STOVALL v WATT

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No. 14712 I N THE SUPREME COURT O T E STATE O M N A A F H F OTN 1979 J A Y STOVALL and JUANITA STOVALL, P l a i n t i f f s and &nts, -vsLILLWWATT, DAN HARDY and FERN HARDY, I t ' D e f e n d a n t s and * ~ & e l l & t s . Appeal from: D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a l D i s t r i c t , Honorable C h a r l e s Luedke, J u d g e p r e s i d i n g . Counsel o f Record: For Appellants: Hibbs, Sweeney and C o l b e r g , B i l l i n g s , Montana Maurice R. C o l b e r g , J r . , a r g u e d , B i l l i n g s , Montana F o r Respondents: Freeman and M a r t i n , H a r d i n , Montana L a u r e n c e R. M a r t i n a r g u e d , H a r d i n , Montana Submitted: Decided: Filed: - .- -- September 1 8 , 1979 4 ~ f2 i 1384 J u s t i c e D a n i e l J. Shea d e l i v e r e d t h e Opinion of t h e Court. Mr. The S t o v a l l s , p l a i n t i f f s below, a p p e a l from a judgment and o r d e r of t h e Big Horn County D i s t r i c t C o u r t d e n y i n g t h e i r r e q u e s t f o r s p e c i f i c performance of an o p t i o n t o p u r c h a s e c l a u s e c o n t a i n e d i n a l e a s e which t h e S t o v a l l s had e n t e r e d i n t o w i t h L i l l i a n I . Watt. Defendant L i l l i a n W a t t a l s o c r o s s - a p p e a l s from a n award t o t h e S t o v a l l s of $9,600 i n damages f o r h e r b r e a c h of agreement t o convey t h e r e a l p r o p e r t y i n v o l v e d . The t r i a l c o u r t d e t e r m i n e d t h a t d e f e n d a n t s Dan M. Hardy and F e r n A. Hardy had s u p e r i o r e q u i t a b l e c l a i m s t o t h e p u r c h a s e o f t h e l a n d i n v o l v e d as a r e s u l t of a l e a s e o p t i o n t o p u r c h a s e agreement which t h e y a l s o had e n t e r e d i n t o w i t h d e f e n d a n t Lillian W a t t . The e s s e n t i a l c o n t e n t i o n o f t h e S t o v a l l s i s t h a t t h e t r i a l c o u r t abused i t s d i s c r e t i o n by n o t g r a n t i n g t h e i r c l a i m f o r s p e c i f i c performance o f t h e o p t i o n t o p u r c h a s e c l a u s e c o n t a i n e d i n a l e a s e d a t e d March 3 , 1969. The p r i m a r y con- t e n t i o n of d e f e n d a n t Watt i n h e r c r o s s - a p p e a l s e e k i n g t o a v o i d damages awarded t o t h e S t o v a l l s , i s t h a t t h e s t o v a i l lease had no i n c e p t i o n i n f a c t and t h a t t h e l e a s e was a l s o s u b j e c t t o a c o n d i t i o n p r e c e d e n t t h a t t h e Hardys v a c a t e t h e l a n d i n v o l v e d , and t h a t t h e Hardys n e v e r d i d v a c a t e t h e l a n d . The problems began w i t h t h e d e a t h o f Edmund A n d r e t t who owned t h e p r o p e r t y i n q u e s t i o n u n t i l h i s d e a t h i n J u n e 1966. A n d r e t t had p r e v i o u s l y used C . D. Wolfe o f Farm and Ranch Management Co. o f B i l l i n g s t o a c t a s h i s a g e n t i n l e a s i n g t h e land involved. Through a c o n t i n u i n g s e r i e s o f l e a s e s t h e Hardys had l e a s e d t h e l a n d from t h e agency s i n c e 1951. The problems began when t h e l e a s i n g agency d e a l t d i r e c t l y w i t h t h e Hardys a f t e r t h e d e a t h of Edmund A n d r e t t b u t where L i l l i a n W a t t d e a l t , through her attorney, p r i m a r i l y , with t h e S t o v a l l s . -2- Lillian Watt, an elderly Seattle, Washington resident, became the owner of the property involved by virtue of a decree of distribution entered on July 18, 1967. was then subject to an existing Hardy lease. The property She retained Missoula attorney, Dwight N. Mason, to handle her affairs concerning the property. During all of the proceedings or transactions in relation to the land, she had never gone to see the land in this state located in Big Horn County. Hardy lease was to expire on March 1, 1968. The Prior to this time, however, Lillian Watt and the Hardys were disputing lease rental payments. For some reason, Lillian Watt believed that the Hardy lease had expired and that