Heller v. Osburnsen ( 1973 )

No. 12400
I N THE SUPREME C U T O THE STATE O M N A A
OR F F OTN
1973
LESTER J. HELLER and V I R G I N I A
ANN HELLER, h i s w i f e ,
P l a i n t i f f s and Respondents,
A T U S. OSBURNSEN and LUCILLE F.
RH R
OSBURWSEN, h i s w i f e ,
Defendants and A p p e l l a n t s .
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 J. McKinnon, Judge p r e s i d i n g .
Counsel of Record:
For Appellants :
Robert L. Johnson and William Berger, Lewistown, Montana.
Robert L. Johnson argued, Lewistown, Montana.
K. Robert F o s t e r argued, Lewis town, Montana.
For Respondents:
Dockery and P a r r i s h , Lewistown, Montana.
Raymond E. Dockery argued, Lewistown, Montana.
Submitted: March 29, 1973
Decided :MAY - 7 19'73
Filed: MfiY - 7 1973
Nr, J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e a p i n i o n o f t h e Court.
Arthur S. and L u c i l l e F, Osburnsen, husband and w i f e , a r e
d e f e n d a n t s and a p p e l l a n t s i n t h i s a c t i o n , and w i l l be r e f e r r e d t o
h e r e i n a s Osburnsen. L e s t e r J, and V i r g i n i a Ann H e l l e r , husband
and w i f e , a r e p l a i n t i f f s and respondents and w i l l be r e f e r r e d t o
a s Heller. H e l l e r brought t h e a c t i o n i n t h e d i s t r i c t c o u r t of
t h e t e n t h j u d i c i a l d i s t r i c t , county of Fergus, f o r a d e c l a r a t o r y
judgment i n r e f e r e n c e t o a ranch s a l e t r a n s a c t i o n between H e l l e r
and Osburnsen. The c a s e was heard w i t h o u t a j u r y and judgment
e n t e r e d on f i n d i n g s of f a c t and c o n c l u s i o n s of law. From t h a t
judgment Osburnsen a p p e a l s .
For a p e r i o d of time p r i o r t o October 1967, EIeller had been
t r y i n g t o s e l l h i s ranch p r o p e r t i e s . He had appointed one Tom
G i r v i n of Girvin R e a l t o r s a s h i s a g e n t t o s e l l t h e p r o p e r t y . One
buyer had been found p r e v i o u s t o t h i s t i m e , b u t had been unable
t o o b t a i n n e c e s s a r y f i n a n c i a l backing, O October 5 , 1967, G i r v i n
n
d i d n e g o t i a t e a s a l e t o Osburnsen and a r e c e i p t and agreement t o
s e l l . and purchase was executed on t h a t d a t e . The f o r e g o i n g f a c t s
a r c agreed t o by t h e p a r t i e s ; however t h e remaining f a c t s a r e d i s -
puted.
The f a c t s a s found by t h e d i s t r i c t judge a r e : In order t o
r a i s e t h e n e c e s s a r y down payment on t h e Hel-ler p r o p e r t y w i t h o u t
d i s t u r b i n g o t h e r i n v e s t m e n t s , i t became n e c e s s a r y f o r Osburnsen
t o borrow approximately $ 3 5 , 0 0 0 . ~ e l l e r ' sa g e n t , Tom G i r v i n , was
a l s o an a g e n t f o r t h e John Hancock l4utual L i f e I n s u r a n c e Company;
i t was agreed t h e loan f o r t h e down payment would be made through
t h a t company.
A t t h e time of t h e s a l e , H e l l e r owed approximately $30,000
p l u s an t h e p r o p e r t y t o t h e Kansas C i t y L i f e I n s u r a n c e Company and
approximately $ 4 , 0 0 0 p l u s f o r c l o s i n g c o s t s t o R e a l t y A b s t r a c t
Company. John Hancock Company d i d n o t want a second mortgage on
t h e p r o p e r t y and t h e r e f o r e r e q u i r e d t h a t any loan i t made be l a r g e
enough t o p a y o f f t h e p r i o r indebtedness, i n o r d e r f o r i t t o have
a f i r s t mortgage. Both H e l l e r and Osburnsen signed Loan applica-
t i o n s made t o t h e John Hancock Company and a loan of $70,000 was
:nade t o t h e p a r t i e s ,
Of t h e $70,000 borrowed, $35,000 was t o pay o f f t h e Kansas
C i t y Company mortgage and money owed t o R e a l t y A b s t r a c t Company,
The remaining $35,000 was t h e down payment on t h e H e l l e r p r o p e r t y .
On November 24, 1967, t h e p a r t i e s e n t e r e d i n t o a formal and de-
t a i l e d c o n t r a c t f o r deed which s e t o u t t h e d e t a i l s of t h e t r a n s -
a c t i o n more completely than d i d t h e r e c e i p t and agreement t o s e l l
and purchase, b u t i n no way c o n f l i c t e d w i t h i t . A t t h e time of
t h e execution of t h e c o n t r a c t f o r deed, t h e only mortgage o r en-
cumbrance on t h e p r o p e r t y was t h e Kansas C i t y L i f e Insurance
Company and Realty A b s t r a c t Company.
I n February 1968 t h e p a r t i e s signed t h e loan i n s t r u m e n t s i n
favor o f John Hancock Company; t h e $70,000 was used t o r e t i r e t h e
encumbrances and make t h e down payment t o H e l l e r . Copies of t h e
c o n t r a c t and supporting documents, i n c l u d i n g t h e John Hancock
Company n o t e , were subsequently placed i n escrow w i t h t h e bank.
J u s t under a year l a t e r Osburnsen made t h e f i r s t annual payment
with i n t e r e s t , which i n t u r n was paid over by t h e escrow a g e n t
p a r t l y t o John Hancock Company and p a r t l y t o H e l l e r . The escrow
agent was following t h e terms of t h e c o n t r a c t , s i n c e i t s t a t e d
t h a t any mortgage on t h e land would be paid f o r out of proceeds
of t h e s a l e . H e l l e r complained t o t h e escrow agent t h a t h e was
i n no way involved i n t h e repayment of t h e l o a n t o John Hancock
Company and t h a t p o r t i o n o f t h e c o n t r a c t f o r deed r e f e r r i n g t o any
mortgage r e f e r r e d t o t h e Kansas C i t y L i f e Insurance Company mortgage
which had been paid o f f .
Since t h e r e was a problem i n i n t e r p r e t i n g t h e language of
t h e c o n t r a c t , H e l l e r brought t h i s a c t i o n f o r d e c l a r a t o r y judgment
t o a d j u d i c a t e t h e r e s p e c t i v e r i g h t s and d u t i e s of t h e p a r t i e s ,
i n p a r t i c u l a r t h e amount of money owed by Osburnsen t o H e l l e r f o r
t h e purchase of t h e ranch, k t t r i a l Osburnsen contended t h e
purchase p r i c e was $85,000 and H e l l e r had given Osburnsen $35,000
f o r cosigning t h e n o t e and mortgage. H e l l e r contended t h e s a l e
was
?rice/$120,000, a s s e t out i n a l l t h e documents, and t h a t Osburnsen
s t i l l owed H e l l e r $50,000.
The t r i a l c o u r t found t h e purchase p r i c e t o be $120,000; t h a t
H e l l e r had r e c e i v e d $35,000 a s down payment and t h e a d d i t i o n a l
sum of $35,000 by reason of payment of t h e Kansas C i t y and
A b s t r a c t o b l i g a t i o n s ; and Osburnsen s t i l l owed H e l l e r t h e sum of
$50,000. The t r i a l c o u r t f u r t h e r found t h e John Hancock Company
loan was made j o i n t l y t o both p a r t i e s and Osburnsen was o b l i g a t e d
t o pay 50% of t h e l o a n , independent of payments on t h e c o n t r a c t ;
t h a t H e l l e r was o b l i g a t e d t o repay t h e o t h e r 50% of t h e John Hancock
Company loan out o f t h e y e a r l y payments f o r t h e s a l e of t h e ranch.
O a p p e a l a p p e l l a n t Osburnsen r a i s e s t h r e e i s s u e s f o r review:
n
1, Did t h e d i s t r i c t c o u r t abuse i t s d i s c r e t i o n i n d e c r e e i n g
a reformation of a w r i t t e n c o n t r a c t i n a d e c l a r a t o r y judgment a c t i o n ?
2. Did t h e d i s t r i c t c o u r t abuse i t s d i s c r e t i o n i n e n t e r i n g
f i n d i n g s and g r a n t i n g d e c l a r a t o r y judgment o u t s i d e t h e i s s u e s
presented?
3. Did t h e d i . s t r i c t c o u r t e r r i n denying d e f e n d a n t ' s motion
f o r summary judgment?
I n h i s f i r s t i s s u e Osburnsen contends t h e d i s t r i c t c o u r t i n
a d e c l a r a t o r y judgment proceeding abused i t s d i s c r e t i o n by reformi-ng
t h e c o n t r a c t . He a r g u e s t h e c o n t r a c t was c l e a r and s t a t e d s p e c i f i -
cally:
"The Vendors s h a l l d e p o s i t w i t h t h e escrow a g e n t h e r e -
i n a f t e r named a l l mortgages o r o t h e r indebtedness i n c u r r e d
by Vendors which indebtedness i s secured by a mortgage on
t h e above d e s c r i b e d r e a l p r o p e r t y , and i n s t r u c t t h e escrow
agent t h a t a l l payments r e c e i v e d on t h i s Contract f o r Deed
s h a l l be a p p l i e d by t h e escrow a g e n t on t h e payment of such
indebtedness; That upon payment i n f u l l of such o u t s t a n d i n g
i-ndebtedness of t h e Vendors a l l amounts paid by t h e Vendees
t o t h e Vendors s h a l l be c r e d i t e d t o t h e Vendors."
Osburnsen argues t h a t n e i t h e r p a r t y wants t h e c o n t r a c t
changed, and t h e above c i t e d c l a u s e r e f e r s t o t h e John Hancock
Company loan. Respondent H e l l e r clai-ms t h e c l a u s e r e f e r s t o t h e
Reaity A b s t r a c t and Kanszs C i t y Company l o a n s , Osburnsen con-
tends s i n c e t h e d i s t r i c t c o u r t went beyond t h e c o n t r a c t and
found both p a r t i e s owed on t h e n o t e , i t reformed t h e c o n t r a c t
without proper a u t h o r i t y .
W do n o t a g r e e t h e d i s t r i c t c o u r t reformed t h e c o n t r a c t .
e
This a c t i o n was brought under t h e Uniform D e c l a r a t o r y Judgments
A c t , s e c t i o n s 93-8901 through 93-8916, R.C.M. 1947, which provides
i.n p a r t :
"93-8901 Scope, Courts of record w i t h i n t h e i r
r e s p e c t i v e j i l r i s d i c t i o n s s h a l l have power t o d e c l a r e
r i g h t s , s t a t u s , and o t h e r l e g a l r e l a t i o n s whether o r
n o t f u r t h e r r e l i e f i s o r could b e claimed, N a c t i o n o
o r proceeding s h a l l be open t o o b j e c t i o n on t h e ground
t h a t a d e c l a r a t o r y judgment o r d e c r e e i s prayed f o r .
The d e c l a r a t i o n may be e i t h e r a f f i r m a t i v e o r n e g a t i v e
i n form and e f f e c t ; and such d e c l a r a t i o n s s h a l l t h e
f o r c e and e f f e c t of a f i n a l judgment o r decree. II
"93-8902 Power t o c o n s t r u e , e t c . Any person i n t e r -
e s t e d under a deed, w i l l , w r i t t e n c o n t r a c t o r o t h e r
w r i t i n g s c o n s t i t u t i n g a c o n t r a c t , o r whose r i g h t s ,
s t a t u s o r o t h e r l e g a l r e l a t i o n s a r e a f f e c t e d by a
s t a t u t e , municipal ordinance, c o n t r a c t o r f r a n c h i s e ,
may have determined any q u e s t i o n of c o n s t r u c t i o n o r
v a l i d i t y a r i s i n g under t h e i n s t r u m e n t , s t a t u t e ,
ordinance, c o n t r a c t , o r f r a n c h i s e and o b t a i n a d e c l a r -
a t i o n of r i h t s , s t a t u s o r o t h e r l e g a l r e l a t i o n s
thereunder. 6
'93-8903 Before breach. A c o n t r a c t may be construed
e i t h e r b e f o r e o r a f t e r t h e r e h a s been a breach t h e r e o f . "
Here, t h e r e was ambiguity on t h e f a c e of t h e c o n t r a c t a s t o
which mortgage -- John Hancock o r Kansas C i t y L i f e -- was r e f e r r e d
to. I n McNussen v. Graybeal, 146 Mont. 173, 186, 405 P.2d 447,
t h i s Court when faced w i t h a problem of ambiguity s a i d :
" f t i s w e l l - s e t t l e d law t h a t t h e q u e s t i o n of whether
an ambiguity e x i s t s i s one of law f o r t h e c o u r t . 11
The Court then went on t o say t h a t when having t o explain an
ambiguity i n a c o n t r a c t , e x t r i n s i c evidence w i l l be used t o ex-
p l a i n t h e t r u e i n t e n t i o n of t h e p a r t i e s .
Considering t h e evidence, w e f i n d two e x h i b i t s introduced
a t t r i a l which were a p p l i c a t i o n s f o r a farm mortgage l o a n , One
was signed by H e l l e r and t h e o t h e r by Osburnsen. Both a p p l i c a -
tions were f o r t h e same l a n d , t h e H e l l e r ranch, and both r e c i t e d t h e
same s e l l i n g p r i c e $120,000, Upon being c a l l e d t o i n t e r p r e t t h e
c o n t r a c t , i t was c l e a r l y w i t h i n t h e purview of t h e d i s t r i c t
c o u r t judge t o examine t h e evidence and i t was n o t an abuse of
h i s d i s c r e t i o n t o f i n d t h a t both p a r t i e s were l i a b l e t o t h e John
Hancock Company. Both p a r t i e s had signed loan a p p l i c a t i o n s
f o r t h e same l a n d , and t h e d i s t r i c t c o u r t found t h a t both owed
one h a l f of t h e n o t e . The c o u r t d i d n o t reform t h e c o n t r a c t b u t
i n s t e a d i n t e r p r e t e d i t i n l i g h t of t h e whole t r a n s a c t i o n and
a l l t h e documents and evidence, which i s according t o law,
W f i n d a u t h o r j - t i e s c i t e d by a p p e l l a n t Osburnsen d e a l w i t h
e
a c t i o n s concerni.ng s u i t s t o reform c o n t r a c t s , Such was n o t t h e
s i t u a t i o n h e r e ; t h e r e f o r e t h e c i t e d a u t h o r i t i e s a r e n o t persua-
Osburnsen's second i s s u e i s t h a t t h e d i s t r i c t c o u r t abused
i t s d i s c r e t i o n i n e n t e r i n g f i n d i n g s and g r a n t i n g d e c l a r a t o r y
judgment outsi.de t h e i s s u e s p r e s e n t e d , He c i t e s National S u r e t y
Corp. v. Krtlse, 121 Elant. 202, 192 P,2d 317, where t h i s Court h e l d
t h a t i n a d e c l a r a t o r y judgment a c t i o n t h e d i s t r i c t c o u r t must have
f i n d i n g s of f a c t t o support t h e judgment; o r t h e i s s u e s must have
been p r e s e n t e d i n t h e p l e a d i n g s f o r determination. That r u l e of
law i s c l e a r and e s t a b l i s h e d ; we do n o t f i n d t h a t i t i s i n con-
f l i c t with the s i t u a t i o n i n the i n s t a n t case.
The complaint a l l e g e d :
11
I. That t h i s a c t i o n i s brought under t h e p r o v i s i o n s
o f Chapter 89 of T i t l e 93 of t h e Revised Codes o f
Montana, 1947, and a c t s amendatory t h e r e t o .
"11. That p r i o r t o t h e 5 t h day o f October, 1967,
P l a i n t i f f s were t h e owners of a c e r t a i n ranch and
had l i s t e d t h e same f o r s a l e w i t h Tom G i r v i n , a
r e l a t o r i n t h e c i t y of Lewjstown; t h a t on o r about
t h e 5 t h day of October, 1967, Defendants h e r e i n
agreed t o purchase and P l a i n t i f f s h e r e i n agreed t o
s e l l , t h e s a i d ranch f o r t h e sum of $120,000.00
on t h e terms and b a s i s s e t o u t i n a c e r t a i n r e c e i p t
and agreement t o s e l l and purchase, a t r u e and
c o r r e c t cop of which i s annexed t o t h i s Complaint
a s E x h i b i t 'A1' and by i n c o r p o r a t i o n and r e f e r e n c e
made a p a r t h e r e o f .
"111. That subsequently on o r about t h e 24th da.y of
November, 1967, t h e p a r t i e s h e r e t o had a formal Can-
t r a c t f o r Deed prepared and t h a t t h e same was duly
and p r o p e r l y e x e c u t e d b y a l l o f t h e p a r t i e s h e r e t o ; t h a t
s a i d c o n t r a c t provided i o r t h e payment of $120,O00.00
by Defendants t o P l a i n t i f f s f o r t h e purchase
of s a i d ranch, and c e r t a i n o t h e r m a t t e r s ; t h a t
a t r u e and c o r r e c t copy of t h i s Contract f o r
Deed i s annexed t o t h i s Complaint a s E x h i b i t
It If
B and by i n c o r p o r a t i o n and r e f e r e n c e made a
p a r t hereof,
"IV. That subsequently Defendants made arrange-
ments t o borrow c e r t a i n sums of money on t h e r e a l
p r o p e r t y w i t h which t o complete t h e down payment
thereon and t o prepay c e r t a i n o t h e r items of
c o s t s and o t h e r m a t t e r s i n connection t h e r e w i t h ;
and t h a t P l a i n t i f f s h e r e i n executed t h e loan
documents a t t h e s p e c i a l i n s t a n c e and r e q u e s t of
Defendants; t h a t Defendants have taken possession
of t h e ranch and t h a t a l t o g e t h e r t h e r e h a s been
paid t o P l a i n t i f f s on account o f s a i d agreement t h e
sum of approximately $69,670.00, and t h a t t h e r e
i s s t i l l due and owing t o P l a i n t i f f s t h e sum of
approximately $50,330.00, p l u s accrued i n t e r e s t
and o t h e r i n t e r e s t which w i l l a c c r u e from time t o
time .
"V. That Defendants have now s t a t e d and a l l e g e d
t h a t they o n l y p a i d $85,000.00 f o r t h e ranch,
and on account of t h e t r a n s a c t i o n . and t h a t t h e r e
i s now only due and owing t o p l a i n t i f f s t h e sum
of $15,000.00, a l l c o n t r a r y t o t h e form, f o r c e
and e f f e c t of t h e w r i t t e n agreement between t h e
p a r t i e s and a l l o t h e r agreements between t h e p a r t i e s ;
t h a t such a l l e g a t i o n s by Defendants a r e f a l s e and
u n t r u e and t h a t t h e r e i s due and owing t o P l a i n t i f f s
t h e sum of approximately $50,330,00. "
The p r a y e r f o r r e l i e f asked t h a t a d e c l a r a t o r y judgment be
e n t e r e d d e c l a r i n g and a d j u d i c a t i n g t h e r e s p e c t i v e r i g h t s and
d u t i e s of t h e p a r t i e s under t h e p r o v i s i o n s of t h e c o n t r a c t .
It i s c l e a r from t h e complaint, i n p a r t i c u l a r paragraph IV
and t h e p r a y e r , t h a t H e l l e r wanted a d e t e r m i n a t i o n of who owed
what on t h e John Hancock Company l o a n , T h i s i s what t h e pleadings
asked f o r , and i t i s what t h e d i s t r i c t c o u r t d i d . Osburnsen
a l l e g e s t h e d i s t r i c t c o u r t went beyond t h e p l e a d i n g s i n i t s d e t e r -
mination, b u t our r e a d i n g of t h e pleadings and p r a y e r f o r r e l i e f
f i n d s no e r r o r i n t h e d i s t r i c t c o u r t ' s a c t i o n ,
Appellant ~ s b u r n s e n ' s f i n a l i s s u e i s t h a t t h e d i s t r i c t c o u r t
e r r e d i n n o t g r a n t i n g sllmmary judgment. Defendant Osburnsen served
on p l a i n t i f f H e l l e r a r e q u e s t f o r admissions, pursuant t o Rule 36,
M.R..Civ,P. H e l l e r d i d n o t respond t o t h e r e q u e s t w i t h i n t h e time
p e r i o d and s o Osburnsen moved f o r summary judgment, based p r i m a r i l y
on t h e admissions which a r e deemed admitted a s t r u e i f n o t answered.
