Edgar v. Hunt

NO. 85-127
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985

ALMA EDGAR,
Plaintiff and Respondent,

ERNEST EMMETT HUNT and JACQUELINE
M. HUNT, husband & wife,

Defendant and Appellant.

APPEAL FROM: District Court of the Third Judicial District,
In and for the County of Granite,
The Honorable Robert Boyd, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Ken H. Grenfell, Missoula, Montana

For Respondent :
Skelton & Cooley; Robert Skelton, Pdissoula, Montana

Submitted on Briefs: June 6, 1985
Decided: September 10, 1985

I J; 1985
Filed:

Clerk
M r . J u s t i c e L. C. Gulbrandson d e l i v e r e d t h e Opinion of the
Court.

Hunts a p p e a l from a n o r d e r g r a n t i n g p l a i n t i f f Edgars'

motion for summary judgment by the District Court, Third

J u d i c i a l D i s t r i c t , G r a n i t e County i n t h i s q u i e t t i t l e a c t i o n .

Hunts contend that adequate consideration supported the

r e p u r c h a s e o p t i o n and t h a t t h e o p t i o n d i d n o t v i o l a t e e i t h e r

the rule against perpetuities o r the rule against restraints

on a l i e n a t i o n . W e reverse and remand f o r t r i a l .

O August
n 13, 1964, t h e Hunts s o l d th.e s u b j e c t r e a l

p r o p e r t y by w a r r a n t y deed t o Alma and O m e r Edgar i n j o i n t

tenancy. Apparently, t h e p a r t i e s entered i n t o a notarized

agreement contemporaneously w i t h t h e e x e c u t i o n of t h e deed.

Under this agreement, Edgars had the right to use sewer

f a c i l i t i e s on H u n t s ' l a n d and t o t a k e w a t e r from a w e l l on

t h e a d j a c e n t Hunt l a n d . The a g r e e m e n t a l s o s t a t e d :

Whereas, s a i d r e a l p r o p e r t y was s o l d t o
F i r s t P a r t i e s [ E d g a r s ] by Second P a r t i e s
[Hunts] with the understanding that
Second P a r t i e s [ H u n t s ] would h a v e f i r s t
o p t i o n t o purchase s a i d p r o p e r t y should
F i r s t P a r t i e s [Edgars] d e s i r e t o s e l l
said property in their respective
lifetimes;

That should F i r s t P a r t i e s [Edgars] s e l l
said real property, Second Parties
[ H u n t s ] a r e h e r e b y g r a n t e d an o p t i o n t o
r e p u r c h a s e s a i d p r e m i s e s f o r t h e sum o f
Seven Thousand Dollars ($7,000.00) ;
provided always that First Parties
[ E d g a r s ] s h a l l g i v e t o Second P a r t i e s
[Hunts] t h i r t y (30) days w r i t t e n n o t i c e
of t h e i r i n t e n t i o n t o sell s a i d premises,
and t h a t Second P a r t i e s [ H u n t s ] s h a l l
b e f o r e t h e e x p i r a t i o n o f s a i d t h i r t y (30)
d a y p e r i o d have t h e r i g h t t o r e p u r c h a s e
s a i d premises for the sum o f Seven
Thousand D o l l a r s ( $ 7 , 0 0 0 . 0 0 ) c a s h .

Thereafter, Omer Edgar died, terminating the joint

tenancy. H i s widow, Alma E d g a r , now t h e s o l e owner o f t h e
property, on J u n e 1 3 , 1 9 8 4 , b r o u g h t t h i s q u i e t t i t l e a c t i o n

t o i n v a l i d a t e t h e o p t i o n agreement. A f t e r t h e Hunts answered

h e r request f o r admissions, she f i l e d a motion f o r summary

judgment contending; (1) t h a t t h e r e was no c o n s i d e r a t i o n f o r

the repurchase option; and (2) t h a t the repurchase option

v i o l a t e d s e c t i o n 70-1-405, MCA and i s t h u s i n v a l i d .

On J a n u a r y 29, 1985, the court granted Alma Edgar's

motion f o r summary judgment. The c o u r t r u l e d t h a t t h e r e was

no c o n s i d e r a t i o n t o s u p p o r t t h e o p t i o n , and s e c o n d l y , t h a t it

was a c o n d i t i o n r e s t r a i n i n g a l i e n a t i o n , and t h e r e f o r e v o i d .

On February 5, 1985, the District Court entered judgment

quieting t i t l e t o t h e property. From t h i s o r d e r and judgment

Hunts a p p e a l , r a i s i n g t h e f o l l o w i n g i s s u e s :

(1) Whether t h e D i s t r i c t C o u r t p r o p e r l y g r a n t e d summary

judgment h o l d i n g t h a t t h e r e was no c o n s i d e r a t i o n s u p p o r t i n g

t h e repurchase agreement.

( 2 ) Whether t h e D i s t r i c t C o u r t p r o p e r l y g r a n t e d summary

judgment holding t h a t t h e repurchase a g r e e m e n t was i n v a l i d

because it violated the rule against restraints on

alienation, o r the rule against perpetuities.

As to the first issue, the District Court erred in

hol-ding t h e agreement unenforceable for a lack of mutual

consideration. The c o u r t ' s o r d e r r e a s o n e d " [ i l t i s obvious
from r e a d i n g t h e p r e a m b l e t o t h e m u t u a l a g r e e m e n t t h a t any

c o n s i d e r a t i o n was t o b e p a i d by t h e E d g a r s t o t h e Hunts and

not vice versa." In this respect, the court failed to

construe the contract according to section 28-3-202, MCA,

which r e q u i r e s t h a t " [ t l h e whole o f a c o n t r a c t i s t o b e t a k e n

together s o a s t o g i v e e f f e c t t o e v e r y p a r t if r e a s o n a b l y

practicable, each clause helping to interpret the other."

The agreement, read in its entirety, set up obligations
r u n n i n g b o t h ways. The Hunts w e r e t o p r o v i d e t h e E d g a r s w i t h

water and a c c e s s t o t h e i r sewer facility. In return, the

E d g a r s p a i d a nominal c o n s i d e r a t i o n o f o n e d o l l a r "and o t h e r

valuable consideration," agreed t o help maintain the sewer

and w a t e r f a c i l i t i e s , and g r a n t e d t o t h e Hunts t h e r e p u r c h a s e

option. Further, this Court has ruled that even nominal

c o n s i d e r a t i o n i s adequate t o support an o p t i o n c o n t r a c t . Van

Atta v. Schillinger (Mont. 1 9 8 1 ) , 625 P.2d 73, 38 St.Rep.

426; K e a s t e r v . Bozik (Mont. 1 9 8 1 ) , 623 P.2d 1376, 38 St.Rep.

194. W e h o l d t h a t t h e r e p u r c h a s e a g r e e m e n t was s u p p o r t e d by

adequate consideration a s p a r t of the original contract t o

purchase.

The District Court erred in holding that the

pre-emptive r i g h t h e l d by t h e Hunts was v o i d a s a m a t t e r o f

law and in g r a n t i n g summary judgment on t h a t ground. The

court correctly noted that the rule against perpetuities,

5 70-1-407, 408, MCA, did not apply to the fixed price

pre-emptive r i g h t a t i s s u e . I n re Murphy's E s t a t e ( 1 9 3 5 ) , 99

Mont. 114, 43 P.2d 233. The error was in interpreting

s e c t i o n 70-1-405, MCA a s a n a b s o l u t e p r o h i b i t i o n a g a i n s t a n y

r e s t r a i n t on t h e a l i e n a t i o n o f r e a l property. That s e c t i o n

states: "Conditions restraining alienation, when repugnant

- -e
t o th i n t e r e s t c r e a t e d , a r e void." (Emphasis a d d e d . ) This

Court reads that provision as a statement of the majority

common law rule that restraints on alienation, when

reasonable, are valid. Lawson v. Redmoor Co. (Wash-App.

1984), 679 P.2d 972. 6 1 AmJur.2d, P e r p e t u i t i e s 5121, p . 129

(1981). The q u e s t i o n i s w h e t h e r t h e p a r t i c u l a r r e s t r a i n t i s

reasonable under t h e circumstances. Lawson, 679 P.2d a t 974.

The Restatement o f Property, in section 406, comment

"i", sets f o r t h v a r i o u s f a c t o r s t h a t may b e c o n s i d e r e d when
determining t h e reasonableness of any p a r t i c u l a r restraint.

In addition to the Restatement factors, case law has

articulated two others to be considered when determining

reasonableness. The t y p e o f p r i c e s e t i s i m p o r t a n t . I f the

price is fixed and greatly disproportionate to t h e market

value of the property, this supports a finding of

unreasonableness. Ross v. Poneman (N.J.Super. 1970), 263

A. 2d 195, 199; I g l e h a r t v. Phillips (Fla. 1980) , 383 So. 2d

610, 614, 615. Secondly, the intent of the parties

contracting for the preemptive right is a factor. If, from

t h e circumstances, it a p p e a r s t h a t t h e p a r t i c u l a r r e s t r a i n t ,

o r the price s e t thereby, is primarily f o r t h e purpose of

restraining t h e a l i e n a b i l i t y of the property, i t w i l l weigh

heavily a g a i n s t t h e v a l i d i t y of t h e r e s t r a i n t . O the other
n

hand, if the circumstances suggest t h a t the restraint was

f r e e l y e n t e r e d i n t o by m u t u a l c o n s e n t a s a normal i n c i d e n t o f

an equal bargaining relationship in order to promote the

original transfer of t h e property, t h e s c a l e s w i l l t i p back

t o w a r d s t h e r e a s o n a b l e n e s s of t h e r e s t r a i n t , see Lawson, 679

P.2d a t 974-975. W e hold t h a t t h e repurchase o p t i o n did not

v i o l a t e t h e r u l e a g a i n s t r e s t r a i n t s on a l i e n a t i o n .

Respondent c o n t e n d s t h a t t h i s C o u r t s h o u l d f o l l o w t h e

C a l i f o r n i a C o u r t o f A p p e a l s d e c i s i o n i n Wharton v. Mollinet

(Cal.App. 1 9 5 1 ) , 229 P.2d 861. I n Wharton, the California

c o u r t i n t e r p r e t e d s e c t i o n 711 o f t h e C a l i f o r n i a C i v i l Code,

which Montana a d o p t e d a s B 70-1-405, MCA, a s an a b s o l u t e r u l e

a g a i n s t any r e s t r a i n t on t h e a l i e n a t i o n o f p r o p e r t y . Wharton,

229 P.2d a t 863. Respondent c o n t e n d s t h i s C o u r t i s bound t o

f o l l o w t h e Wharton r u l e b e c a u s e o f o u r holding i n S t a t e v.

Murphy ( 1 9 7 7 ) , 174 Mont. 307, 570 P.2d 1103, t h a t :
 Montana f o l l o w s t h e r u l e o f s t a t u t o r y
c o n s t r u c t i o n where i n a d o p t i n g a s t a t u t e
from a s i s t e r s t a t e , t h e c o u r t a d o p t s t h e
construction placed upon it by the
h i g h e s t c o u r t o f t h e s t a t e from which i t
was a d o p t e d .

Murphy, 570 P . 2 d a t 1105.

Though w e r e c o g n i z e t h e c o n t i n u i n g v a l i d i t y o f t h e r u l e

i n Murphy, it d o e s n o t , r e q u i r e t h i s C o u r t t o a d o p t t h e r u l e

i n Wharton i n t h i s case. First, § 70-1-405 was a d o p t e d i n

1 8 9 5 , p r i o r t o t h e Wharton h o l d i n g . S e c o n d , Wharton was n o t

decided by the "highest court" of California. Thirdly,

Wharton a p p e a r s t o b e no l o n g e r f o l l o w e d i n C a l i f o r n i a , see

Budny v. Bank of America (Cal.App. 1959), 333 P.2d 812;

lilogman v. Wells F a r g o Rank and Union T r u s t Co. ( C a l . App.

The order of the District Court granting summary

judgment to the plaintiff is reversed, and this case is
'
7
remanded.

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J u s t i c e ,'

Chief J u s t i c e