NO. 83-68 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

AUSTIN BAILEY & LOIS E. BAILEY, 

Plaintiffs and Appellants, 

-vs- JULY-- 1983 

GFLEGORY FRANCIS LILLY AND BONITA &krl JJarPidon 

KATHRYN LILLY, w-Lr12;c CUPRE~~E COURT 

sy~i~ :,c;-' gC8'CAidA 

Defendants and Respondents. 

Appeal from: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable W. W. Lessley, Judge presiding. 

Counsel of Record: 

For Appellants: 

Bolinger & Conover, Bozeman, Montana 

For Respondents: 

Scully & Lilly, Bozeman, Montana 

Filed: 

Submitted on Briefs: June 2, 1983 

Decided: July 7, 1933 

Clerk 
Mr. 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 Eighteenth Judicial 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 at the 

rate of 8 percent per annum for a period of ten years on a 

monthly basis. Payments were to be 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. As of the 

date of trial all payments were current. 

The contract contained the following provision: 

"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 interest in said property or this 

contract without the written consent of the 

parties." 

In August 1980, Bonnie Lilly wrote to Baileys 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 in perspective and would like to know if 

you would consider carrying a qualified buyer 

under our original contract with you. " 

Lois Bailey responded to Bonnie Lilly's request as follows: 

"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 are finalized." 

Lillys placed the property for sale in August 1980. The pro- 
perty was listed with a real estate agent and advertised. In 

June 1981, Lillys executed an earnest money receipt and agreement 

for sale and purchase with Edward M. and Loralee Hiramoto 

governing the West Yellowstone property. The sale of the property was to close July 1, 1981. 

After execution of the agreement Greg Lilly contacted Baileys 

at their home and requested their consent to the sale of the real 

estate. Baileys refused to consent to the sale unless Lillys 

paid off the original contract in full. 

In mid-July 1981, real estate agent John 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 late July 1981, Lillys and 

the Hiramotos executed a contract for sale of real estate. All 

matters concerning the contract were back-dated to July 1, 1981, 

pursuant to the earnest money 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 the Hiramotos 

as insureds. Due to an error, Baileys were not named on the new 

policy as insureds for a fourteen-day period. When the error was 

discovered it was corrected and the insurance policy was given 

retroactive effect as of July 1, 1981. 

After the sale by Lillys to the Hiramotos, all payments made 

by Hiramotos were placed in a second escrow account at First 

Security Bank 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 all payments. 

Baileys sent a second notice of default on September 9, 1981. On 

November 13, 1981, Baileys filed a complaint in District Court 

alleging Lillys defaulted on their contract by allowing the fire 
insurance 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 immediate possession with a demand for acceleration of the balance of 

the purchase price of the property. 

Prior to trial, Baileys continued to accept the payments 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 as Baileys accepted Lillys payments 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 the District Court erred in holding Baileys' 

acceptance of payments under their contract with Lillys cons titutes a waiver of any default on the part 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 are not dealing with acceptance 

of monthly payments after a required balloon payment was not 

made. Baileys accepted monthly payments under the contract af ter 
they had given Lillys notice of default. Such acceptance constitutes a waiver of their right to sue for acceleration of the 

existing balance. This Court held in Shultz v. Campbell (1966), 

147 Mont. 439, 445, 413 P.2d 879, 883: 

"Although by its express terms time is made 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 

at the date it falls due, or, if it is payable 

in installments, at the date that any one of 

the installments falls due, this provision 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 for declaring 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' monthly payments after the declaration of default. 

Judgment of the District Court is affirmed. 

I 

We concur: 

Chief Justice 

w