No. 14770 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979

DONALD J. HOFFMAN and DONNAM. HOFFMAN, Plaintiffs andAppellants,

VS

# . PATRICKA. BYRNE and ROBERTA R. BYRNE, Defendants and Respondents.

ORIGINAL PROCEEDING: Counsel of Record: ForAppellants: Keller, Reynolds,Drake, Sternhagen & Johnson, Helena,

Montana Hood and Sherwood, Missoula,Montana Mike Sherwood argued, Missoula,Montana Morales, Volinkaty and Harr, Missoula,Montana 

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# ../ For Respondents: Milodragovich, Dale & Dye,Missoula,Montana Harold Dye argued, Missoula,Montana

Submitted: November 6,1979 ~ecided: 

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## 1979 Cje;[l Q7 *A- Filed:
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### /~'7$jMr. Justice John C. Sheehy delivered the Opinion of the Court. Appeal isby plaintiffs Donald J. Hoffman and Donna Hoffman from a grant of summary judgment against them by the District Court, Fourth Judicial District,Missoula County. They had brought action in that court againstdefendants PatrickA. Byrne and RobertaR. Byrne for a declaratory judgment thatplaintiffs were not in defaultwith respect to a contract topurchase real estate from the defendants. The District Court decided against the Hoffmans as purchasers, granted summary judgment to the Byrnes, and later ordered by writ of restitution that the Hoffmans surrender the real property to the Byrnes. The appeal followed. In separating the factsof the case, it is easier to separate the incidentsby dates as follows: October 

## -- 23, 1974: PatrickA. Byrne and RobertaR. Byrne, as sellers entered into a contract for deed with Donald J. Hoffman and DonnaM. Hoffman, as buyers, for certain real property located in Missoula County. The contract provided for an escrow towhich paymentswere to be made this being the Southside National Bank of Missoula at the time that ispertinent here. The contract also provided that the escrowholder was to deduct from eachmonthly payment made by the Hoffmans a sum sufficient to pay amortgage remaining due on the property on the interestof the sellers, Byrnes. December 

### -- 6, 1977: On this date the Byrnes sent a letter by certified mail to the Hoffman~ alleging a default in that judgmenthad been taken against them by Budget Finance in Flathead County for $4,223.81 and the Sheriff of Missoula County had filed and served a notice of levy of execution on the interest of the Hoffmans in the real property being purchased. This contract fordeed required a 30-daywritten notice, the time apparently to run from the receipt of the written notice by the buyers. Theprovision of the contract

onwhich the sellers relied as a default provides: -2-"Thebuyer agrees to keep all of the property covered hereby free from any lien,mortgage or encumbrance which may be or become superior to the lien of the Sellers' title, without the prior written permission of the sellers.. 

# . ." December 

### - 21, -- 1977: Donald Hoffman signed the certified mail receipt,acknowledging receipt of the letter of December

January 

### - 11, -- 1978: The sellers Byrnes closed the escrow account of the Southside National Bank, and obtained the escrow papers which have been deposited therein. One of these was a quitclaim deed to the subjectproperty from the buyers to the sellerswhich the'sellersfiled and recorded on that date. January 

## -- 12, 1978: Donald Hoffman filed a petition for bankruptcy. January 

## -- 20, 1978: The buyers filed a petition for declaratory judgment against the sellers. In general, the allegations are that Donna Hoffman never received a notice of default in respect to the property; that in any event no default existed. Theprayer was that the court declare that the defendants were not entitled to default by reason of the notice dated December 6,1977 and to restrain the sellers from otherwise selling or transferring or encumbering the subjectproperty. January 

### - 24, -- 1978: Hugh Kidder, on behalf of Donna Hoffman, tendered to Southside National Bank, and then to Gary Chumrau, counsel for the bank, such sums asmight then be due upon the contract. March -- 24, 1978: Judgment in the declaratory judgment action by thebuyers was entered against the sellers on sellers' default. June 26, 1978: The default judgment against the sellers 

## --- was set asideby stipulation. The sellers filed their answer to thepetition for declaratory judgment on that date. The answer alleged essentially:The sellers admit they sent the notice of default on December 6, 1977,but deny any knowledgeof whether or not itwas received by Donald Hoffman. The sellers admit that they have demanded and received the escrowpapers from SouthsideNational Bank of Missoula. Jul 31, 1978: The bankruptcy petition by Donald J. 

### 2-- Hoffman was dismissed. August 16, 1978: On this date a second letter addressed 

## -- to the Hoffman~ was sentby the attorneys for the Byrnes setting out several alleged defaults and demanding cure of the same within 30days. September 

## -- 27, 1978: The sellers, through their attorneys, sent out a request for admissions to each of the buyers, asking in essence that they admit that they had received a second notice of default, that they had notmade payments in connection with the same, except for a letter dated September 19, 1978 from Richard Volinkaty, one of the attorneys for the husband, in which letterVolinkaty agreed on behalf of Hoffman to pay the amounts nowdue on the contract,provided that the sellers also pay the sum of $10,000 for damages. December 

### -- 13, 1978: Sellers moved for summary judgment against buyers. December 

## -- 13, 1978: Affidavit of John Peterson,Vice Presidentof Southside National Bank of Missoula was filed in which he indicated that "since January 13, 1978"no offer of payments have been made to him in connectionwith the escrow. Also filed on this date was the affidavit of one of the sellers,Patrick Byrne, stating that since January 13, 1978,

no tender ofpayment has been made. December 

### -- 21, 1978: The deposition of Patrick Byrne was taken. He testified that he still had the escrowpapers, that he has never authorized Southside National Bank, since January 11, 1978 to accept payments, and that he has continued tomakethemortgage payments and tax reserve payments in connection with the property concerned. During thatperiod of time the property has continued to be occupied by the buyers. January -- 3, 1979: Donna Hoffman filed her responses to the request for admissions,admitting receiving the second notice of August 16, 1978. February 

### -- 22, 1979: The Court granted sellers' motion for summary judgment against the defendants. February 

### -- 26, 1979: The sellers made a motion forwrit of restitution. March 

## -- 1, 1979: The court denied the motion for a stay order. April 

## -- 12, 1979: The court granted awrit of restitution but stayed the effect of the order pending appeal. Subsequently this Court stayed any further action of the courtbelow until this appeal has been decided. The issues as framed by the parties are these: 1. Whether the District Court erred in granting summary judgment because material questions of fact exist. 2. Whether the District Court erred in granting summary judgment by construing the declaratory judgment as a request for relief from forfeiture. 3. Whether the District Court erred in granting a writ of restitution. The first notice of default was defective. The clause in the contract of purchase relied upon by the sellers makes the filing of a lien a cause for default only if it affects the sellers' title. The lien of a judgment creditor against the buyer in this casewould affect only the interestof the buyer in the property, and not the sellers' title. Therefore the originaldefault noticewas without basis. However,based on the notice of default of December 6, 1977,and within 30 days of the receipt of that written notice -5-by Donald Hoffman (Donna, thewife, did not receive the notice), the sellerson January 11, 1979, closed out the escrow, and recorded the quitclaim deed against the buyers which had been filed as a part of the escrowpapers. The pleadings in the declaratory judgment action relate only to the situation as it existed on January 20, 1978, the date of the filing of the petition for declaratory judgment. The courtwithout any furtherpleadings, but based only upon requests for admissions onmatters that occurred after the case was at issue,granted summary judgment in favor of the sellers. Thus the court went outside the pleadings, because as far as thepleadings are concerned, the court should have declared and determined that the originalnotice of default

was defective, that the defendantswere not in default and perhaps have given such additional relief asmight be necessary to restore the parties to their statusquo. At the time of the hearing on the writ of restitution, onApril 12, 1979, the buyers did in fact through their attorneys tender a cashier's check,the sum of $7,408,which they had calculated to be the amount thatwould make the sellerswhole on that date. Nevertheless, the court refused to accept this tender and went ahead and issued the writ of restitution. The proper result in this case is to set aside the findings and conclusionsand summary judgment and we return the matter to the DistrictCourt for further proceedings ordering: (1) that the court require the parties to determine the amounts necessary to bring the contract current; (2) that the buyers and sellersrestore escrow arrangements and documents; (3) that the buyers be given a reasonable time to cure any defaultsproperly a ground for forfeiture of the contract; and, -6-(4) thereupon if the defaults are cured, restore the contract for deed as in full force and effect; otherwise declare a forfeiture. (5) As we see no present merit in buyers' claim for tort damages,we reserve our opinion on that point, and leave it to the District Court for any further decision. We realizewe have not pointed to a single authority in this Opinion. It is enough to say the situation isnovel. This cause is remanded for further proceedings in accordance with this Opinion.

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We Concur:

Chief Justice

Justices