Olsen v. Milner

April 23 2012

DA 11-0464

IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 88

GARY OLSEN,

Plaintiff and Appellee,

v.

NEIL MILNER and SETH MILNER,

Defendants and Appellants.

APPEAL FROM: District Court of the Nineteenth Judicial District,
In and For the County of Lincoln, Cause No. DV 10-72
Honorable James B. Wheelis, Presiding Judge

COUNSEL OF RECORD:

For Appellants:

Jay Forsyth, Attorney at Law; Libby, Montana

For Appellee:

Doug Scotti; Morrison & Frampton, PLLP, Whitefish, Montana

Submitted on Briefs: February 29, 2012

Decided: April 23, 2012

Filed:

__________________________________________
Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.

¶1 Appellants Neil and Seth Milner appeal from the District Court for the Nineteenth

Judicial District’s grant of a mandatory injunction, abatement, and $10,000 damages to

Appellee Gary Olsen (Olsen) for his claims of private nuisance and trespass.

¶2 We restate the issues as follows:

¶3 Issue one: Did the District Court err in determining that Olsen’s claims were not

barred by res judicata?

¶4 Issue two: Did the District Court err in determining that Olsen’s claims were not

barred by equitable estoppel or waiver?

¶5 Issue three: Did the District Court err in determining that Milner was liable to

Olsen for trespass?

¶6 Issue four: Is Olsen entitled to attorney fees and costs?

FACTUAL AND PROCEDURAL BACKGROUND

¶7 This appeal arises from a dispute between two neighboring property owners in

Libby, Montana, regarding a workshop addition to the home of Seth Milner and his father

Neil (Milner). The record demonstrates that Seth did not participate in the litigation, thus

we will refer to Neil as “Milner” in the singular.

¶8 In 2007, Milner began construction of a 16 foot by 14 foot workshop addition to

his house. Based upon a sketch, the Libby building inspector issued Milner a permit to

cover construction of the addition. The sketch did not include property line boundaries

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even though Milner had commissioned a survey and staked boundary lines in anticipation

of the project.

¶9 Libby municipal ordinances require seven-foot setbacks from common boundary

lines for permanent structures and three-foot setbacks for outbuildings. The Milner house

itself violates the city’s seven-foot setback requirement, but was grandfathered in when

the ordinance was adopted. The Libby building inspector performed an initial inspection

of the addition on June 7, 2007, and informed Milner that the addition violated the city’s

seven-foot setback requirement. Completion of the structure would require either moving

the addition, obtaining a variance from the city, or purchasing property from Olsen in

order to satisfy the ordinance. Milner continued construction, at one point telling the

building inspector that he had reached an agreement with Olsen to purchase the property

necessary to satisfy the setback requirement. However, no such agreement had been

reached at that time, and Milner’s first contact with Olsen regarding the addition did not

occur until the project was nearly completed.

¶10 Olsen has lived with his mother in their house for nearly 40 years, and is

developmentally disabled. Olsen’s brother, Brian, lives in Kalispell and has power of

attorney over Olsen’s affairs. When the addition to the Milner property was framed and

had drywall installed, Brian became aware of the project and contacted the Libby

building inspector regarding setback requirements. The brothers then contacted their

neighbors on September 2, 2007, to discuss selling them a strip of land so that the

building would be in compliance.

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¶11 The parties reached an initial agreement to sell a five-foot-wide strip of Olsen’s

property on September 3, 2007. However, Milner learned the next day that the setback

requirement was seven feet—not the five feet that the parties initially believed. The

brothers then agreed to sell seven feet for the same price of $5,000. On December 17,

2007, the parties executed all transaction documents, including a warranty deed and

escrow instructions. Nevertheless, they continued to disagree about what the terms of the

agreement required from each of the parties.

¶12 Olsen maintained a shed roughly three feet from the parties’ common boundary

line. He asserted that the agreement allowed him to keep his shed where it was until he

died or sold the property. Milner contended the agreement allowed Olsen to continue his

use of the property, but required him to move the shed. The warranty deed for the

transaction allowed for Olsen to maintain his fence and “other improvements” within the

strip for as long as he owned the property, but Milner argued that the deed did not reflect

the parties’ agreement as found in the escrow instructions. In the meantime, snow fell off

of Milner’s roof, damaging Olsen’s fence and destroying his shed. The brothers replaced

the shed with a sturdier structure the following spring, which Milner demanded be

removed.

¶13 The disagreement culminated in Milner filing suit in district court, seeking specific

performance of the agreement as he presented it, removal of Olsen’s property from the

strip, and damages for trespass and emotional distress. Olsen filed a counterclaim

alleging conversion, emotional distress, and a claim for attorney fees and costs. After a

bench trial, the court’s order, dated July 20, 2009, rescinded and set aside the agreement

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on the basis of “a lack of consent resulting from a mutual mistake of material fact.”

Olsen was ordered to return Milner’s money and costs, and Milner was required to deed

the land back to Olsen. The court also denied Milner’s motion to amend the judgment to

allow him to keep the strip of land.

¶14 Because snow and rain continued to fall from the roof eaves onto his property,

Olsen commissioned a survey that revealed that Milner’s addition encroached .81 feet

past the boundary line of his property. On March 19, 2010, he filed suit alleging trespass

and nuisance. The complaint requested injunctive relief in the form of abatement of the

addition’s encroachment onto his property. Milner raised the affirmative defenses of res

judicata, waiver, and estoppel based upon Olsen’s failure to include these claims as

compulsory counterclaims in the prior action. He also filed a counterclaim for malicious

prosecution. In December 2010, after the second suit proceeded beyond the point of

discovery, Milner began cutting back the roof eaves that encroached over Olsen’s

property.

¶15 A one-day bench trial was held on April 19, 2011. The District Court denied

Milner’s motion to dismiss, and held that he was not entitled to damages for malicious

prosecution. Instead, the court found that Olsen was entitled to $10,000 damages for

Milner’s trespass and promotion of a nuisance. Moreover, Olsen was entitled to

abatement of the nuisance, including removal of a portion of the addition if necessary to

comply with setback requirements. Because the addition was not built in good faith, and

Milner demonstrated reckless indifference to Olsen’s property rights, removal was

mandatory despite any hardship. Milner was given 60 days to remove the addition, or

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Olsen was entitled to provide notice and begin the work himself, with costs and expenses

accruing as further damages. The District Court declined to consider any evidence of

Milner’s remedial measures because of a motion in limine granted prior to trial. This

appeal followed.

STANDARDS OF REVIEW

¶16 This Court reviews the findings of fact of a trial court sitting without a jury to

determine if the court’s findings are clearly erroneous. A district court’s findings are

clearly erroneous if they are not supported by substantial credible evidence. Morton v.

Lanier, 2002 MT 214, ¶ 12, 311 Mont. 301, 55 P.3d 380. We review a district court’s

conclusions of law to determine whether those conclusions are correct. Guthrie v. Hardy,

2001 MT 122, ¶ 24, 305 Mont. 367, 28 P.3d 467.

¶17 We review for an abuse of discretion a district court’s order granting or denying

attorney fees if legal authority exists for the fees. Hughes v. Ahlgren, 2011 MT 189, ¶ 10,

361 Mont. 319, 258 P.3d 439.

DISCUSSION

¶18 Issue one: Did the District Court err in determining that Olsen’s claims were not

barred by res judicata?

¶19 Milner argues that Olsen’s claims should have been fully litigated in the first

action, and were thus barred in the second action according to the doctrine of res judicata.

The District Court concluded that the earlier suit simply resulted in a rescission of the

sale agreement, and that the issues in that case were not “entirely consonant with the

issues here.” Olsen concedes that the addition to the home was the critical factual

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component in the first action, but argues he could not have brought the nuisance and

trespass claims because the survey he commissioned, which was the lynchpin of the

second action, was not completed until after the first suit’s conclusion.

