Title: MAXTED v BARRETT

State: montana

Issuer: Montana Supreme Court

Document:

No. 81-469 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982 ROY MAXTED, Plaintiff and Respondent, KENNETH P. BARRETT and VOLA J. BARRETT, husband and wife, Defendants and Appellants. .1 from: District Court of the First Judicial District, In and for the County of Lewis and Clark Honorable Mark P. Sullivan, Judge presiding. Counsel of Record: For Appellants: Small, Hatch & Doubek, Helena, Montana Richard J. Pyfer argued, Helena, Montana For Respondent: Hooks and Budewitz, Townsend, Montana Patrick F. Hooks argued, Townsend, Montana Submitted: April 5, 1982 Decided : APR 2 6 1982 M r . Chief J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of t h e C o u r t . Defendants appeal t h e t r i a l c o u r t d e c i s i o n o r d e r i n g them t o s p e c i f i c a l l y perform t h e i r agreement w i t h t h e p l a i n t i f f wherein p l a i n t i f f w a s t o purchase d e f e n d a n t s ' mortgagee's in- terest i n t h e Denver Block Apartments p r o p e r t y i n Helena. W e a f f i r m . On March 23, 1979, d e f e n d a n t s s o l d t h e "Denver Block Apartments" (125 Broadway, Helena) to Benjamin and Annie Brown. Browns assumed a f i r s t mortgage h e l d by t h e Helena American F e d e r a l S a v i n g s and Loan A s s o c i a t i o n and executed a n o t e to d e f e n d a n t s f o r $67,000 a t 9%, secured by a second mortgage. Each monthly payment amounted t o $848.74. I n s u r a n c e payable to t h e d e f e n d a n t s was c a r r i e d t o t h e e x t e n t of t h e second m o r t g a g e ' s b a l a n c e . By t h e e a r l y p a r t of 1980, t h e Browns were d e l i n q u e n t i n t h e i r monthly payments and had not paid t h e r e a l p r o p e r t y t a x e s f o r 1979. Defendants f i l e d an a c t i o n to f o r e c l o s e t h e i r second mortgage b u t d i d n o t pursue it, hoping t h a t t h e Browns would be a b l e to g e t t h e i r f i n a n c i a l problems remedied. I n A p r i l 1981, p l a i n t i f f c o n t a c t e d t h e d e f e n d a n t s r e g a r d i n g t h e p o s s i b l e purchase of t h e i r second mortgagee ' s i n t e r e s t i n t h e p r o p e r t y . The Browns were still i n d e f a u l t on t h e monthly payments and d e f e n d a n t s were aware t h a t t h e C i t y of Helena had o r d e r e d t h e Browns to b r i n g t h e b u i l d i n g up t o code by September 1, 1981, or have it be condemned. On A p r i l 1 5 , 1981, p l a i n t i f f and d e f e n d a n t s signed a real tor s b u y - s e l l agreement ( a Stevens-Ness form e n t i t l e d " R e c e i p t and Agreement to S e l l and Purchase" ) w h e r e i n p l a i n t i f f purchased d e f e n d a n t s i n t e r e s t f o r $37, 500, which was a l i t t l e o v e r h a l f of what w a s still due and owing on t h e n o t e between t h e d e f e n d a n t s and Brown ( a b o u t $63,000). The p a r t i e s i n s e r t e d t h e f o l l o w i n g language i n t h e agreement w i t h r e g a r d t o t h e $37,500: " . . . to be paid i n f u l l by J u n e 1st o r s o o n e r , depending upon t h e c o n t i n g e n c y of reha- b i l i t a t i o n l o a n from American F e d e r a l S a v i n g s t o p u r c h a s e r . ( 1 9 8 1 ) . S e l l e r a g r e e s to sell t h e i r e n t i r e i n t e r e s t i n t h e