No. 87-225
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
BETTY A. McCRACKEN BILLS; DARRELL
McCRACKEN; DAVID McCRACKEN; JUDY
SOUTH; and CAROL EHRESMAN,
Plaintiffs and Appellants,
-vs-
HANNAH, INC., a/k/a HANNAH ASSOCIATES
a/k/a HANNAH ERA REAL ESTATE; ELWOOD E.
HANNAH, individually and as agent for
HANNAH, INC.; et al.
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Russell K. Fillner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Olsen, Christensen & Gannett; Damon L. Gannett and
Marvin Ventrell argued, Billings, Montana
For Respondent:
Emmons & Coder; Robert J. Emmons argued for Smedsrud,
Great Falls, Montana
Anderson, Brown, Gerbase, Cebull, Fulton, Harman &
Ross; John Russell argued for Hannah, Billings,
Montana
Submitted: November 30, 1987
Decided: February 9, 1988
Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
The District Court of the Thirteenth Judicial District
granted summary judgment upon motion by respondents Hannah
Incorporated and Conrad's Real Estate and Insurance (Hannah
and Conrad). In a memorandum accompanying the summary
judgment order, the lower court held that no material
questions of fact existed, and that Hannah and Conrad were
entitled to summary judgment as a matter of law. Darrell and
David McCracken, Betty McCracken Bills, Judy South, and Carol
Ehresman, (McCrackens), appeal contending that the lower
court erred by finding that no material questions of fact
existed. Hannah and Conrad cross appeal contending that the
statute of limitations and McCrackens' own negligence bar all
claims against Hannah and Conrad. We affirm the District
Court's decision to grant Hannah and Conrad summary judgment,
and thus moot the issues presented on cross appeal.
The facts relevant to this appeal are as follows:
McCrackens listed their farm for sale with Hannah. The
listing contract allowed Hannah to associate with other
realtors. Hannah associated with Conrad, and the two realty
offices agreed to split the commission for the sale.
Conrad Realty's agent, Smedsrud , through an
acquaintance, found buyer Melcher Corporation. (Melcher)
Negotiations between Melcher and McCrackens commenced and
resulted in offers McCrackens rejected. During the
negotiations with Melcher, McCrackens were represented by two
lawyers and an accountant.
Melcher's initial offers proposed that Melcher
Corporation make a down payment and secure the balance of the
farm's purchase price with bonds bought on a margin loan from
Melcher's broker. In return the McCrackens were to provide
Melcher with a clear deed to the farm. A provision in
Melcher's initial offers also provided that interest accruing
on the bonds would first be applied to satisfy the margin
loans encumbering the bonds.
Bonds purchased on margin are generally subject to
margin calls by the bond broker who makes the margin loans.
If the margin call is made by the broker, the purchaser of
the bonds must increase the equity he or she holds in the
bonds to prevent the broker from selling the bonds.
McCrackens objected to the provision providing for
payment of bond interest for Melcher's margin loans. In the
offer that McCrackens accepted, the purchase price was
increased and reference to payment of bond interest to
satisfy margin loans was deleted. Sidney Kurth, one of the
two lawyers representing McCrackens, drafted the agreement.
It provided for a purchase price of $2,900,000, with a
$812,000 cash down payment prior to closing. Melcher signed
a promissory note for the balance of the purchase price,
$2,088,000, and the bonds secured the note.
McCrackens were concerned about collateralizing the
debt with bonds. Kurth's provision on the bonds was drafted
to guarantee that the bonds would have a net worth equaling
the amount due on the promissory note which evidenced the
balance of the purchase price. The purchase-sale agreement
defined net worth of the bonds to be the difference between
their fair market value and any encumbrances held against
them.
Although the agreement neither prohibited nor allowed
margin encumbrances, evidence indicated that McCrackens
assumed that the bonds would not be subject to sales by
Melcher's broker because of margin calls. McCrackens agreed
that they would look only to the bonds in the event that
Melcher defaulted on the note.
McCrackens closed the deal with Melcher on December 20,
1979. Shortly after closing, Sidney Kurth went to Los
Angeles to inspect the bonds Melcher had promised to place in
escrow. However, Kurth failed to personally inspect the
bonds, and deposition statements indicated that the bonds
were not in place during Kurth's visit to Los Angeles.
Depositions also indicated that had Kurth properly inspected
the account Melcher had opened for the bonds, he would have
discovered that they provided inadequate security because of
the margin loans.
Sometime in the spring of 1980, Kurth discovered that
the bonds were held on margin. Meanwhile, the bonds became
subject to "margin calls", i.e., the bond broker was
authorized to sell the bonds to satisfy Melcher's margin
debt. By December 27, 1982, margin sales had liquidated the
bonds. McCrackens received $421,391.04 for their security
interest in the bonds.
David and Darrell McCracken, and Betty McCracken Bills,
sued their attorney, Sidney Kurth. The other "McCrackens",
Carol Ehresman and Judy South, sued the lawyer they had
hired, Gregory Munro. Betty, David, and Darrell settled the
suit with Kurth for $500,000. Carol and Judy settled with
Munro for $144,000. McCrackens also have a suit pending
against Melcher, and a suit pending against their accountant.
McCrackens allege that Hannah and Conrad should have
informed them that the bonds provided inadequate collateral.
The basis for this allegation is a statement from H. C.
Jordan, Chairman of the Board of Sabre Farms Incorporated
(Sabre).
Jordan's statement concerns an offer by Melcher to
purchase property owned by Sabre prior to the land sale at
issue in this case. According to Jordan, Sabre rejected the
offer because Melcher proposed to secure the debt owed on the
Sabre land with bonds purchased on a margin. McCrackens
contend that Smedsrud's alleged knowledge of the deal with
Sabre creates a material question of fact in regard to a
breach of the duty owed to McCrackens by Hannah and Conrad.
Hannah and Conrad deny that Smedsrud knew why Sabre rejected
the offer, and contend that even if Smedsrud did know why
Sabre refused to sell to Melcher, this knowledge fails to
create a material question of fact.
The District Court, facing the argument about the Sabre
offer, stated:
it is impossible to see how his not telling
Plaintiffs what they and their counsel already knew
and their accountant already had attempted to
explain to them can make him liable for their
injuries in this case.
We agree with the District Court.
A realtor has an affirmative duty to disclose all
material facts to the seller. See Ellingson Agency v.
Baltrusch (Mont. 1987), 742 P.2d 1009, 1013, 44 St.Rep. 1598,
1603. However, a realtor has no duty to disclose what the
seller already knows. See Mallory v. Watt (Idaho 1979), 594
P.2d 629, 632-33. In this case, McCrackens and their
attorneys already knew from Melcher's initial proposals that
Melcher offered to secure the balance of the purchase price
for property with bonds encumbered by margin loans. Jordan's
statement as to Hannah and Conrad's knowledge of the
existence of a similar offer made by Melcher to Sabre adds
nothing material to the facts relevant to Hannah and Conrad's
duty to disclose. Other than Jordan's statement, there is no
evidence to indicate that Hannah and Conrad knew or should
have known that the bonds were on margin.
Under Rule 56 (c), M. R.Civ.P., summary judgment may be
granted where the party opposing the motion fails to "raise
or to demonstrate the existence of the genuine issue as to
any material fact or demonstrate that the legal issue should
not be determined in favor of the movant." Palin v Gerbert
.
Logging (Mont. 1986), 716 P.2d 200, 202, 4 3 St.Rep 481, 4 8 3 .
McCrackens failed to raise the existence of the genuine issue
as to any material fact in regard to Hannah and Conrad's
breach of duty. Thus we affirm.
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