J. JONES, Justice.
Following the decision of this case on the merits, the Appellants sought an award of attorney fees under the "commercial transaction" prong of I.C. § 12-120(3) and for frivolous litigation under I.C. § 12-121. The district court denied fees on both grounds. We affirm the denial of fees under I.C. § 12-121, but reverse the denial under I.C. § 12-120(3).
This case arose out of a dispute as to the easement rights of the Respondents over property formerly owned by the Appellants. On May 22, 1987, Daniel Garner entered into a contract to purchase a forty-acre parcel of real property located in Franklin County from Ralph and Thelma McCulloch. The contract of sale purported to provide Daniel an easement across the McCullochs' property, but the warranty deed whereby the McCullochs conveyed the property to Daniel did not grant an easement. As a result, Daniel did not obtain an express easement. However, as the district court subsequently determined, Daniel ultimately acquired an easement either by prescription or prior use.
On May 23, 1990, Brad
In 1992, the Poveys conveyed, by warranty deed, some of the property that they had acquired from the McCullochs to Daniel's parents, Gary and Nola Garner. This property is adjacent to Daniel's property. The Poveys retained the property containing the original access road. Although the property that Gary and Nola acquired from the Poveys was not accessible without crossing the Poveys' property, the warranty deed did not grant an easement in favor of the Garners. The deed contained the following language:
Before the district court, the Garners argued that, because the warranty deed conveyed the property along with its "appurtenances," the Poveys' right to use the original access road was conveyed to Nola and Gary. The district court determined that no express easement was granted to the Garners in the warranty deed, but concluded that Gary and Nola had an easement across the original access road by prescription or prior use.
Over the next thirteen years, the Poveys conveyed to several other grantees, none of whom are parties to this appeal, portions of the land adjacent to the Garners. During that time, there has apparently been confusion and dispute as to the exact location and nature of the Garners' easement and the extent to which the Poveys' successors in interest were on notice of, and recognized, the easement. Indeed, it was the Poveys', and their successors', alleged interference with the easement that gave rise to this action.
Daniel Garner, Sherri-Jo Garner, Nola Garner, and Nola Garner as trustee of the Nola Garner Living Trust (the Garners), filed suit against the Poveys alleging that (1) the Poveys physically interfered with the Garners' easement by plowing over the original access road; (2) the Poveys wrongfully conveyed their property without mentioning the Garners' easement in the deeds; and (3) the Poveys breached their duty, arising from the 1992 warranty deed between the Poveys and Gary and Nola Garner, to warrant and defend the Garners' easement. At the time the suit was filed, the Poveys no longer owned the land upon which the original access road is located.
The district court ultimately granted summary judgment in favor of the Poveys. The district court determined that the Poveys did not breach any duties owed to the Garners by transferring the property without specifically mentioning the Garners' easement in the deeds because a servient estate holder has no duty, upon sale of the servient estate, to protect implied or prescriptive easements. The court further determined that the Poveys did not physically interfere with the Garners' easement. Indeed, the district court found that the Garners were not prejudiced by the Poveys' act of plowing over the original access road, and that the plowing merely caused a minor inconvenience that did not constitute an unreasonable interference with the easement. The district court did not directly address the Garners' breach of warranty claim.
Following the favorable summary judgment ruling, the Poveys submitted a memorandum
The Poveys assert that the Garners bought this action against the Poveys because Daniel and Sherri-Jo Garner were involved in a family dispute with Brad Povey, and wanted to use litigation as a way to get even. In support of their request for attorney fees pursuant to I.C. § 12-121, the Poveys submitted an affidavit from Jeff Neigum, wherein he testified that,
The district court granted the Garners' motion on the ground that the testimony in the affidavit was not relevant to the issue of whether the Poveys were entitled to attorney fees under I.C. § 12-121. More specifically, the district court concluded that,
The Poveys argue that the district court "made a critical error in the law applicable to its decision" by concluding that it must analyze the legal position taken by the Garners, and not extraneous factors, when determining whether attorney fees were appropriate under I.C. § 12-121. The Poveys assert that Jeff Neigum's testimony in the affidavit demonstrated that the Garners had an ulterior motive for filing suit against the Poveys and,
The district court determined, in essence, that the statements contained in the affidavit were irrelevant to the issue at hand. The court based its determination to strike the affidavit on I.R.C.P. 56(e), which pertains to affidavits filed in a summary judgment proceeding, but should have based its ruling on I.R.E. 402, which states that "[e]vidence which is not relevant is not admissible." "`The question of whether evidence is relevant is reviewed de novo, while the decision to admit relevant evidence is reviewed for an abuse of discretion.'" State v. Sheldon, 145 Idaho 225, 228, 178 P.3d 28, 31 (2008) (quoting State v. Shutz, 143 Idaho 200, 202, 141 P.3d 1069, 1071 (2006)). In determining whether the district court abused its discretion, the Court considers (1) whether the trial court correctly perceived the issue as one of discretion; (2) whether the trial court acted within the outer boundaries of its discretion and consistently with the legal standards applicable to the specific choices available to it; and (3) whether the trial court reached its decision by an exercise of reason. Cantwell v. City of Boise, 146 Idaho 127, 134, 191 P.3d 205, 212 (2008).
The Poveys fail to explain how the district court "made a critical error in the law" in concluding that Jeff Neigum's testimony was irrelevant to the question at hand. In many cases, the party bringing an action may have a variety of motives for doing so, some of which may be improper. But that fact is irrelevant when the party has a valid legal or factual basis for pursuing the action. Because the Poveys requested attorney fees under I.C. § 12-121, the only relevant inquiry is whether the Garners had a valid legal or factual basis for bringing the action. Therefore, the district court correctly perceived Mr. Neigum's testimony to be irrelevant to the fee issue and did not err in granting the Garners' motion to strike his affidavit.
The Poveys contend that the Garners pursued this action frivolously, unreasonably, and without foundation. The Poveys argue that when the Garners brought this suit, the Poveys did not own any of the property involved, nor did the Poveys do anything to interfere with the Garners' use of the easement or deny the Garners' right to an easement. They thus conclude that the action was without merit.
In denying the Poveys' request for attorney fees under I.C. § 12-121, the district court concluded that,
Fees under I.C. § 12-121 are not awarded to a prevailing party as a matter of right but, rather, are subject to the district court's discretion.
A district court's denial of fees under I.C. § 12-121 will not be overturned absent an abuse of discretion. Chavez v. Barrus, 146 Idaho 212, 225, 192 P.3d 1036, 1049 (2008). In this case, the district court did not abuse its discretion. The district court correctly perceived the I.C. § 12-121 issue as a matter within its discretion. The judge recognized that if he found the Garners pursued this action frivolously, unreasonably, or without merit, he could award fees to the Poveys. He then considered the relative merit of the Garners' claims in light of the limited case law on the subject finding them colorable despite failing as a matter of law. Furthermore, the district court addressed the Poveys' arguments regarding the Garners' motives for bringing the suit and their alleged failure to negotiate, appropriately finding both to be irrelevant in the I.C. § 12-121 analysis. Finally, after concluding that the Garners raised fairly debatable issues, the district court was not left the abiding belief that the Garners' action was frivolous, unreasonable, or without foundation. Accordingly, the district court did not abuse its discretion in denying fees under I.C. § 12-121.
The Poveys assert that the district court erred in failing to award them attorney fees under I.C. § 12-120(3). They present two arguments in support of their fee claim. First, they contend that by alleging in their complaint that the suit was a commercial transaction within the meaning of I.C. § 12-120(3) the Garners "triggered" the application of that section, entitling them to a fee award. Second, they assert that the transaction was, in fact, commercial in nature and, therefore, they are entitled to a fee award. The Garners counter that the trigger argument is without legal support and that the only way the Poveys could obtain a fee award is to establish that there was a transaction between the parties that was commercial in nature. The Garners submit there is nothing in the record to establish that any transaction between the parties could be characterized as being a commercial one.
In its ruling, the district court noted, "Poveys first assert that because Garners alleged, in the Complaint, that this case involved a commercial transaction, it must be deemed one and attorney fees must be allowed to the prevailing party." The court rejected this contention based on its interpretation of the holding in Great Plains Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218 (2001). The court went on to examine the nature of the Garners' action, finding that it was a dispute about the type of easement the Garners had acquired and whether the Poveys had a legal duty to protect that easement. According to the district court, "the primary purpose of this litigation was to confirm N[ola] Garner's easement right and to seek damages if that right was lost or interfered with, either physically or by conveyance, by Poveys." The district court noted that any commercial
Disregarding the allegations of the complaint, there was little evidence before the district court that would establish the action as being commercial in nature. In their fee request to the district court, the Poveys failed to argue that the property was to be used for a commercial purpose. Indeed, it was first argued by the Poveys on appeal that the 1992 sale was a commercial transaction because the property was to be used for commercial farming and hauling gravel. Thus, the Poveys' entitlement to fees must be based upon their first assertion—that they were entitled to fees because the Garners alleged in their complaint that the parties had engaged in a commercial transaction within the meaning of I.C. § 12-120(3), and that their action was based on such transaction. We conclude that the Poveys are entitled to attorney fees on this basis and that the district court erred in concluding otherwise.
Whether a district court has correctly determined that a case is based on a commercial transaction for the purpose of I.C. § 12-120(3) is a question of law over which this Court exercises free review. Great Plains, 136 Idaho at 470, 36 P.3d at 222. Idaho Code § 12-120(3) allows for an award of attorney fees to the prevailing party in a civil action to recover "in any commercial transaction." A commercial transaction includes all transactions except those for personal or household purposes. I.C. § 12-120(3). In determining whether attorney fees should be awarded under I.C. § 12-120(3), the Court has conducted a two-step analysis: "(1) there must be a commercial transaction that is integral to the claim; and (2) the commercial transaction must be the basis upon which recovery is sought." Great Plains, 136 Idaho at 471, 36 P.3d at 223 (internal quotation marks omitted). "The commercial transaction must be an actual basis of the complaint. . . . [T]he lawsuit and the causes of action must be based on a commercial transaction, not simply a situation that can be characterized as a commercial transaction." Id. In other words, the relevant inquiry is whether the commercial transaction constituted "the gravamen of the lawsuit," and was the basis on which a party is attempting to recover. Id. at 472, 36 P.3d at 224.
Pertinent to the inquiry as to whether allegations contained in a complaint can invoke application of I.C. § 12-120(3) is this Court's decision in Magic Lantern Productions, Inc. v. Dolsot, 126 Idaho 805, 892 P.2d 480 (1995). In that case we stated:
Id. at 73, 878 P.2d at 772.
Id. at 808, 892 P.2d at 483. This holding makes eminent sense and we, thus, reaffirm it. It would be anomalous to hold, as we have on a number of occasions, that a prevailing party is entitled to attorney fees under the contract prong of I.C. § 12-120(3), where the opposing party has alleged a contract as the basis for recovery, even though no contract was established, and then not allow the prevailing party to recover under the commercial transaction prong of I.C. § 12-120(3) where the opposing party has alleged a commercial transaction as the basis of his claim.
The district court, however, citing Great Plains, asserted that the above holding in Magic Lantern had been rejected by this Court, quoting from that opinion as follows:
Id. at 471, 36 P.3d at 223. The district court misunderstood what statement in Magic Lantern this Court was disavowing in the above Great Plains quote. After the Magic Lantern quote that we have reaffirmed above, the Court went on to say, "Magic Lantern sought to recover on an alleged commercial transaction, as evidenced by Magic Lantern's request for attorney fees pursuant to I.C. § 12-120." Id. at 808, 892 P.2d at 483. Magic Lantern's fee request under I.C. § 12-120 only implied a commercial transaction. There was no contention that Magic Lantern actually pleaded a commercial transaction. Great Plains thus attempted to clarify that a mere request for attorney fees pursuant to I.C. § 12-120(3), without more, is not sufficient to trigger the commercial transaction prong of that section. In other words, neither a claim or request in the prayer of a complaint for fees under I.C. § 12-120(3), nor a request or claim for attorney fees in a memorandum of costs and fees, is sufficient to trigger application of that fee provision. A party seeking fees based on a mere request under I.C. § 12-120(3) must show that a commercial transaction was the gravamen of the action before a court may award fees. However, allegations in the complaint that the parties entered into a commercial transaction and that the complaining party is entitled to recover based upon that transaction, are sufficient to trigger the application of I.C. § 12-120(3).
It is true that a fee award was denied to Northwest Pipeline (NWP), the prevailing party in Great Plains, even though the losing party, Cate-Idaho, had claimed it was entitled to attorney fees under I.C. § 12-120(3) with regard to an unjust enrichment claim, upon which it subsequently failed to recover. 136 Idaho at 472, 36 P.3d at 224 ("In this case, attorney fees were requested for the separate claim of unjust enrichment pursuant to I.C. § 12-120(3), and the gravamen of that claim was a commercial transaction."). However, the Court held that attorney fees were not available under that statute because "[t]here was no transaction between the subcontractors and NWP. Consequently, NWP as the prevailing party cannot rely on I.C. § 12-120(3) for an award of attorney fees." Id. at 473, 36 P.3d at 225. Further, there was no contention that Cate-Idaho had alleged in its complaint that there was a commercial transaction between it and NWP. The Court simply held that a mere request for fees under § 12-120(3) is insufficient to establish such a transaction. Thus, Great Plains did not overrule the statement in Magic Lantern that a prevailing defendant can recover attorney fees under I.C. § 12-120(3) if the opposing party's complaint alleges a claim seeking to recover on a commercial transaction, even though it fails to prove that such transaction occurred.
In this case the Garners alleged in their complaint that:
(emphasis added). The Garners' complaint continued, alleging that they
Daniel and Nola Garner both affirmed these allegations under oath. The Garners did not simply invoke I.C. § 12-120 as a potential justification for fees; they pleaded it as the law governing the action and they alleged supporting facts in their verified complaint. A commercial transaction was thus integral to the Garners' claim and it was the basis upon which they sought to recover. This was not a situation where, after the substantive litigation, a party seeking fees attempted to characterize the action as one based on a commercial transaction. Rather, according to the Garners' complaint, the gravamen of this action was a commercial transaction of the type embraced by I.C. § 12-120(3).
In this case, the Garners' allegations triggered application of the statute. Accordingly, the Poveys, as the prevailing party below, were entitled to fees under § 12-120(3). We therefore reverse the district court's contrary ruling and remand for further action consistent with this opinion.
The Poveys also argue that they are entitled to attorney fees on appeal pursuant to I.C. § 12-120(3). As discussed above, the Garners' alleged that this action was based on a commercial transaction, which triggered § 12-120(3). The Poveys are the prevailing party in this appeal and, accordingly, they are also entitled to fees under I.C. § 12-120(3) on appeal.
We affirm the district court in granting the Garners' motion to strike Jeff Neigum's affidavit and denying fees under I.C. § 12-121. We reverse the denial of attorney fees for the Poveys under I.C. § 12-120(3) and remand to the district court to determine an appropriate fee award. Finally, we award the Poveys costs and attorney fees on appeal.
Chief Justice BURDICK, and Justices EISMANN, W. JONES, and HORTON concur.
