Tiller White, LLC v. Canyon Outdoor Media, LLC

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 43482
TILLER WHITE, LLC, )
)
Boise, June 2016 Term
Plaintiff-Respondent, )
)
2016 Opinion No. 69
v. )
)
Filed: June 28, 2016
CANYON OUTDOOR MEDIA, LLC, )
)
Stephen W. Kenyon, Clerk
Defendant-Appellant. )
)
Appeal from the District Court of the Third Judicial District, State of Idaho,
Canyon County. Hon. Christopher S. Nye, District Judge.
District court order granting summary judgment, affirmed.
Davison, Copple, Copple & Copple, LLP, Boise, for appellant. Ed Guerricabeitia
argued.
Edwin G. Schiller, Nampa, argued for respondent.
_________________________________
BURDICK, Justice
Canyon Outdoor Media, LLC (Canyon Outdoor) appeals from the Canyon County
District Court’s grant of summary judgment in favor of Tiller White, LLC (Tiller).1 The district
court ruled that because Canyon Outdoor’s easement was unrecorded and because Tiller did not
have actual or constructive notice of the easement, the easement was unenforceable. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In February 2003, Glen and Rachel Knapp (Knapps) entered into a written lease
agreement with Lockridge Outdoor Advertising Agency to place a billboard sign on their
property in exchange for annual rental payments. The lease was for a period of ten years,
beginning May 1, 2003, with a five-year renewal provision after the original term expired.
Lockridge assigned the lease to Canyon Outdoor shortly after it was executed.
The lease agreement contained a provision that allowed Knapps to sell an easement to
Canyon Outdoor for a lump sum. In May 2003, Canyon Outdoor paid a $12,000 lump sum, and
1
The property was originally sold to Daniel L. Tiller, P.A., and then transferred to Tiller White, LLC. For
convenience, “Tiller” will also refer to Dr. Daniel L. Tiller, member of Tiller White, LLC, and Daniel L. Tiller, P.A.
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the parties signed an easement agreement. Canyon Outdoor completed construction of the sign in
May 2003. Neither the lease nor the easement agreement contained a legal description of the
property. Neither document was recorded.
In 2006, Knapps sold their property to Tiller and issued to Tiller a warranty deed with no
restrictions. Tiller had discussions with Knapps about the lease agreement and reviewed the lease
document prior to purchasing the property. Tiller also had a title policy issued that, due to the
non-recording, did not disclose the easement.
Tiller asserted that he was unaware of the easement until May 2013 when Canyon
Outdoor faxed him a copy of the easement. Thus, Tiller argued that he was a bona fide purchaser
under Idaho Code sections 55-606 and 55-812. Canyon Outdoor argued that Tiller, at minimum,
had constructive notice of the easement and therefore did not qualify as a bona fide purchaser.
The parties stipulated to have the district court decide the case on cross-motions for
summary judgment. Finding that Tiller did not have actual or constructive notice of the easement
and that Tiller conducted a reasonable investigation of the property, the district court ruled in
favor of Tiller and found that the easement agreement executed by Knapps and Canyon Outdoor
was unenforceable against Tiller. Canyon Outdoor timely appeals.
II. STANDARD OF REVIEW
We review a district court’s grant of summary judgment de novo, and apply the same
standard used by the district court in ruling on the motion. Grazer v. Jones, 154 Idaho 58, 64, 294
P.3d 184, 190 (2013). “The fact that the parties have filed cross-motions for summary judgment
does not change the applicable standard of review.” Shawver v. Huckleberry Estates, L.L.C., 140
Idaho 354, 360, 93 P.3d 685, 691 (2004). Summary judgment is appropriate when “the pleadings,
depositions, and admissions on file, 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 a judgment as a matter
of law.” I.R.C.P. 56(c). “The facts must be liberally construed in favor of the non-moving party.”
Capstar Radio Operating Co. v. Lawrence, 153 Idaho 411, 416, 283 P.3d 728, 733 (2012). When
both parties move for summary judgment, “the trial court as the trier of fact is entitled to arrive at
the most probable inferences based upon the undisputed evidence properly before it and grant the
summary judgment despite the possibility of conflicting inferences.” Huckleberry Estates, L.L.C.,
140 Idaho at 361, 93 P.3d at 692. “The test for reviewing the inferences drawn by the trial court is
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whether the record reasonably supports the inferences.” Beus v. Beus, 151 Idaho 235, 238, 254
P.3d 1231, 1234 (2011).
III. ANALYSIS
The district court ruled that because Canyon Outdoor’s easement was unrecorded and
because Tiller did not have actual or constructive notice of the easement when he purchased the
land, the easement is unenforceable. On appeal, Canyon Outdoor contends that the district court
erred because Tiller did in fact have notice of the easement when he purchased the land and
therefore the easement is valid.
A. The district court was correct in finding that the easement was unenforceable.
Idaho Code sections 55-606 and 55-812 provide that an unrecorded interest in land is
void against subsequent purchasers who acquire title in good faith and for valuable
consideration. “[T]he words “good faith” in [these] statute[s] mean actual or constructive
knowledge of the prior interest or defect in title.” Benz v. D.L. Evans Bank, 152 Idaho 215, 226,
268 P.3d 1167, 1178 (2012). “[O]ne who purchases or encumbrances with notice of inconsistent
claims does not take in good faith, and one who fails to investigate the open and obvious
inconsistent claim cannot take in good faith.” W. Wood Investments, Inc. v. Acord, 141 Idaho 75,
86, 106 P.3d 401, 412 (2005); see also I.C. § 55-815 (“An unrecorded instrument is valid as
between the parties thereto and those who have notice thereof.”). Good faith requires “a
reasonable investigation of the property.” Langroise v. Becker, 96 Idaho 218, 221, 526 P.2d 178,
181 (1974).
Here, the district court found that Tiller did not know about the unrecorded easement
until 2013 and that Tiller conducted a reasonable investigation of the property prior to purchase
in 2006. Canyon Outdoor argues that this was an unreasonable inference based on the evidence
in the record. Specifically, Canyon Outdoor contends that evidence that Knapps told Tiller they
had received a lump sum payment for the sign and that there was a possibility of having
advertising space on the sign put Tiller on notice that Canyon Outdoor had an easement. Canyon
Outdoor also argues that Tiller did not conduct a reasonable investigation of the property.
Canyon Outdoor points to Glen R. Knapp’s affidavit and Daniel L. Tiller’s deposition
testimony as evidence that Tiller knew about the lump sum Knapps received in exchange for the
easement. In Knapp’s affidavit he states:
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I told [Tiller] I had received a lump sum payment of $12,000 and
that the agreement provided free advertising if one face was vacant
and asked if that was a deal breaker . . . . My wife and I kept a
folder of documents concerning the billboard sign.
To the best of my knowledge, I would have received a copy
of all the documents that my wife and I signed that were related to
the billboard sign.
To the best of my knowledge, I would have given the file
pertaining to the billboard sign to Dr. Tiller or the closing agent
prior to or at the time of closing as we would have had no further
need for the file.
Regarding the same incident Tiller’s deposition testimony revealed the following:
Q: Now were there any discussions with either Mr. Knapp or Mrs.
Knapp with regards to the sign itself at the time you entered into
this agreement on February 27, 2006?
A: Only to say that he was concerned that originally it would have
been a deal breaker. This ten year lease. And that there is only
seven years to go. And at that point we could start collecting rent
that would help pay the taxes.
....
Q: And Mr. Knapp’s conversation about collecting rent, what
information did he provide you with regards to the rent on the
lease?
A: Well, we know how much it was. A lump sum. So for those ten
years we didn’t receive anything.
....
Q: And I presume that it was Mr. Knapp that told you he received
a lump sum on the lease?
A: All he said was at the end of seven more years we could start
receiving rent if we wanted to continue.
Q: What did Mr. Knapp tell you after the ten year lease was
expired?
A: That if we elected to continue with this lease we could receive
rent to help pay for the taxes.
Q: What other conversations did you have with the Knapps in this
time frame in 2006 when you were acquiring the property?
A: That was all.
Q: What documentation did the Knapps provide to you as it relates
to the billboard at this time in 2006?
A: I think this [the Sign Lease] is all we had.
Q: Did they provide you a folder with other information that was
pertinent to the billboard?
A: No.
Q: What information did you request from them specifically
related to the billboard that was situated on the property?
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A: Well, we had this. Exhibit 1 [the Sign Lease]. And then at
closing that is all the paperwork we had.
Neither Tiller’s nor Knapp’s account of their conversation regarding the lump sum
payment and the billboard makes any mention of an easement. While there is mention of a lump
sum in both recollections there is nothing in Knapp’s affidavit to contradict Tiller’s assertion that
Knapp indicated the lump sum was for payment of the lease through the ten-year term and that
Tiller could expect to receive rent after the end of the ten-year term. Knapp alludes to the free
advertising agreement that is part of the addendum to the easement, but Knapp does not say
anything about an easement or otherwise indicate that the advertising agreement and the lump
sum where part of a separate and distinct agreement not contained within the lease. Although
Knapp asserts that “to the best of his knowledge” he would have had a “copy of all the
documents that my wife and I signed that were related to the billboard sign” (which would
presumably contain a copy of the easement) and that, again to “the best of his knowledge,” those
documents would have been given to Tiller, there is no physical evidence that such a folder
existed and there is no testimonial evidence from either Knapp or Tiller that Tiller ever saw,
received, or heard about the easement before it was faxed to him by Canyon Outdoor in 2013.
Based on this evidence, it was reasonable for the district court to conclude that Tiller did not
have knowledge of the easement until 2013.
Canyon Outdoor attempts to make much of the fact that the only place in the lease that
mentions a lump sum is the provision in the lease that allowed Knapps to sell an easement to
Canyon Outdoor. That provision reads as follows: “Lessor reserves the right to, at any time
throughout the term of the lease, to sell Lessee a permanent easement with ingress and egress
right to service structure for a one time lump sum of $10,000 thus voiding the yearly contractual
payment aforementioned.” Canyon Outdoor argues that this provision combined with Tiller’s
knowledge that Knapps received a lump sum payment was enough to put Tiller on notice that
there was an easement attached to the property and trigger Tiller’s duty to further investigate.
Canyon Outdoor further contends that Tiller did not conduct a reasonable investigation of
the property because he did not “attempt to contact Canyon Outdoor to confirm whether or not it
may or possibly had an easement interest in the subject property.” In support of this argument
Canyon Outdoor relies on Wood v. Simonson, 108 Idaho 699, 701 P.2d 319 (Ct. App. 1985). In
that case, the Idaho Court of Appeals stated in dicta that:
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[I]f facts appear which would cast suspicion upon the vendor in the
eyes of the reasonably prudent person, the purchaser “does not
discharge his duty [to investigate] by making inquiry of his vendor
alone, and hence the fact that the purchaser is misled by the
vendor’s false statements is usually not sufficient to protect him.”
108 Idaho at 703–04, 701 P.2d at 323–24 (quoting 92 C.J.S. Vendor & Purchaser § 326 (1955))
(second alteration in original).
Here, when interpreting the facts in a light most favorable to Canyon Outdoor, the
provision in the lease that references a lump sum payment in exchange for an easement of
ingress and egress would be sufficient to “cast suspicion” on Knapp’s statement that the lump
sum payment was only for prepayment of the lease. However, unlike in Simonson, Tiller did
more than simply rely on the word of his vendors. In addition to the conversation he had with
Knapp about the sign, Tiller had the signed lease, he had a warranty deed free of restrictions, and
he had a title policy issued by a title company that indicated that the property was free of
encumbrances. Despite Canyon Outdoor’s contention otherwise, the fact that Tiller did not
contact Canyon Outdoor directly is not dispositive. The test is whether Tiller conducted a
reasonable investigation of the property. Langroise, 96 Idaho at 221, 526 P.2d at 181. A
reasonable investigation of the property does not rely solely on the performance or failure to
perform any one specific act. Rather, a reasonable investigation is one that a reasonable prudent
person would conduct under similar or like circumstances. Simonson, 108 Idaho at 703–04, 701
P.2d at 323–24. Having received a representation that the lump sum payment was prepayment on
the lease and having obtained a title policy and a warranty deed showing no easements attached
to the property, it would be reasonable for Tiller to conclude that the property was free of
encumbrances after the term of the lease had run. Thus, under the facts of this case, it was
reasonable for the district court to conclude that Tiller had conducted a reasonable investigation
of the property.2
In sum, the only evidence that there might have been an easement was Knapp’s mention
of a lump sum payment and Knapp’s passing mention of the advertising agreement. Based on (1)
Tiller’s uncontested testimony that Knapp told him the lump sum was prepayment on the lease,
2
During oral argument Canyon Outdoor repeatedly insisted that a reasonable investigation of the property would
include Tiller contacting Canyon Outdoor and that all Tiller had to do was make “one phone call” to Canyon
Outdoor and all this could have been avoided. We note that the same can be said of Canyon Outdoor’s failure to
record its easement. Arguably, it would be reasonable and just as easy for Canyon Outdoor to have recorded its
easement. Yet, although recording the easement would have cleared up the matter, the law does not require Canyon
Outdoor to do so.
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(2) the presence of an unrestricted warranty deed, and (3) the fact that the title policy did not
disclose the easement, we hold that “the record reasonably supports the inferences” drawn by the
district court that Tiller did not have notice of the easement until 2013 and that Tiller conducted
a reasonable investigation of the property. Shawver v. Huckleberry Estates, L.L.C., 140 Idaho
354, 361, 93 P.3d 685, 692 (“[T]he trial court as the trier of fact is entitled to arrive at the most
probable inferences based upon the undisputed evidence properly before it and grant the
summary judgment despite the possibility of conflicting inferences.”). Therefore, we find no
error.
Because we hold that the district court did not err in concluding that Tiller took the
property free of the unrecorded Canyon Outdoor easement we do not address whether the
easement was unenforceable due to a lack of a proper description of the property.
B. Whether Canyon Outdoor is entitled to attorney fees on appeal.
Canyon Outdoor asserts that it is entitled to attorney fees on appeal under Idaho Code
section 12-121. “Under I.C. § 12–121, attorney fees are awarded to the prevailing party if the
court is left with the belief that the proceeding was brought, pursued or defended frivolously,
unreasonably, or without foundation.” Harris v. State, ex rel. Kempthorne, 147 Idaho 401, 406,
210 P.3d 86, 91 (2009). Canyon Outdoor is not prevailing party. Tiller does not request fees.
Therefore, each side will bear its own fees on appeal.
IV. CONCLUSION
Because the evidence in the record reasonably supports the district court’s ruling, the
district court is affirmed. Costs to Tiller.
Chief Justice J. JONES and Justices EISMANN, W. JONES and HORTON, CONCUR.
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