Maloney v. Heer

• Decision Date: 08 April 1993
• Docket Number: No. 92-380,92-380
• Citation: 850 P.2d 957,257 Mont. 500
• Parties: William B. MALONEY and Margaret N. Maloney, Plaintiffs and Appellants, v. William HEER and Joyce I. Heer, Respondents and Appellants.
• Court: Montana Supreme Court

Page 957

850 P.2d 957

257 Mont. 500

William B. MALONEY and Margaret N. Maloney, Plaintiffs and Appellants, v. William HEER and Joyce I. Heer, Respondents and Appellants.

No. 92-380.

Supreme Court of Montana.

Submitted on Briefs Jan. 14, 1993.

Decided April 8, 1993.

Larry Jent, Williams, Jent & Dockins, Bozeman, for plaintiffs and appellants.

Joseph T. Swindlehurst, Huppert & Swindlehurst, Livingston, for respondents and appellants.

WEBER, Justice.

Plaintiffs William B. Maloney and Margaret N. Maloney (Maloneys) appeal the decision of the District Court of the Sixth Judicial District, Park County, in their action for breach of a real estate contract which awarded damages to the Maloneys for their costs of a survey of the property but denied other damages and attorney's fees. Defendants William and Joyce I. Heer (Heers) cross-appealed, claiming there was no breach, that the Maloneys were precluded from pursuing this appeal, and that the claim was barred by the statute of limitations. We affirm in part, reverse in part, and remand.

The restated issues for appeal are:

1. Did the District Court err when it denied the defendants' motion for summary judgment on the basis of the statute of limitations?

2. Were the plaintiffs precluded from pursuing this appeal by their acceptance of damages?

3. Did the District Court err in finding a breach of contract which did not affect marketability of title?

4. Did the District Court award the correct damages to the Maloneys?

5. Did the District Court err by not awarding attorney's fees to the plaintiffs?

The Heers and the Maloneys entered into an agreement for the sale of the Parkway Motel in Livingston, Montana on August 16, 1985. The agreement provided, among other things, that the Heers would assign their Burlington Northern railroad lease to the Maloneys at closing. Subsequently, the parties executed a contract for deed on September 16, 1985.

The contract for deed stated there was a Burlington Northern railroad lease held in connection with the premises which the Heers would assign to the Maloneys. Both the Maloneys and the Heers were mistaken about the area covered by the lease. Although the Maloneys inspected the property several times before closing on the contract for deed, they did not inspect a copy of the lease. The contract for deed also included a provision agreeing that the sellers made no representations not included in the agreement and that the purchasers relied on their own knowledge and inspection of the premises.

On December 6, 1985, the railroad sent the Maloneys a lease application letter which stated that the Maloneys had "purchased the motel that encroaches on our property." The application described the same area as the prior lease. On January 14, 1986, the Maloneys returned the completed application to the railroad. In answering questions in the application, the Maloneys stated that the use to be made of the site was a motel encroachment and listed a "portion of the motel" as a response to the question asking for a list of all buildings or structures presently on the site covered by the lease. The railroad returned executed leases on October 10, 1986 for an indefinite term at the rate of $180 per year, reserving the right to change the lease rate in the future.

Neither the buy/sell agreement nor the contract for deed specifically disclosed any encroachment of the motel building or appurtenances into the railroad right of way. The buy/sell agreement stated that, "the real property is to be conveyed by warranty deed ... Both the real and personal property shall be free and clear of all encumbrances except those described in this agreement." The contract for deed provided that the property would be conveyed "by good and sufficient warranty deed, accompanied by a title insurance policy showing merchantable title." At the time the District Court issued its findings and conclusions on April 2, 1992, both the Maloney-Heer contract for deed and the contract for deed between the Heers and the prior owners (Kovashes) were still in escrow. The Kovashes had transferred the railroad lease to the Heers on June 16, 1978 after selling the motel to the Heers in 1977. That lease stated that it was for "maintaining and operating thereon a portion of a motel." An attached diagram indicated a 20' by 20' area. The Heers' subsequent lease dated June 16, 1978 makes no reference to the motel. Joyce Heer testified the Heers had been told by Mr. Kovash when they purchased the motel that the lease was for parking.

The Maloneys have operated the motel since September of 1985. In 1988, when Mr. Maloney contacted a real estate office in Livingston, the realtor was unwilling to take the listing because of the encroachment. The Maloneys then hired a surveyor to survey the property, incurring survey fees of $1,895.50. The surveyor determined that the encroachments consist of a small triangular portion of the motel building (about 115 square feet), tiny parts of a planter/sign and of a swimming pool/garbage storage area (about eight and twelve square feet, respectively) in the central parking area, and a small part of the motel eaves on the south end of the building.

The Maloneys unsuccessfully tried to negotiate a long-term lease with the railroad. After the Maloneys initiated this action, the Heers' attorney assisted the Maloneys in obtaining a new railroad lease for a strip four times as large as the area covered by previous leases with an annual rent of $384. This lease commenced August 1, 1990 and will end July 31, 2020, with an option to renew for two succeeding ten year periods--a total of fifty years. The Heers expert testified that the new lease term exceeds the foreseeable thirty to forty-year useful life of the motel for ordinary real property depreciation purposes.

The District Court determined that the present value of the lease assigned with the motel purchase and the present value of the new lease for fifty years differed by only $2,495.63, a nominal amount over that period of time and not a reasonable basis on which to award damages. Further facts will be provided throughout this opinion as necessary.

I.

Is the Maloneys' claim for breach of contract barred by the statute of limitations?

The Heers raised this issue in a motion for summary judgment. Our standard of review for a District Court's conclusion of law is whether it is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 803 P.2d 601. The Heers contend that the two-year limitations period for fraud and mistake under § 27-2-203, MCA, applies to this action instead of § 27-2-202, MCA, which allows an eight-year period for contract actions founded upon a written instrument. They claim that this case involves a mutual mistake relating to the railroad lease and is not a contract action governed by § 27-2-202, MCA.

This Court recently held that § 27-2-202, MCA, governed an action on a contract for deed which affected real property boundaries. See Larson v. Undem (1990), 246 Mont. 336, 805 P.2d 1318. In that case, the vendors breached the contract when they sold the property without first obtaining written consent from their vendor and by failing to provide an accurate legal description of the property. Larson, 805 P.2d at 1321. We conclude that the gravamen of the claim pursued here is a breach of contract action governed by the eight-year statute of limitations provided for in § 27-2-202, MCA. See Erickson v. Croft (1988), 233 Mont. 146, 760 P.2d 706.

We hold the Maloneys' breach of contract claim was not barred by the statute of limitations.

II.

Are the Maloneys precluded from pursuing this appeal by accepting damages paid to them from funds held by the court?

The Maloneys deposited funds with the court rather than make their payments under the contract directly to the Heers pending disposition of this case. They accepted payment from these funds for survey costs awarded to them in this action. The Heers contend that by accepting the $1,895.50 from the court, the Maloneys cannot now appeal from the District Court's judgment because they have acquiesced in the judgment.

The Heers cite Niles v. Carbon County (1977), 174 Mont. 20, 568 P.2d 524; LeClair v. Reiter (1988), 233 Mont. 332, 760 P.2d 740; and Peck v. Bersanti (1935), 101 Mont. 6, 52 P.2d 168, in support of their contentions. These cases do not support their argument. Niles and LeClair provide that a party who has a judgment entered against him and who allows the judgment to be executed against him or pays the judgment voluntarily cannot then appeal if his conduct is inconsistent with the appeal. Peck holds just the opposite of what the Heers have contended.

In Peck, we discussed the general rule on this issue that one cannot both accept the fruits of a judgment and appeal from it at the same time. Peck, 52 P.2d at 169. This Court has also recognized the exception to the general rule--

where the reversal of a judgment cannot possibly affect an appellant's right to the benefit accepted under a judgment, then appeal may be taken and will be sustained despite the fact that the appellant has sought and secured such benefit.

Peck, 52 P.2d at 169.

After Peck, this Court again discussed the general rule and the exception in Ferguson v. Town Pump, Inc. (1978), 177 Mont. 122, 580 P.2d 915. In Ferguson, the plaintiffs asked on appeal for damages to be mathematically increased. This Court stated that

Where the only possible outcome of a successful appeal by a plaintiff is an increase in the damage award, then there is nothing inconsistent about accepting the fruits of the original judgment and appealing from it, and such an appeal may properly be taken.

Ferguson, 580 P.2d at 918. Ferguson is directly on point here. The Maloneys have appealed to increase their damage award. Although the issue whether the District Court erred in granting the Maloneys damages for survey costs is before the Court, it is the Heers who...