SJOBERG v KRAVIK
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Plaintiff and. espondent, -vsLD K VIK FRIEDA Defendan strict Court of the eem Judicial District, ounty of Silver norable AraoLd Olsen, Judge presi Gorette, Smith, Butte [ tana lman & A11e ickelson r r. Justice John Conway Harrison delivered the Opinion of the court. ants/appellants, Donald and Frie a Rravik, appeal a District Court decision favoring plaintiff/respondent eonard Sjoberg. T r i a l w a s h e l d w i t h 0 t a jury on 1987 in the Second Judicial District, Silver Bow County. The District Court awarded Sjoberg 3,100 in damages, $3 costs, and for attorney's fees. e affirm in part and reverse in part. ay 30, On 0 Sjoberg and the Krav s signed a "contract for sale of real property and escro agreement." The land consists of approximately forty acres and is located adison County. As buyer, Sjoberg agreed to pay $52,500 00 as a down pay Afterward, pa ents were to be made in fifteen annual installments of $5,456, with the first payment on May I, 19 The agreed interest rate 10% per annum on the unpaid balance. The fort acres which was ject of the sale was part of far land owned by the Kraviks. The Kraviks land, g these forty acres, was encum ortgage John Hancock Insurance Company, The mortgage had been duly recorded and Sjoberg entered the rchase agreement nowing the mortgage existed, The purchase agreement included a specific clause a dressing the eventual release of the Hancock mortgage: yer enters into this agree The erstanding that the escribed to a mortga Life Insurance is subject John Hancock Mutual Corn recorde at book o&gage Records of nit, on April 3, Buyer agrees that the seller shall not cause said mortgage to be release ecord until the sel ers obtain at 1 250,000 in sales 0 land of which the above real estate is a part or within one 2 year from the date of t Upon such event. the seller be filed a partial satisfaction of mortgage to t above described said real property. The parties agreed to an amendment to the above contract on June 12, 1980. dment provided t at after the Hancock mortgage , the Kraviks would su their contract interest to one acre so that the one acre would be free of both the Hancock mortgage an the Kravik contract. e express purpose of the a. endment was to allow mortgage financing. Sjoberg made his first payment on the forty acres in 1981 without incident. Sjoberg wrote a letter to B nald Kravik stating that Kravik was to have t Hancock mortgage released ay 31, 1 according to the terms of their o inal contract. Kravik was not able to obtain t release and failed to do so until ril 1986. nuary 15, 1982, Sjoberg purchase an additional twenty acres from the Kraviks for the price of $19,200, with 1,000 a a down payment. fifteen annual installments interest rate was 10% per annum. The first made ay 1, 82 and the remainin payments were to occur on e first day of each year thereafter. This contract also contained a clause specifically the Hancock as very similar to the clause in the first contract between Sjo2ae.rg and t Specifically, the clause in the second contract stated: he yer enters into this agree t with he nowledge and understanding at the real property above described is a portion of a larger tract of Land consisting of approximately 1,515 acres which is to a mortgage to the John utual Life Insurance 3 Company, recorded at book 257, pages 73Q-738 o f the ortgage Records of Madison County f ontana, on April 3, Approximately 49 reS of the r tract have been ivided into ler acreage tracts, e land herein being sold is one of these acreage tracts. The sellers in the process of selling the subdivi acreage tracts, sales of the acrea r within 1 satisfaction of subdivided acreag the same of record. shall place Qn April 20, 198 S jober 's attorney sent a letter to the raviks stating that the Kraviks ere in default of the contract entered aY 30, 1980 for the forty acre tract. The letter explained that default occurre because the raviks failed to obtain the release of the Hancoc mortgage on ed that the 31, 1981 as romised in the contract Kraviks cure the default within the time provided in the agreement. The agreement provided that if the buyer defaulted, the sellers could terminate t after written notice, but only if t e buyer did not cure the breach within sixty days after the notice. ough the agreement in the event of a did not expressly contempla y the sellers, it appears that Sjsberg"s attorney was addressing this sixty day grace period and ernanding tha Kraviks obtain a release of the Hancock mortgage wi ty day period fo lowing the written notice and O n aY 1, erg did not make an either of the two contracts entered. Sjoberg attempted t ake p ent an revision t the escrow ag in escrow and not actually deliver the payment. Under those terms I the escrow agent rejected the payment. Also on June Sjoberg's at orney sent a Letter to the Kraviks notifyir_g them that they ere in e contract for the purchase of the twenty acre tract because the aneock mortgage WEtS not released. stated that the agreement entere on January 15, d that "when there is at least 250,000 in sales of these acreage tracts or within one year, seller shall obtain a full satisfaction of mortgage p . . " Although the letter did not specify the reason for breach, one year had not passed since the date of the allegation must have been that raviks had at least their totah acreage. The letter demanded that the raviks mortgage release within the time provided in the contract. 82, an attorney for the Kraviks wrote a Letter to stating Sjoberg was in default on the failing to make pa ents when they were due. joberg responded by making the payments within the specified grace period of sixty Sjoberg filed a lawsuit agains the Kraviks April 7, 1983 and alleged they both contracts an him in the amount of the total sale price of the two tracts of land. Sjoberg has stated he deposited the 1983 ments en both tracts in a ank account pending the o o further payments have been made contracts. On April 11, 1986, the Kraviks obtained the release on e Hancock mortgage as a result of ano awslait. The Kraviks then sent Sjoberg a n tice of def failed to render any Court staye all efault pending A bench trial was held ay 20, 1987. laintiff Sjoberg alleged he had intended to construct a house and develop a horse farm on the property, but as unable to obtain any 5 financing for the because of the Hancock mortgage. The District Court found that the materially breached the contracts by failing to obtain a release of the Hancock mortgage, Sjoberg claimed a number of damages including loss of profits an good will regarding f-he horse farm which the District Court denied because they were too speculative. the District Court id award Sjoberg damages totaling $43110Q, erg claimed to have sustained due to a general increase in COStiS of construction of various buildings, equipment, power, wells, and a horse trailer and truck, The District Court also awarded attorney"s fees in the amount of and costs of Tn. he District Court's final judgment, it found there was a total. of $56,529.38 remaining on t balances due an owing under both contracts, and that the total amount awar to Sjoberg wa herefore, the District Court concl_uded that upon Sjoberg paying the difference, both contracts wout be paid in Full and the obligations of all. parties fulfille efendants/appellants, the Kraviks, appeal and raise ressed as follows: 1 . Did the Kraviks' failure to obtain a release of the Hancock mortgage constitute a reach of the contract w entitled Sjoberg to stop payments? a. . Were e damages awarded Sjoberg correctly calculated? as the Kraviks' appeal been rendered moot? 3. 1 . Breach of the contract. viks admit they were unable to obtain a timely The release of the ortgage as pro in both contracts, The releases were not obtaine until April. 11, 1986, and un the terms of the contracts the release should have been obtained no later than ay 31, 1981 for the forty acre tract an January 15, 1983 for the twenty acre tract. The Rraviks 6 maintain, however, that their reac was not a breach whit constituted default and was not sufficient enough to allow Sjoberq to stop payments. they contend that Sjoberg's sole remedy was to continue with the payments and sue for whatever damages he incurred. If a contracting party materially reaches the contract, the injured party is entitled to sus end his performance, and the determination of whether a material breach exists is a question of fact. E. Farnsworth, Contracts, 5 8.16 (1982). The contracts included specific provisions directing the mortgage release. The District Court found that "the specific purpose of the provision . o . was to allow Sjoberg to have the property free o f the mortgage and subject only to the purchase contract so that he could obtain financing to begin to develop the property as a horse ranch.'" The District Court concluded breach was a ateriai. reach. e agree with the District Court ecause the Kraviks reach substantially effected the purpose of the contract. Sjoberq probably woul. not have entered the contract had he known the mortgage would not be released. We hold that the Kraviks" breach was material and constituted a ition entitling Sjoberg to stop his payments under the contracts. The raviks contend that this holding ould conflict with the rule that under an installment sales contract the seller oes not have to produce mar itle until the date set for final payment and ten Scheitlin V. R & D 731 P.2d 1 3 8 8 , 2390, St.Rep. 986, 1933) r However, this ecision does not run contrary to this rule because the parties specifically agreed the mortqaqe would be release no later than one year after the contracts were entered. 3 2. GE This action was co enced when Sjo erg filed a complaint in the District Court alleging breach of the two real. estate contracts because the John Hancock Insurance Company release had not been obtained within a year. He sought total damages of 71,700, Sjoberg thus chose to stan e contract an to seek damages for its breach. In their answer to the complaint, Kraviks tendered a third defense and counter claim in which they agreed that under the te s of the contracts they were to deliver marketable title in the sellers; and they could not do so because they were unable to secure the release from the John Hancock utual Life Insurance Company; that obtaining the release was not possible and that the Kraviks were ready, willing and able to restore to Sjoberg all payments made him nder his contracts and y reason of the doctrine of mutuality of remedy, sought to rescind the contracts and restore the parties to their status at the time of en into the contracts. No other pleadings were thereafter filed in the nature of supplementary plea hile the action was pending, riE of 1986 through another litigation, e release of the property from the e Insurance was obtaine mortgage of John ancock On May 16, Kraviks served notices of default upon ounds that no for each of the contractsp on the contracts in payments had been ma berg to keep t e default notices, counsel for effect. Upon receipt of erg went to court ained a stay of default on the f the court. contracts until fur&he In its findings and conclusions, the District Court found that the provision in the contracts requiring the John Hancock PSutua.1 Li e insurance Company releases was material at the Kraviks' failure to produce t0 he contracts, such releases constituted a material breac of the contracts. 8 It concluded t erefore that sjo erg's obligation to ake payments ceased on the failure of the raviks to obtain the mortgage releases e The court however further found that Sjoberg was obligated to pay under the contracts co encing e payments due in May of 49 (?, but that no interest accrue on the contracts between the date of the last payment in 1982 and May 1988 because of the Kraviks' material breach. The District Court also found that Sjo rg was damaged through the Kraviks' breach in the sum of for the increase costs of building a house I other outbuildings; 10,000 for the increased costs of r&asing a tractor, plow and irrigation equipment; for the increased costs of obtaining power to the pump and igging wells; and $13,500 or the increase costs of obtaining a horse trailer and appropriate truck. rict Court foun al amount of damages was 43,100. The findings of the District Court are not clearly erroneous, Rule 52(a), M.R.Civ.P., and the app ication of legal principles to the fact situation by the District Court is proper. The court did award attorney's fees in the sum of to Sjoberg based up n the reci 28-3-704, MCA, and the folio ing in the contracts: In the event the Sell must resort to legal action to remove Buyer from the premises, or seek ret he property, after Default and the Buyer hereby specifically a pay all the court costs and reasonable attorney fees incurred by t e Seller in such action. Neither of the parties are entitled to attorney's fees in this action. While Kraviks breached the contracts by not ing the John Hancock releases, Sjoberg also breached the contracts when he did not begin making pay ents on the contracts when he ecame obligated to do so in May of 1986. 9 e hold it would be inequitab e to award attorney's fees 01 costs to either party in this case. 3 . ~OOT~~§S In its judgment, the District Court offset the amounts due to the Xraviks under the contracts with the amounts it found as damagesp attorney*s fees and costs awarded to Sjoberg leaving a net of 3,885.?8. The judgment provided that upon ayment of that sum to the escrow older, the escrow holder was to deliver the escrow documents, inclu the warranty deed to Sjober at which time the contracts would be deeme paid in full and the obligations of all the parties fulfilled. During the pendency of this appeal, Sjoberg has made that payment to he escrow holder and now claims that the cause is moot because the terms of the judgment have been fulfilled by him. Because we have found that Kraviks are entitled to effective relief on appeal, we ds not find the judgment to be moot. See artin Development Company v. Keeney Construction ont. 19851, 703 P.2d 143, 147, 14 , 42 St.Rep. 752, 757 75%. . CONCLUSION Accordingly, we affirm in part and reverse in part the judgment of the District Court. the etermination of the District Court that the sum of 56,529.38 is due to the Kraviks from Sjoberg as principal due and owing on both contracts. ould additionally xeeeive interest on at the rate of 10% per annum from May 16, 1986 date of the judgment appealed from. We affirm the findings of the District Court that Sjoberg is entitled to ges from the Rraviks in the sum of 43,100, and agree that this sum may be offset against the principal balance on the contracts of Sjoberg to Rraviks as of the date o said judgment. Thereafter Kraviks are entitled to receive judgment interest at the rate of 10% per an um on the net 10 principal amount due from and after the ju gment date unt paid. (Post judgment interest shall not include interest on interest.) We determine that neither party is entitled to attorney's fees and costs in this action. We remand this cause to the District Court for such further proceedings as may be necessary to reverse the elivery of the warranty eed from the escrow holder to Sjoberg until such time as the amounts due under this opinion are f y paid. :ef Justice /
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