80-289

IN THE SUPREME COURT OF THE STATE OF MONTANA

CURTIS POND AND SHARON POND, husband and wife, Plaintiffs and Appellants,

LESLIE M. LINDELL; BONNIE LINDELL, et al.,

Defendants-Cross Defendants and Respondents,

C. K. EENSON

Appeal from: District Court of the Thirtee~thJudicial District, In and for the County of Yellowstone, The Honorable Robert H. Wilson, Judge presiding, Counsel of Record:

For Appellants: Moulton, Bellingham, Longo & Mather, Billings, Montana For Respondents: Kammerer and Rodli', Missoula ; Montana

Submitted on Bri'efs: April 1 5 1 1 9 8 1 Dec2dedr August 11, 1981

Filed; AUG 11 1981 Mr.J u s t i c e Frank B. Morrison, J r . , d e l i v e r e d t h e Opinion of t h e Court . his s u i t was commenced by p l a i n t i f f s C u r t i s and Sharon

Pond f o r s p e c i f i c performance of a c o n t r a c t f o r deed and f o r

damages caused by d e l a y i n conveyance. Defendants Dick S.

Dye and P a t r i c i a L. Dye f i l e d an answer t o t h e c o m p l a i n t .

Defendant C.K. Benson answered and f i l e d a c o u n t e r c l a i m f o r

attorney fees . P l a i n t i f f s , t h e Ponds, f i l e d a motion f o r p a r t i a l

summary judgment s e e k i n g s p e c i f i c performance of t h e c o n t r a c t

f o r deed and a d e t e r m i n a t i o n t h a t d e f e n d a n t s w e r e l i a b l e t o

p l a i n t i f f s f o r damages o c c a s i o n e d by d e l a y i n conveyance.

Defendants Dye and Benson f i l e d c r o s s - m o t i o n s f o r summary

judgment and asked f o r a t t o r n e y f e e s .

On J u l y 1, 1980, t h e D i s t r i c t C o u r t i s s u e d a n o r d e r

denying t h e p l a i n t i f f s ' motion f o r summary judgment, g r a n t i n g

d e f e n d a n t s , Dye and B e n s o n ' s motions f o r summary judgment,

and awarding d e f e n d a n t s t h e i r c o s t s and a t t o r n e y f e e s . From

t h i s decision, p l a i n t i f f s appeal.

On December 1 9 , 1980, t h e D i s t r i c t C o u r t i s s u e d a

s u p p l e m e n t a l o r d e r d i r e c t i n g t h e e n t r y of a f i n a l judgment

a s t o t h e i s s u e s d e c i d e d i n t h e J u l y 1, 1980, o r d e r and c e r -

t i f y i n g t h e c a s e f o r a p p e a l p u r s u a n t t o Rule 5 4 ( b ) , M.R.Civ.P.

T h i s c o n t r o v e r s y a r i s e s o u t of a s e r i e s of r e a l e s t a t e

t r a n s a c t i o n s i n v o l v i n g numerous p a r t i e s . Because of t h e

number of p a r t i e s i n v o l v e d , t h e f o l l o w i n g d e s i g n a t i o n s w i l l

be u s e d ; p l a i n t i f f s C u r t i s and Sharon Pond w i l l be r e f e r r e d

t o a s t h e "Ponds"; d e f e n d a n t s Dick S. Dye and P a t r i c i a L.

Dye w i l l b e r e f e r r e d t o a s t h e "Dyes"; d e f e n d a n t s L e s l i e M.

L i n d e l l and Bonnie L i n d e l l w i l l be r e f e r r e d t o a s t h e " ~ i n d e l l s " ;

and C.K. Benson w i l l be r e f e r r e d t o a s e ens on". S o p h i e M. R u s s e l l o r i g i n a l l y owned t h e p r o p e r t y which i s a t t h e c e n t e r of the d i s p u t e i n t h i s a c t i o n . I n 1969, R u s s e l l e n t e r e d i n t o a c o n t r a c t f o r deed w i t h t h e Dyes.

