No. 87-225 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

BETTY A. McCRACKEN BILLS; DARRELL 

McCRACKEN; DAVID McCRACKEN; JUDY 

SOUTH; and CAROL EHRESMAN, 

Plaintiffs and Appellants, 

-vsHANNAH, INC., a/k/a HANNAH ASSOCIATES 

a/k/a HANNAH ERA REAL ESTATE; ELWOOD E. 

HANNAH, individually and as agent for 

HANNAH, INC.; et al. 

Defendants and Respondents. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Russell K. Fillner, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Olsen, Christensen & Gannett; Damon L. Gannett and 

Marvin Ventrell argued, Billings, Montana 

For Respondent: 

Emmons & Coder; Robert J. Emmons argued for Smedsrud, 

Great Falls, Montana 

Anderson, Brown, Gerbase, Cebull, Fulton, Harman & 

Ross; John Russell argued for Hannah, Billings, 

Montana 

Submitted: November 30, 1987 

Decided: February 9, 1988 
Mr. Justice R. C. McDonough delivered the Opinion of the 

Court. 

The District Court of the Thirteenth Judicial District 

granted summary judgment upon motion by respondents Hannah 

Incorporated and Conrad's Real Estate and Insurance (Hannah 

and Conrad). In a memorandum accompanying the summary 

judgment order, the lower court held that no material 

questions of fact existed, and that Hannah and Conrad were 

entitled to summary judgment as a matter of law. Darrell and 

David McCracken, Betty McCracken Bills, Judy South, and Carol 

Ehresman, (McCrackens), appeal contending that the lower 

court erred by finding that no material questions of fact 

existed. Hannah and Conrad cross appeal contending that the 

statute of limitations and McCrackens' own negligence bar all 

claims against Hannah and Conrad. We affirm the District 

Court's decision to grant Hannah and Conrad summary judgment, 

and thus moot the issues presented on cross appeal. 

The facts relevant to this appeal are as follows: 

McCrackens listed their farm for sale with Hannah. The 

listing contract allowed Hannah to associate with other 

realtors. Hannah associated with Conrad, and the two realty 

offices agreed to split the commission for the sale. 

Conrad Realty's agent, Smedsrud , through an 

acquaintance, found buyer Melcher Corporation. (Melcher) 

Negotiations between Melcher and McCrackens commenced and 

resulted in offers McCrackens rejected. During the 

negotiations with Melcher, McCrackens were represented by two 

lawyers and an accountant. 

Melcher's initial offers proposed that Melcher 

Corporation make a down payment and secure the balance of the 

farm's purchase price with bonds bought on a margin loan from 

Melcher's broker. In return the McCrackens were to provide 
Melcher with a clear deed to the farm. A provision in 

Melcher's initial offers also provided that interest accruing 

on the bonds would first be applied to satisfy the margin 

loans encumbering the bonds. 

Bonds purchased on margin are generally subject to 

margin calls by the bond broker who makes the margin loans. 

If the margin call is made by the broker, the purchaser of 

the bonds must increase the equity he or she holds in the 

bonds to prevent the broker from selling the bonds. 

McCrackens objected to the provision providing for 

payment of bond interest for Melcher's margin loans. In the 

offer that McCrackens accepted, the purchase price was 

increased and reference to payment of bond interest to 

satisfy margin loans was deleted. Sidney Kurth, one of the 

two lawyers representing McCrackens, drafted the agreement. 

It provided for a purchase price of $2,900,000, with a 

$812,000 cash down payment prior to closing. Melcher signed 

a promissory note for the balance of the purchase price, 

$2,088,000, and the bonds secured the note. 

McCrackens were concerned about collateralizing the 

debt with bonds. Kurth's provision on the bonds was drafted 

to guarantee that the bonds would have a net worth equaling 

the amount due on the promissory note which evidenced the 

balance of the purchase price. The purchase-sale agreement 

defined net worth of the bonds to be the difference between 

their fair market value and any encumbrances held against 

them. 

