No. 87-192 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

WILLIAM A. SELVIDGE and VIRGIE 

M. FENNER, 

Plaintiffs and Appellants, 

-vsMARCUS McBEEN and NANCY L. McBEEN; 

ROBERT PAYNE; and PAYNE REALTY and 

HOUSING, INC., 

Defendants and Respondents. 

APPEAL FROM: District Court of the Sixth Judicial District, 

In and for the County of Park, 

The Honorable Byron Robb, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Lloyd E. Hartford, Billings, Montana 

For Respondent: 

Richard J. Carstensen, Billings, Montana 

Richard W. Anderson; Anderson, Edwards & Molloy, 

Billings, Montana 

Submitted on Briefs: Dec. 17, 1987 

Decided: February 8, 1988 

Filed: 'rm 8 

Clerk 
Mr. Justice William E. Hunt, Sr. , delivered the Opinion of 

the Court. 

This claim of fraud comes to this Court from the Sixth 

Judicial District, Park County. Following a bench trial, 

defendants, Nancy McBeen, Robert Payne and Payne Realty and 

Housing, Inc. were dismissed from the suit. The trial court 

found that defendant, Marcus McBeen had fraudulently 

misrepresented the income of the property and business that 

he sold to plaintiffs. Plaintiffs/appellants Selvidge and 

Renner were awarded $62,238 in actual and $10,000 in punitive 

damages. They appeal the amount awarded and the dismissal of 

defendants Nancy McBeen, Robert Payne and Payne Realty and 

Housing, Inc. In addition, they appeal the failure of the 

court to award them attorney fees. Defendant Marcus McBeen 

cross-appeals the judgment against him. 

We affirm the District Court. 

The issues presented for our review are as follows: 

1. Whether the District Court erred in dismissing 

Robert Payne and Payne Realty and Housing, Inc. from this 

lawsuit. 

2. Whether the District Court erred in dismissing Nancy 

McBeen from this lawsuit. 

3. Whether the District Court erred in the amount of 

damages awarded. 

4. Whether the District Court erred by failing to award 

reasonable attorney fees to appellants. 

McBeen cross-appeals with issues 5-7: 

5. Whether the legal requirements to prove fraud were 

supported by the facts. 

6. Whether appellants alleged losses were proximately 

caused by Marcus McBeen's alleged misrepresentations. 
7. Whether punitive damages were properly awarded. 

In 1982, defendants Marcus and Nancy McBeen purchased 

the Johnson-Gardner Saloon in Gardiner, Montana. They paid 

$6,000 plus an exchange of property for the saloon. They 

operated the saloon from February 2 to November 25, 1982, 

then closed for the winter due to slow business. Since 1977, 

the saloon had changed hands three times. The sales prices 

were $57,500 in 1977, $70,000 in 1978, and $60,128 in 1980. 

The McBeen's hired managers for the saloon and had very 

little to do with the operation of it except that Nancy 

McBeen wrote some payroll checks and did some bookkeeping. 

McBeens made $10,000 to $20,000 of building improvements 

during the time they owned the saloon. 

In January, 1983, Marcus McBeen contacted Robert Payne 

and Payne Realty and Housing, Inc. about listing the business 

for sale. The purchase price was listed at $120,000 plus 

cash for saleable inventory, with interest at 11%. At the 

time of the listing, Marcus McBeen told Payne that the saloon 

grossed $71,233 in a little less than a 10 month period. The 

purchase price included the saloon building, a rental house, 

the land, bar equipment and fixtures and a Montana all 

beverage license. 

After personally viewing the property, Payne ran an add 

in the Billings Gazette as follows: 

Liquor Bar 

Located in Gardiner, MT. Recently remodeled, 

living quarters, priced to sell at $120,000 with 

good terms. 

Appellants, William Selvidge and Virgie Renner saw the 

ad, drove to Gardiner and met with Marcus McBeen. They 

discussed the sale of the business with McBeen and saw the 

property although the bar was not operating at that time. 
Appellants were originally from California, where 

Selvidge owned and managed a bar/restaurant and Renner worked 

as a waitress for many years. Appellants investigated other 

business prospects in Gardiner and continued to show an 

interest in the Johnson-Gardner Saloon. 

After meeting with McBeen, appellants and Marcus McBeen 

met with Robert Payne. Payne relayed to appellants the gross 

sales figure for 1982 of $71,233. Marcus McBeen told them 

that sales had actually been significantly higher, eventually 

stating that $83,779 was the correct amount. 

On February 24, 1983, after numerous (12-14) visits to 

Gardiner, appellants offered McBeens $110,000 with 10% 

interest for the saloon. McBeens and appellants reached an 

agreement on the purchase price for $115,000 with lo+% 

interest. Prior to the sale, Payne cautioned the appellants 

that he could not vouch for the business figures as all 

anyone had to rely on was Marcus McBeents statements. The 

records from the previous owners were not available and 

McBeenst records were allegedly at their tax accountants, 

being used to prepare their 1982 taxes. Payne advised 

appellants to seek their own legal counsel and went so far as 

to attach the following special provisions to the final sales 

contract. 

This sale is subject to the following items: 

1. Buyers being able to inspect and be satisfied 

with the books (income and expenses) for the year 

1982. 

2. Buyers being able to have legal counsil [sic] 

review all previous contracts that are still in 

effect and a preliminary title policy on the 

property and being fully satisfied with them. 

Appellants demanded that McBeens decide within three 

days after their offer. On February 26, 1983, the McBeens 
accepted and a "Buy/Sell Agreement" was executed containing 

the following standard clause: 

9. Purchaser enters into this agreement in full 

reliance upon his independent investigation and 

judgment and there are no verbal or other 

agreements which modify or affect this agreement. 

On March 14, 1983, prior to the execution of the final 

contract for deed, Marcus McBeen met with appellants at 

Payne's office to review the records of the bar. The man who 

supplies poker and game machines to all Gardiner bars stopped 

by and talked briefly with appellants, presumably about the 

machines which were in the Johnson-Gardner Saloon at the date 

of the sale. At this meeting, appellants were given a 

typewritten sheet titled "Johnson-Gardner 1982 operating 

Statement." Payne again informed appellants that the figures 

were unsubstantiated by anyone except Marcus McBeen. 

Following this meeting on March 31, 1983, an attorney 

for both parties drew up a formal contract for deed. 

Paragraph VII of the contract contained the following 

provisions: 

Examination of Property. The purchasers declare 

they are purchasing this property on their own 

examination and judgment and not through any 

representations to them made by the sellers or 

their agents as to location, value, future value, 

income therefrom or as to its production. 

After about four months of operating the saloon, 

appellants advertised it for sale. They asked ~obert Payne 

to list it for $225,000. He refused to list it at such an 

exorbitant price, even though appellants told him they 

thought it was a fair price. Appellants ended up listing it 

for $225,000 themselves. They could not sell the saloon for 

the desired amount, so appellants continued to own and 

operate it until the time of trial. 
When the saloon failed to make as much as appellants 

anticipated, they filed suit alleging fraud and 

misrepresentation by Marcus and Nancy McBeen, Robert Payne 

and Payne Realty and Housing, Inc. 

In the course of discovery, appellants became aware that 

McBeen's "1982 Operating Statement" was, as described by a 

CPA who reviewed the business records, "grossly inaccurate." 

The District Court made very thorough and elaborate findings 

with regard to Marcus McBeen's alleged fraud and 

misrepresentations and appellant's damages. These will be 

enumerated and discussed further in the following opinion. 

Issue No. 1 

The appellant's first issue alleges error by the 

District Court for disn~issing Robert Payne and Payne Realty 

and Housing, Inc. from this lawsuit. 

After hearing a nonjury trial, the District Court made 

63 findings of fact. Included in the findings of fact 

were : 

29. Payne had no knowledge of and made no 

representation to plaintiffs concerning the 

profitability of the bar. Neither did he conceal 

anything he knew of from plaintiffs. 

31. Plaintiffs knew that Payne himself had not 

audited the books and that all figures presented 

came exclusively from Marcus McBeen. Plaintiffs 

had the right to demand even further records had 

they wanted them, and they were aware of that 

right. Plaintiffs by their own testimony admit 

that they entered into and closed the transaction 

with fewer records than they had hoped to see. 

32. Plaintiffs did not rely on Robert Payne for 

any representations, assurances or confirmation as 

to the profitability of said business, and 

understood that Payne Realty and Housing Inc., 

acting through Robert Payne, was McBeens' real 

estate agent in the transaction, whose function it 
was to bring the parties together, show the 

property, and arrange for the preparation of the 

closing documents. 

33. Payne at no point prior to the closing of the 

transaction had any access to McBeens' 1982 tax 

returns. In fact, the returns had not yet been 

prepared, and plaintiffs knew it. Plaintiffs 

voluntarily completed the transaction, signed the 

contract for deed, and thereby waived any reliance 

upon tax returns. 

34. The property which plaintiffs purchased was 

exactly what they intended to buy. All buildings, 

lands, fixtures, licenses and appurtenances were 

substantially as represented by McBeens, there were 

no hidden or undisclosed defects, and Virgie Renner 

expressly testified plaintiffs had no complaint as 

to the physical assets. 

As a consequence of these findings of fact, the District 

Court concluded. that "Plaintiffs failed to prove any claim 

for damages against Robert Payne individually or against 

Payne Realty and Housing, Inc., the complaint against them 

should be dismissed with prejudice, and defendants Payne 

should have judgment against plaintiffs for their allowable 

costs of $944.05." 

In a nonjury trial, the District Court judge makes the 

findings of fact and conclusions of law. Tolson v. Tolson 

(1965), 145 Mont. 87, 399 P.2d 754. Findings of fact will 

not be overturned unless there is a clear preponderance of 

evidence against them. Round v. Reikofski (Mont. 1985), 699 

P.2d 72, 42 St.Rep. 634. Also, we view the findings in a 

light most favorable to the prevailing party. General Mills, 

Inc. v. Zerbe Bros, Inc. (Mont. 1983), 672 P.2d 1109, 40 

St.Rep. 1830. The appellants have the burden of showing by a 

clear preponderance of the evidence that the findings of fact 

are incorrect before this Court will disturb those findings. 

Cameron v. Cameron (1978), 179 Mont. 219, 587 P.2d 939. 
The court's dismissal of defendants Payne fell within 

the District Court's powers under Rule 41(b), M.R.Civ.P.: 

. . . After the plaintiff, in an action tried by 

the court without a jury, has completed the 

presentation of his evidence, the defendant, 

without waiving his right to offer evidence in the 

event the motion is not granted, may move for a 

dismissal on the ground that upon the facts and the 

law the plaintiff has shown no right to relief. 

The court as trier of the facts may then determine 

them and render judgment against the plaintiff ... 

In the present case, Payne recommended that the 

appellants hire their own attorney, as he could not verify 

the amounts which Marcus McBeen alleged to be the true and 

accurate accountings of the bar's business. Section 

37-51-321, MCA, prohibits real estate brokers from conmitting 

various acts. The key to these acts is knowledge and intent. 

The evidence presented in this case supports the finding that 

Payne had no knowledge of the accurate accounting figures 

relating to the saloon's business, did not intentionally 

misrepresent any information to appellants, nor did he 

advertise in a misleading or untruthful manner. Payne acted 

in good faith as realtor and was properly dismissed from this 

action. 

Issue No. 2 

Appellants contend that it was also error for the 

District Court to dismiss Nancy McBeen from this suit. 

The District Court found as fact that "[tlhere was no 

evidence presented to establish that Nancy McBeen knew of any 

of said misrepresentations, communicated the inaccurate 

information to anyone, or participated in any way in any 

fraud or deceit. She should therefor be and was dismissed as 

defendant at the end of plaintiffs case." 
When reviewing a Rule 41(b) dismissal of a defendant, 

the reviewing court must view the evidence in a light most 

favorable to the plaintiff. However, this does not relieve 

the plaintiff of the burden of producing evidence in support 

of each element essential to recovery. Nixon v. Huttinga 

(1974), 163 Mont. 499, 501, 518 P.2d 263, 265. Appellants 

showed only that Nancy McBeen (1) was co-owner of the 

Johnson-Gardner Saloon before the sale to appellants; 

(2) had some responsibilities for bookkeeping for the 

saloon; and, (3) was present at a few of the meetings of 

McBeens and appellants concerning the sale of the saloon. 

Nancy McBeen, along with her husband, was accused of 

fraud and misrepresentation. The elements of fraud are: 

(1) a representation; (2) its falsity; (3) its 

materiality; (4) the speakers knowledge of the truth; 

(5) the intent that it should be acted upon in the manner 

contemplated; (6) the hearer's ignorance of its falsity; 

(7) the hearer's reliance on its truth; (8) the right of 

the hearer to rely thereon; and (9) the hearer's consequent 

and proximate injury or damage. Hutton v. Ming (1970) , 155 

Mont. 149, 153, 467 P.2d 688, 690. 

The circumstances constituting fraud must be stated with 

particularity. Kinjerski v. Lamery (1979) , 185 Mont. 111, 

117, 604 P.2d 782, 785. Appellants presented only a general 

assertion of fraud. They presented no evidence establishing 

the presence of any one of the elements of fraud. As such, 

we hold that Nancy McBeen was properly dismissed as a 

defendant at the close of appellant's argument in the lower 

court proceeding. 

Issue No. 3 

Appellants' next contention is that the District Court 

erred in its award of damages. 
Appellants were awarded $62,238 in compensatory damages 

and $10,000 in punitive damages. The applicable statutes 

which allow for these awards are S 27-1-317 and S 27-1-220, 

MCA, respectively. We do not agree with appellants' argument 

that the compensatory damages award was too low. The 

District Court found that appellants suffered annual losses 

of $31,338 and reasonable wage loss of $30,900 based on their 

income tax returns. The court found further that appellants 

did not suffer any loss of opportunity to earn income on 

their investment, nor did they pay an excessive amount for 

the saloon property and business. These findings are 

supported by the evidence of past and present business 

records for the Johnson-Gardner Saloon and by evidence of the 

value of other comparable businesses in Gardiner. 

We also disagree with the allegation that the punitive 

damages awarded were too low. The court found that Marcus 

McBeen's acts of misrepresentation to appellants were 

fraudulent. To deter future similar behavior, an award of 

$10,000 in punitives was awarded to appellants. Section 

27-1-221 (7) (b) , MCA, outlines the findings necessary for an 

award of punitive damages: 

(b) When an award of punitive damages is made by 

the judge, he shall clearly state his reasons for 

making the award in findings of fact and 

conclusions of law, demonstrating consideration of 

each of the following matters: 

(i) the nature and reprehensibility of the 

defendant's wrongdoing; 

(ii) the extent of the defendant's wrongdoing; 

(iii) the intent of the defendant in conmitting 

the wrong; 

(iv) the profitability of the defendant's 

wrongdoing, if applicable; 
(v) the amount of actual damages awarded by the 

jury; 

(vi) the defendant's net worth; 

(vii) previous awards of punitive or exemplary 

damages against the defendant based upon the same 

wrongful act; 

(viii) potential or prior criminal sanctions 

against the defendant based upon the same wrongful 

act; and 

(ix) any other circumstances which may operate to 

increase or reduce, without wholly defeating, 

punitive damages. 

In its findings of fact and conclusions of law, the 

District Court concluded that: 

I. The actions of defendant Marcus McBeen in 

representing and warranting that the operating 

statement of the Johnson-Gardner Saloon for 1982 as 

a true and accurate statement of the gross income 

and expenses were false, deceitful of material 

facts, and constitute fraud. 

J. Defendant Marcus McBeen intended that 

plaintiffs should rely upon said representations. 

Plaintiffs were ignorant of the falsity of the 

representations, did in fact rely on them as they 

had a right to do, and thereby suffered injury. 

K. Plaintiffs William Selvidge and Virgie Renner 

are entitled to damages of $31,338 for net business 

loss on said business for the years 1983 through 

1985, plus $30,900 for lost wages during said time, 

making a total of $62,238.00, which amount will 

compensate them for all the detriment proximately 

caused by Marcus McBeen's actions. 

L. Plaintiffs have not established that they are 

entitled to have said contract reformed or the 

price paid for the property and business reduced. 

M. Plaintiffs are not entitled to an award for 

loss of opportunity to earn a return on their 

investment and capital as that would be a 

duplication of the damages referred to in 
conclusion K above, and because the value of the 

real and personal property and business was not 

excessive or grossly disproportionate to the price 

paid by plaintiffs. 

N. Plaintiffs are entitled, however, to punitive 

damages against Marcus McBeen in the sum of 

$10,000.00 to deter similar future conduct by him. 

P. Plaintiffs were not contributorily negligent 

herein, and their damages should not be reduced. 

Because of some seemingly contradictory findings of fact 

with these conclusions of law, the District Court followed up 

the conclusions with an explanatory comment. 

EXPLANATORY COMMENT 

In case the foregoing findings or conclusions 

seem somewhat inconsistent, the court finds that 

while plaintiffs did make a thorough investigation 

of their own prior to purchasing the saloon and 

agree in the contract of sale they were relying on 

that and not on any representations of the sellers, 

and while the court also finds plaintiffs did not 

pay a grossly disproportionate or unreasonable 

price for the premises and business, and that they 

did have opportunity to examine McBeens records, I 

still find McBeen materially misrepresented the 

gross sales he reported in the operating statement 

he prepared, and because plaintiffs were entitled 

to and did rely on this, they are entitled to the 

damages proximately caused thereby, plus moderate 

punitive damages. However, plaintiffs seek 

duplicative, speculative and unjustified amounts of 

damages, both actual and punitive, and I have 

awarded only those that are reasonably certain. 

Ms. Renner's inconsistent and exaggerated testimony 

has caused me to reduce somewhat the punitive 

damages I might have otherwise awarded. 

The conclusions of law considered in light of the facts 

of this case and the judges explanatory comment satisfies the 

statutory requirements for punitive damages. We will not 
disturb the punitive award, nor the award for compensatory 

damages. 

Issue No. 4 

Lastly, appellants allege that the District Court erred 

in failing to award attorney fees. 

In the absence of a contractual agreement or specific 

statutory authority, attorney fees are not recoverable as 

costs by the prevailing party. State ex rel. Wilson v. 

Department of Natural Resources and Conservation (1982) , 199 

Mont. 189, 648 P.2d 766, 769; § 25-10-301, MCA. 

In this case, appellants recovered on their allegation 

of fraud and misrepresentation--a tort. Their testimony 

indicates that they are satisfied with all the buildings and 

fixtures which they purchased under contract. The court 

found the purchase price to be reasonable. Because they 

recovered under tort law, appellants were awarded $10,000 

punitives. There is no statutory authority nor contractual 

agreement which gives rise to an award of attorney fees in 

this case. We affirm the District Court's refusal to award 

attorney fees to Selvidge and Renner. 

Issue No. 5 

McBeens' first issues raised on counter-claim alleges 

that the finding of fraud was not supported by the facts. 

The elements of fraud were outlined under issue no. 2 

above. The District Court's relevant findings of fact, which 

were supported by the evidence include: 

45. Defendant Marcus McBeen knew that the saloon 

business in question did not have gross sales in 

1982 of $83,779 or gross rental income of $2,100. 

46. McBeens said operating statement (EX. ll), 

financial statement (Ex. 14) , and 1982 income tax 

return (Ex. 15), were all prepared by Marcus 

McBeen . He is an experienced businessman, and 

engaged in and familiar with the management and 

running of several different and diverse businesses 
while in Gardiner, namely, a lumber yard, real 

estate business, home construction, solar heating, 

and a saloon. 

47. The documents referred to in finding 46 were 

prepared by McBeen to purportedly accurately 

reflect his total business income and financial 

status, and were prepared for use of lending 

institutions and Internal Revenue Service, and only 

gratuitously given plaintiffs according to Marcus. 

The court finds, however, that the operating 

statement is not only inaccurate and vague, but 

misleading to anyone to whom he submitted it. 

49. Plaintiffs had the right to rely upon the 

representation of defendant Marcus McBeen 

concerning the financial condition of business in 

question, and in fact plaintiffs did rely thereon, 

as well as on their own experience, observations 

and investigation, purchasing the business. 

50. The representations made by Marcus McBeen to 

Selvidge and Renner were false and were material, 

and he intended plaintiffs to rely thereon to 

induce them to purchase said saloon business. 

51. Plaintiffs were ignorant of the falsity of 

defendant McBeen's representations at the time of 

the purchase, and as a result of his false 

representations and plaintiffs reliance thereon, 

plaintiffs suffered injury. 

52. That once plaintiffs purchased the business 

and. took possession, they operated it on a sound 

basis and increased their business some each year. 

However, they claim to have suffered annual losses 

as indicated by their partnership income tax 

returns (Ex. 2) including deductions for 

depreciation, as follows: 

Total ........ $31,338 
53. That plaintiffs have suffered loss of 

reasonable wages since purchasing the business of 

$30,900. 

54. That plaintiffs losses mentioned in findings 

52 and 53 are directly attributable to the 

misrepresentations and deceitful statements of 

Marcus McBeen. 

57. That the court does find, however, that Marcus 

McBeen's omissions and representations in the sale 

were fraudulent and oppressive toward plaintiffs, 

and they should be awarded punitive damages of 

$10,000 to deter similar future conduct. 

60. The only damages plaintiffs have established 

are from Marcus McBeen's tort of fraud, so that no 

attorneys fees are awardable on the contract to 

either side. 

Appellants offer no evidence to contradict or show that 

these findings are clearly erroneous. We affirm the District 

Court on the issue of fraud. 

McBeens' last two contentions alleging that appellants' 

damages were not caused by McBeens' misrepresentations and 

that punitive damages were improperly awarded have been 

adequately addressed in the previous discussion. / 

Affirmed on all issues.