JN THF SUPREME COURT O F THE STATE O F MOl\TTANA
FRANK M I T C H E L L and EVELYN M I T C H E L L ,
Plaintiffs and Respondents,
-VS-
LYLE BOYER and M I N N I E BOYER,
D e f e n d a n t s and A p p e l l a n t s .
A P P E A L FROM: D i s t r i c t C o u r t of t h e Fourth J u d i c i a l D i s t r i c t ,
J n and f o r t h e C o u n t y of R a v a l l i ,
T h e H o n o r a b l e J a m e s R . Wheelis, Judge p r e s i d i n g .
COTJNSEL O F RECORD:
For A p p e l l - a n t :
J e f f r e y H. L,anqton, Hamilton, Montana
For R e s p o n d e n t :
B r i a n 1.
, Del-aney; Mulroney, D e l - a n e y & Scott, M i s s o u l a ,
Montana
S u b m i t t e d on R r j e f s : April 20, 1989
Decided: June 1 1 1989
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Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
This appeal involves an agreement to purchase land
located near Corvallis, Montana. Defendants Lyle and Minnie
Boyer (Boyers) appeal from the judgment of the District Court
of the Fourth Judicial District, Ravalli County, granting
recision of the agreement. The Court awarded plaintiffs
Frank and Evelyn Mitchell (Mitchells) damages based on the
down payment, earnest money and escrow payments made; amounts
expended for improvements to the property; and prejudgment
interest at an annual interest rate of ten percent from a
date thirty days after Mitchells initially offered to rescind
the agreement. We affirm.
Boyers present two issues for review:
1. Did Mitchells ' reliance on the innocent
misrepresentations of Lyle Boyer constitute negligent
reliance, barring the remedy of recision?
2. Did the District Court err in finding that Lyle
Royer's misrepresentations gave rise to a breach so material
as to excuse Mitchells' duty of performance and rescind the
contract?
The property at issue in this case was originally part
of a larger tract belonging to David and Clara Leicht. In
1978, the Leichts sol-ci two parcels of their land to the
Tices, who are not parties to this suit. Lyle Boyer was the
real estate agent involved in that sale. At some point after
the sale had! been negotiated, but before the deeds to the
property had. been delivered, a disagreement arose between the
Leichts and the Tices as to what would constitute allowable
use of the parcels. The end result of this disagreement was
that the parcel. here at issue was subjected to a restrictive
co~renant, duly recorded in the Ravalli County Clerk and
R e c o r d e r ' s O f f i c e a t Book 1-48, page 117, which: a ) p r o h i b i t e 6
subdividing the parcel into more than three lots, b)
r e s t r i c t e d u s e o f t h e p r o p e r t y t o a g r i c u l t u r a l p u r p o s e s and
c) provided that no more than two houses with attendant
o u t h u i l d i n q s c o u l d b e b u i l t on t h e p a r c e l . T h i s c o v e n a n t was
t o remain i n f o r c e f o r a s long a s t h e L e i c h t s continued t o
h o l d any i n t e r e s t i n t h e i r r e m a i n i n g p r o p e r t y , which b o r d e r e d
the parcel.
Soon after this initial transaction took place, the
Tices subdivided t h e p a r c e l i n t o t h r e e l o t s . Tices then sold
two o f t h e l o t s t o t h e Boyers u n d e r a c o n t r a c t f o r d e e d . The
d e s c r i p t i o n o f t h e p r o p e r t y i n t h e c o n t r a c t e x e c u t e d by t h e
T i c e s and t h e R o y e r s r e f e r s t o it a s b e i n g p a r t o f Orchard
View Estates, and subject t o restrictions "as contained i n
Book 148 Deeds, page 117." However, a t the end of the
contract, in a paragraph entitled "Miscellaneous", the
c o n t r a c t s t a t e s t h a t t h e r e s t r i c t i o n s w i l l be l i f t e d when t h e
L e i c h t s no l o n g e r own a n y i n t e r e s t i n t h e p r o p e r t y t h a t i s
the subject of the contract. In other words, the
restrictions w i l l be lifted when the Tices pay off their
obligation as pu-rchasers o f the parcel from the Leichts.
Boyers t h e n l i s t e d t h e l o t s t h e y had j u s t p u r c h a s e d a s
being f o r s a l e . The M i t c h e l l s saw a n a d v e r t i s e m e n t f o r t h e
lots in a newspaper, contacted the Boyers and s e t up an
a p p o i n t m e n t t o view t h e p r o p e r t y . A t t h i s appointment, the
M i t c h e l l s i n d i c a t e d t h e i r i n t e r e s t i n t h e p r o p e r t y , and a s k e d
about t e r m s . L y l e Boyer t o l d t h e M i t c h e l l s t h a t b a s i c a l l y
t h e y would pay a sum t o t h e Boyers and t h e n assume B o y e r s '
i n t e r e s t i n t h e c o n t r a c t f o r deed w i t h t h e T i c e s . A t t h e end
of ten years, t h e M i t c h e l l s would make a balloon payment.
The M i t c h e l l s related t o L y l e Boyer t h e i r plan to further
s u b d i v i d e t h e l o t s , i f n e c e s s a r y , i n o r d e r t o r a i s e money t o
make the balloon payment. He told them of the building
restrictions, and indicated that the restrictions would be
lifted as soon as the Tices paid off their obligation to the
Leichts, which he estimated would happen in the near future.
Based on these discussions, the Mitchells entered into an
agreement to purchase the Boyers' interest.
For reasons that are not relevant here, the Leichts
became concerned about how the land they had sold was being
developed. In early 1986, they contacted an attorney, who
sent a letter to lot owners, including the Mitchells,
describing the restrictions and noting that they would not be
lifted while the Leichts remained on their adjacent property.
IJpon receiving the letter, the Mitchel-1s discussed the matter
with the attorney who wrote the letter, the attorney who had
closed their purchase of Boyers' interest, and their own
attornes. They contacted the Boyers, but apparently were
unsuccessful in attempting to work things out. Mitchell's
attorney offered to rescind the contract, but the Boyers were
unwilling to do so.
The Mitchells filed. a complaint against the Boyers on
April 23, 1987. According to the complaint, Lvle Boyer had
misrepresented the duration of the restrictions, and the
MitchePls agreed to purchase the property in reliance on
those misrepresentations. Count One of the complaint alleged
that Lyle Boyer ' s actions amounted to negligent
misrepresentation, Count Two alleged actual or constructive
fraud, and Count Three alleged mutual. mistake. All three
counts sought basically the same measure of damages: recision
of the contract, return of moneys paid out by the Mitchells
for the property, and their costs and attorney's fees
incurred in the action.
The case was tried to the District Court, sitting
without a jury. On Ju1.y 3 . 8 , 1.980, the court issued its
Findinqs of Fact, Conclusions of Law, and Judgment. The
court held in favor of the Mitchells on Count One. The court
found that Royer's misrepresentations had been made
innocently, hut were negligent in that as a real estate
agent, he should have known they were false. This appeal.
followed.
This case is in equity. As a result, the scope of our
review is set by statute, and is very broad. Under S
3-2-204, MCA, this Court reviews all questions of fact and
law in equity cases and makes its own determination based on
that review. In this case, the District Court held Boyers
liable for Lyle Boyer's negligent misrepresentations. On
appeal, Boyers assign error to this ruling. Their first
argument asserts that the Mitchells' reliance on those
misrepresentations was in itself negligence, which precluded
the court's award of recision. Our review of the case shows
that we need not address Boyers' arguments. In fact, Royers'
first argument points to a resolution to this case that
present itself prominently in the record. Irrespective of
any negligence, this is a case of mutual mistake.
A mutual mistake occurs when, at the time the contract
is made, the parties share a common misconception about a
vital fact upon which they based their bargain. Carey v.
Wallner (Mont. 1986), 725 P.2d 557, 43 St.Rep. 1706. Such a
mistake is a proper ground for recision. Section 28-2-1711,
MCA; Wallner, 725 P. 2d at 561. It was very important to the
Mitchell's when they considered buying these lots from the
Royers that they have the option to subdivide the lots in
order to make the scheduled balloon payment. According to
Boyers' contract with the Tices, the restrictions on
subdividing and building would be removed once the Tices
finished paying the Leichts for the parcel out of which the
Boyers' lots were carved. Lyle Boyer related this to the
Mitchells.
L y l e Royer t e s t i f i e d a t t r i a l t h a t h i s r e p r e s e n t a t i o n s
to the Mitchells honestly reflected his impression o f the
restrictions. He had n o t b e e n p r i v y t o t h e n e g o t i a t i o n s t h a t
resulted o r i g i n a l l y i n t h e r e s t r i c t i o n s being placed i n the
d e e d s , and had n e v e r h e e n i n f o r m e d a s t o t h e i r c o n t e n t beyond
t h e l a n g u a g e found i n t h e c o n t r a c t between t h e Royers and t h e
Tices. He f u r t h e r t e s t i f i e d t h a t he d i d n o t discover t h e
truth about the restrictions until 1986, when h e r e a d the
letter written by the Leichts' attorney. The Mitchells
t e s t i f i e d t h a t b e c a u s e L y l e Boyer was a r e a l e s t a t e a g e n t ,
they assumed that his representations were accurate and
truthful. I t i s t h e r e f o r e a p p a r e n t t h a t t h e Royers and t h e
M i - t c h e l l s were b o t h m i s t a k e n a t t h e t i m e t h e c o n t r a c t was
made; t h e y were l a b o r i n g u n d e r a common m i s c o n c e p t i o n a b o u t
when the restrictions wou.ld be removed. Recision was
therefore proper.
W a f f i r m t h e d e c i s i o n of t h e D i s t r i c t Court.
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