Emmerson v. Walker, Cause No. DV 07-8

• Docket Nº: Cause No. DV 07-8
• Citation: 2010 MT 167
• Case Date: July 28, 2010
• Court: United States State Supreme Court of Montana

2010 MT 167

VALERIE EMMERSON, Petitioner and Appellant,
v.
WALLACE C. WALKER and RANA RAE WALKER, Respondents and Appellees.
WALLACE C. WALKER and RANA RAE WALKER, Third-Party Plaintiffs, Appellees, and Cross-Appellants,
v.
S. TUCKER JOHNSON, Third-Party Defendant and Appellant.

Cause No. DV 07-8

Supreme Court of Montana

July 28, 2010

COUNSEL OF RECORD:

For Appellant: James H. Goetz and Bonnie L. Jarrett; Goetz, Gallik & Baldwin, P.C.; Bozeman, Montana (S. Tucker Johnson)

Karl Knuchel, Attorney at Law; Livingston, Montana (Valerie Emmerson) For Appellees: Leanne M. Schraudner; Schraudner & Hillier, PLLC; Bozeman, Montana

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Justice Jim Rice delivered the Opinion of the Court.

¶1 S. Tucker Johnson appeals from the order and judgment entered by the Sixth Judicial District Court, Sweet Grass County, concluding he tortiously interfered with a contract for the exchange of property between Valerie Emmerson and Wallace and Rana Rae Walker. Emmerson appeals from the District Court's award of attorney fees to Walkers. Walkers cross-appeal the District Court's denial of punitive damages they sought against Johnson. We affirm.

¶2 We state Johnson's and Emmerson's issues as follows:

¶3 1. Did the District Court err by concluding that Johnson's actions constituted tortious interference with a contract between Emmerson and Walkers?

¶4 2. Did the District Court abuse its discretion in determining Walkers' attorney fee award?

¶5 Walkers raise the following issue on cross-appeal:

¶6 3. Did the District Court err by failing to award punitive damages to Walkers?

FACTUAL AND PROCEDURAL BACKGROUND

¶7 Wallace Walker is a physician who resides with his wife, Rana Rae, and children near Big Timber. The Walker family shares a passion for ranching and, in January of 2000, purchased a 739-acre property located roughly seventeen miles outside of Big Timber for $325,000. At the time, Wallace worked for the IHS Hospital serving Crow Agency and Havre.

¶8 Wallace served in the military reserves and, in 2003, served a one-year deployment in Iraq. Upon his return, Wallace obtained employment with the Big Timber

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hospital, where he was required to be on call and to reach the hospital within fifteen minutes. Because Wallace was unable to do so from their ranch, Walkers listed the property for sale at $695,000 and began looking for another ranch property within a fifteen-minute drive to town.

¶9 Emmerson was then attempting to sell her 480-acre ranch property, located within a fifteen-minute drive of Big Timber. Walkers inquired whether Emmerson was interested in a like-kind exchange of their respective properties, pursuant to 26 U.S.C. § 1031. Although not initially interested, Emmerson changed her mind after hearing from a friend about the attributes of Walkers' property, and the parties entered an exchange agreement on May 15, 2006, agreeing to convey their respective properties to each other. The agreement was made contingent upon Emmerson fencing her property and obtaining an access easement which would permit at least one homesite thereon, but Walkers could nevertheless, in their discretion, enforce the agreement should they "desire to proceed," even if Emmerson failed to satisfy the conditions. Walkers paid their realtor $10,000 and took their property off the market. Emmerson asked Walkers if she could begin using their property while they were waiting for the exchange to be completed, to which Walkers agreed. Emmerson began to do so, and she changed the utility service from Walkers' name to her own.

¶10 In October of 2006, Johnson came to Montana to look for real estate to purchase. During a drive through the area, Johnson saw a "For Sale" sign on Susan Newhall's property, adjacent to Emmerson's property. Returning with a real estate agent to view

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Newhall's property, Johnson inquired about purchasing Emmerson's property. Johnson intended on buying numerous parcels, testifying at trial that he "even fantasized about making purchases that could lead all the way up to the base of the Crazies." Johnson indicated to his real estate agent that he would make an offer both on Newhall's property and an offer of $800,000 on Emmerson's property, $105,000 more than the estimated value Emmerson would receive under the exchange agreement with Walkers. Johnson conditioned his purchase of Newhall's property upon his obtaining of Emmerson's property as well.

