No. 13339
IN THE SUPREME COURT OF THE STATE OF MONTANA
1977
VERN J. DOBITZ, JAMES L.
SCHAREN and JOHN FURGASON,
Plaintiffs and Appellants,
FRED E. OAKLAND and LORETTA OAKLAND,
husband and wife, and WESTERN PROPERTIES,
a Montana general partnership,
Defendants and Respondents.
Appeal from: District Court of the Thirteenth Judicial
District,
Honorable Charles Luedke, Judge presiding.
Counsel of Record:
For Appellants:
Michael J. Whalen argued, Billings, Montana
For Respondents :
Moulton, Bellingham, Longo and Mather, Billings,
Montana
B. E. Longo argued, Billings, Montana
Hutton, Sheehy and Cromley, Billings, Montana
Submitted: January 26, 1977
Decided: MAR 4 f g n
Honorable Peter G. Meloy, District Judge, sitting in place of
Mr. Justice Frank I. Haswell.
This is an appeal from a declaratory judgment granted
by the district court, Yellowstone County, in favor of defendants
Fred E. Oakland and Loretta Oakland.
The facts from which this litigation arises are:
Oaklands sold certain real property rental units to the
plaintiffs,Vern J. Dobitz, James L. Scharen and John Furgason,
on a contract for deed, which contract contained a provision
for nonassignment unless Oaklands' consent was given.
Plaintiffs, without Oaklands' consent, entered into
a contract for deed to sell to defendant Western Properties, Inc.
The contract for deed between Oaklands and plaintiffs
provided that in the event of default by plaintiffs, Oaklands
would give a written notice of default and plaintiffs would
have 30 days to cure the default. Notice of default was given
on October 7, 1975.
The contract further provided that in the event the de-
fault was not cured within the 30 day period, that Oaklands could,
by written notice, dzclare the entire balance on the contract
due. Such notice was given November 12, 1975. Plaintiffs on
November 13, 1975 filed this action for declaratory relief and
requested an order restraining Oaklands from further action on
the notice of acceleration. The district court granted a tem-
porary restraining order and order to show cause. Oaklands
filed an answer and a motion for a summary judgment. Defend-
ant Western Properties, Inc., acknowledged service but has not
otherwise pleaded to the complaint.
On December 5, 1975 a hearing before the district court
was had upon the order to show cause and the motion for summary
judgment. The district court entered judgment for Oaklands
holding: (1) that plaintiffs had violated the provisions of the
contract by entering into the contract with Western Properties,
Inc. without first obtaining the consent of the Oaklands; (2)
that a proper notice of default was given by Oaklands; (3) that
there was a failure to cure within the 30 days allowed by the
contract and that further notice accelerating the balance was
given; and (4) that the order restraining the Oaklands as to
action on accelerating the balance be quashed. (The district
court thereafter stayed the execution of the judgment, the
effect of which restrained Oaklands from taking any further ac-
tion under the default provision of the contract until 10 days
after the filing of the remittitur from the Supreme Court.)
On appeal plaintiffs raise issues hereinafter discussed:
First: Has there been a default by plaintiffs which
came within the default provisions of the contract for deed?
Plaintiffs contend there was not a "default", as such,
but merely a "breach". They admit there was a breach but argue
that the remedy is for damages and does not come under the de-
fault provisions which provides for notice and an opportunity
to cure the default. Plaintiffs argue the default provision
applies only to a failure on the part of plaintiffs to perform
their affirmative obligations under the contract.
The pertinent sections of the contract for deed are:
"11. DEFAULT PROVISIONS. Should Buyer fail to
make the payment provided herein or to perform
any of the other terms on Buyer's part to be
performed hereunder * * *." (The balance of
the section provides for notice, etc.)
"12. REMEDIES NOT EXCLUSIVE. In the event of a
breach by Seller or Buyer of a provision hereof
or in the event of anyadefault as defined herein,
the party aggrieved thereby shall have all the
rights and privileges accorded by law or other-
wise. No remedy herein conferred upon or reserved
to any of the parties herein is exclusive of any
other remedy or remedies, and each and every
remedy shall be cumulative and shall be in addi-
tion to every other remedy given hereunder or now
or hereafter existing at law or in equity."
Plaintiffs argue Section 12 makes a distinction between
breach and default.
The question is presented as to whether the action on the
part of plaintiffs in reselling the property and violating the
nonassignment clause without consent constitutes a default with-
in the meaning of Section 11 of the contract.
The district court found the failure to procure the
consent constituted a default within the meaning of Section 11.
We agree.
We note the default provision carries the words, in
addition to the failure to make payments, "or to perform any of
the other terms on Buyer's part to be performed hereunder * * *."
There was an obligation of performance on plaintiffs'
part to secure the Oaklands' consent prior to the sale to Western
Properties, Inc. Such obligation was not performed and thus such
failure of performance constitutes a default within the meaning
of Section 11 of the contract.
Second: Was the provision of Oakland's contract for deed
prohibiting assignment or transfer of interest without Oaklands'
prior consent void in contravention of public policy, and in
contravention of section 67-405, R.C.M. 1947, as an unlawful
restraint upon alienation?
Section 67-405, provides:
"Conditions restraining alienation, when repugnant
to the interest created, are void."
The district court found the contract provision against
transfer without the Oaklands' consent was not void and was a
condition not encompassed within the meaning of section 67-405.
We agree.
The general rule is stated in 4 Corbin on Contracts,
"We have substantial unanimity of authority to
the effect that in contract for the future
conveyance of land or goods, the vendor can
limit or forbid the purchaser's assignment of
his right to transfer. The court may hesitate
to interpret general words against assignment
as being intended as such a prohibition; but
such a prohibition, if made, is not invalid.
Attention may again be called, however, to the
difference between forbidding the assignment of
a contract right to a future transfer, and for-
bidding a future conveyance of land or goods by
the buyer after their transfer to him. The
latter may be invalid for various reasons; it
is the former that is now being considered."
This statement of the law recognizes the difference between a
conveyance and a contract to convey. The land contract such as
is involved here is an executory contract and the legal title
does not pass until the conveyance is actually made. We adopt
the general rule. (Compare: Rother-Gallagher v. Montana Power,
164 Mont. 360, 552 P.2d 1226, wherein this Court held that the
provisions for nonassignment in a contract be upheld in Montana
and cited Winslow v. Dunham, 46 Mont. 71, 125 P. 136; Standard
Sewing Machine Co., v. Smith, 51 Mont. 245, 152 P. 38. See also:
Lipsker v. Billings Boot Shop, 129 Mont. 420, 288 P.2d 660.)
Plaintiffs reason the judgment of the district court
holding the new assignment clause to be valid operates to pre-
vent plaintiffs from entering into rental agreements. There
was, in this case, no default specified in the notice as to the
rental agreements and is not an issue here. We note, however,
that the default complained of here is that of the granting of
an interest which is not a terminable interest, as is the case
of a month to month tenancy.
Plaintiffs do not concede the so-called assignment clause
is not void but contend that should this Court hold that it is
not void, then plaintiffs urge this Court to adopt what the Oak-
lands characterize as the minority rule. Under the so-called
minority rule the clause is not void, but must be of reasonable
application. Plaintiffs contend the failure of Oaklands' giving
of consent was unreasonable and was solely motivated by a desire
to get an increase in their interest rate.
The district court made no findings as to the reason-
ableness of the withholding of consent, and under the view of
this Court such finding is not necessary. (There was conflict
in the testimony as to the information given to Oaklands as
to the terms of the resale contract and the names of the
purchasers. )
The judgment of the
sitting in place of stice Frank
I. Haswell.
Chief Justice
h
justices