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Welu v. Twin Hearts Smiling Horses, Inc.

Supreme Court of Montana

December 28, 2016

TIM WELU, an individual, Plaintiff and Appellant,
v.
TWIN HEARTS SMILING HORSES, INC., a Montana corporation, and STEVE HELD, an individual, Defendants and Appellees.

          Submitted on Briefs: September 28, 2016

         APPEAL FROM: District Court of the Sixteenth Judicial District, In and For the County of Powder River, Cause No. DV 38-12-2510 Honorable Michael B. Hayworth, Presiding Judge

          For Appellant: Michael E. Begley, Adam J. Tunning, & Jordan W. FitzGerald, Moulton, Bellingham PC, Billings, Montana

          For Appellees: Stephen C. Mackey, Towe, Ball, Mackey, Sommerfeld & Turner, P.L.L.P., Billings, Montana

          OPINION

          Patricia Cotter, Justice

         ¶1 This case stems from a disagreement over the ownership and operation of an irrigation system on a ranch near Broadus, Montana. Tim Welu appeals from the Findings of Fact and Conclusions of Law entered after a bench trial in the Sixteenth Judicial District Court, Powder River County. We affirm.

         ISSUES

         ¶2 On appeal, Welu raises three issues, which we restate as follows:

1. Did the District Court err in determining that the entire pivot irrigation system constituted a fixture?
2. Did the District Court err in concluding that Held did not breach the parties' agreement concerning the pivot irrigation system?
3. Did the District Court err in determining that Held and Twin Hearts Smiling Horses, Inc., were not unjustly enriched?

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶3 In 2005, Steve Held and Ginger Held (the Helds), together with David Platt and Diane Case (the Platts), purchased an approximately 6, 000 acre ranch roughly 16 miles south of Broadus in Powder River County, called the Twin Hearts Angus Ranch (the Ranch). In 2008, the parties agreed to divide the Ranch into three, approximately 2, 000 acre parcels. This division was accomplished in 2009 when an agreement was entered into between the Helds, the Platts, and Tim Welu. Under the 2009 agreement, Welu purchased one of the three 2, 000 acre parcels, while the Helds retained a 2, 000 acre parcel, and the remaining 2, 000 acre parcel was transferred to the Platts. In addition to the tracts of land, the parties obtained certain rights relating to the entirety of the Ranch: Welu acquired the exclusive use of hunting rights on the entire Ranch during his lifetime; the Platts were granted exclusive recreational use of the Ranch during their lifetime; and the Helds were granted an exclusive privilege to use the Ranch for livestock grazing purposes. Subsequently, the Helds transferred ownership of their parcel to Twin Hearts Smiling Horses, Inc. (THSH), and Welu transferred ownership of his parcel to Twin Hearts, LLC.

         ¶4 As indicated by the exclusive rights he acquired in the 2009 agreement, Welu's purpose in acquiring an interest in the Ranch was to use the land to hunt game animals. For this purpose, he identified areas suitable for attracting and retaining game animals within the Ranch property. Among these were areas within Held's portion of the Ranch that had previously been used to grow crested wheat without irrigation, as well as areas that had not previously been irrigated. Welu believed that irrigated alfalfa fields would increase the amount of game attracted and retained on the property in those areas. Initially, Welu and Held attempted to utilize a flood irrigation system, already located in the area but in disrepair and inoperable, to grow alfalfa. These efforts ceased in 2010 after the failure to restore the flood irrigation system to the operational condition desired by Welu.

         ¶5 Subsequently, Welu proposed to irrigate the area using a pivot irrigation system.

         This proposal was memorialized in an email sent to Steve Held in December 2010 which, because of its importance to the underlying action, we restate here:

1. I would pick up the primary costs associated with set up and installation.
2. I would expect you to be responsible for all on going [sic] maintenance and operational costs . . .

         In other words, this is a 1 time cost for me. You will maintain them and operate them. You will make sure we have green fields to hunt on. A pump goes out, you replace it. I think that is a reasonable expectation given the amount of investment I am looking at. Agreed?

         Held responded simply, "Its agreed."

         ¶6 To fulfill his end of the agreement, Welu selected and hired Agri-Systems, Inc. (Agri) to provide and install the pivot irrigation system, and drew up plans indicating where the irrigation was to occur. Held had prepared the relevant areas and was ready to plant alfafa by April 2011. However, due to installation delays not attributable to either Held or Welu, the irrigation system was not installed until October 2011. Welu and Agri maintain that by October 2011, the irrigation system was fully installed, as evidenced by the fact that Agri had provided Welu with a run through of the system and then winterized it in place. Held disputes whether the irrigation system was fully installed at this point. Of note is a disagreement that occurred between Held and Agri during the installation process. Agri advised Held that he would need to move a portion of a fence on his property because it was hindering the path of movement of one pivot, which prevented the irrigation system from completing a full circle. Further, Agri advised Mr. Held that failure to move the fence would result in the pivot being damaged.

         ¶7 In early 2012, Welu scheduled a training session with Agri for the purpose of instructing Held on how to operate and maintain the irrigation system. Held did not attend. Nonetheless, at the start of the 2012 growing season, Held proceeded to operate the irrigation system. As a result, a pivot head caught on a fence and was damaged, rendering the pivot unusable until repaired. Further, during Held's operation of the system, a motor was burned out and a supply pipe burst. Due to the damage, the irrigation system was taken offline in May 2012. Shortly after the irrigation system was taken offline, Welu sent an email to Held stating that, "I have instructed Agri to not do any more work on the pivots until I give them further directions, " effectively preventing Held from charging repairs to Welu's account or utilizing the parties' original service provider. The pivot irrigation system remained unrepaired and offline during May and June of 2012.

         ¶8 On July 8, 2012, Welu notified Held that he had sold the pivots and that Agri would enter the property to dismantle and remove the pivots, electrical boxes, motors, pumps, and other components not buried in the ground. After the workers arrived on the property and commenced removing the system, successfully dismantling one of the pivots, Held directed them to leave the property. While they left the dismantled pivot on the property, the workers left without reassembling the system.

         ¶9 Following Held's refusal to allow his workers to remove the irrigation system, Welu filed the instant action against Held and THSH arguing that the pivot irrigation system should be returned to his possession, that the Defendants had converted his property by exercising unauthorized dominion or control over the irrigation system, that Defendants had been unjustly enriched through their possession of the irrigation system, and that the Defendants have caused him damages by way of lost opportunity and revenue. Held and THSH filed counterclaims against Welu, alleging that Welu had trespassed when he and his workers attempted to remove the irrigation system, that Welu had breached the contract between the two parties by failing to perform (arguing that the irrigation system was never completely or correctly installed, and therefore not operational), that allowing Welu to remove the irrigation system would breach the agreement between the parties, and breach of a general duty of care for the alleged operation of an "unlicensed" outfitting or hunting guide operation.

         ¶10 The parties tried the case before the Honorable Michael B. Hayworth on March 24 and 25, 2015. The District Court entered Findings of Fact, Conclusions of Law, and an Order resolving the case in favor of the Defendants. The District Court determined that the irrigation system, in its entirety, was a fixture and attached to the real property owned by THSH and, therefore, the irrigation system was owned by THSH. Further, the District Court determined that Welu was not liable to Held and THSH under any of their alleged counterclaims and, similarly, that Held and THSH were not otherwise liable to Welu under any of his alleged claims.

         ¶11 On appeal, Welu argues the District Court erred in concluding that the entire pivot irrigation system was a fixture, that the District Court erred by determining that Held did not breach the parties' agreement, and that the District Court erred in concluding that Held and THSH were not unjustly enriched by being allowed to retain the pivot irrigation system on their property.

         STANDARD OF REVIEW

         ¶12 "We review findings of fact in a civil bench trial to determine if they are supported by substantial credible evidence, " while viewing the evidence in the light most favorable to the prevailing party. JTL Group, Inc. v. New Outlook, LLP, 2010 MT 1, ¶ 30, 355 Mont. 1, 223 P.3d 912 (citation omitted). "Conclusions of law in this context are also reviewed for correctness." JTL Group, Inc., ¶ 30 (citation omitted). "We apply de novo review to mixed questions of law and fact." Mlekush v. Farmers Insurance Exchange, 2015 MT 302, ¶ 8, 381 Mont. 292, 358 P.3d 913 (citation omitted).

         DISCUSSION

         ¶13 1. Did the District Court err in determining that the entire pivot irrigation system constituted a fixture?

         ¶14 This Court addressed the issue of whether an irrigation system constituted a fixture under Montana law in Schwend v. Schwend, 1999 MT 194, ¶ 11, 295 Mont. 384, 983 P.2d 988. When determining whether the irrigation pipe at issue in Schwend was a fixture, we stated "we review a district court's conclusion of law for correctness, " citing Carbon County v. Union Reserve Coal Company, 271 Mont. 459, 898 P.2d 680 (1995). Schwend, ¶ 11. Although our statement was correct, we use this opportunity to briefly clarify the standard of review we apply to a district court's determination as to whether a fixture exists.

         ¶15 Whether an irrigation system constitutes a fixture depends upon certain factual considerations which, in the context of a civil bench trial, we would review for clear error, determining whether they are supported by substantial evidence. JTL Group, Inc., ¶ 30. However, such a determination also requires us to determine whether those facts satisfy the legal standard provided by § 70-15-103, MCA, and our precedent in Schwend. We apply de novo review to the question of whether facts satisfy a legal standard. BNSFRy. Co. v. Cringle, 2012 MT 143, ¶ 16, 365 Mont. 304, 281 P.3d ...


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