Title: TSCHACHE v BARCLAY

State: montana

Issuer: Montana Supreme Court

Document:

No. 13252 I N THE SUPREPIE COURT O F THE STATE OF M O N T A N A J U N I O R W. TSCHACHE and ELIZABETH A. TSCHACBE, husband and w i f e , P l a i n t i f f s and Respondents, CLARENCE L. BARCLAY and GLADYS BARCLAY, husband and w i f e , Defendants and A p p e l l a n t s . Appeal from: D i s t r i c t Court 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 Honorable Gord-on R. B e n n e t t , Judge p r e s i d i n g Counsel of Record: F o r A p p e l l a n t s : B e n n e t t and B e n n e t t , Bozeman, Montana Lyman H. B e n n e t t I11 argued and Lyman B e n n e t t , Jr. a r g u e d , Bozeman, Montana For Respondents : Landoe, Gary and P l a n a l p , Bozenan, Montana Robert P l a n a l p argued, Bozeman, hlontana Submitted: J a n u a r y 1 0 , 1977 Decided: - . W 2 6 F i l e d : &fiY 2:i M r . J u s t i c e Daniel J. Shea delivered the Opinion of the Court. S e l l e r s appeal from a judgment entered i n the d i s t r i c t court, Gallatin County, by the t r i a l judge s i t t i n g without a jury, allowing buyers t o terminate t h e i r amended contract f o r deed under a con- t r a c t u a l r i g h t of rescission and ordering s e l l e r s t o return a l l money paid on the purchase price. S e l l e r s sued buyers t o terminate t h e i r r i g h t s under t h e contract and buyers countersued, asking f o r rescission of the contract. S e l l e r s r a i s e four issues on appeal: (1) They were fraudulently induced i n t o entering the amended contract f o r deed; (2) buyers a r e bound t o perform the contract under the doctrine of estoppel; (3) the d i s t r i c t court improperly refused testimony t h a t would show the circumstances under which s e l l e r s entered i n t o an agreement t o place the contract f o r deed i n escrow; and (4) buyers f a i l e d t o completely restore s e l l e r s t o t h e i r position p r i o r t o the contract. S e l l e r s a r e Clarence and Gladys Barclay; buyers a r e Junior and Elizabeth Tschache. O n December 24, 1971 the p a r t i e s entered i n t o a contract f o r deed f o r approximately 81 acres of land located i n Gallatin County. Buyers intended t o subdivide the land and s e l l l o t s f o r houses o r t r a i l e r homes, The contract provided, however, t h a t the buyers could terminate the contract and recover a l l money paid on the purchase price, i f they determined within two years the land could not be developed. Buyers paid $15,000 a s a down payment and l a t e r paid two annual installments of $8,000 each. The dispute here centers around an amended contract f o r deed signed by the p a r t i e s a t o r near the end of the expiration of the f i r s t 2 year contract. Buyers conducted extensive t e s t s on the land and discovered problems with zoning, sewage disposal and flood plain regulations. A s a r e s u l t , t h e i r preliminary p l a t s were not approved. I n 1973 they sought a bank loan t o pay the annual installment due on December 15. The bank o f f i c i a l s knew buyers could not obtain approval of t h e i r development plans and accordingly requested,before granting the loan, t h a t buyers f i r s t obtain a new contract extending the r i g h t t o terminate the transaction and place i n escrow with the bank a warranty deed running t o the buyers. O n December 24, 1973 the p a r t i e s did sign an amended contract f o r deed, which gave buyers two more years t o terminate the trans- action,and an escrow agreement. I n February 1974, s e l l e r s deposited the amended contract f o r deed and the warranty deed i n escrow. However, buyers f a i b d t o pay the annual installment due on December 15, 1974 and s e l l e r s on February 28, 1975 sent them a notice of default. Buyers responded by invoking the rescission agreement i n the contract, and on March 18, 1975 they sent the rescission notice t o s e l l e r s , claiming the land could not be developed because of flood p l a i n r e s t r i c t i o n s and because its elevation and s o i l condi- t i o n s precluded proper drainage. S e l l e r s f i r s t claim the buyers fraudulently induced them t o enter i n t o the amended contract f o r deed. Although the contract is dated December 24, 1973, s e l l e r s maintain it was not executed u n t i l l a t e i n February 1974, a t about the time the warranty deed and escrow agreement were signed. S e l l e r s then argue buyers concealed from them the f a c t the l o c a l planning board on February 14, 1974 rejected buyers' subdivision plans, and a l s o concealed the f a c t the bank required a new contract before it would loan money t o buyers. S e l l e r s maintain buyers had already decided the land could not be developed and sought the new contract solely t o revive t h e i r right t o terminate the transaction which expired on December 24, 1973, under the f i r s t contract. However, the d i s t r i c t court found contrary to these contentions. The d i s t r i c t court found the amended contract for deed was executed on December 24, 1973, prior t o the rejection of buyers' subdivision plans i n February 1974. Further, that s e l l e r s were well aware of buyers' d i f f i c u l t i e s i n developing the land and signed the new contract t o allow buyers more time t o solve the problems. The d i s t r i c t court found no proof of fraud. In Cowan v. Westland Realty Co., 162 Mont. 379, 383, 512 P.2d 714, t h i s Court said: "This Court has stated many times that i t s function on appeal i s t o determine whether there is substantial evidence t o support the findings of the d i s t r i c t court. This Court w i l l not reverse the findings of the t r i a l court unless there i s a clear preponderance of the evidence against such findings. [Citing cases. 1" Contrary t o s e l l e r s ' claim on appeal, one of s e l l e r s (Mr. Barclay) t e s t i f i e d the parties did execute the amended contract for deed on December 24, 1973, and a t that time buyers told him they were having trouble satisfying flood plain regulations. There was substantial testimony buyers continued t h e i r efforts t o formu- l a t e an acceptable plan for subdivision i n 1974. They sent t h e i r notice t o rescind more than one year a f t e r they executed the amended contract for deed and t h i s was done only a f t e r buyers t r i e d t o f o r f e i t sellers' rights under the contract. Sellers contend buyers did not t e l l them the bank required an amended contract for deed before it would loan more money t o buyers t o make that year's annual installment. However, there i s testimony i n the record that one of the buyers so informed sellers. Moreover, even assuming non-disclosure of t h i s fact from the s e l l e r s , it was not material t o the contractual relationship between the parties and cannot serve as a basis for fraud. Ray v. Divers, 72 Mont. 513, 234 a The s e l l e r s next claim that buyers, by the act of signing the escrow agreement and putting the contract i n escrow (a departure and from the f i r s t contract), accepted the land/are estopped t o assert otherwise. Sellers rely on section 93-1301-6(3), R.C.M. 1947, which provides : "Whenever a party has, by h i s own declaration, a c t , o r omission, intentionally and deliberately led another t o believe a particular thing true, and t o act upon such belief, he cannot, i n any l i t i g a t i o n arising out of such declaration, a c t , o r omission, be permitted t o f a l s i f y it." The 1971 and 1973 contracts provided that upon buyers' acceptance of the land, s e l l e r s were t o convey the land t o a bank a s a trustee. Sellers admit signing the escrow agreement without reading it, but i n s i s t buyers misled them into believing, the escrow agreement was really the t r u s t arrangement s e t forth i n the contracts. Then, they contend, when buyers asked t o put the warranty deed and amended contract for deed i n escrow "according t o the contract" they thought they were doing it according t o the t r u s t arrangement and t h i s consti- tuted an acceptance of the contract. Sellers claim an estoppel based on these facts. The d i s t r i c t court found that s e l l e r s possessed a copy of the amended contract for deed and the original escrow agreement for "a considerable length of time and had ample opportunity t o examine them". Sellers did not explain why they failed t o read the escrow agreement and amended contract for deed, other than.their reliance on buyers' alleged representations. Such reliance was unjustified. Estoppel has no application where the "'means of knowledge of both parties i s equal"'. Colwell v. City of Great Falls, 117 Mont. 126, 139, 157 P.2d 1013. Sellers next claim the court improperly excluded sellers' offered testimony they signed the warranty deed and escrow agreement solely i n reliance on the buyers' representation that the instruments would establish the t r u s t described i n the amended contract for deed. While par01 evidence is generally excluded under section 93-401-13, R.C.M. 1947, t h i s statute provides exceptions for i t s admission, and states i n pertinent part: "But t h i s section does not exclude other evidence of the circumstances under which the agreement was made, or t o which it relates, a s defined i n section 93-401-17, or t o explain an extrinsic ambiguity, or t o establish i l l e g a l i t y or fraud. The term agreement includes deeds and w i l l s , a s well as contracts between parties. TI Section 93-401-17, R.C.M. 1947, provides: "For the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject of the instrument, and of the parties to it, may also be shown, so that the judge be placed i n the position of those whose language he i s t o interpret. I I I f fraud had been properly pleaded s e l l e r s should have been allowed t o offer the testimony, which was t o show that these instruments constituted an acceptance of the land under the doctrine of estoppel. But, when the question came up during t r i a l and the court excluded the evidence, only a feeble e f f o r t was made t o make an offer of proof as to what fraud s e l l e r s would attempt t o prove. Sellers made no effort either before, during, o r a t the conclusion of the t r i a l , t o amend t h e i r pleadings as required by Rule 15, M.R.Civ.P. There being no fraud pleaded, sellers were not entitled t o present evidence on t h i s theory. Rule 8(a) and Rule 9(b), M.R.Civ.P. Notwithstanding s e l l e r s ' failure t o comply with these pleading requirements however, they s t i l l were permitted t o t e s t i f y that buyers told them the escrow agreement and warranty deed should be executed "according t o the contract." This testimony was sufficient t o put s e l l e r s ' theory of fraud and estoppel i n the record before the d i s t r i c t court, and under these circumstances refusal t o allow the testimony would be harmless error. Hackley v. Waldorf- Hoerner Paper Co., 149 Mont. 286, 425 P.2d 712; Kraft v. Pattyn, 135 Mont. 574, 342 P.2d 1060. Further, even though s e l l e r s were not entitled t o pursue their claim of fraud, the d i s t r i c t court made a specific finding there was no fraud. Sellers' f i n a l claim of error i s that buyers did not restore everything of value t o the s e l l e r s as i f the contract had not been made, even though they offered t o do so i n their notice of rescission. Sellers claim buyers removed the top s o i l from four o r five acres without the consent of s e l l e r s , and l e f t the land so rough it was even d i f f i c u l t t o drive over it with a tractor. O n the other hand, buyers alleged they removed only earth and gravel lying beneath the top s o i l and then replaced and reseeded the top s o i l , with the acquiescence of sellers. This conflict i n testimony created a question of fact within the province of the d i s t r i c t court t o resolve. The d i s t r i c t court judge saw and heard the witnesses t e s t i f y and was i n a superior position t o evaluate their credibility. Richardson v. Howard Motors Inc., 163 Mont. 347, 516 P.2d 1153. The d i s t r i c t court adopted the buyers' version of the facts and found no cornpensable damage had been done t o the land. W e find no error. W e affirm the judgment of the d i s t r i c t court. We Concur: Chief Justice