NO. 93-415
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
JAMES BAKER, Personal Representative
of the Estate of Laura Perrine,
Plaintiff and Appellant,
v.
RICHARD BERGER,
Defendant and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Dorothy McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John F. Lynch, Lynch Law Firm,
Great Falls, Montana
For Respondent:
Gregory J. Hatley, Cure, Borer & Davis,
Great Falls, Montana
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\ Submitted on Briefs: January 20, 1994
Justice William E. Hunt, Sr., delivered the opinion of the Court.
~laintiff/appellant,James Baker, personal representative of
the estate of Laura Perrine, appeals from a judgment of the First
Judicial District Court, Lewis and Clark County, denying his motion
for summary judgment asking the court to find that as a matter of
law, the 1960 property agreement between respondent, ~ichard
Berger, and others is unenforceable; and from the order of the
court granting respondent specific performance of the agreement.
Affirmed.
We rephrase the issues as follows:
1. Is the 1960 agreement an unreasonable restraint on the
alienation of the subject property?
2. Did the District Court abuse its discretion when it
granted respondent specific performance of the agreement?
In 1959, respondent and his late wife, Marjorie, purchased a
lot on Holter Lake with the plan to build a vacation cabin on the
site. On June 30, 1960, they signed an agreement with his brother
Frederick and his wife, Margaret, Harlan and Josephine Mattson, and
Pat and Laura Perrine. Simultaneously, respondent executed three
deeds to the couples, which transferred an undivided one-fourth
interest in the lot to the three couples, while respondent and his
wife retained a one-fourth interest. The agreement provided that
the couples were subject to the following buy-out provision:
AND WHEREAS, the parties hereto are desirous of
providing for the disposition of the interest of each in
said property, in the event of the death of both of the
joint tenants of such parties, and restricting the sale
of the interest of any of the parties, except to each
other, it being the intention and desire of each and all
of the parties hereto that said property shall not be
sold to or otherwise disposed of by any of them except to
the others, as hereinafter provided, and that so far as
possible the ownership of said property shall remain in
the present group or those remaining.
... [I]f a sale is made by any set of the parties
hereto, the remaining set or sets of the parties hereto
shall purchase such interest for the sum of One Thousand
($1,000.00) Dollars; that each set of the remaining
parties shall purchase said share or interest so offered
for sale, and contribute equally thereto; SAVE AND EXCEPT
that if any set of parties desiring to sell, shall have
contributed toward the purchase of the interest of any
former set, then the amount so paid shall be added to the
One Thousand Dollar price or value hereinabove mentioned.
That upon the death of the surviving joint tenant of
any set of parties hereto, the remaining set or sets of
the parties hereto shall have the right and privilege,
and are herebv qiven the ricrht and privilese and do
herebv oblisate themselves to purchase the interest of
said deceased in said lands for the sum of One Thousand
($1,000.00) Dollars, for an undivided one-fourth
interest, plus a proportionate amount for any additional
interest owned by said deceased. [Emphasis added].
The property has not been appraised, but appellant claims that
the actual value of the property is estimated at $100,000, making
the original share of each party now worth $25,000, and Laura
Perrine's current share worth $33,333.33. The District Court found
that the parties agree that the property's fair market value is
significantly in excess of the $4000 value utilized by the parties
The couples built a cabin which they all used as vacation
property for many years, and shared in its upkeep and maintenance.
During the cotenancy, respondent supplied the maintenance, and
periodically submitted itemized statements to the cotenants for
their contribution to the costs. Since Laura's death, respondent
made substantial improvements to the property, has kept up the
property, and since Pat Perrine's death in 1982 or 1983, has paid
all the property taxes.
In 1967, Harlan Mattson died and Josephine Mattson sold their
interest in the property shortly thereafter to the three other
couples for $1000, in accord with the agreement. In about 1978,
Margaret Berger died, and in 1979 her husband, Frederick Berger,
died. Laura and Pat Perrine did not purchase a half of Frederick
and Margaret Berger's one-third interest in the property. The
Berger's son, who was the executor of their estate, sold the
couple's interest to respondent in 1992. Between 1979 and 1992,
Frederick and Margaret Berger's children did not use the property.
In 1982 or 1983, Pat Perrine died. In 1984, respondent's wife
died. Laura Perrine died in 1990. Respondent is the last
surviving cotenant. Appellant is Laura's nephew, as well as the
personal representative of her estate.
In 1991, respondent tendered $1334 to appellant for Laura
Perrine's one-third interest in the property, pursuant to the
agreement, but appellant refused the tender on the basis that the
1960 agreement is unenforceable.
The District Court found that respondent had the right to
specifically enforce the purchase provision in the cotenancy
agreement, and that upon respondent's re-tender of payment of $1344
to appellant, appellant was ordered to make, execute, and deliver
to respondent his personal representative's deed conveying all
right, title, and interest in the disputed property.
On August 19, 1993, appellant filed this appeal.
ISSUE 1
Is the 1960 agreement an unreasonable restraint on the
alienation of the subject property?
Appellant argues that the terms and conditions of the 1960
agreement constitute an illegal restraint upon alienation of
property, in violation of 5 70-1-405, MCA, because the agreement
sought only to restrain alienation, not to facilitate an original
transfer.
Montana's statute regarding restraint on alienation of real
property states that "conditions restraining alienation, when
repugnant to the interest created, are void." Section 70-1-405,
MCA. In addition, § 28-2-707, MCA, provides that:
[a] condition in a contract the fulfillment of which is
impossible or unlawful within the meaning of part 6 and
this part or which is repugnant to the nature of the
interest created by the contract is void.
In Edgar v. Hunt (1985), 218 Mont. 30, 33, 706 P.2d 120, 122, we
interpreted g 70-1-405, MCA,
as a statement of the majority common law rule that
restraints on alienation, when reasonable, are valid.
The auestion is whether the warticular restraint is
reasonable under the circumstances. [Citations omitted:
emphasis added].
In Edsar, we held that a preemptive fixed price repurchase option
in an agreement executed contemporaneously with a deed transferring
property did not violate 5 70-1-405, MCA. There we set out several
factors that may be used in an analysis of whether an agreement's
provision restraining alienation was reasonable. We noted that the
various factors set out in the Restatement (Second) of Property
5 406 cmt. i (1977), may be considered. In addition, we stated
that we will consider the intent of the parties contracting for the
preemptive right, and whether the particular restraint, or price
set thereby, is primarily for the purpose of restraining the
alienability of the property. Edaar, 706 P.2d at 122. Moreover,
we determined that:
if the circumstances suggest that the restraint was
freely entered into by mutual consent as a normal
incident of an equal bargaining relationship in order to
promote the original transfer of the property, the scales
will tip back towards the reasonableness of the restraint
....
Edaar, 706 P.2d at 122.
The District Court found that the agreement was reasonable and
enforceable. The court stated:
Even accepting [appellant's] assertion of the huge
discrepancy between the fixed price and the present
market value of the shares of the property, the intent of
the parties in entering into the agreement far outweighs
that consideration. This situation is unique in that the
restraint on alienation of the property is a material and
integral part of the cotenancy arrangement; without that
provision, the purpose of the cotenancy agreement would
be defeated.
We agree with the District Court that under the circumstances,
the restraint on alienation in the 1960 agreement was an integral
and material part of the cotenancy arrangement. The restraint
provision promoted and facilitated the original transfer of the
property.
The record is clear that but for the couples' 1960 agreement,
executed simultaneously with the deeds, respondent and his wife
would have retained all interest in the property. The parties1
intent was to share and maintain the cabin on the property with the
understanding that they would share close confines among family and
friends, not strangers. The couples entered into the agreement by
mutual consent as an incident of an equal bargaining relationship
which promoted the original transfer of the property and granted
each other the right to purchase their respective interests under
two conditions. Without the restraint provision, respondentls
original plan and the couples' subsequent agreement to the
cotenancy arrangement would have been defeated.
In addition, the record shows that the parties included the
provision in the agreement to fix the buy-out price of the property
at $1000 so as to avoid price negotiations every time one of the
surviving spouses died, and to prevent the last living spouse from
being forced to buy out the decedent's remaining interest at a
price far inflated from his or her own interest in the property.
We hold that the couples' 1960 agreement contains nothing
repugnant to the interest created, but rather, provided a
reasonable restraint on alienation of the vacation property in
accord with § 70-1-405, MCA, and our decision in Eduar.
ISSUE 2
Did the District Court abuse its discretion when it granted
respondent specific performance of the agreement?
Appellant argues that the District Court abused its discretion
when it granted respondent specific performance of the agreement
because the agreement is void and unenforceable against him and
Laura's successors. Appellant asserts that: (1) nothing in the
agreement restricts the donative or intestacy transfer by a party;
(2) they were not parties to the 1960 agreement; (3) the agreement
did not contain an express covenant that would justify enforcement
of the agreement against them, and Montana law prohibits an implied
covenant to sell; and (4) the fixed price contained in the
agreement is unreasonable and inequitable because it cannot be
applied in a way contrary to statutory authority and an exchange of
only $1334 for Laura's ownership rights in the property would work
a great injustice on the estate.
The District Court found that as personal representative to
Laura Perrine's estate, appellant stepped into her shoes with
respect to her legal obligations, and as such, was bound to sell
the property pursuant to the buy-out provision in the agreement.
(citing §§ 72-3-602, -604, and -613, MCA).
The agreement provided respondent with an enforceable right
and privilege, and in fact, an obligation to purchase a decedent's
interest in the property without a provision expressly stating that
each cotenant or cotenant's estate had a duty to sell the interest.
Appellant's argument that nothing in the agreement restricts
the donative or intestacy transfer by a party is without merit.
The buy-out provision specifically states that "said property shall
not be sold to or otherwise dis~osedof by any of them except to
8
the others, as hereinafter provided, and that so far as possible
the ownership of said property shall remain in the present group or
those remaining." [Emphasis added].
The agreement provides that cotenants could buy out a couple's
interest by two methods: (1) by way of a voluntary inter vivos sale
by a couple to the cotenants for $1000, or the value of a couple's
interest after a contribution toward the purchase of the interest
of any former couple; or (2) by way of a compulsory buy-out of a
surviving spousets interest at death. As the last of tlthose
remainingt' of the surviving spouses, respondent's alternative,
pursuant to the agreement, was to buy out Laura's interest in the
property, which he had attempted by tendering payment to appellant.
Even under the maxim of statutory construction, expressio uniw est exclusio
alteriw, (the expression of one thing implies the exclusion of
another), the couples' agreement prohibits donative or intestacy
transfer of a surviving spouse's interest in the property.
Appellant's argument that he and Laura's successors are not
bound by the 1960 agreement because they are not parties to it is
likewise without merit. Generally, contracts made by a decedent
are specifically enforceable against the decedent's personal
representatives, heirs, devisees, and assigns. . . . Specific
81 C J S
Perfomance 31 (1977); Exchange Nat'l Bank v Sparkman (Colo.
.
1976), 554 P.2d 1090, 1093; In re Estate of Sharp (Utah 1975), 537
P.2d 1034, 1038. Montana law provides that:
[wlhenever an obligation in respect to real property
would be specifically enforced against a particular
person, it may be in like manner enforced against any
other person claiming under him by a title created
subsequently to the obligation ..
. .
Section 27-1-421, MCA. In addition, the Uniform Probate Code
authorizes a personal representative to perform the decedent's
enforceable contracts to convey or lease land by executing and
delivering a deed of conveyance for cash payment of all sums
remaining due. Section 72-3-613 (3) (a), MCA. As personal
representative to the estate of Laura Perrine, the 1960 agreement
was enforceable against appellant, who was both authorized and
obligated to convey Laura's interest in the property to respondent,
as the last surviving cotenant.
Appellant is also mistaken that the agreement is unenforceable
because it contains no express covenant requiring any party to
sell. Appellant argues by way of semantics. Appellant is
misguided to assume that the partiesv use of the language "the
right to purchase" rather than stating Ivan obligation to sell"
proves that the parties could not obligate a deceased party's
estate to sell the decedent's interest, but that could only be
implied by creating a mutual right to buv. Such an interpretation
of the agreement's buy-out provision would render it meaningless.
The decedent's obligation to sell is not found in impermissible
extrinsic evidence, as appellant suggests. (citing 5 28-2-905,
MCA) . It follows that where the agreement both obligates and gives
"the right and privilege" to the surviving cotenant(s) to purchase
the decedent's interest in the property, it logically creates a
corresponding obligation on the part of the decedent's estate to
sell her interest in the property to the surviving cotenant(s).
The buy-out provision obligated the parties to a set of mutual
promises--one to buy, and one to sell. See 5 28-2-303, MCA. We
conclude that the agreement, by its terms, obligated appellant to
sell Laura's interest in the property to respondent. The agreement
provides respondent with an enforceable right to purchase the
decedent's interest in the property.