¶20 The doctrine of res judicata, or claim preclusion, bars re-litigation of a claim that a

party has already had the opportunity to litigate. Baltrusch v. Baltrusch, 2006 MT 51, ¶

15, 331 Mont. 281, 130 P.3d 1267. Central to res judicata are the concepts that litigation

must come to an end at some point, and that judicial economy is promoted by a single

action instead of multiple suits. See Touris v. Flathead County, 2011 MT 165, ¶ 12, 361

Mont. 172, 258 P.3d 1 (citations omitted).

¶21 Res judicata applies when four elements are satisfied:

1. The parties or their privies are the same;
2. The subject matter of the present and past actions is the same;
3. The issues are the same and relate to the same subject matter; and
4. The capacities of the parties are the same to the subject matter and issues
between them.

Touris, ¶ 13.

¶22 Olsen concedes the first element, that the parties are the same. However, he

challenges the remaining three elements, which we address in turn.

a. Subject matter

¶23 This element of res judicata is concerned with whether the two actions arise from

the same underlying basis. Wiser v. Mont. Bd. of Dentistry, 2011 MT 56, ¶¶ 12-13, 360

Mont. 1, 251 P.3d 675. Milner contends that the first suit was specifically based upon

damages Olsen suffered due to the location of the addition construction. Milner is correct

in that the location of the addition provided the necessity to purchase the strip of land,

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and it also gives rise to the present causes of action. We conclude that the subject matter

that gave rise to the first suit is the same subject which forms the basis of the present

action.

b. Identity of the issues

¶24 The District Court found that Olsen’s claims were not barred by res judicata

because the first suit resulted in a rescission of the contract to purchase the land, but

otherwise the issues between the cases were dissimilar. When determining whether res

judicata applies, the key is whether the issues are the same. Baertsch v. Co. of Lewis &

Clark, 223 Mont. 206, 210, 727 P.2d 504, 506 (1986). Unless it clearly appears that the

precise question involved in the second case was raised and determined in the former, the

judgment is no bar to the second action. Phelan v. Lee Blaine Enters., 220 Mont. 296,

299, 716 P.2d 601, 603 (1986) (quotation omitted). In the first suit, Milner sought

specific performance of the escrow instructions and removal of Olsen’s shed. Olsen

counterclaimed seeking rescission of the sale agreement and damages for emotional

distress and his ruined shed. In the present suit Olsen pursued claims for nuisance,

trespass, and injunctive relief seeking abatement of the offending structure. Milner

counterclaimed for malicious prosecution. Clearly, the issues raised in the second case

were not raised or determined in the first case.

¶25 Milner argues, however, that res judicata will also bar an action for a claim which

a party had an opportunity to litigate in a prior action, but did not do so. See Fisher v.

State Farm Gen. Ins. Co., 1999 MT 308, ¶ 10, 297 Mont. 201, 991 P.2d 452. While this

is correct, Olsen could not have technically presented the issues in the former case as he

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does now. Olsen’s ability to enforce possessory rights to the strip of land did not accrue

until the strip of land was deeded back to him pursuant to the court order effecting

rescission. See e.g. Traders State Bank v. Mann, 258 Mont. 226, 240, 852 P.2d 604, 613

(1993), overruled on other grounds, Turner v. Mountain Eng'g & Constr., 276 Mont. 55,

915 P.2d 799 (1996) (defendants could not have raised contract-related defenses until

conclusion of prior bankruptcy proceeding). In other words, Olsen’s trespass claim did

not exist as a matter of law while Milner held title to the strip. Moreover, Olsen was not

aware of the trespass claim at the time of the first suit because he had yet to commission

the survey of his property.

¶26 We hold that Milner has failed to demonstrate that the issues are the same and

relate to the same subject matter.

c. Capacities of the parties

¶27 As we stated above, in reference to the subject matter and the issues in both

actions, the respective capacities of Milner and Olsen changed after the rescission of the

purchase agreement for the strip of land. Olsen’s claims in the present case are

necessarily tied to his possessing title to the strip of land. He did not have the capacity to

bring these claims until the end of the prior litigation.

¶28 We conclude that the res judicata criteria are not met here, and Olsen’s claims are

not barred.

¶29 Issue two: Did the District Court err in determining that Olsen’s claims were not

barred by equitable estoppel or waiver?

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¶30 Milner argues that Olsen waived his claims when he initially sold the strip of

property, only to seek rescission later. He claims that he acted in reliance upon the

promised sale of the strip of land, and therefore Olsen waived his right to insist upon

compliance with the city’s setback provisions. Olsen contends that his attempted sale of

the strip of land constituted nothing other than an attempt to help Milner “fix his own

mistakes,” and that the rescission simply restored Milner to his position prior to the sale;

that is to say, already out of compliance with setback requirements.

¶31 Waiver is a voluntary and intentional relinquishment of a known right or claim. It

may be proven by express declarations or by a course of conduct which induces the belief

that the intent and purpose was waiver. McKay v. Wilderness Dev., LLC, 2009 MT 410,

¶ 28, 353 Mont. 471, 221 P.3d 1184. To establish a knowing waiver, the party asserting

waiver must demonstrate the other party’s knowledge of the existing right, acts

inconsistent with that right, and resulting prejudice to the party asserting waiver.

Edwards v. Cascade Co., 2009 MT 229, ¶ 30, 351 Mont. 360, 212 P.3d 289 (citations

omitted). The claims of trespass and nuisance did not exist as they do now at the time of

the first suit. Thus, Olsen could hardly have waived them. Moreover, considering the

subject matter of the first litigation, it is impossible to conclude that Olsen knowingly,

voluntarily, and intentionally relinquished his right to object to the problems stemming

from Milner’s addition construction. His express objections were the reason the two

parties could not reach a mutual agreement on the terms of the land sale.

¶32 In order to establish his claim of estoppel, Milner is required to prove each of six

elements of that defense to Olsen’s claims: (1) the existence of conduct, acts, language,

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or silence amounting to a representation or a concealment of a material fact; (2) these

facts must be known to the party estopped at the time of his conduct, or at least the

circumstances must be such that knowledge of them is necessarily imputed to him; (3) the

truth concerning these facts must be unknown to the other party claiming the benefit of

the estoppel at the time it was acted upon by him; (4) the conduct must be done with the

intention, or at least the expectation, that it will be acted upon by the other party, or under

circumstances both natural and probable that it will be so acted upon; (5) the conduct

must be relied upon by the other party and, thus relying, he must be led to act upon it; and

(6) he must in fact act upon it in such a manner as to change his position for the worse.

Edwards, ¶ 31.

¶33 Olsen neither represented, nor concealed any material fact as related to the first

element. The location of the common boundary lines only became known to Olsen

subsequent to the first lawsuit. To the contrary, the trial courts in both actions found that

Milner knew the boundary lines of his property before he began construction, and was

informed of the setback provisions in its early stages. Concerning elements four through

six, the record demonstrates that Olsen’s offer to sell the strip of land in no way

influenced Milner’s intention to complete the addition construction. As found by the

District Court, Milner’s first discussion with Olsen and his brother did not take place

until “the addition was well on the way to completion.”

¶34 We conclude that the District Court did not err in finding that Olsen neither

waived, nor was equitably estopped from pursuing his claims.

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¶35 Issue three: Did the District Court err in determining that Milner was liable to

Olsen for trespass?

