No. 96-413 IN THESUPREMECOURTOFTHESTATE OFMONTANA 1996

LLOYDBACHEand VIRGINIA BACHE,

Plaintiffs and Respondents,

MARKOWENS,d/b/a MARKOWENSLOGGING,

Defendant, Counterclaimant, and Appellant.

APPEAL FROM: Distr~ict Court of the Nineteenth Judicial District,

In and for the County of Lincoln, The Honorable C. B. McNeil, Judge presiding.

COUNSELOFRECORD:

For Appellant: I. James Heckathorn, Murphy, Robinson, Heckathorn &Phillips, Kalispell, Montana For Respondents: Lon J. Dale, Milodragovich, Steinbrenner &Binney, Missoula, Montana

Filed: Submitted onBriefs: November 7, 1996 Decided: December 10, 1996Justice Terry N. Trieweiler delivered the opinion of the Court.

The respondents, Lloyd Bathe and Virginia Bathe, filed an action against the appellant, Mark Owens, d/b/a Mark OwensLogging, in the District Court for the Nineteenth Judicial District in Lincoln County to enjoin Owens from encroaching on an easement which they alleged had been established in their favor. Owens filed a counterclaim for specific performance of the buy-sell agreement entered into between the parties and for other relief. TheDistrict Court granted summary judgment in favor of the Bathes, and denied Owens' motion for summary judgment. Owens appeals the judgment of the District Court. Weaffirm the District Court. The dispositive issue onappeal is whether the District Court erred when it denied Owens' motion for summary judgment, and granted summary judgment in favor of the Bathes. FACTUAL BACKGROUND TheBathes owned approximately 34acres of property in Lincoln County. In April 1988, they entered into anagreement with Owens for the sale and purchase of 2.42 acres of their property. Pursuant to the Agreement to Sell and Purchase ("the Agreement"), the Bathes promised to: [C]onvey the real property byWarranty Deed, free of all liens and encumbrances except those described in the title insurance section of this agreement. The title insurance section of the Agreement provided that the Bathes would: [Flurnish Buyer Title Insurance committing to insure merchantable title to the real property in the Buyer's name, free and clear of all liens and encumbrances except: encumbrances hereinabove mentioned,

2zoning ordinances, building and use restrictions,

reservations in federal patents, beneficial utility easements apparent or of record, easements of record, and no others. Subsequently, aPreliminary Title Insurance Policy wasissued with regard to the property, and provided that: PRIOR TO THE ISSUANCE OFTITLE INSURANCE, a complete legal description must beplaced of record in the office of the Lincoln County Clerk and Recorder. OnJuly 6, 1988, the Bathes filed Certificate of Survey Number 1657 ("COS No. 1657") with the Lincoln County Clerk and Recorder. COSNo. 1657 depicts two easements along the westerly border of the property: (1) a thirty-foot-wide private roadway easement, retained bythe Bathes; and (2) apublic utility easement. Onthat

same day, the Bathes executed aWarranty Deed in favor of Owens. The deed describes the property, and references COSNo. 1657. OnJuly 8, 1988, the parties finalized their transaction, and executed a Contract for Deed which also makes reference to COSNo. 1657. During 1991 and 1992, Owens constructed a building on the property he purchased from the Bathes. He and his building contractor, Mike Helberg, examined cos No. 1657 prior to establishing the building site. However, they misidentified the easement boundary, and constructed the building only six feet from the property boundary. As aresult, the building encroached upon twenty-four feet of the Bathes' easement. The Bathes filed anaction in the District Court. They sought the removal of Owens' building, and contract remedies for the obstruction of their easement. Owens contended that no easement

3existed, and asserted counterclaims for specific performance,

breach of contract, estoppel, fraud and deceit, quiet title, slander of title, andpunitive damages. Owensmoved for partial summary judgment. Hecontended that,

as a matter of law, the land sale documents did not create an access easement in favor of the Bathes. The Bathes filed their own motion for partial summary judgment. They asked the District Court to conclude, as amatter of law, that the land sale documents created an easement by reservation in their favor. The District Court granted partial summary judgment in favor of the Bathes, and certified its judgment as final pursuant to Rule 54(b), M.R.Civ.P., for purposes of appeal. Onappeal, in BatheI, we held that the parties' land sale documents created a valid easement in favor of the Bathes. Wethen remanded the case to the District Court for its determination of the remaining issues. Bachev.Owens(19941, 267 Mont. 279, 883 P.2d 817. Onremand, the Bathes filed amotion for dismissal of Owens' counterclaims by summary judgment. Owens also moved for summary ,judgment in his favor. He claimed that the existence of an easement contradicts the express provisions of the Agreement. The District Court denied Owens' motion for summary judgment, and granted summary judgment in favor of the Bathes. Subsequently, the Bathes again moved for summary judgment on the remaining issues. They requested injunctive relief to enjoin Owens from interfering with their easement, and to require him to

