RICKETT v DOZE

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No. 14882 IN THE SUPREME COURT OF THE STATE OF MONTANA 1979 EDWARD R. RICKETT and LORRAINE A. RICKETT, husband and wife, Plaintiffs and Respondents, VS. KENNETH M. DOZE et al., Defendants and Appellants. Appeal from: District Court of the Thirteenth Judicial District, Honorable C. B. Sande, Judge presiding. Counsel of Record: For Appellants: Beiswanger and Jarussi, Billings, Montana Gary L. Beiswanger argued, Billings, Montana For Respondents: Joseph P. Hennessey argued, Billings, Montana Submitted: Decided : Filed: 3Fp 7 November 6, 1979 M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e Court. Respondents i n i t i a t e d t h i s a c t i o n i n D i s t r i c t C o u r t , 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 , S t i l l w a t e r County, t h e Honorable C . B. Sande p r e s i d i n g . Respondents b r o u g h t t h e action t o enforce a c o n t r a c t entered i n t o with appellants. ~ p p e l l a n t sa p p e a l t h e judgment o f t h e D i s t r i c t C o u r t e n t e r e d i n J u n e 1979 awarding r e s p o n d e n t s $25,000.00 on t h e c o n t r a c t , $4,452.60 i n i n t e r e s t , and $5,330.23 i n a t t o r n e y f e e s . On March 26, 1973, a p p e l l a n t s Kenneth and V i r g i n i a Doze, a s s e l l e r s , and r e s p o n d e n t Edward R i c k e t t , a s b u y e r , e n t e r e d i n t o a c o n t r a c t f o r deed. The deed c o v e r e d some 344 a c r e s o f r e a l p r o p e r t y l o c a t e d i n S t i l l w a t e r County, Montana. The p u r c h a s e p r i c e o f t h e p r o p e r t y was $330,000. t r a c t p r o v i d e d f o r a down payment of $75,000. The con- Of t h i s amount, $25,000 w a s p a i d on t h e e x e c u t i o n on t h e c o n t r a c t w i t h t h e r e m a i n i n g $50,000 t o g e t h e r w i t h i n t e r e s t a t 6 p e r c e n t t o be p a i d on o r b e f o r e March 1 5 , 1974. The f i r s t a n n u a l i n s t a l l m e n t under t h e c o n t r a c t was a l s o due on March 1 5 , 1974. The 1973 c o n t r a c t c a l l e d f o r t h e Dozes t o e x e c u t e a w a r r a n t y deed conveying t h e p r o p e r t y t o R i c k e t t i n f e e s i m p l e f r e e o f a l l l i e n s and encumbrances. The c o n t r a c t a l s o p r o v i d e d t h a t R i c k e t t would b e e n t i t l e d t o a p a r t i a l deed r e l e a s e of t e n o r more a c r e s of t h e l a n d when ~ i c k e t t had p a i d t h e Dozes enough on t h e t o t a l p u r c h a s e p r i c e t o e s t a b l i s h a r e l a t i o n s h i p of $1000 p a i d f o r e a c h a c r e t o b e released. R i c k e t t took p o s s e s s i o n of t h e p r o p e r t y under t h e t e r m s of t h e c o n t r a c t . H e d i d n o t , however, make any of t h e f u r t h e r payments c a l l e d f o r i n t h e c o n t r a c t . On March 22, 1 9 7 4 , t h e Dozes s e n t R i c k e t t a n o t i c e o f d e f a u l t . Rickett f a i l e d t o cure the d e f a u l t within the thirty-day period provided i n t h e c o n t r a c t . C o n s e q u e n t l y , t h e Dozes e x e r c i s e d t h e i r a c c e l e r a t i o n o p t i o n and d e c l a r e d t h e e n t i r e o u t s t a n d i n g balance of t h e c o n t r a c t w i t h accrued i n t e r e s t immediately due. I n a l e t t e r d a t e d A p r i l 25, 1 9 7 4 , and s e r v e d o n R i c k e t t i n May 1974, t h e Dozes n o t i f i e d R i c k e t t o f t h e d e f a u l t and t e r m i n a t i o n . The n o t i c e p r o v i d e d t h a t i f t h e e n t i r e amount owing was n o t p a i d w i t h i n 60 d a y s , t h e Dozes would c o n s i d e r t h e c o n t r a c t t e r m i n a t e d and r e t a k e p o s s e s s i o n of t h e property. R i c k e t t d i d n o t pay t h e amount owing. On A p r i l 1 9 , 1974, R i c k e t t s e n t t h e Dozes a l e t t e r demanding t h e p a r t i a l r e l e a s e c a l l e d f o r i n t h e c o n t r a c t . The Dozes d i d n o t r e s p o n d . On J u n e 26, 1 9 7 4 , R i c k e t t s e n t t h e Dozes a n o t i c e o f d e f a u l t f o r f a i l u r e t o comply w i t h t h e deed r e l e a s e p r o v i s i o n s of t h e c o n t r a c t . The Dozes con- t i n u e d t o i g n o r e R i c k e t t ' s r e q u e s t f o r t h e deed r e l e a s e . The Dozes c o n t e n d t h e y d i d n o t e x e c u t e t h e r e l e a s e b e c a u s e of Rickett's default. R i c k e t t contends t h e r e l e a s e s w e r e n o t executed because o f a mortgage on t h e p r o p e r t y preventi n g t h e Dozes from p a s s i n g c l e a r t i t l e t o t h e p r o p e r t y . The F i r s t C i t i z e n s Bank o f B i l l i n g s d i d h o l d a $60,000 m o r t g a g e on t h e property. A f t e r t h i s p e r i o d o f r e c i p r o c a l n o t i c e s and demands, the p a r t i e s entered i n t o negotiations t o resolve t h e i r differences. On August 1, 1974, R i c k e t t and h i s w i f e , r e s p o n d e n t L o r r a i n e R i c k e t t , and t h e Dozes e x e c u t e d a new contract f o r the same property. Under t h e new c o n t r a c t , t h e Dozes a g r e e d t o pay t h e R i c k e t t s 25 p e r c e n t o f any f u t u r e s a l e s o f t h e p r o p e r t y n o t t o e x c e e d $25,000. In return R i c k e t t a g r e e d t o (1) w a i v e a n y r i g h t s h e had i n t h e f o r m e r c o n t r a c t f o r deed, ( 2 ) d e l i v e r immediate p o s s e s s i o n o f t h e p r o p e r t y t o t h e Dozes, ( 3 ) pay $530.50 f o r p a s t d u e i n v o i c e s f o r i n s u r a n c e premiums, h o r s e s and s a d d l e s , ( 4 ) pay $500 i n damages, and ( 5 ) w a r r a n t t h a t a l l l i e n s on t h e p r o p e r t y c r e a t e d by R i c k e t t would b e removed w i t h i n t h i r t y d a y s o f t h e agreement. The Dozes had s o l d a l l t h e l a n d i n v o l v e d by J a n u a r y 1978. They r e f u s e d , however, t o pay t h e R i c k e t t s t h e $25,000 a s p r o v i d e d i n t h e a g r e e m e n t o f August 1, 1974. The R i c k e t t s i n i t i a t e d t h i s a c t i o n t o e n f o r c e t h e 1974 contract. A n o n j u r y t r i a l was h e l d on May 22, 1979. From a judgment i n f a v o r o f t h e R i c k e t t s , t h e Dozes a p p e a l . The s o l e i s s u e o n a p p e a l i s w h e t h e r t h e 1974 c o n t r a c t w a s s u p p o r t e d by c o n s i d e r a t i o n . T h i s c a s e i n v o l v e s t h e a p p l i c a t i o n o f o n e o f two b a s i c r u l e s o f c o n t r a c t law. I t i s hornbook law t h a t a p r o m i s e t o perform a n e x i s t i n g l e g a l o b l i g a t i o n does n o t c o n s t i t u t e consideration f o r a contract. 1 7 Am.Jur.2d C o n t r a c t s 8119, a t 465; Heckman and S h e l l v . Wilson ( 1 9 7 1 ) , 1 5 8 Mont. 59, 487 P.2d 1 1 4 1 , 1147. 47, It i s equally well-established t h a t the relinquishment of a l e g a l o r contract r i g h t i s s u f f i c i e n t consideration t o support a contract. 1 7 Am.Jur.2d C o n t r a c t s 9109, a t 455; S u n b u r s t O i l and Gas Company v . N e v i l l e ( 1 9 2 7 ) , 79 Mont. 550, 564, 257 P . 1 0 1 6 , 1020. To r e s o l v e t h e problem i n t h e c a s e a t b a r , w e must d e t e r m i n e which o f t h e above r u l e s a p p l y . I f t h e 1974 c o n t r a c t merely r e q u i r e d R i c k e t t t o perform h i s o b l i g a t i o n s u n d e r t h e 1973 c o n t r a c t , t h e second c o n t r a c t i s v o i d f o r lack of consideration. I f , however, R i c k e t t r e l i n q u i s h e d some c o n t r a c t u a l r i g h t s when h e and h i s w i f e e n t e r e d i n t o t h e second c o n t r a c t , t h e waiver c o n s t i t u t e d c o n s i d e r a t i o n f o r t h e 1974 agreement. The 1974 c o n t r a c t would t h u s b e enforceable. Looking t o t h e f a c t s , R i c k e t t i n i t i a l l y v i o l a t e d t h e t e r m s o f t h e 1973 c o n t r a c t by f a i l i n g t o pay t h e b a l a n c e of t h e down payment o r t h e f i r s t a n n u a l payment when due on March 1 5 , 1974. The Dozes took a p p r o p r i a t e s t e p s under t h e d e f a u l t provisions of t h e f i r s t c o n t r a c t t o terminate R i c k e t t ' s r i g h t s under t h e c o n t r a c t . n o t i c e of t h e d e f a u l t i n May 1974. Rickett received f i n a l H i s r i g h t s under t h e c o n t r a c t terminated 60 days l a t e r . Meanwhile, on A p r i l 1 9 , 1974, R i c k e t t r e q u e s t e d t h e Dozes t o e x e c u t e a p a r t i a l deed a s r e q u i r e d by t h e 1973 contract. The Dozes, f o r whatever r e a s o n , f a i l e d t o e x e c u t e t h e deed r e l e a s e . T h i s p u t t h e Dozes i n d e f a u l t under t h e t e r m s of t h e f i r s t c o n t r a c t . Thus, on August 1, 1974, when t h e p a r t i e s e x e c u t e d t h e second c o n t r a c t , b o t h had d e f a u l t e d on t h e f i r s t . I n para- g r a p h 6 of t h e 1974 c o n t r a c t , t h e R i c k e t t s and t h e Dozes agree that: ". . . t h e p a r t i e s h e r e t o and e a c h of them do h e r e b y m u t u a l l y r e l e a s e and d i s c h a r g e t h e o t h e r party, t h e i r h e i r s , executors, administrators, and a s s i g n s , from any and a l l l i a b i l i t y and damages w h a t s o e v e r , i n any way, r e l a t e d t o s a i d c o n t r a c t f o r deed d a t e d March 1 5 , 1973 . . ." Under t h i s c l a u s e o f t h e second c o n t r a c t , t h e Dozes a g r e e d n o t t o h o l d R i c k e t t l i a b l e f o r h i s b r e a c h of t h e 1973 contract. The c l a u s e a l s o p r o h i b i t s R i c k e t t from s u i n g t h e Dozes f o r damages f o r n o t r e l e a s i n g a p o r t i o n of t h e cont r a c t property. Both p a r t i e s r e l i n q u i s h e d l e g a l r i g h t s i n e x e c u t i n g t h e 1974 c o n t r a c t . Under t h e second r u l e s e t o u t above, b o t h p a r t i e s gave c o n s i d e r a t i o n f o r t h e second contract. The D i s t r i c t C o u r t , t h e r e f o r e , a c t e d p r o p e r l y i n enforcing the contract. Affirmed. W e concur: a CQief , J u s~i c ed P c ~ , ~ ' t P / -\ f ~ i p - 4; Jbstices / C >L ~ A - ~ ' Mr. Justice Daniel J. Shea concurring: I would affirm the judgment--there was a valid consideration for the second contract. What bothers me, however, is the fact that defendants asserted in District Court and before this Court that the second contract was not supported by a valid consideration. Defendants' counsel was involved in the drafting, or at least in advising his clients concerning the execution of both the first and the second contract. Did the defendants and their counsel believe even before the second contract was signed that it was not supported by a valid consideration and thus that plaintiffs in fact could not enforce the contract against the defendants? Or, did the defendants and their counsel, when faced with plaintiffs' attempted enforcement of the second contract, suddenly arrive at the no consideration defense in a last ditch attempt to avoid enforcement? We have a situation here where I assume counsel advised his clients to sign the second contract. The assumption would be, of course, that the defendants believed they were signing a legally enforceable contract. But when the plain- tiffs sought enforcement against the defendants, an attempt behind is made to hiddthe defense of no consideration. This is a rather strange set of circumstances to be asserting that defense.

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