Klawitter v. Dettmann

NO. 94-173
IN THE SUPREivlE COURT OF THE STATE OF MONTANA
1994

MARK R. KLAWITTER and
SANDRA B. KLAWITTER,
Plaintiffs and Respondents,
v.
ETTA W. DETTMAiiN and
JEAN R. BLEKEN,
Defendants and Appellants.

APPEAL FROM: District Court of the Sixth Judicial District,
In and for the County of Park,
The Honorable Byron L. Robb, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Jack Yardley, Yardley and Yardley,
Livingston, Montana
Fox Respondent:
William S. Dockins, Williams, Jent & Dockins,
Bozeman, Montana

Submitted on Briefs: September 22, 1994
Decided: December 13, 1994
Justice William E. Hunt, Sr., delivered the opinion of the Court.

Mark and Sandra Klawitter (Buyers) sued Etta Dettmann and Jean

Bleken (Sellers) for specific performance of a real estate buy/sell

agreement. The parties filed cross-motions for summary judgment.

The Sixth Judicial District Court, Park County, granted the Buyers'

motion and denied Sellers' motion. The District Court entered

judgment decreeing specific performance in favor of Buyers.

Sellers appeal. We affirm in part, reverse in part, and remand.

We frame the issues on appeal as follows:

1. Did the District Court err in determining that the May 3,

1993, agreement constituted a binding real estate buy/sell

agreement?
2. Did the District Court err by construing the language of

the inspection clause in the buy/sell agreement?

On May 3, 1993, Buyers and Sellers signed a standard realtor's
buy/sell agreement. Sellers offered to sell and Buyers offered to

buy a home and land located at 319 South 12th in Livingston for the

sum of $125,000. Buyers requested that their purchase be

conditioned upon an inspection of the home, including a radon gas

test. Based on this request, Sellers' real estate agent added the

following clause to the pre-printed agreement:

2) Offer is contingent upon purchasers having an
inspection and radon gas test done at their expense
within 10 days of acceptance of this Offer, purchaser to
notify Aspen Real Estate within 3 days of receipt of
inspection of acceptance in writing. If notice is not
received it will be deemed acceptable.
This dispute arises primarily over the interpretation and

application of this clause. Additionally, the agreement made the

sale subject to Buyers' ability to obtain financing. Buyers

applied for financing shortly after executing the May 3 agreement

and paid a $750 application fee to the bank.

Buyers hired Donald H. Barrick of Castle Inspection Services

of Bozeman to conduct a full inspection of the house for $250. The

inspection took place on May 6, 1993, and included a radon test.

Mr. Barrick prepared two separate reports: the first, dated May 7

regarding the house inspection, and the second, dated May 18

regarding the radon testing. Prior to May 13, Buyers were informed

by telephone that the radon test results were satisfactory. The

house inspection report, however, disclosed several items which

caused the Buyers concern.

On May 13, 1993, Buyers sent Sellers a letter stating that the
radon test contingency was removed and that five items of concern

existed regarding the house:

II) As to the home inspection there are five items that
need to be addressed and negotiated:

1) Roof: A qualified roofer to inspect and repair
roof as needed to pass financing and give an estimate of
how long he feels the roof will last.

2) Tree in front removed and rain gutter repaired.

3) Paint siding, window trim and house trim.

4) The garage must have 3/4" gypsum board as a fire
wall and a solid core swing open door.

5) The electric updated with GFCI's installed.

3
If these items are repaired at sellers[‘l cost these
contingencies will be removed and the home accepted
according to all information on the original agreement.

Buyers received no response and on May 18 sent a second letter

to Sellers. Buyers reiterated that the house inspection caused
them concern, especially because the problems could affect their

ability to obtain financing. Buyers stated that U [wle are still

interested in purchasing the property at the agreed upon price if

the bank appraiser finds the property satisfactory in its' [sic]

present condition." The letter further stated:

If, however, items must be improved, repaired or replaced
to satisfy the banks' requirements for the property, then
the bank will not grant a loan to us or any other
potential buyer on the property in its' [sic] present
condition. If this occurs, then the purchase price will
be reduced by an amount agreed upon by both seller and
buyer to cover the work required by the bank. Otherwise,
the work will be completed by the seller as required
prior to closing.

Sellers responded by letter on May 21, 1993. The letter

stated that the original asking price of $135,000 had been reduced

by $10,000 in the buy/sell agreement; that Sellers intended the

$10,000 reduction to cover any repairs; and that Sellers would not

make any repairs that may be requested by an appraiser to satisfy

a loan unless the original asking price of $135,000 is restored.

If Buyers were willing to pay the original asking price and

postpone the date of possession to July 31, Sellers would agree to
apply the additional $10,000 to the 5 items specified in the

Buyers' May 13 letter.
By letter dated May 24, Buyers rejected Sellers' May 21
proposal and stated that they

would like to proceed according to our original agreement
to sell and purchase dated May 3, 1993.

Upon written receipt of the appraisal we will let
you know in writing if we can proceed with the purchase
. .

Sellers did not respond to Buyers' May 24 letter. Sometime after

May 24, Sellers' real estate agents informed Buyers that the

Sellers did not intend to sell the house and property to them. On

July 6, Sellers' attorney informed Buyers' attorney in writing that

the May 3 agreement was no longer in effect.

Our standard in reviewing a grant of summary judgment is the
same as that initially utilized by the district court. Cooper v.

Sisters of Charity (Mont. 1994), 875 P.2d 352, 353, 51 St. Rep.

484, 485. Summary judgment is proper when there is no genuine

issue as to any material fact and the moving party is entitled to

judgment as a matter of law. Rule 56(c), M.R.Civ.P.

ISSUE 1

Did the District Court err in determining that the May 3,

1993, agreement constituted a binding real estate buy/sell
agreement?

Sellers argued in District Court, and continue to argue on

appeal, that the May 3 agreement is not an agreement for the sale
of real estate; instead, they argue that that agreement was merely
an offer to sell the property and that Buyers did not timely accept

5
the offer. Alternatively, Sellers argue that the agreement is an

option contract.

In support of their option contract argument, Sellers cite

Pollard v. City of Bozeman (1987), 228 Mont. 176, 180, 741 P.Zd

776, 779, which states:

An option to buy involves a contract wherein the
owner agreed to give another the exclusive right to buy
property at a fixed price within a specified time. The
option is not a sale. It is not even an agreement for a
sale. At best, it is but "a right of election in the
party securing the same to exercise a privilege," and
onlv when that orivileqe has been exercised bv acceptance
does it become a contract to sell. In other words, a
contract of sale and purchase imposes upon the vendee an
obligation to buy. An option confers a privilege or
right to elect to buy, but it does not impose any obligation to buy.

(Underlining added; citations omitted.)
The District Court determined "[t]hat [the] parties entered a

written contract for sale of defendant's home in Livingston on a

standard Montana 'Agreement to Sell and Purchase' form prepared by
the sellers['] realtor," and that "both sides are bound thereby

. . . II We agree.

Section 28-2-102, MCA, sets forth the essential elements of a

contract:

(1 identifiable parties capable of contracting;
their consent;
(3) a lawful object; and
(4) a sufficient cause or consideration.

Sellers' arguments that the May 3 agreement constitutes an

offer or an option is unsupported by the agreement itself. The

agreement contains the following statement, which appears at the

very top of the document:

6
AGREEMENT TO SELL AND PURCHASE
(Including Earnest Money Receipt)

This contract stipulates the terms of sale of this
property. Read carefully before signing (including the
information of reverse side). This is a leqallv bindinq
contract. If not understood, seek competent service.

(Emphasis added.) The agreement identifies the parties. There is

no dispute as to the parties' capability to enter into a contract.

The parties' consent to the agreement is evidenced by their
signatures on the document. The object of the agreement--the

purchase and sale of real estate--is a lawful one and is supported

by sufficient consideration. Because both parties voluntarily

accepted the terms, the agreement is not an option contract nor is

it a mere offer. The agreement is a binding contract to buy and

sell.

In Cady v. Burton (1993), 257 Mont. 529, 537, 851 P.2d 1047,

1052, we held that

[t]he primary purpose of a buy-sell agreement is a
restriction of the seller's ability to market the
property for a specified time in exchange for the buyer's
payment of earnest money and promise to complete the
sale.
As this Court determined in Cady, 851 P.2d at 1052, nothing in the

instant record "suggests any other purpose for the buy-sell

agreement[] at issue."
We conclude that because all four of the elements set forth in

§ 28-2-102, MCA, were present when both parties signed the May 3

agreement, the agreement constitutes a binding contract. We affirm
the District Court as to this issue.

7
ISSUE 2

Did the District Court err by construing the language of the

inspection clause in the buy/sell agreement?

In its explanatory comment to its order ruling on summary

judgment, the District Court determined the following:

Ample legal authorities for granting plaintiffs
their requested relief are set forth in their briefs
filed herein, and the court finds there are no genuine
issues of material fact, but onlv a difference in the
parties construction or interpretation of the contract
and various letters they sent to each other . . . .

(Emphasis added.)

As a general rule, construction and interpretation of written

agreements, including contracts, is a question of law for the court

to decide. First Sec. Bank of Anaconda v. Vander Pas (1991), 250

Mont. 148, 152-53, 818 P.2d 384, 387. Likewise, it is a question

of law whether ambiguity exists in a contract. Audit Services,

Inc. v. Systad (1992), 252 Mont. 62, 65, 826 P.2d 543, 551. The

intent of the parties to an agreement is only looked to when the

agreement is not clear on its face. Bain v. Williams (1990), 245

Mont. 228, 232, 800 P.2d 693, 695; Derrenger v. City of Billings

(1984), 213 Mont. 469, 475, 691 P.2d 1379, 1382.
Where the question of intent depends upon the construction of

an unambiguous contract, the question is one for the court alone;

however, where a contract term is ambiguous or obscure or uncertain

of meaning, the interpretation of the language, and thus, the

determination of the parties' real intent, is a matter to be left

to the consideration of the jury. Section 28-3-301, MCA; Gray v.

8
City of Billings (1984), 213 Mont. 6, 10, 689 P.2d 268, 270.

Pursuant to 5 28-3-306, MCA,

(1) If the terms of a promise are in any respect
ambiguous or uncertain, it must be interpreted in the
sense in which the promisor believed, at the time of
making it, that the promisee understood it.
(2) When the terms of an agreement have been
intended in a different sense by different parties to it,
that sense is to prevail against either party in which he
supposed the other understood it; and when different
constructions of a provision are otherwise equally
proper, that is to be taken which is most favorable to
the party in whose favor the provision was made.

In this case, the District Court found

the inspection and radon clauses of the [buy\selll
agreement to obviously mean that if an inspection showed
repairs were needed or recommended and plaintiffs as
purchasers did not wish to make them, or if the radon
test was not satisfactory, purchasers could terminate the
contract. Such result is determined because buyers
cannot unilaterally impose on sellers new terms or
conditions of making repairs or doing something about an
excessive radon reading.

We do not agree with the District Court that the meaning of the

inspection and radon clause is obvious. The clause reads:

We conclude that the poorly drafted language of the clause is

uncertain. Because the clause " is ambiguous or obscure or

uncertain of meaning, the interpretation of the language and, thus,

the determination of the parties' real intent, is a matter to be
left to consideration of the jury." Grav, 689 P.2d at 270;

5 28-3-301, MCA. We, therefore, reverse the summary judgment and

9
remand this cause to the District Court for further proceedings

consistent with this opinion.

Affirmed in part, reversed in part, and remanded.

We concur:

Justices

10
Justice James C. Nelson dissenting.

I concur with the Court's discussion on Issue 1 and dissent
from our discussion on Issue 2. I agree that the clause at issue

is unartfully drafted. However, I also believe that the Buyers

performed their obligations under a reasonable construction of the

contract's inspection contingency language.

While we have determined that the language of the inspection

clause is uncertain and ambiguous, we fail to acknowledge a

qualifying legal rule that derives from the fact that, here, the

Sellers drafted the contract, including the offending provision,

and, thus, caused the uncertainty and ambiguity of which they now

seek to take advantage. That rule provides that in cases of
uncertainty in the contract language, that language should be most

strongly interpreted against the party who caused the uncertainty
to exist. Section 28-3-206, MCA. The cases upholding that

principle are numerous, but see, for example: St. Paul Fire &

Marine Ins. Co. v. Cumiskey (1983), 204 Mont. 350, 665 P.2d 223,
and Shanahan v. Universal Tavern Corp. (1978), 179 Mont. 36, 585
P.2d 1314. That rule is especially appropriate where, as here, the

party responsible for drafting the provision at issue seeks to

interpret his or her language so as to defeat the contract. 17A.

Am.Jur. 2d Contracts, § 348.

Applying those principles in the instant case where there are

no material facts in dispute and the issue is simply one of

interpreting contract language, leads to exactly the conclusion

arrived at by the District Court.
Accordingly, I would affirm.