Title: DENNY v BRISSONEAUD

State: montana

Issuer: Montana Supreme Court

Document:

No, 12316 I N T H E S U P R E M E C O U R T O F THE STATE O F MONTANA HUBERT G, DENNY and PATRICIA A. DENNY, husband and wife, P l a i n t i f f s and Appellants, JACK L, BRISSONNEAU~), d/b /a ESTATE R E A L T Y : T O M A D A M S , d/b/a R E A L ESTATE EXCHANGE, and GLACIER G E N E R A L A S S U R A N C E C O M P A N Y , Defendants and Respondents. Appeal from: District Court of the Fourth J u d i c i a l D i s t r i c t , Honorable Jack L. Green, Judge presiding, Counsel of Record: For Appellants : Tipp, Hoven and Brault, Missoula, Montana. Vernon Hoven argued, Missoula, Montana, For Respondents: Garlington, Lohn and Robinson, Missoula, Montana. Robert E, Sheridan argued, Missoula, Montana. Boone, Karlberg and Haddon, Missoula, Montana. Thomas H. Boone argued, Missoula, Montana. Mulroney, Delaney and Dalby, Missoula, Montana. Filed : Submitted: November 29, 1972 MAR 12 1 9 E M r . J u s t i c e Frank I, Haswell delivered the Opinion of the Court. I n an action f o r damages based on fraudulent misrepresenta- t i o n involving the s a l e of a residence, the d i s t r i c t court of Missoula County, the Hon. Jack L, Green, d i s t r i c t judge, directed a verdict i n favor of defendants and judgment was entered thereon. From t h i s judgment and subsequent order denying a new t r i a l , p l a i n t i f f s appeal. P l a i n t i f f s a r e Hubert G. Denny and P a t r i c i a A. Denny, h i s wife, who sold t h e i r residence i n Missoula t o Jack L. Brissonneaud, d/b/a Estate Realty, one of the defendants. Another defendant i s Thomas Adams, d/b/a Real Estate Exchange, who was the r e a l e s t a t e broker involved i n the transaction. The t h i r d defendant is Glacier General Iasurance Company, which bonded Adams a s a r e a l e s t a t e broker. In l a t e 1970, p l a i n t i f f s moved from Missoula t o Minneapolis and l i s t e d t h e i r Missoula residence f o r s a l e with defendant Adams who had previously handled t h e i r purchase of t h a t residence the year before, The t o t a l s a l e price a s l i s t e d was $22,500, involving a cash payment of approximately $7,150 and assumption of a mortgage of about $15,350, The residence did not s e l l immediately so on January 1, 1971, the l i s t i n g was extended f o r an additional s i x t y days. I n the l a t t e r part of January, defendant Brissonneaud offered t o exchange a promissory note he held f o r p l a i n t i f f s ' equity i n t h e residence. This o f f e r was communicated by defendant Adams t o p l a i n t i f f s i n Minneapolis. After f i r s t refusing the o f f e r , plain- t i f f s decided t o negotiate and returned t o Missoula. P l a i n t i f f Hubert Denny talked t o defendant Adams f u r t h e r , and rejected an- other o f f e r by defendant Brissonneaud. Thereafter on February 19, p l a i n t i f f Hubert Denny, defendant Adams, and defendant Brissonneaud had a conference i n the l a t t e r ' s o f f i c e , A t t h i s point there i s a c o n f l i c t i n the testimony concerning statements and representations made t o p l a i n t i f f Hubert Denny during t h i s conference. In any event, a w r i t t e n "Earnest Money Receipt and Agree- ment t o S e l l and Purchasef1 was executed on the same day by plain- t i f f s a s s e l l e r s and defendant Brissonneaud a s purchaser. This agreement fixed a t o t a l purchase price of $22,650 on the residence t o be paid: $6,600 by assignment of defendant ~ r i s s o n n e a u d ' s in- t e r e s t i n an installment promissory note on which Carl A. Malcolm and h i s wife were makers, which note was i n escrow a t the F i r s t S t a t e Bank i n Missoula; $750 cash a t closing covering defendant Adamsf r e a l e s t a t e commission; and assumption of the outstanding mortgage on the residence of approximately $15,300. Subsequently, defendant Adams attended t o completion of the various documents involved i n the transaction including an assignment of the pur- chaser's i n t e r e s t i n the escrow account and the deed. P l a i n t i f f s subsequently received two monthly payments on the Malcolm note and escrow, one i n March and one i n April 1971, Since t h a t time p l a i n t i f f s have received no payments whatever. O n August 11, 1971, p l a i n t i f f s f i l e d an action f o r damages based on fraudulent misrepresentations against defendants B r i s - sonneaud, Adams, and Glacier General, The gravamen of t h e i r action was t h a t defendant Brissonneaud made f a l s e representations t o them t h a t the maker of the note, Malcolm, was a prominent Missoula busi- nessman who owned property i n Missoula i n excess of $250,000, and c e r t a i n other statements r e l a t i n g t o t h e c o l l e c t i b i l i t y and security f o r t h e note. P l a i n t i f f s seek t o hold defendant Adams l i a b l e on the b a s i s t h a t he should have made a more thorough investigation t o f u l l y inform p l a i n t i f f s what they were g e t t i n g i n t o , and conducted himself i n v i o l a t i o n of ~ o n t a n a ' s Real Estate License Act, speci- f i c a l l y sections 66-1937 and 66-1940, R.C.M. 1947. Issue was joined and the case came on f o r t r i a l by jury on April 24, 1972, i n the d i s t r i c t court of Missoula County before Judge Green. A t the conclusion of p l a i n t i f f s 1 case-in-chief, Judge Green granted defendantsf motions f o r a directed verdict and dismissal on the b a s i s t h a t no damages had been proven, Judgment was entered thereon and p l a i n t i f f s ' motion f o r a new t r i a l was denied. P l a i n t i f f s now appeal from the judgment and denial of t h e i r motion f o r a new t r i a l , The issue upon appeal i s whether the directed verdict was correct. The underlying issue is whether p l a i n t i f f s proved any damages. P l a i n t i f f s contend they proved damages i n these p a r t i c u l a r s : ( I ) The l o s s of the $750 paid defendant Adams f o r a r e a l e s t a t e commission; (2) t h e l o s s of t h e i r equity i n t h e i r residence; (3) the loss of t h e i r r i g h t t o seek recourse against defendant B r i s - sonneaud; and (4) the l o s s of use of the moneys due under monthly installment payments under the note. P l a i n t i f f s contend t h a t they have been deprived of a present r i g h t with a p o s s i b i l i t y of future damages and therefore the question of damages should have been submitted t o the jury. Actual fraud i s a question of f a c t . Section 13-310, R.C.M. 1947, The burden of proof i s upon the party alleging it, here the p l a i n t i f f s . Reilly v. Maw, 146 Mont. 145, 405 P. 2d 440, Proof of damages i s an e s s e n t i a l element of an action f o r fraud, Lee v. stockmen's Nat. Bank, 63 Mont. 262, 207 P. 623, Where, a s here, an action f o r fraud is bottomed on f a l s e representations, t h i s Court i n Holland Furnace Co. v. Rounds, 139 Mont. 75, 80, 360 P.2d 412, has previously expressed t h i s requirement i n t h i s language: I I Damage, injury, a r prejudice from reliance on fraudulent representation i s a necessary element of fraud whether fraud is being advanced a s a ground f o r recovery o r defense. I 1 Generally speaking, the injury o r damage which the p l a i n t i f f must prove must be something more than contingent damage which may o r may not occur, 37 C . J . S , Fraud 5 4 1 ( f ) , p. 294. P l a i n t i f f may recover when he shows t h a t he has sustained some pecuniary damage o r injury by reason of having been put i n a position worse than he no could have occupied i f there had beenlfraud, but he cannot recover where he does not show t h a t he has sustained such damage o r injury. 37 C.J.S. Fraud 5 41(a), p, 290, P l a i n t i f f s claim t o have been placed i n a worse position by the l o s s of the equity i n t h e i r house i n exchange f o r an assignment of a note. But i s t h i s not exactly what p l a i n t i f f s bargained f o r ? The buy and s e l l agreement of February 19, 1971, s p e c i f i c a l l y s e t t i n g f o r t h these terms of exhange was signed by p l a i n t i f f s . P l a i n t i f f s contend the damages a r e not the balance of the note, the value of the note, nor the insolvency of the makers, but the loss of equity they sustained because of the fraudulent trans- action. P l a i n t i f f s , however, do not seek rescission of the contract. Rather, they claim the amount of $5,468, which w a s e s s e n t i a l l y p l a i n t i f f s ' equity i n the property a t the time of t h e s a l e , plus defendant Adams' commission, P l a i n t i f f s , i n essence, argue they received nothing of value i n exchange f o r t h e i r equity. The f a l l a c y i n t h i s argument l i e s i n the erroneous premise upon which it i s predicated. There i s evidence t o t h e e f f e c t t h a t s h o r t l y . - . A ?-+ a f t r r the contract was consummated no payments where 'bade by the makers of the note. But it does not follow t h a t the assigned escrow account which they acquired a t the time of the transaction was valueless. See: Kaufman v. Mellon National Bank and Trust Company, 366 F,2d 326, 330 (3d Cir,1966). In an action based upon fraud the defrauded p a r t y ' s measure of damages i s the difference between the a c t u a l value of the property a t the date of the s a l e and t h e contract price, Healy v. Ginoff, 69 Mont, 116, 123, 220 P. 539. When the p a r t i e s signed the buy and s e l l agreement of February 19, 1971, p l a i n t i f f s ac- quired the assignment of the proceeds of an escrow account. This assignment had an ascertainable value equal t o the value of the note contained within the escrow account. There i s no testimony i n the record t o indicate t h a t a t the t i m e of the transaction the note was worth l e s s than its face value. P l a i n t i f f s solely r e l i e d on t h e i r claim t o the amount of the equity they transferred i n exchange. There is simply no evi- dence t o support t h e i r claim t h a t a t the time of the transaction they exchanged something f o r nothing, i . e , t h e i r equity and the s a l e s commission valued a t $5,468 f o r the proceeds of a valueless note. Thus no damages were proven simply because there i s no evidence t h a t the proceeds of the note were valueless. Judge Green was correct i n s t a t i n g "that i n a s much a s damages have not been shown i n any amount---a p o s s i b i l i t y of damages perhaps, but no damages". Accordingly, the directed verdict i n favor of defendant Brissonneaud was correct. Directing our a t t e n t i o n t o p l a i n t i f f s ' claim against defendant Adams, we note t h a t he i s a r e a l e s t a t e broker licensed under the laws of t h e s t a t e of Montana. A s he was the r e a l e s t a t e broker involved i n the s a l e from p l a i n t i f f s t o defendant Brisson- neaud, the b a s i s of t h i s action f i l e d by p l a i n t i f f s against Adams and the issue before the Court r e l a t i n g t o defendant Adams is covered by provisions of the Real Estate License Act, sections 66-1937 and 66-1940, R.C,M, 1947. I n seeking a b a s i s f o r recovery p l a i n t i f f s r e l y upon section 66-1940, R.C.M. 1947, which provides i n pertinent p a r t : "(b) In case any person i n a c i v i l action i s found g u i l t y of having received any money, o r the equivalent thereof, a s a fee, commission, compensation, o r p r o f i t by o r i n consequence of a v i o l a t i o n of any provision of t h i s a c t , he s h a l l i n addition be l i a b l e t o a penalty of not l e s s than the amount of the sum of money so received and not more than three times the sum so received, a s may be determined by the court, which penalty may be recovered i n any court of competent j u r i s d i c t i o n by any person aggrieved. "(c) Any person sustaining damages by f a i l u r e of a r e a l e s t a t e broker o r r e a l e s t a t e salesman t o comply with the provisions of t h i s a c t , s h a l l have the r i g h t t o commence an action i n h i s own name against the r e a l e s t a t e broker and h i s surety, o r the r e a l e s t a t e sales- man and h i s s s u r e t y , o r both the broker and any salesman employed d i r e c t l y o r i n d i r e c t l y by such broker and t h e i r respective s u r e t i e s , f o r the recovery of any damages sustained a s the r e s u l t of any a c t specified i n section 66-1937 herein or a s a r e s u l t of the f a i l u r e of the r e a l e s t a t e broker or r e a l e s t a t e salesman t o comply with the provisions of t h i s a c t . I n a l l cases where s u i t is brought against t h e broker o r the salesman, and h i s surety, the court s h a l l , upon entering judgment f o r the p l a i n t i f f , allow a s a p a r t of the costs of s u i t a reasonable amount a s attorney's fees. I I Whether o r not p l a i n t i f f s have shown a v i o l a t i o n of section 66-1937, R.C.M. 1947, it i s s t i l l necessary t o prove damages flowing from such v i o l a t i o n within the meaning of section 66-1940, R.C.M. 1947, P l a i n t i f f s contend t h a t the only proof of damages t h a t i s required i s proof t h a t defendant Adams received a r e a l e s t a t e commission f o r h i s services. Such is not the law. Section 66-1940(c) permits a c i v i l action by any "person sustaining damages" against a r e a l e s t a t e broker who f a i l s t o comply with the pro- visions of the a c t . The mere f a c t t h a t a commission has been received is not enough i n i t s e l f t o meet the requirements of proof of damages. It not only must be shown t h a t the r e a l e s t a t e broker violated some provisions of the a c t , but t h a t p l a i n t i f f s suffered some damages thereby. To hold otherwise would be con- t r a r y t o the i n t e n t of the s t a t u t e which gives a remedy t o one who has suffered some damage by v i r t u e of c e r t a i n actions of a r e a l e s t a t e broker o r salesman. Since no damages have been shown a s a r e s u l t of the transaction with Brissonneaud heretofore discussed, likewise no proof of damages has been shown against defendant Adams , Here, p l a i n t i f f s a r e s t i l l the holders or assignees of the escrow account f o r which they bargained. There i s no proof t h a t it was o r is valueless. P l a i n t i f f s made no attempt t o contact the Malcolms f o r payment o r contact Brissonneaud f o r information o r assistance. I n short, they did nothing but sue Brissonneaud and Adams without proof of the n o n c o l l e c t i b i l i t y o r worthlessness of t h e escrowed note. A s yet they have not been damaged a s the escrowed note may be f u l l y c o l l e c t i b l e with i n t e r e s t , For these reasons, the d i s t r i c t court properly granted defendants' motion f o r a directed v e r d i c t , The judgment of the d i s t r i c t court i s affirmed. Associate J u s t i c e Mr. Justice John Conway Harrison dissenting: I dissent. Qi&L-b*-& # ociate Justice