Fox v. Fairbrother, 2017 MT 135N

Background

In April 2013 Sandra Fox sold a 5-acre parcel to Ethan and Christina Fairbrother under a hand-written agreement with a $9,000 down payment, monthly payments, and a promissory note totaling $24,000 payable in $200 monthly installments.
Fairbrothers executed a short-form Montana Trust Indenture and a one-page promissory note with Clark Fork Title Co.; the short form expressly incorporated by reference a separately filed seven-page long-form trust indenture, which Fox was not given.
Relations soured over access to the property; Fox sued in August 2014 seeking rescission of the sale (alleging mistake, fraud, undue influence). By filing, Fox had received about $13,000 and did not attempt to return funds; Fairbrothers continued contract payments (some held in escrow or counsel’s trust account).
At trial Fairbrothers tried to admit the long-form trust to show an attorney-fee provision; Fox objected that the long-form had not been disclosed in discovery and would be unfair surprise. The district court reserved ruling.
The district court found for Fairbrothers on the merits, holding Fox failed to satisfy statutory requirements for rescission and therefore “takes nothing.” The court allowed litigation costs but denied Fairbrothers’ request for attorney’s fees because the long-form trust (containing the fee clause) was not admitted due to nondisclosure.
On appeal the Montana Supreme Court reviewed whether excluding the long-form trust was an abuse of discretion and whether the denial of attorney’s fees was correct; the court affirmed the district court.

Issues

Issue	Fox (Plaintiff) Argument	Fairbrothers (Defendant) Argument	Held
Admissibility of long-form trust indenture	Nondisclosure in discovery made its admission unfair surprise	Short-form trust incorporated the long form by reference; long form was a public record and need not be produced	Court did not abuse discretion excluding long-form for failure to produce in response to discovery requests
Entitlement to attorney’s fees under promissory note	Note’s fee clause applies only to defaults; no default was alleged	Fee clauses in transaction documents authorize fees to prevailing party	Promissory note fee clause applies only to default litigation; not applicable here
Entitlement to attorney’s fees under long-form trust	—	Long-form trust’s fee clause authorizes fees for actions involving interpretation/performance; would apply if admitted	Long-form trust would have supported fees, but it was properly excluded; thus no basis in admitted record for attorney’s fees
Standard of review for evidentiary rulings	—	—	District court’s evidentiary rulings reviewed for abuse of discretion; deference appropriate and affirmed

Key Cases Cited

Schuff v. Jackson, 342 Mont. 156, 179 P.3d 1169 (2008) (district court has broad discretion on admissibility of evidence)
West v. Club at Spanish Peaks L.L.C., 343 Mont. 434, 186 P.3d 1228 (2008) (abuse of discretion standard for evidentiary rulings)
Foss v. Melton, 385 Mont. 5, 386 P.3d 553 (2016) (review of legal authority to award attorney’s fees is for correctness)
Schuff v. A.T. Klemens & Son, 303 Mont. 274, 16 P.3d 1002 (2000) (Montana follows American Rule; fees available only by statute or contract)
Richardson v. State, 331 Mont. 231, 130 P.3d 634 (2006) (discovery promotes mutual knowledge and reduces unfair surprise)
Perdue v. Gagnon Farms, Inc., 314 Mont. 303, 65 P.3d 570 (2003) (discovery rules are liberally construed to disclose relevant facts)
McKenzie v. Scheeler, 285 Mont. 500, 949 P.2d 1168 (1997) (trial court best positioned to impose discovery sanctions)
United States v. Procter & Gamble Co., 356 U.S. 677 (1958) (pretrial procedures reduce surprise and promote fair contests)