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Full Opinion
NO. 95-064
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
DOUBLE AA CORPORATION, a Delaware corporation,
Plaintiff, Appellant, and Cross-Respondent,
v.
NEWLAND & COMPANY, Successor Trustee
of the Raymond W. George Trust,
Defendant and Respondent,
and
JAMES W. SIEVERS,
Intervenor Defendant, Respondent,
and Cross-Appellant.
APPEAL FROM: District Court of the Sixth Judicial District,
In and for the County of Park,
The Honorable Mark P. Sullivan, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Joseph T. Swindlehurst, Huppert & Swindlehurst,
Livingston, Montana
For Respondent:
James P. Harrington, Attorney at Law,
Butte, Montana (for Newland & Company)
John T. Jones and Harlan B. Krogh,
Moulton, Qellingham, Longo & Mather,
Billings, Montana (for James W. Sievers)
For Amicus:
Rockwood Brown, Brown, Gerbase, Cebull,
Harman & Ross, Billings, Montana
(for Kenneth D. George and Shirley G. Bragg)
Submitted on Briefs: May 25, 1995
Decided: October 24, 1995
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
Plaintiff Double AA Corporation filed a complaint in the
District Court for the Sixth Judicial District in Park County, in
which it alleged that Shirley Bragg, trustee of the Raymond W.
George Trust, who has been succeeded as trustee by Newland &
Company, breached a buy-sell agreement for the sale of a ranch held
by the trust and that it was entitled to specific performance. The
trustee, as well as James W. Sievers, the intervenor, opposed
Double AA's request for specific performance. After a trial, the
District Court entered its findings, conclusions, and judgment,
which denied Double AA's request for specific performance but
awarded it damages. Double AA appeals the District Court's
findings, conclusions, and judgment, and Sievers cross-appeals
specific findings. We affirm the judgment of the District Court.
The issue on appeal is whether the District Court abused its
discretion when it denied Double AA's request for specific
performance.
The issue raised on cross-appeal is whether the District Court
erred when it made findings of fact numbered 73 and 74.
FACTUAL BACKGROUND
The ranch, which is the subject of the dispute, formerly
belonged to Raymond George. Raymond died in 1974 and, as provided
in his will, left the ranch in a testamentary trust for his family.
His daughter Maxine was designated the trustee. The trust provided
that his wife, Olga George, would receive income from the trust for
2
her life and that the George children held remainder interests as
follows: Maxine George--three-ninths, as well as a first option to
purchase from the other remaindermen; Leo George--two-ninths;
Kenneth George--two-ninths; and Shirley Bragg--two-ninths, Maxine
died in 1980, and eventually the remaindermen agreed with her
surviving husband, Cleto McPherson, that he would be entitled to
her share and first option. Shirley Bragg became the trustee
following Maxine's death.
On December 13, 1989, Double AA Corporation, a Delaware
Corporation whose sole shareholders are Charles Allmon and Gwen
Allmon, agreed with Shirley Bragg, who at that time was the trustee
of the Raymond W. George trust, to purchase the George family's
ranch in the Paradise Valley south of Livingston. Shirley agreed
on behalf of the trust to convey the property, and a substantial
deposit was transferred.
At trial, Shirley testified that in 1988 she had received
advice from Wes Johnson, a financial planner for Investment
Diversified Services (IDS), that if the trust did not sell the
ranch there would be tax consequences in an amount between $200,000
and $300,000 at the time of Olga's death. Olga was nearly 90 years
old when Shirley received this advice. Wes Johnson admitted he had
little knowledge about taxes and was not qualified to render tax
advice. He also testified that he was paid on a commission basis,
and as a result felt pressure to locate investors for IDS. He
encouraged that the ranch be sold and the proceeds be invested with
3
IDS. Shirley testified that she reluctantly agreed to sell because
of Johnson's tax advice.
Shirley petitioned the District Court to approve the sale of
the ranch. Sievers intervened and objected on the basis that he
had purchased a five-ninths remainder and a first option to buy
from the other remaindermen. In September 1990, District Court
Judge Byron Robb, granted the petition to confirm the sale and
dismissed Sievers' objection. He specifically found that:
While the testator here gave his daughter Maxine a right
to purchase the interest of the other children in the
ranch, I find it obvious this was personal to her because
she remained on the place while the others left. I thus
conclude it doubtful such option passed to Maxine's
husband and sole heir, Cleto McPherson, and although the
other children made agreements with him to have such
privilege at a different value than Mr. George
contemplated, Cleto never exercised such right and now
has no ability to do so or to keep the ranch in the
family, and I find it most tenuous that Grandpa George
ever intended that such option to purchase would pass to
or be enforceable by a stranger as Mr. Sievers contends.
Further, the trustee was not a party to such option
agreements and is not bound by them.
In November 1990, an attorney from Livingston informed Shirley
that no taxes would be due as a result of Olga's death. On
December 2, 1990, Shirley sent Charles Allmon a letter in which she
advised him that she wanted to rescind the agreement with
Double AA. On April 2, 1991, Shirley filed a motion to dismiss her
petition for a declaration of her right and authority to sell the
trust property and to cancel the sale to Double AA. The District
Court denied her motion and ordered the sale to proceed. We
affirmed the District Court's conclusion that Shirley had the right
4
and authority to sell the ranch andsaffirmed the District Court's
finding that the sale was fair and reasonable. In re Raymond W. George
Trust (1992), 253 Mont. 341, 834 P.2d 1378. However, we reversed
that part of the District Court's decision which granted specific
performance because that issue had not been raised or litigated.
InreGeorge Trust, 834 P.2d at 1381-82.
After our decision in In re George Trust, Double AA filed this
action for specific performance. Sievers intervened and opposed
specific performance because he claimed that in April 1988 he
purchased a three-ninths remainder interest from Cleto, in addition
to Cleto's first option to purchase from the other remaindermen.
He added that in August 1988 he purchased Leo's two-ninths
remainder interest.
A nonjury trial was held on June 22 and 23, 1994. Shirley
testified that the erroneous information she had received from
Johnson was confirmed by Legal Tech, a Billings accounting firm.
However, she was informed in November 1990 that Olga's death would
not result in any immediate tax consequences. Instead, she learned
that capital gains tax in the amount of $400,000 would be due upon
sale of the ranch to Double AA. She testified that the attorney
who represented her prior to the sale had not advised her that
Johnson's advice was incorrect. There was also contradicted
testimony that her previous attorney was to receive a percentage of
the broker's commission which was to be paid by Double AA.
5
In October 1994, the District Court entered its findings of
fact, conclusions of law, and judgment. The District Court held
that specific performance was improper, but awarded Double AA money
damages for breach of contract. The court further found that
Sievers did not obtain a binding first option to purchase the ranch
from the remaining beneficiaries.
Double AA appeals from the District Court's decision, and
Sievers cross-appeals from the District Court's findings that he
did not have a valid first option to purchase.
ISSUE 1
Did the District Court abuse its discretion when it denied
Double AA's request for specific performance?
We review a district court's denial of a request for specific
performance to determine whether the district court abused its
discretion. Larsonv. Undem (1990), 246 Mont. 336, 342-43, 805 P.2d
1318, 1322.
Double A?+ acknowledges that specific performance is an
equitable remedy within the District Court's discretion but
suggests that the court's discretion is narrow. It contends that
the District Court did not exercise sound discretion.
The trustee claims, and Sievers agrees, that under the
circumstances the District Court did not abuse its discretion.
Specific performance is an equitable remedy which requires
performance of a contract based on the precise terms contained in
6
the contract. Siefert v. Siefert ( 19 7 7 ) , 173 Mont. 501, 504, 568 P.2d 155,
156.
1’
[SJpecifc performance will be ordered only on equitable grounds in view of all the
conditions surrounding the particular case. I’
‘A bill in equity for specific performance is an appeal to the conscience of the court,
and generally, in such a proceeding, the inquiry must be whether, in equity and good
conscience, the court should specifically enforce the contract. Accordingly,
specific performance will be granted when it is apparent
from a view of all the circumstances of the particular
case that it will serve the ends of justice, and it will
be withheld when, from a like view, it appears that it
will produce hardships or injustice to either party
. . . . II
Siefert, 568 P.2d at 157 (quoting 81 C.J.S. SpecificPerformance § 3) . In
Siefert , we acknowledged that the appropriateness of specific
performance depends on the facts and circumstances of the case.
Siefert , 568 P.2d at 157.
In determining whether a contract should be specifically
enforced, courts look at the contract, as well as the relationship
of the parties, and will determine if the contract to be enforced
is fair and reasonab1e.l Factors courts consider include execution
1 In InreGeorgeTrust, we upheld the District Court's finding that
Double AA'S offer of $1,300,000, along with the other benefits, was
fair and reasonable. We noted that:
The validity of the contract between the trust and Double
AA and any rights of the parties resulting from the
contract were not the subject of the litigation. The
evidence presented only regarded the fairness and
reasonableness of Double AA's offer and the agreement
that the parties entered.
In re George Trust, 834 P.2d at 1381. We do not construe the above
language to mean that, as to whether specific performance was
appropriate, the contract was fair and reasonable because we did
not address whether it would be fair and reasonable to specifically
enforce the contract.
7
of a contract under circumstances unfavorable to the defendant
because of lack of advice, and the difference in the parties'
business experience and knowledge. 81 C . J . S . Specific Performance § 4 9
(1977).
In addition to the above guidelines, Montana statutes identify
some situations in which specific performance is appropriate.
Specific performance may be necessary when pecuniary compensation
for a defendant's failure to perform pursuant to the terms of a
contract does not afford adequate relief. Section 27-l-411(2),
MCA. More specifically, in contracts involving the sale of land,
l'[i]t is to be presumed that the breach of an agreement to transfer
real property cannot be adequately relieved by pecuniary
compensation . . . .'I Section 27-l-419, MCA.
Section 27-1-415, MCA, however, provides circumstances in
which a party cannot be compelled to specifically perform.
Specific performance cannot be enforced against a
party to a contract in any of the following cases:
i2i . if . it is not, as to him, just and reasonable;
(3) if his assent was obtained by the misrepresen-
tations, concealment, circumvention, or unfair practices
of any party to whom performance would become due under
the contract or by any promise of such party which has
not been substantially fulfilled; or
(4) if his assent was given under the influence of
mistake, misapprehension, or surprise . . . .
Section 27-1-415, MCA.
The District Court made specific findings, which are supported
by substantial evidence, in relation to the above-listed equitable
a
considerations and statutes. The court found: (1) Double AA knew,
or should have known, before the sale, that Shirley misapprehended
facts material to the contract and Shirley testified she told
Charles that she felt pressured to sell because of her erroneous
belief regarding the potential tax liability; (2) Shirley was a
victim of mistaken information and inaccurate advice. The
"mistaken fact [regarding taxes] more than anything else was the
reason Shirley consented to [the] sale [of] the George family
ranch"; (3) Charles and Shirley had extremely divergent backgrounds
in business transactions. Charles was a well-known professional
investor, had experience in multi-million dollar transactions, and
had extensive education, background, and experience in business.
To the contrary, Shirley was a somewhat unsophisticated trustee who
was neither prepared for her position as trustee nor educated in
business nor business transactions, negotiations, or taxes.
Finally, the court found that the land was not unique to
Double AA. Charles testified that the ranch was no more unique
than land that he already had except that it was contiguous with
property he owned in the Paradise Valley. The court found that the
loss would impose a greater hardship on the George Family Trust
than Double AA because Shirley's decision to sell was a direct
result of the incorrect tax advice, and the ranch had been in the
George family for over 100 years.
Based on its findings, the court concluded that, in light of
the circumstances surrounding the execution of the contract,
9
specific performance was not appropriate because the contract was
not fair, just, and reasonable, and Shirley's assent was based on
a mistake or misapprehension. Section 27-1-415, MCA.
Double AA argues that a misunderstanding or mistake regarding
tax consequences is not a sufficient reason to avoid the
transaction and that the exceptions to specific performance
codified in § 27-l-415, MCA, do not apply.
While a misapprehension or mistake regarding taxes is
insufficient to avoid a contract, Quinnv.Briggs (1977), 172 Mont. 468,
475, 565 P.2d 297, 301, such a misunderstanding or mistake, in
light of the surrounding circumstances, may be a sufficient reason
to deny specific performance as an equitable remedy. See 11 Samuel
Williston, Williston on Contracts 5 1427 (3d ed. 1968); Corbin on
Contracts § 1166 (1964).
Moreover, we have upheld the denial of specific performance
where the defendant relied on advice from her attorney which
produced factual and legal misapprehensions. Stovullv. Waft (1980) ,
187 Mont. 439, 610 P.2d 164. In Stovall, we recognized that specific
performance is improper if there is a mistake as set forth in
§ 27-l-415(4), MCA, or if the circumstances show that specific
performance would impose a considerable hardship. Stovall, 610 P.2d
at 167 (citing Siefert, 568 P.2d at 157). Based on the total
circumstances, and balancing the equities, we upheld the district
10
court's denial of a request for specific performance against the
seller. Stovall, 610 P.2d at 167-68.
The facts in Stovall are distinguishable from this case.
Nonetheless, the principles on which we relied in Stow11 apply.
Here, the District Court found that specific performance would
impose a greater hardship on the seller than denial would impose on
the buyer.
Double AA also challenges the District Court's findings
regarding Shirley's mistake or misapprehension because testimony
indicated that other factors motivated her to sell, and evidence
contradicts her position. In the exercise of its discretion, part
of the District Court's responsibility was to weigh conflicting
testimony. The district court is in a better position to observe
the credibility and demeanor of witnesses than this Court. We will
not second guess the district court's determination regarding the
strength and weight of conflicting testimony. SeeIn re Marriage of Newton
(1992), 255 Mont. 463, 466, 844 P.2d 47, 49.
Based on the equitable principles and statutory criteria set
forth above, evidence in the record, and the District Court's
findings, including the parties' unequal positions and the mistaken
information on which the trustee relied, we hold that the District
Court did not abuse its discretion. We affirm the District Court's
denial of Double AA's request for specific performance.
11
ISSUE 2
Did the District Court err when it made findings of fact
numbered 73 and 74?
Our standard of review of a district court's findings of fact
is whether they are clearly erroneous. Columbia Grain Int? v. Cereck
(1993), 258 Mont. 414, 417, 052 P.2d 676, 678.
Sievers contends that we should vacate the District Court's
findings of fact numbered 73 and 74 because the court improperly
found that Sievers did not acquire a first option against Shirley
Bragg, Kenneth George, and Leo George. Sievers contends that the
findings were not relevant to Double AA's request for specific
performance, and he has not had an adequate opportunity to
introduce evidence in support of his position. Sievers adds that
the District Court was not empowered to enter a judgment which
affected the property rights of individuals who were not parties to
the litigation. In making that argument, he relies on 5 25-p-201,
MCA, and Warnackv. Coneen Family Trust (1994), 266 Mont. 203, 879 P.2d
715.
After Sievers raised this issue by cross-appeal, we allowed
Shirley Bragg and Kenneth George to file an amicus brief in support
of their position. They contend that unlike the nonparty in
Warnack , they are not complete strangers to the litigation.
In the initial proceeding before Judge Robb, Sievers
intervened and asserted he had a first option. Judge Robb rejected
12
Sievers' position. He asserted the same argument when he
intervened in the present case; Judge Sullivan also rejected
Sievers' contention. In findings of fact numbered 73 and 74, the
court reaffirmed Judge Robb's prior determination that the option
did not pass to Sievers. In finding of fact number 74, the court
found specifically that Sievers did not purchase a first option
which is binding on the other remaindermen.
Sievers now contends, after two district court judges have
found contrary to the position he asserted by intervening, that
those courts were without authority to make the challenged findings
because the other remaindermen were not parties to the present
action. We disagree and conclude that Sievers' reliance on
procedural flaws is an insufficient basis on which to set aside the
District Court's findings.
Section 25-g-201, MCA, states that subject to Rule 54(b),
M.R.Civ.P., a judgment may be given for or against one or more of
several plaintiffs and for or against one or more of several
defendants. In Warnack, we held that the District Court erred when
it awarded a prescriptive easement to a nonparty. We stated that:
[1]t is a fundamental principle of our jurisprudence that
it is only against a party to the action that a judgment
can be taken and that the judgment is not binding against
a stranger to the action.
Warnack, 879 P.2d at 718 (quoting Moore v. Capitol GasCorp. (19451, 117
Mont. 148, 156, 158 P.2d 302, 306). In Warnack, we recognized that
13
the above rule applied where a judgment was awarded in favor of a
nonparty.
However, this case is distinguishable. Section 25-g-201, MCA,
does not preclude a party who voluntarily intervenes from having an
adverse judgment entered against him or her. See Rule 54(b),
M.R.Civ.P. (stating that a final judgment may grant relief to which
the party is entitled). Sievers voluntarily intervened and
asserted that he purchased a valid first option. The interested
remaindermen did not intervene to protect their interests.
However, unlike Warnack, the remaindermen were aligned with the
trustee's position. Additionally, the remaindermen were not
strangers to the action; they are heirs of the trustor and have an
ownership interest in the trust. A decision against the trustee
would adversely affect the remaindermen.
Sievers contends that it would be unfair to allow parties to
benefit from a judgment if they did not appear to litigate the
merits. The logical conclusion of Sievers' position is that he may
intervene and assert a position contrary to the remaindermen, but
if he loses, claim the adverse decision was not binding. Sievers
has merely asserted a procedural flaw from which he claims he
should benefit because he is dissatisfied with the outcome.
Despite the fact that the remaindermen did not intervene to protect
their position, they were aligned with the trustee. Sievers
introduced evidence in support of his position and must abide by
14
the District Court's decision. Absent a specific indication of how
the District Court's findings were clearly erroneous, or an
indication that the court erred as a matter of law, we must affirm
the District Court's findings. Sievers has failed to indicate
that the District court 0s findings were clearly erroneous.
Therefore, we affirm the District Court's findings.
The judgment of the District Court is affirmed.
We concur:
15