No. 13354 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977

MIKE T. QUINN, Plaintiff and Respondent,

GEORGE HAROLD BRIGGS, LELAND RICHARD BRIGGS, JOHN W. BRIGGS, and ROBERT HUGH BRIGGS, Defendants and Appellants.

Appeal from: DistrictCourt of the Fifth Judicial District, Honorable Frank E. Blair, Judge presiding. Counsel of Record: For AppellantsKline and

### , Helena, Montana John R. Rline argued, Helena, Montana Schulz, Davis and Warren, Dillon, Montana Carl Davis argued, Dillon, Montana For Respondent: Leaphart Law Firm, Helena, Montana C. W. Leaphart argued and W. WilliamLeaphart

appeared, Helena, Montana John H. Jardine argued, Whitehall, Montana

Submitted: January 20, 1977 Decided: 

## -KAY

## 111977 Filed: 

### LAY I 

### :y,r

### Mr. Justice Gene B. Daly delivered the Opinion of the Court.

Plaintiffbrought this action in the district court, Beaverhead County, in equity to rescind a contract to recover 

### $100',400'.00' in payments and to cancel a promissory note for $150,000.00. Defendants counterclaimed seeking enforcement of the $150,000.00 promissory note and attorney fees for defense of the contract. The district court ordered rescission of the contract, restitutionof the 

### $100,000.00 inpayments, cancellationof the promissory note and denied defendants any recovery on their counterclaim. The controlling issue iswhetherplaintiff is entitled to relief on the ground of unilateralmistake. Plaintiff Mike T. Quinn is a cattle rancher and speculator in ranch real estate. He buys ranchproperties for resale, rather than long term investment. Defendantsare the majority stockholders of Briggs Ranch, Inc., a Montana corporation, located south of Dillon,Montana and engaged in the ranching business. In December 1973,plaintiff visited the Briggs Ranch to inspect cattle which he was interested inpurchasing. Plaintiffwas accompanied by Bruce Mecklenburg, a licensed real estate broker. Mecklenburg informed plaintiff the Briggs Ranchwas for sale. Plaintiff expressed

an interest inpurchasing and returned to the ranch several times to inspect the holdings of Briggs Ranch Inc. At the recommendation ofMecklenburg,plaintiff met with

an attorney fromBozeman,Montana. Plaintiff,Mecklenburg and the attorney discussed the aspects involved in purchasing Briggs Ranch Inc. Subsequent to this initialmeeting,plaintiff conferred with the attorney and discussed inparticular 

### (1) the large dollar value involved in the purchase; (2) the fact the proposed saleagreement was for the purchase of corporate stock, as opposed to the purchase of assets; (3) the number of cattle involved inthe ranch operation; (4) the possibility of forfeiture inthe event that $50,000.00 was paid inunder the sale agreement and plaintiff was unable to make the second payment; and 

### (5) general tax consequences associated with the purchase of corporate stock. On February 18, 1974, plaintiff, plaintiff's attorney, Mecklenburg and George Harold Briggs met with defendants' attorney athis officewith the intent of negotiating the sale of Briggs Ranch Inc. A substantialpart of the day involved the discussion and explanation of the sale agreement entitled "AGREEMENT TO PURCHASE STOCK OF BRIGGS RANCH, INC.". The culmination of these negotiations was the execution of the saleagreement; the execution of the memorandum entitled "MEMORANDUM OF UNDERSTANDING AS TO AGREEMENT TO PURCHASE STOCK OF BRIGGS RANCH, INC." ;and plaintiff'

### s tender of $50,000.00. The saleagreement provided for the purchase of 5,000 shares of common capital stock, which comprised allof the issued and outstanding shares of Briggs Ranch, Inc. The purchase price was $6,550,000.00 :and payment* was provided for in.the-agreement. "(b) Buyer shallpay said purchase price as follows:

"(1) FiftyThousand and 00/100 Dollars (50,000.00) upon execution of this Contract, receipt of which 

### is herewith acknowledged. "(2) Two Hundred Thousand and 00/100 Dollars ($200,000.00) On June 1, 1974. "(3) One MillionThree Hundred Thousand Dollars, ($1,300,000.00) not later than the 2nd day of January, 1975. In the event that Buyer fails tomake any payment called forherein and/or failsto deposit a sufficient amount inescrow asprovided inparagraph 3 to satisfy Briggs Ranch, Inc.'s obligations as agreed inparagraph 

