Title: Elk Ridge Lodge, Inc. v. Sonnett

State: wyoming

Issuer: Wyoming Supreme Court

Document:

ELK RIDGE LODGE, INC., a Wyoming corporation v. GEORGE M. SONNETT, JR. and WENDY Z. BURGERS-SONNETT, husband and wife ; GEROGE M. SONNETT, JR., and WENDY Z. BURGERS-SONNETT v. DANIEL FOX AND TERRY REACH, as individuals d/b/a/ ELK RIDGE LODGE, INC.; and ELK RIDGE LODGE  INC., a Wyoming Corporation2011 WY 106Case Number: No. S-10-0191, S-10-0192Decided: 07/08/2011NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so correction may be made before final publication in the permanent volume.
APRIL 
TERM, A.D. 2011

 
 
ELK RIDGE LODGE, 
INC., a Wyoming corporation,

Appellant 
(Plaintiff/Third-Party Defendant),

 
 
v.

 
 
GEORGE M. SONNETT, 
JR. and WENDY Z. BURGERS-SONNETT, husband and wife,

Appellees 
(Defendants/Third-Party Plaintiffs).

 
 
GEORGE M. SONNETT, 
JR. and WENDY Z. BURGERS-SONNETT,

Appellants 
(Defendants/Third-Party Plaintiffs),

 
 
v.

 
 
DANIEL FOX and TERRY 
REACH, as individuals d/b/a ELK RIDGE LODGE, INC.; and ELK RIDGE LODGE INC., a 
Wyoming corporation,

Appellees 
(Third-Party Defendants).

 
 
Appeal 
from the District Court of Sublette County

The 
Honorable Marvin L. Tyler, Judge

 
 
Representing 
Elk Ridge Lodge, Inc.:

Larry B. Jones and 
William L. Simpson, Burg, Simpson, Eldredge, Hersh & Jardine, PC, Cody, 
Wyoming.

 
 
Representing 
Sonnett:

Wendy Z. 
Burgers-Sonnett and George M. Sonnett, Jr., Washington, 
Virginia.

 
 
 
 
Before KITE, C.J., 
and GOLDEN, HILL, VOIGT, and BURKE, JJ.

 
 
BURKE, 
Justice.

 
 

[¶1]        
George M. Sonnett, 
Jr., and Wendy Z. Burgers-Sonnett purchased approximately twenty acres of land 
and improvements in Sublette County, Wyoming, from Elk Ridge Lodge, Inc.  To finance part of the purchase price, 
the Sonnetts gave Elk Ridge a promissory note secured by a mortgage on the 
property.  They later defaulted on 
the note, and Elk Ridge filed suit against the Sonnetts seeking judgment and 
foreclosure on the property.  The 
Sonnetts responded with counterclaims against Elk Ridge.  Both parties filed competing motions for 
summary judgment.

 
 

[¶2]        
The 
district court granted summary judgment in favor of Elk Ridge on its foreclosure 
claim, and against the Sonnetts on their counterclaims.  In Docket No. S-10-0192, the Sonnetts 
appeal that decision.  The district 
court also denied Elk Ridge's request for attorneys' fees and costs pursuant to 
the terms of the promissory note and mortgage.  In Docket No. S-10-0191, Elk Ridge 
appeals that decision.  We will 
affirm the district court's decisions in both appeals.

 
 
ISSUES

 
 

[¶3]      
The Sonnetts present 
these three issues in 
Docket No. S-10-0192:

 
 

1.            
Did the district 
court err in granting summary judgment to Elk Ridge, and in denying summary 
judgment to the Sonnetts, on the Sonnetts' counterclaim of breach of warranty 
(breach of the implied covenant against encumbrances), ruling, as a matter of 
law, that language contained in the deed of conveyance excluded a recorded 
encumbrance from Elk Ridge's warranty.

 
 

2.            
If the district court 
erred under issue 1, did the district court also err in granting summary 
judgment on Elk Ridge's claim for a money judgment and request for a decree of 
foreclosure where the Sonnetts' counterclaim may diminish or defeat Elk Ridge's 
claim?

 
 

3.            
Did the district 
court err by granting summary judgment to Elk Ridge on its request for the 
equitable relief of foreclosure where the Sonnetts invoked equity in defense and 
where the court made no findings as to the equities?

 
 

In 
Docket No. S-10-0191, Elk Ridge asserts a single issue:

 
 
The decision of the 
trial court, in denying Elk Ridge Lodge, Inc.'s motion for attorneys' fees and 
costs, was an abuse of discretion.

 
 
FACTS

 
 

[¶4]        
Harold and Leda Reach 
owned a substantial tract of property in Sublette County, Wyoming.  In 1989, they applied to the county to 
change the zoning on a twenty-acre parcel of that property from Agricultural to 
Recreational, with the stated purpose of developing a lodge for resort use.  In order to gain approval of the 
application during the hearing process, the Reaches offered a set of restrictive 
covenants entitled the "Proposed Masterplan of Elk Ridge Lodge 
Development."  This proposed Master 
Plan restricted the use and development of the property more than the standard 
limitations placed on property with Recreational Zoning.  The County accepted the Master Plan and 
approved the zoning change application.  
The Master Plan and the County's resolution approving the zoning change 
were recorded with the County Clerk in Sublette County's property 
records.

 
 

[¶5]        
The Reaches later 
sold the twenty-acre parcel to Elk Ridge Lodge, Inc., a corporation owned by 
their son, Terry Reach, and another person, Daniel Fox.  In the fall of 1989, Elk Ridge began 
operating a resort facility on the property, offering lodging, a restaurant with 
a beer liquor license, gasoline sales, outfitting, and a gift shop.  Over the next several years, Elk Ridge 
made several improvements to the property, and continued operating the resort 
lodge.

 
 

[¶6]        
In the Spring of 
2001, Elk Ridge entered into a contract to sell the property to the 
Sonnetts.  Prior to closing, the 
Sonnetts obtained title insurance.  
The policy listed a number of easements and other restrictions on the 
property, but did not mention the Master Plan.  The Sonnetts contend that they were 
unaware of the existence of the Master Plan.  The Sonnetts further contend that Elk 
Ridge had been operating the resort lodge for several years in a manner 
consistent with its Recreational Zoning, but contrary to some of the 
restrictions contained in the Master Plan.

 
 

[¶7]        
The Sonnetts learned 
of the Master Plan in 2006.  In May 
of that year, they received a letter from the county informing them that they 
were violating the Master Plan by offering a restaurant and tavern to the 
public, renting snowmobiles, and plowing the property's driveway to allow public 
access during the winter.  In 
subsequent correspondence with the county, the Sonnetts were informed that they 
could face substantial penalties if they failed to comply with the Master 
Plan.  Based on their perception 
that the lodge could not be operated successfully within the limitations of the 
Master Plan, the Sonnetts closed the lodge in the summer of 
2007.

 
 

[¶8]        
The Sonnetts did not 
make the payment due to Elk Ridge under the promissory note on June 1, 
2008.  After providing notice and a 
demand for payment to the Sonnetts, Elk Ridge filed an action to collect on the 
promissory note and foreclose on the mortgage.  In defense, the Sonnetts filed several 
counterclaims against Elk Ridge, based on allegations that the Master Plan was 
an encumbrance that Elk Ridge had not disclosed to the Sonnetts, in violation of 
the covenants of the Warranty Deed by which Elk Ridge conveyed the property to 
the Sonnetts.1  The Sonnetts also filed third party 
claims against the owners of Elk Ridge, Mr. Reach and Mr. Fox.  The district court entered summary 
judgment in favor of Elk Ridge and against the Sonnetts, a decision the Sonnetts 
challenge on appeal.2  Elk Ridge appeals the district court's 
subsequent denial of its request for attorneys' fees and costs. 

 
 
DISCUSSION

 
 

Docket 
No. S-10-0192  Summary Judgment

 
 

[¶9]        
We review a district 
court's decision to grant or deny summary judgment using this 
standard:

 
 
Summary judgment is 
appropriate when there are no genuine issues of material fact and the moving 
party is entitled to judgment as a matter of law.  W.R.C.P. 56(c); Metz Beverage Co. v. Wyoming Beverages, 
Inc., 2002 WY 21, ¶ 9, 39 P.3d 1051, 1055 (Wyo. 2002).  "A genuine issue of material fact exists 
when a disputed fact, if it were proven, would establish or refute an essential 
element of a cause of action or a defense that the parties have asserted."  Id.  Because summary judgment involves a 
purely legal determination, we undertake de novo review of a trial court's 
summary judgment decision.  Glenn v. Union Pacific R.R. Co., 2008 WY 
16, ¶ 6, 176 P.3d 640, 642 (Wyo. 2008).

 
 

Jacobs Ranch Coal Co. 
v. Thunder Basin Coal Co., LLC, 2008 WY 101, ¶ 8, 
191 P.3d 125, 128-29 (Wyo. 2008).  
We view the record in the light most favorable to the party opposing 
summary judgment, giving that party the benefit of all favorable inferences 
reasonably drawn from the record.  
Any doubts about the existence of a genuine issue of material fact must 
be resolved against the party seeking summary judgment.  Wyoming Board of Land Comm'rs v. Antelope 
Coal Co., 2008 WY 60, ¶ 7, 185 P.3d 666, 668 (Wyo. 
2008).

 
 

[¶10]     
The party moving for 
summary judgment bears the initial burden of establishing a prima facie case with admissible 
evidence.  Kruckenberg v. Ding Masters, Inc., 2008 
WY 40, ¶ 20, 180 P.3d 895, 901 (Wyo. 2008).  Our review of the 
record confirms the district court's ruling that Elk Ridge established its prima facie case for summary judgment on 
its foreclosure claim.  The district 
court, citing 55 Am.Jur.2d Mortgages 
§ 664 (1996), identified the necessary elements of a foreclosure claim as 
"(a) the agreement; (b) a default; (c) a notice of default and 
declarations thereof; and, (d) the amount due."  After thorough review of the materials 
submitted in support of, and in opposition to, Elk Ridge's motion for summary 
judgment, the district court found in its decision letter 
that:

 
 
[Elk Ridge] has 
shown, and Sonnetts have admitted:  
(a) the promissory note in the amount of $495,000.00 and mortgage 
covering the property executed by Sonnetts in favor of [Elk Ridge], including 
recording of the mortgage in the official records of Sublette County, Wyoming, 
on May 26, 2004; (b) the failure to pay [Elk Ridge] by Sonnetts; and 
(c) Sonnetts' receipt of the notice of default, coupled with Sonnetts' 
failure to cure default.

 
 
(Internal footnote 
omitted.)  The district court 
further found that the undisputed amount due was $535,000.00 in principle and 
interest as of June 1, 2008, with 8% interest on that amount to accrue from that 
date until the date of judgment.

 
 

[¶11]     
The Sonnetts do not 
dispute these facts, and indeed, admitted nearly all of them in their answer to 
Elk Ridge's foreclosure complaint.  
They do not dispute the district court's list of the elements of 
foreclosure or any other aspect of the district court's legal analysis of the 
foreclosure claim.  The Sonnetts 
assert, however, that summary judgment in favor of Elk Ridge was precluded by 
their counterclaim against Elk Ridge for breach of the covenants of the Warranty 
Deed conveying the property from Elk Ridge to the Sonnetts.  

