IN THE SUPREME COURT OF THE STATE OF MONTANA 

ERNIE RYCKMAN and ERNIE RYCKMAN 

SALES LTD., 

Plaintiff and Respondent, 

VS. 

WILDWOOD, INC., 

Defendant and Appellant. 

Appeal from: District Court of the Eleventh Judicial District, 

In and for the County of Flathead 

Honorable James M. Salansky, Judge presiding. 

Counsel of Record: 

For Appellant: 

Murphy, Robinson, Heckathorn and Phillips, Kalispell, 

Montana 

I. James Heckathorn argued, Kalispell, Montana 

For Respondent: 

Hash, Jellison, O'Brien and Bartlett, Kalispell, Montana 

James Bartlett argued, Kalispell, Montana 

Submitted: January 14, 1982 

Decided: February 25, 1982 

Filed: f~li s o dB2 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion 

of the Court. 

~efendant appeals a judgment of the Eleventh Judicial 

District Court, Flathead County, entered in favor of plaintiffs for the sum of $38,930.86. We reverse and remand for 

a new trial. 

Plaintiffs instituted this action against defendant to 

recover damages for breach of an agreement by defendant to 

pay plaintiffs for services performed in connection with 

real estate sales. In addition to breach of contract, 

plaintiffs included a claim for fraud and asked for an 

accounting. Defendant admitted that plaintiffs were employed to perform certain services in connection with the sale 

of defendant's condominiums, but alleged that plaintiffs had 

been paid in full. Defendant further alleged that plaintiffs' 

claim was barred by the statute of frauds, section 28-2-903, 

MCA, and alleged that plaintiffs did not have standing to 

maintain an action for a broker's commission pursuant to 

section 37-51-401, MCA. 

Keith Gustin, acting as president of defendant, first 

met plaintiff, Ernest Ryckman, in November of 1975. Gustin 

and Ryckman met at the corporate offices of defendant in 

Whitefish, Montana. Ryckman advised Gustin that he was a 

real estate broker in Calgary, Alberta, Canada. Gustin 

agreed that defendant would sell a condominium unit to 

Ryckman and allow Ryckman a 6% discount, the same being the 

equivalent to a real estate commission. Ryckman inquired 

about an arrangement whereby he could be paid a commission 

for selling additional units to his Canadian friends. 

Gustin advised Ryckman that defendant intended to construct 
16 additional condominium units on adjoining property. 

Questions were raised regarding Ryckman's ability to broker 

condominium units in Canada and it was agreed that Ryckman, 

upon his return to Alberta, would discover the cost of 

registration in Canada. Subsequently, it was determined 

that it would cost approximately $25,000 to register for 

purposes of brokering the condominium units in Alberta. 

Gustin decided that this was an excessive cost. Ryckman 

testified that Gustin thereupon agreed to pay Ryckman a 6% 

fee "against the purchase price of my own unit for any 

prospective purchasers supplied by me who did in fact buy 

the unit." Ryckman testified that Gustin assured him that 

this was legal under Montana law. The record does not 

indicate that Gustin agreed to pay a 6% real estate commission 

-- in cash. 

There is support in the record to show that plaintiffs 

engaged in promotional activities which, either directly or 

indirectly, resulted in the sale of 14 condominium units. 

Defendant contends that some of the sales did not result 

from the plaintiffs' efforts. However, the trial court 

found that all sales resulted from efforts by the plaintiffs 

and we are bound since there is "substantial credible evidence" 

in the record to support the finding. M.R.Civ.P., Rule 52. 

On June 12, 1977, Ryckman submitted a statement to 

Gustin setting forth the amount of claimed commissions owed 

by defendant to plaintiff. Thereafter, Gustin advised 

Ryckman that he could not pay in cash and that he was willing to negotiate a settlement of the claim by offering to 

transfer "raw land" to the plaintiffs. Ultimately, negotiations terminated and this action was commenced. 
The trial court held that the plaintiffs had standing 

to maintain the action, and that defendant, acting through 

Gustin, had committed a fraud upon the plaintiffs. Plaintiffs were awarded the full amount of damages claimed. 

Dispositive issues on appeal are: 

(1) Can the plaintiffs maintain this action for a 6% 

real estate commission or is such a claim barred by section 

37-51-401, MCA? 

(2) Is there "substantial credible evidence" of fraud 

which would support the trial court's finding that a fraud 

had been committed? 

(3) Is the plaintiffs' claim barred by the statute of 

frauds, section 28-2-903, MCA? 

(4) Do plaintiffs have an action premised upon constructive 

fraud? 

PLAINTIFFS' STANDING 

Plaintiffs' activities included (1) developing prospects 

for the purchase of defendant's condominium units, (2) 

sending those persons to Whitefish, Montana, and (3) using 

plaintiffs' condominium unit for the purposes of entertaining prospects and showcasing defendant's product. There is 

evidence in the record that plaintiffs were to be paid a 6% 

commission for performing these services. If no sales were 

made, plaintiffs were not to be paid. 

Section 37-51-401, MCA, provides: 

"Any person engaged in the business of or acting in the capacity of a real estate broker 

or real estate salesman within this state shall 

not be permitted to bring or maintain any action 

in the courts for the collection of compensation 

for the sale or lease or otherwise disposing of 

real estate without first alleging and proving 

that such person was a duly licensed real estate 

broker or real estate salesman or authorized to 

act as a broker under the provisions of this 

chapter at the time the alleged cause of action 

or claim arose." 
We must define "real estate broker" and determine the 

applicability of section 37-51-401, MCA. 

The term broker is defined in section 37-51-102(2), 

MCA, wherein it is said: 

"'broker' includes an individual who for 

another or for a fee, commission, or other 

valuable consideration or who with the intent or expectation of receiving the same 

negotiates or attempts to negotiate the 

listing, sale, purchase, rental, exchange, 

or lease of real estate or of the improvements thereon or collects rents or attempts 

to collect rents or advertises or holds himself out as engaged in any of the foregoing 

activities. The term 'broker' also includes 

an individual employed by or on behalf of 

the owner or lessor of real estate to conduct 

the sale, leasing, subleasing, or other disposition thereof at a salary or for a fee, 

commission, or any other consideration. The 

term 'broker' also includes an individual 

who engages in the business of charging an 

advance fee or contracting for collection of 

a fee in connection with a contract by which 

he undertakes primarily to promote the sale, 

lease, or other disposition of real estate 

in this state through its listing in a publication issued primarily for this purpose 

or for referral of information concerning 

real estate to brokers, or both, and any 

person who aids, attempts, or offers to aid, 

for a fee, any person in locating or obtaining any real estate for purchase or lease." 

We hold that the activities performed by Ryckman fall 

within the language "attempts to negotiate the listing, 

sale, purchase, rental, exchange, or lease of real estate or 

of the improvements thereon." The activities performed by 

Ryckman were typically those performed by a real estate 

broker in the promotion and sale of improved real estate. 

The clear intent of the statute is to govern such activities. 

Section 37-51-401, MCA, bars a cause of action by a 

real estate broker seeking compensation for services performed 

"within this state." Plaintiffs argue that all of their 

services were performed in Canada and were therefore not 
subject to regulation by the State of Montana. However, the 

record shows a different mode of operation. Plaintiffs 

purchased a condominium from defendants. This condominium 

was to be used in connection with the promotion and sale of 

those condominiums for which the plaintiffs here seek a 

commission. Plaintiffs generated business in the Calgary 

area and then used the Whitefish condominium for the purpose 

of hosting prospects. Whitefish activity was part of 

plaintiffs' sales promotion, although plaintiffs were not 

physically present in Whitefish during the time that such 

promotion was taking place. Nevertheless, promotion did 

occur in Montana which is subject to statutory regulation 

and for which plaintiffs cannot collect compensation without 

showing that they have a Montana broker's license. The 

trial court awarded a flat 6% fee; such fee would necessarily 

encompass activities performed in Montana. Therefore, the 

court erred. Since this case must be re-tried a discussion 

of damages is presented in the section of the opinion covering constructive fraud and its remedies. 

FRAUD ALLEGATION 

The trial court found defendant, acting through Keith 

Gustin, to be guilty of fraud. The court concluded: 

"Keith Gustin is the President of Wildwood, 

Inc., and is its duly authorized agent and 

the representations made by him are binding 

on Wildwood, Inc. Said agent made representations that were false, material, known to 

be false, with the intent that the representation should be acted upon by Ryckman, and 

that Ryckrnan was ignorant of the falsity of 

the statements, and relied on the truth of 

the statements, and he had a right to rely 

thereon, to his damages. Wildwood, Inc. is 

guilty of fraud and deceit." 

Plaintiffs argue that there is support in the record 

for this finding premised upon two things. First, plaintiffs 
argue that the evidence shows Gustin never intended to pay 

Ryckman a 6% commission, contrary to the representation made 

at the inception. Secondly, plaintiffs argue that Gustin 

misrepresented the state of Montana law by informing Ryckman 

that, under Montana law, the activity they proposed was 

legal. 

There is no evidence in this record from which a trier 

of fact could infer that Gustin, from the inception of the 

agreement, did not intend to pay Ryckman for services rendered. 

In fact, the evidence is all to the contrary. The evidence 

conclusively establishes that Gustin intended to pay compensation 

to Ryckman but that the dispute arose because: (1) the 

parties did not agree on the form of compensation, and (2) 

the parties could not agree on how many condominium sales 

were due to the efforts of plaintiffs. 

It is true that Gustin represented to the plaintiffs 

that, under Montana law, their plan for sales was legally 

permissible. Generally, fraud must be premised upon a 

misrepresentation of material fact, rather than law. However, 

there is an exception. As plaintiffs note, there is authority 

supporting fraud based upon a misrepresentation of "foreign 

law." See Restatement of Law of Torts, Second, Section 545; 

37 Am.Jur.2d, Fraud and Deceit, Section 80; Annotation at 24 

A.L.R.2d, Foreign Law - Misrepresentation, 1039. 

There is no evidence in the record from which a trier 

of fact could infer that Gustin was misstating the Montana 

law as he knew it at the time the representation was made. 

Gustin personally acknowledged that he owed some compensation 

to the plaintiffs. During the pendency of the litigation, 

counsel for defendant, raised section 37-51-401, MCA, pertaining 

to standing, and section 28-2-903, MCA, the statute of frauds, 
as defenses. There is no evidentiary support in the record 

for plaintiffs argument that Gustin knew of the state of law 

in Montana at the time the representations were made. In 

fact, we are here holding at least part of the agreement to 

be enforceable. The trial court's finding of fraud on 

Gustin's part is without support and must be set aside. 

STATUTE OF FRAUDS 

Defendant contends that section 28-2-903, MCA, prevents 

this action from being maintained because there was not an 

agreement in writing. That section provides in pertinent 

part as follows: 

"What contracts must be in writing. (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 or broker to purchase or sell 

real estate for compensation or a commission." 

We have held that the activities contemplated here were 

those of a broker and therefore the section is applicable. 

However, defendant's answer alleges the following: 

"Defendant admits that plaintiff Ernie 

Ryckman and defendant entered into an oral 

agreement by the terms of which plaintiff 

Ernie Ryckman would be credited with the 

finder's fee on certain transactions, which 

fee would be credited toward the purchase 

of plaintiff Ryckman's condominium, . . . 

"~ll sums due plaintiff under their oral 

agreement have been paid." 

In Hillstrom v. Gosnay (1980), Mont. , 614 

P.2d 466, 470, 37 St.Rep. 1087, 1092, this Court said: 

". . . Villano's admission of the agreement 

is important because in cases involving admitted contracts, we have construed the statute 

of frauds less technically, refusing to allow 
the statute to be used so as to defeat its 

purpose to prevent the commission of a fraud." 

(Citations omitted. ) 

Here, the statute of frauds is inapplicable because 

defendant admits the existence of the agreement. The only 

dispute is whether additional compensation is due under the 

agreement. 

CONSTRUCTIVE FRAUD 

Plaintiffs have plead fraud but have not specifically 

outlined a cause of action premised upon "constructive 

fraud." The issues surrounding constructive fraud were 

obliquely treated. The trial court made the following 

finding of fact: 

"14. The conduct, acts, correspondence, and 

memoranda submitted as evidence reflect that 

the parties entered into a contract for attaining the sale of the condominium units, and by 

reason thereof, the parties owe to each other 

a fiduciary relationship." 

Once a fiduciary relationship is established, a duty is 

owed which prevents one party to that relationship from 

gaining advantage over another. The gaining of advantage, 

in breach of such duty, constitutes constructive fraud. 

Section 28-2-406, MCA, provides in pertinent part as follows: 

"What constitutes constructive fraud. Constructive fraud consists in: 

"(1) Any breach of duty which, without an 

actually fraudulent intent, gains an advantage to the person in fault or anyone claiming under him by misleading another to his 

prejudice or to the prejudice of anyone claiming under him;" 

The facts here form the basis for a finding that Ryckman 

was employed to act as an agent for Defendant. The court has 

found, as noted above, that this arrangement resulted in a 

fiduciary relationship. We agree. 
The existence of a fiduciary relationship between 

plaintiffs and defendant would foreclose defendant from 

taking advantage of plaintiffs. There is evidence in the 

record that plaintiffs performed services in Canada which 

resulted in the sale of condominiums in Montana. Defendant 

admits that defendant agreed to compensate for such services. 

Although recovery cannot be had for those services performed 

in Montana because of statutory proscriptions hereinbefore 

noted, defendant, who cannot profit at plaintiffs' expense, 

remains liable to compensate for those services rendered in 

Canada. 

Upon remand, the trial court will hear evidence to 

determine whether there has been a breach of the fiduciary 

relationship previously found to exist. If such a breach is 

found, the trial court shall then determine the amount of 

damages which proximately flow from that breach. Such 

damages would include a reasonable compensation for plaintiffs' 

services rendered in Canada in furtherance of the agreement 

between the parties, but would exclude plaintiffs' services 

rendered in Montana. Because a 6% commission would anticipate 

and would include all brokerage services rendered, and since 

a portion of those services were rendered in Montana as 

previously indicated, the 6% figure should not be used to 

calculate damages proximately flowing from any breach of 

fiduciary relationship found. Defendant should, of course, 

receive credit for any amounts previously paid plaintiffs 

pursuant to their agreement. 

t'. LtOL 

This cause is remanded to the District Court- directions 

to proceed in conformity with this opinion. 
We Concur: