\
No. 92-392
IN THE SUPREME COURT OF THE STATE OF MONTANA
DICK RAGLAND,
Plaintiff and Respondent,
-vs-
WILLIAM F. SREEHAN, JR.,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial. District,
In and for the County of Yellowstone,
The Honorable William J. Speare, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Gary G. Broeder, Veeder & Broeder, Billings, Montana
For Respondent:
William J. OtConnor I OtConnor & OIConnor,
Billings, Montana
Submitted on Briefs: December 3, 1992
Decided; February 2, 1993
Filed:
Justice Fred J. Weber delivered the Opinion of the Court.
This is an appeal from a judgment by the Thirteenth Judicial
District Court, Yellowstone County, granting plaintiff ~ i c k
Ragland
judgment for breach of contract in the amount of $35,000 plus costs
and interest. We affirm.
We consider the following issues on appeal:
1. Did the District Court err in finding a contract existed
between Dick Ragland and William Sheehan, Jr., in which Sheehan
promised to pay $35,000 for the chance to consider participation in
Ragland's hydroelectric project?
2. Did the District Court err in admitting testimony by
Ragland and Doak concerning the Montana Power Company buy out for
$35,O O O ?
Dick Ragland (Ragland) owns a ranch in Carbon County, Montana.
Water i plentiful on the ranch and in 1982 Ragland began exploring
s
the possibility of using water far generating hydroelectric power
from an existing artesian well known as the Ruckavina #2 well. In
November 1984, Ragland obtained a Power Purchase Agreement with
Montana Power Company (MPC) to sell the hydroelectric power which
he hoped to generate.
Because Ragland's attempts to obtain financing were
unsuccessful, Ragland and a financial consultant put together a
bound document describing the Bluewater Hydroelectric Project
(Book) as part of an application for a loan to develop the well.
He then distributed the Book to various parties whom he believed to
be interested in the project.
In the course of this distribution, William F. Sheehan, Jr.
(Sheehan) received a copy of the Book in March 1987. After
receiving the Book, Sheehan visited the Ragland ranch to view the
proposed hydroelectric site and to discuss the merits of such a
project with Ragland.
The following year in August 1988, MPC notified Ragland that
it would terminate the Power Purchase Agreement unless Ragland
signed an amendment to the agreement stating that the hydroelectric
plant would be operational by October 1, 1989. Jon Doak (Doak),
Ragland9s attorney, notified Sheehan that Ragland needed to make
some decisions concerning the hydroelectric project. Sheehan
agreed to meet Ragland at Doakfs office late in the afternoon of
August 31, 1988, to discuss the project and Sheehan's participation
in it. The meeting held in Doak9s Billings office was attended by
Ragland, Sheehan and Doak and lasted approximately one hour. There
is no question that Sheehan was advised by Doak and Ragland that
MPC had offered to buy out the Power Purchase Agreement with
Ragland. At this time, Ragland also advised that he had problems
with the Internal Revenue Service and needed money to pay taxes.
No written agreement was prepared at the August 31, 1988 meeting.
At the conclusion of the meeting, Ragland telephoned a third
party and left a message rejecting a contract buy out by MPC.
Sheehan did not participate in the telephone conversation, nor was
he aware of the identity of the third party.
Ragland testified that as a result of this meeting he believed
that Sheehan had made an unconditional promise to pay Ragland
$35,000 on or before December 1, 1988, for an option to participate
in the development of the hydroelectric project . Sheehan testified
that he believed that the parties had agreed that if Sheehan's own
evaluation of the project was favorable and the agreement was
reduced to writing, that Northland Royalty Company, a corporation
owned by Sheehan would pay Ragland the $35,000 on or before
December 1, 1988, and then proceed to develop the project.
During September 1988, Doak drafted proposed ~rticles of
Limited Partnership. These articles set forth what Doak believed
to be the consensus of the August 31, 1988 meeting. The draft was
shown to Sheehan in October 1988 and Sheehan found them to be
unacceptable. In December 1988, Sheehan notified Ragland twice by
mail that he would not participate in the project. Sheehan's
letters claimed that he had determined that the project as designed
was not feasible or capable of completion. Sheehan did not pay
Ragland the $35,000.
Ragland then brought an action in ~istrictCourt to recover
damages from Sheehan for breach of an oral contract. A trial was
held before the District Court sitting without a jury on November
15, 1990. On April 15, 1992, the District Court issued its
findings and conclusions. The court found in favor of Ragland.
