Court Opinion

ID: 877848
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Date Created: 2013-06-04 21:45:14.639864+00
Date Added: 2024-06-11T08:28:52.306580
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No. 81-460
            IN THE SUPREME COURT OF THE STATE OF MONTANA
                             1982

ROGER W. JENKINS,

                          Plaintiff and Appellant,
      VS.

LARRY JOE HILLARD, JR. and
LARRY HILLARD,
                          Defendants and Respondents.

                         No. 81-461

LARRY HILLARD,
                         Plaintiff and Appellant,
      VS   .
ROGER W e JENKINS,
                         Defendant and Respondent.

Appeal from:     District Court of the Eiqhteenth Judicial District,
                 In and for the County of- alla at in
                 Honorable Jack Shanstrom, Judge presiding.
Counsel of Record:
     For Appellants:

            Landoe, Brown, Planalp, Komrners   &   Lineberger, Bozeman,
             Montana
     For Respondents:
            Steven Nelson, Bozeman, Montana

                               Submitted on briefs: March 4, 1982
                                              Decided: June 29, 1982
Mr.    J u s t i c e Gene B.       D a l y d e l i v e r e d t h e O p i n i o n o f t h e Court..

           T h i s i s an a p p e a l o f two summary j u d g m e n t s i s s u e d by

the     Dist-rict.      Court       of      the    Eighteenth        Judicial        D i s t - r i c t,

G a l l a t i n County.

           Respondent, Larry Joe H i l l a r d , is t h e son of respon-

dent,     Larry H i l l a r d .       I n March 1 9 7 9 t h e s o n s o l d a h o t e l i n

Three      Forks,      Montana,          to    appellant.,       Roger      Jenkins.            The

f a t h e r ( h e r e i n a f t e r r e f e r r e d t o a s H i l l a r d ) showed a p p e l l a n t

t h e h o t e l , conducted t h e c o n t r a c t negot-iat-ions f o r its s a l e ,

and s i g n e d t h e c o n t r a c t f o r s a l e a s h i s s o n ' s a t t o r n e y - i n -

fact.

           Negotiations f o r the s a l e of the h o t e l occurred over

a b o u t a six-month         period.          During t h i s t i m e ,    appellant lived

i n S e a t t l e and came t o T h r e e F o r k s whenever H i l l a r d was f r e e

t o d i s c u s s t.he s a l e .

           Appellant         inspected            the   hotel    thoroughly         o n l y once

and     was     accompanied           by      Hillard.          Appellant        claims       that

during        this    inspection            Hillard      told     him     that      the     hotel

b u i l d i n g was i n e x c e l l e n t c o n d i t i o n and t h a t i t was f o r s a l e

b e c a u s e H i l l a r d was t i r e d o f managing i t f o r h i s s o n .                Con-

cerning       the    c o n d i t i o n of     the heating         system,       appellant         in

h i s d e p o s i t i o n c l a i m s t h a t H i l l a r d made t h e f o l l o w i n g r e p r e -

s e n t a tions :

           Q .         And when you g o t s p e c i f i c a l l y t o t h e
           b o i l e r room, or you know, t.he a r e a which con-
           t a i n e d t h e b o i l e r s and t h e h e a t i n g s y s t e m ,
           d i d he make any s t a t e m e n t - s c o n c e r n i n g t h e
           c o n d i t i o n of t h o s e t h i n g s ?  A.      Yes.        He
           s t a t e d t h a t t h e -- l e t m e p r e f a c e t h a t .
           T h e r e was a b o u t t.wo and a h a l f i n c h e s o f
           w a t e r on t h e f l o o r i n t h e b o i l e r room and
           r i g h t away I q u e s t i o n e d t h a t and I was t o l d
           t h a t t h e r e was a b o u t a 4 0 0 - g a l l o n h o t w a t e r
           h o l d i n g t a n k and w a t e r was l e a k i n g o u t o f i t
           and it had a p a t c h on it and I a s k e d him what
           t h a t was, and h e s a i d , 'Well, t h e r e ' s a s m a l l
           c r a c k i n t h e h o l d i n g t a n k and t h a t c a n b e
            welded,'          and h e had c h e c k e d w i t h l o c a l
            w e l d e r s and h e was a s s u r e d t h a t it c o u l d b e
            w e l d e d , s o it was i n c o n s e q u e n t i a l . A t t-hat
            t i m e I a s k e d him w h a t c o n d i t i o n t.he b o i l e r s
            w e r e i n and h e t o l d m e t h a t . t h e y h a d a s l i g h t
            p r o b l e m w i t h t.he p i l o t l i g h t and t h a t t h e r e
            was n o p r o b l e m wit.h t h a t , b u t t h a t . it was
            o n l y an a d j u s t m e n t .  I was a s s u r e d t h a t b o t h
            t.he h e a t i n g s y s t e m and t h e b o i l e r s were more
            t h a n adequat-e "    .
            Appellant         a l s o s t a t e d t h a t t h e manager o f             the hotel

prevented           him     from        making       further         inspections            of    the

building.          When a p p e l l a n t t - o l d H i l l a r d t . h a t t h e m a n a g e r had

prevented h i s f u r t h e r inspect-ions, H i l l a r d t o l d a p p e l l a n t he

would t a k e c a r e o f t h e s i t u a t i o n .           A p p e l l a n t . d i d not. t . r y t o

inspect the premises a f ter t-his conversation with Hillard.

            I n h i s d e p o s i t i o n , H i l l a r d s t a t e d t . h a t he t h o u g h t t h e

h e a t i n g s y s t e m was o p e r a t i n g p r o p e r l y .     H i l l a r d a l s o s a i d he

did     not     recall       making          comments        on     the    condition        of     the

boilers.

            Appellant         purchased           the    hotel        in   March       1979,       and

about       the     second       week        in   April       he     discovered          that.     the

boilers       did     not    work p r o p e r l y .          Appellant        stated       that     he

t h e n s p e n t a b o u t $35,000           t o r e p a i r and r e b u i l d t h e h o t e l ' s

h e a t i n g system.

            The     contract.          for    sale      of   the     hot-el     contained          the

following provisions:

            ". . .       Buyer h a s i n s p e c t e d and i s f a m i l i a r
            wit-h t h e p r e m i s e s and t h e p h y s i c a l c o n d i t i o n
            o f a l l t h e f u r n i t u r e , f i x t u r e s and equipment.
            and i m p r o v e m e n t s t h e r e o n and t h e r e i n , and
            e n t e r s i n t o t h i s Agreement o n h i s own i n d e -
            pendent i n v e s t i g a t i o n . "

            and

            "This c o n t r a c t c o n t a i n s t h e e n t i r e agreement
            b e t w e e n t h e p a r t - i e s and t h e Buyer a f f i r m s
            that. n e i t h e r S e l l e r nor any a g e n t of t h e
            S e l l e r h a s made a n y r e p r e s e n t a t - i o n s o r
            p r o m i s e s wit,h r e s p e c t . t o o r a f f e c t i n g t.he
            p r o p e r t y h e r e i n d e s c r i b e d on t - h i s c o n t r a c t
            n o t e x p r e s s l y c o n t a i n e d h e r e i n and t h a t Buyer
            a f f i r m s t h a t h e r e l i e s upon h i s own p e r s o n a l
            o b s e r v a t i o n and e x a m i n a t i o n o f t-he p r o p e r t y
            herein described."

            A p p e l l a n t . had g i v e n H i l l a r d a $ 1 5 , 0 0 0 p r o m i s s o r y n o t e

as p a r t o f t h e t r a n s a c t i o n .       $ 5 , 0 0 0 was p a y a b l e o n t-he n o t e

o n March 1, 1 9 7 9 ,          and       $10,000 p a y a b l e on o r b e f o r e August

30, 1979.

            In    January         1980 H i l l a r d      brought        an     action      on    the

note,     c l a i m i n g t h a t a p p e l l a n t f a i l e d t o pay t h e $10,000 d u e

o n August 30, 1979.                 I n March 1 9 8 0 , t h e a p p e l l a n t b r o u g h t a

new and i n d e p e n d e n t      a c t i o n a g a i n s t both t h e son, a s seller,

a n d t h e f a t h e r , as t h e s o n ' s a g e n t , a l l e g i n g t h a t t h e f a t h e r

had f r a u d u l e n t l y m i s r e p r e s e n t e d t h e c o n d i t i o n o f t h e h o t e l ' s

h e a t i n g system.

            In April          1980,        the    appellant          answered            Hillard's

complaint,         a l l e g i n g as an a f f i r m a t i v e d e f e n s e t h a t H i l l a r d

fraudulent-ly misrepresented                       the    condition           of    the    hotel 's

heating        system       and     counterclaiming                for   a     return      of     the

$5,000 he a l r e a d y p a i d on t h e n o t e .

           H i l l a r d moved f o r summary j u d g m e n t o n h i s p r o m i s s o r y

n o t e a c t i o n and on t h e f r a u d a c t i o n b e g a n b y a p p e l l a n t .          The

District. Court            granted         both    motions         for   summary j u d g m e n t .

The     District        Court      found        that     appellant        had      ample     oppor-

tunity       to    inspect         t.he    hotel        and    t-hat. h e     understood          the

clauses of the contract                    i n which he a f f i r m e d            sole reliance

on h i s own i n s p e c t i o n .          The D i s t r i c t C o u r t c o n c l u d e d ,    as a

matter of         law,     t.hat     appellant          had    failed        t o make      a prima

facie      showing t h a t         he     had     the    right     t o r e l y on H i l l a r d ' s

alleged misrepresent-ations.

           The      sole     issue        on     review       is   whether         the    District

C o u r t e r r e d i n g r a n t i n g b o t h summary j u d g m e n t s .
              Under R u l e 5 6 ( c ) , lul.R.Civ.P.,               a   summary j u d g m e n t      is

p r o p e r o n l y when t h e r e i s no g e n u i n e i s s u e o f m a t e r i a l f a c t

and when           t h e moving p a r t y        is e n t i t l e d     to     a judgment         as a

m a t t e r of      law.      Summary j u d g m e n t          is t h e r e f o r e n o t a p r o p e r

tool        f o r resolving         disputed       issues of            f a c t and     is a c c o r d -

ingly         improper       whenever        a    material           factual         matter     is   in

dispute.            F l a n a g a n v . C u r r a n ( 1 9 7 4 ) , 1 6 4 Mont. 262, 5 2 1 P.2d
200.          Moreover,       the    p a r t y opposing t h e motion,                   appellant,

w i l l be i n d u l g e d t o t h e e x t e n t o f            a l l i n f e r e n c e s w h i c h may

be     r e a s o n a b l y drawn     from        the    record.           Equity       Cooperative

A s s ' n v . B e c h t o l d ( 1 9 7 7 ) , 1 7 3 Mont. 1 0 3 , 566 P.2d 793.

              Here,       there    is a t l e a s t one b l a t a n t           i s s u e of     fact:

w h e t h e r H i l l a r d made a w i l l f u l m i s r e p r e s e n t a t i o n          t o appel-

l a n t concerning t h e c o n d i t i o n of t h e h e a t i n g system.

              H i l l a r d , as respondent, a r g u e s t h a t even i f it can be

shown t h a t h e made t h e m i s r e p r e s e n t a t i o n s ,             appellant cannot

make a p r i m a f a c i e s h o w i n g t h a t h e had t h e r i g h t t o r e l y o n

the representations.                   In particular,               r e s p o n d e n t claims t h a t

the     contract           provision         and        appellant's            opportunity           to

inspect          the      hotel    preclude         appellant's              right     to     rely   on

H i l l a r d ' s r e p r e s e n t a t i o n s , however f a l s e .         We disagree.

              It     is    well     established           in     this     state        that    actual

f r a u d is 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;     Cowan

v.    W e s t l a n d R e a l t y Company ( 1 9 7 3 ) , 1 6 2 Mont. 379,    5 1 2 P.2d
714; P o u l s e n v. T r e a s u r e S t a t e I n d u s t r i e s ,         Inc.    ( 1981),

Mont    .           ,     626 P.2d 822,       38 S t .Rep.          218.         Further,     this
Court        has     recognized        the       rule    that       "fraud      vitiates         every

t r a n s a c t i o n and    a l l contracts."                 Bails     v.    Gar     (1976), 171
Mont. 342,       558 P.2d 458,        461.      The      reasoning          behind     this

rule        i s t h a t a p a r t y who h a s p e r p e t r a t e d f r a u d b y i n d u c i n g
another        to    enter       into      a    contract         may     not.    t.hen     use     the

contract        to    immunize        himself           from t h e      fraud.         Bails,      558

P.2d    a t 461-462.           The c o n t r a c t p r o v i s i o n t h e r e f o r e d o e s n o t

p r e c l u d e p r o o f t h a t a p r i o r o r a l r e p r e s e n t a t i o n w a s made and

r e l i e d upon.

