No. 14947 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

MONTANA WILLIAMS DOUBLE DIAMOND, 

a Montana Corporation, 

Plaintiff and Appellant, 

VS. 

ROYAL VILLAGE, INC., a Montana Corporation, 

Defendant and Respondent. 

Appeal from: District Court of the Eighteenth Judicial District, 

County of Gallatin, 

Honorable W. W. Lessley, Judge presiding. 

Counsel of Record: 

For Appellant: 

Goetz and Madden, Bozeman, Montana 

William Madden argued, Bozeman, Montana 

For Respondent: 

Bolinger, Higgins and Andes, Bozeman, Montana 

Hal Bolinger argued, Bozeman, Montana 

Submitted: February 25, 1980 

Decided: MA? : 2 1981) 

Filed: 

MC" .Q@g id'- 

Clerk 
Mr. Justice John C. Sheehy delivered the Opinion of the Court. 

Montana Williams Double Diamond Corporation appeals from 

a judgment issued pursuant to a show cause hearing in Gallatin 

County District Court, declaring that the Corporation forfeited 

all rights under contracts entered into with Royal Village, 

Inc. and ordering the cancellation of all such contracts 

together with an accompanying note and mortgage given to the 

Corporation by Royal Village, Inc. 

Montana Williams Double Diamond Corporation (hereafter 

referred to as Montana Williams) is a Montana corporation 

whose principal business is a real estate sales business under 

the fictitious and unregistered name of Double Diamond Properties. 

Double Diamond Properties is operated by Lillian E. Williams, 

a real estate broker licensed under Montana law. 

In November 1977, Wallace Diteman, a construction contractor, approached Lillian Williams concerning his interest 

in purchasing property for a subdivision development. Through 

her brokerage efforts, Diteman later purchased an approximate 

300 acre parcel west of Belgrade, Montana, in the name of 

Royal Village, Inc. (hereafter referred to as Royal Village). 

It was agreed that the commission owing on the purchase "would 

be deferred and picked-up somewhere along the way." Subsequently 

two attempts were made to pay the deferred commission but the 

various agreements fell by the wayside. 

Meanwhile, Royal Village began developing the Royal 

Village subdivision consisting of approximately 268 lots. 

Royal Village estimated 1.2 million dollars was necessary 

for required improvements. Royal Village was never successful at financing the construction project. In the fall of 

1978, Royal Village approached Montana Williams with a plan 

to generate working capital. Montana Williams entered into 

an agreement dated September 29, 1978, agreeing to purchase 137 

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lots from Royal Village for the total sum of $748,663.04 

payable as follows: earnest money of $3,946.70, consisting 

of the sum of $2,700 plus a credit for title insurance of 

$1,246.70; down payment of $266,053.30 payable on the date 

of closing; and the balance of $478,663.04 together with 

interest at the rate of 10% from September 15, 1978, was to 

be paid in two installments, one of $230,000.50 toward 

principal and interest on or before December 1, 1978, and 

the balance of the principal and accrued interest on or 

before December 1, 1983. The date of closing was designated 

as September 15, 1978. 

As part of the same transaction, Diteman and Double 

Diamond Properties entered into an exclusive real estate 

listing agreement giving Double Diamond the sole right to sell 

the lots in Royal Village Subdivision, exclusive of the lots 

included in Phase I, for a period of five years. No sales 

were ever consummated. 

In order to accomodate the cash generation function of 

the contract, the agreement provides in paragraph 2(H) for 

partial releases of lots for payments under the purchase contract. 

Pursuant to paragraph 2(G) of the contract for sale, five lots 

set forth on Exhibit A to the contract were to be released 

upon payment of the closing amount. Release of the remaining 

132 lots, listed on Exhibit B of the contract was to be, 

according to paragraph 2(H), upon payments on the principal 

balance due at the rate of 77 cents per square foot for each 

lot proposed to be released. Deeds for these 132 lots were 

to be deposited with an escrow agent who was to deliver such 

deeds to the purchaser upon determination that the rate for 

the lot sought to be released had been paid. In the event 

of Montana Williamst breach, Royal Village was entitled under 

paragraph 5, to forfeit Montana Williamst interest under the 

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agreement by giving the notices therein required. However, 

any lots previously released would not be subject to forf eiture. 

Additionally, Royal Village warranted it would obtain 

FHA, VA and HUD approvals of the subdivision. To insure this 

warranty, Royal Village executed a note and mortgage on the 

remaining lots to Montana Williams in the sum of $748,663.04 

to insure Montana Williams that the improvements would be 

made on the lots being purchased by them. 

