Pond v. Lindell

80-289
IN THE SUPREME COURT OF THE STATE OF MONTANA
CURTIS POND AND SHARON POND,
husband and wife,
Plaintiffs and Appellants,
LESLIE M. LINDELL; BONNIE LINDELL, et al.,
Defendants-Cross Defendants
and Respondents,
C. K. EENSON
Appeal from: District Court of the Thirtee~thJudicial District,
In and for the County of Yellowstone, The Honorable
Robert H. Wilson, Judge presiding,
Counsel of Record:
For Appellants:
Moulton, Bellingham, Longo & Mather, Billings,
Montana
For Respondents:
Kammerer and Rodli', Missoula ; Montana
Submitted on Bri'efs: April 1 5 1 1 9 8 1
Dec2dedr August 11, 1981
Filed; AUG 11 1981
Mr.J u s t i c e Frank B. Morrison, J r . , d e l i v e r e d t h e Opinion of t h e
Court .
his s u i t was commenced by p l a i n t i f f s C u r t i s and Sharon
Pond f o r s p e c i f i c performance of a c o n t r a c t f o r deed and f o r
damages caused by d e l a y i n conveyance. Defendants Dick S.
Dye and P a t r i c i a L. Dye f i l e d an answer t o t h e c o m p l a i n t .
Defendant C.K. Benson answered and f i l e d a c o u n t e r c l a i m f o r
attorney fees .
P l a i n t i f f s , t h e Ponds, f i l e d a motion f o r p a r t i a l
summary judgment s e e k i n g s p e c i f i c performance of t h e c o n t r a c t
f o r deed and a d e t e r m i n a t i o n t h a t d e f e n d a n t s w e r e l i a b l e t o
p l a i n t i f f s f o r damages o c c a s i o n e d by d e l a y i n conveyance.
Defendants Dye and Benson f i l e d c r o s s - m o t i o n s f o r summary
judgment and asked f o r a t t o r n e y f e e s .
On J u l y 1, 1980, t h e D i s t r i c t C o u r t i s s u e d a n o r d e r
denying t h e p l a i n t i f f s ' motion f o r summary judgment, g r a n t i n g
d e f e n d a n t s , Dye and B e n s o n ' s motions f o r summary judgment,
and awarding d e f e n d a n t s t h e i r c o s t s and a t t o r n e y f e e s . From
t h i s decision, p l a i n t i f f s appeal.
On December 1 9 , 1980, t h e D i s t r i c t C o u r t i s s u e d a
s u p p l e m e n t a l o r d e r d i r e c t i n g t h e e n t r y of a f i n a l judgment
a s t o t h e i s s u e s d e c i d e d i n t h e J u l y 1, 1980, o r d e r and c e r -
t i f y i n g t h e c a s e f o r a p p e a l p u r s u a n t t o Rule 5 4 ( b ) , M.R.Civ.P.
T h i s c o n t r o v e r s y a r i s e s o u t of a s e r i e s of r e a l e s t a t e
t r a n s a c t i o n s i n v o l v i n g numerous p a r t i e s . Because of t h e
number of p a r t i e s i n v o l v e d , t h e f o l l o w i n g d e s i g n a t i o n s w i l l
be u s e d ; p l a i n t i f f s C u r t i s and Sharon Pond w i l l be r e f e r r e d
t o a s t h e "Ponds"; d e f e n d a n t s Dick S. Dye and P a t r i c i a L.
Dye w i l l b e r e f e r r e d t o a s t h e "Dyes"; d e f e n d a n t s L e s l i e M.
L i n d e l l and Bonnie L i n d e l l w i l l be r e f e r r e d t o a s t h e " ~ i n d e l l s " ;
and C.K. Benson w i l l be r e f e r r e d t o a s e ens on".
S o p h i e M. R u s s e l l o r i g i n a l l y owned t h e p r o p e r t y which
i s a t t h e c e n t e r of the d i s p u t e i n t h i s a c t i o n . I n 1969,
R u s s e l l e n t e r e d i n t o a c o n t r a c t f o r deed w i t h t h e Dyes.
