No. 88-548
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
DANIEL J. FELSKA and ADOLPH L.
SOLVIE, Plaintiffs,
WORLD REALTY LTD., KADON MANAGEMENT
CO., LTD, YORK VENTURES, LTD., HELUND
FOREST CONSULTANTS, RONALD EDWARD LITTLE,
DONALD JOHN HENRY WILLIAMSON, et al.,
Plaintiffs/Intervenors and Appellants,
-vs-
BRIAN GEORGE GOULDING, and all other
persons, unknown, claiming or who might
claim any right, title, estate or interest
in or lein or encumbrance upon the real
property described in the complaint,
adverse to the plaintiffs title thereto,
whether such claim or possible claim be
present or contingent,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Ben Berg, Jr. argued; Berg, Stokes, Tollefsen & Hayes,
Bozeman, Montana
For Respondent :
J. Robert Planalp argued; Landoe, Brown, Planalp &
Kornmers, Bozeman, Montana
Rodney Schwasinger argued, Bozeman, Montana
Submitted: May 9, 1989
Decided: July 19, 1989
Filed:
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This case comes on appeal from the Eighteenth Judicial
District, Gallatin County, the Honorable Joseph B. Gary
presiding. The District Court quieted title in the
plaintiffs, purchasers of certain real property in Bozeman,
Montana. Previously, the property had been held by a group
of investors (hereinafter referred to as the co-owners) from
British Columbia, Canada, each of whom held their respective
interests as tenants in common. In addition to the quiet
title determination, the District Court awarded defendant
Goulding a portion of the sale proceeds in proportion to his
initial capital investment. We affirm in part, reverse in
part and remand for further proceedings.
In December, 1977, Brian George Goulding and other
co-owners acquired the real property, personal property,
fixtures, furniture, liquor license and other business assets
of the Inn of Bozeman (Inn). The parties entered into an
agreement for the purpose of setting forth the rights and
obligations with respect to their interest in the Inn.
Specific provisions of the agreement will be discussed later
in this opinion.
In December, 1983, citing financial difficulties, the
co-owners decided to list the property for sale. Throughout
the following year, meetings were held during which the
co-owners discussed prospective sales and financial problems
of the Inn. Goulding or his attorney, Michael Karton,
attended most of these meetings.
Between December, 1984, and March 9, 1985, Goulding
lived in the Philippines with his family. Goulding did not
leave a forwarding address with the other co-owners, nor
his instructions with his attorney regarding a potential sale
the Inn.
On January 3, 1985, fourteen of the sixteen co-owners
entered into an agreement with plaintiffs for the sale of the
Inn. The co-owners attempted to contact Goulding through his
attorney and sent by registered mail letters informing him of
the majority decision to sell the property. In accordance
with the terms of the co-owners' 1977 agreement, Goulding was
informed that his consent would be "deemed" given if written
objection to the sale was not received within ten days.
(Thereafter, the co-owners petitioned the Supreme Court of
British Columbia for an order authorizing appellant
Williamson to sign on Goulding's behalf. However, all
parties agree the order is void for lack of jurisdiction.)
On March 20, 1985, after returning from the
Philippines, Goulding visited his attorney and was given a
copy of the sale agreement and the registered letter.
Goulding did not respond to the letter. However, on April 3,
1985, Goulding attended a meeting of the co-owners. At that
meeting the sale documents were signed by all co-owners
except Goulding, who abstained. Two days later, Goulding
sent a letter to the co-owners setting forth his objections
to the sale.
Plaintiffs initiated a quiet title action against
Goulding, alleging Goulding's claimed ownership interest in
the Inn created a cloud on their title. Goulding
counterclaimed, stating the co-owners had no authority to
transfer his ownership interest in the Inn. Goulding
additionally claimed plaintiffs had recorded the deed
intentionally and with knowledge of his interest in the
property, and thereby depreciated his interest. Later, the
other co-owners of the Inn filed a complaint in intervention.
On December 3, 1987, the Honorable Joseph B. Gary
entered judgment in favor of the plaintiffs. The District
Court found the agreement between the co-owners required
majority vote for the complete sale of the property.
Alternatively, the court ruled Goulding impliedly consented
to the sale because he failed to give written objection.
