SCOTT v HJELM

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No. 79-53 I N THE SUPREME COURT O F THE STATE OF M N A A OTN CARL D. SCOTT, P l a i n t i f f and Respondent, FLORAL HJELM, Defendant and A p p e l l a n t . Appeal from: D i s t r i c t C o u r t o f t h e F o u r t h J u d i c i a l D i s t r i c t , I n a n d f o r t h e County o f R a v a l l i . Hon. James B. W h e e l i s , J u d g e p r e s i d i n g . C o u n s e l o f Record: For Appellant: R o b e r t Brown a r g u e d , S t e v e n s v i l l e , Montana F o r Respondent: F r e n c h , G r a i n e y a n d Duckworth, Ronan, Montana P h i l i p G r a i n e y a r g u e d , Ronan, Montana Submitted: Decided: Filed: -J!j1_ 2 3 1980 J u n e 1 8 , 1980 J u l y 22, 1980 M r . C h i e f J u s t i c e F r a n k I. H a s w e l l d e l i v e r e d t h e O p i n i o n o f t h e Court. T h i s i s an a p p e a l b y d e f e n d a n t f r o m a j u d g m e n t r e q u i r i n g p l a i n t i f f t o s u r r e n d e r p o s s e s s i o n o f a mare t o d e f e n d a n t , r e q u i r i n g d e f e n d a n t t o pay p l a i n t i f f $1,250, documents f o r a f o a l b o r n t o t h e mare, t o execute t r a n s f e r and f o r v a r i o u s o t h e r relief. I n 1 9 7 8 p l a i n t i f f C a r l D. Scott learned t h a t defendant F l o r a l H j e l m had r e g i s t e r e d q u a r t e r h o r s e s f o r s a l e . The p a r t i e s h a d s e v e r a l t e l e p h o n e c o n v e r s a t i o n s c o n c e r n i n g t h e s e h o r s e s and S c o t t went t o t h e H j e l m r e s i d e n c e and i n s p e c t e d s e v e r a l mares on a S a t u r d a y i n November, 1978. According t o Scott, he a d v i s e d H j e l m t h a t he was n o t i n t e r e s t e d i n t h e p u r c h a s e o f a n y h o r s e o t h e r t h a n a m a r e named S a t i n Beaver. H j e l m c o n t e n d s t h a t a s a l e o f f i v e m a r e s was n e g o - t i a t e d f o r t h e sum o f a p p r o x i m a t e l y $5,600. The n e g o t i a t i o n s were never reduced t o w r i t i n g . On t h e f o l l o w i n g M o n d a y S c o t t r e t u r n e d w i t h a h o r s e t r a i l e r a n d t o o k t h e m a r e named S a t i n B e a v e r . S c o t t contends Y t h a t he g a v e H j e l m a c h e c k f o r $ 1 , 0 0 0 the total purchase p r i c e . m e r e l y a down-payment f o r S a t i n B e a v e r w h i c h was H j e l m c o n t e n d s t h a t t h e $1,000 was on t h e f i v e m a r e s a n d S c o t t was t o p a y t h e b a l a n c e when he c o l l e c t e d t h e r e m a i n i n g m a r e s . H j e l m d i d n o t g i v e t h e r e g i s t r a t i o n p a p e r s and t r a n s f e r d o c u m e n t s f o r S a t i n B e a v e r t o S c o t t a t t h e t i m e t h e c h e c k was w r i t t e n a n d h a s r e f u s e d t o d o so t h e r e a f t e r . A f o a l was b o r n t o S a t i n B e a v e r w h i l e t h e m a r e was i n S c o t t ' s possession. On F e b r u a r y 1 6 , 1 9 7 9 , Scott f i l e d a complaint against H j e l m i n t h e j u s t i c e c o u r t o f R a v a l l i County seeking judgment f o r $1,108 f o r H j e l m ' s a1 l e g e d f a i l u r e t o p r o d u c e r e g i s t r a t i o n d o c u - m e n t s on S a t i n B e a v e r , p l u s $1.50 p e r day mare c a r e . D e f e n d a n t answered and f i l e d a c o u n t e r c l a i m f o r $4,600 r e p r e s e n t i n g t h e balance o f t h e purchase p r i c e . The c a s e was t r a n s f e r r e d f r o m j u s t i c e c o u r t t o D i s t r i c t C o u r t because t h e c o u n t e r c l a i m exceeded t h e j u r i s d i c t i o n a l l i m i t of the justice court. On J u l y 2 0 , 1979, t h e c a s e was t r i e d b e f o r e t h e D i s t r i c t Court s i t t i n g without a jury. o f fact, The D i s t r i c t C o u r t i s s u e d f i n d i n g s c o n c l u s i o n s o f l a w a n d j u d g m e n t o n e week t h e r e a f t e r i n w h i c h p l a i n t i f f was r e q u i r e d t o s u r r e n d e r p o s s e s s i o n o f S a t i n B e a v e r t o d e f e n d a n t , d e f e n d a n t was r e q u i r e d t o p a y p l a i n t i f f $1,250 and s u r r e n d e r a l l documents n e c e s s a r y t o t r a n s f e r t i t l e o f Satin Beaver's foal t o p l a i n t i f f , and a t p l a i n t i f f ' s o p t i o n he could r e t a i n possession o f the f o a l , return the foal with Satin B e a v e r u n t i l i t i s weaned a n d t h e n r e t a k e p o s s e s s i o n o f t h e f o a l n o t l a t e r t h a n O c t o b e r 15, 1979, r e t a k e possession by t h a t time, and t h a t i f p l a i n t i f f d i d n o t t i t l e t o t h e f o a l would r e v e r t t o t h e defendant. Appell a n t presents t h e f o l l owing issues : 1. Whether t h e f a c t s o f t h e case s u p p o r t t h e c o u r t ' s c o n c l u s i o n t h a t t h e p a r t i e s were "merchants" w i t h i n t h e meaning o f s e c t i o n 30-2-104, 2. MCA? Whether t h e f a c t s o f t h e case s u p p o r t t h e c o n c l u s i o n o f l a w t h a t t h e o r a l c o n t r a c t was u n e n f o r c e a b l e f o r l a c k o f writing i n confirmation of the oral contract? 3. Whether t h e d i v i s i o n o f t h e p r o p e r t y c o n s t i t u t e s a r e s c i s s i o n o f the c o n t r a c t t o purchase? 4. W h e t h e r t h e j u d g m e n t i s s u p p o r t e d b y t h e f a c t s as found by t h e t r i a l c o u r t ? A p p e l l a n t contends t h a t the D i s t r i c t Court erred i n i t s c o n c l u s i o n t h a t t h e p a r t i e s were "merchants" i n h o r s e s and t h a t t h i s was a t r a n s a c t i o n " b e t w e e n m e r c h a n t s " w i t h i n t h e m e a n i n g o f s e c t i o n 30-2-104, MCA. T h e D i s t r i c t C o u r t a l s o c o n c l u d e d t h a t t h e r e was a l a c k o f w r i t i n g i n c o n f i r m a t i o n o f t h e o r a l c o n t r a c t as r e q u i r e d b y s e c t i o n 30-2-201(1) and ( 2 ) , MCA, and, as a c o n s e q u e n c e , the oral c o n t r a c t f o r t h e s a l e o f t h e f i v e m a r e s was u n e n f o r c e a b l e . S e c t i o n 30-2-201, MCA, r e a d s as f o l l o w s : "Formal r e q u i r e m e n t s - - s t a t u t e o f f r a u d s . (1) E x c e p t as o t h e r w i s e p r o v i d e d i n t h i s s e c t i o n a c o n t r a c t f o r t h e s a l e o f goods f o r t h e p r i c e o f $ 5 0 0 o r m o r e i s n o t e n f o r c e a b l e b y way o f a c t i o n o r d e f e n s e u n l e s s t h e r e i s some w r i t i n g s u f f i c i e n t t o indicate t h a t a contract f o r sale h a s b e e n made b e t w e e n t h e p a r t i e s and s i g n e d b y t h e p a r t y a g a i n s t whom e n f o r c e m e n t i s s o u g h t o r by h i s authorized agent o r broker. A writing i s n o t i n s u f f i c i e n t because i t o m i t s o r i n c o r r e c t l y s t a t e s a t e r m a g r e e d upon b u t t h e c o n t r a c t i s n o t e n f o r c e a b l e under t h i s p a r a g r a p h beyond t h e q u a n t i t y o f g o o d s shown i n s u c h w r i t i n g . " ( 2 ) Between merchants i f w i t h i n a r e a s o n a b l e time a writing i n confirmation of the contract and s u f f i c i e n t a g a i n s t t h e sender i s r e c e i v e d a n d t h e p a r t y r e c e i v i n g i t h a s r e a s o n t o know i t s contents, it s a t i s f i e s the requirements of s u b s e c t i o n ( 1 ) a g a i n s t such p a r t y u n l e s s w r i t t e n notice o f objection t o i t s contents i s given w i t h i n 10 days a f t e r i t i s r e c e i v e d . " ( 3 ) A c o n t r a c t w h i c h does n o t s a t i s f y t h e r e q u i r e m e n t s o f s u b s e c t i o n (1) b u t w h i c h i s v a l i d i n other respects i s enforceable: ( a ) i f t h e g o o d s a r e t o be s p e c i a l l y m a n u f a c u r e d f o r t h e b u y e r and a r e n o t s u i t a b l e f o r a l e t o others i n the ordinary course of the s e l l e r ' s b u s i n e s s and t h e s e l l e r , b e f o r e n o t i c e o f r e p u d i a t i o n i s r e c e i v e d and u n d e r c i r c u m s t a n c e s w h i c h r e a s o n a b l y i n d i c a t e t h a t t h e goods a r e f o r t h e b u y e r , h a s made e i t h e r a s u b s t a n t i a l b e g i n n i n g o f t h e i r m a n u f a c t u r e o r commitments f o r t h e i r procurement; o r " ( b ) i f t h e p a r t y a g a i n s t whom e n f o r c e m e n t i s sought admits i n h i s pleading, testimony o r o t h e r w i s e i n c o u r t t h a t a c o n t r a c t f o r s a l e was made, b u t t h e c o n t r a c t i s n o t e n f o r c e a b l e u n d e r t h i s p r o v i s i o n beyond t h e q u a n t i t y o f goods admitted; o r " ( c ) w i t h r e s p e c t t o goods f o r w h i c h payment has b e e n made a n d a c c e p t e d o r w h i c h h a v e b e e n r e c e i ved and a c c e p t e d ( 3 0 - 2 - 6 0 6 ) . " Under t h i s s t a t u t e , w h e t h e r t h e p a r t i e s have been c l a s s i f i e d as m e r c h a n t s i s n o t r e l e v a n t u n l e s s t h e r e i s a w r i t i n g i n confirmation of the contract. no w r i t i n g . Thus, I n t h e p r e s e n t c a s e t h e r e was the D i s t r i c t Court's finding that the parties were merchants i s i r r e l e v a n t t o our d e t e r m i n a t i o n o f t h i s appeal. The a p p e l l a n t n e x t c o n t e n d s t h a t t h e c o n t r a c t f o r t h e p u r c h a s e and s a l e o f t h e f i v e h o r s e s i s e n f o r c e a b l e d e s p i t e t h e lack of a writing. I n support of t h i s contention the appellant d i r e c t s t h e C o u r t t o s e c t i o n 30-2-102, MCA, which o u t l i n e s t h e scope o f t h e s t a t u t e o f f r a u d s s e c t i o n w h i c h i s quoted above. S e c t i o n 30-2-102, MCA, provides: " S c o p e - - c e r t a i n s e c u r i t y and o t h e r t r a n s a c t i o n s e x c l u d e d -- c h a p t e r . from t h i s Unless the context otherwise requires, t h i s chapter appl i e s t o t r a n s a c t i o n s . i n goods; i t does n o t - a p p l y t o any t r a n s a c t i o n w h i c h a l t h o u g h i n t h e f o r m o f an unconditional contract t o s e l l o r present sale i s i n t e n d e d t o o p e r a t e o n l y as a s e c u r i t y t r a n s a c t i o n n o r does t h i s c h a p t e r i m p a i r o r r e p e a l any s t a t u t e r e g u l a t i n g s a l e s t o consumers, f a r mers o r o t h e r s p e c i f i e d c l a s s e s o f buyers." T h i s s t a t u t e does n o t s u p p o r t a p p e l l a n t ' s c o n t e n t i o n t h a t t h e t r a n s a c t i o n i n q u e s t i o n f a l l s o u t s i d e t h e scope o f s e c t i o n 30-2-201, MCA. transaction. The t r a n s a c t i o n does n o t i n v o l v e a s e c u r i t y The a p p e l l a n t h a s n o t d i r e c t e d t h e C o u r t t o a n y s t a t u t e which would prevent t h e s t a t u t e o f frauds s e c t i o n from applying t o t h i s transaction, such s t a t u t e . and r e s e a r c h has n o t r e v e a l e d any We d e t e r m i n e t h a t t h e t r a n s a c t i o n f a l l s w i t h i n t h e p r o v i s i o n s o f s e c t i o n 30-2-201, MCA. The a p p e l l a n t n e x t c o n t e n d s t h a t t h e manner i n w h i c h t h e p r o p e r t y was d i v i d e d d i d n o t c o n s t i t u t e a r e s c i s s i o n o f t h e contract. I n essence, appellant i s contending t h a t a rescission o f a c o n t r a c t must r e s u l t i n t h e p a r t i e s b e i n g p l a c e d i n s t a t u s quo, and t h a t t h e p a r t i e s i n t h e p r e s e n t c a s e were n o t p l a c e d i n s t a t u s q u o b e c a u s e C a r l S c o t t was a l l o w e d t o k e e p t h e f i r s t f o a l . S e c t i o n 28-2-1716, MCA, rescission of a contract, states : "On a d j u d g i n g t h e t h e c o u r t may r e q u i r e t h e p a r t y t o whom s u c h r e l i e f i s g r a n t e d t o make a n y c o m p e n s a t i o n o r r e s t o r a t i o n t o t h e o t h e r w h i c h j u s t i c e may r e q u i r e . " T h i s C o u r t has had o c c a s i o n t o c o n s i d e r t h i s s t a t u t e i n A O ' K e e f e v. R o u t l e d g e ( 1 9 4 0 ) , 1 1 0 M o n t . 1 3 8 , 1 0 3 P.pd 3 0 7 , and made t h e f o l l o w i n g o b s e r v a t i o n : " I n t h i s connection the question suggests i t s e l f as t o what i s t h e o b j e c t o f t h e r e q u i r e m e n t o f restoration. Theoretically, it i s t o place the p a r t i e s i n s t a t u quo. I n t h i s aspect,' ' s t a t u quo m e a n s t o p l a c e s u c h p a r t y i n t h e same p o s i t i o n as he was s i t u a t e d i n a t t h e t i m e o f t h e e x e c u t i o n o f t h e c o n t r a c t , b u t a b s o l u t e and l i t e r a l restoration of the parties t o t h e i r f o r m e r p o s i t i o n i s n o t r e q u i r e d , and s u c h r e s t o r a t i o n a s i s r e a s o n a b l y p o s s i b l e and demanded b y t h e e q u i t i e s o f t h e c a s e i s sufficient.' ( 1 7 C.J.S. C o n t r a c t , s e c 4 3 8 , p. 920.) 'The r u l e i s f o u n d e d o b v i o u s l y on t h e p r i n c i p l e t h a t he who s e e k s e q u i t y m u s t do equity. Conversely, wherever under t h e ... c i r c u m s t a n c e s o f t h e p a r t i c u l a r case r e s t i t u t i o n by p l a i n t i f f i s not essential t o t h e complete a d m i n i s t r a t i o n o f j u s t i c e between t h e p a r t i e s , i t w i l l n o t be r e q u i r e d The r u l e i n r e g a r d t o the matter i s equitable, not technical.' (9 C.J., s e c . 9 5 , p. 1 2 0 9 . ) "'An a b s o l u t e and l i t e r a l restoration of the parties t o t h e i r former condition i s not required; i t i s suff i c i e n t i f s u c h r e s t o r a t i o n be made as i s r e a s o n a b l y p o s s i b l e and s u c h as t h e m e r i t s o f t h e c a s e demand."' ( B l a c k M o t o r Co. v . G r e e n , 2 5 8 Ky. 7 2 , 79 S.W.2d 4 0 9 , 4 1 1 ) " 110 Mont. a t 146-147. ... I n t h e p r e s e n t c a s e , c o m p l e t e r e s c i s s i o n was n o t p o s s i b l e , b e c a u s e t h e c i r c u m s t a n c e s had changed. T h e D i s t r i c t C o u r t was f a c e d w i t h t h e t a s k o f p r o p e r l y a1 l o c a t i n g t w o h o r s e s and a n unborn f o a l , foal w h e r e t h e r e h a d o n l y b e e n o n e h o r s e and a n u n b o r n at the time o f transaction. I n such c i r c u m s t a n c e s , t r i a l j u d g e must use h i s d i s c r e t i o n i n d o i n g e q u i t y , the and t h i s C o u r t w i l l n o t r e v e r s e t h a t d e c i s i o n s h o r t o f a showing o f abuse o f that discretion. One f o a l was s i r e d w h i l e t h e m a r e was i n H j e l m ' s p o s s e s s i o n a n d t h e o t h e r was s i r e d w h i l e t h e m a r e was i n S c o t t ' s possession. On t h e b a s i s o f t h e f a c t s p r e s e n t e d i n t h e r e c o r d and t h e D i s t r i c t C o u r t ' s f i n d i n g s , we c a n n o t s a y t h a t H j e l m i s i n a w o r s e p o s i t i o n now t h a n p r i o r t o t h e t r a n s a c t i o n . She h a s S a t i n B e a v e r a n d an u n b o r n f o a l . circumstances, Under these t h e t r i a l c o u r t d i d n o t abuse i t s d i s c r e t i o n . Finally, t h e a p p e l l a n t contends t h a t t h e judgment i s not s u p p o r t e d b y t h e f a c t s as f o u n d b y t h e t r i a l court. t i o n i s b a s e d on t h e a r g u m e n t s p u t f o r w a r d a b o v e , r e s c i s s i o n was n o t p r o p e r a n d i f p r o p e r , p r o p e r l y accomplished. answered above, T h i s conten- i.e., t h e n r e s t o r a t i o n was n o t As t h e s e t w o c o n t e n t i o n s h a v e b e e n t h e y n e e d n o t be a d d r e s s e d a g a i n . Affirmed. ................................. Chief Justice We c o n c u r : 3 . J u s t i c e John C. Sheehy, c o n c u r r i n g i n p a r t and d i s s e n t i n g i n part. Mr. I concur i n t h e m a j o r i t y o p i n i o n i n s o f a r a s it a f f i r m s t h e d e c i s i o n s of t h e D i s t r i c t Court, b u t d i s a g r e e w i t h t h e method o f r e s t o r a t i o n t h a t was determined by t h e D i s t r i c t Court. S a t i n Beaver, t h e mare s o l d by F l o r a l Hjelm t o S c o t t , was a r e g i s t e r e d h o r s e . While i n F l o r a l Hjelm's p o s s e s s i o n , t h e mare had been bred t o a n o t h e r r e g i s t e r e d h o r s e , a p a i n t , and t h e p r o s p e c t of a p a i n t f o a l which could be r e g i s t e r e d made t h a t f o a l more v a l u a b l e t h a n it would be o t h e r w i s e . A f t e r t h e mare was t r a n s f e r r e d t o S c o t t , S a t i n Beaver foaled. The r e s u l t i n g c o l t was r e t a i n e d by S c o t t . While S a t i n Beaver remained i n t h e p o s s e s s i o n of S c o t t , he caused h e r t o be bred t o a n o t h e r h o r s e and a t t h e t i m e of t r i a l t h a t f o a l had n o t been born. Under t h e t e r m s of t h e D i s t r i c t C o u r t ' s judgment, however, when t h e m a t t e r was f i n a l l y d e c i d e d , it decreed t h a t S a t i n Beaver be r e t u r n e d t o F l o r a l Hjelm and t h a t s h e be allowed t o keep t h e second c o l t , a l t h o u g h F l o r a l Hjelm h a s no b a s i s upon which t o r e g i s t e r that colt. She was a l s o r e q u i r e d t o r e t u r n t h e $1,000 t o S c o t t , p l u s $250 a s payment f o r S c o t t keeping both S a t i n Beaver and t h e f i r s t f o a l . S c o t t , under t h e f i n d i n g s of t h e D i s t r i c t C o u r t , breached h i s c o n t r a c t w i t h F l o r a l Hjelm. I t i s o n l y because of t h e s t a t u t e of f r a u d s t h a t h i s c o n t r a c t cannot be e n f o r c e d against Scott. I n a t t e m p t i n g r e s t o r a t i o n , however, F l o r a l Hjelm should n o t be i n a worse p o s i t i o n t h a n s h e was b e f o r e t h e breached c o n t r a c t . I f anyone should b e a r t h e b r u n t o f i n e q u i t y , i t should be t h e one who breached t h e c o n t r a c t , Scott. T h e r e f o r e , I t h i n k a p r o p e r r e s o l u t i o n of t h i s c a s e would be t h a t S a t i n Beaver and t h e f i r s t f o a l be r e t u r n e d t o F l o r a l Hjelm by S c o t t . I f t h e f i r s t f o a l i s n o t now a v a i l a b l e , t h e v a l u e of t h a t f o a l s h o u l d be r e t u r n e d t o F l o r a l Hjelm. The second f o a l s h o u l d be g i v e n t o S c o t t , who c a n n o t complain i f t h e second f o a l i s n o t r e g i s t e r a b l e s i n c e t h e b r e e d i n g o f t h e second c o l t was h i s doing. I t would a l s o be f a i r t o r e q u i r e t h a t F l o r a l Hjelm r e t u r n t h e $1,000 which s h e r e c e i v e d on t h e p u r c h a s e p r i c e of t h e mare, and t h e sum of $ 2 5 0 f o r t h e c a r e of t h e mare w h i l e it was o u t of h e r p o s s e s s i o n . I t s h o u l d b e r e a l i z e d h e r e t h a t F l o r a l Hjelm h a s l o s t v a l u a b l e b r e e d i n g y e a r s i n S a t i n Beaver and t h a t s h e can n e v e r be made whole, a l l b e c a u s e of t h e s t a t u t e o f f r a u d s , which p r e v e n t s complete r e l i e f i n t h i s c a s e .

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