No. 88-07 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

WILLIAM K. SCHULTZ, 

Plaintiff and Respondent, 

-vsCRAIG A. STEVENS and STEVENS 

CONSTRUCTION, INC., 

Defendants and Appellants. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Diane G Barz, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Harris & Seidler; Nancy C. Seidler, Billings, Montana 

For Respondent: 

Peterson, Schofield & Leckie; K.D. Peterson, Billings, 

Montana 

Submitted on Briefs: June 9, 1988 

Decided: July 19, 1988 

Fi. led : 

~UL 1 9 1988 
Mr. Justice William E. Hunt, Sr., delivered the Opinion of 

the Court. 

Defendants, Craig A. Stevens and Stevens Construction, 

Inc., appeals the decision of the District Court of the 

Thirteenth Judicial District, Yellowstone County, ordering 

that the defendants pay the plaintiff, William K. Schultz, 

nineteen thousand eight hundred dollars ($19,800.00) plus 10 

percent interest from May 21, 1984, as a result of the 

promissory note executed by Stevens on behalf of himself and 

the Stevens Construction, Inc. We affirm and remand. 

The sole issue on appeal is whether the District Court 

erred in interpreting the promissory note and mortgage 

executed between the plaintiff Schultz and the defendants 

Stevens and Stevens Construction, Inc. 

Plaintiff-respondent, William K. Schultz, was a licensed 

realtor in Billings from approximately 1982 to 1985. Schultz 

was looking at houses when he first met defendant-appellant, 

Craig A. Stevens, in 1981 or 1982. At that time, Schultz 

owned Lots 21 and 22 in Block 1, Lillis Heights Subdivision 

and Stevens expressed an interest in purchasing these two 

lots. Stevens purchased these lots and eventually built a 

house on Lot 22. Schultz subsequently had Stevens build a 

house for him on Lot 18 for resale but instead moved into the 

house himself. 

While building Schultz's house on Lot 18, Stevens 

expressed an interest in building a house on another lot 

owned by Schultz. Schultz agreed to convey by warranty deed 

this lot, Lot 4, Block 1, Lillis Heights Subdivision, to 

Stevens for $19,800. Prior to delivering the deed to Lot 4 

to Stevens, Schultz had Stevens execute a promissory note and 
mortgage that was dated May 21, 1984. The promissory note 

executed by Stevens reads as follows: 

For Value Received the undersigned CRAIG A. STEVENS 

AND STEVENS CONST. INC., OF BILLINGS MONTANA, 

promise to pay to the order of William K. Schultz, 

of Billings, Montana, the sum of Nineteen Thousand 

Eight Hundred ($19,800.00), as follows: 

The aforementioned amount shall, together with 

interest thereon the annual rate of lo%, shall be 

due and payable in a single payment upon sale of 

the House to be constructed on Lot-4 Block-I Lillis 

Hts. Sub. . . . If this Note is not paid when due, and is placed by 

the holder in the hands of an attorney for 

Collection through legal proceedings or otherwise 

the undersigned shall pay a reasonable attorney's 

fee to such . . . [holder], together with the costs 

and reasonable expenses of collection. 

Stevens signed the promissory note for himself individually 

and for Stevens Construction, Inc. Stevens is the sole owner 

of the Stevens Construction, Inc. The mortgage was never 

acknowledged or recorded. 

Before Stevens could begin building the house on Lot 4, 

he had to obtain a construction loan. He obtained this loan 

from the First Bank Billings (Bank). Stevens did not 

disclose to the Bank his previous obligation to Schultz as 

evidenced by the signed promissory note and accompanying 

mortgage. 

When the building of the house was approximately 

two-thirds finished, Schultz listed the house for sale, 

advertised it, and held open houses. Before the house was 

sold, Schultz retired from the real estate business. After 

his retirement, Schultz's only contact with the house was 

when he occasionally drove by the house. 

In the meantime, sometime prior to December, 1985, 

Stevens' construction loan became delinquent. Stevens then 
conveyed Lot 4 and the house to the Bank in consideration for 

the cancellation of the construction loan obligation of 

Stevens. The lot and house was deeded to the Bank on January 

27, 1986. Schultz received no notice of this transfer and 

conveyance of real property. 

Schultz first became aware that something had "happened" 

with the house when he noticed on one of his drives by the 

house that the "For Sale" sign had been removed. In early 

April, 1986, upon further inquiry, he learned that the 

property had been transferred to the Bank. The Bank would 

not allow Schultz to purchase its interest because of a 

pending sale of the property. The Bank sold the property by 

deed dated April 22, 1986. Schultz subsequently filed this 

action in the Thirteenth Judicial District Court, Yellowstone 

County. 

The District Court found that the promissory note signed 

by Stevens is valid, legally binding and unambiguous; that 

the note is in default and is due and payable in full with 10 

percent interest stemming from May 21, 1984; and that 

pursuant to the terms of the promissory note, Schultz is 

entitled to reasonable attorney fees and costs. 

The issue raised on appeal is whether the District Court 

erred in interpreting the promissory note and mortgage 

executed by Stevens on behalf of himself and the Stevens 

Construction, Inc. 

Stevens argues that the intentions of the parties should 

be introduced by extrinsic evidence because the term "sale" 

is ambiguous and subject to interpretations. More 

specifically, Stevens argues that the transfer of the 

property to the Bank was not a sale within the intentions of 

either party when they contracted on May 21, 1984. Stevens 

al-so argues that the sale anticipated by the parties was a 
sale by Stevens, not a sale which occurred after the property 

had been deeded back to the Bank. We disagree. 

General principles of contract law are applicable in 

this instance. A basic principle in contract law, codified 

by statute, is that "words of a contract are to be understood 

in their ordinary and popular sense . . . unless used by the 

parties in a technical sense or unless a special meaning is 

given to them by usage . . .." Section 28-3-501, MCA. 

Webster's Dictionary defines the term sale as "the transfer 

of ownership of and title to property from one person to 

another for a price." Webster's Ninth New Collegiate 

Dictionary 1037 (1984) . Black's Law Dictionary cites cases 

defining "sale" as " [a] contract whereby property is 

transferred from one person to another for a consideration of 

value, implying the passing of the general and absolute 

title, as distinguished from a special interest falling short 

of complete ownership." Black's Law Dictionary 1503-04 (4th 

ed. 1968) (citing Arnold v. North American Chemical Co. 

(1919), 232 Mass. 196, 122 N.E. 283, 284; Faulkner v. Town of 

South Boston (1925), 141 Va. 517, 127 S.E. 380, 381). 

In the present case, Stevens transferred absolute title 

to Lot 4 and the house to the Bank. In exchange for the 

title to the property, the Bank gave valuable consideration 

by releasing Stevens from his construction loan debt to the 

Bank and the costs and expenses of the foreclosure. A 

transfer of property in exchange for valuable consideration 

constitutes a sale. In light of the above, the transaction 

between Stevens and the Bank regarding Lot 4 and the 

accompanying house is a sale. 

Stevens nonetheless argues that extrinsic evidence is 

needed to show the intentions of the parties. However, the 

intentions of the parties are evidenced by the language used 

in the instruments, Glacier Campground v. Wild Rivers, Inc. 
(1978), 184 Mont. 543, 547, 597 P.2d 689, 692, and as 

discussed above, the ordinary and popular usage of the term 

"sale" includes the transfer of the property to the Bank. 

The introduction of any such extrinsic evidence would only 

create ambiguity that otherwise does not exist. Stevens also 

argues that the term "sale" is ambiguous. We disagree. 

Ambiguity exists only when a contract taken as a whole in its 

wording or phraseology is reasonably subject to two different 

interpretations. Martin v. Laurel Cable TV, Inc. (Mont. 

1985), 696 P.2d 454, 457, 42 St.Rep. 314, 317; Souders v. 

Montana Power Co. (1983), 203 Mont. 483, 486, 662 P.2d 289, 

290. Upon applying the basic principle that the words of a 

contract are to be understood in their ordinary and popular 

sense, no ambiguity exists. 

We affirm the District Court's decision and remand this 

matter to the District Court for a determination of costs, 

and reasonable attorney fees arising as a result of this 

appeal.