No. 12400 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1973 

LESTER J. HELLER and VIRGINIA 

ANN HELLER, his wife, 

Plaintiffs and Respondents, 

ARTHUR S. OSBURNSEN and LUCILLE F. 

OSBURWSEN, his wife, 

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, Lewis town, Montana. 

For Respondents: 

Dockery and Parrish, Lewistown, Montana. 

Raymond E. Dockery argued, Lewistown, Montana. 

Submitted: March 29, 1973 

Decided :MAY - 7 19'73 

Filed: MfiY - 7 1973 
Nr, Justice Wesley Castles delivered the apinion of the Court. 

Arthur S. and Lucille F, Osburnsen, husband and wife, are 

defendants and appellants in this action, and will be referred to 

herein as Osburnsen. Lester J, and Virginia Ann Heller, husband 

and wife, are plaintiffs and respondents and will be referred to 

as Heller. Heller brought the action in the district court of 

the tenth judicial district, county of Fergus, for a declaratory 

judgment in reference to a ranch sale transaction between Heller 

and Osburnsen. The case was 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 to October 1967, EIeller had been 

trying to sell his ranch properties. He had appointed one Tom 

Girvin of Girvin Realtors as his agent to sell the property. One 

buyer had been found previous to this time, but had been unable 

to obtain necessary financial backing, On October 5, 1967, Girvin 

did negotiate a sale to Osburnsen and a receipt and agreement to 

sell. and purchase was executed on that date. The foregoing facts 

arc agreed to by the parties; however the remaining facts are disputed. 

The facts as found by the district judge are: In order to 

raise the necessary down payment on the Hel-ler property without 

disturbing other investments, it became necessary for Osburnsen 

to borrow approximately $35,000. ~eller's agent, Tom Girvin, was 

also an agent for the John Hancock l4utual Life Insurance Company; 

it was 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 to Realty Abstract 

Company. John Hancock Company did not want a second mortgage on 

the property and therefore required that any loan it made be large 
enough to pay off the prior indebtedness, in order for it to have 

a first mortgage. 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 to pay off the Kansas 

City Company mortgage and money owed to Realty 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 set out the details of the transaction more completely than did the receipt and agreement to sell 

and purchase, but in no way conflicted with it. At the 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 to retire the 

encumbrances and make the down payment to Heller. Copies of the 

contract and supporting documents, including the John Hancock 

Company note, were subsequently placed in escrow with the bank. 

Just under a year later Osburnsen made the first annual payment 

with interest, which in turn was paid over by the escrow agent 

partly to John Hancock Company and partly to Heller. 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 he was 

in no way involved in the repayment of the loan to John Hancock 

Company and that portion of the contract for deed referring to any 

mortgage referred to the Kansas City Life Insurance Company mortgage 

which had been paid off. 

Since there was a problem in interpreting the language of 

the contract, Heller brought this action for declaratory judgment 

to adjudicate the respective rights and duties of the parties, 

in particular the amount of money owed by Osburnsen to Heller for 
the purchase of the ranch, kt trial Osburnsen 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 in all the documents, and that Osburnsen 

still owed Heller $50,000. 

The trial court found the purchase price to be $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 still owed Heller the sum of 

$50,000. The trial court further found the John Hancock Company 

loan was made jointly to both 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 for review: 

1, Did the district court abuse its discretion in decreeing 

a reformation of a written contract in a declaratory judgment action? 

2. Did the district court abuse its discretion in entering 

findings and granting declaratory judgment outside the issues 

presented? 

3. Did the di.strict court err in denying defendant's motion 

for summary judgment? 

In his first issue Osburnsen contends the district court in 

a declaratory judgment proceeding abused its discretion by reformi-ng 

the contract. He argues the contract was clear and stated specifically: 

"The Vendors shall deposit with the escrow agent hereinafter named all mortgages or other indebtedness incurred 

by Vendors which indebtedness is secured by a mortgage on 

the above described real property, and instruct the escrow 

agent that all payments received on this Contract for Deed 

shall be applied by the escrow agent on the payment of such 

indebtedness; That upon payment in full of such outstanding 

i-ndebtedness of the Vendors all amounts paid by the Vendees 

to the Vendors shall be 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-ms the clause refers to the 
Reaity 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 shall have power to declare 

rights, status, and other legal relations whether or 

not further relief is or could be claimed, No action 

or proceeding shall be open to objection on the ground 

that a declaratory judgment or decree is prayed for. 

The declaration may be either affirmative or negative 

in form and effect; and such declarations shall the 

force and effect of a final judgment or decree. I I 

"93-8902 Power to construe, etc. Any person interested under a deed, will, written contract or other 

writings constituting a contract, or whose 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 ri hts, 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, there was ambiguity on the face of the contract as to 

which mortgage -- John Hancock or Kansas City Life -- was referred 

to. In McNussen v. Graybeal, 146 Mont. 173, 186, 405 P.2d 447, 

this Court when faced with a problem of ambiguity said: 

"ft is well-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 that when having to explain an 

ambiguity in a contract, extrinsic evidence will be used to explain the true intention of the parties. 

Considering the evidence, we find two exhibits introduced 

at trial which 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 selling price $120,000, Upon being called to interpret the 
contract, it was clearly within the purview of the district 

court judge to examine the evidence and it was not an abuse of 

his discretion to find that both parties were liable to the John 

Hancock Company. Both parties had signed loan applications 

for the same land, and the district court found that both owed 

one half of the note. The court did not reform the contract but 

instead interpreted it in light of the whole transaction and 

all the documents and evidence, which is according to law, 

We find authorj-ties cited by appellant Osburnsen deal with 

actions concerni.ng suits to reform contracts, Such was not the 

situation here; therefore the cited authorities are not persuaOsburnsen's second issue is that the district court abused 

its discretion in entering findings and granting declaratory 

judgment outsi.de the issues presented, He cites National Surety 

Corp. v. Krtlse, 121 Elant. 202, 192 P,2d 317, where this Court held 

that in a declaratory judgment action the district court must have 

findings of fact to support the judgment; or the issues must have 

been presented in the pleadings for determination. That rule of 

law is clear and established; we do not find that it is in conflict with the situation in the instant case. 

The complaint alleged: 

11 I. That this action is brought under the provisions 

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, 

Plaintiffs were the owners of a certain ranch and 

had listed the same for sale with Tom Girvin, a 

relator in the city of Lewjstown; that on or about 

the 5th day of October, 1967, Defendants herein 

agreed to purchase and Plaintiffs herein agreed to 

sell, the said ranch for the sum of $120,000.00 

on the terms and basis set out in a certain receipt 

and agreement to sell and purchase, a true and 

correct cop of which is annexed to this Complaint 

as Exhibit '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 hereto had a formal Cantract for Deed prepared and that the same was duly 

and properly executedbyallofthe parties hereto; that 

said contract provided ior the payment of $120,O00.00 
by Defendants to Plaintiffs for the purchase 

of said ranch, and certain other matters; that 

a true and correct copy of this Contract for 

Deed is annexed to this Complaint as Exhibit 

It If B and by incorporation and reference made a 

part hereof, 

"IV. That subsequently Defendants made arrangements to borrow certain sums of money on the real 

property with which to complete the down payment 

thereon and to prepay certain other items of 

costs and other matters in connection therewith; 

and that Plaintiffs herein executed the loan 

documents at the 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 still due and owing to Plaintiffs the sum of 

approximately $50,330.00, plus accrued interest 

and other interest which will accrue 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 

is now only due and owing to plaintiffs the sum 

of $15,000.00, all contrary to the form, force 

and effect of the written agreement between the 

parties and all other agreements between the parties; 

that such allegations by Defendants are false and 

untrue and that there is due and owing to Plaintiffs 

the sum of approximately $50,330,00. " 

The prayer for relief asked that a declaratory judgment 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 is what the pleadings 

asked for, and it is what the district court did. Osburnsen 

alleges the district court went beyond the pleadings in its determination, but our reading of the pleadings and prayer for relief 

finds no error in the district court's action, 

Appellant ~sburnsen's final issue is that the district court 

erred in not granting sllmmary judgment. Defendant Osburnsen served 

on plaintiff Heller a request for admissions, pursuant to Rule 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 if not answered. 
A review of the record indicates the district court allowed 

Heller to file answers 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 file answers after the time limit had expired? 

We find the district court correctly interpreted the rule. 

It has been established by case law that if answers are not 

made to requests 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, as here, where a party wants to file answers 

but it is after the permitted time period. 2 Moorefs Manual, 

Federal Practice and Procedure, $ 15.05[2], p. 1156, provides a 

guide : 

"9; * * Failure to take any action within the period 

stated in the request results in an admission of the 

facts stated therein, although the court may permit 

the party to file his answer after the expiration of 

such time where the delay was not caused by lack of 

good faith, Or in the 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: 

l f Under compelling circumstances the District Court 

may allow untimely replies to avoid admission. * * * 

Since the purpose of Rule 36 is to expedite trial by 

removing uncontested issues and no delay was caused 

here, there is no sufficient reason to force the 

District Court to grant summary judgment here where 

no prejudice is shown. t I 

In the instant case it was established that the delay was 

caused by a mixup in office procedure, and certainly not by any 

bad faith on Heller's part. It was an accident that the answers 

were not filed within the time, but it was a situation within the 

discretion of the trial court to determine if Osburnsen would be 

prejudiced by the late filing, Since it is clear no prejudice 

could be shown, we find nothing which would indicate the district 
court abused its discretion in either allowing the late filing, 

or in denying the motion for summary judgment. 

The judgment of the district court is affirmed. 

Won. Jack Shanstrom, District 

Judge, sitting for Chief Justice 

James T. Harrison.