Ehly v. Cady

• Decision Date: 27 September 1984
• Docket Number: No. 83-65,83-65
• Citation: 41 St.Rep. 1611,212 Mont. 82,687 P.2d 687
• Parties: , 50 A.L.R.4th 429 Ray E. EHLY, Plaintiff and Respondent, v. Dorothy V. CADY, Bruce M. Cady, and Cassandra Joanne Cady, Defendants and Appellants, and James A. Ussin, d/b/a U Bar S Real Estate, Defendant, Cross-Claimant, and Respondent.
• Court: Montana Supreme Court

Page 687

687 P.2d 687

212 Mont. 82, 50 A.L.R.4th 429

Ray E. EHLY, Plaintiff and Respondent, v. Dorothy V. CADY, Bruce M. Cady, and Cassandra Joanne Cady Defendants and Appellants and James A. Ussin, d/b/a U Bar S Real Estate, Defendant Cross-Claimant, and Respondent.

No. 83-65.

Supreme Court of Montana.

Submitted May 24, 1984.

Decided Aug. 28, 1984.

Rehearing Denied Sept. 27, 1984.

Hooks & Budewitz, Patrick F. Hooks argued, Townsend, Moore, Rice, O'Connell & Refling, Bozeman, for defendants and appellants.

McDougal, Meloche, Love & Eckis, Lynn McDougal argued, El Cajon, Cal., Huppert & Swindlehurst, P.C., Livingston, for Ehly.

Crowley, Haughey, Hanson, Toole & Dietrich, George Dalthorp argued, Billings, for Ussin.

HASWELL, Chief Justice.

Dorothy, Bruce and Cassandra Cady appeal judgments entered in the District Court of the Fourteenth Judicial District, Meagher County, in favor of Ray Ehly and James Ussin. We affirm in part and reverse in part.

Ehly filed a complaint seeking specific performance of a buy/sell agreement executed by the Cadys and him, an immediate preliminary restraining order restraining the Cadys from selling, encumbrancing or transferring the property involved, a hearing on the merits of the case, and $500,000 in general and special damages. The preliminary injunction was granted on September 15, 1981. An amended complaint filed October 8, 1981, sought additional relief in the form of reformation of the contract and exemplary damages. A second amended complaint added James Ussin, the Cadys' realtor, as a defendant and a prayer for $500,000 in damages from Ussin in the event the court found that the Cadys were excused because of Ussin's conduct.

Ussin cross-claimed in his answer against the Cadys, alleging entitlement to his commission. The Cadys, in response, made affirmative claims against Ehly and Ussin.

Before the trial, Ehly abandoned his claim for specific performance. A nonjury trial was held July 26 through 30, 1982. At the conclusion of Ehly's case-in-chief, the District Court granted the Cadys' motion to dismiss Ehly's claim for punitive damages and the injunction was vacated.

The District Court filed findings of fact and conclusions of law on October 26, 1982 and adopted virtually verbatim Ehly's and Ussin's proposed findings and conclusions. Ussin was awarded his commission and judgment against the Cadys and Ehly on the various other claims. The Cadys filed a notice of appeal of the Ussin judgment on November 15, 1982.

By judgment entered November 18, 1982, Ehly was awarded approximately $245,000 in damages from the Cadys and his attorney fees and expenses. A notice of appeal of this judgment was filed on December 8, 1982.

After a hearing held December 8, 1982, the District Court filed supplemental findings and conclusions regarding attorney fees and expenses. Ehly was allowed almost $52,000 in attorney fees and $350 in additional costs. Final judgment was entered on January 19, 1983, and the Cadys appeal the judgments in favor of Ehly and Ussin.

The Cadys own a livestock ranch located in Meagher County of approximately 10,000 acres. The property was listed for sale with James Ussin, d/b/a U Bar S Real Estate, early in April 1981. According to the listing agreement, the selling price was $2,250,000, 5 percent of which Ussin was to receive as a commission "upon effecting a sale of the whole or any part of said property."

Bruce Cady holds a college degree in accounting, as well as one in psychology. Dorothy Cady received a business degree and has done graduate work in business education. Bruce Cady worked as an accountant before he became a farmer, and Dorothy Cady worked as a legal secretary.

Ray Ehly, a contractor from California, was interested in buying a Montana ranch for investment and tax purposes. Ehly was shown the Cady ranch in early April 1981 by Ussin. Ehly's first two offers of $2,100,000 and $2,220,000 were summarily rejected by Cady as not providing the full purchase price. Ehly decided he wanted to make a final offer to the Cadys in person, so he arranged a meeting with Ussin in Harlowton on April 20, 1981. Ehly met Ussin and another realtor, Lewis, in Harlowton. As they were driving toward the Cady ranch, they stopped to prepare a written offer. As they were typing an earnest money receipt and agreement to sell and purchase in one of the vehicles, Ussin advised Ehly that Cady would not accept his offer of $2,230,000, but that Ussin would be willing to reduce his commission by $20,000 to make a sale. Ehly and Ussin did not work out the details of the commission reduction at that time, but agreed that the offer to Cady should read $2,250,000 and Ussin's reduction should make up the difference between what Ehly would pay and what Cady would get. Ehly signed the agreement which quoted a $2,250,000 purchase price, and provided a check for $100,000 earnest money.

