Friends of Lake Five, Inc. v. Flathead Cty. Comm'n

416 Mont. 525

THE FRIENDS OF LAKE FIVE, INC., and WARD E. "MICK" TALEFF, Petitioners and Appellees,

v.FLATHEAD COUNTY COMMISSION; FLATHEAD COUNTY, MONTANA; Respondent and Appellee,andSUSAN DIETZ, Individually and Trustee of G&M TRUST, Respondent and Appellant.

No DA 22-0577

Submitted on Briefs August 16, 2023

Decided June 4, 2024.

2024 MT 119

416 Mont 525

___P 3d___

Appeal from the District Court of Flathead County. Eleventh Judicial District Court, Cause No. DV-20-306A. Honorable Amy Eddy, Judge.

County abused its discretion by failing to consider restrictive easements as required by Canyon Area Land Use Regulatory System § 1.6 and the district court correctly interpreted the ambiguity in the easement language to discern the intention of the parties in 1997 as preventing the type of short-term rental use that the application in question proposed. While the district court did not use the correct standard of review, it correctly held that the county abused its discretion in approving the use permit, and thus the district court did not err by voiding the permit; although the district court was correct in finding that the property could not be used for commercial purposes, the authority upon which the district court relied for ordering restoration of the property to its original condition was not readily apparent, so the court reversed this part of the judgment.

Affirmed in part, reversed in part and remanded.

For Appellant: J. Stuart Segrest, Christensen & Prezeau, PLLP, Helena.

For Appellee The Friends of Lake Five, Inc.: Clifton W. Hayden, Law Office of Clifton W. Hayden, Whitefish.

For Appellee Flathead County: Susan B. Swimley, Attorney and Counselor at Law, Bozeman; Tara DePuy, Attorney at Law, PLLC, Livingston.

For Intervenor and Appellee: Ward E."Mick" Taleff, Taleff & Murphy, P.C., Great Falls.

JUSTICE SHEA delivered the Opinion of the Court.

¶1 Susan Dietz, Individually and as Trustee of G&M Trust (hereafter collectively referred to as "G&M"), appeals the March 27, 2022 Findings of Facts, Conclusions of Law, and Order and the July 12, 2022 Final Judgment of the Eleventh Judicial District Court, Flathead County which voided the Major Land Use Permit issued to G&M, permanently enjoined all future construction or expansion of use or conversion of G&M’s property to any commercial use without first obtaining legal access and complying with all State and local statutes and regulations, ordered restoration of G&M’s property to its previously unaltered condition, and awarded attorney fees and costs to Friends of Lake Five, Inc. (FLF). We reframe and address the following issues:

Issue One: Whether the District Court erred by voiding the County Commission’s zoning approval.

Issue Two: Whether the District Court erred by concluding there was insufficient evidence to show "grandfathered" rental status of prior-existing structures on Tract 2.

Issue Three: Whether the District Court improperly required complete restoration of the G&M Property.

Issue Four: Whether the District Court erred by imposing a permanent injunction prohibiting any change to the G&M Property and holding G&M responsible for half of the awarded attorney fees.

¶2 We affirm in part, reverse in part and remand for further proceedings consistent with this opinion.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 This appeal concerns a Major Land Use Application ("Application") by which G&M requested a Major Change in land use and zoning review by Flathead County ("County"). The Application was initially accepted by the County who issued a Major Land Use Permit ("Use Permit"), later voided by the District Court. The property at issue is two adjacent 11.5-acre tracts on the shore of Lake Five (collectively, "G&M Property"). On June 25, 2018, G&M purchased the G&M Property from the Estate of James Sherwood. At the time of purchase, there were several existing structures on Tract 2 including a main house and three cabins. At the time of the 2018 sale, Tract 1 contained no structures or improvements. Prior to the sale, Sherwood had certified that he did not intend to build structures requiring water or sewage disposal on Tract 1 and therefore no subdivision review was required.

¶4 The sole access to the G&M Property is the Grizzly Spur Road, a private road traveling from Blankenship Road to a dead-end along the shoreline of Lake Five.¹ In 1997, four contiguous property owners along Grizzly Spur Road created four easements which granted use of the road sections on their property to the other property owners. At the time the easements were executed, the four properties over which Grizzly Spur Road traverses belonged to: Dian Cox, BNSF, the Ridenour Trust, and Sherwood.

