LYNCH v SHIELDS

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No. 12734 I N THE SUPREME COURT O THE STATE O M N A A F F OTN 1974 RICHARD E. LYNCH, P l a i n t i f f and A p p e l l a n t , J. PAUL SHIELDS and JESSIE I. SHIELDS, husband and w i f e , Defendants and Respondents. Appeal from: D i s t r i c t Court of t h e S i x t h J u d i c i a l D i s t r i c t , Honorable J a c k D. Shanstrom, Judge p r e s i d i n g . Counsel of Record : For Appellant : Berg, Angel, Andriolo and Morgan, Bozeman, Montana Richard J Andriolo argued, Bozeman , Montana . F o r Respondents: Landoe, Gary and Donald E. White, Bozeman, Montana H. B. Landoe argued, Bozeman, Montana Submitted: Decided: November 20, 1974 =--. L:!.- = Filed : - . - - 3.4 Mr. J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion o f t h e C o u r t . P l a i n t i f f a p p e a l s from a judgment f o r d e f e n d a n t s e n t e r e d on f i n d i n g s of f a c t and c o n c l u s i o n s of law a f t e r d e n i a l of a motion t o a l t e r and amend t h o s e f i n d i n g s and c o n c l u s i o n s . The c a s e was t r i e d t o t h e c o u r t i n t h e s i x t h j u d i c i a l d i s t r i c t , c o u n t y of P a r k , t h e Hon. J a c k D . Shanstrom, p r e s i d i n g w i t h o u t a jury. P l a i n t i f f , R i c h a r d E. Lynch, b r o u g h t t h e a c t i o n t o r e c o v e r t h e sum of $10,000 which he had p a i d t o d e f e n d a n t s J . P a u l S h i e l d s and J e s s i e I . S h i e l d s , husband and w i f e , a l l e g e d l y a s a good f a i t h d e p o s i t i n c o n n e c t i o n w i t h n e g o t i a t i o n s t o p u r c h a s e t h e OTO r a n c h i n Park County. Defendants answered d e n y i n g t h e payment was s i m p l y a good f a i t h d e p o s i t , b u t r a t h e r t h a t i t was payment f o r an o p t i o n t o purchase. The i s s u e s on a p p e a l a r e : 1. The d i s t r i c t c o u r t e r r e d i n r e f u s i n g t o f i n d t h a t a n a l l e g e d o r a l c o n t r a c t o r o p t i o n agreement was n o t e n f o r c e a b l e by way of d e f e n s e a s i t v i o l a t e d t h e s t a t u t e of f r a u d . 2. The c o u r t e r r e d i n f i n d i n g a l e g a l l y b i n d i n g con- t r a c t e x i s t e d between t h e p a r t i e s . To answer t h e i s s u e s , t h e f a c t s a r e i m p o r t a n t . One Bud B e l l i s , who had hunted on t h e S h i e l d s ' p r o p e r t y , c a l l e d P a u l and J e s s i e S h i e l d s i n March 1970 s a y i n g t h a t he had a g r o u p of p e o p l e i n t e r e s t e d i n buying t h e i r r a n c h and a s k i n g them t o w a i t b e f o r e s e l l i n g i t . On A p r i l 2 3 , 1970, p l a i n t i f f Lynch and B e l l i s f l e w t o Montana f o r t h e p u r p o s e of viewing t h e ranch. Mr. Lynch d e s c r i b e d h i m s e l f a s a " s t o c k b r o k e r p a r t t i m e , a s e c u r i t i e s salesman". P r i o r t o h i s p r e s e n t p o s i t i o n he worked a s a merger c o n s u l t a n t a s s i s t i n g i n t h e s a l e o f c o r p o r a t i o n s , and b e f o r e t h a t a s a s e c u r i t i e s salesman. The S h i e l d s w e r e w i l l i n g t o s e l l t h e e n t i r e r a n c h f o r $500,000, b u t a t t h i s f i r s t meeting t h e y r e a c h e d a n agreement whereby t h e y would r e t a i n a c o n t r o l l i n g i n t e r e s t i n t h e r a n c h by s e l l i n g 49% of t h e OTO C o r p o r a t i o n , which would have t o be expanded. The t o t a l p r i c e a g r e e d upon was $245,000 f o r 49% i n t e r e s t , 29% of which w a s t o be p a i d on d e l i v e r y of t h e s t o c k , w i t h $10,000 of t h a t 29% f i g u r e t o be p a i d on e x e c u t i o n of a n instrument. The r e m a i n d e r was t o be p a i d i n e q u a l y e a r l y i n - stallments. They d i s c u s s e d t h e t r a n s a c t i o n day and n i g h t f o r t h r e e d a y s , a g r e e i n g on what P a u l S h i e l d s c o n s i d e r e d t o be a l l t h e a s p e c t s o f the d e a l , and t h e d e t a i l s w e r e n e v e r changed. J e s s i e S h i e l d s t e s t i f i e d t h i s was t h e agreement r e a c h e d and s o d i d Lynch, who l e f t Montana w i t h t h e i n t e n t i o n of consummating t h e d e a l i f i n v e s t o r s c o u l d be found. The S h i e l d s had g i v e n him t i m e t o o b t a i n i n v e s t o r s . S h o r t l y a f t e r r e t u r n i n g t o A r i z o n a , t h e i n t e r e s t e d men r e c e i v e d t h e proposed "Agreement t o S e l l and Buy C a p i t a l S t o c k " and " T r a n s a c t i o n s I n v o l v e d i n S a l e of C a p i t a l S t o c k of OTO Ranch" which Lynch e x p e c t e d and which Lynch and B e l l i s had r e q u e s t e d s o t h a t t h e s a l e c o u l d be consummated. The i n t e r e s t f i g u r e , f o r which a b l a n k was l e f t , was t e s t i f i e d t o by P a u l and J e s s i e S h i e l d s t o have been d e c i d e d on a s 7 % . The documents s e t o u t t h e t e r m s a s a g r e e d upon and t h e S h i e l d s b e l i e v e d t h a t t h e y were e n t i r e l y s a t i s f a c t o r y t o t h e men b e c a u s e t h e S h i e l d s d i d n o t hear from them. On May 11, 1970, J e s s i e S h i e l d s w r o t e a l e t t e r t o B e l l i s and Lynch i n which s h e s t a t e d , b e c a u s e s h e had n o t h e a r d from them i n a l o n g t i m e , s h e supposed t h e y were no l o n g e r i n t e r e s t e d . T h i s l e t t e r prompted a c a l l from Lynch f o l l o w e d by a n o t h e r v i s i t s o t h a t t h e r a n c h c o u l d be shown t o a p r o s p e c t i v e i n v e s t o r and on May 1 5 Lynch b r o u g h t a d o c t o r t o l o o k o v e r t h e r a n c h . When t h e d o c t o r l e f t a f t e r s p e n d i n g o n l y a s h o r t t i m e on t h e r a n c h , Lynch s t a y e d f o r two d a y s t a l k i n g o v e r h i s p l a n s w i t h t h e S h i e l d s a s i f t h e agreement w a s soon t o be s i g n e d . A t t h i s t i m e P a u l t o l d Lynch t h a t s i n c e s o many p e o p l e were i n t e r e s t e d i n t h e r a n c h , Lynch would have t o p u t up $10,000 f o r an option. Concerned a b o u t t h e p o s s i b i l i t y t h a t enough i n - v e s t o r s c o u l d n o t be found, P a u l d i d n o t want Lynch t o have t o f o r f e i t t h e consideration f o r an option. H e asked Lynch i f h e c o u l d r a i s e t h e downpayment on h i s own b e c a u s e , a s Lynch t e s t i f i e d P a u l t o l d him: "He s a i d , w e l l , i f t h e r e s t of your s y n d i c a t e d o e s n ' t g e t t o g e t h e r t h e n t h e o n l y way you c a n g e t t h a t $10,000.00 back i s i f you p u t up t h e whole downpayment." fied: Paul Shields t e s t i - "And I a s k e d him, I s a i d , w e l l , Dick, t o make t h i s a d e a l you w i l l have t o p u t up a n o p t i o n of $10,000.00 t o know t h a t we have g o t something. W e want t o s e l l t h i s d e a l and we c a n ' t s e t h e r e a l l summer and l o s e t h e p e o p l e who were wanting t o buy a l l of t h e t i m e a t t h a t time." J e s s i e ' s testimony agreed with P a u l ' s , and t h e p a r t i e s a g r e e d t h a t on payment o f t h e $10,000 t h e o p t i o n would r u n u n t i l August 1, 1970. Lynch t e s t i f i e d t h a t when he r e t u r n e d t o Phoenix h e " g o t n e r v o u s " and s e n t a check f o r $10,000 t o t h e S h i e l d s . t h a t t h i s would g i v e him t h e f i r s t chance t o buy. He t h o u g h t He t h o u g h t he had accomplished something by s e n d i n g t h e check and t h e S h i e l d s would h o l d t h e d e a l f o r him. I n t h e l e t t e r accompanying h i s check he wrote: " T h i s i s o n l y t h e f i r s t s t e p i n what s h o u l d be a l o n g and f r i e n d l y b u s i n e s s r e l a t i o n s h i p . W e a r e a l l l o o k i n g forward t o b e i n g s t o c k h o l d e r s i n OTO Ranch * * * W e w i l l forward t h e agreement once we have l e g a l l y e s t a b l i s h e d o u r (Bud's and mine) power of a t t o r n e y t o s i g n f o r t h e group. I hope o u r check i s s u f f i c i e n t f o r now." It seemed as though t h e s i g n e d Agreement was f o r t h c o m i n g . The S h i e l d s r e f r a i n e d from showing t h e v a l u a b l e r a n c h , and a l t h o u g h many p e o p l e i n q u i r e d a b o u t i t s p o s s i b l e p u r c h a s e , t h e y were t o l d t h a t i t was n o t f o r s a l e . I n a l e t t e r of May 29, 1970, J e s s i e S h i e l d s a s s u r e d t h e two men t h a t t h e y were p r o p e r l y managing t h e r a n c h and wanted t o keep them informed o f what was happening. She asked i f t h e i r wives c o u l d come up t o g i v e h e r i d e a s on f i x i n g up t h e h o u s e s , which s h e w a s r e a d y i n g f o r them. On J u n e 2 6 , 1970, s h e a g a i n w r o t e and e x p r e s s - e d c o n c e r n f o r t h e management of t h e r a n c h i n t h e f u t u r e ; s i n c e t h e Agreement would g i v e t h e i n v e s t o r s a 4 9 % i n t e r e s t , t h e r e was much p l a n n i n g and t r u s t which would be needed. she wrote: I n one p a r t "Gretchen l e f t t h e house up on t h e OTO p r o p e r t y j u s t i n p e r f e c t shape. W c o u l d r e n t it b u t d i d n ' t t h i n k we had e b e t t e r till we found o u t what you boys wanted t o d o . " She ended by reminding Bud B e l l i s t h a t he s t i l l had t o p i c k o u t t h e house he wanted. On J u l y 31 o r August 1, 1970, R i c h a r d Lynch c a l l e d t h e S h i e l d s b e c a u s e t h e n i n e t y d a y s which t h e S h i e l d s had g i v e n them i n A p r i l were up. A c t u a l l y , t h e s i x t y day o p t i o n p e r i o d which t h e S h i e l d s had a g r e e d t o g i v e i n exchange f o r t h e $10,000 c o n s i d e r a t i o n had e x p i r e d . When asked who he t a l k e d t o on t h e t e l e p h o n e , h e answered, " J e s s i e " . a b o u t f o r f e i t i n g t h e $10,000. H e d i d n o t r e c a l l any t a l k He t h e n t e s t i f i e d t h a t he was n o t s u r e i f it was Jessie he t a l k e d t o , remarking t h a t it had been t h r e e years since t h e conversation. When asked whether he w a s s u r e a b o u t what was s a i d i n t h e c o n v e r s a t i o n , he answered, " n o t dead p o s i t i v e , no". H e d i d r e c a l l t h a t t h e p e r s o n he t a l k e d t o , whoever i t was, o f f e r e d t o a l l o w him more t i m e . P a u l and J e s s i e t e s t i f i e d t h e y were s u r e t h a t Lynch had t a l k e d t o Paul. P a u l o f f e r e d t o e x t e n d t h e o p t i o n t o September 1 5 , a month and a h a l f , and Lynch s a i d t h a t h e a p p r e c i a t e d t h a t v e r y much and i t might d o t h e job. S h i e l d s wanted t o be f a i r and d i d n o t want Lynch t o have t o f o r f e i t h i s money i f t h e r e was a chance of going through with the deal. They had an extension drawn up and after signing it, sent it to Richard Lynch. admitted receiving it. Lynch\ The document was prepared simply to assure Lynch that he had until September 15 to return the signed Agreement. The Shields never received a response from Lynch--they did not hear from him again until the law suit was filed--and assumed that the extension was acceptable to him. Defendants were prepared, from the time of the negotiations which took place in April 1970, to comply literally with the terms and conditions set forth in the agreement to sell and were ready, willing and able to convey the property as agreed. The district court concluded: "I. "That as a result of the oral conversations between plaintiff and defendants on April 23rd and 24th, 1970, a written proposal in the form of a purchase agreement was prepared and delivered to plaintiff by mail on or about May 1, 1970, the receipt of which was acknowledged by the plaintiff, which document constituted an offer to sell. "That on or about May 29th, 1970, plaintiff, following a meeting with defendants at defendantst ranch in Park County, Montana, addressed a letter to defendants enclosing a check for $10,000.00 as part payment in acceptance of the offer and to obtain an option to hold the deal for him and his associates for a certain period of time, and acknowledged acceptance of the terms of the written contract by assuring defendants that the agreement would be forwarded as soon as power of attorney could be established, by which plaintiff implied that he was acting for himself as well as certain undisclosed associates. "That defendants, Paul Shields and Jessie Shields, construed said $10,000.00 payment, together with written assurance by plaintiff that the agreement would be forwarded as soon as power of attorney could be established to sign the agreement, in the nature of an option to hold the deal for the plaintiff until he had perfected his power of attorney. I' IV. "That t h e f o r e g o i n g a c t s and c o n d u c t on t h e p a r t o f p l a i n t i f f and d e f e n d a n t s , i n c l u d i n g p a r t payment o f $10,000.00, c o n s t i t u t e a n o f f e r and a c c e p t a n c e , a s d e f i n e d i n S e c t i o n 87A.8-319, R.C.M. 1947, under S u b s e c t i o n s ( a ) , (b) , and ( c ) t h e r e o f , a s w e l l as S e c t i o n 13-606-4, R.C.M. 1947. "That payment o f t h e sum o f $10,000.00 c o n s t i t u t e s p a r t performance, which removed s a i d t r a n s a c t i o n from t h e S t a t u t e of F r a u d s , and p l a c e d a n o b l i g a t i o n upon t h e d e f e n d a n t s i n t h e n a t u r e of an o p t i o n t o hold t h e d e a l f o r t h e p l a i n t i f f , and t h a t t h e d e f e n d a n t s d i d s o . "That by r e a s o n of t h e f a i l u r e of t h e p l a i n t i f f t o comply w i t h t h e agreement i n t h e n a t u r e of an o p t i o n within t h e agreed t i m e o r w i t h i n a reasonable t i m e , plaintiff forfeited h i s r i g h t t o rec l a i m t h e c o n s i d e r a t i o n p a i d by him f o r t h e o p t i o n t o consummate s a i d p u r c h a s e w i t h i n a c e r t a i n p e r i o d of t i m e o r w i t h i n a r e a s o n a b l e t i m e . " R e f e r r i n g now t o t h e i s s u e s r a i s e d . Insofar a s the s t a t u t e of f r a u d s i s c o n c e r n e d , under s e c t i o n s 1 3 - 6 0 6 ( 4 ) , 931401-7, 74-203, o r 87A-8-319, R.C.M. 1947, it i s c l e a r t h a t a f u l l y e x e c u t e d o p t i o n c o n t r a c t was f u l l y performed and o u t s i d e t h e s t a t u t e s enumerated. A p p e l l a n t Lynch d o e s n o t d i s p u t e t h i s general statement but argues t h a t t h e evidence w a s i n s u f f i c i e n t t o e s t a b l i s h t h e e x i s t e n c e of a n o p t i o n agreement. By o u r r e c i t a t i o n o f t h e f a c t s h e r e and o u r q u o t a t i o n of t h e t r i a l c o u r t ' s c o n c l u s i o n s , we f i n d t h e r e was s u f f i c i e n t e v i d e n c e t o e s t a b l i s h t h e o p t i o n agreement a s w e l l a s t o show t h a t t h e r e was f u l l performance. The p a r t i e s had d i s c u s s e d and a g r e e d upon a l l t h e e s s e n t i a l t e r m s of t h e s a l e , most of which were i n c o r p o r a t e d i n t o t h e two i n s t r u m e n t s . The S h i e l d s had a n o f f e r which t h e y h e l d open f o r a n e n t i r e month. On L y n c h ' s v i s i t t o t h e r a n c h on May 23, 1970, P a u l informed him t h a t some payment would be n e c e s s a r y t o h o l d t h e d e a l any l o n g e r , whereupon t h e two a g r e e d on $10,000. R e t u r n i n g t o Phoenix, Lynch s e n t t h e check and a l e t t e r d a t e d May 29, 1970 i n which h e w r o t e " W e w i l l forward t h e agreement once w e have l e g a l l y e s t a b l i s h e d o u r (Buds and mine) power of a t t o r n e y t o s i g n f o r t h e group. check i s s u f f i c i e n t f o r now." i n g and r e c e i v e d t i m e . I hope o u r I n o t h e r words, Lynch was buy- The S h i e l d s c o n s i d e r e d t h e m s e l v e s bound and h e l d t h e p r o p e r t y o f f t h e market. These t r a n s a c t i o n s c r e a t e d a n o p t i o n c o n t r a c t a s t h e t r i a l c o u r t found. I n P e t e r s o n Sheep and C a t t l e Co. v . Moss, 155 Mont. 311, 471 P.2d 546, a n o p t i o n w a s c r e a t e d by payment of c o n s i d e r a t i o n o n a n agreement t o " t i e up t h e p r o p e r t y " . Finding s u b s t a n t i a l evidence t o support t h e f i n d i n g s of t h e t r i a l c o u r t , and f i n d i n g no m e r i t i n t h e i s s u e s r a i s e d on a p p e a l , w e a f f i r m t h e judgment. T concur: t . Chief J u s t i c e Justices

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