VERNON L. CALDWELL and LAURA J. CALDWELL, individually and by and through their attorney-in-fact CARRIE HELLER, Plaintiffs and Appellees,
CLIFFORD CODY SABO, also known as CODY SABO, individually and doing business as SABO BROTHERS CONSTRUCTION, INC., a Montana Corporation, Defendants and Appellants.
Submitted on Briefs: July 10, 2013
APPEAL FROM: District Court of the Seventh Judicial District, In and For the County of Richland, Cause No. DV-12-111 Honorable Katherine M. Bidegaray, Presiding Judge.
For Appellant: Arthur V. Wittich, Margaret M. Reader; Wittich Law Firm, P.C.; Bozeman, Montana
For Appellee: Loren J. O'Toole, Brad W. Fjeldheim; O'Toole Law Firm; Plentywood, Montana
LAURIE McKINNON Justice
¶1 Clifford Cody Sabo and Sabo Brothers Construction (collectively "the Sabos") appeal from the order entered by the Seventh Judicial District Court, Richland County, granting a preliminary injunction against them in favor of Vernon L. and Laura J. Caldwell ("the Caldwells"). We reverse and remand for further proceedings consistent with this Opinion.
¶2 The Sabos present two issues on appeal:
¶3 1. Did the District Court err in granting a preliminary injunction pursuant to § 27-19-201, MCA?
¶4 2. Did the District Court err in waiving a written undertaking pursuant to § 27-19-306, MCA?
¶5 We will not address the Sabo's second issue because we have determined that the District Court erred in granting the Caldwells a preliminary injunction.
Factual and Procedural Background
¶6 The Caldwells own real property in Richland County which contains a rock substance known as scoria. Scoria is located in a relatively small portion of the United States including eastern Montana, northern Wyoming, and western North Dakota. See Farley v. Booth Bros. Land & Livestock Co., 270 Mont. 1, 4, 890 P.2d 377, 379 (1995). Although it is not considered a mineral, scoria is valuable in road construction— particularly roads used for oil and gas exploration. Farley, 270 Mont. at 5-8, 890 P.2d at 379-80.
¶7 On May 1, 2011, the Caldwells and the Sabos entered into a written lease agreement ("Lease") for the excavation of scoria on the Caldwells' land. Specifically, the agreement granted the Sabos an exclusive "Right and Lease" to enter the Caldwells property to "strip, develop, process, explore, excavate, crush, stockpile and store, remove, and sell for its own account Scoria from the [Caldwells'] lands." The Sabos agreed to pay the Caldwells "a royalty rate of $3.00 per yard for all Scoria sold from [the Caldwells'] land." The Lease terminated on May 1, 2014, and was silent as to when royalty payments were to be made.
¶8 Until January 2012, the Sabos made periodic royalty payments to the Caldwells depending upon when the Sabos were able to sell the scoria and when their company was paid. The payments were neither monthly nor at regular intervals. Since entering into the Lease in May of 2011, the Caldwells have been paid more than $300, 000 in royalties. However, between January 12, 2012, and August 9, 2012, the Caldwells did not receive any royalty payments at all. Cody Sabo testified that during this period scoria sales were either substantially decreased or non-existent.
¶9 On July 13, 2012, counsel for the Caldwells sent Cody Sabo a letter demanding payment for any mined scoria. Included with the letter was an addendum to the Lease which would require monthly royalty payments to the Caldwells. The Sabos did not sign the addendum; however, the Sabos made royalty payments to the Caldwells of $12, 000 on August 9, 2012, $5, 000 on August 19, 2012, and $8, 000 in September 2012.
¶10 On September 17, 2012, the Caldwells filed their Complaint alleging that the Sabos breached the Lease by failing to pay royalties in a timely manner. The Complaint alleged that the Sabos sold 136, 328 yards of crushed scoria as of June 11, 2012, for which the Sabos owe the Caldwells $408, 984. The Caldwells acknowledged in their Complaint that they received payments totaling $268, 678 from March 2011, to January 2012, and that they received payments of $12, 000 on August 9, 2012, $5, 000 on August 19, 2012, and $5, 000 in late August 2012. Thus, the total amount of royalty payments received by the Caldwells from the Sabos was $290, 678. The Caldwells claimed, however, that the Sabos still owe them an additional $118, 306. The Caldwells have asserted claims of breach of contract, unjust enrichment, and conversion. The Caldwells request monetary damages and a permanent injunction against the Sabos to prevent the Sabos from removing scoria from their property.
¶11 In their Answer, the Sabos denied that they have not paid the Caldwells for the scoria sold. The Sabos asserted that the Lease was silent as to when and how royalties were to be paid and that they are not in breach of the Lease. The Sabos specifically contested the amount of royalties that the Caldwells claim is past due and owing.
¶12 On the same day the Caldwells filed their Complaint, they filed an application for a temporary restraining order and preliminary injunction to prevent the Sabos from entering the Caldwells' property and removing scoria. On September 27, 2012, the District Court issued a temporary restraining order and scheduled a show cause hearing. The order was subsequently modified to allow the Sabos to access the property for the limited purpose of removing their equipment.
¶13 The court conducted a show cause hearing on October 25, 2012. During the hearing, the unrefuted testimony of Vernon Caldwell was that the lawsuit was only about money. ...