IN THE SIJPREME COURT OF THE STATE OF MONTANA
RALPH M. HOLMAN,
Plaintiff and Appellant.,
-vs-
GEORGE G. HANSEN, MARGARET E. HAP?SEN,
RITA M. TURIJEY, GEORGIA L. HANSEN, CHRIS
M. HANSEN, T7IC G. HANSEN and MICHAEL J. HANSEN,
Defend-ants,Respondents and Cross--
Appellants.
APPEAL FROM: District Court of the Sixth Judicial District,
In and for the County of Sweet Grass,
The Honorable Byron I,. Robh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard F. Cebull; Anderson, Brown, Gerbase, Cebull,
Fulton, Harman & Ross, Billings, Montana
For Respondent:
John T. Jones; Moulton, Rellingham, Jmngo & Mather,
L-Billjngs , Montana
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Submitted on Briefs: April 6, 1989
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L L I j . Decided: April 27, 1989
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Mr. Justice R. C. McDo~ough delivered the opinion of the
Court.
This appeal involves a contract for deed to ranch
property located near Big Timber, Montana. Plaintiff Ralph
M. Holman (Holman), the buyer under the contract, appeals
from the order of the District Court of the Sixth Judicial
~istrict, Sweet Grass County, granting summary judgment i n
favor of the sellers, George G. Fansen, et al. (Hansens!.
The order held Holman's claims to be barred, and granted one
of the two alternative remedies sought bv Hansens. The court
ordered that Holman would forfeit all payments made un2er the
contract, and Hansens wouI.cl retake possession of the
premises, less a 40-acre tract described below. The court
denied Iqansens' request for payment in full of t h e halance o f
the contract price. We affirm.
Holman presents two issues on appeal:
1. Whether the District Court improperly usurped
Holman's right to a jury trial by resolving questions of fact
in its grant of summary judgment to Hansens?
2. Did the District Court err in granting Hansens'
motion for summary judgment on the grounds that Folman's
claim is barred by the applicable statute of limitations,
waiver, estoppel and contract terms?
Hansens present one additional issue on cross-appeal:
Whether the trial court erred in ruling that Hansens
could not elect the remedy of specific performance and obtain
a judgment for the accelerated balance of the contract for
deed, and that Hansens' sole remedy was repossession of +he
ranch property and retention of the payments made by Holman.
The contract for deed at issue is dated January 1, 1982.
The subject of the contract is approximately 2,800 acres o f
deeded land and assignment of a leasehold interest in another
1,120 acres. The purchase price is $950,000.00, paid with a
$200,000.00 down payment and 20 annual installments of
$88,132.76. The contract also provides that upon payment of
$500,000.00 in principal and interest, Holman receives title
to a 40-acre parcel within the ranch where a house and other
improvements are to be built for Holman.
After execution of the contract, Holman took possession
of the property, which he still retains. After the 19PO
installment was made, more than $500,000.00 in principal an?
interest had been paid on the contract, and Holman received
the deed to the 40-acre parcel. Holman failed to pay the
1987 installment. Pursuant to contract terms, Hansens sent
Holman a ~ o t i c eof Default, which gave him 40 days to pay the
1987 j-nstallment in full. Holman did not make the payment.
Hansens +hen elected under the contract to accelerate the
entire balance due, and sent a ~ o t i c e of Acceleration to
.
Ho lman The notice gave Holman 90 days to pay all
outstanding principal and interest under the contract.
Holman did not do this, and filed suit against FTansens on
January 30, 1987.
Holman's complaint alleged fraud, breach of warranty,
breach of the implied covenant of good faith and fair
dealing, failure of consideration and breach of four separate
contracts to make improvements on the property. Holman
sought rescission, or in the alternative, reformation of the
contract for deed, general an6 punitive d a m a g ~ s for fraud,
contract damages, costs and attorney's fees.
Holman's claims of fraud stem from his alleged intention
to use the ranch property to pursue an outfitting business.
While Holman's primary profession was the operation of an
iron and steel business, he had been licensed as an outfitter
i n Montana since IPS7. Accnrdjnq to Holman, he was
contemplating the sale of his business in order to "retire"
to the ranch to work full-time as an outfitter.
George Hansen was Holman's main contact with the
sellers. It Was George Hansen who showed the ranch to
Holman. According to the Complaint, George Eansen made
misrepresentations to Holman by claiming that, among other
things, an abundance of game and fish inhabited the property,
only one smal-1 patch of noxious weeds was to be found on the
entire ranch, 250 to 300 cow/calf pairs could he grazed on
the land in season, and Hansen himself had paid ~600,000.00
for the property approximately ten years earlier. According
to Bolman, these statements were false, Hansen knew they were
false, an2 Holman relied on them i n deciding to purchase the
property.
Jn their answer, Hansens asserted a counter-claim
alleging two counts: (I) Holman was in default on the
contract for deed, which entitled Hansens to judgment for the
entire balance of the purchase price, or in the alternative
awarding forfeiture of all payments made and repossession of
the property; and (2) the location of Folman's 40-acre parcel
rendere?. much of the ranch unusable by inhibiting access to
it, therefore Holman's warranty deed to the 40 acres should
be declared void and quiet title granted to Hansens.
Hansens later moved for summary judgment. B y its order
of February 29, 1988, the ~istrict Court granted summary
judgment, but permitted Holman to retain the 40-acre parcel
together with an easement for access over existing roads.
The court requested briefs detailing Hansens' claim to the
balance of the purchase price as opposed to forfeiture anc'
repossession as provided for in the contract.. By its Order
of April 6, 1988, the court denied Hansens' request for the
contract balance and instead awarded forfeiture and
repossession. This appeal followed.
I. Holman's Appeal
Holman's arguments on appeal center on the District
Court's holding that his fraud-based claims are barred by the
applicable statute of limitations. The statute of
limitations for fraud is found at § 27-2-203, MCA:
The period prescribed for the commencement of an
action for relief on the ground of fraud or mistake
is within 2 years, the cause of action in such case
not to be deemed to have accrued until the
discovery by the aggrieved party of the facts
constituting the fraud or mistake.
~ccording to Holman, he did not discover the facts
constituting George Hansen' s fraud until 1985, 1-ess than two
years before the complaint was 'iled.
The party asserting fraud is put on inquiry notice of
the other part.yls misdeeds, and must exercise ordinary
d-iligence to di-scover the facts constituting the fraud.
Yellowst.one Conference of United ~ethodist Church v. D.A.
Davidson (Knnt.. ?987), 741 P.2d 794, 44 St.Rep. 1528; Gregory
v. city of Forsyth (1980), 187 Mont. 132, 6 0 9 P.2d 248. Mere
ignorance of the facts will not suffice to toll the statute
of limitations.
"He must show that the acts of fraud were committed
under such circumstances that he would not be
presumed to have knowledge of them, it being the
rule that if he has 'notice or information of
circumstances which would put him on inquiry which
if followed would lead to knowledge, or that the
y
facts were presurnptj.vel within his knowledge, he
will be fleemed to have actual knowledge of the
facts. ' "
Mobley v. Hall (1983), 2 0 2 Mont. 2 3 7 , 232, 657 P.2d 604, 6 0 7
(quoting Kerrigan v. O'Meara (1924), 71 Mont. 1,8, 237 P.
819, 8 3 2 1 . As stated in Holman's brief to t-.his Court, "The
gravamen of Mr. Holman's compl-aint is that Hansen engaged in
a continuing fraudulent concealment of facts that disallowed
Mr. Holman from truly ascertaining the extent of the fraud. "
Holman thus relies on the doctrine of fraudulent
concealment to toll the statute until 1985. Holman cites our
definition of fraudulent concealment from E.W. v. D.C.H.
(Mont. 1988), 754 P.2d 817, 821, 45 St.Rep. 778, 783:
"Fraudulent concealment has been described as the
employment of artifice, planned to prevent inquiry
or escape investigation, and mislead or hinder
acquisition of information disclosing a right of
action. "
(quoting Monroe v. Harper (1974), 164 Mont. 23, 28, 518 P.2d
788, 790). We have previously held that in the context of
non-malpractice negligence actions, invoking fraudulent
concealment requires a showing of affirmative conduct by the
defendant calculated to obscure the existence of the cause of
action. Yellowstone, 741 P.2d at 798. Given our previous
discussions of fraud, this rule applies with equal force to
the case at hand.
Holman first contends that the District Court "usurped"
his right to a jury trial by resolving questions of fact in
order to grant summary judgment. According to Hol-man,
numerous issues of material fact existed as to when he knew,
or should have known, that Hansen defrauded him. He cites 5
28-2-404, MCA; and Jenkins v. Hillard (1382), 199 Mont. 1,
647 P.2d 354, for the proposition that actual fraud is always
a question of fact. While this is a correct statement of the
law which would apply to the merits of this case, it
sidesteps the threshold barrier of the statute of
limitations.
Under 5 27-2-203, MCA, whether there has been a
"discovery" of facts sufficient to start the running of the
statute of 1imi.tat.j.onsi,s a question of law. Mobley, 657
P.2d at 607. Holman's fraud! claims were held to be barred
under the statute of limitations because he discovered, or
should have discovered by the use of his senses, the facts
constituting the alleged Fraud more than two years prior to
the filing of this suit. This was a question of law. The
court did not "usurp" Holman's right to a jury trial.
Holman's second argument asserts that Hansens are
estopped from raising the statute of limitations as a defense
hecause of George Hansen' s acts of fraudulent concealment.
He relies on Reneco v. Cantrell (1977), 174 Mont. 130, 568
P.?d 1225, which he asserts i s factually similar to this
case. In Keneco, the plaintiff and the defendant were
president and vice president., respectively, of a small
corporation. The two men held all of the corporation's
stock. The plaintiff had been responsible for labor
management and day-to-day operations, while the defendant had
been responsible for bookkeeping an6 "business phases" of the
corporation.
A disagreement arose as to the distribution of several
issuances of corporate stock. The plaintiff confronted the
defendant with his belief that he was not receiving his fair
share of the stock. The defendant replied by assuring the
plaintiff that it was a bookkeeping matter, the defendant
knew what he was doing and things would be straightened out;
i.e., the defendant would "make things right." We concluded
that the defendant's assurances had lulled the plaintiff into
a false sense of security, which had led to his failure to
initiate suit before the statute of limitations had run. We
held that the plainti ff had established the necessary
elements of estoppel to prevent the defendant from raising
the statute of limitations as a defense. The plaintiff
relied on the defendant's assurances (and presumably his
superior bookkeeping knowledge? to his detriment.
Holman argues that he was likewise assured by George
Hansen that the problems he comp1-ained of cfould be made
right. Holman argues that Hansen concealed defects in the
premises through these assurances, and lulled Holman into an
equally false sense of security. However, necessary elements
of estoppel we found present in Keneco are not present in
this case.
In Keneco, we held that there had been conduct amounting
to representation or concealment of material facts, and that
the truth concerning these facts was unknown to the party
claiming the henefit of the estoppel. In this case, Folman
either knew or should have known the truth about the defects
at issue here. In fact, the alleged assurances made by
Hansen came in response to Holman's complaints about the
defects. Holman's deposition testimony shows that by 1 9 8 4 ,
he had uncovered "a whole barrelful of problems just about
any place you looked." He had sufficient information about
any alleged misrepresentations made by George Hansen during
their negotiations to have stated to Hansen in 1 9 8 4 that the
ranch did not have "10 percent of the assets you claimed it
had. "
Holman testified, and his counsel now argues, that
George Hansen's fraud was not "fully ascertainable" until the
spring of 1 9 8 5 . While this argument places Holman's fraud
claims neatly within the statute of 1-imitations, it does not
mesh with the law set out above. Holman admitted that the
alleged misrepresentations were "in part ascertainable" prior
to 1 9 8 5 . His deposition indicates that some were apparent as
early as 1 9 8 3 .
Holman has been licensed in Montana as an outfitter
since 1957, and has owned other property in the Big Timber
area for a number of years. His testimony shows his skill-
and experience in matters such as discerning the presence of
game, the growth of noxious weeds and the average price of
local real estate. Under the rules from the Yellowstone and
Moblev cases, Holman was on inquiry notice, and was required
h
to exercise ordinary diligence to discover the facts
constituting the fraud alleged here. Hal-man noticed problems
before 1985 and did in fact investigate them. He is
therefore "deemed to have actual knowledge of the facts"
under Mobley, and is unable to establish the elements of
estoppel. Furthermore, Holman has failed to establish
fraudulent concealment. There has not been a showing of
conduct by George Hansen "calculated to obscure the existence
of the cause of action" as required under Yellowstone. The
defects being complained of were apparent to IIolman. George
Hansen may have attempted to placate Hol-man with assurances
that all would. he made right, but he did not obscure Holman's
cause of action. Holman's fraud-based claims are barred by
the statute of Limitations.
Lastly, Holman argues that the ~istrict Court was in
error when it determined that his claims of misrepresentation
were barred by the independent investigation clause found in
the contract. We need not address this argument, having held
that these claims are barred by the statute of limitations.
We affirm the decision of the ~istrictCourt on Holman's
appeal..
11. Hansens' Cross-Appeal
The ~istrict Court relied mainly on the terms of the
contract for deed in deciding Hansens' counterclaim. Hansens
were unable to convince the court that their alleged
entitlement to the balance of the contract price overcame the
contract's forfeiture clause, which reads in relevant part:
IT IS FURTHER MUTUALLY UNDERSTOOD AND AGREEC
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: and between the parties hereto that said forty
( 4 0 ) clays a ~ d
ninety ( P O ) days is a reasonable and
sufficient notice to be given to the said Party of
the Second Part in case of his failure to perform
any of the covenants on his part hereby made and
entered into, and shall be sufficient to cancel all
obligations hereunder on the part of the said
parties of the First Part and fully reinvest them
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with all risht, title and interest hereby aqreed to
be conveyed, and in case of such cancellation, the
Party of - Second Part shall forfeit all
the
made & - - -
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him on this contract, and all his right,
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title and! - - -i
interest nbbuildlngs - other
or
improvements whatsoever, -- payments shall be
and such
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ti of the First Part in
fu1.1 satisfaction - i n i d a t l o n -x 1 damages
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them sustained ... (Emphasis added.)
Hansens' claim for the contract balance rested on this
Court's decision in Glacier Campground v. Wild Rivers, Inc.
(197E), 184 Mont. 543, 597 P.2d 689. In Glacier, we held
that a seller under a contract for deed could pursue a remedy
other than forfeiture and repossession as long as the
contract did not preclude the remedy sought or provide that
forfeiture and repossession was the exclusj-ve remedy for
breach.
On cross-appeal, Hansens again assert their enti tlement
to seek specific performance (payment of the balance of the
contract price) under the rule in Glacier. In response,
Holman raises two arguments, one based on parol evidence and
one based on the doctrine of election of remedies. We need
not address the election of remedies issue, because parol
evidence admissibl-e on this claim establishes the intent of
the parties to this contract that specific performance would
not be available to the Hansens.
In Glacier, we allowed the seller to seek a remedy
outside the contract in part because the forfeiture clause in
that case was "on its face, ambiguous and uncertain"
requiring recourse to rules of construction and extrinsic
evidence to give it meaning. Glacier, 597 P.?d at 692.
Hansens point out that the forfeiture clause in this case i s
very similar to that construed in Glacier, which by analogy
should allow them to go outside the contract and seek
specific performance.
We noted in Glacier that a primary rule of contract
construction is to give effect to the mutual intent of the
parties. Glacier, 597 P.2d at 692; see S 28-3-301, MCA.
Hansens placed the imperfections in the forfeiture clause in
issue by seeking an alternative remedy based on Glacier. We
are therefore able to look to extrinsic evidence in order to
discover the mutual intent of Holman and the Hansens.
Section 28-2-905, MCA.
Holman placed two affidavits before the District Court,
his own and that of the attorney representing him when the
contract was negotiated, pointing out that George Kansen had
requested a clause giving Hansens the right to seek specific
performance. ~ccording to the affidavits, Holman rejected
such a provision, and none was included in the contract. A s
the District Court stated in the explanatory comment to its
order of April 6, 1988, these affidavits were not
contradicted by Hansens. T + is thus apparent that the mutual
intent of these parties was that specific performance would
not be a possible remedy under this contract. Hansens were
precluded from pursuing that remedy.
We affirm the decision of the District Court. d
Justice
We Co cur
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Mr. Justice John C. Sheehy did not participate.