Neither party performed the contract as written. The 

payments to be made, the warranty deeds to be delivered and 

the escrow agent to become involved were never made or 

designated for the reason that of the $266,053.30 payment due 

at the time of closing, only $41,823.52 (being the full proceeds 

from the sale of the five lots set forth in Exhibit A to the 

contract) was paid. Nevertheless, upon receipt of the money, 

Royal Village released all five Exhibit A lots by delivery 

of deeds and mortgage releases. Following execution of the 

purchase contract, Royal Village also released Exhibit B lots 

sold to third party purchasers by delivering deeds and bank 

releases directly from Royal Village to the third party 

purchasers. 

Overall, Montana Williams sold 12 of the 137 lots to 

third party purchasers for cash. Of the remaining lots, 

Montana Williams sold 120 on contracts for deed to third party 

purchasers. For payments received under these contracts, 

Royal Village released three lots by delivery of warranty 

deeds and releases of mortgage. 

The sales by Montana Williams to third party purchasers 

generated $238,378 in cash. All was paid to Royal Village 

even though Montana Williams was entitled to keep a portion 

as commissions under paragraph 2(E) of the contract for sale. 

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By taking into account credits for title insurance, closing 

fees and some real estate commissions paid by Montana Williams, 

a total of $250,362.24 has been paid by Montana Williams 

under the contract. 

The parties developed differences on how to salvage 

the operations when it became apparent Montana Williams could 

not pay the December installment. In February 1979, Montana 

Williams requested Royal Village to release as many lots as 

paid for by the $238,378.31 so as to free those lots for 

further marketing. Considering the 12 lots already released, 

Montana Williams asserted it was entitled to at least 31 lots. 

Royal Village refused the demand and then served Montana 

Williams with two 15 day notices of default as provided for 

under the contract. The notices gave Montana Williams a total 

of 30 days to bring all payments current or forfeit all its 

contractual rights. 

As a result, Montana Williams filed this cause for a 

declaration of its rights under the contracts on March 22, 

1979. After a show cause hearing on April 17 and 18, 1979, 

the District Court issued findings of fact and conclusions 

of law on May 4, 1979. The court determined that Montana 

Williams had forfeited all its contractual rights by failing 

to make timely payments. The District Court's May 7, 1979 

judgment cancelled all agreements between the parties and 

cancelled the note and mortgage given to secure Royal Village's 

express warranty. This appeal followed. 

The following issues are set forth for our review: 

(1) Whether the District Court erred in ruling that 

the appellant is not entitled to have any additional lots 

deeded to it? 

(2) Whether the District Court erred in not - declaring 

the respondent legally bound by the contracts entered into 

between appellant and third party purchasers? 

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(3) Whether the District Court erred in cancelling 

the note and mortgage? 

(4) Whether the District Court erred in cancelling 

the real estate exclusive agency agreement? 

(5) Whether the District Court erred by granting 

respondent's motion to add additional parties-plaintiff to 

this action? 

(6) Whether the appellant is entitled to its attorney 

fees pursuant to paragraph 8 of the contract? 

Appellants' primary contention on this appeal is that 

they are entitled to the release of additional exhibit B 

lots under the release provision of the real estate sales 

contract, on a waiver theory. It is asserted that respondents 

waived appellants' admitted default in making the payments 

due under the terms of the contract, by accepting sums subsequent to the closing of the contract and by releasing deeds 

to exhibit B lots which by the wording of the contract were 

not to be released until payment of the full closing amount. 

Appellants also submit that the sanctions provided for under 

the forfeiture provisions of the contract were not utilized 

with the celerity that is required under Montana law. 

Although it is true that Montana case law supports the 

proposition that a vendor's option to declare or assert a 

forefeiture for default in payment must be exercised promptly, 

Suburban Homes Co. v. North (1914), 50 Mont. 108, 118, 145 

P. 2, 5; Hansen v. Transamerica Ins. Co. (1978), Mont . 

, 573 P.2d 663, 666, 35 St.Rep. 55, 58-59, it is also true 

that such a waiver does not compel the vendor to keep the 

contract open indefinitely. On the contrary, the essence 

of the waiver is merely that there cannot be a forfeiture 

without the giving of a preliminary warning which in turn 

implies notice of an intent to forfeit if payment is not made 

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within reasonable time. The vendor waives such a right 

only for the time being and can only terminate the contract 

after he has given the purchaser suitable notice and a 

reasonable time to pay. Suburban Homes, 50 Mont. at 118, 

145 P. at 5. 

In the present case, assuming arguendo there did exist 

a suspension of the right of forfeiture due to respondents' 

indulgence, it was only temporary and was restored by the 

respondents giving to the purchaser the 30 day grace period 

and subsequent 15 day notices required by paragraph 5 of the 

contract. As a result, respondents are precluded from 

asserting rights under the contract based on waiver. 

The forfeiture provision of the contract states in 

pertinent part: 

". . . The Purchaser hereby agrees that in the 

event that the said forfeiture is exercised and 

it fails to perform as herein agreed,. . . that 

all of its rights, title, interest and equity 

in said premises are forever forfeited. Provided, 

however, that as to any lots previously released 

and conveyed to the Purchaser as herein provided, 

there shall be no forfeiture and purchaser shall 

be entitled to retain such lots." 

No contest is presented as to those lots "previously' released 

and conveyed to the purchaser." However, appellants' assertion 

of entitlement to additional lots depends on a dead instrument. 

Light v. Zeiter (1950), 124 Mont. 67, 71, 219 P.2d 295, 297. 

As was their choice pursuant to the purchasers' default, 

respondents chose to serve the required notices that terminated 

the contract. The contract being at an end, the appellants 

cannot now sue upon it as though it was still in force. 

Appellants assert as grounds for their second issue of 

review that it is evident from both the contract of sale and 

the manner in which appellants and respondents performed it 

that the contracts entered into between appellants and 

individual third party purchasers constitute a joint venture 
between appellants and respondents making them jointly 

bound. This issue was not presented to the District Court 

and as such cannot be raised for the first time on appeal. 

Northern Plains v. Board of Natural Resources (1979), 594 P.2d 

297, 309, 36 St.Rep. 666, 680; Spencer v. Robertson (1968), 

151 Mont. 507, 511, 445 P.2d 48, 50-51. 

Appellants' next two issues concern the real estate 

exclusive agency agreement and-respondents' note and mortgage 

given as security for that warranty. Appellants contend these 

instruments constitute covenants severable from the contract 

for sale and as such survive the termination of the contract. 

The District Court's findings of fact nos. 12 and 13 

respectively find these instruments executed as part of the 

same transaction. These findings will not be disturbed on 

appeal unless respondents present substantial evidence to 

refute these findings. Knight and Co. v. Manaras (1979), 

Mon t . - , 603 P.2d 675, 676, 36 St.Rep. 2148, 2150A. Respondents 

have failed to refute satisfactorily these findings. After 

examining the record this Court finds that the evidence indeed 

leads to the factual con~:iusion that the execution of these 

documents was achieved pursuant to but one transaction. As a 

result, we find this contention without merit. 

Appellants' next allegation of error concerns findings 

of fact no. 2 which reads in pertinent part: 

"That plaintiff corporation had not filed its 

annual report for the year 1978 at the time this 

action was commenced, and Lillian E. Williams, 

Joseph F. Williams, and David L. Farrand should 

be named as additional parties plaintiff,. . ." 

The District Court denied appellants' post-trial motion to 

amend its findings on this point. During the hearing on the 

post-trial motions, appellant correctly informed the Court 

that section 15-811, R.C.M. 1947, the statute used to impose 

personal liability upon the directors of a corporation for all 
debts and judgments of the corporation where it failed to 

file an annual report, had been repealed by section 143, 

Chap. 300, Laws of 1967. Section 15-22-125, R.C.M. 1947, 

now section 35-1-1103, MCA, is essentially a replacement 

statute which changes the nature of the sanction from personal 

liability to imposition of misdemeanor criminal sanctions upon 

the corporation. 

The evidence is substantial to allow Lillian E. Williams 

and Double Diamond Properties to be named as additional 

parties plaintiff. The real estate exclusive agency agreement was signed on behalf of Double Diamond Properties 

by Lillian E. Williams, a duly licensed Montana real estate 

broker, as was the contract for sale of real property. 

However, the addition of Joseph F. Williams and David 

L. Farrand does not seem to be substantiated by the record. 

As a result they should be dismissed as parties to this action. 

Appellants' last issue requesting attorney fees pursuant 

to paragraph 8 of the contract, is also dismissed since they 

were not the successful party in this litigation. 

The decision of the District Court is affirmed as modified 

in accordance with this opinion. 

Justice 

We Concur: 

Chief Justice 

, . 

Justices