Title: JENKINS v HILLARD

State: montana

Issuer: Montana Supreme Court

Document:

No. 81-460 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982 ROGER W . JENKINS, Plaintiff and Appellant, VS. LARRY JOE HILLARD, JR. and LARRY HILLARD, Defendants and Respondents. No. 81-461 LARRY HILLARD, Plaintiff and Appellant, VS . ROGER W e JENKINS, Defendant and Respondent. Appeal from: District Court of the Eiqhteenth Judicial District, In and for the County of- alla at in Honorable Jack Shanstrom, Judge presiding. Counsel of Record: For Appellants: Landoe, Brown, Planalp, Komrners & Lineberger, Bozeman, Montana For Respondents: Steven Nelson, Bozeman, Montana Submitted on briefs: March 4, 1982 Decided: June 29, 1982 M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court.. T h i s is an a p p e a l of two summary judgments i s s u e d by t h e 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 Dist-rict , G a l l a t i n County. Respondent, Larry Joe H i l l a r d , is t h e son of respon- d e n t , Larry H i l l a r d . I n March 1979 t h e son s o l d a h o t e l i n Three Forks, Montana, to appellant., Roger J e n k i n s . The f a t h e r ( h e r e i n a f t e r r e f e r r e d t o a s H i l l a r d ) showed a p p e l l a n t t h e h o t e l , conducted t h e c o n t r a c t negot-iat-ions f o r its s a l e , and signed t h e c o n t r a c t f o r s a l e a s h i s s o n ' s a t t o r n e y - i n - f a c t . N e g o t i a t i o n s f o r t h e s a l e of t h e h o t e l occurred o v e r about a six-month p e r i o d . During t h i s t i m e , a p p e l l a n t l i v e d i n S e a t t l e and came t o Three Forks whenever H i l l a r d was f r e e t o d i s c u s s t.he s a l e . Appellant i n s p e c t e d t h e h o t e l thoroughly o n l y once and was accompanied by H i l l a r d . A p p e l l a n t c l a i m s t h a t d u r i n g t h i s i n s p e c t i o n H i l l a r d t o l d him t h a t t h e h o t e l b u i l d i n g was i n e x c e l l e n t c o n d i t i o n and t h a t it was f o r s a l e because H i l l a r d was t i r e d of managing it f o r h i s son. Con- c e r n i n g t h e c o n d i t i o n of t h e h e a t i n g system, a p p e l l a n t i n h i s d e p o s i t i o n c l a i m s t h a t H i l l a r d made t h e f o l l o w i n g r e p r e - s e n t a t i o n s : Q . And when you g o t s p e c i f i c a l l y t o t h e b o i l e r room, or you know, t.he a r e a which con- t a i n e d t h e b o i l e r s and t h e h e a t i n g system, d i d he make any statement-s concerning t h e c o n d i t i o n of t h o s e t h i n g s ? A. Y e s . H e s t a t e d t h a t t h e -- l e t m e p r e f a c e t h a t . There was about t.wo and a h a l f i n c h e s of water on t h e f l o o r i n t h e b o i l e r room and r i g h t away I q u e s t i o n e d t h a t and I was t o l d t h a t t h e r e was about a 400-gallon h o t w a t e r holding t a n k and w a t e r was l e a k i n g o u t of it and it had a p a t c h on it and I asked him what t h a t was, and he s a i d , 'Well, t h e r e ' s a s m a l l c r a c k i n t h e holding t a n k and t h a t can b e w e l d e d , ' and h e had c h e c k e d w i t h l o c a l w e l d e r s and he was a s s u r e d t h a t it could b e welded, s o it was i n c o n s e q u e n t i a l . A t t - h a t t i m e I asked him what c o n d i t i o n t.he b o i l e r s were i n and he t o l d m e that. t h e y had a s l i g h t problem w i t h t.he p i l o t l i g h t and t h a t t h e r e was no problem wit.h t h a t , b u t that. it was o n l y an adjustment. I was a s s u r e d t h a t both t.he h e a t i n g system and t h e b o i l e r s were more t h a n adequat-e . " Appellant a l s o s t a t e d t h a t t h e manager o f t h e h o t e l p r e v e n t e d him f r o m making f u r t h e r i n s p e c t i o n s o f t h e b u i l d i n g . When a p p e l l a n t t-old H i l l a r d t.hat t h e manager had prevented h i s f u r t h e r inspect-ions, H i l l a r d t o l d a p p e l l a n t he would t a k e c a r e o f t h e s i t u a t i o n . Appellant. d i d not. t.ry to i n s p e c t t h e premises a f ter t - h i s c o n v e r s a t i o n with H i l l a r d . I n h i s d e p o s i t i o n , H i l l a r d s t a t e d t.hat he thought t h e h e a t i n g system was o p e r a t i n g p r o p e r l y . H i l l a r d a l s o s a i d he d i d n o t r e c a l l making comments on t h e c o n d i t i o n of t h e b o i l e r s . A p p e l l a n t purchased t h e h o t e l i n March 1979, and about t h e second week i n A p r i l he d i s c o v e r e d that. t h e b o i l e r s d i d n o t work p r o p e r l y . A p p e l l a n t s t a t e d t h a t he then s p e n t about $35,000 t o r e p a i r and r e b u i l d t h e h o t e l ' s h e a t i n g system. The c o n t r a c t . f o r s a l e o f t h e hot-el c o n t a i n e d t h e f o l l o w i n g p r o v i s i o n s : ". . . Buyer h a s i n s p e c t e d and is f a m i l i a r wit-h t h e premises and t h e p h y s i c a l c o n d i t i o n o f a l l t h e f u r n i t u r e , f i x t u r e s and equipment. and improvements t h e r e o n and t h e r e i n , and e n t e r s i n t o t h i s Agreement on h i s own inde- pendent i n v e s t i g a t i o n . " and "This c o n t r a c t c o n t a i n s t h e e n t i r e agreement between t h e p a r t - i e s and t h e Buyer a f f i r m s that. n e i t h e r S e l l e r nor any a g e n t of t h e S e l l e r h a s made a n y r e p r e s e n t a t - i o n s o r promises wit,h r e s p e c t . to or a f f e c t i n g t.he p r o p e r t y h e r e i n d e s c r i b e d on t - h i s c o n t r a c t n o t e x p r e s s l y c o n t a i n e d h e r e i n and t h a t Buyer a f f i r m s t h a t he r e l i e s upon h i s own p e r s o n a l o b s e r v a t i o n and e x a m i n a t i o n o f t-he p r o p e r t y h e r e i n d e s c r i b e d . " Appellant. had g i v e n H i l l a r d a $15,000 p r o m i s s o r y n o t e as p a r t of t h e t r a n s a c t i o n . $5,000 was p a y a b l e on t-he n o t e o n March 1, 1979, and $10,000 p a y a b l e on o r b e f o r e August 30, 1979. I n J a n u a r y 1980 H i l l a r d brought a n a c t i o n on t h e n o t e , c l a i m i n g t h a t a p p e l l a n t f a i l e d t o pay t h e $10,000 d u e o n August 30, 1979. I n March 1980, t h e a p p e l l a n t brought a new and independent a c t i o n a g a i n s t b o t h t h e son, a s seller, and t h e f a t h e r , as t h e s o n ' s a g e n t , a l l e g i n g t h a t t h e f a t h e r had f r a u d u l e n t l y m i s r e p r e s e n t e d t h e c o n d i t i o n of t h e h o t e l ' s h e a t i n g system. I n A p r i l 1 9 8 0 , t h e a p p e l l a n t a n s w e r e d H i l l a r d ' s c o m p l a i n t , a l l e g i n g as an a f f i r m a t i v e d e f e n s e t h a t H i l l a r d f r a u d u l e n t - l y m i s r e p r e s e n t e d t h e c o n d i t i o n o f t h e h o t e l ' s h e a t i n g system and c o u n t e r c l a i m i n g f o r a r e t u r n o f t h e $5,000 he a l r e a d y p a i d on t h e n o t e . H i l l a r d moved f o r summary judgment on h i s p r o m i s s o r y n o t e a c t i o n and on t h e f r a u d a c t i o n began by a p p e l l a n t . The District. C o u r t g r a n t e d b o t h motions f o r