No. 92-029 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

DAUGHERTY CATTLE CO., a partnership 

consisting of EMERALD DAUGHERTY, 

WILLIAM DAUGHERTY, JOHN DAUGHERTY, JR.; 

EMERALD DAUGHERTY; WILLIAM EARL DAUGHERTY; 

and JOHN EMERALD DAUGHERTY, JR., Tv.,,5- Tvc-+ Tg" .r: 

Plaintiffs and Respondents, & 

A"- 

??&] 

-vs- s~p 2 2 1992 

i - 

GENERAL CONSTRUCTION COMPANY, a North cd -5 : 4.'. 

Dakota corporation, formerly known as CL.BRK Or C::!i; .' 1: .:WRT s88.r g OF it:*Cbd B'%b3i'k 

MEYER CONSTRUCTION CO., and doing 

business in Montana as GENERAL 

CONSTRUCTION COMPANY OF NORTH DAKOTA, 

Defendant and Appellant. 

APPEAL FROM: District Court of the Thirteenth Judicial ~istrict, 

In and for the County of Yellowstone, 

The Honorable Maurice R. Colberg, Jr., Judge 

presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Stewart R. Kirkpatrick, Murphy & Kirkpatrick, 

Billings, Montana 

For Respondent : 

Allan Karrell and John Bohyer, Crowley, Haughey, 

Hanson, Toole & Dietrich, Billings, Montana 

Filed: 

Submitted on Briefs: June 25, 1992 

Decided: September 22, 1992 
Justice Fred J. Weber delivered the Opinion of the Court. 

Defendant, General Construction Company, appeals from the 

summary judgment ruling of the District Court of the Thirteenth 

Judicial District, Yellowstone County, in favor of plaintiffs. We 

affirm. 

The issues for our review are: 

1. Whether the District Court erred by refusing to consider 

reasonable rental value of the property subject to a land contract 

for purposes of computing damages upon foreclosure by the seller. 

2. Whether Montana's anti-forfeiture statute, S 28-1-104, 

MCA, applies to prohibit the seller from declaring a forfeiture 

when the purchaser tenders a portion of the property back to the 

seller as lafull cornpensati~n'~ for the balance owing on the 

contract. 

On February 13, 1981, Meyer Construction Company, a 

predecessor company of defendant General Construction Company 

(General), and the plaintiffs Daugherty Cattle Co,, a partnership 

consisting of Emerald Daugherty, William Daugherty and John 

Daugherty, Jr.; Emerald Daugherty; William Earl Daugherty; and John 

Emerald Daugherty, Jr. (Daugherty), as sellers, entered into a 

written contract for deed for the sale and purchase of real 

property located on the outskirts of Billings in Yellowstone 

County, Montana. The purchase price of the property was 

$1,195,000.00 plus interest at the rate of nine percent per annum. 

General and its predecessor made annual payments as scheduled until 

1987, when the contract was amended. On July 8, 1987, General and 

2 
Daugherty agreed to revise the payment schedule and reamortize the 

unpaid principal of $422,500.00. The amendment lowered the 

payments and split them, with interest payments (continuing at nine 

percent) and principal payments due on different dates during the 

year. The contract also recited the name change from Meyer 

Construction Company to General Construction Company. 

General continued to make payments as scheduled until 1989, 

when General failed to pay the scheduled payment due on July 15, 

1989. On October 10, 1989, Daugherty sent by certified mail a 

written notice of default giving General thirty days within which 

to make payment, as required by the contract. In early November, 

1989, Daugherty extended the default period for sixty days beyond 

November 9, 1989. 

On January 8, 1990, General made an "offer of performancen in 

writing, which General considered to be full performance and 

compensation under the contract. In its offer, General offered to 

convey back to Daugherty an 85-acre portion of the property 

(approximately 47% of the land covered by the contract) together 

with payments already made totalling $1,273,290.00, in return for 

termination of the contract and retention of the remaining 53% of 

the land. This would have left Daugherty with the portion of the 

land it had leased back from General as farmland since 1981 and 

would have left General with the portion on which it mined gravel 

for construction purposes. 

On January 31, 1990, also pursuant to the contract, Daugherty 

sent by certified mail a tWotice of Continued Default and 
Acceleration of Remaining Purchase Pri~e,~ notifying General that 

it was accelerating the entire contract balance and giving General 

thirty days to pay the accelerated balance in full. Again General 

failed to make any payment on the contract. Daugherty, electing to 

terminate the contract, sent to General a "Notice of Termination of 

Contract for Deedw dated July 18, 1990. 

General refused to execute special warranty deeds to reconvey 

the property to Daugherty and refused to deliver possession to 

Daugherty to effect the termination of the contract. Daugherty 

filed this action to quiet title and to obtain possession of the 

property. 

The District Court granted Daughertyts motion for summary 

judgment on the quiet title and ejectment claims, rejected 

General's claim that termination and forfeiture were not 

enforceable remedies under the contract and allowed Daugherty to 

retain all monies previously paid by General and its predecessor. 

The District Court refused to apply Montana's anti-forfeiture 

statute, 5 28-1-104, MCA, because General's tender of a portion of 

the property did not constitute "full compensation" as required by 

the statute. From this judgment, General appeals. 

Did the District Court err by refusing to consider reasonable 

rental value of the property subject to a land contract for 

purposes of computing damages upon foreclosure by the seller? 

The appellant, General, contends that there are genuine issues 

of fact and that evidence relating to these factual issues should 
have been introduced into evidence at a trial. Specifically, 

General claims that a clause included in the parties' contract 

requires the court to determine the relationship between payments 

retained and actual damages suffered by Daugherty and to determine 

whether the retention of contract payments constitutes a penalty 

rather than damages. The pertinent clause is underlined in the 

following excerpt from Paragraph 5 of the contract for deed: 

(1) If Buyer fails to cure such default or breach 

within the aforesaid 30 day period, the Seller may 

then declare the outstanding balance of the 

purchase price together with all other unpaid 

obligations of the Buyer undertaken in this 

contract due and payable within an additional 30 

days. If the outstanding balance of the purchase 

price together with all other unpaid obligations of 

the Buyer are not paid within the second 30 day 

period, the Seller may either: 

(a) declare this contract terminated. In the 

event of such termination, Buyer agrees 

on demand to surrender possession of the 

property, and any improvements thereon 

immediately and peaceably, and to execute 

and deliver such instruments as Seller 

may require to evidence of record the 

termination of this contract and Buyer's 

interest in the contract and real 

property, and Seller may retain all 

payments made hereunder as reasonable 

rental for the use of the ~ro~ertv and as 

liauidated damacres, . . . (Emphasis 

supplied.) 

General claims there is no evidence that the damages Daugherty 

recovered have any relationship to the actual damages suffered by 

Daugherty. General has made payments of principal and interest 

totalling $1,242,447.50 on the original contract amount of 

$1,195,000.00. The amounts appliedto principal total $857,000.00, 

leaving a principal balance of $338,000.00. General further claims 
that liquidated damages must bear a reasonable relationship to the 

actual damages or such damages will constitute an invalid penaltyDaugherty contends that the language quoted above from Paragraph 

5 of the contract is neither ambiguous nor uncertain in any sense 

and maintains that to accept General's argument would essentially 

convert the contract from a purchase agreement to a lease, as 

noted by the District Court. 

We agree with the District Court's assessment relating to the 

result which would ensue if we were to depart from longstanding 

interpretation of land sale contract provisions. In effect, the 

result would be to rescind the contract at the whim of the 

defaulting purchaser whose wrongdoing caused the vendor to 

terminate the contract. 

Long ago, in Cook-Reynolds Co. v. Chipman (1913) , 47 Mont. 

289, 133 P- 694, the defendant made a similar argument against a 

forfeiture of a contract for deed. This Court noted that in an 

action to terminate the contract for breach, "the remedies afforded 

by the contract will be enforced unless they impinge upon other 

rules of equity or 1aw.I' Cook-Reynolds, 133 P. at 697. In CookRevnolds and subsequent forfeiture cases, this Court has 

consistently upheld contract provisions such as the clause in 

Paragraph 5 which allows the seller to retain all payments "as 

reasonable rental for the use of the property and as liquidated 

damages.ffi See, e.g., Joy v. Little (l96O), 138 Mont. 110, 354 P.2d 

1035; and Erickson v. First Natll Bank of Minneapolis (1985), 215 

Mont. 350, 697 P.2d 1332. 
At the time of contracting, Daugherty and General's 

predecessor agreed that the payments already made under the 

contract terms at the time of a default by the purchaser would be 

reasonable rental and proper liquidated damages. General contends 

that Erickson, 697 P.2d at 1338, requires a court to hear evidence 

of a reasonable relationship between the actual damage suffered and 

the liquidated damage claimed. In Erickson, the trial court found 

that the reasonable rental of the property was $114,750.00. The 

purchaser had paid only $154,751.67 on an $800,000.00 contract and 

had been in possession of the property for over a year and a half. 

The trial court found that the amount forfeited was reasonable, a 

finding this Court affirmed, noting that, w[s]ure3y Starhaven did 

not intend that it should remain in possession for so long and pay 

nothing for the use of the property." Erickson, 697 P.2d at 1338. 

prickson, however, does not require a judicial determination that 

the amount forfeited was a reasonable rental. 

Section 28-2-721, MCA, allows parties to a contract to agree 

to damages in advance of a breach: 

When provision fixing liquidated damages valid. . . . (2) The parties to a contract may agree therein upon an 

amount which shall be presumed to be an amount of damage 

sustained by a breach thereof when, from the nature of 

the case, it would be impracticable or extremely 

difficult to fix the actual damage. 

General argues that this statute, when applied to the facts of 

this case, clearly shows that the actual damages have no 

relationship to the liquidated damages and therefore the contract 

terms should be invalidated. The District Court ruled that 
plaintiff was not required to return to the defendant the 

difference, if any, between the amount paid by the defendant and 

what evidence would show the reasonable rental value of the land to 

have been. In pertinent part the District Court stated: 

The later Montana case of Burqess v. Shi~let, 230 Mont. 

387, 750 P.2d 460 (1988) involved a default by a 

purchaser in contract payments. The Montana Supreme 

Court ordered forfeiture of all amounts paid by the 

purchaser and termination of the contract. There was no 

consideration of a reasonable rental value during the 

period of the buyer1 s holding of the property. . . . The 

court stated at 230 Mont. 390: 

When a purchaser enters into a contract for deed with a 

seller, he or she runs the risk of defaulting on the 

required payments and facing the consequences of losing 

the property along with forfeiting the amount already 

paid. If this produces a harsh or unwanted result, it is 

for the legislature to remedy and not the job of this 

Court to change the plain meaning of the contract." 

Later the Court stated: 

"The default provisions under the contract for deed 

spells [sic] out the remedies available to appellants." 

After a further discussion, the District Court concluded that 

plaintiff and defendant entered into this contract with explicit 

default language which allows the relief requested by the plaintiff 

and that the court should not interpret the contract to be an 

involuntary lease. We agree with the analysis and conclusion of 

the District Court. 

We hold that the District Court did not err by refusing to 

hear evidence relating to the reasonable rental value of the 

property subject to the land contract for purposes of computing 

damages. 
Does Montana's anti-forfeiture statute, 5 28-1-104, MCA, apply 

to prohibit the seller from declaring a forfeiture when the 

purchaser tenders a portion of the property back to the seller as 

"full compensation'' for the balance owing on the contract? 

Section 28-1-104, MCA, provides: 

Relief from forfeiture. 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. 

In order for 3 28-1-104, MCA, to apply, the party requesting 

relief from forfeiture must tender full compensation to the vendor 

as a condition precedent to relief. Sun Dial Land Co. v. Gold 

Creek Ranches, Inc. (1982), 198 Mont. 247, 251, 645 P.2d 936, 939. 

General contends that its offer to reconvey 47 percent of the 

land to Daugherty, at a time when General was in default and during 

a period which was a 60-day extension of the time to cure the 

default, constituted "full compensation" as required by 5 28-1-104, 

MCA. In Eigeman v. Miller (1987), 229 Mont. 28, 32, 745 P.2d 320, 

323, this Court reversed the district court's conclusion that the 

purchasers proved their right to relief under the anti-forfeiture 

provision without tendering full compensation of the entire 

remaining contract balance. We have repeatedly required the 

defaulting party under a contract for deed to tender the entire 

outstanding principal balance in order to obtain relief from 

forfeiture in equity. See, e.g., Sharp v. Holthusen (1980), 189 
Mont. 469, 616 P.2d 374 (defendants tendered entire amount due plus 

personal fees, expenses and attorney fees of plaintiff to date): 

and Parrot v. Heller (1976)' 171 Mont. 212, 557 P.2d 819 (tendering 

entire contract balance plus interest prevented forfeiture). "The 

anti-forfeiture statute allows the defendants to make full payment 

of interest and attorney fees for the default, and allows the 

contract to be enforced." Shar~, 616 P.2d at 378. General's 

tender of 47 percent of the property in exchange for Daugherty's 

cancellation of the remainder owed on the contract was at best an 

offer to modify the contract--an offer not accepted by Daugherty. 

It falls short of the full compensation required under 5 28-1-104, 

MCA, which is the entire principal balance plus interest. 

General's offer of performance was a last ditch effort to hold on 

to a portion of the property by voluntarily forfeiting 47 percent 

of the property at a time when Daugherty, if the default was not 

cured, could soon claim 100 percent of the land. General's offer 

of performance is not full compensation of the sort contemplated 

under Montana's anti-forfeiture statute. 

We hold that Montana's anti-forfeiture statute, 5 28-1-104, 

MCA, did not prohibit the seller from declaring a forfeiture when 

the purchaser tendered a portion of the property back to the 

seller. Such offer of performance was not full compensation for 

the remaining balance of the contract price. 

Affirmed. 
We Concur: 
September 22, 1992 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

Stewart R. Kirkpatrick 

MURPHY & KIRKPATRICK 

300 Western Federal Savings Building 

2929 Third Avenue North 

Billings, MT 59101 

Allan Karell 

John Bohyer 

CROWLEY, HAUGHEY, HANSON, TOOLE & DIETRICH 

P.O. Box 2529 

Billings, MT 59103 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATQ OF MONTANA