DocketNumber： DA 16-0139
Judges： Cotter, McKinnon, Shea, Baker, Wheat
Filed Date： 12/27/2016
Status： Precedential
Modified Date： 10/19/2024
delivered the Opinion of the Court.
¶1 This case stems from a disagreement over the ownership and operation of an irrigation system on a ranch near Broadus, Montana. Tim Welu appeals from the Findings of Fact and Conclusions of Law entered after a bench trial in the Sixteenth Judicial District Court, Powder River County. We affirm.
ISSUES
¶2 On appeal, Welu raises three issues, which we restate as follows:
1. Did the District Court err in determining that the entire pivot irrigation system constituted a fixture?
2. Did the District Court err in concluding that Held did not breach the parties’ agreement concerning the pivot irrigation system?
3. Did the District Court err in determining that Held and Twin Hearts Smiling Horses, Inc., were not unjustly enriched?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 In 2005, Steve Held and Ginger Held (the Helds), together with David Platt and Diane Case (the Platts), purchased an approximately 6,000 acre ranch roughly 16 miles south of Broadus in Powder River County, called the Twin Hearts Angus Ranch (the Ranch). In 2008, the parties agreed to divide the Ranch into three, approximately 2,000 acre parcels. This division was accomplished in 2009 when an agreement was entered into between the Helds, the Platts, and Tim Welu. Under
¶4 As indicated by the exclusive rights he acquired in the 2009 agreement, Welu’s purpose in acquiring an interest in the Ranch was to use the land to hunt game animals. For this purpose, he identified areas suitable for attracting and retaining game animals within the Ranch property. Among these were areas within Held’s portion of the Ranch that had previously been used to grow crested wheat without irrigation, as well as areas that had not previously been irrigated. Welu believed that irrigated alfalfa fields would increase the amount of game attracted and retained on the property in those areas. Initially, Welu and Held attempted to utilize a flood irrigation system, already located in the area but in disrepair and inoperable, to grow alfalfa. These efforts ceased in 2010 after the failure to restore the flood irrigation system to the operational condition desired by Welu.
¶5 Subsequently, Welu proposed to irrigate the area using a pivot irrigation system. This proposal was memorialized in an email sent to Steve Held in December 2010 which, because of its importance to the underlying action, we restate here:
1. I would pick up the primary costs associated with set up and installation.
2. I would expect you to be responsible for all on going [sic] maintenance and operational costs ...
In other words, this is a 1 time cost for me. You will maintain them and operate them. You will make sure we have green fields to hunt on. A pump goes out, you replace it. I think that is a reasonable expectation given the amount of investment I am looking at. Agreed?
Held responded simply, “Its agreed.”
¶6 To fulfill his end of the agreement, Welu selected and hired Agri-Systems, Inc. (Agri) to provide and install the pivot irrigation system, and drew up plans indicating where the irrigation was to occur. Held had prepared the relevant areas and was ready to plant alfafa by April
¶7 In early 2012, Welu scheduled a training session with Agri for the purpose of instructing Held on how to operate and maintain the irrigation system. Held did not attend. Nonetheless, at the start of the 2012 growing season, Held proceeded to operate the irrigation system. As a result, a pivot head caught on a fence and was damaged, rendering the pivot unusable until repaired. Further, during Held’s operation of the system, a motor was burned out and a supply pipe burst. Due to the damage, the irrigation system was taken offline in May 2012. Shortly after the irrigation system was taken offline, Welu sent an email to Held stating that, “I have instructed Agri to not do any more work on the pivots until I give them further directions,” effectively preventing Held from charging repairs to Welu’s account or utilizing the parties’ original service provider. The pivot irrigation system remained unrepaired and offline during May and June of 2012.
¶8 On July 8, 2012, Welu notified Held that he had sold the pivots and that Agri would enter the property to dismantle and remove the pivots, electrical boxes, motors, pumps, and other components not buried in the ground. After the workers arrived on the property and commenced removing the system, successfully dismantling one of the pivots, Held directed them to leave the property. While they left the dismantled pivot on the property, the workers left without reassembling the system.
¶9 Following Held’s refusal to allow his workers to remove the irrigation system, Welu filed the instant action against Held and THSH arguing that the pivot irrigation system should be returned to his possession, that the Defendants had converted his property by exercising unauthorized dominion or control over the irrigation system, that Defendants had been unjustly enriched through their possession of the irrigation system, and that the Defendants have caused him
¶10 The parties tried the case before the Honorable Michael B. Hayworth on March 24 and 25, 2015. The District Court entered Findings of Fact, Conclusions of Law, and an Order resolving the case in favor of the Defendants. The District Court determined that the irrigation system, in its entirety, was a fixture and attached to the real property owned by THSH and, therefore, the irrigation system was owned by THSH. Further, the District Court determined that Welu was not liable to Held and THSH under any of their alleged counterclaims and, similarly, that Held and THSH were not otherwise liable to Welu under any of his alleged claims.
¶11 On appeal, Welu argues the District Court erred in concluding that the entire pivot irrigation system was a fixture, that the District Court erred by determining that Held did not breach the parties’ agreement, and that the District Court erred in concluding that Held and THSH were not unjustly enriched by being allowed to retain the pivot irrigation system on their property.
STANDARD OF REVIEW
¶12 “We review findings of fact in a civil bench trial to determine if they are supported by substantial credible evidence,” while viewing the evidence in the light most favorable to the prevailing party. JTL Group, Inc. v. New Outlook, LLP, 2010 MT 1, ¶ 30, 355 Mont. 1, 223 P.3d 912 (citation omitted). “Conclusions of law in this context are also reviewed for correctness.” JTL Group, Inc., ¶ 30 (citation omitted). “We apply de novo review to mixed questions of law and fact.” Mlekush v. Farmers Insurance Exchange, 2015 MT 302, ¶ 8, 381 Mont. 292, 358 P.3d 913 (citation omitted).
DISCUSSION
¶13 1. Did the District Court err in determining that the entire pivot irrigation system constituted a fixture?
¶14 This Court addressed the issue of whether an irrigation system
¶15 Whether an irrigation system constitutes a fixture depends upon certain factual considerations which, in the context of a civil bench trial, we would review for clear error, determining whether they are supported by substantial evidence. JTL Group, Inc., ¶ 30. However, such a determination also requires us to determine whether those facts satisfy the legal standard provided by § 70-15-103, MCA, and our precedent in Schwend. We apply de novo review to the question of whether facts satisfy a legal standard. BNSF Ry. Co. v. Cringle, 2012 MT 143, ¶ 16, 365 Mont. 304, 281 P.3d 203. Therefore, though the factual findings are reviewed for clear error, the question of whether an irrigation system constitutes a fixture is reviewed de novo.
¶16 Personal property may become a fixture pursuant to § 70-15-103, MCA, which provides, in relevant part, that “[a] thing is deemed to be affixed to land when it is ... permanently attached to what is thus permanent as by means of cement, plaster, nails, bolts, or screws.” Section 70-15-103(4), MCA. We consider the following factors when determining whether personal property has become affixed to the realty: “ ‘(1) annexation to the realty, (2) an adaptation to the use to which the realty is devoted, and (3) intent that the object become a permanent accession to the land.’ ” Schwend, ¶ 15 (quoting Pacific Metal Co. v. Northwestern Bank of Helena, 205 Mont. 323, 329, 627 P.2d 958, 961 (1983)).
¶17 We emphasize that, as illustrated by our decision in Schwend, the specific question of whether an irrigation system is a fixture requires application of the annexation, adaptation, and intent test that is unique to the facts of each case. Schwend, ¶ 27. Therefore, we address each factor in turn.
A. Annexation
¶18 “The clearest cases of annexation are those in which the equipment has some characteristic of permanent physical attachment to the land, such as being buried within the land, or consisting in part of concrete slabs partially buried within the land.” Schwend, ¶ 28.
“Plastic pipe with gates, or windows on one side that can be opened to regulate water flow onto a field. This pipe comes in lengths of twenty or thirty feet and diameters of six, eight, and ten inches. A farmer or rancher uses the pipe by moving the needed lengths to the field on a special trailer and laying them out end-to-end in the proper location. The pipe is then connected to riser pipes that are permanently attached to water lines buried underground. While the installation of the water mainline and the riser pipes clearly involves substantial earthwork, the gated pipe is specifically designed to be lightweight and portable for use in more than one field. A farmer or rancher using this system needs the gated pipe to irrigate. However, any farmer or rancher with a riser pipe connection could attach the gated pipe and irrigate his field with it. The pipe remains above ground at all times, and it is stored away from the field when not in use.”
Schwend, ¶ 25 (emphasis added) (quoting Wyo. State Farm Loan Bd. v. Farm Credit Sys. Capital Corp., 759 P.2d 1230, 1231 (Wyo. 1988)).
¶20 The factual circumstances surrounding the pivot irrigation system at issue here are noticeably different from those we addressed in Schwend. There is no evidence in the record that the parties intended the pivot irrigation system to be moved to different locations on different fields. Instead of removing and stacking the pipes as the parties did in Schwend, this pivot irrigation system was winterized in place. We note further that this pivot irrigation system was not specifically designed to be used in more than one location, as the Schwend irrigation pipe was. Unsurprisingly, there was no evidence
¶21 Given these particular facts, we find that there was substantial evidence tending to show annexation in this instance which outweighed any evidence against such a conclusion. Therefore, we hold that the District Court did not err in concluding that the pivot irrigation system was factually annexed to THSH’s real property within the meaning of our precedent involving fixtures.
B. Adaptation
¶22 The second factor considered when determining whether a piece of personal property constitutes a fixture is whether the property has been adapted to the use to which the realty is devoted. Schwend, ¶ 15. In Schwend, we determined that, although the irrigation system at issue was located on irrigated farmland and necessary for the continued use of the land for cultivating irrigated crops, the irrigation pipes at issue had not been adapted to the land because they were not “an integral part of that system, nor [were they] adapted to the particular ground being farmed in the way that the remainder of the system was.” Schwend, ¶ 31. Welu argues the District Court erred in determining that the pivot irrigation system was adapted to the realty because Held had not previously irrigated the land at issue and because the system was capable of use on other property. However, there are particularly persuasive factual circumstances we noted in Schwend that Welu ignores. Specifically, the determinative question here is whether the pieces of the pivot irrigation system Welu sought to remove were an integral part of the pivot irrigation system as a whole, and whether the removable components were adapted to the particular real property at issue.
¶23 As noted above, the components Welu sought to remove included the “spans, towers, rotophases, and electrical panels.” In other words, Welu argues that he should be able to remove, essentially, every aboveground piece of the pivot irrigation system. However, under the factual circumstances present in this case, it is indisputable that these components constituted an integral part of the pivot irrigation system as a whole. The record reflects that the installation of the pivot irrigation system required that Agri visit the THSH property and assemble each individual pivot arm in specific lengths, tailored to fit
C. Intent
¶24 When addressing the intent factor in its Findings of Fact and Conclusions of Law, the District Court stated that “[s]ignificantly, the intent issue is one of determining objective intent.” (Emphasis in original.) This is not a complete statement of the law. In Schwend, we noted that of the three factors, “the intent of the parties [is given] the most weight and is the controlling factor.” Schwend, ¶ 15. However, we also stated that, while all parties in Schwend had testified as to their intent regarding the irrigation pipe, “the controlling intent is the objective intent of those who installed the purported fixture.” Schwend, ¶ 32 (emphasis added). The objective intent of the installing party “is deduced by the court from all of the circumstances surrounding the installation of the purported fixture.” Schwend, ¶ 32. Further, we find instructive a statement by the Wyoming Supreme Court, which noted “[t]his intention does not refer to the annexor’s subjective state of mind; rather it is the objective intention the law can infer an ordinary reasonable person to have based on the facts and circumstances in the record.” Amoco Prod. Co. v. Wyo. State Bd. of Equalization, 15 P.3d 728, 733 (Wyo. 2001).
¶25 Prior to the installation of the pivot irrigation system, the land Welu identified as suitable for planting food plots for attracting game animals had either not been previously used for agricultural purposes or was not currently being irrigated. Initially, Welu endeavored to restore the existing, but inoperable, flood irrigation system located on TSHS’s property. When those efforts failed, he sought to install the pivot irrigation system at issue in this case. During the installation of the pivot irrigation system, Welu and Agri filled in portions of the ditches that were part of the existing, but inoperable, flood irrigation system. Both systems were purposed towards creating irrigated alfalfa fields with the help of Held, the last cutting of which would be left on the field in the fall to attract game animals. Further, Welu testified that the agreement concerning the pivots was not limited to a specific timeframe, but would carry through as long as the parties owned their
¶26 Under the facts of this case, it is clear that Welu intended to create perennial hunting grounds through the use of irrigation and the assistance of Held on the Ranch for at least the next thirty years. Filling in portions of the existing irrigation ditches located on THSH property is further evidence of the fact that Welu intended the pivot irrigation system to be permanent. We determine that the objective circumstances surrounding Welu’s installation of the pivot irrigation system illustrate that it was his intent for the system to become a permanent fixture on the land.
¶27 Therefore, because the pivot irrigation system was annexed to the realty, adapted to the realty, and installed with the intent to remain permanently on the realty, the District Court did not err in holding that the pivot irrigation system was a fixture attached to the realty owned by THSH.
¶28 2. Did the District Court err in concluding that Held did not breach the parties’ agreement concerning the pivot irrigation system?
¶29 As noted above, Held had two primary obligations under his agreement with Welu: first, he would be responsible for all ongoing maintenance and operational costs; and second, he would ensure Welu had green fields to hunt on. The District Court determined that as of October 2011 Welu had fulfilled his obligation to install a functioning irrigation system on Held’s property, triggering Held’s duty to maintain the irrigation system and provide green fields for hunting purposes. On May 3, 2012, citing ongoing issues with the irrigation system, Welu informed Held that he had instructed Agri “not to do any more work on the pivots until I give [Agri] further directions.” The District Court noted that, had Welu not interfered and prevented Agri, the contractor who had installed the pivot irrigation system, from working on the pivots, Held would have had sufficient time, as of May 3, 2012, to plant and pivot irrigate an alfalfa crop to provide Welu’s required “green fields to hunt on” by the start of the fall hunting season, in satisfaction of the contract. Further, as noted by Welu on appeal, the District Court determined that Held had not breached the agreement between the parties as of early July 2012, when Welu attempted to remove the pivot irrigation system from Held’s property and subsequently filed the instant lawsuit.
¶30 The interpretation and construction of a contract is a question of law which, in the context of a District Court’s ruling in a civil bench trial, we review for correctness. See Bos Terra, LP v. Beers, 2015 MT
¶31 It is undisputed that, at the time they entered into the agreement concerning the pivot irrigation system, it was the intention of the parties to provide Welu with green fields on which to hunt. Indeed, the record reflects that Welu’s sole purpose in acquiring land from Held in the first place was to enjoy the hunting that he thought the area could be manicured to offer. Accordingly, as the agreement provided, Held’s duty to maintain and repair the pivot irrigation system was intended to “make sure we have green fields to hunt on.” The District Court found that Held had not breached the parties’ agreement as of the time that Welu directed that Agri not undertake any more work on the pivots, because there was still sufficient time for Held to repair the pivot irrigation system and cultivate green fields for hunting prior to the start of the 2012 hunting season, but for Welu’s interference. The facts found by the District Court in this regard are supported by substantial credible evidence. Therefore, we conclude that the District Court did not err in determining that, as of July 2012, when Welu commenced this lawsuit, Held had not breached the parties’ agreement.
¶32 3. Did the District Court err in determining that Held and Twin Hearts Smiling Horses, Inc., were not unjustly enriched?
¶33 “Unjust enrichment is an obligation created by law in the absence of an agreement between the parties.” Estate of Pruyn v. Axmen Propane, Inc., 2009 MT 448, ¶ 63, 354 Mont. 208, 223 P.3d 845. In other words, courts have applied the doctrine of unjust enrichment when a contract in law is implied by the facts and circumstances of the case, but no actual contract exists between the parties.
¶34 The District Court determined that the parties’ email exchange formed an express contract between the parties. The District Court noted that the agreement required Welu to provide the “set up and installation” of the pivot irrigation system, and required Held to be “responsible for all on going maintenance and operational costs.” Further, the District Court determined that Welu’s purpose for the contract was to attain “green fields to hunt on” during the hunting season, and that Held’s purpose was to receive irrigation equipment to support the growth of harvestable crops from the irrigated area, as
¶35 Further, while Welu repeatedly refers to the “Pivot Maintenance Agreement” in his arguments to this Court, he also argues that, while there was an agreement between the parties as to the maintenance of the pivot irrigation system, there was no agreement as to the permanent ownership of the system. Essentially, Welu asks this Court to hold that, even when there is a contract between the parties specifically relating to the property at issue in a proceeding, unjust enrichment should be an available remedy if the contract does not specifically mention who has permanent ownership of the property at issue. We decline to do so in this case.
¶36 Neither party disputes the existence of a contract involving the pivot irrigation system at issue. Because it is undisputed that a contract exists, Welu’s unjust enrichment arguments are not well taken. Estate of Pruyn, ¶ 63. The Dissent would have this Court reach the merits ofWelu’s unjust enrichment claim, arguing that because the contract did not expressly cover ownership of the pivot irrigation system, the contract does not preclude an unjust enrichment claim. We disagree.
¶37 The Dissent relies on Robertus v. Candee, 205 Mont. 403, 407, 670 P.2d 540, 542 (1983), to support its premise that “providing restitution to a contracting party who has a claim against the recipient of his performance is the well-settled principle of equity in other jurisdictions.” Dissent, ¶ 55. Robertus is factually distinguishable from the instant case. In Robertus, the plaintiffs had leased two tracts of land from the defendant. Robertus, 205 Mont. at 405, 670 P.2d at 541. In the fall of 1977, a dispute arose as to the amount of rent owed for one of the tracts of land. Robertus, 205 Mont. at 405-06, 670 P.2d at 541. At that time, the plaintiffs had prepared and planted a portion of that tract, incurring certain expenses. Robertus, 205 Mont. at 406, 670 P.2d at 541. The following spring, the defendant “informed [the plaintiffs] that they could no longer enter his land and terminated both lease agreements.” Robertus, 205 Mont. at 406, 670 P.2d at 541. The defendant proceeded to harvest and sell the wheat the plaintiffs had planted. Robertus, 205 Mont. at 406, 670 P.2d at 541. Subsequently, the plaintiffs sued to recover the monetary value of the benefit the defendant had gained by the work plaintiffs had put into the land, which they alleged to be $55,000. Robertus, 205 Mont. at 406, 670 P.2d at 541. The District Court noted that while the plaintiffs were precluded from suing under the lease because the Statute of Frauds
¶38 In summary, Robertus dealt with circumstances where the non-breaching injured party was suing the breaching party to recover a benefit retained by the breaching party. Because Welu is suing Held, who had not breached the agreement at the time of the suit, Robertus is of no assistance at all here. As the Dissent points out, the Restatement has identified circumstances in which a breaching party may recover from a non-breaching party based on the theory of unjust enrichment; however, these circumstances are not present in the instant case.
¶39 In full, § 374 of the Restatement (Second) of Contracts, entitled Restitution in Favor of Party in Breach, states:
(1) Subject to the rule stated in Subsection (2), if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party’s breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach.
(2) To the extent that, under the manifested assent of the parties, a party’s performance is to be retained in the case of breach, that party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss.
¶40 The rule cited by the Dissent is grounded in the theory that where a party justifiably refuses to perform based on the other party’s breach, unjust enrichment serves as a vehicle to reimburse him for the benefit he has conferred on the party who has already breached the agreement. Under the Dissent’s interpretation of the case, Welu is the party justifiably refusing to perform citing Held’s apparent breach. Dissent, ¶¶ 54-55. However, the District Court found, and we agree, that Held had not breached the agreement as of the date Welu sought to remove the pivot irrigation system and subsequently filed suit. Therefore, the predicate required by § 374 of the Restatement—that the party be justified in his or her refusal to perform based on the other party’s breach—is not present here.
¶42 Further, even if we were to assume that it was possible for Welu to proceed on an unjust enrichment claim, applying the doctrine in this case would contravene decades of this Court’s well-established precedent. The Dissent urges us to apply the doctrine of unjust enrichment based on the theory that an implied contract exists as to ownership of the pivot irrigation system. Dissent, ¶ 56. The Dissent goes on to state that “unjust enrichment does not always require a wrongful act.” Dissent, ¶ 57. This is a misleading characterization of the law.
¶43 This Court has yet to find unjust enrichment stemming from an implied contract appropriate, absent some element of fault or misconduct on the part of the defendant. See, e.g., Sebena v. State, 267 Mont. 359, 367, 883 P.2d 1263, 1268 (1994); Ragland v. Sheehan, 256 Mont. 322, 327, 846 P.2d 1000, 1004 (1993); Randolph V. Peterson, Inc., v. J.R. Simplot Co., 239 Mont. 1, 8, 778 P.2d 879, 883-84 (1989); Brown v. Thornton, 150 Mont. 150, 156, 432 P.2d 386, 391 (1967); Estate of Pruyn, ¶ 64; Hinebauch v. McRae, 2011 MT 270, ¶ 29, 362 Mont. 358, 264 P.3d 1098; Albinger v. Harris, 2002 MT 118, ¶ 21, 310 Mont. 27, 48 P.3d 711; Lefeber v. Johnson, 2009 MT 188, ¶ 26, 351 Mont. 75, 209 P.3d 254. The Dissent argues that wrongful acts sufficient to satisfy the requirement of our precedent occurred in either the purported violation of the “inordinate amount of trust” Welu had in Held, for which the Dissent apparently finds support in the record, or in the form of Held’s refusal to allow Welu to remove portions of the pivot irrigation system. Dissent, ¶¶ 57-58. Implicit in these arguments is the Dissent’s refusal to address this case within the temporal snapshot presented to this Court on appeal. The District Court determined that, at the time of Welu’s actions in May and July of 2012, Held would still have been able to produce the “green fields to hunt on” required by Welu under the contract. Therefore, there had been no breach of the
¶44 We acknowledge that a constructive trust may be imposed in the absence of any wrongdoing on the part of the defendant, see Northern Cheyenne Tribe v. Roman Catholic Church, 2013 MT 24, ¶ 29, 368 Mont. 330, 296 P.3d 450, but Welu did not argue in the District Court or on appeal for the imposition of a constructive trust, and we decline to sua sponte impose such a trust here. In conclusion, the District Court did not err in determining that Welu is not entitled under our precedent to recover from Held on the basis of unjust enrichment.
CONCLUSION
¶45 Based on the foregoing, we hold that the District Court did not err in determining that the pivot irrigation system was a fixture under the facts of this case, that the District Court did not err in determining that Held did not breach the parties’ agreement, and that the District Court did not err in concluding that Held and THSH were not unjustly enriched by the installation of the pivot irrigation system at issue in this case. Affirmed.