Property II, Pages 808โ€“811

Daugherty Cattle Co. v. General Construction Co.

Supreme Court of Montana, 1992

Facts:

Plaintiff sold defendant's predecessor company $1,195,000 of real estate. A clause stated that in the event of a breach, plaintiff could keep all payments made "as reasonable rental for the use of the property and as liquidated damages." Eight year later, defendant defaulted on the contract with $338,000 left to pay. Defendant offered to return 47% of the land in exchange for the remaining payment, but plaintiff refused and filed suit to obtain possession of the land.

Procedural History:

Trial court granted summary judgment, giving plaintiff possession of the property and allowing him to keep the $1,273,290 defendant had already paid on the contract.

Issue:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 562 (not in casebook)
  1. Whether the District Court erred by refusing to consider reasonable rental value of the property subject to a land contract for purposes of computing damages upon foreclosure by the seller.
  2. Whether Montana's anti-forfeiture statute, ยง 28-1-104, MCA, applies to prohibit the seller from declaring a forfeiture when the purchaser tenders a portion of the property back to the seller as "full compensation" for the balance owing on the contract.

Rule:

When a contract includes a forfeiture in the event of a breach, this can be avoided by making full compensation.

Reasoning:

  • Past cases did not consider the value of the rental in determining damages. Starting such a thing would be up to the legislature.

  • "Full compensation" means paying off the remaining balance. Defendant offered 47% of the land back in exchange for cancelling the balance, but this offer was not accepted.

Holding:

  • No, the reasonable rental value should not have been considered.

  • No, defendant only offered to tender part of the land back, not full compensation, as required.

Judgment:

Affirmed.

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