Upon arrival at the Cady ranch, the parties discussed the agreement for approximately two hours. Following the discussion, Ehly left the Cady ranch to attend a wedding and the Cadys, Ussin and Lewis drove to Lewistown to meet with Marvin Stephens, the Cadys' accountant. Stephens first met with the Cadys, and later the realtors joined the meeting. For three to four hours the agreement was discussed and after certain changes were made, the Cadys signed and initialed the agreement. On April 21, 1981, Ehly agreed to the changes made at the Lewistown meeting.

The agreement provided that Ehly pay $370,000 (including the $100,000 earnest money) as a downpayment upon closing of the chattel sale. He was to pay $50,000 on November 1, 1981, and $350,000 on January 8, 1982. Title to the livestock and other ranch chattels was to be transferred in May 1981, but title to the property was not to be transferred until January 1982, to facilitate Ehly's income tax plans. It was known by the Cadys that Ehly was purchasing the ranch at least partially for income tax reasons.

Ehly also agreed to transfer to the Cadys ten acres of land in the Gallatin Valley, with a value of $75,000. Ehly would assume a $60,000 mortgage on the Cady property and would be ready to pay $200,000 cash if the Cadys needed the money to make a tax-free exchange. There was no issue as to Ehly's ability to fulfill his obligations under the agreement.

The Cadys insisted that their attorney, Leonard McKinney, prepare the closing documents. When Ehly received the documents prepared by McKinney, Ehly's attorney, Jim McLean reviewed them and found that they contained terms substantially different from those in the April 20 agreement. On May 11, 1981, McLean informed McKinney about the discrepancies and stated that Ehly was prepared to close the sale as soon as accurate documents were prepared.

In anticipation of the sale, Ehly purchased livestock and ranch equipment. He arranged with Cady to place the livestock and equipment on the ranch, as well as to have his son and daughter-in-law move from California to the ranch. He also hired a ranch manager.

On May 15, 1981, at a meeting attended by the parties in Lewistown, Ehly was given another set of closing documents. These also did not comply with the April 20 agreement. While discussing the agreement and sale of the ranch, Bruce Cady became angry and left the room. Testimony at trial indicated that before leaving the room, Cady made a comment about his not wanting to comply with the April 20 agreement and about there being no sale unless it was done his way.

After a break, Cady returned to the meeting and the parties discussed the release clause of the agreement, which reads as follows:

"Buyer may request a release of a parcel of land for building purposes. Seller shall grant said release if buyer will pay the sum of $1,000.00 per acre for said release.

"Principal payment shall apply towards the $1,000.00 per acre. Buyer shall have the right to release 320 acres as of the date of closing of the real property."

As the Cadys were interpreting the language differently from Ehly, discussion was conducted and the differences were resolved. After agreeing that any release of land according to the above clause be limited to 320 acres, in no more than three parcels of not less than 40 acres each which would not affect the "economic integrity of the ranch," the meeting ended. This interpretation of the clause was not consistent with Ehly's initial interpretation, but he was eager to complete the sale and agreed with the Cadys' interpretation.

On May 20, 1981, Ehly received a third set of documents which did not accurately reflect the terms of the April 20 agreement or the clarification of the release clause agreed upon at the May 15 meeting. Stephens withdrew the documents and promised to send Ehly the proper papers by June 1. Ehly did not receive any papers on June 1. On June 2, the parties met at the Cady ranch. Cady stated that he would not sell the ranch according to the buy/sell agreement and produced a list of new demands and terms on which he would sell.

One of the new terms was transfer of the title to the real property in 1981, rather than 1982, thus destroying Ehly's planned income tax advantages. Cady claimed that such transfer was required to maintain the cattle grazing permits Cady held to Forest Service land adjacent to the Cady ranch. The Cadys claimed that Forest Service regulations prevented the transfer of the grazing permits to Ehly unless Ehly acquired title to the chattels and to the land in the same year.

By letter dated June 3, 1981, Carl Fager, a Forest Service official informed Cady that, although a buyer usually satisfies the permit requirements by taking title to the base property and the chattels in the same year, alternatives existed. Ehly could (1) buy the livestock and execute a contract to purchase the real property; (2) not use the permits for one year; or (3) delay transfer of the title to the livestock until November 1981, when the grazing season...