Title: HELLER v OSBURNSEN

State: montana

Issuer: Montana Supreme Court

Document:

No. 12400 I N T H E S U P R E M E C O U R T O F THE STATE O F M O N T A N A 1973 LESTER J. HELLER and VIRGINIA ANN HELLER, h i s wife, P l a i n t i f f s and Respondents, A R T H U R S. O S B U R N S E N and LUCILLE F. O S B U R W S E N , h i s wife, Defendants and Appellants. Appeal from: D i s t r i c t Court of the Tenth J u d i c i a l D i s t r i c t , Honorable LeRoy J. McKinnon, Judge presiding. Counsel of Record: For Appellants : Robert L. Johnson and William Berger, Lewistown, Montana. Robert L. Johnson argued, Lewistown, Montana. K. Robert Foster argued, Lewis town, Montana. For Respondents: Dockery and Parrish, Lewistown, Montana. Raymond E. Dockery argued, Lewistown, Montana. Submitted: March 29, 1973 Decided :MAY - 7 19'73 Filed: MfiY - 7 1973 N r , Justice Wesley Castles delivered the apinion of the Court. Arthur S. and Lucille F, Osburnsen, husband and wife, a r e defendants and appellants i n t h i s action, and w i l l be referred t o herein a s Osburnsen. Lester J, and Virginia Ann Heller, husband and wife, a r e p l a i n t i f f s and respondents and w i l l be referred t o a s Heller. Heller brought t h e action i n the d i s t r i c t court of the tenth j u d i c i a l d i s t r i c t , county of Fergus, f o r a declaratory judgment i n reference t o a ranch s a l e transaction between Heller and Osburnsen. The case was heard without a jury and judgment entered on findings of f a c t and conclusions of law. From t h a t judgment Osburnsen appeals. For a period of time p r i o r t o October 1967, EIeller had been trying t o s e l l h i s ranch properties. H e had appointed one T o m Girvin of Girvin Realtors a s h i s agent t o s e l l the property. One buyer had been found previous t o t h i s time, but had been unable t o obtain necessary financial backing, O n October 5 , 1967, Girvin did negotiate a s a l e t o Osburnsen and a r e c e i p t and agreement t o sell. and purchase was executed on t h a t date. The foregoing f a c t s arc agreed t o by the p a r t i e s ; however the remaining f a c t s a r e dis- puted. The f a c t s a s found by the d i s t r i c t judge are: In order t o r a i s e the necessary down payment on the Hel-ler property without disturbing other investments, i t became necessary f o r Osburnsen t o borrow approximately $35,000. ~ e l l e r ' s agent, Tom Girvin, was a l s o an agent f o r the John Hancock l4utual Life Insurance Company; i t was agreed the loan f o r the down payment would be made through t h a t company. A t the time of the s a l e , Heller owed approximately $30,000 plus an the property t o the Kansas City Life Insurance Company and approximately $4,000 plus f o r closing costs t o Realty Abstract Company. John Hancock Company did not want a second mortgage on t h e property and therefore required t h a t any loan i t made be large enough t o pay off the p r i o r indebtedness, i n order for it to have a f i r s t mortgage. Both Heller and Osburnsen signed Loan applica- tions made t o the John Hancock Company and a loan of $70,000 was :nade t o the p a r t i e s , O f the $70,000 borrowed, $35,000 was t o pay off the Kansas City Company mortgage and money owed t o Realty Abstract Company, The remaining $35,000 was the down payment on the Heller property. O n November 24, 1967, the p a r t i e s entered i n t o a formal and de- t a i l e d contract f o r deed which s e t out the d e t a i l s of the trans- action more completely than did the receipt and agreement t o s e l l and purchase, but i n no way conflicted with it. A t the time of the execution of the contract f o r deed, the only mortgage o r en- cumbrance on the property was the Kansas City Life Insurance Company and Realty Abstract Company. I n February 1968 the parties signed the loan instruments i n favor of John Hancock Company; the $70,000 was used t o r e t i r e the encumbrances and make the down payment t o Heller. Copies of the contract and supporting documents, including the John Hancock Company note, were subsequently placed i n escrow with the bank. Just under a year l a t e r Osburnsen made the f i r s t annual payment with i n t e r e s t , which i n turn was paid over by the escrow agent p a r t l y t o John Hancock Company and p a r t l y t o Heller. The escrow agent was following the terms of the contract, since it stated t h a t any mortgage on the land would be paid f o r out of proceeds of the sale. Heller complained t o t h e escrow agent t h a t he was i n no way involved i n the repayment of the loan t o John Hancock Company and t h a t portion of the contract f o r deed r e f e r r i n g t o any mortgage referred t o the Kansas City Life Insurance Company mortgage which had been paid o f f . Since there was a problem in interpreting the language of the contract, Heller brought t h i s action f o r declaratory judgment t o adjudicate the respective r i g h t s and duties of the p a r t i e s , i n particular the amount of money owed by Osburnsen t o Heller f o r the purchase of the ranch, k t t r i a l Osburnsen contended the purchase price was $85,000 and Heller had given Osburnsen $35,000 f o r cosigning the note and mortgage. Heller contended the s a l e was ?rice/$120,000, a s s e t out i n a l l the documents, and t h a t Osburnsen s t i l l owed Heller $50,000. The t r i a l court found the purchase price t o be $120,000; t h a t Heller had received $35,000 a s down payment and the additional sum of $35,000 by reason of payment of the Kansas City and Abstract obligations; and Osburnsen s t i l l owed Heller the sum of $50,000. The t r i a l court further found the John Hancock Company loan was made j o i n t l y t o both p a r t i e s and Osburnsen was obligated t o pay 50% of the loan, independent of payments on the contract; t h a t Heller was obligated t o repay the other 50% of the John Hancock Company loan out of the yearly payments f o r the s a l e of the ranch. O n appeal appellant Osburnsen r a i s e s three issues f o r review: 1, Did the d i s t r i c t court abuse i t s discretion i n decreeing a reformation of a written contract i n a declaratory judgment action? 2. Did the d i s t r i c t court abuse i t s discretion i n entering findings and granting declaratory judgment outside the issues presented? 3 . Did the di.strict court e r r i n denying defendant's motion f o r summary judgment? I n h i s f i r s t issue Osburnsen contends the d i s t r i c t court i n a declaratory judgment proceeding abused i t s discretion by reformi-ng the contract. H e argues the contract was c l e a r and stated specifi- c a l l y : "The Vendors s h a l l deposit with the escrow agent here- i n a f t e r named a l l mortgages o r other indebtedness incurred by Vendors which indebtedness i s secured by a mortgage on the above described r e a l property, and i n s t r u c t the escrow agent t h a t a l l payments received on t h i s Contract f o r Deed s h a l l be applied by the escrow agent on the payment of such indebtedness; That upon payment in f u l l of such outstanding i-ndebtedness of the Vendors a l l amounts paid by the Vendees t o the Vendors s h a l l be credited t o the Vendors." Osburnsen argues t h a t neither party wants the contract changed, and the above c i t e d clause r e f e r s t o the John Hancock Company loan. Respondent Heller clai-ms the clause r e f e r s t o the Reaity Abstract and Kanszs C i t y Company loans, Osburnsen con- tends since the d i s t r i c t court went beyond the contract and found both p a r t i e s owed on the note, it reformed the contract without proper authority. W e do not agree the d i s t r i c t court reformed the contract. This action was brought under the Uniform Declaratory Judgments A c t , sections 93-8901 through 93-8916, R.C.M. 1947, which provides i.n part: "93-8901 Scope, Courts of record within t h e i r respective jilrisdictions s h a l l have power t o declare r i g h t s , s t a t u s , and other l e g a l r e l a t i o n s whether o r not further r e l i e f i s o r could be claimed, N o action o r proceeding s h a l l be open t o objection on the ground t h a t a declaratory judgment o r decree i s prayed for. The declaration may be e i t h e r affirmative or negative i n form and e f f e c t ; and such declarations s h a l l the force and e f f e c t of a f i n a l judgment o r decree. I I "93-8902 Power t o construe, e t c . Any person i n t e r - ested under a deed, w i l l , written contract o r other writings constituting a contract, o r whose r i g h t s , s t a t u s o r other l e g a l r e l a t i o n s a r e affected by a s t a t u t e , municipal ordinance, contract o r franchise, may have determined any question of construction o r v a l i d i t y a r i s i n g under the instrument, s t a t u t e , ordinance, contract, o r franchise and obtain a declar- a t i o n of r i h t s , s t a t u s o r other l e g a l r e l a t i o n s thereunder. 6 '93-8903 Before breach. A contract may be construed e i t h e r before or a f t e r there has been a breach thereof." Here, there was ambiguity on t h e face of the contract a s t o which mortgage -- John Hancock or Kansas City Life -- was referred to. In McNussen v. Graybeal, 146 Mont. 173, 186, 405 P.2d 447, t h i s Court when faced with a problem of ambiguity said: "ft i s well-settled law t h a t the question of whether an ambiguity e x i s t s i s one of law f o r the court. 11 The Court then went on t o say t h a t when having t o explain an ambiguity i n a contract, e x t r i n s i c evidence w i l l be used t o ex- plain the t r u e intention of the p a r t i e s . Considering the evidence, w e find two exhibits introduced a t t r i a l which were applications f o r a farm mortgage loan, One was signed by Heller and the other by Osburnsen. Both applica- tions were f o r the same land, the Heller ranch, and both r e c i t e d the same s e l l i n g price $120,000, Upon being called t o i n t e r p r e t the contract, it was c l e a r l y within the purview of the d i s t r i c t court judge t o examine the evidence and it was not an abuse of h i s discretion t o find t h a t both p a r t i e s were l i a b l e t o the John Hancock Company. Both p a r t i e s had signed loan applications f o r the same land, and the d i s t r i c t court found t h a t both owed one h a l f of the note. The court did not reform the contract but instead interpreted it i n l i g h t of the whole transaction and a l l the documents and evidence, which i s according t o law, W e find authorj-ties c i t e d by appellant Osburnsen deal with actions concerni.ng s u i t s t o reform contracts, Such was not the s i t u a t i o n here; therefore t h e c i t e d a u t h o r i t i e s a r e not persua- Osburnsen's second issue i s t h a t the d i s t r i c t court abused i t s discretion i n entering findings and granting declaratory judgment outsi.de the issues presented, He c i t e s National Surety Corp. v. Krtlse, 121 Elant. 202, 192 P,2d 317, where t h i s Court held t h a t i n a declaratory judgment action the d i s t r i c t court must have findings of f a c t t o support the judgment; o r the issues must have been presented i n the pleadings f o r determination. That r u l e of law i s c l e a r and established; we do not find t h a t it i s i n con- f l i c t with the s i t u a t i o n i n the i n s t a n t case. The complaint alleged: 11 I. That t h i s action i s brought under t h e provisions of Chapter 89 of T i t l e 93 of the Revised Codes of Montana, 1947, and a c t s amendatory thereto. "11. That p r i o r t o t h e 5th day of October, 1967, P l a i n t i f f s were the owners of a c e r t a i n ranch and had l i s t e d the same f o r s a l e with Tom Girvin, a r e l a t o r i n the c i t y of Lewjstown; t h a t on or about the 5th day of October, 1967, Defendants herein agreed t o purchase and P l a i n t i f f s herein agreed t o s e l l , the said ranch f o r the sum of $120,000.00 on the terms and b a s i s s e t out i n a c e r t a i n r e c e i p t and agreement t o s e l l and purchase, a t r u e and correct cop of which i s annexed t o t h i s Complaint a s Exhibit 'A1' and by incorporation and reference made a p a r t hereof. "111. That subsequently on o r about the 24th da.y of November, 1967, the p a r t i e s hereto had a formal Can- t r a c t f o r Deed prepared and t h a t the same was duly and properly executedbyallofthe p a r t i e s hereto; t h a t said contract provided i o r the payment of $120,O00.00 by Defendants t o P l a i n t i f f s f o r the purchase of said ranch, and c e r t a i n other matters; t h a t a t r u e and correct copy of t h i s Contract f o r Deed i s annexed t o t h i s Complaint a s Exhibit I t I f B and by incorporation and reference made a p a r t hereof, "IV. That subsequently Defendants made arrange- ments t o borrow c e r t a i n sums of money on the r e a l property with which t o complete the down payment thereon and t o prepay c e r t a i n other items of costs and other matters i n connection therewith; and t h a t P l a i n t i f f s herein executed the loan documents a t the special instance and request of Defendants; t h a t Defendants have taken possession of the ranch and t h a t altogether there has been paid t o P l a i n t i f f s on account of said agreement the sum of approximately $69,670.00, and t h a t there i s s t i l l due and owing t o P l