Case Title: YELLOWSTONE PIINE CO v BIG SKY OF

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Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1980-01-10T00:00:00Z

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No. 14866 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979 YELLOWSTONE PINE CO., Plaintiff and Appellant, VS. BIG SKY OF MONTANA, a Corporation and BIG SKY OF MONTANA REALTY, a Corporation, Defendants and Respondents. Appeal from: District Court of the Eighteenth Judicial District, Honorable W. W. Lessley, Judge presiding. Counsel of Record: For Appellant: McKinley Anderson argued, Bozeman, Montana For Respondents: Brown, Pepper and Kommers, Bozeman, Montana William L. Pepper argued, Bozeman, Montana Boone, Karlberg & Haddon, Missoula, Montana Sam Haddon argued, Missoula, Montana - - - Submitted: December 14, 1979 Decided : 0, 9 86 M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e Court. Appellant Yellowstone Pine Company ( h e r e i n Yellowstone) f i l e d a complaint i n t h e D i s t r i c t Court of G a l l a t i n County. The complaint a l l e g e d breach of a c o n t r a c t between Yellow- s t o n e and respondent Big Sky of Montana, Inc. ( h e r e i n Big Sky). The Honorable W. W. Lessley heard t h e c a s e on March 23, 1979. The District Court found no breach of c o n t r a c t and e n t e r e d f i n d i n g s accordingly. This appeal followed. Appellant Yellowstone and respondent Big Sky e n t e r e d i n t o a c o n t r a c t i n March 1970. Yellowstone i s a lumber company o p e r a t i n g a m i l l a t Belgrade, Montana. Big Sky i s t h e o r i g i n a l developer of t h e Big Sky S k i Resort near Boze- man, Montana. The c o n t r a c t o b l i g a t e d Big Sky t o d e l i v e r a minimum of one m i l l i o n board f e e t of timber p e r year t o Yellowstone f o r a p e r i o d of e i g h t years. The c o n t r a c t r e q u i r e d Yellowstone t o pay Big Sky a set p r i c e f o r t h e lumber a s it was d e l i v e r e d . I n a d d i t i o n , t h e c o n t r a c t gave Yellowstone t h e r i g h t of f i r s t r e f u s a l t o purchase any timber s u i t a b l e f o r lumber manufacturing from c e r t a i n l a n d s then owned by Big Sky and r e f e r r e d t o a s t h e Corcoran lands. The c o n t r a c t r e q u i r e d Big Sky t o n o t i f y Yellowstone i n w r i t i n g of i t s i n t e n t i o n t o s e l l any timber s u i t a b l e f o r lumber manufacturing from t h e Corcoran lands. Yellowstone then had 1 5 days t o match any o f f e r f o r purchase of t i m b e r Big Sky had received. I f Yellowstone d i d so, Big Sky agreed t o sell t h e timber t o Yellowstone. I f Yellowstone d i d n o t match t h e o f f e r , Big Sky could sell t h e timber t o a t h i r d p a r t y . The r i g h t of f i r s t r e f u s a l g r a n t e d t o Yellowstone under t h e c o n t r a c t r a n f o r 1 5 y e a r s from March 3, 1970. The p a r t i e s had t h e con- t r a c t recorded s h o r t l y a f t e r i t s execution. I n May 1976, Big Sky c r e a t e d a wholly owned s u b s i d i a r y named ~ i g Sky of Montana Realty, Inc. ( h e r e i n R e a l t y ) . Realty i s t h e second respondent i n t h i s case. I n June 1976 ~ i g Sky, i n t h e process of g e t t i n g o u t of t h e s k i r e s o r t business, conveyed t h e Corcoran lands t o Realty. Realty agreed t o indemnify Big Sky f o r any claim a r i s i n g o u t of t h e 1970 c o n t r a c t with Yellowstone. Also i n June 1976, Boyne Mountain Lodge, I n c . , a company c o n t r o l l e d by E v e r e t t D. Kircher, acquired a l l t h e s t o c k of Big Sky. I n November 1977, Realty conveyed t h e Corcoran p r o p e r t y t o Lone Peak, Inc., a wholly owned s u b s i d i a r y of Big Sky. Although t h e Corcoran lands w e r e t r a n s f e r r e d back t o a wholly owned s u b s i d i a r y of Big Sky, Kircher, n o t t h e o r i g i n a l developers o f Big Sky, now c o n t r o l l e d Big Sky. Big Sky furnished Yellowstone with no n o t i c e of any of t h e conveyances of t h e Corcoran lands. A l l t h e c o r p o r a t i o n s involved i n t h e purchase of t h e lands d i d , however, have n o t i c e of t h e c o n t r a c t between Big Sky and Yellowstone concerning t h e sale of timber from t h e lands. F u r t h e r , a l l successors i n i n t e r e s t t o Big Sky have performed under t h e t e r m s of t h e c o n t r a c t . From June 1976 t o August 1978, Realty and Lone Peak d e l i v e r e d timber t o