No. 80-102 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

RAY D. SHARP and FREDA SHARP, 

Plaintiffs and Appellants, 

EARNEST D. HOLTHUSEN, DONNA M. 

HOLTHUSEN and the FIRST NATIONAL 

BANK OF MISSOULA, et al., 

Defendants and Respondents. 

Appeal from: District Court of the Fourth Judicial District, 

In and for the County of Missoula, 

Honorable James B. Wheelis, Judge presiding. 

Counsel of Record: 

For Appellants: 

Balyeat, Kammerer and Rodli, Missoula, Montana 

For Respondents : 

Tipp, Hoven and Skjelset, Missoula, Montana 

Submitted on briefs: August 6, 1980 

Decided: &P~&k /,?, 19613 

Filed: SEP 12 1980 
Mr. Justice John Conway Harrison delivered the Opinion of the 

Court . 

This is an appeal from a judgment of the District 

Court, Fourth Judicial District, Missoula County, dismissing 

plaintiff's claim for forfeiture under a contract for deed. 

We shall address two issues on this appeal: 

1. May a court of equity relieve a defaulting buyer, 

in a contract for deed from a forfeiture of his equity, when 

before suit the buyer tendered full payment under the contract, plus payment of the seller's personal expenses and 

attorney fees to that date, and where buyer has failed to 

cure a default of nonpayment under the contract within the 

time required in the contract and after proper notice was 

sent declaring that the contract was in default. 

2. Whether sellers, who sued to force a forfeiture of 

the buyers' equity, are entitled to attorney fees as the 

prevailing party when judgment is rendered not allowing the 

forfeiture, but requiring sellers to accept buyers tender of 

performance made before suit. 

On October 11, 1976, Ray D. and Freda Sharp, plaintiffs 

and sellers, and Earnest D. and Donna M. Holthusen, defendants and buyers, entered into a written contract for deed 

for the sale and purchase of real property located in Lake 

County. Terms included monthly installment payments to 

plaintiffs, assumption by defendants of plaintiffs' Veterans 

Administration loan, and discharge i n f u l l of the balance 

due and the VA loan by October 11, 1977. 

Plaintiff gained possession of the property on October 

11, 1976. Plaintiffs have paid $7,000 cash down and monthly 

payments totaling $1,081. Plaintiffs also made payments on 

the assumed Veterans ~dministration loan. The contract for 
deed required defendants to make a balloon payment to plaintiffs and refinance the Veterans Administration loan. The 

parties contemplated that the defendants would refinance the 

obligations by October 11, 1977, and that plaintiffs would 

cooperate in this refinancing, if required. 

A well supplying the property with water was found to 

be functioning properly at the time of sale. Both parties 

believed that the well was functioning properly; however, 

this was incorrect. It was later discovered that the water 

well was contaminated. The trial court found neither party 

in fault for the contamination. 

In April 1977 defendants actively sought financing for 

the obligation due under the contract. The defendants 

attempted to refinance the balloon payment due on October 

11, 1977, rather than make a cash payment from their own resources. Because of numerous reasons, defendants were not 

able to obtain the necessary financing within the time 

limit. 

On October 21, 1977, a notice of default was sent to 

defendants as required in the contract. The default was not 

cured within forty-fivedays as specified in the contract, 

and a demand for the return of the escrow documents from the 

First National Bank was made. Subsequently, the parties 

entered into settlement negotiations for purposes of compromising such claims as each might have against the other. 

Finally in January 1978, financing for the payoff of 

the entire contract, the balloon payment, as well as the 

remaining principal and interest due the plaintiffs was 

obtained through Lomas and Nettleton of Missoula, Montana. 

Lomas and Nettleton made the closing date of the loan 

January 16, 1978, but because they required a test of the 

water purity on the property, the loan could not be closed 
as a result of the water test showing that the water well 

was contaminated. 

The Montana State Department of Health and Environ- 

. mental Sciences recommended to defendants to clean, recap 

and filter the well water. Later, the Department recommended that the well be relocated. Defendants drilled a new 

well and installed a new pump at a cost of $1,741. 

In March 1978 when the well was completed, defendants 

were given financing from Lomas and Nettleton. Defendants 

tendered payment to the escrow agent. The escrow agent 

refused to accept the loan on directions from plaintiffs. 

Plaintiffs required defendants to pay all attorney fees and 

release plaintiffs from all claims they may have for misrepresentation of the water supply. Defendants tendered full 

payment for the attorney fees, but refused to release the 

plaintiffs from any action of misrepresentation. 

Negotiations continued. However, the parties were not 

able to enter into a settlement agreement. Plaintiffs filed 

suit against defendants for forfeiture of the contract and 

for repossession of the real property in May, 1978. Defendants have been ready, willing and able to pay off the 

entire amount of the contract since April, 1978. Plaintiffs 

have refused tender of payment. 

"Whenever by the terms of an obligation a 

party thereto incurs a forfeiture or a loss 

in the nature of a forfeiture by reason of his 

failure to comply with its provisions, he 

may be relieved therefrom upon making full 

compensation to the other party, except in case 

of a grossly negligent, willful or fraudulent breach of duty." Section 28-1-104, MCA. 

This Court has allowed a party to a contract who is 

in default, and who is subject to a penalty of forfeiture 

to redeem his right to the property. Yellowstone County v. 

Wight (1944), 115 Mont. 411, 145 P.2d 516; Parrott v. Heller 
(1976), 170 Mont. 212, 557 P.2d 819. Parties are relieved 

from forfeiture "in any case where he sets forth facts which 

appeal to the conscience of a court of equity." Parrott v. 

Heller, 557 P.2d 819, 820. This Court has said that section 

28-1-104, MCA, was enacted; 

". . . for the benefit of obligors whose failure to 

punctually perform would result in loss to them 

in the matters respect to which they have contracted. The intention of the Legislature in 

enacting the statute was that it should be operative and that it should be given full force and 

effect when the circumstances in any case gave 

it application. The intention of the law under 

this statute is that a forfeiture should not be 

needlessly enforced. The courts have established 

that as the policy of the law in the absence of 

statute. The rule as it has found expression in 

both court decisions generally is that both 

in law and in equity forfeitures are abhorred 

. . ." Yellowstone County v. Wight, 115 Mont. 411, 

417, 145 P.2d 516, 518. 

The parties' contract, which requires forfeiture 

in the case of default, does not divest a court of equity 

of its power to relieve a party from the consequences of his 

default and need not grant forfeiture. 

Defendants' actions here were not intentional, willful 

or fraudulent acts. The record disclosed that defendants 

made a good faith effort to pay the necessary money 

at the time it was due, but because of temporary circumstances 

outside of their control, the condition of the water well, 

they were unable to secure the necessary financing within 

the time desired. 

Plaintiffs argue that the time period between default 

and actual tender of payment was not reasonable to allow a 

court of equity to relieve the defendants from forfeiture 

under section 28-1-104, MCA. We disagree. 

Subsequent to the forty-five day period given the 

buyers to cure this default, the parties entered into settlement negotiations for the purpose of compromising such 
claims as each might have against the other. Defendants 

attended a closing at Lomas and Nettleton in January of 1978. 

This closing could not be completed because of the condition 

of the water well. Plaintiffs never objected to defendants' 

improvements on the land, the drilling and installing of a 

new water well. When tender was made, plaintiffs were willing to accept tender on the condition defendants released 

the plaintiffs from possible suit for misrepresentation on 

the condition of the water well. 

The trial court's judgment gives the plaintiffs what 

they are equitably entitled to,, theamount due under the 

contract, compensation for their personal expenses and attorney fees, as a result of the delay from the time of performance to the time of tender of payment in March, 1978. 

There comes a time when failure to perform is not reasonable, 

and the application of the antiforfeiture statute not applicable, but this is not the case. From the facts presented 

here, we find the court was correct in its equitable judgment. 

It appears from the record that defendants presented to 

the District Court sufficient evidence to appeal to the 

"conscience of a court of equity" which resulted in a specific 

finding that application of the default clause (forfeiture) 

would be "harsh and inequitable." Defendants made an initial 

downpayment and monthly payments to plaintiffs. They paid on 

the Veterans Administration loan. They spent over $1,700 in 

improvements on the property in order to drill a well to 

provide clean water to the house and to satisfy requirements 

of loan application without liability to the plaintiffs. In 

addition to the above-mentioned l~osses, the defendants would 

lose nearly $10,000 in equity in the land if forfeiture 

occurred. 
The facts in this case present a clear case for application of section 28-1-104, MCA. Defendants made tender of 

all of the amount due, as well as the personal fees, expenses 

and attorney fees of the plaintiff to date. Plaintiffs 

suffered no loss. The right to relief under the statute commences when the contracting party is in default and subject 

to forfeiture. Kovachich v. Metals Bank and Trust Co. (1961), 

139 Mont. 449, 365 P.2d 639. 

We accept plaintiffs argument that defendants were in 

default of the contract for deed and of their obligations 

under the contract, but they still retained a right under 

the antiforfeiture statute to make a tender, to redeem their 

interest in the property, and to appeal to the equity of the 

trial court. Defendants were not relieved from their actions 

of default, only plaintiffs' claim for forfeiture. 

Plaintiffs accepted payment of the contract amount but 

required that defendants also provide a release of all 

claims arising out of the contract. From the record, the 

court found that the plaintiffs did not object to the tender, 

only to the release that was demanded as a condition for the 

acceptance of tender. 

We find that tender of payment was made. Defendants 

were delinquent in their payment, and they were in default, 

but under the circumstances as are presented in this case, 

the antiforfeiture statute allows the defendants to make 

full payment of interest and attorney fees for the default, 

and allows the contract to be enforced. 

Plaintiffs argue they are entitled to attorney fees 

when the buyers were in default on an agreement which entitles the "prevailing party to costs of suit and reasonable attorney fees in the event suit is filed." 
The trial court found that defendants did in fact default on the contract between the parties, but as equitable 

relief to enable them to avoid forfeiture of their equity, 

they should be allowed to proceed as if the default were 

insignificant. The trial court granted defendants relief 

from the forfeiture. It did not grant them relief from 

the default. On the issue of default, plaintiffs prevailed in the District Court and are entitled to reasonable 

attorney fees up until time of tender of payment on March, 

1978. The equitable relief granted the defendants is the 

subject of this appeal. The defendants defaulted on the 

contract between the parties, and equity favors enforcement 

of the contract provisions. In no way can it be said that 

the defendants prevailed on this suit, when in fact, it was 

their default which necessitated this suit in the first 

place. However, this Court affirms the District Court's 

equitable judgment as to the forfeiture issue. 

The trial court erred in awarding all attorney fees for 

the suit and appeal to defendants. 

We, therefore, reverse the trial court's decision 

awarding attorney fees and instruct: 

1. Defendants pay plaintiffs reasonable attorney 

fees until the time of tender of payment on March 

1978, pursuant to the contract; and, 

2. Both parties pay their own attorney fees for 

the costs of this suit and appeal, thereon. 

Affirmed in part and reversed in part according to this 

opinion. 
We concur: 

Bief Justice 

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Justices