Although the agreement neither prohibited nor allowed 

margin encumbrances, evidence indicated that McCrackens 

assumed that the bonds would not be subject to sales by 

Melcher's broker because of margin calls. McCrackens agreed 

that they would look only to the bonds in the event that 

Melcher defaulted on the note. 
McCrackens closed the deal with Melcher on December 20, 

1979. Shortly after closing, Sidney Kurth went to Los 

Angeles to inspect the bonds Melcher had promised to place in 

escrow. However, Kurth failed to personally inspect the 

bonds, and deposition statements indicated that the bonds 

were not in place during Kurth's visit to Los Angeles. 

Depositions also indicated that had Kurth properly inspected 

the account Melcher had opened for the bonds, he would have 

discovered that they provided inadequate security because of 

the margin loans. 

Sometime in the spring of 1980, Kurth discovered that 

the bonds were held on margin. Meanwhile, the bonds became 

subject to "margin calls", i.e., the bond broker was 

authorized to sell the bonds to satisfy Melcher's margin 

debt. By December 27, 1982, margin sales had liquidated the 

bonds. McCrackens received $421,391.04 for their security 

interest in the bonds. 

David and Darrell McCracken, and Betty McCracken Bills, 

sued their attorney, Sidney Kurth. The other "McCrackens", 

Carol Ehresman and Judy South, sued the lawyer they had 

hired, Gregory Munro. Betty, David, and Darrell settled the 

suit with Kurth for $500,000. Carol and Judy settled with 

Munro for $144,000. McCrackens also have a suit pending 

against Melcher, and a suit pending against their accountant. 

McCrackens allege that Hannah and Conrad should have 

informed them that the bonds provided inadequate collateral. 

The basis for this allegation is a statement from H. C. 

Jordan, Chairman of the Board of Sabre Farms Incorporated 

(Sabre) . 

Jordan's statement concerns an offer by Melcher to 

purchase property owned by Sabre prior to the land sale at 

issue in this case. According to Jordan, Sabre rejected the 

offer because Melcher proposed to secure the debt owed on the 
Sabre land with bonds purchased on a margin. McCrackens 

contend that Smedsrud's alleged knowledge of the deal with 

Sabre creates a material question of fact in regard to a 

breach of the duty owed to McCrackens by Hannah and Conrad. 

Hannah and Conrad deny that Smedsrud knew why Sabre rejected 

the offer, and contend that even if Smedsrud did know why 

Sabre refused to sell to Melcher, this knowledge fails to 

create a material question of fact. 

The District Court, facing the argument about the Sabre 

offer, stated: 

it is impossible to see how his not telling 

Plaintiffs what they and their counsel already knew 

and their accountant already had attempted to 

explain to them can make him liable for their 

injuries in this case. 

We agree with the District Court. 

A realtor has an affirmative duty to disclose all 

material facts to the seller. See Ellingson Agency v. 

Baltrusch (Mont. 1987), 742 P.2d 1009, 1013, 44 St.Rep. 1598, 

1603. However, a realtor has no duty to disclose what the 

seller already knows. See Mallory v. Watt (Idaho 1979), 594 

P.2d 629, 632-33. In this case, McCrackens and their 

attorneys already knew from Melcher's initial proposals that 

Melcher offered to secure the balance of the purchase price 

for property with bonds encumbered by margin loans. Jordan's 

statement as to Hannah and Conrad's knowledge of the 

existence of a similar offer made by Melcher to Sabre adds 

nothing material to the facts relevant to Hannah and Conrad's 

duty to disclose. Other than Jordan's statement, there is no 

evidence to indicate that Hannah and Conrad knew or should 

have known that the bonds were on margin. 

Under Rule 56 (c) , M. R.Civ.P., summary judgment may be 

granted where the party opposing the motion fails to "raise 
or to demonstrate the existence of the genuine issue as to 

any material fact or demonstrate that the legal issue should 

not be determined in favor of the movant." Palin v. Gerbert 

Logging (Mont. 1986), 716 P.2d 200, 202, 43 St.Rep 481, 483. 

McCrackens failed to raise the existence of the genuine issue 

as to any material fact in regard to Hannah and Conrad's 

breach of duty. Thus we affirm. 

hief Justice 

&E~~/+ Justice 

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