Yellowstone t o f u l f i l l t h e c o n t r a c t requirement of d e l i v e r i n g one m i l l i o n board f e e t of lumber t o Yellowstone each year through 1978. I n t h e f a l l of 1978, Boyne received an o f f e r t o purchase some timber from t h e Corcoran lands. Pursuant t o t h e 1970 c o n t r a c t , Boyne o f f e r e d t o Yellowstone t h e r i g h t of f i r s t r e f u s a l t o purchase t h e logs. Yellowstone e x e r c i s e d i t s r i g h t and purchased t h e l o g s i n October 1978. Yellowstone r a i s e s t h e following i s s u e s on appeal: 1. A r e t h e f i n d i n g s of f a c t and conclusions of law e n t e r e d by t h e ~ i s t r i c t Court s o i n c o n s i s t e n t a s t o r e q u i r e r e v e r s a l ? 2. Can land s u b j e c t t o a r i g h t of f i r s t r e f u s a l c o n t r a c t which g r a n t s t o a p a r t y t h e f i r s t r i g h t t o purchase timber s u i t a b l e f o r lumber manufacturing be conveyed t o someone o t h e r than t h e p a r t y e n t i t l e d t o t h e r i g h t of f i r s t r e f u s a l w i t h no n o t i c e t o t h e p a r t y w i t h t h e r i g h t of f i r s t r e f u s a l without committing a breach of c o n t r a c t ? Under i t s f i r s t a l l e g a t i o n of e r r o r , Yellowstone p o i n t s o u t v a r i o u s d i f f e r e n c e s i n t h e terminology used by t h e D i s t r i c t Court i n t h e f i n d i n g s of f a c t and conclusions of law e n t e r e d i n t h i s case. For example, Yellowstone s t a t e s t h a t Finding No. 1 r e f e r s t o "timber s u i t a b l e f o r lumber manufacturing" while Conclusion No. 1 uses t h e language "lumber s u i t a b l e f o r timber manufacture." Yellowstone argues i n c o n s i s t e n c i e s l i k e t h i s i n t h e judgment r e q u i r e r e v e r s a l . Yellowstone a l s o contends t h e conclusions of law en- t e r e d by t h e D i s t r i c t Court c o n t a i n i n t e r n a l i n c o n s i s t e n c i e s . To s u p p o r t t h i s theory, Yellowstone p o i n t s o u t t h a t Conclusion No. I V concludes t h e r e has been no breach of t h e 1970 con- t r a c t . Yellowstone then s t a t e s Conclusions Nos. V and V I i n d i c a t e it i s estopped from claiming breach of t h e c o n t r a c t and has waived any claim f o r breach of c o n t r a c t because Yellowstone accepted s u b s t a n t i a l b e n e f i t s under t h e c o n t r a c t a f t e r breach by respondents. Yellowstone argues t h e s e con- c l u s i o n s a r e i n c o n s i s t e n t , holding no breach on t h e one hand and breach b u t waiver and e s t o p p e l on t h e o t h e r . y ell ow stone contends t h i s inconsistency r e q u i r e s r e v e r s a l . Yellowstone's arguments challenging the findings and conclusions entered by the District Court lack merit. Findings and conclusions of the District Court will not be disturbed if supported by the evidence. Johnson v. Jarrett (1976), 169 Mont. 408, 412, 548 P.2d 144, 147. In deter- mining if the evidence supports the judgment, the evidence must be viewed in the light most favorable to the prevailing party. Johnson, 169 Mont. at 412. Applying that rule to this case, the hypertechnical allegations of error made by Yellowstone do not warrant reversal. Although the findings and conclusions refer to the timber which is the center of the controversy here in several different fashions, the record justifies the use of different terminology. At trial the parties at various points referred to the timber involved here as "green merchantable logs," "merchan- table timber," "timber suitable for lumber manufacture," and "logs." These references in the record provide sufficient evidence to support the use of the terms by the District Court in the findings and conclusions. This is especially true when it is considered that all the above references come from facts stipulated to by the parties. Big Sky and Realty correctly point out that the conclu- sions entered by the District Court do not contain internal inconsistencies. Conclusion IV states respondents did not breach their contract with Yellowstone. Conclusions V and VI state Yellowstone is estopped and has waived its right to claim or allege breach of contract. Conclusions V and VI do not say the contract has been breached. They merely hold that even if a breach of contract had occurred, Yellowstone had no cause of action because it accepted benefits under the contract after the alleged breach. This statement is c o n s i s t e