                                                                                           December 9 2008


                                           DA 07-0116

                  IN THE SUPREME COURT OF THE STATE OF MONTANA

                                           2008 MT 412



JACK THIBODEAU and ROBERT GILLIES,

              Plaintiffs and Appellees,

         v.

JOSEPH J. BECHTOLD and CHERIE ANTHONY-BECHTOLD,

              Defendants and Appellants.




APPEAL FROM:            District Court of the Fourth Judicial District,
                        In and For the County of Missoula, Cause No. DV 02-1064
                        Honorable Edward P. McLean, Presiding Judge


COUNSEL OF RECORD:

                For Appellants:

                        Thomas C. Orr, Attorney at Law, Missoula, Montana

                For Appellees:

                        Darrel L. Moss, Sullivan, Tabaracci & Rhoades, Missoula, Montana



                                                    Submitted on Briefs: December 12, 2007

                                                               Decided: December 9, 2008




Filed:

                        __________________________________________
                                          Clerk
Justice John Warner delivered the Opinion of the Court.
¶1     Joseph and Cherie Bechtold (Bechtolds) appeal from a judgment entered in the Fourth

Judicial District, County of Missoula, reforming a Warranty Deed and ordering that certain

restrictive covenants attach to Parcel D of Missoula County Certificate of Survey 3943.

¶2     In both the District Court and on appeal the parties raise and argue numerous matters,

including the application of these facts to the law concerning collateral agreements,

recording statutes, consideration for contracts, and merger of agreements. However, upon

analysis, this case is not as complicated as the parties attempt to make it and we determine

the dispositive issues are two, which we restate as follows:

¶3     Issue 1: Did the District Court err in admitting parol evidence to determine it was a

mutual mistake that the deed to Parcel D did not include restrictions on the use of the

property?

¶4     Issue 2: Did the District Court err in reforming the deed to Parcel D to include the

restrictions, and then enforcing these restrictions against the Bechtolds pursuant to § 28-2-

1611, MCA?

                                     BACKGROUND

¶5     The facts as found by the District Court are as follows. On October 31, 1990,

Appellees Jack Thibodeau and Robert Gillies and their spouses jointly purchased 30 acres of

land in Missoula County. In 1991 Thibodeau and Gillies realigned the southern boundary of

the property and divided the remainder into 5 parcels: A, B, C, D and E as evidenced by

Certificate of Survey 3943 (C.O.S. 3943), which was recorded in Missoula County. The

Bechtolds are the current owners of Parcels A and D.
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¶6     At the time they subdivided the land, Thibodeau and Gillies agreed that if any of the

five parcels were sold, certain restrictions on the use of the parcels would be placed in the

deeds transferring title. On July 25, 1991, Dwain and Sharon Dailey purchased Parcel A.

The transfer of Parcel A was made subject to the restrictions agreed on by Thibodeau and

Gillies, and these restrictions were included in the Warranty Deed by attaching an Exhibit A.

These restrictions included a prohibition of commercial uses and obnoxious activities or

noises. The restrictions also limited the total number and type of animals allowed on the

property. On August 29, 1994, the Daileys sold Parcel A to the Bechtolds, conveying title by

means of a warranty deed, subject to the same restrictions.

¶7     As part of the dealings between Thibodeau and Gillies, the title to Parcel D was in

Gillies’ name. The Bechtolds assert that during all times pertinent to this case, Thibodeau

acted as Gillies’ agent. Neither Thibodeau nor Gillies contest this fact. During the Spring of

1999, Thibodeau and Gillies decided to sell Parcels D and E. The Bechtolds inquired about

the possibility of purchasing Parcels D and E. Aware of the Bechtolds’ previous disregard of

Parcel A’s restrictions, Thibodeau orally informed the Bechtolds that any transfer of Parcels

D and E would be subject to the same restrictions as Parcel A.

¶8     On September 28, 1999, Gillies and the Bechtolds entered into a Buy-Sell agreement

for Parcel D. The Buy-Sell agreement stated it constituted the entire agreement between the

parties, and superseded any written or oral agreements. The Buy-Sell agreement did not

reference the restrictions at issue. However, Thibodeau brought a written copy of these

restrictions to the meeting with the Bechtolds where the Buy-Sell agreement was signed.
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Thibodeau and the Bechtolds discussed the restrictions and the Bechtolds agreed Parcel D

would have the same restrictions as Parcel A.

