Title: MOORE v SWANSON

State: montana

Issuer: Montana Supreme Court

Document:

No. 13342 I N T H E S U P R E M E C O U R T O F THE STATE O F M O N T A N A 1976 MARK M. MOORE, P l a i n t i f f and Respondent, HOWARD J. S W A N S O N and M. E V E L Y N S W A N S O N , Defendants and Appellants. Appeal from: D i s t r i c t Court of the Thirteenth J u d i c i a l D i s t r i c t , Honorable C. B. Sande, Judge presiding. Counsel of Record: For Appellants : Ayers and Alterowitz, Red Lodge, Montana Arthur W. Ayers, Jr. argued, Red Lodge, Montana For Respondent : Berger, Anderson, S i n c l a i r and Murphy, Billings, Montana Richard Anderson argued, Billings, Montana Submitted: October 13, 1976 Decided: NOV 3 0 1976 Filed: NOV 3 0 1976 M r . J u s t i c e Frank I. Haswell delivered t h e Opinion of t h e Court. P l a i n t i f f Mark M. Moore, a s buyer, brought t h i s a c t i o n a g a i n s t defendants Swansons, as sellers, t o rescind a c o n t r a c t f o r deed o r , i n t h e a l t e r n a t i v e , t o recover money damages. The d i s t r i c t c o u r t awarded damages t o p l a i n t i f f , and defendants appeal. O n J u l y 18, 1973, p l a i n t i f f and defendants executed a c o n t r a c t f o r deed whereby defendants agreed t o convey t o plain- t i f f t h e Alpine V i l l a g e Motel near Red Lodge, Montana and t h e property upon which t h e motel was s i t u a t e d , c o n s i s t i n g of approx- imately twelve a c r e s . The purchase p r i c e w a s $98,000, of which $73,000 w a s payable on t e r m s over t e n years. During n e g o t i a t i o n s preceding t h e formal c o n t r a c t , t h e p l a i n t i f f made s p e c i f i c inquiry of defendants concerning water r i g h t s a v a i l a b l e t o t h e property. Defendant Howard Swanson t o l d p l a i n t i f f t h a t defendants owned a l l of t h e spring r i g h t s on t h e property and t h a t t h e motel and residence were connected t o Red Lodge c i t y water. These r e s p r e s e n t a t i o n s were embodied i n t h e c o n t r a c t by r e c i t i n g t h e r e i n t h e promise t h a t t h e going business known a s t h e Alpine Village Motel, together with a l l i t s " c o n t r a c t s and engagements, b e n e f i t s and advantages," w a s assured t o t h e p l a i n t i f f - b u y e r . The c o n t r a c t f u r t h e r warranted f e e simple t i t l e i n t h e described r e a l t y and i n " a l l water r i g h t s used i n connection therewith. " The evidence adduced a t t r i a l e s t a b l i s h e d t h e following f a c t s concerning t h e s e "water r i g h t s " i n t h e property. The spring r i g h t s on t h e property had been reserved t o adjoining land by an instrument executed i n 1940. When t h e defendants purchased t h e property i n 1952, t h e i r own deed was s u b j e c t t o t h i s r e s e r v a t i o n of spring waters t o t h e adjoining owners. However, defendants d i d not d i s c l o s e t h i s f a c t t o t h e p l a i n t i f f e i t h e r i n o r a l negotia- t i o n s o r i n t h e c o n t r a c t f o r deed. I n a d d i t i o n , p l a i n t i f f was never informed of t h e f a c t t h a t t h e c i t y water connected t o t h e property w a s provided by a p r i v a t e l i n e approximately one thousand f e e t long. This l i n e r a n through and across property owned by t h e Northern P a c i f i c Railway. The Northern P a c i f i c had given two permits f o r t h i s l i n e which were absolutely cancelable upon 90 days notice. The permits required t h a t t h e e n t i r e l i n e be main- tained and repaired a t t h e u s e r ' s s o l e expense. The Northern P a c i f i c permits w e r e not a matter of public record and they were i n t h e defendants' p r i v a t e possession. Their existence w a s not made known t o p l a i n t i f f u n t i l a f t e r he had signed t h e c o n t r a c t and made payments. Further, t h e permits were not assignable by defendants without t h e Northern P a c i f i c ' s w r i t t e n consent; de- fendants had never obtained such consent. The c o n t r a c t herein e n t i t l e d p l a i n t i f f t o an a b s t r a c t of t i t l e which " s h a l l show a good record f e e simple t i t l e i n t h e S e l l e r s . " I f t h e a b s t r a c t disclosed d e f e c t s not corrected by sellers within a reasonable t i m e , buyer was then given t h e r i g h t t o cancel t h e contract. After p l a i n t i f f received t h e a b s t r a c t , he had it examined by an attorney. The examination disclosed t h e reservation of spring r i g h t s t o p l a i n t i f f ' s neighbors. Plain- t i f f gave defendants' attorney w r i t t e n n o t i f i c a t i o n t h a t he d i d not accept t h e a b s t r a c t , a s was h i s r i g h t under t h e contract. Defendants never took s t e p s t o c o r r e c t t h e s e d e f e c t s . Another aspect of t h e transaction concerns t h e Alpine Village Motel's T r i p l e A r a t i n g with t h e American Automobile Association. During negotiations, defendants s p e c i f i c a l l y t o l d p l a i n t i f f t h a t t h e motel f u l l y complied with T r i p l e A standards. A covenant of t h e c o n t r a c t required t h e p l a i n t i f f t o maintain t h e motel's membership with t h e American Automobile Association during t h e term of t h e c o n t r a c t . Nevertheless, before t h e plain- t i f f and h i s wife took possession of t h e premises i n accordance with t h e c o n t r a c t , defendants received a w r i t t e n d e f i c i e n c y n o t i f i c a t i o n from t h e Association t h a t c e r t a i n improvements w e r e r e q u i r e d ; and defendants i n no way communicated t h i s information t o t h e p l a i n t i f f o r h i s wife. Because of t h e de- f i c i e n c y n o t i c e , p l a i n t i f f expended $1,720.13 f o r t h e i t e m s necessary t o r e t a i n t h e m o t e l ' s T r i p l e A r a t i n g . Regarding both t h e water r i g h t s from t h e c i t y l i n e and t h e s p r i n g s , and t h e T r i p l e A s t a n d a r d s , t h e p l a i n t i f f t e s t i f i e d t h a t he would n o t have purchased t h e motel p r o p e r t y had t h e defendants apprised him of t h e f a c t s a s they subsequently developed and a s w e have o u t l i n e d above. When it became apparent t o p l a i n t i f f t h a t t h e defendants w e r e n o t going t o remedy t h e t i t l e d e f e c t s o r make t h e necessary improvements t o t h e p r o p e r t y , p l a i n t i f f f i l e d s u i t f o r r e s c i s s i o n based upon fraud and f a i l u r e of c o n s i d e r a t i o n , o r a l t e r n a t i v e l y , f o r damages f o r t h e reasonable c o s t s of providing a new water supply and f o r making necessary improvements t o maintain T r i p l e A standards i n t h e amount of $10,000. Following a nonjury t r i a l before D i s t r i c t Judge C. B. Sande, t h e c o u r t e n t e r e d f i n d i n g s of f a c t and conclusions of law denying r e s c i s s i o n b u t awarding p l a i n - t i f f $8,000 i n damages p l u s a refund of i n t e r e s t . The damages w e r e t o be deducted from t h e t o t a l c o n t r a c t p r i c e r a t h e r than be paid upon judgment, making t h e c o n t r a c t p r i z e $90,000 i n s t e a d of $98,000. Defendants appeal from t h e d i s t r i c t c l o u r t ' s d e n i a l of t h e i r motion f o r a new t r i a l , and p r e s e n t t h r e e i s s u e s f o r review: 1. Did t h e d i s t r i c t c o u r t err i n f i n d i n g t h a t t h e c i t y water w a s u n a v a i l a b l e t o p l a i n t i f f a s a m a t t e r of r i g h t ? 