Welu v. Twin Hearts Smiling Horses, Inc.

12/28/2016

DA 16-0139
Case Number: DA 16-0139

IN THE SUPREME COURT OF THE STATE OF MONTANA

2016 MT 347

TIM WELU, an individual,

Plaintiff and Appellant,

TWIN HEARTS SMILING HORSES, INC.,
a Montana corporation, and STEVE HELD,
an individual,

Defendants and Appellees.

APPEAL FROM: District Court of the Sixteenth Judicial District,
In and For the County of Powder River, Cause No. DV 38-12-2510
Honorable Michael B. Hayworth, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Michael E. Begley, Adam J. Tunning, & Jordan W. FitzGerald, Moulton,
Bellingham PC, Billings, Montana

For Appellees:

Stephen C. Mackey, Towe, Ball, Mackey, Sommerfeld & Turner,
P.L.L.P., Billings, Montana

Submitted on Briefs: September 28, 2016

Decided: December 27, 2016

Filed:

__________________________________________
Clerk
Justice Patricia Cotter delivered the Opinion of the Court.

¶1 This case stems from a disagreement over the ownership and operation of an

irrigation system on a ranch near Broadus, Montana. Tim Welu appeals from the

Findings of Fact and Conclusions of Law entered after a bench trial in the Sixteenth

Judicial District Court, Powder River County. We affirm.

ISSUES

¶2 On appeal, Welu raises three issues, which we restate as follows:

1. Did the District Court err in determining that the entire pivot irrigation system
constituted a fixture?

2. Did the District Court err in concluding that Held did not breach the parties’
agreement concerning the pivot irrigation system?

3. Did the District Court err in determining that Held and Twin Hearts Smiling
Horses, Inc., were not unjustly enriched?

FACTUAL AND PROCEDURAL BACKGROUND

¶3 In 2005, Steve Held and Ginger Held (the Helds), together with David Platt and

Diane Case (the Platts), purchased an approximately 6,000 acre ranch roughly 16 miles

south of Broadus in Powder River County, called the Twin Hearts Angus Ranch (the

Ranch). In 2008, the parties agreed to divide the Ranch into three, approximately 2,000

acre parcels. This division was accomplished in 2009 when an agreement was entered

into between the Helds, the Platts, and Tim Welu. Under the 2009 agreement, Welu

purchased one of the three 2,000 acre parcels, while the Helds retained a 2,000 acre

parcel, and the remaining 2,000 acre parcel was transferred to the Platts. In addition to

the tracts of land, the parties obtained certain rights relating to the entirety of the Ranch:

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Welu acquired the exclusive use of hunting rights on the entire Ranch during his lifetime;

the Platts were granted exclusive recreational use of the Ranch during their lifetime; and

the Helds were granted an exclusive privilege to use the Ranch for livestock grazing

purposes. Subsequently, the Helds transferred ownership of their parcel to Twin Hearts

Smiling Horses, Inc. (THSH), and Welu transferred ownership of his parcel to Twin

Hearts, LLC.

¶4 As indicated by the exclusive rights he acquired in the 2009 agreement, Welu’s

purpose in acquiring an interest in the Ranch was to use the land to hunt game animals.

For this purpose, he identified areas suitable for attracting and retaining game animals

within the Ranch property. Among these were areas within Held’s portion of the Ranch

that had previously been used to grow crested wheat without irrigation, as well as areas

that had not previously been irrigated. Welu believed that irrigated alfalfa fields would

increase the amount of game attracted and retained on the property in those areas.

Initially, Welu and Held attempted to utilize a flood irrigation system, already located in

the area but in disrepair and inoperable, to grow alfalfa. These efforts ceased in 2010

after the failure to restore the flood irrigation system to the operational condition desired

by Welu.

¶5 Subsequently, Welu proposed to irrigate the area using a pivot irrigation system.

This proposal was memorialized in an email sent to Steve Held in December 2010 which,

because of its importance to the underlying action, we restate here:

1. I would pick up the primary costs associated with set up and installation.
2. I would expect you to be responsible for all on going [sic] maintenance
and operational costs . . .

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In other words, this is a 1 time cost for me. You will maintain them and
operate them. You will make sure we have green fields to hunt on. A
pump goes out, you replace it. I think that is a reasonable expectation given
the amount of investment I am looking at. Agreed?

Held responded simply, “Its agreed.”

¶6 To fulfill his end of the agreement, Welu selected and hired Agri-Systems, Inc.

(Agri) to provide and install the pivot irrigation system, and drew up plans indicating

where the irrigation was to occur. Held had prepared the relevant areas and was ready to

plant alfafa by April 2011. However, due to installation delays not attributable to either

Held or Welu, the irrigation system was not installed until October 2011. Welu and Agri

maintain that by October 2011, the irrigation system was fully installed, as evidenced by

the fact that Agri had provided Welu with a run through of the system and then

winterized it in place. Held disputes whether the irrigation system was fully installed at

this point. Of note is a disagreement that occurred between Held and Agri during the

installation process. Agri advised Held that he would need to move a portion of a fence

on his property because it was hindering the path of movement of one pivot, which

prevented the irrigation system from completing a full circle. Further, Agri advised Mr.

Held that failure to move the fence would result in the pivot being damaged.

¶7 In early 2012, Welu scheduled a training session with Agri for the purpose of

instructing Held on how to operate and maintain the irrigation system. Held did not

attend. Nonetheless, at the start of the 2012 growing season, Held proceeded to operate

the irrigation system. As a result, a pivot head caught on a fence and was damaged,

rendering the pivot unusable until repaired. Further, during Held’s operation of the

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system, a motor was burned out and a supply pipe burst. Due to the damage, the

irrigation system was taken offline in May 2012. Shortly after the irrigation system was

taken offline, Welu sent an email to Held stating that, “I have instructed Agri to not do

any more work on the pivots until I give them further directions,” effectively preventing

Held from charging repairs to Welu’s account or utilizing the parties’ original service

provider. The pivot irrigation system remained unrepaired and offline during May and

June of 2012.

¶8 On July 8, 2012, Welu notified Held that he had sold the pivots and that Agri

would enter the property to dismantle and remove the pivots, electrical boxes, motors,

pumps, and other components not buried in the ground. After the workers arrived on the

property and commenced removing the system, successfully dismantling one of the

pivots, Held directed them to leave the property. While they left the dismantled pivot on

the property, the workers left without reassembling the system.

¶9 Following Held’s refusal to allow his workers to remove the irrigation system,

Welu filed the instant action against Held and THSH arguing that the pivot irrigation

system should be returned to his possession, that the Defendants had converted his

property by exercising unauthorized dominion or control over the irrigation system, that

Defendants had been unjustly enriched through their possession of the irrigation system,

and that the Defendants have caused him damages by way of lost opportunity and

revenue. Held and THSH filed counterclaims against Welu, alleging that Welu had

trespassed when he and his workers attempted to remove the irrigation system, that Welu

had breached the contract between the two parties by failing to perform (arguing that the

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irrigation system was never completely or correctly installed, and therefore not

operational), that allowing Welu to remove the irrigation system would breach the

agreement between the parties, and breach of a general duty of care for the alleged

operation of an “unlicensed” outfitting or hunting guide operation.

¶10 The parties tried the case before the Honorable Michael B. Hayworth on March 24

and 25, 2015. The District Court entered Findings of Fact, Conclusions of Law, and an

Order resolving the case in favor of the Defendants. The District Court determined that

the irrigation system, in its entirety, was a fixture and attached to the real property owned

by THSH and, therefore, the irrigation system was owned by THSH. Further, the District

Court determined that Welu was not liable to Held and THSH under any of their alleged

counterclaims and, similarly, that Held and THSH were not otherwise liable to Welu

under any of his alleged claims.

¶11 On appeal, Welu argues the District Court erred in concluding that the entire pivot

irrigation system was a fixture, that the District Court erred by determining that Held did

not breach the parties’ agreement, and that the District Court erred in concluding that

Held and THSH were not unjustly enriched by being allowed to retain the pivot irrigation

system on their property.

STANDARD OF REVIEW

¶12 “We review findings of fact in a civil bench trial to determine if they are supported

by substantial credible evidence,” while viewing the evidence in the light most favorable

to the prevailing party. JTL Group, Inc. v. New Outlook, LLP, 2010 MT 1, ¶ 30, 355

Mont. 1, 223 P.3d 912 (citation omitted). “Conclusions of law in this context are also

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reviewed for correctness.” JTL Group, Inc., ¶ 30 (citation omitted). “We apply de novo

review to mixed questions of law and fact.” Mlekush v. Farmers Insurance Exchange,

2015 MT 302, ¶ 8, 381 Mont. 292, 358 P.3d 913 (citation omitted).

DISCUSSION

¶13 1. Did the District Court err in determining that the entire pivot irrigation system
constituted a fixture?

¶14 This Court addressed the issue of whether an irrigation system constituted a fixture

under Montana law in Schwend v. Schwend, 1999 MT 194, ¶ 11, 295 Mont. 384, 983

P.2d 988. When determining whether the irrigation pipe at issue in Schwend was a

fixture, we stated “we review a district court’s conclusion of law for correctness,” citing

Carbon County v. Union Reserve Coal Company, 271 Mont. 459, 898 P.2d 680 (1995).

Schwend, ¶ 11. Although our statement was correct, we use this opportunity to briefly

clarify the standard of review we apply to a district court’s determination as to whether a

fixture exists.

¶15 Whether an irrigation system constitutes a fixture depends upon certain factual

considerations which, in the context of a civil bench trial, we would review for clear

error, determining whether they are supported by substantial evidence. JTL Group, Inc.,

¶ 30. However, such a determination also requires us to determine whether those facts

satisfy the legal standard provided by § 70-15-103, MCA, and our precedent in Schwend.

We apply de novo review to the question of whether facts satisfy a legal standard. BNSF

Ry. Co. v. Cringle, 2012 MT 143, ¶ 16, 365 Mont. 304, 281 P.3d 203. Therefore, though

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the factual findings are reviewed for clear error, the question of whether an irrigation

system constitutes a fixture is reviewed de novo.

¶16 Personal property may become a fixture pursuant to § 70-15-103, MCA, which

provides, in relevant part, that “[a] thing is deemed to be affixed to land when it is . . .

permanently attached to what is thus permanent as by means of cement, plaster, nails,

bolts, or screws.” Section 70-15-103(4), MCA. We consider the following factors when

determining whether personal property has become affixed to the realty: “‘(1)

annexation to the realty, (2) an adaptation to the use to which the realty is devoted, and

(3) intent that the object become a permanent accession to the land.’” Schwend, ¶ 15

(quoting Pacific Metal Co. v. Northwestern Bank of Helena, 205 Mont. 323, 329, 627

P.2d 958, 961 (1983)).

¶17 We emphasize that, as illustrated by our decision in Schwend, the specific question

of whether an irrigation system is a fixture requires application of the annexation,

adaptation, and intent test that is unique to the facts of each case. Schwend, ¶ 27.

Therefore, we address each factor in turn.

A. Annexation

¶18 “The clearest cases of annexation are those in which the equipment has some

characteristic of permanent physical attachment to the land, such as being buried within

the land, or consisting in part of concrete slabs partially buried within the land.”

Schwend, ¶ 28.

¶19 Welu argues the District Court erred in determining that the entire pivot irrigation

system was annexed to THSH’s real property because the aboveground elements,

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including the “spans, towers, rotophases, and electrical panels” were distinct pieces of

equipment, relatively easy to remove and relocate. Welu appropriately directs this Court

to Schwend, where we held that portions of an irrigation system may be personal

property, while other portions may be fixtures. Schwend, ¶¶ 30, 34. In Schwend, we

determined that annexation did not occur where the irrigation piping at issue had been

removed and stacked away from the irrigated fields, was attached to the irrigation system

only during the irrigation season, had been used on other property apart from the property

at issue in the proceeding, and where testimony tended to show that some of the irrigation

pipe at issue was owned by a third party. Schwend, ¶¶ 29-30. Further, we described the

specific irrigation pipe at issue in Schwend as follows:

“Plastic pipe with gates, or windows on one side that can be opened to
regulate water flow onto a field. This pipe comes in lengths of twenty or
thirty feet and diameters of six, eight, and ten inches. A farmer or rancher
uses the pipe by moving the needed lengths to the field on a special trailer
and laying them out end-to-end in the proper location. The pipe is then
connected to riser pipes that are permanently attached to water lines buried
underground. While the installation of the water mainline and the riser
pipes clearly involves substantial earthwork, the gated pipe is specifically
designed to be lightweight and portable for use in more than one field. A
farmer or rancher using this system needs the gated pipe to irrigate.
However, any farmer or rancher with a riser pipe connection could attach
the gated pipe and irrigate his field with it. The pipe remains above
ground at all times, and it is stored away from the field when not in use.”

Schwend, ¶ 25 (emphasis added) (quoting Wyo. State Farm Loan Bd. v. Farm Credit Sys.

Capital Corp., 759 P.2d 1230, 1231 (Wyo. 1988)).

¶20 The factual circumstances surrounding the pivot irrigation system at issue here are

noticeably different from those we addressed in Schwend. There is no evidence in the

record that the parties intended the pivot irrigation system to be moved to different

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locations on different fields. Instead of removing and stacking the pipes as the parties

did in Schwend, this pivot irrigation system was winterized in place. We note further

that this pivot irrigation system was not specifically designed to be used in more than

one location, as the Schwend irrigation pipe was. Unsurprisingly, there was no evidence

that the irrigation system at issue here had been used on other properties previously. In

order to install the pivot irrigation system, Agri filled in existing, although inoperable,

irrigation ditches from the previous flood irrigation system on THSH’s property.

Further, each pivot arm had to be assembled in specific lengths pursuant to its unique

location on the THSH property.

¶21 Given these particular facts, we find that there was substantial evidence tending to

show annexation in this instance which outweighed any evidence against such a

conclusion. Therefore, we hold that the District Court did not err in concluding that the

pivot irrigation system was factually annexed to THSH’s real property within the

meaning of our precedent involving fixtures.

B. Adaptation

¶22 The second factor considered when determining whether a piece of personal

property constitutes a fixture is whether the property has been adapted to the use to which

the realty is devoted. Schwend, ¶ 15. In Schwend, we determined that, although the

irrigation system at issue was located on irrigated farmland and necessary for the

continued use of the land for cultivating irrigated crops, the irrigation pipes at issue had

not been adapted to the land because they were not “an integral part of that system, nor

[were they] adapted to the particular ground being farmed in the way that the remainder

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of the system was.” Schwend, ¶ 31. Welu argues the District Court erred in determining

that the pivot irrigation system was adapted to the realty because Held had not previously

irrigated the land at issue and because the system was capable of use on other property.

However, there are particularly persuasive factual circumstances we noted in Schwend

that Welu ignores. Specifically, the determinative question here is whether the pieces of

the pivot irrigation system Welu sought to remove were an integral part of the pivot

irrigation system as a whole, and whether the removable components were adapted to the

particular real property at issue.

¶23 As noted above, the components Welu sought to remove included the “spans,

towers, rotophases, and electrical panels.” In other words, Welu argues that he should be

able to remove, essentially, every aboveground piece of the pivot irrigation system.

However, under the factual circumstances present in this case, it is indisputable that these

components constituted an integral part of the pivot irrigation system as a whole. The

record reflects that the installation of the pivot irrigation system required that Agri visit

the THSH property and assemble each individual pivot arm in specific lengths, tailored to

fit its location on THSH’s property. Further, pivot arms were assembled in specific

lengths for five separate locations on the Ranch, and were winterized in place once

installed, rather than removed for storage. Under these factual circumstances, we

determine that the components Welu sought to remove from THSH’s property were

specifically adapted to the realty. Therefore, because we determine that the components

at issue were both an integral part of the pivot irrigation system and were specifically

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adapted to the realty at issue, we conclude that the pivot irrigation system as a whole was

adapted to the realty.

C. Intent

¶24 When addressing the intent factor in its Findings of Fact and Conclusions of Law,

the District Court stated that “[s]ignificantly, the intent issue is one of determining

objective intent.” (Emphasis in original.) This is not a complete statement of the law. In

Schwend, we noted that of the three factors, “the intent of the parties [is given] the most

weight and is the controlling factor.” Schwend, ¶ 15. However, we also stated that, while

all parties in Schwend had testified as to their intent regarding the irrigation pipe, “the

controlling intent is the objective intent of those who installed the purported fixture.”

Schwend, ¶ 32 (emphasis added). The objective intent of the installing party “is deduced

by the court from all of the circumstances surrounding the installation of the purported

fixture.” Schwend, ¶ 32. Further, we find instructive a statement by the Wyoming

Supreme Court, which noted “[t]his intention does not refer to the annexor’s subjective

state of mind; rather it is the objective intention the law can infer an ordinary reasonable

person to have based on the facts and circumstances in the record.” Amoco Prod. Co. v.

Wyo. State Bd. Of Equalization, 15 P.3d 728, 733 (Wyo. 2001).

¶25 Prior to the installation of the pivot irrigation system, the land Welu identified as

suitable for planting food plots for attracting game animals had either not been previously

used for agricultural purposes or was not currently being irrigated. Initially, Welu

endeavored to restore the existing, but inoperable, flood irrigation system located on

TSHS’s property. When those efforts failed, he sought to install the pivot irrigation

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system at issue in this case. During the installation of the pivot irrigation system, Welu

and Agri filled in portions of the ditches that were part of the existing, but inoperable,

flood irrigation system. Both systems were purposed towards creating irrigated alfalfa

fields with the help of Held, the last cutting of which would be left on the field in the fall

to attract game animals. Further, Welu testified that the agreement concerning the pivots

was not limited to a specific timeframe, but would carry through as long as the parties

owned their respective properties and Welu owned his exclusive right to hunt throughout

the entire Ranch. Specifically, he testified that he may have the hunting rights “for the

next thirty years.”

¶26 Under the facts of this case, it is clear that Welu intended to create perennial

hunting grounds through the use of irrigation and the assistance of Held on the Ranch for

at least the next thirty years. Filling in portions of the existing irrigation ditches located

on THSH property is further evidence of the fact that Welu intended the pivot irrigation

system to be permanent. We determine that the objective circumstances surrounding

Welu’s installation of the pivot irrigation system illustrate that it was his intent for the

system to become a permanent fixture on the land.

¶27 Therefore, because the pivot irrigation system was annexed to the realty, adapted

to the realty, and installed with the intent to remain permanently on the realty, the District

Court did not err in holding that the pivot irrigation system was a fixture attached to the

realty owned by THSH.

¶28 2. Did the District Court err in concluding that Held did not breach the parties’
agreement concerning the pivot irrigation system?

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¶29 As noted above, Held had two primary obligations under his agreement with

Welu: first, he would be responsible for all ongoing maintenance and operational costs;

and second, he would ensure Welu had green fields to hunt on. The District Court

determined that as of October 2011 Welu had fulfilled his obligation to install a

functioning irrigation system on Held’s property, triggering Held’s duty to maintain the

irrigation system and provide green fields for hunting purposes. On May 3, 2012, citing

ongoing issues with the irrigation system, Welu informed Held that he had instructed

Agri “not to do any more work on the pivots until I give [Agri] further directions.” The

District Court noted that, had Welu not interfered and prevented Agri, the contractor who

had installed the pivot irrigation system, from working on the pivots, Held would have

had sufficient time, as of May 3, 2012, to plant and pivot irrigate an alfalfa crop to

provide Welu’s required “green fields to hunt on” by the start of the fall hunting season,

in satisfaction of the contract. Further, as noted by Welu on appeal, the District Court

determined that Held had not breached the agreement between the parties as of early July

2012, when Welu attempted to remove the pivot irrigation system from Held’s property

and subsequently filed the instant lawsuit.

¶30 The interpretation and construction of a contract is a question of law which, in the

context of a District Court’s ruling in a civil bench trial, we review for correctness. See

Bos Terra, LP v. Beers, 2015 MT 201, ¶ 17, 380 Mont. 109, 354 P.3d 572. “A contract

must be so interpreted as to give effect to the mutual intention of the parties as it existed

at the time of contracting, so far as the same is ascertainable and lawful.” Section 28-3-

301, MCA. Further, “[t]he whole of a contract is to be taken together so as to give effect

14
to every part if reasonably practicable, each clause helping to interpret the other.”

Section 28-3-302, MCA.

¶31 It is undisputed that, at the time they entered into the agreement concerning the

pivot irrigation system, it was the intention of the parties to provide Welu with green

fields on which to hunt. Indeed, the record reflects that Welu’s sole purpose in acquiring

land from Held in the first place was to enjoy the hunting that he thought the area could

be manicured to offer. Accordingly, as the agreement provided, Held’s duty to maintain

and repair the pivot irrigation system was intended to “make sure we have green fields to

hunt on.” The District Court found that Held had not breached the parties’ agreement as

of the time that Welu directed that Agri not undertake any more work on the pivots,

because there was still sufficient time for Held to repair the pivot irrigation system and

cultivate green fields for hunting prior to the start of the 2012 hunting season, but for

Welu’s interference. The facts found by the District Court in this regard are supported by

substantial credible evidence. Therefore, we conclude that the District Court did not err

in determining that, as of July 2012, when Welu commenced this lawsuit, Held had not

breached the parties’ agreement.

¶32 3. Did the District Court err in determining that Held and Twin Hearts Smiling
Horses, Inc., were not unjustly enriched?

¶33 “Unjust enrichment is an obligation created by law in the absence of an agreement

between the parties.” Estate of Pruyn v. Axmen Propane, Inc., 2009 MT 448, ¶ 63, 354

Mont. 208, 223 P.3d 845. In other words, courts have applied the doctrine of unjust

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enrichment when a contract in law is implied by the facts and circumstances of the case,

but no actual contract exists between the parties.

¶34 The District Court determined that the parties’ email exchange formed an express

contract between the parties. The District Court noted that the agreement required Welu

to provide the “set up and installation” of the pivot irrigation system, and required Held

to be “responsible for all on going maintenance and operational costs.” Further, the

District Court determined that Welu’s purpose for the contract was to attain “green fields

to hunt on” during the hunting season, and that Held’s purpose was to receive irrigation

equipment to support the growth of harvestable crops from the irrigated area, as long as

he left the final cutting standing to provide the “green fields to hunt on” required by

Welu.

¶35 Further, while Welu repeatedly refers to the “Pivot Maintenance Agreement” in

his arguments to this Court, he also argues that, while there was an agreement between

the parties as to the maintenance of the pivot irrigation system, there was no agreement as

to the permanent ownership of the system. Essentially, Welu asks this Court to hold that,

even when there is a contract between the parties specifically relating to the property at

issue in a proceeding, unjust enrichment should be an available remedy if the contract

does not specifically mention who has permanent ownership of the property at issue. We

decline to do so in this case.

¶36 Neither party disputes the existence of a contract involving the pivot irrigation

system at issue. Because it is undisputed that a contract exists, Welu’s unjust enrichment

arguments are not well taken. Estate of Pruyn, ¶ 63. The Dissent would have this Court

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reach the merits of Welu’s unjust enrichment claim, arguing that because the contract did

not expressly cover ownership of the pivot irrigation system, the contract does not

preclude an unjust enrichment claim. We disagree.

¶37 The Dissent relies on Robertus v. Candee, 205 Mont. 403, 407, 670 P.2d 540, 542

(1983), to support its premise that “providing restitution to a contracting party who has a

claim against the recipient of his performance is the well-settled principle of equity in

other jurisdictions.” Dissent, ¶ 55. Robertus is factually distinguishable from the instant

case. In Robertus, the plaintiffs had leased two tracts of land from the defendant.

Robertus, 205 Mont. at 405, 670 P.2d at 541. In the fall of 1977, a dispute arose as to the

amount of rent owed for one of the tracts of land. Robertus, 205 Mont. at 405-06, 670

P.2d at 541. At that time, the plaintiffs had prepared and planted a portion of that tract,

incurring certain expenses. Robertus, 205 Mont. at 406, 670 P.2d at 541. The following

spring, the defendant “informed [the plaintiffs] that they could no longer enter his land

and terminated both lease agreements.” Robertus, 205 Mont. at 406, 670 P.2d at 541.

The defendant proceeded to harvest and sell the wheat the plaintiffs had planted.

Robertus, 205 Mont. at 406, 670 P.2d at 541. Subsequently, the plaintiffs sued to recover

the monetary value of the benefit the defendant had gained by the work plaintiffs had put

into the land, which they alleged to be $55,000. Robertus, 205 Mont. at 406, 670 P.2d at

541. The District Court noted that while the plaintiffs were precluded from suing under

the lease because the Statute of Frauds rendered the lease an unenforceable oral

agreement, they were entitled to recover based on the theory of unjust enrichment.

Robertus, 205 Mont. at 407, 670 P.2d at 542. On appeal, this Court affirmed, concluding

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that “where one party repudiates a contract or breaches it by non-performance, the injured

party may seek restitution of the unjust enrichment whether the Statute of Frauds applies

or not.” Robertus, 205 Mont. at 407, 670 P.2d at 542.

¶38 In summary, Robertus dealt with circumstances where the non-breaching injured

party was suing the breaching party to recover a benefit retained by the breaching party.

Because Welu is suing Held, who had not breached the agreement at the time of the suit,

Robertus is of no assistance at all here. As the Dissent points out, the Restatement has

identified circumstances in which a breaching party may recover from a non-breaching

party based on the theory of unjust enrichment; however, these circumstances are not

present in the instant case.

¶39 In full, § 374 of the Restatement (Second) of Contracts, entitled Restitution in

Favor of Party in Breach, states:

¶40 The rule cited by the Dissent is grounded in the theory that where a party

justifiably refuses to perform based on the other party’s breach, unjust enrichment serves

as a vehicle to reimburse him for the benefit he has conferred on the party who has

already breached the agreement. Under the Dissent’s interpretation of the case, Welu is

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the party justifiably refusing to perform citing Held’s apparent breach. Dissent, ¶¶ 54-55.

However, the District Court found, and we agree, that Held had not breached the

agreement as of the date Welu sought to remove the pivot irrigation system and

subsequently filed suit. Therefore, the predicate required by § 374 of the Restatement—

that the party be justified in his or her refusal to perform based on the other party’s

breach—is not present here.

¶41 The Dissent’s argument for relief under the doctrine of unjust enrichment is not

only precluded by the Restatement itself, but is also relief that Welu did not request under

that theory. Dissent, ¶¶ 56-57. Welu recognized that, if this Court determined the pivot

irrigation system constituted a fixture, which we have, he is limited to the recovery of

monetary damages. The Dissent, on the other hand, citing § 374 of the Restatement

(Second), contends that unjust enrichment should serve as a vehicle to return the

aboveground portions of the pivot irrigation system that were “wrongfully” retained by

Held, to Welu. Section 372 of the Restatement (Second) of Contracts explicitly states

that specific restitution, meaning restitution of identifiable assets, is not available under

the rule stated in § 374.

¶42 Further, even if we were to assume that it was possible for Welu to proceed on an

unjust enrichment claim, applying the doctrine in this case would contravene decades of

this Court’s well-established precedent. The Dissent urges us to apply the doctrine of

unjust enrichment based on the theory that an implied contract exists as to ownership of

the pivot irrigation system. Dissent, ¶ 56. The Dissent goes on to state that “unjust

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enrichment does not always require a wrongful act.” Dissent, ¶ 57. This is a misleading

characterization of the law.

¶43 This Court has yet to find unjust enrichment stemming from an implied contract

appropriate, absent some element of fault or misconduct on the part of the defendant. See,

e.g., Sebena v. State, 267 Mont. 359, 367, 883 P.2d 1263, 1268 (1994); Ragland v.

Sheehan, 256 Mont. 322, 327, 846 P.2d 1000, 1004 (1993); Randolph V. Peterson, Inc.,

v. J.R. Simplot Co., 239 Mont. 1, 8, 778 P.2d 879, 883-84 (1989); Brown v. Thornton,

150 Mont. 150, 156, 432 P.2d 386, 391 (1967); Estate of Pruyn, ¶ 64; Hinebauch v.

McRae, 2011 MT 270, ¶ 29, 362 Mont. 358, 264 P.3d 1098; Albinger v. Harris, 2002 MT

118, ¶ 21, 310 Mont. 27, 48 P.3d 711; Lefeber v. Johnson, 2009 MT 188, ¶ 26, 351 Mont.

75, 209 P.3d 254. The Dissent argues that wrongful acts sufficient to satisfy the

requirement of our precedent occurred in either the purported violation of the “inordinate

amount of trust” Welu had in Held, for which the Dissent apparently finds support in the

record, or in the form of Held’s refusal to allow Welu to remove portions of the pivot

irrigation system. Dissent, ¶¶ 57-58. Implicit in these arguments is the Dissent’s refusal

to address this case within the temporal snapshot presented to this Court on appeal. The

District Court determined that, at the time of Welu’s actions in May and July of 2012,

Held would still have been able to produce the “green fields to hunt on” required by Welu

under the contract. Therefore, there had been no breach of the agreement by Held and, at

the time the case was brought, no actual violation of the “inordinate amount of trust”

Welu had in Held. In short, because the Court found no fault or misconduct on the part

20
of Held, our precedent does not support the imposition of an unjust enrichment recovery

against him.

¶44 We acknowledge that a constructive trust may be imposed in the absence of any

wrongdoing on the part of the defendant, see Northern Cheyenne Tribe v. Roman

Catholic Church, 2013 MT 24, ¶ 29, 368 Mont. 330, 296 P.3d 450, but Welu did not

argue in the District Court or on appeal for the imposition of a constructive trust, and we

decline to sua sponte impose such a trust here. In conclusion, the District Court did not

err in determining that Welu is not entitled under our precedent to recover from Held on

the basis of unjust enrichment.

CONCLUSION

¶45 Based on the foregoing, we hold that the District Court did not err in determining

that the pivot irrigation system was a fixture under the facts of this case, that the District

Court did not err in determining that Held did not breach the parties’ agreement, and that

the District Court did not err in concluding that Held and THSH were not unjustly

enriched by the installation of the pivot irrigation system at issue in this case. Affirmed.

/S/ PATRICIA COTTER

We Concur:

/S/ JAMES JEREMIAH SHEA
/S/ BETH BAKER
/S/ MICHAEL E WHEAT

21
Justice Laurie McKinnon, dissenting.

¶46 I disagree that the aboveground portions of the pivot irrigation system were a

permanent fixture attached to Held’s land. I also disagree that a claim for unjust

enrichment is precluded when ownership is determined by operation of statute, rather

than pursuant to principles of contract law.

A. The record does not support a conclusion that the pivot irrigation system was a
permanent and physical attachment to Held’s property.

¶47 I disagree with the Court’s conclusion that the aboveground portions of the pivot

irrigation system are a fixture. First, the system does not meet the criteria under

Schwend, where annexation is most clearly shown by characteristics consistent with

permanent, physical attachment to the land. Schwend, ¶ 28. The record before us shows

that the nature of a pivot irrigation system, and particularly the one at issue here, is, of

necessity, mobile. These systems are mobile to an extent that if they are not correctly

adjusted, they may be damaged by obstacles in their path, as Held discovered when he

failed to account for an obstructing fence, despite Welu’s warning. Even though these

systems are typically custom-cut for an individual property, as they were here, there was

evidence in the record that the aboveground portions of these systems are commonly

removed and often disassembled and sold. In fact, prior to filing suit, Welu had already

explored selling the irrigation system at issue here, and sought to use it on his other

properties in Texas. Further, by the time Held ejected Agri from the land, Agri had

already disassembled a portion of the system. Given these facts alone, I cannot see that

22
the aboveground portions of the system exhibited characteristics of being permanently,

physically attached to the land.

¶48 Second, to bolster its finding to the contrary, the Court conflates the intent of the

parties with sufficient physical characteristics of permanence under Schwend: “There is

no evidence in the record that the parties intended the pivot irrigation system to be moved

to different locations on different fields.” Opinion, ¶ 20. Intent of the parties as to

mobility has no bearing on the pivot’s physical characteristics. Additionally, in that same

paragraph, the opinion notes that “there was no evidence the irrigation system at issue

here had been used on other properties previously.” Opinion, ¶ 20. Essentially, the Court

finds persuasive evidence that the system is permanently affixed from the fact that it was

bought new, and not previously used. I cannot align with either of those rationales, and

thus do not believe the system can be considered annexed under Schwend.1 Welu’s

aboveground pivot system, which was designed to move as it irrigates and was in the

process of being dismantled, cannot reasonably be considered a permanent fixture to

Held’s land.

¶49 Lastly, I disagree that the intent prong of Schwend’s fixture test is met here. The

Court correctly acknowledges that Welu’s intent, as the installing party, bears the most

1
In Schwend, we observed that funds to purchase irrigation systems are obtained frequently
through a government agency, which holds a purchase money security interest. While the record
in these proceedings is silent as to the source of funding for the irrigation system, it cannot
seriously be contended that most farmers and ranchers in Montana would ever be able to obtain
“the funds to purchase the irrigation pipe through a government agency, which [would hold] a
purchase money security interest in the pipe[,]” if the pipe and aboveground portions of the
system were destined to become part of the realty it served. This suggests that the irrigation
systems are commonly seen in the agricultural and finance industries as removable in the event
the underlying debt is not paid. Schwend, ¶ 33.

23
weight. However, while I agree that Welu meant to create “perennial hunting grounds

through the use of irrigation[,]” Opinion, ¶ 26, it does not necessarily follow that this

intent can be equated with Welu’s intent for the system to be a permanent fixture. I

cannot find in the record evidence that he meant for the system to remain on the land for

any longer than he was able and so disposed to hunt upon it. Indeed, Welu’s stated intent

to sell the aboveground portions or use them on his other properties, bolstered in fact by

Agri’s partial dismantling of those aboveground components, is evidence Welu always

intended the system to be removable. An intent that an object remain for so long as a

person wishes or is able to hunt—an intent subject to whim and fancy—does not equate

to an intent that the object forever remain on the land. Given these analytical

inconsistencies of the Court respecting both annexation and intent, it is my opinion that

the aboveground portions of this pivot irrigation system do not constitute a fixture.

B. A claim for unjust enrichment is not precluded when ownership is determined
by operation of statute, rather than pursuant to principles of contract law.

¶50 Even if the irrigation system is a fixture, however, I disagree too, that Welu should

be precluded from restitution under the theory that Held was unjustly enriched. The

Court states in ¶ 35 that, “[e]ssentially, Welu asks this Court to hold that, even when

there is a contract between the parties specifically relating to the property at issue in a

proceeding, unjust enrichment should be an available remedy if the contract does not

specifically mention who has permanent ownership of the property at issue. We decline

to do so in this case.” Denying Welu the remedy of restitution under the theory of unjust

enrichment, on the basis that the contract was indefinite or failed to mention ownership,

24
contravenes well-established principles of equity that are evident in our own precedent

and the Restatement of Restitution and Unjust Enrichment. Most importantly however,

the rationale for denying Welu’s restitution is inconsistent with the findings of the lower

court which have been affirmed through this Court’s fixture analysis.

¶51 The Court’s fixture analysis and the unjust enrichment issue are intertwined in a

subtle way. Left out of the Court’s Opinion is the reason why there is a fixture analysis

of the irrigation system in the first place. To be fair, the Court does note that the District

Court found that because the irrigation system is determined to be a fixture, Held owns it.

However, the Court does not explain the reason why this is so: It is by operation of law,

and not as a matter of contractual interpretation. Pursuant to § 70-18-101, MCA, a

fixture installed to the land of another belongs to the landowner in the absence of an

agreement as to its removability, unless the owner of the land chooses to require the

person to remove it. Thus, in the absence of an agreement, the landowner may elect

whether to keep the fixture attached to the land or require that it be removed.

