### No. 81-58 INTHE SUPREME:COURTOF THE STATEOF MONTANA 1981

GEORGEW. BERRY, Plaintiff and Respondent,

VS. 

### CLAYTONM. ROMAIN and RAYMOND C. ROMAIN, DefendantsandAppellants.

Appeal from: DistristCourtof the EleventhJudicialDistrict, Inand for the CountyofFlathead. Honorable Robert Sykes, Judgepresiding. CounselofRecord: ForAppellants: Keller and Gilmer,Kalispell,Montana ForRespondent: Datsopoulos,MacDonald and Lind,Missoula,Montana

Submittedonbriefs: July 2,

### 1981 ~ecided:

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# 7981 Filed:

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# -798Mr. Justice John Conway Harrison delivered the Opinion of the Court. This action was brought in the District Court of the Eleventh Judicial District of the State of Montana, County of Flathead, to rescind a contract for the purchase of real property in Flathead County. The defendant-appellants counterclaimed for a breach of contract for nonpayment by the plaintiff-respondent

# . The matter was tried before the court, and findings of fact and conclusions of law and judgment were entered forplaintiff-respondent in the amount of $49,385.36. Thereafter, appellants' motions for amendment of the findings, conclusions and judgment and for a new trial were filed. The court entered an order amending various findings and making additional findings and conclusions and an amended judgment in favor of respondent for rescission along with a judgment for $46,218.10 plus interest from the dateof the originaljudgment. The issues before this Court, as 

### set forth in the appellants' brief, were six in number but can be properly handled and discussedby thisCourt as follows: 1. Whether the judgment of the trial court for rescission 

### is supportedby substantial credibleevidence. 2. Whether the rescission of the contract by reason of mutual mistake was a proper remedy to be applied by the court

# . 3. Whether the court properly awarded damages under the circumstances of thiscase. Appellants, the Romains, purchased a tract of land located in Flathead County near Bigfork, Montana, from Wesley House. The irregularly-shaped tract 

### is bounded on the west by Montana Highway 35 and on the south and eastby

### a county road. In the spring of 1978, they contracted with House tobuild a two-story commercial building on the south part of the property, intending to rent the space as offices. They hired House, from whom they were purchasing the land, to construct the building. When construction began, thebuildingwas intended for appellants' use and, as previously noted, for rentalproperty. During the latterpart of June or earlypartof July 1978, respondent Berry, the owner of the Bigfork Convalescence Center, 

### a nursing home, along with the local dentist and a doctor who was considering moving into the 

### area, 

### met with appellants to 

### see if they could purchase thebuilding. They contemplated creating amedical center, with thedoctor and dentistupstairs and respondent occupying thedownstairs

area. Following themeeting respondentmet with a local attorney, Lee 

### Simmons, and discussed with him the possibility of subjecting the building toa condominium ownership. At

### the 

### time respondent contacted Clay Romain, one of the appellants herein, the building was approximately 50 

### percent completed. Respondent and appellants 

### met several 

### times regarding the possibility of a sale. After essentially agreeing to the terms of the sale, if one were to occur, at the suggestion of respondent they 

### met with attorneySimmons. Simmons, in the conference with appellants and respondent, noted that appellants had not held theproperty long enough to qualify for a long-term capital gain. He 

### suggested that, as a 

### business tax matter, an option be used with a sufficient down payment followed by a contract for deed as a method for transferring the property. At 

### thattimethe stageof construction of the building was such that either appellantswould continue with their plans to finish and lease it as office space, or respondent, who had different plans, would have tomake changes consistent with hisplans. The parties agreed to proceed with the option followed by a contract for deed, to be prepared by Simmons, with $40,000 as consideration for the option, and a total purchase priceof $300,000. Inview of the factthatatthe 

### time there was no survey of the property and that the sale

was for 

### less than the entire parcel, Simmons advised the parties that a survey would be required for recording purposes, and the building contractor, atappellants1request, contracted with a local surveyor todo thejob. There 

### is a factual dispute about what description was annexed to the option which was exercisedAugust 23, 1978. The option provided for 

### its exercise by October 15, 1978, and a contract for deed was signed by the parties at approximately that time. While the contract was prepared and signed to convey the property pursuant to the parties1 agreement, theoption topurchase, thedeeds and thenotices of respondent's purchase interest associated with the contractwere not completed because no legaldescriptionwas available to attach as an exhibit to those documents. Consequently, the contract was held by attorney Simmons until the transaction could be completed by obtaining the proper survey. In view of the fact that problems arose in the survey, the documents remained in the possession of the attorney until they were released to the parties for the filing of this action. No escrow was ever formally con-cluded and no documents were ever filed with the clerk and recorder of Flathead County. The contract provided for quarterly payments of $6,827.60, first due on November 15, 1978. The contract required the sellers to furnish the purchasers a title policy in the amount of the contract showing good merchantable title to be vested in the sellers in fee simple. In addition, the land was tobe transferred by a warranty deed upon payment of the purchase price in full. The contract contained special provisions for submitting the property to

a condominium ownership and for the sellers' agreement to

remove or reface an existing building on the remaining property within two years. The contract also provided the following as to paving and parking: "The sellers hereby covenant to pave the parking area on the south and north sides of the building on these premises at no additional cost tothe purchaser by August 1, 1979." Although the surveyhad not been received by November 15, 1978, respondent made the first quarterly payment of $6,827.60 to his attorney. In accordance with the closing statement prepared by him, the attorney paid $5,911.60 of thatamount toappellants. Sometime in December 1978 or early January 1979, respondent contacted the surveyor athis home requesting to

see the survey and at that time was told there were encroachments upon the Stateof Montana and Flathead County right-of-ways. The survey showed that a part of the eaves

on the southeast corner of the building and a brick facing

on the eastcorner of the front southern entrance encroached upon county right-of-way. Italso showed an encroachment of

### a portion of the eaves of the building onto the statehighway right-of-way on thenorthwest corner of thebuilding. After speaking with the surveyor, respondent contacted his attorney and 

### metwith him todiscuss the survey. Within the next few weeks 

### the situationbetween the parties deteriorated. On January 24, 1979, respondent, with a new attorney, sentappellants 

### a notice of intentto rescind the contract, demanding a correction of thevariousbreaches of the contract within ten days and demanding payment of $50,126.86. On January 25, 1979, appellants obtained an easement for the encroachments intheparking involved in the County of Flathead's right-of-way. In addition, appellants' counsel responded tothe noticeof the intention torescind, requesting a detailed statementof the itemsof concern. On February 11, 

### 1979, appellants gave respondent a noticeof defaultunder the contract for failuretomake the second quarterlypayment. On February 21, 1979, respondent's counsel gave written notice of rescission, tendering restoration of the title

### documents previously received by him on the condition that appellants repay allmonies expended together with interest. This actionwas thereafter commenced

on March 30, 1979. The first issue for consideration 

### is whether the judgment of the trialcourt for the rescission 

### is supported by substantial, credibleevidence. The statutory grounds for establishing a case in rescission are 

### set forthin sections28-2-1701 etseq., MCA. A 

### party to a contract may rescind the same only under the following conditions:

### "(1) if the consent of the party rescinding



# . 

# . . was given by mistake or obtained through duress, menace, fraud, or undue influence

# ..

# .; "(2)

### if, through the faultof the partyasto whom he rescinds, the consideration for his obligation failsinwhole or in part; "(3) 

### if such consideration becomes entirely void from any cause; "(4) 

### if such consideration, before it 

### is 

### rendered tohim, fails in a material respect from any cause; or "(5)

### if alltheother partiesconsent." Section 28-2-1711, MCA. 

### Section 28-2-1713, MCA, 

### sets forth the specific requirements to be followed in rescission cases. The rescinding party must use reasonable dil igence and take action within a reasonable time 

### upon discovering the facts which entitle him to rescind. Here, appellants do not question the fact that respondent took prompt and speedy action in filing hiscase. The solequestion in this issue is 

### whether it 

### is 

### a proper casefor rescission. The trialcourtwas urged torescind the contract for mutual mistake with regard to the description of the parcel of property tobe conveyed, for failureof consideration, in whole or in part, because of appellants' breach in failing to furnish title 

### insurance to respondent showing good and merchantable title 

### to the property, free and clear of all liens and encumbrances; for failure of consideration, in whole or inpart and in a material respect, for appellants' failuretoprovide deeded property on the south sideof the building enabling respondent toown a parking lot; and last, for actual and constructive fraud in appellants' failure to advise respondent of known encumbrances on title to the property. The trial court in its 

### findings of fact bearing

### on respondent's right torescissionfound: "7. 

### Prior tothepurchase of thepropertyby plaintiff, plaintiff and defendants had viewed theproperty, thebuilding, and agreed aspartof the contract thatparkingwould be provided on the south and north sidesof the building and paid by defendants. "8. 

# . . . [The surveyor] discovered that county right-of-way runs immediately to the south of the building and a portion of the building encroaches on such right-of-way. The survey further disclosed that a portion of the eaves of the building encroached on state highway right-of-way on the west side of the property. Neither party was aware of the encroachments of the county right-of-way and stateeasement prior tothecompletion of the survey. "9. [As 

### amended] An easement had been obtained in regard to the county right-of-way atalltimes. The Montana Highway Department will 

### not make any agreements in any way affecting encroachment in the west side of thebuilding.

### " Following these findings the court made its 

### conclusionsof law which bear directlyon the issueof rescission: "1. 

### The agreement astoparking on the south and 

### west sides of the building was part and parcel of the contract and agreement of the parties. "2. 

### Both partieswere atalltimes acting in good faith and by reason of mistake and not by fraud." Thus, the court concluded that respondent was entitled to rescission, and the court, contrary to the arguments of appellants, addressed the issue of materiality of mutual mistake of the parties. We find implicit in the trialcourt'

### s determination contained in its 

### conclusions of law the ruling that a mutual mistake of fact occurred in thiscasewith regard totheparking. Both parties agreed that a part of the contractwas 

### thatparking would be available. It

### was uncontradicted that respondent, 

### as purchaser, required 

### a deeded parking lot togo with the building, whether it was to be leased or developed into condominium units. Parking was a major consideration, asshown by the original letter of rescission

on January 4, 1979. We find that the court acted well within 

### its discretion as a court of equity in determining that parking was a material part of the contract; that a mistake with regard to parking was an adequate basis for rescission under section 28-2-1711, MCA; and that the consideration for respondent's contract had failed in a material aspectaswell. Regardless of appellants' argument that a substituteparking easementhad been obtained for the south entrance, which 

### is a crucial issue to a commercial developer and to a proposed tenant, 

### we find the court was 

### well within 

### its discretion in determining that the mistake and failure of consideration associated with the parking problem was sufficient grounds for rescission of the contract. Appellants argue that the easement theyhave obtained for the parking was a sufficient substitute here toprevent

a rescission of the contract. However, such an easement did not comply sufficiently with the practical realities of commercial property ownership to satisfy the trial court that the parking issue was not material. At the trial appellants advanced this position, and it was rejected by the court--a grant of easement 

### is simply not ownership. Appellants had contracted toprovide a fee simple titlefree and clear of all liens and encumbrances and were unable to perform this contract. The trial court was in the best position to determine the question of the right to the remedy of rescission, and adequate legal authority supportsits decision. See Bolinger v. City of Bozeman (1972), 158 Mont. 507, 511, 493 P.2d 1062, 1064; Ryan v. Board of County Commissioners (1980), Mont. 

## , 620 P.2d 1203, 1209, 37 St.Rep. 1965, 1972. The next issue 

### is whether the rescission of the contract by reason of mutual mistake was a proper remedy. Appellants argue that the conclusions of law made by the trial court are inconsistent with 

### its findingsof fact. In particular, appellantsurge thatthe trialcourt "found that the encroachment problems on the south sideof the building were remedied by [appellants] obtaining an easement from the county

# . . ." However, aswe indicated above, although it 

### is true that appellants obtained an easement, the court at

no time found or determined that such an easement "remedied" theparking situation. In fact, the court found exactlythe opposite. Since no deeded parking could be obtained on the south side of the building, there was a material mutual mistake of fact and a material failure of consideration justifying the rescission. Respondent does not have the burden of establishing the proof of the facts because the trial court has already found them, and this Court can draw every legitimate inference to support the presumption of correctness of the trialcourt. Rule 52, M.R.Civ.P.; Poulsen v. Treasure State Industries (1981), Mont

# . , 626 P.2d 822, 827, 38 St.Rep. 218, 223. We adhere tothe doctrine of implied findingswhere,

as here, the trial court's findings are general in terms. Any findings not specifically made but necessary to the judgment aredeemed tohave been implied if supportedby theevidence. See Poulsen, supra. As long as the implied findings are not inconsistent with the express findings, thisCourt willnot overturn the trial court result. Here, the finding that themistake referred to in the conclusions

was a material mistake and the further finding that a lack of deeded parking space supports a material failure of consideration are sufficient implied findingstosupport the court's conclusion thata rescission should be granted under section 28-2-1711, MCA. The third issue for consideration is whether the court properly awarded damages under the circumstances of this case. Appellants raise the issue of damages as credit for fair rental value paid for the property during respondent'speriod of control of thepremises. This issue is one which was addressed attrial and considered by the court in

a motion to amend the findings of fact and conclusions of law. After hearing arguments and reviewing thebriefs, the trial court did in fact partially amend those findings and conclusions. The court added findings concerning attorney fees, fire insurance, utilities and carpeting damages but declined tomake any further additions. The trial court impliedly held that theprovisions of section 28-2-1715, MCA, were 

### met when it adjudged the rescission, allowing an offset in the original findings and conclusions and further offsets in the amendments in its October 22, 1980, order. However, inview of the fact that respondent never obtained actual possession of the property because construction was not completed, a rental offset was not found to be proper and was refused. In addition, the property could not have been occupied or rented, not onlybecause of the lack of parking but also because it was not hooked up totheBigfork sewer system. Affirmed.

I Justice

Weconcur: 

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chiemutice