GRANITE COUNTY MONTANA v. RISING SUN ESTATES LLC JACK McLEOD JOHN DOES (2024)

Justice James Jeremiah Shea delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion, shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.

¶2 Rising Sun Estates, LLC, and Jack McLeod as a member owner of Rising Sun Estates, appeal the February 7, 2023 order of the Third Judicial District Court entering judgment in favor of Granite County. We address the dispositive issue of whether or not the District Court erred in its interpretation and application of the Contract between the parties.¹ We reverse.

¶3 Jack Mcleod and Rising Sun Estates, LLC (collectively “Rising Sun”) entered into two Subdivision Improvement Agreements (“SIA”) with Granite County on April 29, 2008.

¶4 The SIA contains the following relevant provisions:

Rising Sun's Obligations:

Security: to secure the performance of his obligations under this Agreement, the Developer shall deposit with the County on or before the effective date, an Irrevocable Letter of Credit in the amount of $33,500․ The letter of credit shall be payable to the County at any time upon presentation of (1) a sight draft drawn on the issuing lending institution in the amount of $33,500, (2) a signed statement or affidavit executed by an authorized County official stating that the Developer is in default under this Agreement; and (3) the original copy of the letter of credit.

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Warranty: The Developer warrants that each and every improvement shall be free from defects for a period of 1 year from the date that the County accepts the dedication of the last improvement completed by the Developer.

Commencement and Completion Periods: The Developer shall complete all the require[d] improvements 3-27-2009.

Granite County's Obligations:

Inspection and Certification: (A) The County shall provide for inspection of the improvements as they are completed and, where found acceptable shall certify those improvements as complying with the standards and specifications set forth in Attachment D of this Agreement. The inspection and certification, shall occur within 14 days of notice by the Developer that the improvements are complete and he desires County inspection and certification. Before requesting the County certification of any improvement the Developer shall present to the County valid lien waivers from all persons providing materials or performing work on the improvement.

Notice of Defect: The County shall provide timely notice to the Developer whenever inspection reveals that an improvement does not conform to the standards and specification set forth in Attachment D, or is otherwise defective.

Reduction of Security: After the acceptance of any improvement, the amount that the County is entitled to draw on the letter of credit shall be reduced by an amount equal to 90 percent of the estimated cost of the improvement as shown in Attachment B. At the request of the Developer, the County shall execute a certificate verifying the acceptance of the improvement and waiving its right to draw on the letter of credit to the extent of the amount. Upon the certification of all the improvements the balance that may be drawn under the credit shall be available to the County for the one year warranty period plus an additional 90 days.

¶5 On November 5, 2008, Rising Sun's engineer, Ryan Casne, sent a letter to Granite County advising that the fire suppression pond improvement was completed. By letter dated November 21, 2008, Rising Sun requested that Granite County inspect the improvements for completion. Notwithstanding the November 5, 2008 letter advising that the fire suppression pond was completed and the follow-up letter of November 21, 2008 requesting that Granite County inspect improvements for completion, Granite County never inspected the fire suppression pond. Granite County's Planning Director, Linda Bouck, testified that she considered the November 5, 2008 letter from Rising Sun's engineer as confirmation that the fire suppression pond was complete and that further inspection was unnecessary. The letters of credit which were related to the fire suppression pond were released by Granite County.

¶6 On August 16, 2016, Fred Bjorklund, the Chief of the Georgetown Lake Volunteer Fire Department, alerted the Granite County Commission that the fire suppression system at Rising Sun Estates was inadequate. Following Bjorklund's comments, Granite County hired Robert Church to survey the fire suppression pond, who concluded in his report that the fire suppression system was unavailable for year-round use.

¶7 On March 24, 2017, Granite County filed a claim against Rising Sun for breach of contract and negligence relative to its installation of the fire suppression system. The District Court granted Summary Judgment in favor of Granite County which we subsequently reversed. Granite County I, ¶ 7. On remand, the District Court conducted a bench trial on December 19, 2022, after which it found in favor of Granite County, ordering judgment of $113,869.65.

