Court Opinion

ID: 883697
Source: CourtListenerOpinion
Date Created: 2013-06-05 02:34:30.831647+00
Date Added: 2024-06-11T15:11:56.592852
License: Public Domain

NO.    94-355
               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                        1995

WRB-WEST ASSOCIATES, INC., a Texas
Corporation; and WRB-WEST ASSOCIATES,
JOINT VENTURE, a Texas Joint Venture,
              Plaintiffs and Appellants,
         v.
MADISON ADDITION INV
                  INVESTMENTS LIMITED
PARTNERSHIP, an Idaho Limited
Partnership; JOHN COSTELLO; JERALD S.
SCHMIER; FRED J. HAHN; RICHARD G. HAHN;
ROCCO P. CIFRESE, M.D.; SARA ASHMAN
CIFRESE, M.D.; P.A. PENSION TRUST;
ROBERT E. FARNAM; WILLIAM D. FALER;
                              FALER:
CHARLES A. HOMER; BRUCE SOELBERG; FRANK
GUSTIN:
GUSTIN; GAYLORD V. SMITH; KEVIN T.
                V. SMITH
SULLIVAN; TONY MARCON; and CHUCK BECK,
SULLIV
              Defendants, Respondents,
              and Cross-Appellants.

APPEAL FROM:       District Court of the Eighteenth Judicial District,
                   In and for the County of Gallatin,
                   The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD:
              For Appellants:
                   Michael J. Lilly, Berg, Lilly, Andriolo
                   & Tollefsen, Bozeman, Montana
              For Respondents:
                   John G. Crist, Dorsey & Whitney,
                   Billings, Montana   (for Madison Addition
                   Investments and John Costello)
                   James M. Kommers, Kommers, Kasting & Roth,
                   Bozeman, Montana (for Individual Limited
                   Partners)

                                 Submitted on Briefs:     December 22, 1994
                                               Decided:   April 25, 1995
Filed:
Justice Terry N. Trieweiler       delivered the opinion of the Court.

       Plaintiffs WRB-West Associates, Inc., andWRB-West Associates,

Joint Venture, filed this complaint in the District Court for the
Eighteenth Judicial District in Gallatin County to recover damages

from the defendant, John Costello, which it alleged were caused by

breach of Costello's fiduciary duty.               Following a nonjury trial,

the District Court found that Costello had no fiduciary duty to the

plaintiffs   and   entered   judgment       for   the   defendants.   Plaintiffs

appeal from the District Court's findings of fact, conclusions of

law,   and judgment.    We affirm the District Court.
       The dispositive issue on appeal is:

       Did the District Court          err    when it      concluded that John

Costello did not have a realtor/client relationship with the

plaintiffs in 1989?

                             FACTUAL    BACKGROUND

       In the early 198Os,    Lewis Robinson and Robert Russell formed

West Associates Limited Partnership to develop the Madison Addition

property.    The Madison Addition is a subdivision of single family

and duplex lots,       and planned unit developments located in West

Yellowstone. West Associates sold the Madison Addition property to

WRB, Inc., and WRB-JV in 1984.              Lewis Robinson and Albert Walker

were initially the principal shareholders in WRB,                 Inc.,   and the

principal partners in WRB-JV.           As a result of the sale in 1984,

WRB, Inc., owned the single family and duplex lots in the Madison

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Addition,      and WRB-JV owned the planned unit development                         (PUD)
property located in that subdivision.

       Costello was a licensed real estate broker in West Yellowstone

with whom WRB, Inc., executed a written listing agreement in 1985.

It consisted of three pages.                    The first page was prepared by

Robinson and provided that the term for the agreement would be from

May 1, 1985, to November 1, 1985. Costello prepared an addendum to

the   agreement      which    specifically      limited    his    obligations   to    the

term of the listing agreement.                  After the agreement expired, no

additional agreement was executed and Costello sold no real estate

for WRB, Inc.

       On January 16, 1985, WRB-JV and Costello executed an agreement

which authorized Costello to act as a broker for one of the four

PUDs owned by WRB-JV.              That agreement expired, by its terms, on

January      14,   1986.     No further agreement was executed by those

parties after it expired.
       In     October      1984,     WRB,   Inc.,    and    WRB-JV      (referred to

collectively as WRB) had borrowed $4,200,000                     from Deseret Federal
Savings and Loan to finance development in the Madison Addition.

Repayment was        secured by a mortgage            interest       in the Madison

Addition      property.

       In 1988, WRB failed to make the loan payments agreed upon and

Deseret filed an action to foreclose on the secured property. At

the   time   of the initial foreclosure action, WRB still owed over

$Z,OOO,OOO to Deseret.             In addition, WRB was substantially indebted

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to other creditors whose loans were also secured by the same

property.         In 1988, an appraisal of the Madison Addition property

indicated a value of only $1,057,000.

      In    1989,    Costello learned that Deseret was selling its note

and mortgage on the Madison Addition property for the amount of the

1988 appraisal.         Costello contacted others and suggested that they

purchase the note and mortgage.                     Together they formed a limited

partnership         known      as     Madison       Addition     Investments    Limited

Partnership         (MAILP),        which ultimately purchased the note and

mortgage    for     $1,057,000.        The purchase and sale was completed on

September 11, 1989.

      On September 7, 1989, the WRB entities filed a petition for

Chapter    11     bankruptcy        protection.       However,   the Chapter 11 plan

failed when WRB was unable to sell the necessary number of lots to

fund it.        Therefore,      the bankruptcy proceeding was dismissed and

the stay of foreclosure proceedings vacated.                         MAILP     concluded

Deseret's foreclosure action;                obtained a judgment against WRB;

purchased the Madison Addition property at foreclosure sale; and,
after selling individual lots, obtained a deficiency judgment.

      In this suit,            the WRB entities alleged that their broker/

seller relationship with Costello extended to 1989, and therefore,

that he had a fiduciary relationship which was breached when he
negotiated the purchase of their note from Deseret.                       Although   no

written agreement was in effect at that time, WRB alleged that the
previous agreements were extended based on the fact that Costello

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continued to act as WRB's broker.               They alleged that because of

Costello's breach of his fiduciary duty, they were denied the

opportunity to purchase their own note                for the amount paid by

MAILP, and thereby, lost the opportunity to reduce their liability

by $2,000,000.        However,   the District Court held that based on the

statute of       frauds there could be no real estate brokerage

relationship,    and found that the last agreement between the parties

expired by its own terms in 1986.               The District Court also held

that Costello's conduct was not sufficient to establish a broker/

seller     relationship.         WRB appeals from the District Court's

findings of fact, conclusions of law, and judgment.

                                   DISCUSSION

      Did the District Court err when it concluded that John

Costello did not have a realtor/client relationship with the

plaintiffs in 1989?
      We review a district court's findings of fact to determine

whether they are clearly erroneous.              Interstate Prod Credit Ass’n v. D&aye

(1991), 250 Mont. 320, 322, 820 P.Zd 1285, 1287.                  In doing so, we

first consider whether the findings are supported by substantial

evidence.     If the findings are supported by substantial evidence,

we   determine   if    the   district   court   misapprehended      the   evidence.

Finally,    if the findings are supported by substantial evidence, and

that evidence has not been misunderstood, we may still conclude

that a finding is clearly erroneous if a review of the record

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leaves this Court with a definite and firm conviction that a

mistake has been made.         DeSaye, 820 P.2d at 1287.

       We review conclusions of law to determine whether they are

correct.    Inrekfurriage ofBarnard   (1994), 264 Mont. 103, 106, 870 P.2d
91,   93 (citing InreMurriageofBurris           (1993), 258 Mont. 265, 269, 852
P.2d 616, 619).

       WRB contends that the District Court erred by concluding that

Costello was not their realtor in 1989, and therefore, had no

fiduciary duty that could be breached.

       The court found that no written agreement existed in 1989, as

required by § 28-2-903(l), MCA, and that the previous written

agreements were not extended because the parties had not satisfied

the requirements of 5 28-2-1602, MCA,                 for altering a contract by

extending      its term.    The court concluded that the parties could not

have created an employment agreement by conduct because the statute

of frauds prohibits such a result.                  Furthermore,     the court found

that even if a contract could be extended or created by conduct,

the evidence was not sufficient to prove the parties consented to

do    so.    We     agree    with     the       District   Court's     findings   and

conclusions.
       Section    28-2-903, MCA, provides in relevant part that:

      (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.

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      Section 28-2-1602, MCA, provides that "[a] contract in writing
may be altered by a contract in writing or by an executed oral
agreement, and not otherwise."         The District Court correctly found
that there was no written listing agreement,                    nor a written
modification of the previous           agreement     in   effect between the
parties in 1989.
      We have previously held that a listing agreement must be in
writing and cannot be orally extended.              Kraji v. Hodson (1992),   254
Mont. 262, 264, 836 P.2d 1234, 1236.            In order to be enforceable,
a listing agreement,          and any subsequent modification of that
agreement's     terms, must be reduced to writing and signed by the
party to be bound thereby.          Carnell V. Watson (1978), 176 Mont. 344,

347-40,     578 P.2d 308, 310.      We have also recognized that a real
estate broker does not obtain general authority, but has only that
authority    specifically     authorized   by   a   contract.    Martin v. Vincent

(1979),    181 Mont. 247, 251, 593 P.2d 45, 47.
     WRB    contends that based on dicta in Property Brokers, Inc. v. Loyning

(19821,    201 Mont. 309, 312, 654 P.2d 521, 523, an exception to the
general rule may apply if the surrounding circumstances indicate
that the parties waived the expiration provision in a listing
agreement.      We cited Snyderv. Schram (Or. 1976), 547 P.2d 102, for

that rule.
     However,     Snyder is   factually    distinguishable.      In Snyder, the

plaintiff broker sued to recover a commission for a sale based on

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negotiations which commenced during the term of the agreement and
continued beyond its expiration date.              That court recognized that
the defendants encouraged the plaintiff to continue negotiations,
that the plaintiff kept them informed, and that the defendants
eventually sold the property for substantially the same terms
negotiated by the broker.      These facts were sufficient to establish
that the defendants waived the original termination date.                Snyder,
547 P.2d at 104.
     Substantial evidence supports the District Court's findings
that this exception does not apply to the facts of this case.
     Costello did not offer to act as WRB's broker in writing or
orally in 1988 or 1989.         He did no advertising of WRB property
during either year, and the only written communication between the
parties   during that       time    was       Robinson's   January 12,    1988,
memorandum advising that single family and duplex lots were being
withdrawn from the market.         Costello sold no property during that
period; no one offered to buy any of WRB's property from Costello
during that   time;   and he had little communication of substance with
any of WRB's principals during those two years.                  The   District
Court's finding that the contractual relationship between Costello
and WRB was not         extended to 1989 by Costello's           conduct was
supported by substantial evidence and is not clearly erroneous.
     Because the District Court's conclusion that Costello had no
brokerage relationship with plaintiffs during 1989 is dispositive
of plaintiffs' claims,      and because we affirm that conclusion, we

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will not address the remaining issues raised on appeal, and by

cross-appeal.

     The judgment of the District Court is affirmed

We concur:

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