No. 14826
IN THE SUPREME COURT OF THE STATE OF MONTANA
1979
WILBUR H. REINKE and OMA J. REINKE,
Plaintiffs and Counter-Defendants,
VS.
FRANK MILLER BIEGEL and JOYCE E. BIEGEL,
Defendants and Counter-Claimants and Appellants.
Appeal from: District Court of the Thirteenth Judicial District,
Honorable Robert H. Wilson, Judge presiding.
Counsel of Record:
For Appellants:
Hauf and Forsythe, Billings, Montana
For Respondents:
Mouat and Martinson, Billings, Montana
Submitted on briefs: October 30, 1979
Decided: DEC 2 7 1979
Clerk
Mr. 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 C o u r t .
Frank ~ i l l e r i e g e l
~ and J o y c e E. B i e g e l , t h e p u r c h a s e r s
o f two l o t s from Wilbur H. Reinke and Oma J . Reinke under a
c o n t r a c t f o r deed, b r i n g t h i s a p p e a l from a f i n a l judgment
of t h e D i s t r i c t Court of t h e Thirteenth J u d i c i a l D i s t r i c t ,
Yellowstone County, s i t t i n g w i t h o u t a j u r y . The judgment
t e r m i n a t e d a c o n t r a c t f o r deed between t h e p a r t i e s , d e c l a r e d
a f o r f e i t u r e of t h e down payment made by t h e p u r c h a s e r s ,
q u i e t e d t i t l e i n f a v o r o f t h e s e l l e r s , and w a s e n t e r e d upon
a f i n d i n g t h a t t h e p u r c h a s e r s were i n d e f a u l t f o r f a i l u r e t o
make t i m e l y payment under t h e c o n t r a c t . The D i s t r i c t C o u r t ' s
judgment a l s o d e n i e d t h e p u r c h a s e r s ' c o u n t e r c l a i m f o r damages
o r i n j u n c t i v e r e l i e f based o n t h e s e l l e r s ' a l l e g e d b r e a c h of
t h e c o n t r a c t f o r deed by v i o l a t i o n o f a r e s t r i c t i v e c o v e n a n t
and awarded r e a s o n a b l e a t t o r n e y f e e s t o t h e s e l l e r s .
On F e b r u a r y 1 5 , 1974, Reinkes and B i e g e l s e n t e r e d i n t o
a c o n t r a c t f o r deed whereby B i e g e l s w e r e t o p u r c h a s e from
Reinkes L o t s 1 5 and 16 of Block 2 i n t h e Heyn S u b d i v i s i o n i n
Yellowstone County. B i e g e l s p a i d $200 i n e a r n e s t money
under t h e c o n t r a c t which p r o v i d e d t h a t a w a r r a n t y deed f o r
e a c h l o t b e p l a c e d i n escrow and t h a t B i e g e l s would o b t a i n a
deed f o r e a c h l o t upon payment o f $3100 p l u s 8 p e r c e n t p e r
annum i n t e r e s t f o r e a c h l o t b e f o r e t h e due d a t e , December
31, 1975. The c o n t r a c t f u r t h e r p r o v i d e d t h a t d e f a u l t would
b e e n t e r e d a g a i n s t t h e buyer a f t e r 30 d a y s n o t i c e and t h a t
t i m e was of t h e e s s e n c e . B i e g e l s p a i d i n f u l l f o r L o t 16
sometime i n December 1975 b e f o r e t h e due d a t e , o b t a i n e d a
deed t o t h a t l o t , and completed c o n s t r u c t i o n o f a home
t h e r e o n i n September 1976.
~einkes
and G e r t r u d e V. Heyn p r e p a r e d , f i l e d and d u l y
r e c o r d e d a n amended d e c l a r a t i o n o f r e s t r i c t i o n s w i t h t h e
s u b d i v i s i o n p l a t o f t h e Heyn S u b d i v i s i o n on A p r i l 24, 1973.
The r e s t r i c t i v e c o v e n a n t s p r o v i d e d , among o t h e r t h i n g s , t h a t
"no b u i l d i n g s h a l l b e l o c a t e d and e r e c t e d n e a r e r t h a n 30
f e e t t o the front l o t line." The d e c l a r a t i o n of r e s t r i c -
t i o n s f u r t h e r p r o v i d e d t h a t i t was b i n d i n g upon a l l h e i r s ,
a s s i g n s , d e v i s e e s and p a r t i e s c l a i m i n g t h r o u g h them, and
t h a t f a i l u r e by t h e p r e s e n t p r o p e r t y owners t o e n f o r c e t h e
r e s t r i c t i o n s a t t h e t i m e o f any v i o l a t i o n t h e r e o f would n o t
be deemed a waiver o f t h a t r i g h t .
