Background
The dispute centers on a 38.2-acre tract in Bigfork, Flathead County, Montana, that sits within a designated floodplain and cannot be subdivided under county regulations. In 1992, the original owners entered into an 89-year land lease with Charles DeRego covering a portion of the tract. Section 5 of that lease contained two distinct options: a first paragraph granting a fee-simple purchase option conditioned on subdivision approval and payment of the first twenty years of rent, and a second paragraph providing that if subdivision remained legally unavailable after twenty years, the lessee could instead acquire an undivided tenancy-in-common interest in the smallest tract that could be subdivided with the leased acreage, with exclusive use of the leased parcel.
In 2018, Adam and Amber Britt purchased DeRego’s leasehold interest along with the structure on the property. Their acquisition was formalized through a Second Amendment to the Lease, negotiated with the Slater Trust (successor to the original lessors) and drafted by attorney Brant Beaudry. That amendment stated: “Paragraph 5. ‘Option to purchase’ is hereby removed.” It also included language providing that, in the event the parent tract could be subdivided, the Britts had “paid in full for the tract.” A 2020 Third Amendment expanded the leasehold from 6.325 to 10.325 acres.
Later in 2020, George and Irene Tuma purchased the parent tract from the Slater Trust. Before closing, they received a title commitment disclosing the lease and all amendments, and the Purchase and Sale Agreement recommended independent legal review — which the Tumas declined to obtain. After relations deteriorated, the Tumas filed suit in 2022, asserting multiple claims challenging the Britts’ use of the property. The Britts counterclaimed, seeking a declaratory judgment that their right to acquire a tenancy-in-common interest had vested and been paid in full. The district court granted partial summary judgment for the Britts, ordering the Tumas to execute a quitclaim deed conveying a 27.5% tenancy-in-common interest, and the Tumas appealed.
The Court’s Holding
The Montana Supreme Court unanimously affirmed, holding that the Second Lease Amendment is ambiguous because the phrase “Paragraph 5. ‘Option to purchase’ is hereby removed” is reasonably susceptible to two conflicting interpretations. The lease itself is organized by numbered sections — not paragraphs — and Section 5 contains two distinct paragraphs addressing separate options triggered by different conditions. The amendment’s reference to the singular “Paragraph 5” could reasonably be read as targeting only the first paragraph (the fee-simple option, which had become largely obsolete given the passage of twenty years) while leaving the second paragraph’s tenancy-in-common mechanism intact. Because the text was ambiguous, the parol evidence rule did not bar resort to extrinsic evidence.
Considering that extrinsic evidence — declarations from the Slater Trust’s successor trustee and his wife, the drafting attorney, and the Britts themselves — the Court found the contracting parties’ intent consistent and undisputed: the Second Amendment was meant to remove only the first paragraph of Section 5, and the “paid in full” language memorialized that the Britts had already satisfied their consideration for the tenancy-in-common interest. The Court also found that the trustee’s later deposition memory lapses did not create a genuine issue of material fact, since he acknowledged his prior declaration and his wife corroborated its contents, and the Tumas offered no contrary testimony from any contracting party or drafter.
The Court further noted that under § 28-3-306(2), MCA, any residual ambiguity must be construed in favor of the party for whose benefit the provision was made — here, the lessee. All five justices concurred in the opinion authored by Justice Gustafson.
Key Takeaways
- An amendment that “removes” a lease section is ambiguous — and open to extrinsic evidence — when the section contains multiple distinct paragraphs and the amendment’s language does not precisely track the lease’s structural organization.
- Once contractual ambiguity is found, Montana’s parol evidence rule not only permits but requires consideration of extrinsic evidence, including testimony from contracting parties and the drafting attorney, to ascertain mutual intent.
- A witness’s subsequent memory lapses and inability to define legal terms do not, standing alone, create a genuine issue of material fact sufficient to defeat summary judgment when earlier clear statements are corroborated by other witnesses and documentary evidence.
- Under § 28-3-306(2), MCA, any residual ambiguity in a contract provision is construed in favor of the party for whose benefit the provision was made.
- Sophisticated buyers who decline to obtain independent legal review of title commitments disclosing complex lease structures take on the risk of their own interpretation of those documents.
Why It Matters
This decision is a practical reminder for attorneys handling real property transactions in Montana that ambiguity can lurk in seemingly simple amendment language — particularly when a lease is organized by sections containing multiple paragraphs and an amendment uses imprecise shorthand. A one-sentence deletion clause that does not precisely identify what is being removed may not accomplish what the drafter intended, and a subsequent purchaser who relies on their own reading of title documents without independent counsel has little recourse when extrinsic evidence of the original parties’ intent points the other way.
The case also reinforces the breadth of Montana’s extrinsic evidence rule once ambiguity is established. Declarations from a successor trustee, his wife, and the drafting attorney — even where one declarant’s later deposition reflects significant memory decline — can collectively constitute undisputed evidence of contracting parties’ intent sufficient to resolve ambiguity on summary judgment. Practitioners should ensure that lease amendments removing options or other multi-part provisions expressly identify, by paragraph or sub-section, each specific provision being eliminated.