Urquhart v. Teller
| Decision Date | 06 May 1998 |
| Docket Number | No. 97-372,97-372 |
| Citation | 288 Mont. 497,958 P.2d 714 |
| Parties | Robert D. URQUHART and Evelyn M. Urquhart, individually and as Trustees of the Urquhart Revocable Living Trust, Plaintiffs, Counterdefendants, Appellants and Cross-Respondents, and John P. Talia, James A. Cote, Barbara L. June, a/k/a Barbara L. Urquhart, and Spring Creek Investments, a Montana partnership, Involuntary Plaintiffs, Counterdefendants and Cross-Respondents, v. Otto H. TELLER and The Cinnabar Foundation, a Montana non-profit corporation, Defendants, Counterclaimants, Respondents and Cross-Appellants. |
| Court | Montana Supreme Court |
William T. Wagner; Garlington, Lohn & Robinson, Missoula, for Appellants and Involuntary Plaintiffs Barbara L. June and Spring Creek.
Gregory G. Schultz; Knight, Masar & Poore, Missoula, for Involuntary Plaintiffs John P. Talia and James A. Cote.
Grant D. Parker; Parker Law Firm, Missoula, for Respondents.
¶1 Appellants Robert and Evelyn Urquhart (the Urquharts) appeal from the April 2, 1997 opinion and order of the Twenty-First Judicial District Court, Ravalli County, granting partial summary judgment in favor of Respondents Otto Teller (Teller) and The Cinnabar Foundation (Cinnabar) on the Urquharts' claim to enforce an option to purchase. Teller and Cinnabar cross-appeal from the District Court's grant of partial summary judgment in favor of the Urquharts, the Urquhart Revocable Living Trust, and Involuntary Plaintiffs/Counter-defendants John Talia (Talia), James Cote (Cote), Barbara [Urquhart] June (June), and Spring Creek Investments on Teller and Cinnabar's counterclaim to enforce restrictive covenants. We affirm.
¶2 The parties raise the following issues:
¶3 1. Did the District Court err in holding that the Urquharts may not exercise the preemptive right of first refusal contained in the Contract for Deed?
¶4 2. Did the District Court err in holding that the covenants contained in the Contract for Deed may not be enforced?
¶5 Teller and his late wife, Elena Teller, were the owners of 280 acres of land in Ravalli County, Montana. In May 1971, the Tellers entered into an agreement with the Urquharts to sell approximately 270 acres, reserving 10 acres to the Tellers (Contract for Deed). The parties executed the agreement and deposited an unrestricted Warranty Deed in escrow.
¶6 The Contract for Deed contained the following provision:
IT IS SPECIFICALLY AGREED by and between the parties hereto that should Sellers choose to dispose of said ten acre tract, Buyers shall have the option to purchase said tract for the sum of $10,000.00, and in addition thereto the sum of $2000.00 in the event there is added to the house on said premises a bedroom and bath. PROVIDED, HOWEVER, that this option shall be non-assignable unless coupled with the assignment of this contract and the sale of the said premises and this option as a unit, and shall absolutely expire unless said option be exercised by Buyers within six months of written notice by Sellers that the property is to be disposed of. On death of Sellers, Buyers shall have the right to exercise said option, but the time for payment thereof shall be extended to six months after notice is given hereunder by the personal representatives or heirs of Sellers. Death of Buyers, however, shall not terminate this option....
Teller states that he intended to grant the Urquharts a temporary option during the term of the Contract for Deed to ensure that the property would not be divided should he or his wife die before the Contract for Deed was paid off. The Urquharts claim that Teller intended to grant them an option exercisable upon sale of the property or upon the death of the Tellers and that Teller was told by his attorney that the option would continue in full force after the Contract for Deed was paid off.
¶7 The Contract for Deed also contained restrictions on constructing improvements on or selling portions of the property, on committing waste, and on removing or destroying improvements on the property. The Contract for Deed stated that no covenant would be waived by the Tellers' choosing not to enforce it and that "[t]he covenants and conditions hereof run with the land and are binding upon the heirs, executors, administrators and assigns of the parties hereto." The Urquharts state that they were told these covenants were not permanent, but were intended to protect the Tellers in the event they defaulted on the Contract for Deed.
¶8 On January 9, 1979, the Urquharts contracted to sell 11.31 acres of the property to Raymond Bartram (Bartram). On January 17, 1979, the Urquharts paid off the Contract for Deed, and the unrestricted Warranty Deed was released from escrow and recorded. Teller did not object to the Urquharts' selling a portion of the property to Bartram. Bartram constructed substantial improvements on the property, and Teller never sought to enforce the restrictive covenants. Bartram subsequently conveyed his portion to Talia, and Talia conveyed an undivided one-half interest to Cote.
¶9 After paying off the Contract for Deed, the Urquharts built a home, machine shed, hay barn, and another house on the property. Although Teller was aware of the construction, he did not seek to enforce the covenant prohibiting improvements on the property. In 1982, the Urquharts conveyed all of their remaining interest in the 270 acres to the Urquhart Revocable Living Trust. The Urquhart Revocable Living Trust conveyed a portion of the property to June and a portion to Spring Creek Investments, a partnership comprised of June and her brother, Tom Urquhart. In the contract for sale with Spring Creek Investments, the Urquharts, as trustees of the Urquhart Revocable Living Trust, purported to assign the option, but agreed to exercise it on Spring Creek's behalf if it were deemed non-assignable.
¶10 The Urquharts claim that on several occasions since the Contract for Deed was satisfied, both Teller and his nephews have offered to buy portions of the Urquharts' property and have attempted to purchase the option. In July 1993, the Urquharts received a letter from Teller's attorney, which stated that Teller would not commence litigation for the Urquharts' violation of the covenants if they would agree to new covenants prohibiting the construction of more than one house on each portion of the property and if they would agree to release their option to purchase.
¶11 In the fall of 1993, Teller conveyed his 10-acre parcel to Cinnabar, a non-profit corporation dedicated to the conservation and protection of Montana's lands and waters, as a charitable gift. The value of the 10-acres plus improvements had increased to between $375,000 and $400,000. On August 23, 1994, the Urquharts, individually and as trustees of the Urquhart Revocable Living Trust, filed suit in the District Court seeking to enforce the option. Teller and Cinnabar counterclaimed to enforce the restrictive covenants contained in the Contract for Deed and joined Talia, Cote, June, and Spring Creek Investments as involuntary plaintiffs.
¶12 All parties filed motions and cross-motions for summary judgment. On March 31, 1997, the District Court entered its opinion and order granting partial summary judgment for Teller and Cinnabar on the Urquharts' claim to specifically enforce the option. The District Court held that the option, which it characterized as a preemptive right of first refusal, was limited to the duration of the Contract for Deed, constituted an unreasonable restraint on alienation, and violated the Rule against Perpetuities. The court also found that, considering the fair market value of the property, it would be inequitable to enforce the terms of the right of first refusal.
¶13 The District Court also granted partial summary judgment in favor of the Urquharts and involuntary plaintiffs on Teller and Cinnabar's counterclaims. The District Court held that the restrictive covenants did not run with the land because they were not contained in a grant of an estate in real property. The court also held that the statute of limitations barred their claims for violations of the covenants occurring more than eight years before filing of the action and that laches barred their claims for violations occurring within the statute of limitations. The parties appeal from this order.
¶14 We review a district court's grant of summary judgment de novo. Motarie v. Northern Montana Joint Refuse Disposal Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154, 156. Therefore, pursuant to Rule 56, M.R.Civ.P., we review the record to determine whether material issues of fact exist and whether the movant is entitled to judgment as a matter of law. Bruner v. Yellowstone County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903.
¶15 1. Did the District Court err in holding that the Urquharts may not exercise the preemptive right of first refusal contained in the Contract for Deed?
¶16 As noted by the District Court, the "option" provision is actually a preemptive right of first refusal, triggered only upon Teller's choosing to sell or transfer the 10-acre parcel or upon his death. The Urquharts argue that the right of first refusal was triggered when Teller transferred the property to Cinnabar and that the District Court erred in refusing to grant the Urquharts' request for specific performance. The District Court held that the right of first refusal was enforceable only during the period of the Contract for Deed, was an unreasonable restraint on alienation, and violated the Rule against Perpetuities. The court also held that granting the Urquharts specific performance would be inequitable. We agree that the right of first refusal is an unreasonable restraint on alienation. Because we determine that the right of first refusal is void, we need not reach the issues of its possible duration or of the...
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