No. 88-548

IN THE SUPREME COURTOF THE STATEOF MONTANA
1989

DANIELJ. FELSKA andADOLPH L. SOLVIE, Plaintiffs,

WORLD REALTY LTD., KADON MANAGEMENT CO., LTD,YORKVENTURES,LTD., HELUND FORESTCONSULTANTS,RONALD EDWARD LITTLE, DONALD JOHN HENRY WILLIAMSON,et al., Plaintiffs/IntervenorsandAppellants,-vsBRIAN GEORGE GOULDING,and all other persons, unknown,claiming orwhomight claim any right,title,estate or interest in or lein or encumbrance upon the real property described in the complaint, adverse to the plaintiffs title thereto, whether such claim orpossible claimbe present or contingent, Defendants and Respondents.

APPEAL FROM: District Court of the Eighteenth Judicial District, Inand for the County ofGallatin, The Honorable JosephGary,Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Ben Berg, Jr. argued; Berg, Stokes,Tollefsen & Hayes, Bozeman, Montana

For Respondent: J. Robert Planalpargued; Landoe, Brown,Planalp & Kornmers, Bozeman,Montana Rodney Schwasinger argued, Bozeman,Montana

Filed: Submitted: May 9,1989 Decided: July 19,1989Mr. Justice John Conway Harrison delivered the Opinion of the Court.

This case comes on appeal from the Eighteenth Judicial District, Gallatin County, the Honorable Joseph B. Gary presiding. The District Court quieted title in the plaintiffs, purchasers of certain real property in Bozeman, Montana. Previously, the property had been held by a group of investors (hereinafterreferred to as the co-owners) from British Columbia, Canada, each ofwhom held their respective interests as tenants in common. In addition to the quiet title determination, the District Court awarded defendant Goulding a portion of the sale proceeds in proportion to his initial capital investment. We affirm in part, reverse in part and remand for further proceedings. In December, 1977, Brian George Goulding and other

co-owners acquired the real property, personal property, fixtures,furniture, liquor license and otherbusiness assets of the Inn of Bozeman (Inn). The parties entered into an agreement for the purpose of setting forth the rights and obligations with respect to their interest in the Inn. Specific provisions of the agreement will be discussed later in this opinion. In December, 1983, citing financial difficulties, the

co-owners decided to list the property for sale. Throughout the following year, meetings were held during which the

co-owners discussed prospective sales and financial problems of the Inn. Goulding or his attorney, Michael Karton, attendedmost of thesemeetings. Between December, 1984, and March 9, 1985, Goulding lived in the Philippines with his family. Goulding did not leave a forwarding address with the other co-owners, norhis instructionswith his attorney regarding apotential sale the Inn. On January 3, 1985, fourteen of the sixteen co-owners entered into an agreement with plaintiffs for the saleof the Inn. The co-owners attempted to contactGoulding throughhis attorney and sentby registeredmail letters informing him of the majority decision to sell the property. In accordance with the terms of the co-owners' 1977 agreement,Gouldingwas informed that his consentwould be "deemed"given ifwritten objection to the sale was not received within ten days.

(Thereafter, the co-owners petitioned the Supreme Court of British Columbia for an order authorizing appellant Williamson to sign on Goulding's behalf. However, all parties agree the order is void for lack of jurisdiction.) On March 20, 1985, after returning from the Philippines, Goulding visited his attorney and was given a copy of the sale agreement and the registered letter. Goulding did not respond to the letter. However,onApril 3, 1985,Goulding attended ameeting of the co-owners. At that meeting the sale documents were signed by all co-owners except Goulding, who abstained. Two days later, Goulding sent a letter to the co-owners setting forth his objections to the sale. Plaintiffs initiated a quiet title action against Goulding, alleging Goulding's claimed ownership interest in the Inn created a cloud on their title. Goulding counterclaimed, stating the co-owners had no authority to transfer his ownership interest in the Inn. Goulding additionally claimed plaintiffs had recorded the deed intentionally and with knowledge of his interest in the property, and thereby depreciated his interest. Later, the other co-ownersof the Inn filed a complaint in intervention.On December 3, 1987, the Honorable Joseph B. Gary entered judgment in favor of the plaintiffs. The District Court found the agreement between the co-owners required majority vote for the complete sale of the property. Alternatively, the court ruled Goulding impliedly consented to the sale because he failed to give written objection. Finally, in original Conclusion of Law No. 8, the court ordered that upon delivery of the deed to plaintiffs, all monies in deposit due and owing to Goulding shall be deliveredby the escrow agent to Goulding. 

