Light v. Zeiter

219 P.2d 295, 124 Mont. 67, 1950 Mont. LEXIS 8

• Court: Montana Supreme Court
• Decided: May 29, 1950
• Docket: 8932
• Status: Published

Opinions

MR. CHIEF JUSTICE ADAIR:

Six plaintiffs, Ed Light, Lucy Light, H. R. Suit, Edna H. Suit, Horace Green and Hazel Green, were and are the owners of a certain described lot or parcel of land situate in the county of Wheatland together with the buildings thereon and all stock and fixtures in said building.

On April 2, 1947, plaintiffs as vendors and Herman G. Baehler, Alice Y. Baehler, Archie C. Zeiter and Cecelia C. Zeiter, as vendees, made, entered into, and signed a written contract for deed wherein plaintiffs agreed to sell and the vendees agreed to buy “that certain lot or parcel of land situate in the county of Wheatland, State of Montana and described as follows: Tracts Thirteen (13), Fourteen (14) and Fifteen (15) in Section 23, Township 8 North, Range 15 East situated in Liberty Park Subdivision in Wheatland County, Montana, together with the buildings thereon and all stock and fixtures in said building, less land deeded to the State of Montana for Highway purposes,” (emphasis supplied) for the agreed consideration of $27,000 to be paid in five installments as follows: $500 cash on the signing of the contract; $10,000 on or before April 15, 1947; $2,500 on or before. September 15, 1947; $3,500 on January 1, 1948, ánd $10,500 on January 1, 1949, deferred payments to carry interest at the rate of 6 % per annum.

The contract provides for the placing in escrow of a good and sufficient deed of general warranty to be delivered to vendees upon the performance of the contract and further provides that “all buildings and improvements now on the land and the fixtures within the building shall not be removed from said lands but shall remain the property of the parties of the first part [vendors] until this contract shall be completely performed and the deed delivered to the said second parties [vendees] *' * * and if it [the default] is the payment of money [the notice thereof] shall contain the amount necessary to cure the breach and if the same is not cured within thirty days the lands and the buildings and the improvements and all payments made as the stock which shall be substituted for the original stock, as per agreement, shall be and forever remain the absolute property of the parties of the first part [vendors] and the parties of the second part [vendees] shall have no right or claim thereto. ” Emphasis supplied.

On April 2, 1947, on the signing of the contract, the vendees paid to plaintiffs the first installment of $500 cash and on April 15, 1947, the vendees paid the further sum of $10,000 called for by the contract, upon receipt whereof and. on the date of such payment, possession of the described property was delivered to the vendees.

Prior to and at the time possession was so delivered to the vendees a bar known as the ‘ ‘ Corral Club ’ ’ was operated on the described premises by one “H. F. Green” under a retail beer license and a retail liquor license issued to such licensee, as owner, by the Montana liquor control board, and covering the license year 1946-1947.

In the latter part of June 1947, being almost three months after the execution of the contract for deed, “H. F. Green” executed and delivered to the defendants Archie C. Zeiter and Cecelia C. Zeiter, his wife, a written assignment of the 1946-1947 retail beer and liquor licenses so standing in the name of the assignor “H. F. Green.”

Following the making and delivery to them of the assignment of the licenses the defendants Archie C. Zeiter and Cecelia C. Zeiter filed with the Montana liquor control board the assignment of the “H. F. Green” licenses together with their application for the issuance to them of retail beer and retad liquor licenses for the premises for the new license year beginning July 1, 1947.

The Montana liquor control board approved and consented to the assignment so executed by “H. F. Green” and, on July 1, 1947, issued to and in the names of Archie C. Zeiter and Cecelia C. Zeiter, as owners, retail beer license No. 1483 and retail liquor license No. 1387, authorizing defendants to sell beer and liquor at retail in and from the premises, pursuant to which authority defendants operated a bar thereon from July 1, 1947, until April 20, 1948, being the day following the commencement of this suit.

The vendees failed to pay any part of the installments which, under the contract, became due on September 15, 1947, and on January 1, 1948, respectively.

