No. 85-390
I N THE SUPREME COURT O THE STATE O MONTANA
F F
1986
LEONARD and B O N N I E BOLES,
P l a i n t i f f s and A p p e l l a n t s ,
-vs-
VERA LER,
Defendant and Respondent.
APPEAL FROM: D i s t r i c t Court o f t h e Seventh J u d i c i a l D i s t r i c t ,
I n and f o r t h e County o f R i c h l a n d ,
The Honorable R. C . McDonough, Judge p r e s i d i n g .
COUNSEL O RECORD:
F
For Appellant:
Lloyd E. H a r t f o r d , B i l l i n g s , Montana
F o r Respondent:
P h i l Carter; Koch, C a r t e r & Anciaux, S i d n e y , Montana
S u b m i t t e d on B r i e f s : March 6 , 1986
Decided: J u n e 6 , 1986
Filed: J N 6 - 1986
U
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This is an appeal by the contract purchasers of certain
land located in Savage, Montana, from an order of the
Richland County District Court granting summary judgment to
the contract seller. The District Court held that the seller
properly invoked the forfeiture provisions of the contract
and consequently awarded her possession and ownership of the
real property in question including the fixtures and personal
property. In the alternative, the lower court allowed the
purchasers 75 days to pay in full the balance due under the
contract. From this judgment the purchasers appeal. We
affirm.
The facts relevant to this appeal are basically
undisputed by the parties. On September 22, 1978, Leonard
Boles and Bonnie Boles ("Boles") and Melvin Ler and Vera Ler
("Ler") entered into a contract for the sale of real property
(contract for deed) wherein the Boles purchased certain real
property located in Savage, Montana, from the Lers. It
should be noted that Melvin Ler is no longer a party to this
action because he is deceased.
The Boles remained current on their monthly installment
payments as called for under the contract through November of
1982. However, the December 1982 payment and the January and
February 1983 payments were not paid on time as required by
the contract. On February 8, 1983, the Boles paid to the
escrow agent their monthly installment which was due on
December 1, 1982. On or about February 11, 1983, the Boles
paid to the escrow agent the monthly installment which was
due on January 1, 1983. Finally, on or about February 16,
1983, the Boles paid to the escrow agent the monthly
installment which was due on February 1, 1983.
On February 10, 1983, Ler, through her attorney of
record, sent a notice of intention to cancel and determine
the contract to the Boles at their home address. Ler
thereafter reaffirmed her wish to cancel the contract by a
letter dated February 24, 1983, sent to the Boles' attorney
of record.
On or about April 13, 1983, Ler returned all of the
delinquent checks to the Boles uncashed. On April 25, 1983,
the Boles initiated this lawsuit by filing their complaint.
The complaint sought in part an order entitling the Boles to
carry out the terms of the contract and an order enjoining
Ler from foreclosing on the contract. In August of 1983, Ler
filed her motion for summary judgment and the Boles filed
their cross-motion for summary judgment. In October of 1983,
the District Court entered its findings of fact, conclusions
of law, and judgment wherein it ordered the Boles to either
pay the accelerated unpaid purchase price of the real
property plus interest, or, in the alternative, to return
possession of the real property to Ler. The lower court also
awarded Ler her reasonable attorney's fees and by an order
dated February 17, 1984, determined this amount to be $240.
From these rulings of the lower court denying their
cross-motion for summary judgment and awarding Ler her
attorney's fees, the Boles appealed to this Court.
By a decision dated November 14, 1984, this Court
dismissed the Boles' appeal without prejudice and remanded
the cause to the District Court for further proceedings.
Boles v. Ler (Mont. 1984), 692 P.2d 1, 41 St.Rep. 2106. This
Court held that the summary judgment entered against the
Boles was not final because the attorney's fees question
actually still remained unanswered and because the Boles, if
they desired to appeal before a final judgment on all the
issues, were required to get the issue properly certified
based upon Rule 54, M.R.Civ.P. The Boles failed to get the
partial judgment certified, so the matter was not properly
before this Court.
On November 27, 1984, Ler again filed her motion for
summary judgment with the District Court. On June 27, 1985,
the lower court entered its findings of fact, conclusions of
law and judgment in favor of Ler awarding her possession and
ownership of the real property in question, including the
fixtures and personal property. In the alternative, the
Boles were allowed 75 days to pay in full the accelerated
balance due under the contract, including interest. The
lower court also awarded Ler her attorney's fees in the sum
of $450. From this judgment the Boles appeal and present the
following issues for review by this Court:
1. Whether the District Court erred in granting Ler's
motion for summary judgment.
a. Whether the escrow agent was the agent for
Ler and, if so, whether the agent's acceptance of
the late payments constituted acceptance by the
principal (Ler) .
b. Whether Ler's act of retention of the late
payments remitted to her by the escrow agent
resulted in a ratification of the agent's
acceptance of the late payments by Ler.
The Boles' argument in this case essentially boils down
to the assertion that Ler waived her right to cancel the
contract because she "accepted" the late payments for January
and F e b r u a r y 1983 a f t e r s h e had s e n t h e r n o t i c e o f d e f a u l t t o
t h e Boles. A s Ler correctly points out, t h e Boles r e l y on
three specific arguments in their brief to support t h e i r
theory that Ler waived h e r right t o cancel the contract.
These arguments a r e :
(1) L e r ' s f a i l u r e t o n o t i f y t h e escrow a g e n t t h a t
the contract had been terminated; ( 2 ) The
ratification by Ler of the escrow agent's
a c c e p t a n c e o f t h e l a t e payments a f t e r t h e n o t i c e o f
d e f a u l t had been i s s u e d ; (3) L e r ' s f a i l u r e t o
promptly r e t u r n t h e f u n d s .
In her b r i e f , Ler c l e a r l y and c o r r e c t l y r e b u t s t h e s e
s p e c i f i c arguments r a i s e d by t h e B o l e s . F i r s t , with regard
t o the argument that Ler s h o u l d have n o t i f i e d t h e escrow
a g e n t t h a t t h e c o n t r a c t had been t e r m i n a t e d , Ler contends
that contacting the Boles directly by mail was the only
proper a c t i o n t o take pursuant t o t h e c o n t r a c t terms. Ler
p o i n t s o u t t h e terms of t h e c o n t r a c t only required t h a t a
n o t i c e o f d e f a u l t be s e n t t o t h e B o l e s i n c a s e o f a c o n t r a c t
forfeiture, which the Boles acknowledged receiving on
F e b r u a r y 11, 1983. L e r f u r t h e r p o i n t s o u t s h e had a b s o l u t e l y
no d u t y t o n o t i f y t h e escrow a g e n t t h a t t h e c o n t r a c t had been
t e r m i n a t e d under t h e t e r m s o f t h e c o n t r a c t i t s e l f .
More important, Ler points out, the terms of the
c o n t r a c t provided t h a t should she i s s u e a n o t i c e of d e f a u l t
t o t h e B o l e s , t h e B o l e s would t h e n have 90 days t o pay h e r
t h e a c c e l e r a t e d b a l a n c e due under t h e c o n t r a c t . Ler a r g u e s
that because the warranty deed and other documents were
d e p o s i t e d w i t h t h e escrow a g e n t , and b e c a u s e a l l payments
were t o b e made t h r o u g h t h e escrow a g e n t , it was n e c e s s a r y
f o r h e r t o l e a v e t h e escrow a c c o u n t open i n c a s e t h e Boles
wanted t o pay o f f t h e r e m a i n i n g b a l a n c e on t h e c o n t r a c t . Ler
a s s e r t s had s h e n o t i f i e d t h e escrow a g e n t t h a t t h e c o n t r a c t
had been terminated, as the Boles suggest, she would have
prematurely closed the escrow account, thus denying the Boles
the opportunity to pay off the contract within the 90 day
period. We agree.
Next, with regard to the Boles' second and third
arguments that Ler ratified the escrow agent's acts of
accepting the late payments and that Ler failed to promptly
return the payments, Ler once again directs this Court's
attention to the contract language which allowed the Boles 90
days to pay off the accelerated balance owing under the
contract. Ler points out the contract does not state that
should the Boles choose to pay off the contract balance
within the 90 day period that they must pay the entire amount
in one installment. Rather, Ler argues, the Boles had 90
days to pay off the balance owed under the contract in as
many or as few installments as they wished. Realizing this
situation, Ler argues she decided the Boles must be
intending, by their continuance to make payments after they
had received their notice of default, to pay off the contract
balance and that by sending the payments when they did, they
were attempting to reduce the amount of principal and
interest that would be due at the end of the 90 day period.
Ler argues she was always aware that if she did in fact cash
the late payments sent to her by the Boles, this action might
be interpreted as a waiver on her part. Therefore, Ler
argues she decided to hold the late checks without cashing
them until such time as it became apparent that the Boles
were either going to pay off the remaining contract balance
or that they were making the late payments only for the
purpose of inducing her into waiving her right to cancel the
contract. When it became apparent that the latter was the
Bolesf true motive, Ler argues she returned the uncashed
checks to the Boles immediately.
Ler further points out that the Boles, by continuing to
make monthly payments after they had received their notice of
default, were intentionally putting her in a "catch-22"
situation. Ler argues if she had returned the late checks
immediately, the Boles would have argued that she was not
allowing them time to pay off the contract balance as they
had a right to do under the contract. Further, Ler argues if
she did not immediately return the late checks (as she did in
this case), the Boles would then argue she had waived her
right to cancel the contract. We agree with Ler that what
the Boles failed to prove in establishing that Ler "accepted"
the late payments, and thereby waived her right to cancel the
contract, is that she "intended" to retain these payments.
The Boles correctly point this Court's attention to the
recent case of Bailey v. Lilly (Mont. 1983), 667 P.2d 933, 40
St.Rep. 1079, to help resolve this matter. The Boles also
correctly state that the Bailey decision stands for the
proposition that where a seller (i.e. Ler) continues to
accept monthly payments under a contract for deed after she
has sent the purchaser (i.e. Boles) a notice of default, such
acceptance constitutes a waiver by the seller of any right to
cancel the contract. As the Court in Bailey succinctly
stated:
[Blaileys (sellers) waived any right to declare a
default (of the contract) by continuing to accept
Lillys' (purchasers) monthly payments after the
declaration of default.
In light of this general rule, the Boles recognize the
cruicial issue in the present case is whether Ler "accepted"
their late payments thereby precluding her right to declare
the contract in default.
We hold with regard to the still valid rule expressed in
Bailey above, the critical inquiry is whether the seller
(i.e. Ler) charged with having "accepted" late payments
actually "intended" to retain those payments. For example,
in the Bailey case, involving a situation analogous to the
present case, it was clear that the sellers (Baileys) had the
intention to retain the late payments submitted to them by
the purchasers (Lillies) because the money from these
payments was never returned to the Lilly family. Clearly
this is not the situation in the present case. In the
present case, Ler did not have the intention of retaining the
late payments submitted to her by the Boles. This is
evidenced by several actions performed by Ler. First, and
most important, Ler returned all of the late checks submitted
to her by the Boles on April 13, 1983, uncashed. This Court
believes, as did the District Court, that Ler obviously did
not want to waive her right to cancel the contract because
she did not cash these late payments. It appears Ler
retained the late payments until it became evident that the
Boles did not intend to pay off the contract balance within
90 days.
The second act evidencing Ler's true intentions was that
she, through her attorney of record, sent a letter to the
Boles on February 24, 1983, reaffirming her desire to cancel
the contract and also rejecting the Boles' offer to reinstate
the contract. This letter also notified the Boles that JJer
either wanted the accelerated contract balance paid in full
or the subject property returned to her.
In light of the above discussion, it is clear that Ler
did not intend to waive her right to cancel the contract with
the Boles. Therefore, the general rule expressed in the
Bailey decision is not applicable to the present case.
The judgment of the District Court is affirmed.
We concur: /