Cape-France Enterprises v. Estate of Peed, 99-518.

• Decision Date: 02 August 2001
• Docket Number: No. 99-518.,99-518.
• Parties: CAPE-FRANCE ENTERPRISES, A Montana Partnership, Plaintiff and Respondent, v. The ESTATE OF Lola H. PEED, a/k/a Lola Peed, f/k/a Lola H. Johnson, Deceased and Marthe E. Moore, Defendants and Appellants.
• Court: Montana Supreme Court

29 P.3d 1011

2001 MT 139

CAPE-FRANCE ENTERPRISES, A Montana Partnership, Plaintiff and Respondent, v. The ESTATE OF Lola H. PEED, a/k/a Lola Peed, f/k/a Lola H. Johnson, Deceased and Marthe E. Moore, Defendants and Appellants.

No. 99-518.

Supreme Court of Montana.

Submitted on Briefs April 12, 2001.

Decided August 2, 2001.

Rehearing Denied August 23, 2001.

For Appellants: Carl A. Hatch, John C. Doubek, Small, Hatch, Doubek & Pyfer, Helena, MT.

For Respondent: Calvin L. Braaksma, Landoe, Brown, Planalp, Braaksma & Reida, Bozeman, MT.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Cape-France Enterprises brought this action to rescind an agreement between the parties for the sale of a tract of land in Bozeman, Montana. On cross-motions for summary judgment the District Court granted summary judgment in favor of Cape-France. The Estate of Lola Peed and Marthe Moore appeal from the District Court's order granting summary judgment in favor of Cape-France. We affirm.

¶ 2 The dispositive issue on appeal is restated as follows:

¶ 3 Whether the District Court correctly concluded that the parties' buy-sell agreement was unenforceable on the grounds of impossibility or impracticability and correctly refused to order specific performance.

FACTUAL AND PROCEDURAL HISTORY

¶ 4 Cape-France Enterprises (Cape-France), is the owner of a tract of real property in Bozeman, Montana. Lola Peed¹ and her granddaughter Marthe Moore (Peed and Moore) wished to buy a portion of that tract of land in order to build a motel or hotel. The two parties worked through a real-estate agent in the arrangement of this transaction.

¶ 5 Cape-France entered into a buy-sell agreement in 1994 with Peed and Moore for the purchase of a five acre portion of their land that was to be surveyed. The land had not been subdivided at the time of the agreement and needed to be subdivided and rezoned in order for the sale to be completed. Closing was supposed to take place in September of 1994 but a plat creating the tract at issue was never recorded and the subdivision and closing never took place.

¶ 6 The parties attempted to accomplish subdivision of the property but several obstacles presented themselves. First, difficulties were encountered with the state and local agencies responsible for approving the subdivision. According to the depositions, application files were lost by the state more than once, which caused delays. Second, the parties encountered difficulty in obtaining water, which ultimately needed to be procured in order for subdivision to be approved. Water was not available to the land at the time the agreement was made. According to the agreement, it was the responsibility of Peed and Moore, as buyers, to bring water to the property. City water was not available, so presumably, a well would have to be drilled for that water.

¶ 7 To complicate matters further, a pollution plume was spreading through the groundwater in Bozeman in the area of the tract in question. Sometime during this process, it was discovered that the plume was closer to the land than had been expected. It is not clear where the pollution plume had moved, but state and local officials feared that it may have spread, possibly underneath the tract.

¶ 8 The potential presence of the pollution plume presented an obstacle to the parties' ability to subdivide the property. Ultimately, the Department of Environmental Quality, Water Quality Division (DEQ) warned Cape-France that the subdivision would not be approved unless a well was first drilled and tested. DEQ also warned that the pollution plume may have advanced under Cape-France's property and if the testing of the well water showed pollution in the water, the necessary treatment of this water would be extensive. Further, DEQ warned that if the drilling or pumping of the water caused expansion of the pollution, Cape-France, as the owner of the property, would be held liable for the clean-up costs. This warning took place after the subdivision process was commenced, making it clear to Cape-France that the completion of water drilling and testing was required before subdivision would be approved. According to the record, drilling and testing still have not been completed.

¶ 9 The warning came in December of 1995, when Cape France received a notice from DEQ, which informed it that the property was located within a groundwater contamination site:

This letter is to inform you that perchlor[o]ethylene (PCE) has been detected in a well near the north boundary of old Highway 10. . . . The contamination appears to be extending north but the extent of the contamination is unknown. You and your client need to be aware of the consequences resulting from drilling wells in the vicinity of the plume. Water supply wells drilled in your proposed subdivision may tap contaminated groundwater or may become contaminated over time with pumping. If contaminated groundwater is encountered then advanced treatment of the water will be required. The legal owners of the subdivision lots will be liable under the Water Quality Act or other environmental laws (state or federal) if pollution results from improper well construction or if contaminated groundwater is pumped into a clean area.

¶ 10 Although the parties appear to have been aware of the existence of a pollution plume in Bozeman, presumably originating from a dry cleaner in the area, they believed the property at issue to be unaffected until receiving this notice.

¶ 11 A second letter was sent by DEQ to Cape-France, informing the partners that before subdivision could be approved:

A well must be drilled and pump tested per WQB 3 3.2.4. Also, the well must be sampled for VOCs in accordance with EPA method 524.2. The well that is drilled and tested should be the proposed well that is closest to the Bozeman Solvent Site.

¶ 12 The District Court ruled, on cross-motions for summary judgment, that the agreement could be rescinded on the basis of mutual mistake of fact, impossibility and impracticability of performance and that specific performance would not be granted.

STANDARD OF REVIEW

¶ 13 Our standard of review on appeal from summary judgment rulings is de novo. See Motarie v. N. Mont. Joint Refuse Disposal (1995), 274 Mont. 239, 242, 907 P.2d 154, 156, Mead v. M.S.B., Inc. (1994), 264 Mont. 465, 470, 872 P.2d 782, 785. When we review a district court's grant of summary judgment, we apply the same evaluation as the district court based on Rule 56, M.R.Civ.P., Bruner v. Yellowstone County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903. The movant must demonstrate that no genuine issues of material fact exist. Once this has been accomplished, the burden then shifts to the non-moving party to prove, by more than mere denial and speculation, that a genuine issue does exist. Bruner, 272 Mont. at 264, 900 P.2d at 903.

¶ 14 Ordinarily, such a review requires that we first determine whether the moving party met its burden of establishing both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Jarrett v. Valley Park, Inc. (1996), 277 Mont. 333, 338, 922 P.2d 485, 487. In this case, however, the facts are undisputed. Through their cross-motions for summary judgment, each party asserted entitlement to judgment as a matter of law. Therefore, our review is confined to the District Court's conclusions of law. We review a district court's conclusions of law to determine whether the court's interpretation of the law is correct. Carbon County v. Union Reserve Coal Co., Inc. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686.

DISCUSSION

¶ 15 Whether the District Court correctly concluded that the parties' buy-sell agreement was unenforceable on the grounds of impossibility or impracticability, and correctly refused to order specific performance.

¶ 16 Cape-France argues, and the District Court determined, that the contract should be rescinded because the spread of the pollution and the potential liability involved with drilling a well made subdivision of the property impossible or impracticable.

¶ 17 This Court has observed that, "impossibility of performance is a strict standard that can only be maintained where the circumstances truly dictate impossibility. The general rule is that, where a party to a contract obligates himself to a legal and possible performance, he must perform in accordance with the contract terms." Barrett v. Ballard (1980), 191 Mont. 39, 44, 622 P.2d 180, 184 (citation omitted). See also, 360 Ranch Corp. v. R & D Holding (1996), 278 Mont. 487, 926 P.2d 260. However, "[i]mpossibility encompasses not only strict impossibility but impracticability because of extreme and unreasonable difficulty, expense, injury or loss involved." Smith v. Zepp (1977), 173 Mont. 358, 364, 567 P.2d 923, 927, quoting the Restatement of Contracts, Section 454.

¶ 18 The Montana Code allows for rescission of a contract based on impossibility, under § 28-2-603, MCA, providing:

Where a contract has but a single object and such object is unlawful, whether in whole or in part, or wholly impossible of performance, or so vaguely expressed as to be wholly unascertainable, the entire contract is void.

¶ 19 Rescission of a contract under the doctrine of impossibility or impracticability, while a strict standard, is not limited to literal impossibility, but also encompasses impracticability. As observed by the Fourth Circuit Court of Appeals:

[M]odern authorities [have] abandoned any absolute definition of impossibility and, following the example of the Uniform Commercial Code, have adopted impracticability or commercial impracticability as synonymous with impossibility in the application of the doctrine of impossibility of performance as an excuse for breach of contract. Opera Co. of Boston v. Wolf Trap Foundation (4th Cir.1987), 817 F.2d 1094, pp. 1098.

¶ 20 Commentators in this area of contracts have also noted the broadening scope of the...