the Hardys were in default on rental payments. For this reason, she contacted attorney Mason and asked him to find a new tenant. Unknown to Lillian Watt or to attorney Mason, however, the leasing agency managed by Wolfe, had entered into a renewal lease with the Hardys on March 1, 1968. on November 22, 1969. This lease was recorded The problem became complicated then because attorney Mason had, pursuant to Lillian Watt's instructions, found another tenant for the farmland and entered into a lease and purchase option with the Stovalls. The following circumstances led to the Stovall-Lillian Watt lease option to purchase agreement. Attorney Mason wrote a letter to the father of Jay Stovall and solicited him as a tenant. Jay Stovall's father had died however, and the letter was passed along to Jay Stovall, who was ranching property adjacent to the ~illianWatt property occupied by the Hardys. Jay Stovall and his wife met with attorney Mason in Missoula in early February 1969, and expressed their interest in leasing the property. Mason told the Stovalls t h a t L i l l i a n W a t t would b e r e c e p t i v e t o a n o f f e r t o l e a s e t h e l a n d i n v o l v e d b e c a u s e s h e was t h e n h a v i n g problems w i t h t h e Hardys and d i d n o t want t o c o n t i n u e l e a s i n g t o them. A f t e r r e t u r n i n g home, t h e S t o v a l l s s e n t a w r i t t e n o f f e r f o r lease t e r m s , n e g o t i a t i o n s e n s u e d , and f i n a l l y a t t o r n e y Mason p r e p a r e d a l e a s e d a t e d March 3 , 1969 and L i l l i a n Watt and t h e S t o v a l l s s i g n e d it. T h i s l e a s e was r e c o r d e d on September 22, 1969, a month b e f o r e t h e Hardys r e c o r d e d t h e i r l e a s e from t h e l e a s i n g agency managed by Wolfe. The S t o v a l l l e a s e was f o r a t h r e e y e a r term s t a r t i n g March 3 , 1969 and i t a l s o i n c l u d e d a p r e f e r e n t i a l r i g h t o f renewal and an o p t i o n " t o m e e t t h e p u r c h a s e p r i c e o f f e r e d " i n t h e e v e n t o f any s a l e d u r i n g t h e t e r m o f t h e l e a s e . clause recited t h a t ". . . p o s s e s s i o n Another t h e r e o f t o be g i v e n a s soon as p r e s e n t t e n a n t ( t h e Hardys) v a c a t e s same . . ." The Hardy lease a l s o c o n t a i n e d a n o p t i o n t o p u r c h a s e c l a u s e s i m i l a r t o t h a t contained i n t h e S t o v a l l lease. Although t h e S t o v a l l s knew t h a t t h e Hardys w e r e occupying t h e l a n d a t t o r n e y Mason t o l d them t h a t i f any problem a r o s e a s t o p o s s e s s i o n t h a t h e would e v i c t t h e Hardys and p l a c e t h e S t o v a l l s on t h e l a n d a s the tenants. Problems e r u p t e d a l m o s t immediately because o f t h e two competing l e a s e s and c l a i m s made by t h e r e s p e c t i v e p a r t i e s . Upon r e c e i v i n g a s i g n e d copy o f t h e i r lease t h e S t o v a l l s immediately proceeded t o c l a i m p o s s e s s i o n of t h e l a n d . They r e b u i l t some f e n c e s , opened up g a t e s , and moved t h e i r c a t t l e from a d j o i n i n g l a n d o n t o t h e L i l l i a n Watt p r o p e r t y . his s p a r k e d a c t i o n by t h e Hardys, who w e r e occupying t h e l a n d . They moved t h e c a t t l e o f f t h e p r o p e r t y and l o c k e d t h e g a t e s . These a c t s t r i g g e r e d a series o f communications between a t t o r n e y Mason, t h e Hardys, L i l l i a n W a t t , -4- and Wolfe, t h e manager o f t h e l e a s i n g agency who had s i g n e d t h e lease w i t h t h e Hardys. From t h e s e communications i t w a s l e a r n e d t h a t t h e Hardys w e r e n o t a c t u a l l y i n d e f a u l t on t h e r e n t a l payments, and t h a t t h e Hardys had e n t e r e d i n t o t h e March 1, 1968 renewal l e a s e w i t h a g e n t Wolfe. The Hardys had p a i d t h e r e n t a l money t o a g e n t Wolfe. Wolfe t h e n t r i e d t o s e t t l e t h e r e n t s w i t h L i l l i a n Watt on March 2 1 , 1969, b u t s h e