Keller v. Dooling

Citation813 P.2d 437,248 Mont. 535
Decision Date01 August 1991
Docket NumberNo. 90-508,90-508
PartiesByron C. KELLER, Plaintiff, Respondent and Cross-Appellant, v. Thomas A. DOOLING, Margaret L. Dooling, and Ann Dooling, Defendants, Appellants and Cross-Respondents.
CourtUnited States State Supreme Court of Montana

Vincent Kozakiewicz, Dillon, William A. Brolin, Anaconda, for defendants, appellants and cross-respondents.

W. Cecil Jones, Dillon, for plaintiff, respondent and cross-appellant.

WEBER, Justice.

The plaintiff, Byron C. Keller, initiated this suit to recover damages for breach of contract, fraud, and breach of the implied covenant of good faith and fair dealing. Defendants counterclaimed to recover damages for breach of contract, fraud, and breach of the implied covenant of good faith and fair dealing. The District Court for the Fifth Judicial District, Beaverhead County, dismissed the fraud claims under statute of limitations defenses. Following trial, the District Court entered judgment for the plaintiff for $26,395.37 for defendant's breach of contract, $10,000.00 for defendant's breach of the covenant of good faith and fair dealing, and $5,000.00 for punitive damages for the breach of the covenant of good faith and fair dealing. The defendants' counterclaims were dismissed on the merits. Defendants appeal and plaintiff cross-appeals. We affirm in part and reverse in part.

The issues are:

(1) Was the contract between the Doolings and the Kellers correctly interpreted by the District Court and the jury?

(2) Was the Doolings' obligation under the contract extinguished by their offer of performance?

(3) Was evidence of the provisions of an amended contract for deed barred by the parol evidence rule?

(4) Did the District Court err in awarding punitive damages?

(5) Did the District Court err in awarding usurious rates of interest to Mr. Keller?

(6) Did the District Court err in allowing the Doolings to amend their answer at trial to raise a statute of limitations defense?

The plaintiff, Byron C. Keller, and his ex-wife, Karen R. Keller, entered into a contract with Thomas Dooling and his ex-wife, Margaret L. Dooling dated January 13, 1976. Kellers agreed to sell to Doolings a tract of land located in Beaverhead County, Montana, consisting of approximately 96 acres. The parties agreed to have the property surveyed and to determine a final price of $1,000.00 per acre for each acre described in the survey.

The 1976 contract called for the Doolings to make an initial down payment of $27,840.00, annual payments in 1977, 1978, and 1979 in the amount of $12,684.12 and a balloon payment in 1980 of the remaining balance. The contract interest rate was 7.5%. Doolings made the initial down payment and the annual payments in 1977, 1978, and 1979.

Prior to the 1980 balloon payment, the property was surveyed and determined to contain 106 acres. The purchase price was thus $106,000.00. The parties negotiated a rescheduling of the balloon payment over a period of four years. The exact nature of the rescheduling was disputed by the parties at trial. The parties agreed that the payments remained at $12,684.12. Mr. Keller contended that in exchange for extending the payment schedule he was to receive interest on the last four annual payments at 13%. Mr. Keller had his attorney draft a 1980 amendment to the 1976 contract incorporating the surveyed legal description, the extension of the payments by four years, and changing the interest rate to 13%.

The 1980 amendment to the 1976 contract was never executed. However, Mr. Dooling drafted an amortization schedule showing the interest payment at 13%, and wrote several letters indicating the amount he owed in 1984 and the interest rate at 13%. The final payment was not made by Mr. Dooling and this litigation ensued.

I

Was the contract between the Doolings and the Kellers correctly interpreted by the District Court and the jury?

The subject property under the contract for deed between the parties was part of a larger tract of land owned by the Kellers. The Kellers were making payments under a mortgage to Connecticut Mutual Life Insurance Company and a contract for deed to Clark and Geraldine Harshbarger on the larger tract of land. Under the Keller-Dooling contract for deed, the Doolings would pay off their obligation to the Kellers several years before the Kellers would pay off their obligations on the underlying mortgage and Harshbarger contract.

The Doolings assert that the intent under the contract for deed was for the Kellers to provide the Doolings with a warranty deed free of the underlying mortgage and Harshbarger contract obligations at the time that the Doolings made their final payment on the contract for deed. When Kellers failed to produce such a warranty deed, Doolings refused to make the final payment and Kellers sent notices of default.

The relevant language in the Keller-Dooling contract provides:

(7) The Kellers further agree that prior to the delivery to the Doolings of the warranty deed, they will purchase and deliver to the Doolings an owner's title insurance policy insuring the merchantable title of the Kellers to the property excepting, however, mortgages of record of which the Doolings have been advised and the usual exceptions with respect to easements of public record.

(8) ... The Doolings have further been advised of the existence of other interests in this property including a mortgage to Connecticut Mutual Life Insurance Company and an equitable interest in favor of the said Clark and Geraldine Harshbarger. It is understood that the sellers Keller (sic) are primarily liable and will timely discharge these obligations. Should they fail, however, to make the payments to either Connecticut Mutual Life Insurance Company or the Harshbargers, then and in that event the Doolings may at their option make said payments which would constitute a credit to them of the monies owing on this Contract.

The lien of the mortgage to Connecticut Mutual Life Insurance Company and the equitable interest of the Harshbargers shall not constitute a defect of title. (Emphasis supplied.)

It is clear from this language that the Keller-Dooling contract is subject to the interest of the underlying mortgage and Harshbarger contract. When the language of a contract is clear and unambiguous, the contract does not require the application of the rules of construction and it is the court's duty to enforce the contract as made by the parties. Morning Star Ent., Inc. v. R.H. Grover, Inc. (Mont.1991), 805 P.2d 553, 556, 48 St.Rep. 112, 113. Under the above quoted language Kellers did not have an obligation to produce a warranty deed free of the underlying obligations and Doolings breached the contract by not making the final annual payment. We hold that the contract between the Doolings and the Kellers was correctly interpreted by the District Court and the jury.

II

Was the Doolings' obligation under the contract extinguished by their offer of performance?

The Doolings contend that they made a tender of performance in 1984 and that no interest should accrue beyond the date of tender of performance. Nothing in the record establishes that a tender of performance was ever made. On June 13, 1984 Mr. Dooling stated in a letter to the Kellers' attorney:

Assuming that the final payment is made on June 29, a Friday, which is the 178th day of the year, I owe Byron the sum of $12,429.14 plus 178 days' interest at 13% per year, in the amount of $787.97. (Emphasis supplied.)

On the same day Mr. Dooling wrote a letter to Mr. Keller which stated:

This letter is formal notice of my intention to prepay the balance of my Contract for Deed with you, on or before July 1, 1984. I had notified you orally of my plans in January, when I made my last payment. According to the amortization schedule which I provided to you some years ago, the principal balance now due on my contract with you is $12,429.14. Assuming that I make the payment on the...

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