Case Title: BARBARA REYNOLDS and LAURRIE REYNOLDS V. JOHN A. MILATZO and DIANA R. MILATZO

Citation: 

Docket Number: 06-217

State: wyoming

Court: Wyoming Supreme Court

Date: 2007-06-29T00:00:00Z

Document:
BARBARA REYNOLDS and LAURRIE REYNOLDS V. JOHN A. MILATZO and DIANA R. MILATZO2007 WY 104161 P.3d 509Case Number: 06-217Decided: 06/29/2007
APRIL 
TERM, A.D. 2007

 
 
BARBARA 
REYNOLDS and LAURRIE REYNOLDS,

 
 
Appellants

(Plaintiffs),

 
 
v.

 
 
JOHN A. 
MILATZO and DIANA R. MILATZO,

 
 
Appellees

(Defendants).

 
 
Appeal 
from the DistrictCourtofLaramieCounty

The 
Honorable Edward L. Grant, Judge

 
 
Representing 
Appellants:

Lisa M. 
Barrett of Buchhammer & Kehl, P.C., Cheyenne, Wyoming.

            

Representing 
Appellees:

Steven 
F. Freudenthal of Freudenthal, Salzburg & Bonds, P.C., Cheyenne, Wyoming.

            

Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and GUTHRIE, D.J.

 
 
KITE, 
Justice.

            

[¶1]      Barbara and 
Laurrie Reynolds (Sellers), the sellers under a contract for deed, sought to 
enforce the default provisions of the contract against the buyers, John and 
Diana Milatzo (Buyers).  The 
district court refused to order that the property reverted to Sellers, but 
granted a money judgment in favor of Sellers because they had paid taxes and 
insurance on the property for which, under the terms of the contract, Buyers 
were responsible.  We conclude that 
Sellers waived strict compliance with the terms of the contract and failed to 
comply with the default notification provisions.  Consequently, we affirm the district 
court's decision.   

 
 
ISSUES

 
 
[¶2]      Sellers 
present the following appellate issues, phrased as 
statements:

 
 

I.                    
The 
district court erred by determining a waiver of Appellant[s]' ability to enforce 
their rights pursuant to the default provisions of the Contract for 
Deed.

 
 

II.                  
The 
notice of default to Appellee[s] was sufficient under the terms of the Contract 
for Deed and, as such, the Appellees failed to cure the default thus triggering 
the default provisions.

 
 
Buyers 
articulate the issues somewhat differently:

 
 

A.     
Was 
the district court's application of the recognized doctrine of waiver erroneous 
or contrary to the great weight of the evidence[?]

 
 

B.     
Failure 
to comply with the notification provisions of the escrow instructions was an 
attempt to deny Milatzos of a substantial contractual protection[.] 

 
 
FACTS

 
 
[¶3]      On March 31, 
1994, the parties entered into a contract for deed on property located in 
Cheyenne, Wyoming.  
The total purchase price was $79,500, payable by a substantial down 
payment with the balance, together with interest, to be paid over a term of 192 
months.  The payments were due on 
the first day of the month and "[a]ny payment received more than 10 days after 
the due date" was to include "a penalty in a sum which is equal to four percent 
(4%) of the monthly payment."  The 
contract also required Buyers to pay the taxes and insurance on the property and 
provide proof of those payments to Sellers.  The default provision gave Sellers the 
following rights:

 
 
            
In the event Purchaser fails to make any payment required by the terms of 
this contract, within 15 days of the date the same falls due including 
installment payments to Seller, payments for taxes, assessments and insurance 
premiums, or in the event Purchaser is otherwise in default Seller may, at his 
option:

 
 

1.                  
Make 
such payment and add the amount thereof together with interest at eight percent 
(8%) to the obligation of Purchaser.

2.                  
Notify 
Purchaser by registered or certified mail of such failure.  The Purchaser shall have 30 days from 
the date of mailing of such notice to cure such defect and in the event such 
defect is not cured within the 30 days, this contract shall be forfeit[ed] and 
terminated, all documents in escrow shall be delivered to Seller . . . and 
Seller shall be fully reinvested with all right, title, and interest [in the 
property].  

 
 
* * 
*

 
 
4.         The waiver of any breach of 
any term hereof shall not be a waiver of any subsequent or other breach hereof 
nor of any term or condition hereof.            

 
 
[¶4]      The parties 
agreed in the contract for deed to have the transaction overseen by an escrow 
agent.  To that end, they signed 
escrow instructions, which included the following provisions pertaining to 
default:

 
 

1.                  
[S]hould 
any of the undersigned declare in writing to escrow agent a default or breach of 
the terms and conditions of the agreements subject to this escrow, specifying 
the same with particularity, the escrow agent shall give written notice of said 
default by registered mail to the undersigned claimed to be in default at their 
last known address.  The undersigned 
claimed to be in default within 30 days after mailing of the notice of default 
by escrow agent shall give written notice to escrow agent of any objection to 
the termination of this escrow.  
Lacking receipt of objection within said time, escrow agent, without 
liability of any kind whatsoever, shall terminate the escrow, and return all 
escrowed agreements, documents and funds to the undersigned requesting the 
re[s]cis[s]ion.

 
 
The 
contract for deed specifically addressed the possibility of a conflict between 
the terms of the contract and the escrow instructions, by stating:  "[a]ny conflict between this agreement 
and the escrow instructions shall be controlled by the provisions of the escrow 
instructions."    

 
 
[¶5]      Shortly after 
execution of the contract for deed, the parties exchanged correspondence, both 
personally and through their respective attorneys, about the contract.  The correspondence pertained to Buyers' 
obligation to provide proof of insurance and payment of taxes.1  Sellers also reminded Buyers of their 
obligation to make timely payments and the penalty for late payments.  In August 1995, Sellers' attorney 
proposed that the parties amend the contract for deed to have Sellers pay all of 
the taxes and insurance on the property and add approximately $80 per month to 
Buyers' monthly payment to reimburse Sellers for those expenses.  Buyers' attorney responded, indicating 
Buyers agreed with the proposal.  In 
an August 16, 1995, letter to Buyers' attorney, Sellers' attorney indicated he 
would contact Sellers to obtain their final approval of the contract 
amendment.  The parties never 
followed through with the proposal and the contract remained unchanged.   

 
 
[¶6]      Over the years 
there were instances when Buyers did not comply with their contractual 
obligations.  In particular, Buyers 
did not consistently insure the property, and, even when they did maintain 
insurance on the property, they did not provide Sellers with proof of insurance 
coverage.  Consequently, in 1996, 
Sellers began to separately insure their continuing interest in the 
property.  In addition, Sellers paid 
the property taxes in 2003 when Buyers failed to comply with that 
obligation.  Buyers were also late 
making some payments under the contract for deed.        

 
 
[¶7]      On January 9, 
2004, Sellers sent Buyers a certified letter notifying them they were in default 
on certain provisions of the contract for deed.  Sellers stated that, to cure the 
default, Buyers needed to provide proof of insurance, reimburse Sellers for late 
fees, taxes and insurance payments made on their behalf in the amount of 
$6,424.10, and pay interest in the amount of $3,294.36.  The letter stated the cure deadline was 
February 9, 2004.  On January 20, 
2004, Sellers personally served Buyers with a second letter, which included the 
same demands as the January 9 letter, but extended the cure deadline to February 
19, 2004.  Neither default letter 
was transmitted through, or copied to, the escrow agent.      

 
 
[¶8]      In response to 
the default notifications, Buyers made arrangements to pay off the contract for 
deed by securing a loan from another individual.  The escrow agent provided a statement of 
the balance due on the contract for deed, and on February 16, 2004, Buyers 
tendered full payment in accordance with the escrow agent's pay-off 
calculations.  Following the terms 
of the escrow, the escrow agent released the warranty deed to Buyers.      

 
 
[¶9]      Sellers objected 
to the transfer of the property to Buyers because they had not paid the 
additional amounts identified in the default notices.  Consequently, Sellers filed a complaint, 
setting forth claims for breach of contract, breach of the covenant of good 
faith and fair dealing, and punitive damages.  Sellers requested relief in the form of 
return of the property, payment of damages, and attorney's fees and costs.  Buyers answered and counterclaimed, 
asserting they had fulfilled the terms of the contract for deed.    

 
 
[¶10]   The district court held a bench 
trial.  After Sellers rested their 
case, the district court granted Buyers' motion to dismiss Sellers' claims for 
late fees and interest because the evidence was insufficient to support those 
claims.2  At the conclusion of the trial, the 
district court articulated its ruling verbally:

 
 
Well, 
judgment will be for the plaintiffs in the sum of [$]5310.66.  That will be the extent of the relief 
granted.  Beyond that, the Court 
finds for the defendants  I think the evidence is clear that there was a 
waiver, a failure to enforce the rights.  
If one wants to look at this in terms of requiring strict compliance, 
then of course, the Reynolds didn't strictly comply, either.  They didn't go through the escrow the 
terms of the agreement required them to do.  Notice was not given in writing through 
the escrow.  There's no question 
that the equity favored the Milatzos here.  

 
 
I think 
it's appropriate to enter judgment for the amount of the insurance payment 
because the Reynolds had this investment, and it was at risk at any time due to 
casualty loss.  They simply had to 
cover it in the absence of the proof of insurance that was required, and that 
was reasonable for them to do that.  

 
 
So that 
will be the judgment. 

 
 
The 
written judgment incorporated the critical terms of the district court's oral 
ruling, but did not include specific findings of fact or conclusions of 
law.  Sellers appealed from the 
district court's judgment.    

 
 
STANDARD 
OF REVIEW

 
 
[¶11]   The district court heard this case 
without a jury, but did not issue special findings of fact and conclusions of 
law pursuant to Wyo. R. Civ. P. 52(a).  
When the district court does not accompany its decision with express 
findings of fact, we assume that the general finding by the court carries with 
it every finding of fact supported by the record.   In the Interest of MFB, 860 P.2d 1140, 
1151 (Wyo. 1993); Deroche v. R.L. Manning Co., 737 P.2d 332, 335 (Wyo. 
1987).  This Court will not 
interfere with the district court's findings unless they are clearly erroneous 
or so totally against the evidence as to be manifestly wrong.   Skinner v. Skinner, 601 P.2d 543, 545 
(Wyo. 
1979).  

 
 
[¶12]   "A finding is clearly erroneous 
when, although there is evidence to support it, the reviewing court on the 
entire evidence is left with the definite and firm conviction that a mistake has 
been committed."'  Wells Fargo Bank Wyoming, N.A. v. Hodder, 
2006 WY 128, ¶ 13, 144 P.3d 401, 407 (Wyo. 2006), quoting Fraternal Order of Eagles Sheridan Aerie No. 
186, Inc. v. State ex rel. Forwood, 2006 WY 4, ¶ 24, 126 P.3d 847, 857 (Wyo. 
2006).  In reviewing the district 
court's findings, we assume the evidence of the prevailing party is true and 
give that party every reasonable inference that can fairly and reasonably be 
drawn from it.  Id.  
As always, the district court's conclusions of law are subject to our 
de novo standard of review.  
Mullinnix LLC v. HKB Royalty Trust, 2006 WY 14, ¶ 12, 126 P.3d 909, 
916 (Wyo. 2006). 

 
 
DISCUSSION

 
 
[¶13]   
Sellers contest the district court's refusal to declare that the 
contract for deed had terminated because of Buyers' defaults and order the 
property returned to them.   
The district court based its decision on several related grounds, 
including:  Sellers had waived 
strict performance by Buyers of some of the terms of the contract; Sellers did 
not give Buyers notice of default in accordance with the escrow agreement; and 
the relative equities supported Buyers.    

 
 
[¶14]   Wyoming case law offers several principles to 
guide us in reviewing the district court's decision.  We begin with the general rule that 
courts interpret contracts to effectuate the parties' intention, as expressed in 
the language of the agreement.  See, Ahearn v. Hollon, 2002 WY 125, ¶ 18, 53 P.3d 87, 91 (Wyo. 2002).  As long as 
the contract language is clear and unambiguous, our obligation on appeal is to 
interpret it as a matter of law.  
Id.  

 
 
[¶15]   We are also cognizant of the 
principle that this Court does not favor forfeiture of contractual rights.  Angus Hunt Ranch, Inc. v. REB, Inc., 577 P.2d 645, 650 (Wyo. 1978).  See also, Brown v. Johnston, 2004 WY 17, ¶ 32, 85 P.3d 422, 431 (Wyo. 2004).  Before a 
party can declare a forfeiture, he must establish he has a clear right to 
terminate the contract and he must be free from blame.  Id.  
Moreover, "[p]rovisions for forfeiture may be waived and the courts 
are quick to take advantage of circumstances indicating such an 
intention.'"  Angus Hunt Ranch, 577 P.2d  at 650, 
quoting 17 C.J.S. Contracts § 407, 
page 86.  See also, Knapp v. Landex Corp., 2006 WY 36, ¶ 14, 
130 P.3d 924, 928 (Wyo. 2006).    
In order to establish a prima 
facie case of waiver, the buyer must establish that the seller "has condoned 
or assented to previous defaults and has not given notice of his intention to 
insist on strict compliance in the future."  Angus Hunt Ranch,  577 P.2d  at 
650.

 
 
[¶16]   In appropriate cases, however, we 
must enforce the default provisions the parties freely agreed to in their 
contract.   We have said:  

 
 
[A]fter 
competent parties have solemnly contracted and agreed to certain conditions, 
courts should exercise restraint in nullifying the terms thereof or rewriting 
the contract.  It is said that this 
is "a dangerous jurisdiction which should not be extended."   It does not extend so far as to 
authorize a court of equity to disregard and set aside a valid stipulation of 
the parties upon the performance of which their rights are made to depend in the 
absence of some equitable basis.

 
 

Ahearn 
v. Ahearn, 993 P.2d 942, 948 (Wyo. 
1999) (citations omitted).  

 
 
[¶17]   The district court held that 
Sellers waived strict compliance with some of the terms of the contract for 
deed.  The record supports the 
district court's ruling.  Beginning 
early in the contract, Buyers made some late payments and failed to secure 
hazard insurance, provide proof of insurance when it was in place, and, on a 
couple of occasions, pay the property taxes.  As described above, in the early years 
of the contract, the parties discussed amending it to have Sellers pay for the 
insurance and taxes on the property and have an amount added to Buyers' monthly 
payment in order to reimburse Sellers for those costs.  The last letter in that series was dated 
August 16, 1995, and was written by Sellers' attorney to Buyers' attorney.  In that letter, Sellers' attorney 
indicated that he generally agreed with the plan to amend the agreement, but his 
clients needed to make the final decision about whether to accept the 
proposal.  The record does not 
indicate Sellers took any further action, at that time, to address Buyers' 
failure to comply with their tax and insurance obligations.  Instead, the contract continued under its 
original terms and Sellers' obtained their own insurance on the property.    

 
 
[¶18]   In addition, Buyers made numerous 
late payments over the years and, apparently, paid the late fees on some 
occasions, but not on others.  The 
parties communicated about the late payment issue, but there is no indication 
Sellers made any effort to declare a default under the terms of the contract or 
the escrow instructions.  Thus, the 
evidence supported the district court's conclusion that Sellers waived strict 
compliance with the contract for deed and, in order to enforce the contractual 
terms as written, Sellers were required to give appropriate notice of their 
intention.   

 
 
[¶19]   As quoted above, the contract for 
deed called for Sellers to provide Buyers with notice of default by certified 
mail and Buyers would then have thirty days to cure the defect.  The escrow instructions added to the 
notification obligation by requiring the notice of default to be given through 
the escrow agent.  The contract for 
deed also provided that, in the event there was any conflict between the terms 
of the contract and the escrow instructions, the escrow instructions 
controlled.    Under the 
plain language of the parties' agreement, in order to declare a default, Sellers 
were required to give Buyers notice through the escrow agent.   

 
 
[¶20]   It is undisputed that Sellers 
issued the notices of default directly to Buyers, without going through the 
escrow agent.  Consequently, the 
default notice did not comply with the clear language of the parties' agreement 
and was not effective to trigger the default or cure provisions of the contract 
for deed.  Failing appropriate 
notice of default, Buyers were entitled to rely on the provisions of the 
contract which allowed them to prepay the contract amount to the escrow agent 
and receive, in return, full title to the property.    

 
 
[¶21]   The district court's findings that 
Sellers waived strict compliance with some of the contract requirements and that 
the default notices did not comply with the contractual terms were not clearly 
erroneous. Consequently, the district court did not err by refusing to declare 
that the contract had terminated or order the property to be returned to 
Sellers.

 
 
[¶22]   Affirmed.

            

FOOTNOTES

 
 

1Buyers 
did not pay the second half of the 1994 property taxes when due.  Sellers paid the taxes, and Buyers 
reimbursed them for that expenditure.

  

2Sellers 
do not contest the district court's dismissal of those 
claims.