Jenkins v. Hillard

• Decision Date: 29 June 1982
• Docket Number: 81-461,Nos. 81-460,s. 81-460
• Citation: 647 P.2d 354,199 Mont. 1,39 St.Rep. 1156
• Court: Montana Supreme Court
• Parties: Roger W. JENKINS, Plaintiff and Appellant, v. Larry Joe HILLARD, Jr. and Larry Hillard, Defendants and Respondents. Larry HILLARD, Plaintiff and Appellant, v. Roger W. JENKINS, Defendant and Respondent.

Page 354

647 P.2d 354

199 Mont. 1

Roger W. JENKINS, Plaintiff and Appellant, v.Larry Joe HILLARD, Jr. and Larry Hillard, Defendants andRespondents.

Larry HILLARD, Plaintiff and Appellant, v.Roger W. JENKINS, Defendant and Respondent.

Nos. 81-460, 81-461.

Supreme Court of Montana.

Submitted on Briefs March 4, 1982.

Decided June 29, 1982.

Landoe, Brown, Planalp, Kommers & Lineberger, Bozeman, for plaintiff and appellantRoger W. Jenkins.

Steven Nelson, Bozeman, for defendants and respondents Hillards.

DALY, Justice.

This is an appeal of two summary judgments issued by the District Court of the Eighteenth Judicial District, Gallatin County.

Respondent, Larry Joe Hillard, is the son of respondent, Larry Hillard.In March 1979 the son sold a hotel in Three Forks, Montana, to appellant, Roger Jenkins.The father(hereinafter referred to as Hillard) showed appellant the hotel, conducted the contract negotiations for its sale, and signed the contract for sale as his son's attorney-in-fact.

Negotiations for the sale of the hotel occurred over about a six-month period.During this time, appellant lived in Seattle and came to Three Forks whenever Hillard was free to discuss the sale.

Appellant inspected the hotel thoroughly only once and was accompanied by Hillard.Appellant claims that during this inspection Hillard told him that the hotel building was in excellent condition and that it was for sale because Hillard was tired of managing it for his son.Concerning the condition of the heating system, appellant in his deposition claims that Hillard made the following representations:

"Q.And when you got specifically to the boiler room, or you know, the area which contained the boilers and the heating system, did he make any statements concerning the condition of those things?A.Yes.He stated that the-let me preface that.There was about two and a half inches of water on the floor in the boiler room and right away I questioned that and I was told that there was about a 400-gallon hot water holding tank and water was leaking out of it and it had a patch on it and I asked him what that was, and he said, 'Well, there's a small crack in the holding tank and that can be welded,' and he had checked with local welders and he was assured that it could be welded, so it was inconsequential.At that time I asked him what condition the boilers were in and he told me that they had a slight problem with the pilot light and that there was no problem with that, but that it was only an adjustment.I was assured that both the heating system and the boilers were more than adequate."

Appellant also stated that the manager of the hotel prevented him from making further inspections of the building.When appellant told Hillard that the manager had prevented his further inspections, Hillard told appellanthe would take care of the situation.Appellant did not try to inspect the premises after this conversation with Hillard.

In his deposition, Hillard stated that he thought the heating system was operating properly.Hillard also said he did not recall making comments on the condition of the boilers.

Appellant purchased the hotel in March 1979, and about the second week in April he discovered that the boilers did not work properly.Appellant stated that he then spent about $35,000 to repair and rebuild the hotel's heating system.

The contract for sale of the hotel contained the following provisions:

"... Buyer has inspected and is familiar with the premises and the physical condition of all the furniture, fixtures and equipment and improvements thereon and therein, and enters into this Agreement on his own independent investigation."

and

"This contract contains the entire agreement between the parties and the Buyer affirms that neither Seller nor any agent of the Seller has made any representations or promises with respect to or affecting the property herein described on this contract not expressly contained herein and that Buyer affirms that he relies upon his own personal observation and examination of the property herein described."

Appellant had given Hillard a $15,000 promissory note as part of the transaction. $5,000 was payable on the note on March 1, 1979, and $10,000 payable on or before August 30, 1979.

In January 1980 Hillard brought an action on the note, claiming that appellant failed to pay the $10,000 due on August 30, 1979.In March 1980, the appellant brought a new and independent action against both the son, as seller, and the father, as the son's agent, alleging that the father had fraudulently misrepresented the condition of the hotel's heating system.

In April 1980, the appellant answered Hillard's complaint, alleging as an affirmative defense that Hillard fraudulently misrepresented the condition of the hotel's heating system and counterclaiming for a return of the $5,000 he already paid on the note.

Hillard moved for summary judgment on his promissory note action and on the fraud action began by appellant.The District Court granted both motions for summary judgment.The District Court found that appellant had ample opportunity to inspect the hotel and that he understood the clauses of the contract in which he affirmed sole reliance on his own inspection.The District Court concluded, as a matter of law, that appellant had failed to make a prima facie showing that he had the right to rely on Hillard's alleged misrepresentations.

The sole issue on review is whether the District Court erred in granting both summary judgments.

Under Rule 56(c), M.R.Civ.P., a summary judgment is proper only when there is no genuine issue of material fact and when the moving party is entitled to a judgment as a matter of law.Summary judgment is therefore not a proper tool for resolving disputed issues of fact and is accordingly improper whenever a material factual matter is in dispute.Flanagan v. Curran(1974), 164 Mont. 262, 521 P.2d 200.Moreover, the party opposing the motion, appellant, will be indulged to the extent of all inferences which may be reasonably drawn from the record.Equity Cooperative Ass'n v. Bechtold(1977), 173 Mont. 103, 566 P.2d 793.

Here, there is at least one blatant issue of fact: whether Hillard made a willful misrepresentation to appellant concerning the condition of the heating system.

Hillard, as respondent, argues that even if it can be shown that he made the misrepresentations, appellant cannot make a prima facie showing that he had the right to rely on the representations.In particular, respondent claims that the contract provision and appellant's opportunity to inspect the hotel preclude appellant's right to rely on Hillard's representations, however false.We disagree.

It is well established in this state that actual fraud is a question of fact.Section 28-2-404, MCA;Cowan v. Westland Realty Company(1973), 162 Mont. 379, 512 P.2d 714;Poulsen v. Treasure State Industries, Inc. (1981), Mont., 626 P.2d 822, 38 St.Rep. 218.Further, this Court has recognized the rule that "fraud vitiates every transaction and all contracts."Bails v. Gar(1976), 171 Mont. 342, 558 P.2d[199 Mont. 6] 458, 461.The reasoning behind this rule is that a party who has perpetrated fraud by inducing another to enter into a contract may not then use the contract to immunize himself from the fraud.Bails, 558 P.2d at 461-462.The contract provision therefore does not preclude proof that a prior oral representation was made and relied upon.

Respondent contends that Schulz v. Peake(1978), 178 Mont. 261, 583 P.2d 425, should control our interpretation of the contract for sale.In Schulz, this Court construed a contract provision similar to the one in this case and stated that because the provision was unambiguous, the court's duty was to enforce it.Schulz is not controlling here for the simple reason that in Schulz a trial was had and findings of fact were made that no misrepresentations were made and no fraud committed.Here, appellant was not given the opportunity to...