### By order of March 8, 1988, the District Court amended its Findings to include the following: Finding No. 13. During the negotiations for the sale of the principle assets it was necessary that additional capital be infused in the corporation for operating expenses. A Motion was passed at the meeting of December 8, 1983, at which the Defendant Goulding was not present, that any advance of capitalwould be considered as a loan at the interest rate of twenty-five percent (25%) or at U.S. prime rate plus six/nine percent (6/9%) and that a legal opinion was to be obtained as to whether this was enforceable. No legal opinion was ever obtained and the net effect of this Motion as shown by the evidence would be to completely wipe out the equity of all of the original investors in the business and allmonies remaining onhand would be paid to those persons advancing funds.
That the effect of wiping out all original investors was done without notice to the members of the partnership that this would be the result taken at the meeting and would amount to an inequitable result and contrary to due process of law.14. That any investments made aftertheDecember 14, [sic] 1983meeting by themembers of the partnership should be treated as capital investments and added to each partner's original capital account so that the monies remaining in escrow atthistimebe paid outpro rated shareon allcapitalaccounts. Conclusion of Law No. 8 was amended to conform to the new findings and reads asfollows: That upon the delivery of the Deed to Felska and Solvieby eitherGoulding ora refereeappointedby theCourt toexecute a deed, that all monies in deposit at SecurityTitleInsurance Company shallbe distributed to the members of the partnership in proportion of their original investmentsplus any infusionof capital following the December 14, [sic] 1983 meeting. Said payments following that meeting constitute a capital investment and nota loan.
On April 13, 1988, co-owners moved for relief under Rule 60(b)(2), M.R.Civ.P., from the March 8, 1988 order, seeking to admit a legal opinion written December 9, 1983, which discussed the legality of the 25%interest on loans. On April 18, 1988, the District Court denied the motion without opinion. On June 28, 1988, the District Court entered judgment and decreed the plaintiffs fee owners of the real property. Further, the court ordered that allmonies held inescrowbe distributed to the partners in proportion totheir original investmentsplus any infusion of capital. Upon Goulding's motion to amend for a definite amount due him, theDistrictCourt, on August 8, 1988, ordered that he should receive 10.26%of allnetproceeds of disposition

or $25,163.70, together with interest from thedate of sale,plus 10.26% of all other assets which arose out of the operationand saleof the Inn. The following issuesareraisedon appeal: 1. Did theDistrict Court errwhen it quietedtitlein theplaintiffs? 2. Did theplaintiffsand co-owners slander Goulding's title? 3. Did theDistrictCourt errwhen it adopted Findings Nos. 13 and 14 and Conclusion of Law No. 8, in which it determined the advances made after December, 1983 were capital investments rather than loans and wherein it awarded

a money judgment? 4. Did the District Court err when it denied the co-owners' Rule 60(b)(2),M.R.Civ.P., motion? Our scope of review is such that we may consider the contract language independently. SAS Partnershipv. Schafer (1982), 200 Mont. 478, 653 P.2d 834. Generally, contract ambiguitiesarequestions of fact. S-W Co. v. Schwenk (1977), 176 Mont. 546, 568 P.2d 145. However, the determination of whether or not an ambiguity exists is one of law, freely reviewable by this Court. SAS Partnership; Martin v. United 

## - States (9thCir. 1981), 649 F.2d 701; United States Fidelity and Guaranty Co. v. Newman (9th Cir. 1981), 656 F.2d 457. The entirecase focusesupon the 1977 agreement entered into between the 16 co-owners. Therefore, a review of the significantcontractprovisions isinorder: 15. 

# .

# . .Voting shall be by hand, with each Co-owner having one vote, unless otherwise demanded by any Co-owner, in which case voting shall be according to the equitiesof theCo-Owners inthe Inn. All decisions shall be bv maioritv vote

RESTRICTIONS OF TRANSFER:16. No Co-owner shall assign, or otherwise dispose of, allor any part of his interest in the Inn unless such Co-owner :
A. has obtained the prior written consent of the other Co-Owners; or
B. has first offered his interest in the Inn to the other Co-Owners

17. No Co-owner shall mortgage, pledge, charge or otherwise encumber all or any part of his interest or restrict the transferability of his co-ownership interestunless:

A. such Co-owner has obtained the prior written consent of the other Co-Owners; and

B. the holder of such mortgage, pledge, charge encumbrance orother restriction agrees to be bound to andwith theother Co-Owners and to grant to the other Co-Owners the rights of firstrefusal and options topurchase hereby granted amongst and between the Co-Owners, pursuant to the terms of this Agreement.

BORROWING PROVISIONS:
21. The Co-Owners shallborrow fromtime totimeallthe sums of money required in connection with the carrying on of the Inn, upon the security of the assets of the Inn to the extent possible. The approval of all Co-Owners shall be acquired when establishing lines of credit or financing with any banks or other financial institutions or private lenders.
LOANS BY CO-OWNERS:22. If at any time a Co-owner shall properly determine that, in order to protect orpreserve any of the properties or other assets of the Inn, additional funds are required to meet the current cash requirements of the Innand the same are not available from sources already available to the Co-Owners,then any such Co-owner may, but shall not be obligated to, advance such funds to the Inn or pay such funds to third parties for the benefit of the Inn.

# . .Any suchadvances or payments shall during their existence bear interestat a rate determinedby the Manager.

DISTRIBUTIONOF DISTRIBUTABLEFUNDS:
28. 

# . . .Distributable funds shall be distributed as follows:

A. Firstly, in repayment of the principal and accrued interest under each temporary loan, if any, to the Innpursuant to Paragraph 22 hereof which remains unpaid, with all amounts being applied firstly to accrued interest and the balance toprincipal,and, ifmore than one such loanremainsunpaid, then on a pro ratabasis;

B. Secondly, the balance if any shall be distributed to the Co-Owners in accordance with their respective interests.
29. In the event that the Co-Owners agree to sell all or 

### any portion of the 

### --- -- interest or properties of the Inn, then 

### --- in such event, the net proceeds of such sale (except for the amounts thereof required to be paid to any liabilities) shall be deemed tobe distributable funds and shall be distributed in accordance with the provisions of the aforesaid.

(Emphasisadded.)

# ... IMPLIED CONSENT:
37. Inany instanceunder thisAgreement in which the consent or approval of a CoOwner [sic] to any proposed action already approved by a majority of the Co-Owners is required, such consent or approval shall be deemed to have been given unless written objection to such proposed action, setting out the grounds for such objection, is sent by such objecting Co-owner totheGeneralManager within ten (10) days after receipt of a written request for such consent or approval.
An ambiguity exists when a contract is subject totwo interpretations. In such an instance, par01 testimony may be used toascertain theparties' intent. S-W Co., 568 P.2d at 147. However, intent of the parties is only looked towhen the agreement inissue is not clear on its face 

# ...Where the contractual language is clear and unambiguous on its face, it is this Court's duty to enforce the contract as drafted and executed by the parties. (CitationsOmitted.)
Monte Vista Co. v. Anaconda Co. (Mont. 1988), 755 P.2d 1358, 1362, 45 St.Rep. 809, 814; citing Glacier Campground v. Wild Rivers, Inc. (1978), 182 Mont. 389, 597 P.2d 689. It is fundamental when reviewing contractual disputes thatwe are required to read the entire contract together and give effect to every part, if reasonably practicable. Section 28-3-202, MCA. The 1977 agreement is silent concerning the specific vote required for the full sale of the property. However, the agreement mandates unanimous co-owner consent for one owner's sale or encumbrance of his individual interest and,in connection with the regular business activities, the establishment of lines of credit and financingwith banks or financial institutions. Goulding argues that because unanimous consent is required of these activities,unanimous consent must also be required for the sale of the business. In support of his position, Goulding points to comments made during meetings that "the sale agreement requires the signatures of Messrs. Otto and Goulding, both of whom are unwilling to sign" and statements regarding the co-owners' need for "powersof attorney executedby all partners to sell the motel." Further, Goulding contends the void British Columbia court order indicates that the co-owners believed unanimous consentwas necessary to effect a full sale of the business. The District Court found the contract language clear and unambiguous and therefore rejected Goulding's attempt to introduce extrinsicevidence. We agree. While the contract does not specifically address the vote required to effect a full sale, the absence of that specific language does not render the contract ambiguous. First, the provisions requiring unanimous consent address specific circumstances, unrelated to the sale in issue. Because the unanimous consent provisions are definite, we refuse to stretch their applicability. Additionally, the parties contemplated the full sale of the business, as evidenced by Paragraph 29,which discusses the distribution of proceeds in the event of a sale. More importantly, however, the agreement states that all decisions are to be determined by majority vote, unless otherwise specified. We interpret thisprovision to limit the instances which require unanimous consent,because it indicates the co-owners' intent tomaintainmajority vote for allotherdecisions.When a contract is clear and unambiguous, this Court must enforce the agreement as written by the parties. We conclude that Paragraph 15,which allows for majority vote, governs the saleof theproperty. The District Court concluded that Goulding's letter of April 5, 1985, did not specifically object to the sale, as required under Paragraph 38 of the agreement. Rather, Goulding expressed concern over management problems, the repayment of loans to various co-owners, amounts held in
escrow,and legalquestions ofwarranties. Becausewe uphold the sale on other grounds, we need not address the matter. However,we state simply that it is clear to this Court that Goulding did not actpromptly to protect his interest in the Inn. Next, Goulding contends that because the co-owners maintained their interests as tenants-in-common, a majority vote of the co-owners is ineffective to divest him of his property. However, Paragraph 38 of the agreement provides: The Co-Owners shall and will sign such further and other papers and documents, shall cause suchmeetings to be held and do and cause to be done and perform such further and other acts or things thatmay be necessary or desirable from time to time in order to give full effect to this Agreement and each and every part hereof. Further,Paragraph 42 states: Any decision of the Co-Ownersmade in the manner herein before described shall be fully and faithfully carried out by all Co-Owners as if all Co-Owners had - - 

### - - unanimously consented to such decision, and all Co-Owners shall execute such documents and things as may be necessary or advisable for the fullcarrying outof the true intent of such decision.

(Emphasisadded.)The agreement is sufficient to control the rights of the various co-owners. Hence, by signing the agreement, Goulding expressly agreed to abide by all decisions rendered by the majority. We concludeGoulding is required to comply with thewill of the majority. In light of the above, Goulding's slander of title counterclaim against the plaintiffs must necessarily fail. In First SecurityBank v. Tholkes (1976),169 Mont. 422, 427, 547 P.2d 1328, 1331, we defined slander of title as "[olne who maliciously publishes false matter which brings in questionordisparages the title to property, thereby causing special damage to the owner

# . . ." See, 50Am.Jur.2dI Libel and Slander, S 541. Since we upheld the sale and rejected Goulding's claimed interest in the property, plaintiffs' actionswere not slanderous. Next, we consider the apportionment of funds addressed in the District Court's amended order of March 8, 1988. Based on plaintiffs' Exhibit 2, a summary of investments and advanced funds at 10% and 12% interest rates, the District Court found that "[tlhe net effect of allowing interest on the advancements after the December 8, 1983 payments, 

# . .. is to completely wipe out all the original investors and giving all of the remaining assets to those persons that advanced monies." The court concluded the equitable manner of disbursing the funds would be to add the contributions to the original capital investment of the respective co-owners and distribute the fundson apro ratabasis. The standardof review for a case in equity is that the judgment of the trial court is presumed correct, and all legitimate inferences will be drawn to support this presumption. This Court's inquiry into the evidence is limited to whether the findings of the trial court are clearly erroneous. Rule 52, M.R.Civ.P.; and Citizens StateBank v. Bossard (Mont. 1987), 733 P.2d 1296, 44 St.Rep. 468. With this standard inmind, we review the evidence,dividing

our discussion into post- and pre- December, 1983 advancements. The co-owners contend the evidence indicates an intent to treat the advancementsas loanswith an accrued interest, not as capital investments. We agree in part. The evidence supports a loan designation for the post-December, 1983, advancements. First, in his letter of April 5, 1985, Goulding acknowledged the monies advanced were loans. The record indicates Goulding objected to an interest rate of 59%,but stated that a "usualbank rate isreasonable." Second, Paragraph 22 of the agreement provides for loans, at a rate of interest determined by the manager, by the various co-owners of the Inn, if necessary to protect or preserve the assets. Paragraphs 28 and 29 provide for distribution of sale proceeds first to the repayment of principal and accrued interest,and thereafter the balance to the co-owners according to respective shares. Third, minutes of the co-owners

### ' meetings indicate complete discussions took place regarding the poor financial condition of the Inn. During these meetings, management requested additional funds for the Inn which included an interest rate commensurate with the risk and a repayment preference upon distribution of the sale proceeds. However, it is not clear what rate of interest the parties contemplated: (25%; 6%/9% over U.S. prime; or the "highest legal rate")


# . Nor is it clearwhat reasonable rate could be applied. We leave these specific questions to the District Courtupon remand. The District Court's findings related solely to advancementsmade after December, 1983. However,plaintiff's Exhibit 2 indicates that the co-owners contributed funds inJanuary 1982 and 1983. In addition, the co-owners expressed

a desiretoretroactively designate thesemonies asloans, as evidenced by the minutes of their December 8, 1983, meeting: MOTION: All funds contributed after the initialinvestment accrue interest atU.S. Prime rateplus 6%/9% and that this interest should be paid outmonthly.

All monies advanced since that time should be secured, if possible, and be treated as loans frompartners.
Interest accrued on funds contributed before December 31, 1983, be treated as a portion of the partners[

### '] loans. (Emphasis added.
Neither partypresented argument regarding these funds. The District Court must make specific findingsregarding the pre-December, 1983, advancements by determining the legality of theretroactive designation of these funds as loans. We conclude the co-owners' final issue regarding the District Court's denialof theRule 60(b)(2)motion, ismoot. Upon remand, the District Court may give the evidence whatever weight it deems appropriate. Affirmed in part, reversed in part and remanded for proceedings consistentwith thisopinion.

Ch-efJustice 

# 7

# nJusticesMr. Justice John C. Sheehy,dissenting:

I dissent and would affirm the District Court in total. This case is an example of the minor investors ganging up on one of the two largest investorsby passing resolutions in his absence which in effect take away his investment and leave nothing of the net proceeds in which the larger investor will participate. Judge Gary saw through this obvious raid or, the net proceeds and refused to agree. I would affirm judge Gary.

Justice

Mr. ~ustice William E. Hunt, Sr., dissenting:

I concur ir, the foregoing dissent of Justice Sheehy.

/'

Justice