Pegg v. Mid-State v. Dev. Corp. ( 1974 )

No. 12723
I N T E SUPREME COURT O THE STATE O M N A A
H F F OTN
1974
D N L E. P G and KAY A. PEGG,
O AD EG
husband and w i f e ,
P l a i n t i f f s and Respondent,
-vs -
MID-STATE DEVELOPMENT CORPORATION,
a Montana Corporation,
Defendant and A p p e l l a n t ,
and
GAIL W. BURLEIGH and ZITA E. BURLEIGH,
Defendants,
and
MARGARET (HARVEY) BARBER,
Defendant and Respondent.
Appeal from: D i s t r i c t Court of t h e Tenth J u d i c i a l D i s t r i c t ,
Honorable LeRoy L. McKinnon, Judge p r e s i d i n g .
Counsel of Record:
F o r Appellant :
Kurth, Davidson & Calton, B i l l i n g s , Montana
David A. Veeder argued, B i l l i n g s , Montana
For Respondents :
Theodore P. Cowan argued, Lewistown, Montana
Donald E. Ronish, Lewistown, Montana
Submitted: June 14, 1974
Decided : J'Ji 4 1974
2
Filed : JUL 2 4 1974
Mr. Justice Wesley Castles delivered the Opinion of the Court,
This is an appeal from a judgment for plaintiffs permanently
enjoining defendant Mid-State Development Corporation from entry
onto lands under a timber purchase contract and from other orders
and judgments in regards thereto. The matter was tried to the
district court in Fergus County, sitting without a jury.
Plaintiffs, respondents here, are husband and wife and will
be referred to as Peggs. Defendant and appellant Mid-State Develop-
ment Corporation will be referred to as Mid-State,
On April 16, 1969, Don and Margaret Harvey, owners of certain
real property, entered into a "Timber Purchase Contract" with
Silver City Lumber, Inc. The contract was for cutting and removing
timber on certain lands owned by the Harveys. The contract ran
until April 30, 1974. The contract was assigned by Silver City to
Mid-State on October 12, 1972.
On April 3, 1970, Margaret Harvey, after on's death, sold the
land which was the subject of the timber purchase contract to Gail
and Zita Burleigh under a contract for deed. The Burleighs were
informed of the timber purchase contract. The contract for deed was
for a term of twenty years.
On June 1, 1973, the land which was subject to the timber
purchase contract was again sold on a c~ntractfor deed by Burleighs
to Peggs. Peggs were informed and had actual notice of the timber
purchase contract. This contract for deed was for a term of ten
years, and required the consent of Burleighs before the purchasers,
Peggs, could contract for the sale of timber, which consent was
given for the subject timber purchase contract,
In mid-September 1973, Peggs received notification from Mid-
State by telephone and by letter that Mid-State would go upon the
land to harvest the timber.
On September 24, 1973, Mid-State was restrained by a temporary
restraining order from such entry; and subsequently the restraining
order was made permanent. A motion to quash the temporary restraining
o r d e r was denied. Motions f o r summary judgment were made by each
party. The t r i a l judge granted summary judgnent t o Peggs. Appeal
i s taken from the order denying t h e motion t o quash and t h e judgment
entered on t h e motion f o r summary judgment.
The c o u r t made f i n d i n g s of f a c t and conclusions of law i n
which t h e t r i a l judge determined t h a t t h e timber purchase c o n t r a c t
amounted only t o a revocable l i c e n s e t o e n t e r Peggs' land which
l i c e n s e was revoked by Peggs. The judge f u r t h e r determined t h e
timber purchase c o n t r a c t was ambiguous by reason of i t s e s c a l a t o r
c l a u s e , and t h e r e f o r e i t was impossible t o determine t h e c o n s i d e r a t i o n
of t h e c o n t r a c t .
The i s s u e s here go, i n t h e main, t o the foregoing determinations.
Two b a s i c questions a r e : (1) Is t h e timber purchase c o n t r a c t a
valid contract? (2) I f v a l i d , may such a c o n t r a c t be revoked
u n i l a t e r a l l y by t h e purchaser under an executory c o n t r a c t f o r deed
where t h e purchaser had a c t u a l knowledge of t h e c o n t r a c t ?
The timber purchase c o n t r a c t provided:
"TIMBER PURCHASE C N R C
OTAT
"This Contract Made and entered i n t o t h i s 16 day of
A p r i l , 1969, by and between SILVER C I T Y LUMBER, I N C . , A
Montana Corporation, t h e p a r t y of t h e f i r s t p a r t , herein-
a f t e r r e f e r r e d t o a s t h e BUYER, and Don E and Margaret A
Harvey, of Lewistown, t h e p a r t y of t h e second p a r t , herein-
a f t e r r e f e r r e d t o a s t h e SELLER,
"THAT WHEREAS, t h e SELLER i s t h e owner of t h e
following described property s i t u a t e d i n Fergus County,
and more p a r t i c u l a r l y described a s follows:
"T 15 R 19
I1
sec. 24 S 112 of SE 114 sec. 25 N 112 of NW 114
S 114 of SW 114
E S 114 of NW 114
W
W 1 1 2 of NE 1 / 4
"AND WHEREAS, t h e BUYER i s d e s i r o u s of buying t h e
merchantable timber on s a i d land and t h e SELLER i s de-
s i r o u s of s e l l i n g s a i d timber;
"NOW THEREFORE, i n c o n s i d e r a t i o n of t h e premises and
and mutual covenants and agreement h e r e i n a f t e r set f o r t h ,
i t i s agreed by and between t h e p a r t i e s a s follows:
"TIMBER TO BE S L
OD
"1. The SELLER w i l l s e l l t o t h e BUYER a l l of t h e
merchantable timber on t h e above described lands. The
SELLER warrants t o BUYER t h a t he has l e g a l t i t l e t o s a i d
timber t h a t i t i s f r e e and c l e a r of a l l encumbrances and
t h a t he does hereby forever warrant and w i l l forever
defend t h e t i t l e t o t h e BUYER a g a i n s t any and a l l claims
of a l l persons whomsoever.
"PURCHASE PRICE
"1. The BUYER agrees t o pay t h e SELLER t h e sum of
n i n e d o l l a r s ($9.00) per thousand f e e t f o r a l l species.
"1. A l l logs s h a l l be scaled by t h e BUYER'S s c a l e r
when d e l i v e r e d t o BUYER'S s c a l i n g point. A l l logs s h a l l
be scaled with t h e Scribner Decimal C l o g r u l e . Saw logs
s h a l l n o t be considered merchantable u n l e s s they have a
n e t sound s c a l e of a t l e a s t 50% of t h e i r gross s c a l e . I f
t h e SELLER i s a t any time d i s s a t i s f i e d with t h e log s c a l i n g ,
t h e SELLER may a t h i s own expense h i r e h i s own l o g s c a l e r .
I n t h e event t h e BUYER and t h e SELLER'S log s c a l e r cannot
agree on t h e log s c a l i n g , t h e two s c a l e r s s h a l l h i r e a
t h i r d and independent s c a l e r who s h a l l be paid e q u a l l y by
t h e BUYER and SELLER. The d e c i s i o n of two out of t h r e e of
t h e s c a l e r s s h a l l i n such event be binding upon t h e p a r t i e s .
Timber w i l l be crused before c u t . M.H.
D.E.H.
"1. The BUYER w i l l pay t o t h e SELT.P& upon t h e signing
of t h i s agreement, t h e sum of $75.00 r e c e i p t of which i s
hereby acknowledged by t h e SELLER. This s m i s t o beu
t r e a t e d a s an advance payment on t h e i n i t i a l stumpage. The
BUYER w i l l pay t h e SELLER f o r a l l timber s o c u t and removed
between t h e f i r s t and f i f t e e n of t h e month by twentieth
of t h e month, and f o r a l l timber so c u t and removed between
t h e f i f t e e n t h and t h e end of t h e month by t h e f i f t h of t h e
following month.
$500.00 d e p o s i t paid before timber i s c u t . M.H.
D.E.H.
"SLASH DISPOSAL
" . The BUYER w i l l pay t h e S t a t e F o r e s t e r $1 per
1
thousand f o r s l a s h d i s p o s a l .
"TERM O AGREEMENT
F
"1. It i s hereby agreed and understood by t h e p a r t i e s
h e r e i n t h a t t h i s c o n t r a c t s h a l l continue i n e f f e c t u n t i l
A p r i l 30 1974.
"INGRESS AND EGRESS
"1. The BUYER s h a l l have t h e r i g h t over s a i d property
t o b u i l d a l l roads necessary f o r t h e removal of s a i d timber,
t o g e t h e r with t h e r i g h t s of i n g r e s s and egress over and
along s a i d roads and elsewhere over s a i d premises necessary
f o r c u t t i n g and removal of s a i d timber.
"BUYER TO HOLD SELLER HARMLESS
" . In all logging operations hereunder conducted
1
by the BUYER, the BUYER will at all times protect and
save harmless the SELLER and his property against claims
for labor, materials or supplies furnished and against
and from any and all liens and claims of liens therefore.
SELLER shall be reimbursed by the BUYER for any damage
done to the fences, gates, cattle guards or livestock
of the SELLER'S that is attributable to the acts of the
BUYER, his agents, servants, or employees.
Timber price will be esculated each year.
M.H.
D.E.H.
"1. In the event of any default under the terms
of this contract by the BUYER, the SELLER shall give
written notice stating the manner in which the BUYER
is in default on said contract. Upon the receipt of
such written notice of default all logging operations
on said land shall cease at once until the said default
has been corrected; and unless the BUYER can and does
correct said default within 30 days of the time of re-
ceipt of said notice, the SELLER may cancel and ter-
mintate this agreement.
"TIME OF ESSENCE
"1. Lastly, it is agreed that time is of the
essence of this contract and that all of the covenants
and agreements herein contained shall extend to and be
obligatory upon heirs, executors, successors and assigns
of the parties herein.
"IN WITNESS WHEREOF, the parties have hereunto set
their hands the date hereinabove first written.
"SELLER : S/ Don E. Harvey
Margaret A. Harvey
SILVER .CITY LUMBER,INC.
S/ By: Michael A. ~olmes"
Is the sale of standing timber under such a written contract
of sale a sale of goods subject to the Montana Uniform Commercial Code
or is it simply a sale of an interest in land, hence subject to
the laws of real property?
Peggs rely on Gullicksen v. Shadoan, 124 Mont. 56, 218 P.2d
714, for the proposition that an executory contract for sale and
removal of growing timber is a mere license revocable at the will
of the owner. This Court there held that title to the trees severed
passed until the license was revoked. In Gullicksen the purchaser
by deed was an innocent purchaser for value, unlike the instant case.
Mid-State urges the effect of the Montana Uniform Commercial
Code. This code was enacted by the Montana legislature in 1963
to become effective at midnight on January 1, 1965, and therefore
it applied to transactions entered into and events occurring after
that date and was the law in Montana at the time of the execution
of this timber purchase contract.
Under the code, Title 87A, goods are defined at section 87A-2-
105(1), R.C.M. 1947, as:
"* * * '~oods'also includes the unborn young of
animals and growing crops and other identified things
attached to realty as described in the section on
goods to be severed from realty (section 87A-2-107). I I
Mid-State dwells on the application of the Uniform Commercial
Code to such a contract. However, we believe the same result is
reached under the general contract law as it applies to realty.
No problem concerned with the statutesof fraud appears. No problem
with lack of knowledge appears. From the findings of the trial
court, the contract was found to be ambiguous because of the esca-
lator clause, "Timber price will be esculated each year. I I
It is evident from a reading of the contract that money was
to be paid in a minimum amount, $9.00 per M for the timber removed
with an additional amount to be paid as an escalator. As Montana
statutory law indicates in sections 13-506 through 13-509, R.C.M.
1947, the amount of such additional consideration may be determined
other than specifically in the contract. The additional considera-
tion amount here could be determined by the use of ~rescott's
testimony presented at a hearing on February 20, 1974. Prescott
testified that the Silver City Lumber, Inc. escalator clause dated
November 8, 1968, only a few months before this contract, would
have been intended by the parties. The only difference between
that clause and this was the minimum price was $8.00 per M, rather
than $ . 0 per M
90 .