A review of t h e r e c o r d i n d i c a t e s t h e d i s t r i c t c o u r t allowed
H e l l e r t o f i l e answers which, although l a t e , were admitted and
t h e n t h e d i s t r i c t c o u r t denied t h e motion f o r summary judgment,
The r e a l q u e s t i o n i s --- was t h e d i s t r i c t c o u r t c o r r e c t i n g r a n t i n g
H e l l e r time t o f i l e answers a f t e r t h e time l i m i t had e x p i r e d ?
W find the d i s t r i c t court correctly interpreted the rule.
e
It h a s been e s t a b l i s h e d by c a s e law t h a t i f answers a r e n o t
made t o r e q u e s t s f o r admissions under Rule 36, M.R,Civ.P., such
admissions a r e deemed admitted a s t r u e , Naegeli v. D a n i e l s , 145
Mont. 323, 400 P.2d 896. However, t h i s Court h a s n o t h e r e t o f o r e
had t h e problem, a s h e r e , where a p a r t y wants t o f i l e answers
b u t i t i s a f t e r t h e permitted time p e r i o d . 2 Moorefs Manual,
F e d e r a l P r a c t i c e and Procedure, $ 15.05[2], p. 1156, provides a
guide :
"9; ** F a i l u r e t o t a k e any a c t i o n w i t h i n t h e p e r i o d
s t a t e d i n t h e r e q u e s t r e s u l t s i n an admission of t h e
f a c t s s t a t e d t h e r e i n , although t h e c o u r t may permit
t h e p a r t y t o f i l e h i s answer a f t e r t h e e x p i r a t i o n of
such time where t h e d e l a y was n o t caused by l a c k o f
good f a i t h , O r i n t h e absence of any p r e j u d i c e t o t h e
p a r t y r e q u e s t i n g t h e admission. 11
I n French v. United S t a t e s , 416 F.2d 1149, 1152, t h e Ninth
C i r c u i t Court o f Appeals, c i t i n g from Moosman v. Joseph P, B l i t z ,
Inc., 358 F,2d 686 (2 C i r . 1966), s a i d :
lf
Under compelling circumstances t h e D i s t r i c t Court
may allow untimely r e p l i e s t o avoid admission. ***
Since t h e purpose of Rule 36 i s t o e x p e d i t e t r i a l by
removing uncontested i s s u e s and no d e l a y was caused
h e r e , t h e r e i s no s u f f i c i e n t r e a s o n t o f o r c e t h e
D i s t r i c t Court t o g r a n t summary judgment h e r e where
no p r e j u d i c e i s shown. t I
I n t h e i n s t a n t c a s e i t was e s t a b l i s h e d t h a t t h e d e l a y was
caused by a mixup i n o f f i c e procedure, and c e r t a i n l y n o t by any
bad f a i t h on H e l l e r ' s p a r t . It was an a c c i d e n t t h a t t h e answers
were n o t f i l e d w i t h i n t h e time, b u t i t was a s i t u a t i o n w i t h i n t h e
d i s c r e t i o n of t h e t r i a l c o u r t t o determine i f Osburnsen would be
p r e j u d i c e d by t h e l a t e f i l i n g , Since i t i s c l e a r no p r e j u d i c e
could be shown, we f i n d n o t h i n g which would i n d i c a t e t h e d i s t r i c t
c o u r t abused i t s d i s c r e t i o n i n e i t h e r allowing t h e l a t e f i l i n g ,
o r i n denying t h e motion f o r summary judgment.
The judgment of t h e d i s t r i c t c o u r t i s affirmed.
Won. Jack Shanstrom, D i s t r i c t
J u d g e , s i t t i n g f o r Chief J u s t i c e
James T. Harrison.