No. 81-203
IN THE SUPREME COURT OF THE STATE OF MONTANA
1981
T & W CHEVROLET,
Defendant and Appellant,
VS .
GEORGE A. DARVIAL,
Plaintiff and Respondent.
Appeal from: District Court of the Fourth Judicial District,
In and for the County of Missoula
Honorable Jack L. Green, Judge presiding.
Counsel of Record:
For Appellant:
Boone, Karlberg and Haddon, Missoula, Montana
William L. Crowley argued, Missoula, Montana
For Respondent :
Richard A. Weber, Jr. argued, Hamilton, Montana
For Amicus Curiae:
Hon. Mike Greely, Attorney General, Helena, Montana
Submitted: October 21, 1981
Decided : LAN 2 1 $ttt
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Clerk
Mr. Justice Gene B. Daly delivered the Opinion of the Court.
This is an appeal by the defendant from an adverse
judgment of the District Court of the Fourth Judicial
District, in and for the County of Missoula, sitting without
a jury, in a contract action for rescission of an automobile
installment contract for deceptive trade practices. We
affirm.
On October 21, 1978, plaintiff purchased a 1970 Ford
Torino from the defendant for a total purchase price of
$2,678. Prior to the sale, a salesman, employed by the
defendant, represented to plaintiff that the vehicle was in
perfect condition and had been "completely gone over." That
same day, the salesman went for a test drive with plaintiff
in the Ford Torino. During the test drive plaintiff inquired
about the stiffness in the steering of the vehicle. The
salesman informed plaintiff that the vehicle probably just
needed a front-end alignment or that the steering was too
tight. At the time of the sale, the defendant did not
extend to plaintiff any type of express warranties on the
vehicle.
The plaintiff and his wife drove the vehicle for
approximately one month before noticing that the tires were
wearing unevenly. Plaintiff took the vehicle into another
car dealer for an inspection and was informed that the
vehicle was unsafe to drive because the front two cross-
members of the frame were severely bent and cracked. The
damage to the frame was the result of a single accident.
Shortly thereafter, plaintiff brought the vehicle to
the defendant for an inspection. The defendant informed the
plaintiff that the vehicle was indeed damaged and required
extensive repair work. Upon being informed of the cost of
the repairs, the plaintiff notified defendant that defendant
could keep the vehicle. Plaintiff then filed suit seeking
damages and rescission of the sales contract.
The District Court determined that the defendant had
engaged in unfair or deceptive trade practices because its
salesman misrepresented the condition of the car. Plaintiff
was awarded attorney fees, damage in the amount of the
installment contract purchase price ($2,678) and $750
exemplary damages.
The defendant-appellant presents the following issues
to this Court for review:
1. Do section 30-14-104, PICA, and the administrative
rules promulgated thereunder represent an unconstitutional
delegation of legislative power to the Montana Department of
Business Regulation?
2. Do section 30-14-104, MCA, and the administrative
rules promulgated thereunder represent an unconstitutional
delegation of legislative power to the Federal Trade
Commission and the federal courts?
3. Is there substantial credible evidence in the
record to support the District Court award?
4. Is there sufficient evidence in the record to
base an award of exemplary damages under section 30-14-133,
PICA, of the Montana Unfair Trade Practices and Consumer
Protection Act?
5. Did the plaintiff properly rescind the contract?
Section 30-14-104, MCA, and the administrative rules
promulgated thereunder do not represent an unconstitutional
delegation of legislative power to the Montana Department of
Commerce, the Federal Trade Commission (FTC) or the federal
courts. The Montana Unfair Trade Practices and the Consumer
Protection Act (the Act) both contain sufficiently declared
policies and sufficiently prescribed standards for guidance
to satisfy the guidelines enunciated by Montana case law and
pertinent case law in other jurisdictions.
The test of whether an act contains sufficient
expressions of legislative policy and intent to guide a
department was set down by this Court in Bacus v. Lake
County (1960), 138 Mont. 69, 354 P.2d 1056, and reiterated
in Douglas v. Judge (1977), 174 Mont. 32, 568 P.2d 530.
These two cases hold that a legislature must prescribe with
reasonable clarity the limits of power delegated to an
administrative agency. Further, these cases hold that, if
the legislature fails to do this, then the attempt to dele-
gate will be nullified.
Appellant contends that the Act in question is one
that does not meet the test set out in Douglas and Bacus.
The contention is that the Act is not specific enough and,
therefore, gives the Department of Commerce an unbridled
amount of control.
Section 30-14-101 et seq., MCA, were modeled after
Section 5 of the FTC Act which was designed to curb "unfair
or deceptive acts or practices in the conduct of any trade
or practice . . ." The federal act, as well as the state
act, was designed to be general in nature because of the
type of practices it was designed to regulate. Atlantic
Refining Company v. Federal Trade Commission (1965), 381
U.S. 357, 367-368, 85 S.Ct. 1498, 14 L.Ed.2d 443; H.R. Rep.
No. 1142, 63rd Cong., 2d Sess. 19 (1914).
This Act, in almost identical form, has been chal-
lenged on similar grounds in several other jurisdictions.
In State v. Reader's Digest Association, Inc. (1972), 81
Wash.2d 259, 501 P.2d 290, the Washington version of the Act
was challenged on grounds that it was vague and that it was
in violation of due process. Though this challenge differs
somewhat from the one presented here, the Washington case
offers an excellent analysis of the type of legislation
involved. The Supreme Court of Washington, in upholding the
constitutionality of the Washington act, held:
". . .
The language of the amended federal
act, from which RCW 19.86.020 is taken, has
been with us since 1938. The federal courts
have amassed an abundance of law giving shape
and definition to the words and phrases
challenged by respondent. Now, more than 30
years after the Supreme Court said that the
phrase 'unfair methods of competition' does
not admit to 'precise definition', we can say
that phrase, and the amended language has a
meaning well settled in federal trade
regulation law. RCW 19.86.020 directs us to
be guided by the federal law. Thus, in
interpreting the language of RCW 19.86.020 we
must hold that the phrases 'unfair methods of
competition' and 'unfair or deceptive acts or
practices' have a sufficiently we11 estab-
lished meaning in common law and federal
trade law, by which we are guided, to meet
any constitutional challenge of vagueness."
501 P.2d at 301.
The case of Department of Legal Affairs v. Rogers
(Fla. 1976), 329 So.2d 257, again involves an act virtually
identical to the one in question here. Rogers dealt
specifically with the problem of delegation. In Rogers the
Florida Supreme Court upheld the legislative delegation of
power stating that the phrases "unfair methods of competi-
tion" and "unfair or deceptive acts or practices'' have
sufficiently well-established meanings to meet any consti-
tutional challenge. Also, the court held that the statutes
imposed a clear and definite standard upon the enforcing
authority for defining "unfair methods of competition" and
"unfair or deceptive" trade practices. Clearly, this is not
an area of law that warrants "laundry list" type legisla-
tion. Further, the Florida Supreme Court went on to hold,
"[wle agree and find that the act does not constitute an
unlawful delegation of legislative authority but rather
conclude that adequate standards have been announced in the
act to guide the administrative agency in the exercise of
the delegated powers consistent with constitutional
dictates." Rogers, 329 So.2d at 265.
The cases cited by appellant are distinguishable
because they involve judicial interpretation of legislation
that differs greatly from the type of legislation involved
here. For instance, Af f j-liated Distillers Brands Corp. v.
Gillis (S.D. 1964), 130 N.W.2d 597, dealt with legislation
affecting the state's liquor laws, specifically the size of
containers. The court in Gillis merely held one particular
regulation invalid because the legislature had specifically
enacted sufficient legislation "to cover the field exten-
sively" and the statutory scheme lacked a delegation of
authority to the liquor commissioner to secure compliance of
licensees by rule or regulation. The court recognized that
liquor control laws involve legislation that is very speci-
fic and definitive in nature.
When reviewing the constitutionality of a given law,
it is important to keep in mind the basic premise, well
recognized in Montana, that the constitutionality of a
legislative enactment is prima facie presumed, and every
intendment in its favor will be made unless its unconsti-
tutionality appears beyond a reasonable doubt. State ex
rel. Mills v. Dixon (1923), 66 Mont. 76, 84, 213 P. 227,
229; accord, Board of Regents v. Judge (1975), 168 Mont.
Appellant also contends that section 30-14-104, MCA,
and the administrative rules promulgated thereunder
represent an unconstitutional delegation of legislative
power to the FTC and the federal courts. This contention
lacks merit. The statute does not mandate that the Depart-
ment adopt all future rules of the FTC. Rather, it allows
the Department to adopt rules, if it chooses to, so long as
those rules are not inconsistent with the rules and deci-
sions of the FTC, the federal courts and this Court. In
both its arguments and citations, appellant ignores the
discretionary nature of the phrase "the department make
rules interpreting" contained in section 30-14-104, MCA. The
effect is that the Department is adopting the standards of
the federal rulings, but not necessarily the contents.
In State v. Reader's Digest Association, Inc. (1972),
81 Wash.2d 259, 501 P.2d 290, the court ruled that the
interpretation of the act was, in the final analysis, left
to the state courts, not the federal courts. The court
stated:
"This enables us to arrive at the statute's
meaning by the same 'gradual process of
judicial inclusion and exclusion' used by the
federal courts. When appropriate we will
consider the pertinent federal court inter-
pretations of section 5 of the Federal Trade
Commission Act. But in each case the question
of what constitutes an 'unfair method of
competition1 or an 'unfair or deceptive act
or practice' . . . is for us rather than the
federal courts to determine. Since federal
judicial interpretations are guiding but not
binding, we may consider all relevant federal
precedent including that decided after the
enactment . . ." 501 P.2d at 301.
Both the Act itself and the rules promulgated thereunder
satisfy the delegation test of Judge and Bacus. There is no
doubt that the statutes were validly enacted and are
constitutionally proper.
Appellant next contends there was insufficient evi-
dence presented by the respondent to support the District
Court award. Specifically, the contention is that respon-
dent failed to establish the actual value of the vehicle at
the time of the transaction and, therefore, failed to prove
actual damages.
Appellant has misconstrued the judgment of the
District Court. The District Court judgment was based upon
rescission--it was not an award of actual damages. From the
District Court's conclusj.ons of law we find the statement
that, ". . . the plaintiff is entitled to rescission of the
contract between the parties and the return of the full
amount paid by plaintiff to defendant." Since the judgment
was based upon rescission, there is no need to discuss the
contention of whether there was substantial evidence on the
record to support an actual damage award.
Appellant further contends that there was insuffi-
cient evidence to support an award of exemplary damages
under section 30-14-133, MCA, of the Montana Unfair Trade
Practices and Consumer Protection Act. Appellant alleges
that a plaintiff must show malice, oppression, or fraud on
the defendant's part to recover exemplary damages.
In section 30-14-101 et seq., MCA, there is no
mention of any requirement that a party must first prove
malice, oppression or fraud. The damages section, section
30-14-133, MCA, provides:
"Damages -- notice ---public agencies - -
to ------- ---------
attorney fee -- prior judgment as evidence.
(1) Any person who purchases or leases goods
or services primarily for personal, family,
or household purposes and thereby suffers any
ascertainable loss of money or property, real
--- ..................................
or E e r s o n a l , a s a result of t h e u s e or
-- ~-- y m e n tby another person of a method,
e m l o ---
act, or practice declared unlawful by 30-14-
- may brinq an individual but not a class
103
action under the rules of civil procedure in
the district court of the county in which the
-
seller or lessor resides or has his principal
place of business or is doing business to
recover damages or $200, which ever is
greater. The court may, in its discretion,
award up to three times the actual damages
sustained and may provide such equitable
relief as it considers necessary or proper.
" (2) Upon commencement of any action brought
under subsection (1) of this section, the
clerk of court shall mail a copy of the
complaint or initial pleading to the
department and the appropriate county
attorney and, upon entry of any judgment or
.
decree in the action, shall mail a copy of
such judgment or decree to the department and
the appropriate county attorney.
"(3) In any action brought under this
section, the court may award the prevailing
party reasonable attorney fees incurred in
prosecuting or defending the action.
" (4) Any permanent injunction, judgment, or
order of the court made under 30-14-111 shall
be prima facie evidence in an action brought
under this section that the respondent used
or employed a method, act, or practice
declared unlawful by 30-14-103." (Emphasis
added. )
The cases cited by appellant in support of its
argument do not deal with the section in question; they
involve interpretations of other statutes not relevant to
the issue presented.
Appellant's final contention is that respondent, by
his actions, waived any right to rescind the contract. This
contention is not supported by the facts when applied to the
statutes.
The record indicates that respondent purchased the
vehicle on October 21, 1978, and discovered the damage on or
about November 20, 1978. Respondent notified appellant of
the damages that same week and delivered the vehicle to the
appellant on December 4, 1978, at the time and place
requested by appellant. During the following week and after
being informed of the damages and cost to repair, respondent
informed appellant that he did not want the vehicle and that
appellant could keep it.
Section 28-2-1701 et seq., MCA, pertain to the
rescission of contracts. The two sections that apply to
the facts at hand are sections 28-2-1711 and 28-2-1712,
MCA, which provide:
"28-2-1711. When a party may rescind. A
party to a contract may rescind the same in
the following cases only:
"(1) if the consent of the party rescinding
or of any party jointly contracting with him
was given by mistake or obtained through
duress, menace, fraud , or undue in£luence
exercised by or with the connivance of the
party as to whom he rescinds or of any other
party to the contract jointly interested with
such party;
"(2) if, through the fault of the party as to
whom he rescinds, the consideration for his
obligation fails in whole or in part;
"(3) if such consideration becomes entirely
void from any cause;
"(4) if such consideration, before it is
rendered to him, fails in a material respect
from any cause; or
"(5) if all the other parties consent."
"28-2-1713. - rescission accomplished.
How-
Rescission, when not effected by consent, can
be accomplished only by the us~e on the part
of the party rescinding of reasonable
diligence to comply with the following rules:
"(1) He must rescind promptly upon
discovering the facts which entitle him to
rescind, if he is free from duress, menace,
undue influence, or disability and is aware
of his right to rescind.
"(2) He must restore to the other party
everything of value he has received from him
under the contract or must offer to restore
the same, upon condition that such party
shall do likewise, unless the latter is
unable or positively refuses to do so."
It is clear from a reading of these sections that respondent
properly rescinded the contract.
The judgment of the District Court is affirmed.
We Concur:
Chief Justice