PIPKIN v CONNOLLY

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No. 12898 I N THE SUPREME C U T O THE STATE O M N A A OR F F OTN 1975 D R A L PIPKIN and BETTY PIPKIN, ERL husband and w i f e , P l a i n t i f f s and Respondents, GERALD C N O L and EMILIE CONNOLLY, O N LY husband and w i f e , Defendants and A p p e l l a n t s , D i s t r i c t Court of t h e S i x t h J u d i c i a l D i s t r i c t , Honorable Jack D, Shanstrom, Judge p r e s i d i n g . Appeal from: Counsel of Record: For A p p e l l a n t s : Lee O v e r f e l t argued, B i l l i n g s , Montana For Respondents: Joseph T. Swindlehurst argued, L i v i n g s t o n , Montana Huppert and Swindlehurst, Livingston, Montana Submitted: " " t - 7' _.c ? ;; ? 4 4 Decided : May 6, 1975 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: This i s an a p p e a l from a judgment o f t h e d i s t r i c t c o u r t , Sweet Grass County, s i t t i n g without a j u r y , holding defendants' l e a s e terminated upon f a i l u r e t o e x e r c i s e 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 f u r t h e r t h a t defendants were accountable t o p l a i n t i f f s i n unlawful d e t a i n e r . Defendants Gerald and Emilie Connolly, husband and w i f e , and p l a i n t i f f s D e r r a l l and B e t t y P i p k i n , husband and w i f e , e n t e r e d i n t o an a g r i c u l t u r a l l e a s e agreement drawn by d e f e n d a n t s ' a t t o r n e y John R. Glenn, Esq. The l e a s e was f o r a f i v e year p e r i o d beginning March 1, 1973 and t e r m i n a t i n g February 28, 1978. The C Gr-~r-ubCC -7 t h a t Pipki*'day $4,000 a y e a r a s r e n t f o r t h e property. r e s e r v e d t h e dwelling house l o c a t e d on t h e p r o p e r t y f o r t h e i r p e r s o n a l use. Pipkins f u r t h e r agreed t o g i v e 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 a c c e p t t h e 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 March 28, 1974, Pipkins r e c e i v e d a w r i t t e n o f f e r f o r n t h e purchase of t h e premises, t o g e t h e r w i t h e a r n e s t money of $10,000 from Rainbow Ranch, I n c . of F o r t C o l l i n s , Colorado, upon t h e s e terms: "The t o t a l purchase p r i c e i s Two Hundred Thousand D o l l a r s ($200,000.00) payable a s follows : "Sixty Thousand D o l l a r s ($60,000.00) paid down; "The Balance payable over a p e r i o d of T h i r t y (30) y e a r s , w i t h i n t e r e s t amortized o u t a t Six p e r c e n t (6%) ; "Contract f o r Deed t o be c a r r i e d by S e l l e r ; 11 I n t e r e s t t o commence a s of d a t e of possession; "Earnest money of Ten Thousand D o l l a r s ($10,000.00); "The c l o s i n g d a t e of t h e s a l e s h a l l b e on o r b e f o r e June 1, 1974." O A p r i l 25, 1974, Pipkins served upon Connollys n o t i c e n of t h e o f f e r , g i v i n g them t h e r i g h t t o meet t h e o f f e r on o r b e f o r e May 31, 1974. Connollys f a i l e d t o a c c e p t t h e o f f e r o r t o d e l i v e r possession of t h e premises, a s r e q u e s t e d . Pipkins brought a c t i o n i n unlawful d e t a i n e r t o r e c o v e r possession of t h e premises. Connollys cross-complained praying f o r t h e c o u r t t o amend t h e l e a s e t o r e a d a s they c l a i m was t h e o r i g i n a l i n t e n t i o n of t h e c o n t r a c t i n g parties--that any s a l e of t h e farmland was s u b j e c t t o t h e l e a s e . The proposed s a l e was n o t 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 t h e y wanted t h e r i g h t t o s e l l t h e property a t anytime and t