Regan v. Owen

• Decision Date: 18 December 2014
• Docket Number: No. 40848–2013.,40848–2013.
• Citation: 339 P.3d 1162,157 Idaho 758
• Court: Idaho Supreme Court
• Parties: Brent REGAN and Moura Regan, Plaintiffs–Respondents, v. JEFF D. and Karen A. Owen, Defendants–Appellants.

157 Idaho 758

339 P.3d 1162

Brent REGAN and Moura Regan, Plaintiffs–Respondents,

v.JEFF D. and Karen A. Owen, Defendants–Appellants.

No. 40848–2013.

Supreme Court of Idaho, Boise, April 2014 Term.

Dec. 18, 2014.

Susan P. Weeks, James Vernon & Weeks P.A., Coeur d'Alene, argued for appellants.

Scott L. Poorman, Hayden, argued for respondents.

EISMANN, Justice.

This is an appeal out of Kootenai County from a partial judgment reforming the deed of subsequent purchasers of real property based upon a finding that their predecessors in interest made a mutual mistake in drafting the legal description of the deed to the grantee. We vacate the judgment of the district court and remand this case for further proceedings.

I.Factual Background.

The issue in this appeal is whether the deed of Jeff and Karen Owen should be reformed to grant an easement across their property for the benefit of Brent and Moura Regan. The Regans are the owners of a 50.55–acre parcel of land in Kootenai County. Adjoining their parcel to the east is a 10.7–acre parcel of land owned by Jeff and Karen Owen. The Owens' property was acquired by two separate conveyances. They acquired a 10.3–acre parcel from David and Helen Hanna by a warranty deed dated February 4, 2003 (Owen Parcel), and they acquired a 0.4–acre parcel from Kootenai County by a deed dated November 28, 2005 (Orphan Parcel). The Orphan Parcel adjoins the northern boundary of the Owen parcel. The primary dispute in this appeal is whether the Regans have an easement across the Orphan Parcel.

These parcels now owned by the Regans and the Owens were part of several tracts of land in sections 27 and 34 of township 50 north, range 3 west, of the Boise Meridian, that were owned by BAR–ACH, Inc. On July 24, 1978, the corporation conveyed those tracts of land to Alexander H. Hargis, John W. Acheson, Jr., and R.C. Collins (herein called Original Grantors).¹ The Original Grantors later sold various parcels from the land acquired from the corporation. The sales relevant to this case were of parcels of land located in the southern part of section 27 and the northern part of section 34.

At the time of the conveyances of these parcels, there was a public road that ran in a north-south direction along the southern part of the north-south half-section line of section 27 and turned east at the section line between sections 27 and 34.² The Original Grantors intended to create a road and utility easement from the public road to the parcels, and they reserved a thirty-foot-wide easement for roadway and utility purposes along the southern boundary of each parcel in section 27 and along the northern boundary of each parcel in section 34. However, the proposed road was not a straight line. It began at about the north-south half-section lines of sections 27 and 34, with most of the road being in section 34. As it progressed west, it curved to the north into section 27 and then continued along the section line angling northerly.

There are two conveyances of property in section 27 along its southern border that are relevant to this appeal. Beginning at the north-south half-section line of section 27, the Original Grantors conveyed an 8.9–acre parcel to Patricia H. Hart by a warranty deed dated March 1, 1988. By a warranty deed dated June 2, 1989, the Original Grantors conveyed a 10–acre parcel of property to Robert and Debora Doney, which abutted the western boundary of the Hart parcel. Both deeds described the southern boundary of the respective parcels as being a line that would correspond to the centerline of the proposed road.

There are three conveyances of property in section 34 along its northern boundary that are relevant to this appeal. By a warranty deed dated November 25, 1988, the Original Grantors conveyed to Harold and Jean Smart a 10.3–acre parcel, which was ultimately conveyed to the Owens and is the Owen Parcel. The legal description in the Smarts' deed described the northern boundary of the parcel as being the section line, not the centerline of the proposed road. The Original Grantors conveyed the parcel to the east of the Owen Parcel to Judith Johnson by a deed dated November 28, 1988. The legal description in her deed described the centerline of the proposed road as the northern boundary of her property. A parcel of land adjoining the Owen Parcel to the west was conveyed by a real estate contract dated September 18, 1989, to Leslie Jean Schunemann Marchelli as the trustee of the Leslie Jean Schunemann Marchelli Trust dated July 10, 1989. She later conveyed the property to the Regans by a warranty deed dated February 26, 1999.

