Hardin v. Hill

• Decision Date: 21 February 1967
• Docket Number: No. 11077,11077
• Citation: 423 P.2d 309,149 Mont. 68
• Parties: Dennis W. HARDIN and Joyce S. Hardin, Plaintiffs and Respondents, v. Glenn D. HILL and Rose Hill, husband and wife, and Arthur D. Hill and Lottie Hill, husband and wife, Defendants and Appellants.
• Court: Montana Supreme Court

Page 309

423 P.2d 309

149 Mont. 68

Dennis W. HARDIN and Joyce S. Hardin, Plaintiffs and Respondents, v. Glenn D. HILL and Rose Hill, husband and wife, and Arthur D Hill and Lottie Hill, husband and wife, Defendants and Appellants.

No. 11077.

Supreme Court of Montana.

Submitted Nov. 7, 1966.

Decided Jan. 23, 1967.

Rehearing Denied Feb. 21, 1967.

J. A. Turnage (argued), Polson, John D. French, Ronan, Murphy, Robinson & Heckathorn, I. James Heckathorn (argued), Kalispell, for appellants.

Korn, Warden & Walterskirchen, Merritt N. Warden (argued), Kalispell, for respondents.

CASTLES, Justice.

This is an action for rescission of a contract for the sale of a ranch initiated by respondents, hereinafter referred to as Hardin. Rescission was denied, but Hardin obtained a judgment for breach of contract in the amount of $139,450.35, from which the defendants appeal.

The defendants, appellants here, are Arthur D. Hill and Lottie Hill, husband and wife, and their son Glenn D. Hill and his wife Rose Hill, and will be referred to as Hills. The Hills were joint owners of a large cattle ranch lying in Flathead and Lake counties. In 1960 the Hills listed the ranch for sale with various realtors, including Peder Pedersen. Dennis W. Hardin and his wife Joyce S. Hardin, respondents, were residents of Colorado and answered an ad for the ranch placed by Pedersen. After some correspondence between the Hardins and Pedersen, the Hardins came to Montana to inspect the ranch. On October 3, 1960, Pedersen escorted the Hardins to the Hill property to inspect it and enter further negotiations. On the following day the Hardins entered a buy and sell agreement; the final contract was signed on October 5, 1960. The purchase price of $300,000.00 included real estate, two houses, various out-buildings, equipment and machines, and some livestock.

The ranch contained both deeded land and adjacent leased or permitted land owned by four owners, the land, which the parties considered as a lease. The leases were generally for a period of one year and customarily were renewed to the owner of the deeded property. Throughout the period of negotiation, the Hills represented to the Hardins that the ranch contained approximately 5,000 acres of deeded property and 10,000 acres of leased land. The Hills also stated that approximately 11,000 acres of deeded and leased land were under fence; the area so enclosed being the 'heart' of the ranch, containing the best grazing land. The Hardins realized that a survey had never been made of the ranch, and that the statements regarding acreage were rough estimates. The alleged source of the representations made by the Hills was a map prepared by the United States Soil Conservation Service which erroneously included a large portion of land within the ranch which in fact was not owned or leased by the Hills. As this map itself indicated, the boundary lines were 'used for conservation planning only'. Additionally, the testimony indicates that the map was not relied upon, even if seen prior to the contract.

The Hardins entered possession in January of 1961 and continued to raise cattle on the property. In September of 1963 the Hardins discovered a shortage in acreage. A survey revealed a shortage of 279 acres of deeded land and 1,456 of leased. In addition, 2,383 acres were not fenced in as represented. The Hardins attempted to renegotiate the contract and then notified the Hills of their intent to rescind the contract. This action was commenced on December 23, 1963. While rescission was not permitted by the district court, damages for breach of contract were awarded to the Hardins on a rather broad spectrum, as follows: $45,390.00 for the shortage of land within the fence. This amount was deducted from the total purchase price of $300,000.00 for purposes of recomputing the 29 percent down payment used the contract. The difference between the actual down payment and readjusted down payment was apparently allowed as an element of damages. An additional $24,340.35 was awarded for interest actually paid and interest owing over the life of the contract on the $45,390.00 excess (computed at 4 1/2 percent, the contract rate). The total judgment entered for the shortage of land was $77,566.14. Additional damages were allowed for loss of anticipated profits over the life of the contract in the amount of $61,884.21. This figure was awarded without interest and was payable in annual installments from 1965 to 1972.

Appellants' motion for a new trial was denied; they contend on this appeal that the Hardins were not entitled to any relief and that damages awarded were excessive. There are several interesting issues presented.

Initially we must consider whether the misrepresentations made by the Hills were 'fraudulent' by legal definition; and whether the failure of the Hardins to investigate the truth of those assertions woud be a bar to relief. Section 13-309, R.C.M.1947, defines constructive fraud to include, 'any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice * * *.' We think that the district court correctly ruled that there was 'fraud', but it is evident that the Hills did not intend to deceive anyone and made an honest mistake.

The Hardins relied upon the Hills' statements since they made no attempt to confirm the amount of acreage or obtain an abstract of title prior to entering the contract. We say, parenthetically that this is astonishing. According to the testimony of Mr. Hardin, a survey monument was discovered in 1963 at the southeast corner of the ranch on the fence line which indicated the true location of the boundary, and which in itself showed that the soil conservation map was in error. The contract described the deeded property by section and lot number from which the deficiency could easily have been computed.

Perhaps the most aggravating aspect of this case is the failure of the buyers to exercise a reasonable degree of circumspection before signing the contract. Certainly this is not the case of a naive or inexperienced party who is led astray by the deliberate manipulations of the seller. Mr. Hardin was an experienced real estate developer and it is clear from the record and evidence that he had every confidence in his ability to consummate the sale to his satisfaction.

The only attorney who participated in the sale was Don Olsson, an officer of the Ronan State Bank. He drew up the contract and deed at the request of Pedersen. The bank was the escrow holder of the deed and legal services rendered by Olsson were pursuant to his affiliation with the bank. In any event, the Hardins relied upon their own judgment, based upon their own inspection, and did not seek independent legal advice before entering the agreement.

Montana decisions have held that the defense of caveat emptor (let the buyer beware) is available in an action based on false representations. Lee v. Stockmen's National Bank, 63 Mont. 262, 207 P. 623; Helena Adjustment Co. v. Claflin, 75 Mont. 317, 243 P. 1063. However, these cases apply the rule where the purchaser had actual notice of the true state of affairs prior to entering the contract for sale. Under the facts of this case it is at least arguable that the Hardins knew that the Hills did not have substantial factual support for the statements made concerning the amount of acreage. To allow a defense of caveat emptor on this basis involves a degree of conjecture which this court should not entertain, and we do not feel it is necessary to a proper resolution of this dispute to formally rule on the matter of caveat emptor. But the relative conduct of the parties in a suit for equitable relief cannot be overlooked. The Hardins at least co-authored the defective transaction before us and should not be heard to deny all responsibility for the consequences.

The Hills urge that this was a sale in gross, as distinct from a sale by the acre, and since the Hardins purchased the ranch as a single unit they would not be entitled to any relief. The evidence clearly shows that the ranch was sold as a single going concern; there was no discussion or agreement on a per acre price. Moreover, the contract described the deeded land by section and lot number and did not indicate the number of deeded acres. The lease land was described as 'approximately Ten Thousand (10,000) acres'. Taking the language of the contract together with the express intent of the parties to bargain for the ranch as a whole, we feel that the sale was clearly one in gross.

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