No. 87-116
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
DOUGLAS F. EIGEMAN,
Plaintiff and Appellant,
-vs-
LLOYD J. MILLER and BETTY J. MILLER,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable John McCarvel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Church, Harris, Johnson & Williams; Richard F.
Gallagher, Great Falls, Montana
For Respondent:
Emmons & Coder; H. William Coder, Great Falls,
Montana
Cotter & Cotter; Patricia O'Brien Cotter, Great
Falls, Montana
Submitted on Briefs: July 14, 1987
Decided: October 27, 1987
Filed:
* b
,
Clerk
0
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Mr. Eigeman brought this action for forfeiture of the
Millers' contract right to property they purchased from him
on a contract for deed. The District Court for the Eighth
Judicial District, Cascade County, dismissed the complaint.
Mr. Eigeman appeals. We reverse and remand for trial.
The dispositive issues are:
1. Did the District Court err in failing to find that
the Millers must tender the full balance due under the con-
tract in order to be entitled to the benefits of the
antiforfeiture statute, § 28-1-104, MCA?
2. Did the court err in finding and concluding that the
contract's shortening of notice provision is unconscionable
as applied and that the default notices were inadequate and
fatally defective?
In September 1982, Mr. Eigeman agreed to sell the Mill-
ers a piece of commercial property in Great Falls, Montana,
under a contract for deed. The Millers used their equity in
a home as the downpayment on the contract. Mr. Eigeman's
interest in the property was based on a lease with an option
to buy. His lessors gave their written agreement that they
would pass title to him when the Millers paid off the option
price under the lease-option. The Eigeman-Miller contract
requires the Millers to pay $1,480.16 on the 10th of each
month.
Paragraph 7 of the Eigeman-Miller contract provides that
if the Millers default in making any payment, and if the
default continues for 10 days, then Mr. Eigeman may give
notice to the Millers of the default claimed. If the first
default claimed is not cured within 30 days of the notice,
then the contract is' in default and Mr. Eigeman may elect to
either sue for the entire balance remaining unpaid, repossess
the property, or foreclose the contract as a real estate
mortgage. Paragraph 8 provides:
8. If, after the first notice of default, the
Purchasers cure or correct the default or defaults,
and if there is a subsequent default, the periods
of time are shortened to FIVE DAYS (5) after the
existence of the default before the notice can be
given, and to TWENTY DAYS (20) as the period within
which the default may be cured. If, after this
TWENTY DAYS (20) notice the Purchasers cure the
default or defaults complained of, and a subsequent
default exists, the periods are further shortened
to THREE DAYS (3) after the default before the
notice can be given, and to TEN DAYS (10) within
which to cure the default. If there is a default
after THREE (3) notices have been given to the
Purchasers, then the Sellers need give no further
notice and may forthwith elect one of the three
alternatives described above in the paragraph under
defaults, No. 7.
The record of payments to the escrow account shows that
the Millers never once made their payments on time, although
they were never more than 13 days late. Beginning in August
1984, Mr. Eigeman gave the Millers notices of default for
late payments. The notice of default for September read:
NOTICE OF DEFAULT
Per the contract for Deed dated the 10th day of
September, 1982, you are in default of Article 7 of
that agreement, in that the payment of $1,480.16
was not paid by September 10, 1984. The property
affected by the agreement is described as follows:
Lot 5, Block 3, Charles Russell Addition to
Great Falls, Cascade County, Montana according
to the officially recorded plat thereof on
file and of record in the office of the Clerk
and Recorder of Cascade County, Montana.
Demand is hereby made under Article 7 of the
agreement.
The other default notices were substantially the same as the
September notice. The series of payments on which Mr.
Eigeman sent default notices was as follows:
Payment Due Date of Default Notice Date of Payment
August 10 August 22 August 23
September 10 September 17 September 18
October 10 October 15 October 22
November 10 ------ November 14
When the Millers failed to make the December payment by
December 11, Mr. Eigeman sent them a Notice of Election of
Remedies and Cancellation and Termination of Contract for
Deed, based on the provisions of paragraph 8.
Mr. Eigeman then brought this action to terminate the
contract for deed and to obtain forfeiture of the downpayment
and monthly payments which had been made by the Millers.
Both parties filed motions for summary judgment. After the
first of five hearings in this matter, the court granted
partial summary judgment to Mr. Eigeman, ruling that the
Millers were in default of their obligations under the con-
tract. It also granted Mr. Eigeman leave to amend his com-
plaint, to allege defects making the Millers' house less
valuable than the value assigned to it for downpayment on the
contract. It ordered the Millers, if they could do so, to
show that they were entitled to the benefits of Montana's
antiforfeiture statute, § 28-1-104, MCA.
At the second hearing, the Lawsons, Mr. Eigeman's les-
sors, moved to intervene. Their motion was granted, and the
court ordered an escrow account set up for deposit of pay-
ments on the property during this litigation.
