NO. 84-233 IN THE SUPREME COURT OF THE STATEOF MONTANA 1984

DONALDD. TODD and 3OSALIEM. TODD, Plaintiffsand Respondents.

HARVEY F. RERNER and ALICE V. BERNER, Defendants and Appellants.

APPEAL FROM: District Court of the Sixth Judicial District, Inand for the County of SweetGrass, The Honorable Byron Robb, Judge presiding.

COUNSEL OF RECORD:

ForAppellant: Gregory 0. Morgan, Rozeman, Montana For Respondent: Josephson & Fredricks; Conrad B. redr ricks, Rig Timber, Montana

Submitted onBriefs: Sept. 27, 1984 Decided: December 28, 1984 

### DEC2.!

## 984 Filed:

ClerkMr. Justice John Conway Harrison delivered.the Opinion of the Court. This is an appeal for the District Court of the Sixth Judicial-District of the State of Montana, in and for the County of Sweet'Grass, involving a rescission of a contract for thepurchase of a ranch. We affirm. In November of 1981, the respondents, Todds and defendants,Rerners entered into an agreement, whereby the Berners agreed to purchase the Todds' ranch for a total purchase price of $2,250,000, with a 29% down payment and the balance to be carried on the contract for deed by the sellers (Todds) at 118 on all but $300,C00 thereof for a period of twenty vears with a ten-year balloon. Marjorie Sizemore, a real estate agent, represented both parties in this transaction. Provisions were included to accommodate a "three-cornered exchange" of the Berners' Round Fiver Ranch if desired by the Berners. On the same date, Bob Siebrasse and Sons made an offer to the Berners on the Rou.ndRiver Ranch and deposited

an earnest money check for $1.00,000with LyleWatson Realty. This informationhad been communicated to the Berners through their real estate agent, Marjorie Sizemore, before the Rerners signed the agreement with the Todds. The offer by Bob Siebrasse and Sons on the ranch was entirely consistent with the listing agreement that the Eerners had signed on their ranch. The sale of the Berners' Round River Ranch fell through onemonth later,through no fault of theTodds. On February 3, 1982, the Bernersmet with the Todds and Margorie Sizemore in Billings, Montana. The Berners' brief indicates, "At that time they (Berners) felt they owed Todds something for their (Todds 

### ') hospi-talityand showing them (Berners)around the ranch." The Todds felt they had 

### a lotmore coming and asserted to the Berners that they had consulted an attorney and were entitled to the $100,000 downpayment agreed upon in the contract. The.Todds qot the Rerners to sign a note in the amount of $32,500 to avoid a suit over the $100,000 downpayment. At that same time the agreementbetween the Todds and the Bernerswasmarked "Void" and initialled by both parties. Thereafter the Rerners refused to pay the note when due, and this action ensued. The Todds filed a complaint to recover on the promissory note executed and delivered to them by the Berners. Thereafter, the Eerners interposed an answer, raising two affirmative defenses seeking rescission of the promissory note. Depositions were taken and the Todds filed a motion for summary judgment. No response to the motion for summary judgment was filed by the Berners. Neither the Berners nor their attorney appeared at the hearing on the motion. At that point the Todds presented their argument for summary judgment and the court took the motion under advisement. Thereafter,on March 15, 1984 the court,exparte, entered an order giving the Berners until March 26 to respond to the motion by brief 2nd allowing the Berners to present oral argument on the motion onMarch 29, 1984. The Berners filed a motion for leave to file a thirdparty complaint against Marjorie Sizemore. On March 29, 1984, the motion for summary judgment of the Toddswas again argued to the court, with the Berners' counsel.present. On March 30, 1984, the trial court granted Todds' motion for summary judgment, denied motion for leave to file a thirdparty complaint against Sizemore and this appeal. ensued. Three issues arepresented for review:Hon. John C. Harrison Justice, Supreme Court Room 414 Justice Building 215 North Sanders Helena, Montana 59620 CORRECTION.Inpreparingthisopinionforpublication,wenoted inourverificationoftitlesand citations the matterslisted below.Correctionshave beenmadeonourcopyofthe opinion.

January 25, 1985 Todd v. Berner, No. 84-233, Dec. 28, 1984

Page 4, line 4 from bottom 

### --- 280 P. 761 should read 228 P. 761. Page 7, line 11 from bottom 

### --- section 28-2-1725 should read section 28-2-1715.

WESTPUBLISHINGCOMPANY Box43526 St.Paul.MN55lfiA(1)Does mistake or fraud as to the enforceability of the buy/sell constitute grounds for rescinding or voiding the compromise and settlement? (2)Are facts regarding fraud and/or mistake in dispute which prevent summary iudgment? (3) Should the third-party co~.pI.aint have been permitted? It shouldbe noted that the respondents,Todds, filed a complaint to recover on a promissory note executed and delivered to them by the defendants, Berners. Thereafter, the Eerners interposed an answer,raising two affirmative defenses seeking rescissi.onof the promissory note. Depositions

were taken of the T0dd.sand. P3a.rjori.eSizemore. The Tod.ds then filed a motion for summary iudgment and served the same within ten days before the time fixed for the hearing. As previously noted, there was no response to the Todds'motion for summary judqment by the Berners and neither they nor their attorney appeared. However the court, upon learning the facts why the appellants' counsel overlooked thismatter, al.J..owed Berners' counsel topresent a brief and argue against the granting of summary judgment. While the Todds argue the District Court erred in al.lowing the Ferners to submit briefs and argue the summary judgment motion of the Todds late, we note there are no Montana cases on point in this matter. However, several cases such as FosterApiary, Jnc. v. Hubbard Apiaries, Inc.,

(Mont. 1981), 630 P.2d 1213, 38 St.Rep. 1025;Pacific Accep

### 2

### a2 tance Corp. v. McCue (1924), 71 Mont. 99, 24-0P. 761; and Robinson v. Peterson (1922), 63 Mont. 247, 206 P. 1092, recognized that there is judicial discretion invol-vedby the trial court and it may set aside a iudgment committed inerror or because of excusable neglect under Rule GOlb)

## , M.R.Civ.P. For the above reason we find no merit in the argument of respondents that the trial court erred in allowing appellants to brief and argue thepoint. We find,however, it is clear from the depositions that appellants issued an? delivered the promissory note,which is the subject of this action, as a compromise settlement

### of the respondents' claims against the appellants, arising from an agreementof the Berners tobuy the Todds' ranch. Whether or not the "earnest money receipt and agreement to sell or purchase," considered as an exhibit to the depositions, might have ultimately been proved, after litjqation, to be unenforceable against appe13ants is immaterial under the circumstances. We fjnd the relinquishment of the Todds' claim against the Berners, even though the claim may not have been ul-timately proved valid, is sufficient consideration of the promissory note. See Murray v. White (1910),42 Mont. 423, 113 P. 754, and Brown v. Jennett (Iowa 1906), 106 N.W. 747. The court found the Toddswere in good faith when they alleged they had a valid claim under the "earnest money receipt and agreement to sell and purchase" referred to in the depositions. Whether this qood faith on their part came from the fact that they consulted an attorney or not, the record indicates the contract was enforceable against both parties. As the record indicates if the Todds had not felt they had an enforceable agreement, they would not have sold their cattle; they would have kept their hay; they would not have dispossessed their tenants; and they would not haveta.ken their ranch off the market. See 15A Arl.Jur.2~3 Compromise and Settlement,5s 16 and 17 at 789, ?90. The appellants argue the stake neutral to the parties

as to the enforceability of a buy/sell was material to the compromise and settlement between the two parties. They argue that the Todds could not, in good faith, assert the validity of the buy/sell and Eerners would not agree to pay $32,500 unless they thought the buy/sell was enforceable. The validity of thebuy/sellwas the substance upon which the compromisewasbased. Appellants further argue there was fraud.as a qrounds for the rescission of the compromise and settlement. In Rclqers v. Swingley (Mont. 1983) 670 P.2d 1386, 40 St..Rep. 1676, this Court reversed a summary judgment in an action based upon a compromise of awritten leasewhichwas rep]-aced. with a.promissory note. We find the above case not applicable in view of the fact there is no showing of any fraud in the procurement of the agreement hetween the two parties. As to the second defense in the Berners' answer, they allege there was a mutual mistake upon which the "promissory note" could be rescinded. However,nowhere in the complaint do the Rerners allege,nor is a~ything revealed in the depositions and admissions before the court, that they complied with the pertinent statutes with regard to any rescission. Section 28-2-1713, MCA, is specific with regard to rescission,andprovides as follows: "Rescission, when not effected by consent, canhe accomplished onlyby the use on the part of the party rescinding of reasonable diligence to comply with the following rules: 1) He must rescind promptly upon discovering the facts which entitle him to rescind 

### if he is free from duress,menace, undue influence, or disability and is aware of his right to rescind. "(2) He must restore to the other party everything of value which he has received from him under the contract ormust offer to restore the same,upon condition that such party shall do likewise, unless the latter isunable or positively refuses to do SO.

### " Here there isno allegationor showing that the Berners used reasonabl-ediligence to complywith the statute. There is no allegation or proof that the defendants rescinded. promptly upon discovering the fact which allegedly entitled them to rescind. As noted by the trial court in its order granting the plaintiffs' motion for summary judgment, the Eerners took no legal action to dispute this note until the Todds filed suit. In addition, there is no allegation or proof that the Serners have restored to the Todds everything ofvalue which the Berners received from them under the contract, or that the Eerners offered to restore the same as provided by statute. Further, concerning the second defense of the Berners, sect.ion 28-2 

## , MCA, provri.des: "Rescission cannot be adjudged formere mistake unless theparty against whom it is adjudged can be restored to substantially the same posj-tion

as if the contra-cthad notbeenmade." It should be noted there is no allegation or proof before the District Court that the Todds can be restored to substantially the same position as if thepromissory note had notbeenmade. For the foregoing reasons alone, the District Courtwas correct in granting the Todds' mot.ion for summary judgment and its ruling is affirmed.In addition, it should be noted i.n the second defense of the Berners' answer,the Berners admit in theirbrief that thepromissory notewas a compromise settlementof the Todds' claim on the buy/se11. Whether or not the buy/se11 was enforceable or might ultimately prove, after litigation, to be unenforceable against the Berners is immaterial. The relinquishment of theTodds' claim on the buy/sell,

even though the claimmight nothave ultimatelyproved valid, is sufficient consideration for the promissory note and the court so found. From the depositjons of the parties, it is clear that at t.he time of the compromise and settlement--the promissory note with which this litigation is concerned--the Berners feltthey owed the Todds something for theTodds'hospitality in showing them the ranch. The Todds felt theyhad much more coming to themwhich resulted in the compromisenote. Tn addition, it would appear the Berners' argument in their brief to the court regarding the enforceability of the buy/sell agreement, is not only misleading but inaccurate. The terms of the sale of the ranch were specified with specific certainty: The purchase price was $2,250,000. The land sold was sufficiently described. The downpayment, 29% of the purchaseprice,was provided for. The balance of the ;purchase price was to be carried on a contract for deed payable on a twenty-year amortization basis with a ten-year balloon. Interest on all but $300,000 of the balance of the purchase price was set at 11%. The $300,000was an assumption of a contract with the Todds' predecessor in interest and itwas to carry the same interest rate as the underlying contract of 8%.In addition it should be noted that as to the appellants' fraud argument,theDistrictCourt in an "Explanatory Note" granted the motion for summary judgment and stated: "I further conclude that there are no facts showing fraud or misrepresentation on plaintiffs [sic] part ascertainable from the entire record so as to give defendants a valid defense to the promissorynote." From the record,we find the courtmade no error in so finding. The third issue is whether the third-party complaint should have been permitted by the trial court. Having found the trial courtdid not err in gra-ntingsummary judgment,we find it unnecessary to discuss this issue. Thatmatter canbe disposed of by the appellants in any further action they desire. The judgment of the District Court in granting summary judgment is affirmed.

We concur:

# /

Justices

Mr. Justice Fred J. Weber, specially concurring: Iconcur in the result.