Preview:

No.

81-194

I N THE SUPREME COURT O THE STATE O MONTANA F F
1982

I R V I N S . NAYLOR,

Plaintiff
VS.

and A p p e l l a n t ,

J O H N P . HALL, SHERRILL HALL, and SKI YELLOWSTONE, I N C . , Defendan.ts and R e s p o n d e n t s .

Appeal from:

G i s t r i c t C o u r t of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e County o f G a l l a t i n H o n o r a b l e W. W. L e s s l e y , Jud-qe p r e s i d i n g .

C o u n s e l o f Record: For Appellant: G r e g o r y 0 . Morgan a r g u e d , Bozeman, Montana A l b e r t G. B l a k e y , I11 a r q u e d , v o r k , Pa. For Respondents : Landoe, Brown Law F i r m , Bozeman, Montana J . R o b e r t P l a n a l p a r g u e d , Bozeman, Montana

---Submitted: Decised: F i l e dJ .
t

~ u l y , 1982 8
O c t o b e r 7 , 1982

.~82

Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiff, Irvin Naylor (Naylor), sought specific

performance of a contract for the purchase of real property from defendants Hall, and Ski Yellowstone, Inc., herein referred to as Hall. The District Court of the Eighteenth

Judicial District, Gallatin County, tried the case without a jury, and refused to grant Naylor specific performance. reverse the District Court. This case is a companion to Supreme Court case No. 81222, Ski Roundtop, Inc., individually and derivatively in behalf of Ski Yellowstone, Inc. v. John P. Hall and others, to be decided at a later date by this Court. Naylor raises a single issue on review: Whether the We

agreements between the parties constituted a specifically enforceable, valid option contract. The individuals involved in this action were all shareholders and officers in the Montana corporation, Ski Yellowstone, which is developing a four-seasons resort in the Hebgen Lake area in Gallatin County. Plaintiff Naylor Defendant

was chairman of the board of directors in 1975-76.

John Hall was a director and is presently the chief executive officer and majority stockholder. Hans Geier was president

at the time the disputed agreements were made and, under the corporation's bylaws, was authorized to execute contracts for the corporation. Fred Pack is a Bozeman realtor, whose

agency was authorized to sell lots in the Bear Trap Subdivision owned by Ski Yellowstone. Fred Pack wrote Naylor and offered him the opportunity to purchase lots in the Bear Trap Subdivision at the listed

price less a ten percent commission. Naylor replied:

On February 25, 1975,

"Thank you for your letter of February 20, inviting me to acquire at a 10% discount any of the lots that are shown on the plats that were enclosed with that letter. I am pleased to make the following offer on lot #7 in Sear Trap Ranch subdivision #1: "1. A purchase price of $11,700.
"2.
"3.

A deposit now of $500.00 cash.

$5,000 to be paid at the time my $5,000 'bonus' has been offered to me by Ski Yellowstone, Inc.
"4. The balance of $6,200 to be paid in cash within 90 days of the accomplishment of ?!3 above. At this time the lot is to be transferred to me with good, insurable, fee-simple, marketable title. "If this proposal is acceptable as presented, please have Hans sign the enclosed copy of this letter as President of Ski Yellowstone, Inc., and return it to me in the enclosed self-addressed and stamped envelope, upon receipt of which I will promptly send you the $500.00 deposit."

The letter was marked "Approved March 5, 1975, Hans Geier, President, Ski Yellowstone, Inc." and returned to Naylor. On May 8, 1975, Pack acknowledged receipt of the

$500 deposit forwarded by Naylor, and informed Naylor that he (Pack) had placed the deposit in a trust account "to be held there until the conditions as set forth in your letter of February 25, 1975 have been complied with and we will be able to deliver to you a title to said lot free of all encumbrances." On March 29, 1976, Naylor mailed the following "clarification" to Hans Geier: "It occurred to me a couple of days ago that a point of clarification in my proposal to you of February 25, 1975 referring to my offer (which you accepted) on lot #7 in Bear Trap Ranch subdivision #1 should be noted:

"If by January 1, 1980 the '$5,000 bonus has (not) been offered to me by Ski Yellowstone, Inc.', then I should have the prerogative of either acquiring the lot for a cash payment of $11,200 within 90 days of January 1, 1980 or a return of my $500.00 cash deposit (without interest)

.

