No. 96-436
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
HAROLD E. GIERKE and SHIRLEY GIERKE,
Plaintiffs and Respondents,
LONNY WALKER,
Defendant and Appellant.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Thomas R. Anacker, Anacker Law Office,
Bozeman, Montana
For Respondent:
John H. Tarlow, Landoe, Brown, Planalp
& Braaksma, Bozeman, Montana
Submitted on Briefs: October 31, 1996
Decided: November 21, 1996
Filed:
Justice Terry N. Treiweiler delivered the opinion of the Court.
The respondents, Harold E. Gierke and Shirley Gierke, filed an
action against the appellant, Lonny Walker, in the District Court
for the Eighteenth Judicial District in Gallatin County. The
District Court granted partial summary judgment in favor of the
Gierkes on the issue of liability, and after a hearing, entered
judgment for damages. Walker appeals the judgment of the District
Court. We affirm the District Court.
The issues on appeal are:
1. Did the District Court err when it granted partial
summary judgment in favor of the Gierkes on the issue of liability?
2. Did the District Court err when it concluded that the
Gierkes "took reasonable and appropriate steps" to mitigate their
damages?
FACTUAL BACKGROUND
On November 1, 1994, the Gierkes contracted with Walker to
purchase a house in Bozeman from him. The Gierkes paid Walker the
sum of $135,000 for the house. Pursuant to the contract, Walker
agreed to perform additional renovation work on the house after
payment and transfer of possession.
Subsequently, the Gierkes discovered various construction
defects in the house for which they concluded Walker was
responsible. They insisted that he cease the renovation work, and
denied him access to the property.
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For several weeks thereafter, the parties engaged in
negotiations. Ultimately, in April 1995, they entered into a
second contract. Pursuant to the terms of that contract, Walker
agreed to repurchase the house from the Gierkes for the sum of
$135,000. The contract also required the Gierkes to execute a
mutual release of claims at the time of closing. Significantly,
the contract contained the following language:
13.Settlement of Dispute and Mutual Release of
Claims.
The parties acknowledge that the purchase and sale
of the Premises pursuant to the terms of this Agreement
is for the purpose of settling the dispute between them
regarding the nature and quality of the construction of
the house located on the Premises and the sale of the
Premises by Lonny Walker to Harold E. Gierke and Shirley
Gierke.
Upon closing of the sale of the Premises described
in this Agreement, the parties agree to execute the
Mutual Release of Claims attached to this Agreement as
Exhibit 1.
On July 12, 1995, the scheduled closing date, the Gierkes
were prepared to perform in accordance with the terms of the
contract. Walker, however, failed to attend the closing, and has
never paid the repurchase price.
In August 1995, the Gierkes filed an action against Walker in
the District Court. In their complaint, they sought: (1) an order
requiring specific performance of the April 1995 contract; and
(2) the recovery of damages from Walker for his breach of contract.
In January 1996, the District Court granted partial summary
judgment in favor of the Gierkes on the issue of liability. The
District Court found that there were no disputed issues of material
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fact, and that, based on Walker's undisputed breach of the April
1995 contract, the Gierkes were entitled to judgment as a matter of
law.
Subsequently, the District Court held a nonjury trial on the
issue of damages. Walker stipulated to the amount of damages;
however, he alleged as an affirmative defense that the Gierkes
failed to adequately mitigate their damages.
At the conclusion of the hearing, the District Court
determined that the Gierkes "took reasonable and appropriate steps"
to mitigate their damages, denied Walker's affirmative defense for
failure of proof, and entered judgment for the Gierkes.
The District Court awarded the Gierkes damages in the amount
of $148,525.68, and ordered specific performance of the April 1995
contract. Specifically, the District Court issued the following
order:
Mr. Walker will be given 60 days to either pay the
repurchase price himself or find a buyer . . If Mr.
Walker fails to so act, the Gierkes are authorized to
list the property for sale . . . Any deficiency
involving the above damage elements and any new costs of
sale would be reflected in a judgment in favor of the
Gierkes and against Mr. Walker.
ISSUE 1
Did the District Court err when it granted partial summary
judgment in favor of the Gierkes on the issue of liability?
Summary judgment is governed by Rule 56(c), M.R.Civ.P., which
provides, in relevant part:
The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
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admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment
as a matter of law. A summary judgment, interlocutory in
character, may be rendered on the issue of liability
alone although there is a genuine issue as to the amount
of damages.
The purpose of summary judgment is to encourage judicial
economy through the elimination of any unnecessary trial. However,
summary judgment is not a substitute for trial if a genuine factual
controversy exists. Renvesv. Reinbold (1980), 189 Mont. 284, 288, 615
P.2d 896, 898.
It is well established that the moving party must prove that
it is entitled to a judgment as a matter of law. To do this, it is
required to show a complete absence of any genuine factual issues.
D’Agostinov.Swanson (lPPO), 240 Mont. 435, 442, 784 P.2d 919, 924. To
defeat the motion, the nonmoving party must set forth facts which
demonstrate that a genuine factual issue exists. O’Bagvv.FirstInterstate
BankofMssoula (1990), 241 Mont. 44, 46, 785 P.2d 190, 191
It is undisputed that Walker breached the April 1995 contract,
and in his brief he concedes that there are no genuine issues of
material fact. However, he contends that the Gierkes are not
entitled to a judgment as a matter of law. He claims that a
condition precedent in the contract was not met, and that,
therefore, his performance cannot be enforced.
