No. 90-234
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
KARYN ANN BAIN,
Plaintiff and Appellant,
-vs- --
LARRY WILLIAMS, BRIAN CLOUTIER, and STATE MEDICAL S R Z ' ,
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a Montana corporation, - - , ~rl
Defendants and Respondents. 1 , .-
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APPEAL FROM: District Court of the Eleventh Judicial @$strict,
In and for the County of Flathead,
The Honorable Michael Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
E. Eugene Atherton, Kalispell, Montana
For Respondent:
Randy K. Schwickert, Whitefish, Montana
submitted: August 9, 1990
Decided: October 30, 1990
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.
The plaintiff, Karyn Ann Bain brought this action in the
Eleventh Judicial District Court, Flathead County, to recover the
unpaid balance due under the terms of a written promissory note.
Although a jury trial had been initially requested by Bain, she
later agreed to bifurcate the contract (promissory note) issues
from the tort issues raised in her complaint and to try the
contract issues in front of the court sitting without a jury. The
defendants filed an action for declaratory judgment concerning the
same contract and sought recovery of monies advanced to Bain. The
District Court consolidated Bain's collection actions with the
declaratory judgment action. The District Court determined that
the purpose for execution of the promissory note had been totally
frustrated and, as a result, the remaining obligation of the
defendants should be excused and the promissory note rescinded.
The District Court then entered judgment in favor of the defendants
and against Bain. Thereafter, Bain filed a Rule 59(g), M.R.Civ.P.
motion to alter or amend the judgment, which motion was deemed
denied by the expiration of the 45 day time limit. (Rule 59(d),
M.R.Civ.P.) Bain now appeals the District Court judgment and the
denial of the Rule 59 motion. We reverse and remand.
Bain raises the following issues on appeal:
1. Whether the trial court's findings are supported by
substantial evidence?
2. Whether the trial court erred by allowing the defendants
to amend their answer on the day of trial?
Prior to January 28, 1983, Bain was married to Steven Boyd.
During their marriage, Boyd started an in-home oxygen care business
known as Montana Medical Oxygen and Supply, Inc. (hereafter f4M) .
At the time of her divorce from Boyd in 1983, Bain acquired from
him, as part of the divorce agreement, his promissory note for
$900,000 and held 50% of the stock of MM as security for Boyd's
payment under the terms of the note. Late in 1983, Bain learned
that Boyd was attempting to sell MM to the defendants. At the
time, Bob Allison, an attorney in Kalispell, represented Bain, and
he began negotiating with Williams on behalf of Bain in the effort
by the defendants to purchase her interest in MM. During the
negotiations with Williams, Bain and Allison demanded to know how
much Williams was paying Boyd for MM, but were told by Williams
that was none of their business and the negotiations with Bain was
a Itseparatedeal.
The negotiations proved to be fruitful, and Bain agreed to
accept $370,000 from the defendants for the marital obligation Boyd
owed her, which included her security interest in the MM stock.
As a result, on November 7, 1983, the defendants executed an
agreement and promissory note to Bain for $370,000. Allison
prepared this promissory note for the parties. After the execution
of the promissory note, Bain conveyed her stock in MM to Williams.
Sometime in January of 1984, the parties began to suspect that
the MM purchase was in trouble, and in fact the purchase did not
close as planned or expected on February 29, 1984. The cause of
the failure rested on Steven Boyd. Thereafter, Boyd told the
defendants he intended to look for a new buyer for MM.
The defendants stopped making payments on the promissory note
in March of 1984, and Bain filed this suit to enforce payment under
the note. In their answer, the defendants contended that the
execution of the promissory note has been conditioned on the
purchase of Boyd's half of MM, that they had failed to purchase
Boyd's MM stock, and therefore the defendants' purpose in executing
the promissory note had been totally frustrated.
On April 25, 1984, in a letter from defendants' attorney to
Bain, the defendants discussed filing the declaratory judgment
action to determine their duty under the agreement with Bain. They
also advised Bain that they would continue to make payments under
the note, but that they would seek reimbursement for any money
advanced. The defendants made payments through January, 1985.
After a bench trial, the District Court found that the
execution of the promissory note was contingent upon the
defendants' successful purchase of Boyd's half of MM. The court
found that the failure to complete the purchase of Boyd's half of
MM constituted a frustration of purpose of their promissory note
with Bain. The trial court determined that the promissory note
should be rescinded, and the remaining payment obligation under the
note excused. The court also ordered Bain to repay the money that
the defendant had already paid her. From this judgment, Bain
appeals.
The first issue is whether the District Court's findings are
supported by substantial evidence. The appellate standard for
review is clear. This Court may not set aside findings of fact
unless they are clearly erroneous. Rule 52 (a), M.R.Civ.P.
Expanding on this standard, we have stated:
When reviewing findings of fact and conclusions of law
of a district court, sitting without a jury, this Court
has repeatedly held such findings and conclusions will
not be disturbed if supported by substantial evidence and
by the law.
...
Central Bank of Montana v. Eystad (1985), 219 Mont. 69, 73,
710 P.2d 710, 713, and cases cited therein.
The District Court made findings that (1) the defendants'
execution of the promissory note was contingent upon their
successful purchase of Boyd's half of MM; (2) the defendants did
not complete their purchase of Boyd's half of MM; (3) the failure
to purchase Boyd's share of the business constituted frustration
of the principal purpose of the promissory note; and (4) the
contract is rescinded due to this frustration of the principal
purpose of the note.
The District Court's findings and conclusions are not
supported by substantial evidence and the law. We disagree with
the court Is findings, and find the parties' promissory note was not
contingent on the defendants' purchase of Boyd's half of MM.
The District Court's first obligation was to peruse the four
corners of the promissory note to determine whether the claimed
contingency existed. ''Where the language of a written contract is
clear and unambiguous there is nothing for the court to construe;
the duty of the court is simply to apply the language as written
to the facts of the case, and decide the case accordingly.I1
Danielson v. Danielson (1977), 172 Mont. 55, 58, 560 P.2d 893, 894 ;
Nordlund v. School District No. 14 (1987), 227 Mont. 402, 404, 738
P.2d 1299, 1301. Courts have no power to change the contract or
the express language used. Williams v. Insurance Company of North
America (1967), 150 Mont. 292, 295, 434 P.2d 395, 397.
Here, the promissory note is unambiguous, and clearly does not
include a contingency. Despite the obvious lack of contingency in
the note, the defendants argue that paragraph 5 of the note reveals
the note was conditioned upon the defendants operating MM
Paragraph 5 of the note states:
That should Second Parties (defendants) decide in anyway
sell or dispose of their majority interest or stock in
and to the business entities known as State Medical
Services, Inc. and Montana Medical Oxygen & Supply, Inc. ,
at any time prior to having paid the obligations to First
Party (Bain) as set out above in full, the entire balance
remaining unpaid shall become immediately due and payable
upon such a sale or transfer of their interest. In other
words, this Agreement is not assignable and is
conditioned upon the continuing operation of said
business by Larry Williams, Brian Cloutier and Mark
Hungerford.
This paragraph does not state that the successful acquisition
of Boyd's business was contingent for the execution of the
promissory note. Instead, it simply states that if the defendants
were to sell or otherwise dispose of Boyd's business before
completing payment to Bain, then the entire remaining balance due
to Bain would accelerate. The last sentence of the paragraph
simply reasserts that the obligation to pay under the promissory
note is not transferrable or assignable to someone else and would
accelerate unless the defendants continued to run Boyd's business.
The defendants also argue that the promissory note is
contingent on their purchase of Boyd's half of MM, because the
promissory note is peppered throughout with references of the
defendants assuming the right to manage the assets of MM, and
references to Bain's and Boyd's earlier property settle agreement.
We disagree with the defendants, and will not read a contingency
into the contract when one clearly does not exist on the face of
the contract.
The District Court erred when it went beyond the four corners
of the contract, and looked to the intent of the parties to
determine if the contingency existed in the promissory note.
Again, the intent of the parties is only looked at when the
agreement is not clear on its face. Glacier Campground v. Wild
Rivers, Inc. (1979), 184 Mont. 543, 547, 597 P.2d 689, 692. Here,
the promissory note does not contain a contingency, and the court
mistakenly looked at the intent of the parties. Courts may not
disregard the express language of a contract. Williams, 434 P.2d
at 397; Lemley v. Bozeman Community Hotel Co. (1982), 200 Mont.
470, 475, 651 P.2d 979, 981; New Hampshire Insurance Group v.
Strecker (Mont. 1990), - P.2d , 47 %.Rep. 1736, 1738; See
also 5 28-3-401, MCA.
The District Court improperly granted the defendants the right
of rescission. In its order, the court stated:
Defendants' right of rescission, based upon failure of
consideration, excuses their continued performance under
7
this contract, and they may rescind. Despite Plaintiff's
assertions to the contrary, Defendants failed to acquire
the business of Montana Medical, and that acquisition was
fundamental to the promissory note and agreement between
the parties.
The consideration in this case was not the acquisition of MM
but ~ain'sagreement to turn over her security interest in 50% of
the MM stock to the defendants in exchange for the $370,000 under
the promissory note. Accordingly, we find an exchange of
consideration among the parties, and reverse the court's rescission
of the contract.
We need not address the second issue concerning amending the
answer the day of trial, since we have found for Bain under the
terms of the contract.
Conclusion
Since the contract was not contingent on the defendants
purchasing Boyd's half of MM, the defendants did not have a right
to rescind the contract. Thus, when the defendants stopped their
payments under the terms of the promissory note, ~ a i n
properly sent
to the defendants a notice of default and accelerated the balance
due under the promissory note. We reverse the District Court's
order and remand the case to the District Court to determine the
amount of damages the defendants owe Bain under the promissory
note. Under the terms of the promissory note, Bain, as the
prevailing party is entitled to recover attorney's fees. Reversed
and remanded for further proceedings in accordance with this
Opinion.
We Concur: