### NO. 83-68 

### INTHE SUPREME COURTOF THE STATEOF 

### MONTANA 1983

AUSTIN BAILEY & 

### LOIS E. BAILEY, PlaintiffsandAppellants,

-vs- 

## JULY--

## 1983
GFLEGORY

### FRANCISLILLYAND BONITA 

# &krl JJarPidon KATHRYNLILLY, w-Lr12;c CUPRE~~E COURT sy~i~ :,c;-' gC8'CAidA 

### Defendantsand Respondents.

Appeal from: District Court of the Eighteenth Judicial District, Inand for the County of 

### Gallatin, TheHonorable

### W. 

### W. Lessley, Judgepresiding.

Counsel of Record: ForAppellants: Bolinger & 

### Conover,Bozeman, Montana

ForRespondents: Scully & 

### Lilly,Bozeman,Montana

Filed: Submittedon Briefs: June 2, 

### 1983 Decided: July 7,

### 1933

ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court. Baileys brought this action to accelerate the balance of the purchase price on a contract between themselves and the Lillys for real estate located in West Yellowstone, Montana. After a trial in the District Court of the EighteenthJudicial District, Gallatin County, the District Court entered findings of fact, conclusions of law and ordered judgment be entered in favor of Lillys. Baileys appeal. On November 21, 1975, Baileys as sellers, and Lillys as buyers, entered into a contract for the sale of real property located in West Yellowstone. Lillys agreed to pay Baileys $40,500 for the purchase of the property to be paid by a down payment of $12,000, a lump sum payment of $1,000 on January 2, 1976, and the balance of $27,500 together with interest atthe rate of 

### 8 percent per annum for a period of ten years on a monthly basis. Payments were tobe made by Lillys into an escrow account at First Security Bank in West Yellowstone, and the

escrow agent was to then deliver payment to Baileys. Asof the dateof trial allpayments were current. The contract contained the followingprovision: "This Agreement shall apply to and bind the heirs, executors, administrators, successors and assigns of the parties hereto, subject to the provision that second parties shall not assign their interestin saidproperty or this contract without the written consent of the parties." InAugust 1980, BonnieLillywrote toBaileys as follows: "Greg and I have decided to move from West Yellowstone and to put the house up for sale. We are trying to get the financing of the house inperspective and would like to know if you would consider carrying a qualified buyer under our original contract with you.

### " LoisBailey responded toBonnieLilly's request asfollows: "Yes, we would carry a qualified buyer on the original contract or, if you prefer, the lending institution. Would like to see you before any plans arefinalized." Lillysplaced the property for sale inAugust 1980. The pro-perty was listed with a real estate agent and advertised. In June 1981, Lillys executed anearnestmoney receipt and agreement for 

### sale and purchase with Edward M. and Loralee Hiramoto governing the West Yellowstone property. The sale of the propertywas tocloseJuly 1, 1981. After execution of the agreementGregLillycontacted Baileys attheir home and requested their consent tothe sale of the real estate. Baileys refused to consent to the sale unless Lillys paid off the originalcontract infull. Inmid-July 1981, real estate agentJohn Costello contacted Baileys to assure them the Hiramotos 

### were financially sound. Baileys 

### still refused to consent to the sale unless the balance of the contract was paid in full. In 

### lateJuly1981, Lillys and the Hiramotos executed a contract for 

### sale of real 

### estate. All matters concerning the contract 

### were back-dated toJuly 1, 1981, pursuant to the earnestmoney receipt and agreement to purchase. The original contract between Baileys and Lillys required Lillys to maintain fire insurance on the premises with Baileys named as loss payees. After Lillys executed the earnest money agreement with Hiramotos, they cancelled the existing fire insurance policy and purchased a new policy naming theHiramotos

asinsureds. Due to an error, Baileys

### were not named on thenew policy asinsureds for a fourteen-day period. When the errorwas discovered it was corrected and the insurance policy was given retroactive effect asof July 1, 1981. After the sale by Lillys to theHiramotos, allpayments made by Hiramotos were placed in a second escrow account at First SecurityBank of West Yellowstone and money was disbursed to the Lillys and Baileys' escrow account. On August 13, 1981, Baileys notified Lillys they considered them to have defaulted on their contract with Baileys and demanded acceleration of allpayments. Baileys sent a second notice of default on September 9, 1981. On November 13, 1981, Baileys filed a complaint in

### District Court alleging Lillysdefaulted on their contract by allowing the fireinsurance to lapse and by selling their interest in the contract without Baileys written consent. The original complaint asked that the contract be terminated and Baileys be granted immediate possession of the property. On July 26, 1982, Baileys filed a motion to amend their complaint to replace their demand for immediatepossession with a demand for acceleration of the balance of thepurchase price of theproperty. Prior to trial, Baileys continued to accept thepayments from the escrow account for Lilly's obligation under the contract. After trial the District Court entered findings of fact and conclusions of law on September 23, 1982. The District Court held Lillys did not breach their agreement with Baileys and any right of Baileys to demand acceleration of the balance due was waived asBaileys accepted Lillyspayments under the terms of the contract up until the date of trial. The District Court entered judgment in favor of Lillys on November 22, 1982. Baileys appeal. Baileys raise four issues on appeal. We find one issue to be dispositive;whether theDistrict Court erred inholding Baileys' acceptance of payments under their contract with Lillys constitutesawaiver of any defaulton thepart of Lillys. Baileys rely on a decision of the Oregon Supreme Court. In Carrigg v. Fackrell (1980), 44 Or.App. 413, 606 P.2d 636, that Court held acceptance of four monthly installment payments after

a balloon payment was due under the contract did not estop sellers from contending payment of the balance was 

### still due. The Oregon Supreme Court held the payments made a£ter the date the balloon payment was due constituted a partial accord and satisfaction as to the part of the balance which was made by the four payments. However, Carriqg involves a totally different fact situation from the present case. Here, we arenot dealing with acceptance of monthly payments after a required balloon payment was not made. Baileys accepted monthlypayments under the contract afterthey had givenLillysnoticeof default. Such acceptance constitutes a waiver of their right to sue for acceleration of the existing balance. This Court held inShultz v. Campbell (1966), 147Mont. 439, 445, 413 P.2d 879, 883: "Although by 

### itsexpress terms 

### time ismade of the essence of a contract, and an option 

### is reserved by the vendor to declare it 

### terminated for failure to pay the purchase price atthe date it fallsdue, or, if it 

### ispayable in installments, atthe date that any one of the installments fallsdue, thisprovision may be waived by failure to exercise the option, or by accepting a payment after it 

### is due. The vendor cannot thereafter allege such default as

### a ground fordeclaring the contract terminated." In Shultz the 

### seller alleged buyer defaulted by not properly keeping crop records and not delivering proportionate shares of government payment to seller. This Court upheld the District Court's ruling that seller had waived any right to declare default by continuing to accept the annual payments after the date of the alleged default. 

### We find this holding to be consistent with the holding of the 

### District Court that Baileys waived any right to declare a default by continuing to accept Lillys' monthlypayments after the declarationof default. Judgment of the

### DistrictCourt 

### is affirmed. 

## I

Weconcur:

Chief Justice 

# w