Title: REINKE v BIEGEL
Citation: N/A
Docket Number: 14826
State: Montana
Issuer: Montana Supreme Court
Date: December 27, 1979

No. 14826 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979 WILBUR H. REINKE and OMA J. REINKE, Plaintiffs and Counter-Defendants, VS. FRANK MILLER BIEGEL and JOYCE E. BIEGEL, Defendants and Counter-Claimants and Appellants. Appeal from: District Court of the Thirteenth Judicial District, Honorable Robert H. Wilson, Judge presiding. Counsel of Record: For Appellants: Hauf and Forsythe, Billings, Montana For Respondents: Mouat and Martinson, Billings, Montana Submitted on briefs: October 30, 1979 Decided: DEC 2 7 1979 Clerk M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court. Frank ~ i l l e r ~ i e g e l and Joyce E. Biegel, t h e purchasers of two l o t s from Wilbur H. Reinke and Oma J. Reinke under a c o n t r a c t f o r deed, bring t h i s appeal from a f i n a l judgment of t h e D i s t r i c t Court of t h e Thirteenth J u d i c i a l D i s t r i c t , Yellowstone County, s i t t i n g without a jury. The judgment terminated a c o n t r a c t f o r deed between t h e p a r t i e s , declared a f o r f e i t u r e of t h e down payment made by t h e purchasers, q u i e t e d t i t l e i n favor of t h e s e l l e r s , and w a s entered upon a finding t h a t t h e purchasers were i n d e f a u l t f o r f a i l u r e t o make timely payment under t h e c o n t r a c t . The D i s t r i c t Court's judgment a l s o denied t h e purchasers' counterclaim f o r damages o r i n j u n c t i v e r e l i e f based on t h e sellers' a l l e g e d breach of t h e c o n t r a c t f o r deed by v i o l a t i o n of a r e s t r i c t i v e covenant and awarded reasonable a t t o r n e y f e e s t o t h e s e l l e r s . O n February 15, 1974, Reinkes and Biegels entered i n t o a c o n t r a c t f o r deed whereby Biegels w e r e t o purchase from Reinkes Lots 15 and 16 of Block 2 i n t h e Heyn Subdivision i n Yellowstone County. Biegels paid $200 i n e a r n e s t money under t h e c o n t r a c t which provided t h a t a warranty deed f o r each l o t be placed i n escrow and t h a t Biegels would o b t a i n a deed f o r each l o t upon payment of $3100 p l u s 8 percent per annum i n t e r e s t f o r each l o t before t h e due d a t e , December 31, 1975. The c o n t r a c t f u r t h e r provided t h a t d e f a u l t would be entered a g a i n s t t h e buyer a f t e r 30 days n o t i c e and t h a t t i m e was of t h e essence. Biegels paid i n f u l l f o r Lot 16 sometime i n December 1975 before t h e due d a t e , obtained a deed t o t h a t l o t , and completed construction of a home thereon i n September 1976. ~ e i n k e s and Gertrude V. Heyn prepared, f i l e d and duly recorded an amended d e c l a r a t i o n of r e s t r i c t i o n s with t h e subdivision p l a t of t h e Heyn Subdivision on April 24, 1973. The r e s t r i c t i v e covenants provided, among o t h e r things, t h a t "no building s h a l l be located and e r e c t e d nearer than 30 f e e t t o t h e f r o n t l o t l i n e . " The d e c l a r a t i o n of restric- t i o n s f u r t h e r provided t h a t it was binding upon a l l h e i r s , a s s i g n s , devisees and p a r t i e s claiming through them, and t h a t f a i l u r e by t h e p r e s e n t property owners t o enforce t h e r e s t r i c t i o n s a t t h e t i m e of any v i o l a t i o n thereof would n o t be deemed a waiver of t h a t r i g h t . Reinkes d e s i r e d t o b u i l d a house on Lot 1 4 , which they had n o t sold and which w a s a d j a c e n t t o Lot 15, t h e property s u b j e c t t o t h i s c o n t r a c t f o r deed. They began building a house on Lot 1 4 on October 1, 1974 and completed construc-- t i o n i n t h e e a r l y p a r t of 1975. The house w a s set back approximately 20 f e e t from t h e f r o n t l i n e , r a t h e r than 30 f e e t as required by t h e d e c l a r a t i o n of r e s t r i c t i o n s which Reinkes had prepared and f i l e d . Reinkes d i d n o t attempt t o amend t h i s setback requirement by obtaining t h e s i g n a t u r e s of 80 percent of t h e owners within t h e subdivision a s pro- vided f o r i n t h e r e s t r i c t i v e covenants. Instead, they sought and obtained a variance of zoning r e s t r i c t i o n s from t h e City-County Planning Board of Yellowstone County on November 8, 1974, allowing them t o b u i l d with a setback of only 20 f e e t from t h e f r o n t property l i n e . A n o t i c e of t h e variance w a s posted on Lot 1 4 on t h e s a m e date. ~ e i n k e s completed construction of t h e Lot 1 4 house i n t h e e a r l y p a r t of 1975. Biegels f a i l e d t o pay t h e balance of t h e purchase p r i c e of Lot 15 by t h e due d a t e , December 31, 1975, and f a i l e d t o c u r e t h e d e f a u l t w i t h i n 30 days a f t e r receiving n o t i c e as required under t h e c o n t r a c t f o r deed. Notice of d e f a u l t w a s served on February 18, 1976. O n A p r i l 1 4 , 1976, 25 days a f t e r t h e t i m e f o r curing t h e i r d e f a u l t under the c o n t r a c t had expired, Biegels o f f e r e d t o pay t h e $3100 c o n t r a c t p r i c e f o r Lot 15. This o f f e r w a s refused by t h e Reinkes, and Lot 1 5 remained vacant and unimproved t o t h e t i m e of t r i a l with Reinkes paying t h e property taxes. Reinkes commenced an a c t i o n on August 24, 1977 t o q u i e t t i t l e and t o terminate and f o r f e i t the c o n t r a c t f o r deed because of Biegels' de- f a u l t . Biegels r a i s e d t h e a f f i r m a t i v e defense of breach of c o n t r a c t and counterclaimed f o r damages t o Lot 15 o r f o r i n j u n c t i v e r e l i e f based on Reinkes' breach of t h e c o n t r a c t f o r deed, i.e. t h e breach of t h e r e s t r i c t i v e covenant run- ning with t h e land, which rendered Reinkes unable t o perform t h e c o n t r a c t f o r deed t o convey t o Biegels t h e l o t i n t h e condition it was represented t o be when t h e c o n t r a c t was entered i n t o . The D i s t r i c t Court made a conclusion of law t h a t : "Defendants f a i l e d t o make timely payment under t h e Contract f o r Deed as t o Lot 15, Block 2, Heyn Subdivision, and w e r e i n d e f a u l t thereunder a s t o Lot 15, Block 2 a t t h e t i m e p l a i n t i f f s n o t i f i e d them i n w r i t i n g of t h e d e f a u l t . De- fendants f a i l e d and refused t o remedy t h e de- f a u l t within t h e t i m e provided by t h e c o n t r a c t o r a t a l l , and any r i g h t s they might have ac- q u i r e d by t h e c o n t r a c t became f o r f e i t e d by rea- son of t h e i r f a i l u r e to cure t h e d e f a u l t i n a timely manner. " On March 13, 1979, t h e D i s t r i c t Court entered judgment i n favor of Reinkes and denied Biegels' counterclaim. The p a r t i e s i n t h e i r b r i e f s have f a i l e d t o address t h e threshold i s s u e involved i n t h i s appeal--that is, where l o t s within a l e g a l subdivision are sold pursuant t o a c o n t r a c t f o r deed, does t h e s e l l e r s ' breach of a r e s t r i c t i v e covenant, occurring p r i o r t o t h e contracted due d a t e and r e l a t i n g t o a t h i r t y f o o t setback requirement on s e l l e r s ' adjacent l o t , excuse t h e buyer from h i s duty t o make payment by t h e due d a t e so t h a t h i s r i g h t t o recover damages i s not precluded by h i s f a i l u r e t o make such payment? Because our answer t o t h a t question i s i n the negative, w e must affirm the judgment of t h e D i s t r i c t Court. Appellants contend t h a t t h e recorded r e s t r i c t i v e cove- nants w e r e incorporated i n t o the c o n t r a c t f o r deed between the p a r t i e s and t h a t t h e i r c o n t r a c t was made subject t o those provisions s o t h a t a v i o l a t i o n of t h e setback requirement by the s e l l e r s was a breach of contract. While the c o n t r a c t f o r deed d i d not expressly r e f e r t o t h e d e c l a r a t i o n of r e s t r i c t i o n s applicable t o t h e Heyn Subdivision previously f i l e d and recorded by t h e sellers, it d i d make reference t o the recorded p l a t of t h e Heyn Subdivision. Furthermore, t h e d e c l a r a t i o n of r e s t r i c t i o n s provided t h a t : "The r e s t r i c t i o n s herein set f o r t h s h a l l run with the land and bind t h e present owners, t h e i r h e i r s , and assigns, and a l l p a r t i e s claiming by, through o r under them . . ." I t i s unnecessary, however, t o decide whether o r not t h e r e s t r i c t i v e covenants became a p a r t of t h e c o n t r a c t f o r deed between the p a r t i e s t o t h i s appeal. W e reach t h i s con- clusion because even i f we assume t h a t t h e r e s t r i c t i v e covenants were incorporated i n t o t h e c o n t r a c t f o r deed, t h e promises contained i n t h e r e s t r i c t i v e covenants a r e indepen- dent of t h e other promises i n the c o n t r a c t f o r deed. I n p a r t i c u l a r , they a r e independent of t h e promise t o make payment by t h e due date. Therefore, Reinkes' breach of t h e t h i r t y f o o t setback requirement on t h e i r l o t adjacent t o t h e one being sold, which occurred before t h e d a t e payment w a s due under t h e c o n t r a c t , d i d n o t excuse Biegels' o b l i g a t i o n t o make payment by t h e due d a t e . Biegels could n o t stand on t h e i r c o n t r a c t f o r deed and counterclaim f o r damages f o r breach of t h e r e s t r i c t i v e covenant a s a p a r t of t h e c o n t r a c t f o r deed without f u l f i l l i n g t h e i r o b l i g a t i o n t o make payment by t h e due date. The r i g h t s c r e a t e d by r e s t r i c t i v e covenants a r e con- t r a c t u a l r i g h t s . Sheridan v. Martinsen (1974), 164 Mont. 383, 523 P.2d 1392, 1395. Assuming t h a t t h e r e s t r i c t i v e covenants contained i n t h e recorded d e c l a r a t i o n of r e s t r i c - t i o n s became incorporated i n t o t h e c o n t r a c t f o r deed by reference, t h e governing r u l e is s t a t e d i n O'Conner v. W h i t e s i t t (1948), 1 2 1 Mont. 257, 193 P.2d 365, 366: " P l a i n t i f f ' s claim of r i g h t t o have a r e s c i s s i o n of h i s c o n t r a c t because of defendant's removal of about $75 worth of lumber and building mater- i a l s from t h e premises f o r which p l a i n t i f f had contracted t o pay $5,800 cannot be sustained. This breach of agreement by t h e defendant went t o only a very s m a l l p a r t of t h e consideration and could e a s i l y be compensated i n damages. I t cannot t h e r e f o r e c o n s t i t u t e a ground f o r r e s c i s - s i o n of p l a i n t i f f ' s c o n t r a c t . " I n Johnson v. Meiers, Mont., 164 P.2d 1 0 1 2 , 1014, we quoted with approval t h e following from 12 Am.Jur., ' C o n t r a c t s , ' s e c t i o n 440: ' I t i s n o t every breach of a c o n t r a c t o r f a i l u r e e x a c t l y t o perform--certainly n o t every p a r t i a l f a i l u r e t o perform--that e n t i t l e d t h e o t h e r .. p a r t y t o rescind. A breach which goes to only a p a r t of t h e c o n s i ~ e r a t i o n , i s n c i d e n t a l and - -- subordinate ---- t o m m a i n o = of -- t h e c o n t r a c t , and m a y be compensated i n damages does n o t war- rant - - a r e s c i s s i o n of -- t h e c o n t r a c t ; * i n j u r e d p a r t y is s t i l l bound t o perform ---- h i s p a r t of t h e agreement, and h i s on% remedy -- f o r t h e breach c o n s i s t s of -- t h e damages -- he has s u f f e r e d there- from. A r e s c i s s i o n i s not warranted by a mere breach of c o n t r a c t not so s u b s t a n t i a l and funda- mental a s t o d e f e a t t h e o b j e c t of t h e p a r t i e s i n making t h e agreement. Before p a r t i a l f a i l u r e of performance of one p a r t y w i l l g i v e t h e o t h e r t h e r i g h t of r e s c i s s i o n , t h e a c t f a i l e d t o be