REINKE v BIEGEL

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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: Clerk DEC 2 7 1979 Mr. 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 C o u r t . ~ and J o y c e E. B i e g e l , t h e p u r c h a s e r s Frank ~ i l l e r i e g e l o f 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, b r i n g t h i s a p p e a l 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 w i t h o u t a j u r y . The judgment t e r m i n a t e d a c o n t r a c t f o r deed between t h e p a r t i e s , d e c l a r e d a f o r f e i t u r e of t h e down payment made by t h e p u r c h a s e r s , q u i e t e d t i t l e i n f a v o r o f t h e s e l l e r s , and w a s e n t e r e d upon a f i n d i n g t h a t t h e p u r c h a s e r s were i n d e f a u l t f o r f a i l u r e t o make t i m e l y payment under t h e c o n t r a c t . The D i s t r i c t C o u r t ' s judgment a l s o d e n i e d t h e p u r c h a s e r s ' c o u n t e r c l a i m f o r damages o r i n j u n c t i v e r e l i e f based o n t h e s e l l e r s ' a l l e g e d b r e a c h 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 o f a r e s t r i c t i v e c o v e n a n t and awarded r e a s o n a b l e a t t o r n e y f e e s t o t h e s e l l e r s . On F e b r u a r y 1 5 , 1974, Reinkes and B i e g e 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 whereby B i e g e l s w e r e t o p u r c h a s e from Reinkes L o t s 1 5 and 16 of Block 2 i n t h e Heyn S u b d i v i s i o n i n Yellowstone County. B i e g e l s p a i d $200 i n e a r n e s t money under t h e c o n t r a c t which p r o v i d e d t h a t a w a r r a n t y deed f o r e a c h l o t b e p l a c e d i n escrow and t h a t B i e g e l s would o b t a i n a deed f o r e a c h l o t upon payment o f $3100 p l u s 8 p e r c e n t p e r annum i n t e r e s t f o r e a c h l o t b e f o r e 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 p r o v i d e d t h a t d e f a u l t would b e e n t e r e d a g a i n s t t h e buyer a f t e r 30 d a y s n o t i c e and t h a t t i m e was of t h e e s s e n c e . B i e g e l s p a i d i n f u l l f o r L o t 16 sometime i n December 1975 b e f o r e t h e due d a t e , o b t a i n e d a deed t o t h a t l o t , and completed c o n s t r u c t i o n o f a home t h e r e o n i n September 1976. ~einkes and G e r t r u d e V. Heyn p r e p a r e d , f i l e d and d u l y r e c o r d e d a n amended d e c l a r a t i o n o f r e s t r i c t i o n s w i t h t h e s u b d i v i s i o n p l a t o f t h e Heyn S u b d i v i s i o n on A p r i l 24, 1973. The r e s t r i c t i v e c o v e n a n t s p r o v i d e d , among o t h e r t h i n g s , t h a t "no b u i l d i n g s h a l l b e l o c a t e d and e r e c t e d n e a r e r t h a n 30 f e e t t o the front l o t line." The d e c l a r a t i o n of r e s t r i c - t i o n s f u r t h e r p r o v i d e d t h a t i t was b i n d i n g upon a l l h e i r s , a s s i g n s , d e v i s e e s and p a r t i e s c l a i m i n g t h r o u g h them, and t h a t f a i l u r e by t h e p r e s e n t p r o p e r t y owners t o e n f o r c e t h e r e s t r i c t i o n s a t t h e t i m e o f any v i o l a t i o n t h e r e o f would n o t be deemed a waiver o f 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 o n L o t 1 4 , which t h e y had n o t s o l d and which w a s a d j a c e n t t o L o t 1 5 , t h e p r o p e r t y 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 b u i l d i n g a house on L o t 1 4 o n October 1, 1974 and completed c o n s t r u c - t i o n i n t h e e a r l y p a r t o f 1975. The house w a s s e t back a p p r o x i m a t e l y 20 f e e t from t h e f r o n t l i n e , r a t h e r t h a n 30 f e e t a s r e q u i r e d by t h e d e c l a r a t i o n o f r e s t r i c t i o n s which Reinkes had p r e p a r e d and f i l e d . Reinkes d i d n o t a t t e m p t t o amend t h i s s e t b a c k r e q u i r e m e n t by o b t a i n i n g t h e s i g n a t u r e s o f 80 p e r c e n t of t h e owners w i t h i n t h e s u b d i v i s i o n a s provided f o r i n t h e r e s t r i c t i v e covenants. Instead, they s o u g h t and o b t a i n e d a v a r i a n c e o f zoning r e s t r i c t i o n s from t h e City-County P l a n n i n g Board of Yellowstone County on November 8 , 1974, a l l o w i n g them t o b u i l d w i t h a s e t b a c k of o n l y 20 f e e t from t h e f r o n t p r o p e r t y l i n e . A n o t i c e of t h e v a r i a n c e w a s p o s t e d on L o t 1 4 on t h e s a m e d a t e . ~einkes completed c o n s t r u c t i o n of t h e L o t 1 4 house i n t h e e a r l y p a r t o f 1975. B i e g e l s f a i l e d t o pay t h e b a l a n c e o f t h e p u r c h a s e p r i c e o f L o t 1 5 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 d a y s a f t e r r e c e i v i n g n o t i c e a s r e q u i r e d under t h e c o n t r a c t f o r deed. s e r v e d on F e b r u a r y 1 8 , 1976. Notice of d e f a u l t w a s O A p r i l 1 4 , 1976, 25 d a y s n a f t e r t h e t i m e f o r c u r i n g t h e i r d e f a u l t under t h e c o n t r a c t had e x p i r e d , B i e g e l s 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 L o t 15. T h i s o f f e r w a s r e f u s e d by t h e Reinkes, and L o t 1 5 remained v a c a n t and unimproved t o t h e t i m e of t r i a l w i t h Reinkes p a y i n g t h e p r o p e r t y t a x e s . Reinkes commenced a n 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 t e r m i n a t e and f o r f e i t t h e c o n t r a c t f o r deed b e c a u s e o f B i e g e l s ' default. B i e g e l s r a i s e d t h e a f f i r m a t i v e d e f e n s e of b r e a c h o f c o n t r a c t and c o u n t e r c l a i m e d f o r damages t o L o t 1 5 o r f o r i n j u n c t i v e r e l i e f based on R e i n k e s ' b r e a c h of t h e c o n t r a c t f o r deed, i . e . t h e b r e a c h o f t h e r e s t r i c t i v e c o v e n a n t run- n i n g w i t h t h e l a n d , which r e n d e r e d Reinkes u n a b l e t o p e r f o r m t h e c o n t r a c t f o r deed t o convey t o B i e g e l s t h e l o t i n t h e c o n d i t i o n i t was r e p r e s e n t e d t o be when t h e c o n t r a c t was entered into. The D i s t r i c t C o u r t made a c o n c l u s i o n o f law t h a t : "Defendants f a i l e d t o make t i m e l y payment under t h e C o n t r a c t f o r Deed a s t o L o t 1 5 , Block 2, Heyn S u b d i v i s i o n , and w e r e i n d e f a u l t t h e r e u n d e r a s t o L o t 1 5 , 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 . Def e n d a n t s f a i l e d and r e f u s e d t o remedy t h e def a u l t w i t h i n t h e t i m e p r o v i d e d 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 t h e y m i g h t have acq 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 r e a 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 t i m e l y manner. " On March 1 3 , 1979, t h e D i s t r i c t C o u r t e n t e r e d judgment i n f a v o r o f Reinkes and d e n i e d B i e g e l s ' c o u n t e r c l a i m . 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 a d d r e s s t h e threshold i s s u e involved i n t h i s appeal--that i s , where l o t s w i t h i n a l e g a l s u b d i v i s i o n are s o l d p u r s u a n t t o a c o n t r a c t f o r deed, d o e s t h e s e l l e r s ' b r e a c h of a r e s t r i c t i v e c o v e n a n t , o c c u r r i n g p r i o r t o t h e c o n t r a c t e d 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 s e t b a c k r e q u i r e m e n t on s e l l e r s ' a d j a c e n t l o t , e x c u s e t h e buyer from h i s d u t y t o make payment by t h e due d a t e s o t h a t h i s r i g h t t o r e c o v e r damages i s n o t p r e c l u d e d by h i s f a i l u r e t o make s u c h payment? Because o u r answer t o t h a t q u e s t i o n i s i n t h e n e g a t i v e , w e must a f f i r m t h e judgment of t h e D i s t r i c t C o u r t . A p p e l l a n t s c o n t e n d t h a t t h e r e c o r d e d r e s t r i c t i v e coven a n t s w e r e i n c o r p o r a t e d i n t o t h e c o n t r a c t f o r deed between t h e 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 s u b j e c t t o t h o s e p r o v i s i o n s s o t h a t a v i o l a t i o n o f t h e s e t b a c k r e q u i r e m e n t by t h e s e l l e r s was a b r e a c h of c o n t r a c t . While t h e c o n t r a c t f o r deed d i d n o t e x p r e s s l y r e f e r t o t h e d e c l a r a t i o n o f r e s t r i c t i o n s a p p l i c a b l e t o t h e Heyn S u b d i v i s i o n p r e v i o u s l y f i l e d and r e c o r d e d by t h e s e l l e r s , i t d i d make r e f e r e n c e t o t h e r e c o r d e d p l a t of t h e Heyn S u b d i v i s i o n . 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 p r o v i d e d t h a t : "The r e s t r i c t i o n s h e r e i n set f o r t h s h a l l r u n w i t h t h e l a n d and b i n d t h e p r e s e n t owners, t h e i r h e i r s , and a s s i g n s , and a l l p a r t i e s c l a i m i n g by, t h r o u g h o r under them . . ." I t i s u n n e c e s s a r y , however, t o d e c i d e whether o r n o t t h e r e s t r i c t i v e c o v e n a n t s became a p a r t of t h e c o n t r a c t f o r deed between t h e p a r t i e s t o t h i s a p p e a l . W e r e a c h t h i s con- c l u s i o n b e c a u s e even i f we assume t h a t t h e r e s t r i c t i v e c o v e n a n t s were i n c o r p o r a t e d i n t o t h e c o n t r a c t f o r d e e d , t h e p r o m i s e s c o n t a i n e d i n t h e r e s t r i c t i v e c o v e n a n t s a r e independ e n t of t h e o t h e r p r o m i s e s i n t h e c o n t r a c t f o r deed. In p a r t i c u l a r , t h e y a r e i n d e p e n d e n t of t h e promise t o make payment by t h e due d a t e . T h e r e f o r e , R e i n k e s ' b r e a c h of t h e t h i r t y f o o t s e t b a c k r e q u i r e m e n t on t h e i r l o t a d j a c e n t t o t h e o n e b e i n g s o l d , which o c c u r r e d b e f o r e 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 e x c u s e B i e g e l s ' o b l i g a t i o n t o make payment by t h e due d a t e . B i e g e l s c o u l d n o t s t a n d on t h e i r c o n t r a c t f o r deed and c o u n t e r c l a i m 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 w i t h o u t 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 d a t e . 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 c o v e n a n t s a r e contractual rights. S h e r i d a n v. M a r t i n s e n ( 1 9 7 4 ) , 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 c o v e n a n t s c o n t a i n e d i n t h e r e c o r d e d 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 i n c o r p o r a t e d i n t o t h e c o n t r a c t f o r deed by r e f e r e n c e , t h e g o v e r n i n g r u l e i s s t a t e d i n O'Conner v . W h i t e s i t t ( 1 9 4 8 ) , 1 2 1 Mont. 257, 193 P.2d 365, 366: " P l a i n t i f f ' s c l a i m of r i g h t t o have a r e s c i s s i o n o f h i s c o n t r a c t b e c a u s e of d e f e n d a n t ' s removal of a b o u t $75 w o r t h of lumber and b u i l d i n g materi a l s from t h e p r e m i s e s f o r which p l a i n t i f f had c o n t r a c t e d t o pay $5,800 c a n n o t be s u s t a i n e d . T h i s b r e a c h o f agreement by t h e d e f e n d a n t went t o o n l y a v e r y s m a l l p a r t of t h e c o n s i d e r a t i o n It and c o u l d e a s i l y be compensated i n damages. c a n n