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Brown v. Greenheart

Supreme Court of Idaho

September 19, 2014

JAY BROWN and CHRISTINE HOPSON-BROWN, husband and wife, Plaintiffs-Respondents,
v.
AUGUSTA SAYOKO MIMOTO GREENHEART, an individual, Defendant-Appellant

2014 Opinion No. 100.

Page 2

Appeal from the district court of the Fourth Judicial District of the State of Idaho, Elmore County. Hon. Lynn G. Norton, District Judge.

Judgment for reformation of deed, affirmed. Attorney's fees and costs on appeal are awarded to respondent.

Borton Lakey Law Offices, Meridian, attorneys for appellant. Victor Villegas argued.

Givens Pursley, Boise, attorneys for respondents. Michael C. Creamer argued.

WALTERS, J. pro tem. Chief Justice BURDICK, Justices EISMANN, J. JONES and HORTON, CONCUR.

OPINION

Page 3

[157 Idaho 158] WALTERS, J. pro tem

This is an action for the reformation of a deed to real property. The appellant, Augusta Greenheart, challenges a decision of the district court determining that a warranty deed conveying a portion of land " with their appurtenances" did not transfer a water right to Greenheart as the purchaser of the property. The district court ordered the warranty deed reformed due to mutual mistake, and grounds of quasi-estoppel and waiver, and granted the sellers of the property, respondents Jay and Christine Brown (" the Browns" ), full water rights to the property. The district court entered a judgment reforming the deed accordingly and awarded attorney fees to the Browns as prevailing parties. We affirm.

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[157 Idaho 159]I. Factual and Procedural Background

The background in the case is drawn from the findings of fact entered by the district court sitting without a jury. In 1988, the Browns acquired a 320-acre parcel of land in Elmore County (" Brown Property" ). In 2000, the Snake River Basin Adjudication Court decreed Water Right Numbers 61-2188 and 61-7151 to the Browns. Water Right Number 61-2188 authorized the irrigation of up to 164 acres within a permissible place of use that encompassed the Brown Property. This water right could be used in conjunction with Water Right Number 61-7151, which permitted the irrigation of up to 123 acres of land, to irrigate up to a total of 287 acres of the Brown Property; however, neither of the water rights had been used to irrigate any portion of the property at issue in this case since at least 1986.

In August, 2003, the Browns leased a portion of their water rights to the Idaho Water Resource Board and agreed to idle 160 acres from irrigation. In 2006, the Browns contracted to sell 272 acres of the water rights to the Idaho Water Company. The buyer did not perform on this contract, and it terminated in 2009. In the meantime, in December 2006, the Browns listed 60 acres of their unirrigated property for sale through a real estate agent. The Browns informed their real estate agent that they did not intend to transfer their water rights to the 60 acres.

Greenheart spoke with the Browns' realtor about purchasing the 60 acres of land, informing the realtor that she wanted vacant land with low taxes and low maintenance. Greenheart testified that her conversation with the Browns' realtor revealed that the land was " dry." Greenheart made an offer on the 60 acres without looking at or inspecting the property. Greenheart was never told before closing on the property that water rights were associated with the property.

The purchase and sale agreement contained the following provision in paragraph 6.E under the heading " Utilities, Improvements, & Other Rights" : " Seller represents that the property does have the following utilities, improvements, services and other rights available (describe availability):" with the designation " N/A" inserted after the colon. Paragraph 16 of the purchase and sale agreement provided as follows:

16. WATER RIGHTS: Description of water rights, water systems, wells springs, water, ditches, ditch rights, etc. if any, that are appurtenant thereto that are now on or used in connection with the premises and shall be included in the sale unless otherwise provided herein: [left blank.]

The purchase and sale agreement contained a box designating which party would pay for the water rights transfer fee, and the box for " not applicable" was marked. Accompanying the purchase and sale agreement was Seller's Property Disclosure Form, which contained the following disclosure: " Irrigation water provided by: N/A." Greenheart later acknowledged that the designation " N/A" meant " not applicable."

On January 29, 2007, a warranty deed prepared by First American Title conveying a portion of the Brown property to Greenheart was signed and recorded by the Browns in Elmore County. The deed granted the premises " with their appurtenances." On June 10, 2007, Greenheart submitted to the Elmore County Board of Equalization a notice of appeal challenging the tax classification of her property as irrigated agriculture. Greenheart sought to have the property reclassified as dry-grazing. Greenheart requested the Browns to assist in her appeal by appearing before the Board of Equalization and representing that the land had no water right and that the land was strictly for dry grazing. The Board of Equalization granted Greenheart's request on July 6, 2007, and adjusted the land's classification to dry-grazing, which resulted in a $600 per year annual reduction in the real estate taxes on the Greenheart Property. In 2009, during discussions between Greenheart and Elmore County in which Elmore County expressed interest in purchasing the property, Greenheart wrote an email to the county asserting that she understood that at the time she acquired the land she was very aware that the parcel was strictly for dry-grazing only, due to lack of an irrigation system and no water rights.

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[157 Idaho 160] In February 2012, the City of Mountain Home offered to purchase the Browns' water rights for $2,000 per acre. While speaking with an attorney, the Browns were informed that the " appurtenances" language in the deed to Greenheart may have conveyed a portion of the Browns' water rights. The Browns contacted Greenheart and informed her that the water rights may have been inadvertently conveyed to her. On February 17, 2012, allegedly without notice to the Browns, Greenheart filed a notice of change of water right ownership with the Idaho Department of Water Resources (" IDWR" ). On March 22, 2012, the IDWR revised its records to indicate that Greenheart was the current owner of a portion of the water rights held by the Browns and reduced the quantity of rights held by the Browns.

The Browns filed a quiet title complaint on April 5, 2012. The Browns sought declaratory judgment that they owned the water rights because the claim that the water rights passed under the appurtenances clause of the warranty deed was rebuffed by facts demonstrating that the parties did not intend to convey water rights. Count 1 of the complaint requested declaratory judgment on contract interpretation. Count 2 requested a declaratory judgment under the principles of promissory estoppel, quasi-estoppel, and waiver. Greenheart answered with affirmative defenses, including the statute of limitations, laches, merger, waiver, estoppel, parol evidence, and unclean hands. The Browns moved for summary judgment on each of their quiet title claims, maintaining that the water rights were not appurtenant to the property conveyed. Greenheart also sought summary judgment on the grounds that the Browns' claims were barred by one or more statutes of limitations and that the deed unambiguously conveyed water rights, rendering inadmissible any extrinsic evidence regarding the parties' intent. With respect to the cross-motions for summary judgment, the district court decided that " the matters presented by both sides in support of the motions for summary judgment raise the issue of whether there was a mistake which is a question of fact that precludes summary judgment."

The district court also denied Greenheart's motion for summary judgment on the statute of limitations question, finding that the Browns' claim accrued on February 17, 2012, when Greenheart filed a Notice of Change of Ownership of the Water Rights with the IDWR, which constituted a claim adverse to the Browns' interest. The court also denied Greenheart's motion to strike certain parol evidence on the basis that even a deed that is unambiguous on its face can be challenged with parol evidence when issues of fraud or mistake are presented.

Prior to trial, Greenheart sought reconsideration of the order denying her motion for summary judgment and asserted that the issue of mutual mistake had not been specifically pled by the Browns. In response, the Browns filed a motion to amend their complaint with a claim alleging mutual mistake and requested reformation of the warranty deed on that ground. At a pretrial conference on February 21, 2013, the district court denied Greenheart's motion to reconsider and denied the Browns' motion to amend their complaint, ruling that the issue of mutual mistake had been sufficiently pled in the original complaint.

A bench trial was held on March 5, 2013. At the conclusion of the trial, the district court ruled that the evidence showed a mutual mistake was made by the parties when the warranty deed included unqualified appurtenances language. The district court also ruled that the Browns were entitled to equitable relief on the grounds of quasi-estoppel and waiver as alleged in Count 2 of their complaint. On May 23, 2013, final judgment was entered reforming the warranty deed to specifically exclude and reserve the water rights to the Browns. Finding that a commercial transaction was the gravamen of the lawsuit, the district court awarded attorney fees to the Browns as the prevailing parties under Idaho Code section 12-120(3). Greenheart filed a notice of appeal to contest the district court's determinations of mutual mistake, applicable statutes of limitations, and the award of attorney fees.

II. Issues on Appeal

1. Whether the district court erred when it ruled that the Browns' claims were not barred by a statute of limitations.

Page 6

[157 Idaho 161] 2. Whether the district court erred when it permitted the Browns to try the issue of mutual mistake.
3. Whether Greenheart failed to appeal the district court's decision on quasi-estoppel and waiver.
4. Whether the district court erred when it declined to preclude the Browns from relying on mutual mistake because they were ...

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