No. 12400 INTHE SUPREME COURT OF THE STATE OF MONTANA 1973

LESTER J. HELLER and VIRGINIA ANN HELLER, hiswife, Plaintiffs and Respondents,

ARTHUR S. OSBURNSEN and LUCILLE F. OSBURWSEN, hiswife, Defendants and Appellants.

Appeal from: District Court of the Tenth Judicial District, 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, Lewistown, Montana. For Respondents: Dockery and Parrish, Lewistown, Montana. Raymond E. Dockery argued, Lewistown, Montana.

Submitted: March 29, 1973

Decided

## :MAY

# -719'73 Filed: 

## MfiY

# -71973Nr, JusticeWesley Castles delivered the apinion of the Court.

Arthur S. and Lucille F, Osburnsen, husband and wife, are defendants and appellants in this action, and willbe referred to herein as Osburnsen. Lester 

### J, and Virginia Ann Heller, husband and wife, are plaintiffs and respondents and willbe referred to

asHeller. Hellerbrought the action in the district court of the tenthjudicial district, county of Fergus, for a declaratory judgment inreference to a ranch sale transaction between Heller and Osburnsen. The casewas heard without a jury and judgment entered on findings of fact and conclusions of law. From that judgment Osburnsen appeals. For 

### a period of time prior toOctober 1967, EIeller had been trying to sellhis ranch properties. He had appointed one Tom Girvin of Girvin Realtors as his agent to sellthe property. One buyer had been found previous to this time, but had been unable to obtain necessary financialbacking, On October 

### 5, 1967, Girvin did negotiate a sale toOsburnsen and a receipt and agreement to sell.and purchase was executed on that date. The foregoing facts

arc agreed toby the parties; however the remaining facts are disputed. The facts as found by the districtjudge are: In order to raise the necessary down payment on the Hel-lerproperty without disturbing other investments, it became necessary for Osburnsen toborrow approximately $35,000. ~eller's agent, Tom Girvin, was also an agent for the John Hancock l4utual Life Insurance Company; itwas agreed the loan for the down payment would be made through that company. At the time of the sale, Heller owed approximately $30,000 plus an the property to the Kansas City Life Insurance Company and approximately $4,000 plus for closing costs toRealty Abstract Company. John Hancock Company did not want a second mortgage on the property and therefore required that any loan it made be largeenough to pay off the prior indebtedness, in order for it to have

a firstmortgage. Both Heller and Osburnsen signed Loan applications made to the John Hancock Company and a loan of $70,000 was :nade to the parties, Of the $70,000 borrowed, $35,000 was topay off the Kansas City Company mortgage and money owed toRealty Abstract Company, The remaining $35,000 was the down payment on the Heller property. On November 

### 24, 1967, the parties entered into a formal and detailed contract for deed which setout the details of the transaction more completely than did the receipt and agreement to sell and purchase, but inno way conflicted with it. Atthe time of the execution of the contract for deed, the only mortgage or encumbrance on the property was the Kansas City Life Insurance Company and Realty Abstract Company. In February 1968 the parties signed the loan instruments in favor of John Hancock Company; the $70,000 was used toretire the encumbrances and make the down payment toHeller. Copies of the contract and supporting documents, including the John Hancock Company note, were subsequentlyplaced inescrow with thebank. Just under a year later Osburnsen made the first annual payment with interest, which in turn was paid over by the escrow agent partly toJohn Hancock Company and partly toHeller. The escrow agent was following the terms of the contract, since it stated that any mortgage on the land would be paid for out of proceeds of the sale. Heller complained to the escrow agent that hewas inno way involved in the repayment of the loan toJohn Hancock Company and that portion of the contract for deed referring toany mortgage referred tothe Kansas City Life Insurance Company mortgage which had been paid off. Since therewas a problem in interpreting the language of the contract, Heller brought this action for declaratoryjudgment to adjudicate the respective rights and duties of the parties, in particular the amount of money owed by Osburnsen toHeller forthe purchase of the ranch, kt trialOsburnsen contended the purchase price was $85,000 and Heller had given Osburnsen $35,000 for cosigning the note and mortgage. Heller contended the sale was ?rice/$120,000, as set out inallthe documents, and that Osburnsen stillowed Heller $50,000. The trialcourt found the purchase price tobe $120,000; that Heller had received $35,000 as down payment and the additional

sum of $35,000 by reason of payment of the Kansas City and Abstract obligations; and Osburnsen 

### stillowed Heller the sum of $50,000. The trialcourt further found the John Hancock Company loan was made jointly toboth parties and Osburnsen was obligated to pay 50%of the loan, independent of payments on the contract; that Heller was obligated to repay the other 50%of the John Hancock Company loan out of the yearly payments for the sale of the ranch. On appeal appellant Osburnsen raises three issues forreview: 

### 1, Did the district court abuse its discretion indecreeing

a reformation of a written contract in a declaratoryjudgment action? 