Reinkes d e s i r e d t o b u i l d a house o n L o t 1 4 , which t h e y
had n o t s o l d and which w a s a d j a c e n t t o L o t 1 5 , t h e p r o p e r t y
s u b j e c t t o t h i s c o n t r a c t f o r deed. They began b u i l d i n g a
house on L o t 1 4 o n October 1, 1974 and completed c o n s t r u c - -
t i o n i n t h e e a r l y p a r t o f 1975. The house w a s s e t back
a p p r o x i m a t e l y 20 f e e t from t h e f r o n t l i n e , r a t h e r t h a n 30
f e e t a s r e q u i r e d by t h e d e c l a r a t i o n o f r e s t r i c t i o n s which
Reinkes had p r e p a r e d and f i l e d . Reinkes d i d n o t a t t e m p t t o
amend t h i s s e t b a c k r e q u i r e m e n t by o b t a i n i n g t h e s i g n a t u r e s
o f 80 p e r c e n t of t h e owners w i t h i n t h e s u b d i v i s i o n a s pro-
vided f o r i n t h e r e s t r i c t i v e covenants. Instead, they
s o u g h t and o b t a i n e d a v a r i a n c e o f zoning r e s t r i c t i o n s from
t h e City-County P l a n n i n g Board of Yellowstone County on
November 8 , 1974, a l l o w i n g them t o b u i l d w i t h a s e t b a c k of
o n l y 20 f e e t from t h e f r o n t p r o p e r t y l i n e . A n o t i c e of t h e
v a r i a n c e w a s p o s t e d on L o t 1 4 on t h e s a m e d a t e . ~einkes
completed c o n s t r u c t i o n of t h e L o t 1 4 house i n t h e e a r l y p a r t
o f 1975.
B i e g e l s f a i l e d t o pay t h e b a l a n c e o f t h e p u r c h a s e p r i c e
o f L o t 1 5 by t h e due d a t e , December 31, 1975, and f a i l e d t o
c u r e t h e d e f a u l t w i t h i n 30 d a y s a f t e r r e c e i v i n g n o t i c e a s
r e q u i r e d under t h e c o n t r a c t f o r deed. Notice of d e f a u l t w a s
s e r v e d on F e b r u a r y 1 8 , 1976. O A p r i l 1 4 , 1976, 25 d a y s
n
a f t e r t h e t i m e f o r c u r i n g t h e i r d e f a u l t under t h e c o n t r a c t
had e x p i r e d , B i e g e l s o f f e r e d t o pay t h e $3100 c o n t r a c t p r i c e
f o r L o t 15. T h i s o f f e r w a s r e f u s e d by t h e Reinkes, and L o t
1 5 remained v a c a n t and unimproved t o t h e t i m e of t r i a l w i t h
Reinkes p a y i n g t h e p r o p e r t y t a x e s . Reinkes commenced a n
a c t i o n on August 24, 1977 t o q u i e t t i t l e and t o t e r m i n a t e
and f o r f e i t t h e c o n t r a c t f o r deed b e c a u s e o f B i e g e l s ' de-
fault. B i e g e l s r a i s e d t h e a f f i r m a t i v e d e f e n s e of b r e a c h o f
c o n t r a c t and c o u n t e r c l a i m e d f o r damages t o L o t 1 5 o r f o r
i n j u n c t i v e r e l i e f based on R e i n k e s ' b r e a c h of t h e c o n t r a c t
f o r deed, i . e . t h e b r e a c h o f t h e r e s t r i c t i v e c o v e n a n t run-
n i n g w i t h t h e l a n d , which r e n d e r e d Reinkes u n a b l e t o p e r f o r m
t h e c o n t r a c t f o r deed t o convey t o B i e g e l s t h e l o t i n t h e
c o n d i t i o n i t was r e p r e s e n t e d t o be when t h e c o n t r a c t was
entered into.
The D i s t r i c t C o u r t made a c o n c l u s i o n o f law t h a t :
"Defendants f a i l e d t o make t i m e l y payment under
t h e C o n t r a c t f o r Deed a s t o L o t 1 5 , Block 2,
Heyn S u b d i v i s i o n , and w e r e i n d e f a u l t t h e r e u n d e r
a s t o L o t 1 5 , Block 2 a t t h e t i m e p l a i n t i f f s
n o t i f i e d them i n w r i t i n g of t h e d e f a u l t . De-
f e n d a n t s f a i l e d and r e f u s e d t o remedy t h e de-
f a u l t w i t h i n t h e t i m e p r o v i d e d by t h e c o n t r a c t
o r a t a l l , and any r i g h t s t h e y m i g h t have ac-
q u i r e d by t h e c o n t r a c t became f o r f e i t e d by r e a -
son of t h e i r f a i l u r e to cure t h e d e f a u l t i n a
t i m e l y manner. "
On March 1 3 , 1979, t h e D i s t r i c t C o u r t e n t e r e d judgment i n
f a v o r o f Reinkes and d e n i e d B i e g e l s ' c o u n t e r c l a i m .
The p a r t i e s i n t h e i r b r i e f s have f a i l e d t o a d d r e s s t h e
threshold i s s u e involved i n t h i s appeal--that i s , where l o t s
w i t h i n a l e g a l s u b d i v i s i o n are s o l d p u r s u a n t t o a c o n t r a c t
f o r deed, d o e s t h e s e l l e r s ' b r e a c h of a r e s t r i c t i v e c o v e n a n t ,
o c c u r r i n g p r i o r t o t h e c o n t r a c t e d due d a t e and r e l a t i n g t o a
t h i r t y f o o t s e t b a c k r e q u i r e m e n t on s e l l e r s ' a d j a c e n t l o t ,
e x c u s e t h e buyer from h i s d u t y t o make payment by t h e due
d a t e s o t h a t h i s r i g h t t o r e c o v e r damages i s n o t p r e c l u d e d
by h i s f a i l u r e t o make s u c h payment? Because o u r answer t o
t h a t q u e s t i o n i s i n t h e n e g a t i v e , w e must a f f i r m t h e judgment
of t h e D i s t r i c t C o u r t .
A p p e l l a n t s c o n t e n d t h a t t h e r e c o r d e d r e s t r i c t i v e cove-
n a n t s w e r e i n c o r p o r a t e d i n t o t h e c o n t r a c t f o r deed between
t h e p a r t i e s and t h a t t h e i r c o n t r a c t was made s u b j e c t t o t h o s e
p r o v i s i o n s s o t h a t a v i o l a t i o n o f t h e s e t b a c k r e q u i r e m e n t by
t h e s e l l e r s was a b r e a c h of c o n t r a c t . While t h e c o n t r a c t
f o r deed d i d n o t e x p r e s s l y r e f e r t o t h e d e c l a r a t i o n o f
r e s t r i c t i o n s a p p l i c a b l e t o t h e Heyn S u b d i v i s i o n p r e v i o u s l y
f i l e d and r e c o r d e d by t h e s e l l e r s , i t d i d make r e f e r e n c e t o
t h e r e c o r d e d p l a t of t h e Heyn S u b d i v i s i o n . Furthermore, t h e
d e c l a r a t i o n of r e s t r i c t i o n s p r o v i d e d t h a t :
"The r e s t r i c t i o n s h e r e i n set f o r t h s h a l l r u n
w i t h t h e l a n d and b i n d t h e p r e s e n t owners,
t h e i r h e i r s , and a s s i g n s , and a l l p a r t i e s
c l a i m i n g by, t h r o u g h o r under them . . ."
