Blakely v. Kelstrup

NO. 93-527
IN THE SUPREME COURT OF THE STATE OF MONTANA
BECKY BEE BLAKELY, Trustee for Blakely
Farms, a Wyoming Trust,
Plaintiff and Appellant,
v.
REIDAR E. KELSTRUP and
DELORES J. KELSTRUP,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Larry W. Moran, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Eric Rasmusson, Boulder, Montana
For Respondents:
Terry Schaplow, Bozeman, Montana
Submitted on Briefs: September 8, 1 9 9 4
Decided: October 1 3 , 1 9 9 4
Filed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Becky Bee Blakely, as trustee for Blakely Farms, a Wyoming
trust, appeals from a decision of the District Court for the
Eighteenth Judicial District, Gallatin County. That court
dismissed, without prejudice, her complaint for forcible detainer,
ejectment, wrongful occupation, and reentry. We vacate and remand
for further proceedings consistent with this Opinion.
The issue is whether the District Court erred in dismissing
the complaint.
In 1976, Yolanda Blakely entered into a contract for sale of
real estate in Gallatin County, Montana, to Reidar and Delores
Kelstrup, husband and wife. The total purchase price was $220,000.
Blakely acknowledged payment by the Kelstrups of $40,000 of this
amount upon execution of the contract. Under the contract, the
Kelstrups were to pay the remainder of the purchase price in yearly
installments of $13,000 on January 5 of each year.
In November 1988, the District Court awarded Blakely judgment
of $26,000 for annual payments due but not paid on the contract in
January of 1987 and 1988. The court also ruled that the parties
had agreed to an increased interest rate on the contract. However,
the court decreed that the annual payment would remain at $13,000
and the increased rate of interest would be included in a balloon
payment at the end of the contract.
In April 1993, Blakely assigned her interest in the contract
to her daughter, Becky Bee Blakely, trustee for Blakely Farms.
Becky Bee immediately filed this action against the Kelstrups. The
complaint alleged that the Kelstrups defaulted on the contract by
failing to make the payment due on January 5, 1990. It further
alleged that in June 1990 Blakely gave the Kelstrups notice of
default, and on December 30, 1991, Blakely gave the Kelstrups a
three-day notice to vacate the property, with which the Kelstrups
did not comply. The complaint stated the Kelstrups have defaulted
on the contract and that they, "by fraud, force, or by menaces and
threats of violence unlawfully hold and keep possession of the
Property." The complaint also included counts charging the
Kelstrups with wrongful and unlawful ouster and ejectment, and
wrongful occupation of the property pursuant to 5 27-1-318, MCA.
The relief requested included forfeiture of any interest held by
the Kelstrups in the property.
Reidar Kelstrup died in May 1993. In August of that year, the
District Court granted Delores Kelstrup's motion to dismiss the
complaint. In a memorandum explaining the ruling, the court
stated:
In event of [the Kelstrups'] default under the contract
involved in this matter, [Blakelyl's exclusive remedy is
to foreclose [her] interest in a mortgage foreclosure
proceeding. The action brought by [Becky Bee] is not the
remedy which the contract provides, and therefore must be
dismissed.
Becky Bee appeals.
Did the District Court err in dismissing the complaint?
Our standard of review in an equity case such as this one is
set forth at 5 3-2-204(5), MCA:
[Tlhe supreme court shall review all questions of fact
arising upon the evidence presented in the record,
whether the same be presented by specifications of
particulars in which the evidence is alleged to be
insufficient or not, and determine the same, as well as
questions of law, unless for good cause a new trial or
the taking of further evidence in the court below be
ordered.
Under this Court's equitable jurisdiction, "[w]e have a duty to
determine all of the issues of [the] case and to do complete
justice." Peterson v. Montana Bank of Bozeman (1984), 212 Mont.
