No. 88-567 

IN THE SIJPREME COURT OF THE STATE OF MONTANA 

JOHN D. ROMAIN, 

Defendant and Appellant, 

-vsEARL SCHWARTZ COMPANY, A Partnership, 

composed of EARL SCHCVARTZ , GLADYS 

SCHWARTZ, KAY SCHWARTZ YORK, RAY L. 

YORK, KATHY SCHWARTZ MAU, ROBERT MAU 

and KARLA LEA SCHWARTZ, Partners, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Twelfth Judicial District, 

In and for the County of Hill, 

The Honorable Chan Ettien, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Robert J. Emmons and Joseph Sullivan; Emmons & Coder, 

Great Falls, Montana 

For Respondent: 

STUART c ~~WCKENZIE,E~U~~S, Solem & MacKenzie, Chinook, 

Montana 

Submitted on Briefs: June 30, 1989 

Decided: Au-yust 25, 1989 2 *qc 

. C 
Justice R. C. McDonough delivered the Opinion of the Court. 

This is an appeal from an action begun to foreclose a 

mortgage on agricultural real property. Defendant John D. 

Romain (Romain) appeals from the judgment of the District 

Court of the Twelfth Judicial District, Hill County, finding 

adverse to his cross-claim asserted against Earl Schwartz 

Company, a partnership (partnership) . We affirm in part and 

reverse in part. 

Although Romain presents several issues for review, we 

find that consideration of only two are necessary to decide 

this case. These issues are: 

1) Did the trial court err in determining that Romain 

as vendor and grantor divested himself of all alleged rights 

to repossession under a contract for deed covering the 

property upon delivery of a warranty deed to the partnership, 

vendee and grantee? 

2) Did the trial court err in holding that Romain 

failed to mitigate his damages and therefore should not be 

allowed to assert a right of indemnity against the 

partnership for damages caused by the partnership's default 

on the mortgage? 

The facts in this case are somewhat complicated. On 

July 26, 1979, John Romain agreed to sell his farm by 

contract for deed to the partnership for $4,635,000. When 

this contract was entered into, the farm was subject to a 

mortgage held by John Hancock Mutual Life Insurance Company 

(John Hancock) . As part of the purchase price, the 

partnership agreed to pay the remaining balance owed John 

Hancock by Romain. On July 31, 1979, Earl Schwartz as an 

individual delivered his personal guaranty of Romain's note, 

to the extent of $1,000,000, to John Hancock. 
In January 1980, the partnership paid off the balance 

owed Romain on the contract for deed. Romain then conveyed 

the legal title by warranty deed to the partnership, "subject 

to," the John Hancock mortgage. 

In 1986 and 1987, payments on the mortgage were not 

made, putting the note and mortgage in default. As a result, 

John Hancock sued to foreclose on the property. Named as 

defendants were the partnership and the individual partners, 

Earl Schwartz in his individual capacity as guarantor, John 

and Maradel Romain and other lienholders. 

Upon learning of the default, Romain cross-claimed 

against the partnership and sought cancellation of the contract for deed, possession of the property and growing crops, 

and all monies from any federal farm programs on the farm. 

On August 29, 1988, the trial judge granted John Hancock a 

decree of foreclosure with a judgment against John and 

Maradel Romain for $3,966,973.46, and a judgment against Earl 

Schwartz based on his guaranty in the amount of 

$1,269,310.87. 

The trial judge made separate Findings of Fact, Conclusions of Law and Judgment on Romain's cross-claim. On this 

issue, the trial court denied Romain relief and redemption 

rights and left the partnership in possession of the farm 

property and crops, and all monies from the 1987 and 1988 

farm programs. 

In reaching this conclusion, the court found that Romain 

lost all rights to repossession of the property upon delivery 

of the warranty deed by him to the partnership. Because he 

had no right to possession of the property, the trial court 

also found that Romain had no claim to any growing crops or 

farm program money. Rather, his only existing remedy under 

the contract for deed was indemnification by the partnership 

for damages sustained as a consequence of the default. 
Any right to indemnification, however, was contingent 

upon Romain's mitigation of damages. In August of 1988, John 

Hancock wrote Romain and informed him that if he executed a 

deed transferring all of his rights and interest in the 

property to John Hancock, he would be absolved of all claims 

against him resulting from the foreclosure and any deficiency 

which may arise. Romain refused to execute such a deed. The 

trial court found this refusal to be a failure on his part to 

mitigate damages. Consequently, Romain was denied indemnification for any deficiency judgment which may arise from the 

foreclosure sale. This appeal followed. 

I 

Romain argues that his delivery of the warranty deed to 

the partnership did not operate to divest him of his right to 

repossession of the farm under the contract for deed. We 

disagree. 

In support of our conclusion, we begin by examining two 

statutes. Section 70-1-508, MCA, provides that a grant of 

property takes effect only upon delivery by the grantor. 

Moreover, $ 70-1-510, MCA, provides that a grant cannot be 

delivered conditionally. Rather, delivery to a grantee is 

deemed to be absolute and the instrument takes effect upon 

its delivery. Any prior conditions are discharged at time of 

delivery. 

Examination of these two statutes leads to the conclusion that Romain divested himself of all interest in the 

property upon delivery of the deed to the partnership. The 

language of the warranty deed is clear. Romain gave up the 

legal title and any other interest in the property. 

Romain argues, however, that it was not his intent, upon 

delivery of the deed, to give up his right to repossession 

upon foreclosing or cancelling the contract for deed. He 

maintains that it was always his intention, to allow the 
forfeiture clause of the contract for deed to remain in 

effect until the John Hancock loan was fully repaid. Because 

he remained liable for any deficiency underlying the 

multi-million dollar mortgage, Romain argues that his 

intention to retain his right to repossession should be 

obvious. 

We recognize that a valid delivery of title requires not 

only actual manual transfer, but also an intent on the part 

of the grantor to pass title to the property. Hartley v. 

Stibor (Idaho 1974), 525 P.2d 352, 355. Therefore, it is 

possible that there is no legal delivery although the instrument has been delivered to the grantee. Hayes v. Moffatt 

(1928), 83 Mont. 214, 226, 271 P. 433, 437. Romain argues 

that this lack of intent is evidenced by the default provision within the contract for deed and the language within the 

warranty deed which states that the conveyance is "subject 

to" the John Hancock mortgage. 

This logic fails in light of Montana statutory law, the 

language of the warranty deed, and established case law. 

Section 70-1-519, MCA, in accordance with established case 

law, provides that upon transfer of property, the transferee 

obtains all title held by the transferor unless a different 

intention is expressed or is necessarily implied. As stated 

earlier, Romain maintains that this intent should be implied 

from the language within the contract and the warranty deed, 

and the circumstances surrounding the conveyance. 

The language of the deed giving up all right, title and 

interest in the property clearly indicates Romain's intent to 

transfer full title to the partnership, including all his 

security interest. The fact that the warranty deed contained 

language stating that it was "subject to" the John Hancock 

mortgage does not render inoperative the presumption that 

Romain intended to convey his entire interest. It is 
presumed that one who conveys property by deed intends to 

convey his entire interest unless a portion of the interest. 

is expressly excepted. The words "subject to" are a 

limitation upon the warranty of title and not such an exception. First National Bank of Denver v. Allard (Colo. 1972), 

506 P.2d 405, 406. 

Moreover this intention, manifested by the deed, prevails over any contrary intent which may be gleamed from the 

contract for deed. It has long been recognized that an 

unambiguous provision in a deed prevails over an inconsistent 

provision in a sales contract pursuant to which the deed was 

given. Johnson v. Ware (Cal. 1943), 136 P.2d 101, 102; 

McCafferty v. Young, (1964), 144 Mont. 385, 397 P.2d 96. 

I1 

Romain next contests the trial court's decision to deny 

him any right to indemnity for damages sustained as a result 

of the respondent's default. The trial court ruled that 

Romain failed to mitigate his damages by refusing to execute 

a deed transferring all of his rights in the property to John 

Hancock. In exchange for this performance, John Hancock 

promised to absolve Romain of any possible deficiency judgment. Because of this failure to mitigate, the court held 

that Romain could not avail himself of any indemnification by 

the partnership for damages sustained as a consequence of 

their default. 

In this regard, we disagree with the trial judge. A 

damaged party is only expected to do what is reasonable under 

the circumstances and need not embark upon a course of action 

which may cause further detriment to him. Spackman v. Ralph 

M. Parsons Co. (1966), 147 Mont. 500, 414 P.2d 918. Romain 

may have reasonably determined that a release of his interest 

in the property to John Hancock would jeopardize his 

ownership of the claim here. Therefore, we decide that under 
these facts, Romain was under no duty to sign over the deed 

to John Hancock until he exhausted his remedies. However, as 

a result of the holding in this case, Romain could now be 

required to transfer all of his rights in the property 

pursuant to John Hancock's offer. Accordingly, on this issue 

the trial court is reversed and the case is remanded for 

proceedings consistent with this opinion.