McCarty v. Lincoln Green, Inc.

No. 80-68
IN THE SUPREME COURT OF THE STATE OF MONTANA
1980

ROGER J. McCARTY and JANICE L.
McCARTY and CAROL A. McCARTY,
Husband and wife,
Plaintiffs and Respondents,

LINCOLN GREEN, INC., a Montana
corporation, JAMES L. LEE, BERT
A. NELSON and BENITA NELSON,
Defendants, Third-Party Plaintiffs
and Respondents
VS.

RAY I. BERRYMAN and AMERICAN BONDING COMPANY,
Third-Party Defendants and Appellants.

Appeal from: District Court of the Fourth Judicial District,
In and for the County of Ravalli.
Honorable Jack L. Green, Judge presiding.
Counsel of Record:
For Appellants:
Jon E. Ellingson argued, Missoula, Montana
For Respondents:
Datsopoulos, MacDonald and Lind, Missoula, Montana
Ronald MacDonald argued, Missoula, Montana

Submitted: November 19, 1980
Decided: Idf C 1 9 1984
Filed: RC 1". 9 1980
-
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

Ray I. Berryman, a real estate agent,as third party
defendant, appeals from a judgment in the Fourth Judicial
District Court, Missoula County, in favor of Lincoln Green,
Inc., James L. Lee, Bert A. Nelson and Benita Nelson (Lincoln
Green, Inc.), third party plaintiffs.
Berryman raises these issues fcr review:
(1) A principal may not be held liable to a third
party for negligence of its agent where there is no proof of
the agent's liability to the third party.
(2) The District Court erred in concluding that the
principal's agent was negligent through his acts or omissions
or by misrepresentation.
(3) A real estate agent's negligence may not be

established without proof that he failed to use the standard
of care exercised ordinarily by real estate agents in the
community .
(4) The District Court improperly assessed damages
against Berryman in the sum of $7,169.58, plus attorney's
fees of $2,200.00.
After due consideration, we conclude that the judgment
of the District Court should be affirmed.
In 1975, Lincoln Green, Inc. was offering for sale
parcels of a subdivided ranch located in ~avalliCounty
Montana. As part of its selling effort, Lincoln Green, Inc.
permitted licensed real estate agents to show various parcels
which were for sale, without entering into a listing agreement
with such real estate agents. If a real estate agent showed
any of the parcels and found a buyer, the agent who had
shown the property presented a buy-sell agreement, executed
by the proposed purchaser to Lincoln Green, Inc., for its
approval and signature.
 I n 1975, Berryman p r e s e n t e d t o L i n c o l n Green, I n c . , a
buy-sell agreement e x e c u t e d by Roger J. McCarty, J a n i c e L.

McCarty, ~ o b e r t
J. McCarty and C a r o l McCarty (McCartys) a s

purchasers. On September 1, 1975, L i n c o l n Green, I n c . and

McCartys e n t e r e d i n t o a c o n t r a c t f o r deed f o r t h e s a l e and

p u r c h a s e o f a l o t which was d e s c r i b e d i n t h e c o n t r a c t a s

" t h e s o u t h one-half o f Lot 32." The w r i t t e n c o n t r a c t c o n t a i n e d

i n p a r a g r a p h 1 8 , l a n g u a g e t h a t t h e McCartys ". . . acknow-
l e d g e t h a t t h e y have examined and i n s p e c t e d t h e p r o p e r t y and

a r e f u l l y f a m i l i a r and a c q u a i n t e d t h e r e w i t h and t h a t t h e y

a r e e n t e r i n g i n t o t h i s Agreement based on t h e i r own e x a m i n a t i o n

and i n s p e c t i o n , and t h a t no r e p r e s e n t a t i o n s o f any k i n d

c o n c e r n i n g t h e p r o p e r t y have been made by t h e S e l l e r s o r

anyone a c t i n g on b e h a l f of t h e S e l l e r s . "

One y e a r a f t e r t h e e x e c u t i o n of t h e c o n t r a c t f o r d e e d ,

t h e McCartys i n i t i a t e d l e g a l a c t i o n a g a i n s t L i n c o l n Green,

Inc., Berryman, and Berryman's bonding company. Lincoln

Green, I n c . , responded by f i l i n g i t s t h i r d p a r t y c o m p l a i n t

a g a i n s t t h e r e a l e s t a t e a g e n t Berryman a s t h i r d p a r t y d e f e n d a n t .

The McCartys a l l e g e d t h a t t h e a g e n t Berryman had i m -

p r o p e r l y i d e n t i f i e d t h e r e a l p r o p e r t y which he showed t o

t h e McCartys. I t was a l l e g e d t h a t Berryman showed t h e McCartys

a l o t d e s i g n a t e d a s "Lot 31," and i d e n t i f i e d t h e l o t t o t h e

McCartys a s b e i n g t h e " s o u t h h a l f of Lot 32." McCartys

f u r t h e r c l a i m e d t h a t when t h e y e x e c u t e d t h e b u y - s e l l agreement

on t h e c o n t r a c t f o r deed f o r t h e p u r c h a s e of t h e s o u t h h a l f

of L o t 3 2 , t h e y t h o u g h t t h a t t h e y w e r e i n f a c t buying t h e

r e a l p r o p e r t y which i s Lot 31. Three months b e f o r e McCartys

had e x e c u t e d t h e i r c o n t r a c t , Lot 31 had been s o l d .

While t h e l i t i g a t i o n was p e n d i n g , and b e f o r e t r i a l i n

t h e D i s t r i c t C o u r t , L i n c o l n Green, I n c . and t h e McCartys

e n t e r e d i n t o an agreement f o r s e t t l e m e n t a s t o t h e l i t i g a t i o n
between them. Lincoln Green, Inc. advised Berryman in
advance of the proposed settlement, but Berryman declined to
participate in the settlement in any form. The consideration
for the settlement was $7,169.58. Lincoln Green, Inc.
incurred attorney's fees of $2,200.00 in connection with the
suit against it by the McCartys.
After trial between Lincoln Green, Inc. and Berryman,
on the third party complaint, the District Court found that
Berryman had a duty to his principal reasonably to establish
the location of the parcel by geographical landmarks and
that this duty existed particularly where the seller, Lincoln
Green, Inc., did not have an existing relationship with the
McCartysand did not participate in the showing of the parcel
or the preparation of the buy-sell agreement except to the
extent that Lincoln Green, Inc. prepared the documents of
transfer.
The District Court concluded that Berryman was negligent
in his scope as a broker salesperson in his failure properly
to identify the parcel owned by Lincoln Green, Inc., and by
misrepresenting the parcel to the McCartys, contrary to the

duty a real estate agent owes to his principal as established
by the standards accepted by the profession in the State of
Montana.
Accordingly, judgment was entered by the District Court
and this appeal followed.
We will consider together the first two issues raised
by Berryman. Berryman contends that Lincoln Green, Inc.
may not be held responsible to the McCartys unless Berryman
himself was liable to the McCartys. Thus, he contends that
Lincoln Green, Inc. may recover damages paid to the McCartys
only if Lincoln Green, Inc. proves that Berryman was tortious
-4-
and t h a t no d e f e n s e s a v a i l a b l e t o Berryman c o u l d r e l i e v e t h e

a g e n t from l i a b i l i t y t o t h e McCartys. Berryman t h e n c o n t e n d s

t h a t t h e D i s t r i c t C o u r t e r r e d i n f i n d i n g e i t h e r t h a t h e was

n e g l i g e n t o r t h a t t h e r e was a m i s r e p r e s e n t a t i o n o f p r o p e r t y

which gave r i s e t o a l e g i t i m a t e c l a i m a g a i n s t L i n c o l n Green,

Inc.

Berryman's argument on t h i s p o i n t i s grounded on e v i d e n c e

t h a t t h e r e a l e s t a t e a g e n t t o l d McCartys a t t h e t i m e t h e y

went o u t t h a t h e w a s n ' t s u r e o f t h e e x a c t l o c a t i o n o f t h e

p r o p e r t y and t h e r e f o r e , t h e McCartys assumed "any r i s k

a s s o c i a t e d " i n l o c a t i n g t h e c o r r e c t p a r c e l ; and on p a r a g r a p h

18 of t h e w r i t t e n c o n t r a c t whereby t h e McCartys d i s c l a i m e d

any r e l i a n c e i n e n t e r i n g i n t o t h e c o n t r a c t upon a n y t h i n g

o t h e r t h a t t h e i r own e x a m i n a t i o n and i n s p e c t i o n of t h e

premises.

Berryman r e l i e s on o u r r e c e n t c a s e o f Schulz v. Peake

(1978) , Mont . , 583 P.2d 425, 3 5 St.Rep. 1295. In

t h a t c a s e , t h e p u r c h a s e r of a m o t e l p r o p e r t y sued f o r f r a u d -

u l e n t misrepresentations i n t h e s a l e , contending they w e r e

t o l d t h a t t h e y w e r e g e t t i n g 13 a c r e s i n a d d i t i o n t o t h e

motel. A year a f t e r t h e purchase, t h e buyers discovered

t h e y had o n l y 1 . 3 a c r e s o f l a n d . The p u r c h a s e agreement had

i n it a s i m i l a r p r o v i s i o n t o p a r a g r a p h 18 i n t h i s case, t o

t h e e f f e c t t h a t t h e p u r c h a s e r s had conducted t h e i r own

e x a m i n a t i o n and w e r e r e l y i n g on t h a t and n o t on any r e p r e s e n t -

a t i o n made t o them by t h e s e l l e r s o r t h e s e l l e r s ' a g e n t s .

T h i s C o u r t h e l d t h a t b e c a u s e of t h e c o n t r a c t u a l p r o v i s i o n s ,

a s w e l l a s t h e e v i d e n c e t h a t t h e p u r c h a s e r s had i n f a c t

i n s p e c t e d t h e p r o p e r t y numerous t i m e s when t h e boundary

l i n e s w e r e p o i n t e d o u t t o them, and i n none o f t h e s a l e s

agreements was t h e f i g u r e "13 a c r e s " i n c l u d e d , t h e m o t e l and

t h e p a r c e l c o n t a i n i n g 1 . 3 a c r e s were p r o p e r l y d e s c r i b e d i n

t h e t r a n s f e r agreements.
 S c h u l z , s u p r a , i s d i s t i n g u i s h a b l e from t h e f a c t s i n t h e

case a t bar. Although t h e McCartys c o n t r a c t e d t h a t t h e y had

i n f a c t i n s p e c t e d t h e p r e m i s e s and r e l i e d on t h e i r own

i n s p e c t i o n , it i s a l s o t r u e t h a t t h e y had i n s p e c t e d t h e

wrong p r o p e r t y and t h a t t h e i n s p e c t i o n o f t h e wrong p r o p e r t y

was b r o u g h t a b o u t t h r o u g h t h e f a i l u r e of t h e r e a l e s t a t e

a g e n t p r o p e r l y t o i d e n t i f y t h e p r o p e r t y t h a t he was showing

t o t h e p r o s p e c t i v e buyers.

Thus, i n t h i s c a s e , L i n c o l n Green, I n c . i n c u r r e d a

l i a b i l i t y t o t h e McCartys because a s e l l e r i s bound by m i s -

r e p r e s e n t a t i o n s made by a r e a l e s t a t e b r o k e r o r a g e n t a s t o

t h e location of t h e property, o r a s t o t h e p a r t i c u l a r l o t o r

t r a c t which was f o r s a l e . Blanke v. Miller ( 1 9 5 4 ) , 364 Mo.

797, 268 S.W.2d 809; Williams v. R i t c h e s o n (Tex.Civ.App.

1 9 4 8 ) , 212 S.W.2d 813.

Under s e c t i o n 28-10-602, MCA, a p r i n c i p a l i s r e s p o n s i b l e

t o t h i r d p e r s o n s f o r t h e n e g l i g e n c e of h i s a g e n t i n t h e

t r a n s a c t i o n of t h e b u s i n e s s of t h e agency, i n c l u d i n g wrong-

f u l a c t s committed by s u c h a g e n t i n and a s a p a r t o f t h e

t r a n s a c t i o n of s u c h b u s i n e s s .

N e i t h e r assumption o f r i s k n o r c o n t r i b u t o r y n e g l i g e n c e

w e r e pleaded a s a f f i r m a t i v e defenses. This Court w i l l n o t

p a s s on i s s u e s n o t r a i s e d i n t h e D i s t r i c t C o u r t . Chadwick

v. G i l b e r s o n ( N o . 80-7, Decided O c t . 8 , 1 9 8 0 , 37 S t - R e p . 1723)

Berryman n e x t c o n t e n d s t h a t t h e C o u r t i m p r o p e r l y concluded

t h a t h e was n e g l i g e n t b e c a u s e t h e r e w a s no e v i d e n c e b e f o r e

t h e D i s t r i c t C o u r t as t o t h e s t a n d a r d of c a r e o r d i n a r i l y

e x e r c i s e d by r e a l e s t a t e a g e n t s i n t h e community i n l i k e

circumstances. I n i t s conclusions of l a w , t h e ~ i s t r i c t

C o u r t found t h a t Berryman was n e g l i g e n t i n f a i l i n g p r o p e r l y

-6-
t o i d e n t i f y t h e p a r c e l t o be s o l d , t h e r e b y m i s r e p r e s e n t i n g

t h e p a r c e l s of t h e p u r c h a s e r s " c o n t r a r y t o t h e d u t y a r e a l

e s t a t e a g e n t owes t o h i s p r i n c i p a l as e s t a b l i s h e d by t h e

s t a n d a r d s a c c e p t e d by t h e p r o f e s s i o n i n t h e S t a t e o f Montana."

The l a n g u a g e i n t h e c o n c l u s i o n s r e s p e c t i n g t h e s t a n d a r d s

a c c e p t e d by t h e p r o f e s s i o n i n Montana a p p e a r s t o b e g r a t u i t o u s ,

b e c a u s e no e v i d e n c e of t h e s t a n d a r d s w a s p r e s e n t e d a t t h e

trial.

W e f i n d no e r r o r on t h i s p o i n t . An a g e n t i s r e s p o n s i b l e

t o t h i r d p a r t i e s a s a p r i n c i p a l , when h i s a c t s a r e w r o n g f u l

i n t h e i r nature. S e c t i o n 28-10-702(3), MCA. No s t a n d a r d

c o u l d be countenanced by t h e r e a l e s t a t e b r o k e r s ' p r o f e s s i o n ,

a c c e p t i n g as a r e a s o n a b l e s t a n d a r d o f c a r e t h e showing of

t h e wrong p r o p e r t y on b e h a l f o f a p r o s p e c t i v e s e l l e r t o a

prospective purchaser.

The l a s t i s s u e r a i s e d by Berryman r e l a t e s t o t h e damages

awarded by t h e D i s t r i c t C o u r t . When t h e McCartys d i s c o v e r e d

t h a t a f t e r making improvements upon t h e p r o p e r t y which t h e y

t h o u g h t was t h e i r s , t h a t t h e agreements d e s c r i b e d t h e wrong

property, they d i d n o t seek r e s c i s s i o n , b u t i n s t e a d sued

f o r damages. They s o u g h t n o t o n l y a c t u a l damages, b u t

p u n i t i v e damages i n a sum i n e x c e s s of $107,660.00. The

c o u r t found t h a t L i n c o l n Green, I n c . and t h e McCartys e n t e r e d
i n t o an a r m s - l e n g t h n e g o t i a t i o n whereby L i n c o l n Green, I n c . ,

c r e d i t e d t h e unpaid b a l a n c e on an e x i s t i n g c o n t r a c t f o r

deed f o r t h e wrong p a r c e l by t h e sum of $2,500.00; interest

on t h e unpaid b a l a n c e was f o r g i v e n i n t h e sum o f $2,108.08;

and i t o b t a i n e d an a c c e s s s u i t a b l e t o McCartys f o r t h e o t h e r

p r o p e r t y i n t h e sum o f $2,500.00. There was a l s o t h e c o s t

o f $61.50 f o r a c u r r e n t t i t l e commitment and i n s u r a n c e

p o l i c y , and L i n c o l n Green, I n c . i n c u r r e d l e g a l f e e s i n t h e

amount of $2,200.00 i n t h e d e f e n s e of t h e o r i g i n a l l i t i g a t i o n .

-7-
 Berryman claims that in cases of a negligent misrepre-
sentation, the measure of damages should be the difference
in the value of the property received in the transaction and
his purchase price or other value given for it, and the
pecuniary loss suffered otherwise as a consequence of the
misrepresentation, citing Restatement of Torts 5 552(b).
Here, Berryman claims there is no evidence offered to substantiate
that there was a difference in value between the property
actually received by the McCartys and what the McCartys
actually paid for it.
The District Court decided the issues in favor of
Lincoln Green, Inc., in this case, on tort liability of the
agent. The measure of damages for tort liability is con-
trolled by section 27-1-317, MCA. It provides:
"For the breach of an obligation not arising
from contract, the measure of damages, except
where otherwise expressly provided by this code,
is the amount which will compensate for all the
detriment proximately caused thereby, whether it
could have been anticipated or not."
It is the intent and purpose of our statutes, except
for liquidated damages, agreed damages, or exemplary damages,
that damages be compensatory and are properly awarded when
they serve to compensate the plaintiff for the detriment
proximately caused by the defendant. Lovely v. Burroughs

Corporation (1974), 165 Mont. 209, 527 P.2d 557, appeal
after remand, 169 Mont. 454, 548 P.2d 610. The damages
awarded by the District Court here meet the statutory test
of section 27-1-317, MCA, and were properly awarded.
Affirmed.

,
* ----,

Justice
 We Concur:

Chief Justice

Justices

Mr. Justice Gene B. Daly dissenting:
I dissent.

The right to indemnity is an equitable principal based
on the general theory that one compelled to pay for damages
caused by another should be able to seek recovery from that
party. May Trucking Co. v. International Harvester (1975),
97 Idaho 319, 543 P. 2d 1159.
A suit for indemnification is generally allowed where,
"the parties are not in pari delicto, and an injury results
from the act of one party whose negligence is the primary,
active and proximate cause of the injury, and another party,
who is not negligent or whose negligence is remote, passive
and secondary, is nevertheless exposed to liability by acts
of the first party. . ." Great Northern Railway Co. v.
United States (D. Mont. 1960), 187 F.Supp. 690, 693.
 In its suit for idemnification respondent alleged, by

way of a third party complaint, that appellant, due to his
negligent misrepresentation to the McCartys, breached the
standard of care established by the real estate profession.
Respondent then went on to state that, as a result of this
breach, appellant should indemnify respondent, as a third
party plaintiff, for any sums due and owing the McCartys.
In response to the third party complaint, appellant entered,
by way of an answer, a specific denial to respondent's
averments of negligence. Appellant, however, asserted no
affirmative defenses or counterclaims to the suit.
To establish a right of indemnity, as set forth in its
third party complaint, respondent must prove that appellant,
due to his misstatements as to the property shown the McCartys,
breached a standard of care established by the real estate
profession and, thus, is liable for any sums due and owing
resulting from the negligent misrepresentation. Respondent
has failed in this regard; thus, it was not entitled to
prevail on the suit for indemnification.
In support of his argument that respondent failed to
establish any negligent behavior, appellant asserts that the
testimony and evidence offered at trial reveals that the
McCartys place no reliance upon the alleged misrepresenta-
tion as required to establish a cause of action for negli-
gent or fraudulent misrepresentation.
As a basis for this contention, appellant makes note of
the contract for deed between respondent and McCartys.
Included in this contract is the following provision:
"18. Buyers acknowledge that they have examined
and inspected the property and are fully familiar
and acquainted therewith and that they are enter-
ing into this agreement based upon their own
 e x a m i n a t i o n and i n s p e c t i o n , and t h a t no r e p r e -
s e n t a t i o n s o f any k i n d c o n c e r n i n g t h e p r o p e r t y
have been made by t h e S e l l e r s o r anyone a c t i n g
on b e h a l f o f t h e S e l l e r s . "

A s i m i l a r c o n t r a c t p r o v i s i o n was i n t e r p r e t e d i n S c h u l z

v . Peake ( 1 9 7 8 ) , Mont. , 583 P.2d 425, 35 St.Rep.

1295. The C o u r t i n S c h u l z h e l d t h a t t h e language i n s u c h a

c o n t r a c t c l a u s e i s c l e a r and unambiguous and, t h u s , i s t o be

e n f o r c e d a s made by t h e p a r t i e s . The C o u r t t h e n went on t o

a f f i r m t h e lower c o u r t ' s d e c i s i o n t h a t t h e "complete i n v e s t i -

g a t i o n " c l a u s e i n s u l a t e s t h e s e l l e r s from a n a l l e g a t i o n o f

fraudulent representation.

Upon examining t h e c o n t r a c t p r o v i s i o n and g i v i n g i t

e f f e c t a s made by t h e p a r t i e s , i t i s c l e a r and a p p a r e n t t h a t

t h e McCartys d e n i e d any r e l i a n c e on any r e p r e s e n t a t i o n s o f

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

ment based on t h e i r own e x a m i n a t i o n and i n s p e c t i o n . With

t h i s b e i n g t h e c a s e , t h e e s s e n t i a l e l e m e n t of r e l i a n c e upon

t h e s e l l e r ' s r e p r e s e n t a t i o n s , needed t o s u p p o r t a c a u s e of

action f o r fraud o r negligent misrepresentation, i s eliminated.

Respondent c o n t e n d s t h a t even i f i t i s d e t e r m i n e d t h a t

i t was n o t l i a b l e t o McCartys f o r r e p r e s e n t a t i o n s made by
to
a p p e l l a n t , i t i s s t i l l entitled/indemnification f o r t h e

c o s t s of t h e s e t t l e m e n t . I n s u p p o r t of t h i s c o n t e n t i o n ,

r e s p o n d e n t c i t e s G r e a t N o r t h e r n Railway =, supra.

I n G r e a t N o r t h e r n Railway Co. t h e p l a i n t i f f (indem-

n i t e e ) had been s u e d by a b u s i n e s s i n v i t e e who was i n j u r e d

when s t r u c k by a m a i l pouch thrown by a U n i t e d S t a t e s Govern-

ment p o s t a l t r a n s p o r t a t i o n c l e r k . The p l a i n t i f f s e t t l e d t h e

a c t i o n w i t h t h e i n j u r e d p a r t y and t h e n i n i t i a t e d s u i t a g a i n s t

t h e U n i t e d S t a t e s Government f o r i n d e m n i t y .
 One of t h e i s s u e s on a p p e a l i n t h a t c a s e was whether

t h e p l a i n t i f f i s p r e c l u d e d from r e c o v e r y f o r a payment,

v o l u n t a r i l y made, i n view of a f i n d i n g t h a t p l a i n t i f f ' s

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

s t a t e d t h a t s i n c e t h e d e f e n d a n t had r e f u s e d t h e t e n d e r of

d e f e n s e of t h e o r i g i n a l a c t i o n , p l a i n t i f f was j u s t i f i e d i n

e f f e c t i n g a f a i r and r e a s o n a b l e s e t t l e m e n t w i t h o u t r e s i s t i n g

t h e l i t i g a t i o n i n s t i t u t e d by t h e i n j u r e d p a r t y t o t h e p o i n t

o f judgment. G r e a t N o r t h e r n Railway Co., 187 F.Supp. a t

697.

Appellant contends t h a t the p r e s e n t c a s e involves a

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

from G r e a t N o r t h e r n Railway Co. F i r s t of a l l , t h e c o u r t

p l a c e d a g r e a t d e a l of r e l i a n c e on t h e f a c t t h a t t h e d e f e n -

d a n t ( i n d e m n i t o r ) was g i v e n n o t i c e of t h e o r i g i n a l s u i t y e t

refused t o tender a defense. I n t h e p r e s e n t case, respon-

d e n t merely sued f o r i n d e m n i f i c a t i o n by means of a t h i r d

p a r t y c o m p l a i n t w i t h no demand b e i n g made, o r one r e f u s e d ,

t h a t a p p e l l a n t t e n d e r d e f e n s e of t h e a c t i o n b r o u g h t by t h e

McCartys. F u r t h e r m o r e , i n G r e a t N o r t h e r n Railway Co., it

was o n l y t h e p l a i n t i f f ' s a g e n t who was found n o t n e g l i g e n t ;

the defendant's agent's l i a b i l i t y f o r the i n j u r i e s still

remained, t h u s , s t i l l e n t i t l i n g t h e i n j u r e d t h i r d p a r t y t o a

recovery. Here, however, n o t o n l y was r e s p o n d e n t ' s l i a b i l i t y

e l i m i n a t e d by t h e c o n t r a c t p r o v i s i o n e n t e r e d i n t o by McCartys,

but appellant's l i a b i l i t y t o the parties a s w e l l .

Respondent a l s o c i t e s Washington Water Power Co. v .

Morgan E l e c t r i c Co. ( 1 9 6 8 ) , 152 Mont. 126, 448 P.2d 683, i n

s u p p o r t of i t s argument t h a t i t i s e n t i t l e d t o i n d e m n i f i -

c a t i o n i ' n . s p i t e of l i a b i l i t y . The C o u r t i n t h i s c a s e found

that:
 "Where, as here, the indemnitor and his insurer,
after notice, refuse to defend the indemnitee;
breach the indemnity agreement; refuse to par-
ticipate in settlement negotiations or defend
af ter demand; know the amount of the settlement
and make no objections; the indemnitee is en-
titled to judgment as a matter of law in the
amount of any settlement paid by it in good
faith absent proof that the settlement is un-
reasonable." 448 P.2d at 689.
Appellant again would have this Court distinguish the
case at issue in that here there is no indemnity agreement;
no demand or refusal to tender a defense; and no prior
notice of the settlement negotiations or allowance to parti-
cipate therein. Furthermore, the defendant indemnitor in
Washington Water Power Co. was specifically found to be
negligent, which, based upon the lack of reliance on appel-
lant's representations, is not the case in this instance.
In essence, appellant argues that prior to a proper
indemnification for settlement costs the following elements
must be present: (1) notice and refusal to tender a defense;
(2) justification for seeking a settlement, with the appel-

lant contending that said justification arises only when
the indemnitee is exposed to actual liability (as opposed to
mere potential liability); and (3) that the settlement be
fair and reasonable. Appellant then argues that since
respondent failed to give notice and demand a tender of

defense and respondent failed to establish exposure to
actual liability, it is not entitled to an indemnification
for its settlement costs.
As to the requirement of notice, although there is
authority to the contrary, as a general rule the liability
of an indemnitor does not depend on the reception of a
notice that indemnitee is subject to a suit for injuries
caused by the indemnitor's negligent acts. 42 C.J.S.
Indemnity, §26 at 604. Even if notice would be a require-
ment, filing of a third party complaint by indemnitee seek-
ing recovery from indemnitor, such as occurred here, would
be sufficient.
As to justification of the settlement, the authorities
are divided on whether actual liability is required or
whether mere potential liability will suffice. See Block-
ston v. United States (D. Md. 1968), 278 F.Supp. 576, 586.
The majority of the courts hold, however, that when an
indemnitee seeks reimbursement from his indemnitar for a
payment made by him in discharge of a claim, he is not bound
to submit a suit to judgment before paying the claim; -
but,

- - indemnitee settles prior - judgment, - -a condition
if the to as

- recovery -- indemnitor, - - under the necessity
of from his he is

- proving - - actually liable - - amount paid.
of he was for the
United Boatbuilders, Inc. v. Tempo Products Co. (1969), 1
Wash.App. 177, 459 P.2d 958; Nelson v. Sponberg (1957), 51
Wash.2d 371, 318 P.2d 951; see also Ke-Wash Co. v. Stauffer
Chemical Co. (Iowa 1970), 177 N.W.2d 5; Williams v. Johnston
(1968)r 92 Idaho '292, 442 P.2d 178; 42 C.J.S. Indemnity, S25
at 603-604.
The contract entered into between the parties, if it is
given effect by the Court, contains a clause that has been
held to insulate the seller and the seller's agent from a
claim of fraudulent or negligent misrepresentations. With
this being the case, respondent is unable to prove actual
liability on the part of appellant. Thus, respondent is not
entitled to an accrument of the right to indemnification for
settlement costs.
I acknowledge that the lower court determined that

appellant was liable for negligent misrepresentation. I
also note, however, that the trial court ignored appellant's
argument that the contract for deed refutes the charges
brought by eliminating an essential factor required to
establish the cause of action.
It is a well-settled rule of law that the finder of
fact will not be reversed on appeal unless the evidence
clearly preponderates against the findings. Berdine v.
Sanders County (1974), 164 Mont. 206, 520 P.2d 650. The
findings in this case, however, are not supported by the
evidence presented. Thus, the decision of the District
Court should be reversed.

I n substance, I j o i n i n t