NO. 82-521 INTHE SUPREME COURT OF THE STATE OF MONTANA 1983

NORTHWESTERN UNION TRUST CO., Personal Representative of theEstateof CBRIST WORM, SR., Deceased, Plaintiff and Appellant,

BEN WORM AND DORIT WORhI,Defendants and Respondents.

Appeal from: DistrictCourt of theThirteenthJudicialDistrict, Inand fortheCounty of Treasure, The HonorableWilliam J. Speare, Judge presiding.

Counsel of Record: For Appellant: Keefer, Roybal, Hanson, Stacey & Jarussi; Gene R. Jarussi, Billings, Montana Bruce E. Lee, co-counsel, Billings, Montana For Respondents: WilliamF. Fteisburqer, Forsyth, Montana I-I. D. Euelow, MilesCity, Pilontana

Submitted on Briefs: March 25, 1983 Decided: May 19, 1983

Filed: 

## MAY19

## 1983

ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court

# . Northwestern Union Trust Company brought this action to 

### set asidea recorded deed which placed titleto real property located inTreasure County intodefendants' names. Judgment was entered upon 

### a jury verdict in favor of defendants and the Trust Company appeal

### s

# . In the late 19401s,ChristWorm purchased two pieces of property inTreasureCounty known asthe "Home Place" and the "South Place." On December 28, 1960, Christ and Helen Worm, and their

son and daughter-in-law, Ben and Dorit Worm, executed a $12,000 notepayable to theFederal Land Bank of Spokane, afterreceiving



### a $12,000 loan. In addition, the Worms executed 

### a Federal Farm LoanAmortization Mortgage on theHome Placeand theSouthPlace. The note 

### was to be paid in twenty annual installments of $1,046.22. On March 31, 1961, Ben and Doritentered into 

### a contract for deed with Christ and Helen, to purchase the Home Place and the South Place. The purchase price on the contract 

### was $24,000. Ben and Dorit agreed to pay the $12,000 note to the Federal Land Bank and another $12,000 toChristand Helen directlywith 1percent annual interest. Simultaneously with the execution of the contract, Christ and Helen executed a warranty deed for theHome Place and the South Place to Ben and Dorit. Christ kept possession of the warranty deed to be delivered to Ben and Dorit upon completion of the contract. Ben testified beginning in 1961 and every year thereafter until 1973he paid Christenough money to cover the Federal Land Bank mortgage and paidChristatleast$1,000 annuallydue on the contract. Ben also paid Christ $5,000 in 1974 and $7,000 in 1975. Ben testified he had therefore paid off the entire contractwith the finalpayment in1975. In 1965, Ben and Dorit filed a petition for bankruptcy. The petition did not 

### list Ben's equity in the farm 

### as an 

### asset, nordid the petition list the note payable to the Federal Land Bank

asa claimagainst the bankruptcy estate. After the bankruptcy, Ben, Dorit, and their children continued to live and work on the farm. From 1967 through 1973Ben and/or Christ obtained annual financing from the Midland Production Credit Association (PCA). To obtain financing, the debtor must complete and sign a financial statement, loan applications, and security agreements. In those yearsBen obtained the financing, he stated on the security agreements that he was operating the farm as a 

### lessee. In those years Christ obtained the financing, he stated on the security agreements thathe was operating the farm 

### as the owner. Northwestern Union introduced into evidence checks showing payments to the Federal Land Bank for theyears 1966, 1968, 1969, 1970, 1975, 1976, and 1977. Each check 

### is drawn upon Christ's account and signed by Christ. Ben testified he paid cash to Christ who would then make the necessary payments to the Land Bank. In April 1975, Ben testified Christ gave him the warranty deed stating Ben had fulfilled his obligation on the contract. DoritWorm testified she was present when the deed was exchanged. Two persons, ShirlyCunningham and Charles Blythe, testified Ben had possession of the deed in 1975 and showed the deed to them. InFebruary 1977, DoritWorm filed a petition for dissolutionof her marriage toBen Worm. ParagraphVIIIstatesthe parties, "have accumulated no personal or real property." In 1978, Christ leased theHome Place and the SouthPlace to Harold Zent Farms, Inc. In March 1980, Christ leased the Home Place and theSouthPlace toRobertDeCock and James DeCock. Ben Worm was not aparty to the leases. Dawn Worm, Ben's daughter, testified Ben gave her the deed for safekeeping and that she returned the deed to Ben near the end of 1980 or the beginning of 1981. Helen Worm testified Ben found what she thought was the deed in 1981while he was helping her move a mattress inChrist's home. Ben recorded the deed attheTreasureCounty Clerk and Recorder's Office inNovember 1981. Christdied onNovember 14, 1981. In aWillhe executed June 3, 1975, Christ devised one-third of all his real property to HelenWorm; two-thirds of theHome Place toJamesJacobWorm; and two-thirds of the SouthPlace to Ben's children, Ben ChristWorm and Christian Willie Worm. The Will states, "Iam leaving the 'South Place' to my son BENJAMIN'S CHILDREN at his request so that he may not 