n t w i t h a statement t h a t t h e c o n t r a c t had n o t been breached a t a l l . Since no inconsistency e x i s t s , t h e judg- ment cannot be reversed on t h i s b a s i s . ~ i g Sky and Realty should a l s o p r e v a i l on t h e second i s s u e r a i s e d by t h i s appeal. The q u e s t i o n presented by t h e second i s s u e hinges on a determination o f whether t h e 1970 c o n t r a c t granted Yellowstone an i n t e r e s t i n t h e Corcoran l a n d i t s e l f o r whether t h e c o n t r a c t only gave Yellowstone t h e r i g h t t o purchase a product Big Sky might produce on t h e land. I f Yellowstone obtained a property r i g h t under t h e c o n t r a c t , s e l l i n g t h e Corcoran l a n d s without n o t i c e t o Yellowstone breached t h e r i g h t of f i r s t r e f u s a l c l a u s e of t h e c o n t r a c t . I f , however, Yellowstone o n l y received t h e r i g h t t o purchase a product produced on t h e Corcoran l a n d s , t h e 1970 c o n t r a c t cannot be considered breached u n l e s s t h e product i s s o l d without g i v i n g Yellowstone t h e o p p o r t u n i t y t o purchase t h e product. The problem i n determining i f t h e 1970 c o n t r a c t g r a n t e d Yellowstone a n i n t e r e s t i n t h e Corcoran l a n d s a r i s e s o u t of t h e use of t h e t e r m "timber s u i t a b l e f o r lumber manufactur- ing" i n t h e c o n t r a c t . When a c o n t r a c t g r a n t s a r i g h t t o timber growing on l a n d s , t h e c o n t r a c t normally conveys an i n t e r e s t i n t h e land. Hart v. Anaconda Copper ~ i n i n g Co. (1924), 69 Mont. 354, 360, 222 P. 419, 421; R. M. Cobban Realty Co. v. Donlan (1915), 51 Mont. 58, 65-71, 149 P. 484, 486-488. However, when timber i s severed from t h e l a n d , it becomes p e r s o n a l property. Sorensen v. Jacobson (1951), 125 Mont. 148, 152, 232 P.2d 332, 335. From t h e s e two r u l e s of law, it follows t h a t i f a c o n t r a c t conveys an i n t e r e s t i n growing trees s t i l l a t t a c h e d t o t h e land, t h e c o n t r a c t g r a n t s an i n t e r e s t i n r e a l property. I£ t h e c o n t r a c t g r a n t s an i n t e r e s t i n t h e timber a f t e r severance from t h e l a n d , it only conveys an i n t e r e s t i n personalty. To determine when Yellowstone acquired an i n t e r e s t i n t h e timber from t h e Corcoran l a n d s , t h e t e r m s of t h e con- t r a c t a s an e n t i r e t y must be considered. R. M. Cobban, 51 Mont. a t 65. Viewing t h e c o n t r a c t i n t h i s f a s h i o n , Yellow- s t o n e acquired no r i g h t t o t h e timber u n t i l severed from t h e Corcoran lands. Under t h e c o n t r a c t , Yellowstone had a r i g h t of f i r s t r e f u s a l t o purchase t h e timber i f and when Big Sky decided t o sell timber i n a d d i t i o n t o t h e m i l l i o n board f e e t p e r year it was r e q u i r e d t o d e l i v e r . Nothing i n t h e c o n t r a c t allowed Yellowstone t o compel Big Sky t o l o g timber i n a d d i t i o n t o t h e y e a r l y requirement. Thus, Yellowstone acquired no i n t e r e s t i n t h e timber u n t i l Big Sky decided t o l o g t h e timber and p u t it up f o r s a l e . Then, a f t e r Big Sky had severed t h e timber from t h e land, t h e c o n t r a c t g i v e s Yellowstone a n i n t e r e s t i n t h e timber. A s pointed o u t above, an i n t e r e s t i n t h e timber a f t e r it i s severed from t h e land i s n o t an i n t e r e s t i n r e a l t y . I t o n l y r e p r e s e n t s an i n t e r e s t i n personal property. Under t h i s a n a l y s i s , Yellowstone only had a n i n t e r e s t i n a product from t h e l a n d , n o t t h e land i t s e l f . Therefore, Big Sky and Realty d i d n o t breach t h e c o n t r a c t by conveying t h e land without n o t i c e t o Yellowstone s i n c e Yellowstone had no i n t e r e s t i n t h e land. The c o n t r a c t would o n l y be breach- ed i f t i m b e r from t h e l a n d w e r e s o l d without f i r s t o f f e r i n g t h e timber t o Yellowstone. There i s no evidence t h i s has occurred. On t h e c o n t r a r y , it appears a l l Big Sky's succes- s o r s i n i n t e r e s t have honored t h e r i g h t of f i r s t r e f u s a l p r o v i s i o n of t h e 1970 c o n t r a c t . A s long as they continue t o do s o , Yellowstone has no cause f o r breach of c o n t r a c t a g a i n s t Big Sky o r Realty. Affirmed. We concur: Chief Justice .