¶11 On October 27, 2006, Emmerson was informed of Johnson's offer. During her discussions with Newhall's realtor and Johnson, Emmerson disclosed her exchange agreement with Walkers. Emmerson called Walkers and advised them she had received a "better offer" and wanted out of their agreement. Walkers were upset and attempted to contact their attorney, Mark Josephson, who was out of town. Later, Newhall's realtor inquired of Josephson whether Walkers would be willing to forgo their exchange agreement with Emmerson. Emmerson's attorney, Jane Mersen, called Josephson indicating that Emmerson was interested in an "efficiency breach" of the exchange agreement and wanted to know how much in damages Walkers would take to terminate the agreement. In response to these inquiries, Josephson explained that Walkers were happy with the agreement.

¶12 The District Court found that, on November 15, 2006, following multiple contacts between Josephson and Johnson's and Newhall's real estate agents, and noting Johnson

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had been kept fully informed, Johnson directly contacted Josephson and asked Josephson to represent him. Josephson declined and advised Johnson that the Emmerson-Walker agreement was binding and Walkers intended to close.

¶13 Because of these contacts, Josephson sent a letter on November 27, 2006, to Mersen, Emmerson's attorney, conveying Walkers' intention to close on the agreement and seeking assurances the transaction would proceed as agreed:

If we do not hear from you by 5:00 p.m., Monday, December 4th, we will assume that Ms. Emmerson does indeed intend to continue pursuing the easement application and to honor her obligations under the exchange contract by completing the exchange with Walkers. If Ms. Emmerson's intentions are to not honor the exchange contract, then please notify us by 5:00 p.m., December 4th, 2006.

Neither Emmerson nor Emmerson's attorney offered any response by the stated deadline.¹

¶14 In mid-December 2006, Johnson made a second round of offers on Newhall's and Emmerson's properties, again made contingent upon the closing of the other. In the new offer to Emmerson, Johnson increased the amount offered by $30,000, or $135,000 more than the anticipated value Emmerson would receive under the exchange agreement with Walkers. Johnson had his attorney, Karl Knuchel, write to Emmerson's attorney, Mersen, suggesting that the agreement between Emmerson and Walkers was voidable. When Mersen disagreed, Johnson suggested to Emmerson that she obtain opinions from other lawyers. Johnson provided Emmerson with a list of attorneys to consult, and after

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Emmerson spoke with a different attorney who opined that the exchange agreement with Walkers was valid, Johnson continued to encourage Emmerson to forgo closing on the agreement.

¶15 On January 5, 2007, an offer to purchase Walkers' property for $695,000, their original, full asking price, was conveyed to Walkers through Sonny Todd Realty, which had received the offer from the same real estate agent representing Johnson. The offer was made by an entity named Open Range LLC and Johnson's involvement was not disclosed. This offer provided that Walkers' property was to be purchased with cash and that the buyer reserved the right to facilitate a 1031 exchange. Walkers responded by contacting Emmerson to inquire whether she would be willing to sell her property for cash. Emmerson seemed unsurprised by the inquiry and immediately rejected it. Walkers then refused the offer from Open Range LLC. It was not until this litigation commenced that Walkers learned Johnson was behind the offer and had created Open Range LLC to act as his buyer. On January 10, 2007, Johnson entered an exchange agreement with Emmerson, promising that he "would acquire" Walkers' property, exchange the property for Emmerson's property, and pay Emmerson $135,000 in boot² ¶16 After Johnson's attempt to secretly purchase Walkers' property failed, Emmerson signed a waiver of conflict of interest permitting Johnson's attorney, Knuchel, to represent her. On February 23, 2007, Knuchel wrote to Josephson on Emmerson's

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behalf, advising that "by this letter... Val Emmerson repudiates the 'Exchange Agreement' and considers it to be null and void." Johnson had Emmerson, represented now by Karl Knuchel, initiate a declaratory action against Walkers seeking to invalidate the Emmerson-Walker exchange agreement, which was filed on February 28, 2007. For her part, Emmerson testified that she did "not want the legal responsibility" for the lawsuit and that she may not have filed the suit if she would have been obligated to pay her attorney fees. Johnson bore these fees.

¶17 Walkers, represented in the litigation by Leanne M. Schraudner, answered by asking that the court declare the exchange agreement valid and Emmerson be ordered to specifically perform. They also filed a third-party claim against Johnson, alleging tortious interference with a contract and intentional and negligent infliction of emotional distress....