No. 13614
IN THE SUPREME COURT OF THE STATE OF MONTANA
1977
GERALD HANSEN and CONSOLIDATED
CO14NERCE CORPORATION,
Plaintiffs and Appellants,
TRANSAMERICA INSURANCE COMPANY,
A corporation, and COUNTY OF SILVER
BOW, et al.,
Defendants and Respondents,
COUNTY OF SILVER BOW, et al.,
Cross-Claimant and Respondent.
Appeal from: District Court of the Second Judicial District,
Honorable Arnold Olsen, Judge presiding.
Counsel of Record:
For Appellants:
Michael J. McKeon argued, Anaconda, Montana
N. F. Hennessey, Butte, Montana
For Respondents:
John G. Winston, County Attorney, Butte, Montana
Corette, Smith & Dean, Butte, Montana
R. D. Corette Jr. argued and John Larson argued,
Submitted: September 27, 1977
~ecided:JAN I S 1978
Mr. Justice Daniel J. Shea delivered the Opinion of the Court.
Plaintiffs Gerald Hansen and Consolidated Commerce Corpora-
tion appeal from an order of the Silver Bow County District Court
granting summary judgment in favor of defendants Transamerica In-
surance Company and Silver Bow County in an action on an insurance
policy.
Plaintiffs brought this action seeking the full amount of
an insurance policy following the destruction by fire of a building
known as the Woodrow Hotel, located in Butte, Montana, and a
declaration of the county's interest in the building at the time
of its destruction. The county was the seller and plaintiff Hansen
the buyer of this building under a contract of sale entered into by
these parties. The county cross-claimed against Transamerica seek-
ing the full amount of the insurance policy, alleging its interest
in the building was superior to that of plaintiffs. On March 13,
1974, Transamerica deposited $2,862.35, a sum less than the full
amount of the insurance policy, with the District Court.
On May 29, 1974, the District Court ordered the remains of
the destroyed building demolished, reserving for a later hearing
determination of the rights of the parties in the building and
the building's value at the time of its destruction. Following
a hearing, the District Court granted motions of the county and
Transamerica for summary judgment on the issue of the building's
ownership, ruling that plaintiffs had forfeited all rights to the
building as of June 19, 1970, nearly five months before the building's
loss, because of their failure to pay the first of four yearly in-
stallments on the contract which was due on that date.
Undisputed facts upon which summary judgment was granted
are as follows:
On June 19, 1969, plaintiff Gerald Hansen entered into a
contract with Silver Bow County to purchase property which had
reverted to the county for back taxes. By the terms of the contract
Hansen was to pay $8,500 for this property, which consisted of the
Woodrow Hotel building. The contract called for a payment of $1,700
down and $1,700 in each of the next four years, with the payments
due on the 19th of June of each year.
Important here is the third clause of this contract, which
provides :
"3. That time is of the essence of this contract,
and in the event that the purchaser or his assigns
shall fail to pay any installment, when due, or any
annual interest on deferred payment when due, or
any tax or assessment, when due, or shall fail to
comply with any other terms or covenants in this
contract, then and thenceforth the vendor shall be
released from all obligation in law or equity to
convey such property, and the purchaser, or his
assigns, shall forfeit all right thereto. * * * "
Hansen made the down payment and assigned the contract to
the Consolidated Commerce Corporation, which was owned by Hansen.
The installment due on June 19, 1970, was not paid. The county
sent no notice of default with respect to this missed installment
and took no action to repossess the property. The building was
destroyed as the result of two fires, on the 3rd and 9th of November,
1970. Four days after the building's destruction, nearly five
months after plaintiffs' failure to pay the 1970 installment, the
county repossessed the building.
Transamerica, which had transferred an existing insurance
policy covering the building to Hansen on August 11, 1969, received
proofs of loss from plaintiffs and the county following the building's
destruction. Transamerica paid neither claim.
The underlying issue on appeal is whether Hansen still had
an interest in the property at the time of the fire.
Summary judgment is proper if the record shows there is no
genuine issue of material fact and the movant is entitled to judgment
as a matter of law. The burden initially is on the movant to show
the absence of any genuine issue of material fact; if the record
discloses no such issue, the burden shifts to the party opposing
the motion, who must then establish a genuine factual issue.
Rule 56(c), M.R.Civ.P.; Harland v. Anderson (1976), 169 Mont. 447,
548 P.2d 613, 33 St.Rep. 363.
In this case determination of the interest of the parties
in the building at the time of its destruction did not raise an
issue of material fact. The propriety of summary judgment, there-
fore, turns on whether the county is, as a matter of law, entitled
to sole ownership of the building as of June 19, 1970, the date on
which the unpaid installment became due.
The county contends the third clause of the contract, the
"time is of the essence" provision, controls, and that since no
notice of forfeiture was required by that provision, plaintiffs'
failure to pay the installment due on June 19, 1970 automatically
terminated their interest in the building as of that date.
Plaintiffs contend they had an insurable interest in the
building at the time of the fire because the county had not yet
acted to repossess the property. They argue that by failing to
assert its ownership interest by repossession until five months
after plaintiffs' default the county waived the "time is of the
essence" provision and therefore, as a matter of law, was not entitled
to invoke strict forfeiture under this provision.
All parties rely on Fratt v. Daniels-Jones Co. (1913), 47
Mont. 457, 133 P. 700, in support of their respective positions.
In Fratt, the sellers of real property sought to enforce a contract
clause which provided that failure of the buyer to make a payment
when due "shall work an immediate forfeiture of this contract,
without any notice whatever * * *." Four months after the due date
of a missed installment the sellers sent the buyer notice of for-
feiture. The buyers then tendered the amount owed, which was refused.
The sellers received a judgment on the pleadings in their subsequent
quiet title action and upon appeal the buyers contended that the
delay between default and taking action thereon constituted a waiver
of the default. This Court did not agree. Distinguishing between
two "classes" ofcontractswhich include "time is of the essence"
provisions, this Court stated:
" * * * counsel failed to discriminate between a
contract like the one now under consideration, by the
very terms of which the failure to pay an installment
when due ipso facto ends the contract, and one which
provides that upon the failure of the vendee to make
payment on time, the vendor shall have the right to
declare the agreement at an end * * * Under an agree-
ment of the first class the breach by the vendee ter-
minates the contract unless the vendor elects to
waive the time provision and continue the agreement
in force. * * * Under a contract of the second class
the breach by the vendee does not ipso facto terminate
the agreement. It merely creates the condition under
which the vendor may terminate it if he elects to
avail himself of the power conferred * * *." 47 Mont. 499.
The "time is of the essence" provision at issue here is
not qualified by a notice requirement of any kind, and the contract
therefore can be described as being of the first "class" as set
forth in Fratt. Absent a waiver of the operation of this provision,
plaintiffs' default would have the effect of working a forfeiture
of their interests in the building as of the date of the default.
We hold in this case there was such a waiver by the county.
A period of nearly five months elapsed between the date on which
the 1970 installment became due and the county's action in repos-
sessing the building as a result of plaintiffs' nonpayment of that
installment. During that period the county did nothing. It was
not until four days after the building's destruction that the county
commissioners notified the county treasurer of the repossession.
As this Court stated in Suburban Homes Co. v. North (1914), 50 Mont.
" * * * If payment is to be made in installments,
default in the payment of any installment is a dis-
tinct breach and gives the vendor the right to
declare a forfeiture. The right must be promptly
exercised, however; otherwise, the right being
exclusively that of the [vendor], he will be
presumed to regard the contract as still valid
and existent. * * * "
The county could have repossessed the building immediately
upon plaintiffs' failure to pay the 1970 installment when it was
due. However, the county was not required to repossess the building,
and could have either expressly waived the time provision or accepted
latepayment if such payment had been tendered. In either event,
the contract would have remained in effect notwithstanding plaintiffs1
default. Although not express, the county's waiver in the present
case by its nonaction achieved the same result.
Plaintiffs concede that the county has an interest in the
building and a corresponding right to the insurance proceeds to the
extent of the unpaid balance of the purchase price. Although not
named a loss payee in the insurance policy as required by the con-
tract, the county still has an equitable lien on the insurance pro-
ceeds regardless of the positions of the parties at the time of the
loss. American Equitable Assurance Co. v. Newman (1957), 132 Mont.
The summary judgment of the District Court is vacated and
the cause remanded for further proceedings consistent with this
opinion.
We Concur:
f
Justices
-6-
Mr. Justice Frank I. Haswell, dissenting:
I would affirm the judgment of the Uistrict Court.
In my view all right, title or interest of plaintiffs
in the property was terminated automatically on their failure
to pay the first installment of the purchase price on June 19,
1970. The contract between plaintiffs and Silver Bow County
expressly so provides in pertinent part:
"That time is of the essence of this contract,
and in the event that the purchaser or his assiqns
shall fail to pay any installment, when due * * *
then and thenceforth the vendor shall be released
-
Erom all obligation in law or equity to convey
- -
such property, and t h e y , o his assisnq,
;
1 f n r f u all risht t r
h-
e. * * *" (Emphasis
supplied.)
The majority find an implied waiver of this contract
provision in the failure of the county to repossess the property
for a period of five months. Fratt, cited and quoted in the
majority opinion, holds that a breach terminates a contract of
the type involved in this case " * * * unless the vendor elects
to waive the time provision and continue the agreement in force."
It is axiomatic that a waiver is the voluntary relin-
quishment of a known right. I would not imply such voluntary
relinquishment by the county of its contract right simply from
its nonaction for a period of five months to formally repossess
the property and cut off any rights of the plaintiffs under the
contract, an action it was not required to take under the auto-
matic termination provision of the contract. Hence no waiver,
and the judgment of the District Court should be affirmed.
Justice
Mr. Justice John Conway Harrison dissenting:
I concur in the dissent of Justice Haswell.
L
Justice