Austin v. Cash

NO. 95-186
IN THE SUPREMECOURT OF THE STATE OF MONTANA
1995

RICHARD D. AUSTIN and VIRGINIA P. AUSTIN,
husband and wife,
Plaintiffs and Respondents,
v.
MARTHA KONOPACKI CASH and JOHN MICHAEL KONOP
Defendants and Appellants,
and
BRUCE A. YOUNG,
Defendant,
and
LOREN "GEORGE" EVERETT and ROSS HAFFNER, d/b/a WESTERNBROKERS,
Third-Party Defendants.

APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Katherine R. Curtis, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Jeffrey D. Ellingson, Ellingson Law Offices,
Kalispell, Montana
For Respondent:
Alan J. Lerner, Attorney at Law,
Kalispell, Montana (for Austins)
James E. Vidal, Murray & Kaufman,
Kalispell, Montana (for Young)
Mark L. Stermitz, Warden, Christiansen, Johnson
&Berg, Kalispell, Montana (for Everett and Haffner)

Submitted on Briefs: October 19, 1995
November 14, 1995

Filed:
Justice Charles E. Erdmann delivered the opinion of the Court.
This is an appeal from the Eleventh Judicial District Court,
Flathead County, which found an enforceable real estate contract
between the parties, ordered specific performance, and awarded
damages and attorney fees. We affirm in part and reverse in part.
We restate the issues on appeal:
1. Did the District Court err in concluding that a valid and
enforceable contract existed between the Austins and Cash/
Konopacki?
2. Did the District Court err in dismissing Cash/Konopacki's
slander of title claim against the Austins?
3. Did the District Court err in dismissing Cash/Konopacki's
counterclaim against Everett?
4. Did the District Court err in awarding costs and attorney
fees to the Austins?
FACTS
Martha Cash and John Konopacki are brother and sister who
jointly owned approximately 19.5 acres in Flathead County. One
acre was to the east of Highway 93, and 18.5 acres were to the
west. Cash and Konopacki listed the properties for sale in
separate listing agreements with Bruce Young of ReMax Realty in
August and September 1992. Young entered the two listings into the
multiple listing service. Cash had authority from Konopacki to
negotiate and sign on his behalf, although she did not have a
formal power of attorney.
 Richard and Virginia Austin were looking for real estate to
purchase in Flathead County. In October 1992, Mr. Austin contacted
George Everett, a real estate agent in Kalispell, about securing

property for a retirement home. The Austins owned two properties
in California which were the subject of purchase agreements and
were awaiting closing. Everett showed Mr. Austin the parcel owned
by Cash and Konopacki. Relying on the multiple listing service
listing and information received from Young, Everett thought there
was only one parcel of land which contained the entire 19.5 acres.
Although both Cash and Konopacki had signed the initial listing
contracts, this was not known to Everett and he represented to the
Austins that the sole owner of the property was Cash.
On November 6, 1992, Mr. Austin signed an offer prepared by
Everett to purchase the entire 19.5 acres for $100,000 with $50,000
down and $50,000 payable on a note. The offer was also contingent

on the closing of the Austins' California properties and required
the sellers to cooperate in any land subdivision that may be
required to execute a 5 1031 tax deferred exchange.
Everett presented the offer to Young, who faxed it to Cash.
On November 12, 1992, Cash signed a counteroffer and sent it to
Young, who delivered it to Everett. The counteroffer clarified
that the offer was only for the 18.5 acre parcel, that the price
was $110,000, and that the sellers would not cooperate in
subdividing the property for a s 1031 tax deferred exchange.
Everett testified that he faxed the sellers' counteroffer to Mr.

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Austin at his California office. Even though Austin testified that
he did not remember receiving the fax, telephone records indicate
that the counteroffer was faxed to him and that he then immediately
called Everett.
Austin rejected the counteroffer and asked Everett to
negotiate with the sellers for the purchase of all of the property.
Everett went to Young's office where they called Cash on a speaker
telephone. According to Cash and Young, Cash said she would
consider the additional acre for an additional $5,000 from the
Austins, but that she would first have to discuss it with her
brother. According to Everett, Cash told him that she would add
the additional property to the sellers' counteroffer for $5,000.
Everett then took the sellers' counteroffer which had been
previously signed by Cash and added a handwritten paragraph
including the additional acre for $5,000. Without obtaining Cash's
signature or initials indicating the sellers' assent to the
handwritten paragraph, Everett faxed the revised counteroffer to
the Austins on November 17, 1992. Everett testified that he knew
that both Cash and the Austins needed to sign or initial the
revised counteroffer because it had been changed to include terms
regarding the additional acre. Everett also testified that in a
telephone conversation on November 17, 1992, he told Mr. Austin
that he (Everett) had added the handwritten language pertaining to
the purchase of the additional acre, although this is disputed by
Austin.

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 Austin testified that when he received the revised
counteroffer, he believed it had been signed by Cash. On the
evening of November 17, 1992, the Austins signed the revised
counteroffer and faxed it back to Everett on November 18, 1992.
The Austins testified that in relying on their belief there was a
binding contract, they reduced the price of one of their California
properties by $45,000--a move they would not have made without a
binding agreement to purchase the Montana property. Everett
testified that upon receiving the revised counteroffer signed by
the Austins, he faxed the document to Young intending to convey a
counteroffer from the Austins back to Cash for her signature.
On November 18, 1992, Cash received an inquiry from Karen
Nagelhus about purchasing the property. Nagelhus was referred to
Young and ultimately made an offer on November 20, 1992, to
purchase the property for $117,500. On November 19, 1992, Mr.
Austin called Everett to see whether or not "we had a deal." The
same day Everett faxed Austin a letter stating that the seller had
not responded and that another offer was coming in. Young also
advised Austin on November 19, 1992, that Cash had received another
offer and that Austin had the right to change his offer, but that
Cash did not intend to accept his counteroffer. On November 20,
1992, Everett wrote a letter to Young on behalf of the Austins,
asserting that there was a binding contract between Cash and the
Austins for the land lying west of Highway 93. On November 21,
1992, Cash and Konopacki accepted the Nagelhus offer.

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 On December 30, 1992, the Austins' attorney filed a lispendens

on the property. As a result of the lispendens, the sellers were

unable to give marketable title to Nagelhus and the sale did not
close. Nagelhus entered into a "Closing Date Extension" agreement
which extends the date of closing until 30 days after resolution of
this litigation.
On January 26, 1993, the Austins brought an action seeking
specific performance of the revised counteroffer which they claimed
was a binding contract between themselves and the sellers. Cash
and Konopacki counterclaimed for slander of title arising out of
the lispendens filed by the Austins. Cash, Konopacki, and Young

brought a third-party complaint against Everett. A trial was held
before the District Court without a jury. The District Court
entered judgment for the Austins ordering specific performance of
the contract and awarding to the Austins $7,500 in damages,
together with attorney fees and costs. All other claims were
dismissed. Cash and Konopacki appeal from the judgment, and the
Austins have filed notice of a conditional cross-appeal.
STANDARDOF REVIEW
Whether or not a contract exists is a combined issue of fact
and law. Our review of a district court's finding of fact is set
forth in Y A Bar Livestock Company v. Harkness (1994), 269 Mont.
239, 887 P.2d 1211, as follows:
This Court reviews the findings of a trial court
sitting without a jury to determine if the court's
findings are clearly erroneous. Rule 52(a), M.R.Civ.P.

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 A district court's findings are clearly erroneous if they
are not supported by substantial credible evidence, if
the trial court has misapprehended the effect of the
evidence, or if a review of the record leaves this Court
with the definite and firm conviction that a mistake has
been committed.
Y A Bar Livestock, 887 P.2d at 1213 (citing Interstate Prod. Credit
Ass'n v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d 1285, 1287).
We have defined substantial evidence to mean "more than a
scintilla, but . . . less than a preponderance, of evidence."
State v. Shodair (Mont. 1995), 902 P.2d 21, 26, 52 St. Rep. 879,
882 (citing Miller v. Frasure (1991), 248 Mont. 132, 137, 809 P.2d
1257, 1261).
We review a district court's conclusion of law to determine if
the court's interpretation of the law is correct. Carbon County v.
Union Reserve Coal Co. (Mont. 1995), 898 P.2d 680, 686, 52 St. Rep.
529, 533.
ISSUE 1
Did the District Court err in concluding that a valid and
enforceable contract existed between the Austins and Cash/
Konopacki?
Cash/Konopacki argue that the District Court's findings of
fact are clearly erroneous and that its conclusion of law
establishing the existence of a contract is incorrect.
Cash/Konopacki claim there is no contract between the parties as a
matter of law because the statute of frauds is not satisfied. They
urge this Court to reverse the District Court's conclusion that the
Austins were entitled to specific performance of the contract.

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 Cash/Konopacki argue that Everett significantly altered the

language of the sellers' counteroffer by adding his own handwritten

language changing the price, property and terms outlined in the

original document. They argue that because these changes were made

after Cash had signed the original counteroffer and because they

were made without being authorized by Cash/Konopacki or subscribed

or initialled by Cash/Konopacki, Young, or Everett, a valid

contract does not exist.

The Austins urge us to affirm the District Court's conclusion
that a valid contract exists between the parties and that specific

performance ordered by the District Court should be affirmed. The
Austins allege that Everett had authority to bind Cash/Konopacki to

the revised counteroffer. The Austins further argue that due to

their part performance and acts made in reliance on the alleged

contract, the contract is taken out of the statute of frauds.

In transactions involving real property, consent of the

parties must be in writing. Contracts for the sale of real

property in this State must satisfy the statute of frauds which is

codified as follows:

28-2-903. What contracts must be in writing. (1) The
following agreements are invalid unless the same or some
note or memorandum thereof is in writing and subscribed
by the party to be charged or his agent:

idi 'an agreement for the leasing for a longer
period than 1 year or for the sale of real property or of
an interest therein. Such agreement, if made by an agent
of the party sought to be charged, is invalid unless the
authority of the agent is in writing and subscribed by
the party sought to be charged.

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 30-11-111. Contract for sale of real property. No
agreement for the sale of real property or of any
interest therein is valid unless the same, or some note
or memorandum thereof, be in writing and subscribed by
the party to be charged or his agent thereunto authorized
in writing; but this does not abridge the power of any
court to compel the specific performance of any agreement
for the sale of real property in case of part performance
thereof.
In its findings of fact, the District Court determined that:

All of the exhibits, taken together, constitute a
sufficient memorandum, signed by all parties to be
charged, to satisfy the statute of frauds for all parcels
of real property involved in this case. The documents,
taken together, establish a meeting of the minds and a
mutually binding contract for the sale of all parcels of
real property involved in this case under the terms and
conditions of Agreed Exhibit 6.

"Agreed Exhibit 6" is the sellers' revised counteroffer signed

by the Austins. This finding of fact, in concluding that the

documents taken together satisfy the statute of frauds, is actually

a conclusion of law. We conclude that the District Court's

interpretation of the law is incorrect.

The uncontroverted facts presented in the record indicate that

the revised counteroffer from Cash/Konopacki to the Austins

included Everett's handwritten addition to the sellers' original

counteroffer and was not "subscribed" by Cash, Konopacki, Young, or

Everett. Everett testified that he knew that both the buyer and

seller would have to sign or initial the revised counteroffer

indicating each parties' assent to his handwritten additions to the

original document. Since neither Cash, Konopacki, Young, or

Everett signed or initialled the additional handwritten language on

behalf of the sellers, the contract was not properly "subscribed"

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by the sellers or their agents and therefore does not satisfy the

statute of frauds.

The Austins argue that the alleged contract should be taken

out of the statute of frauds because of their part performance of

the alleged agreement with Cash/Konopacki. The original
counteroffer from Cash/Konopacki included a provision that the

offer was conditioned on the sellers approving the Austins' sales

contracts on their California properties. The Austins argue they
partially performed the alleged contract with Cash/Konopacki by

reducing the sales price on their California home by $45,000 in an

effort to satisfy this condition.
The sufficiency of acts to constitute part performance can be

decided as a matter of law. Schwedes v. Romain and Mudgett (1978),

179 Mont. 466, 472, 587 P.2d 388, 391 (citing Boesiger v. Freer

(Idaho 1963), 381 P.2d 802). We have held that "[cllaimed acts of

partial performance sufficient to take an otherwise unenforceable

contract out of the statute of frauds must be unequivocally

referable to that contract." Schwedes, 587 P.2d at 391 (citing

Throndson v. Commissioner of Internal Revenue (Cal. 1972), 457 F.2d

1022). Acts undertaken by a party in contemplation of eventual

performance are to be distinguished from acts which truly

constitute part performance of the contract so as to take it out of

the operation of the statute of frauds. Schwedes, 587 P.2d at 391.

