Summary 2011 WY 106

Summary of Decision July 8, 2011


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Case Name: Elk Ridge Lodge, Inc. v. Sonnett

Citation: 2011 WY 106

Docket Number: S-10-0191, S-10-0192

URL: http://wyomcases.courts.state.wy.us/applications/oscn/DeliverDocument.asp?CiteID=463902

Appeal from the District Court of Sublette County, Honorable Marvin L. Tyler, Judge

Representing Elk Ridge Lodge (Plaintiff/ Third-Party Defendant): Larry B. Jones and William L. Simpson, Burg, Simpson, Eldredge, Hersh & Jardine, Cody, Wyoming.

Representing The Sonnetts (Defendants/Third-Party Plaintiffs): Wendy Z. Burgers-Sonnett and George M. Sonnett, Jr., Washington, Virginia

Date of Decision: July 8, 2011

Facts: The Sonnetts purchased approximately twenty acres of land and improvements in Sublette County, Wyoming, from Elk Ridge Lodge, Inc. To finance part of the purchase price, the Sonnetts gave Elk Ridge a promissory note secured by a mortgage on the property. They later defaulted on the note, and Elk Ridge filed suit against the Sonnetts seeking judgment and foreclosure on the property. The Sonnetts responded with counterclaims against Elk Ridge claiming breach of the implied covenant against emcumbrances. Both parties filed competing motions for summary judgment. The district court granted summary judgment in favor of Elk Ridge on its foreclosure claim, and against the Sonnetts on their counterclaims. In Docket No. S-10-0192, the Sonnetts appeal that decision. The district court also denied Elk Ridge’s request for attorneys’ fees and costs pursuant to the terms of the promissory note and mortgage. In Docket No. S-10-0191, Elk Ridge appeals that decision.

Issues: Issues S-10-0192: Whether the district court erred in granting summary judgment to Elk Ridge, and in denying summary judgment to the Sonnetts, on the Sonnetts’ counterclaim of breach of warranty (breach of the implied covenant against encumbrances), ruling, as a matter of law, that language contained in the deed of conveyance excluded a recorded encumbrance from Elk Ridge’s warranty. Whether the district court erred in granting summary judgment on Elk Ridge’s claim for a money judgment and request for a decree of foreclosure where the Sonnetts’ counterclaim may diminish or defeat Elk Ridge’s claim. Whether the district court erred by granting summary judgment to Elk Ridge on its request for the equitable relief of foreclosure where the Sonnetts invoked equity in defense and where the court made no findings as to the equities.

Issue S-10-0191: Whether the decision of the trial court, in denying Elk Ridge Lodge, Inc.’s motion for attorneys’ fees and costs, was an abuse of discretion.

Holdings: The party moving for summary judgment bears the initial burden of establishing a prima facie case with admissible evidence. The necessary elements of a foreclosure claim are (a) the agreement; (b) a default; (c) a notice of default and declarations thereof; and, (d) the amount due. A review of the record confirms the district court’s ruling that Elk Ridge established its prima facie case for summary judgment on its foreclosure claim. The Sonnetts do not dispute these facts, and indeed, admitted nearly all of them in their answer to Elk Ridge’s foreclosure complaint. The Sonnetts assert, however, that summary judgment in favor of Elk Ridge was precluded by their counterclaim against Elk Ridge for breach of the covenants of the Warranty Deed conveying the property from Elk Ridge to the Sonnetts.

It is undisputed that Elk Ridge conveyed the property to the Sonnetts by Warranty Deed. A Warranty Deed includes the covenant that the property conveyed is free from all incumbrances. Consequently, any encumbrance on the seller’s title needs to be specifically listed and excluded from the warranty. Otherwise, the seller will be in breach of the warranty. Elk Ridge’s Warranty Deed did not specifically list and exclude the Master Plan. The Sonnetts contend that the Master Plan is an encumbrance, and therefore, that Elk Ridge breached its warranty. While Elk Ridge’s Warranty Deed does not specifically list and exclude the Master Plan, it more generally states that the deed is “SUBJECT TO reservations and restrictions contained in the United States patents or other matters of public record, to easements and rights-of-way of record or in use and to prior mineral reservations of record. It is undisputed that the Master Plan, having been recorded and indexed in the Sublette County property records, is “of public record.” Therefore, the district court’s conclusion that the Sonnetts’ breach of warranty claim is not viable, and that Elk Ridge was entitled to summary judgment on that claim is upheld. The district court did not err in granting summary judgment to Elk Ridge, and in denying summary judgment to the Sonnetts, on the Sonnetts’ counterclaim of breach of warranty.

As presented by the Sonnetts, their second issue arises only if we reverse the district court’s grant of summary judgment in favor of Elk Ridge. Because that decision has been upheld, there is no need reach the Sonnetts’ second issue.

In their third issue, the Sonnetts point out that foreclosure is equitable relief, and that they “invoked equity in defense” of Elk Ridge’s foreclosure claim. The Sonnetts contend that it was error for the district court to grant foreclosure to Elk Ridge without making specific findings as to the equities. The Sonnetts are correct that the district court did not make a separate ruling on their equitable defenses to foreclosure. However, it is apparent that the district court’s grant of summary judgment in favor of Elk Ridge implicitly ruled against the Sonnetts on these defenses. The Sonnetts’ equitable defenses were variations on their counterclaim that Elk Ridge wrongfully failed to disclose the existence of the Master Plan. As Elk Ridge’s nondisclosure did not violate the covenants of the Warranty Deed, the record does not support the applicability of the Sonnetts’ equitable defenses.

Segregation of fees between multiple clients and/or multiple claims is required when it is possible. Implicit in this directive is the requirement that a party must show segregation is impossible before he may recover for claims for which there is no authorization of fee shifting. Applying these legal concepts, the district court then made specific findings to support its decision. First, it found that Elk Ridge’s defense of the Sonnetts’ counterclaims were inextricably intertwined and impossible to segregate from Elk Ridge’s prosecution of the foreclosure action. In contrast, it found that the Sonnetts’ third party claims against the two shareholders of Elk Ridge were separable, and all fees and costs related to such must be segregated. It found that Elk Ridge had not adequately and appropriately segregated the hours worked, rate charged, and expenses incurred in defending issues against Elk Ridge and the individual Third-Party Defendants, Terry Reach and Daniel Fox, for piercing the corporate veil, intentional misrepresentation, fraud, and willful and wanton misconduct. The district court applied the rule that once a party is given an opportunity to present sufficient evidence of attorneys’ fees and fails to do so, the party will not be given another chance. While noting the “harsh result,” the district court denied Elk Ridge’s request for attorneys’ fees in its entirety. A careful review the district court’s ruling shows no error in its careful adherence to Wyoming precedent regarding the award of attorneys’ fees. Under the applicable standard of review, the ultimate question is whether the district court could reasonably conclude as it did. In this case, the district court presided over this litigation for nearly a year and a half before reaching its decision to deny Elk Ridge’s motion for attorneys’ fees. It had held numerous hearings and decided many different motions. Under the circumstances, the district court was in a better position than we are to decide whether the Sonnetts’ third party claims against Mr. Reach and Mr. Fox were inextricably intertwined with Elk Ridge’s foreclosure claim. The district court’s decision was not beyond the bounds of reason.

The district court’s decisions in both Docket No. S-10-0191 and Docket No. S-10-0192 are affirmed.





J. Burke delivered the opinion for the court.