master's findings and recommendations, Defendants filed a motion requesting clarification of the court's order. Defendants argued that nothing in the order precluded the Third Amendment's elimination of the No Standing Provision. At the direction of the District Court, the Special Master addressed Defendants' motion. On April 30, 2010, the Special Master concluded that the elimination of the No Standing Provision was invalid whether it was a part of another amendment or a separately adopted amendment. The court adopted the master's recommendation on this issue in an order dated July 21, 2010.

¶ 15 In September 2010, the Houdens and all Defendants except Todd reached a settlement. Pursuant to the terms of the Settlement Agreement, each of the settling parties agreed to pay the Houdens $7500 and to sign “Amended and Restated Covenants” (Restated Covenants). The Restated Covenants expressly prohibit amendment to deprive the Houdens of their right to subdivide Lot Twenty–Six. After the filing of the Restated Covenants on September 17, 2010, the Original Covenants, including the Second and Third Amendments, were superseded. The Settlement Agreement reserved the Houdens' right to litigate any claims against lot owners not party to the settlement.

¶ 16 On February 22, 2011, the District Court entered partial judgment in favor of the Houdens and against Todd, declaring the Second and Third Amendments null, void and unenforceable. The court also ruled against Todd on his counterclaims.

¶ 17 On August 24, 2012, the District Court ordered that the Houdens were entitled to attorneys' fees under the Original Covenants as the prevailing party in the action. After holding a hearing, the Court awarded the Houdens attorneys' fees and costs in the amount of $371,513.03. In its twenty-eight page order, including fifty findings of fact and fifty-six conclusions of law, the court recounted the extensive collateral issues that Todd raised in the case; it faulted him for complicating the litigation with unsubstantiated counterclaims and an unreasonable removal to federal court. After consideration of these factors, the court concluded that the Houdens' requested attorneys' fees were reasonable. The amount awarded reflected a deduction of amounts already paid in the settlement and the attorneys' fee award by the U.S. District Court. It included fees for work on the fee award and fees that the federal court declined to award for the removal proceeding.

¶ 18 Todd appeals: the final judgment entered on April 15, 2013; the findings of fact, conclusions of law and order regarding the award of costs and attorneys' fees entered on April 10, 2013; and all orders resulting in the final judgment in favor of the Houdens and against Todd.

STANDARD OF REVIEW

¶ 19 We review a district court's grant of summary judgment de novo. Chipman v. N.W. Healthcare Corp., 2014 MT 15, ¶ 11, 373 Mont. 360, 317 P.3d 182. Whether a party is entitled to recover attorneys' fees is a question of law. Chase v. Bearpaw Ranch Assn., 2006 MT 67, ¶ 14, 331 Mont. 421, 133 P.3d 190. “We review a district court's conclusions of law pertaining to the recovery of attorney fees to determine whether those conclusions are correct.” Chase, ¶ 14 (internal citation omitted).

¶ 20 An award of attorneys' fees is reviewed for an abuse of discretion. Chase, ¶ 15. “A court abuses its discretion if it acts arbitrarily without employment of conscientious judgment or exceeds the bounds of reason resulting in substantial injustice.” Chase, ¶ 15.

DISCUSSION

¶ 21 1. Whether the District Court erred in its entry of judgment in favor of the Houdens.

¶ 22 Todd contends that the District Court erred in declaring the Second and Third Amendments null, void and unenforceable. He argues that their adoption was consistent with the broad amendment provisions of the Original Covenants. The Houdens respond that the adoption of the Restated Covenants renders Todd's arguments moot. Although Todd was not a party to the Settlement Agreement, the Restated Covenants run with the land and apply to Todd. Even if Todd's argument regarding the Second and Third Amendment is correct, the Houdens maintain the Amendments can no longer be enforced because the Restated Covenants have superseded them.

¶ 23 Todd does not dispute that the Restated Covenants have resolved the dispute regarding...