Sheehan now appeals.
Did the District Court err in concluding that a contract
existed between Dick Ragland and William Sheehan, Jr., in
which Sheehan promised to pay $35,000 for the chance to
consider participation in Ragland's hydroelectric
project?
The District Court concluded that an enforceable contract
existed between Ragland and Sheehan. The contract, according to
the District Court, provided that Sheehan would pay $35,000 to
Ragland if Ragland would reject MPC's buy out offer and execute a
first amendment to the Power Purchase Agreement, which provided
Sheehan a longer time to review the project in-depth. The court
determined that Ragland executed an amendment to the purchase
agreement and turned down MPC's offer. Sheehan, however, failed to
perform his part of the contract which included payment of $35,000.
Therefore, the court awarded Ragland the contract amount of $35,000
plus costs and interest.
Sheehan contends that there was no mutual consent of the
parties and that each of the three parties left the August 31, 1988
meeting with a different understanding of what had happened. The
proposed Articles of Partnership which were written after the
meeting were unacceptable to Sheehan and he did not sign them; this
prevented formation of any contract, according to Sheehan. Ragland
counters that there were not three versions of what happened on
August 31--Ragland and Doak both testified that Sheehan's promise
to pay Ragland $35,000 was unconditional. Ragland argues that the
promise to pay $35,000 was separate and distinct from any agreement
to develop the hydroelectric project.
The standard of review for findings of fact in a civil case
tried by a district court without a jury is whether the District
Court's findings are clearly erroneous. Trad Industries, Ltd. v.
Brogan (1991), 246 Mont. 439, 805 P.2d 54. This Court will
determine whether the findings of a district court are clearly
erroneous by reviewing them to see if the findings are supported by
substantial evidence. Interstate Production Credit Assoc. v.
DeSaye (1991), 250 Mont. 320, 820 P.2d 1285. When the findings are
supported, this Court will look to see if the District Court
misapprehended the effect of the evidence; when the court has not
so misapprehended, we may still find that although there is
sufficient evidence to support the findings, a review of the record
leaves the Court with the definite and firm conviction that a
mistake has been committed. DeSave, 250 Mont. at 323. Based on
the evidence presented, the District Court concluded that a
contract existed between Ragland and Sheehan obligating Sheehan to
pay $35,000 to Ragland.
Ragland correctly contends that two possible contracts exist
under the facts of this case. The first contract is the one argued
by Sheehan, the agreement concerning the hydroelectric project and
Sheehants participation in it. The second contract, and the
contract which concerns us, is the oral contract between Ragland
and Sheehan concerning the $35,000 payment to Ragland. Sheehan
argues that this oral agreement was not supported by consideration.
If an agreement contains a bargained-for exchange in legal
positions between parties, the agreement becomes a legally
enforceable contract. Nordwick v. Berg (1986), 223 Mont. 337, 725
P.2d 1195. It is not essential that consideration should impose a
certain gain or loss to either party; it is sufficient that a party
in whose favor the contract is made foregoes some advantage or
benefit. Nordwick, 223 Mont. at 341. Here, there is no question
that Ragland told Sheehan that MPC had offered him $35,000 to buy
out his Power Purchase Agreement and that he had to make a decision
to accept the money or continue the project by 5:00 p.m. that day.
The record establishes that all parties present at the August 31,
1988 meeting knew that Ragland needed money for tax debt. The
record also shows that if Ragland turned down the MPC buy out
offer, he needed to sign a first amendment to the original
agreement designating a starting date for the hydroelectric
project. All parties agree that Ragland made a telephone call and
turned down the MPC buy out. Clearly, Ragland changed his legal
position by foregoing the $35,000 from MPC with the understanding
that instead of MPC Sheehan would pay him the $35,000.
The record indicates that Sheehan had already been to the
Ragland Ranch to check the site and had possessed the Book about
the project for some time. Sheehan was aware of Raglandfs options
and Ragland's need for money. The District Court concluded
Raglandfs refusal of MPCts buy out offer bound Sheehan to a
contract under which Sheehan was granted time to further consider
the project. The record establishes that Sheehan benefited by the
four months1 time he was given to evaluate the details of the
project. However, after reviewing the project for the additional
four months, he refused to participate in the project and refused
to pay Ragland the $35,000.
Sheehan contends that a contract cannot exist because the
facts do not indicate mutual consent, but that is not controlling.
An implied contract does not arise from the consent of the parties-
-it springs from principles of natural justice and equity, based on
the doctrine of unjust enrichment. St. James Community Hospital v.
Dept. of Social and Rehabilitation Services (1979), 182 Mont. 80,
595 P.2d 379. Unjust enrichment is an equitable doctrine wherein
the plaintiff (Ragland) must show some element of misconduct or
fault on the part of defendant (Sheehan) or that defendant somehow
took advantage of plaintiff. Randolph v. Peterson, Inc. v. J. R.
Simplot Co. (1989), 239 Mont. 1, 778 P.2d 879.
We hold the District Court did not err in concluding a
contract existed between Ragland and Sheehan in which Sheehan
promised to pay $35,000 for the chance to consider participation in
Ragland's hydroelectric project.
Did the District Court err in admitting testimony by
Ragland and Doak concerning the Montana Power Company buy
out for $35,000?
The District Court determined that Ragland's rejection of the
$35,000 MPC buy out offer was consideration for the oral agreement
with Sheehan. Sheehan argues that there is no evidence to support
such a buy out offer except Ragland's testimony that MPC offered it
to him and Doak's testimony that Ragland told him about it. Both,
according to Sheehan, are hearsay. Ragland contends his testimony
and Doak's are not hearsay.
Ragland's testimony that MPC offered to buy him out for
$35,000 if he decided by 5 p.m. on August 31, 1988, is not hearsay
testimony. The testimony involves a ''verbal actg1pursuant to
M.R.Evid. 801. The verbal act was not MPCgs offer of $35,000 but
the act of Ragland's telling both Doak and Sheehan that the offer
had been made and that Ragland stood to lose $35,000 if he chose to
continue the Power Purchase Agreement and the hydro- electric
project .
The Hearsay Rule does not apply to statements offered not for
their truth but merely for the purpose of showing that certain
words were spoken. Quayle v. Mackert (ID. 1968), 447 P.2d 679.
The Quavle court considered the possible offer to buy a ranch and
the effect that offer had on t h e e s t a t e of t h e deceased owner. T h e
court stated:
Appellants objected at trial to Joseph Quaylegstestimony
about Dean Onne1s offer to buy the farm ...
Appellants
objected to this repetition by Joseph Quayle of Dean
Orme1s offer to contract to purchase the farm as hearsay
... But this objection was properly overruled because
the hearsay rule does not apply to statements offered not
for their truth, but merely for the purpose of showinq
that certain words were spoken. Thus, whether true or
not, the offer of Dean Orme was admissible for the
purpose of showinq that Manx Ouayle thousht he had an
offer which he misht forbear to accept. . .
.[Emphasis
added. ]
Quaylet 447 P.2d at 683. The Quayle reasoning is pertinent to the
instant case and we herein adopt it as it concerns Werbal a c t w
testimony.
In the case before us there was no issue as to whether MPC
actually had offered $35,000 to Ragland. The record demonstrated
that Ragland believed MPC had made an offer for $35,000 which he
would lose if not accepted by 5 p.m. on August 31; and that he
communicated that belief to defendant Sheehan as well as his lawyer
Doak. That communication by Ragland was a verbal act to which both
Ragland and Doak properly testified.
In a similar case, this Court noted that when a statement goes
to prove an operative fact of the alleged action, that statement is
not hearsay. Phillip R. Morrow, Inc. v. FBS Ins. Montana (1989),
236 Mont. 394, 770 P.2d 859. In the Morrow case, the district
court excluded a statement as hearsay testimony that the witness
was told **Don't Business with Morrow.*' In reversing, we stated
do
that:
The trial court should have admitted the . . . statement
as non-hearsay under Rule 801(c), M.R.Evid., because the
statement constitutes a "verbal actn, in the sense that
it goes to prove the operative facts of the alleged tort,
i-e., pressuring Fisher. .. [It] is an operative fact
which gives rise to legal consequences.
Morrow, 236 Mont. at 398.
We hold the District Court did not err by admitting testimony
by Ragland and Doak concerning the MPC buy out offer of $35,000.
Aff inned.
We Concur:
Chief Justice
February 2, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
GARY G. BROEDER
Veeder & Broeder. P.C.
P.O. Box 1115
Billings, MT 59103
WILLIAM J. O'CONNOR I1
O'Connor & O'Connor, P.C.
208 North Broadway, Suite 412
Billings, MT 59101
ED SMITH
CLERK OF THE SUPREME COURT