### No. 81-460 INTHE SUPREMECOURT OF 

### THE STATE OF 

### MONTANA 1982

ROGER W. 

### JENKINS, Plaintiff and Appellant,

VS. 

### LARRY JOEHILLARD, JR. and LARRY HILLARD, Defendantsand Respondents.

No. 81-461

LARRY HILLARD, Plaintiffand Appellant,

VS

# . ROGER We

### JENKINS, Defendantand Respondent.

Appeal from: District Court of theEiqhteenth JudicialDistrict, Inand for the County

## of- alla at in Honorable Jack Shanstrom,Judgepresiding. Counsel of Record: ForAppellants: Landoe, Brown, Planalp,Komrners & 

### Lineberger, Bozeman,

Montana For Respondents: Steven Nelson, Bozeman,Montana

Submitted onbriefs: March 

### 4,1982 Decided:June 29, 

### 1982Mr. JusticeGene 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 (hereinafterreferred toas Hillard) showed appellant the hotel, conducted the contract negot-iat-ionsfor its sale, and signed the contract for sale as his son's attorney-infact. Negotiations for the saleof the hotel occurred over about a six-month period. During thistime, appellant lived in Seattle and came toThree Forks whenever Hillard was free todiscuss 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 forhis son. Concerning the condition of the heating system, appellant in hisdeposition claimsthatHillard made the following representat ions:

Q. And when you got specifically to the boiler 

### room, or you know, t.he areawhich 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 thatwas, and he said, 'Well, there's a small crack in the holding tank and that can bewelded,' 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. theyhad 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 thatboth 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-oldHillard 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-hisconversation with Hillard. In hisdeposition, Hillard stated t.hathe thought the heating systemwas 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 contractnotexpresslycontained herein and thatBuyer affirms that he relies upon his own personal observation and examination of t-he property hereindescribed." Appellant. had given Hillard a $15,000 promissory note

as part of the transaction. $5,000 

### was payable on t-henote

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 topay the $10,000 due

on August 30, 1979. In March 1980, the appellantbrought a

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

### as the son's agent, alleging thatthe father had fraudulentlymisrepresented the conditionof the hotel's heating system. In April 1980, the appellant answered Hillard's complaint, alleging 

### as an affirmative defense that Hillard fraudulent-ly misrepresented the condition of the hotel

## 's heating system and counterclaiming for a return of the $5,000 he alreadypaid on thenote. Hillard moved for summary judgment on hispromissory note action and on the fraud actionbegan 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 ingranting 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), 164Mont. 262, 521P.2d 200. Moreover, the party opposing the motion, appellant, willbe indulged to the extent of all inferences which may be reasonably drawn from the record. Equity Cooperative Ass'n v. Bechtold (1977), 173Mont. 103, 566 P.2d 793. 

### Here, there 

### is at least one blatant issue of fact: whether Hillard made 

### a willful misrepresentation to appellantconcerning the condition of the heating system. Hillard, 

### asrespondent, arguesthateven if it can be shown that he made the misrepresentations, appellant cannot make a prima facie showing that he had the right torelyon 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'srepresentations, 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), 162Mont. 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 inducinganother 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 thata prior oralrepresentation

### wasmade 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 forsale. In Schulz, thisCourt 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 trueof false. In particular, respondent 

### cites this often-quoted passage inVan Ettinger: "'When it appears that

### a party, who claims 

### t.o have been deceived t-o his prejudice, 

## - has investigated forhimself orthat themeans 

### were athand 

### toascertain thetruth

# ... of any representationsmade tohim, hisreliance 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 appellanton inquiry that theboilerswere defective. Appellant, indeed, was put on inquiry. According 

### to hisdeposition, appellant asked Hillard why the water was there and Hillard replied that the boilers needed only minor repairs, allegedlymisrepresenting the true conditionof 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 inhisdeposition 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 buyermust 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 theVan Ettinger and Lowe cases: "'The trend of the decisionsof the courtsof this and ot.her states is towards the just doctrine, thatwhere a contract is induced by falserepresentations as

### tomaterial 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 outof thedeceit, that the party to whom the representations 

### were made might, with due diligence, have discovered their falsity, and thathe 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 tomake a prima facie showing thathe had a right to relyon Hillardfsalleged 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 casesarejoined and remanded to the District

"? Court.

We concur:Mr. JusticeJohn C. Sheehy dissenting:

I would affirmtheDistrictCourt. Under the facts of thiscase, ourprior decisionsshould requireaffirmance. SeeparticularlyVan Ettinger

### v. Pappin (1978), 180Mont. 1, 588 P.2d 988; Lowe 

### v. Koot (1975), 166Mont. 150, 531 P.2d 674; Lee 

### v. Stockmen's National Bank (1922), 63 Mont. 262, 207 P. 523; and Grinrodv. Anglo-American Bond Co. (1906), 34 Mont. 169, 85 P. 891. Herethebuyer specificallycontractedthatthe sellermade no representations tohim not contained inthe written agreement. If that language affordsno protection toa sellerunder thesefacts, we have provided a fertile breeding ground forlawsuits inallland salecontracts. Therewould be civicand social benefit if

### werequired persons signingwritten contracts tosaywhat theymean or

mean what they sayinthe language used.