No. 87-443
IN THE SUPREME COURT OF THE STATE OF MONTANA
RONALD L. BURGESS, JOHN L. LAKE, JR.,
and NICK MALLAS,
Plaintiffs and Appellants,
-vs-
ROBERT SHIPJJET, JACQUELINE SHIPLET, TAM1
SHIPLET and FIRST BANK OF LIVINGSTON, or
any other person known or unknown, claiming
any interest in the property described herein,
Defendants and Respondents.
APPEAL FROM: District Court of the Sixth Judicial District,
In and for the County of Park,
The Honorable R. D. McPhillips, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Knuchel & McGregor; Karl Knuchel, Livingston, Montana
For Respondent:
Moore, Rice, OIConnell & Refling; Perry J. Moore,
Bozeman, Montana
Huppert & Swindlehurst; Arnold Huppert, Jr.,
Livingston, Montana
Submitted on Briefs: Jan. 14, 1988
Decided: February 18, 1988
Filed: FEB 1 8 1988
Mr. Justice William E. Hunt, Sr., delivered the Opinion of
the Court.
This contract dispute is appealed to this Court from the
Sixth Judicial District, Park County. Ronald Burgess, John
Lake and Nick Mallas appeal the judgment of the District
Court which treated respondents purchase of land from
appellants, under a contract for deed, as a mortgage. The
appellants also allege error by the court in failing to award
them reasonable attorney fees and damages.
We reverse and remand to the District Court.
The issues presented are as follows:
1. Did the District Court err in treating a contract
for deed as an equitable mortgage?
2. Is the anti-forfeiture statute, S 28-1-104, MCA
applicable?
3. Did the District Court err in finding that
appellants also breached the contract, thereby diminishing
respondents obligations under the contract?
4. Did the District Court err in failing to award
attorney's fees to appellants?
5. Did the District Court err in failing to award
damages?
Respondents Robert, Jacqueline and Tami Shiplet
purchased land from Shields River Bench, a partnership owned
by appellants. The first tract was purchased by Robert and
Jacqueline Shiplet in 1980 for $110,000. They paid $21,500
down with annual payments of $12,017. The second tract was
purchased by Robert, Jacqueline and Tami (daughter) Shiplet
in 1981 for $110,000. They paid $10,000 down with annual
payments of $13,575. The respondents have been in possession
of both tracts of land since the dates of closing on the
sales. The last payment made on the 1980 contract was on May
11, 1984. The last payment made on the 1981 contract was
June 27, 1983.
Appellants unsuccessfully attempted to serve default
notices on the respondents, first by certified mail, then by
service by the Park County Sheriff. However, respondents
refused to accept the notices. Finally, after the appellants
filed suit, the court ordered the respondent's attorney to
accept all default notices on behalf of the Shiplets.
Notices of default and continuing default were then served on
the Shiplets' attorney on July 1, 1986, and September 3,
1986.
For the purposes of trial, the two causes of action, one
on each contract, were consolidated. The Shiplets
counterclaimed with allegations of breach of contract because
appellants failed to control noxious weeds on their property;
failed to establish a homeowner's association in the proposed
subdivision where Shiplets purchased their land; and failed
to buy gravel from the Shiplets in lieu of an annual payment
under their contract.
After a bench trial, the District Court made findings of
fact and conclusions of law and entered judgment against the
respondents for default on the contracts for deed. The court
also found that the appellants breached the contracts for not
fulfilling the protective covenants and for violating their
statutory obligation to control noxious weeds on their
property. The court then granted the respondents one year
right of redemption on the contracts beginning June 24, 1987.
Appellants contend that the District Court erred by
treating the contract for deed as a mortgage.
Subsequent to the District Court's findings of fact and
conclusions of law in the case now before us, this Court, in
December 1987, held that " (a) contract for deed is not the
same legal concept as a mortgage under Montana law." Aveco
Properties, Inc. v. Nicholson (Mont. 1987), - P.2d f44
St.Rep. 2098, 2102. See also Glacier Campground v. wild
Rivers, Inc. (1979), 182 Mont. 389, 597 P.2d 689, (a contract
for deed and a mortgage are "distinct legal creatures. " )
When a purchaser enters into a contract for deed with a
seller, he or she runs the risk of defaulting on the required
payments and facing the consequences of losing the property
along with forfeiting the amount already paid. If this
produces a harsh or unwanted result, it is for the
legislature to remedy and not the job of this court to change
the plain meaning of the contract.
In the case before us, the contract for deed provides
that upon their default buyers have 30 days in which to
correct the default or sellers are entitled to demand, within
30 days, full payment of the unpaid balance of the purchase
price plus accrued interest. If the buyer fails to pay the
total unpaid balance in 30 days, the agreement terminates and
the property is returned to seller.
The District Court found that respondents/buyers
defaulted on both contracts which they had with
appellants/sellers. The default provisions under the
contract for deed spells out the remedies available to
appellants. Respondents cannot look to mortgage law for
alternative remedies but must accept the remedies set forth
in their contract with appellants. We reverse on the first
issue.
The District Court concluded that the anti-forfeiture
statute, 5 28-1-104, MCA, does not apply to these facts, but
then for "equitable" reasons refused to award appellants the
amount already paid by respondents and return the land to
appellants. Section 28-1-104, MCA, applies only when the
party exposed to forefeiture has offered the entire
outstanding balance as full compensation on the contract.
Eigeman v. Miller (Mont. 1987), 745 P.2d 320, 323, 44 St.Rep.
1752, 1755. The Shiplets have not offered the unpaid balance
nor any amount as compensation for these contracts. The
antiforfeiture statute therefore does not apply.
Respondents had paid a total of $65,357.49 principal on
the combined contracts when they stopped making payments.
However, they still owed $154,642.51 on the principal plus
accrued interest. Respondents lived on the property, farmed
the land and kept all income from it since 1980 on one parcel
and since 1981 on the other. They have continued to possess,
enjoy and reap the benefits from the property without making
any payments on it since June, 1983, on the first contract
and May, 1984, on the second contract. Appellants, on the
other hand, have been denied either payments on or possession
of the property while still being responsible for their own
payment obligations for the same land. We hold that the
District Court was correct in its refusal to apply 5
28-1-104, MCA. However, the court should have ab~arded
forfeiture of the amount already paid by the Shiplets to
appellants.
Appellants argue that it was error for the District
Court to circumvent the agreement between the parties, with
respect to the default clause, for the reasons that
appellants failed to control noxious weeds on their property
and breached the protective covenants contained in the
contract.
The record shows that there were noxious weeds on
appellants' land which adjoins the land purchased by
respondents. While S 7-22-2116, MCA, provides that " [ilt is
unlawful for any person to permit any noxious weed to
propagate or go to seed on his land, . .. " the failure of
appell-ants to control the weeds is not sufficient to forgive
payment on the contract by respondents for the purchase of
land. Violations of S 7-22-2116, MCA, are dealt with in S S
7-22-2117 and 2123, MCA, by allowing for fines to be
assessed against the person who commits the misdeameanor
offense and is convict-ed of allowing noxious weeds to
propagate on his property. We hold that appellants did not
breach the contract by failing to control the noxious weeds
on the land.
Furthermore, it is not sufficient to forgive payments
due under the contract because of appellant's failure to
create a homeowners association in the subdivision where
respondents purchased property. The protective covenants
contained in the contracts for deed require that a
homeowner's association be formed "at such time as fifty one
(51%) percent of the tracts in the subdivision have been sold
or by , 19- whichever shall occur first."
At the time of filing the contract for deed with the
Clerk and Recorder on June 18, 1980, the blanks in the
protective covenant were not filled in. The record does not
indicate there was any deadline or intention to establish
one. What is clear from the record is that 51% of the tracts
were not sold at the date of respondent's default. There
was, therefore, no breach by appellants. Furthermore,
enforcement of the covenants was outlined in the contract.
Remedies include damages and/or injunctions against
violators. The provision does not declare the entire
contract terminated in the event of a covenant violation, as
it does for a default on payments. No notice was ever given
by the respondents to the appellants that they considered the
failure to establish the homeowners association a violation
of the contract. We hold that the appellants did not breach
the contract.
The District Court did not award attorney fees because
"each party is in default." Since we held that appellants
were not in default, they are entitled to attorney fees from
the Shiplets pursuant to the parties' agreement. The
contract provides for reasonable attorney fees to the
prevailing party in the event an action is brought to enforce
the terms of the contract. We remand to the District Court
to make findings and award reasonable attorney fees to
appellants.
The District Court found that the appellants were not
entitled to damages for respondents default on the contract.
However, § 27-1-311, MCA, allows for damages arising from the
breach of a contract. We remand to the District Court to
determine what, if any, damages appellants may be entitled to
under that statute as a result of Shiplet's breach.
Reversed and remanded to the Disftrict Court.
We Concur: /