per- formed must go t o t h e r o o t of t h e c o n t r a c t o r t h e f a i l u r e t o perform the c o n t r a c t must be i n r e s p e c t of m a t t e r s which would render t h e per- formance of t h e remainder a t h i n g d i f f e r e n t i n substance from t h a t which was contracted f o r . ' " (Emphasis added.) For statements t o t h e same e f f e c t , see 17A C.J.S. Contracts S344 a t 334: "When a covenant goes only t o p a r t of t h e consideration on both s i d e s and a breach may be compensated f o r i n damages, and it i s only subordinate and i n c i d e n t a l t o t h e main purpose of t h e c o n t r a c t , it i s t o be regarded a s an independent covenant unless t h i s i s c o n t r a r y t o t h e expressed i n t e n t of t h e p a r t i e s " ; and 17A C.J.S. Contracts S453 a t 571: "A p a r t y ' s f a i l u r e t o perform an independent s t i p u - l a t i o n of a c o n t r a c t does n o t bar h i s r i g h t t o recover f o r t h e o t h e r p a r t y ' s breach o r excuse such o t h e r p a r t y from performing t h e s t i p u l a t i o n s made by him." The same r u l e i s s t a t e d i n 17 Am.Jur.2d Contracts 5355 a t 792: ". . . where t h e c o n t r a c t i s executory on both s i d e s , t h e o b l i g a t i o n of one of t h e p a r t i e s t o perform frequently depends on whether t h e mutual promises a r e dependent o r independent. I f t h e promises a r e independent of each o t h e r , a p a r t y must perform h i s p a r t of the c o n t r a c t when t h e t i m e f o r performance has a r r i v e d , i r r e s p e c t i v e of whether t h e o t h e r p a r t y has performed h i s o b l i g a t i o n . . ." See a l s o Nolan v. Lunsford (1940), 142 Fla. 671, 196 So. 193, 128 A.L.R. 649, where t h e c o u r t considered a similar issue--namely, whether o r n o t performance by a vendor of h i s covenant t o make improvements was a necessary condition t o h i s r i g h t t o f o r e c l o s e on t h e c o n t r a c t . I n discussing t h e n a t u r e of dependent and independent covenants, the c o u r t s t a t e d : "An independent covenant is one which goes only t o a p a r t of t h e consideration on both s i d e s and a breach of which may be paid f o r i n damages . . . "In determining whether covenants are dependent or not, the intention of the parties is sought for and regarded in the light of all the circum- stances evidenced by the contract. The court will consider whether the acts contemplated by the covenants are subordinate and incidental or whether they go to the entire consideration. . ." Nolan, 196 So. at 197. Applying these principles to the present case, it is clear that the restrictive covenant relating to a 30 foot setback requirement was incidental and subordinate to the main purpose of the contract for deed and that the sellers' breach went at most to only a part of the consideration. The primary consideration in a contract for deed is the sellers' delivery of a deed in exchange for the buyers' payment of the purchase price. The sellers' breach of the restrictive covenant was not so substantial and fundamental as to defeat the object of the parties in making the con- tract for deed. Therefore, under the rule announced in O'Conner and the other authorities cited above, Biegels, the parties injured by the Reinkes' breach of the restrictive covenant, were still bound to perform their part of the agreement by tendering payment of the purchase price on or before the due date. Having failed to do so, they cannot now stand on the contract and recover damages. The District Court properly declared a forfeiture and denied appellants' counterclaims. Because the issue discussed is dispositive of this case, it is unnecessary to consider the other issues raised by the parties, such as the effect of asking the City for zoning variance, etc. The judgment of the District Court being fully supported by the evidence is affirmed. - ' , \ . / , ? + - Jus W e concur: ~ d 4 , % 4 4 Chief J u s t i c e , # - / ' 'I J u s t i c e s