No. 13614 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977

GERALD HANSEN and CONSOLIDATED CO14NERCE CORPORATION, Plaintiffs and Appellants,

TRANSAMERICA INSURANCE COMPANY, A corporation,and COUNTY OF SILVER BOW, et al., Defendants and Respondents,

COUNTY OF SILVER BOW, et al., Cross-Claimant and Respondent.

Appeal from: District Court of the Second Judicial District, HonorableArnold Olsen,Judgepresiding. Counsel of Record: ForAppellants: Michael J. McKeon argued, Anaconda,Montana N. F. Hennessey, Butte,Montana For Respondents: John G. Winston, CountyAttorney, Butte,Montana Corette, Smith & Dean, Butte,Montana R. D. Corette Jr. argued and John Larson argued,

Submitted: September 27, 1977 ~ecided: 

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# IS1978Mr. Justice Daniel J. Shea delivered the Opinion of the Court.

PlaintiffsGerald Hansen and Consolidated Commerce Corporation appeal from an order of the Silver Bow County District Court granting summary judgment in favor of defendants Transamerica Insurance Company and Silver Bow County in an action on an insurance policy. Plaintiffsbrought this action seeking the full amount of

an insurancepolicy following the destruction by fire of a building known as the Woodrow Hotel, located in Butte,Montana, and a declaration of the county's interest in the building at the time of its destruction. The countywas the seller and plaintiff Hansen the buyer of thisbuilding under a contract of sale entered into by these parties. The county cross-claimed against Transamerica seeking the full amount of the insurancepolicy, alleging its interest in the building was superior to that of plaintiffs. On March 13, 1974, Transamericadeposited $2,862.35, a sum less than the full amount of the insurance policy,with the DistrictCourt. On May 29, 1974, the District Court ordered the remains of the destroyed building demolished, reserving for a later hearing determination of the rights of the parties in the building and the building's value at the time of its destruction. Following

a hearing, the District Court grantedmotions of the county and Transamerica for summary judgmenton the issue of the building's ownership, ruling that plaintiffs had forfeited all rights to the building as of June 19, 1970,nearly fivemonths before the building's loss,because of their failure to pay the first of four yearly installmentson the contractwhich was due on that date. Undisputed facts upon which summary judgmentwas granted

are as follows:On June 19, 1969,plaintiff Gerald Hansen entered into a contract with Silver Bow County to purchase property which had reverted to the county for back taxes. By the terms of the contract Hansenwas to pay $8,500 for this property,which consisted of the Woodrow Hotel building. The contract called for a payment of $1,700 down and $1,700 in each of the next four years,with the payments due on the 19th of June of each year. Important here is the third clause of this contract,which provides: "3. That time is of the essence of this contract, and in the event that thepurchaser or his assigns shall fail to pay any installment,when due, or any annual interest on deferred paymentwhen due, or any tax or assessment, when due, or shall fail to comply with any other terms or covenants in this contract,then and thenceforth thevendor shall be released from all obligation in law or equity to convey such property, and the purchaser, or his assigns, shall forfeit all right thereto. 

## * * *" Hansen made the downpayment and assigned the contract to the Consolidated Commerce Corporation, which was owned by Hansen. The installmentdue on June 19, 1970,was not paid. The county sent no notice of default with respect to thismissed installment and took no action to repossess theproperty. The building was destroyed as the result of two fires, on the 3rd and 9th of November, 1970. Four days after the building's destruction,nearly five months after plaintiffs' failure to pay the 1970 installment, the county repossessed the building. Transamerica, which had transferred an existing insurance policy covering the building to Hansen onAugust 11, 1969,received proofs of loss fromplaintiffs and the county following the building's destruction. Transamericapaid neither claim. The underlying issue on appeal iswhether Hansen still had

an interest in the property at the time of the fire. Summary judgment isproper if the record shows there is no genuine issue of material fact and the movant is entitled to judgmentas a matter of law. The burden initially is on themovant to show the absence of any genuine issue of material fact; if the record discloses no such issue, the burden shifts to the party opposing themotion, who must then establish a genuine factual issue. Rule 56(c), M.R.Civ.P.; Harland v. Anderson (1976),169Mont. 447, 548 P.2d 613, 33 St.Rep. 363. In this case determination of the interest of the parties in the building at the time of itsdestruction did not raise an issue of material fact. Thepropriety of summary judgment, therefore, turns onwhether the county is, as amatter of law, entitled to sole ownership of the building as of June 19, 1970, the date on which the unpaid installmentbecame due. The county contends the third clause of the contract, the "time is of the essence" provision, controls,and that sinceno notice of forfeiturewas required by that provision, plaintiffs' failure to pay the installment due on June 19, 1970 automatically terminated their interest in the building as of that date. Plaintiffs contend they had an insurable interest in the building at the time of the firebecause the county had not yet acted to repossess the property. They argue that by failing to assert its ownership interestby repossession until five months after plaintiffs' default the county waived the "time is of the essence" provision and therefore, as amatter of law,was not entitled to invoke strict forfeiture under thisprovision. All parties rely on Fratt

### v. Daniels-JonesCo. (1913),47 Mont. 457, 133 P. 700, in support of their respectivepositions. In Fratt, the sellers of realproperty sought to enforce a contract clause which provided that failure of the buyer tomake a payment when due "shallwork an immediate forfeiture of this contract, without any notice whatever

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## *." Four months after the due date of amissed installment the sellers sent the buyer notice of for-feiture. The buyers then tendered the amount owed, which was refused. The sellers received a judgment on the pleadings in their subsequent quiet title action and upon appeal the buyers contended that the delay between default and taking action thereon constituted a waiver of the default. This Court did not agree. Distinguishing between two "classes"ofcontractswhich include "time is of the essence" provisions, this Court stated: 

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## * * * counsel failed to discriminate between a contract like the one now under consideration,by the very terms of which the failure to pay an installment when due ipso facto ends the contract,and onewhich provides that upon the failure of the vendee to make payment on time, the vendor shall have the right to declare the agreement at an end 

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## * * Under an agreement of the first class the breach by the vendee terminates the contract unless the vendor elects to waive the time provision and continue the agreement in force. 

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## * Under a contract of the second class the breach by the vendee does not ipso facto terminate the agreement. Itmerely creates the condition under which thevendor may terminate it if he elects to avail himself of thepower conferred 

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## *." 47Mont. 499. The "time is of the essence" provision at issue here is not qualified by a notice requirement of any kind,and the contract therefore can be described as being of the first "class"as set forth in Fratt. Absent a waiver of the operation of this provision, plaintiffs' default would have the effect of working a forfeiture of their interests in the building as of the date of the default. We hold in this case therewas such a waiver by the county. A period of nearly five months elapsed between the date onwhich the 1970 installmentbecame due and the county's action in repossessing the building as a result of plaintiffs' nonpayment of that installment. During thatperiod the county did nothing. Itwas not until four days after the building's destruction that the county commissionersnotified the county treasurer of the repossession. As this Court stated in Suburban Homes Co. v. North (1914),50 Mont.

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## * * * If payment is to be made in installments, default in the payment of any installment is a distinct breach and gives thevendor the right to declare a forfeiture. The rightmust be promptly exercised, however; otherwise, the rightbeing exclusively that of the [vendor], he will be presumed to regard the contract as stillvalid and existent. 

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## * " The county could have repossessed the building immediately upon plaintiffs' failure to pay the 1970 installmentwhen it was due. However, the countywas not required to repossess the building, and could have either expressly waived the time provision or accepted latepayment if such payment had been tendered. In either event, the contractwould have remained in effect notwithstandingplaintiffs1 default. Although not express, the county's waiver in the present

case by its nonaction achieved the same result. Plaintiffs concede that the county has an interest in the building and a corresponding right to the insurance proceeds to the extent of the unpaid balance of the purchase price. Although not named a loss payee in the insurance policy as required by the contract, the county still has an equitable lien on the insuranceproceeds regardless of the positions of the parties at the time of the loss. American Equitable Assurance Co. v. Newman (1957),132Mont.

The summary judgment of the District Court is vacated and the cause remanded for further proceedings consistentwith this opinion.

We Concur: 

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Justices -6-

### Mr. Justice Frank I. 

### Haswell,dissenting: Iwould affirm the judgmentof the Uistrict Court. Inmy view all right, title or interestof plaintiffs in the property was terminated automatically on their failure to pay the first installment of the purchase price on June 19, 1970. The contract between plaintiffs and Silver Bow County expressly soprovides inpertinentpart: "Thattime is of the essence of this contract, and in the event that the purchaser or his assiqns shall fail to pay any installment,when due

## * * * then and thenceforth the vendor shall be released - 

### Erom all obligation in law or equity to convey - - 

### suchproperty, and they, 

### o; his assisnq, 1 fnrfu

### all risht ther-. 

## * * *" (Emphasis supplied.) Themajority find an impliedwaiver of this contract provision in the failure of the county to repossess the property for a period of fivemonths. Fratt, cited and quoted in the majority opinion,holds that a breach terminates a contractof the type involved in this case 

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## * * * unless the vendor elects to waive the time provision and continue the agreement in force." It is axiomatic that a waiver is the voluntary relinquishmentof a known right. Iwould not imply such voluntary relinquishmentby the county of its contract right simply from its nonaction for a period of five months to formally repossess the property and cut off any rights of the plaintiffs under the contract,an action itwas not required to take under the automatic termination provision of the contract. Hence no waiver, and the judgmentof the District Court should be affirmed.

Justice Mr. Justice John Conway Harrison dissenting: I concur in the dissent of JusticeHaswell.

L 

### Justice