¶36 Milner argues that he was unaware at the time of construction that the roof eaves

of his addition encroached onto Olsen’s property, and therefore he could not have had the

requisite intent for the tort of intentional trespass. However, the District Court did not

find that Milner had intentionally trespassed on Olsen’s land. Instead, the court found

that the “encroachment is the result of Milner’s grossly negligent and willful ignorance of

the location of the parties’ property line.”

¶37 In addition to the tort of intentional trespass, we also recognize the tort of reckless

or negligent trespass. Sunburst Sch. Dist. No. 2 v. Texaco, Inc., 2007 MT 183, ¶ 51, 338

Mont. 259, 165 P.3d 1079. The Restatement (Second) of Torts, § 165, states in part:

One who recklessly or negligently . . . enters land in the possession of
another or causes a thing or third person so to enter is subject to liability to
the possessor if, but only if, his presence or the presence of the thing or the
third person upon the land causes harm to the land, to the possessor, or to a
thing or a third person in whose security the possessor has a legally
protected interest.

Restatement (Second) of Torts § 165 (1965); see also Guenther v. Finley, 236 Mont. 422,

425, 769 P.2d 717, 719 (1989).

¶38 In this case, the District Court specifically concluded that Milner acted “without

good faith and with either the intent to cause harm to Olsen’s property, or the reckless

disregard of Olsen’s property rights.” In doing so, Milner “injuriously affected Olsen’s

property, and lessened Olsen’s personal enjoyment of his property.” Further, the District

Court found that Milner was aware of the property line boundaries before he began

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construction and was again warned of encroachment problems early in the process, yet

still built the addition in a manner that effected trespass and nuisance. We find that the

District Court’s findings were supported by substantial credible evidence, and the court

did not err in determining that Milner was liable to Olsen for trespass.

¶39 Issue four: Is Olsen entitled to attorney fees and costs?

¶40 Olsen argues that Milner’s appeal was taken without substantial or reasonable

grounds, and thus he is entitled to the sanction award of attorney fees and costs pursuant

to M. R. App. P. 19(5). Olsen also bases his request upon what he argues are Milner’s

mischaracterizations of the factual record and the District Court’s findings. Milner cites

to Murphy Homes, Inc. v. Muller, 2007 MT 140, ¶ 90, 337 Mont. 411, 162 P.3d 106, for

the proposition that we generally do not impose sanctions pursuant to M. R. App. P.

19(5) “unless the appeal is entirely unfounded and intended to cause delay or unless

counsel’s actions otherwise constitute an abuse of the judicial system.” In this case, we

hold the appeal was based on substantial and reasonable grounds and not intended to

cause delay. However, M. R. App. P. 19(3)(a) allows costs on appeal to be awarded to

the prevailing party unless otherwise specifically provided in the decision by this Court.

“Taxable costs include costs of reproducing briefs and necessary appendices, costs

incurred in transmission of the record, cost of the reporter’s transcript if necessary for the

determination of the appeal, and the fee for filing the notice of appeal.” M. R. App. P.

19(3)(a). Accordingly, we decline to award Olsen attorney fees, but as the prevailing

party, he is entitled to the costs of his appeal pursuant to Rule 19(3)(a) of the Montana

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Rules of Appellate Procedure. This is a factual matter that must be resolved by the

District Court on remand.

CONCLUSION

¶41 For the foregoing reasons, we affirm the judgment of the District Court and

remand for further proceedings in accordance with this opinion.

/S/ MIKE McGRATH

We concur:

/S/ JAMES C. NELSON
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS

Justice Jim Rice, dissenting.

¶42 On first glance, the Court’s analysis of the distinction between the two actions to

avoid the application of res judicata seems viable. Yet, a closer inspection of how these

two cases were actually pled and tried convinces me that res judicata should apply.

¶43 The Court concludes that Olsen “could not have technically presented the issues in

the former case as he does now.” Opinion, ¶ 25. A comparison of Olsen’s pleadings in

the two actions indicates he essentially did so. The following are quotes:

1. Olsen’s Answer/Counterclaim in Case #1:
Milners had a boundary line adjustment survey conducted . . . . Milners,
knowing the property line, built an addition onto [their lot] that abuts the

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 property line. This violates the City of Libby’s Ordinance 17.12.060 that
states “[t]he minimum width of any side yard shall be seven feet . . . .”