¶9     To complete the closure of the transaction on Gillies’ behalf, Thibodeau delivered a

copy of the restrictions to a closing agent with instructions to attach them to the Warranty

Deed. However, due to a mistake of either the title company or the closing agent, the

restrictions were attached to a Deed of Trust—which secured a loan the Bechtolds obtained

from a bank in order to pay the purchase price—instead of being attached to the deed

conveying Parcel D to the Bechtolds. The Deed of Trust, signed by the Bechtolds at closing,

was recorded along with the Warranty Deed. The Bechtolds made no objection to the

inclusion of the restrictions in the closing documents or to the recording of the restrictions as

a part of the Deed of Trust.

¶10    Thibodeau and Gillies filed a complaint, asking the District Court to issue an

injunction enforcing the restrictions on both Parcels A and D because the Bechtolds were

violating the restrictive covenants. They later filed a motion for summary judgment. The

District Court granted the motion with respect to Parcel A and ordered the Bechtolds to

comply with Parcel A’s restrictions. However, it denied summary judgment with respect to

Parcel D. The question of whether the restrictions were attached to Parcel D, and whether

Thibodeau and Gillies could enforce them against the Bechtolds, proceeded to trial before

the District Court sitting without a jury.

¶11    At trial, Thibodeau testified about informing the Bechtolds the restrictions would

apply to Parcel D on at least two occasions. He testified the Bechtolds agreed to purchase
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the property subject to the restrictions. He related to the court how he mistakenly failed to

include the restrictions in the Buy-Sell agreement. He described his giving the title company

instructions to include the restrictions in the deed conveying Parcel D from Gillies to the

Bechtolds. In addition, a neighbor testified that Joseph Bechtold told her he was aware that

when he purchased Parcel D, it would have the same restrictions as Parcel A and he would

be a “good neighbor” and comply with the restrictions.

¶12    The District Court found the testimony of Thibodeau and Gillies’ witnesses to be

credible. Relying on the testimony and documentary evidence introduced by Thibodeau and

Gillies, the District Court, inter alia, concluded that the parties agreed Parcel D would be

sold to the Bechtolds subject to the same deed restrictions as Parcel A, and that these

restrictions were omitted from the deed conveying Parcel D by a virtue of a mutual mistake.

¶13    The District Court reformed the Warranty Deed to include the restrictions in question,

entered judgment in favor of Thibodeau and Gillies, and also ordered the Bechtolds to

comply with the restrictions on both Parcels A and D. The Bechtolds appeal.

                              STANDARDS OF REVIEW

¶14    This Court reviews conclusions of law for correctness. Galassi v. Lincoln County Bd.

of Com'rs, 2003 MT 319, ¶ 7, 318 Mont. 288, ¶ 7, 80 P.3d 84, ¶ 7. We review the findings

of fact entered by a district court sitting without a jury to determine if they are clearly

erroneous. See M. R. Civ. P. 52(a). To determine if findings of fact are clearly erroneous,

this Court will first review the record to see if the findings are supported by substantial

evidence. Second, if the findings are so supported, we will determine if the trial court
                                             5
misapprehended the effect of evidence. Third, if substantial evidence exists and the effect of

the evidence was not misapprehended, we may still conclude a finding is clearly erroneous

when, although there is evidence to support it, a review of the record leaves this Court with

the definite and firm conviction the district court made a mistake. Interstate Production

Credit v. DeSaye, 250 Mont. 320, 323, 820 P.2d 1285, 1287 (1991).

¶15    We will not disturb a court’s evidentiary rulings absent an abuse of discretion. Fox

Grain and Cattle Co. v. Maxwell, 267 Mont. 528, 538, 885 P.2d 432, 438 (1994).

                                       DISCUSSION

¶16    Issue 1: Did the District Court err in admitting parol evidence to determine it was a

mutual mistake that the deed to Parcel D did not include restrictions on the use of the

property?

¶17    The pre-trial order, which superseded prior pleadings and was signed by counsel for

the parties and the district judge, listed as issues to be tried: (1) Thibodeau and Gillies’

contention the restrictions were attached to the Deed of Trust and not the Warranty Deed by

mistake; (2) whether the Warranty Deed from Gillies to the Bechtolds should be reformed to

include the restrictions; and, (3) whether it was the court’s equitable duty to reform the

Warranty Deed to reflect the true and correct agreement between the parties.

¶18    The Bechtolds claim the District Court erred in admitting parol evidence to reform the

deed to Parcel D to include the restrictions on the use of the land. Thus, according to the

Bechtolds, the District Court was precluded from enforcing the restrictions on Parcel D.



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¶19    Whenever the terms of an agreement are reduced to writing by the parties, the writing

is considered as containing all those terms and there can be no evidence of the terms of the

agreement other than the contents of the writing. Section 28-2-905(1), MCA. However,

extrinsic evidence may be admitted when a mistake or other imperfection of the writing is

put in issue by the pleadings. Section 28-2-905(1)(a), MCA. The credibility of the witnesses

and the weight given their testimony is a determination for the district court. Voyta v.

Clonts, 134 Mont. 156, 167, 328 P.2d 655, 662 (1958).

¶20    The extrinsic evidence offered by Thibodeau and Gillies was for the purpose of

proving Gillies’ and the Bechtolds’ original intent in entering into the Buy-Sell agreement

and their original intent regarding the transfer of Parcel D to the Bechtolds. It was

introduced to prove that, by virtue of a mutual mistake, the deed did not contain the agreed

upon restrictions. Thus, this evidence falls squarely within the exception to the parol

evidence rule codified in § 28-2-905(1)(a), MCA, noted above. The District Court did not

err in admitting parol evidence.

¶21    Issue 2: Did the District Court err in reforming the deed to Parcel D to include the

restrictions and then enforcing them against the Bechtolds pursuant to § 28-2-1611, MCA?

¶22    Section 28-2-1611, MCA, provides:

       When, through fraud or a mutual mistake of the parties or a mistake of one
       party while the other at the time knew or suspected, a written contract does not
       truly express the intention of the parties, it may be revised on the application
       of a party aggrieved so as to express that intention, so far as it can be done
       without prejudice to rights acquired by third persons in good faith and for
       value.


                                              7
The record in this case reveals no third parties acquiring rights in Parcel D. The steps to

reformation are:

       There is a prior understanding of the parties; the parties execute a written
       contract; somewhere and sometime between the understanding reached and the
       actual creation of the written instrument, a mistake occurs. It occurs in
       reducing to writing the agreement which the parties have intended. Obviously
       the alleged mistake must relate to something then in the contemplation of the
       parties. The fault sought to be corrected is that the executed written instrument
       does not reflect the actual and true understanding of the parties. This is a
       cardinal principle in the field of reformation for mutual mistake. Then, and
       only then, can the powers of equity be invoked to correct the mistake.

Voyta, 134 Mont. at 166, 328 P.2d at 661 (quoting Restatement of Contracts, § 504 (1932)).

Thus, if the true intention of the parties was to include the restrictions, the deed from Gillies

to the Bechtolds for Parcel D may be reformed to include the restrictions.

¶23    To reform a deed because of a mistake, the mistake must be established by clear,

convincing, and satisfactory evidence. Voyta, 134 Mont. at 166, 328 P.2d at 661. Clear and

convincing evidence is not a mere preponderance of evidence but a preponderance of

evidence that is definite, clear, and convincing. Clear and convincing does not mean

unanswerable or conclusive evidence or evidence beyond a reasonable doubt. In re G.M.,

2008 MT 200, ¶ 23, 344 Mont. 87, ¶ 23, 186 P.3d 229, ¶ 23.

¶24    We held in Issue 1 that the District Court did not err in admitting extrinsic evidence to

prove the intention of the parties because it was introduced to show mutual mistake. The

Bechtolds, however, claim the evidence proving mutual mistake is not clear and convincing,

and thus the judgment must be reversed and the complaint dismissed.



                                               8
¶25    The District Court did not specifically state that it found mistake by clear and

convincing evidence. However, on appeal, the Bechtolds do not fault the District Court for

not using the phrase “clear and convincing.” The Bechtolds’ claim on appeal is that the

quantum of proof supplied to the District Court is insufficient to meet the clear and

convincing evidence standard.

¶26    The three-part test announced in DeSaye, referred to in ¶ 14 above, is used to

determine if a finding of fact is clearly erroneous in a case where clear and convincing

evidence is the standard of proof. In re. G.M., ¶¶ 22-23; See Cartwright v. Equitable Life

Assur., 276 Mont. 1, 28, 914 P.2d 976, 993 (1996).

¶27    The District Court found as matters of fact: (1) Thibodeau informed Joseph Bechtold

in Spring of 1999 that, upon a sale, Parcel D would be made subject to the same restrictions

as Parcel A; (2) Thibodeau confirmed with the Bectholds at the meeting where the Buy-Sell

agreement was signed that Parcel D would be subject to the same restrictions as Parcel A; (3)

the Bechtolds agreed that Parcel D would be subject to the restrictions; (4) Thibodeau

delivered the closing documents to the title agent with instructions to attach the restrictions

to Parcel D’s deed; (5) the Bechtolds’ neighbor spoke with Joseph Bechtold about these

same restrictions and he promised to comply with them; and, (6) the Bechtolds made no

objection to the inclusion of the restrictions in their closing documents. The Deed of Trust,

signed by the Bechtolds, stated the very restrictions at issue here were attached to the

property. Against this proof stands only the deposition testimony of Joseph Bechtold that he

remembered several conversations with Thibodeau but not their contents and then his
                                              9
conflicting testimony at trial he had no conversations with Thibodeau at all concerning

Parcel D’s restrictions.

¶28    We conclude the record reveals the findings of fact of the District Court are supported

by substantial evidence, the trial court has not misapprehended the effect of the evidence,

and we are not left with a definite and firm conviction the District Court made a mistake.

The facts found by the District Court are not clearly erroneous.

¶29    Generally, it is more appropriate for the District Court to clearly state it reformed a

deed because it found by clear and convincing evidence a mistake occurred. Failure to refer

to this standard of proof could be grounds for remand or outright reversal under some

circumstances. However, the Bechtolds cite no portion of the record—nor can we find

any—where they requested the District Court to include the words “clear and convincing” in

its findings of fact or conclusions of law. The Bechtolds do not point to any place in the

record where they argued to the District Court that Thibodeau and Gillies failed to satisfy the

clear and convincing standard of proof. The Bechtolds’ argument that the evidence was

insufficient to meet the clear and convincing standard of proof is made for the first time on

appeal. It has long been the rule in Montana that we will not consider arguments raised for

the first time on appeal. State v. Rosling, 2008 MT 62, ¶ 76, 342 Mont. 1, ¶ 76, 180 P.3d

1102, ¶ 76. The underlying principals behind this rule are judicial economy and fairness to

the trial courts and the parties. State v. West, 2008 MT 338, ¶¶ 16-17, 346 Mont. 244, ¶¶ 16-

17, 194 P.3d 683, ¶¶ 16-17. Our review shows the District Court’s findings of fact are not



                                              10
clearly erroneous and, under these circumstances, we conclude reversing judgment would be

unfair to the District Court as well as Thibodeau and Gillies.

¶30    The District Court did not err in reforming the Warranty Deed to include the

restrictions because the writing did not reflect the actual and true understanding of the

parties. See Restatement of Contracts, § 504.

                                     CONCLUSION

¶31    The District Court did not err in admitting extrinsic evidence to prove the deed

restrictions were omitted from the deed conveying Parcel D by mutual mistake. The District

Court did not err in reforming Parcel D’s deed to include these restrictions and ordering the

Bechtolds to abide by them.

¶32    Affirmed.

                                          /S/ JOHN WARNER

We Concur:

/S/ BRIAN MORRIS
/S/ PATRICIA COTTER
/S/ W. WILLIAM LEAPHART
/S/ JIM RICE




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