Court Opinion

ID: 880301
Source: CourtListenerOpinion
Date Created: 2013-06-05 00:01:32.252507+00
Date Added: 2024-06-11T13:02:46.430046
License: Public Domain

No. 89-270
                IN THE SUPREME COURT OF THE STATE OF MONTANA
                                    1989

RAYMOND R. GARCIA and GAIL GARCIA,
husband and wife,
                 Plaintiffs and Appellants,
         -vs-
PAUL SCHELL and CAROLINE SCHELL,
husband and wife,
                 Defendants and Respondents.

APPEAL FROM:     ~istrictCourt of the ~ineteenth~udicial~istrict,
                 In and for the County of ~incoln,
                 The Honorable Robert Keller, Judge presiding.
COUNSEL OF RECORD:
         For Appellant:
                 Bruce McEvoy; Warden, ~hristiansen,Johnson           &   Berg,
                 Kalispell, Montana
         For Respondent:
                 Lawrence H. Sverdrup; Sverdrup   &   Barnes, ~ i b b y ,
                 Montana

                                                                ---

                                    Submitted on ~riefs: Aug. 17, 1989
                                     Decided:     October 24, 1989
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.

     Plaintiffs, Raymond and Gail Garcia, filed suit in the
District Court for the ~ineteenth~udicial~istrict,Lincoln
County, to rescind their contract for deed with the
defendants, Paul and Caroline Schell.     The court entered
judgment for the defendants awarding them possession of the
real and personal property, or in the alternative, allowing
plaintiffs to retain the property by updating and continuing
payments.
     Defendants were also awarded $2,500 in attorney fees
plus costs.    From this judgment, plaintiffs appeal.     We
affirm.
     The issues are:
     1. May a contract for the        sale of a gas station
operated in violation of state law    at the time of contract,
and   subsequently, be    rescinded     for either   lack   of
consideration or mutual mistake?
     2. Did plaintiffs waive any      right to rescission by
their conduct?
     Appellants, Raymond and Gail     Garcia, entered into a
contract for deed with respondents, Paul and ~arolineSchell,
on October 16, 1985.    Garcias agreed to purchase Schells'
self-service gas station, propane plant and 20-hookup RV
park for $95,000.00. ~arciaspaid $30,000.00 down, and made
29 monthly payments of $698.49, the last payment being made
on March 24, 1988.
     On January 12, 1988, the "Eagle ConocoM business was
inspected by the Libby ire Chief and the Deputy State     ire
Marshall. The Deputy State Fire Marshall again inspected the
facility in March of 1988 and determined that several
violations of the Uniform ire Code existed. Most serious
was the violation of   §   79-902(c), which states   ". . . Class
                                                             I
or Class I1 liquids shall not be dispensed into the fuel tank
of a motor vehicle from above ground tanks." Eagle Conoco's
tanks are above ground.
     The Deputy Fire Marshall listed the corrective steps
necessary.    Plaintiffs were given the option of installing
underground tanks conforming to UFC and Environmental
Protection Agency standards within three years, or to make
the existing facility as safe as possible, with the
understanding that any major renovation would require full
conformance with the UFC and EPA standards.         The first
option's cost, changing to underground leak-resistant tanks,
was determined to be approximately $26,700.00.     The second
option's cost was determined to be approximately $2,000.00.
     Garcias failed to make their April 16, 1988 payment, or
any subsequent payments.     Schells notified the Garcias of
their default on June 2, 1988.      Garcias' attorney sent a
letter on June 21, 1988, notifying Schells of their intent to
rescind the contract for deed. On that same day, ail ~ a r c i a
obtained a loan from the First ~ational Bank in ~ i b b y ,
encumbering the gas station with a Deed of Trust and
Assignment of Contract for Deed.     Garcias continued to use
and occupy the premises up to the time of judgment, and sold
some items of personal property released by Schells from the
security of the contract.
     On August 2, 1988, under the default provisions in the
Contract for Deed, Schells would be entitled to the premises.
     ~arcias filed their complaint on July 15, 1988, to
effect a rescission of the Contract for Deed.          Garcias
alleged    lack   of   consideration,   mutual  mistake    or,
alternatively, actual or constructive fraud on the part of
Schells.     Garcias asked for $55,132.27 in compensatory
damages, in addition to $50,000.00 in punitive damages.
                              I
     Did the District Court err in determining that neither
the illegality of the operation nor the mutual mistake of the
parties justified rescission of the contract for deed?
     The District Court determined that, while failure of
consideration and mutual mistake existed, neither were of
such seriousness as to justify rescission.
     Schells contended that the violations of the Uniform
Fire Code provisions were not fatal to the contract's
consideration. The facts bear this out. ~arciasbargained
for, amongst other things, a working, income-producing gas
station. Eagle Conoco is such a station. Schells correctly
point out that Garcias are not enjoined from operating the
station due to the violations.        Nor must they install
underground tanks to continue operation.        The cost of
bringing the station up to the standards acceptable to the
Montana   ire Marshall Bureau is approximately $2,000.00.
While this expense constitutes a burden to the Garcias, it is
not so great as to justify rescission of the contract for
deed. This Court has stated that a breach which goes to only
part of the consideration, is incidental and subordinate to
the main purpose of the contract, and may be compensated in
damages does not warrant a rescission of the contract.
Johnson v. Meirs (1946), 118 Mont. 258, 164 P.2d 1012; Halcro
v. Moon (1987), 226 Mont. 121, 733 P.2d 1305.
     ~arcias' contention that they may soon be forced to
install underground tanks is not borne out by the record.
The State   ire Marshall, Ray Blehm, testified that the UFC
granted him discretion in allowing nonconforming facilities.
He stated that his position was that above-ground tanks would
be allowed to remain until replacement occurred through the
operator's own volition.   Nothing in the record shows that
replacement may soon be required by the ~nvironmental
Protection Agency, which has instituted new,          stricter
standards since the contract for deed was formed.
     The District Court made its decision on the weight of
this evidence, and we will not set aside findings of fact
unless they are clearly erroneous.   Rule 52 (a), M. R.C ~ V P.
                                                             .
                              I1
     Did Garcias waive their right to rescission?
     Schells argued, and the District Court concurred, that
Garcias waived any right to rescission by their conduct.
     Rescission of a contract may only be undertaken under
certain circumstances.
     28-2-1713.        How   rescission    accomplished.
     Rescission, when not effected by consent, can be
     accomplished only by the use on the part of the
     party rescinding of reasonable diligence to comply
     with the following rules:
     (1) He must rescind promptly upon discovering the
     facts which entitle him to rescind  . . ..
     (2) He must restore to the other party everything
     of value which he has received from him under the
     contract or must offer to restore the same, upon
     condition that such party shall do likewise, unless
     the latter is unable or positively refuses to do
     SO.

     Garcias' conduct following their notice of rescission
was inconsistent with an intent to rescind. On the very day
notice of rescission was sent to the Schells, Mrs. Garcia
encumbered the property by executing an ~ssignment of the
Contract for Deed and a Trust Indenture with the First
National Bank of Libby. Further, Garcias continued in their
use and occupancy of the premises from June of 1988 (when
notice of rescission was given) until after the rendition of
judgment in January, 1989. In addition, they disposed of a
Jeep and a snowplow (items of personal property transferred
under   the contract) after notice of rescission.   None of
these acts is consistent with a rescission.

1   C lef Justlce