Plaintiff and. espondent,

-vsLD K VIK FRIEDA

Defendan

strict Court of the eem Judicial District,

ounty of Silver

norable AraoLd Olsen, Judge presi

Gorette, Smith, lman & A11e

Butte [

ickelson r

tana
r. Justice John Conway Harrison delivered the Opinion of the

court.

ants/appellants, Donald and Frie a Rravik, appeal

a District Court decision favoring plaintiff/respondent

eonard Sjoberg. Trial was held with0 t a jury on

1987 in the Second Judicial District, Silver Bow County. The

District Court awarded Sjoberg 3,100 in damages, $3

costs, and for attorney's fees. e affirm in part and

reverse in part.

On ay 30, 0 Sjoberg and the Krav s signed a

"contract for sale of real property and escro agreement."

The land consists of approximately forty acres and is located

adison County. As buyer, Sjoberg agreed to pay $52,500

00 as a down pay Afterward, pa ents were to

be made in fifteen annual installments of $5,456, with the

first payment on May I, 19 The agreed interest rate

10% per annum on the unpaid balance.

The fort acres which was ject of the sale was

part of far land owned by the Kraviks. The Kraviks land,

g these forty acres, was encum ortgage

John Hancock Insurance Company, The mortgage had

been duly recorded and Sjoberg entered the rchase agreement

nowing the mortgage existed, The purchase agreement

included a specific clause a dressing the eventual release of

the Hancock mortgage:

The yer enters into this agree

erstanding that the

escribed is subject

to a mortga John Hancock Mutual

Life Insurance Corn recorde at book

o&gage Records of

nit, on April 3,

Buyer agrees that the seller shall

not cause said mortgage to be release

ecord until the sel ers obtain at 1

250,000 in sales 0 land of which the

above real estate is a part or within one

2
year from the date of t

Upon such event. the seller

be filed a partial satisfaction of said

mortgage to t above described real

property.

The parties agreed to an amendment to the above contract

on June 12, 1980. dment provided t at after the

Hancock mortgage , the Kraviks would su

their contract interest to one acre so that the one acre

would be free of both the Hancock mortgage an the Kravik

contract. e express purpose of the a. endment was to allow

mortgage financing.

Sjoberg made his first payment on the forty acres in

1981 without incident. Sjoberg wrote a

letter to B nald Kravik stating that Kravik was to have t

Hancock mortgage released ay 31, 1 according to the

terms of their o inal contract. Kravik was not

able to obtain t release and failed to do so until ril

1986.

nuary 15, 1982, Sjoberg purchase an additional

twenty acres from the Kraviks for the price of $19,200, with

1,000 a a down payment.

fifteen annual installments

interest rate was 10% per annum. The first

made ay 1, 82 and the remainin payments were to occur on

e first day of each year thereafter. This contract also

contained a clause specifically the Hancock

as very similar to the clause in the first

contract between Sjo2ae.rg and t Specifically, the

clause in the second contract stated:

he yer enters into this agree t with

he nowledge and understanding at the

real property above described is a

portion of a larger tract of Land

consisting of approximately 1,515 acres

which is to a mortgage to the

John utual Life Insurance

3
Company, recorded at book 257, pages

73Q-738 of the ortgage Records of

Madison County f ontana, on April 3,

Approximately 49 reS of the

r tract have been ivided into

ler acreage tracts, e land herein

being sold is one of these acreage

tracts. The sellers in the process

of selling the subdivi acreage tracts,

sales of the acrea r within 1

satisfaction of

subdivided acreag

the same of record.

shall place

Qn April 20, 198 S jober 's attorney sent a letter to

the raviks stating that the Kraviks ere in default of the

contract entered aY 30, 1980 for the forty acre tract. The

letter explained that default occurre because the raviks

failed to obtain the release of the Hancoc mortgage on

31, 1981 as romised in the contract ed that the

Kraviks cure the default within the time provided in the

agreement. The agreement provided that if the buyer

defaulted, the sellers could terminate t after

written notice, but only if t e buyer did not cure the breach

within sixty days after the notice. ough the agreement

did not expressly contempla in the event of a

y the sellers, it appears that Sjsberg"s attorney was

addressing this sixty day grace period and ernanding tha

Kraviks obtain a release of the Hancock mortgage wi

ty day period fo lowing the written notice and

O n aY 1, erg did not make an

either of the two contracts entered.

Sjoberg attempted t ake p ent an

revision t the escrow ag

in escrow and not actually deliver the payment. Under those

terms I the escrow agent rejected the payment. Also on June

Sjoberg's at orney sent a Letter to the Kraviks
notifyir_g them that they ere in e contract for

the purchase of the twenty acre tract because the aneock

mortgage WEtS not released. stated that the

agreement entere on January 15, d that "when there

is at least 250,000 in sales of these acreage tracts or

within one year, seller shall obtain a full satisfaction of

mortgage p . . " Although the letter did not specify the

reason for breach, one year had not passed since the date of

the allegation must have been that

raviks had at least

their totah acreage. The letter demanded that the raviks

mortgage release within the time provided in the

contract.

82, an attorney for the Kraviks wrote a

Letter to stating Sjoberg was in default on the

failing to make pa ents when they were due.

joberg responded by making the payments within the specified

grace period of sixty

Sjoberg filed a lawsuit agains the Kraviks April 7,

1983 and alleged they both contracts an

him in the amount of the total sale price of the two

tracts of land. Sjoberg has stated he deposited the 1983

ments en both tracts in a ank account pending the o

o further payments have been made

contracts. On April 11, 1986, the Kraviks obtained the

release on e Hancock mortgage as a result of ano

awslait. The Kraviks then sent Sjoberg a n tice of def

failed to render any

Court staye all

efault pending

A bench trial was held ay 20, 1987. laintiff Sjoberg

alleged he had intended to construct a house and develop a

horse farm on the property, but as unable to obtain any

5
financing for the because of the Hancock

mortgage. The District Court found that the

materially breached the contracts by failing to obtain a

release of the Hancock mortgage, Sjoberg claimed a number of

damages including loss of profits an good will regarding f-he

horse farm which the District Court denied because they were

too speculative. the District Court id award

Sjoberg damages totaling $43110Q, erg claimed to

have sustained due to a general increase in COStiS of

construction of various buildings, equipment, power, wells,

and a horse trailer and truck, The District Court also

awarded attorney"s fees in the amount of and costs of

Tn. he District Court's final judgment, it found

there was a total. of $56,529.38 remaining on t

balances due an owing under both contracts, and that the

total amount awar to Sjoberg wa herefore,

the District Court concl_uded that upon Sjoberg paying the

difference, both contracts wout be paid in Full

and the obligations of all. parties fulfille

efendants/appellants, the Kraviks, appeal and raise

ressed as follows:

1 . Did the Kraviks' failure to obtain a release of the

Hancock mortgage constitute a reach of the contract w

entitled Sjoberg to stop payments?

a. . Were e damages awarded Sjoberg correctly

calculated?

3 . as the Kraviks' appeal been rendered moot?

1 . Breach of the contract.

The viks admit they were unable to obtain a timely

release of the ortgage as pro in both contracts, The

releases were not obtaine until April. 11, 1986, and un

the terms of the contracts the release should have been

obtained no later than ay 31, 1981 for the forty acre tract

an January 15, 1983 for the twenty acre tract. The Rraviks

6
maintain, however, that their reac was not a breach whit

constituted default and was not sufficient enough to allow

Sjoberq to stop payments. they contend that

Sjoberg's sole remedy was to continue with the payments and

sue for whatever damages he incurred.

If a contracting party materially reaches the contract,

the injured party is entitled to sus end his performance, and

the determination of whether a material breach exists is a

question of fact. E. Farnsworth, Contracts, 5 8.16 (1982).

The contracts included specific provisions directing the

mortgage release. The District Court found that "the

specific purpose of the provision . o . was to allow Sjoberg

to have the property free o f the mortgage and subject only to

the purchase contract so that he could obtain financing to

begin to develop the property as a horse ranch.'" The

District Court concluded breach was a

ateriai. reach. e agree with the District Court ecause

the Kraviks reach substantially effected the purpose of the

contract. Sjoberq probably woul. not have entered the

contract had he known the mortgage would not be released. We

hold that the Kraviks" breach was material and constituted a

ition entitling Sjoberg to stop his payments under the

contracts.

The raviks contend that this holding ould conflict

with the rule that under an installment sales contract the

seller oes not have to produce mar itle until the

date set for final payment and ten Scheitlin

V . R & D 731 P.2d 1388, 2390,

St.Rep. 986, 1933) r

However, this ecision does not

run contrary to this rule because the parties specifically

agreed the mortqaqe would be release no later than one year

after the contracts were entered.

3
2 . GE

This action was co enced when Sjo erg filed a complaint

in the District Court alleging breach of the two real. estate

contracts because the John Hancock Insurance Company release

had not been obtained within a year. He sought total damages

of 71,700, Sjoberg thus chose to stan e contract an

to seek damages for its breach.

In their answer to the complaint, Kraviks tendered a

third defense and counter claim in which they agreed that

under the te s of the contracts they were to deliver

marketable title in the sellers; and they could not do so

because they were unable to secure the release from the John

Hancock utual Life Insurance Company; that obtaining the

release was not possible and that the Kraviks were ready,

willing and able to restore to Sjoberg all payments made

him nder his contracts and y reason of the doctrine of

mutuality of remedy, sought to rescind the contracts and

restore the parties to their status at the time of en

into the contracts. No other pleadings were thereafter filed

in the nature of supplementary plea

hile the action was pending, riE of 1986 through

another litigation, e release of the property from the

mortgage of John ancock e Insurance was obtaine

On May 16, Kraviks served notices of default upon

for each of the contractsp on the ounds that no

payments had been ma berg to keep t contracts in

effect. Upon receipt of e default notices, counsel for

erg went to court ained a stay of default on the

contracts until fur&he f the court.

In its findings and conclusions, the District Court

found that the provision in the contracts requiring the John

Hancock PSutua.1 Li e insurance Company releases was material

t0 he contracts, at the Kraviks' failure to produce

such releases constituted a material breac of the contracts.

8
It concluded t erefore that sjo erg's obligation to ake

payments ceased on the failure of the raviks to obtain the

mortgage releases e The court however further found that

Sjoberg was obligated to pay under the contracts co encing

e payments due in May of 49 (?, but that no interest

accrue on the contracts between the date of the last

payment in 1982 and May 1988 because of the Kraviks' material

breach.

The District Court also found that Sjo rg was damaged

through the Kraviks' breach in the sum of for the

increase costs o f building a house I other

outbuildings; 10,000 for the increased costs of r&asing a

tractor, plow and irrigation equipment; for the

increased costs of obtaining power to the pump and igging

wells; and $13,500 or the increase costs of obtaining a

horse trailer and appropriate truck. rict Court

foun al amount of damages was 43,100.

The findings of the District Court are not clearly

erroneous, Rule 52(a), M.R.Civ.P., and the app ication of

legal principles to the fact situation by the District Court

is proper.

The court did award attorney's fees in the sum of

to Sjoberg based up n the reci 28-3-704,

MCA, and the folio ing in the contracts:

In the event the Sell must resort to

legal action to remove Buyer from the

premises, or seek ret he property,

after Default and the Buyer

hereby specifically a pay all the

court costs and reasonable attorney fees

incurred by t e Seller in such action.

Neither of the parties are entitled to attorney's fees

in this action. While Kraviks breached the contracts by not

ing the John Hancock releases, Sjoberg also breached

the contracts when he did not begin making pay ents on the

contracts when he ecame obligated to do so in May of 1986.

9
e hold it would be inequitab e to award attorney's fees 01

costs to either party in this case.

3 . ~OOT~~§S

In its judgment, the District Court offset the amounts

due to the Xraviks under the contracts with the amounts it

found as damagesp attorney*s fees and costs awarded to

Sjoberg leaving a net of 3,885.?8. The judgment provided

that upon ayment of that sum to the escrow older, the

escrow holder was to deliver the escrow documents, inclu

the warranty deed to Sjober at which time the contracts

would be deeme paid in full and the obligations of all the

parties fulfilled. During the pendency of this appeal,

Sjoberg has made that payment to he escrow holder and now

claims that the cause is moot because the terms of the

judgment have been fulfilled by him.

Because we have found that Kraviks are entitled to

effective relief on appeal, we ds not find the judgment to be

moot. See artin Development Company v. Keeney Construction

ont. 19851, 703 P.2d 143, 147, 14 , 42 St.Rep. 752,

757 ‘ 75%.

. CONCLUSION

Accordingly, we affirm in part and reverse in part the

judgment of the District Court. the etermination

of the District Court that the sum of 56,529.38 is due to

the Kraviks from Sjoberg as principal due and owing on both

contracts. ould additionally xeeeive interest on

at the rate of 10% per annum from May 16, 1986

date of the judgment appealed from. We affirm the

findings of the District Court that Sjoberg is entitled to

ges from the Rraviks in the sum of 43,100, and agree

that this sum may be offset against the principal balance

on the contracts of Sjoberg to Rraviks as of the date o said

judgment. Thereafter Kraviks are entitled to receive

judgment interest at the rate of 10% per an um on the net

10
principal amount due from and after the ju gment date unt

paid. (Post judgment interest shall not include interest on

interest.) We determine that neither party is entitled to

attorney's fees and costs in this action. We remand this

cause to the District Court for such further proceedings as

may be necessary to reverse the elivery of the warranty eed

from the escrow holder to Sjoberg until such time as the

amounts due under this opinion are f y paid.

:ef Justice

/