No. 83-251 IN THE SUPREMECOURT OF THE STATEOF MONTANA 1934

KATHRYN L. WYMAN, individually and KATHRYN L. WYMAN and KARENW. BAGEblAN, Plaintiffsand Appellants,

HORACE C. WYI.IAN, Trustee,and G. IiEIqNETHALLEN & GLADYSK. ALLEN, d/b/a MOTOR POWER EQUIPMENT CO.

### , Defendantsand Respondents.

APPEAL FROM: District Court of the Thirteenth JudicialDistrict, In and for the County of Yellowstone The Honorable William J. Speare,Judgepresiding.

COUNSELOF RECORD: ForAppellants: Wright,Tolliver & Guthals, Billings,Montana

For Respondents: Berger Law Firm;Arnold Berger, Billings, Montana Moulton Law Firm;B. E. Longo,Billings, Montana

Filed: Submitted on Briefs: November 3, 1983 Decided: January 26,1984



### - ClerkMr. Justice John C. Sheehy delivered the Opinion of the Court. Kathryn Wyman and Karen Bageman appeal a summary judgment entered against them in the District Court for the Thirteenth Judicial District,Yel-lowstoneCounty. We affirm the DistrictCourt. In August of 1956, Horace and Kathryn Wyman, then husband and wife, entered into a lease agreement with G. Kenneth and GladysAllen. TheAllens became lessees of real property located in Yellowstone County, a portion of which

was owned by the Burlington Northern Railway and leased to the Wymans. The lease between the Wymans and theAllens had

aprimary term of ten yearswith three consecutive three-year options for renewal. The lease also prescribed a penalty of double rentalas liquidated damages, in the event the lessees held over. In 1964, Hora.cea.ndKathryn Wyman were divorced. The realproperty thatwas the subject of the lease agreementwas transferred to a trust, for the benefit of Horace Wyman and Kathryn Wyman. Both Horace and Kathryn were made trustees, along with their daughter Karen Bageman. The trust agreementprovided that the expenses of operation and maintenance of the trustwere to be paid with checks co-signed by Horace Wyman and Kathryn F7yman. Two of the three trustees could revoke the trust, as well as borrow money for expenses and taxes. The final paragraph of the trust agreementread as follows: "7. Generally speaking, the aforementioned Horace C. Wyman shallhave general charge of the operation of the business, and shall receive no fees or additional compensation therefor. In addition to the obligations hereinbefore set forth, the said Horace C. Wyman shall beobligated to report, at I-eastquarterly, to the aforementioned Kathryn L. Wyman, of all receipts and expenditures of the trust." Although the lease was executed in August of 1956, the Allens did not take possession until February 1, 1957. Following the initial ten-year period of the lease, the three options for renewal were exercised, extending the lease period to January 31, 1976. According to KennethAllen, the renewals were exercised by his writing letters to Horace Wyman,notifying Wyman of the extension. During the early months of 1975, Horace Wyman and Kenneth Allen discussed modifying and extending the leasehold arrangement. They agreed that the terms of the leasehold should remain the same as before, with a raise j.n rent of $400, for a term of threeyears. Inhis answers to interrogatories,Horace Wyman stated that according to his recollection, a new lease agreement with the above provisions was drafted, dated February 1, 3975, and sent to Kathryn Wyman. In addition, Horace Wyman's attorney, in an affidavit, claimed that he and Horace Wyman met and went over themod-ifications of the lease agreement. Themodified documentwas given to Wyman's attorney's secretary for typing. Shortly thereafter, the attorney had a meetingwith Kenneth Allen at which time he reported to Allen that the lease was being prepared, along with manila envelopes to be used to send the lease to Kathryn Wyman and Kenneth Allen. Kathryn Wyman testified that she never received a new lease agreement. The Allens paid the increased rent starting in February 1975 and Kathryn Wyman received her portion of the payments. She also continued to co-sign the checks paying Burlington Northern an increased rent for the portion of the propertysubleased to the All-ens, such increase required after 1974. Karen Bageman was alsoavrare of the increased rentalpayments by the Allens. She testified that, between 1976 and 1980, she asked Horace Wyman numerous times what was taking place with regard to the rental property. He allegedly answered that a new lease was being drawn and that everything was being taken care of. Both Karen Baqeman and Kathryn Wyman claim that they were misled by Horace Wyman's assurances. In November 1977, the Allens wrote to Horace Wyman, advising him thattheywished torenew the lease for another three-year period from February 1, 1978 toFebruary 1, 1981. Horace Wyman wrote hack on January 31, 1978, ~aying,"The original 1-easeprovided you an option torequest a threeyear extension and this letter is toinform you that such extensionishereby granted." Again, itwas assertedininterrogatories that Horace Wyman was acting under the assumption thata new leasehad been executed. InMarch of 1980, Karen Rageman and KathrynWyman senta letter toG. Kenneth Allen informinghim that "henseforthany mattersrelatedtothetermand leasepayments of your tenancymust be previously approved, inwriting, by any two of the three trustees, who as you know, are Horace Wyman, Kathryn Wyman and Karen Bageman." The letternoted thattheoriginal 1-ease, with all available extensions, expired in August of 1975 and that no current written executed lease agreement existed. The authors assumed that Kenneth Allen was not a party toa newly-written and executed lease and asof August 6, 1975, was "a tenant under an oralagreementwith Horace." The letter ended with the statement that: "If any of the facts assumed above are incorrect, please advise us accordingly sowe can determine the true status of your tenancy."