Denver Apartments t o p u r c h a s e r upon r e c e i p t of t h e purchase p r i c e s t a t e d ." P l a i n t i f f p a i d $100 e a r n e s t money a t t h a t t i m e . On A p r i l 23, 1981, p l a i n t i f f agreed w i t h Browns t o purchase t h e i r i n t e r e s t and r e c e i v e a deed to t h e p r o p e r t y , e f f e c t i v e May 26, 1981. Under t h a t agreement, p l a i n t i f f was t o assume t h e Browns' i n d e b t e d n e s s , i n c l u d i n g t h e second mortgage. On May 25, 1981, f i r e c o m p l e t e l y d e s t r o y e d t h e b u i l d i n g and t h e r e a f t e r p l a i n t i f f s e n t a r e s c i s s i o n n o t i c e to Browns, s t a t i n g t h a t t h e d e s t r u c t i o n of t h e b u i l d i n g c o n s t i t u t e d a f a i l u r e of c o n s i d e r a t i o n . On May 29, 1981, p l a i n t i f f tendered to d e f e n d a n t s a check f o r $37,400 and an Assignment of Mortgage form. Defendants r e f u s e d b o t h checks and re t u r n e d them and t h e unexecuted Assignment form to p l a i n t i f f s a t t o r n e y . On June 3, 1981, p l a i n t i f f f i l e d s u i t seeking s p e c i f i c performance of t h e agreement with d e f e n d a n t s . Defendants answered, r a i s i n g v a r i o u s d e f e n s e s , i n c l u d i n g t h e f a c t t h a t p l a i n t i f f had n o t o b t a i n e d t h e r e h a b i l i t a t i o n l o a n as p e r t h e agreement and t h a t p l a i n t i f f would be u n j u s t l y e n r i c h e d . Af ter d e p o s i t i o n s , t h e Court g r a n t e d p l a i n t i f f I s motion f o r summary judgment, t h e e f f e c t of which is t o g i v e t h e p l a i n t i f f $25,500 ($63,000 i n i n s u r a n c e p r o c e e d s l e s s t h e $37,500 payment t o d e f e n d a n t s ) . Defendants a p p e a l . The i n s u r a n c e carrier h a s paid t h e $63,000 i n i n s u r a n c e p r o c e e d s i n t o t h e D i s t r i c t Court i n a s e p a r a t e i n t e r p l e a d e r a c t i o n , pending t h e f i n a l d e t e r m i n a t i o n of t h i s c a s e . The i s s u e on a p p e a l is whether t h e lower c o u r t e r r e d i n g r a n t i n g summary judgment to p l a i n t i f f and o r d e r i n g d e f e n d a n t s t o s p e c i f i c a l l y perform t h e A p r i l 1 5 agreement. I t is c l e a r t h a t e i t h e r way t h i s case is d e c i d e d , one of t h e p a r t i e s is going to r e c e i v e a s u b s t a n t i a l amount of money i n i n s u r a n c e p r o c e e d s which was n o t i n any of t h e p a r t i e s 1 con- t e m p l a t i o n a t t h e t i m e of c o n t r a c t i n g . Bearing t h i s i n mind, w e proceed t o examine t h e p a r t i e s ' v a r i o u s c o n t e n t i o n s . A p p e l l a n t s f i r s t a r g u e t h a t t h e p l a i n t i f f was n o t e n t i t l e d t o s p e c i f i c performance because he f a i l e d to perform t h e con- t i n g e n c i e s r e q u i r e d by t h e c o n t r a c t , i .e. t h e c o n t r a c t r e q u i r e d t h e p l a i n t i f f t o o b t a i n a r e h a b i l i t a t i o n l o a n from American F e d e r a l S a v i n g s and Loan which he f a i l e d to do. P l a i n t i f f coun- ters by emphasizing t h e p r o v i s i o n i n t h e c o n t r a c t which states t h a t d e f e n d a n t s w i l l t r a n s f e r t h e i r i n t e r e s t t o p l a i n t i f f on r e c e i p t of t h e purchase p r i c e , which d e f e n d a n t s f a i l e d to do. According t o p l a i n t i f f , t h e s o u r c e of t h e money is immaterial . W e a g r e e w i t h t h e p l a i n t i f f . The i m p o r t a n t f a c t h e r e is t h a t t h e d e f e n d a n t s had r e c e i v e d t h e f u l l $37,500 p u r c h a s e p r i c e b y May 29, 1981, and t h e y r e f u s e d to a s s i g n t h e i r i n t e r e s t to p l a i n t i f f . A p p e l l a n t s emphasis of t h e need to o b t a i n t h e funding from American F e d e r a l as c o n d i t i o n p r e c e d e n t to t h e i r performance r i n g s hollow when it is c o n s i d e r e d t h a t e l s e w h e r e i n t h e i r b r i e f a p p e l l a n t s concede t h a t , af ter t h e f i r e , t h e r e was no way f o r p l a i n t i f f to o b t a i n a r e h a b i l i t a t i o n l o a n because t h e b u i i l d i n g no l o n g e r e x i s t e d . A l s o , w e are mindful of t h e f a c t t h a t a p p e l l a n t s were w i l l i n g to r i d themselves of Brown as a d e b t o r and accepted an approximate 50% r e d u c t i o n i n t h e v a l u e of t h e n o t e Brown had exe- c u t e d to them. They are now a t t e m p t i n g to r e l i e v e themselves of t h i s o b l i g a t i o n i n view of t h e p o t e n t i a l i n s u r a n c e p r o c e e d s r e c o v e r y . A p p e l l a n t s n e x t argue t h a t s p e c i f i c performance does n o t l i e because t h e s u b j e c t matter of t h e c o n t r a c t was s u b s t a n t i a l l y d e s t r o y e d b e f o r e t h e c o n t r a c t was c l o s e d . A p p e l l a n t s c i t e s e v e r a l cases i n s u p p o r t of t h i s p r o p o s i t i o n , i n c l u d i n g G e i s t v. Lehmann ( 1 9 7 4 ) , 1 9 Ill.App.3d 557, 312 N.E.2d 42; Wheeler v. Gahan ( 1 9 2 4 ) , 206 Ky. 366, 267 S.W. 227 and Gamble v. Garlock ( 1 9 1 1 ) , 116 Minn. 59, 1 3 3 N.W. 175. P l a i n t i f f a r g u e s t h a t most o f a p p e l l a n t s 1 c a s e s i n v o l v e a seller seeking s p e c i f i c p e r f o r - mance and are t h u s d i s t i n g u i s h a b l e from t h e case a t b a r where t h e buyer s e e k s t h e remedy. Although Wheeler and Gamble b o t h i n v o l v e d o p t i o n e e s being denied s p e c i f i c performance, p l a i n t i f f a r g u e s t h e y are n o t i n p o i n t because an abatement of t h e purchase p r i c e was involved. I n Gamble, p l a i n t i f f l e a s e d d e f e n d a n t ' s house and l o t w i t h a 90-day o p t i o n to buy, beginning A p r i l 1, 1911. A f i r e o c c u r r e d A p r i l 27, 1911, and p l a i n t i f f attempted to e x e r c i s e h i s o p t i o n w i t h an abatement i n p r i c e f o r t h e d e s t r u c t i o n of t h e b u i l d i n g s and f u r n i t u r e . A f t e r being r e f used, p l a i n t i f f sued f o r s p e c i f i c performance w i t h abatement. I n denying p l a i n t i f f any r e l i e f , t h e C o u r t s t a t e d : "The p a r t i e s d i d n o t contemplate t h a t a f i r e might o c c u r , and t h a t t h e o f f e r should still h o l d good, s u b j e c t to a d j u s t m e n t of damages. The owner w a s w i l l i n g to p a r t w i t h t h e e n t i r e p r o p e r t y as it stood f o r $6,000, b u t s h e might n o t have been w i l l i n g to sell t h e land f o r t h a t p r i c e less t h e amount of damages by a f i r e . " 116 Minn. a t , 1 3 3 N.W. a t 176. I n Wheeler, t h e r e was a s i m i l a r l e a s e - o p t i o n arrangement and w h i l e t h e p l a i n t i f f was a t t e m p t i n g to e x e r c i s e h i s o p t i o n , a f i r e d e s t r o y e d t h e b u i l d i n g and n e a r l y a l l improvements. The Kentucky Court of Appeals r e v e r s e d t h e lower c o u r t o r d e r , which had g r a n t e d p l a i n t i f f s p e c i f i c performance w i t h an abatement i n p r i c e , and made t h e f o l l o w i n g s t a t e m e n t s : "To r e q u i r e s p e c i f i c peformance under such changed c o n d i t i o n s , n o t brought about by e i t h e r p a r t y , is to make f o r t h e p a r t i e s a new contract--one n o t contemplated i n t h e i r o r i g i n a l n e g o t i a t i o n s . For t h e s e r e a s o n s we are of opi- n i o n t h a t a p p e l l e e w a s n o t e n t i t l e d to s p e c i f i c performance of t h e c o n t r a c t , and t h a t t h e chan- cellor e r r e d i n h o l d i n g o t h e r w i s e . 206 Ky. a t , 267 S.W. a t 229. However, i n n e i t h e r Gamble n o r Wheeler is t h e r e any i n d i - c a t i o n t h a t t h e c o n t r a c t s p e c i f i c a l l y gave t h e o p t i o n e e t h e r i g h t to s p e c i f i c performance. Here, paragraph f i v e of t h e b u y / s e l l states : "5. The p u r c h a s e r a g r e e s t h a t t h i s c o n t r a c t does a u t h o r i z e t h e seller to e n f o r c e t h e remedy of s p e c i f i c performance. The seller a g r e e s t h a t t h i s c o n t r a c t does a u t h o r i z e t h e p u r c h a s e r to e n f o r c e t h e remedy of s p e c i f i c performance ." Moreover, w e have a s t a t u t e i n Montana which p r o v i d e s f o r s p e c i - f ic performance under t h e c i r c u m s t a n c e s of t h i s c a s e : "27-1-411. When s p e c i f i c performance -- o f a n o b l i g a t i o n -- may be compelled. Except as o t h e r - wise provided i n t h i s p a r t and T i t l e 28, c h a p t e r 2, p a r t s 16 and 1 7 , t h e s p e c i f i c performance of a n o b l i g a t i o n may be compelled when: " ( 4 ) it h a s been e x p r e s s l y agreed i n w r i t i n g , between t h e p a r t i e s to t h e c o n t r a c t , t h a t s p e c i - f i c performance t h e r e o f may be r e q u i r e d by e i t h e r p a r t y . . ." W e t h i n k t h e above s t a t u t e and t h e language of t h e c o n t r a c t i t s e l f f a v o r s t h e a p p l i c a t i o n of s p e c i f i c performance i n t h i s c a s e . The n e x t argument a p p e l l a n t s make is t h a t p l a i n t i f f w i l l b e u n j u s t l y e n r i c h e d by t h e lower c o u r t ' s judgment. While we a g r e e t h a t p l a i n t i f f w i l l p r o f i t by t h e r e s u l t s of t h e lower d e c i s i o n , it is e q u a l l y a p p a r e n t t h a t a p p e l l a n t s would g a i n s u b s t a n t i a l l y i f t h e d e c i s i o n were r e v e r s e d . F u r t h e r , a p p e l l a n t s have n o t c i t e d any case where u n j u s t enrichment was c o n s i d e r e d d i s p o s i t i v e i n a s p e c i f i c performance a c t i o n . T h i s is n o t s u r p r i s i n g due t o t h e d i s t i n c t i o n between s p e c i f i c performance and u n j u s t enrichment. I n a s p e c i f i c performance a c t i o n , t h e p l a i n t i f f s e e k s to e n f o r c e t h e terms of an agreement between t h e p a r t i e s and t h e c o n t r a c t u r a l terms must be s u f f i c i e n t l y c e r t a i n s o t h e c o u r t can compel performance. S e i f e r t v. S e i f e r t ( 1 9 7 7 ) , 173 Mont. 501, 568 P.2d 155; s e c t i o n 27-1-412(6), MCA. The t h e o r y of u n j u s t enrichment and r e s t i t u t i o n is b r o u g h t i n t o p l a y when no c o n t r a c t between t h e p a r t i e s e x i s t s and t h e c o u r t i m p l i e s a c o n t r a c t i n l a w . One c o u r t s t a t e d it t h u s : " P l a i n t i f f a l t e r n a t i v e l y c o n t e n d s t h a t he is e n t i t l e d to payment by t h e d e f e n d a n t under a t h e o r y of u n j u s t enrichment o r r e c o v e r y i n q u a s i - c o n t r a c t , which a l l o w s t h e c o u r t s to impose a d u t y t o refund money to t h e person to whom it r i g h t f u l l y belongs. T h i s argument also must f a i l . A q u a s i or c o n s t r u c t i v e c o n t r a c t rests upon t h e e q u i t a b l e p r i n c i p l e t h a t a p e r s o n s h a l l n o t be allowed to e n r i c h himself a t t h e expense o f a n o t h e r . --- is a n o b l i g a t i o n c r e a t e d -- by law It o n l y i n t h e a b s e n c e o f a n agreement between t h e --- -- p a r t i e s . Bradkin v. Leverton, 26 N.Y.2d 192, 309 N.Y.S.2d 192, 257 N.E.2d 643 ( 1 9 7 0 ) . A s - - a l r e a d y n o t e d abbve, where, - a s h e i e , - a.wri=en c o n t r a c t d o e s e x i s t , t h e d u t y o f t h e c o u r t s is ---- t o e n f o r c e it. . . " (Emphasis added. ) Fox - - Lummus Co. (S.D.N.Y. 1 9 8 1 ) , 524 F.SUPP. 27, 29-30. Here it is undisputed t h e r e was a c o n t r a c t between t h e p a r t i e s and a p p e l l a n t s u n j u s t enrichment arguments are n o t w e l l t a k e n . See g e n e r a l l y Dobbs, Handbook on t h e Law of Remedies (1973 ), 9 A p p e l l a n t ' s n e x t c o n t e n t i o n is t h a t s p e c i f i c performance d o e s n o t l i e because t h e r e is no m u t u a l i t y of remedy, c i t i n g S c h u l t z v . Campbell ( 1 9 6 6 ) , 147 Mont. 439, 413 P.2d 879, which h o l d s i n e s s e n c e t h a t m u t u a l i t y r e q u i r e s t h a t t h e d e c r e e w i l l o p e r a t e w i t h o u t i n j u s t i c e or o p p r e s s i o n to p l a i n t i f f or d e f e n d a n t . P l a i n t i f f , on t h e o t h e r hand, a r g u e s t h a t t h e r e is m u t u a l i t y of remedy by t h e p r o v i s i o n s of paragraph f i v e of t h e b u y / s e l l , s u p r a , which state t h a t b o t h p a r t i e s s h a l l have t h e remedy of s p e c i f i c performance and t h a t p l a i n t i f f f u l l y performed when h e t e n d e r e d t h e remaining amount due on May 29, 1981. Both par- t i e s cite s e c t i o n 27-1-414, MCA, which p r o v i d e s : "27-1-414. R i g h t t o s p e c i f i c performance -- to be mutual. (1) When e i t h e r of t h e p a r t i e s t o an o b l i g a t i o n is e n t i t l e d to a s p e c i f i c performance t h e r e o f a c c o r d i n g to t h e p r o v i s i o n s of 27-1-411, t h e o t h e r p a r t y is also e n t i t l e d to it, though n o t w i t h i n t h o s e p r o v i s i o n s . " ( 2 ) N e i t h e r p a r t y -- to any o b l i g a t i o n --- c a n be com- p e l l e d s p e c i f i c a l l y to perform u n l e s s t h e o t h e r p a r t y t h e r e t o h a s performed or is compellable s p e c i f i c a l l y to perform e v e r y t h i n g t o which t h e former is e n t i t l e d u n d e r t h e o o b l i g a t i o n , -- e i t h e r c o m ~ l e t e l v o r n e a r l v so, t o s e t h e r w i t h - - - - - - - - ~L a - - - f u l l compensation ---- f o r any w a n t n o £ e n t i r e p e r f o r - mance ." (Emphasis added. ) Applying t h e words of t h e s t a t u t e t o t h e p r e s e n t c i r c u m s t a n c e s , t h e a p p e l l a n t s were e n t i t l e d to r e c e i v e $37,500 f o r t h e i r m o r t g a g e e ' s i n t e r e s t , which, it is u n c o n t r o v e r t e d , was tendered t o them. The s o u r c e of t h e money was immaterial u n t i l t h e p r o s p e c t o f i n s u r a n c e p r o c e e d s a r o s e . Thus they r e c e i v e d e v e r y t h i n g they were e n t i t l e d to and could be compelled by t h e lower c o u r t to s p e c i f i c a l l y perform t h e i r p a r t of t h e o b l i g a t i o n . F u r t h e r , w e do n o t view o u r d e c i s i o n today as being u n j u s t or o p p r e s s i v e t o a p p e l l a n t s , S c h u l t z , s u p r a . A p p e l l a n t s were more t h a n r e a d y to r i d themselves of Brown as an o b l i g o r , as e v i - denced by t h e i r t a k i n g a s u b s t a n t i a l r e d u c t i o n i n t h e sale of t h e n o t e t o p l a i n t i f f , and t h e r e is nothing u n j u s t or o p p r e s s i v e i n r e q u i r i n g them to f o l l o w through w i t h t h e i r end of t h e d e a l . The o n l y t h i n g t h e y are l o s i n g is t h e r e c o v e r y of i n s u r a n c e p r o c e e d s . See s e c t i o n 27-1-415 ( 2 ) and 27-1-413, MCA. F i n a l l y , a p p e l l a n t s contend t h a t t h e p a r t i e s contemplated t h e sale of a b u i l d i n g and, s i n c e t h e f i r e d e s t r o y e d t h e b u i l d i n g , t h e agreement is n o t s p e c i f i c a l l y e n f o r c e a b l e . P l a i n t i f f c o u n t e r s by r e l y i n g on t h e r u l e of law t h a t a c o n t r a c t , f r e e l y e n t e r e d i n t o , c a n n o t l a t e r be avoided when 20-20 h i n d s i g h t i n d i c a t e s t h e terms are n o t as f a v o r a b l e as t h e y once appeared to b e . In s u p p o r t of t h i s o p p o s i t i o n , p l a i n t i f f cites Hein v. Fox ( 1 9 5 3 ) , 126 Mont. 514, 254 P.2d 1076, and V e t e r a n s R e h a b i l i t a t i o n C e n t e r , I n c . v . Birrer ( 1 9 7 6 ) , 170 Mont. 182, 551 P.2d 1001. W e do n o t a g r e e w i t h a p p e l l a n t . While it is t r u e t h a t n e i t h e r p a r t y contemplated t h e r e c o v e r y of i n s u r a n c e p r o c e e d s when t h e b u y / s e l l w a s e x e c u t e d , t h i s does n o t a u t o m a t i c a l l y n e g a t e t h e remedy of s p e c i f i c performance. What we are c a l l e d on t o do h e r e is r e n d e r a d e c i s i o n i n a f a c t s i t u a t i o n beyond t h e scope of t h e agreement i n t h e l i g h t of s u b s e q u e n t happenings. The f a c t t h a t e v e r y c o n t i n g e n c y was n o t included i n t h e agreement d o e s n o t r e n d e r it i n c a p a b l e of being s p e c i f i c a l l y performed. Af f irmed . Chief J u s t i c e \