Walker bases his claim on the following language, contained in
paragraph thirteen of the April 1995 contract: "Upon closing of
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the sale of the Premises described in this Agreement, the parties
agree to execute the Mutual Release of Claims."
Contrary to Walker's assertion, the language contained in
paragraph thirteen does not establish a condition precedent. "A
condition precedent is a condition which must be met before the
agreement becomes effective." Depee v. First Citizen’s Bank of Bum ( 1993 ) ,
258 Mont. 217, 220, 852 P.2d 592, 593.
In this case, the April 1995 contract was effective when
signed, and its enforceability was not conditioned upon the
occurrence of a particular event. In fact, paragraph thirteen only
establishes a condition subsequent--it merely dictates what action
the parties must take afier closing. Pursuant to the contract,
Walker would have been entitled to receive a release of claims
"upon closing." However, his obligation to perform and repurchase
the house was not conditioned upon his receipt of a release of
claims.
It is undisputed that Walker breached the April 1995 contract
when he failed to attend the closing, and since he has failed to
pay the repurchase price. Furthermore, his claim with regard to
the unenforceability of the contract is without merit.
We conclude that there are no genuine issues of material fact,
and that the Gierkes are entitled to judgment as a matter of law.
Accordingly, we hold that the District Court did not err when it
granted partial summary judgment in favor of the Gierkes on the
issue of liability.
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ISSUE 2
Did the District Court err when it concluded that the Gierkes
"took reasonable and appropriate steps" to mitigate their damages?
When we review a district court's findings of fact, the
standard of review is whether those findings are clearly erroneous.
Dainesv. Knight (1995), 269 Mont. 320, 324, 888 P.2d 904, 906. When
we review a district court's conclusions of law, the standard of
review is whether those conclusions are correct. Carbon County v. Union
ReserveCoalCo. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686
On appeal, Walker contends that, for the following reasons,
the Gierkes failed to adequately mitigate their damages: (1) they
failed to rent two units of the residence; and (2) they denied him
access to the property, and did not allow him to make improvements.
He also alleges that, as a result of their actions, he was unable
to sell the property to a third party.
We begin our analysis with the following well-established
principles of Montana contract law:
The rule in Montana is that a nondefaulting party in a
contractual arrangement must act reasonably under the
circumstances so as not to unnecessarily enlarge damages
caused by default. Whether the injured party violated
his duty to mitigate damages is a question for the trier
of fact when there is conflicting evidence.
Bronken’s Good Time Co. v. J.W. Brown & Assoc. (1983), 203 Mont. 427, 432-33,
661 P.2d 861, 864 (citations omitted). Furthermore, we recognize
that a "damaged party is only expected to do what is reasonable
under the circumstances and need not embark upon a course of action
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which may cause further detriment to him." Remain v. Earl Schwartz Co.
(1989), 238 Mont. 500, 504, 779 P.2d 54, 56-7.
At the conclusion of the trial on the issue of damages, the
District Court directly addressed Walker's affirmative defense, and
made the following findings of fact:
12. Gierkes give these reasons for not renting any of
the units after [the scheduled closing date]:
(a) If they rented the property, Mr. Walker might later
dispute the condition of the property.
(b) Mr. Walker led Gierkes to believe that he was either
going to come up with the repurchase price or sell it to
a third party. Gierkes wanted the residence to be ready
for immediate occupancy.
(c) They were concerned about the defective condition of
the property, and possible injuries to tenants .
(d) Gierke's counsel requested a written proposal from
Mr. Walker concerning the possible rental of the units,
and no response was received.
.
14. The Gierkes offered three reasons why they would not
allow Mr. Walker onto the property to make improvements
to the residence [after the scheduled closing date] :
(a) They were dissatisfied with the quality of his work.
(b) They wanted Mr. Walker to repurchase the residence,
not drag them into other transactions involving third
parties.
(c) They requested a written description of Mr. Walker's
plan and received no response.
15. Mr. Walker cited a number of oral proposals made to
the Gierkes including consent to the renting of units,
and his making improvements to the residence to make it
more saleable. Introduced, however, was an April 20,
1995 letter from Mr. Walker that he did not want tenants
in place when he purchased it.
Based on its findings of fact, and the application of those
findings to the principles of contract law established by Bronken’s
Good Time and Remain. the District Court concluded that the Gierkes
"took reasonable and appropriate steps" to mitigate their damages.
Additionally, the District Court determined that:
Under these circumstances, it would have been foolhardy
for Gierkes to undertake work on the residence or to rent
it out. It would invite disaster to rent the defective
premises to unsuspecting tenants. Given Mr. Walker's
unsatisfactory performance in making repairs or coming up
with the repurchase price, it was reasonable for the
Gierkes not to want him on the premises. It was also
reasonable for the Gierkes to be wary of promised deals
with third parties connected with Mr. Walker.
After our review of the record, we conclude that there is
substantial credible evidence to support the District Court's
findings of fact. The District Court's findings of fact are not
clearly erroneous, and its conclusions of law are correct.
Accordingly, we hold that the District Court did not err when it
concluded that the Gierkes "took reasonable and appropriate steps"
to mitigate their damages.
The judgment of the District Court is affirmed
We concur:
Chief Justice
Justices
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