No. 12898
I N THE SUPREME C U T O THE STATE O M N A A
OR F F OTN
1975
D R A L PIPKIN and BETTY PIPKIN,
ERL
husband and w i f e ,
P l a i n t i f f s and Respondents,
GERALD C N O L and EMILIE CONNOLLY,
O N LY
husband and w i f e ,
Defendants and A p p e l l a n t s ,
Appeal from: D i s t r i c t Court of t h e S i x t h J u d i c i a l D i s t r i c t ,
Honorable Jack D, Shanstrom, Judge p r e s i d i n g .
Counsel of Record:
For A p p e l l a n t s :
Lee O v e r f e l t argued, B i l l i n g s , Montana
For Respondents:
Joseph T. Swindlehurst argued, L i v i n g s t o n , Montana
Huppert and Swindlehurst, Livingston, Montana
Submitted: May 6, 1975
Decided :
" " 7' ? ;;
?
t - _.c 4 4
M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court:
This i s an a p p e a l from a judgment o f t h e d i s t r i c t c o u r t ,
Sweet Grass County, s i t t i n g without a j u r y , holding defendants'
l e a s e terminated upon f a i l u r e t o e x e r c i s e t h e i r r i g h t of f i r s t
r e f u s a l t o purchase farmland and f u r t h e r t h a t defendants were
accountable t o p l a i n t i f f s i n unlawful d e t a i n e r .
Defendants Gerald and Emilie Connolly, husband and w i f e ,
and p l a i n t i f f s D e r r a l l and B e t t y P i p k i n , husband and w i f e , e n t e r e d
i n t o an a g r i c u l t u r a l l e a s e agreement drawn by d e f e n d a n t s ' a t t o r n e y
John R. Glenn, Esq. The l e a s e was f o r a f i v e year p e r i o d beginning
March 1, 1973 and t e r m i n a t i n g February 28, 1978. The
C Gr-~r-ubCC
-7
t h a t Pipki*'day $4,000 a y e a r a s r e n t f o r t h e property.
r e s e r v e d t h e dwelling house l o c a t e d on t h e p r o p e r t y f o r t h e i r p e r s o n a l
use.
Pipkins f u r t h e r agreed t o g i v e Connollys t h e r i g h t t o meet
any o f f e r t o buy t h e farmland and Pipkins agreed t o a c c e p t t h e
Connollys' o f f e r which would meet any o f f e r o r o f f e r s t o buy from
any source.
O March 28, 1974, Pipkins r e c e i v e d a w r i t t e n o f f e r f o r
n
t h e purchase of t h e premises, t o g e t h e r w i t h e a r n e s t money of $10,000
from Rainbow Ranch, I n c . of F o r t C o l l i n s , Colorado, upon t h e s e terms:
"The t o t a l purchase p r i c e i s Two Hundred Thousand
D o l l a r s ($200,000.00) payable a s follows :
"Sixty Thousand D o l l a r s ($60,000.00) paid down;
"The Balance payable over a p e r i o d of T h i r t y (30)
y e a r s , w i t h i n t e r e s t amortized o u t a t Six p e r c e n t
(6%) ;
"Contract f o r Deed t o be c a r r i e d by S e l l e r ;
11
I n t e r e s t t o commence a s of d a t e of possession;
"Earnest money of Ten Thousand D o l l a r s ($10,000.00);
"The c l o s i n g d a t e of t h e s a l e s h a l l b e on o r b e f o r e
June 1, 1974."
O A p r i l 25, 1974, Pipkins served upon Connollys n o t i c e
n
of t h e o f f e r , g i v i n g them t h e r i g h t t o meet t h e o f f e r on o r b e f o r e
May 31, 1974. Connollys f a i l e d t o a c c e p t t h e o f f e r o r t o d e l i v e r
possession of t h e premises, a s r e q u e s t e d . Pipkins brought a c t i o n
i n unlawful d e t a i n e r t o r e c o v e r possession of t h e premises.
Connollys cross-complained praying f o r t h e c o u r t t o amend t h e l e a s e
t o r e a d a s they c l a i m was t h e o r i g i n a l i n t e n t i o n of t h e c o n t r a c t i n g
parties--that any s a l e of t h e farmland was s u b j e c t t o t h e l e a s e .
The proposed s a l e was n o t completed due t o t h e pending l i t i g a t i o n .
Pipkins i n s i s t t h e y wanted t h e r i g h t t o s e l l t h e property
a t anytime and t h a t t h e l e a s e would t e r m i n a t e upon such s a l e . The
l e a s e d i d n o t provide f o r i t s t e r m i n a t i o n upon s a l e of t h e premises,
b u t provided i n p e r t i n e n t p a r t :
"The Landlords [ P i p k i n s ] agreed t o g i v e Tenants
[Connollys] t h e r i g h t t o meet any o f f e r t o buy
t h e above d e s c r i b e d r e a l e s t a t e and Landlords a g r e e
t o a c c e p t ena ants' o f f e r which does meet an o f f e r ,
o r o f f e r s , t o buy from any source whatsoever.
"Jc * %The Tenants recognize and lords' r i g h t t o
s e l l t h e above d e s c r i b e d r e a l e s t a t e during t h e
term of t h i s l e a s e o r any f u t u r e l e a s e providing
t h a t Tenants b e given t h e r i g h t s h e r e i n b e f o r e
mentioned. I f
M r . Glenn, Connollys' a t t o r n e y , t e s t i f i e d t h e r e was no
p r o v i s i o n made f o r f o r f e i t u r e of t h e l e a s e f o r f a i l u r e t o e x e r c i s e
t h e r i g h t of f i r s t r e f u s a l because i t was f u l l y understood i n h i s
d i s c u s s i o n s w i t h t h e p a r t i e s t h a t t h e land could be s o l d , b u t
Connollys would remain i n possession under t h e l e a s e .
I n i t s f i n d i n g s of f a c t t h e d i s t r i c t c o u r t found: t h a t '
a t t h e t i m e t h e l e a s e was made Pipkins s t r o n g l y emphasized t h e f a c t
t h a t they wanted t o r e s e r v e t h e r i g h t t o s e l l t h e farmland and upon
such s a l e t h e l e a s e would t e r m i n a t e ; Pipkins had r e c e i v e d a bona
f i d e o f f e r f o r t h e purchase of t h e premises from Rainbow Ranch, I n c . ;
t h a t Connollys r e f u s e d t o meet t h e o f f e r ; and, t h e r e f o r e , t h e l e a s e
was terminated on June 1, 1974. I n i t s conclusions of law t h e c o u r t
h e l d t h a t t h e Connollys unlawfully d e t a i n e d t h e premises s i n c e June
1, 1974, and awarded Pipkins judgment f o r t r e b l e damages. ~onnollys'
cross-complaint was denied.
Connollys p r e s e n t n i n e i s s u e s f o r t h i s C o u r t ' s review.
Briefly stated, the issues are:
1. Did t h e d i s t r i c t c o u r t e r r i n f i n d i n g t h a t t h e l e a s e
terminated upon t h e s a l e of t h e farmland and ~ o n n o l l y s ' f a i l u r e t o
e x e r c i s e t h e i r r i g h t of f i r s t r e f u s a l ?
2. Did t h e c o u r t e r r i n a d m i t t i n g an unacknowledged b u y - s e l l
agreement i n t o evidence a s proof of an o f f e r t o buy t h e farmland i n
question?
Lessees Connolly argue t h a t i n l i g h t of t h e testimony
of t h e a t t o r n e y who drew up t h e c o n t r a c t , M r . Glenn, t h e r e was no
such i n t e n t on t h e p a r t of t h e p a r t i e s t h a t t h e l e a s e would t e r m i n a t e
upon t h e s a l e of t h e l a n d ; t h a t l e s s o r s Pipkin t e s t i f i e d Connollys
wanted a l e a s e s o t h a t t h e y could borrow money from t h e bank and,
i n l i g h t of t h e f a c t t h e law does n o t f a v o r f o r f e i t u r e , P i p k i n s
have f a i l e d i n t h e i r burden of proof, t h e r e f o r e t h e d i s t r i c t c o u r t
e r r e d i n f i n d i n g f o r them.
The l e a s e was drawn by t h e a t t o r n e y f o r Connollys. The
terms of t h e l e a s e when ambiguous w i l l be construed most s t r o n g l y
a g a i n s t him whose words t h e y a r e . Bickford v. Kirwin, 30 Mont. 1,
75 P. 518.
The l e a s e c l a u s e allowing t h e s a l e of t h e farmland and
g i v i n g l e s s e e s t h e r i g h t of f i r s t r e f u s a l i s , a t b e s t , incomplete
a s i t r e l a t e s t o t h e problem here. I f a l l Pipkins wanted t o do was
t o b e a b l e t o s e l l t h e i r farmland, s u b j e c t t o t h e l e a s e h o l d , t h e r e would
have been no need f o r t h e c l a u s e . Connollys s t a t e d t h e y included t h e
c l a u s e because Pipkins demanded i t , even though i n t h e i r opinion
i t was n o t necessary. Connollys argue t h a t i f t h e l e a s e could be
terminated upon t h e s a l e of t h e farmland, what*bank would lend money
on t h a t type of l e a s e ? Pipkins s t a t e t h e y were adamant about being
a b l e t o s e l l t h e i r farmland anytime t h e y wanted t o , and n o t have
the s a l e subject t o the lease. Pipkins a l s o p o i n t o u t t h a t
Connollys agreed t h a t they could move from C a l i f o r n i a t o t h e
farmland, and t h a t would t e r m i n a t e t h e l e a s e although t h a t was
n o t included i n t h e l e a s e . That t y p e of agreement Pipkins argue
i s c o n t r a d i c t o r y t o t h e t y p e of l e a s e Connollys c l a i m t h e y r e c e i v e d .
I n Lunke v. Egeland, 46 Mont. 403,410, 128 P. 610, w h i l e
c o n s t r u i n g an a g r i c u l t u r a l l e a s e which c o n t a i n e d a d d i t i o n a l elements,
t h i s Court d i d r e a c h t h e problem of t h e e f f e c t of a c l a u s e g i v i n g
t h e l e s s o r t h e r i g h t t o s e l l and t h e l e s s e e t h e r i g h t of f i r s t
refusal. The Court h e l d :
II
There was no n e c e s s i t y of r e s e r v i n g t h e r i g h t
t o s e l l i f such s a l e was n o t t o a f f e c t t h e l e a s e .
[Lessor] had such r i g h t i n any event. I?
2j.7
The C a l i f o r n i a Supreme Court i n Garetson v. Wester, 39'
Cal.R+r. P.2d 863, 864, 865, construed t h i s language of
t h e l e a s e involved t k r e :
"'1t i s mutually understood and agreed t h a t t h e
p r o p e r t y covered by t h i s l e a s e i s s u b j e c t t o s a l e ;
however, t h e l e s s o r a g r e e s t h a t i n t h e event of an
o f f e r t o purchase t h a t l e s s e e i s t o b e given f i r s t
o p p o r t u n i t y t o buy. I I 1
The Court s t a t e d :
"Obviously, t h e p r o p e r t y was s u b j e c t t o s a l e without
t h e i n s e r t i o n o f any such c l a u s e . The Lessor a t any-
time had t h e r i g h t t o s e l l t h e p r o p e r t y s u b j e c t , of
c o u r s e , t o t h e l e a s e , and t h e e f f e c t of t h e s a l e would
have been merely t o s u b s t i t u t e t h e vendee t o a l l of
t h e r i g h t s of t h e o r i g i n a l l e s s o r . ** The c l a u s e
must, t h e r e f o r e , have an important intended.meaning.
The p l a c i n g of t h e o p t i o n i n t h i s c l a u s e i n d i c a t e d
very c l e a r l y t h a t i t was t h e i n t e n t i o n of t h e p a r t i e s ,
and i n s i s t e d upon by t h e l e s s e e s , t h e a p p e l l a n t s h e r e i n ,
t h a t t h e l e s s e e s be p r o t e c t e d i n t h e event of t h e s a l e
and b e given t h e f i r s t o p p o r t u n i t y t o purchase. I f i t
was n o t intended by t h e p a r t i e s t h a t a bona f i d e o f f e r
t o purchase w i t h a subsequent r e f u s a l by l e s s e e s t o
purchase should t e r m i n a t e t h e l e a s e s , t h e r e would have
been no occasion whatsoever f o r t h i s s o r t of an o p t i o n .
I f t h e purpose of t h e c l a u s e was merely t o g r a n t an
o p t i o n t o t h e l e s s e e s t o buy t h e p r o p e r t y d u r i n g t h e
l i f e of t h e l e a s e s , i t would n o t have been coupled w i t h
t h e c l a u s e r e s e r v i n g t h e p r o p e r t y f o r s a l e . The two
e x p r e s s i o n s t o g e t h e r c l e a r l y i n d i c a t e t h a t i t was i n -
tended by a l l p a r t i e s t h a t t h e s a l e of t h e land would
t e r m i n a t e t h e l e a s e s . I n no o t h e r way can t h e presence
of t h e c l a u s e be explained. I I
Connollys a l l e g e t h e language of t h e l e a s e i n q u e s t i o n
h e r e , and t h e language of t h e l e a s e s i n Lunke and Garetson are
distinguishable. They p o i n t out t h e r e was a p r o v i s i o n i n Lunke
f o r payment t o t h e l e s s e e upon t e r m i n a t i o n of t h e l e a s e f o r t h e
crops planted. I n Garetson t h e r e was a d d i t i o n a l language i n t h e
l e a s e which Connollys a r g u e make t h a t l e a s e d i f f e r e n t from t h e one
i n q u e s t i o n h e r e , i t provided:
"The l e a s e s f u r t h e r provided t h a t a t t h e 'end of t h e
I
term of l e a s e , which term could i n f e r e n t i a l l y mean
when i t was terminated a t t h e end of t h e l e a s e h o l d
period o r by f a i l u r e of t h e l e s s e e t o e x e r c i s e h i s
I
o p t i o n t o purchase, he might be permitted t o ***
remove any improvements o r s t r u c t u r e s ' and t o pay t h e
r e n t f o r such f u r t h e r t i m e a s t h e l e s s e e s might hold
t h e property." (Emphasis added.)
Connollys argue t h i s language, construed along w i t h t h e rest of
t h e l e a s e i n Garetson made i t p o s s i b l e t o i n t e r p r e t t h e c o n t r a c t
a s being one i n which t h e p a r t i e s intended t h a t f a i l u r e t o e x e r c i s e
t h e r i g h t of f i r s t r e f u s a l could amount t o l o s s of t h e l e a s e .
True, each l e a s e must be construed s e p a r a t e l y , depending
upon i t s own language. However, t h e i n s t a n t c a s e , Lunke and
Garetson, a l l involve a l e a s e which i n c l u d e s a c l a u s e r e s e r v i n g
t h e r i g h t t o s e l l , b u t makes no mention of t h e t e r m i n a t i o n of t h e
lease. It i s t h e language of t h a t c l a u s e we a r e i n t e r p r e t i n g h e r e .
It i s t h a t language which was i n t e r p r e t e d i n Lunke and Garetson.
I n Garetson t h e C a l i f o r n i a c o u r t d i d n o t r e l y on t h e emphasized
language c i t e d here-by Connollys t o r e a c h i t s conclusion. Too,
although i n Lunke t h e reimbursement f o r a c r e a g e p l a n t e d c l a u s e was
an added f a c t o r i n t h e c o u r t ' s r e a c h i n g i t s d e c i s i o n , t h a t c o u r t
r e i t e r a t e d our major premise h e r e , t h a t t h e r e was no need f o r t h e
c l a u s e r e s e r v i n g t h e r i g h t t o s e l l i f such r i g h t was s u b j e c t t o t h e
lease. Therefore, Lunke and Garetson cannot b e d i s t i n g u i s h e d on
t h e point i n i s s u e here.
Connollys condemn t h e h a r s h f o r f e i t u r e and l a c k of any
c o n s i d e r a t i o n given f o r t h e i r growing c r o p s o r improvements. In
t h i s r e g a r d t h e Court n o t e s t h e n o t i c e t o t h e Connollys of A p r i l 25,
1974, a d v i s e s t h a t they would have u n t i l May 31, 1974 t o e x e r c i s e
t h e i r r i g h t t o purchase and remit a down payment of $60,000; t h a t
t h e p r o p e r t y would b e s o l d on June 1, 1974, i f Connollys d i d n o t
e x e r c i s e t h e i r r i g h t t o purchase, and they would be expected t o
d e l i v e r up p e a c e f u l p o s s e s s i o n on o r b e f o r e June 1, 1974. No
f u r t h e r demand from Pipkins o r t h e i r s u c c e s s o r i n i n t e r e s t was e v e r
made. S u i t i n unlawful d e t a i n e r was f i l e d June 1 2 , 1974. Connollys
t e c h n i c a l l y were h o l d i n g o v e r a f t e r midnight May 31, 1974.
S e c t i o n 93-9703(2), R.C.M. 1947, provides r e l i e f f o r
t h i s type of f o r f e i t u r e . While a l l o t h e r t e n a n c i e s speak of
holding over without permission of t h e l a n d l o r d , and t h i s Court
i s mindful of t h e c a s e s h o l d i n g t h r e e day n o t i c e t o pay o r q u i t
11
satisfies without permission" i m p l i e d l y , a g r i c u l t u r a l l e a s e s
r e q u i r e demand a f t e r holding over a f t e r t h e e x p i r a t i o n of t h e l e a s e
term. This problem was t r e a t e d by t h i s Court i n a c a s e i n v o l v i n g
a l e s s e e who attempted t o e x e r c i s e an o p t i o n t o purchase a f t e r
t h e term of h i s l e a s e had expired. I n M i l l e r v. Meredith, H i l l and
W h i t f i e l d , 149 Mont. 125, 129, 423 P.2d 595, t h e Court s t a t e d :
"Under t h e common law t h e holdover t e n a n t was
considered a t r e s p a s s e r and i n o r d e r t o g e t away
from t h e harshness of such a r u l e , and t o conform
t o a g r i c u l t u r a l p r a c t i c e s of t h e s t a t e , o u r Code
s p e c i f i c a l l y provided f o r a g r i c u l t u r a l l e s s e e s i n
s e c t i o n 93-9703, R.C.M. 1947. Under t h i s s e c t i o n
a holdover t e n a n t f o r s i x t y days without n o t i c e who
i n v e s t s time and seed w i l l n o t l o s e t h i s investment
t o t h e l a n d l o r d . However, t h e s t a t u t e g i v e s him no
more than t h e r i g h t t o h a r v e s t h i s c r o p t o p r o t e c t
h i s investment and p r o t e c t s him from l i a b i l i t y i n an
a c t i o n f o r unlawful d e t a i n e r . " (Emphasis s u p p l i e d . )
A s s t a t e d h e r e t o f o r e , no n o t i c e o r demand was e v e r given
Connollys a f t e r t h e e x p i r a t i o n of t h e l e a s e . They remained on t h e
p r o p e r t y s i x t y days a f t e r t h e l e a s e terminated and p l a n t e d t h e i r
crops. Therefore, under s e c t i o n 93-9703(2), they had a r i g h t t o
h a r v e s t t h o s e crops and a r e p r o t e c t e d from l i a b i l i t y f o r unlawful
detainer .
F i n a l l y , concerning whether t h e b u y - s e l l agreement h a s t o
b e acknowledged b e f o r e i t can be admitted i n t o evidence, Connollys
a r g u e t h a t such agreement h a s t o b e acknowledged t o be admitted
i n t o evidence t o a s c e r t a i n whether t h e s i g n e r i s t h e p r e s i d e n t
of t h e Rainbow Ranch I n c . , and whether he h a s t h e a u t h o r i t y t o
b i n d t h e c o r p o r a t i o n t o t h e c o n t r a c t t o purchase a s provided i n
s e c t i o n 39-117, R.C.M. 1947.
Testimony of A 1 Whiteside, t h e r e a l e s t a t e b r o k e r involved,
e s t a b l i s h e s t h a t h e witnessed t h e s i g n a t u r e of Ronald W. M i l l e r ,
P r e s i d e n t of t h e c o r p o r a t i o n , and Coreen M. M i l l e r , S e c r e t a r y -
Treasurer. Under s e c t i o n 93-1101-12, R.C.M. 1947, t h a t was s u f f i -
c i e n t foundation t o admit t h e c o n t r a c t i n t o evidence. Since n e i t h e r
p a r t y t o t h e c o n t r a c t c h a l l e n g e s t h e c o n t r a c t , we s e e no r e a s o n
t o e n t e r t a i n any c h a l l e n g e t o i t s a u t h e n t i c i t y .
The judgment of t h e d i s t r i c t c o u r t i s a f f i r m e d a s t o i t s
conclusions of law Nos. 1, 2, and 5 r e g a r d i n g t e r m i n a t i o n of t h e
lease. Judgment i s r e v e r s e d a s t o i t s conclusions of law Nos. 3
and 4 , a s t h e y r e l a t e t o unlawful d e t a i n e r and damages. The cause
i s remanded t o t h e d i s t r i c t c o u r t t o e n t e r judgment a c c o r d i n g l y .
Justice. f
Chief J u s t i c e