Sanpete America, LLC v. Willardsen
| Decision Date | 27 October 2011 |
| Docket Number | No. 20090616.,20090616. |
| Citation | 269 P.3d 118,2011 UT 48 |
| Parties | SANPETE AMERICA, LLC, Plaintiff and Appellant, v. Christian WILLARDSEN, an individual; Douglas Neeley, an individual; Attorneys' Title Guaranty Fund, Inc., a Colorado Corporation; Enid Graser, an individual; and All Persons Unknown, Claiming Any Legal or Equitable Right, Title, Lien, or Interest in Water Right Nos. 65–920 and 65–1077, or Who Are Adverse to Plaintiff's Title Therein, or Any Cloud Thereon, Defendants and Appellees. |
| Court | Utah Supreme Court |
OPINION TEXT STARTS HERE
J. Craig Smith, Kathryn J. Steffey, Salt Lake City, for plaintiff.
David C. Wright, Salt Lake City, for defendant.
Douglas L. Neeley, Manti, pro se.Chief Justice DURHAM, opinion of the Court:
INTRODUCTION
¶ 1 This appeal involves the conveyance of a water right with a tortuous history, blunders in the conveyance process, and two successive trial judges, whose rulings were inconsistent on some points but reached the same result: dismissal of the plaintiff's claims. Appellant, Sanpete America, LLC, asks us to reverse aspects of both judges' decisions and hold that it is entitled to damages and attorney fees from the Appellees, Christian Willardsen and Douglas Neeley. We decline to do so.
¶ 2 Although we conclude that some errors were made below, we affirm both judges' conclusion that Sanpete America is entitled to no damages. We hold that Mr. Willardsen conveyed his portion of the water right to Sanpete America under a warranty deed, Mr. Willardsen breached no covenants in the deed, and Mr. Neeley's actions were not the cause of Sanpete America's alleged damages. We therefore affirm the judgment dismissing Sanpete America's claims.
¶ 3 At the heart of this appeal is the conveyance of approximately 110 acres of farmland (the Farm) and certain water rights located in Sanpete County, Utah. In the summer or fall of 1998, Robert Clyde approached the Farm's owner, Christian Willardsen, about a potential purchase. During Mr. Clyde's visit, Mr. Willardsen showed him a well and stated it was sufficient to irrigate the Farm and was “his well.” The water right associated with the well is known as Water Right No. 65–920 (WR920), the number assigned to it by the Division of Water Rights.
¶ 4 Mr. Clyde was a member of Sanpete America, LLC, a Utah limited liability company with three other members: Paul Hamilton, Vern Fischer, and Merrill Ogden.1 After Mr. Clyde's visit to the Farm, the members of Sanpete America discussed purchasing the Farm and WR920. Mr. Hamilton, a former real estate agent who purported to have experience in the conveyance of water rights, visited the Division of Water Rights office in Richfield, Utah, to determine the status of Mr. Willardsen's ownership of WR920. He obtained a description of the water right, which indicated that it was sufficient to irrigate 200 acres and listed the owner of the water right as Seymour E. Christensen, the Farm's owner prior to Mr. Willardsen.
¶ 5 Mr. Hamilton then researched the chain of title to the Farm at the Sanpete County Recorder's Office. He found a 1967 warranty deed conveying title to the Farm from Seymour E. Christensen to Mr. Willardsen and his wife. Mr. Hamilton determined that the property conveyance meant that Mr. Willardsen owned WR920 because Mr. Hamilton believed water rights normally passed to grantees with property. During his research, Mr. Hamilton also encountered a reference to eighty shares of stock in the South Fork of Ditch 28 Pumping Company, but this did not concern him.
¶ 6 In early June 1999, the members of Sanpete America visited the office of Douglas Neeley, Mr. Willardsen's attorney, to arrange for a sixty-day option to purchase the Farm and Mr. Willardsen's water rights. Mr. Neeley operated a title company in addition to his law practice, and he acted as escrow agent in the transaction. During the meeting, Mr. Neeley stated he did not know anything about the conveyance of water rights, that he would not guarantee the conveyance of Mr. Willardsen's water rights, and that he typically referred water issues to a water rights attorney. Mr. Hamilton agreed to take care of the legal description of the water rights to be conveyed and took on the responsibility of determining what water rights Mr. Willardsen owned. Mr. Hamilton then obtained legal descriptions of the water rights associated with the Farm, including WR920 and a smaller well used for culinary water, known as Water Right No. 65–918 (WR918).
¶ 7 The members of Sanpete America believed that the purchase of WR920 would yield six hundred acre-feet of water. At the time, one acre-foot of water was worth between $3,000 and $4,000, making the value of six hundred acre-feet between $1.8 million and $2.4 million. Pursuant to the option contract, Sanpete America could purchase the Farm and the water rights for substantially less: $328,350. Sanpete America planned to sell about one hundred acre-feet of surplus water to satisfy the entire purchase price. To furnish a down payment, Sanpete America secured a $35,000 loan, incurring $1,400 in fees.
¶ 8 Sanpete America exercised its option to purchase the Farm and Mr. Willardsen's water rights, and the closing took place August 7, 1999, at Mr. Neeley's office. Mr. Neeley's office manager, Natalie Tucker, conducted the closing because Mr. Neeley was out of town.
¶ 9 Sanpete America and Mr. Willardsen executed a Land Purchase Agreement that Mr. Neeley's office had drafted. Pursuant to the agreement, Sanpete America would purchase the following property: 109.45 acres of land, comprising fifteen parcels; the “underground [w]ater [w]ell, Water [R]ights Number 65–920 ... a flow of 1.1783 cfs, irrigation of 200 acres”; “a 3[-inch] culinary well”; an irrigation pond; and “[a]ny and all other [w]ater now a part of or belonging to the subject property.” The agreement stated that Mr. Willardsen would have “free title to the subject property” at closing and would convey title to Sanpete America by warranty deed.
¶ 10 The parties also executed a warranty deed (the Warranty Deed), but it was not delivered to Sanpete America at the closing. The Warranty Deed, drafted by Mr. Neeley's office, lacked a legal description of the Farm's smaller well, WR918, simply referring to it as “a 3[-inch] culinary well.” Mr. Hamilton told Ms. Tucker he would provide a legal description of WR918 to include in the Warranty Deed, and he did so in a letter on August 9, 1999. But instead of adding the description of WR918 to the deed, Ms. Tucker replaced the legal description of WR920 with the description of WR918. Ms. Tucker recorded the Warranty Deed that same day, omitting any description of or reference to WR920.
¶ 11 About two or three weeks after closing, Mr. Hamilton spoke with Ms. Tucker about the omission of WR920 from the Warranty Deed. Ms. Tucker promised to correct the error. Soon thereafter, Mr. Hamilton received a copy of a “new” warranty deed in the mail, but Mr. Neeley's office had not corrected it to include WR920. Mr. Hamilton called Mr. Neeley's office, which again assured Mr. Hamilton that the problem would be resolved.
¶ 12 Shortly thereafter, Mr. Clyde learned from the family leasing the Farm that Wayne Graser, a neighbor, had an interest in WR920. Mr. Clyde relayed this information to the other Sanpete America members, and Mr. Hamilton again checked the records of the Division of Water Rights. The records were identical to those he had seen prior to closing and indicated no others having interest in WR920. But Mr. Hamilton did discover that Mr. Neeley's office had failed to file the Warranty Deed with the Division of Water Rights so that it could update its ownership records. In September 1999, Mr. Hamilton again visited Mr. Neeley's office and was assured the error would be fixed.
¶ 13 On June 9, 2000, Mr. Neeley finally prepared another deed, which was signed by Mr. Willardsen and was titled “Warranty Deed.” The language of the deed, however, quitclaimed Mr. Willardsen's rights in WR920 to Sanpete America (the Quitclaim Deed). Mr. Neeley's office recorded the Quitclaim Deed on June 21, 2000. On June 28, Mr. Neeley sent a copy of the Quitclaim Deed to the Division of Water Rights.
¶ 14 On July 7, 2000, the Division informed Mr. Neeley that the state engineer would not update its records to list Sanpete America as a 100 percent owner of WR920. The Division's files indicated that WR920 was owned by an entity known as South Fork of Ditch 28 Pumping Company, which had issued shares to multiple individuals. Mr. Neeley did not forward this letter to Sanpete America.
¶ 15 In August 2000, Sanpete America's Mr. Fisher visited the Division to inquire about WR920. He was given a copy of the Division's July 7 letter to Mr. Neeley. At this point, the members of Sanpete America believed that they could not sell any portion of WR920, which compromised the company's ability to make an upcoming payment to Mr. Willardsen. Mr. Hamilton sent a letter to Mr. Neeley and Mr. Willardsen requesting that the payment be postponed. Mr. Neeley responded with a letter notifying Sanpete America that it was in default and that it had ninety days to cure. Sanpete America cured its default by obtaining a bank loan, which it had to renew several times.
¶ 16 On August 21, 2000, the Division recognized Sanpete America as the owner of a portion of WR920 sufficient to irrigate 68.46 acres. In financial distress, Sanpete America sold a portion of WR920 sufficient to irrigate 31.6 acres, along with 31.6 acres of land, to Arlin K. and Karalyn R. Freeman. The Freemans also acquired an option to purchase more land and water at the same price. The Freemans' purchase price of $189,900 was below fair market value for the land and water rights. With these proceeds, Sanpete America paid the remaining balance owed to Mr. Willardsen.
¶ 17 In May 2002, Sanpete America sold three acre-feet of...
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