NO. 95-064 IN THE SUPREME COURTOFTHE STATE OFMONTANA 1995

DOUBLE AA CORPORATION, a Delaware corporation,

Plaintiff, Appellant, and Cross-Respondent,

v. NEWLAND &COMPANY, Successor Trustee of the Raymond W. George Trust,

Defendant and Respondent, and JAMES W. SIEVERS,

Intervenor Defendant, Respondent, and Cross-Appellant.

APPEAL FROM: District Court of the Sixth Judicial District,

In and for the County of Park, The Honorable Mark P. Sullivan, Judge presiding.

COUNSELOF RECORD:

For Appellant: Joseph T. Swindlehurst, Huppert & Swindlehurst, Livingston, Montana For Respondent: James P. Harrington, Attorney at Law, Butte, Montana (for Newland &Company) John T. Jones and Harlan B. Krogh, Moulton, Qellingham, Longo &Mather, Billings, Montana (for James W. Sievers) For Amicus: Rockwood Brown, Brown, Gerbase, Cebull, Harman &Ross, Billings, Montana (for Kenneth D. George and Shirley G. Bragg)

Submitted on Briefs: May 25, 1995

Decided: October 24, 1995 Filed:Justice Terry N. Trieweiler delivered the opinion of the Court.

Plaintiff Double AA Corporation filed a complaint in the District Court for the Sixth Judicial District in Park County, in which it alleged that Shirley Bragg, trustee of the Raymond W. George Trust, who has been succeeded as trustee by Newland & Company, breached abuy-sell agreement for the sale of aranch held bythe trust andthat it wasentitled to specific performance. The trustee, as well as James W. Sievers, the intervenor, opposed Double AA's request for specific performance. After atrial, the District Court entered its findings, conclusions, and judgment, which denied Double AA's request for specific performance but awarded it damages. Double AA appeals the District Court's findings, conclusions, and judgment, and Sievers cross-appeals specific findings. Weaffirm the judgment of the District Court. The issue on appeal is whether the District Court abused its discretion when it denied Double AA's request for specific performance. Theissue raised oncross-appeal is whether the District Court erred when it madefindings of fact numbered 73 and 74. FACTUALBACKGROUND The ranch, which is the subject of the dispute, formerly belonged to RaymondGeorge. Raymonddied in 1974 and, asprovided in his will, left the ranch in atestamentary trust for his family. His daughter Maxine wasdesignated the trustee. Thetrust provided that his wife, Olga George, would receive income from the trust for 2her life and that the George children held remainder interests as

follows: Maxine George--three-ninths, aswell asafirst option to purchase from the other remaindermen; Leo George--two-ninths; Kenneth George--two-ninths; andShirley Bragg--two-ninths, Maxine died in 1980, and eventually the remaindermen agreed with her surviving husband, Cleto McPherson, that hewould be entitled to her share and first option. Shirley Bragg became the trustee following Maxine's death. On December 13, 1989, Double AA Corporation, a Delaware Corporation whose sole shareholders are Charles Allmon and Gwen Allmon, agreed with Shirley Bragg, whoat that time wasthe trustee of the RaymondW. George trust, to purchase the George family's ranch in the Paradise Valley south of Livingston. Shirley agreed

on behalf of the trust to convey the property, and a substantial deposit wastransferred. At trial, Shirley testified that in 1988 she had received advice from Wes Johnson, a financial planner for Investment Diversified Services (IDS), that if the trust did not sell the ranch there would betax consequences in anamount between $200,000 and $300,000 at the time of Olga's death. Olga wasnearly 90years old whenShirley received this advice. WesJohnson admitted hehad little knowledge about taxes andwas not qualified to render tax advice. Healso testified that hewaspaid on acommission basis, and as a result felt pressure to locate investors for IDS. He encouraged that the ranch besold andthe proceeds beinvested with 3IDS. Shirley testified that shereluctantly agreed to sell because

of Johnson's tax advice. Shirley petitioned the District Court to approve the sale of the ranch. Sievers intervened and objected on the basis that he had purchased a five-ninths remainder and a first option to buy from the other remaindermen. In September 1990, District Court Judge Byron Robb, granted the petition to confirm the sale and dismissed Sievers' objection. Hespecifically found that: While the testator here gave his daughter Maxine aright to purchase the interest of the other children in the ranch, I find it obvious this waspersonal to her because she remained onthe place while the others left. I thus conclude it doubtful such option passed to Maxine's husband andsole heir, Cleto McPherson, andalthough the other children made agreements with him to have such privilege at a different value than Mr. George contemplated, Cleto never exercised such right and now has no ability to do so or to keep the ranch in the family, and I find it most tenuous that Grandpa George ever intended that such option to purchase would pass to or be enforceable by astranger asMr. Sievers contends. Further, the trustee was not a party to such option agreements and is not bound by them. In November 1990, anattorney from Livingston informed Shirley that no taxes would be due as a result of Olga's death. On December 2, 1990, Shirley sent Charles Allmon aletter in which she advised him that she wanted to rescind the agreement with Double AA. OnApril 2, 1991, Shirley filed amotion to dismiss her petition for adeclaration of her right and authority to sell the trust property and to cancel the sale to Double AA. The District Court denied her motion and ordered the sale to proceed. We affirmed the District Court's conclusion that Shirley hadthe right 4and authority to sell the ranch andsaffirmed the District Court's

finding that the sale was fair andreasonable. InreRaymondW.George Trust (1992), 253 Mont. 341, 834 P.2d 1378. However, we reversed that part of the District Court's decision which granted specific performance because that issue had not been raised or litigated. InreGeorge Trust, 834 P.2d at 1381-82. After our decision in InreGeorgeTrust, Double AA filed this action for specific performance. Sievers intervened and opposed specific performance because he claimed that in April 1988 he purchased athree-ninths remainder interest from Cleto, in addition to Cleto's first option to purchase from the other remaindermen. He added that in August 1988 he purchased Leo's two-ninths remainder interest. A nonjury trial was held on June 22 and 23, 1994. Shirley testified that the erroneous information she had received from Johnson was confirmed by Legal Tech, a Billings accounting firm. However, shewas informed in November 1990that Olga's death would not result in any immediate tax consequences. Instead, she learned that capital gains tax in the amount of $400,000 would bedue upon sale of the ranch to Double AA. Shetestified that the attorney who represented her prior to the sale had not advised her that Johnson's advice was incorrect. There was also contradicted testimony that her previous attorney wasto receive apercentage of the broker's commission which was to bepaid by Double AA.

5In October 1994, the District Court entered its findings of

fact, conclusions of law, and judgment. The District Court held that specific performance wasimproper, but awarded Double AAmoney damages for breach of contract. The court further found that Sievers did not obtain abinding first option to purchase the ranch from the remaining beneficiaries. Double AA appeals from the District Court's decision, and Sievers cross-appeals from the District Court's findings that he did not have avalid first option to purchase. ISSUE1 Did the District Court abuse its discretion when it denied Double AA's request for specific performance? Wereview adistrict court's denial of arequest for specific performance to determine whether the district court abused its discretion. Larsonv.Undem (1990), 246 Mont. 336, 342-43, 805 P.2d 1318, 1322. Double A?+acknowledges that specific performance is an equitable remedy within the District Court's discretion but suggests that the court's discretion is narrow. It contends that the District Court did not exercise sound discretion. The trustee claims, and Sievers agrees, that under the circumstances the District Court did not abuse its discretion. Specific performance is an equitable remedy which requires performance of acontract based onthe precise terms contained in

6the contract. Siefertv.Siefert (1977), 173Mont. 501, 504, 568 P.2d 155,

156. 1’ [SJpecifcperformancewillbeorderedonlyonequitablegroundsinviewofallthe conditionssurroundingtheparticularcase. I’ ‘Abillinequityforspecificperformanceisanappealtotheconscienceofthecourt, andgenerally,insuchaproceeding,theinquirymustbewhether,inequityandgood conscience,thecourtshouldspecificallyenforcethecontract. Accordingly, specific performance will begranted whenit is apparent from aview of all the circumstances of the particular case that it will serve the ends of justice, and it will be withheld when, from a like view, it appears that it will produce hardships or injustice to either party

II

. . . . Siefert, 568 P.2d at 157 (quoting 81 C.J.S. SpecificPerformance § 3)

. In Siefert, we acknowledged that the appropriateness of specific performance depends on the facts and circumstances of the case. Siefert, 568 P.2d at 157. In determining whether a contract should be specifically enforced, courts look at the contract, aswell asthe relationship of the parties, andwill determine if the contract to be enforced is fair andreasonab1e.l Factors courts consider include execution

1In InreGeorgeTrust, weupheld the District Court's finding that Double AA'S offer of $1,300,000, along with the other benefits, was fair and reasonable. Wenoted that: Thevalidity of the contract between the trust andDouble AA and any rights of the parties resulting from the contract were not the subject of the litigation. The evidence presented only regarded the fairness and reasonableness of Double AA's offer and the agreement that the parties entered. InreGeorgeTrust, 834 P.2d at 1381. Wedo not construe the above language to mean that, as to whether specific performance was appropriate, the contract was fair and reasonable because wedid not address whether it would befair andreasonable to specifically enforce the contract. 7of a contract under circumstances unfavorable to the defendant

because of lack of advice, and the difference in the parties' business experience and knowledge. 81 C

.J

.S

. SpecificPerformance § 49 (1977). In addition to the aboveguidelines, Montana statutes identify

some situations in which specific performance is appropriate. Specific performance maybe necessary whenpecuniary compensation for a defendant's failure to perform pursuant to the terms of a contract does not afford adequate relief. Section 27-l-411(2), MCA. More specifically, in contracts involving the sale of land, l'[i]t is to bepresumed that the breach of anagreement to transfer real property cannot be adequately relieved by pecuniary compensation

. . . .'I Section 27-l-419, MCA. Section 27-1-415, MCA, however, provides circumstances in which aparty cannot be compelled to specifically perform.

Specific performance cannot be enforced against a party to acontract in any of the following cases: i2i

. . if it is not, as to him, just and reasonable; (3) if his assent wasobtained bythe misrepresentations, concealment, circumvention, or unfair practices of any party to whomperformance would becomedue under the contract or by any promise of such party which has not been substantially fulfilled; or (4) if his assent wasgiven under the influence of mistake, misapprehension, or surprise

. . . . Section 27-1-415, MCA. TheDistrict Court madespecific findings, which are supported by substantial evidence, in relation to the above-listed equitable

aconsiderations andstatutes. Thecourt found: (1) Double AAknew,

or should have known, before the sale, that Shirley misapprehended facts material to the contract and Shirley testified she told Charles that she felt pressured to sell because of her erroneous belief regarding the potential tax liability; (2) Shirley was a victim of mistaken information and inaccurate advice. The "mistaken fact [regarding taxes] more than anything else was the

reason Shirley consented to [the] sale [of] the George family ranch"; (3) Charles andShirley had extremely divergent backgrounds in business transactions. Charles was awell-known professional investor, hadexperience in multi-million dollar transactions, and had extensive education, background, and experience in business. Tothe contrary, Shirley wasasomewhat unsophisticated trustee who

was neither prepared for her position as trustee nor educated in business nor business transactions, negotiations, or taxes. Finally, the court found that the land was not unique to Double AA. Charles testified that the ranch was no more unique than land that he already had except that it was contiguous with property heownedin the Paradise Valley. Thecourt found that the loss would impose a greater hardship on the George Family Trust than Double AAbecause Shirley's decision to sell was a direct result of the incorrect tax advice, andthe ranch had been in the George family for over 100years. Based on its findings, the court concluded that, in light of the circumstances surrounding the execution of the contract, 9specific performance was not appropriate because the contract was

not fair, just, and reasonable, and Shirley's assent was based on amistake or misapprehension. Section 27-1-415, MCA. Double AAargues that amisunderstanding or mistake regarding tax consequences is not a sufficient reason to avoid the transaction and that the exceptions to specific performance codified in §27-l-415, MCA,donot apply. While a misapprehension or mistake regarding taxes is insufficient to avoid acontract, Quinnv.Briggs (1977), 172Mont. 468, 475, 565 P.2d 297, 301, such a misunderstanding or mistake, in light of the surrounding circumstances, maybe asufficient reason to deny specific performance as anequitable remedy. See11Samuel Williston, Williston on Contracts 5 1427 (3d ed. 1968); Corbin on Contracts §1166 (1964). Moreover, wehave upheld the denial of specific performance where the defendant relied on advice from her attorney which produced factual and legal misapprehensions. Stovullv.Waft (1980) , 187Mont. 439, 610 P.2d 164. In Stovall, werecognized that specific performance is improper if there is a mistake as set forth in §27-l-415(4), MCA, or if the circumstances show that specific performance would impose aconsiderable hardship. Stovall, 610 P.2d at 167 (citing Siefert, 568 P.2d at 157). Based on the total circumstances, and balancing the equities, weupheld the district

10court's denial of a request for specific performance against the

seller. Stovall, 610 P.2d at 167-68. The facts in Stovall are distinguishable from this case. Nonetheless, the principles on which we relied in Stow11apply. Here, the District Court found that specific performance would impose agreater hardship onthe seller than denial would impose on the buyer. Double AA also challenges the District Court's findings regarding Shirley's mistake or misapprehension because testimony indicated that other factors motivated her to sell, and evidence contradicts her position. In the exercise of its discretion, part of the District Court's responsibility was to weigh conflicting testimony. Thedistrict court is in abetter position to observe the credibility anddemeanor of witnesses than this Court. Wewill not second guess the district court's determination regarding the strength andweight of conflicting testimony. SeeInreMarriageofNewton (1992), 255 Mont. 463, 466, 844 P.2d 47, 49. Based on the equitable principles and statutory criteria set forth above, evidence in the record, and the District Court's findings, including the parties' unequal positions andthe mistaken information onwhich the trustee relied, wehold that the District Court did not abuse its discretion. Weaffirm the District Court's denial of Double AA's request for specific performance.

11ISSUE2

Did the District Court err when it made findings of fact numbered 73and 74? Our standard of review of adistrict court's findings of fact is whether they are clearly erroneous. Columbia GrainInt?v.Cereck (1993), 258 Mont. 414, 417, 052 P.2d 676, 678. Sievers contends that we should vacate the District Court's findings of fact numbered 73 and 74 because the court improperly found that Sievers did not acquire afirst option against Shirley Bragg, Kenneth George, and Leo George. Sievers contends that the findings were not relevant to Double AA's request for specific performance, and he has not had an adequate opportunity to introduce evidence in support of his position. Sievers adds that the District Court was not empowered to enter a judgment which affected the property rights of individuals whowere not parties to the litigation. In making that argument, he relies on 525-p-201, MCA, and Warnackv. ConeenFamily Trust (1994), 266 Mont. 203, 879 P.2d 715. After Sievers raised this issue by cross-appeal, we allowed Shirley Bragg andKenneth George to file anamicus brief in support of their position. They contend that unlike the nonparty in Warnack, they are not complete strangers to the litigation. In the initial proceeding before Judge Robb, Sievers intervened andasserted hehadafirst option. Judge Robbrejected

12Sievers' position. He asserted the same argument when he

intervened in the present case; Judge Sullivan also rejected Sievers' contention. In findings of fact numbered 73and 74, the court reaffirmed Judge Robb's prior determination that the option did not pass to Sievers. In finding of fact number 74, the court found specifically that Sievers did not purchase a first option which is binding onthe other remaindermen. Sievers now contends, after two district court judges have found contrary to the position he asserted by intervening, that those courts were without authority to makethe challenged findings because the other remaindermen were not parties to the present action. We disagree and conclude that Sievers' reliance on procedural flaws is aninsufficient basis onwhich to set aside the District Court's findings. Section 25-g-201, MCA, states that subject to Rule 54(b), M.R.Civ.P., ajudgment maybegiven for or against one or more of several plaintiffs and for or against one or more of several defendants. In Warnack, weheld that the District Court erred when it awarded aprescriptive easement to anonparty. Westated that: [1]t is afundamental principle of our jurisprudence that it is only against aparty to the action that ajudgment can betaken andthat the judgment is not binding against a stranger to the action. Warnack, 879 P.2d at 718 (quoting Moorev.CapitolGasCorp. (19451, 117 Mont. 148, 156, 158 P.2d 302, 306). In Warnack, werecognized that

13the above rule applied where ajudgment was awarded in favor of a

nonparty. However, this case is distinguishable. Section 25-g-201, MCA, does not preclude aparty whovoluntarily intervenes from having an adverse judgment entered against him or her. SeeRule 54(b), M.R.Civ.P. (stating that afinal judgment maygrant relief to which the party is entitled). Sievers voluntarily intervened and asserted that he purchased avalid first option. The interested remaindermen did not intervene to protect their interests. However, unlike Warnack, the remaindermen were aligned with the trustee's position. Additionally, the remaindermen were not strangers to the action; they are heirs of the trustor andhave an ownership interest in the trust. Adecision against the trustee would adversely affect the remaindermen. Sievers contends that it would be unfair to allow parties to benefit from a judgment if they did not appear to litigate the merits. Thelogical conclusion of Sievers' position is that hemay intervene and assert aposition contrary to the remaindermen, but if he loses, claim the adverse decision wasnot binding. Sievers has merely asserted a procedural flaw from which he claims he should benefit because he is dissatisfied with the outcome. Despite the fact that the remaindermen did not intervene to protect their position, they were aligned with the trustee. Sievers introduced evidence in support of his position and must abide by

14the District Court's decision. Absent aspecific indication of how

the District Court's findings were clearly erroneous, or an indication that the court erred as a matter of law, we the District Court's findings. Sievers has failed that the District court 0 s findings were clearly Therefore, we affirm the District Court's findings. The judgment of the District Court is affirmed. must affirm to indicate

erroneous.

Weconcur:

15