### 2. Did the district court abuse its discretion inentering findings and granting declaratoryjudgment outside the issues presented? 

### 3. Did the di.strict court err indenying defendant's motion for summary judgment? 

### Inhis first issue Osburnsen contends the districtcourt in

a declaratoryjudgment proceeding abused 

### its discretionby reformi-ng the contract. He argues the contract was clear and stated specifically: "The Vendors shall deposit with the escrow agent hereinafternamed allmortgages or other indebtedness incurred by Vendors which indebtedness is secured by a mortgage on the above described realproperty, and instruct the escrow agent that allpayments received on this Contract for Deed shallbe appliedby the escrow agent on the payment of such indebtedness; That upon payment in full of such outstanding i-ndebtedness of the Vendors allamounts paid by the Vendees to the Vendors shallbe credited to the Vendors." Osburnsen argues that neither party wants the contract changed, and the above cited clause refers to the John Hancock Company loan. Respondent Heller clai-msthe clause refers to theReaity Abstract and Kanszs City Company loans, Osburnsen contends since the district court went beyond the contract and found both parties owed on the note, it reformed the contract without proper authority. We do not agree the district court reformed the contract. This action was brought under the Uniform Declaratory Judgments Act, sections 93-8901 through 93-8916, R.C.M. 1947, which provides i.n part: "93-8901 Scope, Courts of record within their respective jilrisdictions shallhave power todeclare rights, status, and other legal relations whether or not further relief isor could be claimed, No action orproceeding shallbe open toobjection on the ground that a declaratoryjudgment or decree 

### isprayed for. The declarationmay be either affirmative ornegative in form and effect; and such declarations shall the force and effect of a finaljudgment or decree. II "93-8902 Power toconstrue, etc. Any person interested under a deed, will, written contract or other writings constituting a contract, orwhose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of 

### rihts, status or other legal relations thereunder.

# 6
'93-8903 Before breach. A contract may be construed either before or after there has been a breach thereof." Here, therewas ambiguity on the face of the contract as to which mortgage

# -- John Hancock or Kansas City Life

# -- was referred to. In McNussen v. Graybeal, 146Mont. 173, 186, 405 P.2d 447, this Court when faced with 

### a problem of ambiguity said: "ft

### iswell-settled law that the question of whether an ambiguity exists 

### is one of law for the court. 11 The Court then went on to say thatwhen having to explain an ambiguity in a contract, extrinsic evidence willbe used to explain the true intention of the parties. Considering the evidence, we find two exhibits introduced at trialwhich were applications for a farm mortgage loan, One

was signed by Heller and the other by Osburnsen. Both applications were for the same land, the Heller ranch, and both recited the

same sellingprice $120,000, Upon being called to interpret thecontract, itwas clearlywithin the purview of the district court judge toexamine the evidence and itwas not an abuse of his discretion to find that both partieswere liable tothe John Hancock Company. Both partieshad signed loan applications for the same land, and the district court found thatboth owed

one half of thenote. The court did not reform the contract but instead interpreted it in light of thewhole transaction and allthe documents and evidence, which 

### isaccording to law, We find authorj-tiescitedby appellant Osburnsen dealwith actions concerni.ng suits toreform contracts, Such was not the situationhere; therefore the cited authorities arenot persuaOsburnsen's second issue isthat the district court abused itsdiscretion in entering findings and granting declaratory judgment outsi.de the issues presented, He citesNational Surety Corp. v. Krtlse, 121Elant. 202, 192 P,2d 317, where this Court held that in a declaratoryjudgment action the district court must have findings of fact to support thejudgment; or the issues must have been presented in the pleadings fordetermination. That rule of law isclear and established; we do not find that it 

### is inconflictwith the situation inthe instant case. The complaint alleged:

11I. That this action 

### isbrought under theprovisions of Chapter 

### 89 of Title 93 of the Revised Codes of Montana, 1947, and acts amendatory thereto. "11. That prior to the 5th day of October, 1967, Plaintiffswere the owners of a certain ranch and had listed the same for salewith Tom Girvin, a relator in the city of Lewjstown; that on or about the 5th day of October, 1967, Defendants herein agreed topurchase and Plaintiffsherein agreed to sell, the said ranch for the sum of $120,000.00 on the terms and basis setout in

### a certain receipt and agreement to selland purchase, a true and correct cop of which is annexed to this Complaint asExhibit 'A1' and by incorporation and reference made a part hereof. "111. That subsequently on or about the 24th da.y of November, 1967, the parties heretohad a formal Cantract forDeed prepared and that the same was duly and properly executedbyallofthepartieshereto; that said contract provided ior the payment of $120,O00.00by Defendants toPlaintiffs for the purchase of said ranch, and certainother matters; that a true and correct copy of this Contract for Deed isannexed to this Complaint asExhibit It If

B and by incorporation and reference made a part hereof, "IV. That subsequently Defendants made arrangements toborrow certain sums of money on the real propertywith which to complete the down payment thereon and toprepay certain other items of costs and other matters in connection therewith; and that Plaintiffsherein executed the loan documents atthe special instance and request of Defendants; that Defendants have taken possession of the ranch and that altogether there has been paid to Plaintiffs on account of said agreement the sum of approximately $69,670.00, and that there is 

### stilldue and owing toPlaintiffs the sum of approximately $50,330.00, plus accrued interest and other interestwhich willaccrue from time to time

# . "V. That Defendants have now stated and alleged that they only paid $85,000.00 for the ranch, and on account of the transaction. and that there isnow only due and owing to plaintiffs the sum of $15,000.00, allcontrary to the form, force and effect of the written agreement between the parties and allother agreements between the parties; that such allegationsby Defendants are falseand untrue and that there 

### is due and owing to Plaintiffs the sum of approximately $50,330,00.

## " The prayer forrelief asked that a declaratoryjudgment be entered declaring and adjudicating the respective rights and duties of the parties under the provisions of the contract. It is clear from the complaint, in particular paragraph 

### IV and the prayer, that Heller wanted a determination of who owed what on the John Hancock Company loan, This iswhat the pleadings asked for, and it iswhat the district court did. Osburnsen alleges the district court went beyond thepleadings inits determination, but our reading of the pleadings and prayer forrelief finds no error in the districtcourt's action, Appellant ~sburnsen's final issue isthat the district court erred innot granting sllmmary judgment. Defendant Osburnsen served

on plaintiff Heller a request for admissions, pursuant toRule 36, M.R..Civ,P. Heller did not respond to the request within the time period and so Osburnsen moved for summary judgment, based primarily

on the admissions which are deemed admitted as true ifnot answered.A review of therecord indicates the districtcourt allowed Heller tofileanswers which, although late, were admitted and then the district court denied the motion for summary judgment, The real question is

# --- was the district court correct in granting Heller time to fileanswers after the time limithad expired? We find the district court correctly interpreted the rule. It has been established by case law that if answers arenot made torequests for admissions under Rule 36, M.R,Civ.P., such admissions are deemed admitted as true, Naegeli v. Daniels, 145 Mont. 323, 

### 400 P.2d 

### 896. However, this Court has not heretofore had the problem, ashere, where a partywants to fileanswers but it is after the permitted time period. 2Moorefs Manual, Federal Practice and Procedure, $ 15.05[2], p. 1156, provides a guide: "9; 

# ** Failure to take any actionwithin the period stated in the request results inan admission of the facts stated therein, although the court may permit the party to filehis answer after the expiration of such time where the delaywas not caused by lack of good faith, Orinthe absence of any prejudice to the party requesting the admission. 11 In French 

### v. United States, 416 F.2d 1149, 1152, the Ninth Circuit Court of Appeals, citing from Moosman v. Joseph P, Blitz, Inc., 358 F,2d 

### 686 (2 Cir. 1966), said:

lfUnder compelling circumstances the District Court may allow untimely replies to avoid admission. 

# **

# * Since the purpose of Rule 36 

### is to expedite trialby removing uncontested issues and no delaywas caused here, there isno sufficient reason to force the District Court togrant summary judgment herewhere no prejudice is shown. tI In the instant case itwas established that the delaywas caused by a mixup in officeprocedure, and certainlynot by any bad faith on Heller's part. It was an accident that the answers
were not filedwithin the time, but itwas a situationwithin the discretion of the trialcourt to determine ifOsburnsen would be prejudiced by the latefiling, Since it isclearno prejudice could be shown, we find nothing which would indicate the districtcourt abused 

### itsdiscretion ineither allowing the late filing,

or indenying the motion for summary judgment. The judgment of the district court isaffirmed.

Won. 

### Jack Shanstrom, District Judge, sitting for Chief Justice James T. Harrison.