Jenkins v. Hillard

• Court: Montana Supreme Court
• Decided: June 29, 1982
• Docket: 81-460
• Status: Published

Opinion

No. 81-460 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982

ROGER W. JENKINS,

Plaintiff and Appellant, VS.

LARRY JOE HILLARD, JR. and LARRY HILLARD, Defendants and Respondents.

No. 81-461

LARRY HILLARD, Plaintiff and Appellant, VS . ROGER W e JENKINS, Defendant and Respondent.

Appeal from: District Court of the Eiqhteenth Judicial District, In and for the County of- alla at in Honorable Jack Shanstrom, Judge presiding. Counsel of Record: For Appellants:

Landoe, Brown, Planalp, Komrners & Lineberger, Bozeman, Montana For Respondents: Steven Nelson, Bozeman, Montana

Submitted on briefs: March 4, 1982 Decided: June 29, 1982 Mr. J u s t i c e Gene B. D a l y d e l i v e r e d t h e O p i n i o n o f t h e Court..

T h i s i s an a p p e a l o f two summary j u d g m e n t s i s s u e d by

the Dist-rict. Court of the Eighteenth Judicial D i s t - r i c t,

G a l l a t i n County.

Respondent, Larry Joe H i l l a r d , is t h e son of respon-

dent, Larry H i l l a r d . I n March 1 9 7 9 t h e s o n s o l d a h o t e l i n

Three Forks, Montana, to appellant., Roger Jenkins. The

f a t h e r ( h e r e i n a f t e r r e f e r r e d t o a s H i l l a r d ) showed a p p e l l a n t

t h e h o t e l , conducted t h e c o n t r a c t negot-iat-ions f o r its s a l e ,

and s i g n e d t h e c o n t r a c t f o r s a l e a s h i s s o n ' s a t t o r n e y - i n -

fact.

Negotiations f o r the s a l e of the h o t e l occurred over

a b o u t a six-month period. During t h i s t i m e , appellant lived

i n S e a t t l e and came t o T h r e e F o r k s whenever H i l l a r d was f r e e

t o d i s c u s s t.he s a l e .

Appellant inspected the hotel thoroughly o n l y once

and was accompanied by Hillard. Appellant claims that

during this inspection Hillard told him that the hotel

b u i l d i n g was i n e x c e l l e n t c o n d i t i o n and t h a t i t was f o r s a l e

b e c a u s e H i l l a r d was t i r e d o f managing i t f o r h i s s o n . Con-

cerning the c o n d i t i o n of the heating system, appellant in

h i s d e p o s i t i o n c l a i m s t h a t H i l l a r d made t h e f o l l o w i n g r e p r e -

s e n t a tions :

Q . And when you g o t s p e c i f i c a l l y t o t h e b o i l e r room, or you know, t.he a r e a which con- t a i n e d t h e b o i l e r s and t h e h e a t i n g s y s t e m , d i d he make any s t a t e m e n t - s c o n c e r n i n g t h e c o n d i t i o n of t h o s e t h i n g s ? A. Yes. He s t a t e d t h a t t h e -- l e t m e p r e f a c e t h a t . T h e r e was a b o u t t.wo and a h a l f i n c h e s o f w a t e r on t h e f l o o r i n t h e b o i l e r room and r i g h t away I q u e s t i o n e d t h a t and I was t o l d t h a t t h e r e was a b o u t a 4 0 0 - g a l l o n h o t w a t e r h o l d i n g t a n k and w a t e r was l e a k i n g o u t o f i t and it had a p a t c h on it and I a s k e d him what t h a t was, and h e s a i d , 'Well, t h e r e ' s a s m a l l c r a c k i n t h e h o l d i n g t a n k and t h a t c a n b e welded,' and h e had c h e c k e d w i t h l o c a l w e l d e r s and h e was a s s u r e d t h a t it c o u l d b e w e l d e d , s o it was i n c o n s e q u e n t i a l . A t t-hat t i m e I a s k e d him w h a t c o n d i t i o n t.he b o i l e r s w e r e i n and h e t o l d m e t h a t . t h e y h a d a s l i g h t p r o b l e m w i t h t.he p i l o t l i g h t and t h a t t h e r e was n o p r o b l e m wit.h t h a t , b u t t h a t . it was o n l y an a d j u s t m e n t . I was a s s u r e d t h a t b o t h t.he h e a t i n g s y s t e m and t h e b o i l e r s were more t h a n adequat-e " . Appellant a l s o s t a t e d t h a t t h e manager o f the hotel

prevented him from making further inspections of the

building. When a p p e l l a n t t - o l d H i l l a r d t . h a t t h e m a n a g e r had

prevented h i s f u r t h e r inspect-ions, H i l l a r d t o l d a p p e l l a n t he

would t a k e c a r e o f t h e s i t u a t i o n . A p p e l l a n t . d i d not. t . r y t o

inspect the premises a f ter t-his conversation with Hillard.

I n h i s d e p o s i t i o n , H i l l a r d s t a t e d t . h a t he t h o u g h t t h e

h e a t i n g s y s t e m was o p e r a t i n g p r o p e r l y . H i l l a r d a l s o s a i d 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 p r o p e r l y . Appellant stated that he

t h e n s p e n t a b o u t $35,000 t o r e p a i r and r e b u i l d t h e h o t e l ' s

h e a t i n g system.

The contract. for sale of the hot-el contained the

following provisions:

". . . Buyer h a s i n s p e c t e d and i s f a m i l i a r wit-h t h e p r e m i s e s and t h e p h y s i c a l c o n d i t i o n o f a l l t h e f u r n i t u r e , f i x t u r e s and equipment. and i m p r o v e m e n t s t h e r e o n and t h e r e i n , and e n t e r s i n t o t h i s Agreement o n h i s own i n d e - pendent i n v e s t i g a t i o n . "

and

"This c o n t r a c t c o n t a i n s t h e e n t i r e agreement b e t w e e n t h e p a r t - i e s and t h e Buyer a f f i r m s that. n e i t h e r S e l l e r nor any a g e n t of t h e S e l l e r h a s made a n y r e p r e s e n t a t - i o n s o r p r o m i s e s wit,h r e s p e c t . t o o r a f f e c t i n g t.he p r o p e r t y h e r e i n d e s c r i b e d on t - h i s c o n t r a c t n o t e x p r e s s l y c o n t a i n e d h e r e i n and t h a t Buyer a f f i r m s t h a t h e r e l i e s upon h i s own p e r s o n a l o b s e r v a t i o n and e x a m i n a t i o n o f t-he p r o p e r t y herein described."

A p p e l l a n t . had g i v e n H i l l a r d a $ 1 5 , 0 0 0 p r o m i s s o r y n o t e

as p a r t o f t h e t r a n s a c t i o n . $ 5 , 0 0 0 was p a y a b l e o n t-he n o t e

o n March 1, 1 9 7 9 , and $10,000 p a y a b l e on o r b e f o r e August

30, 1979.

In January 1980 H i l l a r d brought an action on the

note, c l a i m i n g t h a t a p p e l l a n t f a i l e d t o pay t h e $10,000 d u e

o n August 30, 1979. I n March 1 9 8 0 , t h e a p p e l l a n t b r o u g h t a

new and i n d e p e n d e n t a c t i o n a g a i n s t both t h e son, a s seller,

a n d t h e f a t h e r , as t h e s o n ' s a g e n t , a l l e g i n g t h a t t h e f a t h e r

had f r a u d u l e n t l y m i s r e p r e s e n t e d t h e c o n d i t i o n o f t h e h o t e l ' s

In April 1980, the appellant answered Hillard's

complaint, a l l e g i n g as an a f f i r m a t i v e d e f e n s e t h a t H i l l a r d

fraudulent-ly misrepresented the condition of the hotel 's

heating system and counterclaiming for a return of the

$5,000 he a l r e a d y p a i d on t h e n o t e .

H i l l a r d moved f o r summary j u d g m e n t o n h i s p r o m i s s o r y

n o t e a c t i o n and on t h e f r a u d a c t i o n b e g a n b y a p p e l l a n t . The

District. Court granted both motions for summary j u d g m e n t .

The District Court found that appellant had ample oppor-

tunity to inspect t.he hotel and t-hat. h e understood the

clauses of the contract i n which he a f f i r m e d sole reliance

on h i s own i n s p e c t i o n . The D i s t r i c t C o u r t c o n c l u d e d , as a

matter of law, t.hat appellant had failed t o make a prima

facie showing t h a t he had the right t o r e l y on H i l l a r d ' s

alleged misrepresent-ations.

The sole issue on review is whether the District

C o u r t e r r e d i n g r a n t i n g b o t h summary j u d g m e n t s . Under R u l e 5 6 ( c ) , lul.R.Civ.P., a summary j u d g m e n t is

p r o p e r o n l y when t h e r e i s no g e n u i n e i s s u e o f m a t e r i a l f a c t

and when t h e moving p a r t y is e n t i t l e d to a judgment as a

m a t t e r of law. Summary j u d g m e n t is t h e r e f o r e n o t a p r o p e r

tool f o r resolving disputed issues of f a c t and is a c c o r d -

ingly improper whenever a material factual matter is in

dispute. F l a n a g a n v . C u r r a n ( 1 9 7 4 ) , 1 6 4 Mont. 262, 5 2 1 P. 2d

200. Moreover, the p a r t y opposing t h e motion, appellant,

w i l l be i n d u l g e d t o t h e e x t e n t o f a l l i n f e r e n c e s w h i c h may

be r e a s o n a b l y drawn from the record. Equity Cooperative

A s s ' n v . B e c h t o l d ( 1 9 7 7 ) , 1 7 3 Mont. 1 0 3 , 566 P.2d 793.

Here, there is a t l e a s t one b l a t a n t i s s u e of fact:

w h e t h e r H i l l a r d made a w i l l f u l m i s r e p r e s e n t a t i o n t o appel-

l a n t concerning t h e c o n d i t i o n of t h e h e a t i n g system.

H i l l a r d , as respondent, a r g u e s t h a t even i f it can be

shown t h a t h e made t h e m i s r e p r e s e n t a t i o n s , appellant cannot

make a p r i m a f a c i e s h o w i n g t h a t h e had t h e r i g h t t o r e l y o n

the representations. In particular, r e s p o n d e n t claims t h a t

the contract provision and appellant's opportunity to

inspect the hotel preclude appellant's right to rely on

H i l l a r d ' s r e p r e s e n t a t i o n s , however f a l s e . We disagree.

It is well established in this state that actual

f r a u d is a q u e s t i o n o f f a c t . S e c t i o n 28-2-404, MCA; Cowan

v. W e s t l a n d R e a l t y Company ( 1 9 7 3 ) , 1 6 2 Mont. 379, 5 1 2 P.2d

714; P o u l s e n v. T r e a s u r e S t a t e I n d u s t r i e s , Inc. ( 1981),

Mont . , 626 P.2d 822, 38 S t .Rep. 218. Further, this Court has recognized the rule that "fraud vitiates every

t r a n s a c t i o n and a l l contracts." Bails v. Gar (1976), 171

Mont. 342, 558 P.2d 458, 461. The reasoning behind this

rule i s t h a t a p a r t y who h a s p e r p e t r a t e d f r a u d b y i n d u c i n g another to enter into a contract may not. t.hen use the

contract to immunize himself from t h e fraud. Bails, 558

P.2d a t 461-462. The c o n t r a c t p r o v i s i o n t h e r e f o r e d o e s n o t

p r e c l u d e p r o o f t h a t a p r i o r o r a l r e p r e s e n t a t i o n w a s made and

r e l i e d upon.

Respondent contends t h a t Schulz v. Peake ( 1 9 7 8 ) , 178

Mont. 261, 583 P.2d 425, should c o n t r o l our interpret.ation

of the contract for sale. In Schulz, t h i s Court construed a

contract provision similar t.o the one in this case and

stated that because the provision was unambiguous, the

c o u r t ' s d u t y was t o e n f o r c e i t . S c h u l z is n o t c o n t r o l l i n g

h e r e f o r t h e s i m p l e r e a s o n t h a t i n S c h u l z a t r i a l w a s had

and findings of f a c t were made t h a t no m i s r e p r e s e n t a t i o n s

w e r e made and no f r a u d c o m m i t t e d . Here, a p p e l l a n t was n o t

g i v e n t h e o p p o r t u n i t . y t o show t . h a t m i s r e p r e s e n t a t i o n s were

made and f r a u d c o m m i t t e d .

Respondent c i t e s Van E t t i n g e r v . Pappin ( 1 9 7 8 ) , 180

Mont. 1, 588 P.2d 988, and Lowe v . Root ( 1 9 7 5 ) , 1 6 6 Mont.

150, 5 3 1 P.2d 674, to support his argument that because

a p p e l l a n t i n s p e c t e d t h e premises he cannot, as a matter o f

law, be allowed the right to rely on a representation,

whether t r u e of f a l s e . In particular, respondent cites t h i s

often-quoted p a s s a g e i n Van E t t i n g e r :

"'When i t a p p e a r s t h a t a p a r t y , who c l a i m s t.o h a v e b e e n d e c e i v e d t-o h i s p r e j u d i c e , - has i n v e s t i g a t e d f o r h i m s e l f o r t h a t t h e means were a t h a n d t o a s c e r t a i n t h e t r u t h ... of a n y r e p r e s e n t a t i o n s made t o him, h i s r e l i a n c e upon s u c h r e p r e s e n t a t i o n s made t o h i m , how- e v e r f a l s e t h e y may h a v e b e e n , a f f o r d s n o ground of complaint. ( G r i n d r o d v . Anglo- A m e r i c a n Bond Co., 34 Mont. 1 6 9 , 85 I?. 891; Power & B r o t h e r s v . T u r n e r , 37 Mont. 521, 97 P. 950; 26 C. J. 1 1 4 9 . ) I " (Emphasis added. ) 588 P.2d a t 9 9 4 , q u o t i n g L e e v . S t o c k m e n ' s N a t i o n a l Bank ( 1 9 2 2 ) , 63 Mont. 262, 284, 207 P. 623, 630, Respondent h a s placed an u n n e c e s s a r i l y h a r s h int-er-

p r e t a t i o n on t h e above p a s s a g e . I n Van E t t i n g e r t h e p a r t y

claiming f r a u d knew t.he f a l s i t y o f the representation and

t h e r e f o r e no e v i d e n c e c o u l d be p r e s e n t e d t o show t h e r i g h t

to rely on the representation. In Lowe a superficial

i n s p e c t i o n of t h e b u i l d i n g would h a v e r e v e a l e d t h e o p e n and

notorious deficiencies in the building. T h a t i s s i m p l y not.

the case here.

Appellant acknowledges t - h a t upon his inspection he

found two inches of water in the basement.. Respondent

claims that the presence of the water should have put

a p p e l l a n t on i n q u i r y t h a t t h e b o i l e r s w e r e d e f e c t i v e . Appel-

lant, i n d e e d , was p u t o n i n q u i r y . According to h i s d e p o s i -

tion, a p p e l l a n t a s k e d H i l l a r d why t h e w a t e r was t h e r e and

H i l l a r d r e p l i e d t h a t t h e b o i l e r s needed o n l y minor r e p a i r s ,

a l l e g e d l y m i s r e p r e s e n t i n g t h e t r u e c o n d i t i o n of t h e b o i l e r s .

Moreover, appellant may have been prevented from further

access t o the hotel i n o r d e r to invest.igate H i l l a r d ' s al-

leged misrepresentations. Appellant s t a t e d i n h i s deposition

that the manager of the hotel would not let him freely

inspect. t h e premises.

Van E t t i n g e r and Lowe do n o t stand f o r the proposi-

t i o n t h a t a b u y e r m u s t assume a s e l l e r o r h i s a g e n t i s l y i n g

when t h e b u y e r i s t o l d a p l a u s i b l e e x p l a n a t i o n f o r a d e f e c t

and what is r e q u i r e d t o c u r e t h e d e f e c t . The Kansas Supreme

C o u r t h a s e x p r e s s e d t.he l i m i t a t i o n s t h a t need t o be placed

on t h e Van E t t i n g e r and Lowe c a s e s :

"'The t r e n d of t h e d e c i s i o n s of t h e c o u r t s of t h i s and o t . h e r s t a t e s i s t o w a r d s t h e j u s t d o c t r i n e , t h a t where a c o n t r a c t i s i n d u c e d by f a l s e representations a s to material e x i s t e n t f a c t . s , w h i c h a r e made w i t h t.he i n t e n t t o d e c e i v e , and upon which t h e p l a i n t i f f r e l i e d , i t i s no d e f e n s e , t o a n a c t i o n f o r r e s c i s s i o n o r f o r damages a r i s i n g o u t o f t h e d e c e i t , t h a t t h e p a r t y t o whom t h e r e p r e s e n t a t i o n s were made m i g h t , w i t h d u e d i l i g e n c e , h a v e d i s c o v e r e d t h e i r f a l s i t y , a n d t h a t h e made no searching inquiry into facts. . ."' N o r d s t r o m v . M i l l e r ( 1 9 8 0 ) , 227 Kan. 5 9 , 6 0 5 P.2d 5 4 5 , 553, q u o t i n g Speed v. H o l l i n g s w o r t h (1894) , 54 Kan. 4 3 6 , 4 4 0 , 38 P . 4 9 6 , 497.

Opportunity to inspect in itself is no defense to

possible willful misrepresentations that, because of their

plausibility, preclude further investigation. See also,

Shechter v. Brewer (Mo. 1 9 6 1 ) , 3 4 4 S.W.2d 7 8 4 , a n d Lumby v .

D o e t c h ( 1 9 7 9 ) , - Mont. -, 600 P.2d 2 0 0 , 36 S t . R e p . 1684.

The District Court therefore erred by h o l d i n g that

a p p e l l a n t f a i l e d t o make a p r i m a f a c i e s h o w i n g t h a t h e h a d a

r i g h t t o r e l y on H i l l a r d f s a l l e g e d m i s r e p r e s e n t a t i o n s . Since

the record r e f l e c t s o t h e r genuine i s s u e s of m a t e r i a l fact,

such as, whether Hillard made fraudulent 'representations,

whether appellant relied on those representations, and

whether a p p e l l a n t had t h e o p p o r t u n i t y t o f u r t h e r i n v e s t i g a t e

Hillard's alleged representations, t h e summary j u d g m e n t s a r e

reversed. The c a s e s a r e j o i n e d and remanded t o t h e D i s t r i c t "?

Court.

W concur: e Mr. J u s t i c e John C. Sheehy d i s s e n t i n g :

I would a f f i r m t h e D i s t r i c t C o u r t . Under t h e f a c t s

of t h i s case, our p r i o r decisionsshould r e q u i r e affirmance.

See p a r t i c u l a r l y Van E t t i n g e r v. Pappin ( 1 9 7 8 ) , 180 Mont.

1, 588 P.2d 988; Lowe v. Koot ( 1 9 7 5 ) , 166 Mont. 1 5 0 , 531

P.2d 674; Lee v. Stockmen's N a t i o n a l Bank ( 1 9 2 2 ) , 63 Mont.

262, 2 0 7 P. 523; and G r i n r o d v. Anglo-American Bond Co.

( 1 9 0 6 ) , 34 Mont. 169, 85 P. 891.

H e r e t h e buyer s p e c i f i c a l l y c o n t r a c t e d t h a t t h e

s e l l e r made no r e p r e s e n t a t i o n s t o him n o t c o n t a i n e d i n t h e

w r i t t e n agreement. I f t h a t language a f f o r d s no p r o t e c t i o n

t o a s e l l e r under t h e s e f a c t s , we have p r o v i d e d a f e r t i l e

b r e e d i n g ground f o r l a w s u i t s i n a l l l a n d s a l e c o n t r a c t s .

There would b e c i v i c and s o c i a l b e n e f i t i f w e r e q u i r e d

p e r s o n s s i g n i n g w r i t t e n c o n t r a c t s t o s a y what t h e y mean o r

mean what t h e y s a y i n t h e language u s e d .