Appeal from the District Court of the Sixth Judicial District of the State of Idaho, Franklin County. The Honorable Stephen S. Dunn, District Judge.
The opinion of the court was delivered by: J. Jones, Justice.
The decision of the district court is affirmed in part and reversed in part and the case is remanded.
Following the decision of this case on the merits, the Appellants sought an award of attorney fees under the "commercial transaction" prong of I.C. § 12-120(3) and for frivolous litigation under I.C. § 12-121. The district court denied fees on both grounds. We affirm the denial of fees under I.C. § 12-121, but reverse the denial under I.C. § 12-120(3).
I. Factual and Procedural Background
This case arose out of a dispute as to the easement rights of the Respondents over property formerly owned by the Appellants. On May 22, 1987, Daniel Garner entered into a contract to purchase a forty-acre parcel of real property located in Franklin County from Ralph and Thelma McCulloch. The contract of sale purported to provide Daniel an easement across the McCullochs' property, but the warranty deed whereby the McCullochs conveyed the property to Daniel did not grant an easement. As a result, Daniel did not obtain an express easement. However, as the district court subsequently determined, Daniel ultimately acquired an easement either by prescription or prior use.*fn1 The parties refer to this easement as "the original access road."
On May 23, 1990, Brad*fn2 and Leiza Povey (the Poveys) acquired, by warranty deed, the remaining property owned by the McCullochs. As a result of that transaction, the Poveys acquired the property containing the original access road. The warranty deed conveying the property to the Poveys does not mention any easement in favor of Daniel. In the district court, the Poveys conceded that Daniel was entitled to an easement across the property, but they disputed the location and the scope of the easement.
In 1992, the Poveys conveyed, by warranty deed, some of the property that they had acquired from the McCullochs to Daniel's parents, Gary and Nola Garner. This property is adjacent to Daniel's property. The Poveys retained the property containing the original access road. Although the property that Gary and Nola acquired from the Poveys was not accessible without crossing the Poveys' property, the warranty deed did not grant an easement in favor of the Garners.
The deed contained the following language:
TO HAVE AND TO HOLD the said premises, with their appurtenances unto the said Grantees, their heirs and assigns forever. And the said Grantors do hereby covenant to and with the said Grantees that they are the owners in fee simple of said premises; that they are free from all incumberances and that they will warrant and defend the same from all lawful claims whatsoever.
Before the district court, the Garners argued that, because the warranty deed conveyed the property along with its "appurtenances," the Poveys' right to use the original access road was conveyed to Nola and Gary. The district court determined that no express easement was granted to the Garners in the warranty deed, but concluded that Gary and Nola had an easement across the original access road by prescription or prior use.*fn3
Over the next thirteen years, the Poveys conveyed to several other grantees, none of whom are parties to this appeal, portions of the land adjacent to the Garners. During that time, there has apparently been confusion and dispute as to the exact location and nature of the Garners' easement and the extent to which the Poveys' successors in interest were on notice of, and recognized, the easement. Indeed, it was the Poveys', and their successors', alleged interference with the easement that gave rise to this action.
Daniel Garner, Sherri-Jo Garner, Nola Garner, and Nola Garner as trustee of the Nola Garner Living Trust (the Garners), filed suit against the Poveys alleging that (1) the Poveys physically interfered with the Garners' easement by plowing over the original access road; (2) the Poveys wrongfully conveyed their property without mentioning the Garners' easement in the deeds; and (3) the Poveys breached their duty, arising from the 1992 warranty deed between the Poveys and Gary and Nola Garner, to warrant and defend the Garners' easement. At the time the suit was filed, the Poveys no longer owned the land upon which the original access road is located.
The district court ultimately granted summary judgment in favor of the Poveys. The district court determined that the Poveys did not breach any duties owed to the Garners by transferring the property without specifically mentioning the Garners' easement in the deeds because a servient estate holder has no duty, upon sale of the servient estate, to protect implied or prescriptive easements. The court further determined that the Poveys did not physically interfere with the Garners' easement. Indeed, the district court found that the Garners were not prejudiced by the Poveys' act of plowing over the original access road, and that the plowing merely caused a minor inconvenience that did not constitute an unreasonable interference with the easement. The district court did not directly address the Garners' breach of warranty claim.
Following the favorable summary judgment ruling, the Poveys submitted a memorandum of costs and attorney fees. The Poveys requested attorney fees pursuant to I.C. § 12-121 on the ground that the Garners brought and pursued the action frivolously, unreasonably, or without foundation, and pursuant to I.C. § 12-120(3) on the ground that the action involved a commercial transaction. In support of their claim for attorney fees under I.C. § 12-120(3), the Poveys argued that the Garners' claims were based on the transaction between the Poveys and Nola and Gary Garner in 1992 whereby Nola and Gary purchased property from the Poveys and that such transaction was commercial in nature. The Poveys also argued that the Garners attested, under oath, in their verified complaint that their action ...