Lumby v. Doetch, 14602
| Decision Date | 26 September 1979 |
| Docket Number | No. 14602,14602 |
| Citation | 600 P.2d 200,183 Mont. 427,36 St.Rep. 1684 |
| Parties | Dale M. LUMBY and Frances Lumby, husband and wife, Plaintiffs and Respondents, v. LaMoine O. DOETCH et al., Defendants and Appellants. |
| Court | Montana Supreme Court |
Keller & Gilmer, Kalispell, for defendants and appellants.
William A. Douglas, Thomas R. Bostock, Ann C. German, Libby, for plaintiffs and respondents.
The defendants, LaMoine O. Doetch, Betty D. Doetch, Estate of Kenneth L. Doetch and Bonnie L. Doetch, appeal from a judgment entered in favor of the plaintiffs, Dale M. and Frances Lumby, rescinding a contract for the sale of real and personal property. The judgment was entered by the District Court, Nineteenth Judicial District, Lincoln County.
LaMoine and Betty Doetch owned a small business in Libby, Montana, known as "Dutch's Sport Shop". The business dealt with Suzuki motorcycles, Bombardier snowmobiles, boats and accessories. Similarly, Kenneth and Bonnie Doetch owned a small business in the same city dealing with Honda motorcycles and office supplies.
Kenneth was the son of LaMoine and Betty Doetch. Kenneth died of leukemia in January 1978, and Bonnie, his widow, represents both his estate and herself individually in this cause.
Having seen a "for sale" advertisement, the Lumbys were interested in purchasing that portion of the Doetch businesses dealing with Suzuki and Honda motorcycles and Bombardier snowmobiles, including the real property associated with "Dutch's Sport Shop" and the personal property associated with the motorcycles and snowmobiles.
The Lumbys first met LaMoine and Betty Doetch on July 21, 1977, in Libby. At that time, the Lumbys inquired about the financial health of "Dutch's Sport Shop" and whether that business was in good standing with its suppliers and wholesalers. The Lumbys were assured the business was in excellent financial condition and there were no problems at all with its suppliers and wholesalers. The Lumbys were shown a handwritten profit and loss statement for 1976 showing a net income of $42,756.13. The statement was prepared by Betty Doetch.
The Lumbys were impressed with the profitability of "Dutch's Sport Shop". They gave $500 to LaMoine and Betty Doetch to hold open the exclusive opportunity to purchase the business.
Thereafter, the Doetchs assured the Lumbys on many occasions of the profitability of the business and that it was in good standing with suppliers and wholesalers. The Lumbys were told the business was realizing a profit schedule in 1977 equal to that realized in 1976. To confirm this fact, the Lumbys were shown a profit and loss statement for January 1, 1977, to June 30, 1977, depicting a net profit of $19,201.68. This statement was also prepared by Betty Doetch.
On July 27, 1977, the Lumbys and the Doetchs entered a real estate purchase and sale agreement specifying a purchase price of $112,500. The agreement specified August 15, 1977, as the closing date for the transaction.
Also on July 27, 1977, the Lumbys paid $500 to the Doetchs. This payment entitled the Lumbys to inspect the financial records of "Dutch's Sport Shop" to verify the represented profitability of that business. The inspection continued for one week but proved fruitless. The records maintained by Betty Doetch, were in poor condition, disorganized and confusing.
As a result, the Lumbys asked a bank officer about the financial condition of "Dutch's Sport Shop". They were told it was illegal to give out such information.
Despite the failure of their investigations, the Lumbys continued payments on the contract of July 27, 1977. The Lumbys paid the Doetchs $8,877 on August 12, 1977, $8,250 on August 14, 1977, and $9,873 on August 15, 1977.
On August 15, 1977, the parties executed a contract for deed embodying the general terms of the real estate purchase and sale agreement of July 27, 1977. Thereupon, the Lumbys assumed full control and operation of the business formerly known as "Dutch's Sport Shop".
On or about November 1977, the Lumbys received letters and telephone calls from suppliers seeking payment for past due bills incurred by the Doetchs. The Lumbys became aware of numerous "not sufficient funds" checks written by the Doetchs and that shipments of equipment and parts to the Doetchs had been suspended in 1977 by U. S. Suzuki and Bombardier.
Dale Lumby approached LaMoine Doetch and requested a return of the purchase money already paid to the Doetchs on the contract for deed. Dale Lumby warned of possible legal action in case of a refusal. His request was refused.
On November 29, 1977, the Doetchs assigned their interest in the contract for deed to David Kieffer for the sum of $50,000 cash plus a repair of LaMoine Doetch's boat. Just prior to the assignment, the Doetchs represented to Kieffer that there were no problems with the contract for deed. The representation was made after Dale Lumby had requested a rescission of the contract for deed.
Kieffer borrowed $50,102.50 from United National Bank of Libby to finance the purchase of the Doetch interest in the contract for deed. This loan was secured by a written promissory note and financing statement whereby Kieffer pledged his interest in the contract for deed as collateral for the loan. Kieffer was current on all required payments on the loan as of the time of the trial of this cause.
On January 12, 1978, the Lumbys filed this cause for rescission of the contract for deed. The Lumbys alleged the Doetchs misrepresented the financial condition of their business and its standing with its suppliers and wholesalers.
The District Court held as follows:
1. The Lumbys were entitled to rescind the contract of August 15, 1977, as to all defendants.
2. The Lumbys were entitled to the return of $31,650 plus interest and were entitled to a judgment in that amount against the Doetchs.
3. The Doetchs had defrauded Kieffer and the United National Bank of Libby in the sum of $50,102.50 plus $840 expenses, together with interest at the rate of 10% per annum. Kieffer and the United National Bank of Libby were entitled to a judgment in such amount.
4. Kieffer was entitled to a judgment for exemplary damages against the Doetchs in the amount of $5,000.
5. The property which is the subject of the action was to be sold at public auction in accordance with Montana statutes relating to sales of property subject to lien.
The Doetchs filed motions to amend the findings of fact and for a new trial. Such motions were not set for hearing within the...
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