Mark R. Kiesel Living Trust et al v. Hyde

Filing 112

IT IS ORDERED that Hydes Motion for Summary Judgment (Doc. 59) is GRANTED, Kiesels Motion for Partial Summary Judgment (Doc. 54) is DENIED, all other motions are DENIED AS MOOT, and this case is DISMISSED. Signed by Magistrate Judge Kathleen L. DeSoto on 8/30/2024. (HMJ)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
MARK R. KIESEL LIVING TRUST
and MONTANA WOODS LLC,

CV 22-109-M-KLD

Plaintiffs,

ORDER

vs.
THOMAS HYDE,
Defendant.

Plaintiffs Mark R. Kiesel Living Trust and Montana Woods LLC
(collectively “Kiesel”) bring this action seeking rescission of, or damages arising
out of, a real estate transaction with Defendant Thomas Hyde (“Hyde”). Hyde has
filed a motion for summary judgment on all claims (Doc. 59), and Kiesel has filed
a cross-motion for partial summary judgment (Doc. 54). The motions are fully
briefed, and Court heard oral argument on August 16, 2024. For the reasons stated
below, Hyde’s motion for summary judgment is granted, Kiesel’s cross-motion for
partial summary judgment is denied, and this matter is dismissed.
I.

Background
In November 1999, Hyde entered into a contract for deed with Stock Farm,

LLC for the purchase of real property commonly known as NKN Stock Farm Rd.,
Lot 31, Hamilton, Montana (“Lot 31”). (Doc. 89 at ¶ 1; Doc. 84 at ¶ 1). Lot 31 is
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located within the Stock Farm development (“Stock Farm”), a gated residential
community featuring a private golf course and club. (Doc. 89 at ¶ 2). The
residential portion of the Stock Farm is overseen by the Board of Directors of the
Stock Farm Homeowners’ Association (“Stock Farm HOA”). (Doc. 89 at ¶ 3).
Before purchasing Lot 31, Hyde, who is an attorney, was involved with
founding the Stock Farm, including forming the relevant legal entities and
establishing the Declaration of Protective Covenants, Conditions, Restrictions, and
Easements for Stock Farm (“Covenants”) that govern and regulate development
within the Stock Farm subdivision. (Doc. 89 at ¶ 4). Lot 31 is subject to the
Covenants, which are recorded in Ravalli County, Montana. (Doc. 84 at ¶ 2; Doc.
61-2). The Covenants provided for the creation of a Design Review Committee
(“DRC”), which assists landowners in securing “the most desirable structure
location on each Lot to take advantage of the surrounding views while securing
views and privacy from adjacent neighbors.” (Doc. 84 at ¶ 3; Doc. 61-2 at 28). The
Covenants state that “[n]o building shall be constructed outside of the designated
building envelope…unless otherwise approved by the Board of Directors and the
DRC,” and require that all utilities must “be installed and maintained below the
surface of the ground. (Doc. 84 at ¶ 4; Doc. 89 at ¶ 96; Doc. 61-2 at 24, 25).
The Covenants further provide for the creation of “initial design and
development guidelines and application and review procedures (the “Development
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Guidelines”), which define “Building Envelope” as:
[t]hat portion of any Lot designated as a Building Envelope on the Final
Plat, and within which the construction of buildings and accessory and
appurtenant structures and improvements is permitted. Horizonal
improvements may be developed outside of the Building Envelope, i.e.
ponds, decks, fencing, provided the improvements are in compliance with
the DRC standards.
(Doc. 84 at ¶¶ 5-6). The building envelope for Lot 31 is depicted on the property
plat. (Doc. 84 at ¶ 8; Doc. 61-4).
During Stock Farm’s founding, Professional Consultants, Inc. (“PCI”) was
engaged to prepare the plat materials and otherwise accomplish the engineering
work necessary to establish the Stock Farm’s residential subdivision. (Doc. 89 at ¶
6). Portions of the subdivision materials prepared and recorded by PCI depict the
intended location of the subdivision’s sewer line to run along the border between
Lot 31 and an adjacent lot, Lot 33. (Doc. 89 at ¶ 8; Doc. 56-3). For some unknown
reason, however, the entity responsible for installing the sewer line instead placed
it across Lot 31 and just inside the northern boundary of its designated building
envelope in an east-west direction. (Doc. 89 at ¶ 9; Doc. 56-5).
Although PCI updated the site plan on March 2, 1999, to show the actual
location of the sewer line running through Lot 31, no easement was recorded.
(Doc. 84 at ¶ 30; Doc. 61-12). However, the “as built” site plans were available to
any member or prospective purchaser at the Stock Farm HOA offices. (Doc. 84 at
¶ 31).
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In 2002, Hyde retained architect Robert Arrigoni (“Arrigoni”) to design a
home for Lot 31. (Doc. 84 at ¶ 9). Like Hyde, Arrigoni had been involved with the
Stock Farm since its formation. (Doc. 89 at ¶ 61). Arrigoni obtained topographic
information about Lot 31 that depicted a line running through the property with the
designation “S”, which is the industry designation for “sewer” in civil engineering
surveys. (Doc. 89 at ¶¶ 12-14). Between March 2002 and July 2002, Arrigoni
subsequently prepared three preliminary design drawings depicting “what might be
possible” on” Lot 31. (Doc. 89 at ¶ 15; Doc. 56-7). The first drawing dated March
3, 2002, is identified as “Hyde Res. Plan Sk.” and includes a line labeled “Sewer
L” running east-west across Lot 31 within the designated building envelope (“First
Drawing”). (Doc. 89 at ¶¶ 16-17; Doc. 56-7 at 1). The second drawing dated June
3, 2002, states “Hyde Lot 31” and shows a line labeled “S” crossing Lot 31 within
the designated building envelope in an east-west direction (“Second Drawing”).
(Doc. 89 at ¶ 18; Doc. 56-7 at 2). The third drawing dated July 27, 2002 depicts an
unlabeled line in the same location as the “Sewer L” and “S” line included on the
first and second drawings (“Third Drawing”). (Doc. 89 at ¶ 19; Doc. 56-7 at 3).
Hyde ultimately decided that he would not pursue the building project and
would instead hold on to Lot 31 and let it appreciate. (Doc. 84 at ¶ 11). Hyde
eventually listed Lot 31 with real estate brokers Bobbi Lockhart and Jim Schueler.
(Doc. 84 at ¶ 14; Doc. 89 at ¶ 26). In 2020, Kiesel began looking at real estate in
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the Bitterroot Valley, and retained Cindi Hayne of Glacier Sotheby’s International
Realty to assist him. (Doc. 84 at ¶¶ 15, 17). Kiesel and his partner at the time,
Erika Hayflick, looked at several properties in and around the Stock Farm and
eventually focused on Lot 31. (Doc. 84 at ¶ 18). Before presenting an offer, Hyde
walked Lot 31 with Bob Webster, a builder who frequently does work within the
Stock Farm, pointing out the location of a PVC pipe identifying the center point of
the building envelope, which measures 150 by 150 feet. (Doc. 84 at ¶¶ 19-21).
On May 27, 2021, Kiesel presented an offer to purchase Lot 31 from Hyde
for $850,000. (Doc. 89 at ¶ 38; Doc. 56-12). Hyde counteroffered, and on June 2,
2021, he and Kiesel agreed on a purchase price of $875,000. (Doc. 89 at ¶ 39; Doc.
56-12). The Buy-Sell Agreement included the following relevant terms and
conditions:
PROPERTY INVESTIGATION: This offer is contingent upon Buyer’s
independent investigation of the following conditions relating to the
property, including but not limited to; covenants, zoning, access, easements,
well depths, septic and sanitation restrictions, surveys or other means of
establishing the corners and boundaries, special improvement districts,
restrictions affecting use, special building requirements, future assessments,
utility hook up and installation costs, environmental hazards, airport affected
area, road maintenance obligations or anything else Buyer deems
appropriate. Buyer agrees that any investigations or inspections undertaken
by buyer or his/her behalf shall not damage or destroy the property, without
the prior written consent of Seller. Further Buyer agrees to return the
property to its original condition and to indemnify Seller from any damage
or destruction to the property cause by the Buyer’s investigations or
inspections, if Buyer does not purchase the property. Release Date: June 11,
2021.
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(Doc. 84 at ¶ 23; Doc. 61-8 at 4).
BUYER’S ACKNOWLEDGMENT: Buyer acknowledges that prior verbal
representations by the Seller or Seller’s representatives do not modify or
affect this Agreement. Buyer acknowledges that by signing this Agreement
he/she has examined the subject real and personal property and represents
that buyer has … visited the Property in person prior to the execution of this
Agreement; has entered into this Agreement in full reliance upon his/her
independent investigation and judgments and has read and understood this
entire Agreement.
(Doc. 84 at ¶ 24; Doc. 61-8 at 9).
As set forth in the property investigation provision, the due diligence period
associated with the purchase of Lot 31 ran from June 2, 2021, when Hyde’s
counteroffer was fully executed, to the June 11, 2021, release date specified in the
Buy-Sell Agreement. (Doc. 89 at ¶ 45).
On June 7, 2021, after the Buy-Sell Agreement was fully executed, Hayne
forwarded Kiesel a map showing the location Lot 31’s building envelope, as well
as the preliminary title commitment on an adjacent lot that Kiesel had previously
considered purchasing, for informational purposes. (Doc. 84 at ¶ 27; Doc. 61-10).
Hayne sent the preliminary title commitment to Lot 31, which is dated June 8,
2021, to Kiesel’s Wyoming attorneys prior to closing. (Doc. 89 at ¶¶ 51; Doc. 899). Both of these preliminary title commitments disclosed the recorded Covenants,
and included a special exception for an easement to the Montana Power Company
permitting it to place gas lines throughout the subdivision. (Doc. 61-10 at 28; Doc.
89-9 at 6). The preliminary title commitments also referenced Montana
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Department of Environmental Quality documents showing that the sewer line was
to follow the border between Lot 31 and Lot 33, and then run to the south of Lot
31. (Doc. 84 at ¶ 29; Doc. 56 at ¶ 53; Doc. 56-3; Doc. 61-11).
Also prior to closing, Kiesel asked his Wyoming attorney, Erika Nash, to
review information related to Lot 31. (Doc. 84 at ¶ 37). On June 15, 2021, Nash
offered her opinions regarding the property, including the following:
Cindy and I chatted this am about the Montana transaction, and I reviewed
the documents she provided to me. This is a platted subdivision with adopted
covenants (CC&Rs) which control the development of the lot. There is a
Design Review Committee (DRC), an arm of the HOA that will oversee
approval of your construction…I mentioned to Cindi that the DRC likely has
adopted design guidelines which are not recorded on title to keep them a bit
more fluid and able to amend to keep up with construction best practices,
and she mentioned you already have a copy, and are already engaging with
an architect and building for construction on the lot. You also understand
that your structures will be placed in the building envelope of the lot, which
envelope has been established by the plat of the subdivision—again I
mention these items to make sure you understand the use restrictions and are
satisfied with them.
(Doc. 84 at ¶ 38).
Kiesel closed on the purchase of Lot 31 on or about June 29, 2021. (Doc. 89
at ¶ 57). By then, Kiesel had retained Arrigoni and architect Justin Alexander to
design a residence on the property. (Doc. 84 at ¶ 33). Arrigoni and Alexander were
both on the DRC, and were both familiar with the requirements for constructing a
residence within the Stock Farm. (Doc. 84 at ¶ 34; Doc. 89 at ¶ 6)
Kiesel gave Alexander and Arrigoni the parameters of designing a 7,000 to
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8,000 square foot home with construction costs ranging from $500 to $600 per
square foot, for a total construction cost ranging from $3.5 million to $4.8 million.
(Doc. 84 at ¶ 47). The total construction costs did not include the purchase price of
Lot 31 or the architectural fees that Kiesel would incur, which were estimated
between $900,000.00 and $1 million. (Doc. 84 at ¶ 48).
After closing, Kiesel, Hayflick, Alexander, and Webster met at Lot 31 for a
site visit, at which time Kiesel commented on his desire to build outside of the
building envelope to the north to capture the view of Blodgett Canyon. (Doc. 84 at
¶ 40). During a subsequent site visit on August 16, 2021, the owner of the
neighboring property, Henry Hunte, communicated to Kiesel’s agents that he did
not want any construction outside of the building envelope and would oppose any
attempt to move the building envelope to the north. (Doc. 84 at ¶¶ 41-44). While
on the property that day, Alexander and Arrigoni noticed a PVC riser sticking out
of the ground. (Doc. 89 at ¶ 66). Alexander then contacted the Stock Farm’s ranch
manager, Bill Thomas, who confirmed that the sewer line was running through Lot
31 and within the building envelope. (Doc. 84 at ¶¶ 49-50).
Alexander retained engineer Craig Schaeffer to complete a survey of Lot 31
in order to locate the building envelope and the existing sewer line. (Doc. 84 at ¶
51). Schaeffer created a diagram (“Utility Line Survey”) that shows the sewer, gas,
and electrical service lines (collectively “Utility Lines”) crossing Lot 31 just south
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of the northern boundary of the building envelope but north of the designated
driveway. (Doc. 56-5; Doc. 62-6; Doc. 89 at ¶ 10). On October 19, 2021, Schaeffer
sent an email to Alexander indicating that in addition to the sewer line, the natural
gas and electrical service lines were also located within the building envelope.
(Doc. 84 at ¶ 52).
Upon discovering the location of the Utility Lines, Alexander began looking
at possible solutions, including either moving Lot 31’s building envelope to the
north or south, or moving the Utility Lines off Lot 31. (Doc. 84 at ¶¶ 54-55; Doc.
61-6 at 19-20). Of the options he identified, Alexander has testified that the only
reasonable alternative was to move to move the Utility Lines entirely off Lot 31 at
an estimated cost of $176,995. (Doc. 84 at ¶55; Doc. 61-16 at 20-21; Doc. 91-4 at
2).
At some point after the Utility Lines were discovered, Arrigoni looked
through the file he had prepared while completing drawings for Hyde and found
the Second Drawing dated June 3, 2002, which include the line labeled “S”
crossing Lot 31 within the designated building envelope. (Doc. 84 at ¶ 61; Doc. 567 at 2). Arrigoni shared the drawing with Alexander, who then sent it to Kiesel.
(Doc. 84 at ¶ 62). Kiesel concluded that Hyde must have known about the Utility
Lines, and immediately retained counsel. (Doc. 84 at ¶ 64).
On December 6, 2021, Kiesel, through counsel, wrote to Hyde demanding
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rescission of the Buy-Sell Agreement based on mutual mistake, and requested
Hyde’s assistance in unwinding the transaction. (Doc. 84 at ¶ 64; Doc. 64-1). Hyde
refused to rescind the transaction, and Kiesel filed this lawsuit on June 21, 2022.
(Doc. 1; Doc. 89 at ¶ 84). Kiesel claims that the existence of the Utility Lines, and
their location on Lot 31, significantly impacts his ability to use and enjoy the
property, and substantially decreases its value. (Doc. 27 at ¶ 23). He alleges that
Hyde knew or should have known of the existence of the Utility Lines, and had a
legal obligation to disclose their presence prior to the sale of Lot 31 but failed to do
so. (Doc. 27 at ¶¶ 26-28).
Kiesel’s Amended Complaint alleges seven claims for relief: (1) negligence
(Count 1); (2) rescission (Count 2); (3) negligent misrepresentation (Count 3); (4)
fraud (Count 4); (5) constructive fraud (Count 5); (6) punitive damages; and (7)
breach of contract/attorney fees (Count 7). (Doc. 27 at ¶¶ 30- 89). Hyde moves for
summary judgment on all seven claims (Doc 59), and Kiesel cross-moves for
partial summary judgment on his rescission claim, or alternatively, his claims for
actual or constructive fraud (Doc. 54). The Court addresses these claims in the
order set forth below.
II.

Legal Standard
Under Rule 56(c), a party is entitled to summary judgment “if the pleadings,

the discovery and disclosure materials on file, and any affidavits show that there is
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no genuine issue as to any material fact and that the movant is entitled to judgment
as a matter of law.” A movant may satisfy this burden where the documentary
evidence produced by the parties permits only one conclusion. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 251 (1986). Once the moving party has satisfied its
burden, it is entitled to summary judgment if the non-moving party fails to
designate by affidavits, depositions, answers to interrogatories or admissions on
file, “specific facts showing that there is a genuine issue for trial.” Celotex Corp. v.
Cattrett, 477 U.S. 317, 324 (1986).
“The mere existence of some alleged factual dispute between the parties will
not defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Anderson, 477 U.S.
at 247–48 (emphasis in original). The non-moving party may not rest upon the
mere allegations or denials of the pleadings. Anderson, 477 U.S. at 248. Further,
inadmissible hearsay is insufficient to raise a genuine issue of material fact.
Skillsky v. Lucky Stores, Inc., 893 F.2d 1088, 1091 (9th Cir. 1990).
In considering a motion for summary judgment, the court “may not make
credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing
Prods., 530 U.S. 130, 150 (2000); Anderson, 477 U.S. at 249–50. The Court must
view the evidence in the light most favorable to the non-moving party and draw all

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justifiable inferences in the non-moving party’s favor. Anderson, 477 U.S. at 255;
Betz v. Trainer Wortham & Co., Inc., 504 F.3d 1017, 1020–21 (9th Cir. 2007).
When presented with cross-motions for summary judgment on the same
matters, the court must “evaluate each motion separately, giving the non-moving
party the benefit of all reasonable inferences.” American Civil Liberties Union of
Nevada v. City of Las Vegas, 333 F.3d 1092, 1097 (9th Cir. 2003).
Where, as here, a contract dispute is in federal court based on diversity
jurisdiction, the court applies the substantive law of Montana, the forum state. 28
U.S.C. § 1652; Med. Lab. Mgmt. Consultants v. Am. Broad. Cos., Inc., 306 F.3d
806, 812 (9th Cir. 2002).
III.

Discussion
A.

Constructive Notice

As set forth in the Amended Complaint, Kiesel’s claims are all premised on
the theory that Hyde knew or should have known of the existence and location of
the Utility Lines, and failed to disclose that information prior to the sale of Lot 31.
(Doc. 27). In response to Kiesel’s motion for partial summary judgment, Hyde
raises what amounts to a threshold argument regarding constructive notice. (Doc.
95). Hyde argues that the Plat (Doc. 61-4), the Covenants (Doc. 61-3), and the
Montana Power Company Easement (Doc. 89-10) provided Kiesel with
constructive notice of the Utility Lines on Lot 31, which not only defeats Kiesel’s
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motion for partial summary judgment but entitles Hyde to summary judgment on
all claims. (Doc. 95 at 9).
“An easement is a non-possessory interest in land that gives a person the
right to use the land of another for a specific purpose[.]” James v. Chicago Title
Ins. Co., 339 P.3d 420, 423 (Mont. 2014). “Easements arise by express grant or
reservation in a written instrument of conveyance, written declaration of covenant,
operation of law (implication from necessity or prior use), or prescription.”
O’Keefe v. Mustang Ranches HOA, 446 P.3d 509, 515 (Mont. 2019), citing Blazer
v. Wall, 183 P.3d 84, 93-94 (Mont. 2008).
“[T]o create an easement by express grant or reservation, an instrument of
conveyance and any reference subdivision plat, certificate of survey, or map of
record must be sufficient together to express clear and unambiguous grantor intent
to grant or reserve an easement in a manner that clearly and unambiguously
describes or otherwise manifests with reasonable certainty the intended dominant
or servient estates, use, and location of the easement.” O’Keefe, 446 P.3d at 516-17
(footnotes omitted) (emphasis in original). “[A] recorded document creating an
easement imparts constructive notice of its contents.” James v. Chicago Title Ins.
Co., 339 P.3d 420, 423 (Mont. 2014).
Hyde relies on the Plat, Covenants, and Montana Power Company Easement
to argue that Kiesel had constructive notice of the utility easements on Lot 31. The
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Plat, which was filed with the Ravalli County Clerk and Recorders office on
December 31, 1997, states: “All properties shown hereon (lots, common areas, and
golf course parcel “A”) are subject to easements as necessary for the installation,
operation and ongoing maintenance of private and public utilities that are in place
at the time of the filing of this plat.” (Doc. 61-4; Doc. 90-1).
In addition, the Covenants, which were also filed with Ravalli County Clerk
and Recorder’s office on December 31, 1997, expressly reserve a utility easement
in favor of Stock Farm across all property within the subdivision, including Lot 31.
(Doc. 91-9 at 33-34, 59-60). Section XIII of the Covenants provides:
Easements for Utilities, Etc. There are hereby reserved unto the Declarant,
so long as the Declarant owns any property described on Exhibit A of this
Declaration, the Association, and the designees of each (which may include,
without limitation, Ravalli County, Montana, and any utility) access and
maintenance easements upon, across, over, and under all the Property to the
extent reasonably necessary for the purpose of replacing, repairing, and
maintaining…all utilities, including, but not limited to, water, sewers, meter
boxes, telephone, gas, and electricity, and for the purpose of installing any of
the foregoing on property which it owns or within easements designated for
such purposes on the recorded plats of the Property. This easement shall not
entitle the holders to construct or install any of the foregoing systems,
facilities, or utilities over, under, or through any dwelling on a Lot, and any
damage to a structure or improvement resulting from the exercise of this
easement shall promptly be repaired by, and at the expense of, the person
exercising the easement. The exercise of this easement shall not
unreasonably interfere with the use of any Lot and, except in an emergency,
entry onto any Lot shall be made only after reasonable notice to the Owner
or occupant.
(Doc. 91-9 at 33-34).
The preliminary title commitments for Lot 31 and the adjacent lot disclosed
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the recorded Covenants as well as an easement for the benefit of Montana Power
Company, permitting it to lay gas lines throughout the subdivision. (Doc. 89 at ¶
123; Doc. 92-2 at 11; Doc. 89-10). Schedule B, Part II of the title commitment for
Lot 31 lists several exceptions to the title commitment, including Special
Exception #17 which provides: “Easement to the Montana Power Company for a
natural gas pipeline, communication system, and necessary appurtenances,
recorded in Book 228 Deeds, page 243.” (Doc. 89-9 at 6). The pipeline easement,
recorded as Book 228 Deeds, page 243, provides: “Section(s) 22 through 27. An
easement 10 feet in width for Natural Gas Pipelines within the Stock Farm
Subdivision located within the above said sections.” (Doc. 89-10 at 2). As reflected
on the Plat, Lot 31 is within Sections 23 and 26. (Doc. 61-4).
Hyde argues based on these recorded documents that Kiesel had constructive
knowledge of the utility easements and Utility Lines on Lot 31. Kiesel counters
that not only is this argument incorrect, but it also is misplaced because it attempts
to reframe this litigation as an easement dispute, when in fact the real issue is
whether, as Kiesel claims, “Hyde’s failure to disclose the existence and location on
Lot 31 was the product of fraud or mistake.” (Doc. 98 at 2).
Kiesel first contends that the documents Hyde relies on to establish
constructive notice are insufficient. Kiesel relies on Wild River Adventures, Inc. v.
Bd. of Trustees of Sch. Dist. No. 8 of Flathead County, 812 P.2d 344, 346 (Mont.
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1991) for the proposition that the words “subject to” are not sufficient to create an
easement. Wild River explained that the words “subject to” are commonly used in
deeds to refer to existing easements that the grantor wishes to exclude from
warranties of title, and “[t]here is nothing in the use of the words ‘subject to’, in
their ordinary use, which would even hint at the creation of affirmative rights or
connote a reservation or retention of property rights.” Wild River, 812 P.2d at 34647.
Applying Wild River here, Kiesel argues the Plat’s statement that “[a]ll
properties shown hereon are subject to easements as necessary for the installation,
operation, and ongoing maintenance of private and public utilities…” does not
create an easement by reservation for the Utility Lines. (Doc. 98 at 6, citing Doc.
Doc. 90-1 (emphasis added). But even if the “subject to” language in the Plat was
not sufficient to create any utility easements, the recorded Covenants referenced in
the title commitment expressly reserved utility easements in favor of Stock Farm.
(Doc. 61-4; Doc. 90-1).
Focusing next on the location of the Utility Lines, Kiesel argues he could not
have had constructive notice that they were located inside the building envelope
because the recorded documents did not describe the scope and actual, physical
location of any utility easements on Lot 31. (Doc. 98 at 5). Anticipating this
argument, Hyde maintains that “under Montana law, the lack of a precise
16

