No. 84-433
IN THE SUPREME COURT OF THE STATE OF P4ONTANA
MICHAEL J. SCHEITLIN, Personal
Representative of the Estate of
Edward E. Scheitlin, Deceased,
Plaintiff and Respondent,
R & D MINERALS, a Montana
corporation,
Defendant and Appellant.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Lino A. Marsillo, Missoula, Montana
For Respondent:
Leaphart Law Firm, Helena, Montana
Jardine, McCarthy & Grauman, Whitehall, Montana
Submitted on Briefs: February 28, 1985
Decided: July 2, 1985
Filed: du!. 2 '985
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Clerk
Mr. J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion o f t h e
Court.
T h i s i s a n a p p e a l from a n O r d e r o f t h e D i s t r i c t C o u r t ,
Fifth Judicial District of the State of Montana, Madison
County. On November 15, 1978, Edward E. and Vaeda G.
Scheitlin entered into a contract to sell certain mining
p r o p e r t i e s and c e r t a i n p e r s o n a l p r o p e r t y t o R & D Minerals.
R & D was g i v e n immediate p o s s e s s i o n o f t h e p r o p e r t y and t h e
right t o b e g i n mining. I t was obligated t o make monthly
i n s t a l l m e n t payments, t h e l a s t one due on December 3 1 , 2 0 0 0 .
On August 16, 1983, Michael Scheitlin, as personal
r e p r e s e n t a t i v e o f t h e E s t a t e o f Edward and Vaeda Scheitlin,
filed a complaint in Madison County District Court which
asked that R & D Minerals be declared i n default on the
contract. During t h e c o u r s e of t h e ensuing l i t i g a t i o n R & D
Minerals f i l e d f o r bankruptcy. On A p r i l 1 3 , 1984, t h e U n i t e d
S t a t e s B a n k r u p t c y C o u r t f o r t h e D i s t r i c t o f Montana remanded
t h e c a s e t o t h e Montana S t a t e D i s t r i c t C o u r t , Madison C o u n t y ,
f o r t h e determination of t h e following matters concerning t h e
above-mentioned contract between R & D Minerals and the
Scheitlin estate:
1. The current status (terms and
c o n d i t i o n s ) o f a n y a g r e e m e n t s between
R & D M i n e r a l s and t h e S c h e i t l i n e s t a t e ;
3-. The r i g h t s and l i a b i l i t i e s of t h e
p a r t i e s under t h e c u r r e n t c o n t r a c t o r
agreement ;
3. When the sellers are legally
obligated t o provide buyers with c l e a r
title;
4. The s t a t u s o f s e l l e r s ' t i t l e ;
5. The amounts, i f a n y , due t o the
s e l l e r s under t h e c u r r e n t c o n t r a c t ; and
6. Any other issues stipulated to by
R & D M i n t ~ r a l sand t h e S c h e i t l i n E s t a t e .
A f t e r a n e v i d e n t i a r y h e a r i n g , and p u r s u a n t t o t h e o r d e r
o f t h e B a n k r u p t c y C o u r t , t h e D i s t r i c t C o u r t on May 3 1 , 1984,
issued an order containing t h e following findings:
"1. The only contract in existence
between the parties is the Mining
P r o p e r t y S a l e Agreement o f November 1 5 ,
1978, a s amended on F e b r u a r y 25, 1980,
and May 8 , 1980;
"2. R & D is i n default of the contract
o b l i g a t i o n s by v i r t u e o f i t s f a i l i n g t o
make t h e r e q u i r e d payments;
"3. The amount owing S c h e i t l i n may b e
c a l c u l a t e d from a n e x a m i n a t i o n o f t h e
c o n t r a c t and by t h e r e c o r d s o f the
d e s i g n a t e d escrow agent;
"4. The r i g h t s and l i a b i l i t i e s o f t h e
parties t o the contract a r e limited t o
t h e s p e c i f i c t e r m s and c o n d i t i o n s o f t h a t
c o n t r a c t and none o t h e r .
"5. S c h e i t l i n ' s o b l i g a t i o n t o provide
m a r k e t a b l e t i t l e i s now moot, b u t t h a t i f
the contract were i n good standing,
Scheitlin was obligated to provide
m a r k e t a b l e t i t l e a t any t i m e p r i o r t o t h e
R & D ' s making t h e f i n a l payment;
"6. The s t a t u s o f R & D ' s title t o the
p r o p e r t i e s i s moot, g i v e n its default;
"7. There was no novation of the
o r i g i n a l c o n t r a c t , t h e r e h a v i n g b e e n no
e x e c u t e d a g r e e m e n t between t h e p a r t i e s . "
R & D M i n e r a l s a p p e a l s from t h e s e f i n d i n g s o f t h e t r i a l
court and raises the fo11-owing i s s u e for review: Is the
purchaser of mineral claims, upon notification of serious
title defects, justified in ceasing installment payments
a f t e r t h e p a s s i n g o f a r e a s o n a b l e p e r i o d i n which t h e v e n d o r
t o o k no m e a n i n g f u l a c t i o n t o c o r r e c t s a i d d e f e c t s ?
The rule in Montana is that a seller under an
installment sales contract does not have to produce
marketable title until the date set f o r f i n a l payment and
tender of t h e deed. S i l f v a s t v. Asplund ( 1 9 3 3 ) , 93 Mont.
584, 592, 20 P.2d 631, 636. R & D does n o t d i s p u t e t h a t
this is the rule in Montana but argues that there are
exceptions applicable t o t h i s case.
First, R & D contends that the contract "expressly
c o n t e m p l a t e s t h a t t h e v e n d o r was t o p r o d u c e m a r k e t a b l e t i t l e
w e l l i n advance o f t h e c l o s i n g d a t e . " The c o n t r a c t p r o v i d e s
the following under the heading, Marketability -
of Title
t o Real P r o ~ e r t v :
" P r i o r t o O c t o b e r 1 5 , 1979, t h e s e l l e r s
will cause t o be furnished to the
purchaser a b s t r a c t s o f t i t l e f o r such
mineral claims a s a r e t h e property of t h e
s e l l e r s , and w i l l p e r m i t t h e p u r c h a s e r
r e a s o n a b l e t i m e , n o t t o exceed s i x t y (60)
d a y s , t o have s u c h a b s t r a c t s examined by
a n a t t o r n e y o f i t s own c h o i c e . Should
such examination d i s c l o s e t h e t i t l e t o
such p r o p e r t i e s t o be unmarketable, then
t h e s e l l e r s s h a l l t a k e s u c h s t e p s a s may
be necessary to render the same
marketable, including a quiet title
a c t i o n , a l l a t s e l l e r s ' own e x p e n s e . "
The c o n t r a c t f u r t h e r p r o v i d e s f o r t h e s e t t i n g u p o f a n e s c r o w
account, r e q u i r i n g t h e escrow t o " d e l i v e r such instruments,
documents and p a p e r s t o t h e p u r c h a s e r a t t h e t i m e o f final
payment h e r e u n d e r . " W e find t h a t neither of these provisions
is inconsistent with the rule in Silfvast requiring that
marketable title be produced no earlier than the time of
final payment. The contract provides that sellers, upon
notification of discrepancies in title, " . . . will
immediately t a k e any n e c e s s a r y s t e p s t o b r i n g such i t e m s i n t o
conformity with t h e i r warranty." However, t h e c o n t r a c t d o e s
not contemplate that purchasers can withhold payments in
o r d e r t o coerce t h e sellers i n t o c o r r e c t i n g t i t l e . Rather, a
s p e c i f i c remedy i s p r o v i d e d :
"Upon d i s c o v e r y o f a b r e a c h o f s e l l e r s '
w a r r a n t i e s concerning ownership o r l i e n
o b l i g a t i o n s , o r sellers ' f a i l - u r e t o keep
c u r r e n t any u n d e r l y i n g obl i g a t i o n s n o t
assumed by p u r c h a s e r and a f f e c t i n g t h e
r e a l o r p e r s o n a l p r o p e r t y , p u r c h a s e r may,
a t i t s o p t i o n , c o r r e c t any d e f i c i e n c y by
p a y i n g a n y o u t s t a n d i n g amount d u e , l i e n
o r encumbrance, o r by i n i t i a t i n g l e g a l
proceedings t o c l e a r any d e f e c t s i n
title. S e l l e r s agree t o cooperate f u l l y
w i t h p u r c h a s e r i n c o r r e c t i n g any s u c h
d e f i c i e n c y and a g r e e t h a t any legal
p r o c e e d i n g may b e b r o u g h t i n t h e i r names.
The c o s t s , i n c l u d i n g a t t o r n e y s ' f e e s and
c o u r t c o s t s , i n c u r r e d by p u r c h a s e r i n
a p p l y i n g a n y amounts d u e , o b t a i n i n g t h e
release of any liens or otherwise
c o r r e c t i n g any d e f e c t s o f t i t l e s h a l l b e
d e d u c t e d from t h e p u r c h a s e p r i c e c a l l e d
f o r h e r e u n d e r and may b e o f f s e t a g a i n s t
a n y payments d u e s e l l e r s . "
Even a s s u m i n g t h a t t h e r e w e r e d e f e c t s i n t i t l e , R & D d i d n o t
invoke the remedy provided by contract. Consequently, by
terminating payments R & D was in breach of contract and
p r o p e r l y h e l d i n d e f a u l t by t h e D i s t r i c t C o u r t .
Second, R & D a r g u e s t h a t even i f t h e c o n t r a c t d o e s n o t
contemplate t h a t marketable t i t l e be provided p r i o r t o t h e
closing date, t h e p u r c h a s e r may demand m a r k e t a b l e t i t l e i f
there a r e defects i n t h e seller's t i t l e t h a t a r e incurable.
In o t h e r words, if i t i s apparent that the seller cannot
acquire marketable title by closing then the purchaser is
justified i n h a l t i n g payments on t h e c o n t r a c t . By making
t h i s argument R & D assumes t h a t t h e r e w e r e d e f e c t s i n t h e
S c h e i t l i n ' s t i t l e t h a t could n o t be cured. However, t h e r e i s
n o t h i n g i n e i t h e r t h e r e c o r d on a p p e a l o r t h e D i s t r i c t C o u r t
t r a n s c r i p t which s u p p o r t s t h i s a s s u m p t i o n . Furthermore, t h e
c o n t r a c t p r o v i d e s f o r t h e p o s s i b i l i t y o f an i n c u r a b l e d e f e c t
a s follows:
" I f any defects of title c a n n o t be
c o r r e c t e d t o conform t o t h e s e l l e r s '
warranties, the parties agree to
r e n e g o t i a t e t h e purchase p r i c e t o r e f l e c t
t h e d i f f e r e n c e i n v a l u e between what was
b a r g a i n e d f o r by t h e p u r c h a s e r and what
sellers a c t u a l l y d e l i v e r e d . Failing
agreement i n t h i s r e g a r d t h e p a r t i e s
agree to submit that issue for
d e t e r m i n a t i o n by t h e D i s t r i c t C o u r t o f
t h e Fourth J u d i c i a l D i s t r i c t of t h e S t a t e
o f Montana i n and f o r t h e County o f
Missoula.''
R & D ' s argument t h a t i n c u r a b l e d e f e c t s i n t h e s e l l e r ' s t i t l e
justifies withholding payments on the contract must fail
s i n c e , even i f t h e r e w e r e evidence o f i n c u r a b l e d e f e c t , t h e r e
h a s been no r e s o r t t o t h e remedy p r o v i d e d by c o n t r a c t .
R & D further argues t h a t t h e Scheitlins a r e g u i l t y of
fraud and misrepresentation for selling property with
i n c u r a b l e d e f e c t s i n t h e t i t l e and t h a t R & D was w i t h i n i t s
r i g h t s i n w i t h h o l d i n g payments. W e note: 1. The r e c o r d d o e s
not support t h a t there a r e incurable defects i n t i t l e . 2.
Rule 8 ( c ) , M.R.Civ.P. states that fraud i s an a f f i r m a t i v e
d e f e n s e t h a t must b e p l e a d e d i n t h e answer. R & D's answer
contains no pleadings concerning fraud and/or
misrepresentation. 3. The transcript of the May 30, 1984
hearing before the State District Court contains no
allegations of fraud o r misrepresentation. 4. This i s t h e
f i r s t time t h a t R & D Minerals has r a i s e d t h e i s s u e o f fraud
and m i s r e p r e s e n t a t i o n i n t h i s l i t i g a t i o n . A s we h a v e n o t e d
often t i m e s before, t h i s C o u r t w i l l n o t c o n s i d e r on a p p e a l
i s s u e s t h a t have n o t b e e n r a i s e d below. See, e.g., Rustics
of Lindberg Lake v. Lease (Mont. 19841, 690 P.2d 440, 41
St.Rep. 2092.
Finally, respondent asks us to dismiss this appeal
because of appellant's failure t o comply w i t h Rule 10(c),
M.R.App.Civ.P. Rule 1 0 ( c ) p r o v i d e s t h a t t h e r e c o r d on a p p e a l
must b e submitted t o t h i s Court within ninety days of the
n o t i c e of appeal. N i n e t y d a y s from t h e f i l i n g o f t h e n o t i c e
o f t h i s a p p e a l e x p i r e d on September 2 6 , 1 9 8 4 , and t h e r e c o r d
was n o t forwarded t o t h i s Court u n t i l October 3 , 1984. In
H a n n i f i n v . R e t a i l C l e r k s ( 1 9 7 3 ) , 162 Mont. 1 7 0 , 172-173, 511
P.2d 982, 984, we noted that Rule 10 (c) gives this Court wide
discretion in permitting the filing of a record, and we
quoted from that rule as follows: "If the District Court is
without authority to grant the relief sought or has denied a
request therefore, the Supreme Court may on motion extend the
time for transmitting the record or may permit the record to
be transmitted and filed after the expiration of the time
allowed or fixed." In this case both the appellant, who
requested an extension for transmitting the record to more
than ninety days from the filing of the appeal, and the
District Court, which granted the request, though it had no
authority to do so, indicated a relaxed attitude about the
Appellate Rules which we do not encourage. However, the
violation in this case was not egregious and there is no
evidence that it was anything but inadvertent. Under these
circumstances we refuse to dismiss.
The judgment of the District Court is affirmed.
We concur: --/