MCCARTY v LINCOLN GREEN INC

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No. 80-68 IN THE SUPREME COURT OF THE STATE OF MONTANA 1980 ROGER J. McCARTY and JANICE L. McCARTY and CAROL A. McCARTY, Husband and wife, Plaintiffs and Respondents, LINCOLN GREEN, INC., a Montana corporation, JAMES L. LEE, BERT A. NELSON and BENITA NELSON, Defendants, Third-Party Plaintiffs and Respondents VS. RAY I. BERRYMAN and AMERICAN BONDING COMPANY, Third-Party Defendants and Appellants. Appeal from: District Court of the Fourth Judicial District, In and for the County of Ravalli. Honorable Jack L. Green, Judge presiding. Counsel of Record: For Appellants: Jon E. Ellingson argued, Missoula, Montana For Respondents: Datsopoulos, MacDonald and Lind, Missoula, Montana Ronald MacDonald argued, Missoula, Montana Submitted: Decided: Filed: RC 1". 9 1980 - November 19, 1980 Idf C 1 9 1984 Mr. Justice John C. Sheehy delivered the Opinion of the Court. Ray I. Berryman, a real estate agent,as third party defendant, appeals from a judgment in the Fourth Judicial District Court, Missoula County, in favor of Lincoln Green, Inc., James L. Lee, Bert A. Nelson and Benita Nelson (Lincoln Green, Inc.), third party plaintiffs. Berryman raises these issues fcr review: (1) A principal may not be held liable to a third party for negligence of its agent where there is no proof of the agent's liability to the third party. (2) The District Court erred in concluding that the principal's agent was negligent through his acts or omissions or by misrepresentation. (3) A real estate agent's negligence may not be established without proof that he failed to use the standard of care exercised ordinarily by real estate agents in the community . (4) The District Court improperly assessed damages against Berryman in the sum of $7,169.58, plus attorney's fees of $2,200.00. After due consideration, we conclude that the judgment of the District Court should be affirmed. In 1975, Lincoln Green, Inc. was offering for sale parcels of a subdivided ranch located in ~avalliCounty Montana. As part of its selling effort, Lincoln Green, Inc. permitted licensed real estate agents to show various parcels which were for sale, without entering into a listing agreement with such real estate agents. If a real estate agent showed any of the parcels and found a buyer, the agent who had shown the property presented a buy-sell agreement, executed by the proposed purchaser to Lincoln Green, Inc., for its approval and signature. I n 1975, Berryman p r e s e n t e d t o L i n c o l n Green, I n c . , buy-sell a agreement e x e c u t e d by Roger J. McCarty, J a n i c e L. McCarty, ~ o b e r t J. McCarty and C a r o l McCarty (McCartys) a s purchasers. On September 1, 1975, L i n c o l n Green, I n c . and McCartys e n t e r e d i n t o a c o n t r a c t f o r deed f o r t h e s a l e and p u r c h a s e o f a l o t which was d e s c r i b e d i n t h e c o n t r a c t a s " t h e s o u t h one-half o f Lot 32." The w r i t t e n c o n t r a c t c o n t a i n e d i n p a r a g r a p h 1 8 , l a n g u a g e t h a t t h e McCartys ". . . acknow- l e d g e t h a t t h e y have examined and i n s p e c t e d t h e p r o p e r t y and a r e f u l l y f a m i l i a r and a c q u a i n t e d t h e r e w i t h and t h a t t h e y a r e e n t e r i n g i n t o t h i s Agreement based on t h e i r own e x a m i n a t i o n and i n s p e c t i o n , and t h a t no r e p r e s e n t a t i o n s o f any k i n d c o n c e r n i n g t h e p r o p e r t y have been made by t h e S e l l e r s o r anyone a c t i n g on b e h a l f of t h e S e l l e r s . " One y e a r a f t e r t h e e x e c u t i o n of t h e c o n t r a c t f o r d e e d , t h e McCartys i n i t i a t e d l e g a l a c t i o n a g a i n s t L i n c o l n Green, Inc., Berryman, and Berryman's bonding company. Green, I n c . , Lincoln responded by f i l i n g i t s t h i r d p a r t y c o m p l a i n t a g a i n s t t h e r e a l e s t a t e a g e n t Berryman a s t h i r d p a r t y d e f e n d a n t . The McCartys a l l e g e d t h a t t h e a g e n t Berryman had i m p r o p e r l y i d e n t i f i e d t h e r e a l p r o p e r t y which he showed t o t h e McCartys. I t was a l l e g e d t h a t Berryman showed t h e McCartys a l o t d e s i g n a t e d a s "Lot 31," and i d e n t i f i e d t h e l o t t o t h e McCartys a s b e i n g t h e " s o u t h h a l f of Lot 32." McCartys f u r t h e r c l a i m e d t h a t when t h e y e x e c u t e d t h e b u y - s e l l agreement on t h e c o n t r a c t f o r deed f o r t h e p u r c h a s e of t h e s o u t h h a l f of L o t 3 2 , t h e y t h o u g h t t h a t t h e y w e r e i n f a c t buying t h e r e a l p r o p e r t y which i s Lot 31. Three months b e f o r e McCartys had e x e c u t e d t h e i r c o n t r a c t , Lot 31 had been s o l d . While t h e l i t i g a t i o n was p e n d i n g , and b e f o r e t r i a l i n t h e D i s t r i c t C o u r t , L i n c o l n Green, I n c . and t h e McCartys e n t e r e d i n t o an agreement f o r s e t t l e m e n t a s t o t h e l i t i g a t i o n between them. Lincoln Green, Inc. advised Berryman in advance of the proposed settlement, but Berryman declined to participate in the settlement in any form. for the settlement was $7,169.58. The consideration Lincoln Green, Inc. incurred attorney's fees of $2,200.00 in connection with the suit against it by the McCartys. After trial between Lincoln Green, Inc. and Berryman, on the third party complaint, the District Court found that Berryman had a duty to his principal reasonably to establish the location of the parcel by geographical landmarks and that this duty existed particularly where the seller, Lincoln Green, Inc., did not have an existing relationship with the McCartysand did not participate in the showing of the parcel or the preparation of the buy-sell agreement except to the extent that Lincoln Green, Inc. prepared the documents of transfer. The District Court concluded that Berryman was negligent in his scope as a broker salesperson in his failure properly to identify the parcel owned by Lincoln Green, Inc., and by misrepresenting the parcel to the McCartys, contrary to the duty a real estate agent owes to his principal as established by the standards accepted by the profession in the State of Montana. Accordingly, judgment was entered by the District Court and this appeal followed. We will consider together the first two issues raised by Berryman. Berryman contends that Lincoln Green, Inc. may not be held responsible to the McCartys unless Berryman himself was liable to the McCartys. Thus, he contends that Lincoln Green, Inc. may recover damages paid to the McCartys only if Lincoln Green, Inc. proves that Berryman was tortious -4- and t h a t no d e f e n s e s a v a i l a b l e t o Berryman c o u l d r e l i e v e t h e a g e n t from l i a b i l i t y t o t h e McCartys. Berryman t h e n c o n t e n d s t h a t t h e D i s t r i c t C o u r t e r r e d i n f i n d i n g e i t h e r t h a t h e was n e g l i g e n t o r t h a t t h e r e was a m i s r e p r e s e n t a t i o n o f p r o p e r t y which gave r i s e t o a l e g i t i m a t e c l a i m a g a i n s t L i n c o l n Green, Inc. Berryman's argument on t h i s p o i n t i s grounded on e v i d e n c e t h a t t h e r e a l e s t a t e a g e n t t o l d McCartys a t t h e t i m e t h e y went o u t t h a t h e w a s n ' t s u r e o f t h e e x a c t l o c a t i o n o f t h e p r o p e r t y and t h e r e f o r e , t h e McCartys assumed "any r i s k a s s o c i a t e d " i n l o c a t i n g t h e c o r r e c t p a r c e l ; and on p a r a g r a p h 18 of t h e w r i t t e n c o n t r a c t whereby t h e McCartys d i s c l a i m e d any r e l i a n c e i n e n t e r i n g i n t o t h e c o n t r a c t upon a n y t h i n g o t h e r t h a t t h e i r own e x a m i n a t i o n and i n s p e c t i o n of t h e premises. Berryman r e l i e s on o u r r e c e n t c a s e o f Schulz v. Peake (1978) , Mont . , 583 P.2d 425, 3 5 St.Rep. 1295. In t h a t c a s e , t h e p u r c h a s e r of a m o t e l p r o p e r t y sued f o r f r a u d u l e n t misrepresentations i n t h e s a l e , contending they w e r e t o l d t h a t t h e y w e r e g e t t i n g 13 a c r e s i n a d d i t i o n t o t h e motel. A year a f t e r t h e purchase, t h e y had o n l y 1 . 3 a c r e s o f l a n d . t h e buyers discovered The p u r c h a s e agreement had i n it a s i m i l a r p r o v i s i o n t o p a r a g r a p h 18 i n t h i s case, t o t h e e f f e c t t h a t t h e p u r c h a s e r s had conducted t h e i r own e x a m i n a t i o n and w e r e r e l y i n g on t h a t and n o t on any r e p r e s e n t a t i o n made t o them by t h e s e l l e r s o r t h e s e l l e r s ' a g e n t s . T h i s C o u r t h e l d t h a t b e c a u s e of t h e c o n t r a c t u a l p r o v i s i o n s , a s w e l l a s t h e e v i d e n c e t h a t t h e p u r c h a s e r s had i n f a c t i n s p e c t e d t h e p r o p e r t y numerous t i m e s when t h e boundary l i n e s w e r e p o i n t e d o u t t o them, and i n none o f t h e s a l e s agreements was t h e f i g u r e "13 a c r e s " i n c l u d e d , t h e m o t e l and t h e p a r c e l c o n t a i n i n g 1 . 3 a c r e s were p r o p e r l y d e s c r i b e d i n t h e t r a n s f e r agreements. S c h u l z , s u p r a , i s d i s t i n g u i s h a b l e from t h e f a c t s i n t h e case a t bar. Although t h e McCartys c o n t r a c t e d t h a t t h e y had i n f a c t i n s p e c t e d t h e p r e m i s e s and r e l i e d on t h e i r own i n s p e c t i o n , it i s a l s o t r u e t h a t t h e y had i n s p e c t e d t h e wrong p r o p e r t y and t h a t t h e i n s p e c t i o n o f t h e wrong p r o p e r t y was b r o u g h t a b o u t t h r o u g h t h e f a i l u r e of t h e r e a l e s t a t e a g e n t p r o p e r l y t o i d e n t i f y t h e p r o p e r t y t h a t he was showing t o t h e p r o s p e c t i v e buyers. Thus, i n t h i s c a s e , L i n c o l n Green, I n c . i n c u r r e d a l i a b i l i t y t o t h e McCartys because a s e l l e r i s bound by m i s r e p r e s e n t a t i o n s made by a r e a l e s t a t e b r o k e r o r a g e n t a s t o t h e location of t h e property, o r a s t o t h e p a r t i c u l a r l o t o r t r a c t which was f o r s a l e . Blanke v. Miller ( 1 9 5 4 ) , 364 Mo. 797, 268 S.W.2d 809; Williams v. R i t c h e s o n (Tex.Civ.App. 1 9 4 8 ) , 212 S.W.2d 813. Under s e c t i o n 28-10-602, MCA, a p r i n c i p a l i s r e s p o n s i b l e t o t h i r d p e r s o n s f o r t h e n e g l i g e n c e of h i s a g e n t i n t h e t r a n s a c t i o n of t h e b u s i n e s s of t h e agency, i n c l u d i n g wrongf u l a c t s committed by s u c h a g e n t i n and a s a p a r t o f t h e t r a n s a c t i o n of s u c h b u s i n e s s . N e i t h e r assumption o f r i s k n o r c o n t r i b u t o r y n e g l i g e n c e w e r e pleaded a s a f f i r m a t i v e defenses. This Court w i l l n o t p a s s on i s s u e s n o t r a i s e d i n t h e D i s t r i c t C o u r t . v. G i l b e r s o n ( N o . 80-7, Decided O c t . Chadwick 8 , 1 9 8 0 , 37 S t - R e p . 1723) Berryman n e x t c o n t e n d s t h a t t h e C o u r t i m p r o p e r l y concluded t h a t h e was n e g l i g e n t b e c a u s e t h e r e w a s no e v i d e n c e b e f o r e t h e D i s t r i c t C o u r t as t o t h e s t a n d a r d of c a r e o r d i n a r i l y e x e r c i s e d by r e a l e s t a t e a g e n t s i n t h e community i n l i k e circumstances. I n i t s conclusions of l a w , t h e ~ i s t r i c t C o u r t found t h a t Berryman was n e g l i g e n t i n f a i l i n g p r o p e r l y -6- t o i d e n t i f y t h e p a r c e l t o be s o l d , t h e r e b y m i s r e p r e s e n t i n g t h e p a r c e l s of t h e p u r c h a s e r s " c o n t r a r y t o t h e d u t y a r e a l e s t a t e a g e n t owes t o h i s p r i n c i p a l as e s t a b l i s h e d by t h e s t a n d a r d s a c c e p t e d by t h e p r o f e s s i o n i n t h e S t a t e o f Montana." The l a n g u a g e i n t h e c o n c l u s i o n s r e s p e c t i n g t h e s t a n d a r d s a c c e p t e d by t h e p r o f e s s i o n i n Montana a p p e a r s t o b e g r a t u i t o u s , b e c a u s e no e v i d e n c e of t h e s t a n d a r d s w a s p r e s e n t e d a t t h e trial. W e f i n d no e r r o r on t h i s p o i n t . An a g e n t i s r e s p o n s i b l e t o t h i r d p a r t i e s a s a p r i n c i p a l , when h i s a c t s a r e w r o n g f u l i n t h e i r nature. S e c t i o n 28-10-702(3), MCA. No s t a n d a r d c o u l d be countenanced by t h e r e a l e s t a t e b r o k e r s ' p r o f e s s i o n , a c c e p t i n g as a r e a s o n a b l e s t a n d a r d o f c a r e t h e showing of t h e wrong p r o p e r t y on b e h a l f o f a p r o s p e c t i v e s e l l e r t o a prospective purchaser. The l a s t i s s u e r a i s e d by Berryman r e l a t e s t o t h e damages awarded by t h e D i s t r i c t C o u r t . When t h e McCartys d i s c o v e r e d t h a t a f t e r making improvements upon t h e p r o p e r t y which t h e y t h o u g h t was t h e i r s , t h a t t h e agreements d e s c r i b e d t h e wrong property, they d i d n o t seek r e s c i s s i o n , b u t i n s t e a d sued f o r damages. They s o u g h t n o t o n l y a c t u a l damages, b u t p u n i t i v e damages i n a sum i n e x c e s s of $107,660.00. The c o u r t found t h a t L i n c o l n Green, I n c . and t h e McCartys e n t e r e d i n t o an a r m s - l e n g t h n e g o t i a t i o n whereby L i n c o l n Green, I n c . , c r e d i t e d t h e unpaid b a l a n c e on an e x i s t i n g c o n t r a c t f o r deed f o r t h e wrong p a r c e l by t h e sum of $2,500.00; interest on t h e unpaid b a l a n c e was f o r g i v e n i n t h e sum o f $2,108.08; and i t o b t a i n e d an a c c e s s s u i t a b l e t o McCartys f o r t h e o t h e r p r o p e r t y i n t h e sum o f $2,500.00. There was a l s o t h e c o s t o f $61.50 f o r a c u r r e n t t i t l e commitment and i n s u r a n c e p o l i c y , and L i n c o l n Green, I n c . i n c u r r e d l e g a l f e e s i n t h e amount of $2,200.00 i n t h e d e f e n s e of t h e o r i g i n a l l i t i g a t i o n . -7- Berryman claims that in cases of a negligent misrepresentation, the measure of damages should be the difference in the value of the property received in the transaction and his purchase price or other value given for it, and the pecuniary loss suffered otherwise as a consequence of the misrepresentation, citing Restatement of Torts 5 552(b). Here, Berryman claims there is no evidence offered to substantiate that there was a difference in value between the property actually received by the McCartys and what the McCartys actually paid for it. The District Court decided the issues in favor of Lincoln Green, Inc., in this case, on tort liability of the agent. The measure of damages for tort liability is con- trolled by section 27-1-317, MCA. It provides: "For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not." It is the intent and purpose of our statutes, except for liquidated damages, agreed damages, or exemplary damages, that damages be compensatory and are properly awarded when they serve to compensate the plaintiff for the detriment proximately caused by the defendant. Lovely v. Burroughs Corporation (1974), 165 Mont. 209, 527 P.2d 557, appeal after remand, 169 Mont. 454, 548 P.2d 610. The damages awarded by the District Court here meet the statutory test of section 27-1-317, MCA, and were properly awarded. Affirmed. , * ----, Justice We Concur: Chief Justice Justices Mr. Justice Gene B. Daly dissenting: I dissent. The right to indemnity is an equitable principal based on the general theory that one compelled to pay for damages caused by another should be able to seek recovery from that party. May Trucking Co. v. International Harvester (1975), 97 Idaho 319, 543 P. 2d 1159. A suit for indemnification is generally allowed where, "the parties are not in pari delicto, and an injury results from the act of one party whose negligence is the primary, active and proximate cause of the injury, and another party, who is not negligent or whose negligence is remote, passive and secondary, is nevertheless exposed to liability by acts of the first party. . ." Great Northern Railway Co. v. United States (D. Mont. 1960), 187 F.Supp. 690, 693. In its suit for idemnification respondent alleged, by way of a third party complaint, that appellant, due to his negligent misrepresentation to the McCartys, breached the standard of care established by the real estate profession. Respondent then went on to state that, as a result of this breach, appellant should indemnify respondent, as a third party plaintiff, for any sums due and owing the McCartys. In response to the third party complaint, appellant entered, by way of an answer, a specific denial to respondent's averments of negligence. Appellant, however, asserted no affirmative defenses or counterclaims to the suit. To establish a right of indemnity, as set forth in its third party complaint, respondent must prove that appellant, due to his misstatements as to the property shown the McCartys, breached a standard of care established by the real estate profession and, thus, is liable for any sums due and owing resulting from the negligent misrepresentation. Respondent has failed in this regard; thus, it was not entitled to prevail on the suit for indemnification. In support of his argument that respondent failed to establish any negligent behavior, appellant asserts that the testimony and evidence offered at trial reveals that the McCartys place no reliance upon the alleged misrepresentation as required to establish a cause of action for negligent or fraudulent misrepresentation. As a basis for this contention, appellant makes note of the contract for deed between respondent and McCartys. Included in this contract is the following provision: "18. Buyers acknowledge that they have examined and inspected the property and are fully familiar and acquainted therewith and that they are entering into this agreement based upon their own e x a m i n a t i o n and i n s p e c t i o n , and t h a t no r e p r e s e n t a t i o n s o f any k i n d c o n c e r n i n g t h e p r o p e r t y have been made by t h e S e l l e r s o r anyone a c t i n g on b e h a l f o f t h e S e l l e r s . " A s i m i l a r c o n t r a c t p r o v i s i o n was i n t e r p r e t e d i n S c h u l z v . Peake ( 1 9 7 8 ) , 1295. Mont. , 583 P.2d 425, 35 St.Rep. The C o u r t i n S c h u l z h e l d t h a t t h e language i n s u c h a c o n t r a c t c l a u s e i s c l e a r and unambiguous and, t h u s , i s t o be e n f o r c e d a s made by t h e p a r t i e s . The C o u r t t h e n went on t o a f f i r m t h e lower c o u r t ' s d e c i s i o n t h a t t h e "complete i n v e s t i g a t i o n " c l a u s e i n s u l a t e s t h e s e l l e r s from a n a l l e g a t i o n o f fraudulent representation. Upon examining t h e c o n t r a c t p r o v i s i o n and g i v i n g i t e f f e c t a s made by t h e p a r t i e s , i t i s c l e a r and a p p a r e n t t h a t t h e McCartys d e n i e d any r e l i a n c e on any r e p r e s e n t a t i o n s o f t h e s e l l e r o r t h e s e l l e r ' s a g e n t and e n t e r e d i n t o t h e a g r e e ment based on t h e i r own e x a m i n a t i o n and i n s p e c t i o n . With t h i s b e i n g t h e c a s e , t h e e s s e n t i a l e l e m e n t of r e l i a n c e upon t h e s e l l e r ' s r e p r e s e n t a t i o n s , needed t o s u p p o r t a c a u s e of action f o r fraud o r negligent misrepresentation, i s eliminated. Respondent c o n t e n d s t h a t even i f i t i s d e t e r m i n e d t h a t i t was n o t l i a b l e t o McCartys f o r r e p r e s e n t a t i o n s made by to a p p e l l a n t , i t i s s t i l l entitled/indemnification f o r t h e c o s t s of t h e s e t t l e m e n t . I n s u p p o r t of t h i s c o n t e n t i o n , r e s p o n d e n t c i t e s G r e a t N o r t h e r n Railway =, supra. I n G r e a t N o r t h e r n Railway Co. t h e p l a i n t i f f (indem- n i t e e ) had been s u e d by a b u s i n e s s i n v i t e e who was i n j u r e d when s t r u c k by a m a i l pouch thrown by a U n i t e d S t a t e s Government p o s t a l t r a n s p o r t a t i o n c l e r k . The p l a i n t i f f s e t t l e d t h e a c t i o n w i t h t h e i n j u r e d p a r t y and t h e n i n i t i a t e d s u i t a g a i n s t t h e U n i t e d S t a t e s Government f o r i n d e m n i t y . One of t h e i s s u e s on a p p e a l i n t h a t c a s e was whether t h e p l a i n t i f f i s p r e c l u d e d from r e c o v e r y f o r a payment, v o l u n t a r i l y made, i n view of a f i n d i n g t h a t p l a i n t i f f ' s a g e n t was n o t n e g l i g e n t . The c o u r t , i n d e c i d i n g t h e i s s u e , s t a t e d t h a t s i n c e t h e d e f e n d a n t had r e f u s e d t h e t e n d e r of d e f e n s e of t h e o r i g i n a l a c t i o n , p l a i n t i f f was j u s t i f i e d i n e f f e c t i n g a f a i r and r e a s o n a b l e s e t t l e m e n t w i t h o u t r e s i s t i n g t h e l i t i g a t i o n i n s t i t u t e d by t h e i n j u r e d p a r t y t o t h e p o i n t o f judgment. G r e a t N o r t h e r n Railway Co., 187 F.Supp. a t 697. Appellant contends t h a t the p r e s e n t c a s e involves a d i f f e r e n t f a c t u a l s i t u a t i o n and, t h u s , i s d i s t i n g u i s h a b l e from G r e a t N o r t h e r n Railway Co. F i r s t of a l l , t h e c o u r t p l a c e d a g r e a t d e a l of r e l i a n c e on t h e f a c t t h a t t h e d e f e n d a n t ( i n d e m n i t o r ) was g i v e n n o t i c e of t h e o r i g i n a l s u i t y e t refused t o tender a defense. I n t h e p r e s e n t case, respon- d e n t merely sued f o r i n d e m n i f i c a t i o n by means of a t h i r d p a r t y c o m p l a i n t w i t h no demand b e i n g made, o r one r e f u s e d , t h a t a p p e l l a n t t e n d e r d e f e n s e of t h e a c t i o n b r o u g h t by t h e McCartys. F u r t h e r m o r e , i n G r e a t N o r t h e r n Railway Co., it was o n l y t h e p l a i n t i f f ' s a g e n t who was found n o t n e g l i g e n t ; the defendant's agent's l i a b i l i t y f o r the i n j u r i e s still remained, t h u s , s t i l l e n t i t l i n g t h e i n j u r e d t h i r d p a r t y t o a recovery. Here, however, n o t o n l y was r e s p o n d e n t ' s l i a b i l i t y e l i m i n a t e d by t h e c o n t r a c t p r o v i s i o n e n t e r e d i n t o by McCartys, but appellant's l i a b i l i t y t o the parties a s w e l l . Respondent a l s o c i t e s Washington Water Power Co. v . Morgan E l e c t r i c Co. ( 1 9 6 8 ) , 152 Mont. 126, 448 P.2d 683, i n s u p p o r t of i t s argument t h a t i t i s e n t i t l e d t o i n d e m n i f i c a t i o n i ' n . s p i t e of l i a b i l i t y . that: The C o u r t i n t h i s c a s e found "Where, as here, the indemnitor and his insurer, after notice, refuse to defend the indemnitee; breach the indemnity agreement; refuse to participate in settlement negotiations or defend af ter demand; know the amount of the settlement and make no objections; the indemnitee is entitled to judgment as a matter of law in the amount of any settlement paid by it in good faith absent proof that the settlement is unreasonable." 448 P.2d at 689. Appellant again would have this Court distinguish the case at issue in that here there is no indemnity agreement; no demand or refusal to tender a defense; and no prior notice of the settlement negotiations or allowance to participate therein. Furthermore, the defendant indemnitor in Washington Water Power Co. was specifically found to be negligent, which, based upon the lack of reliance on appellant's representations, is not the case in this instance. In essence, appellant argues that prior to a proper indemnification for settlement costs the following elements must be present: (1) notice and refusal to tender a defense; (2) justification for seeking a settlement, with the appel- lant contending that said justification arises only when the indemnitee is exposed to actual liability (as opposed to mere potential liability); and (3) that the settlement be fair and reasonable. Appellant then argues that since respondent failed to give notice and demand a tender of defense and respondent failed to establish exposure to actual liability, it is not entitled to an indemnification for its settlement costs. As to the requirement of notice, although there is authority to the contrary, as a general rule the liability of an indemnitor does not depend on the reception of a notice that indemnitee is subject to a suit for injuries caused by the indemnitor's negligent acts. 42 C.J.S. Indemnity, §26 at 604. Even if notice would be a require- ment, filing of a third party complaint by indemnitee seeking recovery from indemnitor, such as occurred here, would be sufficient. As to justification of the settlement, the authorities are divided on whether actual liability is required or whether mere potential liability will suffice. See Block- ston v. United States (D. Md. 1968), 278 F.Supp. 576, 586. The majority of the courts hold, however, that when an indemnitee seeks reimbursement from his indemnitar for a payment made by him in discharge of a claim, he is not bound to submit a suit to judgment before paying the claim; but, if the to as - - indemnitee settles prior - judgment, - -a condition of from his he is - recovery -- indemnitor, - - under the necessity of he was for the - proving - - actually liable - - amount paid. United Boatbuilders, Inc. v. Tempo Products Co. (1969), 1 Wash.App. 177, 459 P.2d 958; Nelson v. Sponberg (1957), 51 Wash.2d 371, 318 P.2d 951; see also Ke-Wash Co. v. Stauffer Chemical Co. (Iowa 1970), 177 N.W.2d 5; Williams v. Johnston (1968)r 92 Idaho '292, 442 P.2d 178; 42 C.J.S. Indemnity, S25 at 603-604. The contract entered into between the parties, if it is given effect by the Court, contains a clause that has been held to insulate the seller and the seller's agent from a claim of fraudulent or negligent misrepresentations. With this being the case, respondent is unable to prove actual liability on the part of appellant. Thus, respondent is not entitled to an accrument of the right to indemnification for settlement costs. I acknowledge that the lower court determined that appellant was liable for negligent misrepresentation. I also note, however, that the trial court ignored appellant's argument that the contract for deed refutes the charges brought by eliminating an essential factor required to establish the cause of action. It is a well-settled rule of law that the finder of fact will not be reversed on appeal unless the evidence clearly preponderates against the findings. Berdine v. Sanders County (1974), 164 Mont. 206, 520 P.2d 650. The findings in this case, however, are not supported by the evidence presented. Thus, the decision of the District Court should be reversed. I n substance, I j o i n i n t

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