Opinion ID: 877974
Heading Depth: 1
Heading Rank: 2

Heading: whether the district court abused its discretion by failing to grant rescission of the contracts involved.

Text: Section 28-2-1711, MCA, governs when a party may rescind a contract. Section 28-2-1711(1), MCA, allows rescission when the consent of the party rescinding ... was given by mistake or obtained through duress, menace, fraud, or undue influence ... Appellants in this case allege both mistake and fraud, specifically constructive fraud. Constructive fraud is defined in section 28-2-406, MCA, the relevant portion of which states: 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. This Court in Mends v. Dykstra (1981), Mont., 637 P.2d 502, 38 St.Rep. 2010, extended the concept of constructive fraud to transactions such as a contract for the purchase of a house. Therefore, constructive fraud may be raised as an issue in this case; however, pursuant to the express terms of section 28-2-406(1), MCA, constructive fraud requires the breach of a duty. Therefore, a factual determination regarding the existence of a duty must be made prior to any finding of constructive fraud. The District Court determined that Matthews was not aware of an unlevel condition in portions of the home when it was sold to the Woodahls ... Testimony by Mrs. Matthews and several contractors who performed work on the house substantiate this finding. In addition, appellants failed to notice the condition on two occasions and their professional appraiser testified to being unaware of the condition at the time he conducted the appraisal. The findings of fact and conclusions of law of the District Court will not be disturbed if supported by substantial evidence and by the law. Lauterjung v. Johnson (1977), 175 Mont. 74 at 77, 572 P.2d 511 at 512-513. We find there to be substantial credible evidence to support this finding of fact and therefore uphold the District Court's determination that Mrs. Matthews was unaware of the defective condition at the time she sold the house to the Woodahls. Since Mrs. Matthews was unaware of the defect, she was under no duty to disclose the defect to the Woodahls. This Court in Moschelle v. Hulse (1980), Mont., 622 P.2d 155, 37 St.Rep. 1506, made it clear that knowledge of a defect is necessary before the duty to disclose the defect exists. Therefore, pursuant to section 28-2-406, MCA, Mrs. Matthews is not guilty of constructive fraud as she had no duty to breach. We affirm the District Court's conclusion that Mrs. Matthews was not guilty of constructive fraud. The District Court also determined that the Woodahls received that for which they had bargained. The trial court found: Woodahls received the property for which they bargained. No condition of the home renders it uninhabitable or unfit for the purposes which they intended. Insofar as the purpose of the agreements was to furnish the Woodahls with a home to live in, that purpose was not frustrated by the unlevel condition of a portion of the home. This determination by the trial court is not contested on appeal by appellants. There is substantial credible evidence to support this conclusion as the Matthews resided in the home for ten years. Thus, the conclusion is accepted as stated. In order for a mutual mistake by the parties to a contract to warrant rescission of the contract, the mistake must be so substantial and fundamental as to defeat the object of the parties in making the contract. Johnson v. Meiers (1946), 118 Mont. 258, 164 P.2d 1012. The trial court found no mutual mistake existed. However, even if a mutual mistake had been found, the mistake did not affect the object of the parties in making the contract and rescission on the basis of mutual mistake does not lie. Finally, as the court held that appellants' received the property for which they had bargained, there is no material failure of consideration. We affirm the District Court's decision not to rescind.