97-372
No. 97-372
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 119
ROBERT D. URQUHART and EVELYN M. URQUHART, individually
and as Trustees of the URQUHART REVOCABLE LIVING TRUST,
Plaintiffs, Counterdefendants, Appellants
and Cross-Respondents,
and
JOHN P. TALIA, JAMES A. COTE, BARBARA L. JUNE, a/k/a BARBARA
L. URQUHART, and SPRING CREEK INVESTMENTS, a Montana partnership,
Involuntary Plaintiffs, Counterdefendants
and Cross-Respondents,
v.
OTTO H. TELLER and THE CINNABAR FOUNDATION,
a Montana non-profit corporation,
Defendants, Counterclaimants, Respondents
and Cross-Appellants.
APPEAL FROM: District Court of the Twenty-First Judicial District,
In and for the County of Ravalli,
The Honorable Jeffrey H. Langton, Judge presiding.
COUNSEL OF RECORD:
For Appellants and Cross-Respondents:
William T. Wagner; Garlington, Lohn & Robinson, Missoula,
Montana
(for Appellants and Involuntary Plaintiffs Barbara L. June and
Spring Creek)
Gregory G. Schultz; Knight, Masar & Poore, Missoula,
Montana
(for Involuntary Plaintiffs John P. Talia and James A. Cote)
For Respondents:
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Grant D. Parker; Parker Law Firm, Missoula, Montana
Submitted on Briefs: February 12, 1998
Decided: May 6, 1998
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
1 Appellants Robert and Evelyn Urquhart (the Urquharts) appeal from the
April 2, 1997 opinion and order of the Twenty-First Judicial District Court,
Ravalli County, granting partial summary judgment in favor of Respondents
Otto Teller (Teller) and The Cinnabar Foundation (Cinnabar) on the
Urquharts' claim to enforce an option to purchase. Teller and Cinnabar cross-appeal
from the District Court's grant of partial summary judgment in favor of
the Urquharts, the Urquhart Revocable Living Trust, and Involuntary
Plaintiffs/Counter-defendants John Talia (Talia), James Cote (Cote), Barbara
[Urquhart] June (June), and Spring Creek Investments on Teller and Cinnabar's
counterclaim to enforce restrictive covenants. We affirm.
2 The parties raise the following issues:
3 1. Did the District Court err in holding that the Urquharts may not
exercise the preemptive right of first refusal contained in the Contract for
Deed?
4 2. Did the District Court err in holding that the covenants contained in
the Contract for Deed may not be enforced?
Factual and Procedural Background
5 Teller and his late wife, Elena Teller, were the owners of 280 acres of
land in Ravalli County, Montana. In May 1971, the Tellers entered into an
agreement with the Urquharts to sell approximately 270 acres, reserving 10
acres to the Tellers (Contract for Deed). The parties executed the agreement
and deposited an unrestricted Warranty Deed in escrow.
6 The Contract for Deed contained the following provision:
IT IS SPECIFICALLY AGREED by and between the parties
hereto that should Sellers choose to dispose of said ten acre
tract, Buyers shall have the option to purchase said tract for the
sum of $10,000.00, and in addition thereto the sum of $2000.00
in the event there is added to the house on said premises a
bedroom and bath. PROVIDED, HOWEVER, that this option
shall be non-assignable unless coupled with the assignment of
this contract and the sale of the said premises and this option as
a unit, and shall absolutely expire unless said option be
exercised by Buyers within six months of written notice by
Sellers that the property is to be disposed of. On death of
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Sellers, Buyers shall have the right to exercise said option, but
the time for payment thereof shall be extended to six months
after notice is given hereunder by the personal representatives
or heirs of Sellers. Death of Buyers, however, shall not
terminate this option . . . .
Teller states that he intended to grant the Urquharts a temporary option during
the term of the Contract for Deed to ensure that the property would not be
divided should he or his wife die before the Contract for Deed was paid off.
The Urquharts claim that Teller intended to grant them an option exercisable
upon sale of the property or upon the death of the Tellers and that Teller was
told by his attorney that the option would continue in full force after the
Contract for Deed was paid off.
7 The Contract for Deed also contained restrictions on constructing
improvements on or selling portions of the property, on committing waste, and
on removing or destroying improvements on the property. The Contract for
Deed stated that no covenant would be waived by the Tellers' choosing not to
enforce it and that "[t]he covenants and conditions hereof run with the land
and are binding upon the heirs, executors, administrators and assigns of the
parties hereto." The Urquharts state that they were told these covenants were
not permanent, but were intended to protect the Tellers in the event they
defaulted on the Contract for Deed.
8 On January 9, 1979, the Urquharts contracted to sell 11.31 acres of the
property to Raymond Bartram (Bartram). On January 17, 1979, the Urquharts
paid off the Contract for Deed, and the unrestricted Warranty Deed was
released from escrow and recorded. Teller did not object to the Urquharts'
selling a portion of the property to Bartram. Bartram constructed substantial
improvements on the property, and Teller never sought to enforce the
restrictive covenants. Bartram subsequently conveyed his portion to Talia, and
Talia conveyed an undivided one-half interest to Cote.
9 After paying off the Contract for Deed, the Urquharts built a home,
machine shed, hay barn, and another house on the property. Although Teller
was aware of the construction, he did not seek to enforce the covenant
prohibiting improvements on the property. In 1982, the Urquharts conveyed
all of their remaining interest in the 270 acres to the Urquhart Revocable
Living Trust. The Urquhart Revocable Living Trust conveyed a portion of the
property to June and a portion to Spring Creek Investments, a partnership
comprised of June and her brother, Tom Urquhart. In the contract for sale
with Spring Creek Investments, the Urquharts, as trustees of the Urquhart
Revocable Living Trust, purported to assign the option, but agreed to exercise
it on Spring Creek's behalf if it were deemed non-assignable.
10 The Urquharts claim that on several occasions since the Contract for
Deed was satisfied, both Teller and his nephews have offered to buy portions
of the Urquharts' property and have attempted to purchase the option. In July
1993, the Urquharts received a letter from Teller's attorney, which stated that
Teller would not commence litigation for the Urquharts' violation of the
covenants if they would agree to new covenants prohibiting the construction
of more than one house on each portion of the property and if they would
agree to release their option to purchase.
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11 In the fall of 1993, Teller conveyed his 10-acre parcel to Cinnabar, a
non-profit corporation dedicated to the conservation and protection of
Montana's lands and waters, as a charitable gift. The value of the 10-acres
plus improvements had increased to between $375,000 and $400,000. On
August 23, 1994, the Urquharts, individually and as trustees of the Urquhart
Revocable Living Trust, filed suit in the District Court seeking to enforce the
option. Teller and Cinnabar counterclaimed to enforce the restrictive
covenants contained in the Contract for Deed and joined Talia, Cote, June, and
Spring Creek Investments as involuntary plaintiffs.
12 All parties filed motions and cross-motions for summary judgment. On
March 31, 1997, the District Court entered its opinion and order granting
partial summary judgment for Teller and Cinnabar on the Urquharts' claim to
specifically enforce the option. The District Court held that the option, which
it characterized as a preemptive right of first refusal, was limited to the
duration of the Contract for Deed, constituted an unreasonable restraint on
alienation, and violated the Rule against Perpetuities. The court also found
that, considering the fair market value of the property, it would be inequitable
to enforce the terms of the right of first refusal.
13 The District Court also granted partial summary judgment in favor of
the Urquharts and involuntary plaintiffs on Teller and Cinnabar's
counterclaims. The District Court held that the restrictive covenants did not
run with the land because they were not contained in a grant of an estate in
real property. The court also held that the statute of limitations barred their
claims for violations of the covenants occurring more than eight years before
filing of the action and that laches barred their claims for violations occurring
within the statute of limitations. The parties appeal from this order.
Standard of Review
14 We review a district court's grant of summary judgment de novo.
Motarie v. Northern Montana Joint Refuse Disposal Dist. (1995), 274 Mont.
239, 242, 907 P.2d 154, 156. Therefore, pursuant to Rule 56, M.R.Civ.P., we
review the record to determine whether material issues of fact exist and
whether the movant is entitled to judgment as a matter of law. Bruner v.
Yellowstone County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903.
Discussion
15 1. Did the District Court err in holding that the Urquharts may not
exercise the preemptive right of first refusal contained in the Contract for
Deed?
16 As noted by the District Court, the "option" provision is actually a
preemptive right of first refusal, triggered only upon Teller's choosing to sell
or transfer the 10-acre parcel or upon his death. The Urquharts argue that the
right of first refusal was triggered when Teller transferred the property to
Cinnabar and that the District Court erred in refusing to grant the Urquharts'
request for specific performance. The District Court held that the right of first
refusal was enforceable only during the period of the Contract for Deed, was
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an unreasonable restraint on alienation, and violated the Rule against
Perpetuities. The court also held that granting the Urquharts specific
performance would be inequitable. We agree that the right of first refusal is
an unreasonable restraint on alienation. Because we determine that the right
of first refusal is void, we need not reach the issues of its possible duration or
of the equities of specific performance.
17 Under Montana law, a condition restraining alienation, when repugnant
to the interest created, is void. Section 70-1-405, MCA. This Court discussed
the reasonableness of a restraint on alienation in Edgar v. Hunt (1985), 218
Mont. 30, 706 P.2d 120. In that case, the Hunts sold real property to Omer
and Alma Edgar. Edgar, 706 P.2d at 121. The parties agreed that the Hunts
would have the first option to purchase the property for $7,000 on written
notice from the Edgars of their intention to sell. Edgar, 706 P.2d at 121. After
the death of her husband, Alma Edgar filed a quiet title action, seeking to
invalidate the option agreement. Edgar, 706 P.2d at 121. The district court
granted summary judgment for Edgar, holding that there was no consideration
to support the option and that it was an unreasonable restraint on alienation.
Edgar, 706 P.2d at 121.
18 This Court set forth the factors to be considered in determining whether
a restraint is void under 70-1-405, MCA:
The type of price set is important. If the price is fixed and
greatly disproportionate to the market value of the property, this
supports a finding of unreasonableness. Secondly, the intent of
the parties contracting for the pre-emptive right is a factor. If,
from the circumstances, it appears that the particular restraint,
or the price set thereby, is primarily for the purpose of
restraining the alienability of the property, it will weigh heavily
against the validity of the restraint. On the other hand, if the
circumstances suggest that the restraint was freely entered into
by mutual consent as a normal incident of an equal bargaining
relationship in order to promote the original transfer of the
property, the scales will tip back towards the reasonableness of
the restraint. [Citations omitted.]
Edgar, 706 P.2d at 122. The Edgar Court remanded to the district court to
consider the option provision in light of these factors. Edgar, 706 P.2d at 122.
19 In this case, the price set in the 1971 right of first refusal is fixed at
$10,000 (or $12,000 in the event a house was erected on the property). Some
23 years later, the market value of the 10-acre parcel and improvements
thereon had increased to between $370,000 and $400,000. Obviously, at
nearly 35 times greater, the market value is grossly disproportionate to the
option price. Other courts considering the issue have found much smaller
variances in option and market price to be unreasonable. For example, a New
Jersey court found that a $10,000 fixed option to purchase property valued at
$40,000 was an unreasonable restraint. Ross v. Ponemon (N.J. Super. 1970),
263 A.2d 195. A Texas court held an option price of $79,955 to be
unreasonable where the property value had risen to $550,000. Procter v.
Foxmeyer Drug Co. (Tex. App. 1994), 884 S.W.2d 853.
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20 In determining the reasonableness of a restraint, we also consider
whether the restraint was entered into by mutual consent as a normal incident
of an equal bargaining relationship or whether the parties intended for it to
restrain the alienation of the property. Edgar, 706 P.2d at 122. If the person
imposing the restraint has some interest in land which he is seeking to protect
by the enforcement of the restraint and if the enforcement of the restraint
accomplishes a worthwhile purpose, the restraint is more likely to be
reasonable. Edgar, 706 P.2d at 122 (citing Restatement of Property:
Perpetuities and other Social Restrictions (1994) [hereinafter "Restatement of
Property"] 406 cmt. i).
21 In this case, the evidence does not suggest that the Urquharts intended
for the right of first refusal to restrain Teller from transferring his ten acres,
but rather that the Urquharts sought to ensure they would be able to buy the
acreage adjoining their own if they so desired. However, since the parties
entered the agreement, the Urquharts have conveyed their entire interest in the
property, and the property is now in the hands of several different owners,
including the Urquhart Revocable Living Trust and involuntary plaintiffs.
Thus, the Urquharts' legitimate purpose of obtaining ownership to neighboring
property can no longer be served by enforcing the option. Enforcing the right
of first refusal at this point would simply restrain Teller from transferring the
property or give the Urquharts the bargain purchase of the century.
22 The Restatement's reasonableness factors also include whether the
restraint is limited in duration, allows a substantial variety of types of
transfers, or is limited as to the number of persons to whom transfer is
prohibited. Restatement of Property 406. The Urquharts' right of first
refusal states, in part:
On death of Sellers, Buyers shall have the right to exercise said
option, but the time for payment thereof shall be extended to six
months after notice is given hereunder by the personal
representatives or heirs of Sellers. Death of Buyers, however,
shall not terminate this option . . . .
Thus, the right of first refusal affects the alienability of the property in all
types of transfers to all transferees.
23 Further, the District Court found that the right was of potential
perpetual duration and therefore violated the Rule against Perpetuities. The
District Court concluded that, under the language of the right, if the personal
representatives or heirs of Sellers failed to give Buyer notice of Seller's death,
the six-month period would never be triggered and the right would go on in
perpetuity. However, in interpreting similar option language, other courts have
held that when death triggers the buyer's right, the representatives or heirs of
the seller are required to give the buyer notice within a reasonable time of
death. See, e.g., Smerchek v. Hamilton (Kan. App. 1980), 606 P.2d 491. The
Rule against Perpetuities should not be applied when it is possible to give an
instrument a construction which leads to its validity. Trust Created Under
Will of Damon (Haw. 1994), 869 P.2d 1339; Matter of Estate of Crowl (Okla.
1987), 737 P.2d 911; Oliner v. City of Englewood (Colo. App. 1979), 593
P.2d 977. Therefore, we adopt the interpretation of the right of first refusal
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that does not violate the rule and determine that the right of first refusal
imposed an obligation on Teller's heirs or representatives to give the Urquharts
notice of death within a reasonable time. However, that the restraint could be
interpreted as existing in perpetuity further supports our holding that it is an
unreasonable restraint on alienation.
24 Under the Restatement of Property, a restraint that tends to increase the
value of the property or that is imposed on property that is not otherwise
marketable is more reasonable. Restatement of Property 406. In this case,
the right of first refusal fixes the price of the property, property that has
appreciated in value to almost $400,000, at $10,000. Obviously, such a
restraint decreases, rather than increases, the value of the property. Further,
the property's market value and location in the Bitterroot Valley suggest that
without the fixed price restraint, the property would be highly marketable.
25 We determine that the right of first refusal is an unreasonable restraint
on alienation. The District Court correctly concluded that, under 70-1-405,
MCA, the right is repugnant to Teller's interest and therefore void.
26 2. Did the District Court err in holding that the covenants contained in
the Contract for Deed may not be enforced?
27 The Contract for Deed executed by the parties in 1971 contained
covenants prohibiting the Urquharts from constructing improvements on or
transferring portions of the property. The Warranty Deed, which was released
from escrow when the Urquharts paid off the Contract for Deed in 1979,
contained no restrictions or references to the Contract for Deed. Teller argues
that the covenants contained in the Contract for Deed run with the land and
that, despite his failure to enforce them in the past, he should be free to
enforce them in the future.
28 It is a general tenet of contract law that all provision in a contract for
sale of real property are merged into the deed. Davis v. Tazewell Place
Associates (Va. 1997), 492 S.E.2d 162; U.S. v. Mojac Const. Corp. (E.D.N.Y.
1960), 190 F.Supp. 622; Colorado Land & Resources, Inc. v. Credithrift of
America, Inc. (Colo. App. 1989), 778 P.2d 320. Thus, when a deed has been
executed, the purchaser's rights are generally founded in the deed covenants,
not the executed contract. Simpson v. Johnson (Idaho 1979), 597 P.2d 600.
An exception to the general rule of merger occurs when the parties intended
for an agreement in a contract for sale to be collateral. Baxter v. Stubbs (Utah
1980), 620 P.2d 68. Covenants relating to title, quantity, and possession of
land are generally not collateral and merge into the deed. Lazy Dog Ranch v.
Telluray Ranch Corp. (Colo. App. 1996), 923 P.2d 313. In this case, we hold
that Teller and the Urquharts did not intend for the covenants to be collateral
agreements and that they merged with and were extinguished by the
unrestricted Warranty Deed.
29 Teller and Cinnabar argue that the covenants should be enforced
because the Contract for Deed specifically states that they run with the land
and because they were properly recorded when the Contract for Deed was
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filed. They state that this Court has held that restrictive covenants do not need
to be contained in a deed granting title to the property and cite Kosel v. Stone
(1965), 146 Mont. 218, 404 P.2d 894, for the proposition that restrictive
covenants filed in the clerk and recorder's office bind a subsequent purchaser,
regardless of whether that purchaser had knowledge of the restrictions.
30 We find Kosel readily distinguishable. In that case, the developer had
filed a subdivision plat and declaration of restrictions in the clerk and
recorder's office. Kosel, 404 P.2d at 895. The developer originally conveyed
the lots by deeds which referenced the restrictions; however, when the Stones
purchased their lot, the deed from the seller did not mention the restrictions,
and the Stones claimed that they were unaware that the declarations existed.
Kosel, 404 P.2d at 895. This Court affirmed the district court in holding that
the declaration of restrictions ran with the land. Kosel, 404 P.2d at 896. We
noted that the restrictions were recorded prior to the Stones' purchasing their
lot and that the Stones' deed described the property as being located in the
subdivision according to the official plat on file. Kosel, 404 P.2d at 897.
Thus, we determined that the Stones had constructive notice of the official plat
and declaration of restrictions and that they became part of the Stones' deed.
Kosel, 404 P.2d at 897.
31 In Kosel, the declaration of restrictions was not contained in a contract
for sale between the same parties who executed the deed, but rather was a
separate document filed by the original developer. The facts in Kosel did not
necessitate application of the doctrine of merger, which only applies where a
buyer and seller enter into a contract for the sale of real property and
subsequently execute a deed conveying title to the real property.
32 We agree with Teller and Cinnabar that a contract for sale of property
can contain a valid covenant running with the land. However, we determine
that the evidence in this case suggests that Teller and the Urquharts intended
for the Contract for Deed, and the restrictions set forth therein, to merge into
the Warranty Deed. Teller and the Urquharts executed the Contract for Deed
and the Warranty Deed at the same time and intended for the Warranty Deed
to be recorded upon the Urquharts' performance of the contract. The parties
did not record the Contract for Deed at the time it was executed. In fact, it
was not recorded until the following year when the Urquharts recorded it as
part of an unrelated real estate transaction. The Warranty Deed makes no
reference to restrictive covenants, and no separate declaration of covenants
was ever filed. The notice of purchaser's interest recorded by the Urquharts
and Teller at closing makes no reference to any property restrictions. Further,
the remedies for breach provided in the Contract for Deed were exclusive to
the contracting parties and did not extend to heirs or assigns.
33 Therefore, we apply the general rule of merger and hold that the
District Court did not err in refusing to enforce the covenants contained in the
Contract for Deed or in refusing to hold that they may be enforced in the
future.
34 Based on the foregoing, we affirm the decision of the District Court.
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/S/ W. WILLIAM LEAPHART
We concur:
/S/ JIM REGNIER
/S/ JAMES C. NELSON
/S/ KARLA M. GRAY
Justice Terry N. Trieweiler specially concurring in part and dissenting in part.
35 I concur with the majority's conclusion that the preemptive right of first
refusal claimed by the plaintiffs is void as an unreasonable restraint on
alienation. I dissent from that part of the majority opinion which holds that the
restrictive covenants agreed upon by the Tellers and Urquharts as partial
consideration for the transfer of real estate among them are unenforceable.
36 The real estate contract executed by the parties included the following
relevant provisions:
IT IS SPECIFICALLY AGREED by the parties hereto that there shall
be no construction on the property except by mutual written agreement
between the parties. But it is agreed that a 2-car garage with reasonable shop
facilities may be erected near the pump house which shall be of the same
quality and style as the pump house.
. . . .
BUYERS SPECIFICALLY AGREE that they will not sell or contract
to sell portions of the above described property, although nothing in this
paragraph contained shall prevent the assignment of this contract or the sale
of said premises as a unit.
. . . .
. . . [T]he failure of sellers to insist in any one instance or more upon
the performance of any of the covenants or conditions of this contract or of
exercising any right or privilege herein contained, shall not be construed as
thereafter waiving any such covenants, conditions, rights, or privileges, but
the
same shall continue and remain in full force and effect, and it is expressly
agreed that there are no promises, agreements or understanding or
representations of any kind other than those contained in this written
agreement, and that no agent has or had any authority to obligate the sellers by
any promises, stipulations or conditions not herein expressed.
The covenants and conditions hereof run with the land and are binding
upon the heirs, executors, administrators and assigns of the parties hereto.
37 The majority holds, without explaining the basis for its conclusion, that
the parties did
not intend the restrictive covenants to be a collateral agreement and, therefore,
that the
contract for deed merged with the unrestricted warranty deed. The majority does
exactly
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what the very terms of the contract prohibit when it assumes that the parties
intended
something other than indicated by the plain language of their agreement. The plain
language
of the parties' agreement provides for restrictions which "run with the land and are
binding
upon the heirs, executors, and assigns of the parties hereto."
A covenant running with the land is one so relating to the land, that its
benefit or obligation passes with the ownership irrespective of the consent of
subsequent parties.
In order for a covenant to run with the land, the grantor and grantee
must intend that the covenant run with the land, that the covenant touch and
concern the land, and that there be privity of estate between the original
parties
to the covenant, the original parties and the present disputants, or between the
party claiming the benefit of the covenant and the party who rests under the
burden.
In addition, the covenant must be in writing, must have been
enforceable between the original parties, and the successor to the burden must
have notice.
Where the intention of the parties is the determining factor, such intent
will be ascertained from the facts, as appear from the grant itself and the
surrounding circumstances.
21 C.J.S. Covenants 25 (1990).
38 Section 70-17-201, MCA, establishes as a matter of statutory law that certain
covenants run with the land in Montana. It provides:
Certain covenants contained in grants of estates in real property are
appurtenant to such estates and pass with them so as to bind the assigns of the
covenantor and to vest in the assigns of the covenantee in the same manner as
if they had personally entered into them. Such covenants are said to run with
the land.
39 Section 70-17-203(1), MCA, explains which covenants run with the land in
Montana.
It provides that "[e]very covenant contained in a grant of an estate in real
property, which is
made for the direct benefit of the property or some part of it then in existence,
runs with the
land."
40 In this case, the contract for deed executed by Tellers and Urquharts, when
filed with
the Clerk and Recorder in Ravalli County, satisfied all of the necessary
prerequisites to bind
the land conveyed by Tellers and to provide notice to subsequent purchasers.
41 Furthermore, this Court has not had difficulty in the past with the argument
that a
subsequent warranty deed which includes no restrictions on the use of land
supersedes an
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earlier agreement which placed restrictions on the use of that same land. In Kosel
v. Stone
(1965), 146 Mont. 218, 404 P.2d 894, the owners of land near Billings, prior to the
sale of
that land, entered into an agreement with the seller entitled "declaration of
restrictions"
which provided that no lot in what was about to be a subdivision could be used for
other than
residential purposes. That declaration was filed in the clerk and recorder's
office. The lots
were subsequently conveyed by a deed which made no reference to the declaration of
restrictions. The property was later conveyed to Stone by deed which made no
mention of
building or use restrictions. When neighbors eventually learned that Stone wanted
to put a
filling station on his property, they brought suit to have the "declaration of
restrictions"
enforced. The district court did so. On appeal, Stone contended that the only
covenants
which run with the land are those contained in a grant of real estate, and that the
agreement
between the parties which placed restrictions on the use of his land was not a grant
of real
estate. While not specifically referring to principles of merger, this Court held
on appeal that
because the declaration of restrictions affected the title to the real estate it
was, in effect, a
conveyance and that, furthermore, because the document was filed with the clerk and
recorder of Yellowstone County, it was as much a part of the deed as if fully
incorporated
therein by its terms. This Court stated:
Under our recording statutes these instruments [including the
declaration of restrictions] constituted constructive notice of their contents
to
subsequent purchasers. Section 73-201, R.C.M. 1947. Since defendants' deed
described the property as being located in the subdivision according to the
official plat on file, the official plat becomes as much a part of the deed as
if
fully incorporated therein, and the same situation applies to the declaration of
restrictions. See 16 Am.Jur. Deeds, Sec. 273, p. 592.
. . . .
". . . [T]he term conveyance as used in section 1213 of said Code
embraces every instrument in writing by which an estate in real property is
created, aliened, mortgaged, or encumbered or by which the title to any real
property may be affected, except wills. This definition of 'a conveyance of
real property' is sufficiently comprehensive to include the agreement which is
the basis of the present controversy." Wayt v. Patee, 205 Cal. 46, 53, 269 P.
660, 663 [emphasis in original].
Our own court has defined the word "conveyance," as used in sections
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73-201 and 73-203 to include . . . a contract for sale of land, Piccolo v.
Tanaka, 78 Mont. 445, 451, 253 P. 890 . . . .
Kosel, 146 Mont. at 222-23, 404 P.2d at 896-97 (emphasis added).
42 Likewise, the contract for deed executed by Tellers and Urquharts was a
conveyance
of an interest in land which included restrictions on Urquharts' use of the land
conveyed.
That contract, including those restrictions, was filed with the clerk and recorder
in Ravalli
County, thereby placing all of the public, including subsequent purchasers, on
constructive
notice of its terms, and they are as binding as if included in the warranty deed
which was
subsequently filed.
43 There is simply no basis for the majority to conclude that the Tellers and
Urquharts
intended that the contract for deed merge with the warranty deed. The best and only
necessary evidence of the parties' intention is the plain language of their contract
for deed
which provides that the restrictions therein on Urquharts' use of the land run with
the land
and are binding on Urquharts' successors. Where the language of the contract is
clear, the
court has no authority to contradict those terms by assuming that the parties
intended
something else. See Carbon County v. Dain Bosworth, Inc. (1994), 265 Mont. 75, 87,
874
P.2d 718, 726; First Security Bank of Anaconda v. Vander Pas (1991), 250 Mont. 148,
153,
818 P.2d 384, 387. Furthermore, had the parties chosen to do what the majority has,
in
effect, done for them, they could have stated, as Urquharts did in subsequent
conveyances,
that restrictions on use of the property being conveyed are limited to the term of
the contract
for deed. The fact that they included such a provision in subsequent contracts by
which they
conveyed parts of the land in question makes clear that the parties to this contract
understood
the significance when they stated a contrary intention.
44 The fact that the remedies provided for breach in the contract for deed were
exclusive
to the contracting parties is of no significance. The remedies provided for breach
in the
contract (termination of the contract and forfeiture of rights) do not include all
of the
remedies available for breach of a contract, and there is nothing in the contract
which would
preclude enforcement of other remedies, such as injunctive relief or damages for or
against
either of the parties' successors in interest.
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45 I do agree with the District Court that principles of laches bar enforcement of
the land
use restrictions against those persons who violated them prior to the date on which
Tellers'
counterclaim was filed.
Laches exists where there has been an unexplainable delay of such duration
or character as to render the enforcement of an asserted right inequitable, and
is appropriate when a party is actually or presumptively aware of his rights but
fails to act.
Murray v. Countryman Creek Ranch (1992), 254 Mont. 432, 435-36, 838 P.2d 431,
433.
46 However, I do not believe the doctrine of laches, nor the notice provision in
the
enforcement part of the contract for deed, preclude future enforcement of the
contract's terms
and prevention of future violations. This is so because of the specific nonwaiver
provision
in the agreement.
47 For these reasons, I dissent from that part of the majority opinion which holds
that
those restrictions in the contract for deed which limit the use of the land conveyed
to
Urquharts are unenforceable. I would reverse that part of the District Court
judgment;
however, I would limit enforcement to future violations.
48 I otherwise concur with the majority opinion.
/S/ TERRY N. TRIEWEILER
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