No. 13118 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1977 

PERL SMITH, S. CHARLENE SMITH, and 

EVERETT SATTERFIELD, 

Plaintiffs and Respondents, 

WILBUR J. ZEPP, WESLEY FARNER, C. E. 

KNOWLES, and WOLVERINE MINING, INC., 

a Montana corporation, 

Defendants and Appellants. 

Appeal from: District Court of the Third Judicial District, 

Honorable Robert Boyd, Judge presiding. 

Counsel of Record: 

For Appellant: 

Crowley, Haughey, Hanson and Toole, Billings, Montana 

Stephen Foster argued, Billings, Montana 

Boone, Karlberg and Haddon, Missoula, Montana 

Sam E. Haddon argued, Missoula, Montana 

For Respondents: 

William R. Taylor , Deer Lodge, Montana 

Radonich, Brolin and Reardon, Anaconda, Montana 

John N. Radonich argued, Anaconda, Montana 

-. ?&It;L. "gri Filed: 

Submitted: April 20, 1977 

Decided : 

UGz Isn 
Mr. Chief Justice Paul G. Hatfield delivered the Opinion of the 

Court. 

This is an appeal by defendants from a district court judgment granting forfeiture of a contract for purchase of mining property by defendants and cancellation of a deed to a number of 

patented and unpatented mining claims. 

In 1964, plaintiff Perl Smith purchased numerous patented 

and unpatented mining claims in Granite and Powell Counties known 

as the "Master Mine". Plaintiff thereafter obtained a personal bank 

loan and mortgaged the Master Mine property as security. When 

plaintiff failed to repay the loan, the bank obtained a judgment 

of foreclosure. The property was sold at a foreclosure sale on 

May 28, 1971, after which plaintiff's sole interest in the property 

was a year's statutory right of redemption under section 93-5835, 

R.C.M. 1947. 

In late April, 1972, plaintiff met with defendants Zepp and 

Farner and discussed the sale of the Master Mine. On May 15, 1972, 

the parties entered into a contract whereby plaintiff agreed to 

sell, and defendants agreed to purchase, the Master Mine properties. 

As consideration for plaintiff's granting of his ownership rights 

in the property to defendants, defendants agreed to pay approximately 

$69,000 for the redemption of the first mortgage on the Master Mine 

property, and to pay $31,455 to various creditors of plaintiff. 

In addition, defendants agreed to pay plaintiff Perl Smith a monthly 

consultation fee of fifteen percent (15%) of the net operating profit 

of the Master Mine. The parties contracted that defendants would 

pay the 15% consultation fee to plaintiff Perl Smith or to his wife, 

plaintiff Charlene Smith, during their lifetimes; if both plaintiffs 

predeceased their son, defendants agreed to pay the son a commission 

of 7-1/2% of the net profits. 

To insure that the income from the mine, and consequently, 
the consultation fee or commission, were maximized, defendants 

agreed to produce an average of 300 yards of material each working 

day. The material would then be taken to the mine's washing plant 

where the gravel would be washed from the gold. There was not 

sufficient machinery at the gold mine to excavate 300 yards of 

material per day, but defendants agreed to purchase the larger 

Caterpillar, dragline with three yard bucket, and dump truck necessary to achieve a 300 yard per day production level. 

The parties provided in the contract that in lieu of the 

consultation fees or commissions to be paid from the net mining 

profits, they might at a later date negotiate a fixed monthly payment. In case of any dispute between the parties as to the provisions of the contract, plaintiff Per1 Smith and defendants agreed 

to submit the controversy to arbitration. 

The contract also contained a provision which provided for 

a reversion of the property to the seller if defendants defaulted 

in their "payment of said property", and failed to cure their 

default within thirty days from receiving the seller's notice of 

default . 

After plaintiff and defendants signed the contract, plaintiff fully performed his contract obligations. Plaintiff gave to 

defendants a quitclaim deed for all his interests in the Master 

Mine property and the buildings thereon. The buildings consisted 

of a main building with dining room, kitchen, bedrooms, showers, 

five furnished cottages, an assay building, and several other shops, 

light plants, storage and machinery repair buildings. The land 

consisted of approximately 360 acres of patented and 1,680 acres 

of unpatented mining claims. According to a local appraiser, the 

mining land was also valuable for recreation, timber and livestock 

grazing. The appraiser set the value of the land on ~ebruary 12, 

1968, at approximately $148,000, excluding mineral rights. ~ccording 
to the report of a geophysicist who took random samples of the 

earth at the mine site, the property contained an estimated $615 

million worth of gold and other noble metals. 

Defendants paid the approximately $69,000 necessary to 

redeem the property from the mortgage foreclosure and paid the 

approximately $31,455 of plaintiff Per1 Smith's debts, as they had 

agreed to do in the contract. Defendants also successfully prepared 

the property for mining, by clearing the mine road of snow, repairing damaged equipment, and building dams and settling ponds so as 

to comply with state and federal environmental regulations. Defendants thereafter, however, failed to meet the contract condition 

that required them to produce 300 yards of material each day. It 

was defendants' failure to satisfy this contractual provision 

which gave rise to plaintiff's successful lawsuit in district court, 

and defendants' appeal to this Court. 

At the time that defendants commenced mining operations on 

July 16, 1972, they had not acquired the equipment necessary to 

remove 300 yards of material each day. Rather than using the three 

yard or bigger dragline that defendants had agreed to obtain, 

defendants provided a 3/4 yard dragline for excavation of gravel. 

The gravel was then hauled from the excavation pit to the washing 

plant in a truck which held five yards of material. Defendants 

hauled six to eight truckloads of material per day, so that total 

daily mining production averaged between thirty and forty yards. 

In August, 1972, defendants twice negotiated without success for the purchase of used large draglines. Defendants also 

ran advertisements in various Montana newspapers and talked to 

heavy equipment dealers regarding the purchase of a Caterpillar. 

These efforts likewise were unsuccessful, and defendants continued 

to mine only thirty to forty yards per day until late August, 1972. 

On August 30, 1972, the man whom defendants had hired to operate 
the Master Mine resigned from his job because he felt that the 

equipment at the mine was grossly inadequate. At that time, after 

little more than one month of mining thirty to forty yards of 

material daily, defendants ceased their mining operation. 

For the entire month of mining, defendants recovered one 

ounce of gold. Because expenses of operation far exceeded mining 

income, there was no net profit, and plaintiff received nothing 

under the contract provision granting him a 15% commission fee from 

net mining profits. 

On October 29, 1972, plaintiff Perl Smith and defendant 

C. E. Knowles attempted without success to negotiate a monthly 

payment to plaintiff to replace the contract's percentage of net 

profit commission clause. This matter was not submitted for arbitration under the contract's arbitration clause. 

Plaintiff Perl Smith sent defendants notice of default in 

a letter dated March 15, 1973. Plaintiff stated in the letter 

that defendants were in breach of the contract for failure to mine 

300 yards of material per working day. Plaintiff alleged that if 

300 yards per day were mined, much gold and silver would be recovered 

and a net operating profit would be received from which plaintiff 

could receive his monthly percentage commission payment. 

Defendants failed to cure the alleged default within the 

thirty days allowed in the contract. Plaintiffs on November 13, 

1973, filed a complaint in district court, Granite County, alleging 

that defendants had breached their contract and asking that defendants forfeit all rights under the contract and all money paid 

pursuant to the contract, and that title to the Master Mines 

property be quieted in plaintiffs. 

On December 9, 1974, the case was tried in district court 

before the Honorable Robert J. Boyd, sitting without a jury. he 

district judge found that the 300 yard per day production require- 
ment was a basic term of the contract which required strict compliance by defendants. Defendant2 failure to produce 300 yards of 

material per day was caused, the judge found, by their failure to 

obtain adequate equipment. The judge concluded that defendants' 

failure to produce more than fifty yards of material per day when 

the mine was worked, and their total failure to mine the claims in 

1973 and 1974 was a substantial failure of performance. The judge 

concluded, as a matter of law, that the contract required that 

defendantsf failure to mine 300 yards of material per day would 

result in cancellation of the contract, cancellation of the deed 

transferring the property from Perl Smith to defendants, and reversion of the title to the mining claims to plaintiffs Perl Smith 

and Everett Satterfield. 

Defendants assert that the district court erred in ordering 

a forfeiture of their rights under the contract, which resulted in 

the loss to defendants of both the mining property and $96,000 in 

contract payments. Defendants claim that the evidence failed to 

show that a significant breach of the agreement occurred. Defendants next assert that, even if they did significantly breach the 

contract, forfeiture was an improper remedy. 

Defendants' claim that the evidence failed to support a 

finding that they significantly breached the contract is without 

merit. The evidence at trial clearly showed that defendants failed 

to meet the express contract requirement that they produce 300 yards 

of material per working day. Defendants do not assert that they 

performed their contractual duty; rather, they claim that their 

failure to perform was excused due to impossibility of performance 

and commercial frustration. 

The general rule is that, where a party to a contract 

obligates himself to a legal and possible performance, he must 

perform in accordance with the contract terms. Brown v. First 
Fed. Savings and Loan Assn., 154 Mont. 79, 460 P.2d 97. Defendants, however, would have had no duty to perform their contractual 

promise to produce 300 yards of material daily if, due to facts of 

which neither plaintiffs nor defendants had reason to know, the 

promise was impossible of performance at the time the contract 

was made. 2 Rest. Contracts, section 456. Impossibility encompasses "not only strict impossibility but impracticability because 

of extreme and unreasonable difficulty, expense, injury or loss 

involved." 2 Rest. Contracts, section 454. 

Defendants assert that it was a basic assumption of all 

the parties to the contract that the Master Mine contained substantial gold, and that when their aborted efforts to mine yielded 

only about one ounce of gold, their failure to produce 300 yards 

of material daily was excused. Defendants contend that even if 

they had produced the ,300 yards per day, there would have been no 

profit from which plaintiffs could receive a commission, because 

there was no gold. Defendants therefore concluded that it was 

impossible to operate the mine at a profit. Defendants cite 

2 Rest. Contracts, section 460, which says: 

"(1)Where the existence of a specific thing * * * 

is, either by the terms of a bargain or in the 

contemplation of both parties, necessary for the 

performance of a promise in the bargain, a duty 

to perform the promise 

(a) never arises if at the time the 

bargain is made the existence of the 

thing * * * within the time for 

seasonable performance is impossible * * *." 

The flaw in defendants' argument, however, is that they 

never proved that the "specific thing", gold, did not exist in the 

Master Mine properties in sufficient quantities to make a placer 

mining operation profitable. Plaintiffs had no duty to prove that 

marketable quantities of gold did exist in the Master Mine. Rather, 

the burden of proving impossibility rested on the party asserting 

the defense. Hensler v. City of Los Angeles, 124 Cal.App.2d 71, 
268 P,2d 12. Defendant Wilbur Zepp testified that only one ounce 

of gold was recovered. Yet defendants presented no expert testimony to establish that production of merely 30-40 yards of material 

per day for one month was conclusive evidence that substantial 

quantities of gold did not exist on the property. Defendants did 

not introduce any evidence of geologists' or geophysicists' reports 

as to the minerals contained in the land. Furthermore, a geophysicist's report prepared at the request of plaintiff Per1 Smith prior 

to the sale of the property indicated that the Master Mine contained 

valuable gold and other noble metals. 

Defendants, during the one month in which they operated the 

mine, were unable to achieve a 300 yard per day production because 

their mining equipment was insufficient. "The party pleading impossibility must demonstrate that it took virtually every action 

within its powers to perform its duties under the contract." 

Kama Rippa Music, Inc. v. Schekeryk, 510 F.2d 837. Defendants 

explained that they advertised in the state newspapers and contacted two private parties and one dealer concerning larger equipment, but failed to explain why other sources in nearby states 

were not contacted. 

A final reason why the failure of defendants to satisfy 

the contract provision requiring 300 yards of production per day 

was not excused due to impossibility is that the possible absence 

of gold at the mine was a risk of the bargain. It is uncertain 

whether or not an appreciable amount of gold exists at the Master 

Mine. In a gold mining venture such as this one, however, where 

defendants failed to inspect the mine or geologically test the 

soil before purchase, the possibility existed that the rewards 

might range from lucrative to nonexistent. Defendants could have 

hired geologists to study the mineral content in the Master ~ine 

prior to signing their contract with plaintiff rather than relying 
solely on geological reports prepared several years previously for 

Per1 Smith. This they failed to do. 2 Rest. Contracts, section 

456,excuses a promisor from performing a contractual promise due 

to impossibility only when the promisor and promisee had no reason 

to know of the impossibility when they contracted. In this case, 

the possibility of an unprofitable mine should have been foreseen 

by defendants and specifically provided for in the contract. 

It is possible that the Master Mine properties contain so 

trifling an amount of gold that further mining would be economically 

disastrous. If this is the case, defendants did not prove it at 

trial. If such is the case, however, defendants merely made a 

bad bargain by not providing for this very foreseeable contingency 

in the contract or by themselves inspecting and testing the mining 

property before the purchase. This Court may not rewrite the terms 

of the contract in this case. Rather, we follow the law as stated 

by this Court in Hein v. Fox, 126 Mont. 514, 520-521, 254 P.2d 1076: 

"Courts can give no solace where parties 

to a contract find themselves minus expected 

profit through failure to exercise care in drawing up such contract. What this court said in 

Hinerman v. Baldwin, 67 Mont. 417, 433, 215 Pac. 

1103, 1108, well applies here, viz: '* * * The 

court has no right to make a contract for the 

parties different from that actually entered into 

by them. * * * 

"'Whether the plaintiff made a good or a 

bad bargain is of no concern to the court. * * * 

Merely because the terms of the contract now 

appear unreasonable or burdensom affords no reason to permit him to avoid his contract. * * * 

"I* * * The duty of the court is to enforce 

contracts, not to make new ones for the parties, 

however unwise the terms may appear.'" 

The doctrine of commercial frustration is also inapplicable 

to the facts of this case. To relieve a promisor from a duty to 

perform under this doctr-ine, the expected value of the performance 

must be destroyed by an unforeseeable, intervening event. Lloyd v. 
Murphy, 25 Cal.2d 48, 153 P.2d 47. The possibility that there is 

negligible gold at the Master Mine was foreseeable at the time 

the parties contracted. Furthermore, no intervening event has 

reduced the quantity of gold at the mine. Defendants are not 

excused from breaching their contractual duty to mine 300 yards of 

material daily. 

The remaining issue on appeal is the propriety of forfeiture 

as a remedy for defendants' breach. The district judge based his 

judgment that the defendants should forfeit their payments and 

rights under the contract on the contract provision which stated 

in pertinent part that "In case of default by purchaser in payment 

of said property, it shall immediately revert to the seller, Perl 

Smith, provided first seller gives purchaser thirty (30) days' 

written notice of any default and purchaser shall then have thirty 

(30) days from receipt of said notice to remedy said default * * *." 

Plaintiff Perl Smith did give defendants written notice of their 

default in failing to produce 300 yards of material per day. Defendants did fail to remedy the default within thirty days of 

receiving the notice. Defendants' default, however, was not of the 

type that would trigger the contract's forfeiture provision. 

Montana law does not favor forfeitures. Table Mtn. Farms 

v. Burton, 128 Mont. 434, 278 P.2d 213; State ex rel. Green v. 

Bird, 62 Mont. 408, 205 P. 241. Section 58-212, R.C.M. 1947, 

provides : 

"A condition involving a forfeiture must 

be strictly interpreted against the party for 

whose benefit it is created." 

This Court has consistently given section 58-212 and its 

predecessor statutes an expansive interpretation, enforcing forfeiture provisions only in situations where "the strict letter of 

the contract requires it" and language of forfeiture is "plainly 

expressed". Finley v. School District No. 1, 51 Mont. 411, 416, 
153 P. 1010 (1915); Lipsker v. Billings Boot Shop, 129 Mont. 420, 

288 P.2d 660; Cedar Creek Oil & Gas Co. v. Archer, 112 Mont. 477, 

117 P.2d 265. Interpreting the forfeiture clause against plaintiffs, 

the parties for whose benefit the provision was created, it can 

hardly be said that the contract requires forfeiture for failure to 

produce 300 yards of material each working day. The provision 

required reversion of the property to the seller "In case of default 

by purchaser in payment of said property * * *." Defendants made 

all the'payments for the property" that were required under the 

contract. These payments included furnishing the redemption price 

for the property, and paying various debts of Per1 Smith. The 

production clause on which defendants defaulted, directly related 

to a consultation fee or commission to be paid from the net mining 

profits. The forfeiture clause, strictly interpreted, did not 

relate to this contract provision or to any provision other than 

the property payment clauses. 

Section 58-212, R.C.M. 1947, is borrowed from Section 1442, 

Ca1.Ci.v. Code. The California Court of Appeals refused to declare 

that mine buyers' contract rights and purchase moneys were forfeited in a case in which the buyers failed to perform a contract 

obligation to mine for a minimum amount of hours per month. The 

court stated that "if an agreement can be reasonably interpreted 

so as to avoid forfeiture, it is the duty of the court to avoid 

it." Nelson v. Schoettgen, 1 Cal.App.2d 418, 36 P.2d 665. 

Plaintiffs claim that the clause is not a forfeiture 

clause, but is a reversion clause for which the rules regarding 

forfeitures are inapplicable. A forfeiture by any other name is 

still a forfeiture. There has been a forfeiture where parties 

such as defendants lose all the money they have paid on a contract, 

as well as all their rights and interests in the property. 

Although plaintiffs and defendants have themselves provided 
in their contract for all future contract disputes to be decided 

by arbitration, this Court cannot order that the question of 

damages be submitted to arbitration, pursuant to this contract 

clause. The parties may agree that this specific issue of the 

"value" of damages be submitted to binding arbitration, and then 

they will be bound by the arbitrators' decision. School District 

No. 1 v. Globe & Republic Ins. Co., 146 Mont. 208, 404 P.2d 889. 

The arbitration provision as written, however, was nearly identical 

to the arbitration clause which this Court held to be unenforceable in Green v. Wolff, 140 Mont. 413, 372 P.2d 427. Any contract 

provision which states that all future contract disputes shall be 

submitted to arbitration is void under section 13-806, R.C.M. 

1947, which invalidates any contract provision restricting access 

to the courts. Although arbitration may be the most speedy and 

economical means available to parties for a binding resolution of 

their disputes, this Court cannot enforce as broadly worded an 

arbitration clause as exists in this contract until the legislature 

amends or repeals section 13-806. 

The legislature intended, in section 17-301, R.C.M. 1947, 

to insure that one who is injured by another's wrongful breach of 

contract has a right to recover such damages as will make him whole 

again. Bos v. Dolajak, 167 Mont. 1, 534 P.2d 1258. The contract 

in this case provided that plaintiff Perl Smith, his wife, or son 

would receive consultation fees or commissions for a limited period 

of time, measured by how long they should live. plaintiffs can 

never recover those lost years of fees or commissions from net 

profits except by way of damages. The proper measure of damages 

so as to make the seller in this case "whole again", therefore, 

is the amount which the district judge finds that plaintiff Perl 

Smith would have received in consultation fee royalties from net 

mining profits if defendants had produced 300 yards of material 
each working day since the property was made ready to be mined in 

1972, plus interest from the date the royalties would have accrued. 

See Freeport Sulpher Co. v. American sulph@-r Royalty Co. , 117 Tex. 

439, 6 S.W.2d 1039. 

Plaintiffs have the burden of proving, by competent 

evidence, the amount of damages which they suffered due to defendants failure to produce 300 yards of material during each working 

day. Rigney v. Swingley, 112 Mont. 104, 113 P.2d 344. Plaintiffs 

will not be denied recovery merely because the damages in this 

case are difficult to ascertain, as long as they prove damages 

with reasonable certainty. In Brown v. Homestalte Exploration Co., 

98 Mont. 305, 337, 39 P.2d 168, this Court stated plaintiff must 

provide the district judge with: 

"A reasonable basis for computation and the best 

evidence obtainable under the circumstances and 

which will enable [the judge] to arrive at a 

reasonably close estimate of the loss * * *." 

(Bracketed material substituted.) 

Such evidence may include, but is not limited to, the testimony of 

geologists and geophysicists who test the mine's soil, the past 

history of the mine, the cost of mining 300 cubic yards of gravel 

per day and the value of gold and other noble metals in the soil 

during the time that defendants failed to mine. 

Although plaintiffs in their complaint asked solely for 

forfeiture as a remedy for defendants' contract breach, the trial 

judge must grant such other relief as is proper under the proven 

facts of the case. Rule 54(c), M.R.Civ.P., which is identical with 

Rule 54 (c) , Fed. R.Civ.P., provides: 

"* * * Except as to a party against whom a 

judgment is entered by default, every final 

judgment shall grant the relief to which the 

party in whose favor it is rendered is entitled, 

even if the party has not demanded such relief 

in his pleadings." 

In Garland v. Garland, 165 F.2d 131, the plaintiff, in her 

complaint, asked soleJyfor recission and cancellation of a contract. 
The court held that Rule 54(c), Fed.R.Civ.P., authorized the trial 

court to grant the plaintiff damages, as well as specific performance, even though the plaintiff did not request that relief in 

her pleadings. In the case at bar, plaintiffs have proven that 

defendants breached their contract and have made a case for possible 

damages, though this was not the relief they requested. Although 

they are not entitled to forfeiture, under Rule 54(c), M.R.Civ.P., 

the trial judge has the duty to give plaintiffs a hearing on damages, 

the remedy to which they are entitled under the facts proven at 

trial. See also: Columbia Nastri & Carta Carbone v. Columbia 

Mfg. Co., 367 F.2d 308; Hutches v. Renfroe, 200 F.2d 337. 

The district judge's findings that defendants breached 

their contract is affirmed. The judge's ruling that defendants 

forfeited all rights and money paid under the contract is reversed. 

The cause is remanded, with instructions to proceed in accordance 

with this opinion. 

vw ,.4& /- 

Chief Justice i