Dolsen Company v. Imperial Cattle C

NO. 79-92 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

THE DOLSEN COMPANY, Plaintiff and Appellant, VS.

THE IMPERIAL CATTLE CO., A Montana Corporation, JAMES EDMISTON and PHILLIS EDMISTON, et al., Defendants and Respondents.

Appeal from: District Court of the Eleventh Judicial District, In and for the County of Flathead. Honorable James Salansky, Judge presiding. Counsel of Record: For Appellant: Moare and Doran, Kalispell, Montana For Respondents: Christopher B.Swartley, Missoula, Montana George Harris, Missoula, Montana

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Submitted on briefs: December 17, 1980 Decided :MAR 4 - 1981 Filed: MflP 4 --

Clerk

Mr. J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e Opinion of the Court.

This is an appeal by Dolson, plaintiff, after an a d v e r s e judgment o f t h e F l a t h e a d County D i s t r i c t C o u r t .

In 1973 the Imperial Cattle Company (Imperial) e n t e r e d i n t o s e v e n l e a s e a g r e e m e n t s w i t h t h e D o l s o n Company ( D o l s o n ) , a Washington c o r p o r a t i o n , f o r t h e l e a s e of d a i r y cattle. Approximately 520 d a i r y cows w e r e t r a n s f e r r e d to Imperial. Two o f t h e s e v e n l e a s e s w e r e c o n c l u d e d p r i o r to t h e s e t t l e m e n t n e g o t i a t i o n s which u n d e r l i e t h i s a c t i o n . All but one of the remaining five leases were personally g u a r a n t e e d by d e f e n d a n t s L i l l i t h u n and E d m i s t o n , p r i n c i p a l s i n t h e I m p e r i a l C a t t l e Company.

During 1974 Imperial suffered major financial r e v e r s e s and n o t i f i e d D o l s o n i n O c t o b e r o f t h a t y e a r t h a t i t would be u n a b l e t o f u r t h e r p e r f o r m on a n y o f t h e r e m a i n i n g

five leases. The parties proceeded to negotiations, a g r e e i n g t o a " P o s s e s s i o n Agreement." By t h e t e r m s o f that

agreement Dolson would reassume possession of the dairy cattle and then sell them. It was agreed that Imperial would be l i a b l e f o r any d e f i c i e n c y owing a f t e r i t s a c c o u n t was c r e d i t e d w i t h t h e p r o c e e d s o f t h e s a l e . The a g r e e m e n t was s i g n e d by t h e p a r t i e s a t a m e e t i n g i n M i s s o u l a , Montana, on October 18, 1974. All parties were represented by counsel.

P u r s u a n t t o t h e a g r e e m e n t , D o l s o n s o l d t h e d a i r y cows

t o t h e h i g h e s t f i n a n c i a l a d v a n t a g e of I m p e r i a l . Dolson t h e n t e n d e r e d a n a c c o u n t i n g and r e q u e s t e d from I m p e r i a l payment of the deficiency. A l l parties cooperated in the l i q u i d a t i o n of t h e d a i r y h e r d .

In March 1975 Dolson's general manager met with defendant Lillithun in Ronan, Montana. A t that meeting Lillithun did not dispute t h e e x i s t e n c e of the deficiency but did take issue with the amount owing. Lillithun f u r t h e r i n d i c a t e d t h a t d e f e n d a n t E d m i s t o n was s o l e l y l i a b l e for the deficiency.

A f t e r t h e Ronan m e e t i n g D o l s o n p r e p a r e d and f o r w a r d e d t h e n o t i c e of d e f i c i e n c y . A n o t h e r m e e t i n g was a r r a n g e d i n which a l l p a r t i e s would be p r e s e n t . With t h e e x c e p t i o n o f defendant L i l l i t h u n , a l l p a r t i e s were p r e s e n t w i t h c o u n s e l a t a May 2 3 , 1 9 7 5 , m e e t i n g i n S p o k a n e , W a s h i n g t o n . At this m e e t i n g D o l s o n was a d v i s e d t h a t I m p e r i a l , and a l l p r i n c i p a l s of Imperial , were insolvent. Dolson was informed that d e f e n d a n t L i l l i t h u n was n e a r b a n k r u p t c y and t h a t d e f e n d a n t E d m i s t o n was d e f e n d i n g an a c t i o n on c e r t a i n l o a n s from t h e Production Credit Association involving hundreds of t h o u s a n d s of d o l l a r s . S e t t l e m e n t d i s c u s s i o n s a t t h e Spokane meeting began at $100,000, substantially less than the $142,000 deficiency computed by Dolson. Defendants were c l e a r l y i n no p o s i t i o n t o n e g o t i a t e a t t h e $ 1 0 0 , 0 0 0 f i g u r e , and t h e number was r e d u c e d t o $ 6 5 , 0 0 0 and t h e n t o $ 5 5 , 0 0 0 .

A t the Spokane meeting defendant Edmiston first mentioned that he owned a parcel of real property in K a l i s p e l l , Montana, which m i g h t be u s e d t o p a r t i a l l y s a t i s f y the deficiency. Dolson's attorneys testified that the property was referred to by defendant Edmiston as a "commercial, downtown piece of property." Edmiston also represented t o Dolson that t h e p r o p e r t y was w o r t h $ 4 5 , 0 0 0 and t h a t t h e p r o p e r t y had r e c e n t l y been a p p r a i s e d a t t h a t f i g u r e by James C h r i s t i a n , f a t h e r o f a t t o r n e y C a l C h r i s t i a n , who r e p r e s e n t e d d e f e n d a n t L i l l i t h u n . Counsel f o r Edmiston informed Dolson that he was acquainted with the elder Christian, knew o f h i s e x p e r i e n c e i n t h e r e a l e s t a t e f i e l d , knew that he was a competent appraiser and that, if a n y t h i n g , t h e a p p r a i s a l would be c o n s e r v a t i v e .

At the conclusion of the Spokane meeting, Dolson advised defendants t h a t i t would agree t o a s e t t l e m e n t of $ 5 5 , 0 0 0 c a s h and a d v i s e d d e f e n d a n t E d m i s t o n t h a t h e s h o u l d use the Kalispell property as collateral in securing the

necessary financing . On J u l y 2 3 , 1 9 7 5 , a m e e t i n g t o o k p l a c e i n K a l i s p e l l ,

Montana. P r e s e n t a t t h i s m e e t i n g were R o b e r t D o l s o n and h i s attorney, James Gillespie; defendant Edmiston and his attorney, Milton Datsopoulos; and a t t o r n e y Cal Christian, representing Imperial Cattle Company and defendant Lillithun, who was a g a i n a b s e n t . Once more t h e K a l i s p e l l property was discussed as possible satisfaction of the deficiency debt. I t was a g a i n r e p r e s e n t e d a s h a v i n g a v a l u e of $45,000, a s c o n f i r m e d by t h e r e c e n t a p p r a i s a l . Robert D o l s o n e x p r e s s e d h i s d e s i r e t h a t any s e t t l e m e n t c o n s i s t o f cash.

The p a r t i e s d i s c u s s e d a t o t a l m o n e t a r y s e t t l e m e n t o f $55,000, a f i g u r e which was r e d u c e d t o $ 5 2 , 5 0 0 w i t h $ 7 , 5 0 0 i n i t i a l l y w i t h q u a r t e r l y p a y m e n t s t o be made t h e r e a f t e r of $2,500 until the debt was extinguished. The o u t s t a n d i n g balance was to be secured with the Kalispell property. Finally, Dolson was to receive a copy of the property d e s c r i p t i o n , t i t l e insurance ( o r o t h e r proof of c l e a r t i t l e ) and a copy o f the C h r i s t i a n appraisal confirming t h a t the t r a c t was w o r t h $ 4 5 , 0 0 0 . T h i s was D o l s o n ' s o n l y p r e s e n c e i n Kalispell until the settlement was signed. He and his

attorney flew into Kalispell on the morning of July 23 and left that afternoon. The Kalispell property was not identified to them, nor did Dolson request to see it. After the Kalispell meeting, negotiations were continued by telephone and correspondence. On October 13, 1975, Dolson agreed to accept the Kalispell property. From defendants Lillithun and Imperial, Dolson was to receive $7,500 in cash. On October 31 Robert Dolson went to Missoula and to Kalispell to execute the settlement. He accepted from Imperial a $7,500 promissory note, payable at 8 percent per annum, and guaranteed by defendant Lillithun. Defendant Edmiston tendered a warranty deed for the Kalispell property. Dolson traveled from Missoula to Kalispell and obtained the signature of defendant Edmiston. While in Kalispell, Dolson contacted a local realtor, John Ming, for the purpose of listing his newly acquired property. He met Ming at the property site. Dolson's brief describes the Edmiston property, which was represented as being conserva- tively valued at $45,000, as follows: ". . . consist[ing] of slightly over one acre of undeveloped ground situated directly between a Pacific Power & Light substation and the railroad tracks in Kalispell, Montana. While there was a narrow corridor leading from Center Street along and behind the substation to the property, the property itself had no frontage upon any Kalispell street. At its closest point to 'downtown Kalispell', the property was five blocks distant. " Ming informed Dolson that he had no interest in accepting a listing on the property and that he could not imagine who would be interested in the property with the possible exception of Pacific Power & Light, the adjacent

landowner. Ming testified that when he examined the property i n O c t o b e r 1 9 7 5 , t h e v a l u e o f t h e t r a c t was a b o u t $7,500.

Upon r e t u r n i n g t o Yakima, W a s h i n g t o n , Dolson engaged MIA appraiser, Wayne N e i l . Neil appraised the parcel at between $1,250 t o $8,900, d e p e n d e n t upon t h e r e s o l u t i o n o f uncertainties regarding access. Neil agreed w i t h r e a l t o r J o h n Ming t h a t a c c e s s was s o l i m i t e d , a p p r o x i m a t e l y s i x t e e n f e e t of passageway, t h a t a commerical use of the property was virtually precluded. Neil's conclusion was that the land would have a use classification of "low-level industrial." That classification is one of the most untenable and unmarketable classifications existing with r e s p e c t t o commercial p r o p e r t y .

A t trial i t was r e v e a l e d t h a t R o b e r t D o l s o n had n o t seen t h e property p r i o r t o the execution of the settlement agreement. I t was a l s o e s t a b l i s h e d t h a t a l t h o u g h D o l s o n had an e x t e n s i v e b u s i n e s s b a c k g r o u n d , h e was n o t e x p e r i e n c e d i n real estate. Defendants introduced a S t a t e Department of Revenue a p p r a i s a l which established that for property tax purposes, t h e t r a c t was w o r t h $ 3 3 , 4 5 0 , only about $11,500 less than Edmiston's representations. Neither defendant Lillithun nor attorneys Christian or D a t s o p o u l o s had ever seen the property, and a l l d e n i e d h a v i n g any knowledge o f i t s v a l u e beyond t h e r e p r e s e n t a t i o n s of d e f e n d a n t Edmiston and t h e C h r i s t i a n a p p r a i s a l .

The f o l l o w i n g i s s u e s a r e r a i s e d on a p p e a l :

1. Whether D o l s o n i s e n t i t l e d t o r e s c i s s i o n b e c a u s e o f d e f e n d a n t s ' m i s r e p r e s e n t a t i o n s a s t o t h e n a t u r e and v a l u e of t h e property?