a i n t i f f s the sum of approximately $50,330.00, plus accrued i n t e r e s t and other i n t e r e s t which w i l l accrue from time t o time . "V. That Defendants have now stated and alleged t h a t they only paid $85,000.00 f o r the ranch, and on account of the transaction. and t h a t there i s now only due and owing t o p l a i n t i f f s the sum of $15,000.00, a l l contrary t o the form, force and e f f e c t of the written agreement between the p a r t i e s and a l l other agreements between the p a r t i e s ; t h a t such allegations by Defendants a r e f a l s e and untrue and t h a t there i s due and owing t o P l a i n t i f f s the sum of approximately $50,330,00. " The prayer f o r r e l i e f asked t h a t a declaratory judgment be entered declaring and adjudicating the respective r i g h t s and duties of t h e p a r t i e s under the provisions of the contract. It i s c l e a r from the complaint, i n p a r t i c u l a r paragraph IV and the prayer, t h a t Heller wanted a determination of who owed what on the John Hancock Company loan, This i s what the pleadings asked f o r , and i t i s what the d i s t r i c t court did. Osburnsen alleges the d i s t r i c t court went beyond the pleadings i n i t s deter- mination, but our reading of the pleadings and prayer f o r r e l i e f finds no e r r o r i n the d i s t r i c t court's action, Appellant ~ s b u r n s e n ' s f i n a l issue i s t h a t the d i s t r i c t court erred i n not granting sllmmary judgment. Defendant Osburnsen served on p l a i n t i f f Heller a request f o r admissions, pursuant t o Rule 36, M.R..Civ,P. Heller did not respond t o the request within the time period and so Osburnsen moved f o r summary judgment, based primarily on the admissions which a r e deemed admitted a s t r u e i f not answered. A review of t h e record indicates the d i s t r i c t court allowed Heller t o f i l e answers which, although l a t e , were admitted and then the d i s t r i c t court denied the motion f o r summary judgment, The r e a l question i s --- was the d i s t r i c t court correct i n granting Heller time t o f i l e answers a f t e r the time l i m i t had expired? W e find the d i s t r i c t court correctly interpreted the r u l e . It has been established by case law t h a t i f answers a r e not made t o requests f o r admissions under Rule 36, M.R,Civ.P., such admissions a r e deemed admitted a s t r u e , Naegeli v. Daniels, 145 Mont. 323, 400 P.2d 896. However, t h i s Court has not heretofore had the problem, a s here, where a party wants t o f i l e answers but it i s a f t e r the permitted time period. 2 Moorefs Manual, Federal Practice and Procedure, $ 15.05[2], p. 1156, provides a guide : " 9 ; * * Failure t o take any action within the period stated i n the request r e s u l t s i n an admission of the f a c t s stated therein, although the court may permit the party t o f i l e h i s answer a f t e r the expiration of such time where the delay was not caused by lack o f good f a i t h , O r i n the absence of any prejudice t o the party requesting t h e admission. 11 I n French v . United States, 416 F.2d 1149, 1152, the Ninth Circuit Court of Appeals, c i t i n g from Moosman v. Joseph P, B l i t z , Inc., 358 F,2d 686 (2 C i r . 1966), said: l f Under compelling circumstances the D i s t r i c t Court may allow untimely r e p l i e s t o avoid admission. * * * Since t h e purpose of Rule 36 i s t o expedite t r i a l by removing uncontested issues and no delay was caused here, there i s no s u f f i c i e n t reason t o force the D i s t r i c t Court t o grant summary judgment here where no prejudice i s shown. t I In the i n s t a n t case it was established t h a t the delay was caused by a mixup i n o f f i c e procedure, and c e r t a i n l y not by any bad f a i t h on Heller's part. It was an accident t h a t the answers were not f i l e d within the time, but it was a s i t u a t i o n within the discretion of the t r i a l court t o determine i f Osburnsen would be prejudiced by the l a t e f i l i n g , Since i t i s c l e a r no prejudice could be shown, we find nothing which would indicate the d i s t r i c t court abused i t s discretion i n e i t h e r allowing the l a t e f i l i n g , o r i n denying the motion f o r summary judgment. The judgment of the d i s t r i c t court i s affirmed. Won. Jack Shanstrom, D i s t r i c t Judge, s i t t i n g f o r Chief J u s t i c e James T. Harrison.