 
 

[¶12]     
It is undisputed that 
Elk Ridge conveyed the property to the Sonnetts by Warranty Deed.3  A Warranty Deed includes the covenant 
that the property conveyed is "free from all incumbrances."  Wyo. Stat. Ann. § 34-2-103 
(LexisNexis 2009).  "Consequently, 
any encumbrance[] on the seller's title needs to be specifically listed and 
excluded from the warranty.  
Otherwise, the seller will be in breach of the warranty."  Foxley & Co. v. Ellis, 2009 WY 16, 
¶ 28, 201 P.3d 425, 432 (Wyo. 2009).  
Elk Ridge's Warranty Deed did not specifically list and exclude the 
Master Plan.  The Sonnetts contend 
that the Master Plan is an encumbrance,4 and therefore, that Elk Ridge 
breached its warranty.

 
 

[¶13]     
While Elk Ridge's 
Warranty Deed does not specifically list and exclude the Master Plan, it more 
generally states that the deed is "SUBJECT TO reservations and restrictions 
contained in the United States patents or other matters of public record, to 
easements and rights-of-way of record or in use and to prior mineral 
reservations of record."  
Interpreting this provision of the Warranty Deed, the district court 
concluded that 

 
 
no ambiguity exists 
and the parties' intent is manifested.  
Title in fee was conveyed.  
The "reservations and restrictions" clause is also clear.  The Deeds evidence the intent of [the] 
Sonnetts and [Elk Ridge] that [Elk Ridge] did not warrant title against, among 
other things, "other matters of public record."  

 
 

[¶14]     
We agree with the 
district court that this provision of the Warranty Deed is clear and 
unambiguous.  Both in the district 
court and on appeal, the Sonnetts' arguments that the language is ambiguous, or 
should be interpreted some other way, are unconvincing, in large part because 
they do not suggest any plausible alternative interpretation.  The Warranty Deed expressly excludes 
matters of public record.5  It is undisputed that the Master Plan, 
having been recorded and indexed in the Sublette County property records, is "of 
public record."  We, therefore, 
uphold the district court's conclusion that the Sonnetts' breach of warranty 
claim is not viable, and that Elk Ridge was entitled to summary judgment on that 
claim.  With regard to the Sonnetts' 
first issue, we conclude that the district court did not err in granting summary 
judgment to Elk Ridge, and in denying summary judgment to the Sonnetts, on the 
Sonnetts' counterclaim of breach of warranty.

 
 

[¶15]     
As presented by the 
Sonnetts, their second issue arises only if we reverse the district court's 
grant of summary judgment in favor of Elk Ridge.  Because we uphold that decision, we need 
not reach the Sonnetts' second issue.

 
 

[¶16]     
In their third issue, 
the Sonnetts point out that foreclosure is equitable relief, and that they 
"invoked equity in defense" of Elk Ridge's foreclosure claim.  The Sonnetts contend that it was error 
for the district court to grant foreclosure to Elk Ridge without making specific 
findings "as to the equities."  
The 
Sonnetts contend that a "lack of rulings in the record on the equities is 
disfavored," citing Beaulieu v. Florquist, 2004 WY 31, ¶ 21, 86 P.3d 863, 870 (Wyo. 2004), overruled on other 
grounds by Brown v. City of 
Casper, 2011 WY 35, ¶ 44, 248 P.3d 1136, 1147 (Wyo. 2011).  In that case, the 
Beaulieus had raised equitable arguments before the district court.  We wrote:

 
 
The district court 
did not rule directly on any of the equitable defenses, but the grant of summary 
judgment to the [Florquists] clearly incorporated a ruling against the Beaulieus 
on these theories.  Although we 
would prefer that the record contain specific rulings on each issue, we will 
affirm the district court because the record does not support the applicability 
of equitable estoppel, waiver or laches.

 
 

Beaulieu, 
¶ 21, 86 P.3d  at 870.  
We find ourselves in 
a nearly identical situation in these appeals.  The Sonnetts are correct that the 
district court did not make a separate ruling on their equitable defenses to 
foreclosure.  However, it is 
apparent that the district court's grant of summary judgment in favor of Elk 
Ridge implicitly ruled against the Sonnetts on these defenses.  The Sonnetts' equitable defenses were 
variations on their counterclaim that Elk Ridge wrongfully failed to disclose 
the existence of the Master Plan.  
As we have concluded that Elk Ridge's nondisclosure did not violate the 
covenants of the Warranty Deed, we also conclude that the record does not 
support the applicability of the Sonnetts' equitable 
defenses.

 
 

Docket 
No. S-10-0191 Attorneys' Fees

 
 

[¶17]     
We review a district 
court's grant or denial of attorneys' fees and costs for abuse of 
discretion.  Mueller v. Zimmer, 2007 WY 195, 
¶ 11, 173 P.3d 361, 364 (Wyo. 2007).  
The ultimate question is whether the district court could reasonably 
conclude as it did.  Ultra Resources, Inc. v. Hartman, 2010 
WY 36, ¶ 149, 226 P.3d 889, 935 (Wyo. 2010).

 
 

[¶18]     
The mortgage provided 
that Elk Ridge "may enforce the provisions of, or foreclose this Mortgage by any 
appropriate suit, action or proceeding at law or in equity or by advertisement 
and sale as provided by Wyoming Statutes."  
It further provided that the Sonnetts "agree to pay all costs of 
enforcement and of foreclosure, including reasonable attorney's fees."  The promissory note includes a provision 
to the same effect.  Based on these 
provisions, the district court, upon granting summary judgment in favor of Elk 
Ridge, decreed that Elk Ridge was "entitled to its costs and fees, including 
reasonable attorneys['] fees, in an amount to be later 
shown."

 
 

[¶19]     
Approximately two 
weeks later, Elk Ridge filed a motion for attorneys' fees, supporting it with an 
affidavit of counsel and billing statements.  The Sonnetts filed objections, the major 
thrust of which was that Elk Ridge might be entitled to attorneys' fees for 
prosecuting the foreclosure claim, but there was no statutory or contractual 
provision that entitled Elk Ridge to attorneys' fees for defending the Sonnetts' 
counterclaims against Elk Ridge or their third party claims against the two 
shareholders of Elk Ridge.  In 
response, Elk Ridge acknowledged the general rule that a party may recover 
attorneys' fees only on claims directly subject to attorneys' fees provisions, 
and that a party is responsible for separating out attorneys' fees incurred on 
any additional claims.  Mueller, ¶ 15, 173 P.3d  at 
365.  Elk Ridge further asserted, 
however, that when the additional claims are "inextricably linked" to a claim 
for which attorneys' fees are recoverable, then "fees are recoverable for 
defending those additional issues as well."  City of Gillette v. Hladky Construction, 
Inc., 2008 WY 134, ¶¶ 109-110, 196 P.3d 184, 212-13 (Wyo. 2008); Forshee v. Delaney, 2005 WY 103, 
¶ 16, 118 P.3d 445, 450 (Wyo. 2005).  
Elk Ridge maintained that the counterclaims and third party claims 
brought by the Sonnetts "were all direct or indirect attacks on the validity of 
the Note and Mortgage," and all of the attorneys' fees were incurred in efforts 
to enforce the mortgage.  According 
to Elk Ridge, the counterclaims and third party claims were inextricably linked 
to the foreclosure claim.

 
 

[¶20]     
The district court 
considered the pleadings and supporting materials, including proposed findings 
and conclusions submitted by both parties.  
After a hearing on the attorneys' fees dispute, the district court issued 
a thorough and thoughtful decision letter in which it reached a decision 
somewhere between the positions of the two parties.  The district court generally adopted Elk 
Ridge's legal position that attorneys' fees were recoverable on all claims 
"inextricably linked" to the foreclosure claim, adding 
that:

 
 
"[S]egregation of 
fees between multiple clients and/or multiple claims is required when it is 
possible."  Cline v. Rocky Mountain, Inc., 998 P.2d 946, 952 (Wyo. 2000) (citing Rocky 
Mountain Helicopters, Inc. v. Air Freight, Inc., 773 P.2d 911, 925 (Wyo. 
1989); Miles v. CEC Homes, Inc., 753 P.2d 1021, 1027 (Wyo. 1988)).  
Implicit in this directive is the requirement that a party must show 
segregation is impossible before he may recover for claims for which there is no 
authorization of fee shifting.

 
 

Jensen v. Fremont 
Motors Cody, Inc., 2002 WY 173, 
¶ 33, 58 P.3d 322, 330 (Wyo. 2002).

 
 

[¶21]     
Applying these legal 
concepts, the district court then made specific findings to support its 
decision.  First, it found that Elk 
Ridge's defense of the Sonnetts' counterclaims were inextricably "intertwined 
and impossible to segregate from [Elk Ridge's] prosecution of 
the foreclosure action."  In 
contrast, it found that the Sonnetts' third party claims against the two 
shareholders of Elk Ridge were separable, "and all fees and costs related to 
such must be segregated."  It found 
that Elk Ridge had not "adequately and appropriately segregate[d] the hours 
worked, rate charged, and expenses incurred in defending issues against [Elk 
Ridge] and the Third-Party Defendants, Terry Reach and Daniel Fox, for piercing 
the corporate veil, intentional misrepresentation, fraud, and willful and wanton 
misconduct."  The district court 
applied the rule that "[o]nce 
a party is given an opportunity to present sufficient evidence of attorneys' 
fees and fails to do so, the party will not be given another chance."  Ringolsby 
v. Johnson, 
2008 WY 127, ¶ 21 193 P.3d 1167, 1171 (Wyo. 2008), citing Pekas v. 
Thompson, 903 P.2d 532, 537 
(Wyo. 1995).  While noting the 
"harsh result," the district court denied Elk Ridge's request for attorneys' 
fees in its entirety.

 
 

[¶22]     
This, of course, is 
the ruling challenged by Elk Ridge on appeal.  Its argument is essentially a 
reassertion that all of the counterclaims and third party claims were 
inextricably linked and impossible to separate from its foreclosure claim.  We have carefully reviewed the district 
court's ruling, and can find no error in its careful adherence to Wyoming 
precedent regarding the award of attorneys' fees.  Based on our review of the record, we 
readily agree with the district court's ruling that the Sonnetts' counterclaims 
against Elk Ridge were inextricably intertwined with Elk Ridge's foreclosure 
claim.  The situation is much like 
that in Forshee, ¶ 16, 118 P.3d  
at 450, where we stated, that, "[h]ad Forshee been successful in his 
counterclaim, his damages would have offset the amount he owed to Delaney, 
rendering his counterclaim a necessary aspect of Delany's suit to collect the 
past due invoices."  Not only would 
the Sonnetts' counterclaims against Elk Ridge have been an offset if successful, 
but in addition, the Sonnetts asserted their counterclaims against Elk Ridge as 
equitable defenses to the foreclosure claim.  

 
 

[¶23]     
It is a much closer 
question whether the district court erred in finding that the Sonnetts' third 
party claims against Mr. Reach and Mr. Fox were not inextricably linked to the 
foreclosure claim.  On one hand, the 
third party claims were made against Mr. Reach and Mr. Fox in their 
personal capacities, making them distinct and separate clients from Elk 
Ridge.  The Sonnetts pleaded two 
claims against Mr. Reach and Mr. Fox that they did not bring against Elk Ridge, 
namely "piercing the corporate veil" and "willful and wanton misconduct."  They pleaded five claims against Elk 
Ridge that were not pursued against Mr. Reach and Mr. Fox, namely "breach of 
covenants contained in the deed," "consequential damages," "promissory 
estoppel," "breach of covenant of good faith and fair dealing," and "unjust 
enrichment."  These considerations 
suggest that the Sonnetts' third party claims against Mr. Reach and Mr. Fox 
might reasonably be separated from Elk Ridge's foreclosure claim.  On the other hand, while there are 
distinctions among the various claims, they all arise from the same transaction, 
that is, Elk Ridge's sale of the property to the Sonnetts without disclosing the 
existence of the Master Plan.  In 
addition, Elk Ridge is a closely held corporation, with Mr. Reach and Mr. Fox 
the only shareholders.  The close 
identity of the parties and the overlapping of the basic facts supporting the 
third party claims suggest that the Sonnetts' counterclaims against Mr. Reach 
and Mr. Fox were inextricably intertwined with Elk Ridge's foreclosure 
claim.

