Double AA Corp. v. Newland & Co.

• Decision Date: 16 November 1995
• Docket Number: No. 95-064,95-064
• Citation: 273 Mont. 486,905 P.2d 138
• Parties: DOUBLE AA CORPORATION, a Delaware corporation, Plaintiff, Appellant, and Cross-Respondent, v. NEWLAND & COMPANY, Successor Trustee of the Raymond W. George Trust, Defendant and Respondent, and James W. Sievers, Intervenor Defendant, Respondent, and Cross-Appellant.
• Court: Montana Supreme Court

Page 138

905 P.2d 138

273 Mont. 486

DOUBLE AA CORPORATION, a Delaware corporation, Plaintiff Appellant, and Cross-Respondent, v. NEWLAND & COMPANY, Successor Trustee of the Raymond W George Trust, Defendant and Respondent and James W. Sievers, Intervenor Defendant, Respondent, and Cross-Appellant.

No. 95-064.

Supreme Court of Montana.

Submitted on Briefs May 25, 1995.

Decided Oct. 24, 1995.

Rehearing Denied Nov. 16, 1995.

Joseph T. Swindlehurst, Huppert & Swindlehurst, Livingston, for Appellant.

James P. Harrington, Attorney at Law, Butte, for Newland & Co.

John T. Jones and Harlan B. Krogh, Moulton, Bellingham, Longo & Mather, Billings, for James W. Sievers.

Rockwood Brown, Brown, Gerbase, Cebull, Harman & Ross, Billings, for Kenneth D. George and Shirley G. Bragg.

TRIEWEILER, Justice.

Plaintiff Double AA Corporation filed a complaint in the District Court for the Sixth Judicial District in Park County, in which it alleged that Shirley Bragg, trustee of the Raymond W. George Trust, who has been succeeded as trustee by Newland & Company, breached a buy-sell agreement for the sale of a ranch held by the trust and that it was entitled to specific performance. The trustee, as well as James W. Sievers, the intervenor, opposed Double AA's request for specific performance. After a trial, the District Court entered its findings, conclusions, and judgment, which denied Double AA's request for specific performance but awarded it damages. Double AA appeals the District Court's findings, conclusions, and judgment, and Sievers cross-appeals specific findings. We affirm the judgment of the District Court.

The issue on appeal is whether the District Court abused its discretion when it denied Double AA's request for specific performance.

The issue raised on cross-appeal is whether the District Court erred when it made findings of fact numbered 73 and 74.

FACTUAL BACKGROUND

The ranch, which is the subject of the dispute, formerly belonged to Raymond George. Raymond died in 1974 and, as provided in his will, left the ranch in a testamentary trust for his family. His daughter Maxine was designated the trustee. The trust provided that his wife, Olga George, would receive income from the trust for her life and that the George children held remainder interests as follows: Maxine George--three-ninths, as well as a first option to purchase from the other remaindermen; Leo George--two-ninths; Kenneth George--two-ninths; and Shirley Bragg--two-ninths. Maxine died in 1980, and eventually the remaindermen agreed with her surviving husband, Cleto McPherson, that he would be entitled to her share and first option. Shirley Bragg became the trustee following Maxine's death.

On December 13, 1989, Double AA Corporation, a Delaware Corporation whose sole shareholders are Charles Allmon and Gwen Allmon, agreed with Shirley Bragg, who at that time was the trustee of the Raymond W. George trust, to purchase the George family's ranch in the Paradise Valley south of Livingston. Shirley agreed on behalf of the trust to convey the property, and a substantial deposit was transferred.

At trial, Shirley testified that in 1988 she had received advice from Wes Johnson, a financial planner for Investment Diversified Services (IDS), that if the trust did not sell the ranch there would be tax consequences in an amount between $200,000 and $300,000 at the time of Olga's death. Olga was nearly 90 years old when Shirley received this advice. Wes Johnson admitted he had little knowledge about taxes and was not qualified to render tax advice. He also testified that he was paid on a commission basis, and as a result felt pressure to locate investors for IDS. He encouraged that the ranch be sold and the proceeds be invested with IDS. Shirley testified that she reluctantly agreed to sell because of Johnson's tax advice.