On October 27, 1971, t h e Dyes e n t e r e d i n t o a c o n t r a c t
f o r deed w i t h t h e L i n d e l l s . This c o n t r a c t contained t h e
following provisions:
" 1 . T h a t i f t h e b u y e r s s h a l l f i r s t make t h e pay-
ments and perform t h e c o v e n a n t s h e r e i n a f t e r men-
t i o n e d on t h e i r p a r t t o be made and performed,
t h e s e l l e r s hereby c o v e n a n t and a g r e e t o convey
and a s s u r e t o t h e b u y e r s by w a r r a n t y deed i n f e e
s i m p l e , f r e e and c l e a r of a l l encumbrances, t h e
r e a l e s t a t e i n t h e County of Yellowstone, and
S t a t e of Montana, known and d e s c r i b e d as f o l l o w s ,
to wit:
T r a c t s K and L of t h e Second Amended P l a t of
CERTIFICATE O SURVEY NO. 744, which i s l o c a t e d
F
i n t h e S 1 / 4 of S e c t i o n 23, Township 2 North,
W
Range 26 E a s t , P.M.M., Yellowstone County, Mon-
t a n a , a c c o r d i n g t o t h e o f f i c i a l p l a t t h e r e o f on
f i l e and of r e c o r d i n t h e o f f i c e of t h e C l e r k
and Recorder of s a i d County, under Document No.
739015.
"4. The s e l l e r s a g r e e t o provide a t i t l e insur-
ance p o l i c y evidencing t h a t t i t l e t o the proper-
t y i s insurable i n the amount of $9,000.00 and
w i l l p l a c e t h e same i n escrow a s h e r e i n a f t e r men-
tioned.
" 5. Upon t h e e x e c u t i o n of t h i s agreement, t h e
s e l l e r s s h a l l e x e c u t e a w a r r a n t y deed r u n n i n g t o
t h e b u y e r s i n t h e u s u a l form, conveying v a l i d , mar-
k e t a b l e , f e e simple t i t l e t o t h e premises t o t h e
b u y e r s , f r e e and c l e a r of a l l l i e n s , encumbrances,
and t i t l e d e f e c t s , i f a n y , b u t e x c e p t i n g r i g h t s -
of-way, easements, and t a x e s f o r t h e p e r i o d sub-
s e q u e n t t o t h e d a t e of t h i s i n s t r u m e n t . . ."
On May 9, 1973, t h e L i n d e l l s e n t e r e d i n t o a c o n t r a c t
f o r deed w i t h t h e Ponds. That c o n t r a c t contained t h e following
provisions:
" T h a t if Buyers s h a l l f i r s t perform t h e c o v e n a n t s
h e r e i n a f t e r mentioned on t h e i r p a r t t o be made
and performed, and s h a l l make t h e payments a s h e r e i n
s p e c i f i e d , t h e S e l l e r s do h e r e b y c o v e n a n t and a g r e e
t o s e l l , t r a n s f e r and convey t o t h e Buyers i n f e e
s i m p l e , c l e a r of a l l encumbrances w h a t e v e r , w i t h
t h e e x c e p t i o n of r e s e r v a t i o n s , r e s t r i c t i o n s and
easements of r e c o r d , and a s may have been i n c u r r e d
by t h e Buyers a f t e r t h e d a t e of t h i s agreement, by
w a r r a n t y deed, r e a l p r o p e r t y s i t u a t e d i n t h e County
of Yellowstone, S t a t e of Montana, and more p a r t i c u -
l a r l y described a s follows ...
" I t i s u n d e r s t o o d and a g r e e d t h a t t h i s c o n t r a c t i s
s u b j e c t t o t h e terms and c o n d i t i o n s of c o n t r a c t s
f o r deed between Sophie M. R u s s e l l , a s S e l l e r s , and
Dick S. Dye and P a t r i c i a L. Dye, d a t e d October 25,
1969; and a c o n t r a c t f o r deed d a t e d October 27, 1971
between Dick S. Dye and P a t r i c i a L . Dye, a s S e l l e r s ,
and L e s l i e M. L i n d e l l and Bonnie A. L i n d e l l as
Buyers; t h a t s a i d c o n t r a c t s a r e h e l d i n escrow by
t h e S e c u r i t y T r u s t & S a v i n g s Bank, B i l l i n g s , Montana,
and t h a t t h i s c o n t r a c t s h a l l be p l a c e d i n escrow a t
t h e S e c u r i t y T r u s t & S a v i n g s Bank, B i l l i n g s , Montana,
and t h a t payments made under t h i s c o n t r a c t s h a l l b e
a p p l i e d t o t h e payment of s a i d e a r l i e r c o n t r a c t s .
"At such t i m e a s t h e Buyers s h a l l have p a i d t h e
f u l l p u r c h a s e p r i c e b a l a n c e of $11,500.00, p l u s
i n t e r e s t a t 8% p e r annum, a s s e t f o r t h i n t h i s
c o n t r a c t f o r deed, S e l l e r s s h a l l f u r n i s h a t i t l e i n -
s u r a n c e p o l i c y t o t h e Buyers showing good and m e r -
chantable t i t l e . The S e c u r i t y T r u s t & S a v i n g s Bank
i s hereby a u t h o r i z e d t o pay t h e c o s t of s a i d t i t l e
i n s u r a n c e p o l i c y from t h e l a s t two payments t o be
made under t h e t e r m s of t h i s c o n t r a c t and d e d u c t
t h e same from t h e payments t o be made t o t h e S e l l e r s . "
On October 24, 1973, Contemporary P r o d u c t s , I n c . , a
f o r e i g n c o r p o r a t i o n which was n o t r e g i s t e r e d t o do b u s i n e s s
i n Montana, r e c o r d e d a judgment a g a i n s t Dick S. Dye, i n t h e
amount of $12,471.08, p l u s i n t e r e s t , c o s t s , and $1,149.00 i n
attorney fees. T h i s judgment was d o c k e t e d i n t h e D i s t r i c t
C o u r t , Yellowstone County, c a s e no. 59091.
On August 26, 1978, t h e Dyes a s s i g n e d t h e i r r i g h t s a s
s e l l e r s under t h e Dye-Lindell c o n t r a c t t o Benson. A t this
t i m e Dyes a l s o gave Benson a w a r r a n t y deed t o t h e p r o p e r t y ,
which was r e c o r d e d August 2 9 , 1978.
Subsequent a s s i g n m e n t s of c o n t r a c t s were made by t h e
L i n d e l l s and Benson. The f o l l o w i n g c h a r t , numbered chrono-
l o g i c a l l y , d e p i c t s a l l of t h e above o c c u r r e n c e s and t r a n s a c -
t i o n s r e l a t i n g t o t h i s p a r c e l of p r o p e r t y .
(See I l l u s t r a t i o n On Next Page)
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C u r t i s Pond - S h ~ r o nP o n d L l o y d E. Pctersar.
Q Tender of full payment made December 6, 1978.
T h i s c o n t r o v e r s y f i r s t began i n t h e summer of 1978,
when t h e Ponds n e g o t i a t e d a r e a l e s t a t e c o n s t r u c t i o n l o a n
f o r t h e purpose of b u i l d i n g a home on t h e p r o p e r t y , and made
p r e p a r a t i o n s t o pay t h e b a l a n c e due under t h e i r c o n t r a c t f o r
deed w i t h t h e L i n d e l l s .
On October 4 , 1978, t h e Ponds o b t a i n e d a t i t l e i n s u r a n c e
commitment from S a f e c o T i t l e I n s u r a n c e Company of Idaho
which r e f l e c t e d , among o t h e r t h i n g s , t h a t t h e p o l i c y t o be
i s s u e d would c o n t a i n a n e x c e p t i o n f o r t h e October 24, 1973,
judgment e n t e r e d i n f a v o r of Contemporary P r o d u c t s , I n c . ,
a g a i n s t Dick S. Dye.
Ponds n o t i f i e d a l l d e f e n d a n t s of t h e a l l e g e d d e f e c t i n
t h e t i t l e and r e q u e s t e d t h a t t h e d e f e c t be removed s o t h a t
m e r c h a n t a b l e t i t l e c o u l d be d e l i v e r e d t o t h e Ponds p u r s u a n t
t o the contract t e r m s .
On December 6 , 1978, t h e Ponds t e n d e r e d f u l l and f i n a l
payment under t h e Pond-Lindell c o n t r a c t by d e p o s i t i n g $9,600
w i t h t h e escrow a g e n t . The f u n d s were n o t t o be p a i d u n t i l
c l e a r and m e r c h a n t a b l e t i t l e was d e l i v e r e d t o t h e Ponds and
a t i t l e i n s u r a n c e p o l i c y i s s u e d which would n o t i n c l u d e t h e
Dye judgment a s a n e x c e p t i o n .
A s u i t was f i l e d by t h e Dyes t o have t h e judgment l i e n
d e c l a r e d v o i d a s a g a i n s t t h e r e a l p r o p e r t y i n q u e s t i o n and
s e e k i n g permanent i n j u n c t i v e r e l i e f p r e v e n t i n g Contemporary
Products, Inc., from e n f o r c i n g t h e judgment a g a i n s t t h i s
r e a l property. Such a c t i o n was f i l e d by t h e Dyes on J u n e
1 2 , 1979, 17 d a y s p r i o r t o t h e f i l i n g of t h e i n s t a n t c a s e by
t h e Ponds. The c o u r t f i l e i n DV-79-979 reveals t h a t although
t h e c o m p l a i n t was f i l e d , no summons was e v e r i s s u e d o r
returned. The judgment remained a n e x c e p t i o n .
On J u n e 29, 1979, t h e Ponds f i l e d t h i s s u i t f o r s p e c i f i c
performance of t h e c o n t r a c t and f o r damages f o r d e l a y i n
performance of t h e c o n t r a c t . The Ponds and/or S a f e c o I n s u r a n c e
Company d e t e r m i n e d t h a t on October 2 4 , 1979, s i x y e a r s would
have r u n on t h e Dye judgment, and i t would no l o n g e r c o n s t i t u t e
a v a l i d l i e n a t t h a t time. T h e r e f o r e , t h e Ponds proceeded
t o t a k e a c t i o n t o c l o s e a second c o n s t r u c t i o n l o a n which had
been o b t a i n e d and t o s e c u r e t h e i n s t r u m e n t s of conveyance
from t h e escrow a g e n t a f t e r October 2 4 , 1979.
On October 1 2 , 1979, Benson n o t i f i e d t h e escrow a g e n t ,
S e c u r i t y Bank, n o t t o d e l i v e r t h e i n s t r u m e n t s of conveyance
t o t h e Ponds w i t h o u t c o l l e c t i o n by t h e escrow a g e n t of t h e
sum of $510 which Benson claimed a s a t t o r n e y f e e s p u r s u a n t
t o c o n t r a c t f o r deed. Benson's c l a i m stemmed from t h e f a c t
t h a t he had been r e q u i r e d t o o b t a i n l e g a l c o u n s e l t o d e f e n d
t h e s u i t commenced by t h e Ponds under c i r c u m s t a n c e s i n which
Benson claimed he had n o t been g u i l t y of a b r e a c h of c o n t r a c t .
P l a i n t i f f s , t h e Ponds, t h e n assumed t h e p o s i t i o n t h a t
t h e y had r i g h t f u l l y commenced t h e i r a c t i o n f o r s p e c i f i c p e r -
formance by r e a s o n of t h e f a i l u r e of t h e d e f e n d a n t s t o
f u r n i s h t o them e v i d e n c e o f c l e a r and m e r c h a n t a b l e t i t l e and
t h e y r e f u s e d t o p a y t h e $510 a t t o r n e y f e e s demanded by
d e f e n d a n t Benson.
The f o l l o w i n g i s s u e s a r e h e r e r e s o l v e d :
1. Did t h e D i s t r i c t C o u r t err i n h o l d i n g t h a t p l a i n t i f f s ,
t h e Ponds, were n o t e n t i t l e d t o summary judgment g r a n t i n g
s p e c i f i c performance of t h e c o n t r a c t ?
2. Did t h e D i s t r i c t C o u r t err i n h o l d i n g d e f e n d a n t s ,
Dyes, and Benson were e n t i t l e d t o summary judgment?
3. Did t h e D i s t r i c t C o u r t err i n h o l d i n g t h a t p l a i n t i f f s ,
t h e Ponds, were n o t e n t i t l e d t o damages c a u s e d by d e l a y i n
conveyance o f c l e a r t i t l e t o t h e p r o p e r t y and p e r f o r m a n c e o f
the contract?
T h e s e i s s u e s a r e r e s o l v e d by d e t e r m i n i n g (1) w h e t h e r t h e
Ponds w e r e r e a d y , w i l l i n g and a b l e t o p e r f o r m t h e i r p a r t o f t h e
and
c o n t r a c t , / ( 2 ) w h e t h e r Benson a s a s s i g n e e o f t h e Dye t o L i n d e l l
c o n t r a c t c o u l d b e r e q u i r e d t o p e r f o r m t o t h e same e x t e n t a s
t h e Dyes c o u l d h a v e been.
F o r t h e Ponds t o be e n t i t l e d t o s p e c i f i c p e r f o r m a n c e ,
they must have o f f e r e d t o perform. Hanlon v . Manger ( 1 9 2 9 ) , 85
Mont. 31, 39, 277 P. 433, 436. Ponds t e n d e r e d t h e c o n t r a c t
b a l a n c e o f $ 9 , 6 0 0 a s shown by t h e a f f i d a v i t o f t h e e s c r o w
agent. However, t h e y d i r e c t e d t h e f u n d s n o t b e d e l i v e r e d
u n t i l a t i t l e p o l i c y c o u l d b e i s s u e d showing good and m e r c h a n t a b l e
title. Benson c l a i m s t h i s w a s a c o n d i t i o n a l t e n d e r . We
disagree. Ponds w e r e o n l y i n s i s t i n g upon r e c e i v i n g t h a t
w h i c h t h e y had a c o n t r a c t u a l r i g h t t o r e c e i v e . A t t h e same
t i m e , Ponds were i n d i c a t i n g t h a t t h e y w e r e r e a d y , a b l e and
willing t o close. Such i s s u f f i c i e n t . Van A t t a v . S c h i l l i n g e r
(1981) -Mont. , 625 P.2d 73, 77, 38 St.Rep. 426, 430.
There can be l i t t l e doubt t h a t s p e c i f i c performance
w i l l l i e a g a i n s t Benson a s a s s i g n e e of Dye. When Benson
p u r c h a s e d Dyes' i n t e r e s t i n t h e c o n t r a c t w i t h L i n d e l l ,
Benson had n o t i c e t h a t L i n d e l l had s o l d t o t h e Ponds some
f i v e y e a r s e a r l i e r . T h i s C o u r t s t a t e d i n Thompson v . ~ i n c o l n
Nat. L i f e I n s . Co. ( 1 9 4 3 ) , 1 1 4 Mont. 521, 529, 138 P.2d 951,
"The d o c t r i n e i s w e l l s e t t l e d t h a t when t h e v e n d o r ,
a f t e r e n t e r i n g i n t o a c o n t r a c t of s a l e , conveys t h e
l a n d t o a t h i r d p e r s o n who h a s knowledge o r n o t i c e
of t h e p r i o r agreement, ... such g r a n t e e t a k e s t h e
l a n d impressed w i t h t h e t r u s t i n f a v o r of t h e o r i g i n a l
vendee, and h o l d s i t a s t r u s t e e f o r s u c h vendee, and
c a n be compelled a t t h e s u i t of t h e vendee t o spec-
i f i c a l l y perform t h e agreement by conveying t h e l a n d
i n t h e same manner, and t o t h e same e x t e n t , a s t h e
vendor would have been l i a b l e t o d o , had he n o t t r a n s -
f e r r e d t h e l e g a l t i t l e ; and such g r a n t e e i s t h e p r o p e r
d e f e n d a n t i n t h e s u i t a q a i n s t whom t o demand t h e
-
remedy of a conveyance." ( C i t i n g Pomeroy's S p e c i f i c
Performance - C o n t r a c t s , S e c t i o n 465.1 (3d Ed. )
of .
I n Myhre v. Myhre ( 1 9 7 6 ) , 170 Mont. 4 1 0 , 419, 554
P.2d 276, t h i s C o u r t s a i d :
"The r u l e seems t o b e t h a t one who a c q u i r e s o r
p u r c h a s e s p r o p e r t y , knowing t h a t t h e p r o p e r t y i s
s u b j e c t t o a c o n t r a c t t o be s o l d t o a n o t h e r , may
be compelled t o perform t h e c o n t r a c t i n t h e same
manner and t o t h e same e x t e n t a s h i s g r a n t o r would
have been l i a b l e t o do had t h e g r a n t o r n o t made
t h e t r a n s f e r t o him. " ( C i t a t i o n s o m i t t e d . )
The Ponds had t h r e e s e p a r a t e r i g h t s which c o u l d be en-
f o r c e d a g a i n s t Benson, namely (1) t h e r i g h t t o r e c e i v e a
deed, ( 2 ) t h e r i g h t t o r e c e i v e a m e r c h a n t a b l e t i t l e , and ( 3 )
t h e r i g h t t o r e c e i v e a t i t l e p o l i c y showing c l e a r t i t l e .
The D i s t r i c t C o u r t a p p a r e n t l y d e n i e d r e l i e f t o t h e
Ponds and g r a n t e d summary judgment t o t h e d e f e n d a n t s b e c a u s e
t h e c o u r t found t h e Contemporary P r o d u c t s ' judgment n o t t o
be a l i e n on t h e p r o p e r t y . The c o u r t f e l t t h a t t h e f a c t a
t i t l e i n s u r a n c e company would i n c l u d e t h e judgment a s a n
.Zl-A.
exception d i d n o t c r e a t e a d e f e c t rendering t h e t i t l e merchantable.
W e need n o t d e c i d e whether t h e judgment c o n s t i t u t e d a
v a l i d l i e n on t h e p r o p e r t y .
The t r i a l c o u r t e r r e d by n o t c o n s i d e r i n g t h a t t h e r e
were two s e p a r a t e c o n t r a c t u a l c o v e n a n t s i n u r i n g t o Ponds'
b e n e f i t . The f i r s t c o v e n a n t w a s t o convey good t i t l e ; t h e
s e c o n d was t o f u r n i s h a t i t l e p o l i c y i n s u r i n g t h a t good
title. The Ponds w e r e e n t i t l e d t o h a v e e a c h c o v e n a n t p e r f o r m e d .
The d e f e n d a n t s f a i l e d t o s o p e r f o r m .
Benson c l a i m s a t t o r n e y f e e s a r i s i n g o u t o f c o n t r a c t .
Whether f e e s s h o u l d b e awarded i f Benson had b e e n s u c c e s s f u l
h a s now b e e n r e n d e r e d moot. The p o s i t i o n t a k e n by Benson from
t h e beginning h a s been u n j u s t i f i e d . H e had a n o b l i g a t i o n t o d e -
l i v e r t h e d e e d and a n i n s u r a b l e c l e a r t i t l e . H e w a s n o t , and i s
not, e n t i t l e d t o e i t h e r attorney f e e s o r costs.
The o r d e r of t h e D i s t r i c t C o u r t g r a n t i n g summary judgment
t o t h e d e f e n d a n t s , Dyes and Benson, i s r e v e r s e d . The c a u s e i s
remanded w i t h d i r e c t i o n s t o e n t e r summary judgment f o r s p e c i f i c
p e r f o r m a n c e i n f a v o r o f t h e p l a i n t i f f s and f o r t r i a l on t h e