At the third hearing, the court heard brief testimony by
Mr. Miller and extensive arguments of counsel on applicabili-
ty of the antiforfeiture statute. The discussion between
court and counsel then broadened to other aspects of the
case. In its findings and conclusions, the court altered,
amended, or withdrew its prior findings and conclusions to
the extent that they were in conflict with the findings and
conclusions from this hearing. It found that the default
notices Mr. Eigeman sent to the Millers referred only to
paragraph 7 of the contract. Only the final notice of elec-
tion of remedies referred to paragraph 8. The court stated
[this] court does not find any substantial, credi-
ble evidence . . . that the Millers, in their
performance of the terms of said contract, were
grossly negligent; nor . . . that there was any
willful or fraudulent breach of duty on the part of
the Millers to prevent the application of the
equitable benefits of that statute.
It found that under the circumstances of this case the appli-
cation of paragraph 8 was unconscionable and that the failure
of Mr. Eigeman to mention paragraph 8 in the notices to the
Millers rendered the complaint for forfeiture fatally defec-
tive. It dismissed the complaint and awarded the Millers
their costs and attorney fees. It also ordered that none of
the payments which the Millers had deposited in the escrow
- ------- account could be distributed witout court order.
Two additional hearings were held. At those hearings,
the disposition of funds in the escrow account was arranged
and the amount of the Millers' attorney fees was set.
I
Did the District Court err in failing to find that the
Millers must tender the full balance due under the contract
in order to be entitled to the benefits of the antiforfeiture
statute, S 28-1-104, MCA?
Section 28-1-104, MCA, provides:
Relief from forfeiture. Whenever by the terms of
an obligation a party thereto incurs a forfeiture
or a loss in the nature of a forfeiture by reason
of his failure to comply with its provisions, he
may be relieved therefrom upon making full compen-
sation to the other party, except in case of a
grossly negligent, willful, or fraudulent breach of
duty.
In its order dated October 1, 1986, the District Court con-
cluded that "the Millers have successfully demonstrated their
right to the antiforfeiture provisions of Section 28-1-204,
[sic] M.C.A."
In order for S 28-1-104, MCA, to apply, the party ex-
posed to the forfeiture must have offered as full compensa-
tion the entire outstanding balance on the contract. Sun
Dial Land Co. v. Gold Creek Ranches (1982), 198 Mont. 247,
251, 645 P.2d 936, 939. The Millers made no such offer of
full compensation to Mr. Eigeman. Therefore the District
Court's conclusion that the Millers proved their right to the
antiforfeiture provision is reversed.
I1
Did the court err in finding and concluding that the
contract's shortening of notice provision is unconscionable
as applied and that the default notices were inadequate and
fatally defective?
The court's finding on unconscionability after the third
hearing was "[tlhat, given the factual circumstances out of
which this case arises, the Court finds that Paragraph 8 of
said contract for deed is, in its application, unconscionable
. . . ." The court concluded that "the forfeiture provisions
under Paragraph 8 of the parties' contract for deed are,
under the circumstances, unconscionable . . . ."
At the time of the third hearing, summary judgment had
been granted to Mr. Eigeman with the exception that the
Millers would be allowed an opportunity to prove they were
entitled to the benefit of the antiforfeiture statute. The
purpose of the hearing was to allow the Millers to prove
their entitlement to application of that statute. The pre-
sentation and cross-examination of witnesses was limited to
that purpose. Yet the District Court went on to rule on the
unconscionability of paragraph 8 and the inadequacy of the
notices.
The court's holding on the unconscionability of para-
graph 8 as applied involves issues of fact. The court found
that the circumstances constituting unconscionability includ-
ed oppression (Mr. Eigeman's attorney drafted the contract
and the Millers were unrepresented) and unfair surprise
(paragraph 8 was not mentioned in the notices of default).
Similarly, although no authority was cited which would re-
quire the notices of default to refer specifically to para-
graph 8, the court found that the notices were inadequate and
fatally defective. Mr. Eigeman argues in his brief to this
Court that the notice given was adequate in light of the
contract provision that "notice shall be sufficient for all
purposes if it describes the default in general terms." He
was not allowed to present any evidence on that or any other
theory in the proceeding before the District Court.
These are issues on which full opportunity for present-
ing testimony and cross-examining witnesses should have been
allowed to all parties. Yet only Mr. Miller testified at the
hearing, and his testimony was limited to the issue of wheth-
er the Millers were entitled to the benefit of the
antiforfeiture statute. We conclude that this case should be
remanded for full trial on the merits.
Mr. Eigeman has also raised the issues of whether he
should have been allowed to present evidence of latent de-
fects in the house used as a down payment on this contract,
and whether the Millers were properly awarded their attorney
fees. These issues need not be addressed at this stage
because of the remand for trial.
Reversed and remanded.
We Concur-
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