No. 14602
IN THE SUPREME COURT OF THE STATE OF MONTANA
DALE M. LUMBY and FRANCES LUMBY,
husband and wife, F .
Plaintiffs and Respondents,
VS .
LaMOINE 0 DOETCH, et al.,
.
Defendants and Appellants.
Appeal from: District Court of the Nineteenth Judicial
District, Honorable Robert M. Holter,
Judge presiding.
Counsel of Record:
For Appellant:
Keller & Gilmer, Kalispell, Montana
For Respondent:
William A. Douglas, Libby, Montana
Thomas R. Bostock, Libby, Montana
Ann C. German, Libby, Montana
Sub~ittedon briefs: ;~p,y 11 1
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Decided: SEP 26 1979
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Filed: bkf? % - 1075
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Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
The defendants, LaMoine 0 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 Lurnbys 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.
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The Doetchs filed motions to amend the findings
of fact and for a new trial. Such motions were not
set for hearing within the time limits prescribed by
Rule 59, Mont.R.Civ.P., and a notice of appeal was timely
filed by the Doetchs.
The sole issue to be decided upon this appeal is
whether the judgment is supported by substantial credible
evidence.
In resolving this issue, we are guided by a number
of principles established by this Court. The credibility
of witnesses and the weight to be given their testimony
are matters for the District Court's determination in
a nonjury case. Corscadden v. Kenney (1977), - Mont .
, 572 P.2d 1234, 1237, 34 St.Rep. 1533, 1537. Thus,
in examining the sufficiency of the evidence, we must view
the same in a light most favorable to the prevailing party,
and we will presume the findings and judgment by the District
Court are correct. Hellickson v. Barret Mobile Home Transport,
Inc. (1973), 161 Mont. 455, 459, 507 P.2d 523, 525. We
will not overturn the findings and conclusions of the
District Court unless there is a decided preponderance of
the evidence against them, and when the evidence furnishes
reasonable grounds for different conclusions, the findings
of the District Court will not be disturbed. Morgen and
Oswood Const. Co. v. Big Sky of Mont. (1976), 171 Mont. 268,
275, 557 P.2d 1017, 1021. The burden of proof is on the
appellant. Schuman v. Study Com'n. of Yellowstone Cty
(1978), Mont . , 578 P.2d 291, 292, 35 St.Rep.
386, 388.
Having examined the record with the above principles
in mind, we find there is substantial credible evidence
to support the findings and conclusions of the District
Court. The evidence in the record furnishes reasonable
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grounds for the court's conclusions as to each element
of a prima facie case for fraud in the inducement.
Consequently, the findings of the District Court will
not be disturbed. Morgen and Oswood Const. Co. v. Big
Sky of Mont., supra.
The Doetchs represented to the Lumbys that their net
income in 1976 was $42,756.13 and they were realizing an
income in 1977 equal to that of 1976. The District Court
could properly conclude that these representations were
false. No one at trial, including the Doetchs' accountant
could verify the profitability of the business. In fact,
the Doetchs' accountant testified he did not have a great
deal of confidence in the business records of the Doetchs.
The Doetchs also represented to the Lumbys that their
business was in good standing with its suppliers and whole-
salers. There is substantial credible evidence that this
representation was false. The Doetchs had written numerous
"not sufficient funds" checks to their suppliers and whole-
salers. In fact, prior to this representation, shipments
from some suppliers were suspended.
There is substantial credible evidence to support the
conclusion the representations were material. Dale Lumby
testified the excellent profitability of the business was
the major inducement for his entering the business trans-
action. Similarly, the relationship of a business with
its suppliers and wholesalers reflects on profitability,
the major inducement.
The District Court could also properly conclude the
Doetchs knew their representations to be false. Betty
Doetch was responsible for keeping the books of the Doetchs'
business. She recorded the transactions of the business
and received notice of the "not sufficient funds" checks.
Also, the evidence indicates the Doetchs would sometimes
record a cash down payment that was not actually received.
There is substantial credible evidence to find the
Doetchs intended the Lumbys to rely on the representations.
The Doetchs knew the Lumbys were interested in purchasing
the business. The Doetchs knew the financial condition
of the business and its standing with its suppliers and
wholesalers was important to the Lumbys. The Lumbys inquired
on these subjects repeatedly.
Next, the District Court could properly conclude
the Lumbys actually relied on and had a right to rely on
the truth of the representations.
Generally, where an injured party investigates the
truth of representations for himself or has equal means as
the defendant to ascertain the truth, reliance on the rep-
resentations, however false, will afford no grounds for
complaint. Bails v. Gar (1976), 171 Mont. 342, 348, 558
P . 2 d 458, 462.
Here, however, the Lumbys investigated the records
of the business to no avail. They requested the
income tax records of the Doetchs but were refused. They
inquired at the local bank but were refusedthere too.
Next, they questioned sales representatives and were told
the business was in good standing with its suppliers and
wholesalers. Consequently, as Dale Lumby testified, the
Lumbys relied on the representations because they felt the
Doetchs were honest people. Under these circumstances, the
Lumbys had a right to rely on the representations.
Finally, there was substantial credible evidence
supporting the finding that the Lurnbys suffered damages as
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a proximate consequence of the representations. The
Lumbys paid a purchase price in excess of the real worth
of the business as a result of their reliance on the
representations by the Doetchs. This excess purchase
price is traceable to the representations.
The judgment of the District Court is affirmed since
there is substantial credible evidence to support the
findings and conclusions of that Court.
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Justice
We Concur:
ief Justice
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