No. 96-413
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
LLOYD BACHE and VIRGINIA BACHE,
Plaintiffs and Respondents,
MARK OWENS, d/b/a MARK OWENS LOGGING,
Defendant, Counterclaimant,
and Appellant.
APPEAL FROM: Distr~ict Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
The Honorable C. B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
I. James Heckathorn, Murphy, Robinson,
Heckathorn & Phillips, Kalispell, Montana
For Respondents:
Lon J. Dale, Milodragovich, Steinbrenner
& Binney, Missoula, Montana
Submitted on Briefs: November 7, 1996
Decided: December 10, 1996
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
The respondents, Lloyd Bathe and Virginia Bathe, filed an
action against the appellant, Mark Owens, d/b/a Mark Owens Logging,
in the District Court for the Nineteenth Judicial District in
Lincoln County to enjoin Owens from encroaching on an easement
which they alleged had been established in their favor. Owens
filed a counterclaim for specific performance of the buy-sell
agreement entered into between the parties and for other relief.
The District Court granted summary judgment in favor of the Bathes,
and denied Owens' motion for summary judgment. Owens appeals the
judgment of the District Court. We affirm the District Court.
The dispositive issue on appeal is whether the District Court
erred when it denied Owens' motion for summary judgment, and
granted summary judgment in favor of the Bathes.
FACTUAL BACKGROUND
The Bathes owned approximately 34 acres of property in Lincoln
County. In April 1988, they entered into an agreement with Owens
for the sale and purchase of 2.42 acres of their property.
Pursuant to the Agreement to Sell and Purchase ("the Agreement"),
the Bathes promised to:
[C]onvey the real property by Warranty Deed, free of all
liens and encumbrances except those described in the
title insurance section of this agreement.
The title insurance section of the Agreement provided that the
Bathes would:
[Flurnish Buyer Title Insurance committing to
insure merchantable title to the real property in the
Buyer's name, free and clear of all liens and
encumbrances except: encumbrances hereinabove mentioned,
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zoning ordinances, building and use restrictions,
reservations in federal patents, beneficial utility
easements apparent or of record, easements of record, and
no others.
Subsequently, a Preliminary Title Insurance Policy was issued
with regard to the property, and provided that:
PRIOR TO THE ISSUANCE OF TITLE INSURANCE, a complete
legal description must be placed of record in the office
of the Lincoln County Clerk and Recorder.
On July 6, 1988, the Bathes filed Certificate of Survey Number
1657 ("COS No. 1657") with the Lincoln County Clerk and Recorder.
COS No. 1657 depicts two easements along the westerly border of the
property: (1) a thirty-foot-wide private roadway easement,
retained by the Bathes; and (2) a public utility easement. On that
same day, the Bathes executed a Warranty Deed in favor of Owens.
The deed describes the property, and references COS No. 1657.
On July 8, 1988, the parties finalized their transaction, and
executed a Contract for Deed which also makes reference to
COS No. 1657.
During 1991 and 1992, Owens constructed a building on the
property he purchased from the Bathes. He and his building
contractor, Mike Helberg, examined cos No. 1657 prior to
establishing the building site. However, they misidentified the
easement boundary, and constructed the building only six feet from
the property boundary. As a result, the building encroached upon
twenty-four feet of the Bathes' easement.
The Bathes filed an action in the District Court. They sought
the removal of Owens' building, and contract remedies for the
obstruction of their easement. Owens contended that no easement
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existed, and asserted counterclaims for specific performance,
breach of contract, estoppel, fraud and deceit, quiet title,
slander of title, and punitive damages.
Owens moved for partial summary judgment. He contended that,
as a matter of law, the land sale documents did not create an
access easement in favor of the Bathes.
The Bathes filed their own motion for partial summary
judgment. They asked the District Court to conclude, as a matter
of law, that the land sale documents created an easement by
reservation in their favor.
The District Court granted partial summary judgment in favor
of the Bathes, and certified its judgment as final pursuant to
Rule 54(b), M.R.Civ.P., for purposes of appeal. On appeal, in
Bathe I, we held that the parties' land sale documents created a
valid easement in favor of the Bathes. We then remanded the case
to the District Court for its determination of the remaining
issues. Bachev. Owens (19941, 267 Mont. 279, 883 P.2d 817.
On remand, the Bathes filed a motion for dismissal of Owens'
counterclaims by summary judgment. Owens also moved for summary
,judgment in his favor. He claimed that the existence of an
easement contradicts the express provisions of the Agreement. The
District Court denied Owens' motion for summary judgment, and
granted summary judgment in favor of the Bathes.
Subsequently, the Bathes again moved for summary judgment on
the remaining issues. They requested injunctive relief to enjoin
Owens from interfering with their easement, and to require him to
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remove his building. They also requested an award of their
attorney fees. The District Court granted the Bathes' motion, and
certified its judgment as final.
DISCUSSION
Did the District Court err when it denied Owens' motion for
summary judgment, and granted summary judgment in favor of the
Bathes?
Summary judgment is governed by Rule 56(c), M.R.Civ.P., which
provides, in relevant part:
The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment
as a matter of law.
The purpose of summary judgment is to encourage judicial
economy through the elimination of any unnecessary trial. However,
summary judgment is not a substitute for trial if a genuine factual
controversy exists. Reavesv.Reinbold (1980), 189 Mont. 284, 288, 615
P.2d 896, 898.
It is well established that the moving party must prove that
it is entitled to judgment as a matter of law. To do this, it is
required to show a complete absence of any genuine factual issues.
D’Agostinov.Swanson (1990), 240 Mont. 435, 442, 784 P.2d 919, 924. To
defeat the motion, the nonmoving party must set forth facts which
demonstrate that a genuine factual issue exists. O’Bagvv.FirstInterstate
BankofMssoula (19901, 241 Mont. 44, 46, 785 P.2d 190, 191.
on appeal, Owens maintains that the District Court erred when
it denied his counterclaims. On that basis, he contends that
summary judgment for the Bathes should be reversed, and that
summary judgment should, instead, be granted in his favor. We
will, therefore, address each of his counterclaims asserted on
appeal.
SPECIFIC PERFORMANCE
The Agreement among the parties did not explicitly mention the
Bathes' easement. Owens maintains that the Agreement is a binding
contract which establishes the terms of the sale, and that the
subsequent creation of the Bathes' easement constitutes a
modification. This modification, he asserts, is invalid because it
was not supported by consideration, and was not a product of the
parties' mutual consent. Therefore, he contends that he is
entitled to specific performance of the strict terms of the
Agreement
Relevant to our consideration of Owens' argument is the law of
the case doctrine, which provides:
[Iln deciding a case upon appeal, when the Supreme Court
states in its opinion a principle or rule of law
necessary to the decision, such pronouncement becomes the
law of the case, and must be adhered to throughout its
subsequent proceedings, both in the trial court and upon
subsequent appeal.
Haines Pipeline Construction, Inc. V. Montana Power Co. ( 19 94 ) , 2 6 5 Mont 2 8 2 , 2 8 9,
876 P.2d 632, 637 (citing Zavarelliv.Might (19891, 239 Mont. 120, 124,
779 P.2d 489, 492).
In Bathe I, we stated that there were four instruments of
conveyance: (1) the Agreement to Sell and Purchase ("the
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Agreement"); (2) the Warranty Deed; (3) the Contract for Deed; and
(4) Certificate of Survey Number 1657 ("COS No. 1657"). We
interpreted those four instruments, and held that they established
a valid easement in favor of the Bathes. BacheI, 267 Mont. at 286,
883 P.2d at 822.
Owens ' counterclaim is, in essence, a collateral attack on our
prior holding in BacheI. As a result of that decision, the Bathes
successfully established the existence of a valid easement in their
favor on Owens' property; they cannot now be compelled, by an order
requiring specific performance, to forfeit that interest.
Furthermore, the Bathes complied with the terms of the
Agreement. Therefore, contrary to Owens' assertions, there was not
a modification of the Agreement, nor was one necessary.
Pursuant to the Agreement, the Bathes promised to:
[Clonvey the real property by Warranty Deed, free of all
liens and encumbrances except those described in the
title insurance section of this aqreement.
(Emphasis added.)
The title insurance section of the Agreement provided that the
Bathes would:
[Flurnish Buyer Title Insurance committing to
insure merchantable title to the real property in the
Buyer's name, free and clear of all liens and
encumbrances except: encumbrances hereinabove mentioned,
zoning ordinances, building and use restrictions,
reservations in federal patents, beneficial utility
easements apparent or of record, easements of record, and
no others.
(Emphasis added.)
Subsequently, a Preliminary Title Insurance Policy, which was
required by the Agreement, was issued with regard to the property.
It provided that:
PRIOR TO THE ISSUANCE OF TITLE INSURANCE, a complete
legal description must be placed of record in the office
of the Lincoln County Clerk and Recorder.
The Bathes filed COS No. 1657, which contains their easement,
prior to closing, and in accordance with the Preliminary Title
Insurance Policy. Both the Warranty Deed and the Contract for Deed
reference COS No. 1657. As a result, the easement in favor of the
Bathes was, in fact, "of record," and Owens had constructive notice
of its existence.
BREACH OF CONTRACT
Owens maintains that the Bathes did not comply with the terms
of the Agreement, and have, therefore, breached the terms of the
parties' contract. This counterclaim is subsumed by the claim for
specific performance, and fails for the same reasons.
