## Facts

- Daugherty Cattle Company (Daugherty) agreed to sell real property near Billings, Yellowstone County, Montana, to Meyer Construction Company, later known as General Construction Company (General), under a February 13, 1981 contract for deed.
- The purchase price was \$1,195,000 plus interest at 9% per year.
- The contract provided that if the buyer defaulted, Daugherty could terminate and retain all installment payments made up to default “as reasonable rental for the use of the property and as liquidated damages.”
- General made the required payments for several years. In 1987, the parties amended the contract (July 8, 1987) to revise the payment schedule and reamortize the unpaid principal (identified as \$422,500), separating principal and interest due dates while keeping the 9% interest rate.
- General later defaulted under the amended schedule with an outstanding principal balance of about \$338,000.
- By the time of default, General had paid \$1,242,447.50 in principal and interest.
- After default, General offered to reconvey 47% of the land to Daugherty in exchange for cancellation of the remaining balance. Daugherty rejected the offer.
- Daugherty sued to quiet title and obtain possession, relying on the contract’s forfeiture/liquidated-damages provision and seeking to retain the payments already made.
- The District Court for the Thirteenth Judicial District, Yellowstone County, granted summary judgment for Daugherty, declined to take evidence of the property’s reasonable rental value, quieted title in Daugherty, and awarded possession while allowing Daugherty to keep the payments made.
- General appealed to the Montana Supreme Court.

## Issues

1. Whether the district court erred by refusing to consider evidence of the property’s reasonable rental value when computing damages after the seller enforced a land installment contract’s default/forfeiture clause.
2. Whether § 28-1-104, MCA (Montana’s anti-forfeiture statute), barred forfeiture when the buyer tendered a partial reconveyance (47% of the land) as “full compensation” for the remaining balance due.

## Decision

- The Montana Supreme Court affirmed the summary judgment for Daugherty.
- The court held the district court was not required to take evidence of reasonable rental value where the parties’ contract expressly allowed retention of payments as “reasonable rental” and liquidated damages upon default.
- The court held § 28-1-104, MCA did not prevent forfeiture because General did not tender “full compensation” for the breach; offering to reconvey only part of the property was not the same as satisfying the remaining payment obligation, and Daugherty was free to reject that proposal.

## Legal Principles

- A contract for deed may validly provide that, upon the buyer’s default, the seller may terminate the contract and retain installments already paid as liquidated damages and as compensation for the buyer’s use of the property.
- When a land installment contract clearly states that payments may be retained as “reasonable rental” and liquidated damages on default, a court may enforce that agreed remedy without receiving separate evidence to set a fair rental value.
- Under § 28-1-104, MCA, a contractual forfeiture may be avoided only if the defaulting party makes “full compensation” to the nonbreaching party.
- In this setting, “full compensation” requires satisfaction of the remaining contractual obligation (or a tender shown to be the equivalent); an unaccepted offer to reconvey only a portion of the land is not “full compensation” and operates as a proposed change to the parties’ bargain.

## Conclusion

The Montana Supreme Court upheld summary judgment for Daugherty, enforcing the contract-for-deed provision allowing termination and retention of all payments without a separate rental-value hearing, and ruling that the anti-forfeiture statute did not apply because General’s offer to deed back 47% of the property did not constitute “full compensation” for the remaining balance due.


Daugherty Cattle Co. v. General Construction Co., 839 P.2d 562 (1992)