No. 14931. 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

FIRST TRUST COMPANY OF MONTANA, 

Personal Representative of the 

Estate of Jack W.Sisson, Decedent, 

Plaintiff and Appellant, 

VS. 

LYLE McKENNA, 

Defendant and Respondent and 

Cross-Appellant. 

Appeal from: District Court of the Tenth Judicial District, 

Honorable LeRoy L. McKinnon, Judge presiding. 

In and For the County of Judith Basin 

Counsel of Record: 

For Appellant: 

Swanberg, Koby, Swanberg and Matteucci, Great Falls, 

Montana 

F a Swanberg argued, Great Falls, Montana 

ORHAM E 

For Respondent : 

Robert J. Emrnons argued, Great Falls, Montana 

Leonard McKinney, Lewistown, Montana 

Submitted: March 28, 1980 

Decided: JUN 17 1980 

Filed: $mi! 7 
Mr. Chief Justice Frank I. Haswell delivered the Opinion of 

the Court. 

In an action by the sellers of a farm to recover a real 

estate commission and treble damages, the District Court 

granted summary judgment in favor of the real estate broker 

and dismissed the broker's counterclaim for malicious prosecution. Both parties appeal from the respective judgments 

against them. 

In 1970 Jack Sisson and his brother Mark owned a ranch 

in Judith Basin County, Montana. The ranch consisted of 

about 8,400 acres of deeded land and about 6,320 acres of 

leased land together with livestock, machinery and improvements. The defendant was at all times pertinent to this 

case a licensed real estate broker. In October 1969, the 

Sissons executed a real estate broker's contract authorizing 

the defendant to sell the Sissons' real property for 

$800,000. The defendant was unable to complete a sale and 

the contract expired on May 1, 1970. The Sissons thereafter 

had the ranch listed with two or more other real estate 

brokers, but no sale was consummated at that time. 

On about December 6, 1972, the Sissons again sought 

defendant's services in selling the ranch. Defendant sought 

another broker's contract but was unsuccessful. He did, 

however, begin looking for a purchaser and determined that 

an area rancher, Bill Skelton, was interested in purchasing 

the real property only for $700,000. Without informing the 

Sissons of Skelton's interest in the land, the defendant 

attempted to persuade the Sissons to separate the livestock 

and machinery from the real estate for separate sale. The 

Sissons declined because they wanted a single sale. 

On or about December 14, Floyd Hicks, a cattle buyer, 

expressed an interest to the defendant in purchasing the 
cattle and machinery. Bill Skelton was apparently still 

interested in buying just the land at this time for $700,000. 

Defendant then approached the Sissons and apparently left 

them with the impression that Hicks wanted to buy the entire 

ranching operation for $900,000. The reason defendant did 

not tell the Sissons that Hicks was only interested in the 

cattle and machinery and that Skelton was to put up the 

money for the land was given in the following testimony of 

defendant broker: 

"Q. Did they know who the buyer was? A. No. 

"Q. Was there a reason why you did not tell 

them who the buyer was? A. Yes. 

"Q. What was the reason? A. Well, Jack 

Sisson had fights with all his neighbors. When 

I had the place sold to Sanmeyer, he refused to 

go because he didn't like Sanmeyer. I knew the 

same thing would happen if I told him who the 

buyer was, so I didn't tell him the buyer. The 

buyer was a very good buyer, substantial money, 

good backing, but for personal reasons, Jack 

wouldn't have sold, probably--that is my surmise." 

On December 18, the Sissons told defendant that they 

would sell to Hicks for $900,000. Defendant and Hicks went 

to the Sisson ranch, and a purchase agreement was drawn up 

but not signed. Defendant and Hicks then went to Skelton's 

ranch and discovered that Bill Skelton was beginning to 

change his mind about buying the entire Sisson ranch. The 

Sissons, in the meantime, discussed the proposed sale with 

their accountant, who suggested that the sale price be 

allocated $675,000 for the land and $225,000 for the personal property. The Sissons contacted the defendant and a 

new purchase agreement was prepared on December 20 pursuant 

to the accountant's advice. Hicks was not present at this 

meeting, but he had given defendant $20,000 earnest money 

for a deposit on the property. The Sissons signed the 

agreement at this time. 
On December 21 defendant again visited the Sissons. By 

this time defendant knew that Bill Skelton was no longer 

interested in purchasing all of the Sisson land. During the 

visit, the defendant informed the Sissons that Hicks could 

not handle the deal alone and that defendant would have to 

go in with Hicks. Defendant also informed the Sissons, 

during this visit, that he wanted five separate deeds so 

that the ranch could be resold in parcels. On December 29, 

the Sissons, Hicks, and defendant met; the buy and sell 

contract was signed; and the earnest money was paid. 

The District Court found that throughout the time 

defendant was attempting to sell the ranch, he was in contact with several neighbors and that some of these neighbors 

were interested in buying parcels of the ranch. The District Court also found that defendant had not made any deals 

to resell the parcels until after the closing date on December 29, 1972. 

Within eleven days from the date when the defendant and 

Hicks bought the ranch, the land was resold in parcels for 

$800,000. The cattle, hay and equipment were eventually 

resold for $279,657.39. This resulted in a $179,657.39 

profit for defendant and Hicks. In addition, defendant 

earned a commission on the sale of $45,000. 

The amended complaint alleges that defendant breached 

his fiduciary duty by failing to disclose to the Sissons the 

fact that he had been conducting negotiations to resell the 

parcels and that defendant had violated certain statutes 

governing the conduct of real estate brokers. ~efendant's 

answer, among other things, included a counterclaim for 

malicious prosecution. During the pendency of the actions, 

Jack Sisson died and the First Trust Company of Montana, the 
personal representative of his estate, was substituted as 

plaintiff in the action. 

Both parties moved for summary judgment. The District 

Court issued findings of fact, conclusions of law, and 

judgment denying plaintiff a summary judgment and granting 

defendant a summary judgment. Additionally, the District 

Court granted plaintiff's motion for dismissal of defendant's counterclaim. Plaintiff appeals from the summary 

judgment against it, and defendant cross-appeals from dismissal of his counterclaim. 

The plaintiff has listed several issues which may be 

summarized as follows: 

1. Did the District Court err in granting summary 

judgment in favor of the defendant? 

2. Did the District Court err in dismissing the malicious prosecution counterclaim for failing to state a cause 

of action? 

Rule 56(c), M.R.Civ.P., provides that summary judgment 

shall be rendered if there is no genuine issue as to any 

material fact and the moving party is entitled to judgment 

as a matter of law. In the present case the District Court 

granted defendant's motion for summary judgment because the 

court concluded there was no issue of material fact as to 

the breach of any duty by the defendant. In this connection, the District Court also concluded that defendant had 

acted in good faith in his dealings with the Sissons. 

Obviously, the District Court felt that the duty a broker 

owes to his principal is a duty of good faith and that 

defendant did not breach his duty. 

In the recent case of Lyle v. Moore (1979), - Mont . 

, 599 P.2d 336, 36 St.Rep. 1307, this Court had occasion 
to consider the duty of disclosure which a broker owed to 

his principal. That case involved a clause in a broker's 

agreement which said, among other things, that the broker 

was entitled to a commission if the defendants withdrew the 

broker's authority to sell before a certain date. The 

defendants withdrew the authority before that date and the 

plaintiff sued for his commission. The defendants claimed 

they did not understand the terms of the contract. The 

District Court held that this did not excuse the defendants 

and gave judgment for plaintiff.. This Court reversed, 

finding that the plaintiff had failed in his duty to explain 

the provision granting the broker his commission if the 

defendants withdrew his authority prior to a specified date. 

This Court said, " [i]n Carnell v. Watson (1978), [176 Mont. 

3441 578 P.2d 308, 312, 35 St-Rep. 550, 555, we recognized a 

fiduciary relationship between a real estate broker and his 

client. This fiduciary relationship between a broker and 

his client has been found to encompass a 'duty of full 

disclosure' by a number of courts." 599 P.2d at 337. We 

went on to say: 

". . . there are times when the law imposes a 

duty upon a party to speak rather than remain 

silent and thereby to disclose information to 

place the person with whom he is dealing on an 

equal footing with him. The failure to speak in 

such a case amounts to the suppression of a fact 

which should have been disclosed and constitutes 

fraud." 599 P.2d at 339. (Citations omitted.) 

A broker has a duty to act in good faith toward his 

client. Embodied within this duty is a requirement to make 

full disclosure. This duty to disclose all pertinent facts 

becomes particularly important where the broker is himself 

buying the property. See Crowley v. Rorvig (1921), 61 Mont. 
This principle is set forth in Comment A to Restatement 

of Law, Agency 2d, Section 390, in the following language: 

". . . Before dealing with the principal on his 

own account, however, an agent has a duty, not 

only to make no misstatements of fact, but also 

to disclose to the principal all relevant facts 

fully and completely . . ." 

12 Arn.Jur.2d Brokers S91 at 844 states: 

"The general rule is that a broker can neither 

purchase from, nor sell to, his principal unless 

the latter expressly assents thereto or, with full 

knowledge of all the facts and circumstances, 

acquiesces in such transaction. Moreover, even 

though the principal gives his assent to a purchase or sale by the broker, the latter's actions 

throughout must be characterized by the utmost 

good faith, In the event of any litigation between him and his employer, the burden is upon 

him to prove both the permission and the exemplary manner in which he availed himself of it. 

The reason is that it is inconsistent for one to 

a c t a s a principal in his own behalf while is 

duty bound to act as the agent of another, for 

in the latter capacity he is bound to exercise 

his best skill and labor and a high degree of 

fidelity and good faith to secure for his principal the best bargain possible, even though 

his own conflicting interests at the same time 

impel him to do just the opposite and thereby 

gain the most advantageous terms for himself." 

In the present case, defendant orally agreed to buy the 

land on December 21, 1972. On December 29 the papers were 

signed and a check was given to the Sissons. Defendant 

testified that on December 22 he offered the entire ranch to 

Henry Wortheimer for $950,000. Wortheimer later declined 

the offer. Defendant did not inform the Sissons that this 

offer was outstanding, He testified: 

"Q. Why did you not tell them? A. Well, we 

made a deal to buy on the 20th, as far as I 

was concerned, and it was sold on the 20th. 

It was now my obligation to try to pick up 

the pieces. I was in a position I had to deal 

for myself." 

Defendant also testified that he had contacted Ray Hill 

on December 23 and Hill had indicated an interest in purchasing a parcel of the ranch; that he had contacted Bill 
Skelton on December 20th and Skelton indicated an interest 

in purchasing a portion of the ranch; that he contacted 

Eloise Reed on about December 27 and she was not interested. 

On December 27, Bill Skelton gave defendant a purchase 

agreement for a portion of the ranch. Defendant did not 

inform the Sissons of these facts. 

In addition, defendant told the Sissons that Hicks was 

going to buy the ranch for $900,000 when in truth Hicks 

merely wanted to buy the cattle, hay, and machinery for 

$200,000 and the land was to be sold for $700,000 to Bill 

Skelton. Defendant did not tell Jack Sisson that Skelton 

was a potential buyer because he was afraid that Jack Sisson 

would not agree to the sale if he knew that Skelton was 

involved. 

Defendant argues that he had no duty to disclose after 

December 21 because that was the day when the agency relationship came to an end. He argues that the agency relationship ends when a broker earns the commission and the 

commission is earned when the broker produces a ready, 

willing and able buyer for the property. Therefore, according to defendant, he no longer had a duty to disclose after 

he produced himself and Hicks as ready, willing and able 

buyers on December 21. 

Defendant is correct in one respect. Montana cases 

have repeatedly stated that a broker is entitled to his 

commission when he produces a ready, willing, and able 

buyer. In Diehl & Associates, Inc. v. Houtchens (1977). 173 

Mont. 372, 567 P.2d 930, this Court said: 

"It is a generally accepted law that a real 

estate broker is entitled to commissions when 

he has, in pursuance of his employment and 

within the time specified in the contract of 

employment, procured a purchaser able, ready 
and willing to purchase the seller's property 

on the terms and conditions specified in the 

contract of employment. Roscow v. Bara, 114 

Mont. 246, 135 P.2d 364; 12 Am.Jur.2d 921, 

Brokers S182. When the broker procures a buyer 

who makes a counteroffer or agrees to terms at 

variance to the terms specified in the employment contract, the seller has the option of 

accepting or rejecting the counteroffer. If 

the seller accepts the counteroffer of the 

procured buyer, the seller is legally obligated to pay commissions to the broker, either 

under the terms of the contract of employment 

or the mutually agreed terms of a contract for 

sale. 

"The broker's ability to recover commissions 

is premised on the broker's ability to accomplish what he undertook to do in his contract 

of employment . . . 

"We note the distinction between a brokerage 

contract which requires a broker to merely 

find a purchaser and a brokerage contract 

which requires a broker to sell, make or effect a sale. In the first case the broker 

earns his commission when he procures a buyer 

able, ready and willing to purchase on the 

seller's terms. A broker employed to sell or 

effect a sale does not earn his commission 

until he completes the sale. Completion of 

the sale, where real property is involved, 

amounts to payment of the purchase price and 

conveyance of title. O'Neill v. Wall, 103 

Mont. 388, 62 P.2d 672." 567 P.2d at 933-35. 

See also Hollinger v. McMichael (1978), - Mont. , 580 

P.2d 927, 35 St.Rep. 856, and Apple v. Henry (1923), 66 

Mont. 244, 213 P. 444. 

It must be noted, however, that in each of the abovecited cases, the issue was whether the broker was entitled 

to a commission, not whether the broker had a duty to disclose relevant facts to the principal, and in none of the 

cases was the broker the prospective buyer. A close reading 

of these cases reveals that the rule of law set forth therein 

is to protect a broker who has produced an eligible buyer. 

These cases do not stand for the proposition that a broker 

is released from a duty to disclose as soon as he proposes 

to buy the land for himself. 
Here defendant was not legally bound to buy the property 

on December 21, 1972, the date that defendant and Hicks 

orally offered to buy the property for $900,000 and the 

 iss sons orally accepted the offer. Defendant was not legally 

bound to buy the land until December 29 when the written 

contracts were signed. He could have backed out at any 

time. It was during this time that the defendant made 

several contacts concerning the property and did not tell 

the Sissons about the contacts. 

Research has not revealed a Montana case which is 

directly on point. We note, however, the case of Irby v. 

Lee (0kla.App. 1973), 512 P.2d 253, which presented a similar 

fact situation. In Irby the defendant was a broker who had 

been trying to sell the plaintiff's land. On April 14, 

1969, the broker told the plaintiff that he, the broker, 

would buy a portion of the land. On April 30, 1969, the 

broker entered into a contract with a third party to sell 

the portion of land that the broker had bought. This was 

not disclosed to the plaintiff seller. In May the plaintiff 

received money for the land and conveyed the land to the 

broker. The court was presented with the issue of whether a 

fiduciary relationship still existed on April 30, the day 

the broker contracted to sell to a third party. The court 

held that the fiduciary relationship did not expire until 

May, when the broker paid the plaintiff for the property. 

The reasoning used by the court was that the broker was not 

legally bound to buy the property until May and he was, 

therefore, still under a duty to disclose on ~pril 30. 

We follow the same rationale and hold that defendant 

had a duty of full disclosure until he was legally bound to 

buy the property on December 29, 1972. his holding corn- 
ports with the high standards applicable to brokers buying 

property from a principal. However, this does not automatically entitle plaintiff to summary judgment. The case 

presents genuine issues of material fact as different inferences can be drawn from the facts as to whether the defendant breached his duty. Consequently, the summary judgment 

in defendant's favor is vacated and the case is remanded to 

the District Court for trial. 

Plaintiff has alleged that the District Court erred in 

not finding that defendant violated certain sections of 

Montana's Real Estate License Act. At the time this action 

arose, the pertinent statute was found at section 66-1937, 

R.C.M. 1947, and has since been amended. Those amendments, 

however, do not change our disposition of the case. In 

particular plaintiff cites section 37-51-321, MCA, which 

provides in pertinent part: 

"Revocation or suspension - of license--initiation 

- of proceedin~--grounds. The board may on its 

own motion and shall on the sworn complaint in 

writing of a person investigate the actions of 

a real estate broker or a real estate salesman, 

subject to 37-1-101 and 37-1-102, and may revoke or suspend a license issued under this 

chapter when the broker or salesman has been 

found guilty by a majority of the board of any 

of the following practices: 

"(3) pursuing a continued and flagrant course 

of misrepresentation or making false promises 

through agents or salesmen or any medium of 

advertising or otherwise; 

"(9) offering real property for sale or lease 

without the knowledge and consent of the owner 

or his authorized agent or on terms other than 

those authorized by the owner or his authorized 

agent; 

"(19) demonstrating his unworthiness or incompetency to act as a broker or salesman . . .I' 
The District Court made no findings concerning these 

statutory provisions. Because there is conflicting evidence 

which presents a genuine issue of material fact, this issue 

can be determined at the trial. 

Defendant has appealed from dismissal of his counterclaim. The counterclaim is based on an allegation of malicious prosecution. The trial court dismissed this counterclaim for failing to state a cause of action. 

In actions for malicious prosecution the party bringing 

the action must prove that there has been a termination of 

proceedings. This rule has been stated as follows: 

". . . On the other hand, an action for malicious prosecution may not be asserted by way of 

cross-complaint or counterclaim in the original 

proceeding, prior to its termination, since - it 

- is essential -- that the original proceeding 

shall -- have been previously terminated - in favor 

of -- the party bringing the malicious prosecution -- - action. Hence a counterclaim purportinq 

to set forth the cause of action in-maiicious 

prosecution is properly dismissed as premature . . ." (Emphasis added.) 52 Arn.Jur.2d Malicious Prosecution S14 at 195. 

In Bollinger v. Jarrett (1965), 146 Mont. 355, 406 P.2d 

834, this Court said: 

"It is also contended that it was error for the 

court to render summary judgment against appellant-buyer's counterclaim. The basis of the 

counterclaim was that the sellers' action 

wrongfully injured the credit standing of the 

buyers. The only possible grounds for such a 

claim are libel and malicious prosecution, 

neither of which can be sustained here. There 

is no libel because any publication in a judicial proceeding is privileged under R.C.M., 

1947, 64-208. And malicious prosecution founded 

on a civil action is not the proper subject of -- --- 

a counterclaim since it requires proof -- of te& 

mination -- of the f~rrne~~roceedin~~avor of 

the defendant therein. Baker v. ~i=an, 138 

Cal.App.2d 510, 292 P.2d 595; 54 C.J.S. Malicious Prosecution §54, P. 1021." (Emphasis added.) 

406 P.2d at 837. 

For this reason the dismissal of defendant's counterclaim was proper. 
Affirmed in part and reversed in part. The summary 

judgment in defendant's favor is vacated and the cause 

remanded to the District Court for trial. 

Chief Justice 

We concu 3' 

Justices 

Mr. Justice John C. Sheehy: 

I dissent. 

Justice