### sell or encumber the same by reason of his admitted weaknesses." Northwestern Union Trust Company was appointed personal representative of Christ's estate. Northwestern Union brought thisaction to setaside the deed that Ben recorded placing title to the Home Place and the South Place in his and Dorit's name. After a jury trial in the District Court of the Thirteenth Judicial 

### District

## , Treasure County, the jury returned a verdict in favor of Ben and Dorit Worm. Northwestern Union moved for a new trial which the DistrictCourtdenied and thisappeal followed. The issues raised on appeal are asfollows: 1. Whether the jury verdict was supported by substantial credibleevidence; 2. Whether it was error to exclude the video testimony of attorney, Richard W. Anderson, who prepared the bankruptcy petition forBen and Dorit in 1965; 3. Whether it was error to instruct the jury thatthey could find that Christ and Helen Worm made a giftof the real property toBen and DoritWorm; 4. Whether it was error to refuse the plaintiff's offered instructiononmutual cancellation of a contract. We will first deal with issue number four. Plaintiff's offered the following instruction on mutual cancellation of a contract:"You are instructed that the parties to a contract may terminate it at any 

### time by mutual consent. The effect 

### is to relieve the parties from going forward under the contract. This termination may be orally done, and the fact of 

### its having been done may beestablished by evidence of the acts and declarationof the parties

# ." Plaintiff's contend the 

### District Court erred in refusing to give this instruction to the jury. We agree. The rule of 

### law stated in the above instruction comes from Eggers 

### v. General RefrigerationCo. (1949), 123Mont. 205, 219, 210 P.2d 636: "The parties to the executory written agreement were privileged to terminate 

### it at any time by mutual consent independently of any express agreement so providing and it 

### is immaterial whether such terminationbe characterized an abandonment, cancellation, mutual rescission or waiver. The effect is the 

### same 

## -- to relieve the parties from going forward under the written instrument, and thismay be accomplished by parol, and the facts of 

### its having been done established by evidence of the actsand declarationsof theparties." This rule originates from Kester 

### v. Nelson (1932), 92 Mont. 69, 10 P.2d 379, and has sincebeen specifically cited inSmall

v. Coca-Cola Bottling Co. (1958), 134 Mont. 168, 328 P.2d 124, and West River Equipment Co. 

### v. Holzworth Construction Co. (1959), 134 Mont. 582, 335 P.2d 298. In Standard Insurance Co.



### v. Sturdevant (1977), 173Mont. 23, 27, 566 P.2d 52, thisCourt stated: "Termination of a contract by mutual consent 

### is 

### a question of fact for the district court." And in Murphy v. Redland, Berthelson & Sidney Livestock (1978), 178 Mont. 296, 306, 583 P.2d 1049, thisCourt stated: "A contract may be 

### terminated by theparties, but onlyby the mutual consent of allthe parties." Plaintiffs pled in their complaint, that the contract had been terminated and intheir trialmemorandum stated the contract

was cancelled by mutual consent of the parties. Helen Worm testified the contract was terminated by the mutual consent of the parties when Ben filed a petition for bankruptcy in 1965. Plaintiffs introduced evidence which showed Ben did not 

### claim ownership of the farm on the bankruptcy petition, loan applications, lease agreements and Dorit's petition for dissolution of marriage. There 

### is no question plaintiff's case rested upon the issue of mutual cancellation of the contract. A party has 

### aright to have instructions given which are adaptable to his theoryof the case. Williamsv. MontanaNational Bank of Bozeman (1975), 167 Mont. 24, 534 P.2d 1247, 1250. Here, refusal to instruct on mutual cancellation of the contract constitutes reversible error. Defendant's argue since mutual cancellation of the contract

was not listed asan issue inthepretrial order, plaintiffscannot raise this issue on appeal. Defendants rely on Rule 16, M.R.Civ.P., claiming the pretrial order, "when entered controls the subsequent course of the action, unlessmodified atthe trial toprevent manifest injustice

# ." However, Rule 15(b)

## ,M.R.Civ. P., states: "When issues not raised by the pleadings are tried by express or implied consent of the parties, they shallbe treated inallrespects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary tocause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to so amend does not affect the result of the trial of these issues." We find here, the issue of mutual consent was raised atthe trialand thuswas an issue for consideration by thejury. 

### We do not agreewithdefendant's position thatthisissue was waived at the trial and not reviewable by thisCourt. In summation, we will briefly comment on issues number two and three. We do not find it necessary to determine whether it

was error to exclude the video testimony of Richard Anderson as he was intended as a rebuttal witness, not listed on the pretrial order. On retrial, plaintiffs can take the necessary action to present their evidence concerning the bankruptcy petition and call the proper witness or witnesses. Plaintiffs contend it was error for the District Court to instruct the jury that they could find Christ had gifted the property to Ben and Dorit. Whether there was a gift was listed as an issue in the pretrial order. As stated above, a party has the right to have instructionsgiven which areadaptable to histheory of the case.We findno error inthe instruction. Judgment 

### is reversed and the case 

### is remanded for retrial.

I Justice

Weconcur: 

# 3d~A&hQq

Chief Justice