Apple Park, L.L.C. v. Apple Park Condomin., DA 07-0611.

• Decision Date: 12 August 2008
• Docket Number: No. DA 07-0611.,DA 07-0611.
• Citation: 192 P.3d 232,345 Mont. 359,2008 MT 284
• Parties: APPLE PARK, L.L.C., Plaintiff and Appellee, v. APPLE PARK CONDOMINIUMS, L.L.C., and Andrew Saunders, Individually, Defendants and Appellants.
• Court: Montana Supreme Court

192 P.3d 232

2008 MT 284

345 Mont. 359

APPLE PARK, L.L.C., Plaintiff and Appellee, v. APPLE PARK CONDOMINIUMS, L.L.C., and Andrew Saunders, Individually, Defendants and Appellants.

No. DA 07-0611.

Supreme Court of Montana.

Submitted on Briefs July 8, 2008.

Decided August 12, 2008.

Rehearing Denied September 10, 2008.

For Appellants: Richard De Jana, Richard De Jana & Associates, PLLC, Kalispell, Montana.

For Appellee: Sean S. Frampton, Morrison & Frampton, PLLP, Whitefish, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Andrew Saunders, a New York resident, incorporated Apple Park Condominiums, L.L.C., for the purpose of purchasing a multi-unit condominium building in Kalispell, Montana. Apple Park, L.L.C. (Seller) and Apple Park Condominiums, L.L.C. and Saunders (Buyers) entered into a Buy/Sell Agreement (Agreement) in July 2005. Subsequently, Buyers refused to close on the Agreement. Seller sued and the Eleventh Judicial District Court ruled that Buyers had breached the contract. Buyers appeal. We affirm.

ISSUES

¶ 2 A restatement of the dispositive issues on appeal is:

¶ 3 Did the District Court abuse its discretion in excluding affidavit testimony submitted by Buyers' witnesses on the basis that said testimony contained inadmissible hearsay?

¶ 4 Did the District Court err in finding that Buyers failed to raise a genuine issue of material fact vis-à-vis encroachments on the property?

¶ 5 Did the District Court err in concluding that the absence of utility easements for individual condominium units was not a "Condition of Title" as set forth in the Buy/Sell Agreement?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 6 In July 2005, Seller and Buyers entered into a Buy/Sell Agreement for a sixteen-unit condominium building located in Kalispell, Montana. Closing was set for September 15, 2005, and Buyers paid $10,000 in earnest money to the Sterling Title Company. The parties agreed in writing to extend the closing date twice with a final closing date set for October 31, 2005. Additionally, the parties agreed in a second addendum that Buyers would reimburse Seller $4,288.80 at closing for gutter repair work performed on the property. Buyers refused to close on October 31. On February 9, 2006, Seller brought a civil action against Buyers for breach of contract. Seller argued for the right to retain the earnest money plus interest, and also sought reimbursement for the gutter repair and attorney's fees and costs.

¶ 7 Seller filed a motion for summary judgment on the ground that the undisputed facts demonstrated that Buyers breached the contract and Seller was entitled to the relief requested. Buyers filed a cross-motion for summary judgment alleging they were legally entitled to forego closing on the ground that they had notified Seller of three problems that Seller had not remedied. The three problems Buyers identified were: (1) an error in the legal description of the property in the property title; (2) an encroachment on the property; and (3) the lack of easements by each individual unit for utilities through the common areas on the property. They maintain that the Seller should have corrected these defects before the day of closing and Seller's failure to do so legally excused them from closing. Buyers maintained they were entitled to the return of their earnest money and should not be responsible for reimbursing Seller for gutter repair work. Moreover, Buyers sought attorney's fees and prejudgment interest.

¶ 8 The District Court determined that the undisputed facts revealed that the erroneous property description in the title was corrected by October 31; the encroachment identified by Buyers was removed prior to the scheduled closing; and the lack of an easement for the individual condominium units across the common area of the property was not an adverse title condition excusing Buyers from performing. The court concluded therefore that none of these claims excused Buyers from performing.

¶ 9 The District Court held that the Buyers breached the contract and that the Seller was entitled to the earnest money. The court also held that Buyers were not required to reimburse Seller for the gutter repair costs because such reimbursement was contingent upon Buyers owning the property. The court observed that both parties had agreed that prejudgment interest and attorney's fees should be awarded to the prevailing party; therefore, the Seller was instructed to submit an affidavit setting forth those costs to the District Court for payment by Buyers. Seller did so and after determining the appropriate interest, the court awarded Seller approximately $9,000.00.

¶ 10 Buyers appeal.

STANDARD OF REVIEW

¶ 11 We review de novo a district court's grant of summary judgment, using the same standards applied by the district court under M.R. Civ. P. 56. Rich v. Ellingson, 2007 MT 346, ¶ 12, 340 Mont. 285, ¶ 12, 174 P.3d 491, ¶ 12. The moving party has the burden of establishing the absence of a genuine issue of material fact, and entitlement to judgment as a matter of law. Rich, ¶ 12. Once the moving party has met this burden, the non-moving party must present substantial evidence essential to one or more elements of the case to raise a genuine issue of material fact. Rich, ¶ 12. "The non-moving party must set forth specific facts and cannot simply rely upon their pleadings nor [sic] upon speculative, fanciful, or conclusory statements." Hiebert v. Cascade County, 2002 MT 233, ¶ 21, 311 Mont. 471, ¶ 21, 56 P.3d 848, ¶ 21 (quotation omitted, emphasis in original).

¶ 12 We review the conclusions of law upon which the district court bases its decision to determine if they are correct. Rich, ¶ 12. In the context of a summary judgment ruling, we review the district court's admission or exclusion of evidence for an abuse of discretion. Hiebert, ¶ 22.

DISCUSSION

¶ 13 Did the District Court abuse its discretion in excluding affidavit testimony submitted by Buyers' witnesses on the basis that said testimony contained inadmissible hearsay?

¶ 14 In response to Seller's motion for summary judgment and its concomitant implication that no material facts were in dispute, Buyers argued that whether the encroachments had been removed from the property by October 31 was a question of material fact and was in dispute. To support their argument, Saunders' New York attorney, Rodney H. Ertischek, submitted testimony to the District Court by affidavit which stated in relevant part:

Thomas Dean and Hoskins ("TD & H"), a local Kalispell engineering firm, was retained by [Buyers] to verify whether the adverse conditions had been rectified. On October 31, 2005, I was notified by them that the encroachments were still on the property. After advising my clients ... both I and [Buyers] received photographs from TD & H demonstrating that as of October 31, 2005 encroachments still existed on the Premises.

Seller challenged Ertischek's affidavit as containing parol evidence and inadmissible hearsay. Saunders subsequently submitted an affidavit to the court containing essentially the same statement as that contained in Ertischek's. Additionally, Buyers submitted an affidavit of the TD & H engineer, Ray Halloran, who took the photographs referenced in the affidavit that purportedly represented the continued existence of the encroachments as of October 31, 2005. The District Court concluded the statements in Ertischek's and Saunders' affidavits constituted inadmissible hearsay and therefore did not consider these affidavits in determining whether the encroachments remained on the property. As stated above, the court decided the encroachments had been removed before October 31.

¶ 15 On appeal, Buyers assert that the above-quoted testimony from the affidavits is not hearsay but rather establishes "why" Buyers refused to close on the transaction and is admissible for this purpose. They maintain that a "statement offered not to prove the truth of the matter asserted but for the purpose of showing that the statement was made and the resulting state of mind is admissible." They insist that the statements should not have been excluded as hearsay but should have been admitted to show the reason for their actions. With regard to the photographs provided by TD & H to Buyers and attorney Ertischek and e-mails sent by the parties, Buyers argue that these are business records that qualify as an exemption to the rule against hearsay.

¶ 16 Seller maintains that Buyers are presenting a new legal theory on appeal. It asserts that while in District Court, Buyers did not counter Seller's "hearsay" argument with the argument being presented on appeal. In other words, they did not argue to the District Court that the affidavits were admissible to show their "motivation for acting" or as business records. Seller opines that because Buyers are presenting a new legal theory on appeal, we should decline to address the issue. Alternatively, Seller reiterates its argument that the challenged evidence is hearsay and was correctly excluded for purposes of ruling on summary judgment.

¶ 17 Buyers admit that Seller's "new theory" argument "[t]o an extent ... is true," but argue that the District Court excluded the affidavit evidence "on its own ruling and not [on] the objection raised below," and they had no opportunity to address the court's ruling until this appeal. While it is impossible to determine whether the District Court excluded the evidence based on Seller's objection or on its own rationale, we will nonetheless address the issue on the merits.

¶ 18 The affidavit testimony is hearsay and was properly excluded from evidence. Hearsay is a statement, other than one made by the declarant while testifying at a trial or hearing, offered in evidence to prove the truth of the matter asserted. M.R. Evid. 801. Hearsay is not admissible unless it meets a statutory or regulatory exception. M.R. Evid. 802. In the case before us, a Kalispell engineer...