Davey v. Nessan
| Decision Date | 09 April 1992 |
| Docket Number | No. 91-205,91-205 |
| Citation | 830 P.2d 92,252 Mont. 397 |
| Parties | M.E. DAVEY, Plaintiff and Appellant, v. Edward M. NESSAN, Joan E. Nessan, Donald E. Dubeau and Connecticut Mutual Life Insurance Company, a Connecticut corporation, Defendants, Respondents and Appellants. Horton B. KOESSLER, as Personal Representative of the Estate of Horace H. Koessler, Deceased, Plaintiff and Appellant, v. Edward M. NESSAN, Donald E. Dubeau, and Connecticut Mutual Life Insurance Company, a Connecticut corporation, Defendants, Respondents and Appellants. |
| Court | Montana Supreme Court |
David R. Paoli, Edwards & Paoli, Billings, for Dubeau.
W. Anderson Forsythe, Moulton Law Firm, Billings, for Connecticut Mut. Life Ins. Co.
Vicki W. Dunaway, Billings, for Nessan.
On February 5, 1988, M.E. Davey filed a complaint against Edward M. Nessan, Joan E. Nessan, Donald E. Dubeau, and Connecticut Mutual Life Insurance Company in the Sixteenth Judicial District Court in Rosebud County. On the same day, Horton B. Koessler filed a complaint in the name of Horace H. Koessler in the same court and against the same parties, omitting only Mrs. Nessan. * Dubeau and Nessan answered and asserted a cross-claim against Connecticut Mutual. On December 29, 1990, the District Court granted summary judgment for Connecticut Mutual, dismissed all of the claims against it, and entered judgment in its favor. All of the other parties appeal. We affirm.
The issue on appeal is whether the District Court erred when it ruled that all claims against Connecticut Mutual failed due to the absence of any contractual obligation by Connecticut Mutual to assume the debts of Dubeau and Nessan.
Davey and Koessler owned contiguous farms adjacent to the Candee farm in Rosebud County. The Candee property was a dry-land farm, but the Davey and Koessler farms had center-pivot irrigation.
Dubeau and Nessan bought the Candee property on a contract for deed in 1980. Dubeau and Nessan then began planning to buy the Davey and Koessler properties under contracts for deed with the intention of operating all three farms as a unit. Their plan envisioned relocating the center-pivot irrigation system on the Davey and Koessler farms to the Candee farm, and replacing it with a newer lineal irrigation system.
On November 12, 1980, Connecticut Mutual offered to loan Dubeau and Nessan more than $1.8 million in order to make the necessary down payments and capital investments. Connecticut Mutual offered Dubeau and Nessan a favorable interest rate in exchange for an option to acquire a one-half interest in the property if the venture proved to be profitable. In turn, Connecticut Mutual took a security interest in Dubeau's and Nessan's purchasers' interest in the three contracts for deed. Dubeau and Nessan accepted Connecticut Mutual's offer.
Thus, in the development of this project Dubeau and Nessan incurred two different types of indebtedness: (1) their underlying debts to Candee, Davey, and Koessler on the three contracts for deed; and (2) their subsequent debt to Connecticut Mutual.
In order to protect its security interest in Dubeau's and Nessan's purchasers' interest against foreclosure, Connecticut Mutual insisted on the right to make payments to Candee, Davey, and Koessler in the event of default by Dubeau and Nessan. Dubeau and Nessan subsequently entered into written agreements to this effect with Davey and Koessler. Specifically, Davey and Koessler granted Connecticut Mutual the right, "at its election and without obligation," to cure any default by Dubeau and Nessan.
Dubeau and Nessan immediately experienced cash flow problems with the project. Dubeau and Nessan had to borrow more money from Connecticut Mutual in order to make the 1982 payments on the underlying contracts for deed. This happened again in 1983. Later in 1983, Dubeau and Nessan advised Connecticut Mutual that the cash flow situation was not improving and that they intended to default on both the land contracts and their contract with Connecticut Mutual.
Dubeau and Nessan offered Connecticut Mutual a deed in lieu of foreclosure but Connecticut Mutual insisted on judicial foreclosure. On April 23, 1984, Dubeau and Nessan signed a settlement agreement with Connecticut Mutual in which they agreed to foreclosure by default. Connecticut Mutual waived its right to a deficiency judgment. The settlement agreement did not provide for any assumption by Connecticut Mutual of Dubeau's and Nessan's debt on the three underlying contracts for deed. Connecticut Mutual bought the property at the foreclosure sale on September 12, 1984. On November 6, 1984, Dubeau and Nessan gave Connecticut Mutual a quitclaim deed to their remaining interest in the three parcels of land.
Connecticut Mutual made payments on the underlying contracts for deed until July 1987, when it notified Davey and Koessler that it intended to tender the property back to them. Davey and Koessler accepted possession and then filed the present lawsuit against Dubeau, Nessan, and Connecticut Mutual.
Davey and Koessler alleged that Connecticut Mutual had assumed the debt of Dubeau and Nessan. They based this theory on the allegations that: (1) the quitclaim deed amounted to an assignment of all of Dubeau's and Nessan's right, title, and interest in the property; and (2) Connecticut Mutual's conduct in making payments on the contracts for deed from 1984 through 1987 indicated its intent to assume the underlying debt. Davey and Koessler asserted that by failing to in fact assume the debt, Connecticut Mutual breached its contract and also breached the implied covenant of good faith and fair dealing.
Dubeau and Nessan asserted cross-claims against Connecticut Mutual in which they, too, sought to hold it liable for the underlying debt on the contracts for deed. Dubeau and Nessan based these cross-claims on the allegation that Connecticut Mutual had intended to acquire outright ownership of the property from the very beginning of the operation and that the negotiations leading up to the 1984 settlement agreement had, therefore, contemplated that Connecticut Mutual would be assuming the underlying debt on the three contracts for deed. Dubeau and Nessan asserted that these facts supported actions for breach of contract and breach of the implied covenant of good faith and fair dealing.
Connecticut Mutual moved for summary judgment on all of the claims against it. It argued that it acquired only an equity interest at the foreclosure sale, that the quitclaim was inoperative to transfer Dubeau's and Nessan's underlying debt, and that the parol evidence rule barred any evidence about the negotiations leading up to the 1984 settlement agreement. The District Court granted summary judgment for Connecticut Mutual on all of the claims against it. All of the other parties appeal from this summary judgment order.
The issue on appeal is whether the District Court erred when it ruled that all claims against Connecticut Mutual failed due to the absence of any contractual obligation by Connecticut Mutual to assume the debts of Dubeau and Nessan. Because the appellants take very similar positions on appeal, we discuss the Davey and Koessler claims together with the Dubeau and Nessan claims.
All of the appellants argue that Connecticut Mutual assumed a contractual duty to make payments on the underlying contracts for deed, either by virtue of the quitclaim deed from Dubeau and Nessan or by virtue of Connecticut Mutual's conduct in making those payments from 1984 to 1987. They concede that Connecticut Mutual never expressly agreed in writing to assume the underlying debt. In order to succeed, then, they must show that in some other way Connecticut Mutual assumed the contractual obligations of Dubeau and Nessan.
An "assignment" of contractual rights is not the same as an "assumption" of contractual obligations. All of the parties agree that generally "[t]he assignee of an executory contract does not, merely by accepting the assignment, or by succeeding to the property subject to the contract, assume the obligations imposed by the contract on the assignor." Thompson v. Lincoln Nat. Life Ins. Co. (1943), 114 Mont. 521, 527-28, 138 P.2d 951, 954. The parties disagree about whether an assignment actually occurred in this transaction; Connecticut Mutual argues that neither the foreclosure sale nor the quitclaim deed operated as an assignment. Because this case comes to us on appeal from an order of summary judgment we assume, without deciding, that an assignment occurred. We turn to the question of whether there was also an assumption.
The appellants argue that although an assumption must typically be expressed, in the proper circumstances it may be implied by the conduct of the parties. They cite the following language in Thompson:
The dissent perforce admits the undeniable rule that the assignment of a contract does not ordinarily operate to cast the contract liabilities upon the assignee in the absence of an assumption thereof by him. The dissent further says, what is obvious, that the assignee may assume the assignor's liabilities, that under certain circumstances and conduct the law will imply such assumption, and that he may not enforce the contract without performing its terms. [Emphasis added...
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