Rice v. Lanning , 2004 MT 237 ( 2004 )


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  •                                             No. 03-558
    
                    IN THE SUPREME COURT OF THE STATE OF MONTANA
    
                                               
    2004 MT 237
    
    
    
    PATSY L. RICE,
    
                   Plaintiff and Respondent,
    
             v.
    
    C. I. LANNING,
    a Montana Corporation,
    
                   Defendant,
    
             and
    
    KATHLEEN JOHNSTON and ROSS JOHNSTON,
    
                   Defendants and Appellants.
    
    
    APPEAL FROM:          District Court of the First Judicial District,
                          In and For the County of Lewis and Clark, Cause No. BDV-99-434
                          Honorable Jeffrey Sherlock, Presiding Judge
    
    COUNSEL OF RECORD:
    
                   For Appellants:
    
                          Robert T. Cummins, Attorney at Law, Helena, Montana
    
                   For Respondent:
    
                          Bruce M. Spencer, R.J. “Jim” Sewell, Jr., Craig D Charlton;
                          Smith Law Firm, Helena, Montana
    
    
    
                                                        Submitted on Briefs: June 15, 2004
    
                                                                   Decided: August 31, 2004
    
    Filed:
    
                          __________________________________________
                                            Clerk
    Chief Justice Karla M. Gray delivered the Opinion of the Court.
    
    
    
    ¶1    Patsy L. Rice filed an eight-count complaint against C. I. Lanning, Kathleen Johnston
    
    and Ross Johnston in the First Judicial District Court, Lewis and Clark County. A jury
    
    ultimately found Lanning was negligent and breached the contract under which he sold real
    
    property to Rice.    The jury also determined Ross Johnston is forbidden to conduct
    
    commercial activities on the lot adjacent to Rice's property which is owned by his mother,
    
    Kathleen Johnston.    The District Court subsequently entered permanent injunctions
    
    prohibiting Ross Johnston and Kathleen Johnston from conducting or permitting any
    
    commercial activity on the Johnston lot. The Johnstons appeal. We affirm.
    
    ¶2    We address the following issues:
    
    ¶3    1. Did the District Court abuse its discretion when it gave Instruction Number 11 on
    
    the effect of unrecorded instruments?
    
    ¶4    2. Did the District Court abuse its discretion when it admitted unrecorded covenants
    
    as Exhibit 4?
    
    ¶5    3. Did the District Court err when it allowed Rice to recover money damages from
    
    Lanning and also entered a permanent injunction against Ross Johnston?
    
    ¶6    4. Did the District Court err in granting an injunction against Kathleen Johnston after
    
    the verdict and judgment had been filed?
    
    
    
                                        BACKGROUND
    
                                                 2
    ¶7      In July and November of 1997, Rice purchased Lots 3 and 4 in Lanning's subdivision
    
    in the Helena, Montana, valley. Rice built her home on Lot 4. Before Rice purchased her
    
    lots, Lanning represented to her that the subdivision would be subject to restrictive covenants
    
    including a covenant prohibiting commercial activity. Lanning or his agent gave Rice's agent
    
    a copy of covenants including that restriction.
    
    ¶8      Kathleen Johnston purchased Lot 2 in Lanning's subdivision in January of 1998, next
    
    door to Rice's lots. Ross Johnston--Kathleen's adult son--and his family moved into the
    
    existing home on Lot 2 and, by January of 1999, had built a large garage out of which he
    
    operated an auto body repair shop. Rice's living room window looks out over the auto body
    
    shop.
    
    ¶9      Rice made various extrajudicial attempts, such as efforts to enforce wastewater
    
    disposal regulations, to force Ross Johnston to stop operating the auto body shop. During
    
    that time, she learned that Lanning had filed restrictive covenants with the Lewis and Clark
    
    County Clerk and Recorder in July of 1997, but those covenants did not match the ones he
    
    had given her and did not include a provision prohibiting commercial activity in the
    
    subdivision.
    
    ¶10     When her extrajudicial efforts to close the auto body shop failed, Rice filed this action
    
    in July of 1999. Lanning filed a cross-claim alleging that, despite express prohibition of
    
    commercial development in the subdivision and his demands that Ross Johnston cease
    
    operating his auto body repair business on Lot 2, Ross Johnston and Kathleen Johnston
    
    
    
    
                                                    3
    refused to stop their commercial activity on the property. Lanning dropped his cross-claim
    
    prior to trial.
    
    ¶11     All of the parties except Kathleen Johnston testified during the three-day jury trial.
    
    Rice presented additional testimony from several witnesses. The Johnstons presented
    
    testimony from Ross and two other witnesses.
    
    ¶12     At the end of trial, the jury was given a special verdict form on which the first
    
    questions were whether Lanning had committed constructive fraud or negligent misrepresen-
    
    tation to Rice. The jury answered "No" to both questions. The jury next was asked if
    
    Lanning had breached a contract with Rice and if he had committed negligence, to both of
    
    which the jury answered "Yes." The jury found Rice suffered $45,000 in damages as a result
    
    of Lanning's actions and attributed negligence 15 percent to Rice and 85 percent to Lanning.
    
    Finally, the jury answered "Yes" when asked whether Ross Johnston is forbidden to conduct
    
    commercial activities on Lot 2.
    
    ¶13     The District Court entered a permanent injunction prohibiting Kathleen Johnston and
    
    Ross Johnston from permitting or conducting commercial activities on Lot 2, then amended
    
    the injunction to make it effective only against Ross, matching the jury verdict. Two months
    
    later, Rice moved the court to hold the Johnstons in contempt based on her observations that
    
    the auto body repair shop was still operating. After a hearing, Rice moved for, and the court
    
    entered, a permanent injunction prohibiting both of the Johnstons from conducting or
    
    permitting any commercial activity on Lot 2. The Johnstons appeal.
    
    
    
    
                                                  4
                                              ISSUE 1
    
    ¶14    Did the District Court abuse its discretion when it gave Instruction Number 11 on the
    
    effect of unrecorded instruments?
    
    ¶15    The District Court gave Jury Instruction Number 11, which stated "An unrecorded
    
    instrument is valid as between the parties and those who have notice thereof." This
    
    instruction directly quotes § 70-21-102, MCA. We review a challenged jury instruction to
    
    determine whether the district court abused its discretion in giving the instruction. Allison
    
    v. Town of Clyde Park, 
    2000 MT 267
    , ¶ 11, 
    302 Mont. 55
    , ¶ 11, 
    11 P.3d 544
    , ¶ 11.
    
    ¶16    Ross Johnston contends the unrecorded covenants did not qualify as an "instrument"
    
    under § 70-21-102, MCA, because they did not contain the names and addresses of the
    
    parties thereto or a description of the real property affected. He contends both are required
    
    under § 70-21-101, MCA.
    
    ¶17    Section 70-21-101, MCA, sets forth requirements for abstracted documents which are
    
    included within the term "instrument" for "purposes of Title 1, chapter 5; part 2 of this
    
    chapter; and 70-21-310[.]" This case does not involve the statutes referenced in § 70-21-101,
    
    MCA; nor are abstracted documents at issue here. Therefore, the requirements of § 70-21-
    
    101, MCA, are of no assistance to Ross Johnston.
    
    ¶18    Ross Johnston also argues § 70-21-102, MCA, applies only to parties, purchasers or
    
    persons who take or hold under them, and that "it does not apply to the general public who
    
    at some time might learn of the unrecorded instrument." He apparently places himself in the
    
    "general public" category in relation to Lot 2. In support of this argument, he relies on the
    
    
                                                 5
    following cases decided under § 70-21-102, MCA: Hull v. Diehl (1898), 
    21 Mont. 71
    , 
    52 P. 782
    ; Mullins v. Butte Hardware Co. (1901), 
    25 Mont. 525
    , 
    65 P. 1004
    ; Sheldon v. Powell
    
    (1904), 
    31 Mont. 249
    , 
    78 P. 491
    ; Custer Consol. Mines Co. v. City of Helena (1916), 
    52 Mont. 35
    , 
    156 P. 1090
    ; Zier v. Osten (1959), 
    135 Mont. 484
    , 
    342 P.2d 1976
    ; Aye v. Fix
    
    (1981), 
    192 Mont. 141
    , 
    626 P.2d 1259
    ; and Harbeck v. Orr (1981), 
    192 Mont. 243
    , 
    627 P.2d 1217
    .
    
    ¶19     The cases upon which Ross Johnston relies stand generally for the proposition that
    
    a subsequent purchaser must have had knowledge of an unrecorded instrument in order to
    
    be bound by it. Without reciting the facts and holdings of each case, we note that none of
    
    them supports the notion that notice of an unrecorded interest in land may be enforced only
    
    against a purchaser. Pursuant to the plain language of § 70-21-102, MCA, unrecorded
    
    instruments are valid between "those who have notice thereof."
    
    ¶20     Darcy Hazen, who worked for Lanning, testified that she showed Ross Johnston Lot
    
    2 before his mother purchased it. Hazen also testified she gave Ross Johnston the same
    
    restrictive covenants Rice had seen and told him the covenants prohibited commercial
    
    activity on the property. In addition, Ross Johnston admitted in 1999 that he had knowledge
    
    of the existence and, in his view, applicability of the unrecorded restrictive covenants in a
    
    letter to the Montana Department of Commerce, in which he wrote, "the covenance [sic] on
    
    this property will not allow for a commercial business, and this building will not be used for
    
    commercial use in the future." Ample evidence was presented on which the jury could find
    
    that Ross Johnston had notice of the covenants.
    
    
                                                  6
    ¶21   We hold that the District Court did not abuse its discretion when it gave Instruction
    
    Number 11 on the effect of an unrecorded instrument.
    
                                             ISSUE 2
    
    ¶22   Did the District Court abuse its discretion when it admitted unrecorded covenants as
    
    Exhibit 4?
    
    ¶23   A district court has broad discretion in determining whether evidence is relevant and
    
    admissible, and we will not overturn the trial court's determination absent an abuse of
    
    discretion. Glacier Tennis Club at Summit, LLC v. Treweek Const. Co., Inc., 
    2004 MT 70
    ,
    
    ¶ 47, 
    320 Mont. 351
    , ¶ 47, 
    87 P.3d 431
    , ¶ 47 (citation omitted).
    
    ¶24   Exhibit 4 is a copy of the unrecorded restrictive covenants Lanning gave to Rice,
    
    which include the prohibition on commercial activity. The covenants state they apply to "T-
    
    L RANCH TRACTS 3-B SUBDIVISION Situated in Section 10 & 14, T-10 N, R-3 W,
    
    MPM, Lewis & Clark County, Montana." Ross Johnston states Lot 2 is located in Section
    
    11, Township 10 North, Range 3 West and, therefore, he argues Exhibit 4 does not apply to
    
    Lot 2. While technically correct, this argument does not render the exhibit inadmissible.
    
    ¶25   Generally, all relevant evidence is admissible. Rule 402, M.R.Evid. Rice testified
    
    that Exhibit 4 was the document which Lanning or his agent gave to her agent and
    
    represented as covenants which applied to the subdivision. Also, Darcy Hazen testified that
    
    she gave Ross Johnston a copy of Exhibit 4 and Ross Johnston admitted in his 1999 letter
    
    to the Montana Department of Commerce that, to his knowledge, covenants precluded
    
    
    
    
                                                7
    commercial activity on the property. On those bases, we conclude Exhibit 4 was relevant
    
    and admissible.
    
    ¶26    We hold that the District Court did not abuse its discretion when it admitted the
    
    unrecorded covenants as Exhibit 4.
    
                                              ISSUE 3
    
    ¶27    Did the District Court err when it allowed Rice to recover money damages from
    
    Lanning and also entered a permanent injunction against Ross Johnston?
    
    ¶28    Ross Johnston states that the jury granted Rice money damages for the existence of
    
    a commercial business on Lot 2, and that the District Court's grant of an injunction as well
    
    results in double recovery. He also cites § 27-19-102, MCA, which sets forth situations in
    
    which a final injunction may be granted, and contends none of the statutory situations exists
    
    here. Finally, he asserts "[t]here is an old legal axiom that states if a party's loss can be
    
    compensated, then it is not an irreparable injury and an equitable remedy of injunction does
    
    not exist."
    
    ¶29    Montana law does not prohibit awarding money damages and an injunction in the
    
    same case. See, e.g., Butler v. Germann (1991), 
    251 Mont. 107
    , 
    822 P.2d 1067
    , overruled
    
    on other grounds, Shammel v. Canyon Resources Corp., 
    2003 MT 372
    , 
    319 Mont. 132
    , 
    82 P.3d 912
    . In this case, the money damages Rice was awarded were from Lanning, for
    
    diminution in value of her property due to his failure to record the covenant prohibiting
    
    commercial use.
    
    
    
    
                                                 8
    ¶30    On the other hand, the injunction against Ross Johnston and, subsequently, Kathleen
    
    Johnston, is based on Ross Johnston's continuing operation of a commercial enterprise in
    
    spite of having been given notice that a restrictive covenant prohibited commercial activity
    
    in the subdivision. Section 27-19-102(3), MCA, allows an injunction when necessary to
    
    prevent a multiplicity of judicial proceedings. A continuing invasion of property rights--like
    
    Ross Johnston's continuing violation of Rice's property rights by operating his auto body
    
    repair shop on the lot next to hers--justifies injunctive relief so an injured party is not forced
    
    to bring a multiplicity of actions at law to be compensated for ongoing injury. See Ducham
    
    v. Tuma (1994), 
    265 Mont. 436
    , 442-43, 
    877 P.2d 1002
    , 1006, overruled on other grounds,
    
    Shammel.
    
    ¶31    We hold the District Court did not err in allowing Rice to recover money damages
    
    from Lanning and also entering a permanent injunction against Ross Johnston.
    
                                                ISSUE 4
    
    ¶32    Did the District Court err in granting an injunction against Kathleen Johnston after
    
    the verdict and judgment had been filed?
    
    ¶33    Our standard of review of a district court's grant of an injunction is whether the court
    
    manifestly abused its discretion. A manifest abuse of discretion is one that is obvious,
    
    evident or unmistakable. Shammel, ¶ 12.
    
    ¶34    The Johnstons point out there was no jury finding against Kathleen Johnston. They
    
    also point out that Rice made no Rule 59, M.R.Civ.P., motion for a new trial or Rule 60,
    
    M.R.Civ.P., motion to amend the judgment.
    
    
                                                    9
    ¶35    Under the circumstances here presented, neither a jury finding against Kathleen
    
    Johnston nor a post-trial Rule 59 or Rule 60 motion was necessary in order for the District
    
    Court to enjoin her from conducting or allowing a commercial operation on her property.
    
    A final or permanent injunction is a continuing process over which a court necessarily retains
    
    jurisdiction in order to do equity. Jefferson v. Big Horn County, 
    2000 MT 163
    , ¶ 27, 
    300 Mont. 284
    , ¶ 27, 
    4 P.3d 26
    , ¶ 27. Pursuant to § 27-19-105(4), MCA, a non-party to an
    
    injunction may be enjoined if she is acting in active concert or participation with someone
    
    who is enjoined, provided she received actual notice of the injunction by personal service or
    
    otherwise. Morton v. Lanier, 
    2002 MT 214
    , ¶ 29, 
    311 Mont. 301
    , ¶ 29, 
    55 P.3d 380
    , ¶ 29.
    
    ¶36    Kathleen Johnston received actual notice of the first injunction against her son Ross
    
    through service on the attorney who represented them both as party defendants in this action.
    
    Nevertheless, she admitted at the hearing on Rice's motion for contempt that, after that
    
    judgment was entered, she formed a corporation through which Ross would continue to run
    
    an auto body repair shop on Lot 2, property to which she held title. She testified that her
    
    corporation--she was the sole shareholder--had only one employee, Ross. She testified that
    
    she did not supervise Ross because she did not know how to operate an auto body repair
    
    business.
    
    ¶37    The record supports a conclusion that Kathleen Johnston formed a sham corporation
    
    in an attempt to get around the court's injunction, of which she had notice, prohibiting her
    
    son from engaging in commercial activity on Lot 2, which she owned. We hold the District
    
    
    
    
                                                 10
    Court did not manifestly abuse its discretion in granting an injunction against Kathleen
    
    Johnston after the verdict and judgment had been filed.
    
    ¶38   Affirmed.
    
    
    
                                                              /S/ KARLA M. GRAY
    
    
    We concur:
    
    
    /S/ PATRICIA O. COTTER
    /S/ JIM REGNIER
    /S/ JOHN WARNER
    /S/ JIM RICE
    
    
    
    
                                               11
    Justice Patricia O. Cotter concurs.
    
    ¶39   I concur in the Court’s Opinion. I write separately to comment on the covenants at
    
    issue. As indicated in the Court’s Opinion, the unrecorded covenants included a prohibition
    
    on commercial activity. However, the covenants that were later recorded did not contain this
    
    prohibition. ¶ 9. At first blush, it might be arguable that the contents of the recorded
    
    covenants should supercede the unrecorded covenants on this point. However, this argument
    
    was not squarely presented by the appellants; in fact, they admitted knowing that the
    
    unrecorded covenants precluded commercial activity on the property. ¶ 25. Moreover, it
    
    was undisputed that the certificate of subdivision applicable to Johnston’s lot provided that
    
    only single-family dwellings would be permitted. Thus, the fact that the subsequently
    
    recorded covenants did not preclude commercial activity is of no consequence under the
    
    facts presented here. I therefore concur.
    
    
    
                                                      /S/ PATRICIA O. COTTER
    
    
    
    
                                                 11