BERRY v ROMAIN
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No. 81-58 IN THE SUPREME: COURT OF THE STATE OF MONTANA 1981 GEORGE W. BERRY, Plaintiff and Respondent, VS. CLAYTON M. ROMAIN and RAYMOND C. ROMAIN, Defendants and Appellants. Appeal from: Distrist Court of the Eleventh Judicial District, In and for the County of Flathead. Honorable Robert Sykes, Judge presiding. Counsel of Record: For Appellants: Keller and Gilmer, Kalispell, Montana For Respondent: Datsopoulos, MacDonald and Lind, Missoula, Montana Submitted on briefs: July 2, 1981 Filed: AUG ' - 798 ~ecided: AU G ? 1 7981 Mr. J u s t i c e J o h n Conway H a r r i s o n the Court. delivered t h e Opinion of T h i s a c t i o n was b r o u g h t i n t h e D i s t r i c t C o u r t o f t h e Eleventh J u d i c i a l D i s t r i c t of t h e S t a t e o f Montana, County of F l a t h e a d , t o r e s c i n d a c o n t r a c t f o r t h e purchase of r e a l property i n Flathead counterclaimed for County. a breach of t h e p l a i n t i f f-respondent court, and The d e f e n d a n t - a p p e l l a n t s findings . of contract for nonpayment The m a t t e r was t r i e d b e f o r e t h e fact and conclusions judgment w e r e e n t e r e d f o r p l a i n t i f f - r e s p o n d e n t of $49,385.36. by Thereafter, appellants' law of and i n t h e amount motions f o r amend- ment o f t h e f i n d i n g s , c o n c l u s i o n s and judgment and f o r a new trial were various filed. findings The and court entered making rescission along with a order additional c o n c l u s i o n s and a n amended judgment for an findings i n f a v o r of judgment for amending and respondent $46,218.10 plus i n t e r e s t from t h e d a t e o f t h e o r i g i n a l j u d g m e n t . The appellants' issues before brief, were t h i s Court, six i n number a s set forth in the b u t c a n be p r o p e r l y h a n d l e d and d i s c u s s e d by t h i s C o u r t a s f o l l o w s : 1. Whether the judgment of the trial court for r e s c i s s i o n i s s u p p o r t e d by s u b s t a n t i a l c r e d i b l e e v i d e n c e . 2. Whether t h e r e s c i s s i o n o f t h e c o n t r a c t by r e a s o n o f m u t u a l m i s t a k e was a p r o p e r remedy t o be a p p l i e d by t h e court . 3. Whether t h e c o u r t p r o p e r l y awarded damages u n d e r t h e circumstances of t h i s c a s e . Appellants, located in Wesley House. t h e Romains, Flathead The County purchased near a Bigfork, irregularly-shaped tract tract of land Montana, from i s bounded on t h e w e s t by Montana Highway 35 and on t h e s o u t h and e a s t by a county road. I n t h e s p r i n g of 1978, t h e y c o n t r a c t e d w i t h House t o b u i l d a t w o - s t o r y part of the offices. the property, c o m m e r c i a l b u i l d i n g on t h e s o u t h intending They h i r e d House, land, to construct to rent the space as from whom t h e y were p u r c h a s i n g the building. When construction b e g a n , t h e b u i l d i n g was i n t e n d e d f o r a p p e l l a n t s ' u s e a n d , a s previously noted, for r e n t a l property. D u r i n g t h e l a t t e r p a r t of J u n e o r e a r l y p a r t o f J u l y 1978, respondent Berry, t h e owner o f t h e B i g f o r k C o n v a l e s - c e n c e C e n t e r , a n u r s i n g home, along with t h e l o c a l d e n t i s t and a d o c t o r who was c o n s i d e r i n g moving i n t o t h e a r e a , met w i t h a p p e l l a n t s t o see i f t h e y c o u l d p u r c h a s e t h e b u i l d i n g . They c o n t e m p l a t e d c r e a t i n g a m e d i c a l c e n t e r , w i t h t h e d o c t o r and d e n t i s t u p s t a i r s and r e s p o n d e n t o c c u p y i n g t h e d o w n s t a i r s area. F o l l o w i n g t h e m e e t i n g r e s p o n d e n t met w i t h a l o c a l a t - t o r n e y , L e e Simmons, and d i s c u s s e d w i t h him t h e p o s s i b i l i t y o f s u b j e c t i n g t h e b u i l d i n g t o a condominium o w n e r s h i p . A t t h e time r e s p o n d e n t c o n t a c t e d C l a y Romain, o n e o f the appellants herein, percent building t h e p o s s i b i l i t y of tially a g r e e i n g t o t h e t e r m s of occur, at the was approximately 50 R e s p o n d e n t and a p p e l l a n t s m e t s e v e r a l completed. times r e g a r d i n g the suggestion of a sale. the sale, respondent After if essen- one were t o they met with a t t o r n e y Simmons. Simmons, respondent, in the conference with appellants and n o t e d t h a t a p p e l l a n t s had n o t h e l d t h e p r o p e r t y l o n g enough t o q u a l i f y for a long-term c a p i t a l gain. He s u g g e s t e d t h a t , a s a b u s i n e s s t a x m a t t e r , an o p t i o n be used w i t h a s u f f i c i e n t down payment f o l l o w e d by a c o n t r a c t f o r d e e d a s a method for transferring the property. At that t i m e t h e s t a g e of c o n s t r u c t i o n o f t h e b u i l d i n g was s u c h t h a t e i t h e r a p p e l l a n t s would c o n t i n u e w i t h t h e i r p l a n s t o f i n i s h and lease as it office space, or respondent, who had d i f f e r e n t p l a n s , would h a v e t o make c h a n g e s c o n s i s t e n t w i t h his plans. The p a r t i e s a g r e e d lowed by a contract w i t h $40,000 for t o proceed deed, t o be as consideration for p u r c h a s e p r i c e of $300,000. with the option fol- p r e p a r e d by Simmons, the option, and a t o t a l I n view of t h e f a c t t h a t a t t h e t i m e t h e r e was no s u r v e y o f t h e p r o p e r t y and t h a t t h e s a l e was less for than the entire parcel, Simmons a d v i s e d the p a r t i e s t h a t a s u r v e y would be r e q u i r e d f o r r e c o r d i n g p u r poses, and t h e b u i l d i n g c o n t r a c t o r , a t appellants1 request, c o n t r a c t e d w i t h a l o c a l s u r v e y o r t o do t h e j o b . factual dispute a b o u t what T h e r e is a d e s c r i p t i o n was annexed o p t i o n which was e x e r c i s e d A u g u s t 23, The o p t i o n p r o v i d e d for to the 1978. i t s e x e r c i s e by O c t o b e r 1 5 , 1 9 7 8 , and a c o n t r a c t f o r d e e d was s i g n e d by t h e p a r t i e s a t approximately that time. W h i l e t h e c o n t r a c t was p r e p a r e d and s i g n e d t o convey t h e p r o p e r t y p u r s u a n t t o t h e p a r t i e s 1 a g r e e m e n t , t h e o p t i o n t o p u r c h a s e , t h e d e e d s and t h e n o t i c e s of respondent's purchase interest associated with the c o n t r a c t were n o t c o m p l e t e d b e c a u s e no l e g a l d e s c r i p t i o n was available to Consequently, until proper attach the as an contract exhibit was t h e t r a n s a c t i o n c o u l d be survey. to those by attorney held completed documents. Simmons by o b t a i n i n g the I n view o f t h e f a c t t h a t problems a r o s e i n t h e s u r v e y , t h e documents remained i n t h e p o s s e s s i o n of t h e attorney f i l i n g of until this they were action. released No to e s c r o w was the parties ever for the f o r m a l l y con- c l u d e d and no d o c u m e n t s w e r e e v e r f i l e d w i t h t h e c l e r k and r e c o r d e r of Flathead County. The $6,827.60, required contract provided f i r s t due the for on November sellers to quarterly 15, furnish payments 1978. the The purchasers of contract a title p o l i c y i n t h e amount o f t h e c o n t r a c t showing good m e r c h a n t a b l e t i t l e t o be v e s t e d addition, in the s e l l e r s i n f e e simple. In t h e l a n d was t o b e t r a n s f e r r e d by a w a r r a n t y d e e d upon payment of the purchase p r i c e in full. The c o n t r a c t contained special provisions for submitting the property t o a condominium o w n e r s h i p and f o r remove or reface an existing p r o p e r t y w i t h i n two y e a r s . following as to paving covena n t t o pave sides of sellers' building agreement on the and p a r k i n g : on "The a r e a on the these premises to remaining The c o n t r a c t a l s o p r o v i d e d the parking the building the the s e l l e r s hereby s o u t h and a t no north additional c o s t t o t h e p u r c h a s e r by A u g u s t 1, 1 9 7 9 . " A l t h o u g h t h e s u r v e y had n o t been r e c e i v e d by November 15, 1978, $6,827.60 respondent made the t o his attorney. statement prepared first q u a r t e r l y payment of I n accordance with t h e c l o s i n g by him, the attorney paid $5,911.60 of t h a t amount t o a p p e l l a n t s . Sometime in December 1978 or early January 1979, r e s p o n d e n t c o n t a c t e d t h e s u r v e y o r a t h i s home r e q u e s t i n g t o see the survey and at that time was told there were e n c r o a c h m e n t s upon t h e S t a t e o f Montana and F l a t h e a d C o u n t y right-of-ways. The s u r v e y showed t h a t a p a r t o f on t h e s o u t h e a s t c o r n e r o f the eaves t h e b u i l d i n g and a b r i c k f a c i n g on t h e e a s t c o r n e r of t h e f r o n t s o u t h e r n e n t r a n c e e n c r o a c h e d upon c o u n t y r i g h t - o f - w a y . I t a l s o showed a n e n c r o a c h m e n t o f a p o r t i o n of t h e eaves of t h e b u i l d i n g o n t o t h e s t a t e highway r i g h t - o f - w a y After on t h e n o r t h w e s t c o r n e r o f t h e b u i l d i n g . speaking with the surveyor, respondent con- t a c t e d h i s a t t o r n e y and m e t w i t h him t o d i s c u s s t h e s u r v e y . W i t h i n t h e n e x t few w e e k s t h e s i t u a t i o n b e t w e e n t h e p a r t i e s deteriorated. On J a n u a r y 2 4 , 1 9 7 9 , r e s p o n d e n t , w i t h a new a t t o r n e y , s e n t a p p e l l a n t s a n o t i c e of i n t e n t t o r e s c i n d t h e c o n t r a c t , demanding a c o r r e c t i o n o f t h e v a r i o u s b r e a c h e s o f the contract within ten days and demanding payment of $50,126.86. On J a n u a r y 2 5 , 1 9 7 9 , a p p e l l a n t s o b t a i n e d a n e a s e m e n t f o r t h e encroachments i n t h e p a r k i n g i n v o l v e d i n t h e County of Flathead's right-of-way. In addition, appellants' counsel responded t o t h e n o t i c e of t h e i n t e n t i o n t o r e s c i n d , r e q u e s t i n g a d e t a i l e d s t a t e m e n t of t h e i t e m s of c o n c e r n . On F e b r u a r y 11, 1 9 7 9 , a p p e l l a n t s g a v e r e s p o n d e n t a n o t i c e of d e f a u l t under t h e c o n t r a c t f o r f a i l u r e t o make t h e s e c o n d q u a r t e r l y payment. On F e b r u a r y 2 1 , 1 9 7 9 , r e s p o n d e n t ' s c o u n s e l gave w r i t t e n n o t i c e of r e s c i s s i o n , t e n d e r i n g r e s t o r a t i o n o f t h e t i t l e d o c u m e n t s p r e v i o u s l y r e c e i v e d by him on t h e c o n d i t i o n t h a t a p p e l l a n t s r e p a y a l l monies expended t o gether with i n t e r e s t . T h i s a c t i o n was t h e r e a f t e r commenced on March 3 0 , 1 9 7 9 . The first issue for consideration is whether the judgment o f t h e t r i a l c o u r t f o r t h e r e s c i s s i o n i s s u p p o r t e d by s u b s t a n t i a l , c r e d i b l e e v i d e n c e . The statutory grounds for establishing r e s c i s s i o n a r e s e t f o r t h i n s e c t i o n s 28-2-1701 A a case e t s e q . , MCA. p a r t y t o a c o n t r a c t may r e s c i n d t h e same o n l y u n d e r following conditions: in the "(1) if t h e consent of t h e p a r t y r e s c i n d i n g was g i v e n by m i s t a k e o r o b t a i n e d t h r o u g h d u r e s s , menace, f r a u d , o r undue influence . . . . . .; " ( 2 ) i f , through t h e f a u l t of t h e p a r t y a s t o whom he r e s c i n d s , t h e c o n s i d e r a t i o n f o r h i s o b l i g a t i o n f a i l s i n whole o r i n p a r t ; " ( 3 ) i f s u c h c o n s i d e r a t i o n becomes e n t i r e l y v o i d from any c a u s e ; " ( 4 ) i f such c o n s i d e r a t i o n , b e f o r e it is r e n d e r e d t o him, f a i l s i n a m a t e r i a l r e s p e c t from any c a u s e ; o r " ( 5 ) i f a l l the other p a r t i e s consent." t i o n 28-2-1711, MCA. S e c t i o n 28-2-1713, requirements rescinding to be party MCA, followed must use sets f o r t h in rescission reasonable Secthe specific cases. d i l igence The and take a c t i o n w i t h i n a r e a s o n a b l e t i m e upon d i s c o v e r i n g t h e f a c t s which entitle question the him fact to rescind. that Here, respondent action in f i l i n g h i s case. took appellants prompt and do not speedy The s o l e q u e s t i o n i n t h i s i s s u e i s w h e t h e r i t is a p r o p e r c a s e f o r r e s c i s s i o n . The t r i a l c o u r t was u r g e d t o r e s c i n d t h e c o n t r a c t f o r mutual mistake with regard t o t h e d e s c r i p t i o n of t h e p a r c e l o f p r o p e r t y t o be c o n v e y e d , f o r f a i l u r e o f c o n s i d e r a t i o n , i n whole o r in part, because of a p p e l l a n t s ' t o furnish t i t l e insurance t o r e s p o n d e n t showing good and merchantable t i t l e t o the property, liens and encumbrances; for breach i n f a i l i n g failure f r e e and c l e a r o f of consideration, all in whole o r i n p a r t and i n a m a t e r i a l r e s p e c t , f o r a p p e l l a n t s ' f a i l u r e t o p r o v i d e d e e d e d p r o p e r t y on t h e s o u t h s i d e o f t h e b u i l d i n g e n a b l i n g r e s p o n d e n t t o own a p a r k i n g l o t ; and l a s t , f o r a c t u a l and c o n s t r u c t i v e f r a u d i n a p p e l l a n t s ' advise respondent property. of known encumbrances on failure to title to the The t r i a l c o u r t i n i t s f i n d i n g s o f f a c t b e a r i n g on r e s p o n d e n t ' s r i g h t t o r e s c i s s i o n f o u n d : "7. P r i o r t o t h e p u r c h a s e o f t h e p r o p e r t y by p l a i n t i f f , p l a i n t i f f and d e f e n d a n t s had viewed t h e p r o p e r t y , t h e b u i l d i n g , and a g r e e d a s p a r t o f t h e c o n t r a c t t h a t p a r k i n g would be p r o v i d e d on t h e s o u t h and n o r t h s i d e s o f t h e b u i l d i n g and p a i d by d e f e n d a n t s . . . . "8. [The s u r v e y o r ] d i s c o v e r e d t h a t county right-of-way runs immediately t o t h e s o u t h o f t h e b u i l d i n g and a p o r t i o n o f t h e b u i l d i n g e n c r o a c h e s on s u c h r i g h t - o f - w a y . The s u r v e y f u r t h e r d i s c l o s e d t h a t a p o r t i o n of t h e e a v e s of t h e b u i l d i n g encroached on s t a t e highway r i g h t - o f - w a y on t h e w e s t s i d e of the property. N e i t h e r p a r t y was a w a r e o f t h e encroachments of t h e county right-of-way and s t a t e e a s e m e n t p r i o r t o t h e c o m p l e t i o n o f the survey. "9. [ A s amended] An e a s e m e n t had b e e n obt a i n e d i n regard t o t h e county right-of-way a t a l l times. The Montana Highway D e p a r t m e n t w i l l n o t make a n y a g r e e m e n t s i n any way a f f e c t i n g encroachment i n t h e west s i d e of the building. " F o l l o w i n g t h e s e f i n d i n g s t h e c o u r t made i t s c o n c l u s i o n s o f law which b e a r d i r e c t l y on t h e i s s u e o f r e s c i s s i o n : "1. The a g r e e m e n t a s t o p a r k i n g on t h e s o u t h and west s i d e s o f t h e b u i l d i n g was p a r t and p a r c e l of t h e c o n t r a c t and a g r e e m e n t o f t h e parties. "2. Both p a r t i e s w e r e a t a l l t i m e s a c t i n g i n good f a i t h and by r e a s o n o f m i s t a k e and n o t by f r a u d . " Thus, entitled to the court rescission, concluded and the that court, respondent contrary to was the arguments of a p p e l l a n t s , addressed t h e i s s u e of m a t e r i a l i t y of mutual mistake of t h e p a r t i e s . W find implicit in the e t r i a l cour t ' s d e t e r m i n a t i o n c o n t a i n e d i n i t s c o n c l u s i o n s o f law t h e r u l i n g t h a t a m u t u a l m i s t a k e o f f a c t occurred i n t h i s case with regard t o t h e parking. Both p a r t i e s a g re e d t h a t a p a r t of t h e c o n t r a c t w a s t h a t p a r k i n g would be a v a i l a b l e . respondent, as p u r c h a s e r , I t was u n c o n t r a d i c t e d t h a t r e q u i r e d a deeded p a r k i n g l o t t o go with the developed building, into whether condominium was it units. to be Parking leased was or major a c o n s i d e r a t i o n , a s shown by t h e o r i g i n a l l e t t e r o f r e s c i s s i o n on January 4, 1979. find We that the its d i s c r e t i o n a s a c o u r t of within t h a t p a r k i n g was mistake with rescission a material regard under consideration section for the an 28-2-1711, respondent's material aspect a s w e l l . equity p a r t of t o p a r k i n g was court acted well in determining contract; that a adequate b a s i s for and the MCA; contract had that failed in a Regardless of a p p e l l a n t s ' argument t h a t a s u b s t i t u t e p a r k i n g e a s e m e n t had b e e n o b t a i n e d f o r t h e south entrance, is a c r u c i a l which d e v e l o p e r and t o a p r o p o s e d issue to a commercial w e f i n d t h e c o u r t was tenant, w e l l within its d i s c r e t i o n in determining t h a t t h e mistake and failure problem of was consideration sufficient associated grounds for with the rescission parking of the contract. A p p e l l a n t s a r g u e t h a t t h e easement t h e y have o b t a i n e d f o r t h e p a r k i n g was a s u f f i c i e n t s u b s t i t u t e h e r e t o p r e v e n t a r e s c i s s i o n of t h e c o n t r a c t . not comply commercial that the sufficiently property parking However, s u c h a n e a s e m e n t d i d with owner s h i p issue was the to practical satisfy not court--a grant of easement the material. a p p e l l a n t s advanced t h i s p o s i t i o n , the realities and is trial court the trial A t i t was simply of rejected not by ownership. A p p e l l a n t s had c o n t r a c t e d t o p r o v i d e a f e e s i m p l e t i t l e f r e e and c l e a r o f a l l l i e n s and e n c u m b r a n c e s and were u n a b l e t o perform this contract. position to determine remedy o f r e s c i s s i o n , The the trial court question of was the in right the to best the and a d e q u a t e l e g a l a u t h o r i t y s u p p o r t s its d e c i s i o n . See Bolinger v. C i t y o f Bozeman ( 1 9 7 2 ) , 1 5 8 507, 5 1 1 , 493 P.2d 1 0 6 2 , 1 0 6 4 ; Ryan v . Board o f County Mont. Commissioners ( 1 9 8 0 ) , 37 S t . R e p . , Mont. 620 P.2d 1203, 1209, 1965, 1972. The next c o n t r a c t by Appellants is issue whether the rescission r e a s o n o f m u t u a l m i s t a k e was a p r o p e r argue that the conclusions of l a w made of the remedy. by the t r i a l c o u r t a r e i n c o n s i s t e n t w i t h i t s f i n d i n g s of f a c t . In p a r t i c u l a r , a p p e l l a n t s u r g e t h a t t h e t r i a l c o u r t "found t h a t t h e e n c r o a c h m e n t p r o b l e m s on t h e s o u t h s i d e o f t h e b u i l d i n g w e r e r e m e d i e d by [ a p p e l l a n t s ] o b t a i n i n g a n e a s e m e n t f r o m t h e . . ." county However, a s we i n d i c a t e d a b o v e , a l t h o u g h i t is t r u e t h a t a p p e l l a n t s obtained an easement, the court a t no t i m e found o r d e t e r m i n e d t h a t s u c h a n e a s e m e n t " r e m e d i e d " the parking s i t u a t i o n . opposite. south S i n c e no d e e d e d p a r k i n g c o u l d be o b t a i n e d on t h e side mistake I n f a c t , t h e c o u r t found e x a c t l y t h e of of the fact building, and a there material was a failure material of mutual consideration justifying the rescission. Respondent does n o t have t h e burden of t h e proof found of them, t h e f a c t s because t h e t r i a l c o u r t has a l r e a d y and this Court can draw inference t o support t h e presumption of t r i a l court. Industries St.Rep. R u l e 5 2 , M.R.Civ.P.; (1981), Mont every legitimate correctness of the Poulsen v. Treasure S t a t e . , 626 P.2d 822, 827, 38 218, 223. W adhere t o t h e d o c t r i n e of e a s here, Any establishing the t r i a l findings not court's implied f i n d i n g s where, findings are general specifically made but i n terms. necessary to the judgment a r e deemed t o h a v e b e e n i m p l i e d i f s u p p o r t e d by t h e evidence. See findings are Poulsen, not supra. inconsistent long As with the as the express implied findings, t h i s Court w i l l not overturn t h e t r i a l c o u r t r e s u l t . Here, the finding t h a t the mistake referred t o in the conclusions was a m a t e r i a l m i s t a k e and t h e f u r t h e r f i n d i n g t h a t a l a c k of deeded parking space supports a material failure of c o n s i d e r a t i o n a r e s u f f i c i e n t implied f i n d i n g s t o support t h e c o u r t ' s c o n c l u s i o n t h a t a r e s c i s s i o n s h o u l d be g r a n t e d u n d e r s e c t i o n 28-2-1711, MCA. The issue court third p r o p e r l y awarded t h i s case. for for fair consideration damages u n d e r is whether the t h e c i r c u m s t a n c e s of A p p e l l a n t s r a i s e t h e i s s u e o f damages a s c r e d i t r e n t a l value paid f o r t h e p r o p e r t y d u r i n g respon- d e n t ' s p e r i o d of c o n t r o l o f t h e p r e m i s e s . T h i s i s s u e is one which was a d d r e s s e d a t t r i a l and c o n s i d e r e d by t h e c o u r t i n a m o t i o n t o amend t h e f i n d i n g s o f law. f a c t and c o n c l u s i o n s o f A f t e r h e a r i n g a r g u m e n t s and r e v i e w i n g t h e b r i e f s , the t r i a l c o u r t d i d i n f a c t p a r t i a l l y amend t h o s e f i n d i n g s and conclusions. fees, fire The c o u r t a d d e d f i n d i n g s c o n c e r n i n g a t t o r n e y insurance, utilities and c a r p e t i n g damages but d e c l i n e d t o make any f u r t h e r a d d i t i o n s . The t r i a l c o u r t i m p l i e d l y h e l d t h a t t h e p r o v i s i o n s o f section 28-2-1715, MCA, were met when it adjudged the r e s c i s s i o n , a l l o w i n g an o f f s e t i n t h e o r i g i n a l f i n d i n g s and conclusions and further October 22, 1980, o r d e r . offsets However, in the amendments in its i n view o f t h e f a c t t h a t respondent never o b t a i n e d a c t u a l p o s s e s s i o n of t h e p r o p e r t y b e c a u s e c o n s t r u c t i o n was n o t c o m p l e t e d , a r e n t a l o f f s e t was not found property t o be p r o p e r and was r e f u s e d . c o u l d n o t have been o c c u p i e d o r In addition, rented, the not only because of t h e l a c k of p a r k i n g b u t a l s o because i t was n o t hooked u p t o t h e B i g f o r k s e w e r s y s t e m . Affirmed. I Justice W e concur: %&$% c h i e m u tice
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