### 17, on or before 5:00 o'clock P.M. on said 2nd day of January, 1975, this Contract shall end and be of no further forceand effect atthe time and on the date of Buyer's default, and Sellers shallhave no further obligation under this Contract and Sellers shallretain as liquidated damages for the breach of said Contract the payment or -* payments made to the time of default. "(4) The balance of the purchase price inthe amount of $5,000.000.00 shallbe satisfiedby note executed by Buyer and by Briggs Ranch, Inc

# .,payable on thebasis of 20 equal annual amortized installments of principal and interest. Interest atthe rate of 7-112%per annum shall be paid monthly. The interest on said $5,000,000.00 shall commence and shallrun from the 31st day of December, 1974; the first such monthly payment shallbe due on-orbefore the 31st day of January, 1975, and each payment thereafter shallbe due on orbefore the last day of each succeeding month. The annual principal payments shall commence on the 31st day of December, 1975, and shallbe payable on the 31st day of December each and every year thereafter until the unpaid balance, plus interest atthe rate of 7-112% per annum 

### ispaid in full, and inany and allevents, on $.. orbefore the 31st day of December, 1984, upon which last mentioned date there shallbe a 'balloont payment of the entire unpaid balance of principal and interest." The sale agreement furtherprovided that, upon the purchase of the corporate stock, plaintiff was to assume certain debts of Briggs Ranch, Inc.': "17. RECEASE FROM ESCROW: "The 5,000 shares of Briggs Ranch, Inc., stock shallbe released to the Buyer at such time as the Federal Land Bank Mortgage has been satisfiedby Buyer through Briggs Ranch, Inc., and the payment contemplated by paragraph 2.(b) (3) has been paid to the Sellers on January 

### 2, 1975. In this regard, it 

### is further agreed among the parties that:

I' (a) Buyer shalluse the money deposited inescrow on January 2, 1975, to cause Briggs Ranch, Inc., to satisfy 

### its indebtedness to the Federal Land Bank. In this regard Buyer warrants that he knows the principal amount of the Federal Land Bank mortgage tobe $850,254.88, and the amount of the accrued interest thereon to January 2, 1975. Buyer agrees and does hereby assume the oblipation of the payment of the said $850,254.88 principal and allinterest accruing from and afterJanuary 1, 1974, to the date of payment in fullon January 2, 1975. It isfurther understood that Buyer shall obtain and record a Release of Mortgage from said Federal Land Bank. It 

### is furtherunderstood that Briggs Ranch, Inc., owns 9,750 shares of Federal Land Bank stock worth $5.00 per share, for a total amount of $48,750.00, which shallbe credited upon the Federal Land Bank loan upon payment in full. During the term of this Contract said Buyer shallkeep allof the real property presently owned by Briggs. . Ranch, Inc., free and clear of allliens, mortgages or other encumbrances, other than the mortgage granted to Sellers and except that the Havasu and Texas properties may be dealt with by Buyer as Buyer sees fit. "(b) At such time as the Buyer satisfies the Note set forth on Exhibit 'D' infull, the contents;, of the escrow shallbe delivered to the Buyer." (Emphasis added,) Under paragraph 4(b) of the sale agreement

# -- "CORPORATE PROPERTIES" appears

### : "(b) The Texas farm, described on Exhibit 'B' attached hereto, and the Lease thereon which expires December 31, 1977. Sub.ject to that certainMortpage in the amount of approximately $27,000.00, plus interest to date, said Mortgage to remain an obligation of Briggs Ranch, Inc., or 

### its successor in interest, after the sale of the stock contemplated herein and towhich Sellers are relieved from any obligation thereon by Buyer." (Emphasis added.) The contract further specified the manner by which plaintiff would acquire possession of the stock certificates and the ranch premises: "3. DELIVERY OF STOCK AND PAYMENT OF PURCHASE PRICE: "The certificates for the shares of capital stock sold hereunder shallbe delivered to the escrow agent named hereafter, on the 31st day of December, 1974, upon acknowledgement to the Sellersby the Buyer before December 15, 1974, that (a) the payment called for inparagraph 2.(b)(3) 

### willbe made on January 2, 1975; (b) that the note and mortgage specified inparagraph 2.(b)(6) has been executed by the Buyer and Briggs Ranch, Inc. ; (c) that a sufficient amount 

### willbe deposited with the escrow agent to satisfy the Federal Land Bank loan referred to inparagraph 17. In the event Buyer informs Sellers that the payments specified inparagraph 2.(b)(3) 

### willbe met and Buyer failsto make saidpayments on January 2, 1975; inaddition to the forfeitures specified in said paragraph 2(b)(3) Buyer 

### willbe responsible for payment to Sellers of alllegal and escrow costs incurred inpreparing documents and settingup the escrow and allincome taxes caused by Sellers' repossession of the stock soldherein." "5. POSSESSION: "Possession of the premises owned by the Corporation, except asnoted herein, shallbe surrendered on the 31st day of December, 1974, or as soon thereafter as it 

### is physically possible for the Buyers to assume the complete operation of the ranch. It isunderstood that Sellers

### will cooperatewith Buyer and stay on the premises and help with the operation for a reasonable time afterDecember 31, 1974, to assure a smooth transition in the management of the operation.IISubsequent to executing the sale agreement with .defendants, plaintiff executed two contracts drafted by his attorney. One of the contracts, dated February 18, 1974, and entitled "CONTRACT FOR LEGAL SERVICES", provided that plaintiff and Mecklenberg would pay their attorney legal fees at specified rates for the performance of legalwork arisingout of the ~riggs/~uinn sale. This contract furtherprovided that the attorneywould receive $25,000.00 upon resale of the Briggs Ranch. The second contract, alsodated February 18, 1974, and entitled "AGREEMENT" acknowledged Mecklenburg's efforts inthe completion of the sale of Briggs Ranch, Inc. The contract provided Mecklenburg be compensated for allexpenses incurred inthe resale or attempted resale of Briggs Ranch, Inc. and in lieu of a real estate commission that plaintiff and Mecklenburg divide on an even basis any profit realized from the resale of Briggs Ranch, Inc. Prior to the June 

### 1, 1974, contract payment deadline, plaintiff realized he could not tender the required $200,000.00 payment. On June 

### 1, 1974, plaintiff tendered $50,000.00 and a promissory note in the amount of $150,000.00. Mecklenburg continued to offer the Briggs Ranch for sale untilDecember 9, 1974. On Oecember 17, 1974, plaintiff executed

a notice of ~sdssion which was delivered to defendants' attorney. Thereafter, plaintiff filedhis action for rescission in the district court, Beaverhead County. On January 13, 1976, the district court sittingwithout

a jury, heard the action to rescind theAGREEMENT TO PURCHASE STOCK OF BRIGGS RANCH, INC. The district court found that plaintiff, atthe time of the execution of the sale agreement (1) did not understand that he was buyinglthe corporate stockof Briggs Ranch,

-6-

### Inc.; 

### (2) did not appreciate the consequences that flow from a stock purchase, as opposed to an asset purchase; (3) believed the purchase price ofBriggs Ranch to be $6,550,000.00; 

### (4) failed to comprehend there would be additionalpayments required ofhim in order to satisfy the $27,000.00 Texas farmmortgage and the $850,254.88 indebtedness to the FederalLand Bank; and 

### (5) did not appreciate the tax consequences associatedwith the purchase of capital stock. The district court concluded: Plaintiff executed the sale agreementunder mistakes of fact; that the mistakes of fact were not caused by plaintiff's neglect of a legal duty, but occurred regardless ofplaintiff's exercise of ordinary care; that it would be unconscionable to enforce the sale agreement;and defendants would be unjustly enriched if the sale agreementwas enforced. Defendantsappeal from the district court's judgment ordering



### (1) rescissionof the sale agreement; (2) restitution from defendants in the amount of 

### $100,000.00; (3) cancellationof the promissory note for $150,000.00;and 

### (4) that defendants recover nothing fromplaintiff on their counterclaim. For the following reasons the judgment of the district court is reversed. A party to a contract cannot avoid the contract on the ground thathemade a mistake where there has been no misrepresentation,

no ambiguity in the terms of the contract and the other party has no notice of suchmistake and acts in good faith. Furthermore,

even if one of the contracting parties believes the words of the contract mean something different, the parties to the contract are bound by the plainmeaning of the words used in the agreement as properly interpreted, unless the otherparty knows of such mistake. 

### 17Am Jur 2d,Contracts $5 146,148.

### One who executes a written contract is presumed to know the contents of the contract and to assent to those specified terms,

, 

### in the absence of fraud,misrepresentation, or otherwrongful act by the other contractingparty. Absent incapacity to contract, ignorance of the contents of a written contract is not a ground for relief liability. Parchen Chessman,

### 49 Mont

# . 326, 142 P. 631;Ferd 

### L. Alpert Industries,Inc. v. Oakland Metal Stamping Co., 3Mich.App. 101, 141N.W.2d 671,reversed

on other grounds, 379Mich.272, 150N.W.2d 765. If a contractingparty acts negligently



### .and in such a

manner as to lead others to suppose that thewriting is assented to by him, the contractingparty will be bound in law and in equity,

even though the contracting supposes the writing instrument of an entirely different character, 17Am Jur 2d, Contracts 5149;Hjermstad v. Barkuloo, 128Mont. 88, 270 P.2d 1112. The integrity of written contracts would be destroyed if contractingparties,having admitted signing the instrument, were allowed to rescind the contract on the basis they neither read

nor understood the expressed agreement. Ryan v. Ald,Inc., 149 Mont. 367,427P.2d 53. Section 13-903,R.C.M. 1947, sets forth the grounds for rescission of contract: "When party may rescind. 

### A party to a contractmay rescind the same in the following cases only: 

### "1. If the consent of the party rescinding,or of any party jointly contractingwith himwas given by mistake, or obtained throughduress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds,or of any other party to the contract jointly interestedwith suchparty; "2. 

### If, through the fault of the party as to whom he rescinds, the consideration for his obligation fails, inwhole or inpart;

### "3. If such considerationbec~mes entirely void from any cause; 

### "4. If such consideration, before it is rendered to him, fails in a material respect, from any cause; or3 

### "5. By consent of all the otherparties." Plaintiff contendshe executed the sale agreement under mistakes of fact as to the character of the property being sold and the purchase price of the property. In addition, plaintiff claimshe acted without understanding the tax consequences of the purchase, a mistake of law. Forplaintiff to avoid the sales agreement hemust show that his unilateralmistakes meet the standards set forth in sections 13-313,314,R.C.M. 1947,which provide: 

### "13-313. Mistake of fact. Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the personmaking the mistake,-andconsisting in: 

### 1. An unconscious ignorance or forgetfulness of a fact,past or present,material to the contract; or, "2. 

### Belief in the present existence of a thing material to the contract,which doesnot exist, or in the past existence of such a thing, which has not existed." "13-314. Mistake of law

# . Mistake of law constitutesa mistake,within the meaning of this chapter, onlywhen it arises from: 

### "1. 

### A misapprehension of the lawby allparties, all supposing that they knewand understood it,and allmaking substantially the same mistake as to the law;or, 

### "2. A misapprehension of the lawby oneparty, of which the others are aware at the time of contracting, but which they do not rectify.'' Here, the evidence fails to supportplaintiff's contention thathe executed the sale agreement undermistakes of fact. The sale agreement clearly and specifically sets forth the subject matter of the sale agreement, the purchase price of the capital stock and the debts assumed by the buyer. Furthermore,defendants'

### counsel spent considerable time in explaining the provisions of the sale agreement prior to executing the instrument. Plaintiff, Mecklenburg and their attorneywere in attendance and participated in the clarification and execution of the sale agreement and the execution of the memorandum of understanding. Ifplaintiff failed to understand the terms of the sale agreement itwas not due to any misrepresentations on the part of defendants. Under these circumstances, neitherplaintiff's purported inability to comprehend the terms of the sale agreement norhis failure to procure adequate advice can be attributed to defendants, Plaintiff

was under a legal duty to execute the sale agreementwith the prudence and care of a reasonable and cautiousbusinessman. Having failed to exercise such care,plaintiff cannot seek relief from a court of equity on the ground of unilateralmistake of fact.Similarly,plaintiff's argument that he executed the sale agreement without appreciating the tax consequences falls short of the standard required to avoid a contract. Section 13-314, R.C.M, 1947,provides that a mistake of law is ground for relief only when there is a misapprehension of the lawby allparties

or a misapprehensionof the law by oneparty with the knowledge of the other contractingparty. Clearly,defendantswere aware of the tax consequences flowing from the sale agreement. Plaintiff,

on the other hand,never brought to defendants' attention the fact that hewas either unaware of the tax consequences or unable to understand the tax consequences, Under these circumstances, equitable relSef cannotbe utilized to rescind the contract. We conclude that plaintiff is bound by the terms of the agreement to purchase stock of Briggs Ranch, Inc. Plaintiff's

### filing of the notice of re'scissionand failure to tender payments pursuant to the sale agreement amounted to a material breach of contract and plaintiff is to recovernothing. In view of the express terms of the sale agreement providing for the payment of defendants' attorney fees, the matter of attorney fees is remanded to the district court to determine reasonable attorney fees and costs. The judgment of the district court is reversed and the cause is dismissed.

/' 

### Justice.

We Concur:

~hyef Justice

Justices.

### C/