Dolsen Company v. Imperial Cattle C ( 1981 )

NO. 79-92
IN THE SUPREME COURT OF THE STATE OF MONTANA
1981
THE DOLSEN COMPANY,
Plaintiff and Appellant,
VS.
THE IMPERIAL CATTLE CO.,
A Montana Corporation, JAMES
EDMISTON and PHILLIS EDMISTON, et al.,
Defendants and Respondents.
Appeal from: District Court of the Eleventh Judicial District,
In and for the County of Flathead.
Honorable James Salansky, Judge presiding.
Counsel of Record:
For Appellant:
Moare and Doran, Kalispell, Montana
For Respondents:
Christopher B.Swartley, Missoula, Montana
George Harris, Missoula, Montana
- - - -
Submitted on briefs: December 17, 1980
Decided :MAR 4 - 1981
Filed: MflP 4 --
Clerk
Mr. J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e Opinion of
the Court.
This is an appeal by Dolson, plaintiff, after an
a d v e r s e judgment o f t h e F l a t h e a d County D i s t r i c t C o u r t .
In 1973 the Imperial Cattle Company (Imperial)
e n t e r e d i n t o s e v e n l e a s e a g r e e m e n t s w i t h t h e D o l s o n Company
( D o l s o n ) , a Washington c o r p o r a t i o n , f o r t h e l e a s e of d a i r y
cattle. Approximately 520 d a i r y cows w e r e t r a n s f e r r e d to
Imperial. Two o f t h e s e v e n l e a s e s w e r e c o n c l u d e d p r i o r to
t h e s e t t l e m e n t n e g o t i a t i o n s which u n d e r l i e t h i s a c t i o n . All
but one of the remaining five leases were personally
g u a r a n t e e d by d e f e n d a n t s L i l l i t h u n and E d m i s t o n , p r i n c i p a l s
i n t h e I m p e r i a l C a t t l e Company.
During 1974 Imperial suffered major financial
r e v e r s e s and n o t i f i e d D o l s o n i n O c t o b e r o f t h a t y e a r t h a t i t
would be u n a b l e t o f u r t h e r p e r f o r m on a n y o f t h e r e m a i n i n g
five leases. The parties proceeded to negotiations,
a g r e e i n g t o a " P o s s e s s i o n Agreement." By t h e t e r m s o f that
agreement Dolson would reassume possession of the dairy
cattle and then sell them. It was agreed that Imperial
would be l i a b l e f o r any d e f i c i e n c y owing a f t e r i t s a c c o u n t
was c r e d i t e d w i t h t h e p r o c e e d s o f t h e s a l e . The a g r e e m e n t
was s i g n e d by t h e p a r t i e s a t a m e e t i n g i n M i s s o u l a , Montana,
on October 18, 1974. All parties were represented by
counsel.
P u r s u a n t t o t h e a g r e e m e n t , D o l s o n s o l d t h e d a i r y cows
t o t h e h i g h e s t f i n a n c i a l a d v a n t a g e of I m p e r i a l . Dolson t h e n
t e n d e r e d a n a c c o u n t i n g and r e q u e s t e d from I m p e r i a l payment
of the deficiency. A l l parties cooperated in the
l i q u i d a t i o n of t h e d a i r y h e r d .
In March 1975 Dolson's general manager met with
defendant Lillithun in Ronan, Montana. A t that meeting
Lillithun did not dispute t h e e x i s t e n c e of the deficiency
but did take issue with the amount owing. Lillithun
f u r t h e r i n d i c a t e d t h a t d e f e n d a n t E d m i s t o n was s o l e l y l i a b l e
for the deficiency.
A f t e r t h e Ronan m e e t i n g D o l s o n p r e p a r e d and f o r w a r d e d
t h e n o t i c e of d e f i c i e n c y . A n o t h e r m e e t i n g was a r r a n g e d i n
which a l l p a r t i e s would be p r e s e n t . With t h e e x c e p t i o n o f
defendant L i l l i t h u n , a l l p a r t i e s were p r e s e n t w i t h c o u n s e l
a t a May 2 3 , 1 9 7 5 , m e e t i n g i n S p o k a n e , W a s h i n g t o n . At this
m e e t i n g D o l s o n was a d v i s e d t h a t I m p e r i a l , and a l l p r i n c i p a l s
of Imperial , were insolvent. Dolson was informed that
d e f e n d a n t L i l l i t h u n was n e a r b a n k r u p t c y and t h a t d e f e n d a n t
E d m i s t o n was d e f e n d i n g an a c t i o n on c e r t a i n l o a n s from t h e
Production Credit Association involving hundreds of
t h o u s a n d s of d o l l a r s . S e t t l e m e n t d i s c u s s i o n s a t t h e Spokane
meeting began at $100,000, substantially less than the
$142,000 deficiency computed by Dolson. Defendants were
c l e a r l y i n no p o s i t i o n t o n e g o t i a t e a t t h e $ 1 0 0 , 0 0 0 f i g u r e ,
and t h e number was r e d u c e d t o $ 6 5 , 0 0 0 and t h e n t o $ 5 5 , 0 0 0 .
A t the Spokane meeting defendant Edmiston first
mentioned that he owned a parcel of real property in
K a l i s p e l l , Montana, which m i g h t be u s e d t o p a r t i a l l y s a t i s f y
the deficiency. Dolson's attorneys testified that the
property was referred to by defendant Edmiston as a
"commercial, downtown piece of property." Edmiston also
represented t o Dolson that t h e p r o p e r t y was w o r t h $ 4 5 , 0 0 0
and t h a t t h e p r o p e r t y had r e c e n t l y been a p p r a i s e d a t t h a t
f i g u r e by James C h r i s t i a n , f a t h e r o f a t t o r n e y C a l C h r i s t i a n ,
who r e p r e s e n t e d d e f e n d a n t L i l l i t h u n . Counsel f o r Edmiston
informed Dolson that he was acquainted with the elder
Christian, knew o f h i s e x p e r i e n c e i n t h e r e a l e s t a t e f i e l d ,
knew that he was a competent appraiser and that, if
a n y t h i n g , t h e a p p r a i s a l would be c o n s e r v a t i v e .
At the conclusion of the Spokane meeting, Dolson
advised defendants t h a t i t would agree t o a s e t t l e m e n t of
$ 5 5 , 0 0 0 c a s h and a d v i s e d d e f e n d a n t E d m i s t o n t h a t h e s h o u l d
use the Kalispell property as collateral in securing the
necessary financing .
On J u l y 2 3 , 1 9 7 5 , a m e e t i n g t o o k p l a c e i n K a l i s p e l l ,
Montana. P r e s e n t a t t h i s m e e t i n g were R o b e r t D o l s o n and h i s
attorney, James Gillespie; defendant Edmiston and his
attorney, Milton Datsopoulos; and a t t o r n e y Cal Christian,
representing Imperial Cattle Company and defendant
Lillithun, who was a g a i n a b s e n t . Once more t h e K a l i s p e l l
property was discussed as possible satisfaction of the
deficiency debt. I t was a g a i n r e p r e s e n t e d a s h a v i n g a v a l u e
of $45,000, a s c o n f i r m e d by t h e r e c e n t a p p r a i s a l . Robert
D o l s o n e x p r e s s e d h i s d e s i r e t h a t any s e t t l e m e n t c o n s i s t o f
cash.
The p a r t i e s d i s c u s s e d a t o t a l m o n e t a r y s e t t l e m e n t o f
$55,000, a f i g u r e which was r e d u c e d t o $ 5 2 , 5 0 0 w i t h $ 7 , 5 0 0
i n i t i a l l y w i t h q u a r t e r l y p a y m e n t s t o be made t h e r e a f t e r of
$2,500 until the debt was extinguished. The o u t s t a n d i n g
balance was to be secured with the Kalispell property.
Finally, Dolson was to receive a copy of the property
d e s c r i p t i o n , t i t l e insurance ( o r o t h e r proof of c l e a r t i t l e )
and a copy o f the C h r i s t i a n appraisal confirming t h a t the
t r a c t was w o r t h $ 4 5 , 0 0 0 . T h i s was D o l s o n ' s o n l y p r e s e n c e i n
Kalispell until the settlement was signed. He and his
attorney flew into Kalispell on the morning of July 23 and
left that afternoon. The Kalispell property was not
identified to them, nor did Dolson request to see it.
After the Kalispell meeting, negotiations were
continued by telephone and correspondence. On October 13,
1975, Dolson agreed to accept the Kalispell property. From
defendants Lillithun and Imperial, Dolson was to receive
$7,500 in cash. On October 31 Robert Dolson went to
Missoula and to Kalispell to execute the settlement. He
accepted from Imperial a $7,500 promissory note, payable at
8 percent per annum, and guaranteed by defendant Lillithun.
Defendant Edmiston tendered a warranty deed for the
Kalispell property.
Dolson traveled from Missoula to Kalispell and
obtained the signature of defendant Edmiston. While in
Kalispell, Dolson contacted a local realtor, John Ming, for
the purpose of listing his newly acquired property. He met
Ming at the property site. Dolson's brief describes the
Edmiston property, which was represented as being conserva-
tively valued at $45,000, as follows:
". . . consist[ing] of slightly over one acre
of undeveloped ground situated directly
between a Pacific Power & Light substation
and the railroad tracks in Kalispell,
Montana. While there was a narrow corridor
leading from Center Street along and behind
the substation to the property, the property
itself had no frontage upon any Kalispell
street. At its closest point to 'downtown
Kalispell', the property was five blocks
distant. "
Ming informed Dolson that he had no interest in
accepting a listing on the property and that he could not
imagine who would be interested in the property with the
possible exception of Pacific Power & Light, the adjacent
landowner. Ming testified that when he examined the
property i n O c t o b e r 1 9 7 5 , t h e v a l u e o f t h e t r a c t was a b o u t
$7,500.
Upon r e t u r n i n g t o Yakima, W a s h i n g t o n , Dolson engaged
MIA appraiser, Wayne N e i l . Neil appraised the parcel at
between $1,250 t o $8,900, d e p e n d e n t upon t h e r e s o l u t i o n o f
uncertainties regarding access. Neil agreed w i t h r e a l t o r
J o h n Ming t h a t a c c e s s was s o l i m i t e d , a p p r o x i m a t e l y s i x t e e n
f e e t of passageway, t h a t a commerical use of the property
was virtually precluded. Neil's conclusion was that the
land would have a use classification of "low-level
industrial." That classification is one of the most
untenable and unmarketable classifications existing with
r e s p e c t t o commercial p r o p e r t y .
A t trial i t was r e v e a l e d t h a t R o b e r t D o l s o n had n o t
seen t h e property p r i o r t o the execution of the settlement
agreement. I t was a l s o e s t a b l i s h e d t h a t a l t h o u g h D o l s o n had
an e x t e n s i v e b u s i n e s s b a c k g r o u n d , h e was n o t e x p e r i e n c e d i n
real estate. Defendants introduced a S t a t e Department of
Revenue a p p r a i s a l which established that for property tax
purposes, t h e t r a c t was w o r t h $ 3 3 , 4 5 0 , only about $11,500
less than Edmiston's representations. Neither defendant
Lillithun nor attorneys Christian or D a t s o p o u l o s had ever
seen the property, and a l l d e n i e d h a v i n g any knowledge o f
i t s v a l u e beyond t h e r e p r e s e n t a t i o n s of d e f e n d a n t Edmiston
and t h e C h r i s t i a n a p p r a i s a l .
The f o l l o w i n g i s s u e s a r e r a i s e d on a p p e a l :
1. Whether D o l s o n i s e n t i t l e d t o r e s c i s s i o n b e c a u s e
o f d e f e n d a n t s ' m i s r e p r e s e n t a t i o n s a s t o t h e n a t u r e and v a l u e
of t h e property?
2. Whether there was substantial credible evidence
to support the District Court judgment; whether the District
Court properly disposed of the issues; and whether the
District Court's conclusions of law were supported by its
findings of fact?
Appellant maintains that the settlement agreement
should be rescinded because of respondents' misrepresenta-
tions as to the value and nature of the Kalispell property.
We do not agree.
This Court has long adhered to the rule that
statements of opinion are preeminently subject to the
common-law doctrine of caveat emptor. See Ray v. Divers
(1925), 72 Pllont. 513, 234 P. 246. Statements as to the
value of property are generally considered declarations of
opinion and will not constitute a proper basis for
rescission. 37 Am.Jur.2d Fraud and Deceit, S 119 at 164.
Courts are continually confronted with the dilemma of
determining to what lengths a vendor of property may go in
"talking up" his merchandise--where does "traders talk" end
and actionable fraud begin? Clearly, the line between
opinion and fact is an especially fine line for the District
Courts to draw when representations are made regarding the
value of property.
The common law provides reasonable protection to
purchasers against fraud and deceit. However, it does not
go to the romantic length of offering indemnity against the
adverse consequences of folly and indolence or a careless
indifference to information which would enlighten the
purchaser as to the truth or falsity of the seller's
assertions as to value. In such an instance, every person
r e p o s e s a t h i s own p e r i l in the f a c e of another's opinion
when he h a s ample o p p o r t u n i t y t o e x e r c i s e i n f o r m e d j u d g m e n t .
" S i m p l e x commendatio non o b l i q a t . " 2 K e n t s Comm. 485.
W emphasize,
e however, t h a t i t is s i n g u l a r l y w i t h i n
the province of the District Court to determine whether
f r a u d h a s been p e r p e t r a t e d on a n innocent purchaser. The
D i s t r i c t C o u r t i s i n t h e b e s t p o s i t i o n t o weigh t h e f a c t o r s
involved, assess the c r e d i b i l i t y of witnesses, and c o n c l u d e
whether the statements regarding value constitute fact or
opinion.
I n r u l i n g t h a t t h e D i s t r i c t C o u r t ' s d e c i s i o n must be
g i v e n g r e a t c r e d e n c e i n t h i s c a s e , we r e a f f i r m o u r d e c i s i o n
i n Lumby v . Doetch ( 1 9 7 9 ) , Mont. , 600 P.2d 200,
36 S t . R e p . 1 6 8 4 , w h e r e i n we f o u n d t h a t t h i s C o u r t m u s t v i e w
the evidence in a l i g h t most favorable to the prevailing
party and presume the c o r r e c t n e s s of the District Court's
judgment. Findings of f a c t s h a l l n o t be s e t a s i d e u n l e s s
clearly erroneous. Rule 52(a), M.R.Civ.P. Although
c o n f l i c t s may e x i s t , such t h a t t h e evidence t e n d s t o show
t h a t r e p r e s e n t a t i o n s a s t o v a l u e c o n s t i t u t e b o t h o p i n i o n and
f a c t , i t is t h e d u t y and f u n c t i o n o f t h e t r i a l c o u r t t o make
a r e s o l u t i o n of t h e c a s e one way o r t h e o t h e r . That c o u r t ' s
reasoned and thoughtful determination that the vendor's
s t a t e m e n t s a s t o t h e v a l u e of t h e p r o p e r t y were o p i n i o n , n o t
declarations of fact, will not be disturbed where its
d e c i s i o n was b a s e d on s u b s t a n t i a l e v i d e n c e . See Kostbade v.
Buckingham (1979), Mont. , 595 P.2d 1149, 36
St.Rep. 129. It is n o t a p r o p e r f u n c t i o n of t h i s Court t o
e x c h a n g e o u r o p i n i o n f o r t h a t of t h e D i s t r i c t C o u r t , e v e n i f
we m i g h t h a v e r e a c h e d a d i f f e r e n t conclusion. I n accord,
P o r t e r v. P o r t e r ( 1 9 7 0 ) , 1 5 5 Mont. 4 5 1 , 473 P.2d 538.
Our r e v i e w m u s t now examine t h e e v i d e n c e t o d e t e r m i n e
whether t h e D i s t r i c t Court exceeded its discretion in the
r e s o l u t i o n of t h i s case. Reviewing t h e e v i d e n c e i n a l i g h t
most f a v o r a b l e t o t h e p r e v a i l i n g p a r t i e s , w e conclude t h a t
there is substantial credible evidence supporting the
court's judgment, that the court properly disposed of the
issues, and that the court's conclusions of law were
s u p p o r t e d by i t s f i n d i n g s o f f a c t .
Robert Dolson is not financially naive. To the
contrary, he i s an a b l e and s u c c e s s f u l businessman. His
relationship to defendants can only be considered
adversarial to the extent their respective positions
r e p r e s e n t competing i n t e r e s t s . T h e s e two f a c t o r s , D o l s o n ' s
business acumen and his relationship t o defendants, weigh
h e a v i l y a g a i n s t t h e p r o p o s i t i o n t h a t d e f e n d a n t s ' took u n f a i r
advantage of Dolson when declaring the value of the
property. If i n d e e d D o l s o n r e l i e d upon t h e r e p r e s e n t a t i o n s
of defendants as to the value of the parcel, we see no
reason why the D i s t r i c t C o u r t would have been obliged to
condone such imprudence by allowing rescission of the
agreement. Helena Adjustment Co. v. Claffin (1926), 75
Mont. 317, 243 P. 1 0 6 3 ; s e e a l s o , W i l l i a m s v . J o s l i n ( 1 9 6 5 ) ,
65 Wash.2d 696, 399 P.2d 308 ( r e l i a n c e m u s t be r e a s o n a b l e ;
purchaser may n o t r e l y on r e p r e s e n t a t i o n s when t h e i r truth
c a n be r e a d i l y d e t e r m i n e d ) .
Even a t t h i s p o i n t i n t h e c a s e , t h e r e c a n be no r e a d y
and a c c u r a t e d e t e r m i n a t i o n o f t h e v a l u e o f t h e p r o p e r t y amid
t h e c o n f l i c t i n g o p i n i o n s found i n t h e r e c o r d . R e a l t o r Ming
alleges the property is worth $7,500. Appraiser Neil
b e l i e v e s t h e p a r c e l i s w o r t h a.s much a s $ 8 , 9 0 0 . The S t a t e
o f Montana D e p a r t m e n t o f Revenue d e t e r m i n e d t h e v a l u e o f t h e
property to be $33,450 with a taxable value of $22,000.
Finally, we have t h e opinion of James C h r i s t i a n that the
p r o p e r t y is worth $45,000.
S u r e l y t h e f a c t s of t h i s c a s e exemplify t h e reasoning
behind t h e r u l e t h a t s t a t e m e n t s a s t o t h e v a l u e of p r o p e r t y
a r e n o t grounds f o r r e s c i s s i o n . I t is reasonable t o expect
that in a s i t u a t i o n s u c h a s t h i s v e n d o r s would a t t a c h t h e
highest possible value t o the property. I n d e e d , i t would b e
u n r e a s o n a b l e t o assume o t h e r w i s e , and p u r c h a s e r s who r e l y on
s u c h r e p r e s e n t a t i o n s p r o c e e d a t t h e i r own r i s k .
On O c t o b e r 3 1 , 1 9 7 5 , R o b e r t D o l s o n was i n K a l i s p e l l
t o o b t a i n t h e s i g n a t u r e s of t h e E d m i s t o n s and c o n c l u d e t h e
p r o v i s i o n s of t h e s e t t l e m e n t agreement. Only a f t e r c o m p l e t e
execution of t h e a g r e e m e n t d i d D o l s o n e x a m i n e what h e had
accepted. The r e c o r d d i s c l o s e s no r e a s o n why D o l s o n d i d n o t
view t h e p r o p e r t y b e f o r e he f o r m a l i z e d t h e agreement. Since
he chos e t o a c c e p t t h e p r o p e r t y s i g h t unseen, when h e had
ample opportunity to examine the s u b j e c t of his bargain,
D o l s o n c a n n o t now be h e a r d t o c o m p l a i n t h a t h e was u n f a i r l y
misled.
We concur with the District Court finding that
Dolson's f o l l y was h i s own. The D i s t r i c t C o u r t ' s finding
t h a t r e s c i s s i o n would be i m p r o p e r i n t h i s c a s e i s s u p p o r t e d
by substantial evidence, and the court's f i n d i n g s of fact
a r e amply s u p p o r t i v e o f i t s l e g a l c o n c l u s i o n s .
A c c o r d i n g l y , we a f f i r m .
n
We c o n c u r ;
Justices