No. 81-194 INTHE SUPREME COURT OF THE STATE OF MONTANA 1982

IRVIN S. NAYLOR, Plaintiff and Appellant,

VS. JOHN P. HALL, SHERRILL HALL, and SKI YELLOWSTONE, INC., Defendan.ts and Respondents.

Appeal from: GistrictCourt of theEighteenth Judicial District, In and for the County of Gallatin Honorable W. W. Lessley, Jud-qepresiding. Counsel of Record: For Appellant: Gregory 0. Morgan argued, Bozeman, Montana Albert G. Blakey, I11 arqued,vork, Pa. For Respondents: Landoe, Brown Law Firm, Bozeman, Montana J. Robert Planalp argued, Bozeman, Montana

----- Submitted: ~uly 8, 1982 Decised: October 7, 1982 

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## .~82 Filed.

### Mr. Justice Fred J. Weber delivered the Opinion of the Court. Plaintiff, Irvin Naylor (Naylor),sought specific performance of a contract for the purchase of real property from defendants Hall, and SkiYellowstone, Inc., herein referred to as Hall. The District Court of the Eighteenth Judicial District, Gallatin County, tried the case without a jury, and refused to grant Naylor specific performance. We reverse the District Court. This case is a companion to Supreme Court case No. 81- 222, Ski Roundtop, Inc., individually and derivatively in behalf of SkiYellowstone, Inc. v. John P. Hall and others, to be decided at a later date by this Court. Naylor raises a single issue on review: Whether the agreementsbetween the parties constituted a specifically enforceable,valid option contract. The individuals involved in this action were all shareholdersand officers in the Montana corporation, Ski Yellowstone, which is developing a four-seasons resort in the Hebgen Lake area in Gallatin County. PlaintiffNaylor was chairman of the board of directors in 1975-76. Defendant John Hallwas a director and ispresently the chief executive officer and majority stockholder. Hans Geier was president at the time the disputed agreementswere made and,under the corporation's bylaws,was authorized to execute contracts for the corporation. Fred Pack is a Bozeman realtor, whose agencywas authorized to sell lots in the Bear Trap Subdivision owned by Ski Yellowstone. Fred Pack wrote Naylor and offered him the opportunity to purchase lots in the Bear Trap Subdivision at the listedprice less a ten percent commission. On February 25, 1975, Naylor replied: "Thankyou for your letter of February 20, inviting me to acquire at a 10%discount any of the lots that are shown on the plats that were enclosedwith that letter. I am pleased to make the following offer on lot #7 in Sear Trap Ranch subdivision 

### #1: "1. A purchase price of $11,700. "2. A deposit now of $500.00 cash. "3. $5,000 to be paid at the time my $5,000 'bonus'has been offered to me by Ski Yellowstone, Inc. "4. The balance of $6,200 to be paid in cash within 90days of the accomplishmentof ?!3 above. At this time the lot is to be transferred to me with good, insurable, fee-simple, marketable title.

"Ifthisproposal is acceptable as presented, please have Hans sign the enclosed copy of this letter as President of SkiYellowstone, Inc., and return it to me in the enclosed self-addressed and stamped envelope, upon receipt of which Iwill promptly send you the $500.00 deposit."

The letter was marked "ApprovedMarch 5, 1975, Hans Geier, President, Ski Yellowstone, Inc." and returned to Naylor. On May 8, 1975, Pack acknowledged receipt of the $500 deposit forwarded by Naylor, and informed Naylor that he (Pack)had placed the deposit in a trust account "to be held there until the conditions as set forth in your letter of February 25, 1975 have been complied with and we will be able to deliver to you a title to said lot free of all encumbrances." On March 29, 1976,Naylor mailed the following "clarification" to Hans Geier: "Itoccurred to me a couple of days ago that a point of clarification in my proposal to you of February 25, 1975 referring to my offer

(whichyou accepted)on lot #7 in Bear Trap Ranch subdivision #1 should be noted:"Ifby January 1, 1980 the '$5,000bonus has (not)been offered to me by Ski Yellowstone, Inc.', then I should have the prerogative of either acquiring the lot for a cash payment of $11,200within 90days of January 1, 1980 or a return ofmy $500.00 cash deposit (without interest)

# . "I selected the date of January 1, 1980 as being totally arbitrary

## - a time by which I hopefully assume the problems relating to the obtainment of the Forest Service Permitwill have been resolved. "Ifyou agree to this clarification of our agreement as reflected inmy letter of February 25, 1975, Iwould appreciate it if you would execute the enclosed copy of this letter and return it to me in the self-addressed and stamped,enclosed envelope." The letterwas returned to Naylor with Geier's approval written on it as follows: "Iaccept the above clarification. Hans Geier, President Ski Yellowstone, Inc. April 11, 1976 Verbal Approval by F. L. Pack. 

# .

# ."

On January 10, 1977, John Hall, who had in 1976 gained control of Ski Yellowstone, and was Executive Vice-President of the corporation, agreed to purchase the same lot (Lot 7, in Block 2) from Ski Yellowstone for $11,000. Paymentwas to be settledwithin sixmonths by the application to the purchase price of corporate credit issued to John Eall for services rendered. A $10,300 corporate creditwas subsequently applied to the purchase price of the lot. On May 2, 1977,Naylor filed a notice of purchaser's interest with the Gallatin County Clerk and Recorder. On June 21, 1977, John and Sherrill Hall, acting as officers of Ski Yellowstone, conveyed the Rear Trap lot to themselves as joint tenants,by warranty deed, and the next day filed the deed with the Gallatin County Clerk and Recorder.The Forest Servicepermit had not issued by January 1, 1980. On January 7, 1980,Naylor, through his attorney, notified Pack that he "elected to exercise his option to purchase the lot in Bear Trap Ranch Subdivision." Naylor demanded that SkiYellowstone specifically perform its contract for the sale of the lot, and supply him with "a copy of a title report showing a marketable title." Ski Yellowstonedid notmeet Waylor's demands, and on ?4arch7, 1980,Naylor filed this action for specific performance in the District Court. The casewas heard, in combination with several connected cases,in September of 1980. The District Court entered findings of fact and conclusions of law on January 2, 1981- The District Court held that following the "clarification" of March 29, 1976, therewas no mutually binding contract because Naylor could, "at his sole prerogative, relieve himself from any liability to purchase the lot." 

### In addition, the District Court concluded that there was no consideration because Naylor could, at his election,demand the return of the $500deposit. An analysis of the contract compels a different conclusion. Under the February 25, 1975, letter agreement,Naylor

was obligated to purchase the lotwhen SkiYellowstone paid him his $5,000 bonus, which in turn depended upon the issuanceby the Forest Service of its permit for Slci Yellowstone. This obligation continued as to Naylor without limit in time. In addition, there was no means by which he could purchase at an earlier date than the date onwhich Ski Yellowstone offered him his bonus. As to Ski Yellowstone, under this letter agreement, it was obligated to hold open the purchase of the lot until such time as the permit was issued by the Forest Service, which again had no limit in 

### the future, and therefore left Ski Yellowstonewith an obligation to sell not limited in time. -5-By the letter agreement of Xarch 29, 1976, several changes were introduced into the contract relationship. Through December 31, 1979, the arrangementwas the same as between the parties, as it had been under the old agreement. However, the effect of the agreement was to terminate this obligation on the part of SkiYellowstone to sell in the event that by January 1, 1980, the Forest Service permit had not been issued. At that point in time, an option arrangement came into effect, under which Naylor could either have his $500back or purchase the lot for an additional cash payment of $11,200. Clearly, the March 29, 1976, letter agreementwasmutually beneficial to the parties. As to Ski Yellowstone, its obligation to continue to hold the lot for the futurepurchase was terminated as of January 1, 1980, unless, within ninety days, Naylor elected to purchase. In addition, if Naylor did elect to purchase, he was required to pay $11,200 of his own cash, without applying a $5,000 bonus whichwould have been furnished by Ski Yellowstone upon issuance of the Forest Servicepermit under the prior agreement. As to Naylor, he now acquired for the first time the capacity to purchase the lot immediately for cash after January 1, 1980, even though no Forest Servicepermit had been issued. He also acquired the right to elect to have his $500 cash deposit returned if he wished to surrenderhis right to purchase the lot. We find that the benefits and obligations on the part of each of the parties under the letter agreement of March 29, 1976, were sufficient to constitute a mutually binding contractbetween the parties. We also find that therewas consideration for the Pqarch 29, 1976, letter agreement. The relinquishmentof a legal

or contract right is sufficient consideration to support acontract. Rickett v. Doze (1979), Nont. -- I 603 P.2d 679, 36 St.Rep. 2170; 17Arn.Jur.2d Contracts § 119, at 465; S~nburst Oil and Gas Company v. Neville (1927), 79 Yont. 550, 257 P. 1016. It is also well-established that a contractmay be modified by subsequent agreement if that subsequent agreement also complies with the requirements of

a contract. Edwards v. Peavey Company (1976),170Nont. 45, 549 P.2d 1082. The 1976 letter agreement, as proposed by Naylor and accepted by Ski Yellowstone,was amutually acceptable modification of the 1975 contract. The consideration in terms of the changes in rights and obligations on the part of both Naylor and Ski Yellowstone constitutes adequate consideration for the 1976 agreement. We find that the 1976 agreementwas supported by consideration and sufficiently complied with contract requirements to constitute a modification of the original agreement. That agreementwas in effect when John and SherrillHall purchased the lot from Ski Yellowstone. Upon the failure of the Forest Service to issue its permit by January 1, 1980, the option rights of Naylor came into effect. At that time,Naylor properly exercised his right to purchase the lot for a cash purchase price of $11,200 (inaddition to the $500 deposit) as authorized under the 1976 letter agreement. Hall has argued at length thatNaylor had no right to specific performance by Ski Yellowstone under the 1976 agreement because it could not compelNaylor to purchase, and because Naylor had the right to ask for his money back, and that as a result, specific ~erformance could not be awarded to Naylor because Ski Yellowstone was not also entitled to specificperformance. This argument, based upon the original 1976 agreement,ignores theposition inwhich theparties found themselves

on January 1, 1980. The portion of the contract under which Naylor then acted is theoption portion which came into effecton January 1, 1980. As is truewith alloption agreements, the party 

### towhom the option is granted has the power todeterminewhen and if hewillpurchase inaccordance with theoption. Until a decision topurchase ismade by the option holder, the owner of theproperty does not have a right of specificperformance, although aswas the case here, the option holder may be required tochoose between theoptions within a given period. When, asNaylor did, the optionholder exercises hisoption topurchase, we then find a binding contractual arrangement under which the option holder (Naylor) is obligated topurchase and the

owner (SkiYellowstone) is obligated to sell. Atthat point, both parties have a binding contractual obligation under which specificperformance can be awarded under section 27-1-414, MCA, and cases interpreting the same. We therefore conclude that therewas a mutually binding contractunder theMarch 29, 1976, letter agreement for which therewas adequate consideration, and which was of a nature which would allow specificperformance on thepartof eitherparty. Hall argues that the 1976 agreement is too uncertain to be specificallyenforced because itwas not known when, if ever, theForest Servicepermit would issue, and it was not clearwhich optionNaylor would elect if the permit was not issued by January 1, 1980. Absolute certainty inevery detail is not a prerequisite for specificperformance. Keaster v. Bozik (1981), Mont. -

### , 623 P.2d 1376, 1381, 38 St.Rep. 194, 201; Gropp v. Lotton (1972),160Mont. 415, 503 P.2d 661;Steen v. Rustad

(1957),132Mont. 96, 313 P.2d 1014. Here the parties and property are identified, the price is established, and the substantive terms of the agreement are clear. Indeed, the 1976 clarification renders the agreement more certain and more easily enforceable. We do not find the agreement to be

so uncertain as to preclude specific performance. This Court has recognized specific performance as an appropriate remedy for the breach, by the seller, of a contract to sell realproperty. Brown v. Griffin (1968), 150Mont. 498, 436 P.2d 695; Section 27-1-419, MCA. InMyhre v. Ivlyhre (1976),170Mont. 410, 419, 554 P.2d 276, 281,we stated: "The rule seems to be that onewho acquires or purchases property, knowing that the property is subject to a contract to be sold to another,may be compelled to perform the contract in the samemanner and to the same extent as his grantorwould have been liable to do had the grantor not made the transfer to him. Moore v. Crawford, 130 U.S. 122, 32 L.Ed. 878, 9 S.Ct. 447; 71Am.Jur.2d Specific Performance.

### " Here the record shows that Hall,managing officer, director and stockholder of SkiYellowstone, in those capacities, as well as individually,was aware of the agreement between 

### Ski Yellowstone and Naylor. Notwithstanding that knowledge, Hall and his wife, acting as executive officers of Ski Yellowstone, sold and conveyed the property to themselves as individuals. As a result, they individually are liable to perform the contract in the samemanner that Ski Yellowstone

was obligated prior to the sale of the lot to Hall. Naylor therefore is entitled to specific performance against defendants Hall. We reverse the District Court and remand the case for judgmentby the District Courtwhich is consistentwith this opinion.WeConcur:

- Chief Justice