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NO.

93-619

IN THE SUPREME COURT OF THE STATE OF MONTANA 1994 WILLIAM G. SHULL, d/b/a GAMO, Plaintiff, Appellant, and Cross-Respondent,

FIRST INTERSTATE BANK OF GREAT FALLS, a corporation; ZYCOM, INC.; CAPITAL DEVELOPMENT COMPANY; NORTH CENTRAL GAMING CO., a Montana corporation, Defendants and Respondents, and THOMAS C. HABETS, Defendant, Respondent, and Cross-Appellant.

APPEAL FROM:

District Court of the Eighth Judicial District, In and for the County of Cascade, The Honorable Thomas M. McKittrick, Judge presiding.

COUNSEL OF RECORD: For Appellants: Joe Bottomly and Anne Biby, Bottomly Law Office, Kalispell, Montana For Respondents: Robert J. Emmons, Emmons & Sullivan, Great Falls, Montana (for Zycom, Inc., and Capital Development Company) Gary S. Deschenes, Deschenes Law Office, Great Falls, Montana (for Thomas C. Habets) Submitted on Briefs: October 28, 1994

DE C 1 5 1994
Filed:
CLERK O F S U P h Z S M E COURT STATE OF MONTANA

Decided: December 15, 1994

'Clerk

Justice Terry N. Trieweiler delivered the opinion of the Court. Appellant William G. Shull, d/b/a Gamo, filed a complaint on April 19, 1988, in the District Court for the Eighth Judicial District in Cascade County against First Interstate Bank of Great Falls, Zycom, Inc., Capital Development Company, North Central Gaming Company, and Thomas C. Habets. alleged breach of contract, bad In his complaint, Shull

faith, negligence, tortious On

interference with contract, and breach of fiduciary duty.

June 7, 1993, after a trial, the jury found that First Interstate Bank breached its lease agreement with Shull. The District Court

ordered First Interstate Bank to pay Shull contract damages, attorney fees, and costs. The jury found that Zycom did not breach the contract, and the District Court ordered Shull to pay Zycom's attorney fees and costs. Shull appeals that part of the District

Court's order which awarded attorney fees and costs to Zycom. We reverse that part of the District Court's order. Cross-appellant Thomas Habets requested that the District Court set aside or amend its judgment and impose Rule
11,

M.R.Civ.P., sanctions against Shull and his attorneys.

The

District Court denied this motion. We affirm the District Court's denial of sanctions. The following issues are raised on appeal: 1. Did the District Court err when it awarded attorney fees

and costs to Zycom?

2.

Did the District Court err when it denied Habets' motion

for an award of sanctions against Shull and his attorneys pursuant to Rule 11, M.R.Civ.P.?
3.

Should sanctions be imposed against Habets for filing a

frivolous appeal? FACTUAL BACKGROUND William G. Shull leased space in the Great Falls Westgate Shopping Center from First Interstate Bank on September 28, 1984, for the operation of a video arcade, known as Gamo. The agreement provided for a three year lease with the option to renew for an additional three years. The agreement also gave Shull the

exclusive right to operate a video arcade in Westgate. After approximately three years, Shull expressed his intent to exercise the option to renew his lease. However, a new lease

agreement was not provided; as a result, Shull stated in a letter to Westgate's manager that he assumed that his old lease would remain in force until a new one was signed. On December 29, 1987, First Interstate assigned the leases in Westgate to Zycom, Inc., a Washington corporation. Zycom then

leased space to another video arcade. Shull was informed that his lease was a month-to-month tenancy, and in March 1988, he was notified that his tenancy was terminated. On April 19, 1988, Shull filed a complaint against First Interstate Bank, Zycom, Inc., Capital Development Company, North Central Gaming Company, and Thomas C. Habets. Shull asserted

claims based on breach of contract, bad faith, negligence, and tortious interference with contract against First Interstate. Shull asserted claims based on breach of contract, bad faith, and tortious interference with contract against Zycom and Capital Development Company (Zycom's successor). Shull also asserted

claims based on bad faith, tortious interference with contract, and breach of fiduciary duty against North Central Gaming Company (the company that owned and maintained Gamo's video machines), and Thomas Habets, North Central Gaming Company's owner. Shull also

alleged that First Interstate, North Central Gaming Company, and Habets conspired to interfere with his contractual rights. He

requested compensatory damages for loss of past, present, and future income and profits from Gamo, lost business opportunities, and the lost value of his exclusive right to a video arcade at Westgate. and costs. Shull moved the District Court to conclude by partial summary judgment that he had validly exercised his option to renew his original lease. The defendants moved the District Court to Shull also requested punitive damages, attorney fees,

conclude by summary judgment that the option had not been validly exercised. On February 21, 1991, the District Court granted

Shull's motion for partial summary judgment, and held that Shull had validly renewed his three year lease agreement with Zycom by the time that he was evicted. After trial, First Interstate was

found by the jury to have breached that agreement. However, the jury found that Zycom had not breached the agreement. Shull's lease agreement provided that if Shull breached the agreement he would have to pay attorney fees and costs caused by his breach. that : In the event of any breach hereinunder by Tenant, Landlord may immediately or at any time thereafter, without notice, cure such breach for the account and at the expense of Tenant. If Landlord at any time, by reason of such breach, is compelled to pay, or elects to pay, any sum of money or do any act which will require the payment of any sums of money, or is compelled to incur any expense, including reasonable attorney's fees, in instituting or prosecuting any action or proceeding to enforce Landlord's rights hereunder, the sum or sums so paid by Landlord, with interest thereon at the rate of twelve percent (12%) per annum from the date of payment thereof, shall be deemed to be additional rent hereunder and shall be due from Tenant to Landlord on the first day of the month following the payment of such respective sums or expenses. Pursuant to

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