McKay v. Wilderness Development, LLC

• Citation: 353 Mont. 471,2009 MT 410,221 P.3d 1184
• Decision Date: 27 November 2009
• Docket Number: No. DA 08-0299.,DA 08-0299.
• Parties: Craig McKAY and Lisa McKay, Husband and Wife, Plaintiffs, Appellees, and Cross-Appellants, v. WILDERNESS DEVELOPMENT, LLC, Defendant, Appellant, and Cross-Appellees.
• Court: Montana Supreme Court

221 P.3d 1184

2009 MT 410

353 Mont. 471

Craig McKAY and Lisa McKay, Husband and Wife, Plaintiffs, Appellees, and Cross-Appellants, v. WILDERNESS DEVELOPMENT, LLC, Defendant, Appellant, and Cross-Appellees.

No. DA 08-0299.

Supreme Court of Montana.

Submitted on Briefs August 5, 2009.

Decided November 27, 2009.

Rehearing Denied December 30, 2009.

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

For Appellees: Amy N. Guth, Attorney at Law, Libby, Montana.

Justice JOHN WARNER delivered the Opinion of the Court.

¶ 1 Craig and Lisa McKay brought suit against Wilderness Development, LLC (Wilderness), in the District Court of the Nineteenth Judicial District Court, Lincoln County, alleging it had violated restrictive covenants attached to the Koocanusa Estates Subdivision near Eureka, Montana (Subdivision). The McKays also alleged that Wilderness had trespassed on their property and converted some of their trees. The District Court granted partial summary judgment to the McKays, holding that Wilderness had violated a restrictive covenant. A Lincoln County jury found that the McKays had suffered $350,000 in damages for violation of the restrictive covenant. The jury also found that Wilderness had converted trees owned by the McKays with a value of $6,500, and that it was not liable for trespass. The jury also awarded $1,000,000 in punitive damages. The District Court reduced the punitive damage award to $25,000 and entered judgment in favor of the McKays. Wilderness appeals the judgment and the McKays cross-appeal. We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.

¶ 2 Wilderness raises eight issues on appeal, which we restate as follows:

¶ 3 Issue 1: Did the District Court err in holding that waiver and laches did not bar the McKays from enforcing restrictive covenants?

¶ 4 Issue 2: Did the District Court err in precluding Wilderness from offering evidence that the McKays failed to object in advance of construction of the maintenance building?

¶ 5 Issue 3: Did the District Court err in its instruction to the jury concerning recovery of damages for emotional distress?

¶ 6 Issue 4: Is there sufficient evidence to support the jury's award of damages for breach of the restrictive covenant prohibiting the construction of a commercial building?

¶ 7 Issue 5: Did the District Court err in holding that Wilderness does not have an easement across the McKays' property?

¶ 8 Issue 6: Is there sufficient evidence to support the jury's award of damages for conversion?

¶ 9 Issue 7: Was the jury verdict reached under the influence of passion and prejudice?

¶ 10 Issue 8: Is there sufficient evidence to establish malice, which is required to award punitive damages?

¶ 11 The McKays raise an issue on cross-appeal which we restate as follows:

¶ 12 Issue 9: Did the District Court err in reducing the punitive damage award?

¶ 13 In addition, the McKays raise alternative issues on cross-appeal should this Court reverse the District Court judgment:

¶ 14 Issue 10: Did the District Court err in refusing to require Wilderness to remove a maintenance building it erected in violation of a restrictive covenant?

¶ 15 Issue 11: Did the District Court err in not enforcing a restrictive covenant prohibiting further division of a lot Wilderness owns in the Subdivision?

BACKGROUND

¶ 16 In 1979, the Koocanusa Estates Subdivision was created. The Subdivision was made subject to covenants which restrict use of the property to "single-family residential or agricultural purposes" and which prohibit "further subdivision of the parcels." Lot 4A in the Subdivision was platted as a 20-acre lot. Despite the restrictions, Lot 4A was subdivided into two 10-acre parcels in 2000 at the McKays' request, and the McKays then purchased the southerly 10 acres of Lot 4A. Later, the McKays purchased the neighboring 20-acre Lot 5A, which is not involved in this dispute.

¶ 17 Wilderness purchased approximately 500 acres of land to the north of the McKays' part of Lot 4A, including 50 acres within the Subdivision. As a part of this purchase, Wilderness acquired the northern 10 acres of Lot 4A. Thus, Wilderness and the McKays share a common boundary, with Wilderness owning the northern 10 acres of Lot 4A and the McKays owning the southern 10 acres.

¶ 18 At the time Lot 4A was divided and the McKays purchased its southern 10 acres, the division left the owner of the northern 10 acres with no access to his portion of Lot 4A other than across the McKays' property, or across a road which he had no legal right to use.

¶ 19 Wilderness is developing a residential community and golf course on its 500 acres, including the 50 acres it owns within the Subdivision. In May of 2007, Wilderness began clearing trees on the western boundary of the McKays' property, where it claims it has a road easement. It cleared an area 150-feet-long and 33-feet-wide along the western boundary of the McKays' portion of Lot 4A, removing over 100 trees.

¶ 20 The McKays filed suit in June 2007 to enjoin the construction of the road and for damages for trespass and conversion.

¶ 21 Wilderness' plans for the golf course include the construction of a maintenance facility located on the northerly part of Lot 4A, adjacent to the McKays. Wilderness also planned to further divide the northerly portion of Lot 10A into four separate parcels. In August 2007, Wilderness poured the foundation for the maintenance facility. The McKays then amended their complaint to pray for a permanent injunction against the alleged violations of the covenants by Wilderness, including the construction of the maintenance facility, and the further division of the northerly portion of Lot 4A. The McKays also prayed for punitive damages.

¶ 22 The parties moved for summary judgment on three issues: Wilderness' right to access its property by constructing a road across the western boundary of the McKays' property; whether the McKays could enforce the restrictive covenant prohibiting the construction of the maintenance building; and whether the McKays could enforce the restrictive covenant prohibiting further division of the northerly portion of Lot 4A. The District Court ruled that Wilderness has no legal right to access its property through the McKays' property. The District Court also ruled that the covenant restricting further subdivision was unenforceable in light of the McKays' own violation of that covenant. Finally, the District Court held as a matter of law that the McKays could enforce the restrictive covenant that prohibited Wilderness from building a commercial maintenance facility to service its golf course on the northerly portion of Lot 4A. The District Court denied the McKays' prayer for an injunction requiring that the maintenance building be removed. Rather than order the building removed, the District Court ordered that a jury would determine the amount of money damages the McKays had suffered because of the violation of the restrictive covenant. The District Court also ordered a jury trial to decide if Wilderness committed a trespass on the McKays' property, had converted the McKays' trees, and had acted with malice justifying punitive damages. The jury would also determine the amount of any damages.

¶ 23 The case was tried to a Lincoln County jury on April 1-4, 2008. The jury fixed the amount of damages suffered by the McKays for violation of the restrictive covenant at $350,000. The jury concluded that Wilderness did not trespass on the McKays' property. However, the jury found that Wilderness had converted the McKays' trees and awarded $6,500 as damages for the conversion. The jury also awarded the McKays $1,000,000 in punitive damages.

¶ 24 Following the verdict, Wilderness moved the District Court to strike the punitive damage award and to grant a new trial. The District Court did not rule on Wilderness' motion to strike and denied Wilderness' Motion for a New Trial. The District Court then reviewed the amount of punitive damages and reduced the award to $25,000. Wilderness now appeals and the McKays cross-appeal. Further facts relating to the several issues presented will be discussed as necessary.

DISCUSSION

¶ 25 Issue 1: Did the District Court err in holding that waiver and laches did not bar the McKays from enforcing restrictive covenants?

¶ 26 We review a district court's consideration of the grant or denial of summary judgment de novo. Prosser v. Kennedy Enterprises, Inc., 2008 MT 87, ¶ 10, 342 Mont. 209, 179 P.3d 1178.

¶ 27 Wilderness sought approval of its development by Lincoln County. The approval process required submission of plans detailing the development. Public hearings were held concerning these plans. The McKays did not attend the public hearings and made no objection to the maintenance building during the approval process. Wilderness argues that the District Court erred in denying its motion for summary judgment, that the McKays had waived their right to enforce the restrictive covenant preventing the construction of the maintenance building because its location was shown on the development plans which were available to the public. Wilderness claims that the McKays were aware of the building's proposed construction, and they neither attended the public hearings nor made any objection during the approval process.

¶ 28 Waiver is a voluntary and intentional relinquishment of a known right or claim. It may be proven by express declarations or by a course of conduct which induces the belief that the intent and purpose was waiver. To establish a waiver, the party asserting waiver must demonstrate that the other party knew of the existing right, acted inconsistent with that right, and prejudice resulted to the party asserting waiver. Edwards v. Cascade County, 2009 MT 229, ¶ 30, 351 Mont. 360, 212 P.3d 289 (citations omitted).

¶ 29 As noted by the District Court, M.R. Civ. P. 8(c) requires that...