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No. 98-720
IN THE SUPREME COURT OF THE STATE OF MONTANA
2000 MT 212
H-D IRRIGATING, INC., and
WILLIAM H. LANE, JR.,
Plaintiffs, Respondents, and
Cross-Appellants,
v.
KIMBLE PROPERTIES, INC., HOBBLE
DIAMOND CATTLE CO., and LLOYD L.
KIMBLE,
Defendants and Appellants.
APPEAL FROM: District Court of the Sixth Judicial District,
In and for the County of Sweet Grass,
The Honorable Joe L. Hegel, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Susan G. Ridgeway, Datsopoulos, MacDonald & Lind, P.C.,
Missoula, Montana
For Respondents:
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James L. Jones, Dorsey & Whitney, Billings, Montana
Submitted on Briefs: March 2, 2000
Decided: August 10, 2000
Filed:
__________________________________________
Clerk
Justice Terry N. Trieweiler delivered the opinion of the Court.
¶1 The Plaintiffs, H-D Irrigating, Inc. and William H. Lane, Jr., (Buyers), filed this action
in the District Court for the Sixth Judicial District in Sweet Grass County to recover
damages from the Defendants, Kimble Properties, Inc., Hobble Diamond Cattle Co., and
Lloyd L. Kimble (Sellers), for misrepresentation and breach of a duty to disclose. The
Defendants filed a counterclaim to recover payments due from the Plaintiffs for the
property purchased. Following a nonjury trial, the District Court found the Defendants
were liable for constructive fraud and that the Plaintiffs were liable for payment pursuant
to the promissory note. The Defendants appeal and the Plaintiffs cross-appeal. We affirm
in part and reverse in part the judgment of the District Court and remand to the District
Court for further proceedings.
¶2 The following issues are presented on appeal:
¶3 1. Did Kimble Properties, Inc. waive its right to appeal when it accepted partial
payment that H-D Irrigating, Inc. had deposited with the clerk of district court?
¶4 2. Did the District Court have jurisdiction to decide the issue of constructive fraud?
¶5 3. Did the District Court err when it concluded that the Sellers committed constructive
fraud?
¶6 4. Are the District Court's findings of fact clearly erroneous?
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¶7 5. Did the District Court abuse it discretion when it assessed damages against Hobble
Diamond Cattle Co. and Lloyd Kimble?
¶8 6. Did the District Court abuse its discretion when it calculated damages?
¶9 7. Did the District Court abuse its discretion when it held neither party was the
prevailing party and did not award attorney fees?
FACTUAL BACKGROUND
¶10 On February 13, 1991, William H. Lane, Jr. agreed with Hobble Diamond Cattle Co.
and Kimble Properties, Inc. to purchase land from Hobble Diamond Cattle Co. for
$1,650,000 and irrigation equipment from Kimble Properties, Inc. for $350,000. Lloyd L.
Kimble was the president of both companies.
¶11 Subsequently, on April 1, 1991, Lane assigned his rights and his duties regarding the
irrigation equipment to H-D Irrigating, Inc. Lane was the president of H-D Irrigating, Inc.
On May 24, 1991, in accordance with the purchase agreement, H-D Irrigating, Inc. paid
Kimble Properties, Inc. $150,000 and executed a promissory note in the amount of
$200,000. The note bore interest at a rate of 8 percent per year and provided:
On June 15, 1992, Maker shall pay all accrued and unpaid interest then outstanding.
On June 15, 1993, the outstanding principal balance of this Note and all accrued and
unpaid interest shall be due and payable in full.
The note further provided:
If any payment due under this Note is not paid in full within fifteen days of the time
specified therefor, the unpaid principal balance of this Note and all accrued and
unpaid interest shall be immediately due and payable without notice and shall
thereafter bear interest at the rate of 11% per annum.
¶12 On June 16, 1992, the Buyers filed a complaint, in which, among other claims, they
alleged misrepresentation and breach of a duty to disclose. The Buyers alleged that Lloyd
Kimble falsely represented that the irrigation equipment was in working order; that all
pivots could be operated at the same time; that the irrigation system provided sufficient
water for the acreage; and that he knew of no irrigation system deficiencies. On the same
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day the Buyers filed their complaint, they also filed a motion to deposit their first
promissory note payment with the clerk of court pursuant to Rule 67, M.R.Civ.P. On June
18, 1992, the District Court granted the Buyers' motion and the Buyers deposited $16,000
with the clerk of court.
¶13 On March 1, 1995, a nonjury trial commenced. Denzel Schmidt, who was a ranch
foreman for Lloyd Kimble from 1983 to 1991, testified:
Q. Would you just tell the Court what was done to convert the old river channel to
make a full circle out of pivot 3?
A. We leveled off the high spots and filled in the low spots and just leveled it.
Q. Were there willows and brush growing in the old channel?
A. Yes.
Q. And what did you do with that?
A. Pushed it into the channel and buried it.
Q. Pushed in the dirt over the top of it?
A. Yes.
Q. Was there any compacting done when the field was leveled?
A. No.
Q. Was there any riprap placed along the river side of the field where the old river
channel had-where the river would come in from that direction?
A. No.
Q. Now, when you were present there after 1983, from 1983 through 1990, did you
observe any erosion by the river into field 3?
A. Yes.
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....
Q. Did you talk to Mr. Kimble about the river eroding into the-where the old river
had been?
A. Yes.
....
Q. Did you recommend to him that you riprap it?
A. Yes, a conversation with either Blain Lininger or Doug Mullaney-I don't rember
which one it was. But I remember the conversation that they suggested that we
would riprap it.
Q. And you talked to Mr. Kimble about that?
A. Yes.
Q. Did Mr. Kimble-what was his response to the recommendation of the three of
you that you riprap that field to protect it from erosion?
A. He said that the riprap would cost more than what the land was worth and he'd
just let the river take it back.
Schmidt remained the ranch foreman after Lane purchased the ranch.
¶14 Following the trial, the District Court entered findings of fact and conclusions of law.
The District Court found:
12. Mr. Kimble did exaggerate the size and efficiency of the irrigation system as
well as the production of hay from the ground beneath it. For a variety of reasons,
including sizes of pumps, pump wear and basic system design, in 1990 and 1991 the
irrigation system was incapable of running all six pivots . . . .
....
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16. Although Mr. Lane had notice of erosion problems via the exception to coverage
under the title insurance policy, he did not have notice of the extent of such
problems as might be expected on pivot three. There is no evidence Mr. Lane knew,
or had an effective means of knowing, that the original half-circle of pivot three had
ben expanded to a full circle by extending the pivot into an old river channel. As
noted in paragraph 12 above, Mr. Lane could have known of the extent of erosion
which had taken place in the years since Pivot three was extended to a full-circle.
However, this, as well as the title insurance policy exception, would only have put
him on notice of the inherent vagaries of the Yellowstone River. It did not
necessarily put him on notice of the risk of greatly increased erosion when a field is
planted in an old river channel which has not been reinforced with rip-rap to
prevent the river from reclaiming its old channel. Mr. Kimble did not disclose this.
(Emphasis added.) Based on these factual findings the District Court concluded that:
21. Mr. Kimble's failure to disclose the extent and cause of the erosion on pivot
three could not be reasonably discovered by Mr. Lane prior to closing and
constitutes a material misrepresentation upon which Mr. Lane reasonably relied to
his detriment.
¶15 With respect to H-D Irrigating, Inc.'s obligation on the note, the District Court also
concluded that:
24. Defendant, Monte Kimble is entitled to a net payment on the promissory note in
the amount of $123,940.96, calculated as follows:
Sales Price of Irrigation System $350,000.00
Less initial payment ($150,000.00)
Amount due on Promissory note $200,000.00
Less damages for misrepresentations ($ 99,575.00)
Balance due to Kimble Properties $100,425.00
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Plus interest at 11% from 5/24/96
to 7/10/98 $ 23,515.96
Total as of 7/10/98 $123,940.96
More facts will be discussed as they are relevant to the issues presented.
STANDARD OF REVIEW
¶16 We review a district court's conclusions of law to determine if they are correct.
McCormick v. Brevig, 1999 MT 86, ¶ 73, 294 Mont. 144, ¶ 73, 980 P.2d 603, ¶ 73. We
review a district court's findings of fact to determine whether they are clearly erroneous. In
re the Estate of Bolinger, 1998 MT 303, ¶ 29, 292 Mont. 97, ¶ 29, 971 P.2d 767, ¶ 29. We
review a district court's award of damages to determine whether the district court abused
its discretion. Martinell v. Montana Power Co. (1994), 268 Mont. 292, 320, 886 P.2d 421,
438. The test for abuse of discretion is whether the trial court acted arbitrarily without
employment of conscientious judgment or exceeded the bounds of reason resulting in
substantial injustice. See C. Haydon Ltd. v. Montana Mining Properties, Inc. (1997), 286
Mont. 138, 146, 951 P.2d 46, 51.
ISSUE 1
¶17 Did Kimble Properties, Inc. waive its right to appeal when it accepted partial payment
that H-D Irrigating, Inc. had deposited with the clerk of district court?
¶18 The Buyers contend that Kimble Properties, Inc. waived its right to appeal when it
accepted $21,928.87 that had been deposited with the clerk of court, following the District
Court's order to release the funds. The Buyers argue that Kimble Properties, Inc. accepted
the benefits of the District Court's judgment and therefore is prohibited from prosecuting
an appeal to reverse that judgment. The Sellers respond that since reversing the judgment
cannot possibly affect the benefit Kimble Properties, Inc. has accepted, Kimble Properties,
Inc. has not waived its right to appeal.
¶19 The general rule is that a litigant who voluntarily and with knowledge of all the
material facts accepts the benefits of an order, decree, or judgment of court, cannot
afterward take or prosecute an appeal to reverse it. 5 Am. Jur. 2d Appellant Review § 628
(1995); Maloney v. Heer (1993), 257 Mont. 500, 505, 850 P.2d 957, 960. In Peck v.
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Bersanti (1935), 101 Mont. 6, 8, 52 P.2d 168, 169, we held:
The rule is generally recognized that the right to accept the fruits of a judgment and
at the same time to prosecute an appeal from it are not concurrent; on the contrary,
they are wholly inconsistent rights. The election of one necessarily excludes the
enjoyment of the other. In re Black's Estate, 32 Mont. 51, 79 P. 554; 2 R.C.L. 61; 3
C.J. 679. Like most general rules, however, this one is subject to certain exceptions
and qualifications. The exception to this rule, which is everywhere recognized, is
that where the reversal of a judgment cannot possibly affect an appellant's right to
the benefit accepted under a judgment, then appeal may be taken and will be
sustained despite the fact that the appellant has sought and secured such benefit.
(Followed in Niles v. Carbon County (1977), 174 Mont. 20, 23, 568 P.2d 524, 526-27.)
Acceptance of payments that were not contested or which were irrevocably conceded as
due by the opposing party, does not preclude appeal. 5 Am. Jur. 2d, Appellant Review §
632 (1995).
¶20 In this case, H-D Irrigating, Inc. has not contested its obligation pursuant to the
promissory note, nor does it dispute that it owes at least the amount that Kimble collected
regardless of the outcome of the appeal and cross-appeal. H-D Irrigating, Inc. conceded its
obligation to Kimble Properties, Inc. on June 15, 1992, when it moved the District Court
to allow it to deposit the first payment due on the note with the clerk of district court. The
Buyers' motion stated:
In this litigation plaintiffs seek to recover damages they have incurred by virtue of
the defects and deficiencies in irrigation equipment sold to them by defendants.
Plaintiff H-D Irrigating Co, Inc. is the maker of a promissory note, dated May 24,
1991, payable to defendant Kimble Properties, Inc. in the amount of
$200,000.00. . . . Under the terms of the Promissory Note H-D Irrigating is to make
an interest payment on June 15, 1992. The amount of interest is $16,000.00.
Plaintiff now requests leave of Court pursuant to Mont. R. Civ. P. 67 to deposit the
June 15, 1992 interest payment with the Clerk of Court for placement in an interest-
bearing account pending the outcome of this litigation.
When Kimble Properties, Inc. accepted the funds released by the District Court, it did not
waive its right to appeal. It simply accepted that which H-D Irrigating, Inc. had already
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conceded was due, and no more than it concedes will be due in the event the Buyers' cross-
appeal is successful. Accordingly, we conclude that Kimble Properties, Inc. did not waive
its right to appeal when it accepted funds that H-D Irrigating, Inc. had deposited with the
clerk of court.
ISSUE 2
¶21 Did the District Court have jurisdiction to decide the issue of constructive fraud?
¶22 The Sellers contend that the Buyers did not notify them in their pleadings or by
evidence submitted at trial that they were claiming Lloyd Kimble created a false
impression regarding the condition of the field at pivot three. The Sellers argue that the
Buyers' complaint concerned defects and misrepresentations relating to the irrigation
system, not the land. Therefore, the Sellers argue, the District Court did not have
jurisdiction to enter judgment allowing the Buyers to recover the cost of riprap, which
concerned the land, not the irrigation equipment. The Buyers respond that the District
Court's award of damages for the cost of riprap ($92,000) and the cost to modify pivot
three to account for erosion ($7575) resulted from the Sellers' misrepresentations
concerning the irrigation system. The Buyers contend, therefore, that the relief the District
Court awarded was based on the pleadings and the pretrial order and the District Court had
issue jurisdiction.
"A district court does not have jurisdiction to grant relief outside of the issues presented by
the pleadings unless the parties stipulate that other questions be considered or the
pleadings are amended to conform to the proof." Ryan v. City of Bozeman (1996), 279
Mont. 507, 511, 928 P.2d 228, 230 (citing Old Fashion Baptist Church v. Montana Dep't
of Revenue (1983), 206 Mont. 451, 457, 671 P.2d 625, 628).
¶23 In this case, we conclude that the pleadings and the final pretrial order gave the Sellers
sufficient notice of the disputed issues to vest the District Court with issue jurisdiction.
Count II of the Buyers' complaint alleged:
Defendants made material representations regarding the irrigation equipment upon
which the Plaintiffs reasonably and justifiable relied. . . . Defendants' material
misrepresentations and concealment of material facts was a direct and proximate
cause of damage and injury to Plaintiffs, including but not limited to the expenses
incurred and to be incurred by Plaintiffs in repairing and replacing the irrigation
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equipment in order to bring it to the level of performance represented.
Among the Buyers' contentions listed in the final pretrial order of February 24, 1995, was
the following:
Following its purchase of the irrigation system, H-D Irrigating learned that, contrary
to Kimble's representations and inducements, the irrigation equipment was deficient
and defective in several material respects. The following defects, among others,
were identified:
....
(6) A substantial volume of river bank in the areas of pivot number three was lost
due to erosion. The erosion could have been prevented through the use of rip rap
and other protective material. Because 105 feet of river bank was lost it will be
necessary for H-D Irrigating to install a new booster pump.
We conclude that the District Court based its judgment on the issues presented.
Accordingly, we hold that the District Court had jurisdiction to decide the issue of
constructive fraud.
ISSUE 3
¶24 Did the District Court err when it concluded that the Sellers committed constructive
fraud?
¶25 Section 28-2-406, MCA provides:
Constructive fraud consists in:
(1) any breach of duty which, without an actually fraudulent intent, gains an
advantage to the person in fault or anyone claiming under him by misleading
another to his prejudice or to the prejudice of anyone claiming under him; or
(2) any such act or omission as the law especially declares to be fraudulent, without
respect to actual fraud.
The presence of a legal duty is an essential element of a claim for constructive fraud.
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Mattingly v. First Bank of Lincoln (1997), 285 Mont. 209, 218, 947 P.2d 66, 71;
Houdashelt v. Lutes (1997), 282 Mont. 435, 447, 938 P.2d 665, 672. In Mattingly, we
stated:
Whether or not a legal duty exists is a question of law for the court's determination.
Although the legal duty which often exists in constructive fraud cases is a fiduciary
one, this Court has previously held that Montana's constructive fraud statute "does
not require that the plaintiff demonstrate a fiduciary relationship, [but] merely
requires the establishment of a duty." Under certain "special circumstances," neither
a confidential nor a fiduciary relationship is necessary for a finding of constructive
fraud.
This Court has held special circumstances may exist where one party has acted to
mislead the other in some way. Specifically, this Court has determined that
constructive fraud may be present "[w]here sellers [of real property], by words or
conduct, create a false impression concerning serious impairment or other important
matters and subsequently fail to disclose the relevant facts." Further, in Drilcon,
[Inc. v. Roil Energy Corp. (1988), 230 Mont. 166, 172, 749 P.2d 1058, 1061-62],we
affirmed a jury instruction on the question of constructive fraud which provided that
"[w]here a party, by his words or conduct creates a false impression concerning
serious impairments or other important matters and subsequently fails to disclose
relevant facts, constructive fraud may be found."
285 Mont. at 218-19, 947 P.2d at 72 (citations partially omitted). In Moschelle v. Hulse
(1980), 190 Mont. 532, 539, 622 P.2d 155, 159, where a seller made statements regarding
the physical condition of a building and the profitability of a business, we held:
Under the facts here, the defendants were under a duty to make such disclosures as
would erase the false impressions created in the minds of the plaintiffs that repairs
to the premises were not needed and that winter earnings were sufficient for the
plaintiffs' needs.
¶26 The Sellers contend the District Court applied the wrong legal standard. They argue,
in reliance on State ex rel. State Fund v. Berg (1996), 279 Mont. 161, 175-76, 927 P.2d
975, 983, that constructive fraud requires proof similar to that required for actual fraud.
The Sellers, however, have misconstrued our holding in Berg. In Berg, after reciting the
nine elements of actual fraud, the opinion states:
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A claim of misrepresentation or constructive fraud requires similar proof, except
that the plaintiff need not prove the fifth element relating to intent to deceive or
dishonesty of purpose. Davis, 852 P.2d at 644 (citing Lee, 798 P.2d at 88).
279 Mont. at 175-76, 927 P.2d at 983. The legal question presented in Berg was whether
the plaintiff pled constructive fraud with sufficient particularity. The quoted language
misstated the elements of constructive fraud, but was of no significance to the opinion
because it was unnecessary to the issue decided. The language relied on was merely dicta.
The legal standard for constructive fraud is set forth in § 28-2-406, MCA. We conclude
that the District Court applied the correct legal standard for constructive fraud.
¶27 The Sellers next contend that the District Court did not make a sufficient factual
finding to support its legal conclusion that Lloyd Kimble committed constructive fraud.
The Sellers argue that they had no duty to disclose the risk of erosion at pivot three
because there was no evidence that Lloyd Kimble created a false impression regarding the
risk of erosion at pivot three, and further that the District Court made no such finding. The
Buyers respond that the District Court's conclusion that Lloyd Kimble failed to disclose
the extent and cause of the erosion on pivot three was based on the factual predicate that
the Sellers had knowledge of the risk of erosion.
¶28 We follow the doctrine of implied findings. Poulsen v. Treasure State Indus., Inc.
(1981), 192 Mont. 69, 77, 626 P.2d 822, 827. In Poulsen we said:
The Supreme Court adheres to the doctrine of implied findings which states that
where a court's findings are general in terms, any findings not specifically made, but
necessary to the judgment, are deemed to have been implied, if supported by the
evidence.
