Lynch v. Shields

No. 12734

I N THE SUPREME COURT O THE STATE O M N A A
F F OTN

1974

RICHARD E. LYNCH,

P l a i n t i f f and A p p e l l a n t ,

J. PAUL SHIELDS and JESSIE I. SHIELDS,
husband and w i f e ,

Defendants and Respondents.

Appeal from: D i s t r i c t Court of t h e S i x t h J u d i c i a l D i s t r i c t ,
Honorable J a c k D. Shanstrom, Judge p r e s i d i n g .

Counsel of Record :

For Appellant :

Berg, Angel, Andriolo and Morgan, Bozeman, Montana
.
Richard J Andriolo argued, Bozeman , Montana

F o r Respondents:

Landoe, Gary and Donald E. White, Bozeman, Montana
H. B. Landoe argued, Bozeman, Montana

Submitted: November 20, 1974

Decided: =--. -
L:!.- - 3.4
= - .

Filed :
Mr. J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion o f t h e C o u r t .

P l a i n t i f f a p p e a l s from a judgment f o r d e f e n d a n t s e n t e r e d

on f i n d i n g s of f a c t and c o n c l u s i o n s of law a f t e r d e n i a l of a

motion t o a l t e r and amend t h o s e f i n d i n g s and c o n c l u s i o n s . The

c a s e was t r i e d t o t h e c o u r t i n t h e s i x t h j u d i c i a l d i s t r i c t ,

c o u n t y of P a r k , t h e Hon. J a c k D . Shanstrom, p r e s i d i n g w i t h o u t a

jury.
P l a i n t i f f , R i c h a r d E. Lynch, b r o u g h t t h e a c t i o n t o r e c o v e r
t h e sum of $10,000 which he had p a i d t o d e f e n d a n t s J . P a u l S h i e l d s

and J e s s i e I . S h i e l d s , husband and w i f e , a l l e g e d l y a s a good f a i t h

d e p o s i t i n c o n n e c t i o n w i t h n e g o t i a t i o n s t o p u r c h a s e t h e OTO r a n c h

i n Park County. Defendants answered d e n y i n g t h e payment was

s i m p l y a good f a i t h d e p o s i t , b u t r a t h e r t h a t i t was payment f o r

an o p t i o n t o purchase.

The i s s u e s on a p p e a l a r e :

1. The d i s t r i c t c o u r t e r r e d i n r e f u s i n g t o f i n d t h a t
a n a l l e g e d o r a l c o n t r a c t o r o p t i o n agreement was n o t e n f o r c e -

a b l e by way of d e f e n s e a s i t v i o l a t e d t h e s t a t u t e of f r a u d .

2. The c o u r t e r r e d i n f i n d i n g a l e g a l l y b i n d i n g con-

t r a c t e x i s t e d between t h e p a r t i e s .
To answer t h e i s s u e s , t h e f a c t s a r e i m p o r t a n t .

One Bud B e l l i s , who had hunted on t h e S h i e l d s ' p r o p e r t y ,

c a l l e d P a u l and J e s s i e S h i e l d s i n March 1970 s a y i n g t h a t he had

a g r o u p of p e o p l e i n t e r e s t e d i n buying t h e i r r a n c h and a s k i n g

them t o w a i t b e f o r e s e l l i n g i t . On A p r i l 2 3 , 1970, p l a i n t i f f
Lynch and B e l l i s f l e w t o Montana f o r t h e p u r p o s e of viewing t h e
ranch. Mr. Lynch d e s c r i b e d h i m s e l f a s a " s t o c k b r o k e r p a r t t i m e ,
a s e c u r i t i e s salesman". P r i o r t o h i s p r e s e n t p o s i t i o n he worked
a s a merger c o n s u l t a n t a s s i s t i n g i n t h e s a l e o f c o r p o r a t i o n s ,

and b e f o r e t h a t a s a s e c u r i t i e s salesman.

The S h i e l d s w e r e w i l l i n g t o s e l l t h e e n t i r e r a n c h f o r
$500,000, b u t a t t h i s f i r s t meeting t h e y r e a c h e d a n agreement

whereby t h e y would r e t a i n a c o n t r o l l i n g i n t e r e s t i n t h e r a n c h

by s e l l i n g 49% of t h e OTO C o r p o r a t i o n , which would have t o be

expanded. The t o t a l p r i c e a g r e e d upon was $245,000 f o r 49%

i n t e r e s t , 29% of which w a s t o be p a i d on d e l i v e r y of t h e s t o c k ,

w i t h $10,000 of t h a t 29% f i g u r e t o be p a i d on e x e c u t i o n of a n

instrument. The r e m a i n d e r was t o be p a i d i n e q u a l y e a r l y i n -

stallments. They d i s c u s s e d t h e t r a n s a c t i o n day and n i g h t f o r

t h r e e d a y s , a g r e e i n g on what P a u l S h i e l d s c o n s i d e r e d t o be a l l

t h e a s p e c t s o f the d e a l , and t h e d e t a i l s w e r e n e v e r changed.

J e s s i e S h i e l d s t e s t i f i e d t h i s was t h e agreement r e a c h e d and s o

d i d Lynch, who l e f t Montana w i t h t h e i n t e n t i o n of consummating
t h e d e a l i f i n v e s t o r s c o u l d be found. The S h i e l d s had g i v e n

him t i m e t o o b t a i n i n v e s t o r s .

S h o r t l y a f t e r r e t u r n i n g t o A r i z o n a , t h e i n t e r e s t e d men

r e c e i v e d t h e proposed "Agreement t o S e l l and Buy C a p i t a l S t o c k "

and " T r a n s a c t i o n s I n v o l v e d i n S a l e of C a p i t a l S t o c k of OTO Ranch"
which Lynch e x p e c t e d and which Lynch and B e l l i s had r e q u e s t e d

s o t h a t t h e s a l e c o u l d be consummated. The i n t e r e s t f i g u r e , f o r

which a b l a n k was l e f t , was t e s t i f i e d t o by P a u l and J e s s i e

S h i e l d s t o have been d e c i d e d on a s 7 % . The documents s e t o u t

t h e t e r m s a s a g r e e d upon and t h e S h i e l d s b e l i e v e d t h a t t h e y were

e n t i r e l y s a t i s f a c t o r y t o t h e men b e c a u s e t h e S h i e l d s d i d n o t hear

from them.

On May 11, 1970, J e s s i e S h i e l d s w r o t e a l e t t e r t o B e l l i s
and Lynch i n which s h e s t a t e d , b e c a u s e s h e had n o t h e a r d from
them i n a l o n g t i m e , s h e supposed t h e y were no l o n g e r i n t e r e s t e d .
T h i s l e t t e r prompted a c a l l from Lynch f o l l o w e d by a n o t h e r v i s i t
s o t h a t t h e r a n c h c o u l d be shown t o a p r o s p e c t i v e i n v e s t o r and
on May 1 5 Lynch b r o u g h t a d o c t o r t o l o o k o v e r t h e r a n c h . When

t h e d o c t o r l e f t a f t e r s p e n d i n g o n l y a s h o r t t i m e on t h e r a n c h ,
Lynch s t a y e d f o r two d a y s t a l k i n g o v e r h i s p l a n s w i t h t h e

S h i e l d s a s i f t h e agreement w a s soon t o be s i g n e d .

A t t h i s t i m e P a u l t o l d Lynch t h a t s i n c e s o many p e o p l e

were i n t e r e s t e d i n t h e r a n c h , Lynch would have t o p u t up $10,000
f o r an option. Concerned a b o u t t h e p o s s i b i l i t y t h a t enough i n -

v e s t o r s c o u l d n o t be found, P a u l d i d n o t want Lynch t o have t o

f o r f e i t t h e consideration f o r an option. H e asked Lynch i f h e

c o u l d r a i s e t h e downpayment on h i s own b e c a u s e , a s Lynch t e s t i -

f i e d P a u l t o l d him: "He s a i d , w e l l , i f t h e r e s t of your s y n d i c a t e

d o e s n ' t g e t t o g e t h e r t h e n t h e o n l y way you c a n g e t t h a t $10,000.00

back i s i f you p u t up t h e whole downpayment." Paul Shields t e s t i -

fied: "And I a s k e d him, I s a i d , w e l l , Dick, t o make t h i s a d e a l

you w i l l have t o p u t up a n o p t i o n of $10,000.00 t o know t h a t we

have g o t something. W e want t o s e l l t h i s d e a l and we c a n ' t s e t

h e r e a l l summer and l o s e t h e p e o p l e who were wanting t o buy a l l

of t h e t i m e a t t h a t time." J e s s i e ' s testimony agreed with P a u l ' s ,

and t h e p a r t i e s a g r e e d t h a t on payment o f t h e $10,000 t h e o p t i o n

would r u n u n t i l August 1, 1970.

Lynch t e s t i f i e d t h a t when he r e t u r n e d t o Phoenix h e " g o t

n e r v o u s " and s e n t a check f o r $10,000 t o t h e S h i e l d s . He t h o u g h t

t h a t t h i s would g i v e him t h e f i r s t chance t o buy. He t h o u g h t

he had accomplished something by s e n d i n g t h e check and t h e S h i e l d s

would h o l d t h e d e a l f o r him. I n t h e l e t t e r accompanying h i s check

he wrote:

" T h i s i s o n l y t h e f i r s t s t e p i n what s h o u l d be
a l o n g and f r i e n d l y b u s i n e s s r e l a t i o n s h i p . We
a r e a l l l o o k i n g forward t o b e i n g s t o c k h o l d e r s
i n OTO Ranch * * * W e w i l l forward t h e agreement
once we have l e g a l l y e s t a b l i s h e d o u r (Bud's and
mine) power of a t t o r n e y t o s i g n f o r t h e group.
I hope o u r check i s s u f f i c i e n t f o r now."

It seemed as though t h e s i g n e d Agreement was f o r t h c o m i n g .

The S h i e l d s r e f r a i n e d from showing t h e v a l u a b l e r a n c h ,

and a l t h o u g h many p e o p l e i n q u i r e d a b o u t i t s p o s s i b l e p u r c h a s e ,
t h e y were t o l d t h a t i t was n o t f o r s a l e . I n a l e t t e r of May

29, 1970, J e s s i e S h i e l d s a s s u r e d t h e two men t h a t t h e y were

p r o p e r l y managing t h e r a n c h and wanted t o keep them informed

o f what was happening. She asked i f t h e i r wives c o u l d come

up t o g i v e h e r i d e a s on f i x i n g up t h e h o u s e s , which s h e w a s

r e a d y i n g f o r them. On J u n e 2 6 , 1970, s h e a g a i n w r o t e and e x p r e s s -

e d c o n c e r n f o r t h e management of t h e r a n c h i n t h e f u t u r e ; s i n c e

t h e Agreement would g i v e t h e i n v e s t o r s a 4 9 % i n t e r e s t , t h e r e was

much p l a n n i n g and t r u s t which would be needed. I n one p a r t
she wrote: "Gretchen l e f t t h e house up on t h e OTO p r o p e r t y j u s t
i n p e r f e c t shape. W c o u l d r e n t it b u t d i d n ' t t h i n k we had
e

b e t t e r till we found o u t what you boys wanted t o d o . " She ended

by reminding Bud B e l l i s t h a t he s t i l l had t o p i c k o u t t h e house

he wanted.

On J u l y 31 o r August 1, 1970, R i c h a r d Lynch c a l l e d t h e

S h i e l d s b e c a u s e t h e n i n e t y d a y s which t h e S h i e l d s had g i v e n

them i n A p r i l were up. A c t u a l l y , t h e s i x t y day o p t i o n p e r i o d

which t h e S h i e l d s had a g r e e d t o g i v e i n exchange f o r t h e $10,000

c o n s i d e r a t i o n had e x p i r e d . When asked who he t a l k e d t o on t h e

t e l e p h o n e , h e answered, " J e s s i e " . H e d i d n o t r e c a l l any t a l k

a b o u t f o r f e i t i n g t h e $10,000. He t h e n t e s t i f i e d t h a t he was n o t

s u r e i f it was Jessie he t a l k e d t o , remarking t h a t it had been

t h r e e years since t h e conversation. When asked whether he w a s

s u r e a b o u t what was s a i d i n t h e c o n v e r s a t i o n , he answered, " n o t
dead p o s i t i v e , no". H e d i d r e c a l l t h a t t h e p e r s o n he t a l k e d t o ,

whoever i t was, o f f e r e d t o a l l o w him more t i m e .
P a u l and J e s s i e t e s t i f i e d t h e y were s u r e t h a t Lynch had
t a l k e d t o Paul. P a u l o f f e r e d t o e x t e n d t h e o p t i o n t o September
1 5 , a month and a h a l f , and Lynch s a i d t h a t h e a p p r e c i a t e d t h a t
v e r y much and i t might d o t h e job. S h i e l d s wanted t o be f a i r

and d i d n o t want Lynch t o have t o f o r f e i t h i s money i f t h e r e was
a chance of going through with the deal. They had an extension
drawn up and after signing it, sent it to Richard Lynch. Lynch\
admitted receiving it. The document was prepared simply to
assure Lynch that he had until September 15 to return the signed
Agreement.
The Shields never received a response from Lynch--they
did not hear from him again until the law suit was filed--and
assumed that the extension was acceptable to him. Defendants
were prepared, from the time of the negotiations which took
place in April 1970, to comply literally with the terms and
conditions set forth in the agreement to sell and were ready,
willing and able to convey the property as agreed.
The district court concluded:
"I.
"That as a result of the oral conversations between
plaintiff and defendants on April 23rd and 24th,
1970, a written proposal in the form of a purchase
agreement was prepared and delivered to plaintiff
by mail on or about May 1, 1970, the receipt of
which was acknowledged by the plaintiff, which
document constituted an offer to sell.

"That on or about May 29th, 1970, plaintiff,
following a meeting with defendants at defendantst
ranch in Park County, Montana, addressed a letter
to defendants enclosing a check for $10,000.00 as
part payment in acceptance of the offer and to
obtain an option to hold the deal for him and his
associates for a certain period of time, and acknow-
ledged acceptance of the terms of the written con-
tract by assuring defendants that the agreement
would be forwarded as soon as power of attorney
could be established, by which plaintiff implied
that he was acting for himself as well as certain
undisclosed associates.

"That defendants, Paul Shields and Jessie Shields,
construed said $10,000.00 payment, together with
written assurance by plaintiff that the agreement
would be forwarded as soon as power of attorney
could be established to sign the agreement, in the
nature of an option to hold the deal for the
plaintiff until he had perfected his power of
attorney.
 I' IV.
"That t h e f o r e g o i n g a c t s and c o n d u c t on t h e p a r t
o f p l a i n t i f f and d e f e n d a n t s , i n c l u d i n g p a r t pay-
ment o f $10,000.00, c o n s t i t u t e a n o f f e r and
a c c e p t a n c e , a s d e f i n e d i n S e c t i o n 87A.8-319, R.C.M.
1947, under S u b s e c t i o n s ( a ) , (b) , and ( c ) t h e r e o f ,
a s w e l l as S e c t i o n 13-606-4, R.C.M. 1947.

"That payment o f t h e sum o f $10,000.00 c o n s t i -
t u t e s p a r t performance, which removed s a i d t r a n s -
a c t i o n from t h e S t a t u t e of F r a u d s , and p l a c e d a n
o b l i g a t i o n upon t h e d e f e n d a n t s i n t h e n a t u r e of
an o p t i o n t o hold t h e d e a l f o r t h e p l a i n t i f f ,
and t h a t t h e d e f e n d a n t s d i d s o .

"That by r e a s o n of t h e f a i l u r e of t h e p l a i n t i f f
t o comply w i t h t h e agreement i n t h e n a t u r e of an
o p t i o n within t h e agreed t i m e o r w i t h i n a reason-
able t i m e , plaintiff forfeited h i s r i g h t t o re-
c l a i m t h e c o n s i d e r a t i o n p a i d by him f o r t h e o p t i o n
t o consummate s a i d p u r c h a s e w i t h i n a c e r t a i n p e r i o d
of t i m e o r w i t h i n a r e a s o n a b l e t i m e . "

R e f e r r i n g now t o t h e i s s u e s r a i s e d . Insofar a s the

s t a t u t e of f r a u d s i s c o n c e r n e d , under s e c t i o n s 1 3 - 6 0 6 ( 4 ) , 93-

1401-7, 74-203, o r 87A-8-319, R.C.M. 1947, it i s c l e a r t h a t a

f u l l y e x e c u t e d o p t i o n c o n t r a c t was f u l l y performed and o u t s i d e

t h e s t a t u t e s enumerated. A p p e l l a n t Lynch d o e s n o t d i s p u t e t h i s

general statement but argues t h a t t h e evidence w a s i n s u f f i c i e n t

t o e s t a b l i s h t h e e x i s t e n c e of a n o p t i o n agreement.

By o u r r e c i t a t i o n o f t h e f a c t s h e r e and o u r q u o t a t i o n

of t h e t r i a l c o u r t ' s c o n c l u s i o n s , we f i n d t h e r e was s u f f i c i e n t
e v i d e n c e t o e s t a b l i s h t h e o p t i o n agreement a s w e l l a s t o show

t h a t t h e r e was f u l l performance.
The p a r t i e s had d i s c u s s e d and a g r e e d upon a l l t h e e s -
s e n t i a l t e r m s of t h e s a l e , most of which were i n c o r p o r a t e d i n t o
t h e two i n s t r u m e n t s . The S h i e l d s had a n o f f e r which t h e y h e l d
open f o r a n e n t i r e month. On L y n c h ' s v i s i t t o t h e r a n c h on
May 23, 1970, P a u l informed him t h a t some payment would be n e c e s -
s a r y t o h o l d t h e d e a l any l o n g e r , whereupon t h e two a g r e e d on
 $10,000. R e t u r n i n g t o Phoenix, Lynch s e n t t h e check and a

l e t t e r d a t e d May 29, 1970 i n which h e w r o t e " W e w i l l forward

t h e agreement once w e have l e g a l l y e s t a b l i s h e d o u r (Buds and
mine) power of a t t o r n e y t o s i g n f o r t h e group. I hope o u r

check i s s u f f i c i e n t f o r now." I n o t h e r words, Lynch was buy-

i n g and r e c e i v e d t i m e . The S h i e l d s c o n s i d e r e d t h e m s e l v e s bound

and h e l d t h e p r o p e r t y o f f t h e market.

These t r a n s a c t i o n s c r e a t e d a n o p t i o n c o n t r a c t a s t h e

t r i a l c o u r t found. I n P e t e r s o n Sheep and C a t t l e Co. v . Moss,

155 Mont. 311, 471 P.2d 546, a n o p t i o n w a s c r e a t e d by payment

of c o n s i d e r a t i o n o n a n agreement t o " t i e up t h e p r o p e r t y " .
Finding s u b s t a n t i a l evidence t o support t h e f i n d i n g s of

t h e t r i a l c o u r t , and f i n d i n g no m e r i t i n t h e i s s u e s r a i s e d on

a p p e a l , w e a f f i r m t h e judgment.

T

concur: t

. Chief J u s t i c e

Justices