YELLOWSTONE II DEVELOPMENT GROUP, INC. v. First Am. Title Ins. Co.

• Decision Date: 06 March 2001
• Docket Number: No. 99-688.,99-688.
• Citation: 2001 MT 41,20 P.3d 755,304 Mont. 223
• Parties: YELLOWSTONE II DEVELOPMENT GROUP, INC., a Montana corporation, Plaintiff and Appellant, v. FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation, Elk Park Ranch, Inc., a Montana corporation, and PARK COUNTY, a political subdivision of the State of Montana, Defendants and Respondents.
• Court: Montana Supreme Court

20 P.3d 755

2001 MT 41

304 Mont. 223

YELLOWSTONE II DEVELOPMENT GROUP, INC., a Montana corporation, Plaintiff and Appellant, v. FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation, Elk Park Ranch, Inc., a Montana corporation, and PARK COUNTY, a political subdivision of the State of Montana, Defendants and Respondents.

No. 99-688.

Supreme Court of Montana.

Submitted on Briefs June 1, 2000.

Decided March 6, 2001.

Rehearing Denied April 5, 2001.

For Appellant: Stephen C. Pohl, Bozeman, MT.

For Respondents: William T. Wagner, Garlington, Lohn & Robinson, Missoula, MT (Park County); Michael Dockery, Crowley, Haughey, Hanson, Toole & Dietrich, Billings, MT (First American); A. Suzanne Nellen, James A. McLean, Drysdale, McLean & Nellen, Bozeman, MT (Elk Park Ranch, Inc.).

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Yellowstone II Development Group, Inc. (Yellowstone II), appeals from three separate judgments entered by the Sixth Judicial District Court, Park County, in favor of each Defendant, First American Title Insurance Company (First American), Elk Park Ranch, Inc. (Elk Park), and Park County. Chronologically, the court first denied Yellowstone II's motion for partial summary judgment and entered summary judgment in favor of Elk Park on April 11, 1997; next, the court entered summary judgment in favor of Park County on December 29, 1997; finally, following a bench trial, the court entered a judgment in favor of First American on September 27, 1999.

¶ 2 We affirm in part, reverse in part, and remand for recalculation of damages.

¶ 3 Yellowstone raises numerous issues on appeal which we have recast as follows:

1. Did the District Court err in denying Yellowstone II's motion for summary judgment and granting summary judgment in favor of Elk Park?

2. Did the District Court err in granting summary judgment in favor of Park County?

3. Did the District Court err in determining that First American did not breach the title insurance policy issued to Yellowstone II?

4. Did the District Court err in denying Yellowstone II's motion to compel discovery and in granting First American's motion for protective order?

5. Did the District Court err in denying Yellowstone II's motion to amend its complaint?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 The litigation here, involving Yellowstone II and the three Defendants, arose from the sale and purchase of two sections of property located in Park County, Montana, in July of 1995. The seller in this instance is Elk Park, one of the named Defendants, and the buyer is the Plaintiff, Yellowstone II. The Defendant First American provided title insurance on the property at issue, and Park County allegedly made negligent misrepresentations concerning the recordability of individual 20 acre tracts within one of the sections of property.

¶ 5 The two undeveloped sections of property, numbered 20 and 29, are located in the Bangtail Mountain Range, a north-south ridge lying parallel to and east of the Bridger Mountain Range, near the border between Gallatin and Park counties. The parties' agreement, an installment contract for deed, provided that the purchase price of $1,288,800 included a $386,640 down payment due at closing. The parties also drafted and signed a contemporaneous addendum to the main agreement, providing that $186,640 of the down payment would be carried for two months by Elk Park on a promissory note. The transaction closed on July 14, 1995, following the execution of an "Agreement for Sale and Purchase of Real Property," signed by Kelly Meyers, as President of Elk Park Ranch, Inc., on July 1, and David Phillips, as President of Yellowstone II, on July 13. When Yellowstone II defaulted by failing to pay off the note by the due date, September 14, 1995, Elk Park terminated the entire agreement in accordance with the express terms of the addendum.

