NO. 94-355

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

WRB-WEST ASSOCIATES, INC., a Texas

Corporation; and WRB-WEST ASSOCIATES,

JOINT VENTURE, a Texas Joint Venture,

Plaintiffs and Appellants,

v.

MADISON ADDITION INVESTMENTS LIMITED MADISON ADDITION INV

PARTNERSHIP, an Idaho Limited

Partnership; JOHN COSTELLO; JERALD S.

SCHMIER; FRED J. HAHN; RICHARD G. HAHN;

ROCCO P. CIFRESE, M.D.; SARA ASHMAN

CIFRESE, M.D.; P.A. PENSION TRUST;

ROBERT E. FARNAM; WILLIAM D. FALER; ROBERT E. FARNAM; WILLIAM D. FALER:

CHARLES A. HOMER; BRUCE SOELBERG; FRANK CHARLES A. HOMER; BRUCE

GUSTIN; GUSTIN: GAYLORD V. SMITH; KEVIN T. GAYLORD V. SMITH

SULLIVAN; TONY MARCON; and CHUCK BECK,

Defendants, Respondents,

and Cross-Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District,

In and for the County of Gallatin,

The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Michael J. Lilly, Berg, Lilly, Andriolo

& Tollefsen, Bozeman, Montana

For Respondents:

John G. Crist, Dorsey & Whitney,

Billings, Montana (for Madison Addition

Investments and John Costello)

James M. Kommers, Kommers, Kasting & Roth,

Bozeman, Montana (for Individual Limited

Partners)

Filed:

Submitted on Briefs: December 22, 1994

Decided: April 25, 1995
Justice Terry N. Trieweiler delivered the opinion of the Court.

Plaintiffs WRB-West Associates, Inc., andWRB-West Associates,

Joint Venture, filed this complaint in the District Court for the

Eighteenth Judicial District in Gallatin County to recover damages

from the defendant, John Costello, which it alleged were caused by

breach of Costello's fiduciary duty. Following a nonjury trial,

the District Court found that Costello had no fiduciary duty to the

plaintiffs and entered judgment for the defendants. Plaintiffs

appeal from the District Court's findings of fact, conclusions of

law, and judgment. We affirm the District Court.

The dispositive issue on appeal is:

Did the District Court err when it concluded that John

Costello did not have a realtor/client relationship with the

plaintiffs in 1989?

FACTUAL BACKGROUND

In the early 198Os, Lewis Robinson and Robert Russell formed

West Associates Limited Partnership to develop the Madison Addition

property. The Madison Addition is a subdivision of single family

and duplex lots, and planned unit developments located in West

Yellowstone. West Associates sold the Madison Addition property to

WRB, Inc., and WRB-JV in 1984. Lewis Robinson and Albert Walker

were initially the principal shareholders in WRB, Inc., and the

principal partners in WRB-JV. As a result of the sale in 1984,

WRB, Inc., owned the single family and duplex lots in the Madison

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Addition, and WRB-JV owned the planned unit development (PUD)

property located in that subdivision.

Costello was a licensed real estate broker in West Yellowstone

with whom WRB, Inc., executed a written listing agreement in 1985.

It consisted of three pages. The first page was prepared by

Robinson and provided that the term for the agreement would be from

May 1, 1985, to November 1, 1985. Costello prepared an addendum to

the agreement which specifically limited his obligations to the

term of the listing agreement. After the agreement expired, no

additional agreement was executed and Costello sold no real estate

for WRB, Inc.

On January 16, 1985, WRB-JV and Costello executed an agreement

which authorized Costello to act as a broker for one of the four

PUDs owned by WRB-JV. That agreement expired, by its terms, on

January 14, 1986. No further agreement was executed by those

parties after it expired.

In October 1984, WRB, Inc., and WRB-JV (referred to

collectively as WRB) had borrowed $4,200,000 from Deseret Federal

Savings and Loan to finance development in the Madison Addition.

Repayment was secured by a mortgage interest in the Madison

Addition property.

In 1988, WRB failed to make the loan payments agreed upon and

Deseret filed an action to foreclose on the secured property. At

the time of the initial foreclosure action, WRB still owed over

$Z,OOO,OOO to Deseret. In addition, WRB was substantially indebted

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to other creditors whose loans were also secured by the same

property. In 1988, an appraisal of the Madison Addition property

indicated a value of only $1,057,000.

In 1989, Costello learned that Deseret was selling its note

and mortgage on the Madison Addition property for the amount of the

1988 appraisal. Costello contacted others and suggested that they

purchase the note and mortgage. Together they formed a limited

partnership known as Madison Addition Investments Limited

Partnership (MAILP), which ultimately purchased the note and

mortgage for $1,057,000. The purchase and sale was completed on

September 11, 1989.

On September 7, 1989, the WRB entities filed a petition for

Chapter 11 bankruptcy protection. However, the Chapter 11 plan

failed when WRB was unable to sell the necessary number of lots to

fund it. Therefore, the bankruptcy proceeding was dismissed and

the stay of foreclosure proceedings vacated. MAILP concluded

Deseret's foreclosure action; obtained a judgment against WRB;

purchased the Madison Addition property at foreclosure sale; and,

after selling individual lots, obtained a deficiency judgment.

In this suit, the WRB entities alleged that their broker/

seller relationship with Costello extended to 1989, and therefore,

that he had a fiduciary relationship which was breached when he

negotiated the purchase of their note from Deseret. Although no

written agreement was in effect at that time, WRB alleged that the

previous agreements were extended based on the fact that Costello

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continued to act as WRB's broker. They alleged that because of

Costello's breach of his fiduciary duty, they were denied the

opportunity to purchase their own note for the amount paid by

MAILP, and thereby, lost the opportunity to reduce their liability

by $2,000,000. However, the District Court held that based on the

statute of frauds there could be no real estate brokerage

relationship, and found that the last agreement between the parties

expired by its own terms in 1986. The District Court also held

that Costello's conduct was not sufficient to establish a broker/

seller relationship. WRB appeals from the District Court's

findings of fact, conclusions of law, and judgment.

DISCUSSION

Did the District Court err when it concluded that John

Costello did not have a realtor/client relationship with the

plaintiffs in 1989?

We review a district court's findings of fact to determine

whether they are clearly erroneous. Interstate Prod Credit Ass’n v. D&aye

(1991), 250 Mont. 320, 322, 820 P.Zd 1285, 1287. In doing so, we

first consider whether the findings are supported by substantial

evidence. If the findings are supported by substantial evidence,

we determine if the district court misapprehended the evidence.

Finally, if the findings are supported by substantial evidence, and

that evidence has not been misunderstood, we may still conclude

that a finding is clearly erroneous if a review of the record

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leaves this Court with a definite and firm conviction that a

mistake has been made. DeSaye, 820 P.2d at 1287.

We review conclusions of law to determine whether they are

correct. Inrekfurriage ofBarnard (1994), 264 Mont. 103, 106, 870 P.2d

91, 93 (citing InreMurriageofBurris (1993), 258 Mont. 265, 269, 852

P.2d 616, 619).

WRB contends that the District Court erred by concluding that

Costello was not their realtor in 1989, and therefore, had no

fiduciary duty that could be breached.

The court found that no written agreement existed in 1989, as

required by § 28-2-903(l), MCA, and that the previous written

agreements were not extended because the parties had not satisfied

the requirements of 5 28-2-1602, MCA, for altering a contract by

extending its term. The court concluded that the parties could not

have created an employment agreement by conduct because the statute

of frauds prohibits such a result. Furthermore, the court found

that even if a contract could be extended or created by conduct,

the evidence was not sufficient to prove the parties consented to

do so. W e agree with the District Court's findings and

conclusions.

Section 28-2-903, MCA, provides in relevant part that:

(1) The following agreements are invalid unless the same

or some note or memorandum thereof is in writing and

subscribed by the party to be charged or his agent:

. . .

(e) An agreement authorizing or employing an agent

o r broker to purchase or sell real estate for

compensation or a commission.

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Section 28-2-1602, MCA, provides that "[a] contract in writing

may be altered by a contract in writing or by an executed oral

agreement, and not otherwise." The District Court correctly found

that there was no written listing agreement, nor a written

modification of the previous agreement in effect between the

parties in 1989.

We have previously held that a listing agreement must be in

writing and cannot be orally extended. Kraji v. Hodson (1992), 254

Mont. 262, 264, 836 P.2d 1234, 1236. In order to be enforceable,

a listing agreement, and any subsequent modification of that

agreement's terms, must be reduced to writing and signed by the

party to be bound thereby. Carnell V. Watson (1978), 176 Mont. 344,

347-40, 578 P.2d 308, 310. We have also recognized that a real

estate broker does not obtain general authority, but has only that

authority specifically authorized by a contract. Martin v. Vincent

(1979), 181 Mont. 247, 251, 593 P.2d 45, 47.

WRB contends that based on dicta in Property Brokers, Inc. v. Loyning

(19821, 201 Mont. 309, 312, 654 P.2d 521, 523, an exception to the

general rule may apply if the surrounding circumstances indicate

that the parties waived the expiration provision in a listing

agreement. We cited Snyderv. Schram (Or. 1976), 547 P.2d 102, for

that rule.

However, Snyder is factually distinguishable. In Snyder, the

plaintiff broker sued to recover a commission for a sale based on

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negotiations which commenced during the term of the agreement and

continued beyond its expiration date. That court recognized that

the defendants encouraged the plaintiff to continue negotiations,

that the plaintiff kept them informed, and that the defendants

eventually sold the property for substantially the same terms

negotiated by the broker. These facts were sufficient to establish

that the defendants waived the original termination date. Snyder,

547 P.2d at 104.

Substantial evidence supports the District Court's findings

that this exception does not apply to the facts of this case.

Costello did not offer to act as WRB's broker in writing or

orally in 1988 or 1989. He did no advertising of WRB property

during either year, and the only written communication between the

parties during that time was Robinson's January 12, 1988,

memorandum advising that single family and duplex lots were being

withdrawn from the market. Costello sold no property during that

period; no one offered to buy any of WRB's property from Costello

during that time; and he had little communication of substance with

any of WRB's principals during those two years. The District

Court's finding that the contractual relationship between Costello

and WRB was not extended to 1989 by Costello's conduct was

supported by substantial evidence and is not clearly erroneous.

Because the District Court's conclusion that Costello had no

brokerage relationship with plaintiffs during 1989 is dispositive

of plaintiffs' claims, and because we affirm that conclusion, we

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will not address the remaining issues raised on appeal, and by

cross-appeal.

The judgment of the District Court is affirmed

We concur:

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