Sharp v. Holthusen

No. 80-102
IN THE SUPREME COURT OF THE STATE OF MONTANA

1980

RAY D. SHARP and FREDA SHARP,
Plaintiffs and Appellants,

EARNEST D. HOLTHUSEN, DONNA M.
HOLTHUSEN and the FIRST NATIONAL
BANK OF MISSOULA, et al.,
Defendants and Respondents.

Appeal from: District Court of the Fourth Judicial District,
In and for the County of Missoula,
Honorable James B. Wheelis, Judge presiding.
Counsel of Record:
For Appellants:
Balyeat, Kammerer and Rodli, Missoula, Montana
For Respondents :
Tipp, Hoven and Skjelset, Missoula, Montana

Submitted on briefs: August 6, 1980
Decided: & P ~ & k /?
,, 19613

Filed: SEP 1 2 1980
Mr.J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f t h e
Court .
T h i s i s a n a p p e a l from a judgment of t h e D i s t r i c t

C o u r t , F o u r t h J u d i c i a l D i s t r i c t , M i s s o u l a County, d i s m i s s i n g

p l a i n t i f f ' s claim f o r f o r f e i t u r e under a c o n t r a c t f o r deed.

W e s h a l l a d d r e s s two i s s u e s on t h i s a p p e a l :

1. May a c o u r t o f e q u i t y r e l i e v e a d e f a u l t i n g b u y e r ,

i n a c o n t r a c t f o r deed from a f o r f e i t u r e o f h i s e q u i t y , when

b e f o r e s u i t t h e b u y e r t e n d e r e d f u l l payment u n d e r t h e con-

t r a c t , p l u s payment of t h e s e l l e r ' s p e r s o n a l e x p e n s e s and

a t t o r n e y f e e s t o t h a t d a t e , and where b u y e r h a s f a i l e d t o

c u r e a d e f a u l t o f nonpayment u n d e r t h e c o n t r a c t w i t h i n t h e

t i m e r e q u i r e d i n t h e c o n t r a c t and a f t e r p r o p e r n o t i c e was

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

2. Whether s e l l e r s , who sued t o f o r c e a f o r f e i t u r e of

t h e buyers' equity, a r e e n t i t l e d t o a t t o r n e y f e e s a s t h e

p r e v a i l i n g p a r t y when judgment i s r e n d e r e d n o t a l l o w i n g t h e

f o r f e i t u r e , b u t r e q u i r i n g s e l l e r s t o a c c e p t b u y e r s t e n d e r of

p e r f o r m a n c e made b e f o r e s u i t .

On O c t o b e r 11, 1976, Ray D . and F r e d a S h a r p , p l a i n t i f f s

and s e l l e r s , and E a r n e s t D . and Donna M. Holthusen, defen-

d a n t s and b u y e r s , e n t e r e d i n t o a w r i t t e n c o n t r a c t f o r d e e d

f o r t h e s a l e and p u r c h a s e o f r e a l p r o p e r t y l o c a t e d i n Lake

County. T e r m s i n c l u d e d monthly i n s t a l l m e n t payments t o

p l a i n t i f f s , a s s u m p t i o n by d e f e n d a n t s o f p l a i n t i f f s ' V e t e r a n s

A d m i n i s t r a t i o n l o a n , and d i s c h a r g e i n f u l l of t h e b a l a n c e

d u e and t h e VA l o a n by O c t o b e r 11, 1977.

P l a i n t i f f g a i n e d p o s s e s s i o n of t h e p r o p e r t y on O c t o b e r

11, 1976. P l a i n t i f f s h a v e p a i d $ 7 , 0 0 0 c a s h down and monthly

payments t o t a l i n g $ 1 , 0 8 1 . P l a i n t i f f s a l s o made payments on

t h e assumed V e t e r a n s ~ d m i n i s t r a t i o nl o a n . The c o n t r a c t f o r
deed r e q u i r e d d e f e n d a n t s t o make a b a l l o o n payment t o p l a i n -

t i f f s and r e f i n a n c e t h e V e t e r a n s A d m i n i s t r a t i o n l o a n . The

p a r t i e s c o n t e m p l a t e d t h a t t h e d e f e n d a n t s would r e f i n a n c e t h e

o b l i g a t i o n s by October 11, 1977, and t h a t p l a i n t i f f s would

cooperate i n t h i s refinancing, i f required.