I t i s u n n e c e s s a r y , however, t o d e c i d e whether o r n o t
t h e r e s t r i c t i v e c o v e n a n t s became a p a r t of t h e c o n t r a c t f o r
deed between t h e p a r t i e s t o t h i s a p p e a l . W e r e a c h t h i s con-
c l u s i o n b e c a u s e even i f we assume t h a t t h e r e s t r i c t i v e
c o v e n a n t s were i n c o r p o r a t e d i n t o t h e c o n t r a c t f o r d e e d , t h e
p r o m i s e s c o n t a i n e d i n t h e r e s t r i c t i v e c o v e n a n t s a r e indepen-
d e n t of t h e o t h e r p r o m i s e s i n t h e c o n t r a c t f o r deed. In
p a r t i c u l a r , t h e y a r e i n d e p e n d e n t of t h e promise t o make
payment by t h e due d a t e . T h e r e f o r e , R e i n k e s ' b r e a c h of t h e
t h i r t y f o o t s e t b a c k r e q u i r e m e n t on t h e i r l o t a d j a c e n t t o t h e
o n e b e i n g s o l d , which o c c u r r e d b e f o r e t h e d a t e payment w a s
due under t h e c o n t r a c t , d i d n o t e x c u s e B i e g e l s ' o b l i g a t i o n
t o make payment by t h e due d a t e . B i e g e l s c o u l d n o t s t a n d on
t h e i r c o n t r a c t f o r deed and c o u n t e r c l a i m f o r damages f o r
breach of t h e r e s t r i c t i v e covenant a s a p a r t of t h e c o n t r a c t
f o r deed w i t h o u t f u l f i l l i n g t h e i r o b l i g a t i o n t o make payment
by t h e due d a t e .
The r i g h t s c r e a t e d by r e s t r i c t i v e c o v e n a n t s a r e con-
tractual rights. S h e r i d a n v. M a r t i n s e n ( 1 9 7 4 ) , 164 Mont.
383, 523 P.2d 1392, 1395. Assuming t h a t t h e r e s t r i c t i v e
c o v e n a n t s c o n t a i n e d i n t h e r e c o r d e d d e c l a r a t i o n of r e s t r i c -
t i o n s became i n c o r p o r a t e d i n t o t h e c o n t r a c t f o r deed by
r e f e r e n c e , t h e g o v e r n i n g r u l e i s s t a t e d i n O'Conner v .
W h i t e s i t t ( 1 9 4 8 ) , 1 2 1 Mont. 257, 193 P.2d 365, 366:
" P l a i n t i f f ' s c l a i m of r i g h t t o have a r e s c i s s i o n
o f h i s c o n t r a c t b e c a u s e of d e f e n d a n t ' s removal
of a b o u t $75 w o r t h of lumber and b u i l d i n g mater-
i a l s from t h e p r e m i s e s f o r which p l a i n t i f f had
c o n t r a c t e d t o pay $5,800 c a n n o t be s u s t a i n e d .
T h i s b r e a c h o f agreement by t h e d e f e n d a n t went
t o o n l y a v e r y s m a l l p a r t of t h e c o n s i d e r a t i o n
and c o u l d e a s i l y be compensated i n damages. It
c a n n o t t h e r e f o r e c o n s t i t u t e a ground f o r r e s c i s -
s i o n of p l a i n t i f f ' s c o n t r a c t .
" I n Johnson v. Meiers, Mont., 164 P.2d 1 0 1 2 ,
1014, we q u o t e d w i t h a p p r o v a l t h e f o l l o w i n g
from 1 2 Am.Jur., ' C o n t r a c t s , ' s e c t i o n 440: ' I t
i s n o t e v e r y b r e a c h of a c o n t r a c t o r f a i l u r e
exactly t o perform--certainly not every p a r t i a l
..
f a i l u r e t o perform--that e n t i t l e d t h e o t h e r
p a r t y t o r e s c i n d . A b r e a c h which g o e s to o n l y
- p a r t - - c o n s i ~ e r a t i o n , i s n c i d e n t a land
a of t h e
s u---- m a i n o =
bordinate t o m - -e c o n t r a c t ,
of t h
and m a y be compensated i n damages d o e s n o t war-
rant
- - a r e s c i s s i o n - -e c o n t r a c t ;
of t h
p a r t y is s t i l l bound t o perform -s- a r t - t h e
*
h i p - of
injured
agreement, and h i s on% remedy - - b r e a c h for the
c o n s i s t s of -e damages - -s s u f f e r e d t h e r e -
- th he h a
from. A r e s c i s s i o n i s n o t w a r r a n t e d by a mere
b r e a c h of c o n t r a c t n o t s o s u b s t a n t i a l and funda-
m e n t a l a s t o d e f e a t t h e o b j e c t of t h e p a r t i e s i n
making t h e agreement. Before p a r t i a l f a i l u r e o f
performance of one p a r t y w i l l g i v e t h e o t h e r t h e
r i g h t of r e s c i s s i o n , t h e a c t f a i l e d t o be p e r -
formed must go t o t h e r o o t of t h e c o n t r a c t o r
t h e f a i l u r e t o p e r f o r m t h e c o n t r a c t must be i n
r e s p e c t of m a t t e r s which would r e n d e r t h e p e r -
formance of t h e remainder a t h i n g d i f f e r e n t i n
s u b s t a n c e from t h a t which was c o n t r a c t e d f o r . ' "
(Emphasis a d d e d . )
For s t a t e m e n t s t o t h e same e f f e c t , s e e 17A C.J.S. Contracts
S344 a t 334: "When a c o v e n a n t g o e s o n l y t o p a r t o f t h e
c o n s i d e r a t i o n on b o t h s i d e s and a b r e a c h may be compensated
f o r i n damages, and i t i s o n l y s u b o r d i n a t e and i n c i d e n t a l t o
t h e main p u r p o s e of t h e c o n t r a c t , i t i s t o be r e g a r d e d a s a n
independent covenant u n l e s s t h i s i s c o n t r a r y t o t h e expressed
i n t e n t of t h e p a r t i e s " ; and 17A C.J.S. C o n t r a c t s S453 a t
571: "A p a r t y ' s f a i l u r e t o perform a n i n d e p e n d e n t s t i p u -
l a t i o n of a c o n t r a c t d o e s n o t b a r h i s r i g h t t o r e c o v e r f o r
t h e o t h e r p a r t y ' s b r e a c h o r e x c u s e such o t h e r p a r t y from
p e r f o r m i n g t h e s t i p u l a t i o n s made by him."
The same r u l e i s s t a t e d i n 1 7 Am.Jur.2d C o n t r a c t s 5355
a t 792:
". . . where t h e c o n t r a c t i s e x e c u t o r y on b o t h
s i d e s , t h e o b l i g a t i o n o f one o f t h e p a r t i e s t o
p e r f o r m f r e q u e n t l y depends on whether t h e mutual
promises a r e dependent o r independent. If the
p r o m i s e s a r e i n d e p e n d e n t of e a c h o t h e r , a p a r t y
must perform h i s p a r t o f t h e c o n t r a c t when t h e
t i m e f o r performance h a s a r r i v e d , i r r e s p e c t i v e
o f whether t h e o t h e r p a r t y h a s performed h i s
obligation. . ."
See a l s o Nolan v. Lunsford ( 1 9 4 0 ) , 142 F l a . 671, 196 So.
193, 128 A.L.R. 649, where t h e c o u r t c o n s i d e r e d a s i m i l a r
issue--namely, whether o r n o t performance by a vendor of h i s
c o v e n a n t t o make improvements was a n e c e s s a r y c o n d i t i o n t o
h i s r i g h t t o f o r e c l o s e on t h e c o n t r a c t . In discussing the
n a t u r e of d e p e n d e n t and i n d e p e n d e n t c o v e n a n t s , t h e c o u r t
stated:
"An i n d e p e n d e n t c o v e n a n t i s one which g o e s o n l y
t o a p a r t o f t h e c o n s i d e r a t i o n on b o t h s i d e s and
a b r e a c h of which may be p a i d f o r i n damages ...
"In determining whether covenants are dependent
or not, the intention of the parties is sought
for and regarded in the light of all the circum-
stances evidenced by the contract. The court
will consider whether the acts contemplated by
the covenants are subordinate and incidental or
whether they go to the entire consideration. . ."
Nolan, 196 So. at 197.
Applying these principles to the present case, it is
clear that the restrictive covenant relating to a 30 foot
setback requirement was incidental and subordinate to the
main purpose of the contract for deed and that the sellers'
breach went at most to only a part of the consideration.
The primary consideration in a contract for deed is the
sellers' delivery of a deed in exchange for the buyers'
payment of the purchase price. The sellers' breach of the
restrictive covenant was not so substantial and fundamental
as to defeat the object of the parties in making the con-
tract for deed. Therefore, under the rule announced in
O'Conner and the other authorities cited above, Biegels, the
parties injured by the Reinkes' breach of the restrictive
covenant, were still bound to perform their part of the
agreement by tendering payment of the purchase price on or
before the due date. Having failed to do so, they cannot
now stand on the contract and recover damages. The District
Court properly declared a forfeiture and denied appellants'
counterclaims.
Because the issue discussed is dispositive of this
case, it is unnecessary to consider the other issues raised
by the parties, such as the effect of asking the City for
zoning variance, etc.
The judgment of the District Court being fully supported
by the evidence is affirmed.
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W e concur:
~d4,%44
Chief J u s t i c e
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Justices