Sebena v. State

NO. 94-218
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
JOSEPH SEBENA, DANIEL SEBENA and
SEBENA PAVING INC a Montana Corp.
Plaintiff;,
-v-
STATE OF MONTANA, et al.
Defendants,

ROGER JONES. MARLENE JONES, and
DONNA WALKER,
Cross-Claim Plaintiffs, &
Appellants,
-v-
STATE of MONTANA,
Cross-Claim Defendant and
Respondent.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.

COUNSEL OF RECORD:
For Appellants:
Eula Compton, Missoula, Montana
For Respondent:
John H. Tarlow, Landoe, Brown, Planalp and Braaksma,
Bozeman, Montana: Roy H. Andes, Montana Department

14 Q/ '7 jyyi,. Submitted on Briefs: August 18, 1994
Justice Fred J. Weber delivered the Opinion of the Court.

This is an appeal from the grant of summary judgment to the

State of Montana by the Eighteenth Judicial District Court,

Gallatin County. We affirm.
We consider the following issues on appeal:

I. Did the District Court err in granting the State's motion for

summary judgment on the Joneses' and D. Walker's negligence claim

where the judgment was based on the court's legal determination

that the State has no duty of care to third parties in the

selection of lessees of state lands?

II. Did the District Court abuse its discretion in failing to

enjoin the State from re-leasing land formerly leased to M & W

Enterprises?

III. Did the District Court err in granting summary judgment on the
Joneses' and D. Walker's quantum meruit claim?

The State of Montana owns school trust land located at North

7th Avenue in Bozeman. The land is administered by the Department

of State Lands (DSL). DSL leased this tract of land to M & W

Enterprises (M & W) for a ten-year period beginning in April of

1989. M & W agreed to pay $3,000 yearly for the purpose of

building an amusement park complete with a waterslide area.

The DSL lease was signed by Bill Metzger (Metzger) and Lonnie

Walker (L. Walker), alleged general partners of M & W Enterprises,

a limited partnership. Cross-Claimants in this case are Roger

Jones and Marlene Jones (the Joneses) and Donna Walker (D. Walker).

The Joneses paid $50,000 to Metzqer and L. Walker and signed

2
an agreement whereby they were promised ten percent of the stock in

llAdventureland", the envisioned corporation which was to be created

in connection with the DSL leased land. In a similar manner, D.

Walker invested $35,000 and the agreement which she signed with

Metzger and L. Walker stated that she would receive 3.5 percent of

the business. The record does not demonstrate that the corporation

Adventureland was ever organized. Instead, both entities were made

limited partners of a registered limited partnership called M & W

Investments--represented later to the Bankruptcy Court during the

subsequent Bankruptcy proceedings of M & W general partners as the

same entity as M & W Enterprises.

During the summer of 1989, Metzger and L. Walker installed the

waterslide and made improvements to the land. During this time, M

& W began to encounter financial problems, and as a result, did not

proceed further in the organization of the corporation.

During the summer of 1991, the Joneses and D. Walker obtained

a non-dischargeable fraud judgment in Bankruptcy Court against L.

Walker and Metzger totalling $85,000. The Joneses and D. Walker

had recovered approximately $55,000 of this amount at the time of

the hearing.

An attorney representing the Joneses, D. Walker, and other

investors approached DSL in 1991 and 1992 inquiring about assuming

the lease from Metzger and L. Walker. DSL refused this course of

action because of the unresolved liabilities that already

surrounded the property. DSL never received a formal assignment

proposal.
 State lease #4586 to M & W Enterprises was canceled for non-

payment of rent on April 1, 1992. The lease itself provided a 60

day period in which persons with a claim against the improvements

on the piece of land could file their claims. No such claims were

ever filed and although DSL offered to permit the Joneses to remove

and salvage the waterslide, the Joneses did not do so.

The Joneses and D. Walker procured a purported assignment of

Metzger's and L. Walker's interests in state lease #4586 in

November of 1992. However, the record is devoid of any evidence

that this assignment proposal was ever submitted to DSL for

approval, nor were the regulatory procedures followed in the

attempt to make the assignment.

DSL did not lease this land for two years following the

cancellation of M & W's lease. In 1994, DSL leased the land for

$28,200.

This case was originally filed by Sebena Paving as a

construction lien foreclosure against a state lessee, M & W

Enterprises. Sebena sued anyone with an interest in the property,

including the State, the Joneses, D. Walker, and other creditors

and investors in the project. Sebena Paving and the other parties

plaintiff were dismissed as parties to the current action. They

were not involved in any manner in this appeal.

In February of 1992, the Joneses and D. Walker filed a two-

count cross-claim against the State seeking to recover their losses

as investors. They subsequently added a third count in auantum

meruit. The State moved for summary judgment on all counts. The

4
District Court granted summary judgment and dismissed the cross-

claims.

From these orders the Joneses and D. Walker appeal.

Did the District Court err in granting the State's motion for

summary judgment on the Joneses' and D. Walker's negligence claim

where the judgment was based on the court's legal determination

that the State has no duty of care to third parties in the

selection of lessees of state lands?

Appellants argue that the State is responsible for the

negligence of its employees and that employees of DSL were

negligent in not investigating the background of Metzger and L.

Walker. Appellants argue that the State has a duty to lease its

land to the best lessee it can find.

The respondent State contends that it has no duty to third

persons such as appellants in this action. The State argues that

injury alone does not create a liability; there must be a legal

duty imposed on the State that has been breached in order for

negligence to lie. The State concedes that it must act prudently

with regards to leases of state lands: however, the prudence

required, according to the State, exists to favor the State and not

the lessee.

The court granted summary judgment because it determined that

the State had no duty to the Joneses or D. Walker. Summary

judgment is appropriately granted when there is no genuine issue of

material fact and the moving party is due judgment as a matter of

5
law. Mogan v. Cargill, Inc. (1993), 259 Mont. 400, 856 P.2d 973.

While some of the facts in this case are disputed by the

parties, the material facts are not. The record shows that the

lease to M & W was automatically canceled in April of 1992. The

record also shows that the automatic cancellation provision is

listed in the signed lease at paragraph 3--the provision is typed

in capital letters; the lease is signed by both parties. When a

contract is clear on its face, the only responsibility that this

Court has is to enforce the contract as the parties intended.

First Sec. Bank of Anaconda v. Vander Pas (1991), 250 Mont. 148,

818 P.2d 384. The parties clearly provided that the lease

automatically expire April 1, 1992, if the yearly payment was not

received by DSL.

We affirm the conclusion of the District Court that the lease

automatically terminated April 1, 1992, as a result of the

nonpayment of rent. We further conclude that the purported

assignment of that lease in November 1992, was ineffective as the

lease had already been cancelled.

Appellants would have us interpret § 77-6-205(2), MCA, as

imposing upon the State a duty to the public to investigate

potential lessees. While DSL has a statutory "duty," that duty is

to the State of Montana:

The board shall accept the highest bid. If the lessee
exercises the preference right and believes the bid to be
excessive, the lessee may request an administrative
hearing. . . .The department shall grant the request for
a hearing if it determines that the statement indicates
evidence that the bid may not be in the state's best
interests. . . . It is the dutv of the board to secure
the best lessees possible, so that the state may receive

6
 the maximum return possible with the least injury
occurrinq to the land. (Emphasis added.)

Section 77-6-205(2), MCA. The statutory obligation on the part of

the State Land Board is to secure the maximum return to the State

with the least injury to the land. The statute does not create any

obligation to third parties.

Appellant cites Jeppeson v. State Dept. of State Lands (1983),

205 Mont. 282, 667 P.2d 428, for the proposition that DSL has a

duty to exercise due care in its handling of leases. DSL admits

that they must act prudently. However, a thorough reading of

Jeppeson also reveals that this Court will not reverse a DSL

decision unless it finds the decision arbitrary or capricious:

This Court will not disagree with the proposition that
the department should act as prudently as possible with
respect to the handling of lease assignments. But we
find no evidence suggesting even a hint of arbitrary and
capricious behavior on the part of respondent or its
employees. . . . this Court will not compel a state
agency to make a particular decision with respect to a
matter when that agency exercises its own judgment and
discretion, and has not violated any statutory provisions
or engaged in fraudulent action.

Jeppeson, 205 Mont. at 292-293, 667 P.2d at 433. The record

contains no evidence that the State acted imprudently, arbitrarily,

or capriciously when it leased the land to M & W.

We conclude that the State is correct in its contention that

the lease was canceled on April 1, 1992. We further conclude that

there was no genuine issue of material fact which precluded summary

judgment. We hold the District Court correctly granted the State's

motion for summary judgment on the Joneses' and D. Walker's

negligence claim where that judgment was based on the court's legal

7
determination that the State has no duty of care to third parties

in the selection of lessees of State lands.
II

Did the District Court abuse its discretion in failing to

enjoin the State from re-leasing land formerly leased to M & W
Enterprises?

The complaint in this action was filed in September of 1991

and the Joneses' and D. Walker's cross-claims were filed on

February 1, 1992. The Joneses and D. Walker allege that at
sheriff's sale they purchased 100 percent of the issued and

outstanding shares of Metzger Real Estate, Inc., and this purchase,

along with their prior investments in the M & W partnership,

entitles them to an interest in the DSL lease which was still in
force in February of 1992.

Because of their claimed interest in the lease with DSL, the

Joneses and D. Walker petitioned the court for an injunction
against DSL to prevent DSL from re-leasing the property until DSL

fully compensated persons for the improvements made to the leased

property. The Joneses and D. Walker contend that their interest in
M & W entitles them to the injunction. They argue that the court
should have granted the injunction until such time as the parties

had been compensated completely for the improvements to the land
that had been made with their money.

The State argues that M & W "Investments" is not the party

that is the lessee in this case. DSL leased land to M & W
"Enterprises," a different legal entity. Further, DSL claims that

8
it provided an opportunity for persons with an interest in the

improvements on the land in question to file claims for removal of

the improvements. No claims were filed, and as a result, DSL
argues that this question of compensation for improvements is moot.

The lease signed by Metzger and L. Walker for M & W calls for
improvements to be removed within 60 days of the lease

cancellation. The record indicates that despite this 60 day limit,

DSL informed the appellants' counsel by letter on September 17,
1992, that the Joneses and D. Walker could remove improvements

traceable to her clients within 60 days after the date of the

letter. Therefore, the record indicates that appellants had seven

months within which to remove the improvements or make claims for
compensation. No one made an attempt to remove anything from this

leased property nor file a claim for compensation. We conclude

that the appellants cannot now claim that DSL failed to provide an

opportunity for such removal when the record is clear that they had
more than the contractually required time in which to remove such

improvements or make a claim.

Based on these facts, the District Court denied the

appellants' request for an injunction stating that no basis existed
for such remedy. The grant or denial of an injunction is a

discretionary ruling of the court and we will not reverse that

ruling absent an abuse of discretion. Gabriel v. Wood (1993), 261

Mont. 170, 862 P.2d 42. The party seeking an injunction must prove

his right to the injunction. Lewis v. Hanson (1951), 124 Mont.

492, 227 P.2d 70. The record clearly demonstrates that the State

9
provided more than the contractually required amount of time for

interested persons to make a claim upon the improvements and remove
the same. We conclude that the plaintiffs failed to prove their

right to an injunction.

We hold the District Court did not abuse its discretion in
denying the issuance of an injunction to stop the State of Montana

from re-leasing its land.

III

Did the District Court err in granting summary judgment on the
Joneses' and D. Walker's quantum meruit claim?

The Joneses and D. Walker argue that the State has been

unjustly enriched at their expense because of the improvements

remaining on the leased land and they are, therefore, entitled to
restitution by virtue of the theory of quantum meruit. Further,

appellants contend that the State has a statutory duty to ensure

that the new lessees of the property compensate the parties whose

money went to create the improvements to the land. Appellants

claim that the State received the benefit of $16,547.99 for

improvements directly and also is receiving $28,200 for the same

leased property which DSL leased to M & W for $3,000.
Unjust enrichment is an equitable doctrine wherein the

plaintiff must show some element of misconduct or fault on the part

of the defendant or that defendant somehow took advantage of the
plaintiff. Randolph v. Peterson, Inc. v. J.R. Simplot (19S9), 239

Mont. 1, 778 P.2d 879.

The District Court granted summary judgment to the State

10
because it found no element of fraud or misconduct on the part of

the State. Following a careful review of the record, we do not

find any indication of misconduct or fault on the part of the

state. Appellants' bald assertions create no genuine issues of

material fact. The State is entitled to summary judgment as a

matter of law. We hold that the District Court did not err in

granting summary judgment to the State on the Joneses' and D.

Walker's quantum meruit claim.

Affirmed.

We Concur: /

11
 November 7, 1994

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:

,
Eula Compton
Attorney At Law
?26 E. Spruce
Missoula MT 59802

John H. Tarlow
LANDOE, BROWN, PLANALP and BRAAKSMA, P.C.
Box One
Bozeman MT 59715

Roy H. Andes
Montana Department of State Lands
1625 Eleventh Avenue
Helena MT 59620

ED SMITH
CLERK OF THE! SUPREME COURT
STATE OF MONTANA