No, 12316 INTHE SUPREME COURT OF THE STATE OF MONTANA

HUBERT G, DENNY and PATRICIA A. DENNY, husband and wife, Plaintiffs and Appellants,

JACK L, BRISSONNEAU~), d/b/a ESTATE REALTY

### : TOM ADAMS

# ,d/b/a REAL ESTATE EXCHANGE, and GLACIER GENERAL ASSURANCE COMPANY, Defendants and Respondents.

Appeal from: 

### District Court of the Fourth Judicial District, Honorable Jack L. Green, Judge presiding, Counsel of Record: For Appellants: Tipp, Hoven and Brault, Missoula, Montana. Vernon Hoven argued, Missoula, Montana, For Respondents: Garlington, Lohn and Robinson, Missoula, Montana. Robert E, Sheridan argued, Missoula, Montana. Boone, Karlberg and Haddon, Missoula, Montana. Thomas H. Boone argued, Missoula, Montana. Mulroney, Delaney and Dalby, Missoula, Montana.

Filed: Submitted: November 

### 29, 1972


### MAR

## 12

## 19EMr. Justice Frank I, Haswell delivered the Opinion of the Court.
In an action for damages based on fraudulent misrepresentation involving the sale of a residence, the district court of Missoula County, the Hon. Jack L, Green, districtjudge, directed
a verdict in favor of defendants and judgment was entered thereon. From thisjudgment and subsequent order denying a new trial, plaintiffs appeal. Plaintiffs areHubert G. Denny and Patricia A. Denny, his wife, who sold their residence inMissoula to Jack L. Brissonneaud, d/b/a Estate Realty, one of the defendants. Another defendant 

### is Thomas Adams, d/b/a Real EstateExchange, who was the real estate broker involved in the transaction. The third defendant is Glacier General Iasurance Company, which bonded Adams asa real estate broker.In late 1970, plaintiffsmoved from Missoula toMinneapolis and listed their Missoula residence for salewith defendant Adams who had previouslyhandled their purchase of that residence the year before, The total saleprice as listedwas $22,500, involving
a cash payment of approximately $7,150 and assumption of a mortgage of about $15,350, The residence did not sellimmediately so on January 

### 1, 1971, the listingwas extended for an additional sixty days. In the latterpart of January, defendant Brissonneaud offered toexchange a promissory note he held for plaintiffs' equity in theresidence. This offerwas communicated by defendant Adams to plaintiffs inMinneapolis. After firstrefusing the offer, plaintiffsdecided tonegotiate and returned toMissoula. Plaintiff Hubert Denny talked todefendant Adams further, and rejected another offerby defendant Brissonneaud. Thereafter on February 19, plaintiff Hubert Denny, defendant Adams, and defendant Brissonneaud had a conference in the latter's office, At this point there is a conflict in the testimony concerning statements and representations made to plaintiff Hubert Denny during this conference.In any event, a written "Earnest Money Receipt and Agreement to Sell and Purchasef1 was executed on the same day by plaintiffsas sellersand defendant Brissonneaud aspurchaser. This agreement fixed a totalpurchase price of $22,650 on the residence tobe paid: $6,600 by assignment of defendant ~rissonneaud'sinterest inan installment promissory note on which CarlA. Malcolm and hiswife were makers, which note was inescrow atthe First StateBank inMissoula; $750 cash atclosing covering defendant Adamsf real estatecommission; and assumption of the outstanding mortgage on the residence of approximately $15,300. Subsequently, defendant Adams attended tocompletion of the various documents involved inthe transaction including an assignment of the purchaser's interest inthe escrow account and the deed. Plaintiffs subsequently received two monthly payments on the Malcolm note and escrow, one inMarch and one inApril 1971, Since that time plaintiffs have received no payments whatever. On August 

### 11, 1971, plaintiffs filedan action for damages based on fraudulent misrepresentations against defendants Brissonneaud, Adams, and Glacier General, The gravamen of their action
was that defendant Brissonneaud made falserepresentations to them that the maker of the note, Malcolm, 

### was a prominent Missoula businessman who owned property inMissoula inexcess of $250,000, and certain other statements relating tothe collectibility and security for the note. Plaintiffs seek tohold defendant Adams liable on the basis that he should have made a more thorough investigation to fullyinform plaintiffs what they were getting into, and conducted himself inviolation of ~ontana's Real EstateLicense Act, specifically sections 66-1937 and 66-1940, 

### R.C.M. 1947. Issuewas joined and the case came on for trialby jury
on April 24, 1972, in the districtcourt of Missoula County before Judge Green. At the conclusion of plaintiffs1case-in-chief, Judge Green granted defendantsfmotions for a directed verdict and dismissal on the basis that no damages had been proven, Judgmentwas entered thereon and plaintiffs' motion for a new trialwas denied. Plaintiffsnow appeal from thejudgment and denial of their motion for a new trial, The issue upon appeal iswhether the directed verdict was correct. The underlying issue 

### iswhether plaintiffs proved any damages. Plaintiffs contend they proved damages in these particulars: (I) The loss of the $750 paid defendant Adams for a real estate commission; (2) the loss of their equity intheirresidence; (3) the loss of their right to seekrecourse against defendant Brissonneaud; and (4) the loss of use of the moneys due under monthly installment payments under the note. Plaintiffs contend that they have been deprived of a present rightwith a possibility of future damages and therefore the question of damages should have been submitted to thejury. Actual fraud 

### is a question of fact. Section 13-310, R.C.M. 1947, The burden of proof 

### isupon the party alleging it,here the plaintiffs. Reilly v. Maw, 146Mont. 145, 405 P.2d 440, Proof of damages 

### is an essential element of an action for fraud, Lee v. stockmen's Nat. Bank, 63 Mont. 262, 207 P. 623, Where, ashere,
an action for fraud isbottomed on falserepresentations, this Court inHolland Furnace Co. v. Rounds, 139Mont. 75, 80, 360 P.2d 412, has previously expressed thisrequirement in this language:

II

Damage, injury, arprejudice from reliance on fraudulent representation 

### is a necessary element of fraud whether fraud 

### is being advanced asa ground forrecovery or defense.I1 Generally speaking, the injury or damage which the plaintiff must prove must be something more than contingent damage which may
ormay not occur, 37 C.J.S, Fraud 

### 5 41(f), p. 294. Plaintiff may
recover when he shows that he has sustained some pecuniary damage
or injuryby reason of having been put in a position worse than he no could have occupied if therehad beenlfraud, but he cannot recover where he does not show that he has sustained such damage or injury. 37 C.J.S. Fraud 

### 5 41(a), p, 290, Plaintiffs claim tohave beenplaced ina worse position by the loss of the equity in their house inexchange for an assignment of a note. But 

### is thisnot exactlywhat plaintiffs bargained for? The buy and sellagreement of February 19, 1971, specifically setting forth these terms of exhange was signed by plaintiffs. Plaintiffs contend the damages arenot the balance of the note, thevalue of the note, nor the insolvency of the makers, but the loss of equity they sustained because of the fraudulent transaction. Plaintiffs, however, do not seek rescission of the contract. Rather, they claim the amount of $5,468, which 

### was essentially plaintiffs' equity in the property atthe time of the sale, plus defendant Adams' commission, Plaintiffs, inessence, argue they received nothing of value in exchange for their equity. The fallacy in this argument lies inthe erroneous premise upon which it ispredicated. There 

### isevidence tothe effect that shortly

.-.A

?-+ aftrr the contract was consummated no payments where'bade by the makers of the note. But it does not follow that the assigned
escrow account which they acquired atthe time of the transaction
was valueless. See: Kaufman v. Mellon National Bank and Trust Company, 366 F,2d 326, 330 (3d Cir,1966). In an actionbased upon fraud the defrauded party's measure of damages 

### is the differencebetween the actualvalue of the property atthe date of the saleand the contract price, Healy v. Ginoff, 69 Mont, 116, 123, 220 P. 539. When the parties signed the buy and sellagreement of February 19, 1971, plaintiffs acquired the assignment of the proceeds of an escrow account. This assignment had an ascertainable value equal tothe value of the note containedwithin the escrow account. There 

### isno testimony in the record to indicate that atthe time of the transaction the note was worth less than 

### its face value. Plaintiffs solelyrelied on their claim to the amount of the equity they transferred inexchange. There is simplyno evidence to support their claim that atthe time of the transaction they exchanged something fornothing, i.e, their equity and thesales commission valued at $5,468 for the proceeds of a valueless note. Thus no damages were proven simply because there 

### isno evidence that the proceeds of the note were valueless. Judge Green was correct in stating "that inas much as damages have not been shown inany amount---a possibility of damages perhaps, but no damages". Accordingly, the directed verdict in favor of defendant Brissonneaud was correct. Directing our attention toplaintiffs' claim against defendant Adams, we note thathe 

### is a real estatebroker licensed under the laws of the state of Montana. As he was the real estate broker involved inthe sale from plaintiffs to defendant Brissonneaud, thebasis of this action filedby plaintiffs against Adams and the issuebefore the Court relating todefendant Adams 

### is covered by provisions of the Real Estate License Act, sections 66-1937 and 66-1940, 

### R.C,M, 1947. In seeking 

### a basis forrecovery plaintiffs relyupon section 66-1940, R.C.M. 1947, which provides inpertinent part: "(b) In case any person ina civilaction isfound guiltyof having received any money, or the equivalent thereof, as a fee, commission, compensation, or profit by or in consequence of a violation of any provision of this act, he shall inadditionbe liable to a penalty of not less than the amount of the sum of money so received and not more than three times the sum so received, asmay be determined by the court, which penalty may be recovered inany court of competent jurisdiction by any person aggrieved. "(c) Any person sustainingdamages by failure of a real estatebroker or real estate salesman to comply with the provisions of this act, shallhave the right to commence an action inhis own name against the real estatebroker and his surety, or the real estate salesman and hisssurety,orboth the broker and any salesman employed directly or indirectlyby such broker and their respective sureties, for the recovery of any damages sustained as the result of any act specified in section 66-1937 herein or asa result of the failure of the real estatebroker or real estate salesman tocomply with the provisions of this act. In allcases where suit is brought against thebroker or the salesman, and his surety, the court shall, upon enteringjudgment for the plaintiff, allow as a part of the costs of suit a reasonable amount as attorney's fees. I I Whether ornot plaintiffs have shown a violation of section 66-1937, R.C.M. 1947, it 

### is stillnecessary to prove damages flowingfrom such violationwithin the meaning of section 66-1940, 

### R.C.M. 1947, Plaintiffs contend that the only proof of damages that is required 

### isproof that defendant Adams received a real estate commission forhis services. Such isnot the law. Section 66-1940(c) permits a civilactionby any "person sustaining damages" against a real estate broker who fails tocomply with the provisions of the act. The mere fact that a commission has been received 

### isnot enough in itself tomeet the requirements of proof of damages. It not only must be shown that the real estate broker violated some provisions of the act, but that plaintiffs suffered some damages thereby. To hold otherwisewould be contrary tothe intent of the statutewhich gives a remedy to one who has suffered some damage by virtue of certain actions of a real estatebroker or salesman. Since no damages have been shown as
a result of the transaction with Brissonneaud heretofore discussed, likewise no proof of damages has been shown against defendant Adams ,Here, plaintiffs are stillthe holders or assignees of the
escrow account forwhich they bargained. There isno proof that itwas or 

### isvalueless. Plaintiffsmade no attempt to contact the Malcolms for payment or contact Brissonneaud for information
or assistance. In short, they did nothing but sue Brissonneaud and Adams without proof of thenoncollectibility orworthlessness of the escrowed note. As yet they have not been damaged as the escrowed note may be fully collectiblewith interest, For these reasons, the district court properly granted defendants' motion for a directedverdict, The judgment of the district court 

### is affirmed.

Associate Justice

### Mr. Justice John Conway Harrison dissenting:



### I dissent. 

# Qi&L-b*-&

# 

### ociate Justice