No. 12409 INTHE SUPREME COURT OF THE STATE OF MONTANA 1973

N

,

# 8?Qp$ IL 

# .COWAN and GAY S

# .COWAN, Husband and Wife, Plaintiffs and Respondents,

WESTLAND REALTY COMPANY

### ; ROBERT MUNSON and DOUGLAS JOHNSON, Defendants and Appellants.

Appeal from: District Court of the Fourth JudicialDistrict, Honorable E. Gardner Brownlee, Judge presiding. Counsel of Record: ForAppellants: Garlington, Lohn and Robinson, Missoula, Montana Robert E. Sheridan, 

### Jr. argued, Missoula

## ,Montaqa

,! For Respondents: Mulroney, Delaney and Dalby, Missoula, Montana Dexter L. Delaney argued, Missoula, Montana

Submitted: June 19, 1973 Decided :

## JUL 1

## 61973 Filed: 

### JUL 

## 18

### 1973

### Mr. Chief Justice Harrison delivered the Opinion of the Court.

This 

### is an actionbrought by plaintiffs Neal D, and Gay S. Cowan, husband and wife, seekingrescission of a "Land Purchase Agreement" on the ground of misrepresentation. The district court of the fourthjudicial district, Missoula County, sitting without a jury, entered findings of fact, conclusions of law, and judgment infavor of plaintiffs. Subsequently, the district court entered an order amending thejudgment which limited the judgment to defendant Westland Realty, and dismissed the action

as to the individual defendants, Robert Munson and Douglas Johnson. Defendant Westland Realty appeals from thejudgment. The basis for this appeal 

### iswhether the evidencewas sufficient towarrant a finding of fraudbased upon misrepresentation, thereby entitling plaintiffs torescind the "Land Purchase Agreement

### 1'. Westland Realty is a Montana corporation engaged inthe real estatebusiness inMissoula, Montana. Munson, president of thecorporation, and Johnson, a salesman employed by Westland, were both licensed as real estatebrokers by the stateof Montana. It was admitted thatboth Munson and Johnson were agents of Westland when actingwithin the scope and course of their employment. Munson did not directly dealwith plaintiffs. In June 1970, plaintiffswere desirous of acquiring a parcel of realproperty on which tobuild or establish a home. Plaintiffs contacted Westland for information concerning a piece of property located inthe Six-Mile area near Missoula which they had seen listed for sale inthenewspaper and had alsoobserved a sign posted

on the property, Plaintiffs agreed tomeet Johnson atthe property togo over theboundaries, kt this meeting plaintiff Neal Cowan asked Johnson about thewater situation forhe had heard, through rumors, that water

was difficult toget in the Six-Mile area, Plaintiff Gay Cowanremained inthe car during this meeting. She did not talkwith Johnson, but she did participate in signing thenecessary papers intransacting the agreement, Attrial, plaintiff Neal Cowan testified that Johnson told him "There 

### iswater allover. They are getting shallow

### wellsup

here." Johnson admitted having made the statement or one quite similar, but stated that itwas made with reference to springs which apparently originated on adjoining Forest Service property. There is conflict inthe testimony with respect to the Forest Service land. Plaintiff contended that neither he nor Johnson walked into the adjoining Forest Service property. However, Johnson contended he and plaintiff walked onto the Forest Serviceproperty and discussed the springs thereon. Johnson maintained that he pointed out the springs toplaintiff and discussed the possibility of filing

### a water right on them, if one had not alreadybeen claimed, Plaintiff alsoclaimed Johnson told him other people were getting shallowwells inthe area; Johnson statedhe was making reference to

### a cistern type system of collecting ground and surfacewaters rather than a well. After viewing the property with Johnson, plaintiffs signed

a "Receipt and Agreement to Sell and Purchase", dated June 15, 1970, On June 17, 1970, plaintiffs signed the "Land Purchase Agreementr' agreeing topay on a time payment basis, Plaintiffs paid $350 as initialpayment and agreed tomake monthly payments of $35 plus escrow fees inthe amount of $1.50 per month over the term of the contract. The purchase pricewas $3,100, Up to the date of the trialJune 19, 1972, plaintiffs made allof the payments required by them tobe made under the terms of the agreement, After signing the agreement, plaintiffs made some improvements

on the property. During July 1970, plaintiffs expended $379.30 forinstallation of 

### a septic tank, On September 

### 7, 1971, they expended the sum of $1,600 

### in digging a well. Plaintiff Neal Cowantestifiedhe had the digger stop at 200 feet when no water was found because of financial reasons. A letter dated September 22, 1971, was sent to defendants by attorney giving notice of rescission of the agreement and demanding reimbursement of allsums they had expended. Thereafter, this actionwas brought alleging that defendants had misrepresented the land and, in effect, had fraudulently induced plaintiffs intopurchasing the property. 

### In its findings of fact the district court found: "That among other things Defendant Johnson, in the scope of his employment with Westland Realty, represented to the Plaintiffs that the lotwhich the Plaintiffs agreed to purchase on a time-payment contract, dated June 

### 17, 1970, had adequate water available forpurposes of domestic use and otherwise. That that representation was one of the material inducements by which the Plaintiffswere persuaded to purchase said real property from Defendant Westland Realty. "That based on the representations of the Defendants that said land which Plaintiffs agreed to purchase had adequate water available for domestic and other purposes, Piaintiffs attempted to drilla water well, installed a septic tank, drain fields and other sewage facilities. That after the due and diligent expenditure of effort in attempting to locatewater for said purpose, the Plaintiffs discovered that itwas not possibl-etoobtainwater or 

### a water source, That at the time the parties were negotiating said saleand purchase, the Defendants knew or should have known that it was not possible toobtain water or a water source on said property and, therefore, the representations to the Plaintiffs ininducing them topurchase said property were false.If

The district court concluded, as a matter of law, that by

reason of the misrepresentation by defendants, plaintiffs were entitled to a decree allowing them torescind the agreement and torecover allsums of money which they expended inconnection with the purchase of the property and their attempt to locate water and the installation of facilities related thereto. Judgment was entered accordingly, Defendants Munson and Johnson having been dismissed, defendant Westland Realty appeals. As heretofore stated the sole issue on appeal is: Was the evidence presented sufficient towarrant a finding of fraud based upon misrepresentation?Lhis Court hds stated many times that its funcciun on appeal is to determine whether there 

### is substantial evidence to support the findings of the district court. This Court willnot reverse the findings of the trialcourt unless there 

### isa clear preponderance of the evidence against such findings. Spencer v. Robertson, 151Mont. 507, 511, 445 P.2d 48; Smith v, Krutar, 153Mont. 325, 333, 457 P.2d 459. In Lee 

### v, ~tockmen's Nat, Bank, 63 Mont. 262, 284, 207 P, 623? this Court set down the elements which the plaintiff must prove to make out a prima facie case of fraud: (1) A representation; (2) 

### its falsity; (3) itsmateriality; 

### (4) the speaker's knowledge of 

### its falsity, or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of 

### its falsity; 

### (7) his reliance upon its truth; 

### (8) hisright torely thereon; and 

### (9) his consequent and proximate injury. These elements must be established in all cases, whether tried before a jury or a judge. Young v. Handrow, 151Mont. 310, 

### 316, 443 P.2d 9. Actual fraud isalways a question of fact. Section 13-310, R.C.M, 1947, Fraud can never be presumed, but must be proved by a preponderance of the evidence. Good faith

### willalways be presumed and mere suspicion of fraud 

### isnot sufficient. Reillyv. Maw, 146Msnt. 145, 

### 153, 405 P,2d 440. The alleged fraud upon which the district court made its finding that plaintiffs were entitled torescission was the repre- ~ntation by Johnson that therewas an adequate supply of water for domestic use and otherwise. We have searched the transcript and fail to findwhere Johnson made any such representation. In response to direct questions by his own counsel, plaintiff Neal Cowan testified: 

### "Q. Now, what was it again that he told you with regard tothe availability of water? A. 'There is water allover. They are getting shallowwells up here. 1"Q. Now, did he saywho was getting shallowwells 

### in the area? A. No,



# . Ordid he saywhere you could get a shallow well or how you could hit-it or anything of that kind? A. No, 11 On cross-examination, plaintiff Neal Cowan testified: "Q. You stated inyour testimony that Mr. Johnson made the statement that therewas water allover up there, isthis correct? A. Yes. "Q. Did, atany time, Mr. Johnson ever specifically assure you or tellyou that you could obtain water on that.particular piece of property by drillinga well? A, I assumed afterhe saidwater allover the place. "Q, Did he ever assure you you could get water by means of a well? A. No, "Q, Did he ever assure you, as a matter of fact, that you could obtainwater by any method on that particular piece of land? A, No. 

### "Q. There was no stream on the land, was there? A* No. "Q. That was perfectly plain and visible? A. Right. "Q. And if he didn't assure you that you could get water by any specific method eitherwell or cistern or otherwise, how did you assume then you were to get your water? A. By drilling

### a well, "Q. 

### Is itnot true, Mr. Cowan, that you bought this land assuming that therewould be water with the land? You were making the assumption that you could obtain water if you bought it? A, By drillinga well, yes, "Q. 13ut by the same token, you were never assured by Mr. Johnson that there 

### iswater available for a well? A, No*11 The foregoing testimony indicates that Johnson never made any representation with respect to the plaintiffs being successful in drillinga well. The district court, however, specifically found Johnson represented toplaintiffs that the lothad adequate water avilable forpurposes of domestic use and otherwise. The record reveals no such representation was ever made by Johnson. Further, an cross-examination plaintiff Neal Cowan testified: "Q. He didn't tellyou specifically, as I already asked you, that you could obtain water by means of a well? A, No. "Q. He didn't mention any other specific method by which you were assured of obtainingwater? A. No.

### "Q. So 

### as a 

### matter of fact,he never did 

### say specifi.cally that therewas adequate water available for home, domestic or other use, did he? That statementwas not made? 

### A. No. II 

### The first requirement to determine fraud is that of a representation, Since the testimony of plaintiff Neal Cowan clearly indicates that no representation as to the availability of

### water for domestic use or otherwisewas made by Johnson,

we hold the evidencewas not sufficient to 

### warrant a finding of fraud based upon misrepresentation. Since therewas no representation, it is not necessary to discuss the other elements required to prove fraud. The judgment of t



### Associate ~usticLs,