### By a letter dated September 17, 1980,Karen Bageman and Kathryn.Wyman's attorney notified the Allens' attorney that the former: "deem Mr. Allen to have materially hreached the lease agreement entered into between himself and Horace and Kathryn Wyman on August 6,1.956,forhis failure, following the expiration thereof, to pay the holdover rental provided for in that document. Iamwritinq to further advise that should Plr. Allen be basing his present tenancy of the property in question upon any writing other than the original 1956 lease,that writing isvoid as having been executed by only one of two trustees required to bind the trust." On November 25, 1980, Kathryn Wyman and Karen Rageman filed a complaint in the District Court charging (1)breach by Horace Wyman of his fiduciary duties, making him liable for damages; (2)breach by G. Kenneth and GladysAllen of the 1956 lease agreement,making them liable for damages; and (3) unlawful detainer of the property by the Allens. Horace Wyman answered and dounterclaimed to recover damages arising from the actions of the plaintiffs. TheAllens answered and counterclaimed to recover damages, asserting breach by the plaintiffs of their duties as trustees. The Allens vacated the premises on Ja.nuary 30, 1981. Motions for summary judgment filed by the defendants

were granted and findings and conclusions were filed March 10, 1983. Before the court were depositions 

### of G. Kenneth Allen, Karen Bageman and KennethWyman, and answers to interr0ga.tori.e~ given by Horace Wyma.n. The court found that all the negotiations regarding the leasehold extensions were between Horace Wyman and Kenneth Allen and thatby agreement between Horace Wyman and the Allens, the lease was modified and extended on February 1, 1975. The rental payments through January 30, 1981, were made with the "knowledge"and"consent"of, and were "acknowledged and accepted"by all of the trustees. The court concluded, inter alia, that (1) Horace Wvman had the authority under the trust instrument to extend the leasehold agreements; (2) the plaintiffs waived any objection to the extension; (3) the plaintiffs were estopped from claiming unauthorized actions by Horace Wyman; and 

### (4) the plaintiffs ratified the extensions by their "conduct in receiving and accepting al.1 of the benefits thereof." The appellants raise the following issue on appeal: Did

li the District Court err in granting summary judgment where therewas a question as to whether the term of the leasewas properly extended by Hora.ceWyman. Kathryn Wyman and Karen Bageman contend that Horace Wyman had no authority to unilaterally modify or extend the lease,given the fact that both Kathryn and Horace signed the original lease. The trust a.greementgeve all three parties to the agreement authority over the real property, to be exercised by two of the three. As to the summary judgment, Kathryn Wyman and Karen Bageman feel there is an unresolved issue as to whether HoraceWyman had authority to extend the lease agreement without the consent of one of the other trustees. They claim therewas no waiver or acknowledgement of Horace Wyman's acts on their part, as theywere unaware of their exactnature. Horace Wyman claims specific authority, granted in the trust agreement, to extend. and modify the lease with the Allens. He contends that his acts were consistent with previous practice, a.she had always negotiated the lease a-rrangements with theAl.l.ens (includingthe extensi0n.sof the original lease). The acceptance of the rental checks byKathryn Wyman past the acknowledged end of the original lease constituted ratificationby Kathryn Wyman of his actions. He argues that Kathryn Wyman and Karen Bageman are now estopped from claiming improper actsby him. The Al-lenscontend that the intent of the trust agreement was to give Horace Wyman charge of the operation of the trust, including the authority to lease the property. Furthermore, any protests by the other trustees at this point should not be persuasive, given the apparent ratification of Horace Wyman's acts. TheAllens feelprotected from Kathryn Wyman and Karen Bageman's claims by the fact that they did not know the trust existed. It isundisputed that the languaqe of paragraph seven of the trust agreement gave Horace Wyman general charge of the operation of the business. We are not to second guess the intentionsof the parties when the languageof the instrument is clear. Section 28-2-905, MCA; Spragqinsv. Elvidge (Mont. 1981), 625 P.2d 1151, 38 St.Rep. 493. Wemust give effect to the parties' intentions, as evidenced by the words used, the nature of the instrument, and the surrounding circumstances. Mathis v. Daines (Mont. 1982), 639 P.2d 503, 39 St.Rep. 73. Thus,upon examination of these factors,we find the language in this trust agreement to be dispositive of whether Horace Wyman had the authority to modify and extend the lease with the Allens. The language clearly expresses the intention of the parties to allow Horace Wyman to continue to handle the "business"which in this case is the lease of the property. The fact thatboth Kathryn and HoraceWyman signed the original lease is not dispositive of this issue. The circumstances, not the least of which was the marital status of theparties, had changed since that time and the trust agreement reflected those changes. It is also undisputed that, prior to the expiration of the original lease, Horace Wyman and Kenneth Allen agreed to increa-sethe amount of the rental payments and extend the leasehold period. Both Kathryn Wyman and Karen Bageman testified that they knew of the increased payments. There

was a period of time from the end of the ori.qi.na1lease (by any calculation) to March 1980, approximately three years, during which Kathryn Wyman and Karen Eageman took no affirmative action. They allegedlymade numerous requestsofHorace Wyman,but did nothing to gain more positive answers to their questions. By such inaction, they ratified the lease extensions. In Audit Services, Inc. v. Francis Tinda1.1 Const. (1979), 183 Mont. 474, 477-78, 600 P.2d 811, 813, this Court found: "Section 28-2-304,MCA, states: "'Ratification of contract void for want of consent. A contractwhich isvoidable solely for want of due consent may be ratified by a subsequentconsent.' "Ratification may occur in either an express oralmanner or solelyby means of personal conduct. "Ratification is a form of equitable estoppel and ordinarily is applied strictly in an agency context,whereby a principal approves the unauthorized act of an agent. SeeLarsonv. Marcy (1921), 61 Mont. I, 201 P. 685. However, it is also applied in varying classes of cases including contracts. Generally,contract ratification is the adoption of a previously formed contract, notwithstanding a quality that,rendered it relativelyvoid and by the very act of ratification the party affirming becomes bound by it and entitled to all the proper benefits from it. Shagun v. Scott Mfg. Co. (8th Cir. 1908), 162 F. 209, 219. The contract is obligatory from its inception and may be signified from the commission or omissionof acts. East Cent. Okl. Elec. Coop., Inc. v. Oklahoma G. & E. Co. (Okl. 1977), 505 P.2d 1324, 1329. "Montana case law also has held that the subsequent recognition of a contract is the equivalent of ratification. This Courthas stated: "'"Ratification" is defined to be the confirmation of a previous act done either by the party himself or by another. (Citingauthority.) And a confirmation necessarily supposes knowledge of the thing ratified. (Citingauthority.) It follows that to constitutea ratification there must be an acceptance of the results of the act with an intent to ratify andwith full knowledgeof all the material circumstances.' Koerner v. Northern Pac. Ry. Co. (1919), 56 Mont. 511, 520, 186 P. 337,340. "It is the manifestation of the ratifying party which controls. The respondent's outward expressions and actions judge of his intention and his intent in the case sub judice is clear." 

### - There can be no doubt that Kathryn Wyman and Karen Bageman knew that the lease arrangements had. changed, at Least in terms of the monthly payments,and that the payments continued well past the term of the original lease. Kathryn Wyman accepted her portion of the payments without protest. Both sheand Karen Bagemanwere satisfiedwith HoraceWyman's answers for approximately three years. Such conduct is consistent with ratification,not rescission of the contract. They cannot now cla-imthat Horace Wyman a.ndKenneth Allen's lease agreement violates the trust agreement. Rule 56(c)

## ,M.R.Civ.P. requires that amotion for summary judgment be granted only if "the pleadings, depositions,

answers to interrogatories,and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a.judgmentas amatter of law."We affirm the District court.'^ grant of summary iudgment

as the alleged unresolved issues do not relate to material facts, or are resolved according to our determination that Horace Wyman had the authority to extend the lease. As a matter of law, the defendants were entitled to a summary judgment.

We Concur: