Title: COWAN v WESTLAND REALTY CO
Citation: N/A
Docket Number: 12409
State: Montana
Issuer: Montana Supreme Court
Date: July 16, 1973

No. 12409 I N THE SUPREME C O U R T O F THE STATE O F M O N T A N A 1973 N , 8?Qp$ IL . COWAN and GAY S . COWAN, Husband and Wife, P l a i n t i f f s and Respondents, W E S T L A N D REALTY C O M P A N Y ; ROBERT M U N S O N and D O U G L A S JOHNSON, Defendants and Appellants. Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l District, Honorable E. Gardner Brownlee, Judge presiding. Counsel of Record: For Appellants : Garlington, Lohn and Robinson, Missoula, Montana Robert E. Sheridan, Jr. argued, Missoula , Montaqa , ! For Respondents : Mulroney, Delaney and Dalby, Missoula, Montana Dexter L. Delaney argued, Missoula, Montana Submitted: June 19, 1973 Decided : JUL 1 6 1973 Filed : JUL 1 8 1 9 7 3 M r . Chief Justice Harrison delivered the Opinion of the Court. This i s an action brought by p l a i n t i f f s Neal D, and Gay S. Cowan, husband and wife, seeking rescission of a "Land Purchase Agreement" on the ground of misrepresentation. The d i s t r i c t court of the fourth j u d i c i a l d i s t r i c t , Missoula County, s i t t i n g without a jury, entered findings of f a c t , conclusions of law, and judgment i n favor of p l a i n t i f f s . Subsequently, the d i s t r i c t court entered an order amending the judgment which limited t h e judgment t o defendant Westland Realty, and dismissed the action a s t o the individual defendants, Robert Munson and Douglas Johnson. Defendant Westland Realty appeals from the judgment. The basis f o r t h i s appeal i s whether the evidence was s u f f i c i e n t t o warrant a finding of fraud based upon misrepresenta- t i o n , thereby e n t i t l i n g p l a i n t i f f s t o rescind the "Land Purchase Agreement 1'. Westland Realty i s a Montana corporation engaged i n the r e a l e s t a t e business i n Missoula, Montana. Munson, president of t h e corporation, and Johnson, a salesman employed by Westland, were both licensed a s r e a l e s t a t e brokers by the s t a t e of Montana. It was admitted t h a t both Munson and Johnson were agents of Westland when acting within the scope and course of t h e i r employ- ment. Munson did not d i r e c t l y deal with p l a i n t i f f s . I n June 1970, p l a i n t i f f s were desirous of acquiring a parcel of r e a l property on which t o build o r e s t a b l i s h a home. P l a i n t i f f s contacted Westland f o r information concerning a piece of property located i n the Six-Mile area near Missoula which they had seen l i s t e d f o r s a l e i n t h e newspaper and had a l s o observed a sign posted on the property, P l a i n t i f f s agreed t o m e e t Johnson a t the property t o go over the boundaries, kt t h i s meeting p l a i n t i f f Neal Cowan asked Johnson about the water s i t u a t i o n f o r he had heard, through rumors, t h a t water was d i f f i c u l t t o get i n the Six-Mile area, P l a i n t i f f Gay Cowan remained i n the c a r during t h i s meeting. She did not t a l k with Johnson, but she did p a r t i c i p a t e i n signing the necessary papers i n transacting the agreement, A t t r i a l , p l a i n t i f f Neal Cowan t e s t i f i e d t h a t Johnson t o l d him "There i s water a l l over. They a r e g e t t i n g shallow w e l l s up here." Johnson admitted having made the statement o r one q u i t e similar, but stated t h a t it was made with reference t o springs which apparently originated on adjoining Forest Service property. There is c o n f l i c t i n the testimony with respect t o the Forest Service land. P l a i n t i f f contended t h a t neither he nor Johnson walked i n t o the adjoining Forest Service property. However, Johnson contended he and p l a i n t i f f walked onto the Forest Service property and discussed the springs thereon. Johnson maintained t h a t he pointed out the springs t o p l a i n t i f f and discussed the p o s s i b i l i t y of f i l i n g a water r i g h t on them, i f one had not already been claimed, P l a i n t i f f a l s o claimed Johnson told him other people were g e t t i n g shallow wells i n the area; Johnson s t a t e d he was making reference t o a c i s t e r n type system of collecting ground and sur- face waters rather than a well. After viewing the property with Johnson, p l a i n t i f f s signed a "Receipt and Agreement t o S e l l and Purchase", dated June 15, 1970, On June 17, 1970, p l a i n t i f f s signed the "Land Purchase Agreementr' agreeing t o pay on a time payment basis, P l a i n t i f f s paid $350 a s i n i t i a l payment and agreed t o make monthly payments of $35 plus escrow fees i n the amount of $1.50 per month over the term of the contract. The purchase p r i c e was $3,100, U p t o the date of the t r i a l June 19, 1972, p l a i n t i f f s made a l l of the payments required by them t o be made under the terms of the agreement, After signing the agreement, p l a i n t i f f s made some improvements on the property. During July 1970, p l a i n t i f f s expended $379.30 f o r i n s t a l l a t i o n of a s e p t i c tank, O n September 7, 1971, they expended the sum of $1,600 i n digging a well. P l a i n t i f f Neal Cowan t e s t i f i e d h e had the digger stop a t 200 f e e t when no water was found because of financial reasons. A l e t t e r dated September 22, 1971, was sent t o defendants by attorney giving notice of rescission of the agree- ment and demanding reimbursement of a l l sums they had expended. Thereafter, t h i s action was brought alleging t h a t defendants had misrepresented the land and, i n e f f e c t , had fraudulently induced p l a i n t i f f s i n t o purchasing the property. In i t s findings of f a c t the d i s t r i c t court found: "That among other things Defendant Johnson, i n the scope of h i s employment with Westland Realty, repre- sented t o the P l a i n t i f f s that the l o t which the P l a i n t i f f s agreed t o purchase on a time-payment con- t r a c t , dated June 1 7 , 1970, had adequate water avail- able f o r purposes of domestic use and otherwise. That t h a t representation was one of the material in- ducements by which the P l a i n t i f f s were persuaded t o purchase said r e a l property from Defendant Westland Realty. "That based on the representations of the Defendants t h a t said land which P l a i n t i f f s agreed t o purchase had adequate water available f o r domestic and other purposes, P i a i n t i f f s attempted t o d r i l l a water well, i n s t a l l e d a septic tank, drain f i e l d s and other sewage f a c i l i t i e s . That a f t e r the due and d i l i g e n t expenditure of e f f o r t i n attempting t o locate water f o r said purpose, the P l a i n t i f f s discovered t h a t i t was not possibl-e t o obtain water o r a water source, That a t the time the p a r t i e s were negotiating said s a l e and purchase, the Defendants knew or should have known t h a t it was not possible t o obtain water o r a water source on said property and, therefore, the representations t o the P l a i n t i f f s i n inducing them t o purchase said property were false. I f The d i s t r i c t court concluded, a s a matter of law, t h a t by reason o f the misrepresentation by defendants, p l a i n t i f f s were e n t i t l e d t o a decree allowing them t o rescind the agreement and t o recover a l l sums of money which they expended i n connection with the purchase of the property and t h e i r attempt t o locate water and t h e i n s t a l l a t i o n of f a c i l i t i e s related thereto. Judg- ment was entered accordingly, Defendants Munson and Johnson having been dismissed, defendant Westland Realty appeals. A s heretofore s t a t e d t h e sole issue on appeal i s : Was the evidence presented s u f f i c i e n t t o warrant a finding of fraud based upon misrepresentation? Lhis Court hds s t a t e d many times t h a t i t s funcciun on appeal is to determine whether there is substantial evidence t o support t h e findings of the d i s t r i c t court. This Court w i l l not reverse the findings of the t r i a l court unless there i s a c l e a r preponder- ance of the evidence against such findings. Spencer v. Robertson, 151 Mont. 507, 511, 445 P.2d 48; Smith v, Krutar, 153 Mont. 325, 3 3 3 , 457 P.2d 459. In Lee v, ~tockmen's Nat, Bank, 63 Mont. 262, 284, 207 P, 623? t h i s Court s e t down the elements which the p l a i n t i f f must prove t o make out a prima f a c i e case of fraud: (1) A representation; (2) i t s f a l s i t y ; (3) i t s materiality; (4) the speaker's knowledge of i t s f a l s i t y , o r ignorance of i t s t r u t h ; (5) h i s i n t e n t t h a t it should be acted upon by the person and i n the manner reasonably contemplated; (6) the hearer's ignorance of i t s f a l s i t y ; (7) h i s reliance upon i t s t r u t h ; (8) h i s r i g h t t o r e l y thereon; and (9) h i s consequent and proximate injury. These elements must be established i n a l l cases, whether tried before a jury o r a judge. Young v. Handrow, 151 Mont. 310, 316, 443 P.2d 9. Actual fraud i s always a question of f a c t . Section 13-310, R.C.M, 1947, Fraud can never be presumed, but must be proved by a preponderance of the evidence. Good f a i t h w i l l always be presumed and mere suspicion of fraud i s not s u f f i c i e n t . Reilly v. Maw, 146 Msnt. 145, 153, 405 P,2d 440. The alleged fraud upon which the d i s t r i c t court made i t s finding t h a t p l a i n t i f f s were e n t i t l e d t o rescission was the repre- ~ n t a t i o n by Johnson t h a t there was an adequate supply of water f o r domestic use and otherwise. W e have searched the t r a n s c r i p t and f a i l t o find where Johnson made any such representation. In response t o d i r e c t questions by h i s own counsel, p l a i n t i f f Neal Cowan t e s t i f i e d : "Q. Now, what was it again t h a t he t o l d you with regard t o the a v a i l a b i l i t y of water? A. 'There i s water a l l over. They a r e getting shallow wells up here. 1 "Q. Now, did he say who was getting shallow wells in the area? A. No, . O r did he say where you could get a shallow well or how you could h i t - it or anything of t h a t kind? A. No, 11 On cross-examination, p l a i n t i f f Neal Cowan t e s t i f i e d : "Q. You s t a t e d i n your testimony t h a t M r . Johnson made the statement t h a t there was water a l l over up there, i s t h i s correct? A. Yes. "Q. Did, a t any time, M r . Johnson ever s p e c i f i c a l l y assure you o r t e l l you t h a t you could obtain water on that. p a r t i c u l a r piece of property by d r i l l i n g a well? A, I assumed a f t e r he said water a l l over the place. "Q, Did he ever assure you you could get water by means of a well? A. No, "Q, Did he ever assure you, a s a matter of f a c t , t h a t you could obtain water by any method on t h a t particular piece of land? A, No. "Q. There was no stream on the land, was there? A* No. "Q. That was perfectly plain and v i s i b l e ? A. Right. "Q. And i f he d i d n ' t assure you t h a t you could get water by any specific method e i t h e r well o r c i s t e r n or otherwise, how did you assume then you were t o get your water? A. B y d r i l l i n g a well, "Q. Is it not t r u e , M r . Cowan, t h a t you bought t h i s land assuming t h a t there would be water with the land? You were making the assumption t h a t you could obtain water i f you bought it? A, By d r i l l i n g a well, yes, "Q. 13ut by the same token, you were never assured by M r . Johnson t h a t there i s water available f o r a well? A, No* 1 1 The foregoing testimony indicates t h a t Johnson never made any representation with respect t o the p l a i n t i f f s being successful i n d r i l l i n g a well. The d i s t r i c t court, however, specifically found Johnson represented t o p l a i n t i f f s t h a t the l o t had adequate water avilable f o r purposes of domestic use and otherwise. The record reveals no such representation was ever made by Johnson. Further, an cross-examination p l a i n t i f f Neal Cowan t e s t i f i e d : "Q. H e didn't t e l l you s p e c i f i c a l l y , a s I already asked you, t h a t you could obtain water by means of a well? A , No. "Q. H e didn't mention any other specific method by which you were assured of obtaining water? A. No. "Q. So as a matter of fact, he never did say specifi.cally that there was adequate water available for home, domestic or other use, did he? That statement was not made? A. No. I I The first requirement to determine fraud is that of a representation, Since the testimony of plaintiff Neal Cowan clearly indicates that no representation as to the availability of water for domestic use or otherwise was made by Johnson, we hold the evidence was not sufficient to warrant a finding of fraud based upon misrepresentation. Since there was no representation, it is not necessary to discuss the other elements required to prove fraud. The judgment of t Associate ~usticLs,