On October 27, 1971, t h e Dyes e n t e r e d i n t o a c o n t r a c t

f o r deed w i t h t h e L i n d e l l s . This c o n t r a c t contained t h e

following provisions:

" 1 . T h a t i f t h e b u y e r s s h a l l f i r s t make t h e pay- ments and perform t h e c o v e n a n t s h e r e i n a f t e r men- t i o n e d on t h e i r p a r t t o be made and performed, t h e s e l l e r s hereby c o v e n a n t and a g r e e t o convey and a s s u r e t o t h e b u y e r s by w a r r a n t y deed i n f e e s i m p l e , f r e e and c l e a r of a l l encumbrances, t h e r e a l e s t a t e i n t h e County of Yellowstone, and S t a t e of Montana, known and d e s c r i b e d as f o l l o w s , to wit:

T r a c t s K and L of t h e Second Amended P l a t of CERTIFICATE O SURVEY NO. 744, which i s l o c a t e d F i n t h e S 1 / 4 of S e c t i o n 23, Township 2 North, W Range 26 E a s t , P.M.M., Yellowstone County, Mon- t a n a , a c c o r d i n g t o t h e o f f i c i a l p l a t t h e r e o f on f i l e and of r e c o r d i n t h e o f f i c e of t h e C l e r k and Recorder of s a i d County, under Document No. 739015.

"4. The s e l l e r s a g r e e t o provide a t i t l e insur- ance p o l i c y evidencing t h a t t i t l e t o the proper- t y i s insurable i n the amount of $9,000.00 and w i l l p l a c e t h e same i n escrow a s h e r e i n a f t e r men- tioned.

" 5. Upon t h e e x e c u t i o n of t h i s agreement, t h e s e l l e r s s h a l l e x e c u t e a w a r r a n t y deed r u n n i n g t o t h e b u y e r s i n t h e u s u a l form, conveying v a l i d , mar- k e t a b l e , f e e simple t i t l e t o t h e premises t o t h e b u y e r s , f r e e and c l e a r of a l l l i e n s , encumbrances, and t i t l e d e f e c t s , i f a n y , b u t e x c e p t i n g r i g h t s - of-way, easements, and t a x e s f o r t h e p e r i o d sub- s e q u e n t t o t h e d a t e of t h i s i n s t r u m e n t . . ." On May 9, 1973, t h e L i n d e l l s e n t e r e d i n t o a c o n t r a c t

f o r deed w i t h t h e Ponds. That c o n t r a c t contained t h e following

provisions:

" T h a t if Buyers s h a l l f i r s t perform t h e c o v e n a n t s h e r e i n a f t e r mentioned on t h e i r p a r t t o be made and performed, and s h a l l make t h e payments a s h e r e i n s p e c i f i e d , t h e S e l l e r s do h e r e b y c o v e n a n t and a g r e e t o s e l l , t r a n s f e r and convey t o t h e Buyers i n f e e s i m p l e , c l e a r of a l l encumbrances w h a t e v e r , w i t h t h e e x c e p t i o n of r e s e r v a t i o n s , r e s t r i c t i o n s and easements of r e c o r d , and a s may have been i n c u r r e d by t h e Buyers a f t e r t h e d a t e of t h i s agreement, by w a r r a n t y deed, r e a l p r o p e r t y s i t u a t e d i n t h e County of Yellowstone, S t a t e of Montana, and more p a r t i c u - l a r l y described a s follows ... " I t i s u n d e r s t o o d and a g r e e d t h a t t h i s c o n t r a c t i s s u b j e c t t o t h e terms and c o n d i t i o n s of c o n t r a c t s f o r deed between Sophie M. R u s s e l l , a s S e l l e r s , and Dick S. Dye and P a t r i c i a L. Dye, d a t e d October 25, 1969; and a c o n t r a c t f o r deed d a t e d October 27, 1971 between Dick S. Dye and P a t r i c i a L . Dye, a s S e l l e r s , and L e s l i e M. L i n d e l l and Bonnie A. L i n d e l l as Buyers; t h a t s a i d c o n t r a c t s a r e h e l d i n escrow by t h e S e c u r i t y T r u s t & S a v i n g s Bank, B i l l i n g s , Montana, and t h a t t h i s c o n t r a c t s h a l l be p l a c e d i n escrow a t t h e S e c u r i t y T r u s t & S a v i n g s Bank, B i l l i n g s , Montana, and t h a t payments made under t h i s c o n t r a c t s h a l l b e a p p l i e d t o t h e payment of s a i d e a r l i e r c o n t r a c t s .