The validity of escalator clauses is annotated in 63 ALR2d 1339.
There was testimony undisputed, that the term escalator has a posi-
tive and definite meaning in the Lewistown area.
The f a c t s show t h e c o n t r a c t t o have been i n w r i t i n g with a
good and v a l i d c o n s i d e r a t i o n and no ambiguity appears.
W r e t u r n now t o t h e Gullicksen case.
e I n 18 ALR2d 1152, t h i s
statement i s made:
"* * * one who purchases land with n o t i c e , a c t u a l
o r c o n s t r u c t i v e , of a p r i o r s a l e of t h e timber
thereon, o r a g r a n t of r i g h t s i n such timber, t o a
t h i r d person, i s g e n e r a l l y held t o take s u b j e c t t o
such r i g h t s i n r e s p c t of such timber a s might have
been a s s e r t e d by t h e l a t t e r a g a i n s t t h e vendor o r
g r a n t o r . 'I
The annotation c i t e s Gullicksen i n support and a t page 1153 of t h e
annotation i n 18 ALR2d, i t i s s a i d :
"* * * a c o n t r a c t f o r t h e s a l e of timber i s
enforceable a g a i n s t a subsequent vendee of t h e
land t o t h e e x t e n t , b u t only t o t h e e x t e n t ,
t h a t he has, o r i s chargeable w i t h , n o t i c e
thereof. "
W f i n d t h i s t o be t h e c o r r e c t view.
e In the i n s t a n t case the
t r i a l c o u r t found "there has been no proof of custom o r usage
i n t h e a r e a t h a t would give meaning t o t h e so-called ' e s c a l a t o r '
c l a u s e ; t h a t i n f a c t t h e c o n t r a c t put i n evidence f o r t h a t purpose
s e t out a method of a r r i v i n g a t t h e p r i c e i n t h a t c o n t r a c t a t any
11
given time, q u i t e c o n t r a r y t o t h e c l a u s e i n t h i s case. The evi-
dence does n o t bear t h i s out. This c a s e was determined on a motion
f o r summary judgment. A t most, i t can be s a i d t h a t t h e evidence may
have been c o n f l i c t i n g a s t o t h e i n t e n t of t h e p a r t i e s ; and by t h a t
statement i t i s evident t h a t t h e c a s e was n o t r i p e f o r summary
judgment. However, a s we read t h e testimony, i t was n o t c o n t r a d i c t e d
t h a t t h e e s c a l a t o r c l a u s e had a d e f i n i t e and fixed meaning i n t h e
a r e a and a s intended by t h e p a r t i e s .
I n Gullicksen statements of t h i s Court could be taken t o mean
t h a t n o t i c e of t h e timber c o n t r a c t i s n o t m a t e r i a l and would n o t
prevent a u n i l a t e r a l revocation of a l i c e n s e . However t h e f a c t was
t h e r e t h a t no n o t i c e was had and such an i n t e r p r e t a t i o n i s n o t
reasonable. To t h e e x t e n t t h a t t h e o b i t e r dictum appears i n
Gullicksen, c o n t r a r y t o what we hold h e r e , i t i s overruled.
Sorensen v. Jacobson, 125 Mont. 148, 232 P.2d 332, i s a l s o
c i t e d by Peggs. I n t h a t c a s e an o r a l c o n t r a c t f o r s a l e of growing
timber was found to be executory in nature and that title to
severed logs passed to the purchaser. It does not conflict with
anything we hold here.
The findings of the district court were not supported by the
evidence and we find that Mid-State had a valid contract. No valid
revocation of the timber purchase contract was shown. Because the
contract by its terms expired on April 30, 1974, and because the
Peggs caused the delay in harvesting the timber while Mid-State
was under the restraining order, Mid-State is entitled to an ex-
tension of an equal amount of time to complete the contract.
Accordingly, the order refusing to quash the temporary re-
straining order and the judgment granted to Peggs are reversed.
The cause is remanded to the district court for further proceedings
not inconsistent herewith.
We Concur:
Justices
"-
H g n , Thomas ~ i & n ,
District
sitting for Chief Justice
-1
T. Harrison.