YELLOWSTONE PIINE CO v BIG SKY OF

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No. 14866 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979 YELLOWSTONE PINE CO., Plaintiff and Appellant, VS. BIG SKY OF MONTANA, a Corporation and BIG SKY OF MONTANA REALTY, a Corporation, Defendants and Respondents. Appeal from: District Court of the Eighteenth Judicial District, Honorable W. W. Lessley, Judge presiding. Counsel of Record: For Appellant: McKinley Anderson argued, Bozeman, Montana For Respondents: Brown, Pepper and Kommers, Bozeman, Montana William L. Pepper argued, Bozeman, Montana Boone, Karlberg & Haddon, Missoula, Montana Sam Haddon argued, Missoula, Montana - - Submitted: Decided : - December 14, 1979 0, 9 86 J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f t h e Court. Mr. A p p e l l a n t Y e l l o w s t o n e P i n e Company ( h e r e i n Y e l l o w s t o n e ) f i l e d a c o m p l a i n t i n t h e D i s t r i c t C o u r t o f G a l l a t i n County. The c o m p l a i n t a l l e g e d b r e a c h o f a c o n t r a c t between Yellows t o n e and r e s p o n d e n t Big Sky o f Montana, I n c . Sky). The Honorable W. 23, 1979. W. ( h e r e i n Big L e s s l e y h e a r d t h e c a s e on March The D i s t r i c t C o u r t found n o b r e a c h o f c o n t r a c t and e n t e r e d f i n d i n g s a c c o r d i n g l y . T h i s a p p e a l f o l l o w e d . A p p e l l a n t Y e l l o w s t o n e and r e s p o n d e n t Big Sky e n t e r e d i n t o a c o n t r a c t i n March 1970. Y e l l o w s t o n e i s a lumber company o p e r a t i n g a m i l l a t B e l g r a d e , Montana. Big Sky i s t h e o r i g i n a l d e v e l o p e r o f t h e Big Sky S k i R e s o r t n e a r Bozeman, Montana. The c o n t r a c t o b l i g a t e d Big Sky t o d e l i v e r a minimum o f o n e m i l l i o n b o a r d f e e t o f t i m b e r p e r y e a r t o Yellowstone f o r a p e r i o d o f e i g h t y e a r s . The c o n t r a c t r e q u i r e d Y e l l o w s t o n e t o pay Big Sky a s e t p r i c e f o r t h e lumber a s it was d e l i v e r e d . I n a d d i t i o n , t h e c o n t r a c t gave Yellowstone t h e r i g h t o f f i r s t r e f u s a l t o p u r c h a s e a n y t i m b e r s u i t a b l e f o r lumber m a n u f a c t u r i n g from c e r t a i n l a n d s t h e n owned by Big Sky and r e f e r r e d t o a s t h e Corcoran l a n d s . The c o n t r a c t r e q u i r e d Big Sky t o n o t i f y Y e l l o w s t o n e i n w r i t i n g o f i t s i n t e n t i o n t o s e l l a n y t i m b e r s u i t a b l e f o r lumber m a n u f a c t u r i n g from t h e Corcoran l a n d s . Y e l l o w s t o n e t h e n had 1 5 d a y s t o match any o f f e r f o r p u r c h a s e o f t i m b e r Big Sky had r e c e i v e d . If Y e l l o w s t o n e d i d s o , Big Sky a g r e e d t o s e l l t h e t i m b e r t o Yellowstone. I f Y e l l o w s t o n e d i d n o t match t h e o f f e r , Big Sky c o u l d s e l l t h e t i m b e r t o a t h i r d p a r t y . The r i g h t o f f i r s t r e f u s a l g r a n t e d t o Yellowstone under t h e c o n t r a c t r a n f o r 1 5 y e a r s from March 3 , 1970. The p a r t i e s had t h e con- t r a c t recorded s h o r t l y a f t e r i t s execution. I n May 1976, Big Sky c r e a t e d a w h o l l y owned s u b s i d i a r y named ~ i Sky o f Montana R e a l t y , I n c . g (herein Realty). R e a l t y i s t h e second r e s p o n d e n t i n t h i s c a s e . I n J u n e 1976 ~ i Sky, i n t h e p r o c e s s o f g e t t i n g o u t o f t h e s k i r e s o r t g b u s i n e s s , conveyed t h e C o r c o r a n l a n d s t o R e a l t y . Realty a g r e e d t o i n d e m n i f y Big Sky f o r any c l a i m a r i s i n g o u t o f t h e 1970 c o n t r a c t w i t h Y e l l o w s t o n e . A l s o i n J u n e 1976, Boyne Mountain Lodge, I n c . , a company c o n t r o l l e d by E v e r e t t D. Big Sky. Kircher, acquired a l l t h e s t o c k of I n November 1977, R e a l t y conveyed t h e C o r c o r a n p r o p e r t y t o Lone Peak, I n c . , Big Sky. a w h o l l y owned s u b s i d i a r y of Although t h e C o r c o r a n l a n d s w e r e t r a n s f e r r e d back t o a w h o l l y owned s u b s i d i a r y o f Big Sky, K i r c h e r , n o t t h e o r i g i n a l d e v e l o p e r s o f Big Sky, now c o n t r o l l e d Big Sky. Big Sky f u r n i s h e d Y e l l o w s t o n e w i t h no n o t i c e o f any o f t h e conveyances o f t h e Corcoran l a n d s . A l l the corporations i n v o l v e d i n t h e p u r c h a s e o f t h e l a n d s d i d , however, have n o t i c e o f t h e c o n t r a c t between Big Sky and Y e l l o w s t o n e c o n c e r n i n g t h e s a l e o f t i m b e r from t h e l a n d s . Further, a l l s u c c e s s o r s i n i n t e r e s t t o Big Sky have performed under t h e t e r m s of t h e contract. From J u n e 1976 t o August 1978, R e a l t y and Lone Peak d e l i v e r e d t i m b e r t o Y e l l o w s t o n e t o f u l f i l l t h e c o n t r a c t requirement of d e l i v e r i n g one m i l l i o n b o a r d f e e t o f lumber t o Y e l l o w s t o n e e a c h y e a r t h r o u g h 1978. I n t h e f a l l o f 1978, Boyne r e c e i v e d a n o f f e r t o p u r c h a s e some t i m b e r from t h e C o r c o r a n l a n d s . P u r s u a n t t o t h e 1970 c o n t r a c t , Boyne o f f e r e d t o Y e l l o w s t o n e t h e r i g h t o f f i r s t r e f u s a l t o purchase t h e logs. Yellowstone e x e r c i s e d i t s r i g h t and p u r c h a s e d t h e l o g s i n O c t o b e r 1978. Y e l l o w s t o n e r a i s e s t h e f o l l o w i n g i s s u e s on a p p e a l : 1. A r e t h e f i n d i n g s o f f a c t and c o n c l u s i o n s o f law e n t e r e d by t h e ~ i s t r i c C o u r t s o i n c o n s i s t e n t a s t o r e q u i r e t reversal? Can l a n d s u b j e c t t o a r i g h t o f f i r s t r e f u s a l 2. c o n t r a c t which g r a n t s t o a p a r t y t h e f i r s t r i g h t t o p u r c h a s e t i m b e r s u i t a b l e f o r lumber m a n u f a c t u r i n g b e conveyed t o someone o t h e r t h a n t h e p a r t y e n t i t l e d t o t h e r i g h t o f f i r s t r e f u s a l w i t h no n o t i c e t o t h e p a r t y w i t h t h e r i g h t o f f i r s t r e f u s a l w i t h o u t committing a breach of c o n t r a c t ? Under i t s f i r s t a l l e g a t i o n o f e r r o r , Y e l l o w s t o n e p o i n t s o u t v a r i o u s d i f f e r e n c e s i n t h e t e r m i n o l o g y u s e d by t h e D i s t r i c t C o u r t i n t h e f i n d i n g s o f f a c t and c o n c l u s i o n s o f law e n t e r e d i n t h i s c a s e . F o r example, Y e l l o w s t o n e s t a t e s t h a t F i n d i n g No. 1 r e f e r s t o " t i m b e r s u i t a b l e f o r lumber m a n u f a c t u r i n g " w h i l e C o n c l u s i o n No. 1 u s e s t h e l a n g u a g e "lumber s u i t a b l e f o r t i m b e r m a n u f a c t u r e . " Yellowstone a r g u e s i n c o n s i s t e n c i e s l i k e t h i s i n t h e judgment r e q u i r e reversal. Y e l l o w s t o n e a l s o c o n t e n d s t h e c o n c l u s i o n s o f law ent e r e d by t h e D i s t r i c t C o u r t c o n t a i n i n t e r n a l i n c o n s i s t e n c i e s . To s u p p o r t t h i s t h e o r y , Y e l l o w s t o n e p o i n t s o u t t h a t C o n c l u s i o n No. I V c o n c l u d e s t h e r e h a s been no b r e a c h o f t h e 1970 contract. Y e l l o w s t o n e t h e n s t a t e s C o n c l u s i o n s Nos. V and V I i n d i c a t e i t i s e s t o p p e d from c l a i m i n g b r e a c h o f t h e c o n t r a c t and h a s waived a n y c l a i m f o r b r e a c h o f c o n t r a c t b e c a u s e Yellowstone accepted s u b s t a n t i a l b e n e f i t s under t h e c o n t r a c t a f t e r b r e a c h by r e s p o n d e n t s . Y e l l o w s t o n e a r g u e s t h e s e con- c l u s i o n s a r e i n c o n s i s t e n t , h o l d i n g no b r e a c h o n t h e o n e hand and b r e a c h b u t w a i v e r and e s t o p p e l on t h e o t h e r . contends t h i s inconsistency r e q u i r e s r e v e r s a l . y ell ow stone Yellowstone's arguments challenging the findings and conclusions entered by the District Court lack merit. Findings and conclusions of the District Court will not be disturbed if supported by the evidence. Johnson v. Jarrett (1976), 169 Mont. 408, 412, 548 P.2d 144, 147. In deter- mining if the evidence supports the judgment, the evidence must be viewed in the light most favorable to the prevailing party. Johnson, 169 Mont. at 412. Applying that rule to this case, the hypertechnical allegations of error made by Yellowstone do not warrant reversal. Although the findings and conclusions refer to the timber which is the center of the controversy here in several different fashions, the record justifies the use of different terminology. At trial the parties at various points referred to the timber involved here as "green merchantable logs," "merchantable timber," "timber suitable for lumber manufacture," and "logs." These references in the record provide sufficient evidence to support the use of the terms by the District Court in the findings and conclusions. This is especially true when it is considered that all the above references come from facts stipulated to by the parties. Big Sky and Realty correctly point out that the conclusions entered by the District Court do not contain internal inconsistencies. Conclusion IV states respondents did not breach their contract with Yellowstone. Conclusions V and VI state Yellowstone is estopped and has waived its right to claim or allege breach of contract. Conclusions V and VI do not say the contract has been breached. They merely hold that even if a breach of contract had occurred, Yellowstone had no cause of action because it accepted benefits under the contract after the alleged breach. This statement is c o n s i s t e n t w i t h a s t a t e m e n t t h a t t h e c o n t r a c t had n o t been breached a t a l l . S i n c e n o i n c o n s i s t e n c y e x i s t s , t h e judg- ment c a n n o t b e r e v e r s e d on t h i s b a s i s . ~ i Sky and R e a l t y s h o u l d a l s o p r e v a i l o n t h e second g i s s u e r a i s e d by t h i s a p p e a l . The q u e s t i o n p r e s e n t e d by t h e second i s s u e h i n g e s on a d e t e r m i n a t i o n o f w h e t h e r t h e 1970 c o n t r a c t g r a n t e d Yellowstone a n i n t e r e s t i n t h e Corcoran l a n d i t s e l f o r whether t h e c o n t r a c t o n l y gave Yellowstone t h e r i g h t t o p u r c h a s e a p r o d u c t Big Sky m i g h t p r o d u c e on t h e land. I f Y e l l o w s t o n e o b t a i n e d a p r o p e r t y r i g h t under t h e c o n t r a c t , s e l l i n g t h e Corcoran l a n d s w i t h o u t n o t i c e t o Yellowstone breached t h e r i g h t of f i r s t r e f u s a l c l a u s e o f the contract. I f , however, Y e l l o w s t o n e o n l y r e c e i v e d t h e r i g h t t o p u r c h a s e a p r o d u c t produced on t h e C o r c o r a n l a n d s , t h e 1970 c o n t r a c t c a n n o t b e c o n s i d e r e d b r e a c h e d u n l e s s t h e p r o d u c t i s s o l d w i t h o u t g i v i n g Yellowstone t h e o p p o r t u n i t y t o purchase t h e product. The problem i n d e t e r m i n i n g i f t h e 1970 c o n t r a c t g r a