Finally, in original Conclusion of Law No. 8, the court
ordered that upon delivery of the deed to plaintiffs, all
monies in deposit due and owing to Goulding shall be
delivered by the escrow agent to Goulding.
By order of March 8, 1988, the District Court amended
its Findings to include the following:
Finding No. 13. During the
negotiations for the sale of the
principle assets it was necessary that
additional capital be infused in the
corporation for operating expenses. A
Motion was passed at the meeting of
December 8, 1983, at which the Defendant
Goulding was not present, that any
advance of capital would be considered as
a loan at the interest rate of
twenty-five percent (25%) or at U.S.
prime rate plus six/nine percent (6/9%)
and that a legal opinion was to be
obtained as to whether this was
enforceable. No legal opinion was ever
obtained and the net effect of this
Motion as shown by the evidence would be
to completely wipe out the equity of all
of the original investors in the business
and all monies remaining on hand would be
paid to those persons advancing funds.
That the effect of wiping out all
original investors was done without
notice to the members of the partnership
that this would be the result taken at
the meeting and would amount to an
inequitable result and contrary to due
process of law.
1 4 . That any investments made
a f t e r t h e December 1 4 , [ s i c ] 1983 m e e t i n g
by t h e members o f t h e p a r t n e r s h i p s h o u l d
be t r e a t e d a s c a p i t a l i n v e s t m e n t s and
added t o e a c h p a r t n e r ' s o r i g i n a l c a p i t a l
a c c o u n t s o t h a t t h e monies r e m a i n i n g i n
escrow a t t h i s t i m e be p a i d o u t p r o r a t e d
s h a r e on a l l c a p i t a l a c c o u n t s .
Conclusion o f Law No. 8 was amended t o conform t o t h e new
f i n d i n g s and r e a d s a s f o l l o w s :
T h a t upon t h e d e l i v e r y o f t h e Deed t o
F e l s k a and S o l v i e by e i t h e r Goulding o r a
r e f e r e e a p p o i n t e d by t h e C o u r t t o e x e c u t e
a d e e d , t h a t a l l monies i n d e p o s i t a t
S e c u r i t y T i t l e I n s u r a n c e Company s h a l l be
distributed to the members of the
partnership in proportion of their
o r i g i n a l investments p l u s any i n f u s i o n of
c a p i t a l f o l l o w i n g t h e December 1 4 , [ s i c ]
1983 m e e t i n g . S a i d payments f o l l o w i n g
that meeting constitute a capital
i n v e s t m e n t and n o t a l o a n .
On A p r i l 13, 1988, co-owners moved for relief under
Rule 60(b) (2), M.R.Civ.P., from the March 8, 1988 o r d e r ,
s e e k i n g t o a d m i t a l e g a l o p i n i o n w r i t t e n December 9, 1983,
which d i s c u s s e d t h e l e g a l i t y o f t h e 2 5 % i n t e r e s t on l o a n s .
On April 18, 1988, the District Court denied the motion
without opinion.
On J u n e 28, 1 9 8 8 , t h e D i s t r i c t C o u r t e n t e r e d judgment
and d e c r e e d t h e p l a i n t i f f s f e e owners o f t h e r e a l p r o p e r t y .
F u r t h e r , t h e c o u r t o r d e r e d t h a t a l l monies h e l d i n e s c r o w be
distributed t o the partners i n proportion t o t h e i r original
investments p l u s any i n f u s i o n of c a p i t a l .
Upon G o u l d i n g ' s m o t i o n t o amend f o r a d e f i n i t e amount
due him, t h e D i s t r i c t C o u r t , on August 8 , 1988, o r d e r e d t h a t
h e s h o u l d r e c e i v e 10.26% o f a l l n e t p r o c e e d s o f d i s p o s i t i o n
o r $25,163.70, t o g e t h e r w i t h i n t e r e s t from t h e d a t e o f s a l e ,
plus 10.26% o f all other assets which arose out of the
o p e r a t i o n and s a l e o f t h e I n n .
The f o l l o w i n g i s s u e s a r e r a i s e d on a p p e a l :
1. Did t h e D i s t r i c t C o u r t e r r when it q u i e t e d t i t l e i n
the plaintiffs?
2. Did t h e p l a i n t i f f s and co-owners slander Goulding's
title?
3. Did t h e D i s t r i c t C o u r t e r r when it a d o p t e d F i n d i n g s
Nos. 1 3 and 1 4 and C o n c l u s i o n o f Law No. 8 , i n which i t
determined the advances made after December, 1983 were
c a p i t a l i n v e s t m e n t s r a t h e r t h a n l o a n s and w h e r e i n i t awarded
a money judgment?
4. Did the District Court err when it denied the
co-owners' Rule 6 0 ( b ) ( 2 ) , M.R.Civ.P., motion?
Our s c o p e o f r e v i e w i s s u c h t h a t w e may c o n s i d e r t h e
c o n t r a c t language independently. SAS P a r t n e r s h i p v . S c h a f e r
( 1 9 8 2 ) , 200 Mont. 478, 653 P.2d 834. Generally, contract
a m b i g u i t i e s a r e q u e s t i o n s o f f a c t . S-W Co. v . Schwenk ( 1 9 7 7 ) ,
176 Mont. 546, 568 P.2d 145. However, t h e determination of
whether o r not an ambiguity e x i s t s i s one o f law, freely
r e v i e w a b l e by t h i s C o u r t . - Partnership;
SAS Martin v. United
States (9th C i r . 1 9 8 1 ) , 649 F.2d 701; U n i t e d S t a t e s F i d e l i t y
and G u a r a n t y Co. v. Newman (9th C i r . 1 9 8 1 ) , 656 F.2d 457.
The e n t i r e c a s e f o c u s e s upon t h e 1977 a g r e e m e n t e n t e r e d
i n t o between t h e 16 co-owners. Therefore, a review of t h e
significant contract provisions is i n order:
15. ... V o t i n g s h a l l b e by h a n d , w i t h
e a c h Co-owner h a v i n g o n e v o t e , u n l e s s
o t h e r w i s e demanded by a n y Co-owner, in
which c a s e v o t i n g s h a l l b e a c c o r d i n g t o
t h e e q u i t i e s o f t h e Co-Owners i n t h e I n n .
A l l d e c i s i o n s s h a l l be bv m a i o r i t v v o t e
RESTRICTIONS OF TRANSFER:
1 6 . No Co-owner shall assign, or
o t h e r w i s e d i s p o s e o f , a l l o r any p a r t o f
h i s i n t e r e s t i n t h e Inn u n l e s s such
Co-owner :
A. has obtained the p r i o r written
c o n s e n t o f t h e o t h e r Co-Owners; o r
B. has f i r s t o f f e r e d h i s i n t e r e s t
i n t h e I n n t o t h e o t h e r Co-Owners
1 7 . No Co-owner s h a l l m o r t g a g e , p l e d g e ,
c h a r g e o r o t h e r w i s e encumber a l l o r any
p a r t of h i s i n t e r e s t o r restrict the
transferability of his co-ownership
i n t e r e s t unless:
A. s u c h Co-owner h a s o b t a i n e d t h e
p r i o r written consent of the other
Co-Owners; and
B. t h e holder o f such mortgage,
p l e d g e , c h a r g e encumbrance o r o t h e r
r e s t r i c t i o n a g r e e s t o b e bound t o
and w i t h t h e o t h e r Co-Owners and t o
g r a n t t o t h e o t h e r Co-Owners t h e
r i g h t s o f f i r s t r e f u s a l and o p t i o n s
t o p u r c h a s e h e r e b y g r a n t e d amongst
and between t h e Co-Owners, p u r s u a n t
t o t h e t e r m s o f t h i s Agreement.
BORROWING PROVISIONS:
21. The Co-Owners s h a l l b o r r o w from t i m e
t o t i m e a l l t h e sums o f money r e q u i r e d i n
c o n n e c t i o n w i t h t h e c a r r y i n g on o f t h e
I n n , upon t h e s e c u r i t y o f t h e a s s e t s o f
t h e Inn t o t h e e x t e n t p o s s i b l e . The
approval of all Co-Owners s h a l l be
acquired when establishing lines of
c r e d i t o r f i n a n c i n g w i t h any b a n k s o r
other financial institutions o r private
lenders.
LOANS BY CO-OWNERS:
22. If at any time a Co-owner shall
properly determine that, in order to
protect or preserve any of the properties
or other assets of the Inn, additional
funds are required to meet the current
cash requirements of the Inn and the same
are not available from sources already
available to the Co-Owners, then any such
Co-owner may, but shall not be obligated
to, advance such funds to the Inn or pay
such funds to third parties for the
benefit of the Inn. .. Any such advances
or payments shall during their existence
bear interest at a rate determined by the
Manager.
DISTRIBUTION OF DISTRIBUTABLE FUNDS:
28. ... Distributable funds shall be
distributed as follows:
A. Firstly, in repayment of the
principal and accrued interest
under each temporary loan, if any,
to the Inn pursuant to Paragraph 22
hereof which remains unpaid, with
all amounts being applied firstly
to accrued interest and the balance
to principal, and, if more than one
such loan remains unpaid, then on a
pro rata basis;
B. Secondly, the balance if any
shall be distributed to the
Co-Owners in accordance with their
respective interests.
29. In the event that the Co-Owners
agree to - -all or any portion - -
sell - of the
interest or properties - - -
of the Inn, then
in such event, the net proceeds of such
sale (except for the amounts thereof
required to be paid to any liabilities)
shall be deemed to be distributable funds
and shall be distributed in accordance
with the provisions of the aforesaid.
(Emphasis added.)
...
IMPLIED CONSENT:
37. I n a n y i n s t a n c e u n d e r t h i s Agreement
i n which t h e c o n s e n t o r a p p r o v a l o f a
CoOwner [ s i c ] t o a n y p r o p o s e d a c t i o n
a l r e a d y a p p r o v e d by a m a j o r i t y o f t h e
Co-Owners i s r e q u i r e d , s u c h c o n s e n t o r
a p p r o v a l s h a l l b e deemed t o have b e e n
given u n l e s s w r i t t e n o b j e c t i o n t o such
proposed a c t i o n , s e t t i n g o u t t h e grounds
f o r such o b j e c t i o n , i s s e n t by s u c h
o b j e c t i n g Co-owner t o t h e G e n e r a l Manager
w i t h i n t e n (10) days a f t e r r e c e i p t of a
written request f o r such consent o r
approval.
An a m b i g u i t y e x i s t s when a c o n t r a c t i s s u b j e c t t o two
interpretations. I n s u c h a n i n s t a n c e , p a r 0 1 t e s t i m o n y may b e
used t o a s c e r t a i n t h e p a r t i e s ' intent. SW Co.,
- 568 P. 2d a t
147.
However, i n t e n t o f t h e p a r t i e s i s o n l y
l o o k e d t o when t h e a g r e e m e n t i n i s s u e i s
n o t c l e a r on i t s f a c e ... Where t h e
contractual language is clear and
unambiguous o n i t s f a c e , it i s t h i s
Court's duty t o enforce the contract a s
d r a f t e d and e x e c u t e d by t h e p a r t i e s .
( C i t a t i o n s Omitted. )
Monte V i s t a C o . v . Anaconda Co. (Mont. 1 9 8 8 ) , 755 P.2d 1358,
1362, 45 St.Rep. 809, 814; c i t i n g G l a c i e r Campground v . Wild
Rivers, Inc. ( 1 9 7 8 ) , 182 Mont. 389, 597 P.2d 689. It is
f u n d a m e n t a l when r e v i e w i n g c o n t r a c t u a l d i s p u t e s t h a t w e a r e
required to read the entire contract together and give
effect to every p a r t , if reasonably practicable. Section
28-3-202, MCA.
The i s s i l e n t concerning t h e s p e c i f i c
1977 a g r e e m e n t
vote required f o r t h e f u l l s a l e of t h e property. However,
the agreement mandates unanimous co-owner consent for one
owner's s a l e o r encumbrance o f h i s i n d i v i d u a l i n t e r e s t a n d ,
in connection with the regular business activities, the
establishment of lines of credit and financing with banks or
financial institutions. Goulding argues that because
unanimous consent is required of these activities, unanimous
consent must also be required for the sale of the business.
In support of his position, Goulding points to comments made
during meetings that "the sale agreement requires the
signatures of Messrs. Otto and Goulding, both of whom are
unwilling to sign" and statements regarding the co-owners'
need for "powers of attorney executed by all partners to sell
the motel." Further, Goulding contends the void British
Columbia court order indicates that the co-owners believed
unanimous consent was necessary to effect a full sale of the
business.
The District Court found the contract language clear
and unambiguous and therefore rejected Goulding's attempt to
introduce extrinsic evidence. We agree.
While the contract does not specifically address the
vote required to effect a full sale, the absence of that
specific language does not render the contract ambiguous.
First, the provisions requiring unanimous consent address
specific circumstances, unrelated to the sale in issue.
Because the unanimous consent provisions are definite, we
refuse to stretch their applicability. Additionally, the
parties contemplated the full sale of the business, as
evidenced by Paragraph 29, which discusses the distribution
of proceeds in the event of a sale. More importantly,
however, the agreement states that all decisions are to be
determined by majority vote, unless otherwise specified. We
interpret this provision to limit the instances which require
unanimous consent, because it indicates the co-owners' intent
to maintain majority vote for all other decisions.
When a contract is clear and unambiguous, this Court
must enforce the agreement as written by the parties. We
conclude that Paragraph 15, which allows for majority vote,
governs the sale of the property.
The District Court concluded that Goulding's letter of
April 5, 1985, did not specifically object to the sale, as
required under Paragraph 38 of the agreement. Rather,
Goulding expressed concern over management problems, the
repayment of loans to various co-owners, amounts held in
escrow, and legal questions of warranties. Because we uphold
the sale on other grounds, we need not address the matter.
However, we state simply that it is clear to this Court that
Goulding did not act promptly to protect his interest in the
Inn.
Next, Goulding contends that because the co-owners
maintained their interests as tenants-in-common, a majority
vote of the co-owners is ineffective to divest him of his
property. However, Paragraph 38 of the agreement provides:
The Co-Owners shall and will sign such
further and other papers and documents,
shall cause such meetings to be held and
do and cause to be done and perform such
further and other acts or things that may
be necessary or desirable from time to
time in order to give full effect to this
Agreement and each and every part hereof.
Further, Paragraph 42 states:
Any decision of the Co-Owners made in the
manner herein before described shall be
fully and faithfully carried out by all
Co-Owners - - - Co-Owners -
as if all had
unanimously consented to such decision,
and all Co-Owners shall execute such
documents and things as may be necessary
or advisable for the full carrying out of
the true intent of such decision.
(Emphasis added.)
The agreement is sufficient to control the rights of
the various co-owners. Hence, by signing the agreement,
Goulding expressly agreed to abide by all decisions rendered
by the majority. We conclude Goulding is required to comply
with the will of the majority.
In light of the above, Goulding's slander of title
counterclaim against the plaintiffs must necessarily fail.
In First Security Bank v. Tholkes (1976), 169 Mont. 422, 427,
547 P.2d 1328, 1331, we defined slander of title as "[olne
who maliciously publishes false matter which brings in
question or disparages the title to property, thereby causing
special damage to the owner ... " See, 50 Am.Jur.2dI Libel
and Slander, S 541. Since we upheld the sale and rejected
Goulding's claimed interest in the property, plaintiffs'
actions were not slanderous.
Next, we consider the apportionment of funds addressed
in the District Court's amended order of March 8, 1988.
Based on plaintiffs' Exhibit 2, a summary of investments and
advanced funds at 10% and 12% interest rates, the District
Court found that "[tlhe net effect of allowing interest on
the advancements after the December 8, 1983 payments, ...
is to completely wipe out all the original investors and
giving all of the remaining assets to those persons that
advanced monies." The court concluded the equitable manner
of disbursing the funds would be to add the contributions to
the original capital investment of the respective co-owners
and distribute the funds on a pro rata basis.
The standard of review for a case in equity is that the
judgment of the trial court is presumed correct, and all
legitimate inferences will be drawn to support this
presumption. This Court's inquiry into the evidence is
limited to whether the findings of the trial court are
clearly erroneous. Rule 52, M.R.Civ.P.; and Citizens State
Bank v. Bossard (Mont. 1987), 733 P.2d 1296, 44 St.Rep. 468.
With this standard in mind, we review the evidence, dividing
our discussion into post- and pre- December, 1983
advancements.
The co-owners contend the evidence indicates an intent
to treat the advancements as loans with an accrued interest,
not as capital investments. We agree in part. The evidence
supports a loan designation for the post-December, 1983,
advancements. First, in his letter of April 5, 1985,
Goulding acknowledged the monies advanced were loans. The
record indicates Goulding objected to an interest rate of
59%, but stated that a "usual bank rate is reasonable."
Second, Paragraph 22 of the agreement provides for
loans, at a rate of interest determined by the manager, by
the various co-owners of the Inn, if necessary to protect or
preserve the assets. Paragraphs 28 and 29 provide for
distribution of sale proceeds first to the repayment of
principal and accrued interest, and thereafter the balance to
the co-owners according to respective shares.
Third, minutes of the co-owners ' meetings indicate
complete discussions took place regarding the poor financial
condition of the Inn. During these meetings, management
requested additional funds for the Inn which included an
interest rate commensurate with the risk and a repayment
preference upon distribution of the sale proceeds. However,
it is not clear what rate of interest the parties
contemplated: (25%; 6%/9% over U.S. prime; or the "highest
legal rate") . Nor is it clear what reasonable rate could be
applied. We leave these specific questions to the District
Court upon remand.
The District Court's findings related solely to
advancements made after December, 1983. However, plaintiff's
Exhibit 2 indicates that the co-owners contributed funds in
J a n u a r y 1982 and 1983. I n a d d i t i o n , t h e co-owners e x p r e s s e d
a d e s i r e t o r e t r o a c t i v e l y d e s i g n a t e t h e s e monies a s l o a n s , a s
e v i d e n c e d by t h e m i n u t e s o f t h e i r December 8 , 1983, m e e t i n g :
MOTION: A l l funds c o n t r i b u t e d a f t e r t h e
i n i t i a l investment accrue i n t e r e s t
a t U . S . Prime r a t e p l u s 6 % / 9 %and
t h a t t h i s i n t e r e s t should be paid
o u t monthly.
All monies advanced s i n c e t h a t
time should be secured, if
p o s s i b l e , and be t r e a t e d a s l o a n s
from p a r t n e r s .
Interest accrued on funds
c o n t r i b u t e d b e f o r e December 3 1 ,
1983, be t r e a t e d a s a p o r t i o n of
t h e partners [ ' ] loans. (Emphasis
added.
N e i t h e r p a r t y p r e s e n t e d argument r e g a r d i n g t h e s e f u n d s .
The D i s t r i c t C o u r t must make s p e c i f i c f i n d i n g s r e g a r d i n g t h e
pre-December, 1 9 8 3 , advancements by d e t e r m i n i n g t h e l e g a l i t y
of t h e r e t r o a c t i v e designation o f t h e s e funds a s loans.
We c o n c l u d e t h e co-owners' f i n a l issue regarding the
D i s t r i c t C o u r t ' s d e n i a l o f t h e R u l e 6 0 ( b ) ( 2 ) m o t i o n , i s moot.
Upon remand, t h e D i s t r i c t C o u r t may g i v e t h e e v i d e n c e
w h a t e v e r w e i g h t i t deems a p p r o p r i a t e .
Affirmed in part, reversed in part and remanded for
proceedings c o n s i s t e n t with t h i s opinion.
7n
Ch-ef J u s t i c e
Justices
Mr. Justice John C. Sheehy, dissenting:
I dissent and would affirm the District Court in total.
This case is an example of the minor investors ganging
up on one of the two largest investors by passing resolutions
in his absence which in effect take away his investment and
leave nothing of the net proceeds in which the larger
investor will participate. Judge Gary saw through this
obvious raid or, the net proceeds and refused to agree. I
would affirm judge Gary.
Justice
Mr. ~ u s t i c eWilliam E. Hunt, Sr., dissenting:
I concur ir, the foregoing dissent of Justice Sheehy.
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'
Justice