Case Title: Meyer v. Ludvik

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1984-04-09T00:00:00Z

Document:
Meyer v. Ludvik1984 WY 37680 P.2d 459Case Number: 83-159, 83-160Decided: 04/09/1984FRED W. MEYER AND BLANCHE L. MEYER, APPELLANTS (PLAINTIFFS)

v.

JAMES A. LUDVIK AND HORSESHOE CREEK LIMITED, A COLORADO GENERAL PARTNERSHIP, APPELLEES (DEFENDANTS).

HORSESHOE CREEK LIMITED, A COLORADO GENERAL PARTNERSHIP, APPELLANT (DEFENDANT),

v.

FRED W. MEYER AND BLANCHE L. MEYER, APPELLEES (PLAINTIFFS), and JAMES A. LUDVIK, APPELLEE (DEFENDANT).

Supreme Court of Wyoming
FRED W. MEYER AND BLANCHE 
L. MEYER, APPELLANTS (PLAINTIFFS)

v.

JAMES A. LUDVIK AND 
HORSESHOE CREEK LIMITED, A COLORADO GENERAL PARTNERSHIP, APPELLEES 
(DEFENDANTS).

HORSESHOE CREEK LIMITED, 
A COLORADO GENERAL PARTNERSHIP, APPELLANT (DEFENDANT),

v.

FRED W. MEYER AND BLANCHE 
L. MEYER, APPELLEES (PLAINTIFFS), and JAMES A. LUDVIK, APPELLEE 
(DEFENDANT).

Appeal from the District 
Court, PlatteCounty, Arthur T. Hanscum, 
J.

E. James Burke 
of Hanes, Gage & Burke, P.C., Cheyenne, for Fred W. Meyer and Blanche L. 
Meyer.

Frank J. Jones 
of Jones & Weaver, P.C., Wheatland for James A. 
Ludvik.

James W. Gusea 
of Vines, Gusea & White, P.C., Cheyenne, for Horseshoe Creek, Ltd. 

Before ROONEY, C.J., and THOMAS, ROSE, BROWN and 
CARDINE, JJ.

ROSE, 
Justice.

[¶1.]     The resolution of the 
issues raised by this appeal requires an examination of the elements of 
misrepresentation as a ground for rescinding a contract. This case arose as an 
action by appellants Fred W. and Blanche L. Meyer to recover on a promissory 
note and mortgage executed by appellant Horseshoe Creek Limited (Horseshoe) and 
assumed by appellee James A. Ludvik as assignee of a contract for the deed to 
the encumbered ranch property. Ludvik defended on the theory that he was 
entitled to rescind the assignment of the contract for deed and, therefore, had 
no obligation on the promissory note or mortgage.

[¶2.]     The case was tried to a 
jury which returned a verdict in favor of the Meyers and against Horseshoe and 
awarded damages in the amount of $196,007.47. The jury determined that Ludvik 
was entitled to rescind the assignment of the contract for deed, thereby 
precluding the Meyers from collecting damages from him. The jury further found 
that, as a result of the rescission, Ludvik was entitled to recover from 
Horseshoe all of the payments he had made under the assignment of the contract 
for deed. The Meyers and Horseshoe appeal from those portions of the jury 
verdict and judgment which grant rescission of the assignment, and Horseshoe 
appeals the award of restitution to Ludvik. The Meyers raise questions 
concerning the trial court's refusal of certain proposed jury 
instructions.

[¶3.]     We will 
affirm.

FACTS

[¶4.]     In October, 1976, Fred 
M. Meyer, who is the son of appellants Fred W. and Blanche Meyer, and Tom Scifo 
formed a partnership under Colorado law known as Horseshoe Creek Limited. The 
following month Horseshoe entered into a contract to purchase a ranch in 
PlatteCounty from James 
Centlivre. In February, 1977, Meyer and Scifo transferred their interests in the 
partnership to Car-ro, Inc. and to Taras, Inc., respectively, although the 
partnership entity continued to be known as Horseshoe Creek Limited. The 
stockholders of Car-ro, Inc. are the minor children of Meyer and his brother. 
Scifo's minor children are the stockholders of Taras, Inc.

[¶5.]     From the time of the 
purchase of the ranch in November, 1976, Horseshoe borrowed money from Fred W. 
and Blanche Meyer to meet the payments called for under the contract for deed. 
By December, 1978, Horseshoe was indebted to the Meyers in the sum of $121,000. 
To provide security to the Meyers, Horseshoe, on December 11, 1978, executed a 
promissory note and a mortgage on the ranch property.

[¶6.]     Prior to the execution 
of this note and mortgage, Horseshoe, through its agent Fred M. Meyer, began 
negotiations with Ludvik and with James S. Jackson Company (Jackson) to assign 
Horseshoe's interest in the contract for the deed to the ranch. During this time 
Ludvik conducted extensive research concerning the title to the ranch. As a 
result of a title insurance commitment dated January 17, 1979, Ludvik was aware 
of two judgment liens on the property as well as a lis pendens filed by 
Jackson. Fred M. 
Meyer, representing Horseshoe, assured Ludvik that Jackson's claim in the 
amount of $352,010.54 as well as the smaller judgment liens "would be taken care 
of."

