Schultz v. Stevens , 233 Mont. 42 ( 1988 )

No. 88-07
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
WILLIAM K. SCHULTZ,
Plaintiff and Respondent,
-vs-
CRAIG A. STEVENS and STEVENS
CONSTRUCTION, INC.,
Defendants and Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Diane G Barz, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Harris & Seidler; Nancy C. Seidler, Billings, Montana
For Respondent:
Peterson, Schofield & Leckie; K.D. Peterson, Billings,
Montana
Submitted on Briefs: June 9, 1988
Decided: July 19, 1988
F .led :
i
~ U 1 9 1988
L
Mr. Justice William E. Hunt, Sr., delivered the Opinion of
the Court.
Defendants, Craig A. Stevens and Stevens Construction,
Inc., appeals the decision of the District Court of the
Thirteenth Judicial District, Yellowstone County, ordering
that the defendants pay the plaintiff, William K. Schultz,
nineteen thousand eight hundred dollars ($19,800.00) plus 10
percent interest from May 21, 1984, as a result of the
promissory note executed by Stevens on behalf of himself and
the Stevens Construction, Inc. We affirm and remand.
The sole issue on appeal is whether the District Court
erred in interpreting the promissory note and mortgage
executed between the plaintiff Schultz and the defendants
Stevens and Stevens Construction, Inc.
Plaintiff-respondent, William K. Schultz, was a licensed
realtor in Billings from approximately 1982 to 1985. Schultz
was looking at houses when he first met defendant-appellant,
Craig A. Stevens, in 1981 or 1982. At that time, Schultz
owned Lots 21 and 22 in Block 1, Lillis Heights Subdivision
and Stevens expressed an interest in purchasing these two
lots. Stevens purchased these lots and eventually built a
house on Lot 22. Schultz subsequently had Stevens build a
house for him on Lot 18 for resale but instead moved into the
house himself.
While building Schultz's house on Lot 18, Stevens
expressed an interest in building a house on another lot
owned by Schultz. Schultz agreed to convey by warranty deed
this lot, Lot 4, Block 1, Lillis Heights Subdivision, to
Stevens for $19,800. Prior to delivering the deed to Lot 4
to Stevens, Schultz had Stevens execute a promissory note and
mortgage that was dated May 21, 1984. The promissory note
executed by Stevens reads as follows:
For Value Received the undersigned CRAIG A. STEVENS
AND STEVENS CONST. INC., OF BILLINGS MONTANA,
promise to pay to the order of William K. Schultz,
of Billings, Montana, the sum of Nineteen Thousand
Eight Hundred ($19,800.00), as follows:
The aforementioned amount shall, together with
interest thereon the annual rate of lo%, shall be
due and payable in a single payment upon sale of
the House to be constructed on Lot-4 Block-I Lillis
Hts. Sub. ...
If this Note is not paid when due, and is placed by
the holder in the hands of an attorney for
Collection through legal proceedings or otherwise
the undersigned shall pay a reasonable attorney's
fee to such ... [holder], together with the costs
and reasonable expenses of collection.
Stevens signed the promissory note for himself individually
and for Stevens Construction, Inc. Stevens is the sole owner
of the Stevens Construction, Inc. The mortgage was never
acknowledged or recorded.
Before Stevens could begin building the house on Lot 4,
he had to obtain a construction loan. He obtained this loan
from the First Bank Billings (Bank). Stevens did not
disclose to the Bank his previous obligation to Schultz as
evidenced by the signed promissory note and accompanying
mortgage.
When the building of the house was approximately
two-thirds finished, Schultz listed the house for sale,
advertised it, and held open houses. Before the house was
sold, Schultz retired from the real estate business. After
his retirement, Schultz's only contact with the house was
when he occasionally drove by the house.
In the meantime, sometime prior to December, 1985,
Stevens' construction loan became delinquent. Stevens then
conveyed Lot 4 and the house to the Bank in consideration for
the cancellation of the construction loan obligation of
Stevens. The lot and house was deeded to the Bank on January
27, 1986. Schultz received no notice of this transfer and
conveyance of real property.