           Respondent contends t h a t Schulz v.                          Peake      ( 1 9 7 8 ) , 178
Mont. 261,       583 P.2d 425,       should c o n t r o l our interpret.ation

of the contract for sale.                      In Schulz, t h i s Court construed a

contract        provision         similar         t.o     the    one     in     this     case      and

stated        that     because        the       provision         was     unambiguous,             the

c o u r t ' s d u t y was t o e n f o r c e i t .           S c h u l z is n o t c o n t r o l l i n g

h e r e f o r t h e s i m p l e r e a s o n t h a t i n S c h u l z a t r i a l w a s had

and     findings of          f a c t were made            t h a t no m i s r e p r e s e n t a t i o n s

w e r e made and no f r a u d c o m m i t t e d .               Here,    a p p e l l a n t was n o t

g i v e n t h e o p p o r t u n i t . y t o show t . h a t m i s r e p r e s e n t a t i o n s were

made and f r a u d c o m m i t t e d .

           Respondent         c i t e s Van E t t i n g e r v .         Pappin      ( 1 9 7 8 ) , 180
Mont. 1, 588 P.2d 988,    and Lowe v .            Root     ( 1 9 7 5 ) , 1 6 6 Mont.
150,     5 3 1 P.2d 674,      to     support        his    argument         that     because

a p p e l l a n t i n s p e c t e d t h e premises he cannot,                   as a matter o f

law,     be    allowed        the     right       to      rely    on     a      representation,

whether t r u e of f a l s e .           In particular,            respondent cites t h i s

often-quoted          p a s s a g e i n Van E t t i n g e r :

           "'When i t a p p e a r s t h a t a p a r t y , who c l a i m s t.o
           h a v e b e e n d e c e i v e d t-o h i s p r e j u d i c e , -    has
           i n v e s t i g a t e d f o r h i m s e l f o r t h a t t h e means
           were a t h a n d t o a s c e r t a i n t h e t r u t h            ...
                                                                               of
           a n y r e p r e s e n t a t i o n s made t o him, h i s r e l i a n c e
           upon s u c h r e p r e s e n t a t i o n s made t o h i m , how-
           e v e r f a l s e t h e y may h a v e b e e n , a f f o r d s n o
           ground of complaint.                      ( G r i n d r o d v . Anglo-
           A m e r i c a n Bond Co., 34 Mont. 1 6 9 , 85 I?.                 891;
           Power & B r o t h e r s v . T u r n e r , 37 Mont. 521, 97
P. 950; 26 C. J. 1 1 4 9 . ) I "                (Emphasis added. )
           588 P.2d a t 9 9 4 , q u o t i n g L e e v . S t o c k m e n ' s
           N a t i o n a l Bank ( 1 9 2 2 ) , 63 Mont. 262, 284, 207
P. 623, 630,
            Respondent h a s placed                  an u n n e c e s s a r i l y h a r s h    int-er-

p r e t a t i o n on t h e above p a s s a g e .               I n Van E t t i n g e r t h e p a r t y

claiming        f r a u d knew t.he f a l s i t y o f             the    representation            and

t h e r e f o r e no e v i d e n c e c o u l d be p r e s e n t e d        t o show t h e r i g h t

to     rely     on       the   representation.                    In    Lowe     a    superficial

i n s p e c t i o n of    t h e b u i l d i n g would h a v e r e v e a l e d t h e o p e n and

notorious deficiencies in the building.                                  T h a t i s s i m p l y not.

the case here.

            Appellant          acknowledges           t - h a t upon      his    inspection          he

found      two       inches      of    water        in    the      basement..          Respondent

claims        that       the   presence         of       the     water        should     have      put

a p p e l l a n t on i n q u i r y t h a t t h e b o i l e r s w e r e d e f e c t i v e . Appel-

lant,     i n d e e d , was p u t o n i n q u i r y .           According to h i s d e p o s i -

tion,      a p p e l l a n t a s k e d H i l l a r d why t h e w a t e r was t h e r e and

H i l l a r d r e p l i e d t h a t t h e b o i l e r s needed o n l y minor r e p a i r s ,

a l l e g e d l y m i s r e p r e s e n t i n g t h e t r u e c o n d i t i o n of t h e b o i l e r s .

Moreover,         appellant           may    have        been     prevented          from     further

access t o the hotel                  i n o r d e r to      invest.igate H i l l a r d ' s         al-

leged misrepresentations.                    Appellant s t a t e d i n h i s deposition

that     the     manager        of     the     hotel       would        not     let    him     freely

inspect. t h e premises.