[¶7.]     On January 23, 1979, 
Horseshoe executed an "Assignment of Contract for Deed," transferring all of its 
interest in the ranch to Ludvik. The assignment expressly provided that Ludvik 
would (1) assume the balance due under the contract for deed to Centlivre in the 
amount of $638,689.08; (2) assume the debt owed to the Meyers in the amount of 
$121,000; (3) execute a promissory note to Horseshoe in the sum of $25,000; and 
(4) pay Horseshoe $750 in cash. Ludvik took possession of the ranch upon the 
execution of the assignment.

[¶8.]     Horseshoe subsequently 
obtained releases of the two judgment liens on the property. On August 14, 1979, 
Horseshoe entered into a compromise and settlement agreement with Jackson, which 
agreement provided for the payment of $255,000 to Jackson by Horseshoe and Fred 
M. Meyer in return for the discharge of all claims asserted by Jackson, 
including the claim to the ranch property. Horseshoe never fulfilled its 
obligation under the settlement agreement and, pursuant to the agreement's 
terms, a judgment was entered in favor of Jackson in the United States District Court for 
the Northern District of Indiana. On January 4, 1980, the United States Marshal 
for the Northern District of Indiana assigned the Centlivre contract for deed to 
Jackson on 
behalf of Horseshoe.

[¶9.]     Ludvik, meanwhile, had 
instituted a quiet-title action against Jackson in October, 1979. The district court 
determined that Jackson's assignment, rendered by the federal district court in 
Indiana, took priority over Ludvik's assignment, and Ludvik was removed from 
possession of the ranch on July 20, 1980. This court reversed that decision in 
Ludvik v. James S. Jackson Company, 
Inc., Wyo., 635 P.2d 1135 (1981), and Ludvik was 
effectively restored to possession in October, 1981. He received $22,000 from 
Jackson as 
compensation for the period that he was out of possession. By this time, 
however, and in further complication of the situation, Ludvik had acquired 
Centlivre's rights as seller under the original contract for 
deed.

[¶10.]  On February 5, 1982, Fred W. and Blanche 
Meyer, having decided that it was time to collect on the indebtedness undertaken 
by Horseshoe and assumed by Ludvik pursuant to the assignment of the contract 
for deed, sent a letter of demand to Ludvik. In his response dated February 26, 
1982, Ludvik asserted that he no longer was obligated to the Meyers under the 
assignment, because Horseshoe had defaulted on the original contract and was 
unable to convey clear title to Ludvik as it had agreed to do. This lawsuit 
followed.

[¶11.]  At trial, Ludvik presented evidence to 
show that he was entitled to rescind the assignment as a result of either fraud 
or breach of contract by Horseshoe. Ludvik's claim of fraud was based upon the 
assurances of Fred M. Meyer, acting for Horseshoe, that he would resolve any 
adverse claims upon the ranch property and would convey a clear title to Ludvik. 
As grounds for his breach-of-contract claim, Ludvik asserted that Horseshoe had 
encumbered the subject property contrary to the terms of its contract with 
Centlivre and, therefore, was unable to perform under its assignment to Ludvik. 
The jury returned a verdict finding generally that Ludvik was entitled to 
rescind the assignment from Horseshoe and that he was entitled to restitution in 
the amount of his payments under the assignment.

[¶12.]  Appellants contend on appeal that the 
evidence is insufficient to support the verdict granting rescission under either 
theory urged by Ludvik. In addition, the Meyers assert that the trial court 
erred in failing to instruct the jury concerning their right as third-party 
beneficiaries to enforce the contract between Ludvik and Horseshoe. Horseshoe 
challenges the validity of the award of restitution to Ludvik in that the jury 
failed to consider the benefits received by Ludvik during his possession of the 
ranch.

[¶13.]  We will hold that appellee Ludvik proved 
by clear and convincing evidence all of the elements of misrepresentation 
necessary to rescind his assignment from Horseshoe. Since the right of the 
Meyers, as third-party beneficiaries, to enforce a valid assignment between the 
two principals was never questioned, we will hold that the trial court properly 
denied the Meyers' proposed jury instructions. Finally, we will hold that the 
record supports a conclusion that the jury properly considered the benefits 
received by both parties in arriving at its award of restitution to 
Ludvik.

I

[¶14.]  The jury was instructed as follows 
concerning the elements of fraud or misrepresentation:

"JURY INSTRUCTION NO. 
5

"In this action Defendant 
Ludvik has the burden of proving the contract between himself and Horseshoe 
Creek was rescinded.

"1. He was entitled to 
rescind for fraud or misrepresentation if all of the following are 
proved:

"a. Any misrepresentation 
of facts were [sic] made by Horseshoe Creek;

"b. Such misrepresented 
fact was material;

"c. Ludvik relied on such 
misrepresentation;

"d. Ludvik's reliance was 
justified;

"e. Notice of rescission 
was promptly given upon discovery of the misrepresentation; 
and

"f. Defendant Ludvik has 
returned or offered to return all benefits derived from his possession of the 
ranch."

This instruction 
is consistent with recent decisions by this court in which we have set out the 
elements necessary to establish a right to rescind a contract on the basis of 
misrepresentation. Schepps v. Howe, Wyo., 665 P.2d 504 (1983); Hagar v. Mobley, Wyo., 
638 P.2d 127 (1981). In Schepps v. Howe, supra, 665 P.2d  at 508, we 
said:

"* * * We recognized in 
our recent decision in Hagar v. 
Mobley, Wyo., 638 P.2d 127 (1981), that fraudulent misrepresentations as to 
material facts can give rise to the remedy of recision of a contract for the 
sale of real property. Before this remedy is available, however, our legal 
precedents made it clear that certain elements must be established. First, the 
buyer is required to prove in a clear and convincing fashion that the seller 
misrepresented a material fact to him. Second, the buyer must establish that 
these representations were relied upon by the buyer in entering into the 
contract and that such reliance was reasonable. Third, the buyer must establish 
that as a result of his reliance upon the false representations he suffered 
injury. [Citations.]"

We acknowledged 
in an earlier case that a party's right to avoid a contract and recover the 
purchase price is conditional upon his notice, within a reasonable time after he 
discovers the misrepresentations, that he intends to seek rescission. Fryer v. Campbell, 48 Wyo. 122, 43 P.2d 994, 
997 (1935). Appellants agree that Instruction No. 5 correctly describes the 
basis upon which a contract may be rescinded for misrepresentation, but contend 
that appellee failed to carry his burden of proof with respect to each of the 
specified elements.

Misrepresentation of a 
Material Fact

[¶15.]  Appellants take the position that all of 
the representations made to Ludvik were promissory in nature and cannot 
constitute a basis for fraud. Relying on our decision in In re Adoption of Hiatt, 69 Wyo. 373, 
242 P.2d 214 (1952), appellants urge that the fraud must relate to a past or 
existing fact and may not be predicated on a representation which relates to the 
future or which depends upon contingencies that may or may not 
happen.

[¶16.]  We agree with appellants that a promise 
or a statement of one's intention to act in the future, without more, cannot 
form the basis for an action in fraud. However, a promise constitutes a 
representation of the maker's present intention to perform, which representation 
is an assertion of a fact - the maker's state of mind. If such promise is made 
with the intention of not performing, it is a misrepresentation of an existing 
fact and is generally held to be actionable. We recognized this proposition in 
Johnson v. Soulis, Wyo., 
542 P.2d 867, 872 (1975), where we said:

"* * * The general rule 
is that fraud ordinarily cannot be founded upon a representation which is 
promissory in nature. [Citations.] This general rule, however, is subject to an 
exception to the effect that if the representation, although promissory in 
nature, is made with no intention of performing it or with a present intention 
not to perform, it may then serve as a foundation for an action in fraud; one of 
the justifications for the exception being that there does exist a 
misrepresentation of a present fact, that is, the intention of the promissor. 
[Citations.]"

See also, Bissett v. Ply-Gem Industries, Inc., 533 F.2d 142, 145 (5th Cir. 1976); Schroerlucke v. Hall, Ky.App., 249 S.W.2d 130 (1952); Hearns v. Hearns, 
333 Mich. 423, 
53 N.W.2d 315 (1952); Roberson v. 
Swain, 235 N.C. 50, 69 S.E.2d 15 (1952); James and Gray, Misrepresentation - 
Part II, § 10, 37 Maryland L.Rev. 488, 502-508 (1978).

[¶17.]  Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906 (1957), presents a factual situation similar to the 
instant case. There, the defendant had represented that he

"`* * * would undertake 
to finance the manufacture of the patented machine' and `would use his best 
efforts to promote the sale or lease of the machine to other 
manufacturers,'"

if the plaintiff 
would assign his patent to the defendant and execute certain other contracts. Sabo v. Delman, supra, 164 N YS.2d at 
715, 143 N.E.2d  at 907. In rejecting the appellate division's conclusion that 
such statements were promissory in nature and therefore not basis for an action 
in fraud, the New 
York Court of Appeals said:

"While `Mere promissory 
statements as to what will be done in the future are not actionable' (Adams v. Clark, 239 N.Y. 403, 410, 146 N.E. 642, 644), it is settled that, if a promise was actually made with a 
preconceived and undisclosed intention of not performing it, it constitutes a 
misrepresentation of `a material existing fact' upon which an action for 
rescission may be predicated. [Citations.]" Sabo v. Delman, supra, 164 N.Y.S.2d  at 
716, 143 N.E.2d  at 908.

This rule is 
consistent with the position taken by the Restatement, Second, Contracts § 
171(2):

"If it is reasonable to 
do so, the promisee may properly interpret a promise as an assertion that the 
promisor intends to perform the promise."

Comment b of 
that section provides:

"A promise as a statement of intention. 
It is ordinarily reasonable for the promisee to infer from the making of a 
promise that the promisor intends to perform it. If, therefore, the promise is 
made with the intention of not performing it, this implied assertion is false 
and is a misrepresentation. * * * The promisor's intention not to perform his 
promise cannot be established merely by proof of its non-performance. 
Nevertheless, the probable inability of a party, at the time the contract is 
made, to perform it, for instance the insolvency of one who buys land, is 
evidence bearing on the question of intent not to perform. If the promisor knows 
or should know that he cannot at least substantially perform his promise, this 
is strong although not conclusive evidence of an intent not to carry it 
out."

[¶18.]  The jury had an opportunity to observe 
the demeanor of the witnesses and gauge their credibility as they testified 
concerning Horseshoe's representation that all liens on the property would be 
removed and that fee title would pass. There was evidence that Horseshoe and its 
representatives were in a precarious financial situation and were facing a 
number of other lawsuits at the time of the transaction with Ludvik. The jury 
heard testimony concerning the significance of these representations to Ludvik 
during negotiations for the assignment of the contract for 
deed.

[¶19.]  The rule that this court, as a reviewing 
court, will not substitute its judgment on the facts for that of the jury, Rissler & McMurry Company v. Atlantic 
Richfield Company, Wyo., 559 P.2d 25 (1977), is particularly compelling here 
where the fact to be determined is the state of mind of the defendant. It is the 
trial court, not this court, which must be satisfied that Horseshoe's 
misrepresentation of a material fact was established by clear and convincing 
evidence. Thomasi v. Koch, Wyo., 660 P.2d 806, 811 
(1983).

[¶20.]  In Thomasi v. Koch, supra, we reviewed our 
appellate duties when considering factual matters determined by the district 
court under the clear-and-convincing standard. We said:

"* * * The only question 
we must resolve is whether the evidence viewed in the light most favorable to 
the appellee and ignoring any evidence in favor of the [appellant] is sufficient 
to make out a prima facie case. Ward v. 
Waterman, [85 Cal. 488, 24 P. 930 (1890)]. This court 
previously has adopted language to this effect:

"`* * * When the evidence 
is such that the mind readily reaches a satisfactory conclusion as to the 
existence or nonexistence of a fact in dispute, then the evidence is, of 
necessity, clear and satisfactory.' Continental Sheep Co. v. Woodhouse, 71 
Wyo. 194, 202, 256 P.2d 97 (1953), quoting language found in Good Milking Mach. Co. v. Galloway, 168 
Iowa 550, 150 N.W. 710, 712 (1915).

"We further had said that 
clear and convincing evidence is `that kind of proof which would persuade a 
trier of fact that the truth of the contention is highly probably.' MacGuire v. Harriscope Broadcasting Co., 
Wyo., 612 P.2d 830, 839 (1980)." 660 P.2d  at 811-812.

[¶21.]  In this case, the jury had before it 
evidence as to the circumstances surrounding the execution of the assignment, 
including the likely inability of Horseshoe to substantially perform its 
promise. We conclude that such evidence was sufficient to persuade the jury of 
the high probability that Horseshoe's agents misrepresented a material fact - 
their intent to remove Jackson's claim to the ranch 
property.

Justifiable 
Reliance

[¶22.]  Next we must examine the evidence to 
determine whether it supports a finding that Ludvik relied on Horseshoe's 
promises and, if so, whether such reliance was justified. Ludvik testified that 
he entered into the assignment in reliance on Horseshoe's representations that 
he would receive clear title to the property and that he continued to rely on 
these representations when he paid $128,520 under the terms of the assignment. 
Ludvik testified further that he believed that all parties entered into the 
assignment with the best of intentions, that he enjoyed a friendly relationship 
with Horsehoe's agents during negotiations for the ranch, and that Fred M. 
Meyer, the primary negotiator for Horseshoe, remained on the ranch and worked 
for Ludvik following the execution of the assignment.

[¶23.]  Appellants contend that Ludvik's asserted 
reliance on Horseshoe's representations was unjustified since, prior to 
accepting the assignment, he procured a title insurance commitment indicating 
the state of title to the ranch. Furthermore, Ludvik sought legal advice and was 
well aware that litigation or settlement would be necessary to remove Jackson's claim to the 
property.

[¶24.]  Restatement, Second, supra, § 171, 
Comment b provides:

"It is ordinarily 
reasonable for the promisee to infer from the making of a promise that the 
promisor intends to perform it."

In determining 
the reasonableness of a recipient's reliance on statements relating to the 
future, courts have distinguished between predictions of external events not 
within the speaker's control and commitments as to what the speaker will do in 
the future. While no one should expect to justify his reliance on predictions, 
opinion, or estimates about that which is yet to come, reasonable people can and 
do rely on commitments within the apparent control of the promisor. 37 Maryland 
L.Rev., supra, at 502. The court in Sabo 
v. Delman, supra, 164 N.Y.S.2d  at 717, 143 N.E.2d  at 908, said in this 
regard:

"The representations of 
the defendant Delman in this case, that he would finance plaintiff's machine and 
use his best efforts to promote its sale and lease, related to something to 
occur in the future, but that does not prevent the plaintiff from relying upon 
them in an action brought to avoid the contracts which they induced. In [Ritzwoller v. Lurie, 225 N.Y. 464, 
467-468, 122 N.E. 634, 635] which involved representations having an element of 
futurity just as pronounced as those here alleged, the court wrote in language 
exceedingly apt: `While the representations * * * related to something which was 
to occur in the future * * * we think the allegations in the complaint describe 
a case where a defendant has fraudulently and positively as with personal 
knowledge stated that something was to be done when he knew all the time it was 
not to be done and that his representations were false. It is not a case of 
prophecy and prediction of something which it is merely hoped or expected will 
occur in the future, but a specific affirmation of an arrangement under which 
something is to occur, when the party making the affirmation knows perfectly 
well that no such thing is to occur. Such statements and representations when 
false are actionable within the authority of Adams v. Gillig, 199 N.Y. 314, 92 N.E. 670.'"