The contract between Blakely and the Kelstrups provided:
In the event that [the Kelstrups] shall be in
default in making any payment of principal or interest as
herein specified ... or shall fail in other respects to
keep and perform the covenants and agreements herein
contained for a period of thirty (30) days, then in that
event, [Blakely] shall be entitled to declare [the
Kelstrups] in default under the terms of this contract by
giving [the Kelstrups] written notice by registered mail,
which notice shall state the particulars in which [the
Kelstrups] are in default, and unless [the Kelstrups]
shall cure such default within ninety (90) days from the
date of mailing this notice, then in that event, the
whole amount of the balance of the purchase price of said
property shall thereupon become due and payable at the
option of [Blakely], and the equity of [the Kelstrups] in
said real estate may be foreclosed and their interest in
said real estate sold under foreclosure proceedings
applicable to the foreclosure of mortgages; or [Blakelyl
shall, at her option, be released from all obliaation in
law or equitv to convev said pro~ertvand rthe Kelstrupsl
shall forfeit all ricfht thereto, and all improvements and
payments made hereunder shall be taken and considered as
rent and liquidated damaaes and as a part of the consid-
eration for enterina into this aareement. [Emphasis
added.]
The contract clause underlined above plainly states that
forfeiture of the Kelstrups' interest in the property is available
as an alternative to foreclosure as a remedy for default, at
Blakelyts option. Therefore, we conclude the District Court erred
in ruling that foreclosure was the exclusive remedy allowed under
the contract between Blakely and the Kelstrups.
In their briefs on appeal, the parties argue whether the
causes of action which were pled in the complaint may be applied to
these facts. In the absence of rulings on these matters by the
District Court, we decline to address those issues at this time.
However, it appears to the Court that the provision of 5 28-1-
104, MCA, concerning relief from forfeiture may apply to this case.
In pursuit of our duty to do complete justice in equitable matters,
we provide the following discussion on the applicability of that
statute.
Section 28-1-104, MCA, provides:
Whenever by the terms of an obligation a party thereto
incurs a forfeiture or a loss in the nature of a forfei-
ture by reason of his failure to comply with its provi-
sions, he may be relieved therefrom upon making full
compensation to the other party, except in case of a
grossly negligent, willful, or fraudulent breach of duty.
In discussing this statute, which has been a part of the law of
Montana since 1895, this Court has stated:
The intention of the law under this statute is that a
forfeiture should not be needlessly enforced. The courts
have established that as the policy of the law in the
absence of statute. The rule as it has found expression
in court decisions generally is that both in law and in
equity forfeitures are abhorred.
Yellowstone County v. Wight (l944), 115 Mont. 411, 417-18, 145 P.2d
516, 518. A contract which requires forfeiture in case of default
does not divest a court of equity of its power to relieve a party
from the consequences of his default. Sharp v. Holthusen (1980),
189 Mont. 469, 474, 616 P.2d 374, 377.
The briefs filed with this Court and the pleadings filed in
the District Court establish that, in addition to their $40,000
down payment, the Kelstrups made at least eleven annual payments on
the contract with Blakely, in the amount of $13,000 each. This
payment of a substantial portion of the contract price mitigates
against forfeiture and supports the application of 5 28-1-104, MCA,
to this case. See Kovacich v. Metals Bank and Trust Co. (1961),
139 Mont. 449, 365 P.2d 639 (a party seeking application of 5 28-1-
104, MCA, must set forth facts which will appeal to a court of
equity).
Before a party will be granted relief from forfeiture under
5 28-1-104, MCA, the party must offer to make full compensation
under the contract and the claim for relief from forfeiture must be
pled as an affirmative defense. Masser Cattle Co., Inc. v. Reese
(1985), 216 Mont. 22, 699 P.2d 87. It appears these two require-
ments also have been met in this case. First, Becky Bee has not
refuted Kelstrupls assertion that she has offered to make full
payment on the contract but that this offer has been rejected.
Second, the Kelstrupsl answer to the complaint against them
included an affirmative defense that Itplaintiffseeks a forfeiture
of a real estate contract, which is disallowed by law."
Finally, in determining whether 5 28-1-104, MCA, should be
applied to this case, findings must be made as to whether the
Kelstrups' failure to comply with the contract terms constituted a
"grossly negligent, willful, or fraudulent breach of duty."
Ponderosa Pines Ranch, Inc. v. McBride (1982), 197 Mont. 301, 303,
642 P.2d 1050, 1052. The record has not been developed on this
issue.
We hold that the District Court must specifically address the
issue of forfeiture and the application of 5 28-1-104, MCA, to this
case. We vacate the order of dismissal entered by the District
Court and remand for further proceedings consistent with this
Opinion.
We concur:
October 13. 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Eric Rasmusson
Attorney at Law
P.O. Box 587
Boulder, MT 59632
Terry Schaplow, Esq.
Attorney at Law
1700 West Koch, Suite 11
Bozeman, MT 59715
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA