RC HOBBS ENTERPRISES, LLC v. JGL Distributing, Inc., 03-704.

• Citation: 2004 MT 396,325 Mont. 227,104 P.3d 503
• Decision Date: 30 December 2004
• Docket Number: No. 03-704.,03-704.
• Parties: R.C. HOBBS ENTERPRISES, LLC, Plaintiff, Respondent and Cross-Appellant, v. J.G.L. DISTRIBUTING, INC., Defendant and Respondent, and Eldon J. Nicholson and Donna Nicholson, Defendants and Appellants.
• Court: United States State Supreme Court of Montana

104 P.3d 503

2004 MT 396

325 Mont. 227

R.C. HOBBS ENTERPRISES, LLC, Plaintiff, Respondent and Cross-Appellant, v. J.G.L. DISTRIBUTING, INC., Defendant and Respondent, and Eldon J. Nicholson and Donna Nicholson, Defendants and Appellants.

No. 03-704.

Supreme Court of Montana.

Submitted on Briefs February 24, 2004.

Decided December 30, 2004.

For Appellants Eldon J. Nicholson and Donna Nicholson: P. Mars Scott, Keithi M. Worthington, Law Offices of P. Mars Scott, P.C., Missoula, Montana.

For Respondent and Cross-Appellant R.C. Hobbs Enterprises, Inc.: Donald V. Snavely, Snavely Law Firm, Missoula, Montana.

For Respondent J.G.L. Distributing, Inc.: Christopher B. Swartley, Attorney at Law, Missoula, Montana.

Justice JOHN WARNER delivered the Opinion of the Court.

¶ 1 Eldon J. Nicholson and Donna Nicholson (the "Nicholsons") appeal from an Opinion and Order entered August 21, 2003, in the District Court for the Fourth Judicial District, Missoula County, granting summary judgment in favor of J.G.L. Distributing ("J.G.L."), thereby permitting J.G.L. to exercise an option to purchase the subject real property. Hobbs Enterprises, L.L.C. ("Hobbs") cross-appeals from the same Opinion and Order which grants summary judgment to the Nicholsons dismissing Hobbs' claims against the Nicholsons and J.G.L. In this cross-appeal, Hobbs seeks to preserve its right to seek an award of attorney fees and costs on appeal based upon the "prevailing party" clause contained in the Option. We affirm.

¶ 2 We address the following issues on appeal:

¶ 3 1. Did the District Court err in concluding an assignment from J.G.L. to Hobbs was void, and therefore, the Nicholsons owed no obligation to Hobbs?

¶ 4 2. Did the District Court err in concluding J.G.L.'s breach of contract in assigning the Option to Hobbs was not sufficient to warrant a forfeiture of J.G.L.'s rights under such Option?

¶ 5 3. Did the District Court err in applying § 28-1-104, MCA, the antiforfeiture statute, to the failure by J.G.L. to make timely payments?

¶ 6 4. Are the Nicholsons entitled to their attorney fees?

¶ 7 5. Are Hobbs and J.G.L. entitled to attorney fees on appeal?

I. FACTUAL AND PROCEDURAL BACKGROUND

¶ 8 On February 13, 1998, the Nicholsons and J.G.L. executed an Option (the "Option") that gave J.G.L. five years to purchase property located on Old Grant Creek Road in Missoula from the Nicholsons. Under the Option J.G.L. was to have possession of the property and to make nonrefundable payments of $1,629 by the 13th of each month to the Nicholsons. Failure of J.G.L. to make a monthly payment would cause the Option to expire immediately and the Nicholsons would not be required to refund any part of the payments already made. The Option stated the monthly payments were not to be credited against the purchase price. The Option did not grant J.G.L. any legal or equitable interest in the property.

¶ 9 The Option also contained a clause which required J.G.L. to obtain the Nicholsons' express written consent before assigning it to a third party.

¶ 10 To exercise the Option J.G.L. was required to notify the Nicholsons of its intent to purchase the property and to tender payment of $230,000, the agreed upon purchase price.

¶ 11 J.G.L. missed two payments, February and March 1998, immediately following execution of the Option. The Nicholsons accepted the late payments. All other payments were made on time until April 2001.

¶ 12 Around the same time the Option was executed, J.G.L. informed the Nicholsons that it wanted to subdivide the property into three separate tracts, keep one, and sell the other two. J.G.L. asked Eldon Nicholson to utilize his family-split exemption to the subdivision requirements in order to avoid the formal subdivision process. Nicholson cooperated and assisted J.G.L. in the subdivision process. The property was divided into three smaller parcels designated Tracts 1, 2, and 3. The Nicholsons executed three warranty deeds to effectuate the subdivision and placed them with the escrow agent, Insured Titles. J.G.L. paid all costs associated with subdividing the property, including debris removal and grading of the lots, for a total of $17,000.

¶ 13 In May 1999, after the subdivision process was completed, J.G.L. assigned its option rights to Tracts 1 and 2 to Hobbs for $50,000. J.G.L. retained its rights to Tract 3. Under the assignment, Hobbs agreed to make all further monthly payments and to pay the $230,000 purchase price to the Nicholsons at such time the Option was exercised. Thereafter, Hobbs commenced making the monthly payments of $1,629 to the Nicholsons through the escrow account at Insured Titles.

¶ 14 Hobbs continued to make the monthly payments through Insured Titles until April 13, 2001, when Hobbs inadvertently missed a payment. In May 2001, the Nicholsons realized they had not received the April payment. The Nicholsons contacted Insured Titles and confirmed the April payment had not been received. Upon learning of the oversight, Hobbs immediately tendered payment on May 8, 2001. Eldon Nicholson sent a letter to J.G.L. on May 11, 2001, informing it that due to the missed payment, the Option had expired; the missed payment caused J.G.L. to forfeit its rights under the Option; any monies paid as consideration for the Option were forfeited; and the Nicholsons had taken full control of the said property. On May 17, Hobbs responded to the Nicholsons' notice of forfeiture on behalf of both J.G.L. and Hobbs, offering to pay the full purchase price, $230,000, in exchange for clear title to the property.

¶ 15 On May 31, 2001, the Nicholsons rejected Hobbs' offer stating only J.G.L. could exercise the Option. In spite of Hobbs' offer, the Nicholsons claim they did not receive any offer to pay the $230,000 purchase price from J.G.L. until November 19, 2002, 18 months after J.G.L. received the notification of forfeiture. Regardless, Hobbs continued to make the monthly payments into the escrow account through January 2003, the end of the Option period. The escrow agent held the money in trust, since the Nicholsons refused to accept any further payments.

¶ 16 In September 2002, a third party (the "Johnson Brothers") offered to purchase Tracts 1 and 2 from the Nicholsons for $365,904. The Nicholsons advised J.G.L. in writing on November 1, 2002, that they intended to sell the property to the Johnson Brothers. J.G.L. responded with a letter reiterating it stood "ready, willing and able" to tender the full purchase price of $230,000.

¶ 17 Meanwhile, in December 2001, Hobbs filed suit against the Nicholsons and J.G.L. Hobbs alleged it had invested $53,972 in the property, and paid the monthly payments from May 1999 to January 2003, for a total investment of $127,277. J.G.L. filed a counterclaim against Hobbs and cross-claims against the Nicholsons. The Nicholsons then filed a counterclaim against J.G.L.

¶ 18 All three parties filed cross-motions for summary judgment in February 2003. The issues were fully briefed, and oral argument was waived. The District Court issued its Opinion and Order on August 21, 2003. The District Court dismissed Hobbs' claims concluding that Hobbs lacked standing to seek relief from forfeiture against the Nicholsons because it was not a party to the contract between J.G.L. and the Nicholsons.

¶ 19 With regards to J.G.L.'s cross-claims, the District Court found the consent to assignment clause contained in the Option was valid and enforceable. However, the District Court also held that even though J.G.L. breached the no assignment provision by not obtaining written consent from the Nicholsons to assign its rights under the Option to Hobbs, such did not serve to terminate J.G.L.'s right to exercise the Option because it was not a material breach of contract. The District Court further found J.G.L. violated the Option by not making the April 13, 2001, payment-and, therefore, the Nicholsons were within their rights to refuse the late payment. However, the District Court went on to find forfeiture would be too harsh a remedy given that J.G.L. otherwise made its payments on time and expended a significant amount of money to improve the property. The District Court found J.G.L.'s breach was not grossly negligent, willful or fraudulent. Therefore, the District Court excused the forfeiture and granted J.G.L. 20 days to pay the full purchase price to the Nicholsons. The District Court denied all requests for attorney fees or other damages. This appeal followed.

II. STANDARD OF REVIEW

¶ 20 Our review of a summary judgment order is de novo. Urquhart v. Teller, 1998 MT 119, ¶ 14, 288 Mont. 497, ¶ 14, 958 P.2d 714, ¶ 14. We review summary judgment to determine if the District Court was correct that there are no material facts at issue and if it applied the law correctly. May v. Era Landmark Real Estate, 2000 MT 299, ¶ 17, 302 Mont. 326, ¶ 17, 15 P.3d 1179, ¶ 17.

III. DISCUSSION

ISSUE ONE

¶ 21 Did the District Court err in concluding an assignment from J.G.L. to Hobbs was void, and therefore, the Nicholsons owed no obligation to Hobbs?

¶ 22 Rule 56(c), M.R.Civ.P., authorizes summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." As the moving party, the Nicholsons had to demonstrate that no genuine issues of material fact exist. Stanley v. Holms, 1999 MT 41, ¶ 31, 293 Mont. 343, ¶ 31, 975 P.2d 1242, ¶ 31. If the movant demonstrates that no genuine issues of material fact exist, "the burden then shifts to the non-moving party to prove, by more than mere denial and speculation, that a genuine issue does exist." Stanley, ¶ 31. Mere conclusory statements are insufficient to create genuine issues of material fact. Stanley, ¶ 32. Further, the fact that all three parties moved for summary judgment does...