 
 

[¶24]     
Under the applicable 
standard of review, the ultimate question is not whether we agree with the 
district court, but whether the district court could reasonably conclude as it 
did.  Ultra Resources, ¶ 149, 226 P.3d  at 
935.  In this case, the district 
court presided over this litigation for nearly a year and a half before reaching 
its decision to deny Elk Ridge's motion for attorneys' fees.  It had held numerous hearings and 
decided many different motions.  On 
appeal, we can only review the written record.  Under the circumstances, it is apparent 
that the district court was in a better position than we are to decide whether 
the Sonnetts' third party claims against Mr. Reach and Mr. Fox were inextricably 
intertwined with Elk Ridge's foreclosure claim.  Compare City of Gillette, ¶ 115, 
196 P.3d  at 213, in which we deferred to a district court's decision regarding 
attorneys' fees, noting that it had "presided 
over this matter for several months before trial during which time it heard and 
decided numerous motions.  It then 
presided over the five week trial when it considered and decided the parties' 
motions."  We cannot conclude that 
the district court's decision was beyond the bounds of reason, and therefore, we 
cannot reverse its decision to deny Elk Ridge's request for attorneys' 
fees.

 
 

[¶25]     
We affirm the 
district court's decisions in both Docket No. S-10-0191 and Docket No. 
S-10-0192.

 
 
FOOTNOTES

 
 

1The Sonnetts filed 
counterclaims against Elk Ridge encompassing several theories in addition to 
breach of the covenants of the Warranty Deed, including intentional or negligent 
misrepresentation, fraud, promissory estoppel, and unjust enrichment.  Their brief makes it plain that their 
appeal extends only to the claim based on the theory of breach of the covenants 
of the Warranty Deed.  The case also 
encompassed a substantial number of additional claims, including, for example, 
claims by Elk Ridge and the Sonnetts against other mortgage and lien 
holders.  None of these additional 
claims are at issue.  

 
 

2The Sonnetts have not 
appealed the district court's decision granting summary judgment in favor of 
Mr. Reach and Mr. Fox.  These 
third party claims are mentioned in the discussion of facts only because they 
are involved in Elk Ridge's appeal of the denial of its attorneys' fees.  

 
 

3Elk Ridge actually 
executed both a Warranty Deed and a Supplemental Warranty Deed to the Sonnetts, 
the latter containing provisions meant to bring about certain tax 
consequences.  For purposes of these 
appeals, however, the pertinent language is the same in both deeds, and the 
distinctions are of no consequence.

 
 

4To 
the extent that the Master Plan is a zoning restriction, it may not be an 
encumbrance subject to the covenants of a Warranty Deed.  Zoning represents a governmental 
entity's exercise of its police powers.  
83 Am.Jur.2d Zoning and Planning 
§ 6, at 52 (2003).  In 
contrast, an encumbrance is "any right or interest existing in a third person 
which diminishes the value of the estate to the grantee."  Foxley, ¶ 31, 201 P.3d  at 432.  The parties have not expressly raised 
this point or addressed it in their briefs.  For purposes of this case, we will 
accept, without deciding, the Sonnetts' contention that the Master Plan is an 
encumbrance.

 
 

5Our reading of other 
cases involving Warranty Deeds suggests that the exclusion of matters of public 
record is a common practice.  See, e.g., Foxley, ¶ 29, 201 P.3d  at 432 (the 
Sellers "conveyed their property subject only to . . . easements, restrictive 
covenants, and reservations of record.'").