No. 81-460 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1982 

ROGER W. JENKINS, 

Plaintiff and Appellant, 

VS. 

LARRY JOE HILLARD, JR. and 

LARRY HILLARD, 

Defendants and Respondents. 

No. 81-461 

LARRY HILLARD, 

Plaintiff and Appellant, 

VS . 

ROGER We JENKINS, 

Defendant and Respondent. 

Appeal from: District Court of the Eiqhteenth Judicial District, 

In and for the County of- alla at in 

Honorable Jack Shanstrom, Judge presiding. 

Counsel of Record: 

For Appellants: 

Landoe, Brown, Planalp, Komrners & Lineberger, Bozeman, 

Montana 

For Respondents: 

Steven Nelson, Bozeman, Montana 

Submitted on briefs: March 4, 1982 

Decided: June 29, 1982 
Mr. Justice Gene B. Daly delivered the Opinion of the Court.. 

This is an appeal of two summary judgments issued by 

the Dist-rict. Court of the Eighteenth Judicial Dist-rict , 

Gallatin County. 

Respondent, Larry Joe Hillard, is the son of respondent, Larry Hillard. In March 1979 the son sold a hotel in 

Three Forks, Montana, to appellant., Roger Jenkins. The 

father (hereinafter referred to as Hillard) showed appellant 

the hotel, conducted the contract negot-iat-ions for its sale, 

and signed the contract for sale as his son's attorney-infact. 

Negotiations for the sale of the hotel occurred over 

about a six-month period. During this time, appellant lived 

in Seattle and came to Three Forks whenever Hillard was free 

to discuss t.he sale. 

Appellant inspected the hotel thoroughly only once 

and was accompanied by Hillard. Appellant claims that 

during this inspection Hillard told him that the hotel 

building was in excellent condition and that it was for sale 

because Hillard was tired of managing it for his son. Concerning the condition of the heating system, appellant in 

his deposition claims that Hillard made the following representat ions : 

Q. And when you got specifically to the 

boiler room, or you know, t.he area which contained the boilers and the heating system, 

did he make any statement-s concerning the 

condition of those things? A. Yes. He 

stated that the -- let me preface that. 

There was about t.wo and a half inches of 

water on the floor in the boiler room and 

right away I questioned that and I was told 

that there was about a 400-gallon hot water 

holding tank and water was leaking out of it 

and it had a patch on it and I asked him what 

that was, and he said, 'Well, there's a small 

crack in the holding tank and that can be 
welded,' and he had checked with local 

welders and he was assured that it could be 

welded, so it was inconsequential. At t-hat 

time I asked him what condition t.he boilers 

were in and he told me that. they had a slight 

problem with t.he pilot light and that there 

was no problem wit.h that, but that. it was 

only an adjustment. I was assured that both 

t.he heating system and the boilers were more 

than adequat-e . " 

Appellant also stated that the manager of the hotel 

prevented him from making further inspections of the 

building. When appellant t-old Hillard t.hat the manager had 

prevented his further inspect-ions, Hillard told appellant he 

would take care of the situation. Appellant. did not. t.ry to 

inspect the premises af ter t-his conversation with Hillard. 

In his deposition, Hillard stated t.hat he thought the 

heating system was operating properly. Hillard also said he 

did not recall making comments on the condition of the 

boilers. 

Appellant purchased the hotel in March 1979, and 

about the second week in April he discovered that. the 

boilers did not work properly. Appellant stated that he 

then spent about $35,000 to repair and rebuild the hotel's 

heating system. 

The contract. for sale of the hot-el contained the 

following provisions: 

". . . Buyer has inspected and is familiar 

wit-h the premises and the physical condition 

of all the furniture, fixtures and equipment. 

and improvements thereon and therein, and 

enters into this Agreement on his own independent investigation. " 

and 

"This contract contains the entire agreement 

between the part-ies and the Buyer affirms 

that. neither Seller nor any agent of the 

Seller has made any representat-ions or 

promises wit,h respect. to or affecting t.he 

property herein described on t-his contract 
not expressly contained herein and that Buyer 

affirms that he relies upon his own personal 

observation and examination of t-he property 

herein described." 

Appellant. had given Hillard a $15,000 promissory note 

as part of the transaction. $5,000 was payable on t-he note 

on March 1, 1979, and $10,000 payable on or before August 

30, 1979. 

In January 1980 Hillard brought an action on the 

note, claiming that appellant failed to pay the $10,000 due 

on August 30, 1979. In March 1980, the appellant brought a 

new and independent action against both the son, as seller, 

and the father, as the son's agent, alleging that the father 

had fraudulently misrepresented the condition of the hotel's 

heating system. 

In April 1980, the appellant answered Hillard's 

complaint, alleging as an af f irmative defense that Hillard 

fraudulent-ly misrepresented the condition of the hotel ' s 

heating system and counterclaiming for a return of the 

$5,000 he already paid on the note. 

Hillard moved for summary judgment on his promissory 

note action and on the fraud action began by appellant. The 

District. Court granted both motions for summary judgment. 

The District Court found that appellant had ample opportunity to inspect t.he hotel and t-hat. he understood the 

clauses of the contract in which he affirmed sole reliance 

on his own inspection. The District Court concluded, as a 

matter of law, t.hat appellant had failed to make a prima 

facie showing that he had the right to rely on Hillard's 

alleged misrepresent-ations. 

The sole issue on review is whether the District 

Court erred in granting both summary judgments. 
Under Rule 56(c), lul.R.Civ.P., a summary judgment is 

proper only when there is no genuine issue of material fact 

and when the moving party is entitled to a judgment as a 

matter of law. Summary judgment is therefore not a proper 

tool for resolving disputed issues of fact and is accordingly improper whenever a material factual matter is in 

dispute. Flanagan v. Curran (1974), 164 Mont. 262, 521 P. 2d 

200. Moreover, the party opposing the motion, appellant, 

will be indulged to the extent of all inferences which may 

be reasonably drawn from the record. Equity Cooperative 

Ass'n v. Bechtold (1977), 173 Mont. 103, 566 P.2d 793. 

Here, there is at least one blatant issue of fact: 

whether Hillard made a willf ul misrepresentation to appellant concerning the condition of the heating system. 

Hillard, as respondent, argues that even if it can be 

shown that he made the misrepresentat ions, appellant cannot 

make a prima facie showing that he had the right to rely on 

the representations. In particular, respondent claims that 

the contract provision and appellant's opportunity to 

inspect the hotel preclude appellant's right to rely on 

Hillard's representations, however false. We disagree. 

It is well established in this state that actual 

fraud is a question of fact. Section 28-2-404, MCA; Cowan 

v. Westland Realty Company (1973), 162 Mont. 379, 512 P.2d 

714; Poulsen v. Treasure State Industries, Inc. ( 1981), 

Mont . , 626 P.2d 822, 38 St .Rep. 218. Further, this 

Court has recognized the rule that "fraud vitiates every 

transaction and all contracts." Bails v. Gar (1976), 171 

Mont. 342, 558 P.2d 458, 461. The reasoning behind this 

rule is that a party who has perpetrated fraud by inducing 
another to enter into a contract may not. t.hen use the 

contract to immunize himself from the fraud. Bails, 558 

P.2d at 461-462. The contract provision therefore does not 

preclude proof that a prior oral representation was made and 

relied upon. 

Respondent contends that Schulz v. Peake (1978), 178 

Mont. 261, 583 P.2d 425, should control our interpret.ation 

of the contract for sale. In Schulz, this Court construed a 

contract provision similar t.o the one in this case and 

stated that because the provision was unambiguous, the 

court's duty was to enforce it. Schulz is not controlling 

here for the simple reason that in Schulz a trial was had 

and findings of fact were made that no misrepresentations 

were made and no fraud committed. Here, appellant was not 

given the opportunit.y to show t.hat misrepresentations were 

made and fraud committed. 

Respondent cites Van Ettinger v. Pappin (1978), 180 

Mont. 1, 588 P.2d 988, and Lowe v. Root (1975), 166 Mont. 

150, 531 P.2d 674, to support his argument that because 

appellant inspected the premises he cannot, as a matter of 

law, be allowed the right to rely on a representation, 

whether true of false. In particular, respondent cites this 

often-quoted passage in Van Ettinger: 

"'When it appears that a party, who claims t.o 

have been deceived t-o his prejudice, - has 

investigated for himself or that the means 

were at hand to ascertain the truth . . . of 

any representations made to him, his reliance 

upon such representations made to him, however false they may have been, a f f o r d s no 

ground of complaint. (Grindrod v. AngloAmerican Bond Co., 34 Mont. 169, 85 I?. 891; 

Power & Brothers v. Turner, 37 Mont. 521, 97 

P. 950; 26 C. J. 1149. )I" (Emphasis added. ) 

588 P.2d at 994, quoting Lee v. Stockmen's 

National Bank (1922), 63 Mont. 262, 284, 207 

P. 623, 630, 
Respondent has placed an unnecessarily harsh int-erpretation on the above passage. In Van Ettinger the party 

claiming fraud knew t.he falsity of the representation and 

therefore no evidence could be presented to show the right 

to rely on the representation. In Lowe a superficial 

inspection of the building would have revealed the open and 

notorious deficiencies in the building. That is simply not. 

the case here. 

Appellant acknowledges t-hat upon his inspection he 

found two inches of water in the basement.. Respondent 

claims that the presence of the water should have put 

appellant on inquiry that the boilers were defective. Appellant, indeed, was put on inquiry. According to his deposition, appellant asked Hillard why the water was there and 

Hillard replied that the boilers needed only minor repairs, 

allegedly misrepresenting the true condition of the boilers. 

Moreover, appellant may have been prevented from further 

access to the hotel in order to invest.igate Hillard's alleged misrepresentations. Appellant stated in his deposition 

that the manager of the hotel would not let him freely 

inspect. the premises. 

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 t.he limitations that need to be placed 

on the Van Ettinger and Lowe cases : 

"'The trend of the decisions of the courts of 

this and ot.her states is towards the just 

doctrine, that where a contract is induced by 

false representations as to material existent 

fact.s, which are made with t.he intent to 

deceive, and upon which the plaintiff relied, 
it is no defense, to an 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. . ."' Nordstrom 

v. Miller (1980), 227 Kan. 59, 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, 

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

Doetch (1979), - Mont. - , 600 P.2d 200, 36 St.Rep. 1684. 

The District Court therefore erred by holding that 

appellant failed to make a prima facie showing that he had a 

right to rely on Hillardfs alleged misrepresentations. Since 

the record reflects other genuine issues of material fact, 

such as, whether Hillard made fraudulent 'representations, 

whether appellant relied on those representations, and 

whether appellant had the opportunity to further investigate 

Hillard's alleged representations, the summary judgments are 

reversed. The cases are joined and remanded to the District "? 

Court. 

We concur: 
Mr. Justice John C. Sheehy dissenting: 

I would affirm the District Court. Under the facts 

of this case, our prior decisionsshould require affirmance. 

See particularly Van Ettinger v. Pappin (1978), 180 Mont. 

1, 588 P.2d 988; Lowe v. Koot (1975), 166 Mont. 150, 531 

P.2d 674; Lee v. Stockmen's National Bank (1922), 63 Mont. 

262, 207 P. 523; and Grinrod v. Anglo-American Bond Co. 

(1906), 34 Mont. 169, 85 P. 891. 

Here the buyer specifically contracted that the 

seller made no representations to him not contained in the 

written agreement. If that language affords no protection 

to a seller under these facts, we have provided a fertile 

breeding ground for lawsuits in all land sale contracts. 

There would be civic and social benefit if we required 

persons signing written contracts to say what they mean or 

mean what they say in the language used.