Similarly, the 
representation in the case at bar, upon which Ludvik relied, was "a specific 
affirmation of an arrangement" to resolve adverse claims to the property after 
the execution of the assignment. Ludvik's knowledge of these claims and their 
legal implications does not prevent his justifiable reliance on Horseshoe's 
promise and we see no reason to disturb the jury's conclusion to that 
effect.

Prompt Notice of 
Rescission

[¶25.]  Appellants rely on Fryer v. Campbell, supra, 48 Wyo. 122, 
43 P.2d 994, for the proposition that a rescission must be exercised promptly 
upon the discovery of grounds giving rise to the right. However, what 
constitutes a prompt and timely notice depends upon the facts of a particular 
case. Eggen v. M. & K. Trailers and 
Mobile Home Brokers, Inc., 29 Colo. App. 177, 482 P.2d 435 
(1971).

[¶26.]  In the instant case, Horseshoe assigned 
the contract for deed to Ludvik on January 23, 1979. On August 14, 1979, 
Horseshoe executed a compromise and settlement agreement with a purported end 
toward the release of all claims asserted by Jackson. Horseshoe did not fulfill 
its obligation under the settlement agreement, and Ludvik was removed from 
possession of the ranch on July 20, 1980. On October 27, 1981, this court 
determined that Ludvik's interest in the ranch property was superior to that of 
Jackson, Ludvik v. James S. Jackson Company, Inc., supra, and Ludvik was 
restored to possession. Ludvik testified that he resumed possession of the ranch 
as the purchaser of Centlivre's seller interest in the original contract for 
deed. On February 5, 1982, Fred W. and Blanche Meyer sent a letter to Ludvik 
demanding payment on the promissory note that Ludvik had assumed under the terms 
of the assignment from Horseshoe. In a letter dated February 26, 1982 to the 
attorney representing the Meyers and Horseshoe, Ludvik responded that he 
considered his title to the ranch to be derived from Centlivre, not from 
Horseshoe, and that he no longer was obligated under the assignment from 
Horseshoe. Ludvik testified at trial that he considered this letter to be a 
notice of rescission of the assignment:

"Q. Have you [Ludvik] 
ever given anyone any notice that you have rescinded this 
contract?

"A. Yes, I 
have.

"Q. 
Whom?

"A. I believe to Mr. 
Burke.

"Q. And I show you what's 
been marked for identification as Defendants' Exhibit 12, and can you identify 
that document?

"A. Yes, this is a letter 
that I sent to Mr. Burke and his firm in response to the letter of demand when 
Fred and Blanche, the letter of demand from Fred and Blanche 
Meyer.

"Q. What was the date on 
that letter?

"A. February 26, 
1982."

[¶27.]  Appellants contend that Ludvik had 
discovered as early as 1979 or 1980 all of the facts upon which he based his 
claim for rescission and that, therefore, his letter of February 26, 1982 cannot 
reasonably be considered a timely notice of rescission. We do not 
agree.

[¶28.]  Because of the nature of the 
representations - promises to remove at an unspecified future date all adverse 
claims to the subject property - Ludvik could not be expected to discover right 
away that the representations were false. In addition, the compromise and 
settlement agreement executed by Horseshoe undoubtedly had the effect of 
inducing belief that the situation would be remedied. An aggrieved party's delay 
in rescinding a contract is excused where the other party's continued assurances 
that his representations are true contribute to the delay. Eggen v. M. & K. Trailers and Mobile 
Home Brokers, Inc., supra; Melms v. 
Mitchell, 266 Or. 208, 512 P.2d 1336, 65 A.L.R.3d 376 (1973); Annot., 1 
A.L.R.3d 542 and cases cited therein. After Ludvik resumed possession of the 
ranch in October, 1981, under the position of Centlivre, there is no indication 
that he acted in a manner inconsistent with an intention to disaffirm the 
assignment. See Fryer v. Campbell, 
supra; Bodenhamer v. Patterson, 
278 Or. 367, 563 P.2d 1212 (1977). Therefore, we hold that under the facts of 
this case, the jury properly considered the letter of February 26, 1982, to be a 
timely notice of rescission.

Tender of 
Benefits

[¶29.]  Appellants assert that Ludvik's failure 
to prove a prior tender or offer to restore benefits precludes rescission of the 
assignment. Such tender will not be required, however, where the decree of the 
court can impose those duties of restitution as justice requires. Fryer v. Campbell, supra, 43 P.2d  at 
996; Woods v. City of Hobbs, 75 N.M. 
588, 408 P.2d 508, 510-511 (1965); Melms 
v. Mitchell, supra, 512 P.2d  at 1342. In Fryer v. Campbell, supra, 43 P.2d  at 
996, in discussing the necessity of an offer by the injured party to restore 
benefits prior to an action for rescission in equity, we 
said:

"Restitution is a 
condition of relief, not of instituting the suit."

We hold that 
proof of a prior tender was not essential to appellee's defense of rescission 
based upon misrepresentation.

II

[¶30.]  The Meyers contend that the trial court 
erred in denying two proposed jury instructions concerning the rights of third 
parties to enforce contracts made for their benefit. The first proffered 
instruction provided:

"A party may enforce a 
contract expressly made for his benefit even though he was not a party to the 
transaction."

Although this 
instruction represents an accurate statement of the law, Lawrence v. Fox, 20 N.Y. 268 (1859), it 
was properly refused by the trial court. No question was ever raised as to the 
status of the Meyers as third-party beneficiaries or their right to enforce the 
pertinent provisions of the assignment between Horseshoe and Ludvik, should that 
assignment be proven valid. Since these matters were not in issue, the proposed 
instruction would have added to the confusion in this case without assisting the 
jury in resolving the essential question - the right of Ludvik to rescind the 
assignment of the contract for the deed to the ranch.

[¶31.]  The second proposed instruction provided 
as follows:

"In this action the 
Plaintiffs, Fred and Blanche Meyer, claim that they were third-party 
beneficiaries of the contract entered into between James A. Ludvik and Horseshoe 
Creek Limited.

"Once the rights of a 
third-party beneficiary vest, the original parties to the contract cannot 
rescind the contract based upon the happening of an event or an occurrence which 
occurs after the rights of the third-party beneficiary have 
vested.

"The rights of a 
third-party beneficiary vest when:

"a. A contract was made 
that benefited the third-party.

"b. The third-parties 
acquire knowledge of the contract for their benefit.

"c. They assent thereto. 
Assent is implied if the third party had knowledge of the contract and failed to 
raise any objection thereto.

"If you find that 
Defendant Ludvik can rescind based upon fraud, Fred and Blanche Meyer have no 
rights under the contract."

This 
instruction, by its terms, concerns the right of the original parties to 
mutually rescind their agreement, once the rights of the third-party beneficiary 
have vested. Accordingly, this instruction has no relevance to the instant case 
and was properly denied by the trial court. The concept of vesting does not 
preclude the assignee of mortgaged premises, who agrees to assume the mortgage, 
from asserting against the mortgagee/third-party beneficiary grounds for 
rescission or any other defense that he could have raised against the 
mortgagor/assignor. Proctor Trust Co. v. 
Neihart, 130 Kan. 698, 288 P. 574 (1930). That which was said in Bank of Alameda County v. Hering, 134 Cal. App. 570, 25 P.2d 1004, 1005 (1933) is pertinent here:

"* * * It is conceded 
that respondent [the mortgagee] was not a party to the alleged fraud, but it was 
alleged that appellant's [the grantee's] grantor made certain fraudulent 
representations in 1924 at the time appellant [the grantee] purchased the 
property. * * * An agreement of assumption is treated as a contract made for the 
benefit of a third person [citations], and such a contract may be enforced by 
the third person at any time before it is rescinded. Civ. Code, § 1559. In order 
to defeat respondent's [the mortgagee's] rights under the agreement of 
assumption, it was necessary for appellant [the grantee] to allege and prove a 
rescission of said agreement."

Hence, the 
second instruction proposed by the Meyers did not address the issues raised by 
the present case and was properly excluded by the trial 
court.

III

[¶32.]  The jury verdict awarded restitution to 
appellee in the sum of $128,523.25. This figure reflects the actual expenditures 
made by Ludvik under the terms of the assignment:



January 
      19, 1979

$       750.00

Cash at 
      signing

January 
      19, 1979

$  42,014.32

Payment

August 1, 
      1979

$  42,173.12

Payment

December 
      24, 1979

$  41,857.68

Payment

September 
      21, 1979

$    1,728.13

1978 
      taxes

Total

$128,523.25

 
 
Horseshoe 
contends that the jury verdict is in error for failing to account for the 
benefits received by Ludvik during his possession of the ranch. Specifically, 
Horseshoe asserts that the jury failed to consider the fair rental value of the 
ranch property, including the $22,000 Ludvik received from Jackson as 
compensation for the time that he was out of possession, and certain profits 
owed to Fred M. Meyer from the sale of cattle, which profits were included in 
the purchase price of the assignment.

[¶33.]  The jury was instructed that a finding 
that Ludvik was entitled to rescind the assignment would necessitate restoring 
both parties to their former positions:

"JURY INSTRUCTION NO. 
9

"A party rescinding a 
contract is entitled to restitution and is entitled to receive back the money he 
has paid on the contract. If you determine James Ludvik rescinded the contract 
with Horseshoe Creek Limited he is entitled to recover the money paid on the 
contract between the time he entered into the contract and the time it was 
rescinded. Horseshoe Creek is entitled to receive any benefits that James Ludvik 
received during the time he possessed the ranch prior to 
rescission."

We have 
recognized that the purpose of an action in rescission is to place the parties 
in their former positions, but have held that a court

"* * * may grant 
rescission whenever by the exercise of its powers it can do what is practically 
just between the parties." Fryer v. 
Campbell, supra, 43 P.2d  at 996.

See also, Dreiling v. Home State Life Insurance 
Company, 213 Kan. 137, 515 P.2d 757, 766-767 (1973); State ex rel. Burk v. Oklahoma City, 
Okla., 522 P.2d 612, 620-621 (1974).

[¶34.]  The jury had before it evidence that 
Ludvik had purchased Centlivre's rights under the contract for deed and had 
incurred litigation expenses in excess of $139,000, in order to protect his 
interest in the ranch property. As a result of these expenditures Ludvik, at the 
time of trial, had paid or was obligated to pay $43,669.27 more than he had 
agreed to pay under the assignment of the the contract from Horseshoe. A 
reasonable conclusion is that the jury considered the benefits received by 
Ludvik while he was in possession of the property, but determined that the value 
of such benefits was offset by the unanticipated, additional expenses that 
Ludvik had incurred in protecting his interest in the 
ranch.

[¶35.]  We are mindful that the parties cannot be 
restored to the positions that they held prior to the execution of the 
assignment. Horseshoe, by allowing various liens to be levied on the ranch, 
defaulted on the original contract for deed from Centlivre, thereby permitting 
Ludvik, in Centlivre's position, to declare a forfeiture. Nevertheless, we 
conclude that the verdict and judgment in this case are supported by the record 
and represent an adjustment of the equities between the parties to the extent 
that is "practically just."

[¶36.]  In view of our affirmance of the verdict, 
we will not address the appellants' contention that the jury's failure to follow 
instructions with respect to restoration casts doubt on other aspects of the 
verdict.

[¶37.]  The issue of the reimbursement to Fred M. 
Meyer of profits earned as a result of the sale of cattle is not properly before 
this court, since Fred M. Meyer is not a party to this 
action.

[¶38.]  Affirmed.

BROWN, Justice, 
dissenting.

[¶39.]  I disagree with the majority's 
disposition of this case. The trial court instructed the jury that Ludvik was 
entitled to rescind the contract with Horseshoe for fraud if all the following 
were proved.

"a. Any misrepresentation 
of facts were [sic] made by Horseshoe Creek;

* * * * * 
*

"c. Ludvik relied on such 
misrepresentation;

"d. Ludvik's reliance was 
justified;

"e. Notice of rescission 
was promptly given upon discovery of the misrepresentation; 
and

"f. Defendant Ludvik has 
returned or offered to return all benefits derived from his possession of the 
ranch."

[¶40.]  The majority approved this instruction 
citing Schepps v. Howe, Wyo., 665 P.2d 504 (1983), and Hagar v. Mobley, 
Wyo., 638 P.2d 127 (1981). I have no disagreement with the instruction. However, 
I do believe that Ludvik failed to prove that fraud existed at the time of the 
assignment.

[¶41.]  Written contracts are not to be treated 
lightly or interfered with by the courts absent compelling reasons. The presence 
of fraud in a contract transaction is reason to disturb a written contract. 
Fraud, however, is never presumed; in fact, there is a legal presumption that 
every transaction is free from fraud. Smith v. Waterloo, C.F. & N.Ry. Co., 
191 Iowa 668, 182 N.W. 890 (1921); 17 C.J.S. Contracts § 154, p. 907 (1963). The 
burden to overcome this presumption rests upon Ludvik; he must establish clear 
proof that fraud existed at the time of the assignment.

[¶42.]  Ludvik claims the false representation 
was that "They [representatives of Horseshoe] told me that I would have clear 
title to that property." However, Ludvik acknowledged that all representations 
made by Horseshoe concerned events that were going to happen in the future. 
Fraud must relate to a present or preexisting fact. Statements or 
representations regarding future or contingent events, or expectations and 
probabilities do not constitute fraud. In 
re Adoption of Hiatt, 69 Wyo. 373, 242 P.2d 214 
(1952).

[¶43.]  Horseshoe did not make any false 
representation regarding an existing or preexisting fact. Ludvik has never 
contended otherwise. The majority, however, say "a promise constitutes a 
representation of the maker's present intention to perform, which representation 
is an assertion of a fact, the maker's state of mind. If such a promise is made 
with the intention of not performing, it is a misrepresentation of an existing 
fact and is generally recognized to be actionable." In support of this premise 
the majority quotes from Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906 (1957):

"* * * If a promise was 
actually made with a preconceived and undisclosed intention of not performing 
it, it constitutes a misrepresentation of a `material existing fact' upon which 
an action for rescission may be predicated. [Citations.]"

[¶44.]  The majority reasons that Horseshoe had a 
preconceived and undisclosed intention not to perform the agreement with Ludvik, 
which intention existed before and at the time the agreement was entered into. 
According to the majority the evidence of this state of mind was that "Horseshoe 
and its representative were in a precarious financial situation and were facing 
a number of other lawsuits at the time of the transaction with Ludvik." The 
majority does not, and cannot point to any other circumstance or evidence 
indicating that Horseshoe had a preconceived and undisclosed intention not to 
perform. I submit that a "precarious financial situation" cannot rationally be 
equated with a preconceived and undisclosed intention not to perform the 
contract. This is a feeble circumstance upon which to predicate fraud. The 
majority opinion has seriously eroded the requirements of an action in 
fraud.

[¶45.]  Even if it could be determined that 
Horseshoe had a preconceived and undisclosed intention not to perform the 
contract, there is no credible evidence that Ludvik relied upon what Horseshoe 
told him, or that any purported reliance was justified. In fact, the evidence is 
to the contrary.

[¶46.]  Before Ludvik's purchase of the ranch 
from Horseshoe he felt that Horseshoe representatives were the type of people 
who were likely to withhold material facts. Because of his feelings Ludvik had 
Horseshoe investigated before he entered into the agreement to purchase the 
ranch. As a result of this investigation Ludvik believed that he and his 
attorney knew more about Horseshoe than anyone had ever known 
before.

[¶47.]  Before purchasing the ranch Ludvik also 
procured a title insurance commitment. The commitment showed the state of title 
to the ranch and what had to be done before clear title could be given. Mr. 
Ludvik's Wyoming attorney advised him not to get involved in the purchase of the 
ranch. Notwithstanding Ludvik's distrust of Horseshoe, his investigation, the 
title insurance commitment, and the advice of an attorney, he said at trial that 
he relied on Horseshoe's representatives. I would hold that this so-called 
reliance was not justified, that the record clearly shows that Ludvik did not 
rely on any representations made by Horseshoe but made his own conclusions based 
upon his independent investigations.

[¶48.]  The deficiencies in Ludvik's proofs are 
progressively more glaring. One of the elements of a fraud action based on 
misrepresentation as the court instructed, is that "notice of rescission was 
promptly given upon discovery of the misrepresentation." Initially Ludvik said 
he did not give notice of rescission. The record reflects:

"Q. * * * [H]ave you [Mr. 
Ludvik] given them notice of rescission, to the best of your 
knowledge?"

"A. 
No."

[¶49.]  Later in Ludvik's testimony an effort was 
made to rehabilitate him and supply the deficiency in his proof of notice 
recission. On redirect examination by his attorney Ludvik testified in the 
manner indicated in the majority opinion. The letter referred to by Ludvik falls 
far short of notice of rescission. It states that Horseshoe was in default and 
indicates Ludvik's willingness to negotiate a settlement of the pending lawsuit. 
In any event, the so-called notice relied on by Ludvik cannot be characterized 
as prompt. The majority in effect holds that notice given two or three years 
after knowledge of the relevant facts is prompt. I 
disagree.

[¶50.]  The idea to rescind the contract was an 
afterthought that came to Ludvik five days before trial. On February 24, 1982, 
this action was filed. Two months later Ludvik filed his answer, counterclaim 
and cross-claim. In the cross-claim he alleged breach of contract. Thereafter, 
for the next fifteen months the parties to this lawsuit, several judges and 
others jousted with motions and amendments. It was not until May 18, 1983, that 
Ludvik decided that he had been defrauded and for the first time filed his 
pleadings alleging rescission because of fraud. The facts upon which the alleged 
fraud was based took place in 1979 or 1980. Ludvik had full knowledge of these 
facts when they occurred. This was the time frame during which Ludvik and his 
lawyer knew more about Horseshoe than anyone had ever known 
before.

[¶51.]  Lastly, there is no evidence in the 
record that Ludvik returned or offered to return any of the benefits he derived 
from his possession of the ranch.

[¶52.]  This case was presented to the jury on 
alternate theories for rescission. In addition to misrepresentation Ludvik 
sought rescission alleging that Horseshoe had breached the contract. The jury 
returned a general verdict; therefore, we do not know whether they found that 
Ludvik was entitled to rescind the contract for misrepresentation or for breach 
of contract. The majority did not address the breach of contract theory, 
apparently thinking that if the verdict could be sustained on either theory it 
would be sufficient. I do not disagree; therefore, I will not address the breach 
of contract theory of rescission. Suffice it to say, Ludvik was not entitled to 
rescind for breach of contract because he himself had also breached the 
contract; his breach had never been cured and existed at the time of 
trial.

[¶53.]  In answer to my concerns about this case 
it will likely be contended that the Supreme Court cannot second guess the jury 
on evidentiary determinations. However, I would hold, as a matter of law, that 
there was no evidence of actionable misrepresentation, no evidence that Ludvik 
justifiably relied on any representation, no prompt notice of rescission, and no 
evidence that Ludvik returned or offered to return benefits derived from his 
possession of the ranch. The fraud action should have never gone to the jury or 
the trial court should have granted appellant's motion for a judgment 
notwithstanding the verdict.

[¶54.]  The underlying and related problems of 
this case have been around a long time. This is the fourth time these parties 
have been before this court. They have been in an Indiana federal district court 
and a Colorado state district court. Without fear of contradiction I can say 
that the judiciary is weary of this case. If this court had reversed the present 
case it would be tried again and no doubt be back before us. By affirming, 
hopefully, the case is finally over. I almost succumbed to the temptation to 
vote to affirm as a matter of expedience to finally end the case - but not 
quite.