Title: SCOTT v HJELM

State: montana

Issuer: Montana Supreme Court

Document:

N o . 79-53 I N T H E SUPREME C O U R T O F T H E STATE O F M O N T A N A C A R L D. SCOTT, P l a i n t i f f and Respondent, FLORAL HJELM, Defendant and Appellant. Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l District, I n and f o r t h e County of R a v a l l i . Hon. James B. Wheelis, Judge p r e s i d i n g . Counsel of Record: For Appellant: Robert Brown argued, S t e v e n s v i l l e , Montana For Respondent: French, Grainey and Duckworth, Ronan, Montana P h i l i p Grainey argued, Ronan, Montana Submitted: June 18, 1980 Decided: J u l y 22, 1980 - J ! j 1 _ 2 3 1980 F i l e d : M r . C h i e f J u s t i c e F r a n k I. H a s w e l l d e l i v e r e d t h e O p i n i o n o f t h e C o u r t . T h i s i s an a p p e a l b y d e f e n d a n t f r o m a j u d g m e n t r e q u i r i n g p l a i n t i f f t o s u r r e n d e r p o s s e s s i o n o f a mare t o d e f e n d a n t , r e q u i r i n g d e f e n d a n t t o pay p l a i n t i f f $1,250, t o e x e c u t e t r a n s f e r d o c u m e n t s f o r a f o a l b o r n t o t h e mare, and f o r v a r i o u s o t h e r r e l i e f . I n 1978 p l a i n t i f f C a r l D. S c o t t l e a r n e d t h a t d e f e n d a n t F l o r a l H j e l m had r e g i s t e r e d q u a r t e r h o r s e s f o r s a l e . The p a r t i e s h a d s e v e r a l t e l e p h o n e c o n v e r s a t i o n s c o n c e r n i n g t h e s e h o r s e s and S c o t t w e n t t o t h e H j e l m r e s i d e n c e and i n s p e c t e d s e v e r a l mares on a S a t u r d a y i n November, 1978. A c c o r d i n g t o S c o t t , he a d v i s e d H j e l m t h a t he was n o t i n t e r e s t e d i n t h e p u r c h a s e o f any h o r s e o t h e r t h a n a mare named S a t i n B e a v e r . H j e l m c o n t e n d s t h a t a s a l e o f f i v e mares was nego- t i a t e d f o r t h e sum o f a p p r o x i m a t e l y $5,600. The n e g o t i a t i o n s w e r e n e v e r r e d u c e d t o w r i t i n g . On t h e f o l l o w i n g Monday S c o t t r e t u r n e d w i t h a h o r s e t r a i l e r and t o o k t h e mare named S a t i n B e a v e r . S c o t t c o n t e n d s Y t h a t he gave H j e l m a c h e c k f o r $1,000 f o r S a t i n B e a v e r w h i c h was t h e t o t a l p u r c h a s e p r i c e . H j e l m c o n t e n d s t h a t t h e $1,000 was m e r e l y a down-payment on t h e f i v e mares and S c o t t was t o pay t h e b a l a n c e when he c o l l e c t e d t h e r e m a i n i n g mares. H j e l m d i d n o t g i v e t h e r e g i s t r a t i o n p a p e r s and t r a n s f e r d o c u m e n t s f o r S a t i n B e a v e r t o S c o t t a t t h e t i m e t h e c h e c k was w r i t t e n and has r e f u s e d t o do so t h e r e a f t e r . A f o a l was b o r n t o S a t i n B e a v e r w h i l e t h e mare was i n S c o t t ' s p o s s e s s i o n . On F e b r u a r y 1 6 , 1979, S c o t t f i l e d a c o m p l a i n t a g a i n s t H j e l m i n t h e j u s t i c e c o u r t o f R a v a l l i C o u n t y s e e k i n g j u d g m e n t f o r $1,108 f o r H j e l m ' s a1 l e g e d f a i l u r e t o p r o d u c e r e g i s t r a t i o n docu- m e n t s on S a t i n B e a v e r , p l u s $1.50 p e r day m a r e c a r e . D e f e n d a n t a n s w e r e d and f i l e d a c o u n t e r c l a i m f o r $4,600 r e p r e s e n t i n g t h e b a l a n c e o f t h e p u r c h a s e p r i c e . The c a s e was t r a n s f e r r e d f r o m j u s t i c e c o u r t t o D i s t r i c t C o u r t because t h e c o u n t e r c l a i m e x c e e d e d t h e j u r i s d i c t i o n a l l i m i t o f t h e j u s t i c e c o u r t . On J u l y 20, 1 9 7 9 , t h e c a s e was t r i e d b e f o r e t h e D i s t r i c t C o u r t s i t t i n g w i t h o u t a j u r y . The D i s t r i c t C o u r t i s s u e d f i n d i n g s o f f a c t , c o n c l u s i o n s o f l a w and j u d g m e n t one week t h e r e a f t e r i n w h i c h p l a i n t i f f was r e q u i r e d t o s u r r e n d e r p o s s e s s i o n o f S a t i n B e a v e r t o d e f e n d a n t , d e f e n d a n t was r e q u i r e d t o pay p l a i n t i f f $1,250 and s u r r e n d e r a l l d o c u m e n t s n e c e s s a r y t o t r a n s f e r t i t l e o f S a t i n B e a v e r ' s f o a l t o p l a i n t i f f , and a t p l a i n t i f f ' s o p t i o n he c o u l d r e t a i n p o s s e s s i o n o f t h e f o a l , r e t u r n t h e f o a l w i t h S a t i n B e a v e r u n t i l i t i s weaned and t h e n r e t a k e p o s s e s s i o n o f t h e f o a l n o t l a t e r t h a n O c t o b e r 15, 1 9 7 9 , and t h a t i f p l a i n t i f f d i d n o t r e t a k e p o s s e s s i o n b y t h a t t i m e , t i t l e t o t h e f o a l w o u l d r e v e r t t o t h e d e f e n d a n t . A p p e l l a n t p r e s e n t s t h e f o l l o w i n g i s s u e s : 1. W h e t h e r t h e f a c t s o f t h e c a s e s u p p o r t t h e c o u r t ' s c o n c l u s i o n t h a t t h e p a r t i e s w e r e " m e r c h a n t s " w i t h i n t h e m e a n i n g o f s e c t i o n 3 0 - 2 - 1 0 4 , MCA? 2. W h e t h e r t h e f a c t s o f t h e case s u p p o r t t h e c o n c l u s i o n o f l a w t h a t t h e o r a l c o n t r a c t was u n e n f o r c e a b l e f o r l a c k o f w r i t i n g i n c o n f i r m a t i o n o f t h e o r a l c o n t r a c t ? 3. W h e t h e r t h e d i v i s i o n o f t h e p r o p e r t y c o n s t i t u t e s a r e s c i s s i o n o f t h e c o n t r a c t t o p u r c h a s e ? 4. W h e t h e r t h e j u d g m e n t i s s u p p o r t e d b y t h e f a c t s as f o u n d b y t h e t r i a l c o u r t ? A p p e l l a n t c o n t e n d s t h a t t h e D i s t r i c t C o u r t e r r e d i n i t s c o n c l u s i o n t h a t t h e p a r t i e s w e r e " m e r c h a n t s " i n h o r s e s and t h a t t h i s was a t r a n s a c t i o n " b e t w e e n m e r c h a n t s " w i t h i n t h e m e a n i n g o f s e c t i o n 30-2-104, MCA. The D i s t r i c t C o u r t a l s o c o n c l u d e d t h a t t h e r e was a l a c k o f w r i t i n g i n c o n f i r m a t i o n o f t h e o r a l c o n t r a c t as r e q u i r e d b y sec- t i o n 3 0 - 2 - 2 0 1 ( 1 ) a n d ( 2 ) , MCA, and, as a c o n s e q u e n c e , t h e o r a l c o n t r a c t f o r t h e s a l e o f t h e f i v e mares was u n e n f o r c e a b l e . S e c t i o n 3 0 - 2 - 2 0 1 , MCA, r e a d s as f o l l o w s : " F o r m a l r e q u i r e m e n t s - - s t a t u t e o f f r a u d s . ( 1 ) E x c e p t as o t h e r w i s e p r o v i d e d i n t h i s s e c t i o n a c o n t r a c t f o r t h e s a l e o f goods f o r t h e p r i c e o f $500 o r more i s n o t e n f o r c e a b l e b y way o f a c t i o n o r d e f e n s e u n l e s s t h e r e i s some w r i t i n g s u f f i c i e n t t o i n d i c a t e t h a t a c o n t r a c t f o r s a l e h a s been made b e t w e e n t h e p a r t i e s and s i g n e d b y t h e p a r t y a g a i n s t whom e n f o r c e m e n t i s s o u g h t o r b y h i s a u t h o r i z e d a g e n t o r b r o k e r . A w r i t i n g i s n o t i n s u f f i c i e n t b e c a u s e i t o m i t s o r i n c o r r e c t l y s t a t e s a t e r m a g r e e d upon b u t t h e c o n t r a c t i s n o t e n f o r c e a b l e u n d e r t h i s p a r a g r a p h beyond t h e q u a n t i t y o f goods shown i n s u c h w r i t i n g . " ( 2 ) B e t w e e n m e r c h a n t s i f w i t h i n a r e a s o n a b l e t i m e a w r i t i n g i n c o n f i r m a t i o n o f t h e c o n t r a c t a n d s u f f i c i e n t a g a i n s t t h e s e n d e r i s r e c e i v e d a n d t h e p a r t y r e c e i v i n g i t has r e a s o n t o know i t s c o n t e n t s , i t s a t i s f i e s t h e r e q u i r e m e n t s o f s u b s e c t i o n ( 1 ) a g a i n s t such p a r t y u n l e s s w r i t t e n n o t i c e o f o b j e c t i o n t o i t s c o n t e n t s i s g i v e n w i t h i n 1 0 d a y s a f t e r i t i s r e c e i v e d . " ( 3 ) A c o n t r a c t w h i c h does n o t s a t i s f y t h e r e q u i r e m e n t s o f s u b s e c t i o n (1) b u t w h i c h i s v a l i d i n o t h e r r e s p e c t s i s e n f o r c e a b l e : ( a ) i f t h e goods a r e t o be s p e c i a l l y m a n u f a c - u r e d f o r t h e b u y e r and a r e n o t s u i t a b l e f o r a l e t o o t h e r s i n t h e o r d i n a r y c o u r s e o f t h e s e l l e r ' s b u s i n e s s and t h e s e l l e r , b e f o r e n o t i c e o f r e p u d i a t i o n i s r e c e i v e d and u n d e r c i r c u m s t a n - c e s w h i c h r e a s o n a b l y i n d i c a t e t h a t t h e goods a r e f o r t h e b u y e r , has made e i t h e r a s u b s t a n t i a l b e g i n n i n g o f t h e i r m a n u f a c t u r e o r c o m m i t m e n t s f o r t h e i r p r o c u r e m e n t ; o r " ( b ) i f t h e p a r t y a g a i n s t whom e n f o r c e m e n t i s s o u g h t a d m i t s i n h i s p l e a d i n g , t e s t i m o n y o r o t h e r w i s e i n c o u r t t h a t a c o n t r a c t f o r s a l e was made, b u t t h e c o n t r a c t i s n o t e n f o r c e a b l e u n d e r t h i s p r o v i s i o n b e y o n d t h e q u a n t i t y o f goods a d m i t t e d ; o r " ( c ) w i t h r e s p e c t t o goods f o r w h i c h payment has b e e n made and a c c e p t e d o r w h i c h h a v e b e e n r e c e i ved and a c c e p t e d ( 3 0 - 2 - 6 0 6 ) . " U n d e r t h i s s t a t u t e , w h e t h e r t h e p a r t i e s have b e e n c l a s s i f i e d as m e r c h a n t s i s n o t r e l e v a n t u n l e s s t h e r e i s a w r i t i n g i n c o n f i r m a t i o n o f t h e c o n t r a c t . I n t h e p r e s e n t case t h e r e was n o w r i t i n g . Thus, t h e D i s t r i c t C o u r t ' s f i n d i n g t h a t t h e p a r t i e s w e r e m e r c h a n t s i s i r r e l e v a n t t o o u r d e t e r m i n a t i o n o f t h i s a p p e a l . The a p p e l l a n t n e x t c o n t e n d s t h a t t h e c o n t r a c t f o r t h e p u r c h a s e and s a l e o f t h e f i v e h o r s e s i s e n f o r c e a b l e d e s p i t e t h e l a c k o f a w r i t i n g . I n s u p p o r t o f t h i s c o n t e n t i o n t h e a p p e l l a n t d i r e c t s t h e C o u r t t o s e c t i o n 30-2-102, MCA, w h i c h o u t l i n e s t h e s c o p e o f t h e s t a t u t e o f f r a u d s s e c t i o n w h i c h i s q u o t e d above. S e c t i o n 30-2-102, MCA, p r o v i d e s : " S c o p e - - c e r t a i n s e c u r i t y and o t h e r t r a n s a c t i o n s e x c l u d e d -- f r o m t h i s c h a p t e r . U n l e s s t h e c o n t e x t o t h e r w i s e r e q u i r e s , t h i s c h a p t e r a p p l i e s t o t r a n s a c t i o n s . i n goods; i t does n o t - a p p l y t o any t r a n s a c t i o n w h i c h a l t h o u g h i n t h e f o r m o f an u n c o n d i t i o n a l c o n t r a c t t o s e l l o r p r e s e n t s a l e i s i n t e n d e d t o o p e r a t e o n l y as a s e c u r i t y t r a n - s a c t i o n n o r does t h i s c h a p t e r i m p a i r o r r e p e a l a n y s t a t u t e r e g u l a t i n g s a l e s t o c o n s u m e r s , f a r - m e r s o r o t h e r s p e c i f i e d c l a s s e s o f b u y e r s . " T h i s s t a t u t e does n o t s u p p o r t a p p e l l a n t ' s c o n t e n t i o n t h a t t h e t r a n s a c t i o n i n q u e s t i o n f a l l s o u t s i d e t h e scope o f s e c t i o n 3 0 - 2 - 2 0 1 , MCA. The t r a n s a c t i o n does n o t i n v o l v e a s e c u r i t y t r a n s a c t i o n . The a p p e l l a n t has n o t d i r e c t e d t h e C o u r t t o any s t a t u t e w h i c h w o u l d p r e v e n t t h e s t a t u t e o f f r a u d s s e c t i o n f r o m a p p l y i n g t o t h i s t r a n s a c t i o n , and r e s e a r c h has n o t r e v e a l e d any s u c h s t a t u t e . W e d e t e r m i n e t h a t t h e t r a n s a c t i o n f a l l s w i t h i n t h e p r o v i s i o n s o f s e c t i o n 3 0 - 2 - 2 0 1 , MCA. The a p p e l l a n t n e x t c o n t e n d s t h a t t h e manner i n w h i c h t h e p r o p e r t y was d i v i d e d d i d n o t c o n s t i t u t e a r e s c i s s i o n o f t h e c o n t r a c t . I n e s s e n c e , a p p e l l a n t i s c o n t e n d i n g t h a t a r e s c i s s i o n o f a c o n t r a c t must r e s u l t i n t h e p a r t i e s b e i n g p l a c e d i n s t a t u s quo, and t h a t t h e p a r t i e s i n t h e p r e s e n t c a s e were n o t p l a c e d i n s t a t u s quo b e c a u s e C a r l S c o t t was a l l o w e d t o k e e p t h e f i r s t f o a l . S e c t i o n 2 8 - 2 - 1 7 1 6 , MCA, s t a t e s : "On a d j u d g i n g t h e r e s c i s s i o n o f a c o n t r a c t , t h e c o u r t may r e q u i r e t h e p a r t y t o whom s u c h r e l i e f i s g r a n t e d t o make any c o m p e n s a t i o n o r r e s t o r a - t i o n t o t h e o t h e r w h i c h j u s t i c e may r e q u i r e . " T h i s C o u r t has had o c c a s i o n t o c o n s i d e r t h i s s t a t u t e i n A O ' K e e f e v. R o u t l e d g e ( 1 9 4 0 ) , 1 1 0 M o n t . 138, 1 0 3 P.pd 307, and made t h e f o l l o w i n g o b s e r v a t i o n : " I n t h i s c o n n e c t i o n t h e q u e s t i o n s u g g e s t s i t s e l f as t o what i s t h e o b j e c t o f t h e r e q u i r e m e n t o f r e s t o r a t i o n . T h e o r e t i c a l l y , i t i s t o p l a c e t h e p a r t i e s i n s t a t u quo. I n t h i s a s p e c t , ' ' s t a t u quo m e a n s t o p l a c e s u c h p a r t y i n t h e same p o s i - t i o n as he was s i t u a t e d i n a t t h e t i m e o f t h e e x e c u t i o n o f t h e c o n t r a c t , b u t a b s o l u t e and l i t e r a l r e s t o r a t i o n o f t h e p a r t i e s t o t h e i r f o r m e r p o s i t i o n i s n o t r e q u i r e d , and s u c h r e s t o r a t i o n as i s r e a s o n a b l y p o s s i b l e and demanded b y t h e e q u i t i e s o f t h e c a s e i s s u f f i c i e n t . ' ( 1 7 C.J.S. C o n t r a c t , sec 438, p. 9 2 0 . ) ' T h e r u l e . . . i s f o u n d e d o b v i o u s l y on t h e p r i n c i p l e t h a t he who s e e k s e q u i t y m u s t do e q u i t y . C o n v e r s e l y , w h e r e v e r u n d e r t h e c i r c u m s t a n c e s o f t h e p a r t i c u l a r c a s e r e s t i t u t i o n b y p l a i n t i f f i s n o t e s s e n t i a l t o t h e c o m p l e t e a d m i n i s t r a t i o n o f j u s t i c e b e t w e e n t h e p a r t i e s , i t w i l l n o t be r e q u i r e d . . . The r u l e i n r e g a r d t o t h e m a t t e r i s e q u i t a b l e , n o t t e c h n i c a l . ' ( 9 C.J., sec. 95, p. 1209.) "'An a b s o l u t e and l i t e r a l r e s t o r a t i o n o f t h e p a r t i e s t o t h e i r f o r m e r c o n d i t i o n i s n o t r e q u i r e d ; i t i s s u f - f i c i e n t i f s u c h r e s t o r a t i o n be made as i s r e a s o - n a b l y p o s s i b l e and s u c h as t h e m e r i t s o f t h e c a s e demand."' ( B l a c k M o t o r Co. v. G r e e n , 2 5 8 Ky. 7 2 , 79 S.W.2d 409, 4 1 1 ) " 1 1 0 M o n t . a t 146-147. I n t h e p r e s e n t c a s e , c o m p l e t e r e s c i s s i o n was n o t p o s s i b l e , b e c a u s e t h e c i r c u m s t a n c e s had changed. The D i s t r i c t C o u r t was f a c e d w i t h t h e t a s k o f p r o p e r l y a1 l o c a t i n g t w o h o r s e s and an u n b o r n f o a l , where t h e r e had o n l y been one h o r s e and an u n b o r n f o a l a t t h e t i m e o f t r a n s a c t i o n . I n such c i r c u m s t a n c e s , t h e t r i a l j u d g e m u s t use h i s d i s c r e t i o n i n d o i n g e q u i t y , and t h i s C o u r t w i l l n o t r e v e r s e t h a t d e c i s i o n s h o r t o f a s h o w i n g o f abuse o f t h a t d i s c r e t i o n . One f o a l was s i r e d w h i l e t h e mare was i n H j e l m ' s p o s s e s s i o n and t h e o t h e r was s i r e d w h i l e t h e mare was i n S c o t t ' s p o s s e s s i o n . On t h e b a s i s o f t h e f a c t s p r e s e n t e d i n t h e r e c o r d and t h e D i s t r i c t C o u r t ' s f i n d i n g s , we c a n n o t say t h a t H j e l m i s i n a w o r s e p o s i t i o n now t h a n p r i o r t o t h e t r a n s a c t i o n . She has S a t i n B e a v e r and an u n b o r n f o a l . U n d e r t h e s e c i r c u m s t a n c e s , t h e t r i a l c o u r t d i d n o t abuse i t s d i s c r e t i o n . F i n a l l y , t h e a p p e l l a n t c o n t e n d s t h a t t h e j u d g m e n t i s n o t s u p p o r t e d b y t h e f a c t s as f o u n d b y t h e t r i a l c o u r t . T h i s c o n t e n - t i o n i s b a s e d on t h e a r g u m e n t s p u t f o r w a r d above, i . e . , r e s c i s s i o n was n o t p r o p e r and i f p r o p e r , t h e n r e s t o r a t i o n was n o t p r o p e r l y a c c o m p l i s h e d . As t h e s e t w o c o n t e n t i o n s have b e e n a n s w e r e d above, t h e y need n o t be a d d r e s s e d a g a i n . A f f i r m e d . ................................. . C h i e f J u s t i c e W e c o n c u r : 3 M r . J u s t i c e John C. Sheehy, concurring i n p a r t and dissenting i n part. I concur i n t h e majority opinion insofar as it affirms the decisions of t h e D i s t r i c t Court, but disagree with t h e method of restoration t h a t was determined by the D i s t r i c t Court. Satin Beaver, the mare sold by Floral Hjelm t o Scott, was a registered horse. While i n Floral Hjelm's possession, the mare had been bred t o another registered horse, a paint, and the prospect of a paint f o a l which could be registered made t h a t f o a l more valuable than it would be otherwise. After the mare was transferred t o Scott, Satin Beaver foaled. The resulting c o l t was retained by Scott. While Satin Beaver remained i n the possession of Scott, he caused her t o be bred t o another horse and a t the t i m e of t r i a l t h a t f o a l had not been born. Under the t e r m s of the D i s t r i c t Court's judgment, however, when the matter was f i n a l l y decided, it decreed t h a t Satin Beaver be returned t o Floral Hjelm and t h a t she be allowed t o keep the second c o l t , although Floral Hjelm has no basis upon which t o r e g i s t e r t h a t c o l t . She was a l s o required t o return the $1,000 t o Scott, plus $250 as payment for Scott keeping both Satin Beaver and t h e f i r s t foal. Scott, under t h e findings of t h e D i s t r i c t Court, breached h i s contract with Floral Hjelm. I t is only because of t h e s t a t u t e of frauds t h a t h i s contract cannot be enforced against Scott. In attempting restoration, however, Floral Hjelm should not be i n a worse position than she was before the breached contract. I f anyone should bear the brunt of inequity, it should be the one who breached the contract, Scott. Therefore, I think a proper r e s o l u t i o n of t h i s case would be t h a t S a t i n Beaver and t h e f i r s t f o a l be returned t o F l o r a l Hjelm by S c o t t . I f t h e f i r s t f o a l is not now a v a i l a b l e , t h e value of t h a t f o a l should be returned t o F l o r a l Hjelm. The second f o a l should be given t o S c o t t , who cannot complain i f t h e second f o a l is not r e g i s t e r a b l e s i n c e t h e breeding of t h e second c o l t was h i s doing. I t would a l s o be f a i r t o r e q u i r e t h a t F l o r a l Hjelm r e t u r n t h e $1,000 which she received on t h e purchase p r i c e of t h e mare, and t h e sum of $250 f o r t h e c a r e of t h e mare while it was o u t of her possession. It should be r e a l i z e d here t h a t F l o r a l Hjelm has l o s t valuable breeding years i n S a t i n Beaver and t h a t she can never be made whole, a l l because of t h e s t a t u t e of frauds, which prevents complete r e l i e f i n t h i s case.