Finally, appellant argues that the fixed price contained in
the agreement is unreasonable, inequitable, and cannot be enforced
in equity by the remedy of specific performance. Specifically,
appellant claims that application of the remedy of specific
performance in this case is inappropriate because: (1) it cannot
be applied in a way contrary to statutory authority; and (2) an
exchange of only $1334 for Laura's ownership rights in the property
would work a great injustice on the estate, presumably where such
an amount tendered for Laura's interest is inadequate consideration
to justify the transfer based on his estimate of the property's
$100,000 fair market value.
We have held that specific performance is an equitable remedy
and is a matter of discretion for the trial court. Larson v. Undem
(1990), 246 Mont. 336, 342, 805 P.2d 1318, 1323. Specific
performance is an appropriate remedy where "the act to be done is
such that pecuniary compensation for its nonperformance would not
afford adequate relief." Section 27-1-411(2), MCA. In addition,
"[ilt is to be presumed that the breach of an agreement to transfer
real property cannot be adequately relieved by pecuniary
11
compensation ... . Section 27-1-419, MCA. Finally, a party
claiming to be entitled to specific performance must have offered
to perform. Pond v. Lindell (1981), 194 Mont. 240, 245, 632 P.2d
1107, 1110.
Here, the remedy of specific performance can be applied in a
way that is not contrary to statutory law. The act to be done is
the transfer of Laura's interest in the property for $1334 to
respondent, as the last surviving cotenant, pursuant to the
agreement. In this case, pecuniary compensation for the
nonperformance of the transfer of Laura's interest in the real
property would not afford respondent adequate relief.
It is not clear whether appellant seeks $32,000 in additional
consideration, or a donative or intestacy transfer to Laura's
interest in the property. Regardless, either result would render
the 1960 agreement meaningless. If appellant seeks an additional
$32,000 in consideration for Laura's interest, respondent would be
denied the right to be free from a forced purchase of a deceased
cotenant's interest at an inflated price--a result that flies in
the face of the couples' intent. If appellant is claiming that
Laura's heirs have received Laura's one-third interest in the
property by donative or intestacy transfer, respondent would be
denied exclusive enjoyment of the property, as the last surviving
cotenant, and potentially faces a forced buy-out from Laura's
heirs; both results which are contrary to the couples* intent.
Either consequence would not honor the 1960 agreement, and unjustly
deny respondent the benefit of his bargain.
Appellant argues that $1334 is inadequate consideration for
Laura's one-third interest in property supposedly worth $100,000,
and thus respondent is not entitled to specific performance. The
argument is without merit. The mutual promises in the buy-out
provision fixed the buy-out price of a cotenant's interest at
$1000, plus any other value paid. The parties had free and equal
bargaining powers. Each couple knowingly bargained that they could
predecease the other couples, and leave the surviving couple or
spouse with full ownership of the property.
Montana law defines good consideration as:
any benefit conferred or agreed to be conferred upon the
promisor by any other person, to which the promisor is
not lawfully entitled, or any prejudice suffered or
agreed to be suffered by such person, other than such as
he is at the time of consent lawfully bound to suffer, as
an inducement to the promisor is a good consideration for
a promise.
Section 28-2-801, MCA. Here, each party to the agreement agreed to
confer upon the surviving cotenants, his or her interest in the
property upon death. Had Laura Perrine not been a party to the
agreement, respondent, as the last surviving cotenant and promisor,
was not otherwise lawfully entitled to her interest upon her death,
in exchange for $1334. Because Laura was a party to the contract,
and is now deceased, respondent is entitled to the benefit of the
bargain. No new consideration is now required as a result of the
increase in the fair market value of the property. Respondent will
receive nothing more than for what he originally bargained.
In addition, in accord with Montana law, respondent offered to
perform the buy-out when he tendered $1334 to appellant--the amount
of Laura's interest in the property. The fact that the property
now may be worth $100,000 is irrelevant.
We hold that the District Court did not abuse its discretion
when it granted respondent specific performance.
Affirmed.
/
Justice
We concur:
May 3, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid,
to the following named:
John F. Lynch
Lynch Law Firm
P.O. Box 2265
Great Falls, MT 59403
Gregory J. Hatley
Cure, Borer & Davis, P.C.
P. 0. Box 2103
Great Falls, MT 59403-2103
ED SMITH
CLERK OF THE SUPREME COURT
STATE Ox MONTAN4,