Old Standard v. Huntley

May 27 2014
DA 13-0391
IN THE SUPREME COURT OF THE STATE OF MONTANA
2014 MT 137N
OLD STANDARD LIFE INSURANCE
CO., IN LIQUIDATION,
Plaintiff and Appellant,
v.
HUNTLEY LAND, LLC,
Defendant and Appellee.
APPEAL FROM: District Court of the Fifth Judicial District,
In and For the County of Beaverhead, Cause No. DV 09-13369
Honorable Loren Tucker, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
John E. Bloomquist, Patti L. Rowland; Bloomquist Law Firm, P.C.;
Helena, Montana
For Appellee:
Peter G. Scott; Gough, Shanahan Johnson & Waterman, PLLP;
Bozeman, Montana
Submitted on Briefs: April 23, 2014
Decided: May 27, 2014
Filed:
__________________________________________
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(d), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion and shall not be cited and does not
serve as precedent. Its case title, cause number, and disposition shall be included in this
Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana
Reports.
¶2 Old Standard Insurance Co., in Liquidation (Old Standard), appeals the judgment
of the Fifth Judicial District Court in favor of Huntley Land, LLC (Huntley). Old
Standard challenges the District Court’s rulings regarding the parties’ dispute over
express and implied easements, its conclusion that it lacked jurisdiction to address certain
water right transfers, and the award of attorney’s fees to Huntley. We affirm the court’s
judgment on the merits and reverse its award of attorney’s fees.
¶3 In 1999, construction began on a commercial water bottling facility on a ranch
near Dillon, Montana. The bottled water originated in a spring named the “Atrium
Spring.” The building process involved installing pumps, a pump house, electric lines,
and water pipelines to carry water between the spring and the bottling facility.
Eventually, the owners added a building and a parking lot at the Atrium Spring. The
pumps receive electricity from a nearby house. The facility was operable by the summer
of 2000.
2
¶4 The ranch was subdivided in 2000, with the Atrium Spring on one property and
the bottling plant on the other. The Plat of the subdivision contains the following
language:
We, also hereby certify that we grant a perpetual easement over, above or
under ground on the remaining lands to Lot 1 as shown on the
accompanying Plat for a drainfield and that a written easement will be
recorded at the Beaverhead County Clerk and Recorder’s office upon
completion of said drainfield. We, also hereby certify that we grant a
perpetual easement over, above or under ground on the remaining land for
the transportation of water to Lot 1 as shown on the accompanying Plat.
¶5 Shortly after, the owners executed a Warranty Deed conveying to Ralph Huntley
& Son, Inc. (predecessor of Huntley) a one-third interest in Lot 1, the property where the
plant is located, and “an undivided one-third (1/3) interest in and to all water and water
rights associated with that certain spring and well known as the ‘Atrium Spring’ situated
on Grantors’ property.” The deed also conveyed “all necessary easements for pipelines
or other conveyance facilities.”
¶6 Huntley acquired the property containing the bottling facility in 2008 through
non-judicial foreclosure. Old Standard acquired the adjacent subdivided property on
which the Atrium Spring is located through a judicial foreclosure proceeding commenced
in November 2002. The written easements are intended to benefit Huntley’s land and
burden Old Standard’s land.
¶7 The relationship between Old Standard and Huntley deteriorated as disputes arose
regarding the electricity agreement, the location and maintenance of the pipeline, the
general cleanliness of the area subject to the easement, and Huntley’s use of two access
3
roads. Old Standard attempted to restrict Huntley’s access to the property subject to the
easements. Eventually, Huntley locked Old Standard out of the Atrium building and
posted a “no trespassing” sign. Prior owners of the properties subsequently attempted to
grant Huntley additional or altered easement rights.
¶8 Old Standard filed this suit to clarify the scope of any easements on its land. The
District Court granted partial summary judgment to Huntley on the existence of an
express easement, but determined that the extent of Huntley’s easement interests was a
factual matter that required a trial. Following a bench trial, the court entered Findings of
Fact and Conclusions of Law and determined that Huntley also holds implied easement
rights.
¶9 This Court reviews a district court’s ruling on a motion for summary judgment de
novo. M. R. Civ. P. 56. Summary judgment “should be rendered if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” M. R. Civ. P. 56(c). This Court reviews a district court’s findings of fact
to determine whether they are clearly erroneous. Stevens v. Novartis Pharms. Corp.,
2010 MT 282, ¶ 24, 358 Mont. 474, 247 P.3d 244. We review questions of law to
determine whether they are correct. Musselshell Ranch Co. v. Seidel-Joukova, 2011 MT
217, ¶ 11, 362 Mont. 1, 261 P.3d 570.
¶10 We address three issues on appeal: first, whether the District Court erred by
determining that Huntley holds easements on Old Standard’s property; second, whether
4
the District Court correctly held that it lacked subject-matter jurisdiction to determine the
validity of post-foreclosure transfers of water rights; and third, whether the District Court
erred by awarding attorney’s fees to Huntley.
¶11 “A grantor may expressly reserve an easement over granted land in favor of
retained land by using appropriate language in the instrument of conveyance.” Blazer v.
Wall, 2008 MT 145, ¶ 27, 343 Mont. 173, 183 P.3d 84. An easement also may be
expressly reserved by referring in the instrument of conveyance to a recorded plat or
certificate of survey in which the easement is adequately described. Blazer, ¶ 27. An
express easement must “(1) identify the grantor and the grantee, (2) adequately describe
what is being conveyed, (3) contain language of conveyance, and (4) be signed.”
Broadwater Dev., L.L.C. v. Nelson, 2009 MT 317, ¶ 27, 352 Mont. 401, 219 P.3d 492.
¶12 An implied easement from a preexisting use may be imposed against one party for
the benefit of another if there is unity of title at the time of severance. Woods v. Houle,
235 Mont. 158, 162, 766 P.2d 250, 253 (1988). “A transfer of real property passes all
easements attached thereto and creates in favor thereof an easement to use other real
property of the person whose estate is transferred in the same manner and to the same
extent as such property was obviously and permanently used by the person whose estate
is transferred for the benefit thereof at the time when the transfer was agreed upon or
completed.” Section 70-20-308, MCA. The extent of an implied easement is determined
by “the nature of the enjoyment by which it was acquired.” Section 70-17-106, MCA.
Implied easements must rest upon an implied intent of the parties gathered from the
5
circumstances surrounding the conveyance, and the easement must be so apparent that it
is discoverable upon reasonable inspection. Woods, 235 Mont. at 162, 766 P.2d at 253.
¶13 Old Standard argues that the requirements for a written express easement are not
met because the 2000 Warranty Deed did not adequately identify the grantor and the
grantee and “the purpose of the purported grant is not ascertainable.” The parties do not
dispute that the 2000 Warranty Deed and the Plat of the subdivision contain express
language that purports to grant an easement.
¶14 The grantors and grantees are clearly and expressly identified in the 2000 deed,
and the dominant and servient tenements are identified by detailed property descriptions.
It is undisputed that the grantors intended to allow the grantee to convey water from the
Atrium Spring to the other subdivided property. The document contained language of
conveyance and was signed by the owners of the property being burdened. Section
70-20-101, MCA. The District Court correctly determined that all four elements for
creating an express easement have been met. Old Standard’s mortgage interest was
subject to Huntley’s express preexisting interest in the Atrium Spring, conveyance
facilities, and the other easements described in the Plat.
¶15 Additionally, the District Court concluded that other easements not contained
within the express language of the 2000 deed or the Plat were implied by the intent and
conduct of the previous landowners. Because the deed conveyed “all necessary
easements for pipelines or other conveyance facilities,” it is not entirely clear which
easements were found by the District Court to be expressly granted and which easements
6
were implied. Nevertheless, even without consideration of the “post-foreclosure
conveyances,” we conclude that the scope of the combined express and implied
easements reasonably includes all easement rights the District Court found to exist,
including the use of the pipelines, Atrium Spring infrastructure, pump house, parking lot,
drainfield, and the two traditional access roads between the Atrium Spring and the
bottling plant.
¶16 Next, Old Standard argues that the District Court erred when it held that it lacked
subject-matter jurisdiction to determine certain water rights deeded to Huntley after Old
Standard initiated foreclosure proceedings. Old Standard seeks to invalidate those
conveyances. A district court’s determination that it lacks subject matter jurisdiction is a
conclusion of law, which we review to ascertain whether the court’s interpretation of the
law is correct. Zempel v. Liberty, 2006 MT 220, ¶ 11, 333 Mont. 417, 143 P.3d 123. The
determination of water rights is “entirely bifurcated” from the easement issue.
Mildenberger v. Galbraith, 249 Mont. 161, 166, 815 P.2d 130, 134 (1991).
¶17 The jurisdiction to interpret and determine existing water rights rests exclusively
with the Water Court. In re Deadman’s Basin Water Users Assn., 2002 MT 15, ¶ 15, 308
Mont. 168, 40 P.3d 387. While a district court may grant injunctive or other relief
necessary to preserve property rights or the status quo pending the issuance of a final
decree, the court lacks the jurisdiction to issue a final decree with regard to a water right.
Section 85-2-406(2), MCA; Mildenberger, 249 Mont. at 166, 815 P.2d at 134. A district
court has jurisdiction to review contracts allocating interests in water rights that
7
previously have been adjudicated by the Water Court. Kruer v. Three Creeks Ranch of
Wyoming, L.L.C., 2008 MT 315, ¶ 19, 346 Mont. 66, 194 P.3d 634.
¶18 Old Standard argues that the District Court had jurisdiction to review the post-
foreclosure transfers of water rights, based on Kruer. The water rights at issue in this
case, however, have not yet been adjudicated by the Water Court. It is not clear which
water rights were subject to Old Standard’s mortgage interests. Huntley claims that other
persons who are not party to this case have interests in the water rights at issue. The
water rights involved contain various issue remarks regarding ownership, flow rate, acres
irrigated, priority date and place of use. These issues must be addressed by the Water
Court before the validity of the transfers may be reached. While Old Standard correctly
asserts that the grantors cannot convey rights that they do not own, the District Court
correctly determined that issues within the exclusive jurisdiction of the Water Court must
be determined before the contractual issues asserted by Old Standard may be addressed.
¶19 Finally, Old Standard argues that Huntley is not entitled to attorney’s fees
pursuant to § 70-17-112, MCA, which provides for reasonable costs and fees where legal
action is brought regarding interference with canal or ditch easements. Musselshell
Ranch Co. v. Seidel-Joukova, 2012 MT 222, ¶ 7, 366 Mont. 337, 286 P.3d 1212. We
agree with Old Standard that this statute does not apply to easements regarding
commercial pipelines like those at issue in this case. Attorney’s fees will not be awarded
absent statutory authority. Braach v. Graybeal, 1999 MT 234, ¶ 8, 296 Mont. 138, 988
P.2d 761.
8
¶20 We have determined to decide this case pursuant to Section I, Paragraph 3(d) of
our Internal Operating Rules, which provides for noncitable memorandum opinions. The
legal issues raised on appeal are controlled by settled law. The District Court correctly
recognized Huntley’s ownership of both express and implied easements on Old
Standard’s property. We also affirm the court’s decision that it did not have jurisdiction
to determine whether conveyance of water rights in the post-foreclosure deeds was valid
under the facts of this case. We reverse the District Court’s award of attorney’s fees to
Huntley.
/S/ BETH BAKER
We concur:
/S/ MIKE McGRATH
/S/ PATRICIA COTTER
/S/ MICHAEL E WHEAT
/S/ LAURIE McKINNON
9