MOORE v SWANSON

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No. 13342 I N THE SUPREME C U T O THE STATE O M N A A OR F F OTN 1976 MARK M. MOORE, P l a i n t i f f and Respondent, HOWARD J. S A S N and W NO M. EVELYN SWANSON, Defendants and A p p e l l a n t s . Appeal from: D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a l D i s t r i c t , Honorable C. B. Sande, Judge p r e s i d i n g . Counsel o f Record: For Appellants : Ayers and A l t e r o w i t z , Red Lodge, Montana A r t h u r W. Ayers, Jr. argued, Red Lodge, Montana For Respondent : Berger, Anderson, S i n c l a i r and Murphy, B i l l i n g s , Montana Richard Anderson argued, B i l l i n g s , Montana Submitted: Filed: NOV 3 0 1976 Decided: October 13, 1976 NOV 3 0 1976 Mr. J u s t i c e Frank I . Haswell 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 Mark M. Moore, a s b u y e r , b r o u g h t t h i s a c t i o n a g a i n s t d e f e n d a n t s Swansons, a s s e l l e r s , t o r e s c i n d a c o n t r a c t f o r deed o r , i n t h e a l t e r n a t i v e , t o r e c o v e r money damages. The d i s t r i c t c o u r t awarded damages t o p l a i n t i f f , and d e f e n d a n t s a p p e a l . On J u l y 1 8 , 1973, p l a i n t i f f and d e f e n d a n t s e x e c u t e d a c o n t r a c t f o r deed whereby d e f e n d a n t s a g r e e d t o convey t o p l a i n t i f f t h e A l p i n e V i l l a g e Motel n e a r Red Lodge, Montana and t h e p r o p e r t y upon which t h e m o t e l was s i t u a t e d , c o n s i s t i n g o f approximately twelve a c r e s . The p u r c h a s e p r i c e w a s $98,000, of which $73,000 w a s p a y a b l e on t e r m s o v e r t e n y e a r s . During n e g o t i a t i o n s p r e c e d i n g t h e f o r m a l c o n t r a c t , t h e p l a i n t i f f made s p e c i f i c i n q u i r y of d e f e n d a n t s c o n c e r n i n g w a t e r r i g h t s available t o t h e property. Defendant Howard Swanson t o l d p l a i n t i f f t h a t d e f e n d a n t s owned a l l of t h e s p r i n g r i g h t s on t h e p r o p e r t y and t h a t t h e m o t e l and r e s i d e n c e were c o n n e c t e d t o Red Lodge c i t y w a t e r . These r e s p r e s e n t a t i o n s were embodied i n t h e c o n t r a c t by r e c i t i n g t h e r e i n t h e promise t h a t t h e g o i n g b u s i n e s s known a s t h e A l p i n e V i l l a g e Motel, t o g e t h e r w i t h a l l i t s " c o n t r a c t s and engagements, b e n e f i t s and a d v a n t a g e s , " w a s a s s u r e d t o t h e plaintiff-buyer. The c o n t r a c t f u r t h e r w a r r a n t e d f e e s i m p l e t i t l e i n t h e d e s c r i b e d r e a l t y and i n " a l l w a t e r r i g h t s used i n c o n n e c t i o n therewith. " The e v i d e n c e adduced a t t r i a l e s t a b l i s h e d t h e f o l l o w i n g f a c t s concerning t h e s e "water r i g h t s " i n t h e property. The s p r i n g r i g h t s on t h e p r o p e r t y had been r e s e r v e d t o a d j o i n i n g l a n d by a n i n s t r u m e n t e x e c u t e d i n 1940. When t h e d e f e n d a n t s purchased t h e p r o p e r t y i n 1952, t h e i r own deed was s u b j e c t t o t h i s r e s e r v a t i o n of s p r i n g w a t e r s t o t h e a d j o i n i n g owners. However, d e f e n d a n t s d i d not d i s c l o s e t h i s f a c t t o t h e p l a i n t i f f e i t h e r i n o r a l negotiat i o n s o r i n t h e c o n t r a c t f o r deed. I n a d d i t i o n , p l a i n t i f f was n e v e r informed of t h e f a c t t h a t t h