No. 81-225
I N THE SUPREME COURT O T H E STATE O MONTANA
F F
1981
WENDY'S O MONTANA,
F a Mont. Corp.,
P l a i n t i f f and A p p e l l a n t ,
-vs-
WILLIAM T . LARSEN and HELEN J . LARSEN,
D e f e n d a n t s and Respondents.
Appeal from: D i s t r i c t Court o f t h e Fourth J u d i c i a l D i s t r i c t ,
I n and f o r t h e County o f M i s s o u l a ,
The Honorable James B. W h e e l i s , Judge p r e s i d i n g .
Counsel o f Record;
For Appellant;
Hibbs, Sweeney, C o l b e r g , J e n s e n & Koessler,
B i l l i n g s , Plontana
F o r Respondent :
Boone, K a r l b e r g & Haddon, M i s s o u l a , Montana
S u b m i t t e d on B r i e f s : July 24, 1981
Decided: f ~ f i l i ~ ~
FEB 11 'I???
Filed :
Mr.J u s t i c e D a n i e l J . Shea d e l i v e r e d t h e Opinion of t h e
Court.
P l a i n t i f f , Wendy's of Montana, a p p e a l s from a summary
judgment g r a n t e d by M i s s o u l a D i s t r i c t C o u r t , t h e e f f e c t of
which w a s t o p e r m i t t h e d e f e n d a n t s , W i l l i a m T. and Helen J.
L a r s e n , t o k e e p a $22,750 e a r n e s t money payment which Wendy's
had p a i d t o t h e L a r s e n s under a c o n t r a c t t o p u r c h a s e l a n d .
The L a r s e n s , i n t u r n , were p u r c h a s i n g t h e l a n d under a
c o n t r a c t f o r deed from W i l l i a m and Dorothy R i g g e r t and A n i t a
Taylor.
Wendy's c o n t e n d s t h a t summary judgment w a s i m p r o p e r l y
granted because t h e Larsens f a i l e d t o perform a condition
precedent t o t h e contract. T h i s c o n t e n t i o n i s based on a
c o n t i n g e n c y c l a u s e which Wendy's a g e n t i n s e r t e d i n t o t h e
b u y - s e l l agreement. Wendy's a l s o c o n t e n d s t h a t summary
judgment was i m p r o p e r l y g r a n t e d b e c a u s e a m a t e r i a l f a c t
e x i s t s as t o whether t h e L a r s e n s o r Wendy's had t h e d u t y t o
o b t a i n t h e c o n s e n t s o f t h e R i g g e r t s and T a y l o r .
I n J u l y 1979, Wendy's a g e n t , Sam McDonald, an e x p e r i e n c e d
businessman and r e a l e s t a t e b r o k e r , approached t h e L a r s e n s
concerning t h e purchase of r e a l property l o c a t e d i n Missoula
County. The L a r s e n s i n d i c a t e d t h e y w e r e w i l l i n g t o s e l l ,
b u t t o l d McDonald t h a t t h e i r i n t e r e s t was s u b j e c t t o a
c o n t r a c t f o r deed between t h e m s e l v e s and t h e R i g g e r t s and
Taylor. T h i s c o n t r a c t c a r r i e d a b a l a n c e of $120,000 w i t h
payments r u n n i n g u n t i l November 1986. The c o n t r a c t c o n t a i n e d
a c l a u s e p r o h i b i t i n g t h e L a r s e n s from s e l l i n g o r a s s i g n i n g t h e i r
i n t e r e s t i n t h e property without Z i r s t obtaining t h e w r i t t e n
c o n s e n t o f t h e R i g g e r t s and T a y l o r , and p r o v i d e d t h a t s u c h
c o n s e n t c o u l d n o t be u n r e a s o n a b l y w i t h h e l d .
McDonald proceeded w i t h a r r a n g e m e n t s f o r a s a l e knowing
t h a t t h e c o n s e n t o f t h e R i g g e r t s and T a y l o r would be r e q u i r e d .
Before this consent was obtained, the Larsens and Wendy's
signed an earnest money receipt and agreement to sell and
purchase real property. Wendy's paid the $22,750 as earnest
money. This buy-sell agreement provided for a total purchase
price of $342,750. The $200,000 was to be paid to the Larsens
on or before October 15 in addition to the earnest money
already paid and Wendy's was to assume the $120,000 outstanding
on the Riggert-Taylor contract. McDonald inserted a typewritten
clause into the buy-sell agreement stating that the agreement
was contingent upon Wendy's obtaining a contract for deed
from the Riggerts and Taylor in the amount of $120,000, at
an annual interest rate of 8 1/2 percent for seven years.
The buy-sell agreement also contained a forfeiture
clause which provided that, upon the sellers' tendering
merchantable title, and the buyer's inability to pay the
balance of the purchase price, the earnest money would be
forfeited as liquidated damages and the buy-sell agreement
would terminate.
The buy-sell agreement provided for a closing date of
October 15, 1979, at which time Wendy's was to pay to the
Larsens, in cash or certified check, in the amount of $200,000.
Wendy's assumed responsibility for obtaining the consent of
the Riggerts and Taylor. Sometime after this agreement was
signed, McDonald met with Harry Haines, the attorney for the
Riggerts. Haines told McDonald that the Riggerts would
consent to the sale provided that the $120,000 would be paid
off in one year, rather than the seven years set out in the buy-sell
agreement. McDonald was satisfied with the terms proposed
by Haines and proceeded to make arrangements to close the
deal. Nothing in the record indicates that McDonald contacted
Ms. Taylor. McDonald did tell Haines that there would be
"no problem" with the Riggerts' proposal.
McDonald told the Larsens that he would be ready to
close on or before October 15, but he was not ready on that
date. The Larsens extended the agreement until November 15,
without demanding additional consideration. The Larsens
granted another extension, until December 15, again without
additional consideration. McDonald was still unable to
complete the transaction, and the Larsens refused any further
extension.
Attorneys for McDonald and the Larsens discussed some
alternative terms, but never reached an agreement. Nonetheless,
McDonald later tendered a check for $72,750 to the Larsens,
apparently in an attempt to comply with one of the alternative
terms that had been discussed but never agreed to. The
Larsens received the check on January 3, 1980 but returned
it to McDonald. After having the check returned to him,
McDonald then demanded the return of the entire $22,750
earnest money which had been paid to the Larsens on August
7, 1979. The Larsens refused and Wendy's then filed an
action to recover the full amount of the earnest money
payment .
The forfeiture clause of the buy-sell agreement is
clear. These clauses have been upheld, absent grounds for
equitable relief. Brigham v. 1st Nat. Bank of Arizona
(Ariz. 1981), 629 P.2d 996; Coble v. Scherer (1979), 3 Kan.2d
572, 598 P.2d 561; Lundstrom v. Hack1 (Colo. 1978), 579 P.2d
85. It is true that McDonald inserted a "contingency clause"
into the agreement, and that this may have been a necessary
prerequisite to closing the transaction, but it was not a
condition precedent that requires the return of the earnest
money. The Larsens complied with the purpose of the earnest
money agreement--the land was tied up and removed from the
marketplace for five months. Peterson Sheep & Cattle Co. v.
Moss (1970), 155 Mont. 311, 471 P.2d 546. In addition to
taking their land off the market during the existence of the
buy-sell agreement, the Larsens also extended the term
within which Wendy's was to perform, and on each occasion
the Larsens did not receive additional consideration.
Wendy's received the benefit of the earnest money agreement
and should not now be relieved of the obligations of the
agreement. The Larsens fully performed their part of the
agreement by withholding the land from sale for five months,
and they are entitled to the earnest money payment as liquidated
damages for Wendy's failure to perform.
Assuming, furthermore, that obtaining the consent of
the Riggerts and Taylor under the "contingency clause"
created a condition precedent, Wendy's has waived its right
to rely on a failure of that condition. A condition may, of
course, be waived by the party for whose benefit it is made.
Hallman v. Safety Stores, Incorporated (5th Cir. 1966), 368
F.2d 400; 3A Corbin Contracts, 5 761. McDonald knew that
the Riggerts and Taylor would consent to the sale only on
terms different from those contained in the buy-sell agreement.
But McDonald accepted the different terms and said there
would be "no problem" in performing them. Although he did
not tell the Larsens that the Riggerts and Taylor had imposed
different sale terms in getting their own contract paid off,
McDonald tried to arrange financing on the basis of the
condition imposed by the Riggerts. Failure of Wendy's to
secure adequate financing does not constitute a failure of
any condition precedent created by the "contingency clause."
Further, by accepting the different terms proposed by the
Riggerts as a condition of consent to the sale, Wendy's
waived any right to rely on the terms of the "contingency
clause. "
Wendy's next contends that whether the Larsens or
Wendy's had the duty of securing the consent of the Riggerts
and Taylor to the sale, is a material fact in dispute precluding
summary judgment. The trial court found that on the basis
of depositions (both the depositions of the Larsens and
McDonald were before the trial court), Wendy's had "assumed
responsibility for securing the consent of the underlying
obligees of the property.. . ." This fact is not in dispute.
The Larsens testified that McDonald had agreed to obtain the
consent of the Riggerts and Taylor, and McDonald also admitted
that he had agreed to assume the responsibility of obtaining
the consent of the Riggerts and Taylor to the sale. McDonald
negotiated with the Riggerts through attorney Haines, and on
behalf of Wendy's, McDonald accepted the proposed terms.
Clearly no material fact exists on the issue of which party
had the duty of obtaining the consent.
The order granting summary judgment to the Larsens is
affirmed.
We Concur:
Chief Justice