2. Whether there was substantial credible evidence to support the District Court judgment; whether the District Court properly disposed of the issues; and whether the District Court's conclusions of law were supported by its findings of fact? Appellant maintains that the settlement agreement should be rescinded because of respondents' misrepresenta- tions as to the value and nature of the Kalispell property. We do not agree. This Court has long adhered to the rule that statements of opinion are preeminently subject to the common-law doctrine of caveat emptor. See Ray v. Divers (1925), 72 Pllont. 513, 234 P. 246. Statements as to the value of property are generally considered declarations of opinion and will not constitute a proper basis for rescission. 37 Am.Jur.2d Fraud and Deceit, S 119 at 164. Courts are continually confronted with the dilemma of determining to what lengths a vendor of property may go in "talking up" his merchandise--where does "traders talk" end and actionable fraud begin? Clearly, the line between opinion and fact is an especially fine line for the District Courts to draw when representations are made regarding the value of property. The common law provides reasonable protection to purchasers against fraud and deceit. However, it does not go to the romantic length of offering indemnity against the adverse consequences of folly and indolence or a careless indifference to information which would enlighten the purchaser as to the truth or falsity of the seller's assertions as to value. In such an instance, every person

r e p o s e s a t h i s own p e r i l in the f a c e of another's opinion when he h a s ample o p p o r t u n i t y t o e x e r c i s e i n f o r m e d j u d g m e n t . " S i m p l e x commendatio non o b l i q a t . " 2 K e n t s Comm. 485.

W emphasize, e however, t h a t i t is s i n g u l a r l y w i t h i n

the province of the District Court to determine whether f r a u d h a s been p e r p e t r a t e d on a n innocent purchaser. The D i s t r i c t C o u r t i s i n t h e b e s t p o s i t i o n t o weigh t h e f a c t o r s involved, assess the c r e d i b i l i t y of witnesses, and c o n c l u d e whether the statements regarding value constitute fact or opinion.

I n r u l i n g t h a t t h e D i s t r i c t C o u r t ' s d e c i s i o n must be g i v e n g r e a t c r e d e n c e i n t h i s c a s e , we r e a f f i r m o u r d e c i s i o n i n Lumby v . Doetch ( 1 9 7 9 ) , Mont. , 600 P.2d 200, 36 S t . R e p . 1 6 8 4 , w h e r e i n we f o u n d t h a t t h i s C o u r t m u s t v i e w the evidence in a l i g h t most favorable to the prevailing party and presume the c o r r e c t n e s s of the District Court's judgment. Findings of f a c t s h a l l n o t be s e t a s i d e u n l e s s clearly erroneous. Rule 52(a), M.R.Civ.P. Although c o n f l i c t s may e x i s t , such t h a t t h e evidence t e n d s t o show t h a t r e p r e s e n t a t i o n s a s t o v a l u e c o n s t i t u t e b o t h o p i n i o n and f a c t , i t is t h e d u t y and f u n c t i o n o f t h e t r i a l c o u r t t o make a r e s o l u t i o n of t h e c a s e one way o r t h e o t h e r . That c o u r t ' s reasoned and thoughtful determination that the vendor's s t a t e m e n t s a s t o t h e v a l u e of t h e p r o p e r t y were o p i n i o n , n o t

declarations of fact, will not be disturbed where its d e c i s i o n was b a s e d on s u b s t a n t i a l e v i d e n c e . See Kostbade v.

Buckingham (1979), Mont. , 595 P.2d 1149, 36 St.Rep. 129. It is n o t a p r o p e r f u n c t i o n of t h i s Court t o e x c h a n g e o u r o p i n i o n f o r t h a t of t h e D i s t r i c t C o u r t , e v e n i f we m i g h t h a v e r e a c h e d a d i f f e r e n t conclusion. I n accord, P o r t e r v. P o r t e r ( 1 9 7 0 ) , 1 5 5 Mont. 4 5 1 , 473 P.2d 538.

Our r e v i e w m u s t now examine t h e e v i d e n c e t o d e t e r m i n e whether t h e D i s t r i c t Court exceeded its discretion in the r e s o l u t i o n of t h i s case. Reviewing t h e e v i d e n c e i n a l i g h t most f a v o r a b l e t o t h e p r e v a i l i n g p a r t i e s , w e conclude t h a t there is substantial credible evidence supporting the court's judgment, that the court properly disposed of the issues, and that the court's conclusions of law were s u p p o r t e d by i t s f i n d i n g s o f f a c t .

Robert Dolson is not financially naive. To the contrary, he i s an a b l e and s u c c e s s f u l businessman. His relationship to defendants can only be considered adversarial to the extent their respective positions r e p r e s e n t competing i n t e r e s t s . T h e s e two f a c t o r s , D o l s o n ' s business acumen and his relationship t o defendants, weigh h e a v i l y a g a i n s t t h e p r o p o s i t i o n t h a t d e f e n d a n t s ' took u n f a i r advantage of Dolson when declaring the value of the property. If i n d e e d D o l s o n r e l i e d upon t h e r e p r e s e n t a t i o n s of defendants as to the value of the parcel, we see no reason why the D i s t r i c t C o u r t would have been obliged to condone such imprudence by allowing rescission of the agreement. Helena Adjustment Co. v. Claffin (1926), 75 Mont. 317, 243 P. 1 0 6 3 ; s e e a l s o , W i l l i a m s v . J o s l i n ( 1 9 6 5 ) , 65 Wash.2d 696, 399 P.2d 308 ( r e l i a n c e m u s t be r e a s o n a b l e ; purchaser may n o t r e l y on r e p r e s e n t a t i o n s when t h e i r truth c a n be r e a d i l y d e t e r m i n e d ) .

Even a t t h i s p o i n t i n t h e c a s e , t h e r e c a n be no r e a d y and a c c u r a t e d e t e r m i n a t i o n o f t h e v a l u e o f t h e p r o p e r t y amid t h e c o n f l i c t i n g o p i n i o n s found i n t h e r e c o r d . R e a l t o r Ming alleges the property is worth $7,500. Appraiser Neil b e l i e v e s t h e p a r c e l i s w o r t h a.s much a s $ 8 , 9 0 0 . The S t a t e o f Montana D e p a r t m e n t o f Revenue d e t e r m i n e d t h e v a l u e o f t h e property to be $33,450 with a taxable value of $22,000. Finally, we have t h e opinion of James C h r i s t i a n that the p r o p e r t y is worth $45,000.

S u r e l y t h e f a c t s of t h i s c a s e exemplify t h e reasoning behind t h e r u l e t h a t s t a t e m e n t s a s t o t h e v a l u e of p r o p e r t y a r e n o t grounds f o r r e s c i s s i o n . I t is reasonable t o expect that in a s i t u a t i o n s u c h a s t h i s v e n d o r s would a t t a c h t h e highest possible value t o the property. I n d e e d , i t would b e u n r e a s o n a b l e t o assume o t h e r w i s e , and p u r c h a s e r s who r e l y on s u c h r e p r e s e n t a t i o n s p r o c e e d a t t h e i r own r i s k .

On O c t o b e r 3 1 , 1 9 7 5 , R o b e r t D o l s o n was i n K a l i s p e l l t o o b t a i n t h e s i g n a t u r e s of t h e E d m i s t o n s and c o n c l u d e t h e p r o v i s i o n s of t h e s e t t l e m e n t agreement. Only a f t e r c o m p l e t e execution of t h e a g r e e m e n t d i d D o l s o n e x a m i n e what h e had accepted. The r e c o r d d i s c l o s e s no r e a s o n why D o l s o n d i d n o t view t h e p r o p e r t y b e f o r e he f o r m a l i z e d t h e agreement. Since he chos e t o a c c e p t t h e p r o p e r t y s i g h t unseen, when h e had ample opportunity to examine the s u b j e c t of his bargain, D o l s o n c a n n o t now be h e a r d t o c o m p l a i n t h a t h e was u n f a i r l y misled.

We concur with the District Court finding that Dolson's f o l l y was h i s own. The D i s t r i c t C o u r t ' s finding t h a t r e s c i s s i o n would be i m p r o p e r i n t h i s c a s e i s s u p p o r t e d by substantial evidence, and the court's f i n d i n g s of fact a r e amply s u p p o r t i v e o f i t s l e g a l c o n c l u s i o n s .

A c c o r d i n g l y , we a f f i r m . n

We c o n c u r ;

Justices