ESTOPPEL
Owens asserts that the Bathes are estopped from claiming an
easement. He contends that the Bathes concealed material facts
with the knowledge that they would be acted upon, and that, as a
result, he changed his position for the worse.
We begin our analysis with the principle that, u [elquitable
estoppel is not favored and will be sustained only upon clear and
convincing evidence." Duchamv.Tuma (1994), 265 Mont. 436, 441, 877
P.2d 1002, 1006.
The six required elements of equitable estoppel are as
follows :
1) There must be conduct, acts, language or silence by
the estopped party amounting to a representation or
concealment of facts;
2) these facts must be known to the estopped party at
the time of the conduct, or at least the circumstances
must be such that knowledge of them is necessarily
imputed to the estopped party;
3) the truth concernins these facts must be unknown to
the other oartv claiminq the benefit of the estoooel at
the time they were acted upon;
4) the conduct must be done with the intention, or at
least with the expectation, that it will be acted upon by
the other party, or under the circumstances that it is
both natural and probable that it will be acted upon;
5) the conduct must be relied upon by the other party;
and
6) the other party must in fact act upon it in such a
manner as to change the other party's position for the
worse.
Ducham , 265 Mont. at 441-42, 877 P.2d at 1006 (emphasis added).
Owens has failed to present clear and convincing evidence in
support of these elements. Although the preliminary title
commitment did not reference the Bathes' easement, it did state:
PRIOR TO THE ISSUANCE OF TITLE INSURANCE, a complete
legal description must be placed of record in the office
of the Lincoln County Clerk and Recorder.
The Bathes complied with this provision when, prior to the
issuance of title insurance, they filed COS No. 1657 with the
Lincoln County Clerk and Recorder. As we have previously held, the
Agreement, the Warranty Deed, the Contract for Deed, and COS No.
1657 created a valid easement in favor of the Bathes. Based on
these documents of conveyance, Owens had constructive notice of the
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easement, and his estoppel claim necessarily fails as a matter of
law.
FRAUD & DECEIT
Owens' claim for fraud and deceit is based upon the alleged
failure of the Bathes to disclose the existence of their easement.
This claim is similar to the estoppel claim, and fails, as a matter
of law, for the same reason.
The Warranty Deed and the Contract for Deed both reference COS
No. 1657, and at the time of closing, the Bathes' easement was "of
record." As a result, Owens had constructive notice of the
easement by operation of law. The Bathes had no affirmative duty
to disclose that which was, by virtue of the conveyancing
documents, of public record. Owens cannot now assert that the
existence of the easement was a fact which was fraudulently and
deceitfully suppressed by the Bathes.
QUIET TITLE
Finally, Owens claims that he is entitled to quiet his title.
This claim was resolved by our decision in BacheI. In that case,
we held that the Bathes have a legitimate right, title, and
interest in their easement on Owens' property. They do not claim
an easement. They have a valid easement. Their easement, therefore,
is not a cloud on Owens' title, and his claim fails as a matter of
law.
We conclude that there are no genuine issues of material fact,
and that the Bathes are entitled to judgment as a matter of law.
Accordingly, we hold that the District Court did not err when it
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denied Owens' motion for summary judgment, and granted summary
judgment in favor of the Bathes.
The judgment of the District Court is affirmed.
We concur:
Chief Jkstice
Justices
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Justice W. William Leaphart, dissenting.
I dissent with regard to the breach of contract claim. The
Court treats Owens' claims as collateral attacks upon our holding
in Bathe I in which we held that the Buy/Sell Agreement, Contract
for Deed and Certificate of Survey, created a valid easement in
favor of Bathe. The fact that these instruments created a valid
easement as of the time of closing, however, does not preclude a
claim that such an easement was not contemplated by the original
Buy/Sell Agreement which provided that Bathes would convey the
property "free of all liens and encumbrances except those described
in the title insurance section of this agreement." The title
insurance section of the Agreement provided that Bathes would
convey title free and clear of all liens and encumbrances except
easements of record. When the Agreement speaks of easements "of
record," there is an ambiguity as to time; that is, "of record" as
of when. Despite the fact that Bathes' easement was "of record" as
of the date of the closing, there is a genuine issue of material
fact as to whether, in signing the Agreement, the parties only
contemplated easements of record as of the April 1988 date of the
Agreement as opposed to an easement which was recorded on July 6th,
two days before the closing. When there is an ambiguity in the
contract, the intent becomes a question for the jury. Klawitter v.
Dettman (1994), 268 Mont. 275, 281, 886 P.2d 416, 420; see also
_-
Johnson v. Nyhart (1995), 269 Mont. 379, 387, 889 P.2d 1170, 1174.
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I would reverse the summary judgment as to breach of contract and
remand for trial on that issue.
Justices Karla M. Gray and James C. Nelson join in the foregoing
dissent.
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