summary judgment. The D i s t r i c t C o u r t found t h a t a p p e l l a n t had ample oppor- t u n i t y t o i n s p e c t t.he h o t e l and t-hat. he understood t h e c l a u s e s o f t h e c o n t r a c t i n which he a f f i r m e d s o l e r e l i a n c e on h i s own i n s p e c t i o n . The District C o u r t concluded, as a m a t t e r o f l a w , t.hat a p p e l l a n t had f a i l e d to make a prima f a c i e showing t h a t he had t h e r i g h t t o r e l y on H i l l a r d ' s a l l e g e d m i s r e p r e s e n t - a t i o n s . The s o l e i s s u e on r e v i e w is whether t h e D i s t r i c t Court e r r e d i n g r a n t i n g b o t h summary judgments. Under Rule 5 6 ( c ) , lul.R.Civ.P., a summary judgment is p r o p e r o n l y when t h e r e is no genuine i s s u e o f material f a c t and when t h e moving p a r t y is e n t i t l e d t o a judgment a s a m a t t e r of l a w . Summary judgment is t h e r e f o r e n o t a p r o p e r t o o l f o r r e s o l v i n g d i s p u t e d i s s u e s o f f a c t and is accord- i n g l y improper whenever a m a t e r i a l f a c t u a l matter is i n d i s p u t e . Flanagan v. Curran ( 1 9 7 4 ) , 164 Mont. 262, 521 P. 2d 200. Moreover, t h e p a r t y opposing t h e motion, a p p e l l a n t , w i l l be indulged t o t h e e x t e n t o f a l l i n f e r e n c e s which may be r e a s o n a b l y drawn from t h e r e c o r d . E q u i t y C o o p e r a t i v e A s s ' n v. Bechtold ( 1 9 7 7 ) , 173 Mont. 103, 566 P.2d 793. Here, t h e r e is a t l e a s t one b l a t a n t i s s u e of f a c t : whether H i l l a r d made a w i l l f u l m i s r e p r e s e n t a t i o n t o appel- l a n t concerning t h e c o n d i t i o n of t h e h e a t i n g system. H i l l a r d , as r e s p o n d e n t , a r g u e s t h a t even i f it c a n b e shown t h a t he made t h e m i s r e p r e s e n t a t i o n s , a p p e l l a n t c a n n o t make a prima f a c i e showing t h a t he had t h e r i g h t t o r e l y on t h e r e p r e s e n t a t i o n s . I n p a r t i c u l a r , r e s p o n d e n t claims t h a t t h e c o n t r a c t p r o v i s i o n and a p p e l l a n t ' s o p p o r t u n i t y t o i n s p e c t t h e h o t e l p r e c l u d e a p p e l l a n t ' s r i g h t to r e l y o n H i l l a r d ' s r e p r e s e n t a t i o n s , however f a l s e . W e d i s a g r e e . I t is w e l l e s t a b l i s h e d i n t h i s s t a t e t h a t a c t u a l f r a u d is a q u e s t i o n of f a c t . S e c t i o n 28-2-404, MCA; Cowan v. Westland R e a l t y Company ( 1 9 7 3 ) , 162 Mont. 379, 512 P.2d 714; Poulsen v. T r e a s u r e S t a t e I n d u s t r i e s , I n c . ( 1 9 8 1 ) , Mont . , 626 P.2d 822, 38 S t .Rep. 218. F u r t h e r , t h i s Court h a s recognized t h e r u l e t h a t " f r a u d v i t i a t e s e v e r y t r a n s a c t i o n and a l l c o n t r a c t s . " B a i l s v. G a r ( 1 9 7 6 ) , 1 7 1 Mont. 342, 558 P.2d 458, 461. The r e a s o n i n g behind t h i s r u l e is t h a t a p a r t y who h a s p e r p e t r a t e d f r a u d by i n d u c i n g a n o t h e r t o e n t e r i n t o a c o n t r a c t may not. t.hen use t h e c o n t r a c t t o immunize himself from t h e f r a u d . B a i l s , 558 P.2d a t 461-462. The c o n t r a c t p r o v i s i o n t h e r e f o r e d o e s n o t p r e c l u d e proof t h a t a p r i o r o r a l r e p r e s e n t a t i o n w a s made and r e l i e d upon. Respondent c o n t e n d s t h a t Schulz v. Peake ( 1 9 7 8 ) , 178 Mont. 261, 583 P.2d 425, should c o n t r o l o u r i n t e r p r e t . a t i o n o f t h e c o n t r a c t f o r s a l e . I n Schulz, t h i s Court c o n s t r u e d a c o n t r a c t p r o v i s i o n s i m i l a r t.o t h e one i n t h i s case and s t a t e d t h a t because t h e p r o v i s i o n w a s unambiguous, t h e c o u r t ' s d u t y was t o e n f o r c e it. S c h u l z is n o t c o n t r o l l i n g h e r e f o r t h e s i m p l e r e a s o n t h a t i n S c h u l z a t r i a l w a s had and f i n d i n g s of f a c t were made t h a t no m i s r e p r e s e n t a t i o n s were made and no f r a u d committed. Here, a p p e l l a n t was n o t g i v e n t h e opportunit.y t o show t.hat m i s r e p r e s e n t a t i o n s were made and f r a u d committed. Respondent c i t e s Van E t t i n g e r v. Pappin ( 1 9 7 8 ) , 180 Mont. 1, 588 P.2d 988, and Lowe v. Root ( 1 9 7 5 ) , 166 Mont. 150, 531 P.2d 674, t o s u p p o r t h i s argument t h a t because a p p e l l a n t i n s p e c t e d t h e premises he c a n n o t , as a matter o f l a w , be allowed t h e r i g h t t o r e l y on a r e p r e s e n t a t i o n , whether t r u e of f a l s e . I n p a r t i c u l a r , r e s p o n d e n t c i t e s t h i s often-quoted p a s s a g e i n Van E t t i n g e r : "'When it a p p e a r s t h a t a p a r t y , who c l a i m s t.o have been d e c e i v e d t-o h i s p r e j u d i c e , - h a s i n v e s t i g a t e d f o r h i m s e l f o r t h a t t h e means were a t hand t o a s c e r t a i n t h e t r u t h . . . of any r e p r e s e n t a t i o n s made t o him, h i s r e l i a n c e upon such r e p r e s e n t a t i o n s made to him, how- e v e r f a l s e t h e y may have been, a f f o r d s no ground of c o m p l a i n t . (Grindrod v. Anglo- American Bond Co., 34 Mont. 169, 85 I ? . 891; Power & B r o t h e r s v. T u r n e r , 37 Mont. 521, 97 P. 950; 26 C. J. 1149. ) I " (Emphasis added. ) 588 P.2d a t 994, q u o t i n g Lee v. Stockmen's N a t i o n a l Bank ( 1 9 2 2 ) , 63 Mont. 262, 284, 207 P. 623, 630, Respondent h a s placed an u n n e c e s s a r i l y h a r s h int-er- p r e t a t i o n on t h e above passage. I n Van E t t i n g e r t h e p a r t y c l a i m i n g fraud knew t.he f a l s i t y of t h e r e p r e s e n t a t i o n and t h e r e f o r e no evidence could be p r e s e n t e d to show t h e r i g h t t o r e l y on t h e r e p r e s e n t a t i o n . I n Lowe a s u p e r f i c i a l i n s p e c t i o n of t h e b u i l d i n g would have r e v e a l e d t h e open and n o t o r i o u s d e f i c i e n c i e s i n t h e b u i l d i n g . That is simply not. t h e c a s e h e r e . A p p e l l a n t acknowledges t-hat upon h i s i n s p e c t i o n he found two i n c h e s of w a t e r i n t h e basement.. Respondent c l a i m s t h a t t h e presence of t h e w a t e r should have p u t a p p e l l a n t on i n q u i r y t h a t t h e b o i l e r s were d e f e c t i v e . Appel- l a n t , indeed, was put on i n q u i r y . According to h i s deposi- t i o n , a p p e l l a n t asked H i l l a r d why t h e w a t e r was t h e r e and H i l l a r d r e p l i e d t h a t t h e b o i l e r s needed o n l y minor r e p a i r s , a l l e g e d l y m i s r e p r e s e n t i n g t h e t r u e c o n d i t i o n of t h e b o i l e r s . Moreover, a p p e l l a n t may have been prevented from f u r t h e r a c c e s s t o t h e h o t e l i n o r d e r to i n v e s t . i g a t e H i l l a r d ' s a l - leged m i s r e p r e s e n t a t i o n s . Appellant s t a t e d i n h i s d e p o s i t i o n t h a t t h e manager of t h e h o t e l would n o t l e t him f r e e l y inspect. t h e premises. Van E t t i n g e r and Lowe do n o t s t a n d f o r t h e