4remove his building. They also requested an award of their

attorney fees. The District Court granted the Bathes' motion, and certified its judgment as final. DISCUSSION Did the District Court err when it denied Owens' motion for summary judgment, and granted summary judgment in favor of the Bathes? Summary judgment is governed by Rule 56(c), M.R.Civ.P., which provides, in relevant part: The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions onfile, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to ajudgment as amatter of law. The purpose of summary judgment is to encourage judicial economy through the elimination of anyunnecessary trial. However, summary judgment is not asubstitute for trial if agenuine factual controversy exists. Reavesv.Reinbold (1980), 189Mont. 284, 288, 615 P.2d 896, 898. It is well established that the moving party must prove that it is entitled to judgment as a matter of law. Todothis, it is required to show acomplete absence of any genuine factual issues. D’Agostinov.Swanson (1990), 240Mont. 435, 442, 784 P.2d 919, 924. To defeat the motion, the nonmoving party must set forth facts which demonstrate that agenuine factual issue exists. O’Bagvv.FirstInterstate BankofMssoula (19901, 241Mont. 44, 46, 785 P.2d 190, 191.onappeal, Owensmaintains that the District Court erred when

it denied his counterclaims. On that basis, he contends that summary judgment for the Bathes should be reversed, and that summary judgment should, instead, be granted in his favor. We will, therefore, address each of his counterclaims asserted on appeal. SPECIFIC PERFORMANCE TheAgreement amongthe parties did not explicitly mention the Bathes' easement. Owensmaintains that the Agreement is abinding contract which establishes the terms of the sale, and that the subsequent creation of the Bathes' easement constitutes a modification. This modification, heasserts, is invalid because it

was not supported by consideration, and was not aproduct of the parties' mutual consent. Therefore, he contends that he is entitled to specific performance of the strict terms of the Agreement Relevant to our consideration of Owens' argument is the law of the case doctrine, which provides: [Iln deciding acase upon appeal, when the Supreme Court states in its opinion a principle or rule of law necessary to the decision, such pronouncement becomes the law of the case, and must be adhered to throughout its subsequent proceedings, both in the trial court andupon subsequent appeal. HainesPipelineConstruction,Inc.V.MontanaPowerCo.(1994),265Mont 282,289, 876 P.2d 632, 637 (citing Zavarelliv.Might (19891, 239Mont. 120, 124, 779 P.2d 489, 492). In BatheI, we stated that there were four instruments of conveyance: (1) the Agreement to Sell and Purchase ("the 6Agreement"); (2) the Warranty Deed; (3) the Contract for Deed; and

(4) Certificate of Survey Number 1657 ("COS No. 1657"). We interpreted those four instruments, andheld that they established

avalid easement in favor of the Bathes. BacheI, 267Mont. at 286, 883 P.2d at 822. Owens'counterclaim is, in essence, acollateral attack onour prior holding in BacheI. As aresult of that decision, the Bathes successfully established the existence of avalid easement in their favor onOwens' property; they cannot nowbecompelled, by anorder requiring specific performance, to forfeit that interest. Furthermore, the Bathes complied with the terms of the Agreement. Therefore, contrary to Owens' assertions, there wasnot

amodification of the Agreement, nor wasone necessary. Pursuant to the Agreement, the Bathes promised to: [Clonvey the real property byWarranty Deed, free of all liens and encumbrances except those described in the title insurance section of this aqreement. (Emphasis added.) Thetitle insurance section of the Agreement provided that the Bathes would: [Flurnish Buyer Title Insurance committing to insure merchantable title to the real property in the Buyer's name, free and clear of all liens and encumbrances except: encumbrances hereinabove mentioned, zoning ordinances, building and use restrictions, reservations in federal patents, beneficial utility easements apparent orof record, easements of record, and noothers. (Emphasis added.)Subsequently, aPreliminary Title Insurance Policy, which was

required by the Agreement, was issued with regard to the property. It provided that: PRIOR TO THE ISSUANCE OF TITLE INSURANCE, a complete legal description must beplaced of record in the office of the Lincoln County Clerk and Recorder. The Bathes filed COSNo. 1657, which contains their easement, prior to closing, and in accordance with the Preliminary Title Insurance Policy. Both the Warranty Deedandthe Contract for Deed reference COSNo. 1657. Asaresult, the easement in favor of the Bathes was, in fact, "of record," andOwenshadconstructive notice of its existence. BREACHOFCONTRACT Owensmaintains that the Bathes did not comply with the terms of the Agreement, and have, therefore, breached the terms of the parties' contract. This counterclaim is subsumed bythe claim for specific performance, and fails for the same reasons. ESTOPPEL Owens asserts that the Bathes are estopped from claiming an easement. Hecontends that the Bathes concealed material facts with the knowledge that they would be acted upon, and that, as a result, hechanged his position for the worse. Webegin our analysis with the principle that, u[elquitable estoppel is not favored andwill be sustained only upon clear and convincing evidence." Duchamv.Tuma (1994), 265Mont. 436, 441, 877 P.2d 1002, 1006.The six required elements of equitable estoppel are as

follows : 1) There must beconduct, acts, language or silence by the estopped party amounting to a representation or concealment of facts; 2) these facts must beknown to the estopped party at the time of the conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to the estopped party; 3) the truth concernins these facts must beunknown to the other oartv claiminq the benefit of the estoooel at the time they were acted upon; 4) the conduct must be done with the intention, or at least with the expectation, that it will beacted upon by the other party, or under the circumstances that it is both natural andprobable that it will beacted upon; 5) the conduct must berelied upon by the other party; and 6) the other party must in fact act upon it in such a manner as to change the other party's position for the worse. Ducham , 265Mont. at 441-42, 877 P.2d at 1006 (emphasis added). Owens has failed to present clear and convincing evidence in support of these elements. Although the preliminary title commitment did not reference the Bathes' easement, it did state: PRIOR TO THE ISSUANCE OF TITLE INSURANCE, a complete legal description must beplaced of record in the office of the Lincoln County Clerk and Recorder. The Bathes complied with this provision when, prior to the issuance of title insurance, they filed COSNo. 1657 with the Lincoln County Clerk andRecorder. Aswehave previously held, the Agreement, the Warranty Deed, the Contract for Deed, and COSNo. 1657 created avalid easement in favor of the Bathes. Based on these documents of conveyance, Owenshadconstructive notice of the

9easement, and his estoppel claim necessarily fails as amatter of

law. FRAUD&DECEIT Owens' claim for fraud and deceit is based upon the alleged failure of the Bathes to disclose the existence of their easement. This claim is similar to the estoppel claim, and fails, asamatter of law, for the same reason. TheWarranty Deedandthe Contract for Deedboth reference COS No. 1657, and at the time of closing, the Bathes' easement was "of record." As a result, Owens had constructive notice of the easement by operation of law. The Bathes had no affirmative duty to disclose that which was, by virtue of the conveyancing documents, of public record. Owens cannot now assert that the existence of the easement was a fact which was fraudulently and deceitfully suppressed by the Bathes. QUIET TITLE Finally, Owensclaims that heis entitled to quiet his title. This claim was resolved by our decision in BacheI. In that case,

we held that the Bathes have a legitimate right, title, and interest in their easement onOwens' property. They donot claim

aneasement. They haveavalid easement. Their easement, therefore, is not acloud onOwens' title, andhis claim fails as amatter of law. Weconclude that there are nogenuine issues of material fact, and that the Bathes are entitled to judgment as amatter of law. Accordingly, wehold that the District Court did not err when it

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### denied Owens' motion for summaryjudgment, andgranted summary

judgment in favor of the Bathes. Thejudgment of the District Court is affirmed.

Weconcur:

Chief Jkstice

Justices

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### Justice W.William Leaphart, dissenting.

I dissent with regard to the breach of contract claim. The Court treats Owens' claims as collateral 

### attacks uponour holding in Bathe I in which weheld that the Buy/Sell Agreement, Contract for DeedandCertificate of Survey, created avalid easement in favor of Bathe. Thefact that these instruments created avalid easement asof the time of closing, however, does not preclude a claim that suchaneasement wasnot contemplated bythe original Buy/Sell Agreement which provided that Bathes would convey the property "free ofall liens andencumbrances except those described in the title insurance section of this agreement." The title insurance section of the Agreement provided that Bathes would convey title free andclear of all liens andencumbrances except easements of record. Whenthe Agreement speaks of easements "of record," there is anambiguity as to time; 

### that is, "of record" as ofwhen. Despite the fact that Bathes' easementwas"of record" as of the date of the closing, there is agenuine issue of material 

### fact as to whether, in signing the Agreement, the parties only contemplated easements of record asof the April 1988date of the Agreement asopposedtoaneasementwhich wasrecorded onJuly 6th, two days before the closing. Whenthere is anambiguity in the contract, the intent becomesaquestion for thejury. Klawitter v. Dettman (1994), 268Mont. 275, 281, 886P.2d 416, 420; seealso _- Johnson v. Nyhart (1995), 269Mont. 379, 387, 889P.2d 1170, 1174. 12

### Iwould reverse the summaryjudgment asto breach of contract and

remandfor trial onthat issue.

Justices Karla M.Gray andJamesC. Nelson join in the foregoing dissent.

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