Schultz first became aware that something had "happened"
with the house when he noticed on one of his drives by the
house that the "For Sale" sign had been removed. In early
April, 1986, upon further inquiry, he learned that the
property had been transferred to the Bank. The Bank would
not allow Schultz to purchase its interest because of a
pending sale of the property. The Bank sold the property by
deed dated April 22, 1986. Schultz subsequently filed this
action in the Thirteenth Judicial District Court, Yellowstone
County.
The District Court found that the promissory note signed
by Stevens is valid, legally binding and unambiguous; that
the note is in default and is due and payable in full with 10
percent interest stemming from May 21, 1984; and that
pursuant to the terms of the promissory note, Schultz is
entitled to reasonable attorney fees and costs.
The issue raised on appeal is whether the District Court
erred in interpreting the promissory note and mortgage
executed by Stevens on behalf of himself and the Stevens
Construction, Inc.
Stevens argues that the intentions of the parties should
be introduced by extrinsic evidence because the term "sale"
is ambiguous and subject to interpretations. More
specifically, Stevens argues that the transfer of the
property to the Bank was not a sale within the intentions of
either party when they contracted on May 21, 1984. Stevens
al-so argues that the sale anticipated by the parties was a
sale by Stevens, not a sale which occurred after the property
had been deeded back to the Bank. We disagree.
General principles of contract law are applicable in
this instance. A basic principle in contract law, codified
by statute, is that "words of a contract are to be understood
in their ordinary and popular sense . .
. unless used by the
parties in a technical sense or unless a special meaning is
given to them by usage . . .." Section 28-3-501, MCA.
Webster's Dictionary defines the term sale as "the transfer
of ownership of and title to property from one person to
another for a price." Webster's Ninth New Collegiate
Dictionary 1037 (1984). Black's Law Dictionary cites cases
defining "sale" as " [a] contract whereby property is
transferred from one person to another for a consideration of
value, implying the passing of the general and absolute
title, as distinguished from a special interest falling short
of complete ownership." Black's Law Dictionary 1503-04 (4th
ed. 1968) (citing Arnold v. North American Chemical Co.
(1919), 232 Mass. 196, 122 N.E. 283, 284; Faulkner v. Town of
South Boston (1925), 141 Va. 517, 127 S.E. 380, 381).
In the present case, Stevens transferred absolute title
to Lot 4 and the house to the Bank. In exchange for the
title to the property, the Bank gave valuable consideration
by releasing Stevens from his construction loan debt to the
Bank and the costs and expenses of the foreclosure. A
transfer of property in exchange for valuable consideration
constitutes a sale. In light of the above, the transaction
between Stevens and the Bank regarding Lot 4 and the
accompanying house is a sale.
Stevens nonetheless argues that extrinsic evidence is
needed to show the intentions of the parties. However, the
intentions of the parties are evidenced by the language used
in the instruments, Glacier Campground v. Wild Rivers, Inc.
(1978), 184 Mont. 543, 547, 597 P.2d 689, 692, and as
discussed above, the ordinary and popular usage of the term
"sale" includes the transfer of the property to the Bank.
The introduction of any such extrinsic evidence would only
create ambiguity that otherwise does not exist. Stevens also
argues that the term "sale" is ambiguous. We disagree.
Ambiguity exists only when a contract taken as a whole in its
wording or phraseology is reasonably subject to two different
interpretations. Martin v. Laurel Cable TV, Inc. (Mont.
1985), 696 P.2d 454, 457, 42 St.Rep. 314, 317; Souders v.
Montana Power Co. (1983), 203 Mont. 483, 486, 662 P.2d 289,
290. Upon applying the basic principle that the words of a
contract are to be understood in their ordinary and popular
sense, no ambiguity exists.
We affirm the District Court's decision and remand this
matter to the District Court for a determination of costs,
and reasonable attorney fees arising as a result of this
appeal.