A w e l l s u p p l y i n g t h e p r o p e r t y w i t h w a t e r was found t o

be f u n c t i o n i n g p r o p e r l y a t t h e t i m e of s a l e . Both p a r t i e s

b e l i e v e d t h a t t h e w e l l was f u n c t i o n i n g p r o p e r l y ; however,

t h i s was i n c o r r e c t . I t was l a t e r d i s c o v e r e d t h a t t h e w a t e r

w e l l was c o n t a m i n a t e d . The t r i a l c o u r t found n e i t h e r p a r t y

i n f a u l t f o r t h e contamination.

I n A p r i l 1977 d e f e n d a n t s a c t i v e l y s o u g h t f i n a n c i n g f o r

t h e o b l i g a t i o n due under t h e c o n t r a c t . The d e f e n d a n t s

a t t e m p t e d t o r e f i n a n c e t h e b a l l o o n payment due on October

11, 1977, r a t h e r t h a n make a c a s h payment from t h e i r own re-

sources. Because of numerous r e a s o n s , d e f e n d a n t s were n o t

a b l e t o obtain t h e necessary financing within the t i m e

limit.

On October 21, 1977, a n o t i c e of d e f a u l t was s e n t t o

defendants a s required i n t h e contract. The d e f a u l t was n o t

cured w i t h i n f o r t y - f i v e d a y s as s p e c i f i e d i n t h e c o n t r a c t ,

and a demand f o r t h e r e t u r n of t h e escrow documents from t h e

F i r s t N a t i o n a l Bank was made. Subsequently, t h e p a r t i e s

e n t e r e d i n t o s e t t l e m e n t n e g o t i a t i o n s f o r p u r p o s e s of com-

p r o m i s i n g such c l a i m s a s e a c h might have a g a i n s t t h e o t h e r .

F i n a l l y i n J a n u a r y 1978, f i n a n c i n g f o r t h e payoff of

t h e e n t i r e c o n t r a c t , t h e b a l l o o n payment, a s w e l l as t h e

r e m a i n i n g p r i n c i p a l and i n t e r e s t due t h e p l a i n t i f f s was

o b t a i n e d through Lomas and N e t t l e t o n of M i s s o u l a , Montana.

Lomas and N e t t l e t o n made t h e c l o s i n g d a t e of t h e l o a n

J a n u a r y 1 6 , 1978, b u t b e c a u s e t h e y r e q u i r e d a t e s t of t h e

w a t e r p u r i t y on t h e p r o p e r t y , t h e l o a n c o u l d n o t b e c l o s e d
 a s a r e s u l t of t h e w a t e r t e s t showing t h a t t h e w a t e r w e l l

was c o n t a m i n a t e d .

The Montana S t a t e Department of H e a l t h and Environ-

. m e n t a l S c i e n c e s recommended t o d e f e n d a n t s t o c l e a n , r e c a p

and f i l t e r t h e w e l l w a t e r . L a t e r , t h e Department recom-

mended t h a t t h e w e l l b e r e l o c a t e d . Defendants d r i l l e d a new

w e l l and i n s t a l l e d a new pump a t a c o s t of $ 1 , 7 4 1 .

I n March 1978 when t h e w e l l was completed, d e f e n d a n t s

were g i v e n f i n a n c i n g from Lomas and N e t t l e t o n . Defendants

t e n d e r e d payment t o t h e escrow a g e n t . The escrow a g e n t

r e f u s e d t o a c c e p t t h e l o a n on d i r e c t i o n s from p l a i n t i f f s .

P l a i n t i f f s r e q u i r e d d e f e n d a n t s t o pay a l l a t t o r n e y f e e s and

r e l e a s e p l a i n t i f f s from a l l c l a i m s t h e y may have f o r m i s r e -

p r e s e n t a t i o n of t h e w a t e r s u p p l y . Defendants t e n d e r e d f u l l

payment f o r t h e a t t o r n e y f e e s , b u t r e f u s e d t o r e l e a s e t h e

p l a i n t i f f s from any a c t i o n o f m i s r e p r e s e n t a t i o n .

Negotiations continued. However, t h e p a r t i e s w e r e n o t

a b l e t o e n t e r i n t o a s e t t l e m e n t agreement. Plaintiffs filed

s u i t a g a i n s t d e f e n d a n t s f o r f o r f e i t u r e of t h e c o n t r a c t and

f o r r e p o s s e s s i o n of t h e r e a l p r o p e r t y i n May, 1978. De-

f e n d a n t s have been r e a d y , w i l l i n g and a b l e t o pay o f f t h e

e n t i r e amount of t h e c o n t r a c t s i n c e A p r i l , 1978. P l a i n t i f f s

have r e f u s e d t e n d e r of payment.

"Whenever by t h e t e r m s of a n o b l i g a t i o n a
party thereto incurs a forfeiture o r a loss
i n t h e n a t u r e of a f o r f e i t u r e by r e a s o n of h i s
f a i l u r e t o comply w i t h i t s p r o v i s i o n s , he
may b e r e l i e v e d t h e r e f r o m upon making f u l l
compensation t o t h e o t h e r p a r t y , e x c e p t i n c a s e
of a g r o s s l y n e g l i g e n t , w i l l f u l o r f r a u d u -
l e n t b r e a c h of d u t y . " S e c t i o n 28-1-104, MCA.

T h i s C o u r t h a s a l l o w e d a p a r t y t o a c o n t r a c t who i s

i n d e f a u l t , and who i s s u b j e c t t o a p e n a l t y of f o r f e i t u r e

t o redeem h i s r i g h t t o t h e p r o p e r t y . Yellowstone County v.

Wight ( 1 9 4 4 ) , 115 Mont. 4 1 1 , 145 P.2d 516; P a r r o t t v . H e l l e r
 ( 1 9 7 6 ) , 170 Mont. 2 1 2 , 557 P.2d 819. Parties are relieved

from f o r f e i t u r e " i n any c a s e where h e sets f o r t h f a c t s which

a p p e a l t o t h e c o n s c i e n c e of a c o u r t o f e q u i t y . " P a r r o t t v.

Heller, 557 P.2d 819, 820. This Court has s a i d t h a t s e c t i o n

28-1-104, MCA, was e n a c t e d ;

". . . f o r t h e b e n e f i t o f o b l i g o r s whose f a i l u r e t o
p u n c t u a l l y p e r f o r m would r e s u l t i n l o s s t o them
i n t h e m a t t e r s r e s p e c t t o which t h e y have con-
tracted. The i n t e n t i o n of t h e L e g i s l a t u r e i n
e n a c t i n g t h e s t a t u t e was t h a t i t s h o u l d be o p e r a -
t i v e and t h a t i t s h o u l d b e g i v e n f u l l f o r c e and
e f f e c t when t h e c i r c u m s t a n c e s i n a n y c a s e gave
it application. The i n t e n t i o n of t h e law under
t h i s s t a t u t e i s t h a t a f o r f e i t u r e should n o t be
needlessly enforced. The c o u r t s have e s t a b l i s h e d
t h a t as t h e p o l i c y o f t h e law i n t h e a b s e n c e o f
statute. The r u l e a s i t h a s found e x p r e s s i o n i n
both c o u r t decisions generally i s t h a t both
i n law and i n e q u i t y f o r f e i t u r e s a r e a b h o r r e d
. . ." Y e l l o w s t o n e County v . Wight, 1 1 5 Mont. 411,
417, 145 P.2d 516, 518.

The p a r t i e s ' c o n t r a c t , which r e q u i r e s f o r f e i t u r e

i n t h e c a s e of d e f a u l t , d o e s n o t d i v e s t a c o u r t of e q u i t y

o f i t s power t o r e l i e v e a p a r t y from t h e c o n s e q u e n c e s of h i s

d e f a u l t and need n o t g r a n t f o r f e i t u r e .

Defendants' actions here w e r e not intentional, willful

or fraudulent acts. The r e c o r d d i s c l o s e d t h a t d e f e n d a n t s

made a good f a i t h e f f o r t t o pay t h e n e c e s s a r y money

a t t h e t i m e i t was d u e , b u t b e c a u s e of temporary c i r c u m s t a n c e s

o u t s i d e o f t h e i r c o n t r o l , t h e c o n d i t i o n of t h e w a t e r w e l l ,

they w e r e unable t o secure t h e necessary financing within

the t i m e desired.

P l a i n t i f f s a r g u e t h a t t h e t i m e p e r i o d between d e f a u l t

and a c t u a l t e n d e r of payment was n o t r e a s o n a b l e t o a l l o w a

c o u r t of e q u i t y t o r e l i e v e t h e d e f e n d a n t s from f o r f e i t u r e

under s e c t i o n 28-1-104, MCA. W e disagree.