h a t t h e l e a s e would t e r m i n a t e upon such s a l e . The l e a s e d i d n o t provide f o r i t s t e r m i n a t i o n upon s a l e of t h e premises, b u t provided i n p e r t i n e n t p a r t : "The Landlords [ P i p k i n s ] agreed t o g i v e Tenants [Connollys] t h e r i g h t t o meet any o f f e r t o buy t h e above d e s c r i b e d r e a l e s t a t e and Landlords a g r e e t o a c c e p t 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 t h e above d e s c r i b e d r e a l e s t a t e during t h e term of t h i s l e a s e o r any f u t u r e l e a s e providing t h a t Tenants b e given t h e r i g h t s h e r e i n b e f o r e mentioned. I f M r . Glenn, Connollys' a t t o r n e y , t e s t i f i e d t h e r e was no p r o v i s i o n made f o r f o r f e i t u r e of t h e l e a s e f o r f a i l u r e t o e x e r c i s e t h e 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 d i s c u s s i o n s w i t h t h e p a r t i e s t h a t t h e land could be s o l d , b u t Connollys would remain i n possession under t h e l e a s e . I n i t s f i n d i n g s of f a c t t h e d i s t r i c t c o u r t found: t h a t ' a t t h e t i m e t h e l e a s e was made Pipkins s t r o n g l y emphasized t h e f a c t t h a t they wanted t o r e s e r v e t h e r i g h t t o s e l l t h e farmland and upon such s a l e t h e l e a s e would t e r m i n a t e ; Pipkins had r e c e i v e d a bona f i d e o f f e r f o r t h e purchase of t h e premises from Rainbow Ranch, I n c . ; t h a t Connollys r e f u s e d t o meet t h e o f f e r ; and, t h e r e f o r e , t h e l e a s e was terminated on June 1, 1974. I n i t s conclusions of law t h e c o u r t h e l d t h a t t h e Connollys unlawfully d e t a i n e d t h e premises s i n c e June 1, 1974, and awarded Pipkins judgment f o r t r e b l e damages. ~onnollys' cross-complaint was denied. Connollys p r e s e n t n i n e i s s u e s f o r t h i s C o u r t ' s review. Briefly stated, the issues are: 1. Did t h e d i s t r i c t c o u r t e r r i n f i n d i n g t h a t t h e l e a s e terminated upon t h e s a l e of t h e farmland and ~ o n n o l l y s ' f a i l u r e t o e x e r c i s e 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 t h e c o u r t e r r i n a d m i t t i n g an unacknowledged b u y - s e l l agreement i n t o evidence a s proof of an o f f e r t o buy t h e farmland i n question? Lessees Connolly argue t h a t i n l i g h t of t h e testimony of t h e a t t o r n e y who drew up t h e c o n t r a c t , M r . Glenn, t h e r e was no such i n t e n t on t h e p a r t of t h e p a r t i e s t h a t t h e l e a s e would t e r m i n a t e upon t h e s a l e of t h e l a n d ; t h a t l e s s o r s Pipkin t e s t i f i e d Connollys wanted a l e a s e s o t h a t t h e y could borrow money from t h e bank and, i n l i g h t of t h e f a c t t h e law does n o t f a v o r f o r f e i t u r e , P i p k i n s have f a i l e d i n t h e i r burden of proof, t h e r e f o r e t h e d i s t r i c t c o u r t e r r e d i n f i n d i n g f o r them. The l e a s e was drawn by t h e a t t o r n e y f o r Connollys. The terms of t h e l e a s e when ambiguous w i l l be construed most s t r o n g l y a g a i n s t him whose words t h e y a r e . Bickford v. Kirwin, 30 Mont. 1, 75 P. 518. The l e a s e c l a u s e allowing t h e s a l e of t h e farmland and g i v i n g l e s s e e s t h e r i g h t of f i r s t r e f u s a l i s , a t b e s t , incomplete a s i t r e l a t e s t o t h e problem here. I f a l l Pipkins wanted t o do was t o b e a b l e t o s e l l t h e i r