Kelly Inn No. 102, Inc. v. Kapnison

Decision Date07 January 1992
Docket NumberNos. 19021,19443,s. 19021
Citation113 N.M. 231,824 P.2d 1033,1992 NMSC 5
PartiesKELLY INN NO. 102, INC., Plaintiff-Appellant, v. Nick KAPNISON, Paul Kapnison, Personal Representative of the Estate of Natalyn Giannini, Deceased, and Robert O. Gathings, Defendants-Appellees. KELLY INN NO. 102, INC., a corporation, and Howard T. Kelly, Plaintiffs-Appellees, v. Nick KAPNISON, et al., Defendants-Appellants.
CourtNew Mexico Supreme Court


In this case we attempt to clarify the sometimes confusing state of the law surrounding the finality of judgments. The specific issue is whether a judgment declaring the rights and liabilities of the parties and awarding attorney's fees, but reserving for future determination the amount of the fees, is final, despite the parties and the court's recognition of the necessity for future proceedings to fix the amount of the award. We hold that it is.

This case also presents issues closely related to the finality issue: whether the trial court had jurisdiction to fix the amount of fees after more than thirty days had passed following entry of the initial judgment and after the losing party had appealed. We hold that it did.

The underlying controversy was a dispute between two lessors and their lessee over the validity of the lessors' termination of the lease because of the lessee's failure to comply with a covenant requiring construction of a motel on the leased premises. The trial court ruled that the lessors had properly terminated the lease and entered judgment to that effect, ordering that attorney's fees would be awarded to the lessors after the amount had been established in a subsequent hearing. The lessee thereupon appealed. The court then held a hearing on the amount of attorney's fees and found that the amount claimed by the lessors was reasonable, but refused to enter a further judgment for that amount on the ground that it lacked jurisdiction to do so. The lessors then appealed from this order. We consolidated the two appeals and now affirm the judgment in favor of the lessors in the first appeal and reverse the order in favor of the lessee in the second appeal, remanding for further proceedings to fix the amount of attorney's fees.


On July 1, 1979, Nick Kapnison and Robert Gathings ("the lessors") signed a lease agreement with Howard Kelly ("the lessee")1 covering a tract of land located near Interstate 40 west of Albuquerque, New Mexico. The lease was for a term of twenty-five years commencing April 1, 1980,2 and granted the lessee three ten-year options to renew.

The lease agreement required the lessee to commence and complete construction of a motel on the leased premises "with due diligence," though it did not specify a date for commencement of such construction. The agreement also authorized the lessors to reenter and repossess the premises if the lessee defaulted in performance of any condition or covenant in the lease and if such default continued for thirty days after written notice from lessors. The agreement provided that if either party was compelled to file suit to enforce the terms of the lease, the prevailing party would be entitled to recover all expenses, court costs and reasonable attorney's fees incurred in the litigation.

As of September 16, 1986, the lessee had not commenced construction of the promised motel. On that date the lessors sent the lessee a written notice, declaring a default due to noncompliance with the provision requiring commencement and completion of a motel with due diligence. The lessee was given thirty days to cure the default.

The lessee failed to commence construction within this thirty-day period, and on November 12, 1986, the lessors filed an affidavit of default, declaring that the lessee's leasehold interest was terminated. The lessee thereupon sued the lessors for reinstatement of the lease and damages for breach of contract.3 Lessors responded with a counterclaim requesting ejectment and damages.

After a bench trial, the district court entered findings of fact and conclusions of law, declaring that the lessee had not exercised due diligence and thus had breached the lease agreement by "failing to take any substantive steps to commence construction between January 1, 1983, and September 16, 1986, when interest rates were generally at the same level or lower than when the lease was originally signed[.]" The court accordingly entered a judgment on January 8, 1990, ejecting the lessee from the premises and declaring that the lessors had lawfully terminated the lease. The judgment further provided that, upon application to the court and after a hearing, the lessors would "recover reasonable attorney's fees and costs against [the lessee]."

The lessee filed a notice of appeal on February 6, 1990. On March 6, the lessors filed applications for attorney's fees and costs.4 The court held a hearing on August 8, 1990, and entered an order on August 28, finding the requested fees and costs reasonable but denying the applications on the ground that it lacked jurisdiction to grant them. The lessors then appealed, and we consolidated the appeals.

The lessee's appeal5 from the January 1990 judgment challenges the judgment primarily by asserting that the findings of fact on which it rests are not supported by substantial evidence. Although the lessors have not sought dismissal of this appeal in their response to the lessee's challenge, they do raise the issue of nonfinality of the judgment in their own appeal,6 contending that, since the judgment was not final and appealable, the trial court retained jurisdiction and its August order refusing to fix the amount of attorney's fees for lack of jurisdiction was therefore in error. Since the lessors' appeal thus raises an issue of our jurisdiction to consider the lessee's appeal,7 and since the issue of finality of the January judgment and the related issues of the trial court's continuing jurisdiction thereafter to fix the amount of attorney's fees are the more significant issues on this appeal, we take up first the questions raised by the lessors' appeal.


In Sacramento Valley Irrigation Co. v. Lee, 15 N.M. 567, 571, 113 P. 834, 835 (1910), this Court, sitting as the Supreme Court of the Territory of New Mexico, said, "A determination of what is a final judgment or decree is often a close question." Relying on federal cases beginning with Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed. 404 (1848), this Court continued:

It appears, therefore, that there are two distinct lines of cases upon the question of what constitutes a final decree. The United States cases ... hold that no judgment or decree will be regarded as final within the meaning of the statutes in reference to appeals unless all issues of law and fact necessary to be determined were determined and the case completely disposed of so far as the court had power to dispose of it.

This rule, however, has been qualified to the extent that the retention of the case by the court after decree for the purpose of distribution of funds, etc., even though other and incidental decrees relating to the subject matter of the original decree and involving some of the same issues may be necessary in order to finally dispose of the case, will not destroy its character as a final decree from which an appeal may be taken.

Sacramento Valley, 15 N.M. at 573, 113 P. at 836 (citations omitted).

The rule in Forgay v. Conrad--that a judgment or decree adjudicating the basic rights and liabilities in controversy is to be given a practical, not technical, construction and treated as final even though other, more or less ministerial actions remain to be taken by the rendering court--retains considerable vitality today. See generally 9 J. Moore, B. Ward & J. Lucas, Moore's Federal Practice p 110.11 (2d ed. 1990) [hereinafter Moore's] (commenting, however, that the rule "is not always a rule of easy application[,]" id. at 97). One of its most recent applications (although the case was not cited in the opinion) is Budinich v. Becton Dickinson & Co., 486 U.S. 196, 108 S.Ct. 1717, 100 L.Ed.2d 178 (1988), in which the United States Supreme Court held that a judgment determining an employer's liability for employment compensation was final and appealable, even though the recoverability and amount of attorney's fees for the litigation (under a state statute providing for such fees in the kind of litigation involved) remained to be determined. Although there are certain differences between the present case and the litigation in Budinich, the issue before us can to some extent be characterized as whether to adopt the federal rule that a judgment on the merits is final and appealable, notwithstanding the necessity of further proceedings to determine the amount of any attorney's fees to be awarded.8

Other state courts considering this issue have ruled consistently with Budinich. Three state supreme courts--those of Connecticut, Colorado, and Kansas--have addressed the issue since Budinich was decided, and all three have relied on the Supreme Court's decision to hold that a judgment on the merits is final even though the recoverability or amount of attorney's fees is undetermined. Baldwin v. Bright Mortgage Co., 757 P.2d 1072 (Colo.1988) (en banc); Paranteau v. DeVita, 208 Conn. 515, 544 A.2d 634 (1988); Snodgrass v. State Farm Mut. Auto. Ins. Co., 246 Kan. 371, 789 P.2d 211 (1990). In each of these cases, the court agreed with the Supreme Court that, since the finality of a judgment and its resulting...

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