Shirley petitioned the District Court to approve the sale of the ranch. Sievers intervened and objected on the basis that he had purchased a five-ninths remainder and a first option to buy from the other remaindermen. In September 1990, District Court Judge Byron Robb, granted the petition to confirm the sale and dismissed Sievers' objection. He specifically found that:

While the testator here gave his daughter Maxine a right to purchase the interest of the other children in the ranch, I find it obvious this was personal to her because she remained on the place while the others left. I thus conclude it doubtful such option passed to Maxine's husband and sole heir, Cleto McPherson, and although the other children made agreements with him to have such privilege at a different value than Mr. George contemplated, Cleto never exercised such right and now has no ability to do so or to keep the ranch in the family, and I find it most tenuous that Grandpa George ever intended that such option to purchase would pass to or be enforceable by a stranger as Mr. Sievers contends. Further, the trustee was not a party to such option agreements and is not bound by them.

In November 1990, an attorney from Livingston informed Shirley that no taxes would be due as a result of Olga's death. On December 2, 1990, Shirley sent Charles Allmon a letter in which she advised him that she wanted to rescind the agreement with Double AA. On April 2, 1991, Shirley filed a motion to dismiss her petition for a declaration of her right and authority to sell the trust property and to cancel the sale to Double AA. The District Court denied her motion and ordered the sale to proceed. We affirmed the District Court's conclusion that Shirley had the right and authority to sell the ranch and affirmed the District Court's finding that the sale was fair and reasonable. In re Raymond W. George Trust (1992), 253 Mont. 341, 834 P.2d 1378. However, we reversed that part of the District Court's decision which granted specific performance because that issue had not been raised or litigated. In re George Trust, 834 P.2d at 1381-82.

After our decision in In re George Trust, Double AA filed this action for specific performance. Sievers intervened and opposed specific performance because he claimed that in April 1988 he purchased a three-ninths remainder interest from Cleto, in addition to Cleto's first option to purchase from the other remaindermen. He added that in August 1988 he purchased Leo's two-ninths remainder interest.

A nonjury trial was held on June 22 and 23, 1994. Shirley testified that the erroneous information she had received from Johnson was confirmed by Legal Tech, a Billings accounting firm. However, she was informed in November 1990 that Olga's death would not result in any immediate tax consequences. Instead, she learned that capital gains tax in the amount of $400,000 would be due upon sale of the ranch to Double AA. She testified that the attorney who represented her prior to the sale had not advised her that Johnson's advice was incorrect. There was also contradicted testimony that her previous attorney was to receive a percentage of the broker's commission which was to be paid by Double AA.

In October 1994, the District Court entered its findings of fact, conclusions of law, and judgment. The District Court held that specific performance was improper, but awarded Double AA money damages for breach of contract. The court further found that Sievers did not obtain a binding first option to purchase the ranch from the remaining beneficiaries.

Double AA appeals from the District Court's decision, and Sievers cross-appeals from the District Court's findings that he did not have a valid first option to purchase.

ISSUE 1

Did the District Court abuse its discretion when it denied Double AA's request for specific performance?

We review a district court's denial of a request for specific performance to determine whether the district court abused its discretion. Larson v. Undem (1990), 246 Mont. 336, 342-43, 805 P.2d 1318, 1322.

Double AA acknowledges that specific performance is an equitable remedy within the District Court's discretion but suggests that the court's discretion is narrow. It contends that the District Court did not exercise sound discretion.

The trustee claims, and Sievers agrees, that under the circumstances the District Court did not abuse its discretion.

Specific performance is an equitable remedy which requires performance of a contract based on the precise terms contained in the contract. Seifert v. Seifert (1977), 173 Mont. 501, 504, 568 P.2d 155, 156.

"[S]pecific performance will be ordered only on equitable grounds in view of all the conditions surrounding the particular case...."

"A bill in equity for specific performance is an appeal to the conscience of the court, and generally, in such a proceeding, the inquiry must be whether, in equity and good conscience, the court should specifically enforce the contract. Accordingly, specific performance will be granted when it is apparent from a view of all the circumstances of the particular case that it will serve the ends of justice, and it will be withheld when, from a like view, it appears that it will produce hardships or injustice to either party...."

Seifert, 568 P.2d at 157 (quoting 81 C.J.S. Specific Performance § 3). In Seifert, we acknowledged that the appropriateness of specific performance depends on the facts and circumstances of the case. Seifert, 568 P.2d at 157.

In determining whether a contract should be specifically enforced, courts look at the contract, as well as the relationship of the parties, and will determine if the contract to be enforced is fair and reasonable. ¹ Factors courts consider include execution of a contract under circumstances unfavorable to the defendant because of lack of advice, and the difference in the parties' business experience and knowledge. 81 C.J.S. Specific Performance § 49 (1977).

In addition to the above guidelines, Montana statutes identify some situations in which specific performance is appropriate. Specific performance may be...