DENNY v BRISSONEAUD

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No, 12316 I N T E SUPREME COURT O THE STATE O MONTANA H F F HUBERT G, DENNY and PATRICIA A. DENNY, husband and w i f e , P l a i n t i f f s and A p p e l l a n t s , JACK L, BRISSONNEAU~),d/b /a ESTATE REALTY : T M A A S , d/b/a REAL ESTATE EXCHANGE, and O DM GLACIER GENERAL ASSURANCE COMPANY, Defendants and Respondents. Appeal from: District Court of t h e Fourth J u d i c i a l D i s t r i c t , Honorable Jack L. Green, Judge p r e s i d i n g , Counsel of Record: For Appellants : Tipp, Hoven and B r a u l t , Missoula, Montana. Vernon Hoven argued, Missoula, Montana, For Respondents: G a r l i n g t o n , Lohn and Robinson, Missoula, Montana. Robert E, Sheridan argued, Missoula, Montana. Boone, Karlberg and Haddon, Missoula, Montana. Thomas H. Boone argued, Missoula, Montana. Mulroney, Delaney and Dalby, Missoula, Montana. Submitted: Filed : MAR 12 1E 9 November 29, 1972 M r . J u s t i c e Frank I , Haswell d e l i v e r e d t h e Opinion of t h e Court. I n a n a c t i o n f o r damages based on f r a u d u l e n t misrepresentat i o n i n v o l v i n g t h e s a l e of a r e s i d e n c e , t h e d i s t r i c t c o u r t of Missoula County, t h e Hon. J a c k L, Green, d i s t r i c t judge, d i r e c t e d a v e r d i c t i n f a v o r of defendants and judgment was e n t e r e d thereon. From t h i s judgment and subsequent o r d e r denying a new t r i a l , p l a i n t i f f s appeal. P l a i n t i f f s a r e Hubert G. Denny and P a t r i c i a A . Denny, h i s w i f e , who s o l d t h e i r r e s i d e n c e i n Missoula t o Jack L. Brissonneaud, d / b / a E s t a t e R e a l t y , one of t h e defendants. Another defendant i s Thomas Adams, d/b/a Real E s t a t e Exchange, who was t h e r e a l e s t a t e broker involved i n t h e t r a n s a c t i o n . The t h i r d defendant i s G l a c i e r General I a s u r a n c e Company, which bonded Adams a s a r e a l e s t a t e broker. I n l a t e 1970, p l a i n t i f f s moved from Missoula t o Minneapolis and l i s t e d t h e i r Missoula r e s i d e n c e f o r s a l e w i t h defendant Adams who had p r e v i o u s l y handled t h e i r purchase of t h a t r e s i d e n c e t h e year before, The t o t a l s a l e p r i c e a s l i s t e d was $22,500, i n v o l v i n g a c a s h payment of approximately $7,150 and assumption of a mortgage of about $15,350, The r e s i d e n c e d i d n o t s e l l immediately s o on January 1, 1971, t h e l i s t i n g was extended f o r an a d d i t i o n a l s i x t y days. I n t h e l a t t e r p a r t of January, defendant Brissonneaud o f f e r e d t o exchange a promissory n o t e he h e l d f o r p l a i n t i f f s ' e q u i t y i n t h e residence. T h i s o f f e r was communicated by defendant Adams t o p l a i n t i f f s i n Minneapolis. After f i r s t refusing the o f f e r , plain- t i f f s decided t o n e g o t i a t e and r e t u r n e d t o Missoula. Plaintiff Hubert Denny t a l k e d t o defendant Adams f u r t h e r , and r e j e c t e d ano t h e r o f f e r by defendant Brissonneaud. T h e r e a f t e r on February 19, p l a i n t i f f Hubert Denny, defendant Adams, and defendant Brissonneaud had a conference i n t h e l a t t e r ' s o f f i c e , A t t h i s point there i s a c o n f l i c t i n t h e testimony concerning s t a t e m e n t s and r e p r e s e n t a t i o n s made t o p l a i n t i f f Hubert Denny during t h i s conference. I n any e v e n t , a w r i t t e n "Earnest Money Receipt and Agreement t o S e l l and Purchasef1was executed on t h e same day by p l a i n t i f f s a s s e l l e r s and defendant Brissonneaud a s purchaser. This agreement f i x e d a t o t a l purchase p r i c e of $22,650 on t h e r e s i d e n c e t o be paid: $6,600 by assignment of defendant ~ r i s s o n n e a u d ' s i n t e r e s t i n an i n s t a l l m e n t promissory n o t e on which C a r l A. Malcolm and h i s w i f e were makers, which n o t e was i n escrow a t t h e F i r s t S t a t e Bank i n Missoula; $750 cash a t c l o s i n g c o v e r i n g defendant Adamsf r e a l e s t a t e commission; and assumption of t h e o u t s t a n d i n g mortgage on t h e r e s i d e n c e of approximately $15,300. Subsequently, defendant Adams a t t e n d e d t o completion of t h e v a r i o u s documents involved i n t h e t r a n s a c t i o n i n c l u d i n g an assignment of t h e purc h a s e r ' s i n t e r e s t i n t h e escrow account and t h e deed. P l a i n t i f f s subsequently r e c e i v e d two monthly payments on t h e Malcolm n o t e and escrow, one i n March and one i n A p r i l 1971, Since t h a t time p l a i n t i f f s have r e c e i v e d no payments whatever. On August 11, 1971, p l a i n t i f f s f i l e d an a c t i o n f o r damages based on f r a u d u l e n t m i s r e p r e s e n t a t i o n s a g a i n s t defendants B r i s sonneaud, Adams, and G l a c i e r General, The gravamen of t h e i r a c t i o n was t h a t defendant Brissonneaud made f a l s e r e p r e s e n t a t i o n s t o them t h a t t h e maker of t h e n o t e , Malcolm, was a prominent Missoula b u s i nessman who owned p r o p e r t y i n Missoula i n e x c e s s of $250,000, and c e r t a i n o t h e r s t a t e m e n t s r e l a t i n g t o t h e c o l l e c t i b i l i t y and s e c u r i t y f o r t h e note. P l a i n t i f f s seek t o hold defendant Adams l i a b l e on t h e b a s i s t h a t he should have made a more thorough i n v e s t i g a t i o n t o f u l l y inform p l a i n t i f f s what they were g e t t i n g i n t o , and conducted himself i n v i o l a t i o n of ~ o n t a n a ' sReal E s t a t e License Act, s p e c i f i c a l l y s e c t i o n s 66-1937 and 66-1940, R.C.M. 1947. I s s u e was j o i n e d and t h e c a s e came on f o r t r i a l by j u r y on A p r i l 24, 1972, i n t h e d i s t r i c t c o u r t of Missoula County b e f o r e Judge Green. A t t h e c o n c l u s i o n of p l a i n t i f f s 1 c a s e - i n - c h i e f , Judge Green g r a n t e d d e f e n d a n t s f motions f o r a d i r e c t e d v e r d i c t and d i s m i s s a l on t h e b a s i s t h a t no damages had been proven, Judgment was e n t e r e d thereon and p l a i n t i f f s ' motion f o r a new t r i a l was P l a i n t i f f s now a p p e a l from t h e judgment and d e n i a l of denied. t h e i r motion f o r a new t r i a l , The i s s u e upon a p p e a l i s whether t h e d i r e c t e d v e r d i c t was correct. The underlying i s s u e i s whether p l a i n t i f f s proved any damages. P l a i n t i f f s contend they proved damages i n t h e s e p a r t i c u l a r s : ( I ) The l o s s of t h e $750 paid defendant Adams f o r a r e a l e s t a t e commission; (2) t h e l o s s of t h e i r e q u i t y i n t h e i r r e s i d e n c e ; (3) t h e l o s s of t h e i r r i g h t t o s e e k r e c o u r s e a g a i n s t defendant B r i s sonneaud; and (4) t h e l o s s of use of t h e moneys due under monthly i n s t a l l m e n t payments under t h e n o t e . P l a i n t i f f s contend t h a t t h e y have been deprived of a p r e s e n t r i g h t w i t h a p o s s i b i l i t y of f u t u r e damages and t h e r e f o r e t h e q u e s t i o n of damages should have been submitted t o t h e j u r y . Actual f r a u d i s a q u e s t i o n of f a c t . 1947, S e c t i o n 13-310, R.C.M. The burden of proof i s upon t h e p a r t y a l l e g i n g i t , h e r e t h e plaintiffs. R e i l l y v. Maw, 146 Mont. 145, 405 P. 2d 440, damages i s an e s s e n t i a l element of an a c t i o n f o r f r a u d , stockmen's Nat. Bank, 63 Mont. 262, 207 P. 623, Proof of Lee v. Where, a s h e r e , an a c t i o n f o r f r a u d i s bottomed on f a l s e r e p r e s e n t a t i o n s , t h i s Court i n Holland Furnace Co. v. Rounds, 139 Mont. 75, 80, 360 P.2d 412, h a s p r e v i o u s l y expressed t h i s requirement i n t h i s language: Damage, i n j u r y , a r p r e j u d i c e from r e l i a n c e on f r a u d u l e n t r e p r e s e n t a t i o n i s a n e c e s s a r y element of f r a u d whether f r a u d i s being advanced a s a ground f o r recovery o r defense. I 1 II Generally speaking, t h e i n j u r y o r damage which t h e p l a i n t i f f must prove must be something more than c o n t i n g e n t damage which may o r may n o t occur, 37 C . J . S , Fraud 5 4 1 ( f ) , p. 294. P l a i n t i f f may r e c o v e r when he shows t h a t he has s u s t a i n e d some pecuniary damage o r i n j u r y by reason of having been put i n a p o s i t i o n worse than he no could have occupied i f t h e r e had b e e n l f r a u d , b u t he cannot r e c o v e r where he does n o t show t h a t h e h a s s u s t a i n e d such damage o r i n j u r y . 37 C.J.S. Fraud 5 4 1 ( a ) , p, 290, P l a i n t i f f s c l a i m t o have been placed i n a worse p o s i t i o n by t h e l o s s o f t h e e q u i t y i n t h e i r house i n exchange f o r an assignment of a n o t e . e x a c t l y what p l a i n t i f f s bargained f o r ? But i s t h i s n o t The buy and s e l l agreement of February 19, 1971, s p e c i f i c a l l y s e t t i n g f o r t h t h e s e terms of exhange was signed by p l a i n t i f f s . P l a i n t i f f s contend t h e damages a r e n o t t h e b a l a n c e of t h e n o t e , t h e v a l u e o f t h e n o t e , nor t h e insolvency of t h e makers, b u t t h e l o s s of e q u i t y t h e y s u s t a i n e d because o f t h e f r a u d u l e n t t r a n s action. P l a i n t i f f s , however, do n o t seek r e s c i s s i o n of t h e c o n t r a c t . Rather, they c l a i m t h e amount of $5,468, which w a s e s s e n t i a l l y p l a i n t i f f s ' e q u i t y i n t h e p r o p e r t y a t t h e time of t h e s a l e , p l u s defendant Adams' commission, P l a i n t i f f s , i n essence, argue they r e c e i v e d n o t h i n g of v a l u e i n exchange f o r t h e i r e q u i t y . The f a l l a c y i n t h i s argument l i e s i n t h e erroneous premise upon which it i s predicated. There i s evidence t o t h e e f f e c t t h a t s h o r t l y .. -A a f t r r t h e c o n t r a c t was consummated no payments where 'bade by t h e makers of t h e n o t e . But i t does n o t f o l l o w t h a t t h e a s s i g n e d escrow account which t h e y a c q u i r e d a t t h e time of t h e t r a n s a c t i o n was v a l u e l e s s . See: Kaufman v . Mellon N a t i o n a l Bank and T r u s t Company, 366 