Case Title: ADAMS v CHILCOTT

Citation: 

Docket Number: 14592

State: montana

Court: Montana Supreme Court

Date: 1979-07-09T00:00:00Z

Document:
No. 14592 I N 'I'Hl3 s U I ? F E Z ! T J Z COuIiT OF THE: STATE OF mNTANA 1979 K . E . ?DAMS, Plaintiff and Respondent, -VS- WlLLIAMRICHARDcHmxIT, Defendant and Appellant. A p p l fm: D i s t r i c t Court of the Thirteenth Judicial District, Honorable C. B. Sande, Judge presiding. Counsel of Record: For Appellant: Stacey and Nye, Billings, hbntana Jeyrold L. Nye argued, Billings, Pbntana For Respondent: Anderson, Symnes, Brawn, Gerbase, Cebull and Jones, Billings, Pbntana James L. Jones arqued, Billings, Montana Suhnitted: M a y 3, 1979 Decided: j\iL 9 1 9 1 9 - - - L ' Filed: mi- 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. Both p a r t i e s appeal from a d e c l a r a t o r y judgment entered i n t h e ~ i s t r i c t Court f o r Carbon County, t h e Honorable C. B. Sande presiding without a jury. Pursuant t o Rule 2 3 ( h ) , M.R.App.Civ.P., defendant w a s s t i p u l a t e d as a p p e l l a n t and p l a i n t i f f a s respondent. Lying a t t h e r o o t of t h i s appeal i s a 640 a c r e ranch i n Carbon County which was sold by a p p e l l a n t t o respondent. The ranch was formerly p a r t of a l a r g e r property owned by appel- l a n t ' s grandfather. I n 1937 and again i n 1962, t h e grand- f a t h e r obtained water purchase c o n t r a c t s and stock subscrip- t i o n agreements which e n t i t l e d him t o buy c e r t a i n amounts of water from t h e Rock Creek Water U s e r ' s Association. There i s no d i s p u t e t h a t t h e s e r i g h t s w e r e owned i n conjunction with t h e undivided property. The record d i s c l o s e s t h a t t h e only a c t u a l use of water under t h e c o n t r a c t s w a s f o r i r r i g a - t i o n during a b r i e f period i n 1966. Upon t h e death of ap- p e l l a n t ' s grandfather i n 1969, t h e ranch and t h e c o n t r a c t water r i g h t s were divided equally between a p p e l l a n t and h i s cousin. A s t h i s c a s e does not concern t h e c o u s i n ' s " i n h e r i - tance," t h e t e r m s ranch o r property w i l l h e r e a f t e r r e f e r only t o t h a t which "passed" t o appellant. According t o a p p e l l a n t , h i s p o r t i o n of t h e c o n t r a c t water r i g h t s continued t o be owned with t h e ranch. his statement is born o u t by t h e f a c t t h a t when a p p e l l a n t mort- gaged t h e land i n 1969 t h e water r i g h t s were t r e a t e d a s ap- purtenant t o it. Attempts t o s e l l t h e ranch began i n 1971. Over s e v e r a l years it w a s l i s t e d with various a r e a r e a l t o r s and unsuccessful negotiations f o r s a l e w e r e begun with s e v e r a l prospective buyers. The p r i c e sought during t h i s period i s most o f t e n r e f e r r e d t o as being approximately $240,000. Appellant t e s t i f i e d t h a t sometimes t h i s f i g u r e included t h e c o n t r a c t water r i g h t s but sometimes d i d not. Further, he s a i d he never intended t o include a gravel d e p o s i t located on t h e ranch. This l a s t a s s e r t i o n was contradicted by an a r e a r e a l t o r who t e s t i f i e d t h a t a p p e l l a n t pointed t h e g r a v e l p i t o u t " a s a real a s s e t of t h e ranch" and i n d i c a t e d it was in- cluded with t h e rest of t h e property. I n l a t e 1975 respondent o f f e r e d t o buy t h e property, including " t h e g r a v e l p i l e s " and " a l l w a t e r r i g h t s " f o r $185,000. Even though a l o c a l bank, a s holder of t h e mort- gage on t h e property, p u t pressure on a p p e l l a n t t o accept t h e o f f e r , he r e j e c t e d it a s too low. A f t e r t h i s occurred, t h e n e g o t i a t i o n s between t h e p a r t i e s w e r e conducted by a t t o r n e y - r e a l t o r William Morse who represented respondent a s an undisclosed p r i n c i p l e . Morse t e s t i f i e d t h a t t h e c a t a l y s t f o r t h e s a l e was a p p e l l a n t ' s r e p r e s e n t a t i o n t h a t t h e r e w a s a c o n t r a c t with a t h i r d p a r t y f o r t h e sale of gravel from t h e ranch. Upon learning t h i s , respondent o f f e r e d $201,500 f o r t h e property. Appellant agreed, and a buy-sell agreement containing t h e following language w a s prepared and signed by both p a r t i e s : "All of t h e seller's r i g h t s , t i t l e s and i n t e r e s t i n and t o t h e above-described r e a l property s h a l l be deemed included i n t h i s s a l e , including a l l water, d i t c h and i r r i g a - t i o n r i g h t s which t h e seller has c u r r e n t l y used on t h e premises. "It is agreed t h a t t h e p a r t i e s a r e not aware of t h e exact s t a t u s of t h e o i l , gas and mineral r i g h t s on t h e premises a t t h e p r e s e n t t i m e . However seller agrees t o convey buyer 50% of a l l t h e o i l , gas and minerals on a l l t h e prem- ises i f seller owns a t l e a s t 50% thereof; i n t h e event seller owns less than 50% of a l l t h e minerals on a l l t h e lands he hereby agrees t o convey a l l such o i l , gas and mineral r i g h t s upon t h e premises a s he does own." A c o n t r a c t f o r deed was prepared by a p p e l l a n t ' s a t t o r - ney and signed by t h e p a r t i e s on May 11, 1976. I t made no mention of w a t e r r i g h t s but did include a clause dealing with t h e minerals i n s u b s t a n t i a l l y t h e same language a s t h e buy-sell agreement. Before t h e c o n t r a c t was signed t h e p a r t i e s disagreed as t o whether a p p e l l a n t was t o reserve 50% of t h e sand and gravel r i g h t s . They completed t h e sale b u t executed a supplementary agreement t o t h e e f f e c t t h a t t h e sand and gravel r i g h t s would be s e t t l e d l a t e r . A n a s s o c i a t e of a p p e l l a n t ' s attorney handled t h e de- t a i l s of t h e transaction and wrote a letter t o Morse which reads: "The buy-sell agreement does not s p e c i f i c a l l y set f o r t h t h e manner i n which t h e water i s t o be t r a n s f e r r e d , b u t I propose t h a t w e handle t h a t aspect a s follows: M r . - C h i l c o t t w i l l -- as- s i g n t o M r . Adams both t h e stock purchase --- -- agreements and water purchase c o n t r a c t s which he holds. M r . Adams w i l l then execute an as- - signment of those r i g h t s back t o M r . C h i l c o t t , which w i l l be held i n escrow f o r use i n t h e event of d e f a u l t . I f e e l t h i s arrangement is b e t t e r f o r your c l i e n t than merely placing t h e assignments from M r . C h i l c o t t t o M r . Adams i n escrow s i n c e t h e stock i n t h e Water Asso- c i a t i o n must be voted by i t s record owner, and I assume t h a t M r . Adams would not want t o wait t h e l i f e of t h e c o n t r a c t t o become record owner. The t r a n s f e r of t h e water c o n t r a c t agreements r e q u i r e s approval by t h e Board of Directors of t h e Water Association, b u t I have been i n contact with t h a t organization and a n t i c i p a t e no problems on t h a t end whatsoever." (Emphasis added.) Morse t e s t i f i e d a s follows: "Q. Did you have occasion t o discuss with M r . Barnard, attorney i n M r . T o l l i v e r ' s o f f i c e , a s t o how the water would be transferred? A. I did. "Q. Was t h e r e any question with r e s p e c t t o your conversation, e i t h e r before o r a f t e r t h i s l e t t e r with M r . Barnard, a s t o whether o r not t h e Cooney D a m [contract] water w a s t o be as- signed t o M r . Adams a s indicated i n M r . Barnard's l e t t e r ? A. Not i n t h e l e a s t , w e had gone over it i n d e t a i l with h i s o f f i c e , w e a l s o had some of t h e Cooney Dam, c a l l it Rock Creek Water Association, o r something l i k e t h a t , forms, t h a t are t o be used f o r t h a t s o r t of thing, and w e discussed it i n d e t a i l ; it w a s purely a perfunc- tory matter t h a t needed t o be done a s f a r a s I was concerned, and I was l e f t with t h e impres- s i o n t h a t w a s what he thought also." O n t h e day t h e c o n t r a c t was executed, respondent de- posited $57,500 i n escrow with i n s t r u c t i o n s not t o r e l e a s e it u n t i l adequate evidence of t i t l e w a s provided. Although t h e escrow money was released approximately two months l a t e r , we have not been presented with any information a s t o whe- t h e r evidence of t i t l e w a s a c t u a l l y presented. Respondent r a i s e d hay on the ranch i n 1976 and harvested tons i n t h r e e c u t t i n g s . The c o n t r a c t water was not needed t h a t year as o t h e r decreed water was s u f f i c i e n t . The next year, respondent spread f e r t i l i z e r on h i s hay pasture i n hopes of obtaining a 300 ton yield. The summer was par- t i c u l a r l y dry and t h e decreed water w a s not enough t o maxi- mize production. Appellant denied t h a t t h e c o n t r a c t water r i g h t s had been t r a n s f e r r e d and would not allow respondent t o have any of t h a t water u n t i l l a t e i n t h e summer. Only 68 tons of hay w a s c u t . C a t t l e w e r e allowed t o graze on p a r t of t h e crop land because, a s respondent a s s e r t s , t h e water came too late and t h e crop w a s already ruined. Ap- p e l l a n t contends t h e grazing c a t t l e w e r e t h e cause of t h e crop l o s s . I n August 1976 respondent f i l e d a declaratory judgment a c t i o n with regard t o t h e sand and gravel. The complaint was amended i n January 1978 and sought damages f o r appel- l a n t ' s f a i l u r e t o t r a n s f e r t h e water purchase c o n t r a c t s as w e l l a s f o r t h e crop damage alleged t o have been caused by t h a t f a i l u r e . Appellant answered, a s s e r t i n g a 50% i n t e r e s t i n t h e sand and g r a v e l and denying t h e t r a n s f e r of t h e water purchase c o n t r a c t s . After a nonjury t r i a l and pursuant t o f i n d i n g s of f a c t and conclusions of l a w , judgment was entered d e c l a r i n g respondent t o own t h e c o n t r a c t water r i g h t s buy only 50% of t h e sand and gravel. I n addition, a p p e l l a n t was found t o be l i a b l e f o r t h e crop damage caused by withholding t h e water and w a s ordered t o execute a warranty deed t o t h e premises. W e affirm. On appeal t h e following i s s u e s have been presented: 1. Whether t h e D i s t r i c t Court e r r e d i n ordering appel- l a n t t o execute a warranty deed. 2. Whether t h e D i s t r i c t Court e r r e d i n d e c l a r i n g re- spondent and a p p e l l a n t t o each own 50% of t h e sand and gravel. 3. Whether t h e D i s t r i c t Court e r r e d i n d e c l a r i n g t h e r i g h t s represented by t h e water purchase c o n t r a c t s t o be owned by respondent. 4. Whether t h e award of damages f o r crop l o s s was e r r o r . 5. Whether t h e D i s t r i c t Court e r r e d i n imposing on each p a r t y t h e duty t o pay i t s c o s t s and a t t o r n e y f e e s . W e note t h a t a p p e l l a n t counterclaimed f o r damages in- curred as a r e s u l t of t h e nonrelease of t h e escrow money. On appeal it is argued t h a t t h e t r i a l judge e r r e d i n n o t de- c i d i n g t h e i s s u e . N o evidence w a s presented on t h i s a s p e c t of t h e case, and we w i l l n o t consider it. Mont. Ass'n of Underwriters v. S t a t e (1977), Mont. , 563 P. 2d 577, 581, 34 St.Rep. 297, 302. The f i r s t i s s u e i s t h e propriety of t h e order t o appel- l a n t t o execute and d e l i v e r a warranty deed. The c o n t r a c t f o r deed c a l l e d f o r t h e delivery of such a deed i n escrow. I n addition t o t h e s p e c i f i c r e l i e f prayed f o r i n h i s com- p l a i n t , respondent sought "such o t h e r r e l i e f a s t o t h e Court may seem proper." W e note t h a t c o u r t s have " t h e power t o g r a n t complete r e l i e f under [ t h e i r ] equity power." Foy v. Anderson (1978), Mont. , 580 P.2d 1 1 4 , 116, 35 St.Rep. 811, 814. N o reason has been brought t o our a t t e n - t i o n why a warranty deed should not be executed and t h i s portion of t h e order w a s within t h e t r i a l c o u r t ' s jurisdic- tion. W e next t u r n t o t h e a s s e r t e d reservation by a p p e l l a n t of 50% of t h e sand and gravel r i g h t s . I n both t h e buy-sell agreement and c o n t r a c t f o r deed, 50% of a p p e l l a n t ' s " o i l , gas and mineral r i g h t s " w e r e reserved t o him i f , t o begin with, he owned more than 50% thereof. To be e f f e c t i v e , a reservation must be expressed. Section 67-1523, R.C.M. 1947, now s e c t i o n 70-1-520 MCA. There being no mention of sand and gravel on t h e f a c e of t h e document, t h e only way any r i g h t s t h e r e t o can be reserved is i f they a r e included i n t h e t e r m " o i l , gas and mineral." W e recognize t h a t t h e r e is a s p l i t of a u t h o r i t y on t h e question, 54 Am.Jur.2d ~ i n e s and Minerals 58, p. 192, b u t decline t o announce an appli- cable r u l e i n Montana. The s p l i t of a u t h o r i t y , t h e volumi- nous l i t i g a t i o n t h e i s s u e has caused and t h e absence of per- t i n e n t Montana case law i n d i c a t e t h a t t h e t e r m "mineral", as applied t o sand and gravel, i s inherently ambiguous. A s such, e x t r a care should be taken t o expressly include o r exclude sand and gravel from t h e term "mineral". Where an ambiguous t e r m is used, t h e i n t e n t of t h e par- ties w i l l govern i t s construction and e x t r i n s i c evidence can be used t o discover t h a t i n t e n t . H i l l C a t t l e Corp. v. K i l l o r n (1927), 79 Mont. 327, 340-41, 256 P. 497, 502. Appellant's mother and g i r l f r i e n d t e s t i f i e d t h a t a t one p o i n t i n t h e negotiations f o r sale, Morse asked them t o s t e p a c r o s s t h e street with a p p e l l a n t f o r coffee while he conferred with t h e undisclosed p r i n c i p l e . Upon t h e i r r e t u r n he informed them t h e p r i n c i p l e would go half and half on t h e minerals and sand and gravel. This i s s u f f i c i e n t evidence upon which t o conclude t h a t t h e p a r t i e s intended t h e t e r m "mineral" t o include sand and gravel. The next question f o r our consideration p e r t a i n s t o t h e t r a n s f e r of t h e c o n t r a c t water r i g h t s . The phrase "All of t h e seller's r i g h t s , titles and i n t e r e s t i n and t o t h e above-described real property s h a l l be deemed included i n t h i s s a l e , including a l l w a t e r , d i t c h and i r r i g a t i o n r i g h t s which t h e s e l l e r has c u r r e n t l y used on t h e premises," ap- pearing i n t h e buy-sell agreement i s t h e only reference t o w a t e r r i g h t s . It i n d i c a t e s what i s t o be t r a n s f e r r e d r a t h e r than what is t o be r e t a i n e d and because it does n o t expressly except t h e c o n t r a c t water r i g h t s , it cannot r e s e r v e them. Section 67-1523, R.C.M. 1947, now s e c t i o n 70-1-520 MCA. The c o n t r a c t water w a s used i n 1966 t o i r r i g a t e t h e land and w a s thus b e n e f i c i a l l y used i n connection with t h e ranch. By s t a t u t e , s e c t i o n 67-211, R.C.M. 1947, now s e c t i o n 70-15- 105 MCA, and by a long l i n e of cases, t h e most f i t t i n g of which i s Schwend v. Jones (1973), 163 Mont. 4 1 , 515 P.2d 89, t h e l a w is w e l l s e t t l e d i n Montana t h a t when a thing i s used f o r t h e b e n e f i t of land, it i s deemed appurtenant t o t h e land. I t i s accepted t h a t an appurtenant water r i g h t may be t r a n s f e r r e d a p a r t from t h e land which it b e n e f i t s . But, i f t h e property i s t r a n s f e r r e d without an express r e s e r v a t i o n of t h e appurtenant water r i g h t s , they accom- pany t h e land. Section 67-1523, R.C.M. 1947, now s e c t i o n 70-1-520 MCA; Schwend, supra, 163 Mont. a t 45; Yellowstone V. Co. v. Asso. Mtg. I n v e s t o r s (1930), 88 Mont. 73, 84, 290 P. 255, 70 A.L.R. 1002. This is as t r u e f o r c o n t r a c t r i g h t s a s it i s f o r appropriated o r decreed r i g h t s . Schwend, supra, 163 Mont. a t 45. I n a d d i t i o n , a p p e l l a n t , a c t i n g through h i s a t t o r n e y , o u t l i n e d how t h e c o n t r a c t r i g h t s would be t r a n s f e r r e d . This c r e a t e d a circumstance which l e d respondent t o a c t t o h i s detriment i n r e l i a n c e on t h e representation. Appellant i s thus estopped from a s s e r t i n g t h a t t h e r i g h t s i n question w e r e n o t t r a n s f e r r e d . Smith v. Krutar (1969), 153 Mont. 325, Having determined t h e water r i g h t s w e r e t r a n s f e r r e d with t h e ranch, it follows t h a t any withholding of them by a p p e l l a n t was wrongful and t h a t he i s l i a b l e f o r t h e damage caused by h i s a c t . The t r i a l c o u r t f i x e d damages a t $11,368 and on review, our function i s t o determine i f t h e r e i s s u b s t a n t i a l c r e d i b l e evidence t o support t h e finding. Cameron v. Cameron (1978) , Mont. , 587 P.2d 939, 945, 35 St-Rep. 1723, 1729. Respondent's son-in-law t e s t i f i e d t h a t c a t t l e w e r e grazed i n t h e hay p a s t u r e only a f t e r t h e crop was ruined. There w a s testimony t h a t t h e average value per ton of hay w a s $70. Respondent t e s t i f i e d t h a t h i s production c o s t was $21 p e r ton. This i n d i c a t e s a $49 per ton l o s s . Respondent f u r t h e r t e s t i f i e d t h a t with t h e f e r t i l i z e r he applied, t h e land should have yielded 300 tons of hay. The contention t h a t it w a s impossible f o r respondent t o spread t h i s much f e r t i l i z e r f o r t h e c o s t incurred is made f o r t h e f i r s t t i m e on appeal and cannot be considered by t h i s Court. Respon- d e n t was a b l e t o c u t only 68 tons of hay and thus l o s t 232 tons. A t $49 p e r ton, t h i s comes o u t t o $11,368, t h e amount of t h e judgment. There is s u b s t a n t i a l c r e d i b l e evidence t o support t h e f i n d i n g t h a t damage i n t h e amount of t h e judgment was caused by a p p e l l a n t wrongfully withholding t h e water. F i n a l l y , t h e c o n t r a c t f o r deed provided: " I f e i t h e r p a r t y t o t h i s agreement s h a l l i n s t i - t u t e s u i t a g a i n s t t h e o t h e r t o enforce r i g h t s o r d u t i e s under t h i s agreement and o b t a i n a v a l i d judgment, t h e l o s i n g p a r t y agrees t o pay a l l c o s t s , expenses, and a t t o r n e y ' s f e e s of t h e p r e v a i l i n g party." Since a p p e l l a n t l o s t on t h e water r i g h t s and damages i s s u e s , and respondent l o s t on t h e sand and g r a v e l question, t h e t r i a l c o u r t order t h a t each p a r t y bear h i s own c o s t s and a t - torney f e e s was proper. The judgment of t h e D i s t r i c t Court i s affirmed. The counterclaim f o r damages from nonrelease of t h e escrow money is remanded. W e concur: