JN THF SUPREME COURT OF THE STATE OF MOl\TTANA 

FRANK MITCHELL and EVELYN MITCHELL, 

Plaintiffs and Respondents, 

-VSLYLE BOYER and MINNIE BOYER, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Fourth Judicial District, 

Jn and for the County of Ravalli, 

The Honorabl e James R. Wheelis, Judge presiding. 

COTJNSEL OF RECORD: 

For Appell-ant: 

Jeffrey H. L,anqton, Hamilton, Montana 

For Respondent: 

Brian 1,. Del-aney; Mulroney, Del-aney & Scott, Missoula, 

Montana 

Submitted on Rrjefs: April 20, 1989 

Decided: June 11 1989 

. -' .- ...?' +., - -- Filed: u-) .: ,, 

- -. I .,. < -. .( ,.J, il&[&& . -- ~ - -- 3-4 .. , -7 1 

- 
Mr. Justice R. C. McDonough delivered the Opinion of the 

Court. 

This appeal involves an agreement to purchase land 

located near Corvallis, Montana. Defendants Lyle and Minnie 

Boyer (Boyers) appeal from the judgment of the District Court 

of the Fourth Judicial District, Ravalli County, granting 

recision of the agreement. The Court awarded plaintiffs 

Frank and Evelyn Mitchell (Mitchells) damages based on the 

down payment, earnest money and escrow payments made; amounts 

expended for improvements to the property; and prejudgment 

interest at an annual interest rate of ten percent from a 

date thirty days after Mitchells initially offered to rescind 

the agreement. We affirm. 

Boyers present two issues for review: 

1. Did Mitchells ' reliance on the innocent 

misrepresentations of Lyle Boyer constitute negligent 

reliance, barring the remedy of recision? 

2. Did the District Court err in finding that Lyle 

Royer's misrepresentations gave rise to a breach so material 

as to excuse Mitchells' duty of performance and rescind the 

contract? 

The property at issue in this case was originally part 

of a larger tract belonging to David and Clara Leicht. In 

1978, the Leichts sol-ci two parcels of their land to the 

Tices, who are not parties to this suit. Lyle Boyer was the 

real estate agent involved in that sale. At some point after 

the sale had! been negotiated, but before the deeds to the 

property had. been delivered, a disagreement arose between the 

Leichts and the Tices as to what would constitute allowable 

use of the parcels. The end result of this disagreement was 

that the parcel. here at issue was subjected to a restrictive 

co~renant, duly recorded in the Ravalli County Clerk and 
Recorder's Office at Book 1-48, page 117, which: a) prohibite6 

subdividing the parcel into more than three lots, b) 

restricted use of the property to agricultural purposes and 

c) provided that no more than two houses with attendant 

outhuildinqs could be built on the parcel. This covenant was 

to remain in force for as long as the Leichts continued to 

hold any interest in their remaining property, which bordered 

the parcel. 

Soon after this initial transaction took place, the 

Tices subdivided the parcel into three lots. Tices then sold 

two of the lots to the Boyers under a contract for deed. The 

description of the property in the contract executed by the 

Tices and the Royers refers to it as being part of Orchard 

View Estates, and subject to restrictions "as contained in 

Book 148 Deeds, page 117." However, at the end of the 

contract, in a paragraph entitled "Miscellaneous", the 

contract states that the restrictions will be lifted when the 

Leichts no longer own any interest in the property that is 

the subject of the contract. In other words, the 

restrictions will be lifted when the Tices pay off their 

obligation as pu-rchasers of the parcel from the Leichts. 

Boyers then listed the lots they had just purchased as 

being for sale. The Mitchells saw an advertisement for the 

lots in a newspaper, contacted the Boyers and set up an 

appointment to view the property. At this appointment, the 

Mitchells indicated their interest in the property, and asked 

about terms. Lyle Boyer told the Mitchells that basically 

they would pay a sum to the Boyers and then assume Boyers' 

interest in the contract for deed with the Tices. At the end 

of ten years, the Mitchells would make a balloon payment. 

The Mitchells related to Lyle Boyer their plan to further 

subdivide the lots, if necessary, in order to raise money to 

make the balloon payment. He told them of the building 
restrictions, and indicated that the restrictions would be 

lifted as soon as the Tices paid off their obligation to the 

Leichts, which he estimated would happen in the near future. 

Based on these discussions, the Mitchells entered into an 

agreement to purchase the Boyers' interest. 

For reasons that are not relevant here, the Leichts 

became concerned about how the land they had sold was being 

developed. In early 1986, they contacted an attorney, who 

sent a letter to lot owners, including the Mitchells, 

describing the restrictions and noting that they would not be 

lifted while the Leichts remained on their adjacent property. 

IJpon receiving the letter, the Mitchel-1s discussed the matter 

with the attorney who wrote the letter, the attorney who had 

closed their purchase of Boyers' interest, and their own 

attornes. They contacted the Boyers, but apparently were 

unsuccessful in attempting to work things out. Mitchell's 

attorney offered to rescind the contract, but the Boyers were 

unwilling to do so. 

The Mitchells filed. a complaint against the Boyers on 

April 23, 1987. According to the complaint, Lvle Boyer had 

misrepresented the duration of the restrictions, and the 

MitchePls agreed to purchase the property in reliance on 

those misrepresentations. Count One of the complaint alleged 

that Lyle Boyer ' s actions amounted to negligent 

misrepresentation, Count Two alleged actual or constructive 

fraud, and Count Three alleged mutual. mistake. All three 

counts sought basically the same measure of damages: recision 

of the contract, return of moneys paid out by the Mitchells 

for the property, and their costs and attorney's fees 

incurred in the action. 

The case was tried to the District Court, sitting 

without a jury. On Ju1.y 3.8, 1.980, the court issued its 

Findinqs of Fact, Conclusions of Law, and Judgment. The 
court held in favor of the Mitchells on Count One. The court 

found that Royer's misrepresentations had been made 

innocently, hut were negligent in that as a real estate 

agent, he should have known they were false. This appeal. 

followed. 

This case is in equity. As a result, the scope of our 

review is set by statute, and is very broad. Under S 

3-2-204, MCA, this Court reviews all questions of fact and 

law in equity cases and makes its own determination based on 

that review. In this case, the District Court held Boyers 

liable for Lyle Boyer's negligent misrepresentations. On 

appeal, Boyers assign error to this ruling. Their first 

argument asserts that the Mitchells' reliance on those 

misrepresentations was in itself negligence, which precluded 

the court's award of recision. Our review of the case shows 

that we need not address Boyers' arguments. In fact, Royers' 

first argument points to a resolution to this case that 

present itself prominently in the record. Irrespective of 

any negligence, this is a case of mutual mistake. 

A mutual mistake occurs when, at the time the contract 

is made, the parties share a common misconception about a 

vital fact upon which they based their bargain. Carey v. 

Wallner (Mont. 1986), 725 P.2d 557, 43 St.Rep. 1706. Such a 

mistake is a proper ground for recision. Section 28-2-1711, 

MCA; Wallner, 725 P. 2d at 561. It was very important to the 

Mitchell's when they considered buying these lots from the 

Royers that they have the option to subdivide the lots in 

order to make the scheduled balloon payment. According to 

Boyers' contract with the Tices, the restrictions on 

subdividing and building would be removed once the Tices 

finished paying the Leichts for the parcel out of which the 

Boyers' lots were carved. Lyle Boyer related this to the 

Mitchells. 
Lyle Royer testified at trial that his representations 

to the Mitchells honestly reflected his impression of the 

restrictions. He had not been privy to the negotiations that 

resulted originally in the restrictions being placed in the 

deeds, and had never heen informed as to their content beyond 

the language found in the contract between the Royers and the 

Tices. He further testified that he did not discover the 

truth about the restrictions until 1986, when he read the 

letter written by the Leichts' attorney. The Mitchells 

testified that because Lyle Boyer was a real estate agent, 

they assumed that his representations were accurate and 

truthful. It is therefore apparent that the Royers and the 

Mi-tchells were both mistaken at the time the contract was 

made; they were laboring under a common misconception about 

when the restrictions wou.ld be removed. Recision was 

therefore proper. 

We affirm the decision of the District Court. 

--- 

Chief Justice 

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