Woodahl v. Matthews, 81-303

• Decision Date: 03 February 1982
• Docket Number: No. 81-303,81-303
• Court: Montana Supreme Court
• Parties: James A. WOODAHL and Barbara A. Woodahl, husband and wife, Plaintiffs and Appellants, v. Carolyn K. MATTHEWS, Defendant and Respondent.

Page 1165

639 P.2d 1165

196 Mont. 445

James A. WOODAHL and Barbara A. Woodahl, husband and wife, Plaintiffs and Appellants, v. Carolyn K. MATTHEWS, Defendant and Respondent.

No. 81-303.

Supreme Court of Montana.

Submitted on Briefs Nov. 5, 1981.

Decided Feb. 3, 1982.

Smith, Baillie & Walsh, Great Falls, for plaintiffs and appellants.

Scott, Linnell & Newhall, Great Falls, for defendant and respondent.

MORRISON, Justice.

Plaintiffs, James and Barbara Woodahl appeal a final judgment entered by the District Court of the Eighth Judicial District denying their claim for rescission and ordering the specific performance of a contract between plaintiffs and defendant, Carolyn K. Matthews.

James Woodahl, an active real estate developer working primarily in Great Falls and Billings, developed the Park Plaza residential condominiums in Great Falls. Barbara Woodahl is James' wife.

Carolyn Matthews was the owner of a house at 1909 Eleventh Street Southwest, Great Falls, Montana. She had been a real estate sales person for approximately six months when she was approached by an agent of the Woodahls regarding the opportunity to purchase a Park Plaza Condominium.

Negotiations commenced between the two parties in late 1979. The negotiations resulted in a series of agreements being entered into on January 8, 1980, whereby the Woodahls would lease units 7A and 4C of Park Plaza to Matthews in exchange for Matthews selling the Woodahls her home. The lease for 7A contained an option to purchase the unit on February 1, 1981. The option was to be exercised by Matthews' forgiving the obligation of the Woodahls under their promissory note on the house.

On February 13, 1980, the Woodahls, their interior decorator, Tom Matsko, and Richard Newman, a building contractor, entered the house to gather information for remodeling purposes. While in the upstairs master bedroom, Mr. Woodahl noted that the floor appeared to be out of level. Using his level, Mr. Newman determined that the floor sloped toward the north at a rate of 51/2 inches over thirty feet. Other rooms also were determined to be out of level, most notably the downstairs television room.

Out of court attempts to cure the problem to the satisfaction of both parties failed. On May 5, 1980, plaintiffs filed a complaint in the Eighth Judicial District alleging fraud; or, in the alternative, mistake on the part of defendant. They requested rescission of the contract; or, in the alternative, damages to be measured by the cost of restoring the house to a structurally sound and habitable state. Defendant filed an answer and counter-claim on May 20, 1980, requesting specific performance of the agreements.

At trial, Carol Matthews testified that she and her family had resided in the house for ten years and that she had never noticed the floors were not level. She had noticed that two doors, the master bedroom door and the door to another upstairs bedroom, tended to automatically slam shut. She propped these doors open with a valet in the master bedroom and a toy in the other bedroom. These objects were in place each time the Woodahls toured the house. The automatic closing problem was attributed by Mrs. Matthews to either loose hinges or incorrect hanging of the doors. She testified that the problem had arisen after her husband oiled the hinges on the doors.

The Matthews completed several remodeling projects and built two additions to the home during their residence. In 1975 the garage beneath the master bedroom was converted to a den and a new garage constructed adjacent to the den. In 1976 the kitchen was remodeled and a dinette constructed. Russ Jones was the construction superintendent for both projects. He testified at trial that he had not noticed any unlevel condition so out of the ordinary as to warrant being brought to the attention of Mrs. Matthews.

Further testimony by Mr. Jones concluded that had the house settled 51/2 inches, cracks in the foundation of the house and breakage of pipes would have occurred. Mr. Jones noticed no cracks or breaks at the time the construction projects were performed.

Mr. James Walsh, a salesman for contract flooring, performed an estimate for floor covering for the master bedroom of the house. He noticed no unlevel condition while performing his estimate and he was never informed by the carpet layer of any problem.

Mr. James Greer, a carpenter, resided the house. He noticed nothing unusual. Mr. Vern Flesch, a painter and paperhanging contractor, applied striped wallpaper to the walls and ceiling of the upstairs bathroom. He noticed no particular unlevel condition within the bathroom which he considered exceptional.

James Woodahl testified at trial that he had toured the house two times prior to the January 8, 1980, agreements. Mrs. Woodahl testified that she had accompanied her husband on those tours. Neither plaintiff noticed the floors to be out of level during the tours. The floor's unlevel condition was first noticed by James Woodahl on February 13, 1980.

James Woodahl hired William Ferro to professionally appraise the house prior to the signing of the contract agreements. Mr. Ferro did not observe the unlevel condition when he appraised the home, nor did he discover any evidence of settlement. He appraised the home at $190,000. He estimated that the unlevel condition would reduce the value of the home by ten to fifteen percent.

In its findings of fact, the District Court found that Mrs. "Matthews was not aware of an unlevel condition in portions of the home when it was sold to the Woodahls." The court also found "that the unlevel condition in portions of the home was not observable by persons engaged in normal usage of the home, did not affect the habitability of the home and did not prevent the Woodahls from using the home for the purpose which they originally intended." Matthews was not found to be guilty of fraud or misrepresentation; mutual mistake between the two parties was not found to exist; and no material failure of consideration warranting a rescission of the agreement was found.

Therefore, the court concluded, since the home was habitable despite the unlevel conditions, "Woodahls received the property for which they bargained." Finally, the court held Matthews not liable for damages as a result of the unlevel condition of the home and found Matthews entitled to specific performance of the agreements.

On appealing the order for specific performance, Woodahls raised the following issues:

(1) Whether the District Court abused its discretion in refusing to grant relief on the theory of express warranty.

(2) Whether the District Court abused its discretion by failing to find that the defendant had knowledge of the defective condition of the home when she sold it to the plaintiffs.

(3) Whether the District Court abused its discretion by failing to grant rescission of the contracts involved.

(4) Whether the District Court abused its discretion in refusing to grant relief on the basis of constructive fraud or unjust enrichment.

(5) Whether, having failed to grant rescission, the District Court abused its discretion by failing to award damages to the plaintiffs.

We will discuss the issue of warranty, consolidate our discussion of the issues bearing on rescission and, because we affirm, the damage issue is moot.

WHETHER THE DISTRICT COURT ABUSED ITS DISCRETION IN REFUSING TO GRANT RELIEF ON THE THEORY OF EXPRESS WARRANTY.

Not only did the District Court refuse to grant relief on the theory of express warranty, it totally failed to address the issue in its findings of fact and conclusions of law. Upon reviewing the testimony concerning express warranties and applying relevant contract law to the facts as we found them, we agree that relief should not have been granted appellant on the theory of express warranty.

In the listing for the house, Mrs. Matthews described the condition of her home as excellent. However, nowhere in their testimony is there an indication that either Mr. or Mrs. Woodahl relied on that listing statement when deciding whether or not to purchase the house. There can be no express warranty without reliance. Jones v. Armstrong (1915), 50 Mont. 168 at 175, 145 P. 949 at 951.

Mr. and Mrs. Woodahl did state that on their second tour of the house, they asked Mrs. Matthews: "Are there any problems with this house?" Mrs. Matthews allegedly replied: "None...