"I selected the date of January 1, 1980 as being totally arbitrary - a time by which I hopefully assume the problems relating to the obtainment of the Forest Service Permit will have been resolved. "If you agree to this clarification of our agreement as reflected in my letter of February 25, 1975, I would appreciate it if you would execute the enclosed copy of this letter and return it to me in the self-addressed and stamped, enclosed envelope." The letter was returned to Naylor with Geier's approval written on it as follows:
"I accept the above clarification. Hans Geier, President Ski Yellowstone, Inc. April 11, 1976 Verbal Approval by F. L. Pack. .

."

On January 10, 1977, John Hall, who had in 1976 gained control of Ski Yellowstone, and was Executive Vice-President of the corporation, agreed to purchase the same lot (Lot 7, in Block 2) from Ski Yellowstone for $11,000. Payment was

to be settled within six months by the application to the purchase price of corporate credit issued to John Eall for services rendered. A $10,300 corporate credit was sub-

sequently applied to the purchase price of the lot. On May 2, 1977, Naylor filed a notice of purchaser's interest with the Gallatin County Clerk and Recorder. On June 21, 1977, John and Sherrill Hall, acting as officers of Ski Yellowstone, conveyed the Rear Trap lot to themselves as joint tenants, by warranty deed, and the next day filed the deed with the Gallatin County Clerk and Recorder.

The Forest Service permit had not issued by January 1, 1980. On January 7, 1980, Naylor, through his attorney,

notified Pack that he "elected to exercise his option to purchase the lot in Bear Trap Ranch Subdivision." Naylor

demanded that Ski Yellowstone specifically perform its contract for the sale of the lot, and supply him with "a copy of a title report showing a marketable title." Ski

Yellowstone did not meet Waylor's demands, and on ?4arch 7, 1980, Naylor filed this action for specific performance in the District Court. The case was heard, in combination with several connected cases, in September of 1980. The District Court entered

findings of fact and conclusions of law on January 2, 1981The District Court held that following the "clarification" of March 29, 1976, there was no mutually binding contract because Naylor could, "at his sole prerogative, relieve himself from any liability to purchase the lot."

In addition,

the District Court concluded that there was no consideration because Naylor could, at his election, demand the return of the $500 deposit. An analysis of the contract compels a

different conclusion. Under the February 25, 1975, letter agreement, Naylor was obligated to purchase the lot when Ski Yellowstone paid him his $5,000 bonus, which in turn depended upon the li issuance by the Forest Service of its permit for S c Yellowstone. This obligation continued as to Naylor without limit in time. In addition, there was no means by which he could

purchase at an earlier date than the date on which Ski Yellowstone offered him his bonus.
As to Ski Yellowstone,

under this letter agreement, it was obligated to hold open the purchase of the lot until such time as the permit was issued by the Forest Service, which again had no limit in

the future, and therefore left Ski Yellowstone with an
obligation to sell not limited in time.
-5-

By the letter agreement of Xarch 29, 1976, several changes were introduced into the contract relationship. Through December 31, 1979, the arrangement was the same as between the parties, as it had been under the old agreement. However, the effect of the agreement was to terminate this obligation on the part of Ski Yellowstone to sell in the event that by January 1, 1980, the Forest Service permit had not been issued. At that point in time, an option arrange-

ment came into effect, under which Naylor could either have his $500 back or purchase the lot for an additional cash payment of $11,200. Clearly, the March 29, 1976, letter As to Ski

agreement was mutually beneficial to the parties.

Yellowstone, its obligation to continue to hold the lot for the future purchase was terminated as of January 1, 1980, unless, within ninety days, Naylor elected to purchase. In

addition, if Naylor did elect to purchase, he was required to pay $11,200 of his own cash, without applying a $5,000 bonus which would have been furnished by Ski Yellowstone upon issuance of the Forest Service permit under the prior agreement. As to Naylor, he now acquired for the first time

the capacity to purchase the lot immediately for cash after January 1, 1980, even though no Forest Service permit had been issued. He also acquired the right to elect to have

his $500 cash deposit returned if he wished to surrender his right to purchase the lot. We find that the benefits and obligations on the part of each of the parties under the letter agreement of March 29, 1976, were sufficient to constitute a mutually binding contract between the parties. We also find that there was consideration for the Pqarch 29, 1976, letter agreement. The relinquishment of a legal

or contract right is sufficient consideration to support a

contract.

Rickett v. Doze (1979),

Nont.

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