Title: SCHEITLIN v R D MINERALS

State: montana

Issuer: Montana Supreme Court

Document:

No. 84-433 IN THE SUPREME COURT OF THE STATE OF P4ONTANA MICHAEL J. SCHEITLIN, Personal Representative of the Estate of Edward E . Scheitlin, Deceased, Plaintiff and Respondent, R & D MINERALS, a Montana corporation, Defendant and Appellant. APPEAL FROM: District Court of the Fifth Judicial District, In and for the County of Madison, The Honorable Frank Davis, Judge presiding. COUNSEL OF RECORD: For Appellant: Lino A. Marsillo, Missoula, Montana For Respondent: Leaphart Law Firm, Helena, Montana Jardine, McCarthy & Grauman, Whitehall, Montana Submitted on Briefs: February 28, 1985 Decided: July 2, 1985 Filed: du!. 2 '985 -- Clerk M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e Court. This i s an appeal from an Order o f t h e District Court, F i f t h J u d i c i a l D i s t r i c t o f t h e S t a t e o f Montana, Madison County. On November 15, 1 9 7 8 , Edward E. and Vaeda G. S c h e i t l i n e n t e r e d i n t o a c o n t r a c t t o sell c e r t a i n mining p r o p e r t i e s and c e r t a i n p e r s o n a l p r o p e r t y t o R & D Minerals. R & D was given immediate possession o f t h e p r o p e r t y and t h e r i g h t t o begin mining. It was o b l i g a t e d t o make monthly i n s t a l l m e n t payments, t h e l a s t one due on December 31, 2000. On August 1 6 , 1983, Michael S c h e i t l i n , a s p e r s o n a l r e p r e s e n t a t i v e o f t h e E s t a t e o f Edward and Vaeda S c h e i t l i n , f i l e d a complaint i n Madison County D i s t r i c t Court which asked t h a t R & D Minerals be d e c l a r e d i n d e f a u l t on t h e c o n t r a c t . During t h e course of t h e ensuing l i t i g a t i o n R & D Minerals f i l e d f o r bankruptcy. On A p r i l 13, 1984, t h e United S t a t e s Bankruptcy Court f o r t h e D i s t r i c t o f Montana remanded t h e c a s e t o t h e Montana S t a t e D i s t r i c t Court, Madison County, f o r t h e determination of t h e following m a t t e r s concerning t h e above-mentioned c o n t r a c t between R & D Minerals and t h e S c h e i t l i n e s t a t e : 1. The c u r r e n t s t a t u s (terms and c o n d i t i o n s ) o f any agreements between R & D Minerals and t h e S c h e i t l i n e s t a t e ; 3 The r i g h t s and l i a b i l i t i e s of t h e -. p a r t i e s under t h e c u r r e n t c o n t r a c t o r agreement ; 3. When t h e sellers a r e l e g a l l y o b l i g a t e d t o provide buyers w i t h c l e a r t i t l e ; 4 . The s t a t u s of s e l l e r s ' t i t l e ; 5. The amounts, i f any, due t o t h e s e l l e r s under t h e c u r r e n t c o n t r a c t ; and 6. Any o t h e r i s s u e s s t i p u l a t e d t o by R & D M i n t ~ r a l s and t h e S c h e i t l i n E s t a t e . A f t e r an e v i d e n t i a r y hearing, and pursuant t o t h e o r d e r o f t h e Bankruptcy Court, t h e D i s t r i c t Court on May 31, 1984, i s s u e d an o r d e r c o n t a i n i n g t h e following f i n d i n g s : "1. The only c o n t r a c t i n e x i s t e n c e between t h e p a r t i e s i s t h e Mining Property S a l e Agreement o f November 15, 1978, a s amended on February 25, 1980, and May 8 , 1980; "2. R & D i s i n d e f a u l t o f t h e c o n t r a c t o b l i g a t i o n s by v i r t u e o f i t s f a i l i n g t o make t h e r e q u i r e d payments; "3. The amount owing S c h e i t l i n may be c a l c u l a t e d from an examination o f t h e c o n t r a c t and by t h e r e c o r d s o f t h e designated escrow agent; "4. The r i g h t s and l i a b i l i t i e s o f t h e p a r t i e s t o t h e c o n t r a c t a r e l i m i t e d t o t h e s p e c i f i c t e r m s and c o n d i t i o n s o f t h a t c o n t r a c t and none o t h e r . "5. S c h e i t l i n ' s o b l i g a t i o n t o provide marketable t i t l e i s now moot, b u t t h a t i f t h e c o n t r a c t w e r e i n good s t a n d i n g , S c h e i t l i n was o b l i g a t e d t o provide marketable t i t l e a t any t i m e p r i o r t o t h e R & D ' s making t h e f i n a l payment; "6. The s t a t u s o f R & D ' s t i t l e t o t h e p r o p e r t i e s i s moot, given i t s d e f a u l t ; "7. There was no novation o f t h e o r i g i n a l c o n t r a c t , t h e r e having been no executed agreement between t h e p a r t i e s . " R & D Minerals a p p e a l s from t h e s e f i n d i n g s o f t h e t r i a l c o u r t and r a i s e s t h e fo11-owing i s s u e f o r review: Is