n t e d Yellowstone a n i n t e r e s t i n t h e Corcoran l a n d s a r i s e s o u t of t h e u s e o f t h e t e r m " t i m b e r s u i t a b l e f o r lumber m a n u f a c t u r ing" i n the contract. When a c o n t r a c t g r a n t s a r i g h t t o t i m b e r growing on l a n d s , t h e c o n t r a c t n o r m a l l y conveys a n i n t e r e s t i n t h e land. ( 1 9 2 4 ) , 69 Mont. Co. H a r t v . Anaconda Copper ~ i n i n g 354, 360, 222 P. 419, 421; R . M. R e a l t y Co. v . Donlan ( 1 9 1 5 ) , 5 1 Mont. 58, 65-71, 486-488. Cobban 149 P. 484, However, when t i m b e r i s s e v e r e d from t h e l a n d , i t becomes p e r s o n a l p r o p e r t y . S o r e n s e n v . J a c o b s o n ( 1 9 5 1 ) , 125 Mont. 1 4 8 , 1 5 2 , 232 P.2d 332, 335. From t h e s e two r u l e s o f law, it f o l l o w s t h a t i f a c o n t r a c t conveys an i n t e r e s t i n growing trees s t i l l a t t a c h e d t o t h e l a n d , t h e c o n t r a c t g r a n t s an i n t e r e s t i n r e a l property. I£ t h e c o n t r a c t g r a n t s a n i n t e r e s t i n t h e t i m b e r a f t e r s e v e r a n c e from t h e l a n d , i t o n l y conveys a n i n t e r e s t i n p e r s o n a l t y . To d e t e r m i n e when Y e l l o w s t o n e a c q u i r e d a n i n t e r e s t i n t h e t i m b e r from t h e C o r c o r a n l a n d s , t h e t e r m s o f t h e cont r a c t a s a n e n t i r e t y must b e c o n s i d e r e d . Mont. a t 65. R. M. Cobban, 5 1 Viewing t h e c o n t r a c t i n t h i s f a s h i o n , Yellow- s t o n e a c q u i r e d no r i g h t t o t h e t i m b e r u n t i l s e v e r e d from t h e Corcoran l a n d s . Under t h e c o n t r a c t , Y e l l o w s t o n e had a r i g h t o f f i r s t r e f u s a l t o p u r c h a s e t h e t i m b e r i f and when Big Sky decided t o s e l l timber i n a d d i t i o n t o t h e m i l l i o n board f e e t p e r y e a r i t was r e q u i r e d t o d e l i v e r . Nothing i n t h e c o n t r a c t a l l o w e d Y e l l o w s t o n e t o compel Big Sky t o l o g t i m b e r i n a d d i t i o n t o t h e y e a r l y requirement. Thus, Y e l l o w s t o n e a c q u i r e d no i n t e r e s t i n t h e t i m b e r u n t i l Big Sky d e c i d e d t o l o g t h e t i m b e r and p u t i t up f o r s a l e . Then, a f t e r Big Sky had s e v e r e d t h e t i m b e r from t h e l a n d , t h e c o n t r a c t g i v e s Yellowstone a n i n t e r e s t i n t h e timber. A s pointed o u t a b o v e , a n i n t e r e s t i n t h e t i m b e r a f t e r i t i s s e v e r e d from the land i s not an i n t e r e s t i n r e a l t y . It only represents an i n t e r e s t i n personal property. Under t h i s a n a l y s i s , Y e l l o w s t o n e o n l y had a n i n t e r e s t i n a p r o d u c t from t h e l a n d , n o t t h e l a n d i t s e l f . Therefore, Big Sky a n d R e a l t y d i d n o t b r e a c h t h e c o n t r a c t by c o n v e y i n g t h e l a n d w i t h o u t n o t i c e t o Y e l l o w s t o n e s i n c e Y e l l o w s t o n e had no i n t e r e s t i n t h e l a n d . The c o n t r a c t would o n l y b e b r e a c h - ed i f t i m b e r from t h e l a n d w e r e s o l d w i t h o u t f i r s t o f f e r i n g t h e timber t o Yellowstone. occurred. T h e r e i s no e v i d e n c e t h i s h a s On t h e c o n t r a r y , i t a p p e a r s a l l Big S k y ' s s u c c e s - s o r s i n i n t e r e s t have honored t h e r i g h t o f f i r s t r e f u s a l p r o v i s i o n o f t h e 1970 c o n t r a c t . A s l o n g as t h e y c o n t i n u e t o d o s o , Y e l l o w s t o n e h a s no c a u s e f o r b r e a c h o f c o n t r a c t a g a i n s t Big Sky o r R e a l t y . Affirmed. We concur: Chief Justice .

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