2. Did t h e d i s t r i c t c o u r t err i n concluding t h a t c i t y water was a water r i g h t under t h e c o n t r a c t f o r deed? 3 . Was t h e r e s u b s t a n t i a l evidence t o support t h e d i s t r i c t c o u r t ' s award of damages t o p l a i n t i f f ? Denial of r e s c i s s i o n i s not r a i s e d as an i s s u e on appeal. A s t o t h e f i r s t i s s u e , t h e bare f a c t s of t h e record show t h a t t h e c i t y water l i n e connecting with t h e motel property e x i s t e d f o r t h e b e n e f i t of t h e property owners only a t t h e sufferance of t h e Northern P a c i f i c Railway. The Northern P a c i f i c permit t o use t h e water l i n e w a s cancelable by it upon n i n e t y days n o t i c e . The f a c t it had not y e t been cancelled a t t h e t i m e of t r i a l i s immaterial. There was not a s c i n t i l l a of evi- dence t h a t t h e motel property w a s within t h e boundaries of t h e Red Lodge Municipal water s e r v i c e a r e a ; so t h e d i s t r i c t c o u r t could n o t indulge i n t h e presumption t h a t t h e c i t y had a "duty" t o f u r n i s h w a t e r t o t h e property under t h e r u l e of Polson v. Public Service Commission, 155 Mont. 464, 473 P.2d 508. There- f o r e , t h e c i t y water was n o t a v a i l a b l e as a matter of r i g h t and t h e d i s t r i c t c o u r t d i d not err i n so holding. I n t h e i r second i s s u e , defendants contend a l t e r n a t i v e l y t h a t t h e c i t y w a t e r connection was n o t a " w a t e r r i g h t " as t h a t t e r m was used i n t h e c o n t r a c t f o r deed. This i s s u e t u r n s on t h e meaning of t h e words used i n t h e c o n t r a c t u a l d e s c r i p t i o n of t h e r e a l property conveyed: "TOGETHER with a l l w a t e r r i g h t s used i n connection therewith." ~ e f e n d a n t s suggest t h a t "water r i g h t s " i s a t e r m of a r t r e f e r r i n g s p e c i f i c a l l y t o property r i g h t s reg- u l a t e d by t h e s t a t e under T i t l e 89, R.C.M. 1947. Thus, they say, t h e c i t y w a t e r was n o t such a s p e c i f i c property r i g h t and was n o t included i n t h e c o n t r a c t . However, such a s t r i c t i n t e r p r e t a - t i o n of t h e language i s untenable under t h e f a c t s of t h i s case. P l a i n t i f f is an inexperienced buyer of r e a l e s t a t e with a n i n t h grade education. Defendants and p l a i n t i f f s p e c i f i c a l l y discussed t h e use of t h e c i t y water on t h e premises i n t h e i r n e g o t i a t i o n s and p l a i n t i f f communicated t o defendants h i s concern about a l l water usable thereon. W e a r e t h e r e f o r e guided by s e c t i o n 13-710, R.C.M. 1947, concerning i n t e r p r e t a t i o n of c o n t r a c t s : "The words of a c o n t r a c t a r e t o be understood i n t h e i r ordinary and popular sense, r a t h e r than according t o t h e i r s t r i c t l e g a l meaning, unless used by t h e p a r t i e s i n a t e c h n i c a l sense, o r un- l e s s a s p e c i a l meaning is given t o them by usage, i n which c a s e t h e l a t t e r must be followed." The d i s t r i c t c o u r t was c o r r e c t i n holding t h a t : I' * * * f o r purposes of t h e c o n t r a c t f o r deed which forms t h e s u b j e c t of t h i s a c t i o n , Red Lodge c i t y water s h a l l be deemed a water r i g h t used i n connection with t h e lands sold by defendants t o p l a i n t i f f . " The f i n a l i s s u e r a i s e d by defendants i s whether t h e evidence s u b s t a n t i a t e s t h e award of damages t o p l a i n t i f f . A s shown by t h e f a c t t h a t t h e spring waters on t h e motel property were owned by adjoining landowners r a t h e r than by t h e owner of t h e motel property, and by our discussion of t h e f i r s t i s s u e regarding u n a v a i l a b i l i t y of c i t y water a s a matter of r i g h t , it i s p l a i n t h a t p l a i n t i f f d i d n o t r e c e i v e t h e water r i g h t s f o r which he contracted. Instead of awarding r e s c i s s i o n , t h e d i s t r i c t c o u r t determined t h e reasonable c o s t of d r i l l i n g w e l l s and re- placing t h e water system so t h a t p l a i n t i f f would n o t be depend- e n t on h i s neighbors and t h e c i t y , and t h e a c t u a l c o s t of remedy- ing d e f e c t s i n t h e motel pursuant t o t h e deficiency n o t i c e . W i t h - r e s p e c t t o t h e c o s t of w e l l s and water, t h e only evidence a t t r i a l was a bid by a l o c a l c o n t r a c t o r f o r t h e con- s t r u c t i o n of a new water system. The estimate was $7,380.70, and t h e d i s t r i c t c o u r t found t h i s t o be t h e reasonable c o s t of con- s t r u c t i n g an a l t e r n a t i v e water supply f o r t h e motel property. Defendants do not c o n t e s t t h e reasonableness of t h e bid per -- se, but contend t h a t t h e proposed construction i s unnecessarily l a r g e f o r supplying p r e s e n t water needs t o t h e motel and t o p l a i n t i f f ' s residence. However, t h e r e i s no evidence t h a t t h e proposed water system would produce an amount of water d i s - proportionately l a r g e r than t h e amount of water which p l a i n t i f f contracted t o purchase a s p a r t of t h e property from t h e defend- a n t s . Thus t h e c o s t of water supply replacement i s supported by s u b s t a n t i a l , uncontradicted evidence and w e w i l l not d i s t u r b t h e d i s t r i c t c o u r t ' s finding on appeal. Defendants a l s o claim t h a t t h e damages awarded f o r re- placement of water supply are s p e c u l a t i v e a s based upon a possi- b i l i t y of f u t u r e i n j u r y . This argument, however, depends upon t h e erroneous proposition t h a t p l a i n t i f f has suffered no l e g a l harm. To t h e contrary, p l a i n t i f f is p r e s e n t l y e n t i t l e d t o t h e b e n e f i t of h i s bargain, t h a t is, t h e b e n e f i t of t h e adequate water supply which defendants promised t o d e l i v e r . A s h e r e t o f o r e demonstrated, p l a i n t i f f i s not e n t i t l e d t o c i t y water a s a matter of r i g h t , nor does he have r i g h t s i n spring waters reserved t o h i s neighbors. This present i n j u r y is compensable a s found by t h e d i s t r i c t court. F i n a l l y , t h e d i s t r i c t c o u r t d i d n o t e r r i n awarding p l a i n t i f f h i s expenses incurred i n improving t h e motel t o r e t a i n its T r i p l e A r a t i n g . It i s undisputed t h a t t h e r e p a i r expenses w e r e necessary t o meet T r i p l e A standards, and t h a t p l a i n t i f f ex- pended t h e amount awarded. Thus, s u b s t a n t i a l evidence supports t h e f i n d i n g s and conclusions of t h e d i s t r i c t c o u r t . The "as i s " disclaimer c l a u s e regarding condition of premises does not bar p l a i n t i f f ' s recovery of r e p a i r damages. Defendants represented t o p l a i n t i f f t h a t t h e motel w a s i n a l l r e s p e c t s i n compliance with T r i p l e A standards, when i n f a c t it w a s not. The d i s t r i c t c o u r t c o r r e c t l y found t h i s r e p r e s e n t a t i o n t o be m a t e r i a l t o t h e t r a n s a c t i o n and a matter c o n t r i b u t i n g t o a p a r t i a l f a i l u r e of consideration on defendants' p a r t . There- f o r e , damages a r e a p p r o p r i a t e t o compensate t h e p l a i n t i f f . Com- pare: Fontaine v. Lyng, 61 Mont. 590, 202 P. 1112. Finding no e r r o r , w e a f f i r m t h e judgment of t h e d i s t r i c t c o u r t . J u s t i c e --W? concur: A Chief J u s t i c e n Hon. ~ R O ~ L. ~ b ~ i n n o n , District Judge, s i t t i n g i n p l a c e o f M r . J u s t i c e Wesley C a s t l e s .