"At such t i m e a s t h e Buyers s h a l l have p a i d t h e f u l l p u r c h a s e p r i c e b a l a n c e of $11,500.00, p l u s i n t e r e s t a t 8% p e r annum, a s s e t f o r t h i n t h i s c o n t r a c t f o r deed, S e l l e r s s h a l l f u r n i s h a t i t l e i n - s u r a n c e p o l i c y t o t h e Buyers showing good and m e r - chantable t i t l e . The S e c u r i t y T r u s t & S a v i n g s Bank i s hereby a u t h o r i z e d t o pay t h e c o s t of s a i d t i t l e i n s u r a n c e p o l i c y from t h e l a s t two payments t o be made under t h e t e r m s of t h i s c o n t r a c t and d e d u c t t h e same from t h e payments t o be made t o t h e S e l l e r s . "

On October 24, 1973, Contemporary P r o d u c t s , I n c . , a

f o r e i g n c o r p o r a t i o n which was n o t r e g i s t e r e d t o do b u s i n e s s

i n Montana, r e c o r d e d a judgment a g a i n s t Dick S. Dye, i n t h e

amount of $12,471.08, p l u s i n t e r e s t , c o s t s , and $1,149.00 i n

attorney fees. T h i s judgment was d o c k e t e d i n t h e D i s t r i c t

C o u r t , Yellowstone County, c a s e no. 59091.

On August 26, 1978, t h e Dyes a s s i g n e d t h e i r r i g h t s a s

s e l l e r s under t h e Dye-Lindell c o n t r a c t t o Benson. A t this

t i m e Dyes a l s o gave Benson a w a r r a n t y deed t o t h e p r o p e r t y ,

which was r e c o r d e d August 2 9 , 1978.

Subsequent a s s i g n m e n t s of c o n t r a c t s were made by t h e

L i n d e l l s and Benson. The f o l l o w i n g c h a r t , numbered chrono-

l o g i c a l l y , d e p i c t s a l l of t h e above o c c u r r e n c e s and t r a n s a c -

t i o n s r e l a t i n g t o t h i s p a r c e l of p r o p e r t y .

(See I l l u s t r a t i o n On Next Page) -- Ccntrrrpomry P r O d ~ a c Judgment aga. - 5 : L.C. ; :.e :or . $;2.4;:.C: cote;

1 D i c k S . Dye C o n t r a c t f o r Deed d a t e d O c t ~ t e c2 5 , 1963.

P a t r l c i a Sye - i ) Z. K. E?nso-

1 Cor.trzct f o r D c ; ~ date3 Cztohcr 27, i3i:. 'n'arrantv 3 c e d a n l +&. n_- -_.-.. ..-LL

r e c o r z e d Adj~s: 2 3 , 1578

C o n t r a c t As;lqnr.ent

G r a T t P. ? . a i t : a l ? ~ (Unrecorded)

e Lindell - Sonitr Li-deli ! I Warra::? 3c.?5 "it C::L?

I Rzccrl.2 P;ck 3z:ei Con:ract for Dece.rserIi, Leccrlcrr ;a, Deed d l t c d 1973 !!ay 3 , 1 0 7 3 , : J o t ~ c er e c o r d e d J u n e 1 4 , 1973

C u r t i s Pond - S h ~ r o nP o n d L l o y d E. Pctersar.

Q Tender of full payment made December 6, 1978.

T h i s c o n t r o v e r s y f i r s t began i n t h e summer of 1978,

when t h e Ponds n e g o t i a t e d a r e a l e s t a t e c o n s t r u c t i o n l o a n

f o r t h e purpose of b u i l d i n g a home on t h e p r o p e r t y , and made

p r e p a r a t i o n s t o pay t h e b a l a n c e due under t h e i r c o n t r a c t f o r

deed w i t h t h e L i n d e l l s .