description of an intended easement is not fatal to an easement if the general
location of the intended easement is reasonably ascertainable from the instrument,
referenced plat, or other extrinsic evidence.” (Doc. 95 at 15, citing Yorlum
Properties, Ltd. v. Lincoln County, 311 P.3d 748, 756-58 (Mont. 2013) and
Anderson v. Stokes, 163 P.3d 1273 (Mont. 2007)).
Hyde relies mainly on Anderson, in which the owners of a 160-acre parcel
granted the owner of a radio station an easement to erect and maintain radio towers
over “certain portions” of the property. The granting document did not identify the
specific location of the easement, stating that “the exact location of which is now
impossible to determine.” Anderson, 163 P.3d at 1277. The radio station later
selected a site on the property and constructed two towers and accompanying
transmission lines, wires, and conduits over some 31 acres. Anderson, 163 P.3d at
1277. The later owner of the radio station sought to move the radio towers,
asserting he had an easement over all 160 acres. Anderson, 163 P.3d at 1277. The
Montana Supreme Court disagreed, and held that the radio station did not have an
easement over the entire 160 acres because the grant of the easement was over only
“certain portions” of the property, and once the radio station selected the site and
constructed the towers, the location of the easement was fixed to the location
originally selected. Anderson, 163 P.3d at 1284-86.
Analogizing to Anderson, Hyde argues that here, Stock Farm reserved the
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right to place utility easements anywhere on the property, including Lot 31, and the
installation of the Utility Lines fixed the location of the easement. But as Kiesel
asserts in response, this argument is misplaced because he is not disputing that any
utility easement Stock Farm has is fixed in the location where the Utility Lines
were installed. Instead, Kiesel is asserting tort and contract claims against Hyde for
failing to disclose the existence and location of the Utility Lines within the
building envelope of Lot 31.
To the extent Hyde argues Kiesel was on constructive notice of the location
of the Utility Lines because, if he had undertaken to locate the Utility Lines as part
of his due diligence inquiry, he would have discovered they crossed Lot 31 within
the building envelope, the Court is not convinced. There are no recorded easements
depicting the location of the Utility Lines, and the Plat, title commitment, and
Covenants do not depict the location of the Utility Lines. The publicly available
DEQ documents referenced in the title commitment show that the sewer line was
to follow the border between Lots 31 and 33. (Doc. 84 at ¶ 29). Hyde nevertheless
asserts Kiesel was on constructive notice of the sewer line’s actual location
because PCI’s “as-built” site plans (Doc. 90-2) were available to any member or
prospective purchaser at the Stock Farm HOA offices. But Hyde fails to explain
why, if the publicly available documents showed the sewer line following the
border between Lots 31 and 33, due diligence would have required him inquire any
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further. To the contrary, the Covenants state that utility lines were not to be
installed “over, under, or through any dwelling on a Lot,” and the exercise of
utility easements “shall not unreasonably interfere with the use of any Lot.” (Doc.
91-9 at 33-34). Consistent with the publicly available DEQ documents, this
language suggests that utility lines would not be installed inside a designated
building envelope. Because the publicly available documents did not show the
Utility Lines crossing Lot 31, Kiesel was not on constructive notice of the location
of the Utility Lines.
B.

Negligence (Count 1), Negligent Misrepresentation (Count 3),
Constructive Fraud (Count 5)

Kiesel’s claims of negligence, constructive fraud, and negligent
misrepresentation are all based on the theory that Hyde knew or should have
known of the existence and location of the Utility Lines, and failed to disclose that
information prior to the sale of Lot 31. (Doc. 27 at ¶¶ 34-37, 53, 76). For example,
Kiesel’s negligence claim alleges that Hyde had “a duty to disclose the existence
and location of the Utilities” and “breached that duty by failing to disclose the
Utilities[.]” (Doc. 27 at ¶¶ 35-36). Kiesel’s constructive fraud claim similarly
alleges that Hyde “breached the duty he owed to [Kiesel] by failing to disclose
known adverse material conditions,” and his negligent misrepresentation claim
alleges Hyde “made representations regarding the Property…and failed to disclose
the existence and location of the Utilities.” (Doc. 27 at ¶¶ 53, 76).
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The parties agree that the presence of a legal duty is an essential element of
Kiesel’s claims for negligence, negligent misrepresentation, and constructive fraud.
(Doc. 83 at 14). See Geiger v. Department of Revenue, 858 P.2d 1250, 1252 (Mont.
1993) (internal citations omitted) (“A fundamental tenet in the law of torts is that
there can be no negligence if no duty exists.”); H-D Irrigating, Inc. v. Kimble
Properties, Inc., 8 P.3d 95, 102 (Mont. 2000) (“The presence of a legal duty is an
essential element of a claim for constructive fraud.”); Jackson v. State, 956 P.2d
35, 43 (Mont. 1998) (“The presence of a duty to exercise due care is thus a
requisite element of any claim for negligent misrepresentation.”).
Hyde argues Kiesel cannot establish the legal duty necessary to support
these claims because there is no duty to disclose information that a party does not
possess, and the undisputed evidence demonstrates that Hyde did not have
knowledge of the existence or location of the Utility Lines prior to the sale of Lot
31. Hyde relies on Woodahl v. Matthews, 639 P.2d 1165, 1169 (Mont. 1992) and a
number of other cases applying Montana law for the threshold proposition that
there is no duty to disclose information that a party does not possess. In Woodahl,
the plaintiffs purchased a home from the defendant and later discovered that the
floors in various rooms were not level. Woodahl, 639 P.2d at 1166-67. Before
purchasing the home, the plaintiffs had asked the defendant whether there were any
problems with the house, to which the defendant allegedly responded “[n]one
20

whatsoever.” Woodahl, 639 P.2d at 1168. The plaintiffs later filed suit seeking
recission of the contract and asserting a number of tort claims, including a claim
for constructive fraud. Woodahl, 639 P.2d at 1167. The district court concluded
that the defendant was not liable for constructive fraud because she was not aware
of unlevel floors at the time of the sale. Woodahl, 639 P.2d at 1169.
The Montana Supreme Court affirmed, explaining that “knowledge of a
defect is necessary before the duty to disclose the defect exists,” and because the
defendant was unaware of the defect at the time of the sale, “she was under no duty
to disclose the defect” to the plaintiffs. Woodahl, 639 P.2d at 1169. See also,
Houdashelt v. Lutes, 938 P.2d 665, 672 (Mont. 1997) (citing Woodahl for the rule
that “if a party is unaware of a defect at the time of sale, he or she is under no duty
to disclose it” and concluding the plaintiffs’ constructive fraud claim failed as a
matter of law because the defendant sellers were ignorant of the alleged defect in
the sump system of the property at issue); Young v. Era Advantage Realty, 513
P.3d 505, 511 (Mont. 2022) (citing Woodahl for the same rule, and affirming
summary dismissal of negligence and constructive fraud claims because without
evidence that the defendant knew of previous water intrusion, the plaintiff could
not prove that defendant owed her a duty to disclose any information pertaining to
water damage and mold later discovered by the plaintiff); Schulz v. Mountain West
Farm Bureau Mut. Ins. Co., 2020 WL 4049871, at *5 (D. Mont. July 20, 2020)
21

(“Had the evidence shown, on the other hand, that the defendants were unaware of
the defects at the time of contracting, no duty to disclose would have been
imposed, and the buyers would have been unable to rescind the sale contract on a
constructive fraud theory.”).
Kiesel does not address these cases, but argues that to prevail on the issue of
duty with respect to his claims for constructive fraud, negligence, and negligent
misrepresentation, he need only demonstrate that Hyde displayed a “want of
ordinary care” for which it was foreseeable that Kiesel would be harmed. (Doc. 83
at 14). Kiesel cites Jackson v. State, 956 P.3d 35, 44-45 (Mont. 1998), which
recognized that a “want of ordinary care” may give rise to liability for negligent
misrepresentation” and proof of intent to misrepresent is not necessary. Jackson,
956 P.3d at 43. To the extent Kiesel relies on Jackson to argue he need only
establish a duty of ordinary care in order to maintain his duty-based claims, the
Court is not persuaded.
Kiesel’s constructive fraud, negligence, and negligent misrepresentation
claims are premised on specific allegations that Hyde was aware of the existence
and location of the Utility Lines, and had a legal duty to disclose that information.
(Doc. 27 at ¶¶ 35-36, 53, 76). Jackson is consistent with the Woodahl line of cases,
which clearly hold that in the context of such duty-based tort claims, a party does
not have a duty to disclose information the party does not possess.
22

Hyde argues Kiesel’s duty-based claims fail as a matter of law because the
undisputed evidence establishes that he did not have knowledge of the existence or
location of the Utility Lines prior to the sale of Lot 31. At his deposition, Hyde
testified that he visited Lot 31 a number of times before June 2, 2002 — the
approximate date of Arrigoni’s Second Drawing — and “never noticed anything
that would indicate that there were utilities at any particular place on the lot.”
(Doc. 61-1 at 5 [140:4-18]). When asked if he had disclosed the existence of the
underground Utility Lines to any potential buyers, Hyde answered: “I didn’t know
about any underground utility lines, so I couldn’t disclose what I didn’t know.”
(Doc. 56-1 at 21 [162:10-15]). Hyde maintains this deposition testimony
establishes that he did not know prior to the sale to Kiesel that the Utility Lines
were located on Lot 31, or that the Utilities Lines traversed the northern part of the
building envelope. (Doc 60 at 21, citing Doc. 61 at ¶ 13).
Kiesel counters that, if anything, the undisputed facts establish the
opposite—that Hyde did know about the existence and location of the Utility Lines
and failed to disclose that information prior to the sale of Lot 31. As Kiesel
describes it, that evidence includes the following: (1) Hyde’s founding and
longstanding involvement with the Stock Farm, including establishing the
Covenants. (Doc. 56 at ¶¶ 4-5); (2) Hyde’s receipt of Arrigoni’s Second Drawing,
which depicted a line labeled “S” running through Lot 31 and its building envelope
23

(Doc. 56 at ¶¶ 11-14, 18, 21); (3) Arrigoni’s deposition testimony that he “is sure”
he provided Hyde with his first architectural drawing, which designated the line
“Sewer L” (Doc. 56 at ¶¶ 18-20); (4) the fact that Hyde had owned Lot 31 since
1999, but never constructed a residence on it (Doc. 56 at ¶¶ 1, 24); (5) evidence
that Hyde never made any disclosures regarding Lot 31 despite being asked to do
so (Doc. 56 at ¶¶ 45-46); and (6) the fact that despite refusing to rescind the
transaction based on mistake, Hyde’s entire position in this case is that any failure
to disclose was the product of mistake (Doc. 56 at ¶¶ 83-84). (Doc. 83 at 14-15).
Kiesel contends that Hyde is not entitled to summary judgment on his claims
for constructive fraud, negligence, and negligent misrepresentation because, at a
minimum, this evidence creates a genuine issue of material fact as to whether Hyde
had knowledge of the existence and location of the Utility Lines as required to
establish a duty to disclose. In reply, Hyde simply asserts that Kiesel’s “conclusory
and speculative assertions” that Hyde was aware of the existence and location of
the Utility Lines are not sufficient to survive summary judgment. (Doc. 100 at 8).
Kiesel’s argument relies in large part on the three architectural drawings that
Arrigoni prepared for Hyde between March 2002 and July 2002. Arrigoni’s First
Drawing depicts a line labeled “Sewer L” running east-west across Lot 31 within
the designated building envelope. (Doc. 89 at ¶ 17; Doc. 56-7 at 1). Arrigoni’s
Second Drawing similarly shows a line labeled “S” crossing Lot 31 inside the
24

northern boundary of the designated building envelope. (Doc. 89 at ¶ 18; Doc. 56-7
at 2). Arrigoni’s Third Drawing depicts an unlabeled line in the same location as
the “Sewer L” and “S” line included on the First and Second Drawings. (Doc. 89 at
¶ 19; Doc. 56-7 at 3). At his deposition, Arrigoni testified that although he does not
have any independent recollection of delivering the drawings to Hyde at the time,
he is “sure that [he] did” and “assume[s]” that he did. (Doc. 89 at ¶ 20; Doc. 56-6
at 10 [100:25-101:9]). Arrigoni explained that it was his practice to always provide
his clients with drawings prepared during informal projects, and he had no reason
believe that he would not have done so in this case. (Doc. 89 at ¶ 20; Doc. 56-6 at
17 [185:1-9]).
Hyde, in turn, testified at his deposition that he does not recall seeing the
First Drawing until this litigation was well underway (Doc. 56-1 at 17 [147:2-6]),
but agreed the Second and Third Drawings “appear to be the drawings that
[Arrigoni] had prepared for us” in 2002. (Doc. 56-1 at 17 [148:2-4]). Along the
same lines, Hyde further testified that “[t]he second and third drawings are clearly
what [he]…understood or recall[ed] that [Arrigoni] was preparing for us,” but
“[t]he first one, to [Hyde’s] recollection, was not part of what was disseminated to
us or reviewed by us” at the time. (Doc. 56-1 at 18 [150:11-19]).
Fairly read, Hyde’s deposition testimony reflects that the Second and Third
Drawings were part of the materials he received from Arrigoni in 2002. Whether
25

Arrigoni also provided Hyde with the First Drawing depicting a “Sewer Line”
running through the building envelope, however, is disputed. Hyde has testified
that he does not recall seeing the drawing until a few weeks before his deposition,
but Arrigoni has testified that he is sure he gave all three drawings to Hyde because
it was his practice to do so. But even assuming he received all three of Arrigoni’s
drawings, Hyde appears to argue the drawings would not have been sufficient to
put him on notice of the sewer line’s actual location within Lot 31’s building
envelope. The Court agrees.
Hyde points to Arrigoni’s deposition testimony that he does not know why
he labeled the line in his First Drawing “Sewer Line,” and had just assumed it was
a sewer line. (Doc. 95 at 22, citing Doc. 56-6 at 8 [90:20-24]). Addressing his First
and Second Drawings, Arrigoni further testified:
On that drawing—on that particular copy of a drawing that I got, this was
shown on it. I don’t recall that it was called a sewer line, that might be
something—that might have been my assumption, okay? I believe that one
of the drawings showed the line and it just shows S on the line, it doesn’t
specify that it’s a sewer line.
(Doc. 56-6 at 8 [92:4-9]). Still addressing his drawings, Arrigoni explained that the
sewer line was not a concern of his at the time, since he was just preparing a
“sketch and we were working on an informal basis and there were not consultants
involved, I wasn’t worried about the line at all, you know, because I knew that if it
were to become a real project, we would have had engineering consultants
26

involved and they would have addressed the issue of that that line was and the
ramifications for it— ”. (Doc. 89 at 6). 1 That apparently did not happen until after
Hyde and Kiesel closed on the sale of Lot 31 in June 2021, when Arrigoni retained
Schaeffer to complete the Utility Line Survey showing that the Utility Lines were
all located within the building envelope.
Consistent with Arrigoni’s testimony, Hyde points out that the lines on each
of Arrigoni’s three drawings do not accurately depict the utility lines as they
appear to cross the building envelope to the south of the depicted driveway (Doc.
56-7), which is different than the actual location depicted in the Utility Line
Survey (Doc. 56-5). Additionally, when Arrigoni was asked whether the line he
identified as a sewer line in his drawings was in the same location as the section
line on the plat, Arrigoni responded, “It sure does.” (Doc. 89-3 at 7 [104:1-22]).
Consistent with Arrigoni’s testimony, the plat of Lot 31 (Doc. 61-4) shows a
section line for Sections 23 and 26 in approximately the same location as the
“Sewer Line” and “S” line in Arrigoni’s drawings (Doc. 56-7 at 1-2).
The uncontroverted evidence thus shows that Arrigoni was not certain of, or
even concerned about, the location of the sewer line at the time he created his three
drawings, and the drawing do not accurately depict the sewer line’s actual location.
Although this portion of Arrigoni’s deposition does not appear to be among the
exhibits before the Court, the accuracy of this statement is not in dispute.

1

27

Accordingly, even assuming Hyde received all three of Arrigoni’s drawings, they
would not have put him on notice of the actual location of the sewer line within
Lot 31’s building envelope.
The additional evidence that Kiesel relies on to bolster his argument that
Hyde had knowledge of the existence and location of the Utility Lines is
insufficient to raise a material factual dispute. For example, Kiesel cites evidence
that Hyde was involved with founding the Stock Farm, including establishing the
relevant legal entities and Covenants. (Doc. 89 at ¶ 4). While the Covenants
reserved a utility easement in favor of Stock Farm and required that all utility lines
be placed underground, the Court fails to see how that would have put Hyde on
notice that the Utility Lines for Lot 31 were located inside the building envelope.
Kiesel next cites the fact that Hyde ultimately decided not to pursue the building
project on Lot 31 (Doc. 84 at ¶¶ 10, 11), and speculates this may have been
because he knew the Utility Lines were inside the building envelope. This theory is
counter to Hyde’s testimony that he decided not to pursue the project because he
wanted to let the property appreciate, and is too speculative to withstand summary
judgment. Kiesel also argues the fact that Hyde claims any failure to disclose on
his part was the product of mistake constitutes evidence supporting a duty to
disclose. The Court fails to see how the fact that Hyde may have been mistaken as
to the location of the Utility Lines supports Kiesel’s argument that Hyde did in fact
28

know where the Utility Lines were located.
Even construing the evidence in the light most favorable to Kiesel, and
drawing all justifiable inferences in his favor, Kiesel fails to raise a genuine issue
of material fact as to whether Hyde knew before he sold Lot 31 that the Utility
Lines were located within the designated building envelope as required to establish
a duty to disclose. Accordingly, Kiesel’s duty-based claims for negligence,
negligent misrepresentation, and constructive fraud fail as a matter of law.
C.

Breach of Contract (Count 7)

Kiesel’s breach of contract claim alleges that Hyde materially breached the
Buy-Sell Agreement “by failing to disclose information regarding the existence
and location of” the Utility Lines, and seeks attorney fees based on a provision in
the Buy-Sell Agreement allowing a prevailing party to recover attorney fees
incurred to enforce the contract. (Doc. 27 at ¶¶ 85-89).
“The construction and interpretation of a written contract is a question of
law.” Wurl v. Polson Sch. Dist. No. 33, 127 P.3d 436, 441 (Mont. 2006). To prevail
on a claim for breach of contract, a plaintiff must establish (1) the existence of a
valid and enforceable contract; (2) breach of an express or implied contract duty or
obligation; and (3) resulting contract damages. Kostelecky v. Peas in a Pod LLC,
518 P.3d 840, 859-60 (Mont. 2022) (citing Tin Cup Cty. Water & Sewer Dist. v.
Garden City Plumbing & Heating, Inc., 200 P.3d 60, 68-70 (Mont. 2009)).
29

Hyde argues he is entitled to summary judgment on Kiesel’s breach of
contract claim because there is no evidence that he breached any express or
implied obligations under the Buy-Sell Agreement. As with his duty-based claims,
Kiesel’s claim for breach of contract is premised on the allegation that Hyde failed
to disclose information regarding the existence and location of the Utility Lines.
(Doc. 27 at ¶ 87). Hyde contends he did not have any information related to the
existence and location of the Utility Lines, but even if he did, he did not have a
contractual duty to disclose such information because the express terms of the
Buy-Sell Agreement establish that Kiesel was purchasing Lot 31 based on his own
due diligence investigation of the property.
Hyde points to the Buy-Sell Agreement’s property investigation provision,
which makes clear that the purchase was contingent on Kiesel’s “independent
investigation” of the property, including “covenants, zoning, access, easements,
well depths, septic and sanitation restrictions, surveys or other means of
establishing the corners and boundaries, special improvement districts, restrictions
affecting use, special building requirements, future assessments, utility hook up
and installation costs, environmental hazards, airport affected area, road
maintenance obligations or anything else the Buyer deems appropriate.” (Doc. 84
at ¶ 23). Additionally, Hyde notes that Kiesel acknowledged within the Buy-Sell
Agreement that any prior verbal representations by Hyde or his representatives did
30

not modify or affect the agreement, and that Kiesel was entering the agreement in
full reliance on his own independent investigation. (Doc. 84 at ¶ 24).
Hyde contends he fulfilled his obligations under the Buy-Sell Agreement by
providing Kiesel with a Warranty Deed to Lot 31 (Doc. 84 at ¶ 39), and argues that
because “Kiesel has not and cannot identify a single provision within the Buy-Sell
Agreement that Hyde did not fulfill,” Kiesel’s breach of contract claim fails as a
matter of law. (Doc. 60 at 18).
Kiesel counters that Hyde is not entitled to summary judgment on his breach
of contract claim because there are genuine issues of material fact as to: (1)
whether Hyde breached the implied covenant of good faith and fair dealing; and
(2) whether Hyde breached the terms of the Buy-Sell Agreement by failing to
convey Lot 31 free of all encumbrances, except those identified in the title
insurance commitment.
1.

Implied Covenant of Good Faith and Fair Dealing

“[E]very valid contract, regardless of type, contains an implied covenant of
good faith and fair dealing.” Story v. City of Bozeman, 791 P.2d 767, 775 (Mont.
1990), overruled on other grounds by Arrowhead School District No. 75 v. Klap,
79 P.3d 250, 264 (Mont. 2003). “The covenant is a mutual promise implied in
every contract that the parties will deal with each other in good faith and not
attempt to deprive the other party of the benefits of the contract through dishonesty
31

or abuse of discretion in performance.” Knucklehead Land. Co., Inc. v. Accutitle,
Inc., 172 P.3d 116, 121 (Mont. 2007). “The conduct required by the implied
covenant of good faith and fair dealing is honesty in fact and the observance of
reasonable commercial standards of fair dealing in the trade.” Mont. Code Ann. §
28-1-211 (2023). The nature and extent of the obligations of good faith and fair
dealing are measured by the “justifiable expectations” of the parties, and a “breach
of the covenant constitutes a breach of the contract.” Hardy v. Vision Service Plan,
120 P.3d 402, 405 (Mont. 2005).
It is undisputed that Kiesel paid $875,000 to obtain an undeveloped lot
within the Stock Farm’s residential development, for the purpose of constructing a
residence. (Doc. 56 at ¶¶ 1-3, 39, 41). Kiesel claims he justifiably expected that he
was purchasing an immediately buildable lot, but instead took title to a lot
encumbered by Utility Lines that he asserts rendered the property “unbuildable,
unmarketable, and diminished in value.” (Doc. 83 at 10). Kiesel argues Hyde
violated reasonable commercial standards of fair dealing by failing to disclose the
existence and location of the Utility Lines on Lot 31 despite Kiesel’s affirmative
request for disclosures. (Doc. 83 at 10-11). At a minimum, Kisel contends, factual
disputes regarding the scope and extent of Hyde’s knowledge as to the existence
and location of the Utility Lines precludes summary judgment. (Doc. 83 at 11).
As addressed above, however, the undisputed evidence establishes that
32

Hyde did not have knowledge of the location of the Utilities Lines prior to selling
Lot 31, and Kiesel’s allegations to the contrary are insufficient to raise a factual
issue. This is fatal to Kiesel’s claim for breach of the implied covenant, which is
premised on the allegation that Hyde failed to disclose information regarding the
existence and location of the Utility Lines. (Doc. 27 at ¶ 87). Because Kiesel has
not provided evidence that Hyde acted dishonestly or acted in a manner that was
commercially unreasonable in the context of their real estate transaction, Hyde is
entitled to summary judgment on Kiesel’s claim that he breached the implied
covenant of good faith and fair dealing.
2.

Express Terms of the Contract

Turning to the express terms of the contract, Kiesel argues there are genuine
issues of material fact as to whether Hyde breached the terms of the Buy-Sell
Agreement by failing to convey Lot 31 free of all encumbrances, except those
identified in the title insurance commitment. (Doc. 83 at 11-12). The Buy-Sell
Agreement’s conveyance provision required Hyde to convey Lot 31 “free of all
liens and encumbrances, except those described in the title insurance commitment,
as approved by [Kiesel].” (Doc. 61-8 at 5). According to Kiesel, nothing in the title
insurance commitment notified him that the Utility Lines ran through Lot 31 or its
building envelope. Kiesel contends that to the contrary, publicly recorded
documents show the sewer line running along the boundary of Lot 31, not across it
33

and the building envelope. (Doc. 84 at ¶ 29; Doc. 56 at ¶ 53; Doc. 56-3).
But according to Hyde, Kiesel’s argument is without merit because the
utility easements were in fact identified in the title insurance commitment. The title
insurance commitment expressly disclosed the Covenants, which are recorded
against real property that includes Lot 31. (Doc. 84 at ¶ 28; Doc. 61-10; Doc. 899). Section XIII of the Covenants reserves a utility easement in favor of Stock
Farm across all property within the subdivision. (Doc. 89 at ¶ 104; Doc. 91-9 at 33,
59-60).
Subsection 13.2 specifically reserves an easement in favor of Stock Farm
over all property within the subdivision “for the purpose of installing [all utilities]
on the property which it owns or within easements designated for such purposes on
recorded plats of the Property.” (Doc. 89 at ¶ 104; Doc. 91-9 at 33). Subsection
13.2 further provides: “This easement shall not entitle the holders to construct or
install any of the foregoing…utilities over, under or through any dwelling on a Lot,
and any damage to a structure or improvement resulting from the exercise of this
easement shall promptly be repaired by, and at the expense of, the person
exercising the easement.” (Doc. 89 at ¶ 104; Doc. 91-9 at 33).
In addition, Hyde notes that the title commitment identifies an express
easement for a natural gas pipeline held by the Montana Power Company. (Doc. 84
at ¶ 28). Specifically, one of the special exceptions to the title commitment
34

provides an “Easement to The Montana Power Company for a natural gas pipeline,
communication system and necessary appurtenances, recorded in Book 228 Deeds,
page 243.” (Doc. 61 at ¶ 28; Doc. 89-9 at 6 ). As recorded in Book 228 Deeds,
page 243, provides: “Section(s) 22 thru 27. An easement 10 feet in width for
Natural Gas Pipelines within the Stock Farm Subdivision located within the above
said sections.” (Doc. 89 at ¶ 124; Doc. 89-10). Lot 31 is within Sections 23 and 26
(Doc. 90-1), meaning that the easement covered the entirety of Lot 31. (Doc. 61 at
¶ 28).
Kiesel’s argument that Hyde breached the express terms of the Buy-Sell
Agreement is without merit. The Buy-Sell Agreement simply required Hyde to
convey Lot 31 free of all encumbrances, except those described in the title
insurance commitment. (Doc. 61-8 at 5). The title insurance commitment reserved
an easement in favor of Stock Farm for the purpose of installing all utilities on the
property, including on Lot 31. Although the title insurance commitment did not
notify Kiesel that the Utility Lines crossed Lot 31 or its building envelope, the
Buy-Sell Agreement did not require that it do so. As required by the Buy-Sell
Agreement, Hyde conveyed Lot 31 free of all encumbrances, except the utility
easements described in the title insurance commitment.
D.

Actual Fraud (Count 5)

Actual fraud occurs when, “with the intent to deceive another party to the
35

contract or to induce the other party to enter into the contract,” a party (1)
suppresses facts he either knows or believes; or (2) commits any other act “fitted to
deceive.” Mont. Code Ann. § 28-2-405(3), (5). Fraud, including fraudulent intent,
may be established by circumstantial evidence. See Walker v. Mink, 158 P.2d 630,
636 (Mont. 1945); Roman v. Albert, 264 P. 115, 119 (Mont. 1928).
Kiesel’s fraud claim alleges that Hyde “made representations as to the
condition of” Lot 31 and failed to disclose the existence and location of the Utility
Lines with the intent to deceive and to induce Kiesel into entering the Buy-Sell
Agreement. (Doc. 27 at ¶¶ 60-67).
To the extent Kisel alleges that Hyde “made representations as to the
condition of the Property” (Doc. 27 at ¶ 62), Hyde argues he is entitled to summary
judgment because there is no evidence that he or agents ever made any
representations regarding Lot 31. (Doc 50 at 22). In response, Kiesel clarifies that,
like his other claims, his fraud claim is premised solely on Hyde’s alleged failure
to disclose the existence and location of the Utility Lines. (Doc. 83 at 16-18).
As addressed above, the undisputed evidence show that Hyde did not have
knowledge of the existence and location of the Utility Lines before selling Lot 31.
Accordingly, Kiesel’s fraud claim fails as a matter of law.
E.

Rescission (Count 2)

Count 2 of the Amended Complaint, which is the subject of cross-motions
36

for summary judgment, alleges that rescission of the Buy-Sell Agreement is
required regardless of whether Hyde was aware of the existence and location of the
Utility Lines. (Doc. 27 at 7-9).
Under Montana law, a party may rescind a contract “[i]f the consent of the
party rescinding or of any party jointly contracting with him was given by mistake
or obtained through … fraud[.]” Mont. Code Ann. § 28-2-1711(1). Kiesel alleges a
right to rescind the Buy-Sell Agreement based on fraud or mistake. (Doc. 27 at ¶¶
39-50).
1.

Actual or Constructive Fraud

Montana law recognizes two kinds of fraud: actual fraud and constructive
fraud. Mont. Code Ann. § 28-2-404. As stated above, actual fraud occurs when,
“with the intent to deceive another party to the contract or to induce the other party
to enter into the contract,” a party (1) suppresses facts he either knows or believes;
or (2) commits any other act “fitted to deceive.” Mont. Code Ann. § 28-2-405(3),
(5). Constructive fraud occurs when a party breaches a duty that “without an
actually fraudulent intent, gains an advantage … by misleading another person to
that person’s prejudice.” Mont. Code Ann. § 28-2-406.
Assuming Hyde was aware of the existence and location of the Utility Lines,
Kiesel argues rescission is warranted because his consent to the Buy-Sell
Agreement was based on Hyde’s fraud in failing to disclose that information. (Doc.
37

27 at ¶ 48). As addressed above, however, the undisputed evidence show that Hyde
did not have knowledge of the existence and location of the Utility Lines before
selling Lot 31, which means that Kiesel’s claims for actual and constructive fraud
fail as a matter of law. Consequently, Kiesel’s claim for rescission based on fraud
also fails as a matter of law.
2.

Mutual Mistake

Kiesel also seeks rescission based on mutual mistake, which “occurs when,
at the time the contract is made, the parties share a common misconception about a
vital fact upon which they based their bargain.” South v. Transportation Ins. Co.,
913 P.2d 233, 235 (Mont. 1996) (citation omitted). To warrant rescission, the
mutual mistake “must be so substantial and fundamental as to defeat the object of
the parties in making the contract.” South, 913 P.2d at 235. See also, Carey v.
Wallner, 725 P.2d 557, 560 (Mont. 1986) (to justify rescission based on mutual
mistake the “mistake must be material, or, in other words, so substantial and
fundamental as to defeat the object of the parties”).
Assuming, as the Court has concluded above, that the undisputed evidence
shows Hyde was unaware of the existence and location of the Utility Lines before
closing on the sale of Lot 31, Kiesel argues rescission is warranted because both
parties entered into the Buy-Sell Agreement based on a mutual mistake of fact that
was material to the transaction. Hyde advances two counterarguments: (1) Kiesel is
38

not entitled to rescission because he bore the risk of the mistake under the terms of
the Buy-Sell Agreement and; (2) even if the parties were mistaken as to the
existence and location of the Utility Lines, the mistake was not so material as to
have defeated the object of the transaction. Because it is dispositive of Kiesel’s
rescission claim, the Court addresses Hyde’s materiality argument first.
Hyde relies again on Woodahl, in which the plaintiffs sought to rescind a
contract for the purchase of the defendant’s home based on the defendant’s failure
to disclose that the floors in parts of the building were not level. Woodahl, 639
P.2d at 1166. The state district court rejected the rescission claim, and the Montana
Supreme Court affirmed, citing the district court’s reasoning with approval:
Woodahls received the property for which they bargained. No condition of
the home renders it uninhabitable or unfit for the purposes which they
intended. Insofar as the purpose of the agreements was to furnish the
Woodahls with a home to live in, that purpose was not frustrated by the
unlevel condition of a portion of the home.
Woodahl, 639 P.2d at 1169. The Supreme Court thus concluded that even if there
had been a mutual mistake, “the mistake did not affect the object of the parties in
making the contract” and rescission was not an appropriate remedy. Woodahl, 639
P.2d at 1169.
Hyde also relies on Halcro v. Moon, 733 P.2d 1305, 1306 (Mont. 1987), in
which the buyers of a house sought to rescind the buy-sell agreement after
discovering water on the floor of a utility room and adjacent bathroom due to a
39

leaky water line. The seller offered to cover the cost of repairs—which took one
week to complete and did not inconvenience the family living there at the time—
but the buyers decided not to purchase the house and later sought to rescind the
contract based on mistake of fact and failure of consideration. Halcro, 733 P.3d at
1306 The Montana Supreme Court affirmed the summary dismissal of the
rescission claim, because the buyers “offered no evidence that the water problems
were so substantial as to defeat the object of the contract.” Halcro, 733 P.2d at
1307. See also, Turner v. Ferrin, 77 P.2d 335, 336-39 (Mont. 1988) (concluding
that an acreage discrepancy of approximately six percent between a buy-sell
agreement’s legal description of the property as containing “96.73 acres, more or
less,” and a survey showing the actual acreage at 90.73 acres did not provide a
basis for rescission).
Analogizing to these cases, Hyde argues the existence and location of the
Utility Lines just inside the northern border of the building envelope does not
defeat the object of the parties in entering the Buy-Sell Agreement. It is undisputed
that Kiesel purchased Lot 31 for the purpose of building a residence on the
property. Kiesel contends that the Utility Lines have rendered Lot 31 unbuildable,
largely unmarketable, and severely devalued, thereby defeating the purpose of the
Buy-Sell Agreement. (Doc. 55 at 7, 27).
To support his assertion that Lot 31 is unbuildable, Kiesel relies on his own
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deposition testimony that, in his view, the lot is “not buildable,” (Doc. 56-8 at 11
[62:9-19]), as well as testimony provided by Alexander, Arrigoni, Hyde, and
Hayflick. (Doc. 89 at ¶ 87). Alexander testified that they could not build a house
on top of a sewer line, and unless the sewer line was moved, the house he had
designed for Kiesel “would not happen” (Doc. 56-4 at 20 [133:6-12], 25 [161:1021]). Arrigoni also testified that house cannot be built on top of a sewer line,
explained that it would be “fairly difficult” to build a house “especially relative to
trying to get a better view,” and would not “advocate building a house on Lot 31 in
the current envelope.” (Doc. 56-6 at 9 [96-18-23], 18 [192:8-19]). Hyde testified
that Arrigoni would “never design a house on top of a utility line” (Doc. 56-1 at 14
[137:21-23]), and Hayflick testified that the utility line “issues needed to be
resolved before the property is buildable.” (Doc. 56-10 at 25 [213:1-5]).
Hyde does not dispute that a house cannot be built over a sewer line, but
provides undisputed evidence the location of the Utility Lines within the northern
border of the building envelope do not render Lot 31 unbuildable. The record
reflects that the building envelope is 150 feet by 150 feet, providing 22,500 square
feet in which to construct a home. (Doc. 84 at ¶ 21). Kiesel testified that he
intended to build a residence that was 7,000 to 8,000 square feet in size, with a
total construction cost ranging from $3.5 million to $4.8 million. (Doc. 84 at ¶ 47).
Hyde’s expert, licensed real estate appraiser Steve Hall, has concluded that even
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with the Utility Lines crossing the building envelope in their current location,
“[t]he encumbered building envelope has a net usable size of 18,650 SF (reduced
from the defined envelope of 22,500 SF) which satisfies almost any residential
structure in the Stock Farm.” (Doc. 66-1 at 16). Hall explains that the mean or
average main floor size of the ten homes near Lot 31 is 3,634 square feet and when
adding the garage space and patio/deck space, the mean footprint of these ten
houses is 5,874 square feet. (Doc. 66-1 at 16). Hall states that “in reflecting a
typical or average footprint of 5,874 SF is clearly supported by the net building
envelope for [Lot 31] of 18,650 SF.” (Doc. 66-1 at 16). 2 This undisputed evidence
refutes Kiesel’s assertion that Lot 31 is unbuildable due to the location of the
Utility Lines.
At oral argument, Kiesel took the position that even if Lot 31 is still
buildable, the location of the Utility Lines is material to the transaction because he
did not get what he bargained for—a lot with an entirely unencumbered building
To refute Kiesel’s argument that Lot 31 is unbuildable, unmarketable, and
diminished in value, Hyde relies in part on the expert report of Steve Hall, which is
the subject of a motion in limine. (Doc. 89 at ¶¶ 87-89) Hall was asked to provide
an opinion “as to whether the location of the utilities (the mutual mistake) is so
substantial and fundamental as to defeat the object of the contract.” (Doc. 66-1 at
11). Hall concludes that the location of the Utility Lines does not defeat the object
of the contract based on the evidence discussed below. While Hyde’s ultimate legal
conclusions on this issue are not admissible, Hyde’s factual conclusions as to the
net usable size of the building envelope, and the residential footprint supported by
the net building envelope, are admissible and support the conclusion that Kiesel is
not entitled to rescission.
2

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envelope. This argument is undercut by Woodahl, which held that notwithstanding
the home’s unlevel floors, the plaintiffs received the property for which they had
bargained because the home was habitable. Woodahl, 639 P.2d at 1169. Here, as in
Woodahl, Kiesel received the property for which he bargained. It is undisputed that
Kiesel purchased Lot 31 for the purpose of constructing a residence. Kiesel
received the property for which he had bargained because the undisputed evidence
demonstrates that even with the Utility Lines in their current location just within
the northern boundary of the building envelope, it is possible to build a residence
on Lot 31 that is comparable in size to other residences in the Stock Farm
subdivision.
To support his assertion that Lot 31 is not currently marketable, Kiesel relies
on his own deposition testimony that if someone else bought the property and
knew there were utility lines inside the building envelope, “they would come to the
same conclusion” that the property is not buildable. (Doc. 89 at ¶ 89, citing Doc.
56-8 at 8 [49:9-23]). As addressed above, however, the undisputed evidence
demonstrates that the property is in fact buildable.
Kiesel also relies on Hayne’s testimony that, in her opinion, Lot 31 “is
currently not marketable without, at a minimum, firm or concrete guarantees to
relocate the lines or, even better, the actual relocation of the lines outside of the
subject property or along its boundary line.” (Doc. at ¶ 89, citing Doc. 56-9 at 17
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[111:8-113:10]). Kiesel additionally relies on Hayne’s deposition testimony as
evidence that Lot 31 has diminished value. (Doc. 89 at ¶ 89, citing Doc. 56-9 at 2122 [163:17-166:24]).
To the extent Lot 31 is unmarketable and has diminished value due to the
location of the Utility Lines, Hyde argues rescission is not warranted because the
evidence demonstrates that the issue can be remedied at a cost of less than
$30,000. (Doc. 60 at 29; Doc. 100 at 13). In June 2023, NorthWestern Energy
prepared a price quotation that it would cost $6,724.00 to move the move the
natural gas line out of the building envelope. (Doc. 84 at ¶ 71, citing Doc. 64-4). In
May 2023, Ravalli County Electric Cooperative prepared a price question that it
would cost $22,735.00, including a $5,000.00 contingency, to move the electrical
line outside the building envelope. (Doc. 84 at ¶ 72, citing Doc. 64-5). Ryan
Guibarra, a member of the Stock Farm HOA, testified that if the Ravalli County
Electric and NorthWestern Energy both agreed to move their utility lines, the Stock
Farm HOA would likely have paid to the move the sewer line. (Doc. 61 at ¶ 57,
citing Doc. 63-3 at 4 [96:15-97:16]). Hyde relies on this evidence to demonstrate
that it would cost only $29,459.00 to relocate the Utility Lines.
It is undisputed that Kiesel gave Alexander and Arrigoni the parameters of
designing a residence with a total construction cost ranging from $3.5 million to
$4.8 million. (Doc. 84 at ¶ 47). It is also undisputed that the total construction cost
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did not include the purchase price of $875,000, or architectural fees that were
estimated between $900,000 and $1 million. (Doc. 84 at ¶ 48). Given the total
project cost of between $5,275,000 and $6,675,000, Hyde argues an expenditure of
$29,450 to move the Utility Lines is so insignificant that “[n]o reasonable juror
could find that the cost to remedy the issue is so substantial as to defeat the object
of the parties in making the contract.” (Doc. 100 at 13-14).
Although Kiesel contends in response that the estimates Hyde relies on are
outdated, he does not provide any more recent estimates to controvert the prices
quoted by NorthWestern Energy and Ravalli County Electric. Kiesel does,
however, point to an October 26, 2021 email from Alexander stating that based on
his civil engineer’s discussions with sub-contractors “the price increased by
basically 2x which seems more accurate to me.” (Doc. 91-2). Even assuming a
100% increase in the cost to relocate move the gas and electrical service lines to
$58,900, the amount is so insignificant in comparison with the total project cost as
to be immaterial.
Keisel has also come forward with evidence that the Stock Farm HOA has
since changed its position and made clear that it will not pay to move the sewer
line. (Doc. 106-1 at 26). Alexander has estimated—without any evidentiary
support—that it would cost $176,995 to move the Utility Lines entirely off Lot 31.
(Doc. 84 at ¶ 55; Doc. 61-16 at 20-21; Doc. 91-4 at 2). If, as the uncontroverted
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evidence submitted by Hyde shows, it would cost a total of $29,450 to move the
gas and electrical service lines, it does not seem plausible that it would cost more
than $140,000 to relocate the sewer line. But even if Alexander’s estimate is
accurate, the cost of moving the Utility Lines is not material.
Assuming a total project cost of between $5,275,000 and $6,675,000, the
expenditure of $176,995 to move the Utility Lines would represent between 3.4%
and 2.7% of the total project cost. No reasonable trier of fact could find that the
cost of moving the Utility Lines was so substantial as to defeat the object of the
Buy-Sell Agreement.
As in Woodahl, Halcro, and Turner, any mutual mistake as to the existence
and location of the Utility Lines was not so substantial as to defeat the object of the
Buy-Sell Agreement. Because the undisputed evidence demonstrates that the
alleged mistake was not material to the transaction, Kiesel’s claim for rescission
fails as a matter of law.
F.

Punitive Damages (Count 6)

Kiesel’s Amended Complaint also includes a claim for punitive damages.
(Doc. 27 at ¶¶ 80-84) Under Montana law, compensatory damages are a
prerequisite to punitive damages. Mont. Code Ann. § 27-1-220(1) (punitive
damages may only be awarded “in addition to compensatory damages”); Stipe v.
First Interstate Bank-Polson, 188 P.3d 1063, 1068 (Mont. 2008) (“Actual damages
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are a predicate for punitive damages, and an individual with no real or actual
damages has no right of action for punitive damages.”). Because Kiesel’s claims
for compensatory damages all fail as a matter of law for the reasons discussed
above, he cannot maintain a claim for punitive damages.
V.

Conclusion
For the reasons discussed above,
IT IS ORDERED that Hyde’s Motion for Summary Judgment (Doc. 59) is

GRANTED, Kiesel’s Motion for Partial Summary Judgment (Doc. 54) is
DENIED, all other motions are DENIED AS MOOT, and this case is
DISMISSED.
DATED this 30th day of August, 2024.

Kathleen L. DeSoto
United States Magistrate Judge

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