The common boundary of the Hart and Doney parcels is north of the Owen Parcel. The centerline of the proposed road is very close to the northeast corner of the Owen Parcel, and from there the centerline proceeds at a slight northerly angle. Because the southern boundary of the Hart and Doney parcels is the centerline of the proposed road and the northern boundary of the Owen Parcel is the section line, the Original Grantors retained a small, triangularly shaped parcel of ground located between the Hart and Doney parcels in section 27 and the Smarts' parcel in section 34. In this litigation, the parties have called this 0.40–acre property the Orphan Parcel. Because the Original Grantors did not convey the Orphan Parcel, they did not reserve an easement across it as they did when they conveyed the other parcels.

The Original Grantors did not pay the real estate taxes assessed against the Orphan Parcel. As a result, on April 13, 2004, the county treasurer issued a tax deed conveying the parcel to Kootenai County. By deed dated November 28, 2005, the county conveyed the Orphan Parcel to the Owens.

In March 2010, there was a dispute between the Owens and the Regans as to whether the Regans had the right to drive across the Orphan Parcel. On March 11, 2011, the Regans filed this action to reform the Owens' deed to include an easement across the Orphan Parcel, to confirm their easement across the northern thirty feet of the Owen Parcel, and to establish a prescriptive easement across the Orphan Parcel. The Owens denied those claims and filed a counterclaim for trespass.

On August 14, 2013, the Regans filed a motion for summary judgment seeking a determination that they were entitled to have the Owens' deed reformed on the ground of mutual mistake. On September 5, 2012, the Owens filed a motion for summary judgment seeking a denial of the Regans' claim for reformation. The district court granted the Regans' motion and denied the Owens' motion. It held that the Regans' claim for reformation based upon a mutual mistake was not barred by the statute of limitations and that there was a mutual mistake between the Original Grantors and the Smarts as to the northern boundary of the parcel that the Smarts purchased. It also held that the Owens were on inquiry notice of that mistake when they purchased the Owen Parcel and later the Orphan Parcel. Finally, the court held that even if they did not have notice of the mistake, granting the Regans an easement across the Owens' property would not prejudice them. The Owens appealed, and the district court ultimately entered a partial judgment certified as final pursuant to Rule 54(b) of the Idaho Rules of Civil Procedure.

II.Did the District Court Err in Holding that the Claim to Reform the Deed for Mutual Mistake was Not Barred by the Statute of Limitations?

The Owens contended that the claim to reform their deed based upon a mutual mistake was barred by Idaho Code section 5–218. It provides that an action for relief on the ground of fraud or mistake must be brought within three years of the discovery by the aggrieved party of the facts constituting the fraud or mistake. The statute of limitation does not begin to run until the aggrieved party, in the exercise of reasonable diligence, discovers the facts constituting the fraud or mistake. Jemmett v. McDonald, 136 Idaho 277, 279, 32 P.3d 669, 671 (2001) ; Gerlach v. Schultz, 72 Idaho 507, 514, 244 P.2d 1095, 1099 (1952).

The Owens contend that had the Original Grantors been exercising reasonable diligence, they would have recognized their mistake at the time they prepared the deed to the Smarts. The cause of action does not accrue when the party makes a mistake by failing to exercise reasonable diligence. It begins to run when the party discovers, or in the exercise of reasonable diligence should have discovered, the facts constituting the mistake.

For example, in Brown v. Greenheart, 157 Idaho 156, 335 P.3d 1 (2014), on January 29, 2007, the owners of real property conveyed it by a warranty deed, but the deed mistakenly failed to reserve the water rights appurtenant to the property. The grantors continued to exercise the water rights, but on February 17, 2012, the grantee filed a notice of change in water right ownership with the Idaho Department of Water Resources. About two months later, the grantors filed an action to quiet their title in the water rights. The matter was tried to the court, and it "ruled that the evidence showed a mutual mistake was made by the parties when the warranty deed included unqualified appurtenances language." Id. at 161, 335 P.3d at 5. The court reformed the warranty deed to reserve the water rights to the grantors. Id. On appeal, this Court held that the claim of mutual mistake was not barred by Idaho Code section 5–218. We rejected the grantee's argument that "a party is expected to realize the alleged fraud or mistake at the time of execution of a deed." Id. at 162, 335 P.3d at 7. We did so even though the deed granted the premises "with appurtenances," and under Idaho law it was "well established that a water right is an appurtenance to the land on which it has been used and will pass by conveyance of the land," Russell v. Irish, 20 Idaho 194, 198, 118 P. 501, 502 (1911). We upheld the trial court's finding that the cause of action did not accrue until the grantors met...