                                                     No.   90-005
                                    IN THE SUPREME COURT OF THE STATE OF MONTANA




      RUSSELL E. VAN HOOK, JR. and JANICE L. VAN HOOK,
           Plaintiffs and Appellants,
      -vs-
      CALVIN A. BAUM and WILMA J. BAUM,
           Defendants and Respondents.




      APPEAL FROM:                       District Court of the First Judicial District,
                                         In and for the County of Lewis and Clark,
                                         The Honorable Henry Loble, Judge presiding.


      COUNSEL OF RECORD:
                                    For Appellant:
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                                        James P. Reynolds, Reynolds, Mot1    &   Sherwood,
       LC               3               Helena, Montana
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       ~ j 3   ;hLJ Respondent:
                  For
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                                        Dennis Loveless, Helena, Montana
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                                                                    Submitted:   July 20, 1990
                                                                     Decided:    October 15, 1990




                                                       Clerk
Justice John C. Sheehy, delivered the Opinion of the Court.

     Russell and Janice Van Hook appeal from the determination of
the ~istrict Court, First Judicial ~istrict, ~ e w i s and Clark
County, denying appellants1 claims for contract rescission or
damages.    We affirm the District Court.
     The issues presented by the appellants are:
     1. Did the District Court err in concluding no mutual mistake

of fact existed warranting rescission of the contract for the
purchase of the real property?
     2.     Did the District Court err in concluding respondents
committed no fraud, actual or constructive in the sale of the real
property?
     3.     Did the District Court err in concluding no failure of
consideration existed in the contract between the parties?
     The real property involved in this case is the house and
property located at Lots 8, 9 and 10 in Block 26 of the Corbin
Addition, known as 1523 Broadway, Helena, Montana.
     In the summer of 1981, Baums constructed a house upon the
property,     acting   as   the   contractors   and   hiring   various
subcontractors.    Baums built the home intending to reside there,
but decided to sell when it became medically necessary for Mrs.
Baum to move to a warmer climate.
    The house was constructed upon a special foundation due to the
fill on the property and water which tended to collect there.
Baums foresaw no problem with continuing water collection upon
completion.
                                   2
     Van Hooks executed an earnest money receipt and an agreement
to purchase on December 5, 1981, and on December 30, 1981, executed
a $41,500 note secured by a trust indenture. Van Hooks also signed
a promissory note to the Baums for $15,400, also secured by trust
indenture, payable no later than December 30, 1983, or upon the
sale of the real property.    Van Hooks have not paid on the note,
and admit to be in default thereon.
     The real property flooded on June 28, 1982, following an
uncommonly large rainstorm.    The property flooded again on August
21, 1983, following a similar storm.      Robert ~eccia,a private
consulting engineer and hydrologist, using National Oceanic and
~tmospheric~dministrationrecords for those dates, testified that
both storms were of such extraordinary nature as to be expected to
occur once every 100 years.
     In January of 1983, Van Hooks wrote a letter to the Baums
seeking rescission of the contract.     Baums refused.   Van Hooks
initiated suit in June of 1984, seeking rescission, or in the
alternative, damages for breach of contract.    The complaint also
named the City of Helena.    The City later paid $10,000 to the Van
Hooks as settlement, and reconstructed the storm sewer on the
property.   The Baums counterclaimed, seeking enforcement of the
contract. Bench trial was held from July 11 through July 14, 1988.
The District Court, in its order of April 5, 1989, denied all
claims of the Van Hooks, and granted leave to the Baums to proceed
against the real property pursuant to the terms of the trust
indenture. The Van Hooks made a motion to amend, which was denied.
This appeal ensued.
     Van Hooks first contend that a mutual mistake of fact occurred
in that neither of the parties knew of the potential flooding
problem, and that rescission is the proper remedy.
     Mistake of fact is Itanunconscious ignorance or forgetfulness
of a fact, past or present, material to the contract       . . .  11


Section 28-2-409, MCA.
     Section 28-2-1711 states in part:
     A party to a contract may rescind the same in the
     following cases only: (1) if the consent of the party
     rescinding ...  was given by mistake or obtained through
     duress, menace, fraud, or undue influence  ...
     It is a well-established rule in Montana that in order for
mutual mistake by the parties to a contract to warrant rescission,
the mistake must be so substantial and fundamental as to defeat the
object of the contract. Halcro v. Moon (1987), 226 Mont. 121, 733
P.2d 1305; Woodahl v. Matthews (1981), 196 Mont. 445, 639 P.2d
1165; Johnson v. Meiers (1946), 118 Mont. 258, 164 P.2d 1012.
Here, Van Hooks maintain that the flooding of the property is a
problem so substantial as to defeat the object of the contract.
However, the evidence does not bear this out.     As the District
Court stated, it is not a mistake of fact that several intense and
unusual storms occurred.    They were I1acts of God,I1 completely
unanticipated, which caused damage to many other homes in the
surrounding area. It should also be noted that corrective measures
were taken by the City of Helena on the storm drain near the
property in 1986 and that no flooding had occurred up to the time
of trial.
     Van Hooks still reside in the house.    This suit was brought
in apprehension of further flooding.   While no one may deny that
the flooding was a problem, it cannot be said to be a mistake
serving to defeat the object of the parties in making the contract,
any more than would an earthquake or tornado or other natural
phenomenon.
     Van    Hooks next contend that Baums committed     fraud or,
alternatively, constructive fraud in the sale of the real property.
     Specifically, Van Hooks contend that Baums knew of the
flooding potential and misled Van Hooks by asserting otherwise.
The evidence does not show that such misrepresentations were made,
or Van Hookst reliance thereupon.   The District Court stated:
     The Van Hooks and the Baums had equal knowledge of the
     property as far as flooding potential was concerned.
     Neither had knowledge that was superior to the other.


    The Van Hooks conducted an independent investigation of
    potential water problems including, but not limited to,
    potential flooding of the property. The investigation
    included discussing potential water flooding problems
    with other individuals who had knowledge of past
    problems, and discussing potential water flooding
    problems with personnel from the City of Helena. The Van
    Hooks knew water had caused some problems in the past,
    and had been so informed by neutral, disinterested third
    parties. The Van Hooks relied upon their own independent
    investigation of the property, including investigations
    regarding potential flooding and water problems, when
    they decided to purchase the real property. They did not
    rely upon any representations made by the Baums regarding
    water problems.
     As noted by the lower court, a cause of action for fraud fails
when the alleged misrepresentation is not relied upon.      Lowe v.
Root (1975), 166 Mont. 150, 531 P.2d 674.   The District Court was
in the best position to determine that Van Hooks did not rely on
any alleged misrepresentation.    We find no error in the lower
court's holding of an absence of fraud.
     As to constructive fraud, no evidence was introduced showing
Baums were aware of flooding potential of the home upon its
construction.   Baums originally built the home for their personal
use, and decided instead to sell it only after Mrs. Baum developed
health problems requiring her to move to a warmer climate. As the
District Court noted, it cannot be reasonably contended that a
person would build a house where he believed it would be flooded.
The District Court's finding that the Baums were unaware of any
defect, and thereby under no duty to disclose the defect, thus
precluding constructive fraud claims, is supported by substantial
evidence and will not be disturbed by this Court.        Woodahl v.
Matthews (1981), 196 Mont. 445, 639 P.2d 1165; Moschelle v. Hulse
(1980), 190 Mont. 532, 622 P.2d 155.
     Van Hooks contend that they are entitled to rescind due to a
partial or complete failure of consideration. They state that the
lower court erred in concluding the house was worth intrinsically
as much at the time of trial as when originally purchased.
     Section 28-2-1711, MCA, outlines the rights of parties wishing
to rescind under a theory of failure of consideration:
        A party to a contract may rescind the same in the
        following cases only:


        (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 becomes entirely void from any
        cause ;

        (4) if such consideration, before it is rendered to him,
        fails in a material respect from any cause ...
        Subsections (2) and (4) are inapplicable here. Subsection (2)
is premised upon the fault of the non-rescinding party, and the
lower court specifically found the Baums to be free from fault.
Nor does subsection (4) apply, as consideration was rendered. Van
Hooks must rely on subsection (3) for relief.         The subsection
states that the party may rescind if consideration becomes entirely
void.    Clearly, that is not the case here. Van Hooks purchased the
home in 1981 for $64,900.     Although appraisals varied, Van Hooks
stated that the house was worth approximately $62,000 in 1988. As
the District Court noted, the lessened appraised values were all
made in apprehension that the property might flood again. Clearly,
the District Courtvs determination that there was not an adequate
failure of consideration under 5 28-2-1711(3) was based on the
evidence and law.       We find substantial evidence supports the
judgment.     Corscadden v. Kenney (1977), 175 Mont. 98, 572 P.2d
1234; Strong v. Williams      (1969), 154 Mont. 65, 460 P.2d 90.
We Concur:




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