e c i t y w a t e r c o n n e c t e d t o t h e p r o p e r t y w a s p r o v i d e d by a p r i v a t e l i n e a p p r o x i m a t e l y o n e thousand f e e t long. T h i s l i n e r a n t h r o u g h and a c r o s s p r o p e r t y owned by t h e N o r t h e r n P a c i f i c Railway. The N o r t h e r n P a c i f i c had g i v e n two p e r m i t s f o r t h i s l i n e which were a b s o l u t e l y c a n c e l a b l e upon 9 0 days n o t i c e . The p e r m i t s r e q u i r e d t h a t t h e e n t i r e l i n e be main- t a i n e d and r e p a i r e d a t t h e u s e r ' s s o l e expense. The N o r t h e r n P a c i f i c p e r m i t s w e r e n o t a m a t t e r of p u b l i c r e c o r d and t h e y were i n t h e defendants' p r i v a t e possession. Their existence w a s not made known t o p l a i n t i f f u n t i l a f t e r he had s i g n e d t h e c o n t r a c t and made payments. F u r t h e r , t h e p e r m i t s were n o t a s s i g n a b l e by d e f e n d a n t s w i t h o u t t h e N o r t h e r n P a c i f i c ' s w r i t t e n c o n s e n t ; def e n d a n t s had never o b t a i n e d s u c h c o n s e n t . The c o n t r a c t h e r e i n e n t i t l e d p l a i n t i f f t o a n a b s t r a c t o f t i t l e which " s h a l l show a good r e c o r d f e e s i m p l e t i t l e i n t h e Sellers." I f t h e a b s t r a c t d i s c l o s e d d e f e c t s n o t c o r r e c t e d by s e l l e r s w i t h i n a r e a s o n a b l e t i m e , buyer was t h e n g i v e n t h e r i g h t t o cancel the contract. After p l a i n t i f f received t h e a b s t r a c t , he had it examined by a n a t t o r n e y . The e x a m i n a t i o n d i s c l o s e d t h e r e s e r v a t i o n of s p r i n g r i g h t s t o p l a i n t i f f ' s n e i g h b o r s . Plain- t i f f gave defendants' a t t o r n e y w r i t t e n n o t i f i c a t i o n t h a t he d i d n o t a c c e p t t h e a b s t r a c t , a s was h i s r i g h t under t h e c o n t r a c t . Defendants n e v e r t o o k s t e p s t o c o r r e c t t h e s e d e f e c t s . Another a s p e c t of t h e t r a n s a c t i o n c o n c e r n s t h e A l p i n e V i l l a g e M o t e l ' s T r i p l e A r a t i n g w i t h t h e American Automobile Association. During n e g o t i a t i o n s , d e f e n d a n t s s p e c i f i c a l l y t o l d p l a i n t i f f t h a t t h e m o t e l f u l l y complied w i t h T r i p l e A s t a n d a r d s . A c o v e n a n t of t h e c o n t r a c t r e q u i r e d t h e p l a i n t i f f t o maintain t h e m o t e l ' s membership w i t h t h e American Automobile A s s o c i a t i o n d u r i n g t h e term of t h e c o n t r a c t . Nevertheless, before t h e plain- t i f f and h i s w i f e t o o k p o s s e s s i o n of t h e p r e m i s e s i n a c c o r d a n c e with t h e contract, defendants received a written deficiency n o t i f i c a t i o n from t h e A s s o c i a t i o n t h a t c e r t a i n improvements w e r e r e q u i r e d ; and d e f e n d a n t s i n no way communicated t h i s information t o t h e p l a i n t i f f o r h i s wife. Because o f t h e d e - f i c i e n c y n o t i c e , p l a i n t i f f expended $1,720.13 f o r t h e i t e m s necessary t o r e t a i n t h e motel's T r i p l e A r a t i n g . Regarding b o t h t h e w a t e r r i g h t s from t h e c i t y l i n e and t h e s p r i n g s , and t h e T r i p l e A s t a n d a r d s , t h e p l a i n t i f f t e s t i f i e d t h a t h e would n o t have p u r c h a s e d t h e m o t e l p r o p e r t y had t h e d e f e n d a n t s a p p r i s e d him o f t h e f a c t s a s t h e y s u b s e q u e n t l y d e v e l o p e d and a s w e h a v e o u t l i n e d a b o v e . When it became a p p a r e n t t o p l a i n t i f f t h a t t h e d e f e n d a n t s w e r e n o t g o i n g t o remedy t h e t i t l e d e f e c t s o r make t h e n e c e s s a r y improvements t o t h e p r o p e r t y , p l a i n t i f f f i l e d s u i t f o r r e s c i s s i o n b a s e d upon f r a u d and f a i l u r e o f c o n s i d e r a t i o n , o r a l t e r n a t i v e l y , f o r damages f o r t h e r e a s o n a b l e c o s t s o f p r o v i d i n g a new w a t e r s u p p l y and f o r making n e c e s s a r y improvements t o m a i n t a i n T r i p l e A s t a n d a r d s i n t h e amount o f $10,000. b e f o r e D i s t r i c t J u d g e C . B. Following a nonjury t r i a l Sande, t h e c o u r t e n t e r e d f i n d i n g s o f f a c t and c o n c l u s i o n s o f law d e n y i n g r e s c i s s i o n b u t a w a r d i n g p l a i n t i f f $8,000 i n damages p l u s a r e f u n d o f i n t e r e s t . The damages w e r e t o b e d e d u c t e d from t h e t o t a l c o n t r a c t p r i c e r a t h e r t h a n b e p a i d upon judgment, making t h e c o n t r a c t p r i z e $90,000 i n s t e a d o f D e f e n d a n t s a p p e a l from t h e d i s t r i c t c l o u r t ' s d e n i a l o f $98,000. t h e i r m o t i o n f o r a new t r i a l , and p r e s e n t t h r e e i s s u e s f o r r e v i e w : 1. Did t h e d i s t r i c t c o u r t err i n f i n d i n g t h a t t h e c i t y water w a s u n a v a i l a b l e t o p l a i n t i f f a s a m a t t e r of r i g h t ? 2. Did t h e d i s t r i c t c o u r t e r r i n c o n c l u d i n g t h a t c i t y w a t e r was a w a t e r r i g h t u n d e r t h e c o n t r a c t f o r d e e d ? 3. Was t h e r e s u b s t a n t i a l e v i d e n c e t o s u p p o r t t h e d i s t r i c t c o u r t ' s award o f damages t o p l a i n t i f f ? D e n i a l of r e s c i s s i o n i s n o t r a i s e d a s a n i s s u e on appeal. A s t o t h e f i r s t i s s u e , t h e b a r e f a c t s of t h e r e c o r d show t h a t t h e c i t y w a t e r l i n e c o n n e c t i n g w i t h t h e m o t e l p r o p e r t y e x i s t e d f o r t h e b e n e f i t o f t h e p r o p e r t y owners o n l y a t t h e s u f f e r a n c e o f t h e N o r t h e r n P a c i f i c Railway. The N o r t h e r n P a c i f i c p e r m i t t o u s e t h e w a t e r l i n e w a s c a n c e l a b l e by i t upon n i n e t y days notice. The f a c t i t had n o t y e t been c a n c e l l e d a t t h e t i m e of t r i a l i s immaterial. There was n o t a s c i n t i l l a of e v i - dence t h a t t h e motel property w a s w i t h i n t h e boundaries of t h e Red Lodge Municipal w a t e r s e r v i c e a r e a ; s o t h e d i s t r i c t c o u r t c o u l d n o t i n d u l g e i n t h e presumption t h a t t h e c i t y had a " d u t y " t o f u r n i s h w a t e r t o t h e p r o p e r t y under t h e r u l e of P o l s o n v . P u b l i c S e r v i c e Commission, 155 Mont. 464, 473 P.2d 508. There- f o r e , t h e c i t y w a t e r was n o t a v a i l a b l e as a matter of r i g h t and t h e d i s t r i c t c o u r t d i d n o t err i n s o h o l d i n g . I n t h e i r second i s s u e , d e f e n d a n t s c o n t e n d a l t e r n a t i v e l y t h a t t h e c i t y w a t e r c o n n e c t i o n was n o t a " w a t e r r i g h t " a s t h a t t e r m was used i n t h e c o n t r a c t f o r d e e d . T h i s i s s u e t u r n s on t h e meaning of t h e words used i n t h e c o n t r a c t u a l d e s c r i p t i o n o f t h e r e a l p r o p e r t y conveyed: connection therewith." "TOGETHER w i t h a l l w a t e r r i g h t s used i n ~ e f e n d a n t ss u g g e s t t h a t " w a t e r r i g h t s " i s a t e r m of a r t r e f e r r i n g s p e c i f i c a l l y t o p r o p e r t y r i g h t s r e g u l a t e d by t h e s t a t e under T i t l e 89, R.C.M. 1947. Thus, t h e y s a y , t h e c i t y w a t e r was n o t such a s p e c i f i c p r o p e r t y r i g h t and was n o t included i n t h e c o n t r a c t . However, s u c h a s t r i c t i n t e r p r e t a - t i o n of t h e language i s u n t e n a b l e under t h e f a c t s of t h i s c a s e . P l a i n t i f f i s a n i n e x p e r i e n c e d buyer of r e a l e s t a t e w i t h a n i n t h grade education. Defendants and p l a i n t i f f s p e c i f i c a l l y d i s c u s s e d t h e u s e of t h e c i t y w a t e r on t h e p r e m i s e s i n t h e i r n e g o t i a t i o n s and p l a i n t i f f communicated t o d e f e n d a n t s h i s c o n c e r n a b o u t a l l water usable thereon. 13-710, R.C.M. W a r e t h e r e f o r e guided by s e c t i o n e 1947, c o n c e r n i n g i n t e r p r e t a t i o n of c o n t r a c t s : "The words of a c o n t r a c t a r e t o be u n d e r s t o o d i n t h e i r o r d i n a r y and p o p u l a r s e n s e , r a t h e r t h a n a c c o r d i n g t o t h e i r s t r i c t l e g a l meaning, u n l e s s used by t h e p a r t i e s i n a t e c h n i c a l s e n s e , o r unl e s s a s p e c i a l meaning i s g i v e n t o them by u s a g e , i n which c a s e t h e l a t t e r must be f o l l o w e d . " The d i s t r i c t c o u r t was c o r r e c t i n h o l d i n g t h a t : I' * * * f o r p u r p o s e s of t h e c o n t r a c t f o r deed which forms t h e s u b j e c t of t h i s a c t i o n , Red Lodge c i t y w a t e r s h a l l be deemed a w a t e r r i g h t used i n c o n n e c t i o n w i t h t h e l a n d s s o l d by d e f e n d a n t s t o plaintiff." The f i n a l i s s u e r a i s e d by d e f e n d a n t s i s whether t h e e v i d e n c e s u b s t a n t i a t e s t h e award of damages t o p l a i n t i f f . As shown by t h e f a c t t h a t t h e s p r i n g w a t e r s on t h e m o t e l p r o p e r t y were owned by a d j o i n i n g landowners r a t h e r t h a n by t h e owner of t h e m o t e l p r o p e r t y , and by o u r d i s c u s s i o n of t h e f i r s t i s s u e r e g a r d i n g u n a v a i l a b i l i t y of c i t y w a t e r a s a m a t t e r of r i g h t , i t i s p l a i n t h a t p l a i n t i f f d i d n o t r e c e i v e t h e water r i g h t s f o r which h e c o n t r a c t e d . I n s t e a d o f awarding r e s c i s s i o n , t h e d i s t r i c t c o u r t d e t e r m i n e d t h e r e a s o n a b l e c o s t of d r i l l i n g w e l l s and rep l a c i n g t h e w a t e r system s o t h a t p l a i n t i f f would n o t be depende n t on h i s n e i g h b o r s and t h e c i t y , and t h e a c t u a l c o s t of remedying d e f e c t s i n t h e motel pursuant t o t h e deficiency n o t i c e . W i t h - r e s p e c t t o t h e c o s t of w e l l s and w a t e r , t h e o n l y e v i d e n c e a t t r i a l was a b i d by a l o c a l c o n t r a c t o r f o r t h e cons t r u c t i o n of a new w a t e r system. The e s t i m a t e was $7,380.70, and t h e d i s t r i c t c o u r t found t h i s t o be t h e r e a s o n a b l e c o s t of cons t r u c t i n g an a l t e r n a t i v e water supply f o r t h e motel property. Defendants do n o t c o n t e s t t h e r e a s o n a b l e n e s s o f t h e b i d p e r - se, b u t c o n t e n d t h a t t h e proposed c o n s t r u c t i o n i s u n n e c e s s a r i l y l a r g e f o r s u p p l y i n g p r e s e n t w a t e r needs t o t h e m o t e l and t o p l a i n t i f f ' s residence. However, t h e r e i s no e v i d e n c e t h a t t h e proposed w a t e r system would produce a n amount o f w a t e r d i s - p r o p o r t i o n a t e l y l a r g e r t h a n t h e amount o f water which p l a i n t i f f c o n t r a c t e d t o p u r c h a s e a s p a r t of t h e p r o p e r t y from t h e defendants. Thus t h e c o s t o f w a t e r s u p p l y r e p l a c e m e n t i s s u p p o r t e d by s u b s t a n t i a l , u n c o n t r a d i c t e d e v i d e n c e and w e w i l l n o t d i s t u r b t h e d i s t r i c t c o u r t ' s f i n d i n g on a p p e a l . Defendants a l s o c l a i m t h a t t h e damages awarded f o r replacement of w a t e r s u p p l y a r e s p e c u l a t i v e a s based upon a p o s s i b i l i t y of f u t u r e i n j u r y . T h i s argument, however, depends upon t h e e r r o n e o u s p r o p o s i t i o n t h a t p l a i n t i f f h a s s u f f e r e d no l e g a l harm. To t h e c o n t r a r y , p l a i n t i f f i s p r e s e n t l y e n t i t l e d t o t h e b e n e f i t of h i s bargain, t h a t i s , t h e b e n e f i t of t h e adequate w a t e r s u p p l y which d e f e n d a n t s promised t o d e l i v e r . A s heretofore demonstrated, p l a i n t i f f i s not e n t i t l e d t o c i t y water a s a m a t t e r o f r i g h t , n o r d o e s h e have r i g h t s i n s p r i n g w a t e r s r e s e r v e d t o h i s neighbors. T h i s p r e s e n t i n j u r y i s compensable a s found by the d i s t r i c t court. F i n a l l y , t h e d i s t r i c t c o u r t d i d n o t e r r i n awarding p l a i n t i f f h i s e x p e n s e s i n c u r r e d i n improving t h e m o t e l t o r e t a i n its Triple A rating. I t i s undisputed t h a t t h e r e p a i r expenses w e r e n e c e s s a r y t o meet T r i p l e A s t a n d a r d s , and t h a t p l a i n t i f f expended t h e amount awarded. Thus, s u b s t a n t i a l e v i d e n c e s u p p o r t s t h e f i n d i n g s and c o n c l u s i o n s of t h e d i s t r i c t c o u r t . The " a s i s " d i s c l a i m e r c l a u s e r e g a r d i n g c o n d i t i o n o f p r e m i s e s d o e s n o t b a r p l a i n t i f f ' s r e c o v e r y of r e p a i r damages. Defendants r e p r e s e n t e d t o p l a i n t i f f t h a t t h e m o t e l w a s i n a l l r e s p e c t s i n compliance w i t h T r i p l e A s t a n d a r d s , when i n f a c t it was not. The d i s t r i c t c o u r t c o r r e c t l y found t h i s r e p r e s e n t a t i o n t o be m a t e r i a l t o t h e t r a n s a c t i o n and a m a t t e r c o n t r i b u t i n g t o a p a r t i a l f a i l u r e o f c o n s i d e r a t i o n on d e f e n d a n t s ' p a r t . There- f o r e , damages a r e a p p r o p r i a t e t o compensate t h e p l a i n t i f f . pare: F o n t a i n e v . Lyng, 61 Mont. 5 9 0 , 202 P . 1112. Com- F i n d i n g no e r r o r , w e a f f i r m t h e judgment o f t h e d i s t r i c t court. Justice --W? c o n c u r : A C nh i e f J u s t i c e Hon. ~ R L. O ~ b ~ i n n o n , i s t r i c t ~ D Judge, s i t t i n g i n p l a c e o f M r . J u s t i c e Wesley C a s t l e s .

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