No. 81-58 

IN THE SUPREME: COURT OF THE STATE OF MONTANA 

1981 

GEORGE W. BERRY, 

Plaintiff and Respondent, 

VS. 

CLAYTON M. ROMAIN and 

RAYMOND C. ROMAIN, 

Defendants and Appellants. 

Appeal from: Distrist Court of the Eleventh Judicial District, 

In and for the County of Flathead. 

Honorable Robert Sykes, Judge presiding. 

Counsel of Record: 

For Appellants: 

Keller and Gilmer, Kalispell, Montana 

For Respondent: 

Datsopoulos, MacDonald and Lind, Missoula, Montana 

Submitted on briefs: July 2, 1981 

~ecided: AU G ? 1 7981 

Filed: AUG ' - 798 
Mr. 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 plaintif f-respondent . The matter was tried before the 

court, and findings of fact and conclusions of law and 

judgment were entered for plaint if f-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 date of the original judgment. 

The issues before this Court, as set forth in the 

appellants' brief, were six in number but can be properly 

handled and discussed by this Court as follows: 

1. Whether the judgment of the trial court for 

rescission is supported by substantial credible evidence. 

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 this case. 

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 east by 
a county road. In the spring of 1978, they contracted with 

House to build 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, the building was intended for appellants' use and, as 

previously noted, for rental property. 

During the latter part of June or early part of 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 the building. 

They contemplated creating a medical center, with the doctor 

and dentist upstairs and respondent occupying the downstairs 

area. Following the meeting respondent met with a local attorney, Lee Simmons, and discussed with him the possibility 

of subjecting the building to a 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 

attorney Simmons. 

Simmons, in the conference with appellants and 

respondent, noted that appellants had not held the property 

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 that 
time the stage of construction of the building was such that 

either appellants would continue with their plans to finish 

and lease it as office space, or respondent, who had 

different plans, would have to make changes consistent with 

his plans. 

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 price of $300,000. In view of the fact that at the 

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, at appellants1 request, 

contracted with a local surveyor to do the job. There is a 

factual dispute about what description was annexed to the 

option which was exercised August 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, the option to purchase, the deeds and the notices 

of respondent's purchase interest associated with the 

contract were not completed because no legal description was 

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 to be 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 to the purchaser by August 1, 1979." 

Although the survey had 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 

that amount to appellants. 

Sometime in December 1978 or early January 1979, 

respondent contacted the surveyor at his home requesting to 

see the survey and at that time was told there were 

encroachments upon the State of 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 east corner of the front southern entrance encroached 

upon county right-of-way. It also showed an encroachment of 
a portion of the eaves of the building onto the state highway right-of-way on the northwest corner of the building. 

After speaking with the surveyor, respondent contacted his attorney and met with him to discuss the survey. 

Within the next few weeks the situation between the parties 

deteriorated. On January 24, 1979, respondent, with a new 

attorney, sent appellants a notice of intent to rescind the 

contract, demanding a correction of the various breaches of 

the contract within ten days and demanding payment of 

$50,126.86. 

On January 25, 1979, appellants obtained an easement 

for the encroachments in the parking involved in the County 

of Flathead's right-of-way. In addition, appellants' 

counsel responded to the notice of the intention to rescind, 

requesting a detailed statement of the items of concern. 

On February 11, 1979, appellants gave respondent a 

notice of default under the contract for failure to make the 

second quarterly payment. 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 all monies expended together with interest. This action was thereafter commenced 

on March 30, 1979. 

The first issue for consideration is whether the 

judgment of the trial court for the rescission is supported 

by substantial, credible evidence. 

The statutory grounds for establishing a case in 

rescission are set forth in sections 28-2-1701 et seq., 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 fault of the party as to 

whom he rescinds, the consideration for his 

obligation fails in whole or in part; 

"(3) if such consideration becomes entirely 

void from any cause; 

"(4) if such consideration, before it is 

rendered to him, fails in a material respect 

from any cause; or 

"(5) if all the other parties consent." 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 his case. The sole question in this issue 

is whether it is a proper case for rescission. 

The trial court was urged to rescind the contract for 

mutual mistake with regard to the description of the parcel 

of property to be conveyed, for failure of 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 in part and in a material respect, for appellants' 

failure to provide deeded property on the south side of the 

building enabling respondent to own 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 to rescission found: 

"7. Prior to the purchase of the property by 

plaintiff, plaintiff and defendants had 

viewed the property, the building, and agreed 

as part of the contract that parking would be 

provided on the south and north sides of 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 state easement prior to the completion of 

the survey. 

"9. [As amended] An easement had been obtained in regard to the county right-of-way 

at all times. The Montana Highway Department 

will not make any agreements in any way 

affecting encroachment in the west side of 

the building. " 

Following these findings the court made its conclusions of law which bear directly on the issue of rescission: 

"1. The agreement as to parking on the south 

and west sides of the building was part and 

parcel of the contract and agreement of the 

parties. 

"2. Both parties were at all times 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 

trial cour t' s determination contained in its conclusions of 

law the ruling that a mutual mistake of fact occurred in 

this case with regard to the parking. 

Both parties agreed that a part of the contract was 

that parking would be available. It was uncontradicted that 

respondent, as purchaser, required a deeded parking lot to 
go with the building, whether it was to be leased or 

developed into condominium units. Parking was a major 

consideration, as shown 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 aspect as well. Regardless of appellants' argument 

that a substitute parking easement had 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 they have obtained 

for the parking was a sufficient substitute here to prevent 

a rescission of the contract. However, such an easement did 

not comply sufficiently with the practical realities of 

commercial property owner ship 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 to provide a fee simple title free 

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 supports 
its 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 findings of fact. In 

particular, appellants urge that the trial court "found that 

the encroachment problems on the south side of the building 

were remedied by [appellants] obtaining an easement from the 

county . . . " However, as we indicated above, although it 

is true that appellants obtained an easement, the court at 

no time found or determined that such an easement "remedied" 

the parking situation. In fact, the court found exactly the 

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 

trial court. 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 to the doctrine of implied findings where, 

as here, the trial court's findings are general in terms. 

Any findings not specifically made but necessary to the 

judgment are deemed to have been implied if supported by the 
evidence. See Poulsen, supra. As long as the implied 

findings are not inconsistent with the express findings, 

this Court will not overturn the trial court result. Here, 

the finding that the mistake 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 findings to support the 

court's conclusion that a 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's period of control of the premises. This issue is one 

which was addressed at trial and considered by the court in 

a motion to amend the findings of fact and conclusions of 

law. After hearing arguments and reviewing the briefs, 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 to make any further additions. 

The trial court impliedly held that the provisions 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, in view 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 only 
because of the lack of parking but also because it was not 

hooked up to the Bigfork sewer system. 

Affirmed. 

I 

Justice 

We concur: 

%&$% chiemu tice