Smith v. Moran

No. 83-514
1N THE SUPREME COURT OF THE STATE OF MONTANA
1984
GEORGE SMITH and WILLIAM SFIITH,
Plaintiffs and R.espondents,
LARRY W. MORAN, ROBERT P. REISER,
RICHARD MILLER, PAULA MILLER, RONALD
PORTNELL and BETTY PORTNELL,
Defendants and Appellants.
APPEAL FROM: District Court of the Eighteenth Judicial District,
Tn and for the County of Gallatin,
The Honorable Thomas Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Monte D. Beck argued, Bozeman, Montana
For Respondent:
David L. Holland argued, Butte, Montana
Submitted: NO'/ \ :'? 1984
Decided : JWN 4 - f 3 8 ~
Filed: JAfl 4 ". 1985
Clerk
Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.
Defendants Larry Moran and Robert Reiser appeal from
judgments entered against them following a iury trial in the
District Court of the Eighteenth Judicial District, Gallatin
County. The Portnells settled with plaintiffs prior to the
conclusion of trial. The Millers were not affected by the
judgment and therefore are not parties to this appeal.
We reverse the judgments against Moran and Eeiser and
remand for a new trial.
Defendants Moran and Reiser are developers of a subdi-
vision located south of Bozeman, Montana, known as the Little
Bear Subdivision. Development began in late 1978, and has
been carried out in accordance with state law and local
regulations pertaining to subdivisions. Development included
the construction of several roads within the subdivision at a
cost of approximately $90,000 to the developers.
The Galla.tin County Board of Commissioners conditional-
ly approved a preliminary plat of the subdivision on December
6, 1978. A final plat was submitted for consideration and
approval by the Board of Commissioners on May 2, 1979. No
final approval of the plat was given at that time. The
eubmitted final plat incl-uded a dedication by the developers
granting "the lands included in all the streets" of the
subdivision "to the use of the public forever." The accuracy
of the submitted plat was then reviewed by land surveyors,
and the county commissioners approved the final plat on May
24, 1979.
Also on May 24, 1979, the comissioners and defendants
entered into a reservation agreement concerning the subdivi-
sion streets. The agreement arose as a result of the
developers ' concern that. landowners adjacent to the subdivi-a
sion might utilize subdivision roads without incurring any
associated costs, and might also develop their properties in
a way i-ncompatible with development in Little Bear Subdivi-
sion. The agreement provided that one foot of land area in
all subdivision streets immediately adjacent to the exterior
boundvies of the subdivision were reserved. from the dedica-
tion included in the final plat. The reservation could be
voided. by the county commissioners upon request of the subd-i-
vision developers, or at such time as the commission deter-
mined voidance to be in the public interest for the purpose
of ensuring good traffic circulation. Although the final
plat was filed with the clerk and recorder on May 25, 1979,
the agreement was not filed until May 30.
Plaintiff George Smith owns a ranch adjacent to the
west boundary of Little Bear Subdivision. In July, 1979, he
sold approximately 20.001 acres of the east portion of his
ranch to his brother, William Smith. This parcel was subse-
quently split into two parcels, with Wil-liam Alverson receiv-
ing one. Both parcels appear to he destined for residential
*
use. This transfer has been criticized by defendants as
having been accomplished in violation of state and loca.1
subdivision laws. However, no attempt ha-s been made to
determine if the transfers were indeed illegal.
It was in July that plaintiffs and d-efendants began
having a dispute concerning access throuqh the subdivision.
Moran a.nd Reiser apparently had no obiection to George Smith
occasionally crossing subdivision property for agricultural
purposes. They did, however, object to access to the tracts
conveyed by George Smith to his brother William. Relying
upon the reservation agreement, Moran and Reiser wrote George
Smith in late July informing him that, on account of the
reservation agreement, Smith did not have a right to cross
any portion of the reserved one foot strip to gain access to
the subdivision streets. However, defendants offered access
if Smith would agree to help pay construction costs for the
roads, approximately $5,766, as well as a pro-rata share of
road maintenance costs. Although the streets had been dedi-
cated to public use, the county was apparently not responsi-
ble for maintenance of any kind. Defendants also wanted
Smith to agree to other conditions respecting development on
the tracts conveyed to William Smith and Alverson.
The parties could not agree on these terms, and both
George and William Smith proceeded to use the streets and
cross the reserved strip at will, although they had other
access to their property. Relying upon the reservation
agreement, defendants attempted to bar access across the
reserved strip. A gate on the fence running between the
Smith-Little Bear property line next to Lot 18 of the subdi-
vision was locked, but the Smiths cut the fence and, at other
times, simply drove over it. Defendants erected an earthen
berm across another access point, but the Smiths avoided this
obstruction by crossina the fence at other points along the
property line. Access continued virtually unabated up to and
through the time of trial.
In August, 1979, the county commissioners, acting on
advice of the county surveyor and a deputy county attorney,
u~ilaterally rescinded the reservation agreement, ostensibly
because the agreement was contrary to state laws dealing with
abandonment of county roads. Although the resolution re-
scinding the agreement was filed with the clerk and recorder,
defendants claim that they received no actual notice of the
rescission, and further claim not to have learned of the
rescission until some time shortly before trial. The rescis-
sion resol-ution does not appear in the official county file
o~ the Little Bear Subdivision.
In December, 1979, George and William Smith filed suit
against Moran, Reiser and Richard and Paula Miller, owners of
one tract in the subdivision, seeking damages stemming from
blocked access to the subdivision streets, and declaration of
a prescriptive easement across several of the tracts in the
subdivision, including the one owned by the Millers. The
compl-aint was subsequently amended to add the Portnells,
owners of Lot 18 adjacent to George Smith's property. The
Portnells cross-claimed against Moran and Reiser for compen-
sation in event plaintiffs secured a judgment against Moran
and Reiser. Despite attempts to settle the access problem,
the case eventually went to trial. Prior to its conclusion,
the Portnells reached a separate settlement with plaintiffs.
The jury returned a special verdict against plaintiffs
on the claim for a prescriptive easement, but rendered a
verdict for plaintiffs on the separate claim for damages due
to blocked access. Together, Moran and Reiser were assessed
$22,000 in actual damages and $20,000 in punitive damages.
Judgment was entered to that effect . Defendants appeal.
The following issues are presented for review:
(1) Whether the trial. court erred by prohibiting intro-
duction of evidence of alleged violations of subdivision laws
and regulations by plaintiffs?
(2) Whether the trial court committed reversible error
in its instructions to the jury respecting the reservation
agreement?
( 3 ) Whether the trial court erred in its refusal to
instruct the jury on the law of rescission?
(4) Whether the award of damages is supported by sub-
stantial evidence?
We find that, upon consideration of the first three
issues, reversal of the judgments against defendants and
remand for a new trial are warranted. We therefore do not
reach the fourth issue concerning damages.
1.
Because of our decision to reverse, we must first
address defendants' argument that, in the event of reversal,
plaintiffs have no ba.sis for bringing their complaint, and
should not be permitted to proceed against defendants.
The gist of defendants' argument is that George and
William Smith have violated state and 1-ocal subdivision laws
in the process of George Smith transferring land to his
brother and William Alverson, and that they have d.one so
intentionally. As a consequence, defendants contend that
they may not bring suit for access across the one-foot strip
bordering Little Rear Subdivision, because the right of
access implicitly sanctions the existence of pla-intiffs' own
j-llegal acts with respect to their lands. Defendants at-
tempted to offer evidence of plaintiffs' allegedly unlawful
acts, but the trial court barred it from introduction.
On appeal., defendants maintain, that the judge should
have permitted introduction of the offered evidence, but
confuse their discussion of the issue with a.n extensive
factua.1 and 1.egal analysis of the plaintiffs' actions, and
conclude by a.sking this Court to reverse the judgment and
d-ismiss pla.intiffsl complaint with prejudice on account of
their i1lega.l activities. This we cannot do, for it is not
the province of an appellate court to try issues which were
never considered by the jury. We can, however, consider
those portions of defendants' argument which related to
whether the trial court should have permitted the jury to
consider evidence of plaintiffs' sctivities respecting their
properties.
There is nothing in Montana subdivision law which
prevents an individual who has developed his property con-
trary to that law from pursuing a claim for relief against an
adjoining subdivision for right-of-access. One who violates
state laws or local regulations pertaining to subdivisions is
guilty of a misdemeanor and is subiect to fine and/or impris-
onment. Section 76-3-105, MCA. Furthermore, the county
attorney in the county wherein the alleged illegal transfers
of land have been made is charged to enjoin further sal-es or
transfers and compel compliance with all relevant provisions
of subdivision law. Section 76-3-301 ( 3 ) , MCA. If plaintiffs
in the instant case have violated the subdivision laws,
whether intentionally or not, it rests with public authori-
ties to deal with any improprieties separate from the immedi-
ate lawsuit. The trial court was correct in excluding
defendants ' offered evidence of illegality, as it would have
been irrelevant to the access issue and could conceivably
have confused the jury. Thus, on remand, defendants will
again be barred from raising the allegations against
plaintiffs.
Appellants next contend that the t.rial court erred in
giving to the jury its Instructions No. 8 and No. 10, quoted
as follows:
"You are instructed that George Smith and
William Smith are owners of land that
abuts or is immediatel-y adjacent to the
Little Bear Subdivision and that they
have, as abutting owners, a special
right, distinct from the riuhts of the
general public, to use the roads located
within the Little Bear Subdivision to
gain access to their property." (Instruc-
tion No. 8.)
"You are instructed that the attempted
one foot reservation from dedication of
the public roa2s located within the
Little Bear Subdivision was ineffective
and void since such change was not made
part of an amended plat to be submitted
for public notice and hearing, and be-
cause the statutory procedures for vacat-
ing or abandoning t,he public roadway were
not followed. You may consider the
defendants' actions concerning the agree-
ment with the County Commissioners in
determining whether they acted innocently
or in good faith or whether they acted
mal-iciously." (Instruction No. 10. )
We find that both instructions amount to an incorrect
statement of the law.
The District Court's admonition in Instructj-on No. 10
regarding the appli-cability of abandonment statutes is in
error. The evidence establishes that subdivision residents
are solely responsibl-e for costs of construction, mainte-
nance, and snow removal regarding Little Bear streets. A
Gallatin County surveyor offered the uncontroverted testimony
that subdivision streets are not recognized as county roads.
No evidence was presented indicating that the Little Rear
streets had been established as county roads as required by
sections 7-14-2601 through -2615, MCA. Thus the abandonment
procedures outlined in section 7-14-2615, MCA, do not apply.
And if the subdivision streets were to be considered
county roads, the reservation agreement does not constitute
an abandonment under section 7-14-2601 (3)(b), MCA. That
statute defines abandonment as "cessation of use of right-
of-way . . . with no intention to reclaim or use again."
Future public use is specifically contemplated within the
t.erms of the reservatjon agreement.
In addition, the statement in Instruction No. 10 that
the reservation agreement was void because it was not made
part of an amended plat submitted for public hearing may be
-
inappropriate upon retrial, depending on the evidence intro-
duced. This instruction appears to be based on Gallatin
County, Mont. Subdivision Reg. 16.2, regarding amendments to
filial plats. We simply note that this regulation requires
only that amendments which materially alter the final plat,
- place - plat - nonconformance with Gallatin County
and the in
Subdivision Regulations, must be submitted for public
hearing .
A-lthough Instruction No. 10 con.t.ained significa.nt
error, the giving of Instruction No. 8 further compounded the
problem. The statement in Instruction No. 8 that the Smiths,
as abutting owners, had a special right distinct from that of
the public to use the subdivision streets to gain access to
their property, is a misreading of the 1-aw. The instruction
is largely based on Gal1atj.n County, Mont., Subdivision Reg.
4.4.2, which provides that "when a new subdivision adjoins
unsubdivided land and rea-sonable access thereto must pass
through the new subdivisj..on, streets and rights-of-way shall.
be provided as to allow suitable access to the unsubdivided
Land. " In the instant case, there was evidence that plain-
tiffs had ample alterna.tive access to their property, and no
evidence to suggest that access across the subdi.vision was
essential. as contemplated by the local regulation.
Also cited. as authority for the instruction was our
decision in Wynia v. City of Great Fa1l.s (1979), 183 Mont.
458, 600 P.2d 802. Wynia involved the closure of a portion
of a public street by the City of Great Falls, Montana. A
question on appeal was whether landowners abutting the street
had a property interest, unique from that of the general
public, in access via the closed street to their lot from the
nearest intersection in both directions. We ruled that any
unique property interest in abutting landowners is limited to
the right only to adequate access necessary to connect the
landowner to the general street system. Wynia, 183 Mont. at
472, 600 P . 2 d at 810. In denying plaintiffs damages, our
analysis in Wynia focused on whether reasonable access to the
complaining landowner had been preserved despite the city's
street closure. Wynia, 183 Mont. at 473, 600 P.2d at 811.
In the instant case, the plaintiffs-respondents had a special
right of access via the Little Rear Subdivj.sion roads only if
they had no other adequate access to their property, and the
iury should have been so instructed.
111
There is no question that the reservation agreement was
rescinded by the county commission in August of 1979. A key
aspect of defendants' case was that they had no notice of the
rescission for almost four years and their attempts to block
access to the subdivision streets were allegedly made in good
faith reliance on the existence of the reservation agreement.
Under Montana law, rescission of a contract requires
mutual assent of the parties to that contract. Cruse v.
Cl-awson (1960), 137 Mont. 439, 446-447, 352 P.2d 989. It is
clear that although no written notice is required, both
parties must assent to and he aware of the rescission in
order for it to be effective. Small v. Caca-Cola Bottling
Co. 11958), 134 Mont. 168, 173, 328 P.2d 124, 126. See also
Stovall v. Publishers Paper Co. (Or. 1978), 584 P.2d 1375,
1377 (rescission of contractual agreement requires notice to
opposing party).
Tn the instant case, the trial court did not instruct
the jury on any ~ s p e c tof rescission. We note, however, the
existence of evidence in the record which suggests that t.he
jury should have been instructed more clearly on this issue.
Both Moran and Reiser testified that they did not learn
of the rescission by resolution until after the pre-trial
conference, approximately six weeks before trial. There is
nothing on the face of the resolution rescinding the agree-
ment to indicate that the county commission gave notice to
Moran and Reiser regarding the decision to rescind, and
apparently no meeting was held with either Moran or Reiser in
August, 1979 regarding the rescission.
And although the reservation agreepent provided that
the commissioners had authority to void the agreement when
they deemed it to he in the public interest for the purpose
of establishing good traffic circulation, there is no indica-
tion in the resolution that the commissioners were employing
that authority in abandoning the agreement. The resolution
does make reference to a recommendation by Gallatin County
Engineer Robert Rabb and Deputy County Attorney Byron Dunbar,
that the agreement be rescinded. About one month prior to
the rescission, R ~ b bmaintained that the reservation agree-
ment appeared to be void because of the failure to follow
abandonment procedures for county roads. In a memorandum to
the county commission, Dunbar indicated that Babb ' s position
was "well taken" and implied that the reservation agreement
should be re-examined. There is no evidence that Moran or
Reiser were aware of or had received a copy of Babb's letter.
There is a notation on the second page of Dunbar's memorandum
indicating that Moran was to receive a copy of the memoran-
dum, but there is no evidence that Moran received a copy.
Neither the Eabb letter, the Dunbar memorandum, nor the
rescissior~ resolution appear in the official county file on
the Little Bear Subdivision, although the resolution was
filed with the county clerk and recorder. During a meeting
with county commissioners in late 1982 on the subject of
completing some roads in the subdivision, there was a conver-
sation about the lawsuit, and Moran apparently mentioned the
existence of the agreement. The commissioners disclaimed
knowledge of it. When Moran sent a copy of the agreement to
one of the deputy county attorneys, he was informed that the
aqreement was indeed on file, but was told that "on the
advise [sic] of [the county attorney's] office and the road
department," the commission had been told that the agreement
had no "force and effect." The letter to Moran does not
mention rescission.
We find sufficient evidence in the record to indicate
that the jury should have been instructed that actual notice
of the rescission was required and that it was entitled to
weigh the evidence and determine whether notice was received
by defendants, such that the jury could determine whether
defendants' attempts to block access to the subdivision
streets were made in good faith reliance on the existence of
the reservation agreement.
Tkr.e. judgments entered against defendants Larry Moran
and Robert Reiser are reversed, and the cause is remanded to
the District Court for new trial-.
We concur:
Chief Justice
Mr. Justice Daniel J. Shea specially concurring:
Although I do not agree with all that is said in the
opinion, I join in the order granting a new trial. Here, in
a case involving punitive damages, the defendants were
prevented from testifying that had they known of the
rescission agreement, regardless of its legality, they would
have conducted themselves differently. This is sufficient
to require a new trial at least on punitive damages.
However, the issues with regard to actual damages and
punitive damages are so intertwined that justice would he
best served to require a new trial on all issues.
Mr. Justice Fred 2. Weber dissents as follows:
I respectfully dissent from the majority opinion in the
following respects.
I agree with the majority's affirmance of the trial
court decision to exclude evidence of alleged violations of
subdivision laws and regulations by the plaintiffs.
I disagree with the majority's conclusion that Jury
Instructions No. 8 and No. 10 as given by the District Court
are an incorrect statement of the law. In substance these
instructions stated that the adjacent land owners as abutting
owners have a special right to use the lands within the
subdivision and that the attempted one foot reservation from
dedication of the public road in the subdivision was
ineffective and void because the change was not made part of
an amended plat nor was the procedure for va-cating a public
roadway followed. Basically the instructions correctly set
forth the appropriate law for this case.
The certificate of dedication of the plat contained the
following statement:
"The above described tract of land is to be known
and designated as LITTLE BEAR SUBDIVISION . and . .
the lands included in all streets, are hereby
granted and donated to the use of the public
forever.. . ."
No modification of that dedication was made by a-mendment,
vacation or otherwise. It is therefore clear that the
streets in the plat were effectively granted to and owned by
the public. The purported agreement between the defendants
and the county commissioners provided that one foot of area
in all streets adjacent to the exterior boundaries of the
subdivision shall be considered as reserved from the
dedication contained in the plat. I find no authority for
such a reservation. The reservation contradicts the plat
itself. The effect of the dedication in the plat is stated
in 5 76-3-103 ( 2 ) , MCA as follows:
"'Dedication' mea.ns the deliberate appropriation of
land by an owner for any general and public use,
reserving to himself no rights which are
incompatible with the full exercise and enjoyment
of the public use to which the property has been
devoted. "
The purported agreement was of course in complete derogation
of the foregoing statutory definition of dedication to the
public in that it attempted to make the exterior one foot
area of the street unavailable for full exercise and
enjoyment by the public. The control-ling standards for
amendment or change in a plat with regard to the use of the
one foot portion of a street are contained in the Uniform
Standards for Final Subdivision Plats at S 8.94.3003 of the
Administrative Rules of Montana. Section l(d) of those
standards provides:
"(d) Cha-nges to a filed subdivision plat must be
filed with the county clerk and recorder as an
amended plat. An amended plat may not be filed
unless it meets the filing requirements for a final
subdivision plat specified in these rules . . ."
It is clear there wa.s no attempt on the part of anyone to
amend the plat in a manner consistent with these standards.
In addition 5 16.2 of the Gallatin County Subdivision
Regulations provides:
"Material Alterations. Amendments that materially
alter the final plats shall be made by the filing
of an amended plat, approved by the governing
body. .. .'
I
No attempt was made to amend as required under the
Subdivision Regulations of the County.
The portion of the agreement between the defendants and
the County relied upon as a protection by the defendants is
"1. The one foot of land area in all within LITTLE
BEAR subdivision, immediately adjacent to the
exterior boundaries thereof shall be considered as
RESERVED from the dedication contained on the plat
of LITTLE BEAR. "
There is no authorization for such an agreement. The above
cited standards and regulations prohibit any such agreement.
It is obvious that the intent of the agreement was to subvert
the Certificate of Dedication, which granted to the public
the ownership and right to use all of the streets including
the one foot in question.
I would therefore agree with the contention of the
plaintiffs that the contract is void under § 28-2-603, MCA,
which in substance provides that where the single object of a
contract is unlawful, the entire contract is void. That is
an accurate description of this particular contract.
I would therefore conclude that the instructions given
were a correct statement of the law. In doing so I would
point out that the District Court in the last sentence of
Instruction No. 10 directed the jury that it may consider the
defendants' actions concerning the agreement with the County
Commissioners in determining whether the defendants acted
innocently or in good faith or whether they acted
maliciously. After the receipt of the instructions, the jury
rendered a verdict for the plaintiffs in the amount of
$22,000 actual damages and $20,000 in punitive damages.
I would hold that Jury Instructions No. 8 and No. 10
were adequate statements of the law.
I would further hold that the trial court did not err in
its refusal to instruct on the law of rescission. I find no
basis for requiring some type of notice before rescinding a
contract which is improper and therefore unlawful under the
statutes. I do not see how some sort of equitable
requirement is necessary before Gallatin County gave notice
that it cancelled the contract which on its face is illegal.
In addition, I do not find that the award of damages was
excessive or unsupported by substantial evidence. As T have
previously indicated, the instruction regarding the attempted
reservation of one foot of the streets stated to the jury
that it could consider the actions of the defendants in
determining whether the defendants acted innocently or in
good faith or maliciously. It seems clear that all of these
were issues properly determined by the jury in accordance
with the law. I would affirm the District Court.
Mr. Chief Justice Frank I. Haswe11 joins in the foregoing
dissent.
Chief Justice
Mr. Justice Frank B. Morrison, Jr. joins in the foregoing
dissent.