Title: POULSEN v TREASURE STATE INDUSTRI
Citation: N/A
Docket Number: 79-068
State: Montana
Issuer: Montana Supreme Court
Date: February 18, 1981

NO. 79-68 I N T H E S U P R E M E COURT O F THE STATE O F M O N T A N A 1981 H A R O L D POULSEN, K A R L INGEBRIGHTON, D I C K O L S O N and EMERY M A T S K O , J R . , P l a i n t i f f and Respondent, TREASURE STATE INDUSTRIES, INC., A Montana Corporation; and KENNETH K. KNIGHT, Defendant and Appellant. Appeal from: District Court of t h e Eighth J u d i c i a l D i s t r i c t , I n and f o r t h e County of Cascade. Honorable Joel G. Roth, Judge presiding. Counsel of Record: For Appellant: Robert Emrnons argued, Great F a l l s , Montana Graybill, O s t r e m , Warner and C r o t t y , Great F a l l s , Montana Donald O s t r e m argued, Great F a l l s , Montana For Respondent : Cure and Borer, Great F a l l s , Montana Edward W. Borer argued, Great F a l l s , Montana Submitted: January 16, 1981 Decided : FEB 1 8 1981 Filed: I 8 1EISI Mr. J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court. P l a i n t i f f s brought t h i s a c t i o n i n t h e D i s t r i c t Court of t h e Eighth J u d i c i a l D i s t r i c t of t h e S t a t e of Montana, i n and f o r t h e County of Cascade, a g a i n s t T r e a s u r e S t a t e I n d u s t r i e s (TSI ) and its former p r e s i d e n t , Kenneth Knight, c l a i m i n g d e f e n d a n t s were g u i l t y of f r a u d i n t h e e x e c u t i o n of a c o n t r a c t f o r deed. Defendant TSI f i l e d a c r o s s - c l a i m a g a i n s t Knight, s e e k i n g indemnity, and Knight a l s o c r o s s - claimed a g a i n s t TSI. Following a t r i a l t o t h e c o u r t s i t t i n g w i t h o u t a j u r y , t h e t r i a l c o u r t e n t e r e d judgment i n f a v o r of p l a i n t i f f s i n t h e amount of $302,129.65, adjudged TSI e n t i t l e d t o indemnity from Knight, and denied K n i g h t ' s cross-claim. Defendants a p p e a l . On August 1 9 , 1974, d e f e n d a n t s s o l d t o p l a i n t i f f s a s h a l e and c o n c r e t e block p l a n t , l o c a t e d n o r t h of G r e a t F a l l s , Montana, along w i t h s u p p o r t i n g equipment. T h i s c a s e i n v o l v e s t h e n e g o t i a t i o n s , r e p r e s e n t a t i o n s and i n s p e c t i o n s which took p l a c e p r i o r t o t h e s a l e . I t is undisputed t h a t t h e s u b j e c t s h a l e and block p l a n t had been f o r s a l e a t l e a s t s i n c e e a r l y 1972. Robert Mager was a t a l l times d u r i n g t h e sequence of e v e n t s l e a d i n g up t o t h e e x e c u t i o n of t h e c o n t r a c t f o r deed t h e p l a n t manager of d e f e n d a n t TSI and was d e s i g n a t e d a s t h e promoter of t h e s a l e i n charge of showing p r o s p e c t i v e p u r c h a s e r s around t h e p l a n t . I n t h e e a r l y s p r i n g of 1974, p l a i n t i f f s I n g e b r i g t s o n , Olson and Poulsen became i n t e r e s t e d i n t h e p l a n t and decided t o i n v e s t i g a t e t h e purchase of t h e TSI p l a n t . During t h e c o u r s e of i n s p e c t i n g t h e s h a l e p l a n t , p l a i n - t i f f s n o t i c e d s c a f f o l d i n g around t h e s t a c k of t h e r o t a r y k i l n . I t is t h e r e p r e s e n t a t i o n s made r e g a r d i n g t h e s c a f - f o l d i n g which p r e s e n t t h e main bone of c o n t e n t i o n . P l a i n t i f f s t e s t i f i e d t h e y asked Mager t h e reason f o r t h e s c a f f o l d i n g and were advised t h a t t h e Board of Health had r e q u e s t e d t h e s t a c k be extended t o t a k e c a r e of a p o l l u t i o n problem. Mager was f u r t h e r asked i f t h i s solved t h e a i r p o l l u t i o n problems t o which he r e p l i e d t h a t it had. P l a i n t i f f s a l s o t e s t i f i e d t h a t approximately one month b e f o r e t h e d e a l became f i n a l , t h e y advised Knight t h a t Mager had t o l d them t h a t t h e s c a f f o l d i n g had been used t o extend t h e s t a c k t o a l l e v i a t e an a i r p o l l u t i o n problem. Knight was asked i f t h e p o l l u t i o n problem was c u r e d , and he confirmed t h a t it was. Mager and Knight t e s t i f i e d t h a t t h e s c a f f o l d i n g had been d i s c u s s e d b u t contend t h e y simply t o l d p l a i n t i f f s t h a t TSI had made a l t e r a t i o n s a s requested by t h e a i r p o l l u t i o n people and t h a t Mager s a i d he thought, and Knight concurred, t h a t it ( T S I ) might have s a t i s f i e d t h e Board of H e a l t h because it had n o t heard from t h e Board f o r some t i m e . N e g o t i a t i o n s between p l a i n t i f f s and TSI were concluded i n t h e summer of 1974 and on August 19, 1974, t h e p a r t i e s e n t e r e d i n t o a c o n t r a c t f o r deed f o r t h e purchase of t h e s h a l e and block p l a n t . I n September 1974, p l a i n t i f f I n g e b r i g t s o n was informed by t h e d i r e c t o r of t h e Cascade County A i r P o l l u t i o n C o n t r o l Program, Sam K a l a f a t , t h a t t h e e m i s s i o n s from t h e s t a c k of t h e r o t a r y k i l n were s u b s t a n t i a l l y i n e x c e s s of t h a t p e r m i t t e d by t h e a i r p o l l u t i o n program, t h a t n o t i c e of v i o l a t i o n would be forthcoming, and t h a t , i f c o r r e c t i v e a c t i o n was n o t t a k e n , t h e s h a l e p l a n t could n o t be o p e r a t e d . On March 5, 1975, an o f f i c i a l n o t i c e of v i o l a t i o n and o r d e r t o t a k e c o r r e c t i v e a c t i o n t o r e p a i r t h e a g g r e g a t e d r y e r s t a c k ( r o t a r y k i l n ) was r e c e i v e d . P l a i n t i f f s were s u c c e s s f u l i n o b t a i n i n g a v a r i a n c e t o o p e r a t e t h e p l a n t e n a b l i n g them t o i n v e s t i g a t e t h e problem and determine what c o r r e c t i v e a c t i o n might be taken. A s t u d y was undertaken which r e v e a l e d t h a t i n s t a l l a t i o n of a bag house a t a c o s t of approximately $60,000 would e l i m i n a t e t h e v i o l a t i o n . P l a i n t i f f s s u b s e q u e n t l y a p p l i e d f o r and r e c e i v e d a permit f o r c o n s t r u c t i o n of t h e bag house on J a n u a r y 9, 1976. Included i n t h e l e t t e r approving t h e permit was a r e q u e s t t o a l l e v i a t e p o l l u t i o n from f i v e o t h e r a r e a s of t h e p l a n t . Rather t h a n c o n s t r u c t t h e bag house and a l l e v i a t e o n l y p a r t of t h e problem, p l a i n t i f f s h i r e d engineer C h a r l e s Lush t o p r e p a r e a s t u d y of t h e p o s s i b l e s o l u t i o n s and c o s t s t o remedy t h e p o l l u t i o n . According t o L u s h ' s r e p o r t t h e c o s t of b r i n g i n g t h e p l a n t i n t o compliance w i t h r e g u l a t i o n s would be $279,871. P l a i n t i f f s f a i l e d t o o b t a i n an e x t e n s i o n on t h e i r v a r i a n c e , and t h e p l a n t stopped o p e r a t i o n sometime t h e r e a f t e r . T h i s s u i t followed. I n a d d i t i o n t o t h e a i r p o l l u t i o n problem, i n t h e s p r i n g of t h e year water from t h e p l a n t would d r a i n i n t o t h e a d j a c e n t land of Robert B a l l a r d , d e p o s i t i n g s h a l e p a r t i c l e s and a d v e r s e l y a f f e c t i n g p r o d u c t i v i t y . Under t h r e a t of a l a w s u i t , p l a i n t i f f s b u i l t a d i v e r s i o n dam a t a c o s t of $19,028 t o remedy t h e problem. P l a i n t i f f s a l l e g e t h a t d e f e n d a n t s ' f a i l u r e t o d i s c l o s e t h e d r a i n a g e problem was c o n s t r u c t i v e f r a u d and t h a t t h e y a r e e n t i t l e d t o t h e amount expended t o c o n s t r u c t t h e dam. The i s s u e s p r e s e n t e d on a p p e a l a r e : 1. Whether t h e t r i a l c o u r t e r r e d i n determining t h a t i n n e g o t i a t i n g t h e c o n t r a c t f o r deed T r e a s u r e S t a t e I n d u s t r i e s , I n c . , and Kenneth K. Knight were g u i l t y of a c t u a l f r a u d o r i n t h e a l t e r n a t i v e c o n s t r u c t i v e f r a u d w i t h r e g a r d t o t h e a l l e g e d a i r p o l l u t i o n problems? 2. Whether t h e t r i a l c o u r t e r r e d i n d e t e r m i n i n g t h e d e f e n d a n t s were g u i l t y of c o n s t r u c t i v e f r a u d i n f a i l i n g t o r e v e a l an a l l e g e d problem w i t h r e g a r d t o water d r a i n a g e ? 3. Whether t h e t r i a l c o u r t e r r e d i n its d e t e r m i n a t i o n t h a t defendant Kenneth K. Knight should be r e q u i r e d t o indemnify d e f e n d a n t T r e a s u r e S t a t e I n d u s t r i e s , I n c . , f o r a l l damages awarded t o p l a i n t i f f s a g a i n s t d e f e n d a n t s ? 4. Whether t h e t r i a l c o u r t e r r e d i n its d e t e r m i n a t i o n of damages by a p p l i c a t i o n of an i n c o r r e c t measure of damages? Defendants contend t h e r e is i n s u b s t a n t i a l evidence t o s u p p o r t a f i n d i n g of e i t h e r a c t u a l o r c o n s t r u c t i v e f r a u d i n t h e c o n t r a c t n e g o t i a t i o n s . On a p p e a l , our f u n c t i o n is t o determine whether t h e r e is s u b s t a n t i a l evidence t o s u p p o r t t h e f i n d i n g s of t h e t r i a l c o u r t . T h i s Court w i l l n o t r e v e r s e t h e f i n d i n g s of t h e t r i a l c o u r t u n l e s s t h e r e is no s u b s t a n t i a l evidence t o s u p p o r t such f i n d i n g s . I n Lee v. Stockmen's Nat. Bank ( 1 9 2 2 ) , 63 Mont. 262, 284, 207 P. 623, t h i s Court s e t down t h e elements which a p l a i n t i f f must prove t o make o u t a prima f a c i e c a s e of a c t u a l fraud: (1) a r e p r e s e n t a t i o n ; ( 2 ) its f a l s i t y ; ( 3 ) its m a t e r i a l i t y ; ( 4 ) t h e s p e a k e r ' s knowledge of its f a l s i t y o r ignorance of its t r u t h ; ( 5 ) h i s i n t e n t t h a t it should be a c t e d upon by t h e person and i n t h e manner reasonably contemplated; ( 6 ) t h e h e a r e r ' s ignorance of its f a l s i t y ; ( 7 ) h i s r e l i a n c e upon its t r u t h ; ( 8 ) h i s r i g h t t o r e l y t h e r e o n ; and ( 9 ) h i s consequent and proximate i n j u r y . A c t u a l f r a u d is always a q u e s t i o n o f f a c t . S e c t i o n 28-2-404, MCA. Fraud can never be presumed b u t must be proved by a preponderance of t h e evidence. Good f a i t h w i l l always be presumed and mere s u s p i c i o n o f f r a u d is n o t s u f f i - c i e n t . R e i l l y v. M a w ( 1 9 6 5 ) , 146 Mont. 145, 153, 405 P.2d 440, 442. The a l l e g e d a c t u a l f r a u d upon which t h e D i s t r i c t Court made its f i n d i n g 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 damages was t h e r e p r e s e n t a t i o n s made by Robert Mager and Kenneth Knight t h a t t h e e x t e n s i o n o f t h e r o t a r y k i l n s t a c k had s a t i s f a c t o r i l y remedied t h e a i r p o l l u t i o n problem. Although t h e D i s t r i c t C o u r t ' s f i n d i n g s do n o t s p e c i f i c a l l y set f o r t h each element of a c t u a l f r a u d , a review o f t h e record i n d i c a t e s evidence t o s u p p o r t a f i n d i n g of f r a u d and s u s e q u e n t damages. P l a i n t i f f s P o u l s e n , I n g e b r i g t s o n and Olson t e s t i f i e d t h a t i n t h e c o u r s e of i n s p e c t i n g t h e s h a l e p l a n t Robert Mager, t h e p l a n t manager, s t a t e d t h a t t h e s t a c k e x t e n s i o n on t h e r o t a r y k i l n had remedied t h e a i r p o l l u t i o n problem. A l s o , on June 28, 1974, T S I 1 s former p r e s i d e n t , Kenneth Knight, t o l d p l a i n t i f f s t h e i n f o r m a t i o n g i v e n them by Mager was c o r r e c t . Of c o u r s e , t h e t e s t i m o n y of Mager and Knight is s l i g h t l y d i f f e r e n t i n t h a t t h e y t e s t i f i e d t h e y t h o u g h t t h e r e p a i r s s a t i s f i e d t h e p o l l u t i o n p e o p l e and informed p l a i n t i f f s o n l y t o t h a t e x t e n t . A s evidenced by t h e "Notice of V i o l a t i o n and Order t o Take C o r r e c t i v e Action" d a t e d March 5 , 1975, t h e e m i s s i o n s from t h e a g g r e g a t e d r y e r s t a c k ( r o t a r y k i l n ) were i n v i o l a t i o n of s t a t e and county p o l l u t i o n r e g u l a t i o n s and t h e e x t e n s i o n p u t t h e r e o n d i d n o t i n f a c t remedy t h e p o l l u t i o n problem. Furthermore, i n response t o a q u e s t i o n r e g a r d i n g T S I ' s a t t e m p t s t o a l l e v i a t e t h e p o l l u t i o n problem, Sam K a l a f a t , t h e d i r e c t o r of Environmental Health S e r v i c e s f o r t h e City-County Health Department, s t a t e d : "The e f f o r t s by T r e a s u r e S t a t e I n d u s t r i e s were t o t a l l y unapproved by our agency. W e advised them t h a t b e f o r e t h e y proceed, t h a t n e c e s s a r y a p p l i c a t i o n s and p e r m i t s be f i l e d . And I t h i n k t h e record speaks f o r i t s e l f t h a t t h e y were n o t . And I f e e l t h a t t h e e f f o r t s were n o t r e a l l y s u b s t a n t i a l , no." I n l i g h t of t h e nonoperative c o n d i t i o n of t h e s h a l e p l a n t due t o p o l l u t i o n v i o l a t i o n s and t h e c o s t of b r i n g i n g t h e p l a n t i n t o compliance w i t h r e g u l a t i o n s , it is beyond s e r i o u s argument t h a t t h e r e p r e s e n t a t i o n s made by d e f e n d a n t s t o p l a i n t i f f s were m a t e r i a l t o t h e c o n t r a c t . On May 23, 1972, TSI r e c e i v e d a "Notice of V i o l a t i o n and Order t o Take C o r r e c t i v e Action" t o a l l e v i a t e t h e p o l l u t i o n problems caused by t h e a g g r e g a t e d r y e r and d u s t c o l l e c t o r . On A p r i l 16, 1973, defendant Knight r e c e i v e d a l e t t e r from t h e Cascade County Air P o l l u t i o n C o n t r o l Program a d v i s i n g him t h a t t h e p l a n t was n o t i n compliance w i t h t h e s t a t e and county r e g u l a t i o n s and t h a t c e r t a i n s t e p s needed t o be taken b e f o r e o p e r a t i o n s could resume. On A p r i l 1 9 , 1973, Dan Lincoln and Cleve E. Johnson, employees of t h e county p o l l u t i o n program, v i s i t e d t h e p l a n t and d i s c u s s e d its d u s t problems w i t h Robert Mager. The a r e a s d i s c u s s e d were t h e hammermill, e l e v a t o r s , s p r a y tower, and s t o r a g e and t r u c k l o a d i n g f a c i l i t i e s . F i n a l l y , from March 1974 u n t i l t h e time of s a l e , t h e TSI o f f i c e manager and c o s t a c c o u n t a n t , C h e r r i e Anthony, over- heard numerous c o n v e r s a t i o n s between TSI p l a n t managers, Bob Mager, A 1 Gehrke, Mr. F o r z l e y and Glen Mortenson, r e g a r d i n g t h e p o l l u t i o n problem and p o s s i b l e s o l u t i o n s . A t t r i a l s h e was asked t h e s u b s t a n c e of c o n v e r s a t i o n s s h e had w i t h F o r z l e y and Mortenson r e g a r d i n g t h e p o l l u t i o n problem and answered: "We were t o l d t h a t w e were j u s t going t o s h e l v e t h e problem. I was t o l d t h a t ' s what t h e y were going t o d o , was j u s t s h e l v e t h e problem. W e were i n t h e p r o c e s s of t r y i n g t o s e l l t h e p l a n t . There had been s e v e r a l buyers i n t e r e s t e d . Super-Lite [ t h e p l a i n t i f f s ] was one o f them, and t h a t f o r t h e c u r r e n t time t h e r e were more i m p o r t a n t t h i n g s t o worry about t h a n t h e problems a t t h e s h a l e p l a n t . " The c i r c u m s t a n c e s s u r r o u n d i n g t h e n e g o t i a t i o n s and s a l e of t h e p l a n t a r e s u f f i c i e n t t o show t h a t Mager and Knight i n t e n d e d t h e i r r e p r e s e n t a t i o n s be r e l i e d and a c t e d upon t o consummate t h e s a l e . See Cowan v. Westland R e a l t y Co. ( 1 9 7 3 ) , 162 Mont. 379, 512 P.2d 714; Lee v. Stockmen's Nat. Bank ( 1 9 2 2 ) , 63 Mont. 262, 207 P. 623; Dunlap v. Nelson ( 1 9 7 4 ) , 165 Mont. 291, 529 P.2d 1394. The f a c t t h a t from t h e moment of its procurement t h e p l a n t was f o r s a l e i n d i c a t e s TSI purchased t h e p l a n t f o r investment p u r p o s e s . One of Mager's primary d u t i e s a s p l a n t manager was t o promote t h e s a l e and s e c u r e a w i l l i n g p u r c h a s e r . I t is fundamental t h a t a p l a n t i n compliance w i t h p o l l u t i o n c o n t r o l r e g u l a t i o n s is more s a l e a b l e t h a n one i n need of s u b s t a n t i a l p o l l u t i o n c o n t r o l d e v i c e s . Defendants contend t h a t p l a i n t i f f s were knowledgeable businessmen and should have known t h e p l a n t had p o l l u t i o n problems. T h i s argument is n o t o n l y an admission b u t is a l s o w i t h o u t m e r i t when one t a k e s i n t o c o n s i d e r a t i o n t h e h i g h l y t e c h n i c a l f i e l d of environmental s c i e n c e . A t no t i m e p r i o r t o t h e n o t i c e of v i o l a t i o n on March 5, 1975, d i d p l a i n t i f f s b e l i e v e t h e p l a n t was n o t i n compliance w i t h p o l l u t i o n r e g u l a t i o n s . One of d e f e n d a n t s ' p r i n c i p a l a l l e g a t i o n s is t h a t p l a i n t i f f s had no r i g h t t o r e l y , and i n f a c t d i d n o t r e l y , upon t h e a l l e g e d m i s r e p r e s e n t a t i o n s . The b a s i s f o r t h i s c o n t e n t i o n is t h e absence of any f i n d i n g of f a c t by t h e D i s t r i c t Court r e g a r d i n g r e l i a n c e . Defendants argue t h e r e l i a n c e is an e s s e n t i a l element of f r a u d and i n t h e absence of a s p e c i f i c f i n d i n g on t h a t element, t h e r e is a f a t a l f a i l u r e of proof. I n concluding t h a t d e f e n d a n t s committed f r a u d , t h e D i s t r i c t Court s p e c i f i c a l l y made f i n d i n g s a s t o t h e elements of a r e p r e s e n t a t i o n , its f a l s i t y , its m a t e r i a l i t y , t h e s p e a k e r ' s knowledge of its f a l s i t y , h i s i n t e n t t h a t it be a c t e d upon, t h e h e a r e r 's ignorance and t h e consequent i n j u r y . Defendants argue t h a t t h e D i s t r i c t C o u r t ' s f a i l u r e t o make a s p e c i f i c f i n d i n g a s t o r e l i a n c e is s u f f i c i e n t grounds f o r r e v e r s a l . W e do n o t a g r e e . On review, t h e t r i a l c o u r t ' s judgment is presumed c o r r e c t , and t h i s Court w i l l draw e v e r y l e g i t i m a t e i n f e r e n c e t o s u p p o r t t h a t presumption. Rule 52, M.R.Civ.P.; Havre I r r i g a t i o n Co. v. Majerus ( 1 9 5 7 ) , 132 Mont. 410, 414, 318 P.2d 1076, 1078; Madison Fork Ranch v. L & B Lodge Pole Timber P r o d u c t s ( 1 9 8 0 ) , Mont . , 615 P.2d 900, 37 St.Rep. 1468. The Supreme Court a d h e r e s t o t h e d o c t r i n e of implied f i n d i n g s which s t a t e s t h a t where a c o u r t ' s f i n d i n g s a r e g e n e r a l i n terms, any f i n d i n g s n o t s p e c i f i c a l l y made, b u t n e c e s s a r y t o t h e judgment, a r e deemed t o have been i m p l i e d , i f supported by t h e evidence. B a l l e n g e r v. Tillman ( 1 9 5 8 ) , 133 Mont. 369, 324 P.2d 1045. I n s u p p o r t of t h e t r i a l c o u r t , t h i s Court w i l l engage i n t h e d o c t r i n e of implied f i n d i n g s so long a s t h o s e f i n d i n g s a r e n o t incon- s i s t e n t w i t h e x p r e s s f i n d i n g s made. C r i s s y v. S t a t e Highway Commission ( 1 9 6 6 ) , 147 Mont. 374, 413 P.2d 308. The Supreme Court of t h e S t a t e of C a l i f o r n i a i n f e r r e d an i n t e n t t o d e c e i v e i n t h e f r a u d c a s e of Boas v. Bank of APP. America Nat. T r u s t & Savings A s s ' n ( 1 9 4 2 ) , 51 ~ a l l \ . 2 d 592, 125 P.2d 620. I n t h a t c a s e t h e c o u r t s t a t e d : "On appeal a reviewing c o u r t is e n t i t l e d t o draw n e c e s s a r y i n f e r e n c e s from t h e t r i a l c o u r t ' s e x p r e s s f i n d i n g s i n o r d e r t o s u p p o r t a judgment [ c i t a t i o n s o m i t t e d ] ; t h a t is t o s a y , where from t h e f a c t s found and t h e judgment ordered it is e v i d e n t i n t h e l i g h t of t h e e n t i r e r e c o r d t h a t i f more complete f i n d i n g s had been made t h e y would have been a d v e r s e t o t h e c o n t e n t i o n of t h e a p p e l l a n t , it w i l l be deemed t h a t such i n f e r e n c e h a s been drawn by a t r i a l c o u r t , and i n t h o s e c i r c u m s t a n c e s t h e f a i l u r e so t o f i n d is n o t a ground f o r t h e r e v e r s a l of t h e judgment. [ C i t a t i o n s omitted .] Here f r a u d was charged; one of t h e l e g a l grounds upon which t h e t r i a l c o u r t founded its judgment t h a t t h e agreement was void was t h a t it was o b t a i n e d by f a l s e pre- t e n s e s ; and t h e evidence shows and t h e t r i a l c o u r t e x p r e s s l y found t h a t t h e f a l s e r e p r e s e n t a t i o n s were a t a l l times known t o t h e p l a i n t i f f t o be f a l s e . I t f o l l o w s n e c e s s a r i l y t h a t i f t h e t r i a l c o u r t had made a f i n d i n g covering t h e element of i n t e n t t o d e c e i v e t h e f i n d i n g would have been a d v e r s e t o a p p e l l a n t s . T h e r e f o r e , t h e absence of a s p e c i f i c f i n d i n g t o t h a t e f f e c t does n o t s e r v e a s grounds f o r r e v e r s a l . ". . . The i s s u e of f r a u d c o n s t i t u t e d one of t h e p r i n c i p a l i s s u e s t h e t r i a l c o u r t was c a l l e d upon t o d e c i d e , and a g r e a t d e a l of evidence was introduced on t h a t i s s u e . I t must be assumed, t h e r e f o r e , t h a t i f t h e t r i a l c o u r t d i d n o t b e l i e v e t h a t a p p e l l a n t s made t h e f a l s e r e p r e s e n t a t i o n s w i t h i n t e n t t o d e c e i v e it would have s o found. A s s a i d i n P h i l l i p s v. Hooper, 43 Cal.App.2d 467, 1 1 1 P.2d 22, t h e f i n d i n g s of f a c t must be t a k e n a s embodying t h e c o n c l u s i o n s of t h e t r i a l c o u r t on a l l q u e s t i o n s of f a c t submitted t o it f o r d e c i s i o n ; and no ante- c e d e n t e x p r e s s i o n s of t h e t r i a l judge can i n any way r e s t r i c t h i s power t o d e c l a r e h i s f i n a l c o n c l u s i o n i n t h e o n l y manner a u t h o r i z e d by law, t h a t is, by f i l i n g h i s d e c i s i o n c o n t a i n i n g h i s f i n d i n g s of f a c t and c o n c l u s i o n s of law a s provided i n s e c t i o n s 632 and 633 of t h e Code of C i v i l Proce- d u r e ( c i t i n g s e v e r a l c a s e s ) . " 125 P.2d a t 623-624. J?,eliance has been d e f i n e d a s a b e l i e f which m o t i v a t e s an a c t . Martin v. Kennel1 ( 1 9 6 9 ) , 169 Colo. 122, 453 P.2d 797. An i n f e r e n c e of r e l i a n c e upon f r a u d u l e n t r e p r e s e n t a t i o n s may L be drawn from circumstances surrounding t h e t r a n s a c t i o n which have been proven. P e i n e v. Murphy ( 1 9 6 2 ) , 46 Haw. 233, 377 P.2d 708; Hunter v. McKenzie ( C a l . 1 9 2 5 ) , 239 P. 1090; Davis v. Re-Frac Manufacturing C o r p o r a t i o n ( 1 9 6 7 ) , 276 Minn. 116, 149 N.W.2d 37. Although c i r c u m s t a n t i a l evidence may be used t o draw an i n f e r e n c e of r e l i a n c e , p l a i n t i f f is n o t confined t o c i r c u m s t a n t i a l proof o r presumption of r e l i a n c e b u t may t e s t i f y a s t o whether he r e l i e d upon t h e f a l s e r e p r e s e n t a t i o n or concealment of defendant. Peskin v. ago S q u i r e s ( 1 9 5 7 ) , 156 Cal.App.2d M I 319 P.2d 405. The f o l - lowing testimony was g i v e n a t t r i a l : "Q. Mr. Olson, would you have bought t h e s h a l e and block p l a n t had you known of t h e a i r p o l l u t i o n problems w i t h t h e s h a l e p l a n t , and t h a t you would be unable t o o p e r a t e t h e s h a l e p l a n t ? A. D e f i n i t e l y , I would n o t have been involved." Q . [To Poulsen] Did you r e l y on t h e r e p r e s e n t a - t i o n s t h a t t h e p l a n t was i n compliance w i t h a i r p o l l u t i o n r e g u l a t i o n s when you purchased t h e p l a n t ? A. Yes. "Q. Were t h o s e r e p r e s e n t a t i o n s , t h e r e p r e s e n t a - t i o n s t h a t I ' m r e f e r r i n g t o a r e t h o s e made by Bob Mager and by Ken Knight? A. Those r e p r e s e n t a t i o n s were made by Bob Mager when we were v i s i t i n g t h e s h a l e p l a n t , and by Kenneth Knight i n h i s o f f i c e i n t h e Holiday V i l l a g e . "Q. And t h o s e were t h e r e p r e s e n t a t i o n s t h a t you r e l i e d upon. A. Yes, v e r y d e f i n i t e l y . " D i r e c t evidence s u p p o r t s a f i n d i n g of r e l i a n c e . W e engage t h e d o c t r i n e of "implied f i n d i n g s " and hold t h e t r i a l c o u r t found r e l i a n c e . W e a f f i r m t h e h o l d i n g of a c t u a l f r a u d . The D i s t r i c t Court a l s o made an a l t e r n a t i v e r u l i n g t h a t d e f e n d a n t s were g u i l t y of c o n s t r u c t i v e f r a u d with r e g a r d t o o t h e r a i r p o l l u t i o n problems a t t h e p l a n t and t h e water d r a i n a g e problem. " C o n s t r u c t i v e f r a u d c o n s i s t s i n : " ( 1 ) any breach of d u t y which, w i t h o u t an a c t u a l l y f r a u d u l e n t i n t e n t , g a i n s an advantage t o t h e person i n f a u l t or anyone claiming under him by m i s l e a d i n g another t o h i s p r e j u d i c e o r t o t h e p r e j u d i c e of anyone claiming under him . . ." S e c t i o n 28-2-406, MCA . R u s s e l l v. R u s s e l l ( 1 9 6 9 ) , 152 Mont. 461, 452 P.2d 77, is s q u a r e l y i n p o i n t on a f a c t u a l s i t u a t i o n v e r y analogous t o t h e i n s t a n t c a s e . R u s s e l l was an a c t i o n f o r t h e recovery of money p a i d f o r an o p t i o n t o purchase p r o p e r t y based on f r a u d . The p r o p e r t y involved was a bar and c a f e . P r i o r t o t h e p l a i n t i f f ' s paying c o n s i d e r a t i o n f o r an o p t i o n t o pur- c h a s e , t h e premises had been examined by t h e county s a n i - t a r i a n and a S t a t e Department of Health i n s p e c t o r . They found t h a t t h e sewage d i s p o s a l system was inadequate and warned t h e owner t h a t t h e v i o l a t i o n of h e a l t h r e g u l a t i o n s was s e r i o u s and should be c o r r e c t e d and, i f it were n o t , a l i c e n s e t o c o n t i n u e o p e r a t i n g t h e b u s i n e s s would n o t be i s s u e d i n t h e coming y e a r . The owner d i d n o t d i s c l o s e t h e sewage problem o r t h e warning from t h e Board of Health t o t h e p r o s p e c t i v e p u r c h a s e r . The purchaser was l a t e r warned by t h e Board t h a t , i f he d i d n o t make t h e n e c e s s a r y c o r r e c t i o n s , t h e l i c e n s e t o o p e r a t e t h e bar and c a f e would n o t be renewed. The purchaser then brought s u i t t o r e s c i n d t h e c o n t r a c t and recover t h e o p t i o n money. The j u r y found i n f a v o r of t h e p l a i n t i f f . O n a p p e a l , t h e d e f e n d a n t made t h e same argument a s d e f e n d a n t s i n t h e c a s e a t bar--that is, t h a t t h e p l a i n t i f f ' s evidence and proof had f a i l e d t o e s t a b l i s h t h e n i n e e l e m e n t s of a c t u a l f r a u d hereinabove set f o r t h . I n r e j e c t i n g t h a t c o n t e n t i o n , t h i s Court s a i d : "We do n o t t h i n k t h e i n s t a n t c a s e was one of a c t u a l f r a u d s o t h a t t h e above n i n e e l e m e n t s would apply. W e t h i n k , i n s t e a d , it was a concealment, more i n t h e n a t u r e of c o n s t r u c t i v e f r a u d . " S e c t i o n 13-309, R.C.M. 1947, s t a t e s : " ' C o n s t r u c t i v e f r a u d c o n s i s t s : . . . ( 2 ) I n any such a c t or omission a s t h e law e s p e c i a l l y d e c l a r e s t o be f r a u d u l e n t w i t h o u t r e s p e c t t o a c t u a l f r a u d . ' " W e t h i n k it was a f r a u d u l e n t a c t on t h e p a r t of t h e a p p e l l a n t t o withhold i n f o r m a t i o n on t h e warning she had r e c e i v e d from t h e S t a t e Board of H e a l t h . I# I . . . f r a u d is complete where a vendor knowingly s u p p r e s s e s a s e r i o u s v i c e of h i s p r o p e r t y which t h e vendee had no r e a s o n t o s u s p e c t . ' [ C i t a t i o n s o m i t t e d . ] " 152 Mont. a t 465-466. The n o t i c e of v i o l a t i o n d a t e d May 23, 1972, s e n t t o TSI and t h e l e t t e r d a t e d A p r i l 6 , 1973, s e n t t o Knight c l e a r l y i n d i c a t e d e f e n d a n t s had knowledge o f p o l l u t i o n v i o l a t i o n s a t t h e s h a l e p l a n t i n c l u d i n g t h e hammermill, e l e v a t o r s , s p r a y tower and s t o r a g e and t r u c k l o a d i n g f a c i l i t i e s . F u r t h e r - more, d e f e n d a n t s were aware of t h e water d r a i n a g e problem, a s evidenced by neighbor B a l l a r d ' s testimony. The r e c o r d is void of any a t t e m p t by d e f e n d a n t s t o d i s c l o s e t h i s informa- t i o n t o p l a i n t i f f s . These v i o l a t i o n s were s e r i o u s impair- ments t o t h e p r o p e r t y which p l a i n t i f f s had no reason t o s u s p e c t . W e f i n d t h e r e is s u b s t a n t i a l e v i d e n c e t o s u p p o r t a f i n d i n g of c o n s t r u c t i v e f r a u d . I n d e t e r m i n i n g T S I 1 s r i g h t t o i n d e m n i f i c a t i o n from Knight, we must a s c e r t a i n t h e b a s i s upon which l i a b i l i t y was imposed. The g e n e r a l r u l e is t h a . t a p r i n c i p a l is r e s p o n s i b l e f o r t h e i n j u r i e s r e s u l t i n g from f r a u d of h i s a g e n t , committed d u r i n g t h e e x i s t e n c e of t h e agency and w i t h i n t h e scope of t h e a g e n t ' s a c t u a l o r a p p a r e n t a u t h o r i t y . Gleason v. Seaboard A i r Line R. Co. ( 1 9 2 9 ) , 278 U.S. 349, 49 S.Ct. 161, yrs 73 L.Ed. W5; Grant v. Weatherholt ( 1 9 5 4 ) , 123 Cal.2d 34, 266 P.2d 185. T h i s r u l e is f u l l y a p p l i c a b l e t o c o r p o r a t i o n s i n t h a t a c o r p o r a t i o n is a p r i n c i p a l which can be l i a b l e f o r f r a u d o n l y through conduct of its a g e n t s . Thomas v. D u r a l i t e Company, I n c . ( D . N . J . 1 9 7 4 ) , 386 F.Supp. 698. I t is undisputed t h a t a t a l l times p e r t i n e n t , Robert Mager was a c t i n g w i t h i n t h e c o u r s e and scope of h i s employ- ment w i t h TSI. I n accordance w i t h t h e aforementioned r u l e , TSI, a s p r i n c i p a l , is l i a b l e f o r t h e f r a u d u l e n t r e p r e s e n t a - t i o n s and concealments of its a g e n t Robert Mager. The D i s t r i c t Court found, and w e a g r e e , t h a t a t a l l times p e r t i n e n t t o t h i s l i t i g a t i o n , Kenneth Knight was p r e s i d e n t of TSI and was a c t i n g w i t h i n t h e scope and c o u r s e of h i s employment w i t h t h e c o r p o r a t i o n . I t is c l e a r l y e s t a b l i s h e d t h a t a d i r e c t o r o r o f f i c e r of a c o r p o r a t i o n is i n d i v i d u a l l y l i a b l e f o r f r a u d u l e n t a c t s o r f a l s e repre- s e n t a t i o n s of h i s own or i n which he p a r t i c i p a t e s even though h i s a c t i o n i n such r e s p e c t may be i n f u r t h e r a n c e of t h e c o r p o r a t i o n ' s b u s i n e s s . T y l e r v. Savage ( 1 8 9 2 ) , 143 U.S. 79, 12 S.Ct. 340, 36 L.Ed. 82; Hoffman v. T o f t ( 1 9 1 4 ) , 70 Or. 488, 142 P. 365. T h i s p e r s o n a l l i a b i l i t y a t t a c h e s r e g a r d l e s s of whether l i a b i l i t y a l s o a t t a c h e s t o t h e c o r p o r a t i o n . United S t a t e s L i a b i l . I n s . Co. v. Haidinger- Hayes, I n c . ( 1 9 7 0 ) , 83 Cal.Rptr. 418, 463 P.2d 770. Defendants' l i a b i l i t y is j o i n t and s e v e r a l . T S I ' s l i a b i l i t y is based on its p r i n c i p a l a g e n t r e l a t i o n s h i p w i t h its manager Mager, whereas K n i g h t ' s l i a b i l i t y is based on h i s f r a u d u l e n t m i s r e p r e s e n t a t i o n s and concealment of m a t e r i a l f a c t s . The r i g h t t o indemnity is an e q u i t a b l e p r i n c i p l e , based on t h e g e n e r a l t h e o r y t h a t one compelled t o pay f o r damages caused by another should be a b l e t o seek recovery from t h a t p a r t y . May Trucking Co. v. I n t e r n a t i o n a l H a r v e s t e r ( I d a h o 1 9 7 5 ) , 543 P.2d 1159; s e e a l s o DeShaw v. Johnson ( 1 9 7 0 ) , 155 Mont. 355, 472 P.2d 298. "As a g e n e r a l r u l e one compelled t o pay damages f o r t h e n e g l i g e n t o r t o r t i o u s a c t of a n o t h e r is n o t e n t i t l e d t o indemnity from t h e l a t t e r where both p a r t i e s a r e j o i n t t o r t f e a s o r s o r i n p a r i d i l e c t o . " 42 C.J.S. Indemnity, 5 27 a t 240. T h i s r u l e was adopted i n G r e a t Northern Railway Company v. United S t a t e s ( D . Mont. 1 9 6 0 ) , 187 F.Supp. 690, 693; F l e t c h e r v. C i t y of Helena ( 1 9 7 3 ) , 163 Mont. 337, 517 P.2d 365, 369. The c o u r t found d e f e n d a n t s i n p a r i d i l e c t o . I n t h e absence of a f i n d i n g of f a c t which d e t e r m i n e s t h e a c t i o n s of Knight t o have t o t a l l y caused p l a i n t i f f s ' i n j u r y , TSI ' s r i g h t t o i n d e m n i f i c a t i o n must be vacated. I n t h e s a l e of commercial p r o p e r t y , a commercial s t a n d a r d of damages should be a p p l i e d . P l a i n t i f f s a r e e n t i t l e d t o t h e b e n e f i t of t h e i r bargain--that is, t h e b e n e f i t which d e f e n d a n t s promised t o d e l i v e r . See Moore v. Swanson ( 1 9 7 6 ) , 171 Mont. 160, 556 P.2d 1249. Defendants promised t o d e l i v e r an o p e r a t i v e s h a l e p l a n t . The code v i o l a t i o n s rendered t h e p l a n t i n o p e r a t i v e . T h e r e f o r e , p l a i n t i f f s a r e e n t i t l e d t o damages i n t h e amount which w i l l b r i n g t h e p l a n t i n t o compliance. I n t h e absence of s u b s t a n t i a l evidence t o s u p p o r t a f i n d i n g of fraud i n r e l a t i o n t o t h e t h e water flowing o n t o t h e B a l l a r d p r o p e r t y , however, t h e r e is no b a s i s on which t o award damages f o r t h e c o n s t r u c t i o n of t h e d i v e r s i o n dam by p l a i n t i f f s . W e a f f i r m t h e D i s t r i c t Court judgment h o l d i n g d e f e n d a n t s j o i n t l y and s e v e r a l l y l i a b l e f o r a c t u a l and c o n s t r u c t i v e f r a u d and v a c a t e t h e judgment f o r i n d e m n i f i c a t i o n and t h e damages f o r t h e d i v e r s i o n dam. R , J u s t i c e /;k4.,, W e concur: ?h*,Ulzstgk.ueQq Chief J u s t i c e y% -Y''zL7 u s t i c e s