No. 88-564 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

GAR 12. AMUNDSON, 

Plaintiff and Respondent, 

-vsRICHARD A. WORTMAN, 

Defendant and Appellant. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Joseph B. Gary, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Morrow, ~edivy & Rennett, P.C.; Lyman H. Rennett, 111, 

and Terry Schaplow, Bozeman, Montana 

For Respondent: 

Drysdale, McLean, Nellen & Nellen; ~ichard C. g ell en, 

Boze~nan, Montana 

Submitted on Briefs: June 8, 1989 

Filed-: ~ . 

-- 

Decided: July 18, 1989 
Mr. Justice R. C. McDonough delivered the Opinion of the 

Court. 

This is an appeal from an action for breach of a contract to buy a business. Defendant Richard A. Wortman appeals from the judgment of the District Court of the 

Eighteenth Judicial District, Gallatin County, finding him in 

breach of the contract and awarding the balance of the purchase price, plus interest, to plaintiff Gar L. Amundson. We 

affirm on the substantive issues regarding the breach, but 

remand for further proceedings. 

Wortman presents three issues for review: 

1. Did the District Court err in failing to find the 

existence of constructive fraud? 

2. Did the District Court err in equating "customer 

lists" with "mailing lists"? 

3. Did the District Court err in awarding attorney's 

fees without holding an evidentiary hearing? 

Amundson was the proprietor of a business called Information Processing in Bozeman, Montana. Information Processing produced a product known as the Direct School Marketing 

Program, a series of computer-generated booklets designed to 

list the names, addresses and telephone numbers of school 

officials, faculty and coaches, together with dates and 

locations of various conferences and student events taking 

place during a given season or school year. The booklets 

were sold to businesses--chiefly in the lodging and restaurant industries--interested in making contact with the listed 

officials in order to obtain their patronage during a conference or event. Information Processing also offered a follow-up service, which involved putting its subscribers in 

touch with school officials by mail. Amundson set up the 
business himself, which included writing the computer program 

that compiled the booklet. 

In 1987, Wortman approached Amundson with a proposal to 

buy the Direct School Marketing Program. While negotiating 

terms of the sale, Amundson made various representations to 

Wortman concerning subjects such as projected earnings from 

the program, the costs involved and opportunities for new 

business. Pursuant to these negotiations, Wortman drew up a 

contract in longhand. Amundson read the contract and prepared a typed version. The contract was executed on April 7, 

1987. The price for the business was $18,000, to be paid 

with a $2,000 down payment and two annual installments of 

$8,000. 

Among other provisions, the contract called for Amundson 

to deliver to Wortman the computer equipment, software and 

other items listed in an appendix to the contract, as well as 

the copyright and logo for the Direct School Marketing Program and all documents related to its course of business. 

Amundson was also to provide Wortman with "whatever assistance is deemed necessary" in the preparation, marketing and 

distribution of the Fall 1987 edition of the program. The 

contract called for Wortman to pursue the business in a 

diligent, businessman-like manner, and. pay all expenses of 

doing business. 

Wortman began operating the business, but was dissatisfied with the results of his efforts. He sought to rescind 

the contract and return the business, but Amundson did not 

agree to the rescission. Wortman did not pay his first 

installment. On September 17, 1987, Amundson made a written 

demand through his attorney for payment of the installment. 

When Wortman did not do so, Amundson filed this action on 

October 21, 1987. The complaint sought payment of "all 

monies owing now or in the future" under the contract, or 
return of the business and damages for waste due to Wortman's 

actions in running it. Wortman raised an affirmative defense, alleging that Amundson had made several misrepresentations during negotiation of the sale that amounted to 

constructive fraud and entitled him to rescission. 

The case was tried before the District Court, sitting 

without a jury. On August 10, 1988, the court issued its 

Findings of Fact and Conclusions of Law with Memorandum, in 

which Wortman was adjudged to be in breach of the contract. 

Judgment was entered awarding Amundson the balance of the 

contract price plus interest, together with attorney's fees 

and costs, and Amundson's attorney filed a Notice of Judgment. This appeal followed. 

I. 

On appeal, Wortman challenges the District Court's 

Findings of Fact. When reviewing the findings of fact in a 

civil action tried by a district court without a jury, this 

Court will not substitute its judgment for that of the trier 

of fact. Rather, our review is confined to determining 

whether the findings of fact are clearly erroneous. Although 

the evidence may conflict, the court's findings will be 

presumed correct if supported by substantial evidence. 

Meridian Minerals Co. v. Nicor Minerals, Inc. (Mont. 19871, 

742 P.2d 456, 461, 44 St.Rep. 1516, 1523-24. 

The District Court's Findings of Fact relevant to 

Wortman's appeal read as follows: 

12. That the Montana Supreme Court discusses 

constructive fraud in the case of Moschelle v. 

Hulse, 622 P.2d 155 (Mont. 1980). The Court spoke 

in terms of "a pattern of repeated concealments of 

the true state of affairs" and "withholding relevant facts," all of which created a false impression to the purchaser. 

13. That the Court does not find constructive 

fraud by the seller to the buyer. 
14. That the evidence did not show that past 

profits of the Plaintiff were falsely stated, that 

he made repeated concealments in promoting the 

business sale, that an intentional lack of full 

disclosure created a false impression, or that 

there was deliberate misleading of the facts which 

crossed the threshold of "puffing" and entered the 

realm of constructive fraud. 

15. That the Court finds a customer list was 

provided, but any mailing list undergoes a constant 

rollover, and use of such a list in a business 

requires aggressive and continual updating. 

16. That a sales person leaving the employment 

upon the sale of a business is not reason to invoke 

constructive fraud. 

17. That the Contract was very vague regarding 

what "assistance" was to be provided by the seller, 

and compelling evidence has not been presented to 

this Court justifying a lack of assistance to the 

point of constructive fraud. 

Wortman argues that the court's Finding of Fact No. 13 was in 

error and contrary to the evidence in this case. Wortman 

also argues that the court confused "customer lists" with 

"mailing lists", which rendered its Finding of Fact No. 15 

erroneous. 

Constructive fraud is defined at 5 28-2-406, MCA, as 

any breach of duty which, without an actually 

fraudulent intent, gains an advantage to the person 

in fault or anyone claiming under him by misleading 

another to his prejudice or to the prejudice of 

anyone claiming under him ... 

In cases such as the one at bar, the "duty" involved is the 

duty to disclose material facts to the purchaser, a breach of 

which is an essential element of constructive fraud. Mends 

v. Dykstra (1981), 195 Mont. 440, 637 P.2d 502. The Mends 

case addressed the issue of when such a duty arises. While 

the defendants in Mends asserted that no duty arose absent a 

fiduciary or confidential relationship, it was pointed out 

that this Court had found "special circumstances" surrounding 
some transactions which give rise to the duty to disclose. 

One such set of circumstances was the "pattern of repeated 

concealments" found in the Moschelle case cited by Wortman in 

support of his position and included in the District Court's 

Findings of Fact quoted above. 

Wortman argues that Amundson repeatedly concealed the 

true state of affairs concerning the business. According to 

Wortman, Amundson failed or refused to provide business 

records detailing the financial history of the business and 

did not disclose important details concerning its current 

status. Wortman thus asserts that his negotiations with 

Amundson created a false impression about the desirability of 

purchasing the Direct School Marketing Program. We disagree. 

The business records Wortman complains of are ledgers 

and tax records for the years preceding the purchase. He 

argues that he was unable to gauge the true performance of 

the business without them, and was forced to rely on representations Amundson made in income projections prepared 

during their negotiations. Wortman also argues that the 

projections presented an inflated notion of the profit, that 

could be made selling booklets. 

Both sides introduced income projections into evidence. 

According to testimony by Amundson, as many as five or six 

such projections were prepared for various possible approaches Wortxnan might take in operating the business. Amundson 

also testified that the figures for such things as materials 

costs, labor and net profit per booklet were based on the 

past performance of the business. The projections introduced 

at trial as Wortman's Exhibit "A" include a statement of 

annual net profit for the years Amundson ran the business, 

which Amundson testified he had taken from the ledgers at 

issue. The projections state net profit forecasts that 

closely approximate the actual figures from past operation, 
although some projected profits are actually lower than past 

performance. Amundson also testified that Wortman never 

requested tax records during negotiations. 

Wortman complains that Amundson also concealed facts 

about the status of the business that worked to Wortman's 

detriment. After the contract had been executed, Amundson 

and Wortman met with Amundson's salesman, Tim Barrett, in 

Butte to go over Barrett's role in the business. At this 

meeting, Barrett informed Wortman that he would be quitting 

his job to pursue other business interests. Wortman alleges 

that Amundson knew this before the meeting and concealed it, 

leading Wortman to believe that he was buying a business 

employing an active salesman. 

The testimony cited by Wortman on this point bears 

examination. Barrett testified that he did in fact tell 

Amundson of his decision to quit prior to the meeting. 

However, Barrett said, "I believe I told Mr. Amundson the day 

he called me and he said he had sold the business ...." This 

testimony indicates that Amundson did not know of Barrett's 

departure until after the sale was consumated. He therefore 

could not have concealed it to Wortman's detriment in deciding on the purchase. Furthermore, Wortman himself testified 

that the presence or absence of a hired salesman was not 

crucial to his plan for operating the business. 

Wortman also complained that Amundson did not disclose 

the "considerable ill will" he had generated among his customers, or their complaints that the booklets were ineffective. However, Wortman testified that the sluggish sales he 

experienced could have been the result of his own shortcomings as a salesman. Wortman's Exhibit "I", a file folder 

containing returned sales letters introduced in support of 

his contention of customer animosity does not lend support to 

his claim. The file contains 12 letters sent out by Wortman 
and later returned. On one of the envelopes is written "not 

interested," but the other 11 were returned because the 

addressee had moved. The only letter actually written by a 

customer states that the booklet previously purchased "helped 

a great deal" and asks that the customer be retained on 

Wortman's mailing list. When testifying about the letters, 

Wortman admitted that the drop in sales could have been 

attributed to other causes, such as a generally slow business 

climate. 

Still another of Wortman's claims was that Amundson 

failed to supply assistance with business operations that he 

promised during negotiations and in the contract itself. In 

response, Amundson testified that he had volunteered assistance, and supplied a record of his activities. 

While the examples above do not address every claimed 

concealment, they are sufficient to illustrate that evidence 

in this case supports the District Court's conclusion that 

constructive fraud was not present. We have found no "pattern of repeated concealments" in the record, and affirm the 

District Court on this issue. 

Wortman's second challenge concerns "mailing lists" 

versus "customer lists". One of the items purchased by 

Wortman as part of the business was a "customer list" compiled over the course of the Direct School Marketing Program's existence. Wortman's brief to this Court makes much 

of the definition of "customer" as one who repeatedly makes 

purchases or has business dealings with a tradesman. 

According to Wortman, the list supplied was a misrepresentation, because he was able to make only approximately 80 

sales to over 300 listed "customers". At trial, Amundson 

testified as to how the list was compiled. According to 

Amundson, businesses were placed on the list when they purchased a booklet. Entries were also made for each purchaser 
indicating such things as method of payment. The names on 

the list were thus "customers" in that each business had made 

at least one purchase. While nearly every business strives 

for repeat customers, there is no guarantee that a customer 

with an established record of repeated purchases will not 

take his business elsewhere or simply stop purchasing for any 

number of reasons. We also see nothing in the record to 

indicate that Amundson made such a guarantee to Wortman. The 

manner in which the list was referred to was thus irrelevant, 

and we affirm the court on this issue. 

Wortman challenges the District Court's award of attorney's fees, arguing that it did so on the basis of the affidavit of Amundson's counsel as to the amount of such fees, 

without holding an evidentiary hearing. Wortman is correct 

in that attorney's fees cannot be awarded solely on the basis 

of an attorney's affidavit. An evidentiary hearing is required. Stark v. Borner (Mont. 1988), 762 P.2d 857, 860, 45 

St.Rep. 1885, 1888. 

Wortman's argument has placed this Court in an unusual 

situation. When the District Court entered its Findings of 

Fact and Conclusions of Law with Memorandum, counsel for 

Amundson was instructed to draft a judgment in conformity 

with the court's ruling. Part of that ruling, and consequently part of the "Judgment" signed and filed by the court, 

was an award of "reasonable attorney's fees and costs, which 

shall be determined at a separate hearing." Shortly after 

the "Judgment" was filed and noticed, but before the time for 

the hearing, counsel for Wortman filed his Notice of Appeal. 

The problem arises because counsel for Wortman filed his 

Notice of Appeal prematurely. A judgment that awards costs 

and attorney's fees to be determined at a later hearing is 

not final and appealable until those costs and fees are 
determined. Roles v. Ler (1984), 213 Mont. 265, 692 P.2d 1. 

However, neither party raised this issue in their briefs, and 

it only became apparent upon our review of the record, after 

all briefs had been filed and the record deposited with this 

Court. Therefore, in the interests of judicial economy, and 

for the purposes of -- this case only, we affirm the decision of 

the District Court on the issues discussed above, and remand 

the cause to the court for proper determination of costs and 

attorney's fees, both at the District Court level and upon 

appeal. 

Affirmed and remanded. 

Wy Concur: 

@~-aJustice