No. 93-445 and 93-446
IN THE SUPREME COURT OF THE STATE OF MONTANA
GORDON PATTON, WILLIAM WINN,
ROBERT ALLEN, and VAL FARRELL,
Petitioners and Respondents,
MADISON COUNTY and THE BOARD OF
COUNTY COMMISSIONERS. WILLIAM R.
~ ~
DRINGLE, chairman; B ~ R O NBAYERS ,
JOHN ALLHANDS, and WALTER W O N , Jk3R 8 7
and HAMBLETONIAN INN, INC.,
Respondents and Appellants. ~ . ..
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S i N E OF MUN'PANA
DAN R. McCLAIN and MARY ALICE McCLAIN,
Trustees under the DAN R. McCLAIN and
MARY ALICE McCLAIN DECLARATION OF TRUST,
Plaintiffs and Respondents,
WALTER KANNON and HAMBLETONIAN INN, INC.,
Defendants and Appellants.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James H. Goetz and Robert K. Baldwin, Goetz, Madden
& Dunn, Bozeman, Montana
For Respondent:
J. Robert Planalp, Landoe, Brown, Planalp &
Braaksma, Bozeman, Montana; Loren Tucker, Madison
County Attorney, Virginia City, Montana
Submitted on Briefs: March 31, 1994
Decided: June 21, 1994
Filed:
Justice James C. Nelson delivered the Opinion of the Court.
This is an appeal by appellants Walter Kannon and Hambletonian
Inn, Inc., from a Fifth Judicial District Court, Madison County,
judgment enforcing the settlement agreement, dated August 17, an
order dated July 7, 1993, and an order denying Kannon's motion for
summary judgment dated June 15, 1992. We reverse.
The following are issues on appeal:
I. Did the District Court err in denying summary judgment for
respondents and enforcing the oral settlement dictated into the
record on June 23, 1992?
11. Did the District Court err in denying Kannon's May 5,
1992, motion for summary judgment regarding Patton's lack of
standing?
111. Did the District Court err in denying Kannon's May 4,
1992, motion for summary judgment regarding McClainvs claim that
Kannon was violating the restrictive covenants?
IV. Did the District Court err in granting judicial review of
the respondents' challenge to the Board of County Commissioners'
approval of the recorded covenants in the instant case?
BACKGROUND
Initially, we provide some framework to assist in a mar?
complete understanding of the present case. On October 26, 1993,
pursuant to Rule 4 ( b ) , M.R.App.P., counsel for the parties
stipulated to the consolidation of the appeals in the two above
captioned cases because of the numerous identical or overlapping
issues. This Court ordered the two cases consolidated on October
2
The appellants in the first case are Madison County and the
Board of County Commissioners (Board), the Hambletonian Inn, Inc.
and Walter Kannon, who, with his family, is a shareholder in
Hambletonian Inn, Inc. (collectively, Kannon). Kannon is also the
president of Hambletonian Inn Inc. The Inn owns Lots 3 and 4 in
the Kenner Estates Minor subdivision. The respondents (Patton
respondents) in the first captioned case are owners of real
property adjacent to the Kenner Estates Subdivision.
The appellants in the second captioned case are Walter Kannon
and the Hambletonian Inn, Inc. (collectively Kannon). The
respondents (McClain respondents) in the second captioned case live
within the four tract Kenner Estates Subdivision. When all
respondents from both cases are referred to, the term l*respondents'l
will be used.
The following background material is gleaned Eromthe petition
in Patton v. Madison County, one of the two cases consolidated
herein. The petition alleges the following:
That on or about November 29, 1988, the Madison
County Planning Board considered the application of Bay
Bank f o r approval of a four-lot subdivision known as
Kenner Estates located on 24.8 acres adjacent to the
Madison River.
On December 7, 1988, the Madison County Planning
Board recommended to the Respondents that the preliminary
plat for Kenner Estates be approved subject to State
Department of Health and Environmental Sciences' approval
and covenants be recorded that provided no structures
would be allowed on any of the four tracts except one
single-family dwelling, one garage and one guest house.
That at the regular meeting of the Respondents on
February 13, 1989, the application for preliminary plat
approval of Kenner Estates was approved.... This approval
was conditioned on the applicants obtaining approval of
the State Department of Health and Environmental Sciences
and the recording of protective covenants that provide
that no structure should be allowed on any of the four
tracts except one single-family dwelling, a garage and a
guest house.
. . .After receipt of the preliminary plat approval, the
applicant recorded a set of protective covenants that did
protective covenants. ...
not conform to the mandated terms of the approved
That since the approval of the subdivision, at least
three of the four residential lots have been sold to
purchasers. One such purchaser, Walter Kannon, has
utilized his tract of land as a commercial hunting and
fishing lodge which has housed, fed and entertained
sportsmen for a fee.
The respondents further state in their brief that the
Hambletonian Inn, Inc. closed the sale of Lot 3 on May 23, 1989,
receiving title subject to the protective covenants of record,
which had been previously filed on May 12, 1989. They assert that
on November 27, 1989, they attended a Madison County Planning Board
meeting for the express purpose of registering complaints that the
Inn was being operated in violation of the protective covenants of
the subdivision.
Finally, the respondents state in their brief:
The protective covenants as recorded are interpreted
to mean that this is a residential subdivision and that
there is allowed on each tract of land three structures:
a single family dwelling, a two car garage and one guest
house on Tracts 1, 2 and 3. There are no dog kennels
allowed on any tract nor are there any stables for horses
allowed on any tract except Tract 4. The phrase
ttexistingstructures exceptedtt means that any structures
that presently existed within the subdivision that were
not a dwelling, a two car garage or a guest house need
not be torn down. Commercial operations are prohibited
from the Kenner Estates Subdivision.
On April 30, 1990, the Planning Board passed a motion
accepting the Kenner Estates Subdivision and the covenants as
recorded. The covenants as recorded were accepted even though the
covenants proposed were not the same as those recorded. At the May
7, 1990 meeting of the Board of County ~ommissioners,the County
decided to give their full support to the Planning Board's decision
to accept the covenants to the subdivision as recorded and followed
their decision with a letter to the Planning Board. The
respondents thereafter, filed two separate actions contesting the
operation of the bed and breakfast on Lot 3.
I. ORAL SETTLF,MENT AGREEMENT
Did the ~istrictCourt err in granting sununary judgment for
respondents and enforcing the oral settlement dictated into the
record on June 23, 1992?
Kannon asserts that the settlement agreement was not a binding
agreement. Kannon insists that the l'~ettlernent~~
which was recorded
at the June 23, 1992 hearing was conditioned upon approval of a
final settlement agreement. We agree.
The transcript of the proceedings on June 23, 1992, reveals
the following testimony:
Secondly, although my clients are here and I believe
all respective clients are here and I want them to
consent to this in sum and substance, this is conditioned
upon the approval of the appropriate settlement documents
and covenants by the ~ a r t i e s of record and their
attorneys.
(Emphasis added.) Additionally, the testimony relates that:
We dictated into the record the hope that this
matter can be drawn, submitted, approved and then a
hearing scheduled by the County Commissioners very
soon....
The Court, in reply to this statement, concluded:
Well, we'll just continue it without a date and then
counsel can keep in touch with me and keep me advised as
to the progress. And we'll schedule the matter if it has
to be tried. Does there appear to be -- are you in the
ballpark? Is there going to be a settlement?
Counsel then replied:
I think so. (Emphasis added.)
#'An agreement is binding if made by an unconditional offer,
and accepted unconditionally." Hetherington v. Ford Motor Co.
(1993), 257 Mont. 395, 399, 849 P.2d 1039, 1042. In the instant
case, the settlement read into the record states that "this is
conditioned upon the approval of the appropriate settlement
documents and covenants." (Emphasis added.) There is, therefore,
no unconditional offer, and there can also, then, be no
unconditional acceptance.
The intentions of the parties are those disclosed
and agreed to in the course of the negotiations. A
party's latent intention not to be bound does not prevent
the formation of a binding contract. Such a condition,
that it will not be effective until signed, must be part
of the agreement between the parties. (Citations
omitted.)
Hetherinaton, 849 P.2d at 1042. Here, the intention of the
parties, made clear on the record, was that the final settlement
documents and covenants would have to be approved. The
respondents' attorney said he thouaht that there was going to be a
settlement. The condition that the settlement would not be
effective until signed was a part of the agreement between the
parties. Hetherinston, 849 P.2d at 1042. Therefore, there was no
unconditional offer nor was there an unconditional acceptance.
Kannon also argues that there was no "meeting of the mindsw on
the material terms of the settlement and therefore, there was no
binding agreement. Again, we agree. The transcript of June 23,
1992, reveals that the agreement was conditional. Moreover, in the
correspondence between the attorneys which followed the June
hearing, the respondents' attorney added extra restrictions in the
list of covenants in their amended covenants dated July 13, 1992.
Kannon's letter in response to the respondents' amended covenants
stated that further discussion would be appreciated regarding
possible additions to existing structures. Additionally, the
respondents did not reply to another set of amended covenants
Kannon had prepared, and instead, wrote Judge Davis to request a
trial date. These activities are not those of two parties who have
had a "meeting of the minds.'' Hetherinaton, 849 P.2d at 1043. The
matters still at issue were not "s~bsidiary,~ l'collateral,lv
or they
were central to the very performance of the contract.
Hetherinaton, 849 P.2d at 1043. The parties' disagreement did not
involve any issue which could easily have been settled by the
court's ruling that the appropriate covenants could be drafted.
Hetherinqton, 849 P.2d at 1043. The covenants could only have been
drafted and approved by the parties. The terms of the covenant
were the essential matters at issue. There was meeting of the
minds in the instant case, and therefore, no binding settlement.
Because there was no unconditional offer, no unconditional
acceptance, and no meeting of the minds, there was neither an
executory accord nor a substituted contract as argued by the
parties. There was simply an attempted but non-binding settlement.
We hold that the District Court erred in granting summary judgment
in the respondents' favor and also erred in its order enforcing the
oral settlement transcribed in the June 23, 1992 record.
Accordingly, we reverse the District Court on this issue.
11. STANDING
Did the District Court err in denying Kannonls May 5, 1992
motion for summary judgment regarding Patton's lack of standing?
The appellants contend that the respondents in the present
case lack standing to enforce the restrictive covenants or compel
the county to enforce the covenants. The respondents argue that
because they are neighbors, and were invited to participate in the
subdivision process, they have standing to enforce the covenants.
Moreover, they state that the restrictive covenants constituted a
negative easement, enforceable by the neighbors.
While the public may be invited to or have a right to provide
input into the subdivision process, it does not follow that,
without ownership of property within the subdivision, statutory
authorization or on the basis of some other legal theory not at
issue here, members of the public necessarily have the right to
enforce or to insist that the local government enforce restrictiv?
covenants once those are approved by the local government as a part
of the subdivision. We conclude that here, the neighbors outside
of the subdivision do not have standing to enforce the restrictive
covenants in the instant case. Lillard v. Jet Homes, Inc. (La.
1961), 129 So.2d 109, is instructive as to the rationale for not
extending standing rights to those persons not a part of the
subdivision. It states:
Where a tract of land is subdivided into lots and
burdened with restrictive covenants, real rights are
created running with the land in favor of each and all of
the grantees. The basis of the creation of this right is
the mutuality of burden and the mutualitv of benefit as
between the urantees arisina out of the im~ositionof
such restrictions on the land itself. This mutuality of
burden and benefit constitutes reciprocal promises as
between the grantees, each supported by that of the
other.
Lillard, 129 So.2d at 111-112. (Emphasis added.) Moreover:
Anyone not a grantee within the particular area or
subdivision covered by the restrictions in question
acquires no right thereunder as there is no mutuality of
benefit or mutuality of burden as between his lot in one
subdivision covered by one set of general restrictions
and a lot in another subdivision covered by another
different, distinct, and separate set of general
restrictions. This lack of mutuality, or privity,
prevents the creation of the real right, or the extension
of the real right burdening one defined area to another
area not described or included therein.
Lillard, 129 So.2d at 112.
In the instant case, Pattons, Winns, Allens and Farrells live
in the area but do not live in the subdivision. Only Dan and Mary
Alice ~ c ~ l a i n
live in the Kenner Estates Minor Subdivision. The
McClain respondents are the only respondents who share the
mutuality of burden and benefit with Kannon as fellow owners of
property in the Kenner Estates Subdivision. The others simply are
not party to the reciprocal promises made between the grantees
which form the basis upon which to challenge another grantee's
right to use his land in a given manner.
See also qenerally; Town & Country Estates Ass'n v. Slater
(1987), 2 2 7 Mont. 489, 740 P.2d 668 ("...the free use of the
property must be balanced against the rights of the other
purchasers in the subdivision.,,.[e]ach purchaser in a restricted
subdivision is both subjected to the burden and entitled to the
benefit of a restrictive covenant." ) ; Kosel v. Stone (1965), 146
Mont. 218, 404 P.2d 894 ("The purchasers having assented to such
restrictions, they and their assigns may ordinarily enforce them
inter sese for their own benefit.") (Citation omitted.)
The respondents cite Reichert v. Weeden (19801, 190 Mont. 95,
618 P.2d 1216, for their argument that the restrictive covenants
constitute a negative easement and are enforceable by the
neighbors. However, the %eighborsM involved in Reichert were
parties to the agreement which created the negative easement at
issue. Moreover, all parties involved in the action in Haggerty v.
Gallatin County (1986), 221 Mont. 109, 717 P.2d 550, also cited by
the respondents, were parties to the agreement in question.
Therefore, they do not stand for the proposition that "neighborsm
have standing to challenge the restrictive covenants of other
parties.
The Patton respondents also argued that they had standing to
compel the Board to enforce the covenants. In State Etc. v. Board
of Cty Commissioners (l979), 181 Mont. 177, 592 P.2d 945, this
Court discussed standing and who bas a legal interest in
subdivision issues. In concluding that Professional Consultants
Inc., which platted five minor subdivisions and then subrnittedthem
to the Ravalli County planning board for review and approval, had
no standing to maintain an action to compel the board to act upon
the proposed subdivision, this Court stated:
Petitioner has stated no legal interest in any of
the minor subdivisions that are the subject of this
action. It is not the owner or purchaser of any of the
property involved in this cause, and admits that it lacks
any legal or equitable interest in the land. Some form
of ownership in the land is necessary to embark standing
to bring a mandamus action. (Citations omitted.)
State. Etc., 592 P.2d at 947. By the same token, parties who live
outside of the subdivision do not have any legal interest in the
subdivision. Therefore, they do not have any standing to compel
the Board to enforce the covenants. The McClain respondents, who
do live within the subdivision, did not seek to compel the Board to
enforce the covenants in their complaint.
In conclusion, the Patton respondents are not owners of
property within the subdivision and therefore, do not share the
mutuality of the benefits and burdens as between grantees of the
subdivision. We hold that the neighbors who live outside of the
subdivision lack standing to enforce the restrictive covenants
under the subdivision. The McClain respondents, who are owners of
property within the subdivision, do have standing to challenge the
restrictive covenants. However, because they did not seek to
compel the Board to enforce the covenants, that issue is not before
this Court.
111. RESTRICTIVE COVENANTS
Did the District Court err in denying Kannon's May 4, 1992
motion for summary judgment regarding McClainlsclaim that Kannon
was violating the restrictive covenants?
Kannon states that the restrictive covenant at issue imposes
a restriction on the property, but that the exception in the
covenant excepts existing structures from that restriction. He
contends that because all structures existed at the time of the
purchase of the property, they are free from the restrictive
covenant. Moreover, the historical use of the property has been
that of a lodge or guest house. The Pattons, Winns, Allens,
Farrells and McClains took exception to Kannon's use of his
property to operate a bed and breakfast, contending that Kannon's
commercial operation violated the single family dwelling
restrictive covenant.
The original covenant at issue, recorded in Madison County by
the County Recorder on May 12, 1989, stated that:
No structure shall be allowed on any tract except one (1)
single family dwelling, a two-car garage, and one (1)
guest house on Tracts 1, 2 and 3. Existing structures
excepted. A stable for horses will be allowed on Tract
4.
However, the Chairman of the Madison County Planning Board and
the Consulting Staff Planner had previously written a letter to the
County Commissioners on December 7, 1988, stating that the
applicable covenant should read:
No structure shall be allowed on any tract except one
single family dwelling with a two car garage and one
guest house. A stable is also allowed on Lot 4.
The clause, "existing structures exceptedM was omitted. The Board
then conditionally approvedthe Kenner Estates Minor Subdivision at
its February 13, 1989 meeting. On May 19, 1989, Bill Dringle, the
Chairman of the Board of County Commissioners wrote a letter to Jim
McGee of Bay Bank, stating that its application for preliminary
plat approval for the subdivision had been approved subject to
certain conditions and including the modified covenant which did
- except
not existing structures from the restriction.
The discrepancy between the covenants as recorded and the
covenants as approved by the County Commissioners was the subject
of much debate in Planning Board meetings, Board of County
Commissioners meetings and a joint meeting between the two boards.
However, the issue was resolved when the Planning Board, upon
advice from the County Attorney, voted to ''accept the Kenner Estate
Minor Subdivision and covenants as recorded even though the
covenants proposed and those recorded had different wording." At.
the May 7, 1990 meeting of the Board, the Commissioners accepted
and announced their full support of the Planning Board's decision
to accept the covenants as recorded. Therefore, the covenants we
address are those recorded on May 12, 1989, including the covenant
which excepts existing structures from restrictions.
We hold that the operation of the bed and breakfast does not
violate the restrictive covenant, for the reason that the covenant
does not restrict the use of structures on the property. The
covenant merely states that no structures shall be allowed on any
tract except one single family dwelling, a two-car garage and one
guest house. This is a restriction based on the types and number
of buildings allowed on the property. Indeed, historically, the
property was used as a guest ranch or a guest resort.
Jones v. Park Lane for Convalescents (1956), 120 A.2d 535, is
instructive concerning the two types of restrictive covenants. The
Jones court stated:
Restrictions limiting the right of the owner to deal
with his land as he may desire fall naturally into two
distinct classes, the one consisting of restrictions on
the type and number of buildings to be erected thereon,
and the other on the subsequent use of such buildings.
The restrictions in the former class are concerned with
the physical aspect or external appearance of the
buildings, those in the latter class with the purposes
for which the buildings are used, the nature of their
occupancy, and the operations conducted therein as
affecting the health, welfare and comfort of the
neighbors. A building restriction and a use restriction
are wholly independent of one another, and, in view of
the legal principles above stated, the one is not to be
extended so as to include the other unless the intention
so to do is expressly and plainly stated; to doubt is to
deny enforcement.
Jones, 120 A.2d at 538. The restrictive covenant at issue here
states that "[nlo structure shall be allowed on any tract except
one (1) single family dwelling, a two-car garage, and one (1) guest
house. . . ." As stated above, this covenant limits the type and
number of buildings on the property; it does not place restrictions
on the use of the property.
Moreover, if the developers, Planning Board, Board or
interested parties were concerned that no commercial operation akin
to the Hambletonian Inn would be established in Kenner Estate Minor
Subdivision, they could have argued for that restriction and so
provided in the covenant. Collins v. Goetsch (Haw. 1978), 583 P.2d
353, 358. No such action was taken.
The respondents' brief cites numerous cases standing for the
proposition that if the rental of rooms is frequent, the single
family dwelling restriction is violated. However, in the cases
cited, the covenants at issue all contained language specifically
pertaining to the of the buildings. In the instant case, the
covenant contains no language addressing the use of the buildings;
the restriction applies to the types and number of buildings. See
Sayles v. Hall (Mass. 1911), 96 N.E. 712; Pierce v. Harper (Mo.
1925), 278 S.W. 410; Kiernan v. Snowden (1953), 123 N.Y.S.2d 895;
Southhampton Civic Club v Couch (Tex. 1959), 322 S.W.2d
. 516;
Wallace v. St. Clair (W.Va. 1962), 127 S.E.2d 742.
In conclusion, whether the term Itexisting structures excepted"
is applied or not, because the restrictive covenant does not
address the use of the buildings, Kannon's commercial operation
does not violate the covenant at issue. The covenant merely
describes the type and number of buildings allowable on a lot in
the subdivision. If there was a desire to restrict the use of the
buildings, the desired restrictions should have been explicitly
included in the covenants. We hold that the District Court erred
when it granted summary judgment to the respondents on this issue.
Accordingly, we reverse the judgment of the District Court on this
issue.
IV. JUDICIAL REVIEW
Did the District Court err in granting judicial review of the
respondents1 challenge to the Board of County Commissioners1
approval of the recorded covenants in the instant case?
We concluded in Issue I1 that the Patton respondents did not
have standing in the instant case. The McClain respondents are the
only respondents who have the requisite interest in the subdivision
and its restrictive covenants to acquire standing. The McClain
respondents, however, did not raise the issue of whether the Board
could be compelled to enforce the covenant. Therefore, since the
Patton respondents do not have standing and the McClain respondents
did not take issue with the Board's approval of the covenant, this
issue is not before this Court, and accordingly, it will not be
addressed.
REVERSED.
,
IN THE SUPREME COURT OF THE STATE OF MONTANA
GORDON PATTON, WILLIAM WINN,
ROBERT ALLEN, and VAL FARRELL,
Petitioners and Respondents,
No. 93-446
MADISON COUNTY and THE BOARD OF
COUNTY COMMISSIONERS, WILLIAM R.
DRINGLE, Chairman; BYRON BAYERS,
JOHN ALLHANDS, and WALTER KANNON,
and HAMBLETONIAN INN, INC.,
AUG 1 0 1994
Respondents and Appellants.
. . . . . . . . . . . . . . . . . . . . CLERK OF 3UFi:z;:.:., :::-.iji:,7
DAN R. McCLAIN and MARY ALICE STATE Oi bi~,.ii.'..~;,
McCLAIN, Trustees under the DAN R.
McCLAIN and MARY ALICE McCLAIN
DECLARATION OF TRUST,
Plaintiffs and Respondents,
NO. 93-445
WALTER KANNON and
HAMBLETONIAN INN, INC.,
Defendants and Appellants.
O R D E R
IT IS HEREBY ORDERED that the Opinion of this Court dated June
21, 1994, is amended as follows:
On page 2 of the opinion beginning at line 7, the first issue
is amended to read:
I. Did the District Court err in enforcing the oral
settlement dictated into the record on June 23, 1992?
On page 5 of the opinion beginning at line 10, the issue is
amended to read:
Did the District Court err in enforcing the oral
settlement dictated into the record on June 23, 1992?
The Clerk is directed to mail copies hereof to counsel of
record f o r t h e respective parties.