¶ 6 Relevant ancillary legal issues have been previously addressed by this Court. See Elk Park Ranch, Inc. v. Park County (1997), 282 Mont. 154, 935 P.2d 1131. In that case, this Court determined that Elk Park's attempt to convey 20-acre parcels to itself in March of 1993, using one-party quit-claim deeds, was invalid, pursuant to this Court's decision in Rocky Mountain Timberlands, Inc. v. Lund (1994), 265 Mont. 463, 877 P.2d 1018. Although the legal issue of the one-party deeds was essentially the same in both cases, one of the focal issues in Elk Park was whether Park County could be estopped from denying the validity of such deeds, and thereby allow Elk Park to convey 20-acre parcels without undertaking subdivision review.¹ This issue was premised on the alleged representations made by county officials indicating that such one-party deeds were valid and could be recorded in March of 1993, as well as the county's apparent acquiescence in initially filing the disputed deeds. This Court held that the doctrine of equitable estoppel was inapplicable in that case.

¶ 7 The foregoing legal action taken by Elk Park, however, did not commence until November of 1995, two months after it had terminated the sale and purchase agreement at issue here. Our determination of the legal effect of certain representations made by county officials in that case are nevertheless germane because Yellowstone II allegedly relied on many of the same representations that were made by the county to Elk Park.

¶ 8 Thus, at the time the contract was entered in July of 1995, whether a subsequent buyer of the whole section could avoid subdivision review in the event the buyer chose to sell and separately deed some or all of the individual 20-acre tracts identified in Elk Park's quit-claim deeds was far from a legal certainty. It is undisputed, however, that this contingency was thoroughly discussed between the bargaining parties, and that, at best, the county's position at the time was irresolute. For example, in May of 1995, Park County informed Elk Park that it would not "transfer any of these above described property [which included section 20] as separate parcels unless they undergo subdivision review." This information was shared with Yellowstone II. Further, it is undisputed that the warranty deed at issue here was not presented to the county at any time for recording, or merely for determining whether it was, in the eyes of county officials, recordable. At a meeting in late August or early September of 1995, however, Phillips was informed by the county that it would in fact seek an Attorney General Opinion regarding whether the county would be estopped from recording Elk Park's one-party deeds as well as deeds resulting from Yellowstone II's subsequent sale of individual 20-acre parcels. It is undisputed that Phillips also discussed subdivision review at that time, and as a result of this discussion decided "there was no way I could put it [section 20] through subdivision" due to a number of complications. At various times throughout the course of this litigation, however, Yellowstone II has alleged that it purchased what it believed was an existing subdivision.

¶ 9 Furthermore, Phillips was certainly no stranger to such transactions. He would testify that he was a Realtor licensed in Colorado and possessed extensive experience in similar real estate development deals in Colorado. He further stated that he had the opportunity to review and negotiate the terms of the sale and purchase agreement, and that he had studied Montana's subdivision laws prior to entertaining the transaction at issue here. He testified that he in fact had been involved in a land deal in Colorado where a new regulation was passed requiring the project to unexpectedly undergo subdivision review, which caused delays and added costs. Nevertheless, Phillips maintained that sufficient assurances were made to him concerning the estoppel effect of the county's prior representations, as well as adequate coverage under the title insurance policy, for him to go forward with the deal.

¶ 10 Elk Park executed one warranty deed conveying the subject real property to Yellowstone II on the closing date. Under the agreement's heading "Warranty Deed," Elk Park agreed that simultaneously with the execution of the agreement it would "execute a good and sufficient Warranty Deed, regular on its face, suitable for recording...." The provision further provided that the title to the real property would be "free and clear of liens and encumbrances...." Pursuant to the terms of the agreement, the deed was deposited with an escrow agent with instructions that the agent would deliver the warranty deed to Yellowstone II upon receipt of full payment of the purchase price, which was set at June 1, 2000. A quit claim deed conveying all interest from Yellowstone II back to Elk Park was also deposited with the escrow agent, in the event Yellowstone II defaulted as provided under the agreement.

¶ 11 Under the terms of the agreement, Elk Park acknowledged receipt of $50,000 in earnest money prior to the agreement being executed pursuant to an initial buy-sell agreement signed June 12, 1995. Elk Park received an additional $150,000 from Yellowstone II at closing, with the $186,640 balance of the $386,640 down payment due under the promissory note. The addendum to the agreement provided:

In the event said Promissory Note is not paid in full together with interest thereon on the due date set forth above, the original agreement shall terminate, be at an end and of no further force and effect and seller shall be under no further or other obligation to convey the real property described therein to Buyer....

The addendum did not provide any notice or cure provision, or any other means by which Yellowstone II could forestall default. The note was due in full on September 14, 1995. The remaining balance of $902,160 would then be paid by Yellowstone II in quarterly installment payments of $26,000, with the first due on October 1, 1995, culminating with a balloon payment on June 1,...