The Austins' reduction of the price of their California home by

$45,000 was an act in contemplation of eventual performance and one

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that is not unequivocally referable to the alleged contract with

Cash/Konopacki.

The Austins argue that the District Court properly ordered

specific performance of the contract. This Court will not grant
the remedy of specific performance in connection with a purported

agreement for the sale of land unless it is first established that

there is a valid contract in existence. Thornton v. Songstad

(1994) I 263 Mont. 390, 393, 868 P.2d 633, 635. In Schwedes, 587

P.2d at 391, we cited with approval the following general rule:

In order for equity to decree specific performance, it is
necessary that there be in existence and in effect a
contract valid at law and binding upon the parties
against whom performance is sought, for specific
performance is never applicable where there is no
obligation to perform.

The Austins go on to argue that Cash/Konopacki are equitably

estopped from denying an enforceable contract between the parties.

Their argument centers around (1) the fact that they were unaware

that Konopacki was a co-owner of the Cash/Konopacki property, and

(2) that they relied to their detriment on a binding agreement to

purchase the Montana property. First, the parties stipulated on

the record that Cash had authority to sign for and bind Konopacki.

Therefore, the fact that the Austins were unaware of Konopacki's

interest in the property becomes moot. Second, we have stated that

where a case is clearly within the statute of frauds,
promissory estoppel is inapplicable, for the net effect
would be to repeal the statute completely. The court
cited [a] general rule that the moral wrong of refusing
to be bound by an agreement because it does not comply
with the statute of frauds, does not of itself authorize
the application of the doctrine of estoppel, because the

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 breach of a promise which the law does not regard as
binding is not a fraud.

Schwedes, 587 P.2d at 392 (quoting 56 A.L.R.3d at 1054, regarding

Sinclair v. Sullivan Chevrolet Co. (Ill. 1964), 195 N.E.2d 250).

We conclude that because Cash/Konopacki or their agents did

not give written approval to Everett's handwritten changes to the

sellers I counteroffer, the contract was not "subscribed" by the
party sought to be charged. The purported contract between the

parties does not comply with the statute of frauds and is therefore

not enforceable. Further, the facts of this case do not merit the

application of the equitable doctrines of part performance and/or

equitable estoppel. Therefore, we hold that the District Court

erred in determining that a valid contract warranting specific

performance existed and we reverse the District Court on this

issue.
ISSUE 2

Did the District Court err in dismissing Cash/Konopacki's

slander of title claim against the Austins?

Since Cash/Konopacki and Nagelhus have entered into a "Closing

Date Extension Agreement," whereby the parties have agreed to

extend the date of closing until 30 days after resolution of this

lawsuit, we conclude that Cash/Konopacki will not be harmed as a

result of the Austins filing a lispendens on the property. We hold

that the District Court properly dismissed Cash/Konopacki's claim

for slander of title and we affirm the District Court on this

issue.

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 ISSUE 3

Did the District Court err in dismissing Cash/Konopacki's

counterclaim against Everett?

Since we held that a valid and enforceable contract did not

exist between the Austins and Cash/Konopacki, the counterclaim

brought by Cash/Konopacki against Everett becomes moot. We

therefore hold that the District Court did not err in dismissing

this claim and we affirm the District Court on this issue.
ISSUE 4

Did the District Court err in awarding costs and attorney fees

to the Austins?
Based on our holdings above, we conclude that neither party

shall be awarded costs and attorney fees. There is no agreement

stipulating such relief and no statute confers such a right in this

case. We hold that the District Court erred in awarding costs and

attorney fees to the Austins and we reverse the District Court on

this issue.

The Austins are free to pursue any and all tort damage claims

as allowed by law, however, this Court renders no opinion as to the

merits of those claims.

Justice

We concur:
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