F,2d 326, 330 (3d Cir,1966). I n a n a c t i o n based upon f r a u d t h e defrauded p a r t y ' s measure of damages i s t h e d i f f e r e n c e between t h e a c t u a l v a l u e of t h e p r o p e r t y a t t h e d a t e of t h e s a l e and t h e c o n t r a c t p r i c e , Ginoff, 69 Mont, 116, 123, 220 P. 539. Healy v. When t h e p a r t i e s signed t h e buy and s e l l agreement of February 1 9 , 1971, p l a i n t i f f s acq u i r e d t h e assignment of t h e proceeds of a n escrow account. This assignment had an a s c e r t a i n a b l e v a l u e e q u a l t o t h e v a l u e of t h e n o t e c o n t a i n e d w i t h i n t h e escrow account. There i s no testimony i n t h e r e c o r d t o i n d i c a t e t h a t a t t h e t i m e of t h e t r a n s a c t i o n t h e n o t e was worth l e s s than i t s f a c e v a l u e . P l a i n t i f f s s o l e l y r e l i e d on t h e i r c l a i m t o t h e amount of t h e e q u i t y they t r a n s f e r r e d i n exchange. There i s simply no e v i - dence t o support t h e i r c l a i m t h a t a t t h e time of t h e t r a n s a c t i o n t h e y exchanged something f o r n o t h i n g , i . e , t h e i r e q u i t y and t h e +-? s a l e s commission valued a t $5,468 f o r t h e proceeds o f a v a l u e l e s s note. Thus no damages were proven simply because t h e r e i s no evidence t h a t t h e proceeds of t h e n o t e were v a l u e l e s s . Judge Green was c o r r e c t i n s t a t i n g " t h a t i n a s much a s damages have n o t been shown i n any amount---a b u t no damages". p o s s i b i l i t y of damages perhaps, Accordingly, t h e d i r e c t e d v e r d i c t i n f a v o r of defendant Brissonneaud was c o r r e c t . D i r e c t i n g our a t t e n t i o n t o p l a i n t i f f s ' c l a i m a g a i n s t defendant Adams, we n o t e t h a t he i s a r e a l e s t a t e b r o k e r l i c e n s e d under t h e laws of t h e s t a t e of Montana. A s he was t h e r e a l e s t a t e b r o k e r involved i n t h e s a l e from p l a i n t i f f s t o defendant Brissonneaud, t h e b a s i s of t h i s a c t i o n f i l e d by p l a i n t i f f s a g a i n s t Adams and t h e i s s u e b e f o r e t h e Court r e l a t i n g t o defendant Adams i s covered by p r o v i s i o n s of t h e Real E s t a t e License Act, s e c t i o n s 66-1937 and 66-1940, R.C,M, 1947. I n seeking a b a s i s f o r recovery p l a i n t i f f s r e l y upon s e c t i o n 66-1940, R.C.M. 1947, which provides i n p e r t i n e n t p a r t : "(b) I n c a s e any person i n a c i v i l a c t i o n i s found g u i l t y of having r e c e i v e d any money, o r t h e e q u i v a l e n t t h e r e o f , a s a f e e , commission, compensation, o r p r o f i t by o r i n consequence of a v i o l a t i o n of any p r o v i s i o n of t h i s a c t , h e s h a l l i n a d d i t i o n be l i a b l e t o a p e n a l t y of n o t l e s s than t h e amount of t h e sum of money s o r e c e i v e d and n o t more than t h r e e times t h e sum s o r e c e i v e d , a s may be determined by t h e c o u r t , which p e n a l t y may be recovered i n any c o u r t of competent j u r i s d i c t i o n by any person aggrieved. "(c) Any person s u s t a i n i n g damages by f a i l u r e of a r e a l e s t a t e broker o r r e a l e s t a t e salesman t o comply w i t h t h e p r o v i s i o n s o f t h i s a c t , s h a l l have t h e r i g h t t o commence an a c t i o n i n h i s own name a g a i n s t t h e r e a l e s t a t e broker and h i s s u r e t y , o r t h e r e a l e s t a t e s a l e s man and h i s s s u r e t y , o r both t h e b r o k e r and any salesman employed d i r e c t l y o r i n d i r e c t l y by such broker and t h e i r r e s p e c t i v e s u r e t i e s , f o r t h e recovery of any damages s u s t a i n e d a s t h e r e s u l t of any a c t s p e c i f i e d i n s e c t i o n 66-1937 h e r e i n o r a s a r e s u l t of t h e f a i l u r e of t h e r e a l e s t a t e broker o r r e a l e s t a t e salesman t o comply w i t h t h e p r o v i s i o n s of t h i s a c t . I n a l l c a s e s where s u i t i s brought a g a i n s t t h e broker o r t h e salesman, and h i s s u r e t y , t h e c o u r t s h a l l , upon e n t e r i n g judgment f o r t h e p l a i n t i f f , a l l o w a s a p a r t of t h e c o s t s of s u i t a r e a s o n a b l e amount a s a t t o r n e y ' s f e e s . I I Whether o r n o t p l a i n t i f f s have shown a v i o l a t i o n of s e c t i o n 66-1937, R.C.M. 1947, i t i s s t i l l n e c e s s a r y t o prove damages flowing from such v i o l a t i o n w i t h i n t h e meaning o f s e c t i o n 66-1940, R.C.M. 1947, P l a i n t i f f s contend t h a t t h e o n l y proof of damages t h a t i s r e q u i r e d i s proof t h a t defendant Adams r e c e i v e d a r e a l e s t a t e Such i s n o t t h e law. commission f o r h i s s e r v i c e s . Section 66-1940(c) permits a c i v i l a c t i o n by any "person s u s t a i n i n g damages" a g a i n s t a r e a l e s t a t e b r o k e r who f a i l s t o comply w i t h t h e prov i s i o n s of t h e a c t . The mere f a c t t h a t a commission has been r e c e i v e d i s n o t enough i n i t s e l f t o meet t h e requirements of proof of damages. I t n o t only must be shown t h a t t h e r e a l e s t a t e b r o k e r v i o l a t e d some p r o v i s i o n s of t h e a c t , b u t t h a t p l a i n t i f f s s u f f e r e d some damages thereby. To hold o t h e r w i s e would be con- t r a r y t o t h e i n t e n t of t h e s t a t u t e which g i v e s a remedy t o one who h a s s u f f e r e d some damage by v i r t u e of c e r t a i n a c t i o n s of a r e a l e s t a t e b r o k e r o r salesman. Since no damages have been shown a s a r e s u l t of t h e t r a n s a c t i o n w i t h Brissonneaud h e r e t o f o r e d i s c u s s e d , l i k e w i s e no proof of damages has been shown a g a i n s t defendant Adams , Here, p l a i n t i f f s a r e s t i l l t h e h o l d e r s o r a s s i g n e e s of t h e escrow account f o r which t h e y bargained. i t was o r i s v a l u e l e s s . There i s no proof t h a t P l a i n t i f f s made no a t t e m p t t o c o n t a c t t h e Malcolms f o r payment o r c o n t a c t Brissonneaud f o r information or assistance. I n s h o r t , t h e y d i d n o t h i n g b u t sue Brissonneaud and Adams without proof of t h e n o n c o l l e c t i b i l i t y o r w o r t h l e s s n e s s of t h e escrowed n o t e . A s y e t they have n o t been damaged a s t h e escrowed n o t e may be f u l l y c o l l e c t i b l e w i t h i n t e r e s t , For t h e s e r e a s o n s , t h e d i s t r i c t c o u r t p r o p e r l y g r a n t e d d e f e n d a n t s ' motion for a directed verdict, The judgment of t h e d i s t r i c t c o u r t i s affirmed. Associate J u s t i c e Mr. Justice John Conway Harrison dissenting: I dissent. Qi&L-b*-& # ociate Justice

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