r e j e c t e d h i s o f f e r , r e t u r n e d h i s c h e c k , and t o l d Wolfe t h a t s h e would n o t a c c e p t any r e n t from t h e Hardys f o r 1969. On A p r i l 5 , 1969 L i l l i a n W a t t w r o t e t o a t t o r n e y Mason and t o l d him s h e would n o t r a t i f y t h e Hardy lease. L i l l i a n Watt and a t t o r n e y Mason t h e n s u g g e s t e d a compromise agreement between t h e competing lessees whereby t h e Hardys would be a l l o w e d t o have t h e c r o p l a n d t h r o u g h t h e 1969 c r o p s e a s o n and t h e S t o v a l l s would u s e t h e g r a z i n g l a n d . The S t o - ~ a l l s i d n o t need t h e g r a s s u n t i l f a l l , and t h e y f e l t d t h a t under customary p r a c t i c e t h e Hardys would, i n any e v e n t , be e n t i t l e d t o t h e 1969 c r o p which t h e Hardys had p l a n t e d . I t a p p e a r s however, t h a t n e i t h e r t h e Hardys n o r t h e S t o v a l l s e v e r s p e c i f i c a l l y a g r e e d t o t h i s compromise arrangement. In any e v e n t , t h e a t t i t u d e o f L i l l i a n W a t t toward t h e Hardys changed markedly a f t e r s h e d e c i d e d t o l e t t h e Hardys s t a y on t h e p r o p e r t y t h r o u g h 1969. Although s h e a p p a r e n t l y b e l i e v e d a t t h a t t i m e t h a t t h e Watt a c c e p t e d t h e Hardys d i d n o t have a v a l i d lease, ~ i l l i a n g r a z i n g r e n t a l from t h e Hardys. I n September 1969, L i l l i a n Watt d e c i d e d t o s e l l t h e p r o p e r t y , and i n J u n e 1970, s h e s o l d t h e p r o p e r t y t o t h e Hardys. A s a r e s u l t of t h i s s a l e t o t h e Hardys, t h e S t o v a l l s f i l e d s u i t s e e k i n g s p e c i f i c performance from L i l l i a n W a t t , and t h a t t h e y w e r e e n t i t l e d t o p u r c h a s e t h e l a n d r a t h e r t h a n t h e Hardys. I n e n t e r i n g i t s o r d e r denying s p e c i f i c performance t h e t r i a l c o u r t d e t e r m i n e d t h a t L i l l i a n Watt had r e l i e d i n good - 5- f a i t h on a t t o r n e y Mason's a d v i c e , and t h a t o u t o f t h i s r e l i a n c e flowed a series o f f a c t u a l and l e g a l misapprehensions. The t r i a l c o u r t d e c i d e d t h a t under t h e t o t a l c i r - cumstances of t h e c a s e , e q u i t y would n o t p e r m i t t h e S t o v a l l s t o o b t a i n t h e p r o p e r t y by s p e c i f i c performance a g a i n s t L i l l i a n W a t t , and t h a t damages awarded a g a i n s t L i l l i a n Watt, would, under t h e c i r c u m s t a n c e s , be t h e p r o p e r remedy. 27-1-415(4), MCA, Under s e c t i o n s p e c i f i c performance w i l l n o t be e n f o r c e d a g a i n s t a p a r t y t o a c o n t r a c t i f h i s a s s e n t was g i v e n under t h e i n f l u e n c e of mistake, misapprehension, o r s u r p r i s e . S p e c i f i c performance, w i l l n o t , f u r t h e r m o r e , be g r a n t e d i n a s i t u a t i o n i n which t h e t o t a l c i r c u m s t a n c e s d e m o n s t r a t e t h a t i t would produce a h a r d s h i p o r i n j u s t i c e . S e i f e r t v. S e i f e r t ( 1 9 7 7 ) , 173 Mont. 501, 504, 568 P.2d 155, 157. H e r e t h e Hardys w e r e n o t d e l i n q u e n t on t h e i r l e a s e payments and always b e l i e v e d t h e y had a v a l i d l e a s e . Lillian Watt a c c e p t e d t h e Hardys' r e n t a l payments b e f o r e s h e d e c i d e d t o s e l l t h e property, although she c l a i m s she d i d n o t thereby r a t i f y t h e Hardy l e a s e p r e v i o u s l y e x e c u t e d by a g e n t Wolfe. A t t o r n e y Mason s e n t l e t t e r s t o b o t h t h e Hardys and t h e S t o v a l l s s o l i c i t i n g o f f e r s f o r t h e p u r c h a s e of t h e p r o p e r t y , and t h e Hardys responded by making an o f f e r t o p u r c h a s e t h e p r o p e r t y . T h i s s a l e w a s mnsl-m.ated by r e c o r d i n g a deed on J u n e 3 , 1970. To g r a n t s p e c i f i c performance t o t h e S t o v a l l s would be t o d e p r i v e t h e Hardys o f p r o p e r t y which t h e y had c o n t i n u o u s l y and l e a s e d , farmed and o p e r a t e d s i n c e t h e e a r l y 1 9 5 0 ' ~ ~ t h e n l a t e r decided t o purchase. The t r i a l c o u r t made no f i n d i n g s t h a t t h e Hardys w e r e o p e r a t i n g ir?. bad f a i t h . There can be no d o u b t t h a t s p e c i f i c performance g r a n t e d t o t h e S t o v a l l s would work a h a r s h r e s u l t upon t h e Hardys who w e r e a c t u a l o c c u p a n t s of t h e l a n d f o r many y e a r s . Nor can w e i g n o r e t h e f a c t t h a t L i l l i a n Watt had s u b s t a n t i a l l y changed h e r -6- p o s i t i o n by conveying t h e p r o p e r t y t o t h e Hardys and t h e r e f o r e s h e was i n no p o s i t i o n t o convey t h e l a n d t o t h e S t o v a l l s . W e c a n n o t s a y , moreover, t h a t t h e d e n i a l o f S t o v c l l s r c q u e s c f o r s p e c i f i c performance o p e r a t e s as h a r s h l y upon them. They n e v e r had p o s s e s s i o n of t h e p r o p e r t y and made no l e a s e r e n t a l payments under t h e l e a s e t h e y had s i g n e d w i t h Lillian W a t t . Although t h e S t o v a l l s l a t e r w r o t e a l e t t e r t o L i l l i a n Watt and a t t o r n e y Mason s t a t i n g t h a t t h e y would m e e t t h e $20,000 o f f e r e d by t h e Hardys and made a r r a n g e m e n t s f o r s u c h f i n a n c i n g , t h e y made no payments toward a p u r c h a s e p r i c e . I n b a l a n c i n g t h e e q u i t i e s i t i s c l e a r t h a t t h e t o t a l circums t a n c e s f a v o r t h e r e s u l t r e a c h e d h e r e by t h e t r i a l c o u r t . W e note furthermore, t h a t t h e t r i a l c o u r t awarded damages a g a i n s t L i l l i a n W a t t f o r h e r b r e a c h of t h e agreement w i t h t h e S t o v a l l s , and t h e S t o v a l l s had t h u s been made whole. I n c o n t e n d i n g t h a t s h e s n o u l d n o t have t o r e s p o n d i n damages t o t h e S t o v a l l s , L i l l i a n Watt c o n t e n d s t h a t t h e S t o v a l l l e a s e w a s s u b j e c t t o a condition precedent t h a t t h e Hardys v a c a t e t h e p r o p e r t y , which e v e n t n e v e r o c c u r r e d . She t h u s c o n t e n d s t h a t t h e lease d i d n o t i n f a c t commence and t h u s no l i a b i l i t y c a n a c c r u e f o r any b r e a c h o f t h e agreement p e r m i t t i n g t h e S t o v a l l s t h e r i g h t t o m e e t t h e purchase p r i c e o f f e r e d by anyone else. Such a c o n t e n t i o n , however, f l i e s i n t h e f a c e o f t h e c l e a r Lmguage o f t h e l e a s e i t s e l f which p r o v i d e d t h a t t h e t e r m w a s t o s t a r t "Three Years from and a f t e r t h e s a i d 3 r d day o f March, 1969." H e r contention i s , moreover, i n c o n s i s t e n t w i t h t h e c i r c u m s t a n c e s s u r r o u n d i n g i t s e x e c u t i o n and w i t h h e r c o n d u c t i n r e l a t i o n t o t h e l e a s e a f t e r i t s execution. A t t h e t i m e she signed t h e l e a s e with t h e S t o v a l l s , L i l l i a n Watt and a t t o r n e y Mason had u n f r i e n d l y f e e l i n g s toward t h e Hardys, and it i s c l e a r t h e y d i d n o t want them t o c o n t i n u e -7- i n possession. I n d e e d , u n t i l l i t i g a t i o n a p p e a r e d imminent, L i l l i a n W a t t c o n s i s t e n t l y o p e r a t e d on t h e a s s u m p t i o n t h a t t h e S t o v a l l l e a s e was v a l i d and s h e and h e r a t t o r n e y had made e f f o r t s t o p l a c e t h e S t o v a l l s i n p o s s e s s i o n . Further- more, n e i t h e r s h e n o r h e r a t t o r n e y e v e r contended t h a t t h e S t o v a l l l e a s e was i n v a l i d a t t h e t i m e when t h e S t o v a l l s w e r e p r e s s i n g h e r and a t t o r n e y Mason f o r i n f o r m a t i o n on o t h e r b i d s s o t h a t t h e S t o v a l l s c o u l d d e c i d e whether o r n o t t o m e e t any b i d s t h a t had been made. A t t o r n e y Mason f i r s t p u t f o r t h t h e t h e o r y t h a t t h e S t o v a l l l e a s e was c o n d i t i o n e d upon t h e Hardys v a c a t i n g t h e p r o p e r t y o n l y a f t e r t h e s a l e t e r m s t o t h e Hardys had been a g r e e d upon and a t t o r n e y s f o r t h e Hardys had made a r e l e a s e of t h e S t o v a l l l e a s e , a t i t l e requirement. The t r i a l c o u r t s p e c i f i c a l l y found t h a t t h e S t o v a l l l e a s e w i t h L i l l i a n W a t t was n o t c o n d i t i o n e d upon t h e Hardys f i r s t v a c a t i n g t h e property. S u b s t a n t i a l c r e d i b l e evidence supports t h i s finding. Under s e c t i o n 27-1-314, MCA, i f t h e breaching p a r t y o p e r a t e s i n bad f a i t h , t h e measure of damages i s t h e d i f f e r e n c e between t h e a g r e e d p r i c e and t h e v a l u e of t h e e s t a t e a t t h e t i m e of t h e b r e a c h , p l u s e x p e n s e s p r o p e r l y incurred i n preparing t o e n t e r t h e land. The e v e n t s h e r e c l e a r l y d e m o n s t r a t e t h a t L i l l i a n Watt, d i r e c t l y , and i n d i r e c t l y t h r o u g h h e r a t t o r n e y , a c t e d i n a f a s h i o n c o n s t i t u t i n g bad f a i t h . By September 1969, L i l l i a n W a t t had d e c i d e d t o s e l l t h e p r o p e r t y and had informed a t t o r n e y Mason of h e r d e c i s i o n . By t h i s t i m e s h e had a l r e a d y s i g n e d t h e l e a s e agreement w i t h t h e Stovalls. A t t o r n e y Mason's l e t t e r t o t h e S t o v a l l s on September 1 5 , 1969, informed them t h a t t h e p r o p e r t y was f o r s a l e and s o l i c i t e d an o f f e r . L a t e r , on October 1 6 , 1969, t h e S t o v a l l s s e n t a l e t t e r t o L i l l i a n Watt reminding h e r of t h e l e a s e agreement, t h e i r r i g h t t o t a k e p o s s e s s i o n , and t h e o p t i o n t o p u r c h a s e p r o v i s i o n i n t h e lease. In t h i s respect the S t o v a l l s r e q u e s t e d i n f o r m a t i o n a s t o any o f f e r which L i l l i a n Watt r e c e i v e d s o t h a t t h e S t o v a l l s c o u l d d e c i d e w h e t h e r o r n o t t o m e e t t h e o f f e r and e x e r c i s e t h e i r r i g h t s under t h e lease. I n r e s p o n s e L i l l i a n Watt w r o t e t o t h e S t o v a l l s on October 27, 1969 and t o l d them t h a t s h e d i d n o t know w h e t h e r a t t o r n e y Mason had r e c e i v e d any b i d from t h e Hardys, b u t s h e a s s u r e d t h e S t o v a l l s t h a t t h e y would most c e r t a i n l y be c o n s u l t e d and g i v e n a chance t o m e e t t h e b i d . Nothing t r a n s p i r e d u n t i l J a n u a r y 1970 when a t t o r n e y Mason w r o t e i d e n t i c a l l e t t e r s t o t h e S t o v a l l s and t h e Hardys s o l i c i t i n g o f f e r s f o r t h e property. The H a r d y ' s a t t o r n e y responded w i t h an o f f e r o f $20 p e r a c r e , making $19,200 t h e t o t a l o f f e r . The S t o v a l l s responded by t e l e p h o n i n g b o t h L i l l i a n Watt and a t t o r n e y Mason and asked t o d e t e r m i n e what b i d t h e y would need t o m e e t i n o r d e r t o e x e r c i s e t h e i r o p t i o n under t h e l e a s e agreement. But n e i t h e r L i l l i a n Watt n o r a t t o r n e y Mason gave a f o r t h r i g h t answer t o t h e S t o v a l l s . L i l l i a n Watt r e f e r r e d t h e S t o v a l l s t o a t t o r n e y Mason and a t t o r n e y Mason r e f e r r e d t h e S t o v a l l s t o Lillian W a t t . A t t h i s point, t h e S t o v a l l s could not o b t a i n anything d e f i n i t e . Sometime l a t e r , L i l l i a n Watt mentioned a f i g u r e of $20,000 t o t h e S t o v a l l s , and i n r e s p o n s e t h e S t o v a l l s w r o t e b o t h L i l l i a n W a t t and a t t o r n e y Mason a s k i n g f o r t h e e x a c t f i g u r e which t h e y had t o meet i f t h e y w e r e t o e x e r c i s e t h e i r option. N e i t h e r L i l l i a n W a t t ror a t t o r n e y Mason responded t o the Stovalls' request. Furthermore, a t t h e t i m e t h e S t o v a l l s had w r i t t e n t h i s l e t t e r , a t t o r n e y Mason had a l r e a d y d e c i d e d t o a c c e p t t h e Hardy o f f e r and i n f a c t t h e a t t o r n e y f o r t h e Hardys had a l r e a d y t e n d e r e d a 10 p e r c e n t down payment and a -9- c o n t r a c t f o r deed t o a t t o r n e y Mason. Mason, however, never disclosed t h i s information t o t h e S t o v a l l s although it d o e s a p p e a r t h a t h e t o l d t h e S t o v a l l s of t h e $20,000 o f f e r made by t h e Hardys. A s a r e s u l t o f t h e S t o v a l l s l e a r n i n g of t h e $20,000 o f f e r by t h e Hardys, t h e S t o v a l l s on March 27, 1970 s e n t l e t t e r s t o b o t h L i l l i a n Watt and a t t o r n e y Mason a d v i s i n g them t h a t t h e y would m e e t t h i s $20,000 b i d and e x e r c i s e t h e i r o p t i o n under t h e lease. But n e i t h e r L i l l i a n Watt n o r a t t o r n e y Mason responded t o t h e l e t t e r s . F u r t h e r m o r e , L i l l i a n Watt and a t t o r n e y Mason f a i l e d t o r e t u r n numerous phone c a l l s t o them by t h e S t o v a l l s i n r e l a t i o n t o t h e p r o p e r t y i n v o l v e d . B e f o r e t h e Hardys s i g n e d t h e p u r c h a s e agreement, t h e i r a t t o r n e y examined t h e a b s t r a c t s and found a d e f e c t i n t i t l e , namely, t h e S t o v a l l lease w i t h t h e o p t i o n t o p u r c h a s e p r o v i s i o n , which had been r e c o r d e d on September 2 2 , 1969. As a r e s u l t of t h i s , L i l l i a n Watt s i g n e d a l e t t e r of i n d e m n i t y t o p r o t e c t t h e Hardys from any damages which might f l o w a s a r e s u l t of any a c t i o n b r o u g h t by t h e S t o v a l l s i n r e l a t i o n t o t h e property involved. L i l l i a n W a t t a l s o a g r e e d t o pay any l e g a l f e e s i n c u r r e d i n r e l a t i o n t o such a c t i o n b r o u g h t by the Stovalls. W e cannot say, i n l i g h t of a l l t h e s e circumstances, t h a t L i l l i a n W a t t ' s c o n d u c t , b o t h p e r s o n a l l y , and t h r o u g h h e r a t t o r n e y , was less t h a n bad f a i t h i n r e l a t i o n t o t h e dealings with the Stovalls. The damages awarded h e r e a r e c l e a r l y w i t h i n t h e l i m i t s o f s e c t i o n 27-1-314, simple process. MCA. Damages w e r e e s t a b l i s h e d by a L i l l i a n W a t t s o l d t h e 960 a c r e s t o t h e Hardys a t a p r i c e o f $20 p e r a c r e . J o e Cormier, a l o c a l r a n c h e r f a m i l i a r w i t h t h e market c o n d i t i o n s f o r l a n d s a l e s , t e s t i f i e d t h a t t h e L i l l i a n Watt l a n 2 was c o n s e r v a t i v e l y w o r t h -10- $30 an a c r e . Cormier had made a s a l e of h i s own r a n c h l a n d a t a b o u t t h e s a m e t i m e as L i l l i a n W a t t s o l d h e r p r o p e r t y t o t h e Hardys. Cormier r e c e i v e d a p r i c e of $35 p e r a c r e f o r comparable l a n d , b u t t h a t was i n c o n j u n c t i o n w i t h a r a n c h s a l e i n v o l v i n g a l a r g e q u a n t i t y of deeded l a n d , p l u s l e a s e s . The t r i a l c o u r t found t h a t t h e L i l l i a n Watt p r o p e r t y w a s r e a s o n a b l y w o r t h $30 p e r a c r e . There i s no r e c o r d , however, of any e x p e n s e s i n c u r r e d by t h e S t o v a l l s p r e p a r a t o r y t o entering t h e land t o take possession. t h a t one-half There i s t e s t i m o n y m i l e o f f e n c e was r e b u i l t , b u t no a t t e m p t was made t o i t e m i z e t h e c o s t s o r e x p e n s e s s o i n c u r r e d . I t i s c l e a r , t h e r e f o r e , t h a t t h e measure of damages i s ($30) t h e d i f f e r e n c e between t h e v a l u e p e r a c r e / a s found by t h e t r i a l ($20) c o u r t , and t h e a c t u a l c o n t r a c t p r i c d , which i s $10 p e r a c r e . A c c o r d i n g l y , t h e t r i a l c o u r t w a s c o r r e c t i n e n t e r i n g judgment a g a i n s t L i l l i a n Watt f o r t h e amount o f $9,600 and c o s t s . The judgment o f 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 . W e Concur: Chief J u s t i c e u Justices Justice John C. Sheehy dissenting: I concur in part and dissent in part from the foregoing opinion. The statute under which the District Court granted the the judgment in the sum of $9,600 to/Stovalls was section 17-306, R.C.M. 1947, now section 27-1-314, MCA, which provides: "The detriment caused by the breach of an agreement to convey an estate in real property is deemed to be the price paid, and the expenses properly incurred in examining the title and preparing the necessary papers, with interest thereon; but adding thereto, - - -of bad in case faith, the difference between the price agreed to be paid and the value of the estate agreed to be conveyed, at the time of the breach, and the expenses properly incurred in preparing to enter upon the land." (Emphasis added.) The District Court confined itself to that statute in determining damages. When one examines the language of section 27-1-314, MCA, above, one sees that damages thereunder can take two forms and two determinations: (1) a return of monies paid and expenses incurred in document preparation; and, (2) if bad faith - present the difference between the is price agreed upon and the value of the estate agreed to be conveyed at the time of the breach. Under the first portion of section 27-1-314, MCA, the District Court found that no damages had been proved, since no purchase price had been paid and there was no evidence relating to document preparation or other expenses. In con- nection with the second determination, the District Court found bad faith on the part of Lillian Watt, and on that basis awarded the damages stated above. The District Court found that the conduct of Lillian Watt in refusing to recognize the option agreement as having any validity was bad faith "admittedly because of the guidance of [her attorney]." The District Court further found that -12- Lillian Watt was not guilty of fraud or misrepresentation, and it did not find that she had unclean hands as against the Stovalls. The controlling element as far as the District Court is concerned is that Lillian Watt, through the advice of her counsel, took the position that the Stovall lease was not a binding lease because the condition precedent, "possession thereof to be given as soon as present tenant vacates same . . ." never occurred. The District Court found that Lillian Watt's position that the lease was not binding until the possession transferred was not asserted at the time the Stovalls were pressing Mason and Lillian Watt for information on the bids so they could exercise the option, and that "it was not until after the sale to the Hardys had been agreed upon and Hardys attorney made a release of the Stovall lease a title requirement, that Mason put forth the theory that the Stovall lease was conditioned upon Hardy vacating." This determination by the District Court however, does not square with the written evidence of the case. In the time when attorney Mason was soliciting bids from the Hardys and the Stovalls, between January 1970 and March 27, 1970, the latter date being when the Stovalls indicated they would meet the $20,000 bid, attorney Mason solicited the bids from both parties to avoid "cutthroat action". It also appears that when the facts of the dual leases became known to all the parties, that the attorney wrote both to Hardy and Stovall suggesting that they share the lease, one to take the lease for farm purposes, and the other to have the grazing privileges after the farming was completed in the fall. a year before the Indeed, on April 5, 1969, nearly - - sale - -to Hardys was consummated, Lillian Watt had written to her attorney "the lease to the Stovalls was contingent upon the Hardys moving off the place, and no money has changed hands . . ." I think the evidence is clear that the contention -13- that Stovall had a conditional lease was not an afterthought on the part of Lillian Watt, but her view of the legal status of the Stovall lease all along. While such legal position may have been mistaken, when we consider her actions from the aspect of bad faith, she cannot be characterized as a miscreant. This brings us to a consideration of what constitutes "bad faith" in connection with an award of damages under section 27-1-314, MCA. It is a term that cannot be defined with scientific precision. It has been held that "good faith" is that ordinarily exhibited by a seller who is unable to perform through no fault of his own; while "bad faith" is that s.hown by a seller who refuses to perform though able to do so. Charles County Broadcasting Co., Inc. v. Meares (Md. 1973), 311 A.2d 27, 31. As applied to an insurer under an insurance policy it is said that "bad faith" embraces more than negligence and imports dishonest purpose or conscious wrongdoing. Simpson v. Motorists Mutual Insurance Company (7th Cir. 1974), 494 ~ . 2 d 850, 853. Cal.2d 499, Although in Rasmussen v. Moe (1956), 1381 292 P.2d 226, 229, it was held that the negligence of a vendor which put him in a position of being unable to perform his contract was sufficient to show bad faith, it has also been held in California that in general bad faith extends beyond fraud or dishonesty and embraces unfair dealings; it often denotes a deliberate refusal to perform without just or reasonable cause. County of Inyo v. City of Los Angeles (Cal. 1978), 144 Cal.Rptr. 71, 77, 78 Cal.3d 82. A refusal to perform without just cause or excuse is sufficient to constitute bad faith according to Brandolino v. Lindsay (Cal. 1969), 75 Cal.Rptr. 56, 60, 269 Cal.2d 319. I would hold that before bad faith may be found as to a vendor who refuses to perform an agreement to convey real estate, such bad faith must be based upon some motive of self-interest or ill will toward the other party. lacking entirely here. fited Lillian Watt. Those elements are The refusal to perform has not bene- In fact, the evidence indicates that the property which she agreed to sell had a value at the time of the trial of $157,000. While that is not a factor to be considered, since section 27-1-314, MCA requires the value to be determined as of the time of the breach, it does indicate that she was not motivated by self profit or self-interest in refusing to convey the property to Stovalls. Nor can it be said from the evidence that her decision was based upon ill will toward Stovall. She made her decision apparently because she recognized that the Hardys had farmed her properties since the 1950's and had acted in good faith in making their lease payments and procuring a new lease from the agent of her predecessor in ownership. Of course, she had received no monies of any kind under the Stovall lease. Therefore since her actions do not constitute bad faith in the premises, the award of damages against her on that ground should be reversed. Nothing I say here should be taken to mean that in a proper case a prospective vendee or option holder is precluded from recovering damages not only under section 27-1-314, MCA, but also under section 27-1-311, MCA. Section 27-1-311 is the general statute on the measure of damages for breach of contract, and incorporates the ancient principle of Hadley v. Baxendale (1854), 9 Exch. 341, 156 Eng. Reprint 145; Laas v. Mont. Hwy. Comm'n. et al. (1971), 157 Mont. 121, 131, 483 P.2d 699. The general rule is that the measure of damages in a contract breach is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby or which in the ordinary course of things will be likely to result therefrom. necessarily exclusive. 387, 517 P.2d 711. Section 27-1-314, MCA, is not Wiseman v. Holt (1973), 163 Mont. But this case was tried under the theory that extra damages were recoverable on the ground of bad faith and on that ground I would determine that the award of damages against Lillian Watt must fall. Accordingly, I concur in the majority opinion that specific performance is not applicable here but I dissent to the affirmance of the judgment against Lillian Watt in favor of the Stovalls. ................................ Justice

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