Subsequent t o t h e f o r t y - f i v e day p e r i o d given t h e

b u y e r s t o c u r e t h i s d e f a u l t , t h e p a r t i e s e n t e r e d i n t o set-

t l e m e n t n e g o t i a t i o n s f o r t h e p u r p o s e of compromising s u c h
c l a i m s a s e a c h m i g h t have a g a i n s t t h e o t h e r . Defendants

a t t e n d e d a c l o s i n g a t Lomas and N e t t l e t o n i n J a n u a r y of 1978.

T h i s c l o s i n g c o u l d n o t be completed b e c a u s e of t h e c o n d i t i o n

of t h e w a t e r w e l l . P l a i n t i f f s never o b j e c t e d t o defendants'

improvements on t h e l a n d , t h e d r i l l i n g and i n s t a l l i n g of a

new w a t e r w e l l . When t e n d e r was made, p l a i n t i f f s w e r e w i l l -

i n g t o a c c e p t t e n d e r on t h e c o n d i t i o n d e f e n d a n t s r e l e a s e d

t h e p l a i n t i f f s from p o s s i b l e s u i t f o r m i s r e p r e s e n t a t i o n on

t h e condition of t h e water w e l l .

The t r i a l c o u r t ' s judgment g i v e s t h e p l a i n t i f f s what

t h e y a r e e q u i t a b l y e n t i t l e d t o , , t h e a m o u n t due under t h e

c o n t r a c t , compensation f o r t h e i r p e r s o n a l e x p e n s e s and a t -

t o r n e y f e e s , a s a r e s u l t of t h e d e l a y from t h e t i m e of p e r -

formance t o t h e t i m e of t e n d e r of payment i n March, 1978.

There comes a t i m e when f a i l u r e t o perform i s n o t r e a s o n a b l e ,

and t h e a p p l i c a t i o n of t h e a n t i f o r f e i t u r e s t a t u t e n o t ap-

p l i c a b l e , b u t t h i s i s not t h e case. From t h e f a c t s p r e s e n t e d

h e r e , we f i n d t h e c o u r t w a s c o r r e c t i n i t s e q u i t a b l e judgment.

I t a p p e a r s from t h e r e c o r d t h a t d e f e n d a n t s p r e s e n t e d t o

t h e D i s t r i c t Court s u f f i c i e n t evidence t o appeal t o t h e

" c o n s c i e n c e of a c o u r t of e q u i t y " which r e s u l t e d i n a s p e c i f i c

f i n d i n g t h a t a p p l i c a t i o n of t h e d e f a u l t c l a u s e ( f o r f e i t u r e )

would be " h a r s h and i n e q u i t a b l e . " Defendants made a n i n i t i a l

downpayment and monthly payments t o p l a i n t i f f s . They p a i d on

t h e Veterans Administration loan. They s p e n t o v e r $1,700 i n

improvements on t h e p r o p e r t y i n o r d e r t o d r i l l a w e l l t o

p r o v i d e c l e a n w a t e r t o t h e house and t o s a t i s f y r e q u i r e m e n t s
of l o a n a p p l i c a t i o n w i t h o u t l i a b i l i t y t o t h e p l a i n t i f f s . In

a d d i t i o n t o t h e above-mentioned l ~ o s s e s , t h e d e f e n d a n t s would

l o s e n e a r l y $10,000 i n e q u i t y i n t h e l a n d i f f o r f e i t u r e

occurred.
 The f a c t s i n t h i s c a s e p r e s e n t a c l e a r c a s e f o r a p p l i -

c a t i o n o f s e c t i o n 28-1-104, MCA. D e f e n d a n t s made t e n d e r o f

a l l o f t h e amount d u e , a s w e l l a s t h e p e r s o n a l f e e s , e x p e n s e s

and a t t o r n e y f e e s o f t h e p l a i n t i f f t o d a t e . Plaintiffs

s u f f e r e d no l o s s . The r i g h t t o r e l i e f u n d e r t h e s t a t u t e com-

mences when t h e c o n t r a c t i n g p a r t y i s i n d e f a u l t and s u b j e c t

to forfeiture. Kovachich v . M e t a l s Bank and T r u s t Co. (1961),

139 Mont. 449, 365 P.2d 639.

W e a c c e p t p l a i n t i f f s argument t h a t d e f e n d a n t s w e r e i n

d e f a u l t of t h e c o n t r a c t f o r deed and of t h e i r o b l i g a t i o n s

under t h e c o n t r a c t , b u t t h e y s t i l l r e t a i n e d a r i g h t under

t h e a n t i f o r f e i t u r e s t a t u t e t o make a t e n d e r , t o redeem t h e i r

i n t e r e s t i n t h e p r o p e r t y , and t o a p p e a l t o t h e e q u i t y o f t h e

t r i a l court. D e f e n d a n t s were n o t r e l i e v e d from t h e i r a c t i o n s

of d e f a u l t , o n l y p l a i n t i f f s ' claim f o r f o r f e i t u r e .

P l a i n t i f f s a c c e p t e d payment o f t h e c o n t r a c t amount b u t

r e q u i r e d t h a t defendants a l s o provide a r e l e a s e of a l l

claims a r i s i n g o u t of t h e c o n t r a c t . From t h e r e c o r d , t h e

c o u r t found t h a t t h e p l a i n t i f f s d i d n o t o b j e c t t o t h e t e n d e r ,

o n l y t o t h e r e l e a s e t h a t was demanded a s a c o n d i t i o n f o r t h e

acceptance of tender.

W e f i n d t h a t t e n d e r o f payment was made. Defendants

w e r e d e l i n q u e n t i n t h e i r payment, and t h e y w e r e i n d e f a u l t ,

b u t under t h e circumstances a s a r e p r e s e n t e d i n t h i s c a s e ,

t h e a n t i f o r f e i t u r e s t a t u t e a l l o w s t h e d e f e n d a n t s t o make

f u l l payment of i n t e r e s t and a t t o r n e y f e e s f o r t h e d e f a u l t ,

and a l l o w s t h e c o n t r a c t t o b e e n f o r c e d .

P l a i n t i f f s argue they a r e e n t i t l e d t o attorney f e e s

when t h e b u y e r s w e r e i n d e f a u l t on a n a g r e e m e n t which en-

t i t l e s t h e " p r e v a i l i n g p a r t y t o c o s t s o f s u i t and r e a s o n -

able attorney fees i n the event s u i t i s filed."
 The t r i a l c o u r t found t h a t d e f e n d a n t s d i d i n f a c t de-

f a u l t on t h e c o n t r a c t between t h e p a r t i e s , b u t a s e q u i t a b l e

r e l i e f t o e n a b l e them t o a v o i d f o r f e i t u r e o f t h e i r e q u i t y ,

t h e y s h o u l d be a l l o w e d t o p r o c e e d a s i f t h e d e f a u l t w e r e

insignificant. The t r i a l c o u r t g r a n t e d d e f e n d a n t s r e l i e f

from t h e f o r f e i t u r e . I t d i d n o t g r a n t them r e l i e f from

the default. On t h e i s s u e of d e f a u l t , p l a i n t i f f s p r e -

v a i l e d i n t h e D i s t r i c t C o u r t and a r e e n t i t l e d t o r e a s o n a b l e

a t t o r n e y f e e s up u n t i l t i m e of t e n d e r of payment on March,

1978. The e q u i t a b l e r e l i e f g r a n t e d t h e d e f e n d a n t s i s t h e

s u b j e c t of t h i s a p p e a l . The d e f e n d a n t s d e f a u l t e d on t h e

c o n t r a c t between t h e p a r t i e s , and e q u i t y f a v o r s e n f o r c e m e n t

of t h e c o n t r a c t p r o v i s i o n s . I n no way c a n i t b e s a i d t h a t

t h e d e f e n d a n t s p r e v a i l e d on t h i s s u i t , when i n f a c t , i t was

t h e i r d e f a u l t which n e c e s s i t a t e d t h i s s u i t i n t h e f i r s t

place. However, t h i s C o u r t a f f i r m s t h e D i s t r i c t C o u r t ' s

e q u i t a b l e judgment a s t o t h e f o r f e i t u r e i s s u e .

The t r i a l c o u r t e r r e d i n awarding a l l a t t o r n e y f e e s f o r

t h e s u i t and a p p e a l t o d e f e n d a n t s .

We, therefore, reverse the t r i a l court's decision

awarding a t t o r n e y f e e s and i n s t r u c t :

1. D e f e n d a n t s pay p l a i n t i f f s r e a s o n a b l e a t t o r n e y

f e e s u n t i l t h e t i m e of t e n d e r of payment on March

1978, p u r s u a n t t o t h e c o n t r a c t ; a n d ,

2. Both p a r t i e s pay t h e i r own a t t o r n e y f e e s f o r

t h e c o s t s of t h i s s u i t and a p p e a l , t h e r e o n .

Affirmed i n p a r t and r e v e r s e d i n p a r t a c c o r d i n g t o t h i s

opinion.
W e concur:

B i e f Justice

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Justices