Significantly, operation of the statute which occurs in the absence of an agreement, does

not foreclose a claim of unjust enrichment when the landowner elects not to return the

fixture.

¶52 Here, the District Court examined the contract between the parties; found that it

had no term governing ownership or removability of the pivot irrigation system;

determined that the irrigation system constituted a fixture; and then, as a result, declared

the system owned by Held, even though Welu had purchased it. By affirming the District

Court’s fixture analysis, this Court employed § 70-18-101, MCA, and necessarily found

25
there was no agreement between the parties regarding ownership or removal of the pivot

system. Nonetheless, when addressing Welu’s unjust enrichment argument, the Court

reinjects principals of contract law by indicating the contract was missing an important

term—ownership of the system—which precluded Welu’s claim of unjust enrichment.

Opinion, ¶¶ 35-36. Section 70-18-101, MCA, however, determines ownership as a

matter of law in the absence of an agreement between the parties—a significant

distinction the Court fails to grasp. As a result, Welu’s unjust enrichment claim fails and

Held gains a windfall in the form of a million dollar irrigation system which, as the trial

court acknowledged in its findings of fact, was never meant to primarily benefit him.

Welu, who was meant to be the primary beneficiary of the irrigation system, in turn gains

nothing and is in fact deprived of the very property from which he was to benefit under

the contract. Held gains a windfall where none was ever intended, to the detriment of

Welu. Held is therefore unjustly enriched and Welu should be afforded restitution.

¶53 The inconsistency in the Court’s rationale underlying its ownership and fixture

analysis is overlooked by the Court because it dismisses Welu’s equitable plea out of

hand, based on an improperly applied rule of Pruyn.2 I would instead reason in a manner

consistent with the District Court’s findings on the fixture issue: since the contract

between the parties contemplated only maintenance of the system, and not ownership of

2
Pruyn requires that to consider unjust enrichment, there must not be an agreement between the
parties. Pruyn, ¶ 63 (citing Maxted v. Barrett, 198 Mont. 81, 87, 643 P.2d 1161 (1982)). See
Bradkin v. Leverton, 26 N.Y.2d 192, 257 N.E.2d 643, 309 N.Y.S.2d 192 (1970); Fox v. Lummus
Co., 524 F. Supp. 27, 29-30 (S.D.N.Y. 1981). At best, this is a poorly articulated rule we
incorporated from a New York Federal District Court ruling that does not comport with the rule
in other jurisdictions or with the Restatement of Restitution: that restitution from unjust
enrichment requires there must not be an adequate remedy at law available to the complainant.

26
the system;3 and since ownership was in fact statutorily determined; there was no contract

between the parties that would preclude an unjust enrichment analysis under Pruyn, ¶ 63.

In the absence of a contract, “[a]n implied contract . . . springs from principles of natural

justice and equity, based on the doctrine of unjust enrichment.” Ragland v. Sheehan, 256

Mont. 322, 327, 846 P.2d 1000, 1004 (1993). I would therefore reach the issue of unjust

enrichment left unexamined by the Court.

¶54 To reach Welu’s unjust enrichment claim would be consistent with the

Restatement (Third) of Restitution and Unjust Enrichment, our own precedent, and the

law in other jurisdictions. Our rule of Pruyn notwithstanding, the Restatement (Third) of

Restitution and Unjust Enrichment clearly contemplates recovery in unjust enrichment

when an existing agreement is indefinite.

A person who renders performance under an agreement that cannot be
enforced against the recipient by reason of

(a) indefiniteness, or
(b) the failure to satisfy an extrinsic requirement of enforceability such as
the Statute of Frauds, has a claim in restitution against the recipient as
necessary to prevent unjust enrichment.
Restatement (Third) of Restitution and Unjust Enrichment, § 31 (2011) (emphasis

added). The contract here was indefinite because it lacked the material terms of

severability and ownership of the irrigation system. Further, even if, as the District Court

concluded, Welu performed, but breached the contract, the Restatement still contemplates

Welu’s recovery in § 36: “(1) A performing party whose material breach prevents a

3
See fact 62 in Findings of Fact and Conclusions of Law of the District Court, where the court
examines what it considers to be objective evidence of ownership, and outside the scope of the
existing contract.

27
recovery on the contract has a claim in restitution against the recipient of performance, as

necessary to prevent unjust enrichment.” Restatement (Third) of Restitution and Unjust

Enrichment, § 36 (2011). Even if the issue was not outside of contract, these facts also

comport with the Restatement (Second) of Contracts, § 374, and cmt. (a) of the same:

(1) Subject to the rule stated in Subsection (2), if a party justifiably refuses
to perform on the ground that his remaining duties of performance have
been discharged by the other party’s breach, the party in breach is
entitled to restitution for any benefit that he has conferred by way of part
performance or reliance in excess of the loss that he has caused by his
own breach.
(2) To the extent that, under the manifested assent of the parties, a party’s
performance is to be retained in the case of breach, that party is not
entitled to restitution if the value of the performance as liquidated
damages is reasonable in the light of the anticipated or actual loss caused
by the breach and the difficulties of proof of loss.
Cmt. (a) Restitution in spite of breach. The rule stated in this Section
applies where a party, after having rendered part performance, commits a
breach by either non-performance or repudiation that justifies the other party
in refusing further performance. It is often unjust to allow the injured party
to retain the entire benefit of the part performance rendered by the party in
breach without paying anything in return. The party in breach is, in any
case, liable for the loss caused by his breach. If the benefit received by the
injured party does not exceed that loss, he owes nothing to the party in
breach. If the benefit received exceeds that loss, the rule stated in this
Section generally gives the party in breach the right to recover the excess in
restitution.
Restatement (Second) of Contracts, § 374 (1981) (emphasis added). The Court

admonishes our examination of the Restatement proposition above, but the Court

transposes the position and situation of the parties and thus the Court’s analysis is

fundamentally flawed. If, as the District Court acknowledged, Welu is the breaching

28
party and there was still time for Held to have performed “but for Welu’s interference,”4

(Opinion, ¶ 31), the Restatement, in both the body of § 374 and comment (a), clearly

contemplates Welu’s recovery in restitution. Regardless, focusing as the Court does on a

contractual analysis and what party breached the contract, while leaving unexamined the

Restatement on Restitution and Unjust Enrichment, misses the larger and much more

important point—the unjust enrichment here arose not from the contract between the

parties, but by operation of statute. With Held’s unjust enrichment occurring by

operation of statute and thereby wholly outside of contract, it is in the end immaterial

what party breached a contract that was indefinite as to the term of ownership.

¶55 Even were we to discount the Restatements, our precedent prior to Pruyn and

Schwend have acknowledged that the harsh results rendered by operation of law against a

party to a contract concerning a permanent improvement to land should not preclude that

party’s recovery in restitution under a theory of unjust enrichment. “Where the labor or

money of a person has been expended in a permanent improvement which enriches the

property of another, under an oral agreement which cannot be enforced under the Statute

of Frauds, that person is entitled to an award for the amount by which such improvements

unjustly enriches the property.” Robertus v. Candee, 205 Mont. 403, 407, 670 P.2d 540,

542 (1983) (citing Smith v. Kober, 189 N.W. 377 (Neb. 1922); Restatement (Second) of

Contracts § 375 (1981)). Although the Court distinguishes Robertus upon its facts,

4
In its findings of fact, the District Court found that Held did not perform his obligation to
repair the system, ostensibly because Welu had instructed Agri to stop maintaining the system.
This meant that “Held did not repair the pivot irrigation system to full operation during May or
June 2012.”

29
(Opinion, ¶¶ 37-38), the Court fails to appreciate the significance of Robertus and the

proposition for which it is cited: without compensation for the additional value which

improvements have conferred upon the property of another by operation of law, not

contract, it is against conscience that one person shall be enriched to the cost and injury

of another. Providing restitution in such circumstances, even to a contracting party who

has a claim against the recipient of his performance, is also the well-settled and a general

principle of equity in other jurisdictions. “The essential elements of a quasi-contract or

quantum meruit claim are that the plaintiff provided to the defendant materials or services

at the defendant’s request or with the acquiescence of the defendant, that the materials or

services had reasonable value, and that the defendant, despite the demands of the

plaintiff, has failed and refused to pay the reasonable value of such materials or services.”

Berra v. Bieg Plumbing Co., Inc., 584 S.W.2d 116, 118 (Mo. Ct. App. 1979) (cited in

Olathe Millwork Co. v. Dulin, 189 S.W.3d 199, 206 (Mo. Ct. App. 2006) (finding that

there was no valid, enforceable contract between the parties where the agreement at issue

was indefinite because it lacked essential terms).

¶56 Since I think it clear that both the District Court and this Court conclude there was

no contract as to ownership of the pivot system, and ownership was in fact determined

only on the basis of a statute, I would find Welu is not precluded from recovering in

equity under a theory of unjust enrichment, and that his plea as to unjust enrichment

should be examined. We stated in Pruyn that:

Unjust enrichment is an obligation created by law in the absence of an
agreement between the parties. In other words, courts have applied the
theory of unjust enrichment when no contract exists between the parties,

30
but a contract in law is implied. The doctrine of unjust enrichment is an
equitable means of preventing one party from benefiting from his or her
wrongful acts. Among other things, a claim of unjust enrichment requires a
plaintiff to show the element of misconduct or fault on the part of the
defendant or that the defendant somehow took advantage of the plaintiff.

Pruyn, ¶¶ 63-64 (citations omitted) (emphasis added).

¶57 In my opinion, Pruyn would not preclude Welu’s recovery. The District Court

found the following fact:

Unjust enrichment is an equitable means of preventing one party from
benefiting by his or her wrongful acts, and, as such, requires a showing of
misconduct or fault to recover. The irrigation system in question was
placed on the defendants’ property by agreement of the parties. It is a
fixture, a part of the real property under Montana law. There is no
agreement permitting the plaintiff to remove any of it, as required by
Montana law. The Defendants have not committed any wrongful act by
retaining it.

District Court’s Findings of Fact, Conclusions of Law, ¶ 66 (emphasis supplied). The

District Court erred because it failed to consider that, as Pruyn notes above, unjust

enrichment does not always require a wrongful act. Unjust enrichment may also be

found under Pruyn where it can be shown the defendant took advantage of the plaintiff.

However, in my opinion, Held both committed a wrongful act, and took advantage of

Welu. Held’s wrongful act arises from the fact that the statute governing the accession of

fixtures to land allows the landowner to, at his option, cede the removability of the

fixture. Held, as the incidental beneficiary of an irrigation system primarily meant to

improve Welu’s hunting fortune, could have easily ceded the aboveground portions of the

pivot irrigation system. The wrongful act requirement of Pruyn is thereby met: Held’s

refusal to cede or pay Welu for those aboveground portions is a wrongful act.

31
Acknowledging that pursuant to § 70-18-101, MCA, Held was entitled to elect whether to

return the aboveground portion of the irrigation system or to keep it, does not transform

this argument for Welu’s relief into a call for specific restitution, as the Court asserts.

Opinion, ¶ 41. If Held chose to keep the system, as he apparently has, Welu is entitled to

restitution generally corresponding to the amount of its value under the theory of unjust

enrichment.

¶58 Even if Held’s retention of the removable portions of the system is not what the

Court would consider wrongful, Held is certainly taking advantage of Welu. Welu is

rightly faulted for believing that his four sentence email would suffice to govern a

complex million dollar transaction involving the property of another. The deficiency of

his contract shows he either held an inordinate amount of trust in the goodwill of Held, or

that he operated under an extreme ignorance of the law, both accession law and contract

law. However, as a matter of equity and justice, Welu’s shortcomings in business

prudence and legal matters should not serve to enrich Held to the tune of one million

dollars when he was, as the trial court determined, merely an incidental beneficiary of

Welu’s purchase.

¶59 I dissent.

/S/ LAURIE McKINNON

Welu v. Twin Hearts Smiling Horses, Inc.

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