No. 12409 

IN THE 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 Judicial District, 

Honorable E. Gardner Brownlee, Judge presiding. 

Counsel of Record: 

For Appellants : 

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 6 1973 

Filed : JUL 1 8 1973 
Mr. Chief Justice Harrison delivered the Opinion of the Court. 

This is an action brought by plaintiffs Neal D, and Gay S. 

Cowan, husband and wife, seeking rescission of a "Land Purchase 

Agreement" on the ground of misrepresentation. The district 

court of the fourth judicial district, Missoula County, sitting 

without a jury, entered findings of fact, conclusions of law, and 

judgment in favor of plaintiffs. Subsequently, the district 

court entered an order amending the judgment 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 the judgment. 

The basis for this appeal is whether the evidence was 

sufficient to warrant a finding of fraud based upon misrepresentation, thereby entitling plaintiffs to rescind the "Land Purchase 

Agreement 1'. 

Westland Realty is a Montana corporation engaged in the 

real estate business in Missoula, Montana. Munson, president of 

the corporation, and Johnson, a salesman employed by Westland, were 

both licensed as real estate brokers by the state of Montana. 

It was admitted that both Munson and Johnson were agents of 

Westland when acting within the scope and course of their employment. Munson did not directly deal with plaintiffs. 

In June 1970, plaintiffs were desirous of acquiring a parcel 

of real property on which to build or establish a home. Plaintiffs 

contacted Westland for information concerning a piece of property 

located in the Six-Mile area near Missoula which they had seen 

listed for sale in the newspaper and had also observed a sign posted 

on the property, Plaintiffs agreed to meet Johnson at the property 

to go over the boundaries, 

kt this meeting plaintiff Neal Cowan asked Johnson about 

the water situation for he had heard, through rumors, that water 

was difficult to get in the Six-Mile area, Plaintiff Gay Cowan 
remained in the car during this meeting. She did not talk with 

Johnson, but she did participate in signing the necessary papers 

in transacting the agreement, 

At trial, plaintiff Neal Cowan testified that Johnson told 

him "There is water all over. They are getting shallow wells up 

here." Johnson admitted having made the statement or one quite 

similar, but stated that it was made with reference to springs 

which apparently originated on adjoining Forest Service property. 

There is conflict in the 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 Service property and 

discussed the springs thereon. Johnson maintained that he pointed 

out the springs to plaintiff and discussed the possibility of 

filing a water right on them, if one had not already been claimed, 

Plaintiff also claimed Johnson told him other people were 

getting shallow wells in the area; Johnson stated he was making 

reference to a cistern type system of collecting ground and surface waters 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 to pay on a time payment basis, 

Plaintiffs paid $350 as initial payment and agreed to make 

monthly payments of $35 plus escrow fees in the amount of $1.50 

per month over the term of the contract. The purchase price was 

$3,100, Up to the date of the trial June 19, 1972, plaintiffs 

made all of the payments required by them to be 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 

for installation of a septic tank, On September 7, 1971, they 

expended the sum of $1,600 in digging a well. Plaintiff Neal Cowan 
testified he 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 all sums they had expended. 

Thereafter, this action was brought alleging that defendants had 

misrepresented the land and, in effect, had fraudulently induced 

plaintiffs into purchasing 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 lot which the 

Plaintiffs agreed to purchase on a time-payment contract, dated June 17, 1970, had adequate water available for purposes of domestic use and otherwise. 

That that representation was one of the material inducements by which the Plaintiffs were 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 drill a water well, 

installed a septic tank, drain fields and other 

sewage facilities. That after the due and diligent 

expenditure of effort in attempting to locate water 

for said purpose, the Plaintiffs discovered that it was 

not possibl-e to obtain water or a water source, That 

at the time the parties were negotiating said sale and 

purchase, the Defendants knew or should have known that 

it was not possible to obtain water or a water source 

on said property and, therefore, the representations to 

the Plaintiffs in inducing them to purchase 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 to rescind the agreement and 

to recover all sums of money which they expended in connection 

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 to warrant 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 will not reverse 

the findings of the trial court unless there is a clear preponderance of the evidence against such findings. Spencer v. Robertson, 

151 Mont. 507, 511, 445 P.2d 48; Smith v, Krutar, 153 Mont. 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) its materiality; (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) his right to rely 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, 151 Mont. 310, 

316, 443 P.2d 9. 

Actual fraud is always 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 will always be 

presumed and mere suspicion of fraud is not sufficient. Reilly v. 

Maw, 146 Msnt. 145, 153, 405 P,2d 440. 

The alleged fraud upon which the district court made its 

finding that plaintiffs were entitled to rescission was the repre- 

~ntation by Johnson that there was an adequate supply of water 

for domestic use and otherwise. We have searched the transcript 

and fail to find where 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 to the availability of water? A. 'There is 

water all over. They are getting shallow wells up 

here. 1 
"Q. Now, did he say who was getting shallow wells 

in the area? A. No, 

. Or did he say where 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 in your testimony that Mr. Johnson 

made the statement that there was water all over 

up there, is this correct? A. Yes. 

"Q. Did, at any time, Mr. Johnson ever specifically 

assure you or tell you that you could obtain water 

on that. particular piece of property by drilling a 

well? A, I assumed after he said water all over 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 obtain water 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 either well or cistern 

or otherwise, how did you assume then you were to get 

your water? A. By drilling a well, 

"Q. Is it not true, Mr. Cowan, that you bought this 

land assuming that there would be water with the land? 

You were making the assumption that you could obtain 

water if you bought it? A, By drilling a well, yes, 

"Q. 13ut by the same token, you were never assured by 

Mr. Johnson that there is water 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 drilling a well. The district court, however, specifically 

found Johnson represented to plaintiffs that the lot had adequate 

water avilable for purposes 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 tell you 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 obtaining water? A. No. 
"Q. So as a matter of fact, he never did say 

specifi.cally that there was adequate water 

available for home, domestic or other use, did 

he? That statement was not made? A. No. I I 

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 otherwise was made by Johnson, 

we hold the evidence was not sufficient to warrant a finding 

of fraud based upon misrepresentation. Since there was no 

representation, it is not necessary to discuss the other elements 

required to prove fraud. 

The judgment of t 

Associate ~usticLs,