On October 4 , 1978, t h e Ponds o b t a i n e d a t i t l e i n s u r a n c e

commitment from S a f e c o T i t l e I n s u r a n c e Company of Idaho

which r e f l e c t e d , among o t h e r t h i n g s , t h a t t h e p o l i c y t o be

i s s u e d would c o n t a i n a n e x c e p t i o n f o r t h e October 24, 1973,

judgment e n t e r e d i n f a v o r of Contemporary P r o d u c t s , I n c . ,

a g a i n s t Dick S. Dye.

Ponds n o t i f i e d a l l d e f e n d a n t s of t h e a l l e g e d d e f e c t i n

t h e t i t l e and r e q u e s t e d t h a t t h e d e f e c t be removed s o t h a t

m e r c h a n t a b l e t i t l e c o u l d be d e l i v e r e d t o t h e Ponds p u r s u a n t

t o the contract t e r m s .

On December 6 , 1978, t h e Ponds t e n d e r e d f u l l and f i n a l

payment under t h e Pond-Lindell c o n t r a c t by d e p o s i t i n g $9,600

w i t h t h e escrow a g e n t . The f u n d s were n o t t o be p a i d u n t i l

c l e a r and m e r c h a n t a b l e t i t l e was d e l i v e r e d t o t h e Ponds and a t i t l e i n s u r a n c e p o l i c y i s s u e d which would n o t i n c l u d e t h e

Dye judgment a s a n e x c e p t i o n .

A s u i t was f i l e d by t h e Dyes t o have t h e judgment l i e n

d e c l a r e d v o i d a s a g a i n s t t h e r e a l p r o p e r t y i n q u e s t i o n and

s e e k i n g permanent i n j u n c t i v e r e l i e f p r e v e n t i n g Contemporary

Products, Inc., from e n f o r c i n g t h e judgment a g a i n s t t h i s

r e a l property. Such a c t i o n was f i l e d by t h e Dyes on J u n e

1 2 , 1979, 17 d a y s p r i o r t o t h e f i l i n g of t h e i n s t a n t c a s e by

t h e Ponds. The c o u r t f i l e i n DV-79-979 reveals t h a t although

t h e c o m p l a i n t was f i l e d , no summons was e v e r i s s u e d o r

returned. The judgment remained a n e x c e p t i o n .

On J u n e 29, 1979, t h e Ponds f i l e d t h i s s u i t f o r s p e c i f i c

performance of t h e c o n t r a c t and f o r damages f o r d e l a y i n

performance of t h e c o n t r a c t . The Ponds and/or S a f e c o I n s u r a n c e

Company d e t e r m i n e d t h a t on October 2 4 , 1979, s i x y e a r s would

have r u n on t h e Dye judgment, and i t would no l o n g e r c o n s t i t u t e

a v a l i d l i e n a t t h a t time. T h e r e f o r e , t h e Ponds proceeded

t o t a k e a c t i o n t o c l o s e a second c o n s t r u c t i o n l o a n which had

been o b t a i n e d and t o s e c u r e t h e i n s t r u m e n t s of conveyance

from t h e escrow a g e n t a f t e r October 2 4 , 1979.

On October 1 2 , 1979, Benson n o t i f i e d t h e escrow a g e n t ,

S e c u r i t y Bank, n o t t o d e l i v e r t h e i n s t r u m e n t s of conveyance

t o t h e Ponds w i t h o u t c o l l e c t i o n by t h e escrow a g e n t of t h e

sum of $510 which Benson claimed a s a t t o r n e y f e e s p u r s u a n t

t o c o n t r a c t f o r deed. Benson's c l a i m stemmed from t h e f a c t

t h a t he had been r e q u i r e d t o o b t a i n l e g a l c o u n s e l t o d e f e n d

t h e s u i t commenced by t h e Ponds under c i r c u m s t a n c e s i n which

Benson claimed he had n o t been g u i l t y of a b r e a c h of c o n t r a c t .

P l a i n t i f f s , t h e Ponds, t h e n assumed t h e p o s i t i o n t h a t

t h e y had r i g h t f u l l y commenced t h e i r a c t i o n f o r s p e c i f i c p e r -

formance by r e a s o n of t h e f a i l u r e of t h e d e f e n d a n t s t o f u r n i s h t o them e v i d e n c e o f c l e a r and m e r c h a n t a b l e t i t l e and

t h e y r e f u s e d t o p a y t h e $510 a t t o r n e y f e e s demanded by

d e f e n d a n t Benson.

The f o l l o w i n g i s s u e s a r e h e r e r e s o l v e d :

1. Did t h e D i s t r i c t C o u r t err i n h o l d i n g t h a t p l a i n t i f f s ,

t h e Ponds, were n o t e n t i t l e d t o summary judgment g r a n t i n g

s p e c i f i c performance of t h e c o n t r a c t ?

2. Did t h e D i s t r i c t C o u r t err i n h o l d i n g d e f e n d a n t s ,

Dyes, and Benson were e n t i t l e d t o summary judgment?

3. Did t h e D i s t r i c t C o u r t err i n h o l d i n g t h a t p l a i n t i f f s ,

t h e Ponds, were n o t e n t i t l e d t o damages c a u s e d by d e l a y i n

conveyance o f c l e a r t i t l e t o t h e p r o p e r t y and p e r f o r m a n c e o f

the contract?

T h e s e i s s u e s a r e r e s o l v e d by d e t e r m i n i n g (1) w h e t h e r t h e

Ponds w e r e r e a d y , w i l l i n g and a b l e t o p e r f o r m t h e i r p a r t o f t h e and c o n t r a c t , / ( 2 ) w h e t h e r Benson a s a s s i g n e e o f t h e Dye t o L i n d e l l

c o n t r a c t c o u l d b e r e q u i r e d t o p e r f o r m t o t h e same e x t e n t a s

t h e Dyes c o u l d h a v e been.

F o r t h e Ponds t o be e n t i t l e d t o s p e c i f i c p e r f o r m a n c e ,

they must have o f f e r e d t o perform. Hanlon v . Manger ( 1 9 2 9 ) , 85 Mont. 31, 39, 277 P. 433, 436. Ponds t e n d e r e d t h e c o n t r a c t

b a l a n c e o f $ 9 , 6 0 0 a s shown by t h e a f f i d a v i t o f t h e e s c r o w

agent. However, t h e y d i r e c t e d t h e f u n d s n o t b e d e l i v e r e d

u n t i l a t i t l e p o l i c y c o u l d b e i s s u e d showing good and m e r c h a n t a b l e

title. Benson c l a i m s t h i s w a s a c o n d i t i o n a l t e n d e r . We

disagree. Ponds w e r e o n l y i n s i s t i n g upon r e c e i v i n g t h a t

w h i c h t h e y had a c o n t r a c t u a l r i g h t t o r e c e i v e . A t t h e same

t i m e , Ponds were i n d i c a t i n g t h a t t h e y w e r e r e a d y , a b l e and

willing t o close. Such i s s u f f i c i e n t . Van A t t a v . S c h i l l i n g e r

(1981) -Mont. , 625 P.2d 73, 77, 38 St.Rep. 426, 430.

There can be l i t t l e doubt t h a t s p e c i f i c performance w i l l l i e a g a i n s t Benson a s a s s i g n e e of Dye. When Benson

p u r c h a s e d Dyes' i n t e r e s t i n t h e c o n t r a c t w i t h L i n d e l l ,

Benson had n o t i c e t h a t L i n d e l l had s o l d t o t h e Ponds some

f i v e y e a r s e a r l i e r . T h i s C o u r t s t a t e d i n Thompson v . ~ i n c o l n

Nat. L i f e I n s . Co. ( 1 9 4 3 ) , 1 1 4 Mont. 521, 529, 138 P.2d 951,

"The d o c t r i n e i s w e l l s e t t l e d t h a t when t h e v e n d o r , a f t e r e n t e r i n g i n t o a c o n t r a c t of s a l e , conveys t h e l a n d t o a t h i r d p e r s o n who h a s knowledge o r n o t i c e of t h e p r i o r agreement, ... such g r a n t e e t a k e s t h e l a n d impressed w i t h t h e t r u s t i n f a v o r of t h e o r i g i n a l vendee, and h o l d s i t a s t r u s t e e f o r s u c h vendee, and c a n be compelled a t t h e s u i t of t h e vendee t o spec- i f i c a l l y perform t h e agreement by conveying t h e l a n d i n t h e same manner, and t o t h e same e x t e n t , a s t h e vendor would have been l i a b l e t o d o , had he n o t t r a n s - f e r r e d t h e l e g a l t i t l e ; and such g r a n t e e i s t h e p r o p e r d e f e n d a n t i n t h e s u i t a q a i n s t whom t o demand t h e - remedy of a conveyance." ( C i t i n g Pomeroy's S p e c i f i c Performance - C o n t r a c t s , S e c t i o n 465.1 (3d Ed. ) of . I n Myhre v. Myhre ( 1 9 7 6 ) , 170 Mont. 4 1 0 , 419, 554 P.2d 276, t h i s C o u r t s a i d :

"The r u l e seems t o b e t h a t one who a c q u i r e s o r p u r c h a s e s p r o p e r t y , knowing t h a t t h e p r o p e r t y i s s u b j e c t t o a c o n t r a c t t o be s o l d t o a n o t h e r , may be compelled t o perform t h e c o n t r a c t i n t h e same manner and t o t h e same e x t e n t a s h i s g r a n t o r would have been l i a b l e t o do had t h e g r a n t o r n o t made t h e t r a n s f e r t o him. " ( C i t a t i o n s o m i t t e d . )

The Ponds had t h r e e s e p a r a t e r i g h t s which c o u l d be en-

f o r c e d a g a i n s t Benson, namely (1) t h e r i g h t t o r e c e i v e a

deed, ( 2 ) t h e r i g h t t o r e c e i v e a m e r c h a n t a b l e t i t l e , and ( 3 )

t h e r i g h t t o r e c e i v e a t i t l e p o l i c y showing c l e a r t i t l e .

The D i s t r i c t C o u r t a p p a r e n t l y d e n i e d r e l i e f t o t h e

Ponds and g r a n t e d summary judgment t o t h e d e f e n d a n t s b e c a u s e

t h e c o u r t found t h e Contemporary P r o d u c t s ' judgment n o t t o

be a l i e n on t h e p r o p e r t y . The c o u r t f e l t t h a t t h e f a c t a

t i t l e i n s u r a n c e company would i n c l u d e t h e judgment a s a n .Zl-A. exception d i d n o t c r e a t e a d e f e c t rendering t h e t i t l e merchantable.

W e need n o t d e c i d e whether t h e judgment c o n s t i t u t e d a

v a l i d l i e n on t h e p r o p e r t y . The t r i a l c o u r t e r r e d by n o t c o n s i d e r i n g t h a t t h e r e

were two s e p a r a t e c o n t r a c t u a l c o v e n a n t s i n u r i n g t o Ponds'

b e n e f i t . The f i r s t c o v e n a n t w a s t o convey good t i t l e ; t h e

s e c o n d was t o f u r n i s h a t i t l e p o l i c y i n s u r i n g t h a t good

title. The Ponds w e r e e n t i t l e d t o h a v e e a c h c o v e n a n t p e r f o r m e d .

The d e f e n d a n t s f a i l e d t o s o p e r f o r m .

Benson c l a i m s a t t o r n e y f e e s a r i s i n g o u t o f c o n t r a c t .

Whether f e e s s h o u l d b e awarded i f Benson had b e e n s u c c e s s f u l

h a s now b e e n r e n d e r e d moot. The p o s i t i o n t a k e n by Benson from

t h e beginning h a s been u n j u s t i f i e d . H e had a n o b l i g a t i o n t o d e -

l i v e r t h e d e e d and a n i n s u r a b l e c l e a r t i t l e . H e w a s n o t , and i s

not, e n t i t l e d t o e i t h e r attorney f e e s o r costs.

The o r d e r of t h e D i s t r i c t C o u r t g r a n t i n g summary judgment

t o t h e d e f e n d a n t s , Dyes and Benson, i s r e v e r s e d . The c a u s e i s

remanded w i t h d i r e c t i o n s t o e n t e r summary judgment f o r s p e c i f i c

p e r f o r m a n c e i n f a v o r o f t h e p l a i n t i f f s and f o r t r i a l on t h e