SUN VALLEY LAND AND MINERALS v. Hawkes

• Decision Date: 10 February 2003
• Docket Number: No. 27528.,27528.
• Citation: 66 P.3d 798,138 Idaho 543
• Parties: SUN VALLEY LAND AND MINERALS, INC., an Idaho Corporation; and Donna R. Kelsey, an individual, Plaintiffs-Counterdefendants-Respondents, v. Glen and Viola HAWKES, as Trustees of the Glen and Viola Hawkes Family Trust; Denise Bean; Dennis A. and Faye H. Dixon, as Trustees of the Dennis and Faye Dixon Family Trust; and Lee and Barbara Morgan, Defendants-Counterclaimants-Appellants.
• Court: Idaho Supreme Court

66 P.3d 798

138 Idaho 543

SUN VALLEY LAND AND MINERALS, INC., an Idaho Corporation; and Donna R. Kelsey, an individual, Plaintiffs-Counterdefendants-Respondents, v. Glen and Viola HAWKES, as Trustees of the Glen and Viola Hawkes Family Trust; Denise Bean; Dennis A. and Faye H. Dixon, as Trustees of the Dennis and Faye Dixon Family Trust; and Lee and Barbara Morgan, Defendants-Counterclaimants-Appellants.

No. 27528.

Supreme Court of Idaho, Twin Falls, November 2002, Term.

February 10, 2003.

Rehearing Denied April 10, 2003.

Parsons, Smith & Stone, Burley, for appellants. Richard K. Smith argued.

Lawson & Laski, PLLC, Ketchum, for respondents. Edward A. Lawson argued.

TROUT, Chief Justice.

This is a quiet title action to determine whether the appellant lot owners have property rights in a 240-acre tract of land in Blaine County by virtue of a subdivision plat and declaration of covenants, conditions, and restrictions for a failed subdivision recorded after a blanket mortgage had been recorded on the same property.

I. FACTUAL AND PROCEDURAL BACKGROUND

In the mid-1970's, developer Patrick Ryan (Ryan), through his corporation, Clarendon Hot Springs Ranch, Inc. (CHSR), began the process of developing two tracts of land in Blaine County. Ryan planned to first develop the 240-acre tract for light density residential use and later develop the 80-acre parcel. In order to finance this development, Ryan borrowed approximately $400,000 from First Federal Savings and Loan Association of Twin Falls (First Federal) secured by a mortgage on both parcels of property. On September 18, 1975, the mortgage was recorded in Blaine County.

On April 9, 1976, the Blaine County Board of Commissioners approved the Clarendon Subdivision Number 1 Plat (Plat) for development of the 240-acre parcel, conditioned on the performance of certain improvements, including the construction of water and sewer facilities and roads, within two years. To guarantee the work would be completed, Ryan provided a performance bond to the County. The improvements were never made.

On the same day the Plat was approved, Ryan recorded the Plat and a Declaration of Covenants, Conditions, and Restrictions (CC & R's) applicable to the 240-acre parcel. The Plat depicts a subdivision with several private roads and a cluster of 45 circular lots approximately ¼ acre each in size. The unusual circular design of the lots was intended to provide each owner with adequate buildable space while maximizing the open space available to all. The CC & R's indicate this open space, as well as all other property shown on the Plat and not dedicated to the public, would be designated as the "Common Area." As the CC & R's further describe, this "Common Area" would be owned by a homeowners' association for the common use and enjoyment of the individual lot owners.

After the Plat and CC & R's had been recorded, CHSR sold a total of five lots to various owners, including the appellants, Glen and Viola Hawkes, Denise Bean, Dennis A. and Faye H. Dixon, and Lee and Barbara Morgan (collectively, the Lot Owners). Each of the Lot Owners' warranty deeds refers to the Plat and CC & R's. However, contrary to the CC & R's, when the lots were sold, no homeowners' association had been formed and no property rights in the land to be considered the "Common Area" had been conveyed.

In 1976, the first two conveyances, including the Morgans' purchase of Lot 45, were recorded and First Federal immediately signed and recorded a partial release of its mortgage as it applied to these properties. In 1979, the Hawkes purchased Lot 1, Denise Bean purchased Lot 2, and the Dixons purchased Lot 3. Again, First Federal immediately signed a partial release of the mortgage as applied to these parcels. These partial releases provide the mortgage was "released and discharged" as to the specific lots named in the subdivision, but the mortgage and lien were retained as to the rest of the property.

When the Lot Owners purchased their lots, there were two roads providing access to the lots from the main road. One of these roads traverses an old wooden dam (Dam Road), and the other crosses Deer Creek to the southwest (Lower Road). Upon purchasing the property, the Lot Owners began to occupy and improve their lots and the area surrounding them. They built corrals, performed some maintenance on both access routes, removed dead timber, and brought in mobile homes. In addition, some water and sewer systems were constructed, generators installed, and shower facilities built.