o t 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 q u o t e d w i t h a p p r o v a l t h e f o l l o w i n g from 1 2 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 e v e r y b r e a c h of a c o n t r a c t o r f a i l u r e exactly t o perform--certainly not 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 r e s c i n d . A b r e a c h which g o e s to o n l y a of t h e - p a r t - - c o n s i ~ e r a t i o n , i s n c i d e n t a land s u---- m a i n o = bordinate t o m of t h - -e c o n t r a c t , and m a y be compensated i n damages d o e s n o t war- - a r e s c i s s i o n - -e c o n t r a c t ; of t h injured h i p - of p a r t y is s t i l l bound t o perform -s- a r t - t h e for the agreement, and h i s on% remedy - - b r e a c h - th he h a c o n s i s t s of -e damages - -s s u f f e r e d t h e r e from. A r e s c i s s i o n i s n o t w a r r a n t e d by a mere b r e a c h of c o n t r a c t n o t s o s u b s t a n t i a l and fundam e n t a l 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 o f 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 p e r 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 rant * t h e f a i l u r e t o p e r f o r m t h e 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 r e n d e r t h e p e r formance of t h e remainder a t h i n g d i f f e r e n t i n s u b s t a n c e from t h a t which was c o n t r a c t e d f o r . ' " (Emphasis a d d e d . ) For s t a t e m e n t s t o t h e same e f f e c t , s e e 17A C.J.S. S344 a t 334: Contracts "When a c o v e n a n t g o e s o n l y t o p a r t o f t h e c o n s i d e r a t i o n on b o t h s i d e s and a b r e a c h may be compensated f o r i n damages, and i t i s o n l y s u b o r d i n a t e and i n c i d e n t a l t o t h e main p u r p o s e of t h e c o n t r a c t , i t i s t o be r e g a r d e d a s a n independent covenant u n l e s s 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. C o n t r a c t s S453 a t 571: "A p a r t y ' s f a i l u r e t o perform a n i n d e p e n d e n t s t i p u l a t i o n of a c o n t r a c t d o e s n o t b a r h i s r i g h t t o r e c o v e r f o r t h e o t h e r p a r t y ' s b r e a c h o r e x c u s e such o t h e r p a r t y from p e r f o r m i n g 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 1 7 Am.Jur.2d C o n t r a c t s 5355 a t 792: ". . . where t h e c o n t r a c t i s e x e c u t o r y on b o t h s i d e s , t h e o b l i g a t i o n o f one o f t h e p a r t i e s t o p e r f o r m f r e q u e n t l y depends on whether t h e mutual promises a r e dependent o r independent. If the p r o m i s e s a r e i n d e p e n d e n t of e a c h o t h e r , a p a r t y must perform h i s p a r t o f t h e c o n t r a c t when t h e t i m e f o r performance h a s a r r i v e d , i r r e s p e c t i v e o f whether t h e o t h e r p a r t y h a s performed h i s obligation. . ." See a l s o Nolan v. Lunsford ( 1 9 4 0 ) , 142 F l a . 671, 196 So. 193, 128 A.L.R. issue--namely, 649, where t h e c o u r t c o n s i d e r e d a s i m i l a r whether o r n o t performance by a vendor of h i s c o v e n a n t t o make improvements was a n e c e s s a r y c o n d i t i o n 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 . In discussing the n a t u r e of d e p e n d e n t and i n d e p e n d e n t c o v e n a n t s , t h e c o u r t stated: "An i n d e p e n d e n t c o v e n a n t i s one which g o e s o n l y t o a p a r t o f t h e c o n s i d e r a t i o n on b o t h s i d e s and a b r e a c h of which may be p a i d 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 circumstances 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 contract 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: ~d4,%44 Chief J u s t i c e # , 'I - / ' Justices

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