[00:00:01] Speaker 00:
The last case of argument this morning is Glacier Bay Retreat LLC versus Doosan.

[00:00:46] Speaker 04:
Good morning, your honors.

[00:00:47] Speaker 04:
May it please the court?

[00:00:48] Speaker 04:
Mike Manning for the appellants, Matt and Rachel Dusek.

[00:00:50] Speaker 04:
I'm going to try to reserve a few minutes for rebuttal, and I'll keep my eye on the clock.

[00:00:55] Speaker 04:
Is there any number of paths this court can take to reverse the district court summary judgment order forcing the Duseks to unwillingly purchase a multimillion dollar house?

[00:01:05] Speaker 04:
We believe the easiest and the simplest way, contractually and factually, is via what we've called the water rights contingency.

[00:01:13] Speaker 04:
That's a separate independent contingency

[00:01:16] Speaker 04:
drafted into the agreement by the party's dual agents that expressly states that this agreement is contingent on all well-related permitting, well-logged recording, and any associated water rights to be in place prior to closing.

[00:01:31] Speaker 04:
The district court interpreted that contingency to be subsumed by the completely separate inspection contingency and effectively rendered the water rights contingency and its release date meaningless.

[00:01:46] Speaker 04:
The contingency section of the agreement begins with what we've called an umbrella paragraph, which very clearly states that if a party is notified the other party on or before the release date that a contingency is not released, waived, or satisfied, this agreement is terminated with the buyer getting its earnest money back.

[00:02:06] Speaker 04:
That umbrella language applies to all of the contingencies unless they're otherwise

[00:02:13] Speaker 04:
amended or special terms are included in an individual contingency.

[00:02:17] Speaker 04:
The water rights contingency doesn't have any of that.

[00:02:21] Speaker 04:
So the contract application here should have been very straightforward.

[00:02:26] Speaker 04:
The DUSIX provided notice on or before November 3rd, their notice was on October 30th, that they were refusing to release the water rights contingency.

[00:02:37] Speaker 04:
They provided that notice in writing like they were supposed to.

[00:02:40] Speaker 04:
And under the very clear language of the umbrella provision, the effect of that notice should have been that the agreement was terminated and that they had received their earnest money back.

[00:02:53] Speaker 04:
The application really isn't any more complicated than that.

[00:02:57] Speaker 04:
There was no requirement that they wait until the eve of that deadline, the November 3rd release date.

[00:03:05] Speaker 04:
In fact, the contract says on or before the release date, which they complied with.

[00:03:11] Speaker 04:
And there's no requirement to give any sort of advance notice to tell the seller, hey, we're thinking about refusing to release this, and here's why.

[00:03:20] Speaker 04:
To be sure, the seller had

[00:03:23] Speaker 04:
and out here, the water rights contingency says that there would be a reasonable extension for the contingency or for closing if the seller asked for one in writing.

[00:03:34] Speaker 04:
And we know that didn't happen here.

[00:03:35] Speaker 04:
It's undisputed that when the DUSEC sent their termination notice, the next day they got a letter from the seller's council.

[00:03:41] Speaker 02:
Can you explain why the water right contingency was not met?

[00:03:44] Speaker 02:
As I read it, it says that any associated water rights be in place prior to closing.

[00:03:49] Speaker 02:
And in this case, at least the provisional water rights were in place prior to closing.

[00:03:54] Speaker 04:
Yes, that's true in a sense, Your Honor.

[00:03:59] Speaker 04:
It is true that it says any associated water rights to be in place prior to closing.

[00:04:04] Speaker 04:
It also says all well-related permitting, the very first clause of that sentence.

[00:04:11] Speaker 04:
And practically, the only water rights at issue here were permitting for a groundwater well on the property.

[00:04:17] Speaker 04:
the seller did go to Montana DNRC and did get a provisional permit.

[00:04:22] Speaker 03:
That's all they could get, right?

[00:04:24] Speaker 04:
A provisional water right is all that they could get, and a provisional permit is the mechanism to get that, but there is a process to complete the permit.

[00:04:35] Speaker 04:
I mean, the most they can get is a complete provisional permit or a final provisional permit, which we didn't have here.

[00:04:41] Speaker 00:
Right, and that's the form 617.

[00:04:44] Speaker 04:
Yes, that's right, Your Honor.

[00:04:45] Speaker 00:
And looking through the record, I really could not tell what the significance of filing or not filing the Form 617 is, because what the sellers are saying is that that's just a formality.

[00:04:57] Speaker 00:
It doesn't affect the rights to kind of exercise and take advantage of whatever rights you have under the permit.

[00:05:05] Speaker 00:
So regardless of whether it was technically filed or not, it really has no significance.

[00:05:10] Speaker 00:
Therefore, the water rights were essentially in place.

[00:05:13] Speaker 00:
I couldn't find answers to whether that's right or whether you're right that 617 needed to be filed in order for the process to be deemed completed.

[00:05:24] Speaker 00:
Can you help me with that?

[00:05:25] Speaker 04:
I hope that I can.

[00:05:28] Speaker 04:
The project completion notice did have very real-world consequences.

[00:05:33] Speaker 04:
If it's not filed, whatever DNRC's underlying reason for requiring it is, both the project completion notice itself and DNRC's correspondence says that the permit will be void.

[00:05:46] Speaker 04:
It will be canceled if the project completion notice is not received by the deadline.

[00:05:51] Speaker 04:
We have testimony here from the seller under oath, well, a declaration, I should say, not testimony, where she swears that she was aware that this form was required to complete the permitting process.

[00:06:05] Speaker 04:
And whatever DNRC's reason is, it's undisputed that it was required and that failure to file it would result in cancellation of the permit.

[00:06:13] Speaker 02:
I'd actually... My understanding is that there had to be some sort of time limit, a time period before you could file it.

[00:06:17] Speaker 02:
Is that right?

[00:06:18] Speaker 04:
So there's testimony from the seller on that point.

[00:06:23] Speaker 04:
I think it's hearsay testimony.

[00:06:24] Speaker 04:
There's nothing in any of the DNRC's forms that reference any sort of waiting period.

[00:06:30] Speaker 04:
They did provide a December 31st, 2022 deadline, but I couldn't find anything in the actual documents about a waiting period.

[00:06:38] Speaker 04:
I'd also point the court to the permit itself.

[00:06:41] Speaker 02:
If on ER3- Just be free to move on.

[00:06:46] Speaker 02:
You agree then all you have to do is hand in that form and then that would have met this contingency.

[00:06:53] Speaker 04:
Agreed.

[00:06:54] Speaker 02:
If that form had been complete... But then isn't it just purely ministerial and like not a material breach at all?

[00:07:00] Speaker 04:
No, I mean, I think the easiest way to demonstrate is to look at the consequences from the DUSEC standpoint.

[00:07:07] Speaker 04:
They had received the general water abstract from their dual agent and they looked at it and they said, we're not comfortable with this.

[00:07:15] Speaker 04:
The seller hadn't completed the project completion notice at that point.

[00:07:18] Speaker 04:
If they had said, well,

[00:07:20] Speaker 04:
We think that the general abstract is good enough.

[00:07:22] Speaker 04:
This provisional permit is good enough.

[00:07:24] Speaker 04:
They'd have proceeded to closing.

[00:07:26] Speaker 04:
They would have had no idea that that water right was sitting there with another step in the permitting process to be complete.

[00:07:34] Speaker 04:
And December 31st, 2022, their water right would have been gone.

[00:07:37] Speaker 04:
It would have been terminated.

[00:07:38] Speaker 04:
They would have had to start the process over.

[00:07:40] Speaker 02:
Well, then if they didn't know that that needs to be completed, then how can this contingency been the basis to withdraw from the agreement?

[00:07:48] Speaker 04:
Well, because they were generally unsettled about the water rights based on the information they had received.

[00:07:53] Speaker 02:
And there's no other than a good... But you said they didn't know that there's another step.

[00:07:58] Speaker 02:
So what were they unsettled about?

[00:08:00] Speaker 04:
Well, Matt Dusak testified in his deposition that that general abstract gave him concern about the permitting process, about the provisional versus permanent.

[00:08:09] Speaker 04:
There's no requirement anywhere in the agreement, like under the inspection contingency, that they provide the sellers with the specific notice.

[00:08:17] Speaker 04:
And factually, it's true here that all well-related permitting was not in place.

[00:08:21] Speaker 04:
And I'd point the court to the permit itself, which is at ER 314.

[00:08:25] Speaker 04:
On the bottom of that permit, there's a section that says completion deadline.

[00:08:29] Speaker 04:
And the first sentence,

[00:08:30] Speaker 04:
of that completion deadline says to complete this permit, and then it goes on to talk about the project completion notice.

[00:08:37] Speaker 04:
So the provisional permit itself says that it was not complete.

[00:08:43] Speaker 04:
And whatever DNRC's ministerial reasons for that process, it had consequences, and the DUSECs were factually correct when they sent their notice.

[00:08:54] Speaker 02:
The problem is the contingency says be in place, not be complete.

[00:08:59] Speaker 04:
But all well-related permitting was not in place because we had an incomplete permit that was subject to cancellation.

[00:09:07] Speaker 02:
It was in place.

[00:09:08] Speaker 02:
All you had to do is submit this final form.

[00:09:10] Speaker 04:
Well, but submitting the final form is the final step of the process to complete the permitting process.

[00:09:17] Speaker 04:
And if the process is not complete, all well-related permitting by definition can't be in place.

[00:09:24] Speaker 04:
And so on those grounds, we'd ask that the court reverse summary judgment.

[00:09:29] Speaker 03:
The district court didn't place much stock in this argument.

[00:09:33] Speaker 04:
The district court didn't address it at all.

[00:09:35] Speaker 04:
It was made.

[00:09:35] Speaker 03:
Well, the district court did address the water right, the water contingency.

[00:09:42] Speaker 04:
That's true.

[00:09:43] Speaker 03:
He didn't buy whatever argument you were making then.

[00:09:48] Speaker 04:
Yes.

[00:09:48] Speaker 04:
Judge DeSoto's water rights analysis focused primarily on the difference between provisional and permanent water rights and didn't address the argument that was made in response to the seller's argument in their summary judgment briefing that, hey, look, there's nothing else we could have done to get all well-related permitting in place.

[00:10:07] Speaker 04:
The argument was made, the same one that I'm making now, that yes, there was one more step in the process to complete the permitting and there were consequences because the permit would have been cancelled had that step not been taken.

[00:10:19] Speaker 03:
So you said this was the easiest way to reverse what the district court did.

[00:10:24] Speaker 03:
I gather the other ways are more difficult?

[00:10:28] Speaker 04:
I don't know if I'll, maybe I'll backtrack on my words there a little bit, Your Honor, but I think this is... Well, I'm just listening to what you have to say.

[00:10:36] Speaker 04:
This is factually a very supportable way to reverse and frankly to grant summary judgment in the DUSIX favor based on the clear contract language and the fact that DNRC and all of its documents say that this

[00:10:50] Speaker 04:
This form is required to complete the permitting process, and your provisional permit is not final and is cancelable until it's done.

[00:10:59] Speaker 00:
Maybe the fact that we've spent so much time talking about it suggests that it may not be quite that easy, but let's get to the inspection contingencies.

[00:11:09] Speaker 04:
Sure, Your Honor.

[00:11:10] Speaker 00:
I'm looking at the inspection notice language, which signed by both parties in October 2021, ER64,

[00:11:19] Speaker 00:
And it says around line 79, if seller and buyer agree to the remedy specified above, this document shall constitute an amendment to the buy-sell agreement and shall be an integral part of this transaction.

[00:11:35] Speaker 04:
Yes, Your Honor.

[00:11:36] Speaker 00:
So does that mean the contingency provisions in the buy-sell agreement have been supplemented by this additional inspection notice?

[00:11:45] Speaker 04:
Yes, for the reasons in our briefs, we think that the language as a whole of the inspection contingency and that language that you just cited from the inspection notice were effectively an extension of the contingency period and that the parties understood that through all of their actions and their testimonies.

[00:12:04] Speaker 04:
But even in the worst case scenario for the DUSIX, if the district court's contract analysis was right,

[00:12:09] Speaker 04:
and the inspection contingency was extinguished when the parties signed that inspection notice and the sellers agreed, yes, we'll fix all those problems you identified.

[00:12:20] Speaker 04:
There's still a materiality question.

[00:12:23] Speaker 04:
And unlike the Halcro case, where there was never any inspection contingency and we were talking about a minor pinhole water leak that was easily fixed, we know that the remedies that the buyers requested here were

[00:12:39] Speaker 04:
material to the agreement.

[00:12:40] Speaker 04:
And we know that by the language that you just read, Your Honor, that if they agree to the remedies above, then this document shall constitute an amendment to the Bicell agreement referred to above, and shall be an integral part of this transaction.

[00:12:54] Speaker 04:
An integral part of the transaction is the same as saying it's material.

[00:12:58] Speaker 00:
And practically, that means... Right, but because the inspection notice had all of the remedies for all of the issues that the Deus Ex were concerned about,

[00:13:07] Speaker 00:
It supplanted whatever went before, right?

[00:13:10] Speaker 00:
It supplanted all of the contingencies that's laid out in the Bi-cell agreement.

[00:13:16] Speaker 00:
Why isn't that a reasonable interpretation?

[00:13:20] Speaker 04:
I think because, well, let me back up and say, we think that's the incorrect interpretation because the whole point of the inspection contingency is to identify the problems that the buyers wanted to condition their purchase on.

[00:13:35] Speaker 04:
And in this case, it's the mold issue with the parties agreeing that all mold would be remediated and pass a mold clearance test.

[00:13:43] Speaker 04:
Just logically, it doesn't make any sense that the buyers would say, well, if the property doesn't pass a mold clearance test, we still want to purchase it anyway.

[00:13:52] Speaker 04:
And that's effectively what the district court found here.

[00:13:54] Speaker 04:
But even if the district court's interpretation was correct and that this is sort of a supplemental contract provision and not a continuation of the contingencies,

[00:14:04] Speaker 04:
There's still, at the very least, a fact question about materiality here, given the integral language in the inspection notice and the fact that... But that's a different question, whether or not you've reached this, you know, extension, not a question of whether or not the contingency is still in force.

[00:14:21] Speaker 04:
Sure, but the but the result can be the same.

[00:14:23] Speaker 04:
I agree with you, your honor.

[00:14:24] Speaker 04:
But if no, it is a well, it's different.

[00:14:27] Speaker 02:
I think the result is not the same because if it's a contingency violation, then you could get back out of the sale.

[00:14:32] Speaker 02:
But it's a if it's a material breach of this extension, then you get damages for that for failing to, you know, or specific performance.

[00:14:41] Speaker 02:
But that's very different result.

[00:14:42] Speaker 04:
No, under Montana law, if it's a material breach, then the buyer has no more duty to perform.

[00:14:48] Speaker 04:
They can rescind the agreement due to the material breach on the seller's part.

[00:14:53] Speaker 04:
If it's an immaterial breach, as the district court found, then their only remedy is to continue to purchase the property and sue for whatever damages are related to the mold.

[00:15:01] Speaker 02:
So you're saying a breach of this side agreement or extension can rescind the entire sale?

[00:15:07] Speaker 04:
Yes, I'm saying that if... But where is that?

[00:15:09] Speaker 02:
Is that a part of the extension?

[00:15:13] Speaker 04:
So that's just... I mean, it's in our brief under the materiality section that under Montana law, if there is a material breach of the agreement by one party, then the other party is entitled to rescind the agreement.

[00:15:28] Speaker 03:
So that applies to any one of these provisions that they...

[00:15:33] Speaker 04:
Assuming that the materiality threshold is met, yes.

[00:15:38] Speaker 04:
Any single one?

[00:15:39] Speaker 04:
Yeah, but practically here we're really only talking about the mold.

[00:15:43] Speaker 04:
The other items listed in here, there was the water remediation and the mold were the two big ones, and the DUSIX agreed that all the others were fixed.

[00:15:52] Speaker 02:
Is that a mandatory remedy?

[00:15:53] Speaker 02:
It just seems like if there's a breach of mold and you agree to remediate the mold and it's not remediated, then it seems like the obvious remedy is

[00:16:03] Speaker 02:
forcing remediation of the mold.

[00:16:05] Speaker 02:
It doesn't seem like obvious that the remedy would be unwinding the entire sale.

[00:16:11] Speaker 04:
Well, but I think that you need to back up to the purpose of the sale.

[00:16:15] Speaker 04:
I mean, the DUSIX are buying a residential property here.

[00:16:18] Speaker 04:
And one of their conditions, one of their insistence on the front end is they hire an inspector to go and figure out the property conditions that are problematic.

[00:16:28] Speaker 04:
And they say, OK, we've identified these nine things.

[00:16:32] Speaker 04:
And we want to purchase the property if these nine things are fixed.

[00:16:37] Speaker 04:
But if they're not fixed, we don't want to.

[00:16:39] Speaker 04:
And then they negotiate a deadline for them to be fixed.

[00:16:42] Speaker 04:
They get noticed on October 28th that the seller's efforts at remediation

[00:16:49] Speaker 04:
are complete and they say, well, now we have a property that has not passed the required mold clearance test and we've got this lab report that shows that there's still a moderate likelihood of mold in the home.

[00:17:00] Speaker 04:
We don't want to purchase it under those conditions, which was the whole point of insisting on a mold clearance test in the first place.

[00:17:06] Speaker 04:
And, like I say, even if the inspection contingency wasn't in effect, the effect of a material breach is the same, that they can rescind.

[00:17:15] Speaker 04:
And even if there's a fact question about whether the mold clearance test was passed, the result on summary judgment, particularly cross motions viewing the facts in the light most favorable to the Deus Ex,

[00:17:26] Speaker 04:
isn't summary judgment for the sellers, it's a trial to decide whether that provision was material, to decide whether there was a material breach, to decide whether the mold requirements in that inspection notice had been met.

[00:17:38] Speaker 00:
So remind me, Council, after the inspection notice was signed and the mold was supposed to be completed, was there further negotiation when it wasn't?

[00:17:51] Speaker 00:
No.

[00:17:51] Speaker 00:
On the mold issue?

[00:17:52] Speaker 04:
No, there was not.

[00:17:54] Speaker 04:
Once the Deus Ex sent their termination notice in citing several different reasons, there was no further negotiation.

[00:18:02] Speaker 04:
I can't speak to whether there were settlement negotiations at any point along the way, but there were no further negotiations about the seller coming and saying, hey, what are you unhappy with with the mold?

[00:18:11] Speaker 04:
Can we get the guy back in there and do a little more work and test it again?

[00:18:16] Speaker 04:
The very next day was a letter from council saying that the sellers were proceeding to closing and demanding that the buyers do the same.

[00:18:22] Speaker 03:
Let me ask you this, is this inspection notice the agreement contemplated by the inspection contingency?

[00:18:32] Speaker 04:
We don't believe so, Your Honor.

[00:18:34] Speaker 03:
Why not?

[00:18:35] Speaker 03:
Because as one of my colleagues just noted, it's got the identified issues, the nine, proposes solutions, and offers the following resolution.

[00:18:50] Speaker 03:
The summon says what has to be done, signed by the Deus Ex, seller agrees to the terms and conditions as stated here and above, signed by Goodwin and Slatterin.

[00:19:03] Speaker 04:
Yes, and we agree that it's a negotiation of the resolutions and it's the party's agreement as to the resolutions that would take place, but it's not the party's agreement that those issues have been satisfied.

[00:19:14] Speaker 03:
No, I understood that, but that was, if these

[00:19:18] Speaker 03:
It set forth what the sellers had to do.

[00:19:21] Speaker 04:
Agreed.

[00:19:22] Speaker 04:
But it did not constitute an agreement between the parties that the sellers had in fact done those things.

[00:19:27] Speaker 03:
Correct.

[00:19:28] Speaker 04:
So there was no agreement in satisfaction, which again circling back to the point... Well, let me ask you this.

[00:19:33] Speaker 03:
Under this agreement, who had the authority to decide and what was the test to be applied that these conditions were satisfied?

[00:19:44] Speaker 04:
Well, Your Honor, to be frank, I think that that is at least ambiguous.

[00:19:48] Speaker 04:
The agreement doesn't sell it, does not spell out how we should go about deciding whether those nine remedies were actually satisfied.

[00:19:59] Speaker 04:
I think in terms of the big picture that's the point of a contingency in the first place and it's the reason that buyers do inspections to say these are the problems and I want them fixed to my satisfaction because otherwise I don't want to purchase the house if it might still have mold in it or if it might still have water leaking and I get to decide and that's the point of extending the contingency and it is the point of all the extrinsic evidence if the court believes that the language is ambiguous

[00:20:26] Speaker 04:
that both parties here agreed that that contingency was still in effect.

[00:20:31] Speaker 04:
I mean, there's testimony from Ms.

[00:20:32] Speaker 04:
Grewin.

[00:20:32] Speaker 00:
I mean, it's not ambiguous in the sense that the buyer chooses to negotiate those specific terms, right?

[00:20:41] Speaker 00:
Because the inspection notice gives you the option and your client checked the box on the top.

[00:20:47] Speaker 00:
that says buyer elects to negotiate the terms of disapproval.

[00:20:52] Speaker 00:
So on the mold contingency, it was really, to me, not ambiguous.

[00:20:56] Speaker 00:
It's very specific.

[00:20:57] Speaker 00:
You're choosing to negotiate whatever problems you had with the mold issue.

[00:21:01] Speaker 00:
The negotiation was basically for mold to be remediated, pass a clearance test.

[00:21:08] Speaker 00:
It specified who was going to complete that work.

[00:21:11] Speaker 00:
buyer and seller agrees that.

[00:21:13] Speaker 00:
So for me that really supplanted whatever issues in the buy-sell agreement that you had with the mole contingency because buyer affirmatively chose to renegotiate that and both parties specified how it was going to be fixed.

[00:21:26] Speaker 04:
I see I'm out of time, Your Honor, but I'll try to briefly address that.

[00:21:30] Speaker 04:
I think that any ambiguity comes in terms of the satisfaction language.

[00:21:34] Speaker 04:
We agree that absolutely the DUSSEC's agreed to negotiate a resolution here and that those nine things constituted the negotiated resolution and that the parties agreed that they were an integral part of the transaction.

[00:21:46] Speaker 04:
Any ambiguity comes in terms of whether this was an agreement in satisfaction, where once the seller undertook those repairs, the buyer had not yet agreed that they were remedied to its satisfaction.

[00:21:57] Speaker 04:
So it was a negotiated resolution, but not necessarily an agreement in satisfaction.

[00:22:02] Speaker 04:
And all the extrinsic evidence is that the parties understood that the buyer still could back out and still had a contingency in effect.

[00:22:11] Speaker 03:
Did you have to read that in to this agreement?

[00:22:15] Speaker 04:
I think that you don't necessarily have to read it into the agreement other than that you can look at it and identify that the parties have negotiated a resolution, but that the DUSIX, the buyers have not signed off on satisfaction of those resolutions.

[00:22:31] Speaker 04:
And something like the notice of release of contingencies

[00:22:34] Speaker 04:
which is another Montana form agreement that the dual agent presented the DUSIX with that they refused to sign, would be something more like an agreement and satisfaction where the buyer has now looked and said, okay, you did remediate the mold, it did pass a mold clearance test, and now we're gonna release our contingencies in writing because we're satisfied that the problems have been fixed.

[00:22:53] Speaker 00:
All right, thank you, you're over time.

[00:23:08] Speaker 01:
May it please the court, Soap and Shaw and co-counsel Fred Simpson here for Glacier Bear Retreat, Ms.

[00:23:15] Speaker 01:
Goodwin, Mr. Slavingren.

[00:23:18] Speaker 01:
This is a straightforward contract case with undisputed material facts.

[00:23:24] Speaker 01:
I'll address the issues in the order of the court's questions.

[00:23:27] Speaker 01:
So first, as to water rights, as we've discussed, the agreement requires all well-related permitting, well log recording, and any associated water rights to be in place prior to closing.

[00:23:41] Speaker 01:
The sellers are entitled to a reasonable extension upon written request.

[00:23:47] Speaker 01:
If the court looks to ER 409 and ER 410, the permit, the language at the top says that upon finding the requirements of section 85, 2401, MCA have been met, this provisional permit is granted.

[00:24:04] Speaker 01:
the accompanying letter from the DNRC at ER 409 says, dear applicant, and it's dated October 12th, 2021, your provisional permit has been issued in accordance with section 85-24.

[00:24:19] Speaker 00:
But it's provisional.

[00:24:21] Speaker 00:
So absent the final step of filing this form, the rights were going to expire.

[00:24:28] Speaker 01:
right?

[00:24:28] Speaker 01:
Your honor, the form doesn't have any relationship to the provisional versus permanent status of the water rights.

[00:24:36] Speaker 01:
I believe that is a separate matter, but the form is merely ministerial.

[00:24:43] Speaker 01:
So form 617, in this case,

[00:24:48] Speaker 00:
merely confirmed the existence of a well that the DNRC knew had existed since 2013 and that's all right let me let me clarify because you say ministerial they say it's the final step in the permitting process i'm trying to figure out whether i can find the answer to who's right in the record

[00:25:06] Speaker 00:
I thought, and correct me if I'm wrong, that unless somebody files this particular form, the rights were going to be terminated at the end of 2022.

[00:25:17] Speaker 00:
Am I correct in that?

[00:25:19] Speaker 01:
Yes, the deadline to file the form was December of 2022, and Ms.

[00:25:23] Speaker 01:
Goodwin filed it, and that's in the record.

[00:25:26] Speaker 01:
And you're correct that had the form not been filed and had Ms.

[00:25:30] Speaker 01:
Goodwin not filed for an extension under Form 607,

[00:25:33] Speaker 01:
and the deadline was not met, yes, the permit is subject to cancellation.

[00:25:37] Speaker 00:
So from their perspective, being in place means that the final step is taken.

[00:25:44] Speaker 01:
I don't believe so, Your Honor.

[00:25:46] Speaker 01:
I think in place means that the parties could use the water at the property.

[00:25:51] Speaker 01:
All of the permit, the well log were in place with the DNRC as of October 30th and certainly as of closing as required by the plain language of the water rights contingency.

[00:26:05] Speaker 01:
were those rights not in place, the sellers were entitled to reasonable extension upon written request.

[00:26:11] Speaker 01:
And the due six October 30th termination letters were an anticipatory breach or repudiation of that provision.

[00:26:21] Speaker 00:
But does the fact that the parties disagree on what constitutes water rights being in place suggest that it's a tribal issue?

[00:26:28] Speaker 01:
No, Your Honor, I think that our Montana magistrate judge correctly concluded that in place,

[00:26:35] Speaker 01:
meant the permit and well log were on file with the DNRC.

[00:26:40] Speaker 01:
The parties could use the water at the property in the same way that arguably my law license is subject to cancellation if I do not pay my dues by a certain date, but my law license is in place.

[00:26:54] Speaker 00:
But it has to do with who's got the obligation, right?

[00:26:57] Speaker 00:
Who is expecting that the final step be taken?

[00:27:02] Speaker 01:
Your Honor, I think

[00:27:04] Speaker 01:
The plain language of the water rights contingency does not say that the project completion notice must be filed with the DNRC in order for the contingency to be met.

[00:27:16] Speaker 01:
It merely says that the permit and log should be in place.

[00:27:20] Speaker 01:
And any associated water rights, which is undisputedly a provisional water right, the only type of water right available for this property in Montana after 1973, was in place.

[00:27:32] Speaker 01:
And even if those document, those items were not in place, the sellers were entitled to a reasonable extension upon written request and entitled to at least closing, which was November 9th.

[00:27:45] Speaker 03:
Was there anything that prevented her from filing form 617 before November, what was it, November 3rd was the closing date?

[00:27:57] Speaker 01:
The DNRC requested that Ms.

[00:28:00] Speaker 01:
Goodwin wait until the summer to file that form.

[00:28:04] Speaker 01:
That site is at ER 262.

[00:28:06] Speaker 01:
So at the government.

[00:28:11] Speaker 02:
But the form says by December 31st.

[00:28:12] Speaker 02:
I don't understand that.

[00:28:16] Speaker 01:
December 30th, 2022.

[00:28:17] Speaker 02:
Yeah, it has to be filed by December 31st, 2022.

[00:28:21] Speaker 02:
But you're saying Ms.

[00:28:22] Speaker 02:
Goodwin says she was told to file it in the summer?

[00:28:25] Speaker 01:
Yes, so she filed it in June of 2022, and she was told that in the fall, so in the fall of 2021.

[00:28:32] Speaker 03:
November 3 is late fall.

[00:28:38] Speaker 03:
My question is, was there anything preventing her from filing this

[00:28:44] Speaker 03:
Project completion notice form 617 before November 3, before the date the sale was to close.

[00:28:51] Speaker 01:
The record reflects that it was the Montana DNRC's request that prevented Ms.

[00:28:56] Speaker 01:
Goodwin from filing that form.

[00:28:58] Speaker 03:
They said don't file this on the date of closing or before closing, file this after closing?

[00:29:04] Speaker 03:
Yes, they said... That doesn't make any sense, I'm sorry.

[00:29:07] Speaker 01:
I agree, Your Honor, it doesn't make a whole lot of sense.

[00:29:10] Speaker 01:
I think that's because of the unusual order of operations in this case.

[00:29:13] Speaker 01:
So in this case, the well was on the property and had existed since 2013.

[00:29:18] Speaker 01:
I think in the normal course, the project completion notice, you know, the project might not have been built.

[00:29:25] Speaker 03:
Is the project, the building, the digging of the well?

[00:29:29] Speaker 01:
It's the construction of the well.

[00:29:30] Speaker 01:
That's my understanding.

[00:29:31] Speaker 03:
Okay.

[00:29:32] Speaker 01:
So in the normal course, this project completion notice,

[00:29:37] Speaker 01:
notifies the DNRC, hey, this well for which we have the well log on file has been completed.

[00:29:44] Speaker 01:
But because the well had existed since 2013 and the DNRC knew that, this was a simply ministerial confirmatory form.

[00:29:54] Speaker 01:
Did they say why?

[00:29:55] Speaker 00:
You had to wait six months to file the forms, the final form?

[00:30:00] Speaker 01:
The DNRC said that it was because they hold all of these forms until the end of the year, so until the end of 2021 in our case, and then they wait until spring to approve them.

[00:30:16] Speaker 01:
I think it's because people do not drill wells in the winter.

[00:30:22] Speaker 01:
But that's the testimony in the record.

[00:30:26] Speaker 03:
And no matter what, irrespective of all of this, I gather Ms.

[00:30:34] Speaker 03:
Goodwin would have a good faith obligation under the buy sale agreement to file form 617.

[00:30:42] Speaker 03:
And she did.

[00:30:44] Speaker 01:
And she did.

[00:30:44] Speaker 01:
There's no dispute that she missed the deadline.

[00:30:46] Speaker 01:
The form is on file with the Montana DNRC.

[00:30:49] Speaker 01:
And it does not, the lack of form does not prevent the permit or the well log or the water right from being in place.

[00:30:58] Speaker 01:
As I said, the DUSIX could have used the water at the property undisputedly.

[00:31:03] Speaker 03:
Yeah, council said, well, if the form hadn't been filed, you know, by the date, the due date, there'd been no right to the water and we'd have to start this whole process all over and, you know, big headache.

[00:31:15] Speaker 03:
Is that right?

[00:31:18] Speaker 01:
It is true that if Ms.

[00:31:20] Speaker 01:
Goodwin had not filed the form, that the permit that exists, was granted, would be subject to cancellation.

[00:31:28] Speaker 01:
But again, that does not prevent the permit from being in place.

[00:31:31] Speaker 01:
And in any event, the October 30th termination letter.

[00:31:34] Speaker 01:
But would have been terminated.

[00:31:36] Speaker 00:
The failure to the timely file would have terminated the water rights, right?

[00:31:41] Speaker 01:
I think it says subject to cancellation.

[00:31:44] Speaker 01:
So the possibility exists as with many permits and licenses in daily life, I think.

[00:31:52] Speaker 01:
And as I mentioned, the notice was still premature and anticipatory breach given the plain language of the water rights contingency.

[00:32:01] Speaker 01:
And as Your Honor mentioned earlier,

[00:32:05] Speaker 01:
The DUSIX did not even know about the existence of this form until this litigation.

[00:32:09] Speaker 01:
So that site is at ER 136, and therefore it could not have been a legitimate basis for their termination letter of October 30th.

[00:32:18] Speaker 02:
Yeah, that is kind of my question.

[00:32:20] Speaker 02:
How much do we look at that?

[00:32:22] Speaker 02:
I mean, if they find any breach, does it have to be the actual breach that caused them to terminate, or can any breach justify the termination of the agreement?

[00:32:32] Speaker 02:
Do you know the answer?

[00:32:34] Speaker 01:
I think it's a bit dangerous to permit post hoc rationalizations for termination of contracts.

[00:32:42] Speaker 01:
I think that might encourage parties to breach without a real reason and then perhaps go digging for a subsequent.

[00:32:49] Speaker 02:
But under Montana law that there's no statement against that.

[00:32:54] Speaker 01:
There is the men the whole doctrine and the bad faith cases that we cited in our brief And I think it's consistent with the the policy that I mentioned because it seems what happened here that the the due six visited and then they realized they didn't want it The property is that fair?

[00:33:13] Speaker 02:
characterization what happened or

[00:33:14] Speaker 01:
I think there's evidence that the Dusick's really liked the property.

[00:33:19] Speaker 01:
They liked the house when they visited.

[00:33:20] Speaker 01:
I think there was testimony that Ms.

[00:33:22] Speaker 01:
Dusick got emotional at seeing how wonderful the house was.

[00:33:27] Speaker 01:
I recognize that there's some testimony and I believe it came from Mr. Darkenwald's notes that Mr. Dusick received advice that he was paying too much for the property despite the provision in the BSA that requires the sale price to be

[00:33:43] Speaker 01:
confidential, but I think your honor is correct to look for a reason why the DUSIX terminated the agreement.

[00:33:56] Speaker 01:
Perhaps it's just a simple case of buyer's remorse and they no longer want it to pay.

[00:34:03] Speaker 01:
And I'll turn to the mold inspection issue if that's helpful.

[00:34:12] Speaker 01:
The inspection contingency gave the due six the right to either immediately terminate the agreement or, as Your Honor mentioned, enter into a negotiation to resolve the problematic property conditions.

[00:34:27] Speaker 01:
And that's precisely what they did by checking that box on the inspection notice.

[00:34:33] Speaker 01:
And then the parties entered into the agreement in satisfaction of the conditions noted.

[00:34:38] Speaker 01:
And that's it.

[00:34:39] Speaker 03:
Now, there wasn't much negotiation.

[00:34:42] Speaker 01:
That's correct, Your Honor.

[00:34:43] Speaker 01:
The buyers chose the remedies.

[00:34:46] Speaker 01:
They chose the contractor whom they wanted to perform the mold remediation.

[00:34:51] Speaker 01:
And the sellers immediately accepted, said they would do whatever needed to be done, called the contractor, asked for the work ASAP.

[00:35:01] Speaker 01:
Yes, there's just that one offer and acceptance and form.

[00:35:07] Speaker 01:
Yes.

[00:35:08] Speaker 00:
And then what happened to the mold issue?

[00:35:11] Speaker 01:
Yes.

[00:35:11] Speaker 01:
So the contractor came and performed the mold remediation to his satisfaction, to the mold inspector's satisfaction.

[00:35:19] Speaker 01:
I think the easiest way for the court to see how well the work was performed is to compare the original inspection dated October 13th with the re-inspection dated October 27th.

[00:35:37] Speaker 01:
The original inspection of October 13th is what led to the inspection notice.

[00:35:40] Speaker 01:
So if you look at the inspection notice, you can see section five, item 19, section five, item 20, mold and moisture.

[00:35:52] Speaker 01:
And if this court looks at ER 554, you'll see item 19, evidence of moisture,

[00:36:03] Speaker 01:
is satisfactory, which is the green light of the stoplight of inspection statuses.

[00:36:11] Speaker 00:
And then... Is that the clearance test that's referenced in the inspection notice?

[00:36:16] Speaker 01:
There's a mold clearance test performed by David Quinn.

[00:36:20] Speaker 01:
So he is a mold inspector hired by the contractor.

[00:36:26] Speaker 01:
chosen by the DUSIX.

[00:36:27] Speaker 01:
The contractor's name is Corey Rentsman.

[00:36:29] Speaker 01:
So Corey Rentsman and Mr. David Quinn have an ongoing working relationship.

[00:36:36] Speaker 01:
Mr. Rentsman hired Mr. Quinn to ensure that the mold was remediated.

[00:36:40] Speaker 01:
Mr. Quinn, David Quinn came and did that.

[00:36:44] Speaker 01:
There's 100% guarantee for Mr. Rentsman's work.

[00:36:47] Speaker 01:
Perhaps that's why the DUSIX chose him to perform the remediation.

[00:36:51] Speaker 01:
And so David Quinn, in his declaration,

[00:36:56] Speaker 01:
Testified that the surface remediation work was successful which the do six concede in their first brief at page seven so that as the the magistrate judge determined the evidence in the record is that the property is

[00:37:13] Speaker 01:
passed the mold clearance test, the remediation was successful, and the DUSIX have not shown any evidence to the contrary.

[00:37:21] Speaker 02:
And in any event... Can I ask, so we have to determine as a factual matter that the mold was remediated?

[00:37:28] Speaker 01:
No.

[00:37:29] Speaker 01:
You do not have to.

[00:37:30] Speaker 01:
I think there are two predicate issues.

[00:37:35] Speaker 01:
One is that

[00:37:37] Speaker 01:
Any inadequate mold remediation goes to damages or a breach of that inspection notice agreement, not the right to terminate the entire agreement.

[00:37:48] Speaker 01:
That right to terminate the entire agreement based on mold

[00:37:52] Speaker 01:
went away when the party signed the inspection notice.

[00:37:55] Speaker 01:
The second issue is that even the inspection notice gave the sellers until November 5th to perform the work required by the inspection notice.

[00:38:06] Speaker 01:
As a result, the termination on October 30th was an anticipatory repudiation and breach

[00:38:16] Speaker 01:
And then even if the court were to disagree on those two issues, then as a factual matter, there's no evidence sufficient to create a genuine issue of material fact as to the multiplication.

[00:38:31] Speaker 03:
Let me ask you this.

[00:38:36] Speaker 03:
It seems like the Sussex, the Byers, had some say in whether or not these conditions were satisfied.

[00:38:48] Speaker 01:
The Deuxics had say in choosing the remedies that would satisfy the problematic conditions noted, Your Honor.

[00:38:55] Speaker 03:
They, as... So in other words, let me just hypothetically suppose one of these, I don't know what, replacing some of the, what's it called, the flashings.

[00:39:11] Speaker 03:
And it was done sloppily.

[00:39:16] Speaker 03:
Uh, and it was critical.

[00:39:17] Speaker 03:
I mean, maybe around a, you know, maybe there was a lot of flashings that need to be replaced.

[00:39:23] Speaker 03:
It was done in a terrible way.

[00:39:26] Speaker 03:
Uh, the do six had no say.

[00:39:31] Speaker 03:
This is unacceptable.

[00:39:32] Speaker 03:
And we're going to, you know, you haven't satisfied our contingencies.

[00:39:37] Speaker 03:
Uh, we're out of here.

[00:39:38] Speaker 01:
I think the DUSIX would not be able to terminate the buy-sell agreement on that basis.

[00:39:42] Speaker 01:
They may be able to sue for damages or, in this case, perhaps come back to the sellers on October 30th, November 1st, November 2nd, say, hey, this work was done shoddily

[00:39:58] Speaker 01:
you know, would you negotiate a resolution with us?

[00:40:01] Speaker 01:
But it certainly does not give them a right to terminate the entire agreement on that basis.

[00:40:08] Speaker 01:
I wanted to cover pre-judgment.

[00:40:09] Speaker 03:
Do you think there's, hold on, do you think there's any ambiguity in any of this?

[00:40:14] Speaker 01:
I don't believe so, Your Honor, and the magistrate judge correctly agreed with us that this inspection notice is an agreement in satisfaction, and as a result, the inspection contingency is of no further force and effect.

[00:40:30] Speaker 02:
But I'm just looking at the extension.

[00:40:32] Speaker 02:
It does say that if the buyer and seller agree to the remedies above, this document shall constitute an amendment and shall be an integral part of this transaction.

[00:40:41] Speaker 02:
So it does suggest that violation of this extension is an integral part of the transaction, which means that it could be unwound.

[00:40:49] Speaker 01:
No, Your Honor, I think the integral part of this transaction language means that the buy-sell agreement recognizes the inspection notice as an important part of this, the agreement.

[00:41:01] Speaker 01:
And in fact, it is, right, because it takes away the right to terminate the agreement.

[00:41:08] Speaker 00:
So the inspection notice- Right, because at the bottom, there's only two choices, negotiate or elect to immediately terminate, and they didn't choose the termination route.

[00:41:17] Speaker 01:
Correct, Your Honor.

[00:41:17] Speaker 01:
You're absolutely right.

[00:41:18] Speaker 01:
They could have, and they did not.

[00:41:21] Speaker 02:
But then what does integral part of this transaction mean, if not that it's material reach?

[00:41:29] Speaker 01:
I think it means that it is an important part of the document, the BICEL agreement.

[00:41:36] Speaker 01:
The BICEL agreement recognizes that the inspection notice was signed.

[00:41:41] Speaker 01:
It is the agreement in satisfaction of the problematic conditions noted.

[00:41:46] Speaker 01:
And I think that's an important right that the DUSIX decided to create.

[00:41:53] Speaker 02:
But you're saying that limits them to only damages not to rescind or terminate the agreement?

[00:41:57] Speaker 01:
Based on the conditions in the inspection contingency, correct.

[00:42:03] Speaker 01:
On prejudgment interest, the glacier bear is entitled to prejudgment interest under Montana code 271211 and the Montana Supreme Court's July 2023 decision in Bender v. Rossman, which the district court did not have at the time that it issued its ruling on prejudgment interest.

[00:42:23] Speaker 03:
Not a very satisfying opinion on this issue.

[00:42:30] Speaker 01:
Your Honor, you're correct that the court only devoted a paragraph to it, but I think the language is clear that the court was relying on the statute in using some certain language that's directly from the statute, and it does not mention, the court does not mention equitable accounting or anything like that.

[00:42:47] Speaker 01:
So under that decision, Montana law is clear, and we believe a reversal and remand is justified on that issue.

[00:42:57] Speaker 01:
And even under Hughes,

[00:42:59] Speaker 01:
Glacier Bear is entitled to an equitable accounting if this court believes, despite Bender v. Rossman, that the statute does not apply.

[00:43:09] Speaker 01:
There's an amount of pre-judgment interest and the rent that Glacier Bear obtained during that period is less than that amount.

[00:43:16] Speaker 01:
So the court, even under Hughes, should perform that equitable accounting.

[00:43:20] Speaker 01:
I see my time is expired.

[00:43:21] Speaker 02:
Was the Hughes issue raised in the Bender case?

[00:43:27] Speaker 02:
Was it briefed at all, whether or not it violates Hughes?

[00:43:30] Speaker 01:
It was not, Your Honor.

[00:43:31] Speaker 01:
And perhaps that's because the parties thought it was obvious.

[00:43:34] Speaker 01:
I think the only dispute in obvious that the statute entitles them to prejudgment interest, the only issue they disputed was the some certain language that I mentioned.

[00:43:48] Speaker 00:
Any additional questions?

[00:43:50] Speaker 00:
All right.

[00:43:50] Speaker 00:
Thank you.

[00:43:51] Speaker 00:
I know you're out of time.

[00:43:51] Speaker 00:
I'm going to put a minute back on the clock for rebuttal.

[00:43:55] Speaker 00:
Thank you.

[00:43:55] Speaker 01:
I should have mentioned that.

[00:44:03] Speaker 04:
Thank you.

[00:44:04] Speaker 04:
Thank you, your honor.

[00:44:04] Speaker 04:
Just a few.

[00:44:05] Speaker 00:
Hold on.

[00:44:05] Speaker 00:
Let Ms.

[00:44:08] Speaker 00:
Constantino set the clock at a minute, please.

[00:44:15] Speaker 00:
That's fine.

[00:44:16] Speaker 00:
On the water rights issue, do we look at the fact that the DUSEX didn't know that this final form 617 or whatever the number is,

[00:44:28] Speaker 00:
had to be filed until the litigation.

[00:44:30] Speaker 00:
Do we look at the fact that, okay, well, the invocation of whatever right the Deus Ex thought they had to revoke or terminate the contract is really pretextual to the extent that they're relying on the water rights.

[00:44:46] Speaker 04:
No, Your Honor, because they did have concerns over the water rights.

[00:44:50] Speaker 04:
There was nothing specific in the agreement that made them spell out why they were refusing to release that contingency.

[00:44:56] Speaker 04:
And this idea of anticipatory breach on the water rights contingency frankly doesn't make a lot of sense to me.

[00:45:04] Speaker 04:
The November 3rd release date was the Deus Ex deadline to provide notice to the other party that they were refusing to release the contingency.

[00:45:12] Speaker 04:
There was no obligation for them to spell out their reasoning or anything else.

[00:45:16] Speaker 04:
And if they refused to release that contingency, then the agreement terminated automatically.

[00:45:22] Speaker 04:
That was their only obligation, and they met it.

[00:45:24] Speaker 04:
I wanted to point out that... As far as they were concerned, the water rights were in place.

[00:45:30] Speaker 00:
They didn't know of any contrary facts to suggest that it wasn't in place.

[00:45:34] Speaker 04:
Well, all they had received from the dual agent was a general abstract, and they had serious concerns about whether they were in place.

[00:45:41] Speaker 04:
As it turned out, those concerns were founded, but they didn't have an obligation to go, you know, hire a water rights lawyer and inspect all of the documents.

[00:45:50] Speaker 04:
Their average buyers, citizens, they got the water rights information that was provided to them from the other side and the agent.

[00:45:57] Speaker 04:
And they said, boy, this is really concerning to us.

[00:45:59] Speaker 04:
We have a contingency.

[00:46:01] Speaker 04:
It gives us a November 3rd deadline to release the contingency or to refuse to release the contingency.

[00:46:07] Speaker 04:
And so we're going to exercise our right and our contingency under the agreement.

[00:46:12] Speaker 04:
Ms.

[00:46:12] Speaker 04:
Goodwin didn't actually file that project completion notice until June of 2022, which was long after this case was in litigation, or at least months after it was already in litigation.

[00:46:23] Speaker 04:
So had the DUSECs not released the contingency, they would have gotten that property with a provisional permit that was non-final and by its own terms at the bottom of the permit itself would have been void.

[00:46:35] Speaker 04:
Um, and just sort of fundamentally requiring buyers to take affirmative action after closing to complete the permitting process, evidences that all well-related permitting was not in place.

[00:46:48] Speaker 00:
All right.

[00:46:49] Speaker 00:
Additional questions?

[00:46:50] Speaker 04:
Do you have any questions?

[00:46:51] Speaker 04:
Thank you.

[00:46:51] Speaker 00:
All right.

[00:46:51] Speaker 00:
Thank you very much, both sides, for your argument this morning.

[00:46:54] Speaker 00:
The matter is submitted.

[00:46:55] Speaker 00:
Uh, and we are in recess until tomorrow morning.