The Montana Supreme Court in a decision earlier this month upheld a Flathead County District Court ruling that shuttered a property on the west shore of Lake Five, known as the Whistle Stop Retreat, in 2022.

The latest decision in the lawsuit, first filed in 2020, affirmed the district court’s ruling that Flathead County erroneously granted a Major Land-Use Permit for a guest cabin development off Grizzly Spur Road in West Glacier.

“The County abused its discretion by failing to consider the restrictive easements on Grizzly Spur Road as required,” according to the opinion.

The 23.1-acre lakeshore property, owned by Susan Dietz and operated as G&M Trust, has several buildings spread across two tracts of land, including a single-family home, three guest cabins, a replica train caboose and fire watchtower. The retreat was operated as a short-term rental business, with several buildings listed on AirBnB.

Dietz requested the permit to construct a barn with living quarters, a pavilion and several additional guest rental cabins. Despite the Middle Canyon Land Use Advisory Committee recommendation that the permit be denied due to concerns over legal access to the property, the Flathead County planning board and county commission approved the application.

A nonprofit group, Friends of Lake Five Inc. (FLFI), sued the county in district court alleging the permit was in violation of Montana Administrative Procedure Act, the Montana Subdivision and Platting Act, the Montana Lakeshore Protection Act and the Montana Constitution. The neighborhood group noted that several buildings on the property had already been constructed or renovated without proper permitting, and easement restrictions on the access road prevented commercial use of the land.

A primary point of contention with the permit revolved around whether Grizzly Spur Road provided legal access for nonresidents to use the property. Under the Canyon Area Land Use Regulatory System (CALURS), which regulates land use near West Glacier, the County Commission must consider whether developments comply with all access and road standards. Grizzly Spur Road is subject to several private easements dating back to the 1990s which limit access to residential use.

Dietz argued, however, that a 2019 amendment to CALURS redefined “residential use” to include short-term rentals, therefore allowing her to continue to operate Whistle Stop Retreat. The district court disagreed, stating “G&M provides no evidence or argument that would indicate that the drafters of the 1997 easement agreements understood the term “residential” to include short-term rentals,” and that under CALURS, “the provision setting the greater restriction or higher standard shall apply.”

District Court Judge Amy Eddy revoked the permit in a March 2022 ruling, which Dietz subsequently appealed to the Montana Supreme Court.

In addition to revoking the permit, Eddy granted a permanent injunction preventing any future construction or expansion of the property, any commercial use including overnight resort accommodations without “obtaining legal access and compliance” with state and local regulation, and required Dietz to restore the property to its “previous unaltered condition.”

In their opinion, the Montana Supreme Court affirmed Eddy’s order revoking the permit, granting the permanent injunction and awarding attorneys’ fees. However, the court reversed the requirement that G&M Trust restore the property to its previous unaltered condition.

“Although the District Court was correct in its determination that the G&M Property may not be used for commercial purposes, the authority upon which the District Court relied for ordering restoration of the property to its original condition is not readily apparent … Accordingly, we hold that the District Court erred,” according to the opinion.

The attorneys’ fees and general costs Dietz owes FLFI amount to $43,053 and $1,878, respectively, according to court filings. Flathead County settled with FLFI over attorneys fees in May 2022, paying the group $47,000.