t h e purchaser o f mineral claims, upon n o t i f i c a t i o n o f s e r i o u s t i t l e d e f e c t s , j u s t i f i e d i n c e a s i n g i n s t a l l m e n t payments a f t e r t h e p a s s i n g o f a reasonable p e r i o d i n which t h e vendor took no meaningful a c t i o n t o c o r r e c t s a i d d e f e c t s ? The r u l e i n Montana i s t h a t a seller under an i n s t a l l m e n t s a l e s c o n t r a c t does n o t have t o produce marketable t i t l e u n t i l t h e d a t e set f o r f i n a l payment and t e n d e r o f t h e deed. S i l f v a s t v. Asplund (1933), 93 Mont. 5 8 4 , 592, 20 P.2d 631, 636. R & D does n o t d i s p u t e t h a t t h i s i s t h e r u l e i n Montana b u t argues t h a t t h e r e a r e exceptions a p p l i c a b l e t o t h i s case. F i r s t , R & D contends t h a t t h e c o n t r a c t " e x p r e s s l y contemplates t h a t t h e vendor was t o produce marketable t i t l e w e l l i n advance o f t h e c l o s i n g d a t e . " The c o n t r a c t provides t h e following under t h e heading, M a r k e t a b i l i t y - o f T i t l e t o Real P r o ~ e r t v : " P r i o r t o October 15, 1979, t h e s e l l e r s w i l l cause t o be furnished t o t h e purchaser a b s t r a c t s o f t i t l e f o r such mineral claims a s a r e t h e p r o p e r t y o f t h e sellers, and w i l l permit t h e purchaser reasonable t i m e , n o t t o exceed s i x t y (60) days, t o have such a b s t r a c t s examined by an a t t o r n e y o f i t s own choice. Should such examination d i s c l o s e t h e t i t l e t o such p r o p e r t i e s t o be unmarketable, then t h e sellers s h a l l t a k e such s t e p s a s may be necessary t o render t h e same marketable, i n c l u d i n g a q u i e t t i t l e a c t i o n , a l l a t sellers' own expense." The c o n t r a c t f u r t h e r provides f o r t h e s e t t i n g up of an escrow account, r e q u i r i n g t h e escrow t o " d e l i v e r such instruments, documents and papers t o t h e purchaser a t t h e t i m e o f f i n a l payment hereunder." W e f i n d t h a t n e i t h e r o f t h e s e p r o v i s i o n s i s i n c o n s i s t e n t with t h e r u l e i n S i l f v a s t r e q u i r i n g t h a t marketable t i t l e be produced n o e a r l i e r than t h e t i m e o f f i n a l payment. The c o n t r a c t provides t h a t s e l l e r s , upon n o t i f i c a t i o n o f d i s c r e p a n c i e s i n t i t l e , " . . . w i l l immediately t a k e any necessary s t e p s t o b r i n g such i t e m s i n t o conformity w i t h t h e i r warranty." However, t h e c o n t r a c t does n o t contemplate t h a t purchasers can withhold payments i n o r d e r t o coerce t h e sellers i n t o c o r r e c t i n g t i t l e . Rather, a s p e c i f i c remedy i s provided: "Upon discovery of a breach o f s e l l e r s ' w a r r a n t i e s concerning ownership o r l i e n o b l i g a t i o n s , o r sellers ' f a i l - u r e t o keep c u r r e n t any underlying obl i g a t i o n s n o t assumed by purchaser and a f f e c t i n g t h e r e a l o r personal p r o p e r t y , purchaser may, a t i t s o p t i o n , c o r r e c t any d e f i c i e n c y by paying any o u t s t a n d i n g amount due, l i e n o r encumbrance, o r by i n i t i a t i n g l e g a l proceedings t o c l e a r any d e f e c t s i n t i t l e . S e l l e r s a g r e e t o cooperate f u l l y w i t h purchaser i n c o r r e c t i n g any such d e f i c i e n c y and a g r e e t h a t any l e g a l proceeding may be brought i n t h e i r names. The c o s t s , i n c l u d i n g a t t o r n e y s ' f e e s and c o u r t c o s t s , i n c u r r e d by purchaser i n applying any amounts due, o b t a i n i n g t h e r e l e a s e o f any l i e n s o r otherwise c o r r e c t i n g any d e f e c t s o f t i t l e s h a l l be deducted from t h e purchase p r i c e c a l l e d f o r hereunder and may be o f f s e t a g a i n s t any payments due s e l l e r s . " Even assuming t h a t t h e r e w e r e d e f e c t s i n t i t l e , R & D d i d n o t invoke t h e remedy provided by c o n t r a c t . Consequently, by t e r m i n a t i n g payments R & D was i n breach o f c o n t r a c t and p r o p e r l y held i n d e f a u l t by t h e District Court. Second, R & D argues t h a t even i f t h e c o n t r a c t does n o t contemplate t h a t marketable t i t l e be provided p r i o r t o t h e c l o s i n g d a t e , t h e purchaser may demand marketable t i t l e i f t h e r e a r e d e f e c t s i n t h e seller's t i t l e t h a t a r e i n c u r a b l e . I n o t h e r words, if it i s apparent t h a t t h e s e l l e r cannot a c q u i r e marketable t i t l e by c l o s i n g t h e n t h e purchaser i s j u s t i f i e d i n h a l t i n g payments on t h e c o n t r a c t . By making t h i s argument R & D assumes t h a t t h e r e w e r e d e f e c t s i n t h e S c h e i t l i n ' s t i t l e t h a t could n o t be cured. However, t h e r e i s nothing i n e i t h e r t h e record on appeal o r t h e D i s t r i c t Court t r a n s c r i p t which s u p p o r t s t h i s assumption. Furthermore, t h e c o n t r a c t provides f o r t h e p o s s i b i l i t y o f an i n c u r a b l e d e f e c t a s follows: "If any d e f e c t s o f t i t l e cannot be c o r r e c t e d t o conform t o t h e sellers' w a r r a n t i e s , t h e p a r t i e s a g r e e t o r e n e g o t i a t e t h e purchase p r i c e t o r e f l e c t t h e d i f f e r e n c e i n v a l u e between what was bargained f o r by t h e purchaser and what sellers a c t u a l l y d e l i v e r e d . F a i l i n g agreement i n t h i s regard t h e p a r t i e s agree t o submit t h a t i s s u e f o r determination by t h e District Court o f t h e Fourth J u d i c i a l D i s t r i c t o f t h e S t a t e o f Montana i n and f o r t h e County o f Missoula.'' R & D ' s argument t h a t i n c u r a b l e d e f e c t s i n t h e seller's t i t l e j u s t i f i e s withholding payments on t h e c o n t r a c t must f a i l s i n c e , even i f t h e r e w e r e evidence o f i n c u r a b l e d e f e c t , t h e r e h a s been no r e s o r t t o t h e remedy provided by c o n t r a c t . R & D f u r t h e r argues t h a t t h e S c h e i t l i n s a r e g u i l t y o f fraud and m i s r e p r e s e n t a t i o n f o r s e l l i n g p r o p e r t y w i t h i n c u r a b l e d e f e c t s i n t h e t i t l e and t h a t R & D was w i t h i n its r i g h t s i n withholding payments. W e note: 1. The r e c o r d does n o t support t h a t t h e r e a r e i n c u r a b l e d e f e c t s i n t i t l e . 2. Rule 8 ( c ) , M.R.Civ.P. s t a t e s t h a t fraud is an a f f i r m a t i v e defense t h a t must be pleaded i n t h e answer. R & D ' s answer c o n t a i n s no p l e a d i n g s concerning fraud and/or m i s r e p r e s e n t a t i o n . 3. The t r a n s c r i p t o f t h e May 30, 1984 hearing b e f o r e t h e S t a t e District Court c o n t a i n s no a l l e g a t i o n s of fraud o r m i s r e p r e s e n t a t i o n . 4. T h i s i s t h e f i r s t time t h a t R & D Minerals has r a i s e d t h e i s s u e o f fraud and m i s r e p r e s e n t a t i o n i n t h i s l i t i g a t i o n . A s we have noted o f t e n t i m e s b e f o r e , t h i s Court w i l l n o t c o n s i d e r on appeal i s s u e s t h a t have n o t been r a i s e d below. See, e.g., R u s t i c s of Lindberg Lake v. Lease (Mont. 19841, 690 P.2d 440, 4 1 St.Rep. 2092. F i n a l l y , respondent a s k s u s t o d i s m i s s t h i s appeal because o f a p p e l l a n t ' s f a i l u r e t o comply w i t h Rule 1 0 ( c ) , M.R.App.Civ.P. Rule 1 0 ( c ) provides t h a t t h e record on appeal must be submitted t o t h i s Court w i t h i n n i n e t y days o f t h e n o t i c e o f appeal. Ninety days from t h e f i l i n g of t h e n o t i c e o f t h i s appeal expired on September 26, 1984, and t h e record was n o t forwarded t o t h i s Court u n t i l October 3 , 1984. I n Hannifin v. R e t a i l C l e r k s (1973), 162 Mont. 170, 172-173, 511 P.2d 982, 984, we noted that Rule 10 (c) gives this Court wide discretion in permitting the filing of a record, and we quoted from that rule as follows: "If the District Court is without authority to grant the relief sought or has denied a request therefore, the Supreme Court may on motion extend the time for transmitting the record or may permit the record to be transmitted and filed after the expiration of the time allowed or fixed." In this case both the appellant, who requested an extension for transmitting the record to more than ninety days from the filing of the appeal, and the District Court, which granted the request, though it had no authority to do so, indicated a relaxed attitude about the Appellate Rules which we do not encourage. However, the violation in this case was not egregious and there is no evidence that it was anything but inadvertent. Under these circumstances we refuse to dismiss. The judgment of the District Court is affirmed. We concur: --/