Scheitlin v. R & D MINERALS

No. 84-433 IN THE SUPREME COURT OF THE STATE OF P4ONTANA MICHAEL J. SCHEITLIN, Personal Representative of the Estate of Edward E. Scheitlin, Deceased, Plaintiff and Respondent, R & D MINERALS, a Montana corporation, Defendant and Appellant. APPEAL FROM: District Court of the Fifth Judicial District, In and for the County of Madison, The Honorable Frank Davis, Judge presiding. COUNSEL OF RECORD: For Appellant: Lino A. Marsillo, Missoula, Montana For Respondent: Leaphart Law Firm, Helena, Montana Jardine, McCarthy & Grauman, Whitehall, Montana Submitted on Briefs: February 28, 1985 Decided: July 2, 1985 Filed: du!. 2 '985 -- Clerk Mr. J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion o f t h e Court. T h i s i s a n a p p e a l from a n O r d e r o f t h e D i s t r i c t C o u r t , Fifth Judicial District of the State of Montana, Madison County. On November 15, 1978, Edward E. and Vaeda G. Scheitlin entered into a contract to sell certain mining p r o p e r t i e s and c e r t a i n p e r s o n a l p r o p e r t y t o R & D Minerals. R & D was g i v e n immediate p o s s e s s i o n o f t h e p r o p e r t y and t h e right t o b e g i n mining. I t was obligated t o make monthly i n s t a l l m e n t payments, t h e l a s t one due on December 3 1 , 2 0 0 0 . On August 16, 1983, Michael Scheitlin, as personal r e p r e s e n t a t i v e o f t h e E s t a t e o f Edward and Vaeda Scheitlin, filed a complaint in Madison County District Court which asked that R & D Minerals be declared i n default on the contract. During t h e c o u r s e of t h e ensuing l i t i g a t i o n R & D Minerals f i l e d f o r bankruptcy. On A p r i l 1 3 , 1984, t h e U n i t e d S t a t e s B a n k r u p t c y C o u r t f o r t h e D i s t r i c t o f Montana remanded t h e c a s e t o t h e Montana S t a t e D i s t r i c t C o u r t , Madison C o u n t y , f o r t h e determination of t h e following matters concerning t h e above-mentioned contract between R & D Minerals and the Scheitlin estate: 1. The current status (terms and c o n d i t i o n s ) o f a n y a g r e e m e n t s between R & D M i n e r a l s and t h e S c h e i t l i n e s t a t e ; 3-. The r i g h t s and l i a b i l i t i e s of t h e p a r t i e s under t h e c u r r e n t c o n t r a c t o r agreement ; 3. When the sellers are legally obligated t o provide buyers with c l e a r title; 4. The s t a t u s o f s e l l e r s ' t i t l e ; 5. The amounts, i f a n y , due t o the s e l l e r s under t h e c u r r e n t c o n t r a c t ; and 6. Any other issues stipulated to by R & D M i n t ~ r a l sand t h e S c h e i t l i n E s t a t e . A f t e r a n e v i d e n t i a r y h e a r i n g , and p u r s u a n t t o t h e o r d e r o f t h e B a n k r u p t c y C o u r t , t h e D i s t r i c t C o u r t on May 3 1 , 1984, issued an order containing t h e following findings: "1. The only contract in existence between the parties is the Mining P r o p e r t y S a l e Agreement o f November 1 5 , 1978, a s amended on F e b r u a r y 25, 1980, and May 8 , 1980; "2. R & D is i n default of the contract o b l i g a t i o n s by v i r t u e o f i t s f a i l i n g t o make t h e r e q u i r e d payments; "3. The amount owing S c h e i t l i n may b e c a l c u l a t e d from a n e x a m i n a t i o n o f t h e c o n t r a c t and by t h e r e c o r d s o f the d e s i g n a t e d escrow agent; "4. The r i g h t s and l i a b i l i t i e s o f t h e parties t o the contract a r e limited t o t h e s p e c i f i c t e r m s and c o n d i t i o n s o f t h a t c o n t r a c t and none o t h e r . "5. S c h e i t l i n ' s o b l i g a t i o n t o provide m a r k e t a b l e t i t l e i s now moot, b u t t h a t i f the contract were i n good standing, Scheitlin was obligated to provide m a r k e t a b l e t i t l e a t any t i m e p r i o r t o t h e R & D ' s making t h e f i n a l payment; "6. The s t a t u s o f R & D ' s title t o the p r o p e r t i e s i s moot, g i v e n its default; "7. There was no novation of the o r i g i n a l c o n t r a c t , t h e r e h a v i n g b e e n no e x e c u t e d a g r e e m e n t between t h e p a r t i e s . " R & D M i n e r a l s a p p e a l s from t h e s e f i n d i n g s o f t h e t r i a l court and raises the fo11-owing i s s u e for review: Is the purchaser of mineral claims, upon notification of serious title defects, justified in ceasing installment payments a f t e r t h e p a s s i n g o f a r e a s o n a b l e p e r i o d i n which t h e v e n d o r t o o k no m e a n i n g f u l a c t i o n t o c o r r e c t s a i d d e f e c t s ? The rule in Montana is that a seller under an installment sales contract does not have to produce marketable title until the date set f o r f i n a l payment and tender of t h e deed. S i l f v a s t v. Asplund ( 1 9 3 3 ) , 93 Mont. 584, 592, 20 P.2d 631, 636. R & D does n o t d i s p u t e t h a t this is the rule in Montana but argues that there are exceptions applicable t o t h i s case. First, R & D contends that the contract "expressly c o n t e m p l a t e s t h a t t h e v e n d o r was t o p r o d u c e m a r k e t a b l e t i t l e w e l l i n advance o f t h e c l o s i n g d a t e . " The c o n t r a c t p r o v i d e s the following under the heading, Marketability - of Title t o Real P r o ~ e r t v : " P r i o r t o O c t o b e r 1 5 , 1979, t h e s e l l e r s will cause t o be furnished to the purchaser a b s t r a c t s o f t i t l e f o r such mineral claims a s a r e t h e property of t h e s e l l e r s , and w i l l p e r m i t t h e p u r c h a s e r r e a s o n a b l e t i m e , n o t t o exceed s i x t y (60) d a y s , t o have s u c h a b s t r a c t s examined by a n a t t o r n e y o f i t s own c h o i c e . Should such examination d i s c l o s e t h e t i t l e t o such p r o p e r t i e s t o be unmarketable, then t h e s e l l e r s s h a l l t a k e s u c h s t e p s a s may be necessary to render the same marketable, including a quiet title a c t i o n , a l l a t s e l l e r s ' own e x p e n s e . " The c o n t r a c t f u r t h e r p r o v i d e s f o r t h e s e t t i n g u p o f a n e s c r o w account, r e q u i r i n g t h e escrow t o " d e l i v e r such instruments, documents and p a p e r s t o t h e p u r c h a s e r a t t h e t i m e o f final payment h e r e u n d e r . " W e find t h a t neither of these provisions is inconsistent with the rule in Silfvast requiring that marketable title be produced no earlier than the time of final payment. The contract provides that sellers, upon notification of discrepancies in title, " . . . will immediately t a k e any n e c e s s a r y s t e p s t o b r i n g such i t e m s i n t o conformity with t h e i r warranty." However, t h e c o n t r a c t d o e s not contemplate that purchasers can withhold payments in o r d e r t o coerce t h e sellers i n t o c o r r e c t i n g t i t l e . Rather, a s p e c i f i c remedy i s p r o v i d e d : "Upon d i s c o v e r y o f a b r e a c h o f s e l l e r s ' w a r r a n t i e s concerning ownership o r l i e n o b l i g a t i o n s , o r sellers ' f a i l - u r e t o keep c u r r e n t any u n d e r l y i n g obl i g a t i o n s n o t assumed by p u r c h a s e r and a f f e c t i n g t h e r e a l o r p e r s o n a l p r o p e r t y , p u r c h a s e r may, a t i t s o p t i o n , c o r r e c t any d e f i c i e n c y by p a y i n g a n y o u t s t a n d i n g amount d u e , l i e n o r encumbrance, o r by i n i t i a t i n g l e g a l proceedings t o c l e a r any d e f e c t s i n title. S e l l e r s agree t o cooperate f u l l y w i t h p u r c h a s e r i n c o r r e c t i n g any s u c h d e f i c i e n c y and a g r e e t h a t any legal p r o c e e d i n g may b e b r o u g h t i n t h e i r names. The c o s t s , i n c l u d i n g a t t o r n e y s ' f e e s and c o u r t c o s t s , i n c u r r e d by p u r c h a s e r i n a p p l y i n g a n y amounts d u e , o b t a i n i n g t h e release of any liens or otherwise c o r r e c t i n g any d e f e c t s o f t i t l e s h a l l b e d e d u c t e d from t h e p u r c h a s e p r i c e c a l l e d f o r h e r e u n d e r and may b e o f f s e t a g a i n s t a n y payments d u e s e l l e r s . " Even a s s u m i n g t h a t t h e r e w e r e d e f e c t s i n t i t l e , R & D d i d n o t invoke the remedy provided by contract. Consequently, by terminating payments R & D was in breach of contract and p r o p e r l y h e l d i n d e f a u l t by t h e D i s t r i c t C o u r t . Second, R & D a r g u e s t h a t even i f t h e c o n t r a c t d o e s n o t contemplate t h a t marketable t i t l e be provided p r i o r t o t h e closing date, t h e p u r c h a s e r may demand m a r k e t a b l e t i t l e i f there a r e defects i n t h e seller's t i t l e t h a t a r e incurable. In o t h e r words, if i t i s apparent that the seller cannot acquire marketable title by closing then the purchaser is justified i n h a l t i n g payments on t h e c o n t r a c t . By making t h i s argument R & D assumes t h a t t h e r e w e r e d e f e c t s i n t h e S c h e i t l i n ' s t i t l e t h a t could n o t be cured. However, t h e r e i s n o t h i n g i n e i t h e r t h e r e c o r d on a p p e a l o r t h e D i s t r i c t C o u r t t r a n s c r i p t which s u p p o r t s t h i s a s s u m p t i o n . Furthermore, t h e c o n t r a c t p r o v i d e s f o r t h e p o s s i b i l i t y o f an i n c u r a b l e d e f e c t a s follows: " I f any defects of title c a n n o t be c o r r e c t e d t o conform t o t h e s e l l e r s ' warranties, the parties agree to r e n e g o t i a t e t h e purchase p r i c e t o r e f l e c t t h e d i f f e r e n c e i n v a l u e between what was b a r g a i n e d f o r by t h e p u r c h a s e r and what sellers a c t u a l l y d e l i v e r e d . Failing agreement i n t h i s r e g a r d t h e p a r t i e s agree to submit that issue for d e t e r m i n a t i o n by t h e D i s t r i c t C o u r t o f t h e Fourth J u d i c i a l D i s t r i c t of t h e S t a t e o f Montana i n and f o r t h e County o f Missoula.'' R & D ' s argument t h a t i n c u r a b l e d e f e c t s i n t h e s e l l e r ' s t i t l e justifies withholding payments on the contract must fail s i n c e , even i f t h e r e w e r e evidence o f i n c u r a b l e d e f e c t , t h e r e h a s been no r e s o r t t o t h e remedy p r o v i d e d by c o n t r a c t . R & D further argues t h a t t h e Scheitlins a r e g u i l t y of fraud and misrepresentation for selling property with i n c u r a b l e d e f e c t s i n t h e t i t l e and t h a t R & D was w i t h i n i t s r i g h t s i n w i t h h o l d i n g payments. W e note: 1. The r e c o r d d o e s not support t h a t there a r e incurable defects i n t i t l e . 2. Rule 8 ( c ) , M.R.Civ.P. states that fraud i s an a f f i r m a t i v e d e f e n s e t h a t must b e p l e a d e d i n t h e answer. R & D's answer contains no pleadings concerning fraud and/or misrepresentation. 3. The transcript of the May 30, 1984 hearing before the State District Court contains no allegations of fraud o r misrepresentation. 4. This i s t h e f i r s t time t h a t R & D Minerals has r a i s e d t h e i s s u e o f fraud and m i s r e p r e s e n t a t i o n i n t h i s l i t i g a t i o n . A s we h a v e n o t e d often t i m e s before, t h i s C o u r t w i l l n o t c o n s i d e r on a p p e a l i s s u e s t h a t have n o t b e e n r a i s e d below. See, e.g., Rustics of Lindberg Lake v. Lease (Mont. 19841, 690 P.2d 440, 41 St.Rep. 2092. Finally, respondent asks us to dismiss this appeal because of appellant's failure t o comply w i t h Rule 10(c), M.R.App.Civ.P. Rule 1 0 ( c ) p r o v i d e s t h a t t h e r e c o r d on a p p e a l must b e submitted t o t h i s Court within ninety days of the n o t i c e of appeal. N i n e t y d a y s from t h e f i l i n g o f t h e n o t i c e o f t h i s a p p e a l e x p i r e d on September 2 6 , 1 9 8 4 , and t h e r e c o r d was n o t forwarded t o t h i s Court u n t i l October 3 , 1984. In H a n n i f i n v . R e t a i l C l e r k s ( 1 9 7 3 ) , 162 Mont. 1 7 0 , 172-173, 511 P.2d 982, 984, we noted that Rule 10 (c) gives this Court wide discretion in permitting the filing of a record, and we quoted from that rule as follows: "If the District Court is without authority to grant the relief sought or has denied a request therefore, the Supreme Court may on motion extend the time for transmitting the record or may permit the record to be transmitted and filed after the expiration of the time allowed or fixed." In this case both the appellant, who requested an extension for transmitting the record to more than ninety days from the filing of the appeal, and the District Court, which granted the request, though it had no authority to do so, indicated a relaxed attitude about the Appellate Rules which we do not encourage. However, the violation in this case was not egregious and there is no evidence that it was anything but inadvertent. Under these circumstances we refuse to dismiss. The judgment of the District Court is affirmed. We concur: --/