¶8 “The construction and interpretation of a contract is a question of law for the court to decide.” Ophus v. Fritz, 2000 MT 251, ¶ 19, 301 Mont. 447, 11 P.3d 1192, (citations omitted). “We review the district court's conclusions of law for correctness.” Ophus, ¶19 (citation omitted). “ ‘Where the language of a covenant is clear and explicit,’ extrinsic evidence is not considered, and ‘the Court must apply the language as written.’ ” Lewis & Clark Cnty. v. Wirth, 2022 MT 105, ¶ 17, 409 Mont. 1, 510 P.3d 1206, citing Creveling v. Ingold, 2006 MT 57, ¶ 8, 331 Mont. 322, 132 P.3d 531; § 1-4-101, MCA (the court's role is not; “to insert what has been omitted or to omit what has been inserted.”). “When interpreting written documents, the cardinal rule of construction is to glean the intent of the parties from the four corners of the document and not to focus on isolated tracts, clauses and words.” Richman v. Gehring Ranch Corp., 2001 MT 293, ¶ 18, 307 Mont. 443, 37 P.3d 732, citing Rumph v. Edwards (1979), 183 Mont. 359, 367-68, 600 P.2d 163, 167. “Words in a contract which are wholly inconsistent with its nature or with the main intention of the parties are to be rejected.” Section 28-3-503, MCA; see also, Rumph, 183 Mont. at 369, 600 P.2d at 169.

¶9 The parties engage in a significant amount of ancillary discussion about nonexistent attachments and compulsory counterclaims that, in the final analysis, have little or no bearing on the resolution of this dispute. This is a contract dispute that begins and ends with the parties’ respective obligations under the contract. Relevant to this action, the contract required Rising Sun to complete the fire suppression pond by March 27, 2009. Rising Sun advised Granite County that the fire suppression pond was completed on November 5, 2008. Rising Sun followed up that notice with a written request on November 21, 2008, that Granite County inspect the improvements for completion. The contract required Granite County to inspect and certify the fire suppression pond within fourteen days of the notice of completion and the request for inspection and certification—i.e., within fourteen days of November 21, 2008. The contract required Granite County to provide “timely notice” to Rising Sun if its inspection revealed that the fire suppression pond was defective.² Upon being notified of any defect, the contract provided that Rising Sun “shall have 30 days from the date the notice is issued to remedy the defect.” In any event, the contract provided that Rising Sun would warrant that the fire suppression pond shall be free from defects for a period of 1 year from the date that the County accepts the dedication of the last improvement.

¶10 Because Granite County did not inspect the fire suppression pond pursuant to the terms of the contract, it did not provide “timely notice” to Rising Sun of any defects to the fire suppression pond which, in turn, would have allowed Rising Sun the opportunity to remedy the defect pursuant to the terms of the contract. Even with having failed to inspect the fire suppression pond within the time limits set forth in the contract, if Granite County had inspected it within the one-year warranty period, it may have been able to avail itself of a remedy under the contract. But Granite County waited over eight years before alleging a defect and seeking a remedy under the terms of the contract. The express terms of the contract do not allow for such an untimely remedy.

¶11 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review. The District Court's judgment in favor of Granite County is reversed.

FOOTNOTES

1.   Granite County contends that our previous ruling in Granite County v. Rising Sun Estates, DA 21-0590, 2022 MT 108N, 2022 Mont. LEXIS 507 (Granite County I) limited the issue on remand “only to [Rising Sun's] fire suppression pond system being functionable year round with sufficient water.” In Granite County I, we addressed the sole issue presented to us on appeal: whether genuine issues of material fact precluded the District Court's grant of summary judgment. Addressing that sole issue, we held that summary judgment was improper because there were disputed issues of material fact. Granite County I, ¶ 7. The issue of the District Court's interpretation and application of the contract language was neither presented nor resolved in Granite County I and was not foreclosed from consideration on remand.

2.   The District Court concluded that these provisions requiring Granite County to inspect and certify the improvements, and to provide timely notice to Rising Sun of any defects, with an opportunity to remedy, did not apply to Granite County's claim because the provisions referred to “Attachment D.” The contract did not include an “Attachment D” and the District Court did not attempt to reconcile this discrepancy. In that regard, though, we note that although Granite County's claim was premised on Rising Sun's alleged failure to install a fire suppression pond pursuant to the “agreed upon specifications,” the contract provided that Rising Sun “shall construct the required improvements according to the specifications required by the County as specified in [the non-existent] Attachment D of this Agreement.” Ultimately, however, we need not determine whether or not the references to “Attachment D” are an obvious scrivener's error, since the contract required Granite County to “provide timely notice to [Rising Sun] whenever inspection reveals that an improvement does not conform to the standards and specifications set forth in Attachment D, or is otherwise defective.” (Emphasis added.)

JAMES JEREMIAH SHEA

We Concur: LAURIE McKINNON DIRK M. SANDEFUR INGRID GUSTAFSON JIM RICE