farmland, s u b j e c t t o t h e l e a s e h o l d , t h e r e would have been no need f o r t h e c l a u s e . Connollys s t a t e d t h e y included t h e c l a u s e because Pipkins demanded i t , even though i n t h e i r opinion i t was n o t necessary. Connollys argue t h a t i f t h e l e a s e could be terminated upon t h e s a l e of t h e farmland, what*bank would lend money on t h a t type of l e a s e ? Pipkins s t a t e t h e y were adamant about being a b l e t o s e l l t h e i r farmland anytime t h e y wanted t o , and n o t have the s a l e subject t o the lease. Pipkins a l s o p o i n t o u t t h a t Connollys agreed t h a t they could move from C a l i f o r n i a t o t h e farmland, and t h a t would t e r m i n a t e t h e l e a s e although t h a t was n o t included i n t h e l e a s e . That t y p e of agreement Pipkins argue i s c o n t r a d i c t o r y t o t h e t y p e of l e a s e Connollys c l a i m t h e y r e c e i v e d . I n Lunke v. Egeland, 46 Mont. 403,410, 128 P. 610, w h i l e c o n s t r u i n g an a g r i c u l t u r a l l e a s e which c o n t a i n e d a d d i t i o n a l elements, t h i s Court d i d r e a c h t h e problem of t h e e f f e c t of a c l a u s e g i v i n g t h e l e s s o r t h e r i g h t t o s e l l and t h e l e s s e e t h e r i g h t of f i r s t refusal. The Court h e l d : II There was no n e c e s s i t y of r e s e r v i n g t h e r i g h t t o s e l l i f such s a l e was n o t t o a f f e c t t h e l e a s e . [Lessor] had such r i g h t i n any event. I? 2j.7 The C a l i f o r n i a Supreme Court i n Garetson v. Wester, 39' Cal.R+r. P.2d 863, 864, 865, construed t h i s language of t h e l e a s e involved t k r e : "'1t i s mutually understood and agreed t h a t t h e p r o p e r t y covered by t h i s l e a s e i s s u b j e c t t o s a l e ; however, t h e l e s s o r a g r e e s t h a t i n t h e event of an o f f e r t o purchase t h a t l e s s e e i s t o b e given f i r s t o p p o r t u n i t y t o buy. I I 1 The Court s t a t e d : "Obviously, t h e p r o p e r t y was s u b j e c t t o s a l e without t h e i n s e r t i o n o f any such c l a u s e . The Lessor a t anytime had t h e r i g h t t o s e l l t h e p r o p e r t y s u b j e c t , of c o u r s e , t o t h e l e a s e , and t h e e f f e c t of t h e 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 t h e r i g h t s of t h e o r i g i n a l l e s s o r . The c l a u s e must, t h e r e f o r e , have an important intended.meaning. The p l a c i n g of t h e o p t i o n i n t h i s c l a u s e i n d i c a t e d very c l e a r l y t h a t i t was t h e i n t e n t i o n of t h e p a r t i e s , and i n s i s t e d upon by t h e l e s s e e s , t h e a p p e l l a n t s h e r e i n , t h a t t h e l e s s e e s be p r o t e c t e d i n t h e event of t h e s a l e and b e given t h e f i r s t o p p o r t u n i t y t o purchase. I f i t was n o t intended by t h e 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 w i t h a subsequent r e f u s a l by l e s s e e s t o purchase should t e r m i n a t e t h e l e a s e s , t h e r e would have been no occasion whatsoever f o r t h i s s o r t of an o p t i o n . I f t h e purpose of t h e c l a u s e was merely t o g r a n t an o p t i o n t o t h e l e s s e e s t o buy t h e p r o p e r t y d u r i n g t h e l i f e of t h e l e a s e s , i t would n o t have been coupled w i t h t h e c l a u s e r e s e r v i n g t h e p r o p e r t y f o r s a l e . The two e x p r e s s i o n s t o g e t h e r c l e a r l y i n d i c a t e t h a t i t was i n tended by a l l p a r t i e s t h a t t h e s a l e of t h e land would t e r m i n a t e t h e l e a s e s . I n no o t h e r way can t h e presence of t h e c l a u s e be explained. I I ** Connollys a l l e g e t h e language of t h e l e a s e i n q u e s t i o n h e r e , and t h e language of t h e l e a s e s i n Lunke and Garetson distinguishable. are They p o i n t out t h e r e was a p r o v i s i o n i n Lunke f o r payment t o t h e l e s s e e upon t e r m i n a t i o n of t h e l e a s e f o r t h e crops planted. I n Garetson t h e r e was a d d i t i o n a l language i n t h e l e a s e which Connollys a r g u e make t h a t l e a s e d i f f e r e n t from t h e one i n q u e s t i o n h e r e , i t provided: I "The l e a s e s f u r t h e r provided t h a t a t t h e 'end of t h e term of l e a s e , which term could i n f e r e n t i a l l y mean when i t was terminated a t t h e end of t h e l e a s e h o l d period o r by f a i l u r e of t h e l e s s e e t o e x e r c i s e h i s I o p t i o n 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 f u r t h e r t i m e a s t h e l e s s e e s might hold t h e property." (Emphasis added.) *** Connollys argue t h i s language, construed along w i t h t h e rest of t h e l e a s e i n Garetson made i t p o s s i b l e t o i n t e r p r e t t h e c o n t r a c t 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 e x e r c i s e t h e 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 t h e l e a s e . True, each l e a s e must be construed s e p a r a t e l y , depending upon i t s own language. However, t h e i n s t a n t c a s e , Lunke and Garetson, a l l involve a l e a s e which i n c l u d e s a c l a u s e r e s e r v i n g t h e r i g h t t o s e l l , b u t makes no mention of t h e t e r m i n a t i o n of t h e lease. It i s t h e language of t h a t c l a u s e we a r e i n t e r p r e t i n g h e r e . It i s t h a t language which was i n t e r p r e t e d i n Lunke and Garetson. I n Garetson t h e C a l i f o r n i a c o u r t d i d n o t r e l y on t h e emphasized language c i t e d here-by Connollys t o r e a c h i t s conclusion. Too, although i n Lunke t h e reimbursement f o r a c r e a g e p l a n t e d c l a u s e was an added f a c t o r i n t h e c o u r t ' s r e a c h i n g i t s d e c i s i o n , t h a t c o u r t r e i t e r a t e d our major premise h e r e , t h a t t h e r e was no need f o r t h e c l a u s e r e s e r v i n g t h e r i g h t t o s e l l i f such r i g h t was s u b j e c t t o t h e lease. Therefore, Lunke and Garetson cannot b e d i s t i n g u i s h e d on t h e point i n i s s u e here. Connollys condemn t h e h a r s h f o r f e i t u r e and l a c k of any c o n s i d e r a t i o n given f o r t h e i r growing c r o p s o r improvements. In t h i s r e g a r d t h e Court n o t e s t h e n o t i c e t o t h e Connollys of A p r i l 25, 1974, a d v i s e s t h a t they would have u n t i l May 31, 1974 t o e x e r c i s e 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 p r o p e r t y would b e s o l d on June 1, 1974, i f Connollys d i d n o t e x e r c i s e t h e i r r i g h t t o purchase, and they would be expected t o d e l i v e r up p e a c e f u l p o s s e s s i o n on o r b e f o r e June 1, 1974. N o f u r t h e r demand from Pipkins o r t h e i r s u c c e s s o r i n i n t e r e s t was e v e r made. S u i t i n unlawful d e t a i n e r was f i l e d June 1 2 , 1974. Connollys t e c h n i c a l l y were h o l d i n g o v e r a f t e r midnight May 31, 1974. S e c t i o n 93-9703(2), R.C.M. t h i s type of f o r f e i t u r e . 1947, provides r e l i e f f o r While a l l o t h e r t e n a n c i e s speak of holding over without permission of t h e l a n d l o r d , and t h i s Court i s mindful of t h e c a s e s h o l d i n g t h r e e day n o t i c e t o pay o r q u i t satisfies 11 without permission" i m p l i e d l y , a g r i c u l t u r a l l e a s e s r e q u i r e demand a f t e r holding over a f t e r t h e e x p i r a t i o n of t h e l e a s e term. This problem was t r e a t e d by t h i s Court i n a c a s e i n v o l v i n g a l e s s e e who attempted t o e x e r c i s e an o p t i o n t o purchase a f t e r t h e term of h i s l e a s e had expired. I n M i l l e r v. Meredith, H i l l and W h i t f i e l d , 149 Mont. 125, 129, 423 P.2d 595, t h e Court s t a t e d : "Under t h e common law t h e holdover t e n a n t was considered a t r e s p a s s e r and i n o r d e r t o g e t away from t h e 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 p r a c t i c e s of t h e s t a t e , o u r 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 l e s s e e s i n s e c t i o n 93-9703, R.C.M. 1947. Under t h i s s e c t i o n a holdover t e n a n t f o r s i x t y days without n o t i c e who i n v e s t s time and seed w i l l n o t l o s e t h i s investment t o t h e l a n d l o r d . However, t h e s t a t u t e g i v e s him no more than t h e r i g h t t o h a r v e s t h i s c r o p t o p r o t e c t h i s investment and p r o t e c t s him from l i a b i l i t y i n an a c t i o n f o r unlawful d e t a i n e r . " (Emphasis s u p p l i e d . ) A s s t a t e d h e r e t o f o r e , no n o t i c e o r demand was e v e r given Connollys a f t e r t h e e x p i r a t i o n of t h e l e a s e . They remained on t h e p r o p e r t y s i x t y days a f t e r t h e l e a s e terminated and p l a n t e d t h e i r crops. Therefore, under s e c t i o n 93-9703(2), they had a r i g h t t o h a r v e s t t h o s e crops and a r e p r o t e c t e d from l i a b i l i t y f o r unlawful detainer . F i n a l l y , concerning whether t h e b u y - s e l l agreement h a s t o b e acknowledged b e f o r e i t can be admitted i n t o evidence, Connollys a r g u e t h a t such agreement h a s t o b e acknowledged t o be admitted i n t o evidence t o a s c e r t a i n whether t h e s i g n e r i s t h e p r e s i d e n t of t h e Rainbow Ranch I n c . , and whether he h a s t h e a u t h o r i t y t o b i n d t h e c o r p o r a t i o n t o t h e c o n t r a c t t o purchase a s provided i n s e c t i o n 39-117, R.C.M. 1947. Testimony of A 1 Whiteside, t h e r e a l e s t a t e b r o k e r involved, e s t a b l i s h e s t h a t h e witnessed t h e s i g n a t u r e of Ronald W. M i l l e r , P r e s i d e n t of t h e c o r p o r a t i o n , and Coreen M. M i l l e r , S e c r e t a r y Treasurer. Under s e c t i o n 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 t h e c o n t r a c t i n t o evidence. Since n e i t h e r p a r t y t o t h e c o n t r a c t c h a l l e n g e s t h e c o n t r a c t , we s e e no r e a s o n t o e n t e r t a i n any c h a l l e n g e t o i t s a u t h e n t i c i t y . The judgment of t h e d i s t r i c t c o u r t i s a f f i r m e d a s t o i t s conclusions of law Nos. 1, 2, and 5 r e g a r d i n g t e r m i n a t i o n of t h e lease. Judgment i s r e v e r s e d a s t o i t s conclusions of law Nos. 3 and 4 , a s t h e y r e l a t e t o unlawful d e t a i n e r and damages. The cause i s remanded t o t h e d i s t r i c t c o u r t t o e n t e r judgment a c c o r d i n g l y . Justice. Chief J u s t i c e f

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