QUINN v BRIGGS

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No. 13354 I N THE SUPREME COURT O THE STATE OF M N A A F O T N 1977 MIKE T . QUINN, P l a i n t i f f and Respondent, GEORGE HAROLD BRIGGS, LELAND RICHARD BRIGGS, J O H N W. BRIGGS, a n d ROBERT HUGH BRIGGS, Defendants and A p p e l l a n t s . Appeal from: D i s t r i c t Court of t h e F i f t h J u d i c i a l D i s t r i c t , Honorable Frank E. B l a i r , Judge p r e s i d i n g . Counsel of Record: For A p p e l l a n t s K l i n e and , H e l e n a , Montana J o h n R. R l i n e a r g u e d , H e l e n a , Montana S c h u l z , D a v i s a n d W a r r e n , D i l l o n , Montana C a r l D a v i s a r g u e d , D i l l o n , Montana For Respondent : L e a p h a r t Law F i r m , H e l e n a , Montana C . W. L e a p h a r t a r g u e d a n d W. W i l l i a m L e a p h a r t a p p e a r e d , H e l e n a , Montana J o h n H . J a r d i n e a r g u e d , W h i t e h a l l , Montana Submitted: Decided: Filed: L Y I y,r A : January 20, -KAY 11 1977 1977 Mr. Justice Gene B. Daly delivered the Opinion of the Court. Plaintiff brought this action in the district court, Beaverhead County, in equity to rescind a contract to recover $100',400'.00' payments and to cancel a promissory note for in Defendants counterclaimed seeking enforcement of $150,000.00. the $150,000.00 promissory note and attorney fees for defense of the contract. The district court ordered rescission of the contract, restitution of the $100,000.00 in payments, cancellation of the promissory note and denied defendants any recovery on their counterclaim. The controlling issue is whether plaintiff is en- titled to relief on the ground of unilateral mistake. Plaintiff Mike T. Quinn is a cattle rancher and speculator in ranch real estate. He buys ranch properties for resale, rather than long term investment. Defendants are the majority stockholders of Briggs Ranch, Inc., a Montana corporation, located south of Dillon, Montana and engaged in the ranching business. In December 1973, plaintiff visited the Briggs Ranch to inspect cattle which he was interested in purchasing. Plaintiff was accompanied by Bruce Mecklenburg, a licensed real estate broker. informed plaintiff the Briggs Ranch was for sale. Mecklenburg Plaintiff expressed an interest in purchasing and returned to the ranch several times to inspect the holdings of Briggs Ranch Inc. At the recommendation of Mecklenburg, plaintiff met with an attorney from Bozeman, Montana. Plaintiff, Mecklenburg and the attorney discussed the aspects involved in purchasing Briggs Ranch Inc. Subsequent to this initial meeting, plaintiff conferred 1 with the attorney and discussed in particular ( ) the large dollar value involved in the purchase; (2) the fact the proposed sale agreement was f o r t h e purchase of corporate stock, a s opposed t o t h e purchase of a s s e t s ; (3) t h e number of c a t t l e involved i n t h e ranch operation; (4) the p o s s i b i l i t y of f o r f e i t u r e i n t h e event t h a t $50,000.00 was paid i n under t h e s a l e agreement and p l a i n t i f f was unable t o make t h e second payment; and (5) g e n e r a l t a x consequences a s s o c i a t e d with t h e purchase of corporate stock. O February 18, 1974, p l a i n t i f f , p l a i n t i f f ' s a t t o r n e y , n Mecklenburg and George Harold Briggs met with defendants' a t t o r n e y a t h i s o f f i c e with t h e i n t e n t of n e g o t i a t i n g t h e s a l e of Briggs Ranch Inc. A s u b s t a n t i a l p a r t of t h e day involved t h e d i s c u s s i o n and explanation of t h e s a l e agreement e n t i t l e d "AGREEMENT TO PURC A E STOCK O BRIGGS RANCH, INC.". H S F The culmination of t h e s e nego- t i a t i o n s was t h e execution of t h e s a l e agreement; t h e execution of t h e memorandum e n t i t l e d "MEMORANDUM O UNDERSTANDING A TO F S AGREEMENT T PURCHASE S O K O BRIGGS RANCH, INC." ; and p l a i n t i f f ' s O T C F tender of $50,000.00. The s a l e agreement provided f o r t h e purchase of 5,000 shares of common c a p i t a l s t o c k , which comprised a l l of t h e issued and outstanding shares of Briggs Ranch, Inc. The purchase p r i c e was $6,550,000.00 :and payment*was provided f o r in. t h e -agreement. "(b) Buyer s h a l l pay s a i d purchase p r i c e a s follows: " (1) F i f t y Thousand and 00/100 D o l l a r s (50,000.00) upon execution of t h i s Contract, r e c e i p t of which i s herewith acknowledged. Two Hundred Thousand and 00/100 Dollars "(2) ($200,000.00) O June 1, 1974. n "(3) One M i l l i o n Three Hundred Thousand D o l l a r s , ($1,300,000.00) n o t l a t e r than t h e 2nd day of January, 1975. I n t h e event t h a t Buyer f a i l s t o make any payment c a l l e d f o r h e r e i n and/or f a i l s t o d e p o s i t a s u f f i c i e n t amount i n escrow a s provided i n paragraph 3 t o s a t i s f y Briggs Ranch, I n c . ' s o b l i g a t i o n s a s agreed i n paragraph 1 7 , on o r before 5:00 o ' c l o c k P.M. on s a i d 2nd day of January, 1975, t h i s Contract s h a l l end and be of no f u r t h e r f o r c e and e f f e c t a t t h e time and on t h e d a t e of Buyer's d e f a u l t , and S e l l e r s s h a l l have no f u r t h e r o b l i g a t i o n under t h i s Contract and S e l l e r s s h a l l r e t a i n a s l i q u i d a t e d damages f o r t h e breach of s a i d Contract t h e payment o r payments made t o t h e time of d e f a u l t . -* "(4) The balance of t h e purchase p r i c e i n t h e amount of $5,000.000.00 s h a l l be s a t i s f i e d by note executed by Buyer and by Briggs Ranch, Inc , payable on t h e b a s i s of 20 equal annual amortized i n s t a l l m e n t s of p r i n c i p a l and i n t e r e s t . I n t e r e s t a t t h e r a t e of 7-112% per annum s h a l l be paid monthly. The i n t e r e s t on s a i d $5,000,000.00 s h a l l commence and s h a l l run from t h e 31st day of December, 1974; t h e f i r s t such monthly payment s h a l l be due o n - o r before t h e 31st day of January, 1975, and each payment t h e r e a f t e r s h a l l be due on o r before t h e l a s t day of each succeeding month. The annual p r i n c i p a l payments s h a l l commence on t h e 3 1 s t day of December, 1975, and s h a l l be payable on t h e 31st day of December each and every year t h e r e a f t e r u n t i l t h e unpaid balance, p l u s i n t e r e s t a t t h e r a t e of 7-112% p e r annum i s paid i n f u l l , and i n any and a l l e v e n t s , on o r before t h e 31st day of December, 1984, upon which l a s t mentioned d a t e t h e r e s h a l l be a ' b a l l o o n t payment of t h e e n t i r e unpaid balance of p r i n c i p a l and i n t e r e s t . " . $ . . The s a l e agreement f u r t h e r provided t h a t , upon t h e purchase of t h e corporate s t o c k , p l a i n t i f f was t o assume c e r t a i n d e b t s of Briggs Ranch, Inc .': "17. RECEASE F O E C O : RM S R W "The 5,000 shares of Briggs Ranch, I n c . , s t o c k s h a l l be r e l e a s e d t o t h e Buyer a t such time a s t h e Federal Land Bank Mortgage has been s a t i s f i e d by Buyer through Briggs Ranch, I n c . , and t h e payment contemplated by paragraph 2.(b) (3) has been paid t o t h e S e l l e r s on January 2, 1975. I n t h i s regard, i t i s f u r t h e r agreed among t h e p a r t i e s t h a t : ( a ) Buyer s h a l l use t h e money deposited i n escrow on January 2, 1975, t o cause Briggs Ranch, I n c . , t o s a t i s f y i t s indebtedness t o t h e Federal Land Bank. I n t h i s regard Buyer warrants t h a t he knows t h e p r i n c i p a l amount of t h e Federal Land Bank mortgage t o be $850,254.88, and t h e amount of t h e accrued i n t e r e s t thereon t o January 2, 1975. Buyer agrees and does hereby assume t h e o b l i p a t i o n of t h e payment of t h e s a i d $850,254.88 p r i n c i p a l and a l l i n t e r e s t a c c r u i n g from and a f t e r January 1, 1974, t o t h e d a t e of payment i n f u l l on January 2 , 1975. I t i s f u r t h e r understood t h a t Buyer s h a l l o b t a i n and record a Release of Mortgage from s a i d Federal Land Bank. I t i s f u r t h e r understood t h a t Briggs Ranch, I n c . , owns 9,750 shares of Federal Land Bank s t o c k worth $5.00 per share, f o r a t o t a l amount of $48,750.00, which s h a l l be c r e d i t e d upon t h e Federal Land Bank loan upon payment i n f u l l . During t h e term of t h i s Contract s a i d Buyer s h a l l keep a l l of t h e r e a l property p r e s e n t l y owned by Briggs I' .. Ranch, I n c . , f r e e and c l e a r of a l l l i e n s , mortgages o r o t h e r encumbrances, o t h e r than t h e mortgage granted t o S e l l e r s and except t h a t t h e Havasu and Texas p r o p e r t i e s may be d e a l t with by Buyer a s Buyer sees f i t . "(b) A t such time a s t h e Buyer s a t i s f i e s t h e Note s e t f o r t h on Exhibit ' D ' i n f u l l , t h e contents;, of t h e escrow s h a l l be d e l i v e r e d t o t h e Buyer." (Emphasis added,) Under paragraph 4(b) of t h e s a l e agreement -- "CORPORATE PROPERTIES" appears : "(b) The Texas farm, described on Exhibit ' B ' a t t a c h e d h e r e t o , and t h e Lease thereon which e x p i r e s December 31, 1977. Sub.ject t o t h a t c e r t a i n Mortpage i n t h e amount of approximately $27,000.00, p l u s i n t e r e s t t o d a t e , s a i d Mortgage t o remain an o b l i g a t i o n of Briggs Ranch, Inc., o r i t s successor i n i n t e r e s t , a f t e r t h e s a l e of t h e s t o c k contemplated h e r e i n and t o which S e l l e r s a r e r e l i e v e d from any o b l i g a t i o n thereon by Buyer." (Emphasis added.) The c o n t r a c t f u r t h e r s p e c i f i e d t h e manner by which p l a i n t i f f would acquire possession of t h e s t o c k c e r t i f i c a t e s and t h e ranch premises : "3. DELIVERY O S O K AND P Y E T O PURCHASE PRICE: F T C A MN F "The c e r t i f i c a t e s f o r t h e shares of c a p i t a l s t o c k s o l d hereunder s h a l l be delivered t o t h e escrow agent named h e r e a f t e r , on t h e 31st day of December, 1974, upon acknowledgement t o t h e S e l l e r s by t h e Buyer before December 15, 1974, t h a t (a) t h e payment c a l l e d f o r i n paragraph 2.(b)(3) w i l l be made on January 2, 1975; (b) t h a t t h e n o t e and mortgage s p e c i f i e d i n paragraph 2.(b)(6) has been executed by t h e Buyer and Briggs Ranch, Inc. ; (c) t h a t a s u f f i c i e n t amount w i l l be deposited with t h e escrow agent t o s a t i s f y t h e Federal Land Bank loan r e f e r r e d t o i n paragraph 17. I n t h e event Buyer informs S e l l e r s t h a t t h e payments s p e c i f i e d i n paragraph 2.(b)(3) w i l l be met and Buyer f a i l s t o make s a i d payments on January 2, 1975; i n a d d i t i o n t o t h e f o r f e i t u r e s s p e c i f i e d i n s a i d paragraph 2(b)(3) Buyer w i l l be responsible f o r payment t o S e l l e r s of a l l l e g a l and escrow c o s t s incurred i n preparing documents and s e t t i n g up t h e escrow and a l l income taxes caused by S e l l e r s ' repossession of t h e s t o c k s o l d herein." "5. POSSESSION: "Possession of t h e premises owned by t h e Corporation, except a s noted h e r e i n , s h a l l be surrendered on t h e 31st day of December, 1974, o r a s soon t h e r e a f t e r a s i t i s p h y s i c a l l y p o s s i b l e f o r t h e Buyers t o assume t h e complete o p e r a t i o n of t h e ranch. It i s understood t h a t S e l l e r s w i l l cooperate with Buyer and s t a y on t h e premises and h e l p with t h e operation f o r a reasonable time a f t e r December 31, 1974, t o a s s u r e a smooth t r a n s i t i o n i n t h e management of t h e operation. I I Subsequent t o executing t h e s a l e agreement with .defendants, p l a i n t i f f executed two c o n t r a c t s d r a f t e d by h i s a t t o r n e y . One of t h e c o n t r a c t s , dated February 18, 1974, and e n t i t l e d "CONTRACT F R LEGAL SERVICES", provided t h a t p l a i n t i f f and Mecklenberg would O pay t h e i r a t t o r n e y l e g a l f e e s a t s p e c i f i e d r a t e s f o r t h e performance of l e g a l work a r i s i n g o u t of t h e ~ r i g g s / ~ u i nsn l e . a This c o n t r a c t f u r t h e r provided t h a t t h e a t t o r n e y would r e c e i v e $25,000.00 upon r e s a l e of t h e Briggs Ranch. The second c o n t r a c t , a l s o dated February 18, 1974, and e n t i t l e d "AGREEMENT" acknowledged Mecklenb u r g ' s e f f o r t s i n t h e completion of t h e s a l e of Briggs Ranch, Inc. The c o n t r a c t provided Mecklenburg be compensated f o r a l l expenses incurred i n t h e r e s a l e o r attempted r e s a l e of Briggs Ranch, Inc. and i n l i e u of a r e a l e s t a t e commission t h a t p l a i n t i f f and Mecklenburg d i v i d e on an even b a s i s any p r o f i t r e a l i z e d from t h e r e s a l e of Briggs Ranch, Inc. P r i o r t o t h e June 1, 1974, c o n t r a c t payment deadline, p l a i n t i f f r e a l i z e d he could n o t tender the required $200,000.00 payment. On June 1, 1974, p l a i n t i f f tendered $50,000.00 and a promissory n o t e i n t h e amount of $150,000.00. Mecklenburg continued t o o f f e r t h e Briggs Ranch f o r s a l e u n t i l December 9, 1974. O Oecember 17, 1974, p l a i n t i f f executed n a n o t i c e of ~ s d s s i o n which was d e l i v e r e d t o defendants' a t t o r n e y . Thereafter, p l a i n t i f f f i l e d h i s action f o r rescission i n the d i s t r i c t c o u r t , Beaverhead County. O January 13, 1976, t h e d i s t r i c t c o u r t s i t t i n g without n a j u r y , heard t h e a c t i o n t o rescind t h e AGREEMENT TO PURCHASE S O K T C O BRIGGS RANCH, I N C . F The d i s t r i c t c o u r t found t h a t p l a i n t i f f , a t t h e time of t h e execution of t h e s a l e agreement (1) d i d n o t understand t h a t he was buyinglthe corporate s t o c k of Briggs Ranch, - 6 - Inc. ; (2) did not appreciate the consequences that flow from a stock purchase, as opposed to an asset purchase; (3) believed 4 the purchase price of Briggs Ranch to be $6,550,000.00; ( ) failed to comprehend there would be additional payments required of him in order to satisfy the $27,000.00 Texas farm mortgage and the $850,254.88 indebtedness to the Federal Land Bank; and (5) did not appreciate the tax consequences associated with the purchase of capital stock. The district court concluded: Plaintiff executed the sale agreement under mistakes of fact; that the mistakes of fact were not caused by plaintiff's neglect of a legal duty, but occurred regardless of plaintiff's exercise of ordinary care; that it would be unconscionable to enforce the sale agreement; and defendants would be unjustly enriched if the sale agreement was enforced. Defendants appeal from the district court's judgment ordering (1) rescission of the sale agreement; (2) restitution from defendants in the amount of $100,000.00; (3) cancellation of the promissory note for $150,000.00;and ( ) that defendants 4 recover nothing from plaintiff on their counterclaim. For the following reasons the judgment of the district court is reversed. A party to a contract cannot avoid the contract on the ground that he made a mistake where there has been no misrepresentation, no ambiguity in the terms of the contract and the other party has no notice of such mistake and acts in good faith. Furthermore, even if one of the contracting parties believes the words of the contract mean something different, the parties to the contract are bound by the plain meaning of the words used in the agreement as properly interpreted, unless the other party knows of such mistake. 17 Am Jur 2d, Contracts $ 5 146,148. One who executes a written contract is presumed to know the contents of the contract and to assent to those specified terms, , in the absence of fraud, misrepresentation, or other wrongful act by the other contracting party. Absent incapacity to con- tract, ignorance of the contents of a written contract is not a ground for relief liability. Parchen Chessman, 49 Mont . 326, 142 P. 631; Ferd L. Alpert Industries, Inc. v. Oakland Metal Stamping Co., 3 Mich.App. 101, 141 N.W.2d 671, reversed on other grounds, 379 Mich.272, 150 N.W.2d 765. If a contracting party acts negligently . and in such a manner as to lead others to suppose that the writing is assented to by him, the contracting party will be bound in law and in equity, even though the contracting supposes the writing instrument of an entirely different character, 17 Am Jur 2d, Contracts 5149; Hjermstad v. Barkuloo, 128 Mont. 88, 270 P.2d 1112. The integrity of written contracts would be destroyed if contracting parties, having admitted signing the instrument, were allowed to rescind the contract on the basis they neither read nor understood the expressed agreement. Ryan v. Ald,Inc., 149 Mont. 367, 427 P.2d 53. Section 13-903, R.C.M. 1947, sets forth the grounds for rescission of contract: "When party may rescind. A party to a contract may rescind the same in the following cases only: "1. If the consent of the party rescinding, or of any party jointly contracting with him was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party; "2. If, through the fault of the party as to whom he rescinds, the consideration for his obligation fails, in whole or in part; "3. If such consideration bec~mesentirely void from any cause; "4. If such consideration, before it is rendered to him, fails in a material respect, from any cause; or 3 "5. By consent of all the other parties." Plaintiff contends he executed the sale agreement under mistakes of fact as to the character of the property being sold and the purchase price of the property. In addition, plaintiff claims he acted without understanding the tax consequences of the purchase, a mistake of law. For plaintiff to avoid the sales agreement he must show that his unilateral mistakes meet the standards set forth in sections 13-313,314, R.C.M. 1947, which provide : "13-313. Mistake of fact. Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake,-and consisting in: 1 . An unconscious ignorance or forgetfulness of a fact, past or present, material to the contract; or, "2. Belief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed." . "13-314. Mistake of law Mistake of law constitutes a mistake, within the meaning of this chapter, only when it arises from: "1. A misapprehension of the law by all parties, all supposing that they knew and understood it, and all making substantially the same mistake as to the law; or, "2. A misapprehension of the law by one party, of which the others are aware at the time of contracting, but which they do not rectify.'' Here, the evidence fails to support plaintiff's contention that he executed the sale agreement under mistakes of fact. The sale agreement clearly and specifically sets forth the subject matter of the sale agreement, the purchase price of the capital stock and the debts assumed by the buyer. Furthermore, defendants' counsel spent considerable time in explaining the provisions of the sale agreement prior to executing the instrument. Plaintiff, Mecklenburg and their attorney were in attendance and participated in the clarification and execution of the sale agreement and the execution of the memorandum of understanding. If plaintiff failed to understand the terms of the sale agreement it was not due to any misrepresentations on the part of defendants. Under these circumstances, neither plaintiff's purported inability to comprehend the terms of the sale agreement nor his failure to procure adequate advice can be attributed to defendants, Plaintiff was under a legal duty to execute the sale agreement with the prudence and care of a reasonable and cautious businessman. Having failed to exercise such care, plaintiff cannot seek relief from a court of equity on the ground of unilateral mistake of fact. Similarly, plaintiff's argument that he executed the sale agreement without appreciating the tax consequences falls short of the standard required to avoid a contract. R.C.M, Section 13-314, 1947, provides that a mistake of law is ground for relief only when there is a misapprehension of the law by all parties or a misapprehension of the law by one party with the knowledge of the other contracting party. Clearly, defendants were aware of the tax consequences flowing from the sale agreement. Plaintiff, on the other hand, never brought to defendants' attention the fact that he was either unaware of the tax consequences or unable to understand the tax consequences, Under these circumstances, equitable relSef cannot be utilized to rescind the contract. We conclude that plaintiff is bound by the terms of the agreement to purchase stock of Briggs Ranch, Inc. Plaintiff's filing of the notice of re'scission and failure to tender payments pursuant to the sale agreement amounted to a material breach of contract and plaintiff is to recover nothing. In view of the express terms of the sale agreement providing for the payment of defendants' attorney fees, the matter of attorney fees is remanded to the district court to determine reasonable attorney fees and costs. The judgment of the district court is reversed and the cause is dismissed. /' We Concur: ~hyef Justice Justices. C/ Justice.

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