No. 88-07

IN THE SUPREME COURT OF THE STATE OF MONTANA
1988

WILLIAM K. SCHULTZ, Plaintiffand Respondent,-vsCRAIGA. STEVENSand STEVENS CONSTRUCTION, INC.,
Defendantsand Appellants.

APPEAL FROM: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone, TheHonorable Diane G Barz,Judgepresiding.
COUNSEL OF RECORD:

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

For Respondent:
Peterson, Schofield & Leckie;K.D. Peterson, Billings, Montana

Submittedon Briefs: June 9,1988 Decided: July 19, 1988 Fi.led: 

### ~UL 1

### 91988Mr. 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, WilliamK. Schultz,was a licensed realtor in Billings from approximately 1982 to 1985. Schultz

was looking at houses when he firstmet 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 forhim on Lot 18 for resalebut instead moved into the househimself. 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: ForValue Received theundersigned CRAIGA. STEVENS AND STEVENS CONST. INC., OF BILLINGS MONTANA, promise to pay to the order ofWilliam K. Schultz, of Billings, Montana, the sum ofNineteen 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 tobe constructed onLot-4 Block-I Lillis Hts. Sub.

# . .

# . If thisNote isnotpaid when due,and isplaced 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 droveby thehouse. In the meantime, sometime prior to December, 1985, Stevens' construction loan became delinquent. Stevens then

### conveyedLot 4and 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 onJanuary 27, 1986. Schultz received no notice of this transfer and conveyanceof realproperty. Schultz firstbecame aware that somethinghad "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 DistrictCourt,Yellowstone County. The District Court found that thepromissory note signed by Stevens is valid, legally binding and unambiguous; that the note is indefault and isdue andpayable 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 reasonableattorney feesand costs. The issue raised on appeal iswhether 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 intentionsof 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-soargues that the sale anticipated by the parties was asaleby Stevens,not a salewhich occurred after theproperty 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 "wordsof a contract are tobe understood in their ordinary and popular sense

# ..

# .unless used by the parties in a technical sense or unless a specialmeaning 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 fromoneperson to another fora considerationof value, implying the passing of the general and absolute title, as distinguished froma special interest falling short of complete ownership." Black's LawDictionary 1503-04 (4th ed. 1968) (citing Arnold 

### v. North American Chemical Co.

(1919), 232Mass. 196,122N.E. 283, 284;Faulknerv. Town of South Boston (1925),141Va. 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 accompanyinghouse 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 onlywhen a contract taken as awhole in its wording or phraseology is reasonably subject to twodifferent 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.