Title: LYNCH v SHIELDS

State: montana

Issuer: Montana Supreme Court

Document:

No. 12734 I N T H E S U P R E M E C O U R T O F T H E STATE O F M O N T A N A 19 74 RICHARD E. L Y N C H , P l a i n t i f f and Appellant, J. P A U L SHIELDS and JESSIE I. SHIELDS, husband and wife, Defendants and Respondents. Appeal from: D i s t r i c t Court of the Sixth J u d i c i a l D i s t r i c t , Honorable Jack D. Shanstrom, Judge presiding. Counsel of Record : For Appellant : Berg, Angel, Andriolo and Morgan, Bozeman, Montana Richard J . Andriolo argued, Bozeman , Montana For Respondents: Landoe, Gary and Donald E. White, Bozeman, Montana H. B. Landoe argued, Bozeman, Montana Submitted: November 20, 1974 Decided: =--. - L:!.- - 3.4 = - . Filed : M r . J u s t i c e Wesley Castles delivered t h e Opinion of t h e Court. P l a i n t i f f appeals from a judgment f o r defendants entered on findings of f a c t and conclusions of law a f t e r d e n i a l of a motion t o a l t e r and amend those findings and conclusions. The case was t r i e d t o t h e court i n t h e s i x t h j u d i c i a l d i s t r i c t , county of Park, t h e Hon. Jack D. Shanstrom, presiding without a jury. P l a i n t i f f , R i c h a r d E. Lynch, brought t h e a c t i o n t o recover t h e sum of $10,000 which he had paid t o defendants J. Paul Shields and J e s s i e I. Shields, husband and wife, allegedly a s a good f a i t h deposit i n connection with negotiations t o purchase t h e OTO ranch i n Park County. Defendants answered denying t h e payment was simply a good f a i t h d e p o s i t , but r a t h e r t h a t it was payment f o r an option t o purchase. The i s s u e s on appeal are: 1. The d i s t r i c t c o u r t erred i n refusing t o f i n d t h a t an alleged o r a l c o n t r a c t o r option agreement was not enforce- a b l e by way of defense a s it violated t h e s t a t u t e of fraud. 2 . The c o u r t erred i n finding a l e g a l l y binding con- t r a c t e x i s t e d between t h e p a r t i e s . To answer t h e i s s u e s , the f a c t s a r e important. One Bud B e l l i s , who had hunted on t h e Shields' property, c a l l e d Paul and J e s s i e Shields i n March 1970 saying t h a t he had a group of people i n t e r e s t e d i n buying t h e i r ranch and asking them t o wait before s e l l i n g it. O n April 2 3 , 1970, p l a i n t i f f Lynch and B e l l i s flew t o Montana f o r t h e purpose of viewing t h e ranch. M r . Lynch described himself as a "stockbroker p a r t t i m e , a s e c u r i t i e s salesman". P r i o r t o h i s present position he worked as a merger consultant a s s i s t i n g i n t h e s a l e of corporations, and before t h a t a s a s e c u r i t i e s salesman. The Shields w e r e w i l l i n g t o s e l l t h e e n t i r e ranch f o r $500,000, but a t t h i s f i r s t meeting they reached an agreement whereby they would r e t a i n a c o n t r o l l i n g i n t e r e s t i n t h e ranch by s e l l i n g 49% of t h e OTO Corporation, which would have t o be expanded. The t o t a l p r i c e agreed upon was $245,000 f o r 49% i n t e r e s t , 29% of which w a s t o be paid on delivery of t h e stock, with $10,000 of t h a t 29% f i g u r e t o be paid on execution of an instrument. The remainder was t o be paid i n equal yearly in- stallments. They discussed t h e t r a n s a c t i o n day and n i g h t f o r t h r e e days, agreeing on what Paul Shields considered t o be a l l t h e a s p e c t s of the deal, and t h e d e t a i l s w e r e never changed. J e s s i e Shields t e s t i f i e d t h i s was t h e agreement reached and so d i d Lynch, who l e f t Montana with t h e i n t e n t i o n of consummating t h e d e a l i f investors could be found. The Shields had given him t i m e t o obtain investors. Shortly a f t e r returning t o Arizona, t h e i n t e r e s t e d men received t h e proposed "Agreement t o S e l l and Buy Capital Stock" and "Transactions Involved i n Sale of Capital Stock of OTO Ranch" which Lynch expected and which Lynch and B e l l i s had requested so t h a t t h e s a l e could be consummated. The i n t e r e s t f i g u r e , f o r which a blank was l e f t , was t e s t i f i e d t o by Paul and J e s s i e Shields t o have been decided on a s 7%. The documents set o u t t h e t e r m s a s agreed upon and t h e Shields believed t h a t they were e n t i r e l y s a t i s f a c t o r y t o t h e men because t h e Shields d i d not hear from them. O n May 11, 1970, J e s s i e Shields wrote a l e t t e r t o B e l l i s and Lynch i n which she s t a t e d , because she had not heard from them i n a long t i m e , she supposed they were no longer i n t e r e s t e d . This letter prompted a c a l l from Lynch followed by another v i s i t s o t h a t t h e ranch could be shown t o a prospective investor and on May 15 Lynch brought a doctor t o look over t h e ranch. When t h e doctor l e f t a f t e r spending only a s h o r t t i m e on t h e ranch, Lynch stayed f o r two days t a l k i n g over h i s plans with t h e Shields as i f t h e agreement w a s soon t o be signed. A t t h i s t i m e Paul t o l d Lynch t h a t s i n c e so many people were i n t e r e s t e d i n t h e ranch, Lynch would have t o put up $10,000 f o r an option. Concerned about t h e p o s s i b i l i t y t h a t enough in- v e s t o r s could not be found, Paul d i d not want Lynch t o have t o f o r f e i t t h e consideration f o r an option. H e asked Lynch i f he could r a i s e t h e downpayment on h i s own because, a s Lynch t e s t i - f i e d Paul t o l d him: "He s a i d , well, i f t h e r e s t of your syndicate d o e s n ' t g e t together then t h e only way you can g e t t h a t $10,000.00 back is i f you p u t up t h e whole downpayment." Paul Shields t e s t i - f i e d : "And I asked him, I s a i d , w e l l , Dick, t o make t h i s a d e a l you w i l l have t o put up an option of $10,000.00 t o know t h a t we have g o t something. W e want t o s e l l t h i s d e a l and we c a n ' t s e t here a l l summer and l o s e t h e people who were wanting t o buy a l l of t h e t i m e a t t h a t time." J e s s i e ' s testimony agreed with P a u l ' s , and t h e p a r t i e s agreed t h a t on payment of t h e $10,000 t h e option would run u n t i l August 1, 1970. Lynch t e s t i f i e d t h a t when he returned t o Phoenix he "got nervous" and s e n t a check f o r $10,000 t o t h e Shields. He thought t h a t t h i s would give him t h e f i r s t chance t o buy. H e thought he had accomplished something by sending t h e check and t h e Shields would hold t h e d e a l f o r him. I n t h e l e t t e r accompanying h i s check he wrote: "This i s only t h e f i r s t s t e p i n what should be a long and f r i e n d l y business r e l a t i o n s h i p . W e a r e a l l looking forward t o being stockholders i n OTO Ranch * * * W e w i l l forward t h e agreement once we have l e g a l l y e s t a b l i s h e d our (Bud's and mine) power of a t t o r n e y t o s i g n f o r t h e group. I hope our check is s u f f i c i e n t f o r now." It seemed as though t h e signed Agreement was forthcoming. The Shields r e f r a i n e d from showing t h e valuable ranch, and although many people inquired about its p o s s i b l e purchase, they were t o l d t h a t it was not f o r s a l e . In a l e t t e r of May 29, 1970, J e s s i e Shields assured t h e two men t h a t they were properly managing t h e ranch and wanted t o keep them informed of what was happening. She asked i f t h e i r wives could come up t o give her ideas on f i x i n g up t h e houses, which she w a s readying f o r them. O n June 2 6 , 1970, she again wrote and express- ed concern f o r t h e management of t h e ranch i n t h e future; s i n c e t h e Agreement would give t h e investors a 4 9 % i n t e r e s t , t h e r e was much planning and t r u s t which would be needed. I n one p a r t she wrote: "Gretchen l e f t t h e house up on t h e OTO property j u s t i n p e r f e c t shape. W e could r e n t it but d i d n ' t think we had b e t t e r till we found o u t what you boys wanted t o do." She ended by reminding Bud B e l l i s t h a t he s t i l l had t o pick o u t t h e house he wanted. O n J u l y 31 o r August 1, 1970, Richard Lynch c a l l e d t h e Shields because t h e ninety days which t h e Shields had given them i n April were up. Actually, the s i x t y day option period which t h e Shields had agreed t o give i n exchange f o r t h e $10,000 consideration had expired. When asked who he talked t o on t h e telephone, he answered, "Jessie". H e d i d not r e c a l l any t a l k about f o r f e i t i n g t h e $10,000. H e then t e s t i f i e d t h a t he was not s u r e i f it was Jessie he talked t o , remarking t h a t it had been t h r e e years since t h e conversation. When asked whether he w a s s u r e about what was s a i d i n t h e conversation, he answered, "not dead p o s i t i v e , no". H e d i d r e c a l l t h a t t h e person he talked t o , whoever it was, offered t o allow him more time. Paul and J e s s i e t e s t i f i e d they were s u r e t h a t Lynch had talked t o Paul. Paul offered t o extend t h e option t o September 15, a month and a h a l f , and Lynch s a i d t h a t he appreciated t h a t very much and it might do t h e job. Shields wanted t o be f a i r and d i d not want Lynch t o have t o f o r f e i t h i s money i f t h e r e was a chance of going through with the deal. They had an extension drawn up and after signing it, sent it to Richard Lynch. Lynch\ admitted receiving it. The document was prepared simply to assure Lynch that he had until September 15 to return the signed Agreement. The Shields never received a response from Lynch--they did not hear from him again until the law suit was filed--and assumed that the extension was acceptable to him. Defendants were prepared, from the time of the negotiations which took place in April 1970, to comply literally with the terms and conditions set forth in the agreement to sell and were ready, willing and able to convey the property as agreed. The district court concluded: "I. "That as a result of the oral conversations between plaintiff and defendants on April 23rd and 24th, 1970, a written proposal in the form of a purchase agreement was prepared and delivered to plaintiff by mail on or about May 1, 1970, the receipt of which was acknowledged by the plaintiff, which document constituted an offer to sell. "That on or about May 29th, 1970, plaintiff, following a meeting with defendants at defendantst ranch in Park County, Montana, addressed a letter to defendants enclosing a check for $10,000.00 as part payment in acceptance of the offer and to obtain an option to hold the deal for him and his associates for a certain period of time, and acknow- ledged acceptance of the terms of the written con- tract by assuring defendants that the agreement would be forwarded as soon as power of attorney could be established, by which plaintiff implied that he was acting for himself as well as certain undisclosed associates. "That defendants, Paul Shields and Jessie Shields, construed said $10,000.00 payment, together with written assurance by plaintiff that the agreement would be forwarded as soon as power of attorney could be established to sign the agreement, in the nature of an option to hold the deal for the plaintiff until he had perfected his power of attorney. I' IV. "That t h e foregoing a c t s and conduct on t h e p a r t of p l a i n t i f f and defendants, including p a r t pay- ment of $10,000.00, c o n s t i t u t e an o f f e r and acceptance, as defined i n Section 87A.8-319, R.C.M. 1947, under Subsections ( a ) , (b) , and (c) t h e r e o f , a s w e l l as Section 13-606-4, R.C.M. 1947. "That payment of t h e sum of $10,000.00 consti- t u t e s p a r t performance, which removed s a i d t r a n s - a c t i o n from t h e S t a t u t e of Frauds, and placed an obligation upon t h e defendants i n t h e nature of an option t o hold t h e deal f o r t h e p l a i n t i f f , and t h a t t h e defendants did so. "That by reason of t h e f a i l u r e of t h e p l a i n t i f f t o comply with t h e agreement i n t h e nature of an option within t h e agreed t i m e o r within a reason- a b l e t i m e , p l a i n t i f f f o r f e i t e d h i s r i g h t t o re- claim t h e consideration paid by him f o r t h e option t o consummate s a i d purchase within a c e r t a i n period of time o r within a reasonable time." Referring now t o t h e i s s u e s r a i s e d . Insofar a s t h e s t a t u t e of frauds is concerned, under s e c t i o n s 13-606(4), 93- 1401-7, 74-203, o r 87A-8-319, R.C.M. 1947, it is c l e a r t h a t a f u l l y executed option c o n t r a c t was f u l l y performed and outside t h e s t a t u t e s enumerated. Appellant Lynch does not dispute t h i s general statement but argues t h a t t h e evidence w a s i n s u f f i c i e n t t o e s t a b l i s h t h e existence of an option agreement. By our r e c i t a t i o n of t h e f a c t s here and our quotation of t h e t r i a l c o u r t ' s conclusions, we f i n d t h e r e was s u f f i c i e n t evidence t o e s t a b l i s h t h e option agreement as well a s t o show t h a t t h e r e was f u l l performance. The p a r t i e s had discussed and agreed upon a l l t h e es- s e n t i a l terms of t h e s a l e , most of which were incorporated i n t o t h e two instruments. The Shields had an o f f e r which they held open f o r an e n t i r e month. O n Lynch's v i s i t t o t h e ranch on May 23, 1970, Paul informed him t h a t some payment would be neces- s a r y t o hold t h e d e a l any longer, whereupon t h e two agreed on $10,000. Returning t o Phoenix, Lynch s e n t t h e check and a letter dated May 29, 1970 i n which he wrote " W e w i l l forward t h e agreement once we have l e g a l l y established our (Buds and mine) power of attorney t o sign f o r t h e group. I hope our check is s u f f i c i e n t f o r now." I n o t h e r words, Lynch was buy- ing and received t i m e . The Shields considered themselves bound and held t h e property off t h e market. These transactions created an option c o n t r a c t a s t h e t r i a l court found. I n Peterson Sheep and C a t t l e Co. v. Moss, 155 Mont. 311, 471 P.2d 546, an option w a s created by payment of consideration on an agreement t o "tie up t h e property". Finding s u b s t a n t i a l evidence t o support t h e findings of t h e t r i a l c o u r t , and finding no merit i n t h e i s s u e s r a i s e d on appeal, w e a f f i r m t h e judgment. T concur: t . Chief J u s t i c e J u s t i c e s