Ultimately, Ryan and CHSR defaulted on the First Federal loan. As a result, First Federal filed a foreclosure action in 1984. The Lot Owners were not made parties to the foreclosure action and did not receive notice of the proceedings. The foreclosure resulted in a sheriff's sale to First Federal on May 25, 1984. After a series of subsequent owners, in 1998 Sun Valley Land and Minerals, Inc. (SVLM) acquired the 240-acre tract and Donna R. Kelsey (Kelsey) acquired the adjacent 80-acre tract.

In 1995 the original developer, Ryan, purchased a lot in the subdivision and brought an action against Kelsey and SVLM claiming (1) Kelsey and SVLM had an obligation to complete construction of the subdivision as platted and they breached that obligation and (2) the lot owners had common area and access rights by virtue of the mortgage releases. The district judge granted summary judgment on both issues in favor of Kelsey and SVLM and this Court affirmed the decision in Sun Valley Hot Springs Ranch, Inc. v. Kelsey, 131 Idaho 657, 962 P.2d 1042 (1998).

The instant action began on April 8, 1999, when the plaintiffs, Kelsey and SVLM, filed a complaint seeking to quiet title to both the 240-acre and 80-acre tracts of land. Defendant Lot Owners responded with an answer and counterclaim filed May 18, 1999. These claims were followed by cross motions for summary judgment.

On July 28, 2000, prior to a ruling on the motions for summary judgment, the Lot Owners filed an amended answer and counterclaim. The counterclaim presented three arguments in the alternative: first, the Lot Owners had vested rights in all easements, streets, alleys, parks, open spaces and common areas depicted on the Plat and further described in the CC & R's; second, the Lot Owners had property rights by adverse possession and prescription; and, as a third alternative, the Lot Owners had easement rights by implication or necessity. Thereafter, both parties filed renewed motions for summary judgment.

On October 11, 2000, the district judge granted SVLM and Kelsey partial summary judgment holding (1) the Lot Owners did not obtain any vested fee ownership rights outside the boundaries of their circular lots stemming from the deed, Plat, and CC & R's and (2) the Lot Owners did not establish an ownership interest through adverse possession. Remaining issues of easement rights by prescription, implication, and necessity were litigated at a bench trial on October 24 and 25, 2000, and the district court held in favor of SVLM and Kelsey in all respects, except with regard to an easement by implication over the Lower Road for the benefit of the Lot Owners. On appeal, only those aspects of the lower court's decision determined on summary judgment are at issue.

II. STANDARD OF REVIEW

This Court's review of a district court's ruling on a motion for summary judgment is the same as that required of the trial court when ruling on the motion. Sun Valley v. Rosholt, Robertson & Tucker, 133 Idaho 1, 3, 981 P.2d 236, 238 (1999). Summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." I.R.C.P. 56(c).

III. DISCUSSION

This case is basically a theoretical continuation of Sun Valley Hot Springs Ranch, Inc. v. Kelsey, 131 Idaho 657, 962 P.2d 1042 (1998). The central problem remains the same: a developer of a failed subdivision recorded a Plat and CC & R's on property already subject to a prior recorded mortgage. In Sun Valley Hot Springs, the former developer unsuccessfully argued the mortgagee impliedly consented to the Plat and CC & R's via the execution of partial mortgage releases. In this action, the Lot Owners essentially argue such consent was unnecessary. Their rights vested upon receipt of the deeds and are derived from the Plat and CC & R's. Conceding such property rights are junior to the mortgage, the property owners now argue they should have been included in the foreclosure proceedings due to these junior interests and, because they were not, their interests in the property continue to exist.

The Lot Owners raise four issues on appeal: (1) whether the Lot Owners received any vested property rights in the common area; (2) whether the Lot Owners received any rights of access to their lots or to the use of the roads appearing on the Plat; (3) whether the Lot Owners' rights were eliminated by the foreclosure action; and (4) whether Sun Valley Hot Springs Ranch, Inc. v. Kelsey is the controlling authority in determining the Lot Owners' property rights. This Court addresses the first two issues together and affirms the lower court's decision holding the Lot Owners did not receive any rights to property outside the boundaries of their individual lots. Therefore, the issue regarding the effects of the foreclosure action is rendered moot. Further, this Court holds the lower court did not err in its reliance on the Sun Valley Hot Springs Ranch case, although the case does not directly resolve the present dispute.

A. The District Judge Correctly Held the Lot Owners Did Not Acquire Any Property Rights Outside the Boundaries of Their Circular Lots.

The Lot Owners argue they received vested property rights in the common area and the roads appearing on the Plat upon receipt of their warranty deeds, which...