### No. 82-56 

### INTHE SUPREMECOURTOF THE STATEOF MONTANA 1982

RICHARDA. WORTMAN andANN F. 

### WORTMAN, PlaintiffsandAppellants,

GARYJ. GRIFF,GERALDJ. CAPLAN, CONSERVATIVE INVESTORSGROUP,and FIRST SECURITYBANK OF LIVINGSTON, Defendantsand Respondents.

Appeal from: DistrictCourtof theEighteenth Judicial District, Inand for the CountyofGallatin HonorableW. 

### W. Lessley,Judgepresiding. Counselof Record: For Plaintiffs: Nash & 

### Nash, Bozeman, Montana CordellJohnson,Helena,Montana ForDefendants: Gene I. Brown, Bozeman,Montana IIuppert & 

### Swindlehurst,~ivingston, Montana

Filed: Submittedonbriefs: July 15, 1982 

### Decided: October 4,

### 1982

ClerkMr. JusticeGene B. Daly delivered theOpinion 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 thisjudgment, 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 inquestion. They became aware of the property through an ad in the Wall StreetJournal. 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 atthe 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 thatdefendants, Griff and Caplan, would purchase 

### lotsone through sixand thehouse located on lot one as individuals and the corporation would purchase lotsseven 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 thatthe 

### lots inbothparcels

### 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 topay the taxes 

### to prevent a tax lien from being imposed upon the land. However, an attempt

was made 

### toreimburse theplaintiff 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 inMarch 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 theirrights in allthe property should be terminated. Defendants on the otherhand answered by contending that the 

### twocontractsare separateand distinct. The corporatedefendant 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 substantialevidence? 3. Whether the court erred in failing to construe the 

### two contracts as one? 4. Whether attorney fees should have been awarded to the prevailingparty? The issue of whether the District Court should have granted the nonresident corporate defendantIs counterclaim for rescission is the most easily resolved. Appellants 

### claim that the corporation cannot 

### assert its counterclaim for rescission against them. They cite section35-1-1004(1), MCA, which prohibits a corporation not authorized 

### to do business inMontana from suing inthe courtsof thisstate, insupportof thiscontention. However, the corporation in thissituation

### was not instituting a suit. They

### were merely defending the actionbrought againstthem 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 bebrought. 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. Falsityof the representation; 

### "3. Materialityof the representation; 

### "4. Speaker's knowledge of the falsityof the representationorignorance 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 representa

### tion; "8. The hearer's right to rely on the representation; and 

### "9. Consequent and proximate injurycaused by the reliance on the representation." Van Ettinger

### v. Pappin (1976), 180Mont 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 thirteenand its conclusion of 

### lawnumber one stating that rescission 

### was proper due 

### to fraud. Appellants raise 

### two major contentions in this regard. Firstly, they contend thatbecause the defendants had the opportunitytoinvestigate 

### to see whether there

### were actuallybuilding 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 orhisagent 

### is lyingwhen the buyer 

### is told a plausible explanation fora defect and what is required 

### to cure the defect. The Kansas Supreme Court has expressed the limitations thatneed to be placed on theVan Ettingerand Lowe 

### cases: "'The trend of the decisions of the courts of this and other states is towards the justdoctrine 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 actionforrescission 

### or fordamages arisingoutof 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 

### topossiblewillfulmisrepresentations that, because of their plausibility, preclude further investigation. See 

### also, Schech

### terv. 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 decisionof theDistrict Courtwillnot 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 inLumby where thisCourt 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 theirtestimony 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 sufficiencyof the evidence, 

### we must view the 

### same in 

### a light 

### most favorable 

### to the prevailing party, and 

### we willpresume 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 willnot overturn the findings and conclusions of the DistrictCourt unless there is a decided preponderance of the evidence against them, and when the evidence furnishesreasonable grounds fordifferent conclusions, the findings of the District Court willnot 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, 35St.Rep.386, 388." 600 P.2d at202. 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 contractsbetween theplaintiff and the individual defendantsand 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, 124P.2d 994. Appellants urge thatthisseparate identity be disregarded, as Griff and Caplan and the corporation



### are one and the 

### same, and the contractsbe construed as one under sections 28-3-301 and 28-3-203, MCA. However, the general rule set down by this Court inMonarch Fire Insurance Co. v. Holmes, supra, as 

### todisregarding a corporate identity is:

"I.

# ..a corporationretains its separateand distinct identity where 

### its stock is owned partly 

### or entirely by another corporation as wellaswhere it is owned by naturalpersons.

### ' (18 C. J. S., Corporations, sec. 5, p. 375.) Before the corporate cloak willbe 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 sufficiently 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 theparents (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., 51Fed. 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 "thesubsidairy is not leftwith 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.)" 113Mont. at308. In the present 

### case there is a conflict in the two sides' versions 

### as to how and atwhose urging the 

### terms of these 

### two contracts came into being. The Wortmans claim that they sold the land 

### toGriff and Caplan as individuals. They maintain that the separate contracts 

### were made at the request of Griff and Caplan, to them individuallyand 

### 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 theotherhand, the respondents contend thatthe contracts

are separate and distinct. They claim the contracts 

### were drawn by the plaintiffs1 attorney at the plaintiffs1 direction, and thatneithercontractrefers 

### to the other. Finallyand unequivocally they point out that both contracts 

### are clear and unambiguous on theirface. Where such a conflictexists, 

### aspreviouslypointed 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 toenforce it asthe partiesmade it,Ryan



### v. Board 

### of County Commissioners (1980), 620 P.2d 1203, 1207, 37St.Rep. 1965, Madison Fork Ranch v. L & B Lodge Pole Timber Products (1980),615 P.2d 900, 37 St.Rep. 1468. The partieshere



### 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 inthe record mitigating againstthe application of that rule. We find this mitigating evidence substantial and thus cannot interfere with the decisionof theDistrictCourt. The final issue raised on appeal, by the respondents is whether they should have been awarded attorney's fees as theprevailingparty. The contractsboth provide that: "In the event of legal action to regain possession 

### or 

### to enforce the rights of any party tothisagreement, it is understood that the prevailing party shall be entitled 

### to 

### a reasonable attorney's fee to be fixed by the Court in such 

### action;

### " 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 affirmed and this

### case is remanded for further proceeding

Weconcur: