Houden v. Todd, 2014 MT 113

Background

Canyon Ranches subdivision created by Christopher and Jeffrey Houden; Original Covenants (2002) prohibited further subdivision except for lots ≥20 acres and contained a "No Standing Provision" preventing HOA/owners from opposing subdivision of such large lots. Houdens retained Lot 26 (>20 acres).
A later Second Amendment (2007), adopted by lot-owner votes, restricted subdivision of >20-acre lots and removed the No Standing bar; Houdens sued to invalidate the Second Amendment under the Original Covenants and sought attorneys’ fees under a fee-shifting provision.
A Special Master and the District Court concluded the Second Amendment (and related Third Amendment) could not deprive the Houdens of their settled expectation to subdivide Lot 26; the court declared the Second and Third Amendments void.
Most defendants settled, recording Restated Covenants (2010) that expressly protected the Houdens’ subdivision right but rescinded the Original Covenants; the Settlement Agreement preserved claims against non‑settling lot owners (including Todd).
District Court awarded the Houdens $371,513.03 in attorneys’ fees under the Original Covenants; Todd appealed challenging the merits ruling (mootness), entitlement to fees after rescission, and the reasonableness/amount of the fee award.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Did the District Court err in declaring the Second and Third Amendments void?	Houdens: amendments unlawfully deprived their settled subdivision rights; district court properly voided them.	Todd: amendments were valid under the broad amendment clause of the Original Covenants.	Court: merits are moot because Restated Covenants now govern; therefore it did not decide the merits on appeal and affirmed judgment for Houdens.
2) Did recording the Restated Covenants moot Houdens’ claim for attorneys’ fees?	Houdens: Settlement/Restated Covenants preserved fee claims against non‑settling owners; they prevailed before rescission.	Todd: rescission nullified Original Covenants and their fee provision, mooting fee claim.	Court: Restated Covenants and Settlement Agreement must be read together; fee claim preserved; not moot.
3) Were the fees awarded reasonable and properly calculated?	Houdens: requested full contractual fees, including work to obtain fees and costs related to removal proceedings; two firms and settlement drafting were reasonable.	Todd: award included improper categories (fees-for-fees, fees already limited by federal court, unnecessary duplication, fees for settlement drafting); amount unreasonable.	Court: Houdens are prevailing party entitled to contractual fees, but District Court abused discretion in including (a) fees incurred determining the reasonable amount of fees (fees-for-fees) and (b) additional fees for federal removal matters already adjudicated; remand for recalculation.
4) Are appellate fees recoverable?	Houdens: contract fee provision covers appellate fees for prevailing party.	Todd: (implicit) challenging prevailing-party status or scope.	Court: Houdens prevail on merits and are entitled to reasonable appellate fees; remand to fix amount.

Key Cases Cited

Lewis v. Contl. Bank Corp., 494 U.S. 472 (1990) (a party’s interest in attorney’s fees does not create a justiciable case or controversy on underlying merits that is otherwise moot)
Center for Biological Diversity v. Marina Point Development Co., 560 F.3d 903 (9th Cir. 2009) (when a case becomes moot, appellate courts will not review merits solely to decide ancillary fee questions)
Diamond v. Charles, 476 U.S. 54 (1986) (an award of attorney’s fees is unrelated to underlying merits and does not confer Article III jurisdiction over a moot controversy)
Doe v. Marshall, 622 F.2d 118 (5th Cir. 1980) (fee claims ancillary to litigation may survive mootness under equitable jurisdiction where party is prevailing)
Williams v. Alioto, 625 F.2d 845 (9th Cir. 1980) (claims for attorneys’ fees ancillary to a case may be heard even if the underlying case is moot)