Title: PIPKIN v CONNOLLY
Citation: N/A
Docket Number: 12898
State: Montana
Issuer: Montana Supreme Court
Date: July 18, 1975

No. 12898 I N T H E SUPREME C O U R T O F THE STATE O F M O N T A N A 1975 D E R R A L L PIPKIN and B E T T Y PIPKIN, husband and wife, P l a i n t i f f s and Respondents, GERALD C O N N O L L Y and EMILIE C O N N O L L Y , husband and wife, Defendants and Appellants, Appeal from: D i s t r i c t Court of t h e Sixth J u d i c i a l D i s t r i c t , Honorable Jack D, Shanstrom, Judge presiding. Counsel of Record: For Appellants : Lee Overfelt argued, Billings, Montana For Respondents: Joseph T. Swindlehurst argued, Livingston, Montana Huppert and Swindlehurst, Livingston, Montana Submitted: May 6, 1975 Decided : " " 7' ? ; ? ; t - _.c 4 4 M r . J u s t i c e Gene B. Daly delivered t h e Opinion of the Court: This i s an appeal from a judgment of the d i s t r i c t court, Sweet Grass County, s i t t i n g without a jury, holding defendants' lease terminated upon f a i l u r e t o exercise t h e i r r i g h t of f i r s t r e f u s a l t o purchase farmland and further t h a t defendants were accountable t o p l a i n t i f f s i n unlawful detainer. Defendants Gerald and Emilie Connolly, husband and wife, and p l a i n t i f f s Derrall and Betty Pipkin, husband and wife, entered i n t o an a g r i c u l t u r a l lease agreement drawn by defendants' attorney John R. Glenn, Esq. The lease was f o r a f i v e year period beginning March 1, 1973 and terminating February 28, 1978. The C G r - ~ r - u b C C -7 t h a t Pipki*'day $4,000 a year a s r e n t f o r t h e property. reserved the dwelling house located on the property f o r t h e i r personal use. Pipkins further agreed t o give Connollys t h e r i g h t t o meet any o f f e r t o buy t h e farmland and Pipkins agreed t o accept the Connollys' o f f e r which would meet any o f f e r o r o f f e r s t o buy from any source. O n March 28, 1974, Pipkins received a written o f f e r f o r the purchase of the premises, together with earnest money of $10,000 from Rainbow Ranch, Inc. of Fort Collins, Colorado, upon these terms: "The t o t a l purchase price i s Two Hundred Thousand Dollars ($200,000.00) payable a s follows : "Sixty Thousand Dollars ($60,000.00) paid down; "The Balance payable over a period of Thirty (30) years, with i n t e r e s t amortized out a t Six per cent (6%) ; "Contract f o r Deed t o be carried by Seller; 11 I n t e r e s t t o commence a s of date of possession; "Earnest money of Ten Thousand Dollars ($10,000.00); "The closing date of the s a l e s h a l l be on o r before June 1, 1974." O n April 25, 1974, Pipkins served upon Connollys notice of t h e o f f e r , giving them the r i g h t t o meet the o f f e r on o r before May 31, 1974. Connollys f a i l e d t o accept t h e o f f e r o r t o deliver possession of the premises, a s requested. Pipkins brought action i n unlawful detainer t o recover possession of the premises. Connollys cross-complained praying f o r the court t o amend the lease t o read a s they claim was the o r i g i n a l intention of the contracting parties--that any s a l e of the farmland was subject t o the lease. The proposed s a l e was not completed due t o t h e pending l i t i g a t i o n . Pipkins i n s i s t they wanted the r i g h t t o s e l l the property a t anytime and t h a t the lease would terminate upon such sale. The lease did not provide f o r i t s termination upon s a l e of the premises, but provided i n pertinent part: "The Landlords [Pipkins] agreed t o give Tenants [Connollys] the r i g h t t o meet any o f f e r t o buy the above described r e a l e s t a t e and Landlords agree t o accept ena ants' o f f e r which does meet an o f f e r , o r o f f e r s , t o buy from any source whatsoever. "Jc * %The Tenants recognize and lords' r i g h t t o s e l l the above described r e a l e s t a t e during t h e term of t h i s lease or any future lease providing t h a t Tenants be given the r i g h t s hereinbefore mentioned. I f M r . Glenn, Connollys' attorney, t e s t i f i e d there was no provision made f o r f o r f e i t u r e of the lease f o r f a i l u r e t o exercise the r i g h t of f i r s t r e f u s a l because i t was f u l l y understood i n h i s discussions with t h e p a r t i e s t h a t the land could be sold, but Connollys would remain i n possession under the lease. In i t s findings of f a c t the d i s t r i c t court found: t h a t ' a t the t i m e the lease was made Pipkins strongly emphasized the f a c t t h a t they wanted t o reserve the r i g h t t o s e l l the farmland and upon such s a l e the lease would terminate; Pipkins had received a bona f i d e o f f e r f o r the purchase of t h e premises from Rainbow Ranch, Inc.; t h a t Connollys refused t o meet the o f f e r ; and, therefore, the lease was terminated on June 1, 1974. In i t s conclusions of law the court held t h a t t h e Connollys unlawfully detained the premises since June 1, 1974, and awarded Pipkins judgment f o r t r e b l e damages. ~ o n n o l l y s ' cross-complaint was denied. Connollys present nine issues f o r t h i s Court's review. Briefly s t a t e d , the issues are: 1. Did t h e d i s t r i c t court e r r i n finding t h a t the lease terminated upon t h e s a l e of the farmland and ~ o n n o l l y s ' f a i l u r e t o exercise t h e i r r i g h t of f i r s t r e f u s a l ? 2. Did the court e r r i n admitting an unacknowledged buy-sell agreement i n t o evidence a s proof of an o f f e r t o buy the farmland i n question? Lessees Connolly argue t h a t i n l i g h t of the testimony of the attorney who drew up t h e contract, M r . Glenn, there was no such i n t e n t on the part of the p a r t i e s t h a t t h e lease would terminate upon the s a l e of the land; t h a t lessors Pipkin t e s t i f i e d Connollys wanted a lease so t h a t they could borrow money from the bank and, i n l i g h t of the f a c t the law does not favor f o r f e i t u r e , Pipkins have f a i l e d i n t h e i r burden of proof, therefore the d i s t r i c t court erred i n finding f o r them. The lease was drawn by the attorney f o r Connollys. The terms of the lease when ambiguous w i l l be construed most strongly against him whose words they are. Bickford v. Kirwin, 30 Mont. 1, 75 P. 518. The lease clause allowing t h e s a l e of the farmland and giving lessees t h e r i g h t of f i r s t r e f u s a l is, a t b e s t , incomplete a s it r e l a t e s t o the problem here. I f a l l Pipkins wanted t o do was t o be able t o sell t h e i r farmland, subject t o the leasehold, there would have been no need f o r the clause. Connollys s t a t e d they included t h e clause because Pipkins demanded it, even though i n t h e i r opinion it was not necessary. Connollys argue t h a t i f the lease could be terminated upon the s a l e of the farmland, what* bank would lend money on t h a t type of lease? Pipkins s t a t e they were adamant about being a b l e t o sell t h e i r farmland anytime they wanted t o , and not have the s a l e subject t o the lease. Pipkins a l s o point out t h a t Connollys agreed t h a t they could move from California t o the farmland, and t h a t would terminate the lease although t h a t was not included i n the lease. That type of agreement Pipkins argue i s contradictory t o the type of lease Connollys claim they received. In Lunke v. Egeland, 46 Mont. 403,410, 128 P. 610, while construing an a g r i c u l t u r a l lease which contained additional elements, t h i s Court did reach the problem of the e f f e c t of a clause giving the lessor the r i g h t t o sell and the lessee the r i g h t of f i r s t refusal. The Court held: I I There was no necessity of reserving the r i g h t t o s e l l i f such s a l e was not t o a f f e c t the lease. [Lessor] had such r i g h t i n any event. I? 2j.7 The California Supreme Court i n Garetson v. Wester, 39' Cal.R+r. P.2d 863, 864, 865, construed t h i s language of the lease involved t k r e : "'1t i s mutually understood and agreed t h a t the property covered by t h i s lease i s subject t o s a l e ; however, the lessor agrees t h a t i n the event of an o f f e r t o purchase t h a t lessee i s t o be given f i r s t opportunity t o buy. I I1 The Court s t a t e d : "Obviously, the property was subject t o s a l e without t h e insertion of any such clause. The Lessor a t any- time had the r i g h t t o sell t h e property subject, of course, t o the lease, and t h e e f f e c t of the s a l e would have been merely t o s u b s t i t u t e t h e vendee t o a l l of the r i g h t s of the o r i g i n a l lessor. * * The clause must, therefore, have an important intended.meaning. The placing of the option i n t h i s clause indicated very c l e a r l y t h a t it was the intention of the p a r t i e s , and i n s i s t e d upon by the lessees, the appellants herein, t h a t the lessees be protected i n the event of the s a l e and be given the f i r s t opportunity t o purchase. If it was not intended by the p a r t i e s t h a t a bona f i d e o f f e r t o purchase with a subsequent r e f u s a l by lessees t o purchase should terminate the leases, there would have been no occasion whatsoever f o r t h i s s o r t of an option. I f the purpose of t h e clause was merely t o grant an option t o the lessees t o buy the property during t h e l i f e of the leases, it would not have been coupled with the clause reserving the property f o r sale. The two expressions together c l e a r l y indicate t h a t i t was in- tended by a l l p a r t i e s t h a t t h e s a l e of the land would terminate the leases. In no other way can the presence of t h e clause be explained. I I Connollys a l l e g e t h e language of t h e lease i n question here, and the language of the leases i n Lunke and Garetson a r e distinguishable. They point out there was a provision i n Lunke f o r payment t o the lessee upon termination of the lease f o r t h e crops planted. In Garetson there was additional language i n the lease which Connollys argue make t h a t lease d i f f e r e n t from t h e one i n question here, it provided: "The leases further I provided t h a t a t the 'end of the term of lease, which term could i n f e r e n t i a l l y mean when it was terminated a t t h e end of the leasehold period o r by f a i l u r e of t h e lessee I t o exercise h i s option t o purchase, he might be permitted t o * * * remove any improvements o r s t r u c t u r e s ' and t o pay t h e r e n t f o r such further t i m e a s the lessees might hold the property." (Emphasis added.) Connollys argue t h i s language, construed along with t h e rest of t h e lease i n Garetson made it possible t o i n t e r p r e t t h e contract a s being one i n which t h e p a r t i e s intended t h a t f a i l u r e t o exercise the r i g h t of f i r s t r e f u s a l could amount t o l o s s of the lease. True, each lease must be construed separately, depending upon i t s own language. However, t h e i n s t a n t case, Lunke and Garetson, a l l involve a lease which includes a clause reserving the r i g h t t o s e l l , but makes no mention of t h e termination of the lease. It i s the language of t h a t clause we a r e i n t e r p r e t i n g here. It i s t h a t language which was interpreted i n Lunke and Garetson. I n Garetson the California court did n o t r e l y on the emphasized language c i t e d here-by Connollys t o reach i t s conclusion. Too, although i n Lunke the reimbursement f o r acreage planted clause was an added factor i n the c o u r t ' s reaching i t s decision, t h a t court r e i t e r a t e d our major premise here, t h a t there was no need f o r the clause reserving the r i g h t t o s e l l i f such r i g h t was subject t o t h e lease. Therefore, Lunke and Garetson cannot be distinguished on the point i n issue here. Connollys condemn the harsh f o r f e i t u r e and lack of any consideration given f o r t h e i r growing crops o r improvements. I n t h i s regard the Court notes the notice t o the Connollys of April 25, 1974, advises t h a t they would have u n t i l May 31, 1974 t o exercise t h e i r r i g h t t o purchase and remit a down payment of $60,000; t h a t t h e property would be sold on June 1, 1974, i f Connollys did not exercise t h e i r r i g h t t o purchase, and they would be expected t o deliver up peaceful possession on o r before June 1, 1974. N o further demand from Pipkins o r t h e i r successor i n i n t e r e s t was ever made. Suit i n unlawful detainer was f i l e d June 12, 1974. Connollys technically were holding over a f t e r midnight May 31, 1974. Section 93-9703(2), R.C.M. 1947, provides r e l i e f f o r t h i s type of forfeiture. While a l l other tenancies speak of holding over without permission of the landlord, and t h i s Court i s mindful of the cases holding three day notice t o pay o r q u i t 11 s a t i s f i e s without permission" impliedly, a g r i c u l t u r a l leases require demand a f t e r holding over a f t e r t h e expiration of the lease term. This problem was t r e a t e d by t h i s Court i n a case involving a lessee who attempted t o exercise an option t o purchase a f t e r t h e term of h i s lease had expired. I n Miller v. Meredith, H i l l and Whitfield, 149 Mont. 125, 129, 423 P.2d 595, the Court stated: "Under the common law the holdover tenant was considered a trespasser and i n order t o g e t away from the harshness of such a r u l e , and t o conform t o a g r i c u l t u r a l practices of the s t a t e , our Code s p e c i f i c a l l y provided f o r a g r i c u l t u r a l lessees i n section 93-9703, R.C.M. 1947. Under t h i s section a holdover tenant f o r s i x t y days without notice who invests time and seed w i l l not lose t h i s investment t o the landlord. However, the s t a t u t e gives him no more than the r i g h t t o harvest h i s crop t o protect h i s investment and protects him from l i a b i l i t y i n an action f o r unlawful detainer. " (Emphasis supplied. ) As s t a t e d heretofore, no notice o r demand was ever given Connollys a f t e r t h e expiration of the lease. They remained on the property s i x t y days a f t e r t h e lease terminated and planted t h e i r crops. Therefore, under section 93-9703(2), they had a r i g h t t o harvest those crops and a r e protected from l i a b i l i t y f o r unlawful detainer . Finally, concerning whether the buy-sell agreement has t o be acknowledged before it can be admitted i n t o evidence, Connollys argue t h a t such agreement has t o be acknowledged t o be admitted i n t o evidence t o ascertain whether t h e signer i s the president of t h e Rainbow Ranch Inc., and whether he has the authority t o bind t h e corporation t o t h e contract t o purchase a s provided i n section 39-117, R.C.M. 1947. Testimony of A 1 Whiteside, the r e a l e s t a t e broker involved, establishes t h a t he witnessed the signature of Ronald W. Miller, President of the corporation, and Coreen M. Miller, Secretary- Treasurer. Under section 93-1101-12, R.C.M. 1947, t h a t was s u f f i - c i e n t foundation t o admit the contract i n t o evidence. Since neither party t o the contract challenges the contract, we see no reason t o e n t e r t a i n any challenge t o i t s authenticity. The judgment of the d i s t r i c t court i s affirmed a s t o i t s conclusions of law Nos. 1, 2, and 5 regarding termination of the lease. Judgment i s reversed a s t o i t s conclusions of law Nos. 3 and 4, a s they r e l a t e t o unlawful detainer and damages. The cause i s remanded t o the d i s t r i c t court t o enter judgment accordingly. Justice. f Chief J u s t i c e