            Van E t t i n g e r and Lowe do n o t                  stand f o r the proposi-

t i o n t h a t a b u y e r m u s t assume a s e l l e r o r h i s a g e n t i s l y i n g

when t h e b u y e r i s t o l d a p l a u s i b l e e x p l a n a t i o n f o r a d e f e c t

and what is r e q u i r e d t o c u r e t h e d e f e c t .               The Kansas Supreme

C o u r t h a s e x p r e s s e d t.he l i m i t a t i o n s t h a t need            t o be placed

on t h e Van E t t i n g e r and Lowe c a s e s :

            "'The t r e n d of t h e d e c i s i o n s of t h e c o u r t s of
            t h i s and o t . h e r s t a t e s i s t o w a r d s t h e j u s t
            d o c t r i n e , t h a t where a c o n t r a c t i s i n d u c e d by
            f a l s e representations a s to material e x i s t e n t
            f a c t . s , w h i c h a r e made w i t h t.he i n t e n t t o
            d e c e i v e , and upon which t h e p l a i n t i f f r e l i e d ,
            i t i s no d e f e n s e , t o a n a c t i o n f o r r e s c i s s i o n
                    o r f o r damages a r i s i n g o u t o f t h e d e c e i t ,
            t h a t t h e p a r t y t o whom t h e r e p r e s e n t a t i o n s
            were made m i g h t , w i t h d u e d i l i g e n c e , h a v e
            d i s c o v e r e d t h e i r f a l s i t y , a n d t h a t h e made no
            searching inquiry into facts.                        .  ."' N o r d s t r o m
            v . M i l l e r ( 1 9 8 0 ) , 227 Kan. 5 9 , 6 0 5 P.2d 5 4 5 ,
            553, q u o t i n g Speed v. H o l l i n g s w o r t h (1894) ,
            54 Kan. 4 3 6 , 4 4 0 , 38 P . 4 9 6 , 497.

            Opportunity           to    inspect        in     itself         is   no   defense       to

possible willful               misrepresentations that,                       because      of     their

plausibility,            preclude          further        investigation.                 See      also,

Shechter v.          Brewer       (Mo. 1 9 6 1 ) , 3 4 4 S.W.2d 7 8 4 , a n d Lumby v .

D o e t c h ( 1 9 7 9 ) , - Mont.          -,         600 P.2d 2 0 0 , 36 S t . R e p .     1684.

            The     District        Court       therefore         erred        by h o l d i n g    that

a p p e l l a n t f a i l e d t o make a p r i m a f a c i e s h o w i n g t h a t h e h a d a

r i g h t t o r e l y on H i l l a r d f s 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 .    Since

the    record       r e f l e c t s o t h e r genuine i s s u e s of m a t e r i a l              fact,

such     as,      whether       Hillard        made      fraudulent 'representations,

whether        appellant           relied        on    those         representations,              and

whether a p p e l l a n t had t h e o p p o r t u n i t y t o f u r t h e r i n v e s t i g a t e

Hillard's alleged representations,                           t h e summary j u d g m e n t s a r e

reversed.          The c a s e s a r e j o i n e d and remanded t o t h e D i s t r i c t
                                                                        "?

Court.

W concur:
 e
Mr.   J u s t i c e John C. Sheehy d i s s e n t i n g :

        I would a f f i r m t h e D i s t r i c t C o u r t .      Under t h e f a c t s

of t h i s case, our p r i o r decisionsshould r e q u i r e affirmance.

See p a r t i c u l a r l y Van E t t i n g e r v. Pappin ( 1 9 7 8 ) , 180 Mont.
1, 588 P.2d 988; Lowe v. Koot ( 1 9 7 5 ) , 166 Mont. 1 5 0 , 531
P.2d 674; Lee v. Stockmen's N a t i o n a l Bank ( 1 9 2 2 ) , 63 Mont.
262, 2 0 7 P. 523; and G r i n r o d v. Anglo-American Bond Co.

( 1 9 0 6 ) , 34 Mont. 169, 85 P. 891.

        H e r e t h e buyer s p e c i f i c a l l y c o n t r a c t e d t h a t t h e

s e l l e r made no r e p r e s e n t a t i o n s t o him n o t c o n t a i n e d i n t h e

w r i t t e n agreement.        I f t h a t language a f f o r d s no p r o t e c t i o n

t o a s e l l e r under t h e s e f a c t s , we have p r o v i d e d a f e r t i l e

b r e e d i n g ground f o r l a w s u i t s i n a l l l a n d s a l e c o n t r a c t s .

There would b e c i v i c and s o c i a l b e n e f i t i f w e r e q u i r e d

p e r s o n s s i g n i n g w r i t t e n c o n t r a c t s t o s a y what t h e y mean o r

mean what t h e y s a y i n t h e language u s e d .