No. 82-56 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1982 

RICHARD A. WORTMAN and ANN F. WORTMAN, 

Plaintiffs and Appellants, 

GARY J. GRIFF, GERALD J. CAPLAN, 

CONSERVATIVE INVESTORS GROUP, and 

FIRST SECURITY BANK OF LIVINGSTON, 

Defendants and Respondents. 

Appeal from: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin 

Honorable W. W. Lessley, Judge presiding. 

Counsel of Record: 

For Plaintiffs: 

Nash & Nash, Bozeman, Montana 

Cordell Johnson, Helena, Montana 

For Defendants: 

Gene I. Brown, Bozeman, Montana 

IIuppert & Swindlehurst, ~ivingston, Montana 

Filed: 

Submitted on briefs: July 15, 1982 

Decided: October 4, 1982 

Clerk 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This action arose out of two agreements by the plaintiffs 

with Gary Griff and Gerald Caplan, as individuals, and with 

Conservative Investors Group, a California corporation, for two 

parcels of land. A trial was held in the District Court of the 

Eighteenth Judicial District. In its decision, the District 

Court found that the contracts were separate and distinct 

agreements , and that plaintiff had defrauded the defendant corporation. From this judgment, plaintiff appeals. 

The defendants, Griff and Caplan, who are officers and the 

sole shareholders of the defendant corporation, contacted the 

plaintiff about purchasing the property in question. They became 

aware of the property through an ad in the Wall Street Journal. 

After receipt of a brochure on the land and some initial phone 

contact with the plaintiff, Richard Wortman, the defendant, flew 

to Montana from California to look at the land in mid-November 

1977. After taking a walking tour of the property, which was 

subdivided into ten-acre tracts, and then conducting negotiations, it was agreed that defendants, Griff and Caplan, would 

purchase lots one through six and the house located on lot one as 

individuals and the corporation would purchase lots seven through 

thirteen. This agreement was entered into despite the 

defendants' knowledge that some of the lots were located in a 

floodplain, because it was alleged plaintiff said there were 

building sites outside the floodplain on every lot. 

Although there is evidence that the lots in both parcels were 

not of equal value, it was agreed to allocate one-half of the 

total price to each contract. It was also agreed in both 

contracts that the purchaser was to pay the taxes on the land. 

This was not done and plaintiff had to pay the taxes to prevent a 

tax lien from being imposed upon the land. However, an attempt 

was made to reimburse the plaintiff for said taxes but he refused 

the check. It should also be noted that despite the negotiations, neither contract refers to the other. 
The corporate defendant stopped making its semi-annual 

payments, as required by the contract in March 1981. The individual defendants attempted to make their payment on lots one 

through six, which was refused by the plaintiff. The plaintiff's 

contend that the contracts are not separate but constitute one 

agreement, and therefore the defendants are in default on the 

whole and their rights in all the property should be terminated. 

Defendants on the other hand answered by contending that the 

two contracts are separate and distinct. The corporate defendant 

also counterclaimed asking for rescission because plaintiff had 

misrepresented lots seven through thirteen as having building 

sites on them, when in fact such lots were located in a 

floodplain and no such sites existed on some of them. 

There are four issues raised on appeal: 

1. Whether the District Court erred in granting the nonresident corporate defendant's counterclaim for rescission? 

2. Whether the District Court's finding of fraud is supported by substantial evidence? 

3. Whether the court erred in failing to construe the two 

contracts as one? 

4. Whether attorney fees should have been awarded to the 

prevailing party? 

The issue of whether the District Court should have granted 

the nonresident corporate defendant Is counterclaim for 

rescission is the most easily resolved. Appellants claim that 

the corporation cannot assert its counterclaim for rescission 

against them. They cite section 35-1-1004(1), MCA, which prohibits a corporation not authorized to do business in Montana from 

suing in the courts of this state, in support of this contention. 

However, the corporation in this situation was not instituting a 

suit. They were merely defending the action brought against them 

by plaintiffs, which they have a right to do under section 

35-1-1004(2), MCA. The counterclaim is just one aspect of the 

defense which they are entitled to raise and can therefore be 
brought. 

The next issue to be addressed is whether there is substantial credible evidence to support the finding of fraud. There 

are nine elements which must be established to prove fraud. 

These are: 

"1. A representation; 

"2. Falsity of the representation; 

" 3. Materiality of the representation; 

" 4. Speaker's knowledge of the falsity of the 

representation or ignorance of its truth; 

"5. Speaker's intent it should be relied 

upon ; 

"6. The hearer's ignorance of the falsity of 

the representation; 

"7. The hearer's reliance on the representat ion ; 

"8. The hearer's right to rely on the 

representation; and 

" 9. Consequent and proximate injury caused by 

the reliance on the representation." Van 

Ettinger v. Pappin (1976), 180 Mont 1, 10, 588 

P.2d 988. 

The District Court in this case believed that all of said 

elements were present as is evidenced by its finding of fact 

number eight stating that the plaintiff fraudulently represented 

lots seven through thirteen and its conclusion of law number one 

stating that rescission was proper due to fraud. 

Appellants raise two major contentions in this regard. 

Firstly, they contend that because the defendants had the opportunity to investigate to see whether there were actually building 

sites on the lots, and that since they did not they cannot 

complain. But, this is not the case. In Jenkins v. Hillard 

(1982), 647 P.2d 354, 39 St.Rep. 1156, this Court stated: 

"Van - -- Ettinger and Lowe do not stand for the .- proposition that a buyer must assume a seller 

or his agent is lying when the buyer is told a 

plausible explanation for a defect and what is 

required to cure the defect. The Kansas 

Supreme Court has expressed the limitations 

that need to be placed on the Van Ettinger and 

Lowe cases: 

"'The trend of the decisions of the courts of 

this and other states is towards the just 
doctrine that where a contract is induced by 

false representations as to material existent 

facts, which are made with the intent to 

deceive, and upon which the plaintiff relied, 

it is no defense, to the action for rescission 

or for damages arising out of the deceit, that 

the party to whom the representations were 

made might , with due diligence , have discovered their falsity, and that he made no 

searching inquiry into facts . I 11 

Nordstrom v. Miller (1980), 227 Kan. 591 605 

P.2d 545, 553, quoting Speed v. Hollingsworth 

(1894), 54 Kan. 436, 440, 38 P. 496, 497. 

"Opportunity to inspect in itself is no 

defense to possible willful misrepresentations 

that, because of their plausibility, preclude 

further investigation. See also, Schech ter v. 

Brewer (Mo. 1961), 344 S.W.2d 784, and Lumby 

v. Doetch (1979)f Mont . , 600 P.2d 

200, 36 St.Rep. 1683:"- -39 ~t.~gp;-.at 1160. 

Secondly, they contend that because you can build on a 

floodplain if regulations are met or that the lots could be 

rearranged so a building site exists on each that they are not 

liable. However, this is not the case as neither of these 

situations has anything to do with the representation that the 

District Court must have determined the plaintiff to have made, 

that there were building sites outside the floodplain on each 

lot. 

As this Court has stated on previous innumerable occasions a 

decision of the District Court will not be overturned where there 

is substantial credible evidence to support it. Lumby v. Doetch 

(1979), 600 P.2d 2001 36 St.Rep. 1684. In making a determination on the issue of substantial evidence this Court is 

guided by a number of principles. These are most concisely set 

out in Lumby where this Court stated: 

"In resolving this issue, we are guided by a 

number of principles established by this 

Court. The credibility of witnesses and the 

weight to be given their testimony are matters 

for the District Court's determination in a 

nonjury case. Corscadden v. Kenney ( 1977 ) , Mont . 572 P.2d 1234, 1237, 34 

St .Rep. 1533;-1-577. Thus, in examining the 

sufficiency of the evidence, we must view the 

same in a light most favorable to the prevailing party, and we will presume the findings and judgment by the District Court are 

correct. Hellickson v. Barrett Mobile Home 

Transport, Inc. (1973), 161 Mont. 455, 459, 

507 P.2d 523, 525. We will not overturn the 

findings and conclusions of the District 
Court unless there is a decided preponderance 

of the evidence against them, and when the 

evidence furnishes reasonable grounds for different conclusions, the findings of the 

District Court will not be disturbed. Morgen 

and Oswood Const. Co. v. Big Sky of Mont. 

(1976), 171 Mont. 268, 275, 557 P.2d 1017, 

1021. The burden of proof is on the 

appellant. Schuman v. Study Com'n of 

Yellowstone Cty. (1978 ) , Mont . - . - , 578 

P.2d 291, 292, 35 St.Rep.386, 388." 600 P.2d 

at 202. 

In examining this record in light of these principles and 

despite the many conflicts in the evidence relating to the above 

enumerated nine elements of fraud, we cannot overturn the 

District Court s decision, as there is substantial credible evidence in the record to support its finding that fraud existed. 

The third issue raised on appeal concerns whether the two 

contracts be tween the plaint iff and the individual defendants and 

the plaintiff and the corporate defendant should be construed as 

one. As noted above, the District Court found them to be 

separate. 

A corporation has a separate and distinct identity from its 

stockholders. Monarch Fire Insurance Co. v. Holmes (1942), 113 

Ilont. 303, 308, 124 P.2d 994. Appellants urge that this separate 

identity be disregarded, as Griff and Caplan and the corporation 

are one and the same, and the contracts be construed as one under 

sections 28-3-301 and 28-3-203, MCA. However, the general rule 

set down by this Court in Monarch Fire Insurance Co. v. Holmes, 

supra, as to disregarding a corporate identity is: 

"I. . . a corporation retains its separate and 

distinct identity where its stock is owned 

partly or entirely by another corporation as 

well as where it is owned by natural persons. ' 

(18 C. J. S., Corporations, sec. 5, p. 375.) 

Before the corporate cloak will be disregarded 

it must appear not only that the corporation 

is controlled and influenced by one or a few 

persons, but, in addition, it is necessary to 

demonstrate that the corporate cloak is utilized as a subterfuge to defeat public convenience, to justify wrong, or to perpetrate 

fraud. (18 C. J. S., Corporations, sec. 6, 

p. 378.) Under the identity theory it must 

appear from the evidence and must be suff iciently alleged that the subsidiary corporation is a mere creature of the parent, 

having no separate business existence and 

serving as a mere business conduit of the 
parents (In re Muncie Pulp Co., 2 Cr , 139 

Fed. 546) or a mere department of the parent 

(Interstate Tel. Co. v. Baltimore & 0. Tel. 

Co., C. C., 51 Fed. 49). 

"In People ex rel. Studebaker Corp. v. 

Gilchrist, 244 N.Y. 114, 155 N.E. 68, 71, it 

is said: ' Bef ore "the corporation persona" 

may be ignored, the evidence must show that 

"the subsidairy is not left with any autonomy" 

. . . Proctor & Gamble Co. v. Newton, supra 

[D.C. 289 Fed. 10131) and that the parent, 

though in form speaking and acting through 

another, is operating the business directly 

for itself .' (See, also, Erickson v. Revere 

Elevator Co., 110 Minn. 443, 126 N.W. 130.)" 

113 Mont. at 308. 

In the present case there is a conflict in the two sides' 

versions as to how and at whose urging the terms of these two 

contracts came into being. The Wortmans claim that they sold 

the land to Griff and Caplan as individuals. They maintain that 

the separate contracts were made at the request of Griff and 

Caplan, to them individually and to the corporation. Thus, they 

claim that it is one contract evidenced by two instruments and a 

default on either half constitutes a default on the whole. 

On the other hand, the respondents contend that the contracts 

are separate and distinct. They claim the contracts were drawn 

by the plaintiffs1 attorney at the plaintiffs1 direction, and 

that neither contract refers to the other. Finally and unequivocally they point out that both contracts are clear and unambiguous on their face. 

Where such a conflict exists, as previously pointed out, this 

Court can only look to see if the lower court's findings and 

conclusions are supported by the record. Matters of the credibility of testimony are left for the District Court's determination, Lumby v. Doetch, supra. 

In this case, the contracts speak for themselves. They are 

clear and unambiguous on their faces. Neither makes the 

slightest reference to the other. The law of Montana is that 

where the language is clear and unambiguous on its face, it is 

the duty of the court to enforce it as the parties made it, Ryan 

v. Board of County Commissioners (1980), 620 P.2d 1203, 1207, 37 
St.Rep. 1965, Madison Fork Ranch v. L & B Lodge Pole Timber 

Products (1980), 615 P.2d 900, 37 St.Rep. 1468. The parties here 

are not the same as appellants contend, because although there 

may be some evidence in the record to support disregarding the 

corporation's separate identity, based on the rule enumerated in 

Monarch Fire Insurance Co., supra, there is also evidence in the 

record mitigating against the application of that rule. We find 

this mitigating evidence substantial and thus cannot interfere 

with the decision of the District Court. 

The final issue raised on appeal, by the respondents is 

whether they should have been awarded attorney's fees as the prevailing party. The contracts both provide that: 

"In the event of legal action to regain 

possession or to enforce the rights of any 

party to this agreement, it is understood that 

the prevailing party shall be entitled to a 

reasonable attorney's fee to be fixed by the 

Court in such act ion; " 

This language in itself is clear and unambiguous, and the court 

should have enforced it as made by the parties, Ryan v. Board of 

County Commissioners, 620 P.2d at 1207. This Court has previously upheld such an award of attorney's fees by the District 

Court where the contract fairly provided for them. Hares v. 

Nelson (1981), 637 P.2d 19, 38 St.Rep. 2036. 

The judgment of the District Court is af firmed and this case 

is remanded for further proceeding 

We concur: