MITCHELL v BOYER
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JN THF SUPREME COURT O F THE STATE O F MOl\TTANA FRANK M I T C H E L L and EVELYN M I T C H E L L , Plaintiffs and Respondents, -VS- LYLE BOYER and M I N N I E BOYER, D e f e n d a n t s and A p p e l l a n t s . D i s t r i c t C o u r t of t h e Fourth J u d i c i a l D i s t r i c t , J n and f o r t h e C o u n t y of R a v a l l i , T h e H o n o r a b l e J a m e s R . Wheelis, Judge p r e s i d i n g . A P P E A L FROM: COTJNSEL O F RECORD: For A p p e l l - a n t : J e f f r e y H. L,anqton, Hamilton, Montana For R e s p o n d e n t : , B r i a n 1. Del-aney; Mulroney, D e l - a n e y & Scott, M i s s o u l a , Montana S u b m i t t e d on R r j e f s : Decided: Filed: . - -. < -- -' I .,. u-) .: , , -. 3 - 4 . .. ,- .- '?. . . + . , June 1 1 April 1989 i&& l[& - -- . (,.J, ~ - - 7 1 - 20, 1989 Mr. Justice R. C. McDonough delivered the Opinion of the Court. This appeal involves an agreement to purchase land located near Corvallis, Montana. Defendants Lyle and Minnie Boyer (Boyers) appeal from the judgment of the District Court of the Fourth Judicial District, Ravalli County, granting recision of the agreement. The Court awarded plaintiffs Frank and Evelyn Mitchell (Mitchells) damages based on the down payment, earnest money and escrow payments made; amounts expended for improvements to the property; and prejudgment interest at an annual interest rate of ten percent from a date thirty days after Mitchells initially offered to rescind the agreement. We affirm. Boyers present two issues for review: 1. Did Mitchells ' reliance on the innocent misrepresentations of Lyle Boyer constitute negligent reliance, barring the remedy of recision? 2. Did the District Court err in finding that Lyle Royer's misrepresentations gave rise to a breach so material as to excuse Mitchells' duty of performance and rescind the contract? The property at issue in this case was originally part In of a larger tract belonging to David and Clara Leicht. 1978, the Leichts sol-ci two parcels of their land to the Tices, who are not parties to this suit. Lyle Boyer was the real estate agent involved in that sale. At some point after the sale had! been negotiated, but before the deeds to the property had. been delivered, a disagreement arose between the Leichts and the Tices as to what would constitute allowable use of the parcels. The end result of this disagreement was that the parcel. here at issue was subjected to a restrictive co~renant, duly recorded in the Ravalli County Clerk and R e c o r d e r ' s O f f i c e a t Book 1-48, page 117, which: a ) p r o h i b i t e 6 subdividing the parcel into more than three lots, b) r e s t r i c t e d u s e o f t h e p r o p e r t y t o a g r i c u l t u r a l p u r p o s e s and c) provided that no more than two houses o u t h u i l d i n q s c o u l d b e b u i l t on t h e p a r c e l . with attendant T h i s c o v e n a n t was t o remain i n f o r c e f o r a s long a s t h e L e i c h t s continued t o h o l d any i n t e r e s t i n t h e i r r e m a i n i n g p r o p e r t y , which b o r d e r e d the parcel. Soon after this initial transaction took Tices subdivided t h e p a r c e l i n t o t h r e e l o t s . place, the Tices then sold two o f t h e l o t s t o t h e Boyers u n d e r a c o n t r a c t f o r d e e d . The d e s c r i p t i o n o f t h e p r o p e r t y i n t h e c o n t r a c t e x e c u t e d by t h e T i c e s and t h e R o y e r s r e f e r s t o it a s b e i n g p a r t o f Orchard View Estates, Book 148 and Deeds, contract, in a subject t o restrictions page 117." paragraph However, entitled "as contained i n a t the end of "Miscellaneous", the the c o n t r a c t s t a t e s t h a t t h e r e s t r i c t i o n s w i l l be l i f t e d when t h e L e i c h t s no l o n g e r own a n y i n t e r e s t i n t h e p r o p e r t y t h a t i s the subject of restrictions w i l l obligation the be contract. lifted pu-rchasers o f as In when the the other pay Tices parcel words, from off the the their Leichts. Boyers t h e n l i s t e d t h e l o t s t h e y had j u s t p u r c h a s e d a s being f o r s a l e . lots in a The M i t c h e l l s saw a n a d v e r t i s e m e n t f o r t h e newspaper, contacted a p p o i n t m e n t t o view t h e p r o p e r t y . the Boyers and s e t up A t t h i s appointment, an the M i t c h e l l s i n d i c a t e d t h e i r i n t e r e s t i n t h e p r o p e r t y , and a s k e d about t e r m s . L y l e Boyer t o l d t h e M i t c h e l l s t h a t b a s i c a l l y t h e y would pay a sum t o t h e Boyers and t h e n assume B o y e r s ' i n t e r e s t i n t h e c o n t r a c t f o r deed w i t h t h e T i c e s . of ten years, The M i t c h e l l s t h e M i t c h e l l s would make related t o L y l e Boyer A t t h e end a balloon t h e i r plan to payment. further s u b d i v i d e t h e l o t s , i f n e c e s s a r y , i n o r d e r t o r a i s e money t o make the balloon payment. He told them of the building restrictions, and indicated that the restrictions would be lifted as soon as the Tices paid off their obligation to the Leichts, which he estimated would happen in the near future. Based on these discussions, the Mitchells entered into an agreement to purchase the Boyers' interest. For reasons that are not relevant here, the Leichts became concerned about how the land they had sold was being developed. In early 1986, they contacted an attorney, who sent a letter to lot owners, including the Mitchells, describing the restrictions and noting that they would not be lifted while the Leichts remained on their adjacent property. IJpon receiving the letter, the Mitchel-1s discussed the matter with the attorney who wrote the letter, the attorney who had closed their purchase of Boyers' interest, and their own attornes. They contacted the Boyers, but apparently were unsuccessful in attempting to work things out. Mitchell's attorney offered to rescind the contract, but the Boyers were unwilling to do so. The Mitchells filed. a complaint against the Boyers on April 23, 1987. According to the complaint, Lvle Boyer had misrepresented the duration of the restrictions, and the MitchePls agreed to purchase the property in reliance on those misrepresentations. Count One of the complaint alleged actions amounted to negligent that Lyle Boyer ' s misrepresentation, Count Two alleged actual or constructive fraud, and Count Three alleged mutual. mistake. All three counts sought basically the same measure of damages: recision of the contract, return of moneys paid out by the Mitchells for the property, and their costs and attorney's fees incurred in the action. The case was tried to the District Court, sitting without a jury. On Ju1.y 3 . 8 , 1.980, the court issued its Findinqs of Fact, Conclusions of Law, and Judgment. The court held in favor of the Mitchells on Count One. The court found that Royer's misrepresentations had been made innocently, hut were negligent in that as a real estate This appeal. agent, he should have known they were false. followed. This case is in equity. As a result, the scope of our review is set by statute, and is very broad. Under S 3-2-204, MCA, this Court reviews all questions of fact and law in equity cases and makes its own determination based on that review. In this case, the District Court held Boyers liable for Lyle Boyer's negligent misrepresentations. On appeal, Boyers assign error to this ruling. Their first argument asserts that the Mitchells' reliance on those misrepresentations was in itself negligence, which precluded the court's award of recision. Our review of the case shows that we need not address Boyers' arguments. In fact, Royers' first argument points to a resolution to this case that present itself prominently in the record. Irrespective of any negligence, this is a case of mutual mistake. A mutual mistake occurs when, at the time the contract is made, the parties share a common misconception about a vital fact upon which they based their bargain. Carey v. Wallner (Mont. 1986), 725 P.2d 557, 43 St.Rep. 1706. Such a mistake is a proper ground for recision. Section 28-2-1711, MCA; Wallner, 725 P. 2d at 561. It was very important to the Mitchell's when they considered buying these lots from the Royers that they have the option to subdivide the lots in order to make the scheduled balloon payment. According to Boyers' contract with the Tices, the restrictions on subdividing and building would be removed once the Tices finished paying the Leichts for the parcel out of which the Boyers' lots were carved. Lyle Boyer related this to the Mitchells. L y l e Royer t e s t i f i e d a t t r i a l t h a t h i s r e p r e s e n t a t i o n s to the Mitchells restrictions. honestly reflected his impression o f the He had n o t b e e n p r i v y t o t h e n e g o t i a t i o n s t h a t resulted o r i g i n a l l y i n t h e r e s t r i c t i o n s being placed i n the d e e d s , and had n e v e r h e e n i n f o r m e d a s t o t h e i r c o n t e n t beyond t h e l a n g u a g e found i n t h e c o n t r a c t between t h e Royers and t h e Tices. truth f u r t h e r t e s t i f i e d t h a t he d i d n o t discover t h e He about letter the written restrictions until by the Leichts' when h e r e a d 1986, attorney. The the Mitchells t e s t i f i e d t h a t b e c a u s e L y l e Boyer was a r e a l e s t a t e a g e n t , they assumed truthful. that his representations were accurate and I t i s t h e r e f o r e a p p a r e n t t h a t t h e Royers and t h e M i - t c h e l l s were b o t h m i s t a k e n a t t h e t i m e t h e c o n t r a c t was made; t h e y were l a b o r i n g u n d e r a common m i s c o n c e p t i o n a b o u t when the restrictions wou.ld be removed. Recision therefore proper. W a f f i r m t h e d e c i s i o n of t h e D i s t r i c t Court. e @<zit, ustice Chief J u s t i c e --- was
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