On September 22, 1947, vendees were served in the manner provided in the contract with a writing signed by plaintiffs designated “Notice Terminating and Cancelling Contract for Deed,” stating the amount due and owing to plaintiffs and notifying the vendees that “on or before 30 days from date hereof all your rights and interest in the property above described shall cease and terminate and the contract shall be, by these presents, cancelled and terminated, and you are required and demanded to give up and surrender possession of said real and personal property and deliver the same to the undersigned * *

The vendees failed to pay any part of the installment due September 15, 1947, within said 30 days or at all and on October 29, 1947, two of the vendees, viz., Herman G. Baehler and Alice Y. Baehler, his wife, executed and delivered to Ed Light, H. R. Suit and Horace Green, as grantees, a quitclaim deed of all the right, title, interest, possession and equity of the Baehlers in the property described in the contract for deed. Thus did the Baehlers surrender and turn over to three of the plaintiffs all the interest or equity acquired by them through the contract.

The failure to pay the installment due September 15, 1947, or any part thereof on or before 30 days from and after September 22,1947, on which date the vendees were served with the notice terminating and cancelling the contract for deed, forfeited all defendants’ rights thereunder and made of such contract a dead instrument and rendered the continued occupation of the premises a trespass.

No part of the installment which became due January 1, 1948, was paid and on February 3, 1948, defendants were served with a second notice signed by plaintiffs addressed: “ To: Archie C. Zeiter and Cecelia C. Zeiter, his wife, at Harlowton, Montana,” notifying defendants of their default and setting forth verbatim the provisions of the contract pertaining to default, notice, forfeiture, and cancellation of the contract.

On March 18, 1948, a third notice signed by plaintiffs was served upon defendants stating the amount in which defendants were then in default and concluded with the further notice that, “You are further notified under the provisions above quoted that this is notice likewise that no further notice of cancellation and forfeiture shall be given if the breach is not cured, but that the parties shall, following the expiration of thirty (30) days, sue to cancel said contract and to forfeit the same. ’ ’

April 19, 1948, plaintiffs commenced this suit in equity against the defendants, Archie C. Zeiter and Cecelia C. Zeiter, and on that day caused the latter to be served with process herein.

On the following day, April 20, 1948, the defendants Zeiter delivered to plaintiffs possession of the whole of the premises and property described in the contract for deed and plaintiffs have since continued in possession thereof.

When the Zeiters so vacated and turned the premises and property over to plaintiffs, they retained and took with them the retail beer license and the retail liquor license so issued to them by the Montana liquor control board, on its approval of the written assignment from “H. F. Green” and of defendants’ application for new licenses for 1947-1948, and upon the payment by defendants of the statutory fees therefor.

Defendants value the licenses so standing in their names at $7,000 and offer to assign them to plaintiffs for that sum.

Plaintiffs rejected defendants’ offer, claiming that the words “stock and fixtures” employed in the contract for deed “included said licenses and the return of the same upon default as described in the contract” and here seek to have a court of equity so construe the contract; to revive and reform same, and by decree, to compel a transfer and assignment to plaintiffs of defendants’ licenses “upon payment by plaintiffs to defendants of the pro-rata share of the cost thereof between the dates the plaintiffs acquired possession and the use thereof and their expiration date.” Such “pro-rata share of the cost” was found by the district court to be the sum of $77.74.

Complaint. Plaintiffs seek to invoke the jurisdiction of a court of equity by pleading “mutual mistake” of the ten persons signing the written contract of April 2, 1947.

In their complaint plaintiffs aver: That by ‘‘ mutual mistake ’ ’ the contract does not truly express the intention of the parties; that the written contract was intended by the parties to embody and evidence an understanding and agreement that part of the consideration “was an agreement to also transfer and assign all local, state and federal beer and liquor licenses, for the year 1946, owned by plaintiffs but standing in the name of H. N. Green, otherwise known as Horace Green, one of the plaintiffs herein named, to the defendants for their use and operation in the ‘Corral Club’ * * * an establishment for the sale and dispensing of beers and liquors;” that “said mutual mistake consists in the inadvertent failure of the parties to incorporate into the written contract their oral understanding that all licenses for the sale and dispensing of beers and liquors issued to the plaintiffs, or any one of them for the convenience of the others, and which necessarily were used by them in the operation of the premises sold to the defendants were, and of necessity could not be considered otherwise, the substantial part of the consideration contracted to be paid by the defendants, as defendants well knew; that said mistake was excusable in that prospective purchasers, and actual purchasers of establishments vending beers and liquors take for granted that beer and liquor licenses are a part of the consideration for the sale of the establishment where said licenses are used, whether expressed in the agreement or not, otherwise the establishment could not operate; that said plaintiffs and defendants took for granted that said liquor licenses were part of the consideration for said sale between them; that ‘ ‘ said agreement does not truly express the intention of the parties to provide for plaintiffs’ reacquiring said licenses upon default by the defendants in the performance of all covenants and conditions provided in said contract; that the inadvertence of the said parties signatory in failing to provide for reacquiring the ownership and possession of said licenses is excusable in that neither the plaintiffs and defendants nor any of them, had any experience with the transfer or sale of beer and liquor licenses by contract and all of the parties were unaccustomed to the same; that until defendants defaulted in their payments under said contract and plaintiffs employed counsel to ascertain their rights thereunder against the defendants, plaintiffs labored under the impression that the word ‘stock and fixtures’ included said licenses and the return of the same upon default as described in the contract; that the defendants likewise labored under the same impression until they were advised differently; that said mistake defeats the intentions of the parties hereto in that defendants could by payment of first installment only acquire absolute ownership in valuable beer and liquor licenses without any redress for the plaintiffs; that if said plaintiffs cannot reacquire said licenses in this action and prevent defendants removal and transfer of the same, plaintiffs will suffer irreparable damage and gross injustice for if upon repossession of the premises by voluntary relinquishment of the defendants before judgment herein, or by judgment of this court, the defendants remove said licenses from the premises the plaintiffs will forthwith have to close down said establishment and cease operating the same;” that “said ‘Corral Club’ was described in the contract as ‘improvements’ upon the premises; that “the plaintiffs cannot have issued to them beer or liquor licenses upon original application to the State Liquor Control Board; that without said licenses of the defendants- the possession of the premises will be almost valueless to the plaintiffs for the reasons heretofore alleged; that the defendants have likewise threatened to allow the plaintiffs to reacquire possession of said premises, but have consistently asserted that plaintiffs cannot reacquire possession of title to said licenses.” Emphasis supplied.

Demurrer. Defendants demurred to plaintiffs’ complaint on the grounds: (1) Defect of nonjoinder of parties defendant in omitting to make Herman Gr. Baehler and Alice V. Baehler who signed the contract for deed parties to the action; and (2) that the complaint fails to state a cause of action against defendants, or either of them.

Answer. Upon the overruling of their demurrer, defendants filed an answer, the first portion whereof specifically admits certain allegations of the complaint, specifically denies other allegations thereof, and generally denies all the allegations not so specifically admitted or denied. The answer specifically denies that there was a mutual mistake in the making of the contract for deed or that such contract does not express the true intent of the parties thereto and affirmatively alleges that such contract “was intended to and did express the actual intent of the parties” thereto.

Defendants specifically “deny that they were under the impression that the words ‘stock and fixtures’ included said licenses” and allege that they “understood said phrase in its ordinary meaning” and allege that they sought advice upon the interpretation of said agreement only when informed that plaintiffs construed such words as is alleged in their complaint.

As to the offer to do equity pleaded in paragraph XI of the complaint, the defendants deny that plaintiffs’ offer to pay “the pro-rata share of the cost” of the licenses is an equitable offer and allege that to be equitable it should be a cash offer in the sum of $7,000; allege that the contract for deed was cancelled and fully terminated on October 22, 1947, by their defaults and the notices so served upon them by plaintiffs; allege that at all times since the termination of the contract for deed that defendants have been ever ready and willing to turn over to the said plaintiffs the property described in such contract, and that defendants have actually delivered possession of said property to the said plaintiffs. ,

The answer also separately states five separate affirmative defenses. In the first separate defense defendants alleged that they made default in the payment of the installment due September 15, 1947; that on September 22, 1947, they were duly served with plaintiffs’ notice terminating and cancelling the contract for deed; that defendants failed to make any of the payments necessary to cure the breach on or before October 22, 1947, or at all, and that “under the terms of said notice the said contract terminated on that date [October 22, 1947] and the property described in said contract became the property of said plaintiffs and the defendants had no right or claim thereto, and that by reason of said termination, the said contract ceased to exist and could not become the subject of reformation.”

We do not deem it necessary in our determination of this appeal to separately review the other four affirmative defenses pleaded in the answer.

Reply. By reply plaintiffs placed in issue the affirmative matters pleaded in the answer.

Trial. A trial of the issues so made was had before the court, sitting without a jury, following which, written findings of fact and conclusions of law were filed and decree entered for plaintiffs.

Decree. The decree ordered and adjudged:

1. That the contract be reformed by inserting and including “among the property sold to defendants the beer and liquor licenses for 1946-1947 standing in the name of H. F. Green * *

2. That defendants “forthwith surrender and turn over to the plaintiffs the absolute possession of * * * the beer and-liquor licenses which are renewals of the licenses assigned to the defendants by H. F. Green, including the 1949-1950 licenses” and said “defendants shall forthwith assign the current beer and liquor licenses to the plaintiffs;”

3. That the clerk of court “shall surrender to the defendants the sum of $77.74 lodged with her when the defendants have complied with” the two preceding paragraphs of the decree;

4. That the “contract for deed as reformed is hereby can-celled and the rights and payments of the defendants are forfeited and the defendants have no right, title, interest or estate whatever in said * * * licenses * * * and the title of the plaintiffs thereto is good and valid; ’ ’

5. That “defendants are permanently enjoined from in any manner disposing of the beer or liquor licenses now in their possession, or any renewals thereof, or from applying to the Montana Liquor Control Board for the transfer or assignment of the same to any other parties than the plaintiffs; ’ ’ and

6. The court “reserves jurisdiction to settle and determine any controversy which may arise between the parties in the performance by them of the terms of this decree. ’ ’

Defendants specify as error the overruling of their demurrer to the complaint, the making of the trial court’s conclusions of law and the making and entering of the above decree.

The chief issue in this suit became and is the right of the six plaintiffs to demand and the authority of a court of equity to adjudge and order the defendants to “forthwith surrender and turn over to the plaintiffs” and make an involuntary assignment to plaintiffs of the retail beer license and the retail liquor license so issued on July 1, 1947, by the Montana liquor control board, to and in the names of the defendants, Archie C. Zeiter and Cecelia C. Zeiter, only.

The statute authorizes defendants “with the consent of the board,” R. C. M. 1947, sec. 4-410 to make a voluntary assignment of their licenses to a qualified person or to qualified persons, R. C. M. 1947, secs. 4-401, 4-402, subd. 4, 4-403, 4-408, 4-409, 4-412, subd. 5, having the occupancy and use of “the premises in respect to which [they are] issued,” R. C. M. 1947, sec. 4-410, provided such “premises are suitable for the carrying on of the business.” R. C. M. 1947, sec.. 4-408. Assuming that plaintiffs are qualified persons and that their premises are suitable for carrying on the business, the plaintiffs, with the consent of the board, are privileged to make a deal with the defendants for a voluntary transfer of the licenses. However, a voluntary transfer is one thing while an involuntary assignment and coerced surrender, effected by court decree after making for the parties a contract to which they did not and could not lawfully agree, is quite another matter.

The 1946-1947 licenses for the premises were not transferred to defendants on April 2, 1947, when the contract for deed was entered into and signed nor were they transferred to defendants by any of the terms or provisions set forth in such contract.

It affirmatively appears from the allegations of plaintiffs’ complaint as well as from the trial court’s findings of fact that at the time of the signing of the contract for deed no licenses had been issued to five of the plaintiffs and that they had neither beer nor liquor license to transfer; that at such time the only retail beer license and the only retail liquor license for the premises were the licenses issued to and standing in the name of “H. F. Green,” only, and that “H. F. Green” made no transfer or assignment of his licenses in the written contract for deed nor at the time such contract was executed, nor did “H. F. Green” make any transfer or assignment of the licenses for the premises until in June 1947, being almost three months after the signing of the contract for deed and shortly before June 30, 1947, at midnight whereof the 1946-1947 licenses would expire. The assignment so made, immediately before the expiration of the “H. F. Green” licenses, merely transferred to the assignees the preferential privilege accorded to the assignor to have new licenses issued to his assigns for the new license year beginning July 1, 1947, irrespective of the limitations established by the “Quota Law,” Chapter 226, Session Laws of 1947, R. C. M. 1947, sec. 4-403.

Thus defendants did not acquire their licenses through the written contract of April 2, 1947, which plaintiffs here ask the court to reform. Defendants acquired their preferential privilege to be granted the 1947-1948 licenses through the much later written assignment executed on June 26, 1947, by the licensee “H. F. Green,” in favor of the defendants Archie C. Zeiter and Cecelia C. Zeiter.

It was this assignment from “H. F. Green,” the Montana liquor control board consenting, that effected the transfer to defendants of the 1946-1947 retail beer and liquor licenses for the premises. The validity of the “H. F. Green” assignment was not challenged nor did plaintiffs ask that it be reformed.

Neither the contract for deed of April 2,1947, nor the “Notice Terminating and Cancelling Contract for Deed” served on defendants on September 22, 1947, nor the quitclaim- deed of October 29, 1947, from the Baehlers, grantors, to the plaintiffs Ed Light, H. R. Suit, and Horace Green, grantees, nor the notice served upon defendants February 3, 1948, nor the notice served March 18, 1948, makes any mention whatever of any beer or liquor licenses.

In paragraph XI of their complaint plaintiffs allege: ‘‘ That the plaintiffs offer to do equity as follows: To pay the defendants the pro-rata share of the original cost of all licenses issued to defendants for 1947-1948 for the plaintiffs’ use thereof until renewal date of each license; and to cancel defendants’ note as paid in full for purchase from the plaintiffs of 62 cases of whiskey in a warehouse in Billings, Montana, as in said contract provided.” Emphasis supplied.

The “defendants’ note” last above referred to apparently is a promissory note given under the provisions of the next to the last clause in the written contract for deed of April 2, 1947, which provides: “It is further agreed that the parties of the first part [plaintiffs] have 62 cases of whiskey in a warehouse in Billings, Montaná, and the parties of the second part [the vendees] agree to buy tbe same at tbe market place as of April 2nd, 1947, and to sign a note for the purchase price of the same, and it is further agreed that the purchase price of said whiskey shall be paid on or before the completion of this contract. ’ ’

However, the law did not, and it does not allow any of the plaintiffs to own or operate a bar on their premises or to conduct thereon the business of selling or keeping for sale any alcoholic liquor without first having obtained from the Montana liquor control board a retail beer license and a retail liquor license duly issued to and in the name of each person so owning and operating such bar and business.

“Any person who has not been issued a license under this act, who shall sell or keep for sale any alcoholic liquor, shall be guilty of a felony and upon conviction thereof shall be fined not less than one thousand dollars ($1000.00) nor more than five thousand dollars ($5,000.00), or be imprisoned in the state prison for not less than one (1) nor more than five (5) years, or both such fine and imprisonment.” R. C. M. 1947, sec. 4-420. So reads the law.

The state not only has the right but it demands to know the identity of all persons to whom it grants the privilege of engaging in the liquor business. The law requires that all such persons come out in the open and there reveal to the state their exact interest, concern and participation when trafficking in liquor. A number of such participants may not hide their identity from the law by standing back in the shadows and permitting but one of their number to come forth, speak, act and front for them. The state requires that all licenses by it issued granting the privilege to sell liquor at retail within its borders be signed by the licensees; that the licenses be posted in a conspicuous place on the premises in respect to which they are issued, R. C. M. 1947, sec. 4-410; and that no person shall sell or keep for sale any alcoholic liquor or otherwise traffic in liquor cept he be a person duly licensed under the law. Ch. 84, Laws of 1937, sees, 1 and 18, R. C. M. 1947, secs. 4-401 and 4-420.

For plaintiffs to lawfully sell ‘ ‘ 62 cases of whiskey in a warehouse in Billings, Montana” as they contracted' in writing to do, required that they first have a license granting them that privilege and duly issued to them by the Montana liquor control board.

Plaintiffs affirmatively plead that the “Corral Club” was an establishment for the sale and dispensing of beers and liquors. The owners and operators of such business were required by law to first obtain both a beer and a liquor license before dispensing their wares. Should the “Corral Club” bar be owned and operated by the six plaintiffs as partners, then the law requires that the licenses must be issued to the partnership and must set forth “the names of the persons conducting the business. ” R. C. M. 1947, see. 4-410. All the partners must be qualified persons. The disqualification of a single partner works a disqualification of all the partners. Perry v. Luding, 123 Mont. 570, 217 Pac. (2d) 207, 217; Coletti v. State Board of Equalization, Cal. App., 209 Pac. (2d) 984.

In their complaint the six plaintiffs affirmatively plead that the 1946-1947 licenses for the “Corral Club” bar were “owned by plaintiffs but standing in the name of H. N. Green” and that by “mutual mistake” the parties thereto inadvertently failed “to incorporate into the written contract their oral understanding that all licenses for the sale and dispensing of beers and liquor issued to plaintiffs, or any one of them for the convenience of the others, and which were necessarily used by them in the operation of the premises sold to the defendants” thereby establishing that at least five of their number were unlicensed and illegal owners and operators of such bar. No bar in this state may be lawfully owned and operated by six persons under a liquor license issued to and in the name of but one person, nor does the law permit six persons, under a liquor license issued to and in the name of but one person, to establish ownership and the right to exercise the privilege granted by such liquor license so issued to and standing in the name of but one of their number regardless of whether such arrangement was brought about by design, ignorance, lack of experience or “for the convenience of the others.” Nor may plaintiffs excuse their failure to comply with the requirements of the law by pleading that they were “unaccustomed to” owning and operating bars or trafficking in beer and liquor licenses or because they “labored under the impression that the words ‘stock and fixtures’ included said licenses.”

The law is that “no person, except the licensee therein named, shall exercise any of the privileges granted thereunder.” R. C. M. 1947, sec. 4-410.

A retail liquor license issued by the state to any qualified licensee “is a matter of privilege rather than of right, personal to the licensee, and is neither a right of property, nor a contract or contract right, in the legal or constitutional sense of those terms.” Emphasis supplied. 48 C. J. S., Intoxicating Liquors, sec. 99, page 223, n. 72, 76; Perry v. Luding, supra. “It does not run with the business conducted under the privilege it grants and is not an asset of it.” 48 C. J. S., Intoxicating Liquors, sec. 109, page 228, n. 44. It is neither “lands,” “buildings,” “improvements,” nor “stock and fixtures.”

When the contract for deed was executed no one other than the lone licensee “H. F. Green” had any retail beer or liquor license for the ‘premises and, having no licenses to transfer or assign, it is clear that at least five of the plaintiffs had none “to incorporate into the written agreement.” Hence their omission and failure to incorporate that which they never owned or had any right to transfer cannot be said to evidence a “mutual mistake” from which they are entitled to relief in a court of equity. See: 45 Am. Jur., Reformation of Instruments, secs. 46,' 47, pp. 609, 610, n. 18-20; sec. 49, p. 611, n. 15; sec. 50, pp. 611, 612, n. 19, 20; see. 79, p. 632, n. 4, 5; sec. 103, p. 646, n. 15, 16.

“A court of equity cannot reform an instrument except on allegations which make out a case for the equitable remedy asked. As in other actions, all facts necessary to make out a ease must be pleaded. And if the complaint seeks to reform a written instrument and also to enforce it when reformed, the allegations must be sufficient for both purposes.” 45 Am. Jur., Reformation of Instruments, sec. 98, p. 644, n. 4, 6. Compare: Auerbach v. Healy, 174 Cal. 60, 161 Pac. 1157.

Plaintiffs’ complaint not only fails to state facts sufficient to entitle them to the licenses in question but it affirmatively shows that they have no right thereto.

Defendants acquired their right to the licenses by: (1) Acquiring suitable premises through their written contract with plaintiffs; (2) obtaining from the licensee “H. F. Green” an assignment of the 1946-1947 licenses for the premises; and (3) obtaining the Montana liquor control board’s consent to the assignment and approval of their qualifications and application for the 1947-1948 licenses. Plaintiffs have wholly failed to plead or establish a right in themselves to have a court of equity, bjr decree, wrest from defendants their licenses so acquired or to coerce defendants into making a transfer and assignment thereof on an offer or terms which defendants decline to voluntarily accept.

The decree is reversed and the cause remanded with directions to enter judgment against the plaintiffs for defendants’ costs and for dismissal of the action.

ASSOCIATE JUSTICES FREEBOURN and BOTTOMLY concur. MR. JUSTICE METCALF concurs in the result.