Court Opinion

ID: 8026720
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:39:56.70405+00
Date Added: 2024-06-11T16:36:50.648520
License: Public Domain

MR. JUSTICE CASTLES
(dissenting):
I respectfully dissent to the majority holding. The issue around which this case revolves is “fraudulent inducement” to enter into a contract, and the action clearly arises out of the contract within the meaning of section 27-208, R.C.M.1947. In construing the cases of Westfall, Ryan and Cashen, the majority inaccurately states:
“* * * all three cited cases involved actions for breach of contract, with rescission as part of the relief sought * * *. Here, plaintiffs chose to affirm the contract and sue for fraudulent representations * *
In Westfall, punitive damages were denied because of an allegation the insurance carrier had breached its contract with the insured. Rescission of that underlying obligation, the initial insurance contract, was not prayed for. The fact that rescission of the release agreement was requested, was not determinitive of the case. The continuing existence of the underlying obligation was the factor which caused the application of the statute to deny punitive relief.
The facts in Ryan presented a “fraudulent inducement” very similar to the instant case. The majority states .rescission of the purchase contract was sought, but the opinion contains no language to that effect. Again, punitive damages were disallowed in light of the continuing existence of the contract, an existence which could only be denied by a prayer for rescission.
*85In Cashen, another insurance contract and release problem is presented. A fair reading of that case fails to reveal any intent of the plaintiff to deny the existence of the original insurance agreement. Thus, punitive damages were deemed inappropriate.
In a case not cited by the majority, Paulson v. Kuston Enterprises Inc., 157 Mont. 188, 483 P.2d 708, the relationship between the prayer for rescission and the recovery of punitive damages is made clear. The problem in Paulson was also one of fraudulent inducement. Yet, in Paulson punitive damages were allowed as rescission or cancellation of the underlying contractual obligation was clearly sought. By denying the contract, the plaintiffs became legally eligible to seek punitive damages, as the action clearly sounded in tort.
Section 17-208, R.C.M.1947, requires that plaintiff elect one of two remedies: (1) affirm the contract, receive the benefits derived thereunder, and sue for actual damages, or (2) disaffirm through a prayer for rescission or cancellation and sue for both actual and punitive damages. Even in the unfortunate circumstances presented here, the law does not permit both. The majority by its holding, overrules the firmly established cases cited heretofore, and applies the direct converse of the correct rule.