NO. 93-326 IN THE SUPREME COURT OF THE STATE OF MONTANA



### RONALD J. STEVENSON and VICKI R. STEVENSON,husband and wife, Plaintiffs and Respondents,

EDWARD ECKLUND and MARY ECKLUND, husband and wife; JOHN C. WOOD and CAROL A. WOOD, husband and wife; and THE STATE OF MONTANA, Defendants and Appellants.

APPEAL FROM: District Court of the Eighth Judicial District, In and for the County of Cascade, The Honorable Mark P. Sullivan,Judgepresiding.

COUNSEL OF RECORD: ForAppellants: Donald L. Ostrem, Graybill,Ostrem & Crotty, Great Falls,Montana (Woods) For Respondents: Patrick F. Flaherty, Great Falls, Montana

(Stevensons)

Filed: Submitted on Briefs: November 23, 1993 Decided: December 22, 1993Justice Karla M. Gray delivered the Opinion of the Court.
The sole issue before this Court is whether the Eighth Judicial District Court, Cascade County, erred in concluding that

a breach of the covenant of warranty contained in a warranty deed occurred. Because no party other than the covenantee lawfully asserted ownership over the property conveyed by the deed, we conclude that the covenant of warranty was not breached. We therefore reverse the court's denial of the Woods' motion for summary judgment and grant of summary judgment in favor of the Stevensons on that issue. This case stems from a boundary dispute involving Lots 7 through 9 and 10 through 12, in Block 1 of the J.L. Largent Addition to the town of Ulm, Montana. The dispute arose from an error in the originalplat recorded in 1910. According to the 1910 plat, Block 1,containing twelve lots,was 600 feet long. In fact, its length was 700 feet. The School District in Ulm acquired Lots 1through 3 and Lot 4 in 1904and 1916,respectively. The School District became aware of the discrepancy in the 1910 plat as early as 1954. After purchasing Lots 5 and 6 in 1966, the School District had Lots 1 through 6 restaked to correct the error. The surveyorused a rule of survey known as the doctrine of apportionment to correct the discrepancy in the 1910 plat. Under that doctrine, when a tract contains more or less area than that assigned to it in a recorded plat, the excess or deficiency is distributed among all the lots comprising the tract in proportion to their respective areas. 2Because the lots in Block 1 were of equal size, the surveyor increased the width of Lots 1 through 6 from 50 to 58.33 feet. The record does not indicate when John and Carol Woods (the Woods) acquired Lots 7 through 12. In January of 1975,however, they conveyed their interest in Lots 10 through 12 to Edward and Mary Ecklund (theEcklunds) by quitclaim deed. The Woods showed the Ecklunds lot lines reflecting a 58.33 footwidth. This width

was subsequentlyconfirmedwhen theEcklundshad Lots 10through 12 resurveyed. Surveypinswere placed ontheirproperty accordingly. In October of 1977, the Woods conveyed Lots 7 through 9 to Ronald andVicki Stevenson (the Stevensons)bywarranty deed after showing them lot lines also reflecting a 58.33 footwidth. Lots 9 and 10, owned respectively by the Stevensons and the Ecklunds by 1977, shared a common boundary. In 1985,Edward Ecklund began to exert acts of ownership over part of Lot 8 and all of Lot 9. He mowed the lawn, started to build a fence, and demanded that the Stevensons vacate the property. In October of that year, the Stevensons filed a complaint against the Ecklunds seeking to quiet title to Lots 7 through 9. In their answer, the Ecklunds asserted that the disputed property was actually part of Lots 10 through 12. They also alleged via a counterclaim that the Stevensons had erected a structure on their Lots 10 and 11and requested the court to order the Stevensons to either purchase the property or remove the structure. Through the course of litigation,theymaintained thatthe doctrine of apportionment was improperly applied to increase the width of each of the lots 

### in Block 1. The Stevensons filed 

### an amended complaint in August of 1990, adding the Woods as defendants. The Stevensons alleged that the covenant of 

### warranty contained in their deed from the Woods had been breached by the Ecklundslassertion of ownership. The Woods and the Stevensons concurred on the issue of the doctrine of apportionment and requested 

### the District Court, in separate motions for summary judgment, to determine that the doctrine had been properly applied to correct the 1910plat. The court denied the motions, determining that a factual dispute existed concerning the dimensions of the lots. The Stevensons subsequentlymoved forsummary judgment on the covenantofwarranty issue, arguing that the covenant had been breached as a matter of law. 

### The court denied the motion, again stating that a factual dispute existed. TheWoods filedanothermotion 

### forsummary judgment inJanuary of 1993,asserting that the Ecklunds could not establish a lllawful claimH to any of the Stevensonslproperty because the doctrine of apportionmenthad been properly applied. On thatbasis, the Woods argued that 

### no breach of the covenant of warranty contained in their deed 

### to the Stevensons occurred. OnMarch 31, 1993,the District Courtgranted partial summary judgment in favor of the Woods. The court concluded that the doctrine of apportionment applied to the 100-foot discrepancy in the 1910 plat, reversing its prior refusal to grant summaryjudgment on that issue, Thus, the boundary dispute between the Stevensons and the Ecklunds was resolved in favor of the Stevensons. As a result, the court dismissed the Ecklundsl counterclaim against the Stevensons. The court denied 

### the Woods' motion 

### for summary judgment, however, insofar 

### as it related to the breach of the covenant of warranty. The court determined that a breach had occurred, concluding that the Ecklundsl assertion of ownership was '!not unlawful.Ir It reversed its previous denial 

### of the Stevensons' motion for summary judgment on that issue, effectively granting summary judgment in their favor. The court ruled that the Stevensons were entitled to damages as 

### a matter of law, and scheduled a hearing todeterminetheamount

### of attorney's feesthat they incurred in defending their title to the property. Upon stipulation of the parties, however, the court entered a final judgment in accordance with its resolution of the summary judgment motions and awarded $7,000to the Stevensons. Thecourt stayedthe judgment pending appeal. The

### Woods appeal only from the 

### court's denial of theirmotion for summary judgment and simultaneous grant of summary judgment in favor of the Stevensons relating to the breach of the covenant of warranty. We conclude that no breach of the covenant of warranty occurred and,therefore,reverse theDistrict Court on that issue. Our standard inreviewing summary judgment isthe sameas that used by the district courts. Emery 

### v. Federated Foods [Mont. 19931, 

## -P.2d

## -, I 50 St-Rep. 1454, 1456. Summary judgmentisappropriate when thepleadings, depositions,and other documents

on file demonstrate that no genuine issues of fact exist and the moving party is entitled to judgment as a matter of law. Rule 56(c)

## , M.R.Civ.P. Here, the District Court's summary judgment rulings turned on its legal conclusion that theEcklunds' assertion of ownership overproperty in Lot 9was "notunlawful." Our review of legal conclusions isplenary. Steer, Inc. v. Dept. of Revenue

(1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. The Woods assert that because the doctrine of apportionment

was properly applied to correct the 100-foot discrepancy in the 1910 plat, the Ecklunds had no legal basis to support their assertion of ownership over part of Lot 9. Absent a lawful assertion of ownership, the Woods contend that no breach of the covenant of warranty occurred, relying on 

### 5 30-11-110, MCA, and Green v. Baker (1923), 66Mont. 568, 214 P. 88. We agree. A covenant of warranty indemnifies the covenantee against a loss or injury resulting from a defect in the covenantor's title. Capital Hill Shopping Centerv. Miles (1977), 174 Mont. 222, 230, 570 P.2d 295, 298. It must conform, as did the covenant of warranty contained in the Stevensons' deed,with 5 30-11-110,MCA. That statute requires a covenant of warranty to provide, in substance, that a covenantee is protected from persons "lawfully claimingN the conveyed property. Section 30-11-110,MCA, reflects the common law requirementthata covenantee prove theassertion of a paramount title that resulted in the covenantee's actual or constructiveeviction in order to support a breach of the covenantof warranty. Green, 214 P. at 91. Thus, we focus on whether the Stevensons proved an assertion of paramount titleby the Ecklunds over theproperty in Lot 9 that resulted in eviction. Only in thepresence of suchproof would the Ecklunds' assertion of ownership be a "lawful claimuresulting in

a breach of the covenant of warranty in the Stevensons' deed. Throughout the litigation,the Stevensonsmaintained that the Ecklundshad no lawful claim to any of theirproperty. They argued that the discrepancy in the 1910 plat regarding the size of Block 1was properly resolved by applying thedoctrine of apportionment. At no timedid they allege actual or constructive eviction from the property in dispute. In accordancewith the Stevensons'position, the District Court ruled that the doctrine of apportionment had beenproperly applied. No party has asserted error in this ruling. The Stevensons'position and the District Court's resolution of the boundary dispute in their favor precludes the conclusion that a breach of the covenant of warranty occurred. Absent proof that the Ecklunds asserted paramount title resulting in the actual or constructive eviction oftheStevensons,theEcklunds' assertion of ownership over property in Lot 9 does not constitute a "lawful claim" that can serve as a basis for a breach of the covenant of warranty. In other words, unless the Ecklunds prevailed in their assertion of ownership over property of the Stevensons,no breach of the covenant of warranty could occur. The Stevensons argue, without citing authority, that the Ecklunds' belief that their assertion of ownership had a legal

### basis is sufficient to establish a breach. This position is inconsistent with Green, which requires that paramount title be proved and that the covenantee be actually or constructively evicted. Green, 214 

### P. at 91. 

### A warrantor is notbound to defend against an unlawful claim of title, but only against claims that are, in fact,superior. Chaney v. Haeder (0r.App. 1988), 752 P.2d 854, 856-57; Roperv. Elkhorn at SunValley (Idaho1980)

### , 605 P.

### 2d 968,972-73; 20Am.Jur.2d Covenants,Conditions,and Restrictions 5 

### 56 (1965). The Stevensons also assert that they were unable to obtain title insurance or refinance the underlying loan on the property during the pendency of the litigation. On that basis, they argue that the property was "encumbered," resulting in a breach of the covenant of warranty. We disagree. Themere showing of a cloud on the title is not sufficient to establish a breach. Roper, 605 P.2d at 972; 20 Am.Jur.2d Covenants, Conditions,andRestrictions5 

### 56 (1965). Thus,even if the Ecklunds'assertion of ownership clouded the Stevensons' title in the eyes of the title insurance company or the lending institution,the claim was not paramount to the Stevensons' title

as required by 

### Green. The Stevensons also argue that the covenant of warranty was breached under Wagner v. Cutler (1988), 232 Mont. 332, 757 P.2d 779. They quote at length from Waaner, but neither develop an argument nor apply that case to the facts beforeus. InWaaner,we addressed the scope of a covenant of warranty contained in aC*i special warranty deed. Waqner is not relevant in determining whether a breach of the covenant of warranty occurred here. Finally, the Stevensons contend that S 27-1-316(1) (c)

### , MCA, supports the court's award of attorney's fees as a measure for damages resulting from thebreach of the covenant of warranty. It is true that 27-1-316(1) (c)

### ,MCA,provides that expenses incurred by the covenantee in defending his possession are part of the detriment causedby abreach of the covenant ofwarranty. However, the statute does not serve as a basis for an award of attorney's fees where, as here, no breach is established. Because the Stevensonsdid not establishthat theEcklundshad asserted a lawful claim of ownership on the disputedproperty under Montana law, we hold that the District Court erred in concluding that a breach of the covenant ofwarranty occurred. We reversethe District Court'sdenial of theWoods1motion for summary judgment, and simultaneous grant of summary judgment in the Stevensons' favor,relating to the covenant ofwarranty its judgment consistentwith this opinion. Reversed.

We Concur:

Chief Justice h and direct it tomodify

?