Title: BAILEY v LILLY

State: montana

Issuer: Montana Supreme Court

Document:

NO. 83-68 IN THE SUPREME COURT OF THE STATE OF MONTANA 1983 AUSTIN BAILEY & LOIS E. BAILEY, Plaintiffs and Appellants, -vs- JULY-- 1983 GFLEGORY FRANCIS LILLY AND BONITA &krl JJarPidon KATHRYN LILLY, w-Lr12;c C U P R E ~ ~ E COURT s y ~ i ~ : , c ; - ' gC8'CAidA Defendants and Respondents. Appeal from: District Court of the Eighteenth Judicial District, In and for the County of Gallatin, The Honorable W. W. Lessley, Judge presiding. Counsel of Record: For Appellants: Bolinger & Conover, Bozeman, Montana For Respondents: Scully & Lilly, Bozeman, Montana Filed: Submitted on Briefs: June 2, 1983 Decided: July 7 , 1933 Clerk Mr. J u s t i c e John Conway Harrison delivered t h e Opinion of t h e Court. B a i l e y s brought t h i s a c t i o n t o a c c e l e r a t e the balance of t h e purchase p r i c e on a c o n t r a c t between themselves and t h e L i l l y s f o r r e a l e s t a t e located i n West Yellowstone, Montana. A f t e r a t r i a l i n the D i s t r i c t Court of the Eighteenth J u d i c i a l D i s t r i c t , G a l l a t i n County, t h e D i s t r i c t Court entered f i n d i n g s of f a c t , conclusions of law and ordered judgment be entered i n favor of L i l l y s . Baileys appeal. On November 21, 1975, Baileys a s s e l l e r s , and L i l l y s a s buyers, entered i n t o a c o n t r a c t f o r the s a l e of r e a l property l o c a t e d i n West Yellowstone. L i l l y s agreed t o pay Baileys $40,500 f o r t h e purchase of the property t o be paid by a down payment of $12,000, a lump sum payment of $1,000 on January 2, 1976, and t h e balance of $27,500 t o g e t h e r with i n t e r e s t a t t h e r a t e of 8 p e r c e n t per annum for a period of t e n years on a monthly b a s i s . Payments were t o be made by L i l l y s i n t o an escrow account a t F i r s t S e c u r i t y Bank i n West Yellowstone, and t h e escrow agent was t o then d e l i v e r payment t o Baileys. A s of t h e d a t e of t r i a l a l l payments were c u r r e n t . The c o n t r a c t contained t h e following provision: "This Agreement s h a l l apply t o and bind t h e h e i r s , executors, a d m i n i s t r a t o r s , successors and a s s i g n s of the p a r t i e s h e r e t o , s u b j e c t t o t h e p r o v i s i o n t h a t second p a r t i e s s h a l l not a s s i g n t h e i r i n t e r e s t i n s a i d property or t h i s c o n t r a c t without the w r i t t e n consent of t h e p a r t i e s . " I n August 1980, Bonnie L i l l y wrote t o Baileys a s follows: "Greg and I have decided t o move from West Yellowstone and t o put the house up f o r s a l e . W e a r e t r y i n g t o g e t t h e financing of t h e house i n p e r s p e c t i v e and would l i k e t o know i f you would consider carrying a q u a l i f i e d buyer under our o r i g i n a l c o n t r a c t with you. " Lois Bailey responded t o Bonnie L i l l y ' s request a s follows: "Yes, w e would c a r r y a q u a l i f i e d buyer on the o r i g i n a l c o n t r a c t o r , i f you p r e f e r , t h e lending i n s t i t u t i o n . Would l i k e t o s e e you b e f o r e any plans a r e f i n a l i z e d . " L i l l y s placed the property for s a l e i n August 1980. The pro- p e r t y was l i s t e d w i t h a r e a l e s t a t e a g e n t and a d v e r t i s e d . I n J u n e 1981, L i l l y s executed an e a r n e s t money r e c e i p t and agreement f o r sale and purchase w i t h Edward M. and L o r a l e e Hiramoto governing t h e West Yellowstone p r o p e r t y . The s a l e of t h e pro- p e r t y was t o c l o s e J u l y 1, 1981. A f t e r e x e c u t i o n of t h e agreement Greg L i l l y c o n t a c t e d B a i l e y s a t t h e i r home and r e q u e s t e d t h e i r c o n s e n t t o t h e s a l e of t h e r e a l e s t a t e . B a i l e y s r e f u s e d t o c o n s e n t t o t h e s a l e u n l e s s L i l l y s p a i d o f f t h e o r i g i n a l c o n t r a c t i n f u l l . I n mid-July 1981, r e a l e s t a t e a g e n t John C o s t e l l o c o n t a c t e d B a i l e y s t o a s s u r e them t h e Hiramotos were f i n a n c i a l l y sound. B a i l e y s s t i l l r e f u s e d t o c o n s e n t t o t h e s a l e u n l e s s t h e b a l a n c e o f t h e c o n t r a c t was paid i n f u l l . I n late J u l y 1981, L i l l y s and t h e Hiramotos executed a c o n t r a c t f o r sale of r e a l estate. A l l m a t t e r s concerning t h e c o n t r a c t were back-dated t o J u l y 1, 1981, p u r s u a n t t o t h e e a r n e s t money r e c e i p t and agreement t o p u r c h a s e . The o r i g i n a l c o n t r a c t between B a i l e y s and L i l l y s r e q u i r e d L i l l y s t o m a i n t a i n f i r e i n s u r a n c e on t h e premises w i t h B a i l e y s named a s l o s s payees. A f t e r L i l l y s executed t h e e a r n e s t money agreement w i t h Hiramotos, t h e y c a n c e l l e d t h e e x i s t i n g f i r e i n s u r a n c e p o l i c y and purchased a new p o l i c y naming t h e Hiramotos a s i n s u r e d s . Due t o an e r r o r , B a i l e y s were not named on t h e new p o l i c y a s i n s u r e d s f o r a fourteen-day p e r i o d . When t h e e r r o r was d i s c o v e r e d it was c o r r e c t e d and t h e i n s u r a n c e p o l i c y was g i v e n r e t r o a c t i v e e f f e c t a s of J u l y 1, 1981. A f t e r t h e s a l e by L i l l y s t o t h e Hiramotos, a l l payments made by Hiramotos were placed i n a second escrow account a t F i r s t S e c u r i t y Bank of West Yellowstone and money was d i s b u r s e d t o t h e L i l l y s and B a i l e y s ' escrow account. On August 1 3 , 1981, B a i l e y s n o t i f i e d L i l l y s t h e y c o n s i d e r e d them t o have d e f a u l t e d on t h e i r c o n t r a c t w i t h B a i l e y s and demanded a c c e l e r a t i o n of a l l payments. B a i l e y s s e n t a second n o t i c e of d e f a u l t on September 9 , 1981. On November 1 3 , 1981, B a i l e y s f i l e d a complaint i n District Court a l l e g i n g L i l l y s d e f a u l t e d on t h e i r c o n t r a c t by allowing t h e f i r e insurance t o lapse and by s e l l i n g t h e i r i n t e r e s t i n the c o n t r a c t without Baileys w r i t t e n consent. The o r i g i n a l complaint asked t h a t t h e c o n t r a c t be terminated and Baileys be granted immediate possession of the property. O n J u l y 26, 1982, Baileys f i l e d a motion t o amend t h e i r complaint t o r e p l a c e t h e i r demand f o r imme- d i a t e possession with a demand for a c c e l e r a t i o n of t h e balance of t h e purchase p r i c e of the property. P r i o r t o t r i a l , Baileys continued t o accept the payments from t h e escrow account f o r L i l l y ' s o b l i g a t i o n under t h e c o n t r a c t . A f t e r t r i a l t h e D i s t r i c t Court entered f i n d i n g s of f a c t and conclusions of law on September 23, 1982. The D i s t r i c t Court held L i l l y s did not breach t h e i r agreement with Baileys and any r i g h t of Baileys t o demand a c c e l e r a t i o n of t h e balance due was waived a s Baileys accepted L i l l y s payments under the terms of t h e c o n t r a c t up u n t i l the d a t e of t r i a l . The D i s t r i c t Court entered judgment i n favor of L i l l y s on November 22, 1982. Baileys appeal. B a i l e y s r a i s e four i s s u e s on appeal. W e find one issue t o be d i s p o s i t i v e ; whether the D i s t r i c t Court erred i n holding B a i l e y s ' acceptance of payments under t h e i r c o n t r a c t with L i l l y s cons ti- t u t e s a waiver of any d e f a u l t on t h e p a r t of L i l l y s . B a i l e y s r e l y on a d e c i s i o n of t h e Oregon Supreme Court. I n Carrigg v. F a c k r e l l (1980), 44 Or.App. 413, 606 P.2d 636, t h a t Court held acceptance of four monthly i n s t a l l m e n t payments a f t e r a balloon payment was due under the c o n t r a c t did not e s t o p s e l l e r s from contending payment of the balance was still due. The Oregon Supreme Court held the payments made a£ t e r the d a t e t h e balloon payment was due c o n s t i t u t e d a p a r t i a l accord and s a t i s f a c t i o n a s t o the p a r t of the balance which was made by t h e f o u r payments. However, Carriqg involves a t o t a l l y d i f f e r e n t f a c t s i t u a t i o n from t h e p r e s e n t case. Here, we a r e not dealing with acceptance of monthly payments a f t e r a required balloon payment was not made. Baileys accepted monthly payments under the c o n t r a c t af t e r t h e y had given L i l l y s n o t i c e of d e f a u l t . Such acceptance c o n s t i - t u t e s a waiver of t h e i r r i g h t t o sue f o r a c c e l e r a t i o n of t h e e x i s t i n g balance. T h i s Court held i n S h u l t z v. Campbell ( 1 9 6 6 ) , 147 Mont. 439, 445, 413 P.2d 879, 883: "Although by its e x p r e s s terms time is made of t h e e s s e n c e of a c o n t r a c t , and an o p t i o n is r e s e r v e d by t h e vendor t o d e c l a r e it ter- minated f o r f a i l u r e t o pay t h e purchase p r i c e a t t h e d a t e it f a l l s due, o r , i f it is payable i n i n s t a l l m e n t s , a t t h e d a t e t h a t any one of t h e i n s t a l l m e n t s f a l l s due, t h i s p r o v i s i o n may be waived by f a i l u r e t o e x e r c i s e t h e o p t i o n , o r by a c c e p t i n g a payment a f t e r it is due. The vendor cannot t h e r e a f t e r a l l e g e such d e f a u l t a s a ground f o r d e c l a r i n g t h e c o n t r a c t terminated." I n S h u l t z t h e seller a l l e g e d buyer d e f a u l t e d by n o t p r o p e r l y keeping c r o p r e c o r d s and not d e l i v e r i n g p r o p o r t i o n a t e s h a r e s of government payment t o s e l l e r . T h i s Court upheld t h e District C o u r t ' s r u l i n g t h a t s e l l e r had waived any r i g h t t o d e c l a r e d e f a u l t by c o n t i n u i n g t o a c c e p t t h e annual payments a f t e r t h e d a t e of t h e a l l e g e d d e f a u l t . W e f i n d t h i s holding t o be con- s i s t e n t w i t h t h e holding of t h e District Court t h a t B a i l e y s waived any r i g h t t o d e c l a r e a d e f a u l t by c o n t i n u i n g t o a c c e p t L i l l y s ' monthly payments a f t e r t h e d e c l a r a t i o n of d e f a u l t . Judgment of t h e District Court is a f f i r m e d . I W e concur: C h i e f J u s t i c e w