proposi- t i o n t h a t a buyer must assume a seller or h i s agent is l y i n g when t h e buyer is t o l d a p l a u s i b l e e x p l a n a t i o n f o r a d e f e c t and what is r e q u i r e d to c u r e t h e d e f e c t . The Kansas Supreme Court h a s expressed t.he l i m i t a t i o n s t h a t need t o be placed on t h e Van E t t i n g e r and Lowe c a s e s : "'The t r e n d of t h e d e c i s i o n s of t h e c o u r t s of t h i s and ot.her s t a t e s is towards t h e j u s t d o c t r i n e , t h a t where a c o n t r a c t is induced by f a l s e r e p r e s e n t a t i o n s a s to m a t e r i a l e x i s t e n t fact.s, which a r e made w i t h t.he i n t e n t to d e c e i v e , and upon which t h e p l a i n t i f f r e l i e d , i t is no d e f e n s e , t o a n a c t i o n f o r r e s c i s s i o n o r f o r damages a r i s i n g o u t o f t h e d e c e i t , t h a t t h e p a r t y t o whom t h e r e p r e s e n t a t i o n s were made m i g h t , w i t h d u e d i l i g e n c e , h a v e d i s c o v e r e d t h e i r f a l s i t y , and t h a t h e made no s e a r c h i n g i n q u i r y i n t o f a c t s . . ."' Nordstrom v . M i l l e r ( 1 9 8 0 ) , 227 Kan. 59, 605 P.2d 545, 553, q u o t i n g Speed v. H o l l i n g s w o r t h (1894) , 54 Kan. 436, 440, 38 P. 496, 497. O p p o r t u n i t y t o i n s p e c t i n i t s e l f is no d e f e n s e t o p o s s i b l e w i l l f u l m i s r e p r e s e n t a t i o n s t h a t , b e c a u s e o f t h e i r p l a u s i b i l i t y , p r e c l u d e f u r t h e r i n v e s t i g a t i o n . See a l s o , S h e c h t e r v. Brewer (Mo. 1 9 6 1 ) , 344 S.W.2d 7 8 4 , and Lumby v. Doetch ( 1 9 7 9 ) , - Mont. - , 600 P.2d 200, 36 St.Rep. 1684. The D i s t r i c t C o u r t t h e r e f o r e e r r e d by h o l d i n g t h a t a p p e l l a n t f a i l e d t o make a prima f a c i e showing t h a t he had a r i g h t t o r e l y on H i l l a r d f s a l l e g e d m i s r e p r e s e n t a t i o n s . S i n c e t h e r e c o r d r e f l e c t s o t h e r g e n u i n e i s s u e s o f m a t e r i a l f a c t , s u c h a s , whether H i l l a r d made f r a u d u l e n t ' r e p r e s e n t a t i o n s , w h e t h e r a p p e l l a n t r e l i e d o n t h o s e r e p r e s e n t a t i o n s , a n d whether a p p e l l a n t had t h e o p p o r t u n i t y t o f u r t h e r i n v e s t i g a t e H i l l a r d ' s a l l e g e d r e p r e s e n t a t i o n s , t h e summary judgments a r e r e v e r s e d . The c a s e s a r e j o i n e d and remanded t o t h e D i s t r i c t "? C o u r t . W e c o n c u r : M r . J u s t i c e John C. Sheehy dissenting: I would a f f i r m t h e D i s t r i c t Court. Under t h e f a c t s of t h i s case, our p r i o r decisionsshould r e q u i r e affirmance. See p a r t i c u l a r l y Van E t t i n g e r v. Pappin (1978), 180 Mont. 1, 588 P.2d 988; Lowe v. Koot (1975), 166 Mont. 150, 531 P.2d 674; Lee v. Stockmen's National Bank (1922), 63 Mont. 262, 207 P. 523; and Grinrod v. Anglo-American Bond Co. (1906), 34 Mont. 169, 85 P. 891. H e r e t h e buyer s p e c i f i c a l l y contracted t h a t t h e s e l l e r made no representations t o him not contained i n t h e w r i t t e n agreement. If t h a t language a f f o r d s no p r o t e c t i o n t o a s e l l e r under t h e s e f a c t s , we have provided a f e r t i l e breeding ground f o r lawsuits i n a l l land s a l e c o n t r a c t s . There would be c i v i c and s o c i a l b e n e f i t i f w e required persons signing w r i t t e n c o n t r a c t s t o say what they mean o r mean what they say i n t h e language used.