Brief Fact Summary. Party 1 bought a home from party 2. One of party 1's obligations was to discharge by a certain date a mortgage held by party 2. Party 1 missed the deadline, and pursuant to the contract could have forfeited their rights to the home.
Synopsis of Rule of Law. Pursuant to the Montana antiforfeiture statute "[w]henever by the terms of an obligation a party thereto incurs a forfeiture or a loss in the nature of a forfeiture by reason of his failure to comply with its provisions, he may be relieved therefrom upon making full compensation to the other party, except in case of a grossly negligent, willful or fraudulent breach of duty."
Issue. May a party who defaulted on their obligation be relieved from for¬feiture by tendering the full amount owed?
Held. Yes. The court first quotes Section 28-1-104 of the MCA, which states: "Whenever by the terms of an obligation a party thereto incurs a forfeiture or a loss in the nature of a forfeiture by reason of his failure to comply with its provisions, he may be relieved therefrom upon making full compensation to the other party, except in case of a grossly negligent, willful or fraudulent breach of duty." Based on this statute, the court observes how in the past parties that have been in default, and subject to a penalty of forfeiture, have been allowed to redeem their right to property. Relief from forfeiture has been allowed "in any case where he sets forth facts which appeal to the conscience of a court of equity." Even if a contract allows for forfeiture in the case of default, the court by using its powers of equity can "relieve a party from the consequences of his default."
• Here, the court observed that the Defendants' actions were not "intentional, willful or fraudulent". Instead, the Defendants did everything in their power to make sure they paid the monies due on time. The only reason payment was late was that the condition of the water well did not allow the Defendants to obtain the necessary financing. During the five month period between default and actual tender of payment, the parties were engaged in settlement negotiations and the Defendants were drilling a new well. At no time did the Plaintiffs object to these events. As such, this failure to perform was reasonable.
• The court affirmed the District Court's finding that the Defendants were entitled to equitable relief. There was sufficient evidence to appeal to the "conscience of the court" and allowing the default would be "harsh and inequitable." The Defendants made an initial downpayment, made monthly payments to the Plaintiffs, made payments on the VA loan, spent over $1700 to drill a new well, and had about $10,000 in equity in the land.
• The court recognized that the Defendants defaulted on their obligations under the contract. However, the court also realized the Defendants maintained their rights under the antiforfeiture statute, 28-1-104, MCA, because they tendered all monies owed including the Plaintiffs attorneys fees and the Plaintiffs suffered no loss.
The rule as it has found expression in court decisions generally is that both in law and in equity forfeitures are abhorred.View Full Point of Law