¶5 Except for the easement granted by BNSF, the other 1997 easements restricted access to the property owner’s family and their guests, and prohibited use for commercial purposes. In 2020, G&M and the current owner of the Cox property, Jack Downes, recorded a new Easement. The Ridenour access easement provides that it "shall be used solely for access for residential purposes" and "not be used for any commercial purposes and not to serve smaller tracts created by division of the existing tracts of land, except smaller tracts created solely for use or ownership by the children, grandchildren or other descendants of the Grantees or their spouses and children, and the use by guests of the persons named in this paragraph."

¶6 Upon purchase, G&M began several remodeling, demolition, and construction projects on both Tract 1 and Tract 2. On Tract 1, G&M built a structure resembling a fire tower and placed a "caboose" on a trailer with the intent to rent them nightly to the public. By August 2019, G&M had received notices of multiple violations from both the DEQ and Flathead County. The notices advised that these new structures violated local Canyon Area Land Use Regulatory System ("CALURS") zoning regulations, and the "no facilities" exclusion on Tract 1 for water and sewer facilities, in accordance with Sherwood’s certification that he did not intend to build structures requiring water or sewage disposal on Tract 1.

¶7 On October 22, 2019, G&M submitted the Application, proposing new structures including a single-family residence, small cabins, RV station, caboose, and fire tower which would be used as "short-term/vacation" nightly rentals. The Application was initially reviewed by the Middle Canyon Land Use Advisory Committee which recommended it be denied, based in part, on road access concerns and the potential impact on wildlife and wetland habitat. The County Planning Board next considered the Application. The Board discussed issues with access via the Grizzly Spur Road, including the easement’s prohibition on commercial use. Members of the Zoning office explained that while the easement prohibited commercial use, under CALURS the proposed short-term rentals would be considered residential and thus would not violate the easement. The Board recommended approval of the Application.

¶8 The Board’s recommendation then went to the Flathead County Commission for review. Members of the Zoning Office explained that it was their understanding the existing buildings on Tract 2 (the main house and three cabins) were rented on a short-term basis prior to the 2019 CALURS amendments and were therefore considered grandfathered. Whether the Application qualified as a residential or commercial development was again discussed. The Zoning Office explained their conclusion that, unless the courts determined otherwise, the existing easements provided "legal and physical access" for the proposed use. The Commission set additional conditions of approval, including increased supervision of the construction and minor improvements to Grizzly Spur Road, and granted G&M’s Use Permit.

¶9 On March 27, 2020, FLF filed a "Complaint & Petition for Appellate Review," in which it sought certain declaratory relief and judicial review of the County Commission’s final decision. After the District Court granted a preliminary injunction, holding the permit in abeyance, G&M moved to intervene for the limited purpose of challenging the preliminary injunction. On December 28, 2020, the District Court granted G&M’s motion to intervene but granted G&M full intervention so as not to delay the proceedings any further.

¶10 On January 8, 2021, FLF filed "Plaintiff’s First Amended Complaint and Petition for Appellate Review, Injunctive and Declaratory Relief," in which it asserted claims against both G&M and the County. On January 19, 2021, the County filed an Answer to FLFs First Amended Complaint and a Cross Claim against G&M. On February 1, 2021, G&M filed an Answer to the County’s Cross Claim. On February 5, G&M filed an Answer to FLF’s First Amended Complaint.

¶11 Following discovery and pretrial motions, the District Court held a hearing on FLF’s First Amended Complaint and Petition for Appellate Review, Injunctive and Declaratory Relief on September 8, 2021. The District Court noted that the hearing was a "mixed" hearing, in which issues involving the County’s issuance of the Permit would be limited to the record, while issues involving the relief sought by FLF were both factual and legal. The District Court heard testimony from several witnesses, and numerous exhibits were admitted.

¶12 After the hearing, the District Court entered Findings of Fact, Conclusions of Law and Order. The District Court voided the Use Permit, ordered all construction on G&M’s property to cease immediately, ordered the property to be restored to "its previously unaltered condition," permanently enjoined future construction or expansion of use for commercial purposes, and granted FLF its attorney fees, expenses, and costs.

¶13 FLF filed a statement of attorney fees and costs, requesting $61,020 in attorney fees and $1,878.10 in costs. The County and G&M objected and responded. Prior to a hearing on the matter, the County settled with FLF which prompted FLF to modify its ...