192 Mont. at 77, 626 P.2d at 827.
¶29 In this case, the evidence supports the District Court's findings. Although no fiduciary
relationship existed between the parties, like the sellers in Moschelle, Lloyd Kimble
created a false impression which established a duty to disclose. After Lloyd Kimble
created a false impression by exaggerating the efficiency of the irrigation system, the
Sellers assumed a duty to disclose the fact that they had filled the old river channel thereby
creating an increased risk of serious impairment to pivot number three. See Mattingly, 285
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Mont. at 218, 947 P.2d at 72. The testimony of Lloyd Kimble's employee refutes the
Sellers' argument that Lloyd Kimble had no knowledge which would give rise to a duty.
Denzel Schmidt testified that pivot three was made into a full circle by filling an old river
channel; that he observed erosion at pivot three from 1983 through 1990; and that he
suggested riprap to protect pivot three. During the trial Schmidt testified:
Q. And you talked to Mr. Kimble about [the riprap].
A. Yes.
Q. Did Mr. Kimble-what was his response to the recommendation of the three of
you that you riprap that field to protect it from erosion?
A. He said that the riprap would cost more than what the land was worth and he'd
just let the river take it back.
The evidence supports the implied finding that Lloyd Kimble had knowledge of the
increased risk.
¶30 The District Court also found that the Sellers breached their duty by failing to disclose
the risk of increased erosion resulting from planting a field in an old river channel with no
riprap to prevent the river from reclaiming its old channel. The District Court found that
the Buyers had no notice of this risk. The District Court concluded that:
Mr. Kimble's failure to disclose the extent and cause of the erosion on pivot three
could not be reasonably discovered by Mr. Lane prior to closing and constitutes a
material misrepresentation upon which Mr. Lane reasonably relied to his detriment.
The District Court's factual findings are sufficient to support its legal conclusion that the
Sellers were liable for constructive fraud. Accordingly, we conclude the District Court did
not err when it concluded that the Sellers were liable for constructive fraud.
ISSUE 4
¶31 Are the District Court's findings of fact clearly erroneous?
¶32 The Sellers contend that many of the District Court's findings of fact are clearly
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erroneous.
¶33 First, the Sellers argue that there was no evidence to support the District Court's
finding that a risk of greatly increased erosion exists when a field is planted in an old river
channel which has not been reinforced with riprap. The Sellers assert that expert testimony
was required before the District Court could make such a finding, and that the District
Court simply speculated. The Buyers respond that the Sellers' employees testified that the
field at pivot three was constructed with fill; that it was subject to erosion; and that riprap
would be necessary to prevent the erosion. The Buyers further contend that the District
Court's finding did not require expert testimony.
34 ¶A case that does not require specialized knowledge, does not require expert testimony.
Wagner v. Cutler (1988), 232 Mont. 332, 339, 757 P.2d 779, 783. In Wagner, the
purchaser of residential real estate brought suit against the vendor for defects in the home.
The plaintiff contacted a real estate agent in Bozeman who showed plaintiff the house and
who represented that the house was well built and according to code. The plaintiff moved
in and subsequently discovered defects in the house such as a hazardous chimney, poor
ceiling insulation, a broken sewage pump, and a faulty lawn sprinkler. The plaintiff sued
to recover damages for misrepresentation and violation of the duty to inspect and disclose
defects. We held:
The test for the admissibility of expert testimony is whether the matter is sufficiently
beyond common experience that the opinion of an expert would assist the trier of
fact. The instant case presented no concept or requirement of specialized knowledge
beyond the cognizance of the judge.
Wagner, 232 Mont. at 339, 757 P.2d at 783 (citation omitted).
¶35 In this case, Schmidt testified that to make pivot number three into a full circle, the
old river channel was filled, no compaction was done, and no riprap was installed, in spite
of the fact that Schmidt suggested it. Schmidt further testified that he frequently observed
erosion at pivot number three. Based on these facts, the District Court was capable of
finding "a risk of greatly increased erosion exists when a field is planted in an old river
channel which has not been reinforced with rip-rap," without the benefit of expert opinion
evidence.
¶36 Second, the Sellers contend that there was no evidence that the condition of a portion
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of field three was material to the purchase agreement. The Sellers argue that "only 22
acres or approximately 2.5% of the total acreage" was lost to erosion, which is not
material. The Buyers respond that not only are 22 acres of irrigated land material, but that
erosion of those 22 acres materially affected the irrigation system.
¶37 The standard for constructive fraud is not materiality. In Mattingly, we said:
[C]onstructive fraud may be present "[w]here sellers [of real property], by words or
conduct, create a false impression concerning serious impairment or other important
matters and subsequently fail to disclose the relevant facts."
285 Mont. at 219, 947 P.2d at 72 (emphasis added). "Serious impairment" or "other
important matters" is required for proof of constructive fraud.
¶38 In this case, the District Court found that it cost "$92,000 for riprap to prevent further
erosion and $7,575 to modify pivot 3 to account for such erosion, for a total of $99,575."
Filling the old river bed and thereby creating a greatly increased risk of erosion was a
serious impairment that cost the Buyers $99,575 to fix. We conclude that the District
Court's finding was not clearly erroneous.
¶39 Third, the Sellers contend that there was no evidence to support the District Court's
finding that the Buyers had no means of knowing the increased risk associated with filling
the old river bed at pivot 3. The Sellers argue that if Lane had spoken with Schmidt, he
would have discovered how pivot threewas expanded.
¶40 Lloyd Kimble testified that after the old river channel was filled at pivot 3, it looked
like any other field. He said:
Q. In fact, you did a good enough job of leveling it off that, when it was done, you
couldn't really tell that it was an old river channel there could you?
A. Not when it was in alfalfa. We cleared the land and leveled it off. It looks like
any other field would.
This testimony provides a sufficient basis for the District Court's finding that "there is no
evidence Mr. Lane knew, or had an effective means of knowing, that the original half-
circle of pivot three had been expanded to a full circle by extending the pivot into an old
river channel." The Buyers were not required to speak with the Sellers' employees before
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purchasing the irrigation equipment.
¶41 Finally, the Sellers contend the Buyers cannot recover for constructive fraud based on
the Sellers' failure to disclose facts that the Buyers knew to exist. The Sellers argue that
since the Buyers' consultant, Windsor Wilson, noticed that the field was planted in a river
channel and that the absence of riprapping was obvious, the Sellers had no duty to disclose
the risk of increased erosion. The Sellers contend that to discover the increased risk of
erosion all the Buyers had to do was consult with Wilson.
¶42 Wilson was a ranch consultant hired to assist William Lane in developing the ranch.
He testified that he inspected field number three on the last three or four days in May
1991. The sale closed on May 24, 1991. Therefore, his observation of the filled area
occurred after the closing and could have provided the Buyers with no knowledge.
¶43 Based on the foregoing we conclude that the District Court's findings of fact were not
clearly erroneous.
ISSUE 5
¶44 Did the District Court abuse it discretion when it assessed damages against Hobble
Diamond Cattle Co. and Lloyd Kimble?
¶45 The Sellers contend that if anyone, "the entity responsible for constructive fraud
relating to the condition of the field at Pivot #3 was Hobble Diamond Cattle Co., not
Kimble Properties or Lloyd 'Monty' Kimble." The Sellers argue "Hobble Diamond Cattle
Co. owned and sold the real property to Lane, and Kimble Properties owned and sold only
the irrigation equipment." The Buyers respond that Kimble is individually liable for his
own conduct regardless of who his principal was at the time. The Buyers argue that a
principal and its agent are jointly and severally liable for the agent's wrongful acts.
¶46 A principal is liable for wrongs committed by an agent while the agent acts within the
scope of his employment. Keller v. Safeway Stores, Inc. (1940), 111 Mont. 28, 35, 108
P.2d 605, 610; McCarty v. Lincoln Green, Inc. (1980), 190 Mont. 306, 311, 620 P.2d
1221, 1224. Further, a director or officer is individually liable for his false representations.
Poulsen v. Treasure State Indus., Inc. (1981), 192 Mont. 69, 82, 626 P.2d 822, 829. In
Poulsen, we said:
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It is clearly established that a director or officer of a corporation is individually
liable for fraudulent acts or false representations of his own or in which he
participates even though his action in such respect may be in furtherance of the
corporation's business. This personal liability attaches regardless of whether liability
also attaches to the corporation.
192 Mont. at 82, 626 P.2d at 829 (citations omitted).
¶47 In this case, Lloyd Kimble was the president of Hobble Diamond Cattle Co. and
Kimble Properties, Inc, which made him an agent of both companies. Hobble Diamond
Cattle Co. sold land to the Buyers and Kimble Properties, Inc. sold irrigation equipment to
the Buyers. In assessing liability, neither the District Court's findings of fact and
conclusions of law, nor its judgment, make a distinction between Hobble Diamond Cattle
Co. and Kimble Properties, Inc.; rather, both documents simply refer to the "Defendants."
However, when Lloyd Kimble represented to the Buyers that the irrigation equipment was
in working order; that all pivots could be operated at the same time; that the irrigation
system provided sufficient water for the acreage; and that he knew of no problems or
deficiencies with the irrigation equipment or the irrigation system, he was acting within
the scope of his employment as the president of Kimble Properties, Inc., which owned the
irrigation equipment. Lloyd Kimble's representations concerned the irrigation equipment,
not the land. The subsequent damage to the irrigation system was caused by the erosion of
land, but at the time of the representation Lloyd Kimble was referring to the irrigation
equipment and acting as an agent of its owner Kimble Properties, Inc. Hobble Diamond
Cattle Co., however, is not liable for Lloyd Kimble's misrepresentations because he was
not acting on its behalf when he made representations regarding the irrigation system.
Kimble Properties, Inc. and Lloyd Kimble are jointly and severally liable for the Buyers'
damages resulting from Lloyd Kimble's constructive fraud, but Hobble Diamond Cattle
Co. has no liability. Accordingly we hold the District Court did not err when it assessed
damages against Kimble Properties, Inc. and Lloyd Kimble, but the District Court did err
when it assessed damages against Hobble Diamond Cattle Co.
ISSUE 6
¶48 Did the District Court abuse its discretion when it calculated damages?
¶49 Every person who suffers detriment from the unlawful act of another may recover
damages. Section 27-1-202, MCA. The detriment suffered must result from the unlawful
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act. See Lima School Dist. No. 12 and Elementary School Dist. of Beaverhead County v.
Simonsen (1984), 210 Mont. 100, 112, 683 P.2d 471, 477. "Detriment is a loss or harm
suffered in person or property." Section 27-1-201, MCA.
¶50 The District Court concluded that Lloyd Kimble was entitled to "a net payment on the
promissory note in the amount of $123,940.96," calculated as follows:
Sales Price of Irrigation System $350,000.00
Less initial payment ($150,000.00)
Amount due on Promissory note $200,000.00
Less damages for misrepresentations ($ 99,575.00)
Balance due to Kimble Properties $100,425.00
Plus interest at 11% from 5/24/96
to 7/10/98 $ 23,515.96
Total as of 7/10/98 $123,940.96
¶51 Both parties contend that the District Court abused its discretion. The Sellers contend
that the District Court subtracted an offset before calculating interest, calculated interest
from May 24, 1996, rather than from May 24, 1991, and failed to award interest at the rate
of 11 percent per annum on the obligation that had accrued from June 15, 1992. On cross-
appeal the Buyers contend that Lloyd Kimble's failure to disclose information material to
the agreement was a breach that suspended H-D Irrigating, Inc.'s obligation to pay on the
note until the District Court resolved the parties' rights and obligations. Relying on
Sjoberg v. Kravik (1988), 233 Mont. 33, 759 P.2d 966, the Buyers argue that the accrual of
all interest due under the note should have been suspended pending the District Court's
resolution of the dispute. The Buyers also argue that they should receive prejudgment
interest for their damages.
¶52 This case is distinguishable from Sjoberg, which involved a vendor who breached a
land contract by failing to provide the purchaser with a mortgage release. In Sjoberg, we
affirmed the district court's analysis:
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[T]he District Court found that the provision in the contracts requiring the John
Hancock Mutual Life Insurance Company releases was material to the contracts,
and that the Kraviks' failure to produce such releases constituted a material breach
of the contracts. It concluded therefore that Sjoberg's obligation to make payments
ceased on the failure of the Kraviks to obtain the mortgage releases. The court
however further found that Sjoberg was obligated to pay under the contracts
commencing with the payments due in May of 1988, but that no interest should
accrue on the contracts between the date of the last payment in 1982 and May 1988
because of the Kraviks' material breach.
233 Mont. at 39, 759 P.2d at 969. Unlike Sjoberg, the District Court here concluded that
the Sellers were liable for constructive fraud, which gave rise to money damages, and did
not serve as a basis to excuse H-D Irrigating, Inc.'s performance on the note. See Dan B.
Dobbs, Dobbs Law of Remedies § 9.1 at 547 (2d ed. 1993). H-D Irrigating, Inc. was
obligated to make timely payments on the promissory note. Further, H-D Irrigating, Inc.
was not entitled to damages until the District Court adjudicated the constructive fraud
issue, which occurred on July 10, 1998. Constructive fraud involves the breach of a duty,
not a material breach of a contract. Accordingly, H-D Irrigating, Inc. was not entitled to
offset its obligation pursuant to the promissory note until the time of judgment, July 10,
1998.
¶53 The Buyers argue that the District Court abused its discretion when it failed to award
H-D Irrigating, Inc. prejudgment interest. The Buyers contend that damages in the amount
of $92,000 for the riprap installation were incurred on April 26, 1993. According to the
Buyers, interest began to accrue on that date.
¶54 Section 27-1-211, MCA, provides:
Every person who is entitled to recover damages certain or capable of being made
certain by calculation and the right to recover which is vested in him upon a
particular day is entitled also to recover interest thereon from that day except during
such time as the debtor is prevented by law or by the act of the creditor from paying
the debt.
The district court may award prejudgment interest pursuant to § 27-1-211, MCA, when the
following criteria are met:
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1) there is an underlying monetary obligation; 2) the amount of recovery is certain
or capable of being made certain by calculation; and 3) the right to recovery vests on
a particular day. R.H. Grover, Inc. v. Flynn Ins. Co. (1989), 238 Mont. 278, 777
P.2d 338.
DeTienne Associates Ltd. Partnership v. Farmers Union Mut. Ins. Co. (1994), 266 Mont. 184,
193, 879 P.2d 704, 710. Section 27-1-212, MCA, provides in part:
In an action for the breach of an obligation not arising from contract and in every
case of oppression, fraud, or malice, interest may be given, in the discretion of the
jury.
¶55 In this case, the judge was the fact finder, not the jury; therefore, it was within the
judge's discretion to determine whether interest was appropriate. Kimble Properties, Inc.
and Lloyd Kimble did not have an underlying monetary obligation to H-D Irrigating, Inc.
until held liable for constructive fraud on July 10, 1998. Therefore, we conclude the
District Court did not abuse its discretion when it refused to award prejudgment interest to
H-D Irrigating, Inc.
¶56 The parties, in this case, executed the promissory note on May 24, 1991, for $200,000
with interest of 8 percent per year. The note provided in part:
On June 15, 1992, Maker shall pay all accrued and unpaid interest then outstanding.
On June 15, 1993, the outstanding principal balance of this Note and all accrued and
unpaid interest shall be due and payable in full.
....
If any payment due under this Note is not paid in full within fifteen days of the time
specified therefor, the unpaid principal balance of this Note and all accrued and
unpaid interest shall be immediately due and payable without notice and shall
thereafter bear interest at the rate of 11 percent per annum.
Pursuant to the note, the first payment of $16,966.03 was due on June 15, 1992. On June
16, 1992, the Buyers moved the District Court pursuant to Rule 67, M.R.Civ.P. to allow
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the deposit of the first payment with the clerk of court. The District Court granted the
Buyers' motion, and H-D Irrigating, Inc. deposited $16,000 with the clerk of district court
pending further court order. Although H-D Irrigating, Inc.'s payment was $966.03 less
than the amount due, we conclude that H-D Irrigating, Inc. substantially performed its
obligation for the first payment. The second and final payment due on June 15, 1993,
included the principal of $200,000, the unpaid balance of $966.03, and accrued interest on
both, in the amount of $16,077.28, for a total of $217,043.31. H-D Irrigating, Inc. failed to
make this payment by June 30, 1993, as required by the terms of the note, which
implicated the 11 percent default provision of the note. The unpaid balance of
$217,043.31, accrued interest from June 30, 1993, until the District Court entered
judgment on July 10, 1998, in the amount of $120,027.35. Therefore, at the time of
judgment, H-D Irrigating, Inc. owed a total of $337,070.66.
¶57 The District Court should have offset H-D Irrigating, Inc.'s obligation by the damages
resulting from Lloyd Kimble's constructive fraud in the amount of $99,575 at the time of
judgment. Therefore, when the District Court entered its judgment on July 10, 1998, H-D
Irrigating, Inc. owed $237,495.66. Damages should have been calculated as follows:
Amount due on promissory note: $200,000.00
Accrued interest from May 24, 1991
to June 15, 1992 (387 days x $43.84 per day): $ 16,966.08
Less: Amount paid to Clerk of Court ($ 16,000.00)
Total unpaid interest and principle
owed after June 15, 1992: $200,966.08
Accrued interest from June 15, 1992
to June 15, 1993 ($200,966.03 x 8%): $ 16,077.28
Total owed as of June 15, 1992: $217,043.36
Accrued interest from June 30, 1993
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to July 10, 1998 (1835 days x $65.41 per day): $120,027.35
Total owed as of July 10, 1998: $337,070.71
Less: Amount of judgment: ($ 99,575.00)
Total $237,495.71
Accordingly, we conclude that the District Court erred when it calculated damages.
ISSUE 7
¶58 Did the District Court abuse its discretion when it held neither party was the
prevailing party and did not award attorney fees?
¶59 The Sellers contend that the District Court erred when it determined that neither party
was the prevailing party for purposes of awarding attorney fees. The Sellers contend that
since the promissory note included a provision allowing collection of attorney fees and the
District Court held that H-D Irrigating, Inc. was obligated to pay on the note, they were
the prevailing party. The Buyers respond that since the District Court found the Sellers
were liable for constructive fraud there is no prevailing party.
¶60 The general rule in Montana is that absent a statutory or contractual provision,
attorney fees are not recoverable. Kennedy v. Dawson, 1999 MT 265, ¶ 52, 989 P.2d 390,
¶ 52, 56 St.Rep. 1078, ¶ 52. We have also held "there is no prevailing party where both
parties gain a victory but also suffer a loss." Parcel v. Myers (1984), 214 Mont. 220, 224,
697 P.2d 89, 91-92.
¶61 In this case, the District Court held that "[n]either party is the prevailing party and
each party shall pay his or its own costs and attorney's fees." Both parties here gain a
victory but also suffer a loss. Kimble Properties received a favorable judgment on the
promissory note, but lost on the issue of constructive fraud. Accordingly, we conclude that
the District Court did not abuse its discretion when it held neither party was the prevailing
party and did not award attorney fees.
¶62 We affirm in part and reverse in part the judgment of the District Court and remand to
the District Court for proceedings consistent with this opinion.
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/S/ TERRY N. TRIEWEILER
We Concur:
/S/ J. A. TURNAGE
/S/ WILLIAM E. HUNT, SR.
/S/ JIM REGNIER
/S/ KARLA M. GRAY
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