Olsen’s Complaint in Case #2:
Defendants [Milners] surveyed and staked the boundary line between the
properties for the purpose of constructing an addition onto their home. . . .
Defendants built the addition in violation of the city setback requirement
....

2. Olsen’s Answer/Counterclaim in Case #1:
[T]he addition’s roof slopes towards Olsen’s property. . . . [T]he snow
falling from Milnors’ [sic] roof during the winter of 2007/2008 caused
Olsen’s shed to collapse. . . . Milnors [sic] also had the roof pitch so the
snow would fall onto Olsen’s property. In other words, the eaves ran
parallel to Olsen’s property. . . . [T]he snow fell off the Milnors’ [sic] roof
and onto Olsen’s property.

Olsen’s Complaint in Case #2:
Defendants built the addition . . . in such a manner that the eves from the
addition are on or cross the property boundary. Snow from the eves sheds
onto Olsen’s property. . . . During the winter of 2007-2008, snow slid off
of Defendants’ new addition and caved in Olsen’s shed.

3. Relief requested by Olsen in Answer/Counterclaim in Case #1:
That the Court rescind the Contract and return the parties to their original
positions . . . That the Court require Milnors [sic] to build a snow break on
their roof that will prevent the snow from falling onto Olsen’s property . . .
That the Court award Defendant [Olsen] its damages [for conversion] . . . .

Relief requested by Olsen in Complaint in Case #2:
By permitting snow shedding from their new addition and by placing the
addition so close to the property line, Defendants allowed a nuisance to
exist . . . . Plaintiff is entitled to an abatement of the nuisance as well as
damages . . . . Plaintiff is entitled to an order [for trespass] enjoining
Defendants from maintaining their addition in a location too close to or
across the property boundary line.

¶44 Olsen sought damages under a conversion theory in Case #1 and under nuisance

and trespass theories in Case #2. He sought injunctive relief requiring Milners to modify

their property in both cases. The Court, in distinguishing the actions, notes that Olsen’s

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survey was completed after the first suit, and reasons that Olsen “was not aware of the

trespass claim” at the time of the first suit. Opinion, ¶ 25. However, Olsen’s claims in

the second case were not explicitly premised upon the survey, but rather upon Milners

maintaining their addition “too close to or across” the property line “in violation of the

city setback requirement,” similar to his claims in the first case. More importantly, if

Olsen was not aware of the potential trespass during the first case, he should have been.

The boundary line was not only put into play by Olsen in the first case, but he based his

request for relief on it. The burden of knowing where the line was located should be

imputed to him.

¶45 The Court further reasons that Olsen did not have “possessory rights” in the

disputed strip of land until it was deeded back to him after the first case. Opinion, ¶ 25.

However, Olsen claimed such rights during the first case, seeking damages from Milners

for allowing snow to fall “onto Olsen’s property,” and seeking injunctive relief requiring

Milners to alter their building to broadly “prevent the snow from falling onto Olsen’s

property”—not merely to avoid damaging his shed. Olsen sought not only to reclaim the

property by a rescission of the contract, but he also sought relief based upon the

assumption that he held possessory rights to it and that he would own it outright if

rescission was ordered. Although he sought recovery under different theories in each

case, Olsen’s claims were fundamentally identical in both—the issues were the same. To

the extent there was some variation in the claims, Olsen had the opportunity to litigate all

his claims in the first action.

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¶46 Olsen was denied damages and denied injunctive relief in the first case. He did

not appeal. In the second case he repackaged similar claims under new theories and

obtained both damages and the injunctive relief he was denied in the first case. I would

apply res judicata and reverse.

/S/ JIM RICE

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