                                           No. 8 8 - 1 8 ?

                      IN THE SUPREME COURT OF THE STATE OF MONTANA
                                                1988



ELLIS A. RRUNNER and GLORIA A.
BRUNNER, husband and wife,
                            Plaintiffs and Appellants,
           -vs-

LEO R. LaCASSE and FRIEDA LaCASSE,
husband and wife, and ED LaCASSE,
                            Defendants and Respondents.



APPEAL FROM:                District Court of the Fourth Judicial District,
                            In and for the County of Missoula,
                            The Honorable James R . Wheelis, Judge presiding.
COUNSEL OF RECORD:

           For Appellant:
                            Richard R. Ruley; Tipp, Frizzell. & Ruley, Missoula,
                            Montana

           For Respondent :
                            Clinton H. Kammerer, Kammerer Law Offices, Missoula,
                            Montana
                            Stewart A. Pearce, 11, Missoula, Montana
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                                                Submitted on Briefs:   Sept. 29, 1988

                                                   Decided:   October 25, 1938
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                                                Clerk
Mr. Justice L.   C. Gulbrandson delivered the Opinion of the
Court.

      Steven Gross (Gross), Lyle Grenager (Grenager), Allan
Davis (Davis), and Ellis and Gloria Brunner (Brunners) appeal
a decision from the Fourth Judicial District, Missoula
County, denying them prejudgment interest and denying the
Brunners' claim for return of equity in property conveyed
when the contract for deed was executed. We reverse.
      This case arises from the conveyance of three
twenty-acre,   undeveloped,    agricultural   parcels    from
respondents to appellants Gross, Grenager and Davis in 1978.
In 1979, respondents conveyed a parcel to appellant Rrunners.
At that time, Brunners purchased the property with persons
named Wicker who subsequently conveyed their interest to
Brunners in settlement of a debt. The real estate broker who
put these purchases together is Ed LaCasse, the son of Leo
and Frieda LaCasse.
      Testimony at trial showed the reason appellants entered
the transactions was to divide the parcels into four
five-acre parcels and then convey them via gift theory.
Using a Certificate of Survey and the gift theory laws of
this state, the properties could purportedly be subdivided
without going through the expense of a regular subdivision.
      Unfortunately for the parties involved, the process
fell apart when the county determined the five-acre sites
would not sustain individual drainfields. After attempts to
remedy the situation failed, appellants sought to rescind the
contracts. Letters rescinding the Gross, Grenager and Davis
contracts were sent in June 1981, and letters rescinding the
contracts for all four appellants were sent in February,
1983. When the 1983 rescission letters failed to elicit a
response, the appellants initiated suit, seeking rescission
of the contracts, damages for fraud in the inducement to
enter the contracts, interest and attorney's fees.
       Integral to the rescission claim was the return to
appellants of the monies and property each had conveyed to
respondents as down payments and payments on the contracts.
In the Brunners' case this included equity in a house which
was transferred to respondents as partial payment for the
parcel. This equity was valued at approximately $17,000 at
trial.
       The District Court after hearing the evidence presented
at trial, issued findings of fact, conclusions of law and its
opinion and order on January 13, 1987. The court found the
plaintiffs were entitled to rescind their contracts based
upon mutual mistake between the parties. The judgment dated
February 9, 1987, provided for return of the amounts paid
under the rescinded contracts, prejudgment interest at the
contract rate for each plaintiff's contract, and the
plaintiff's costs of suit.       The judgment also returned
$17,000 to the Brunners, an award representing the equity in
the property traded to the Lacasses. Finally, the judgment
awarded attorney's fees to the plaintiffs.
      Defendant filed timely objections to the judgment on
February 11, 1987. Following a hearing on the objections,
the court filed an opinion and order on April 23, 1987,
wherein the court awarded the plaintiffs their attorney's
fees, but denied them prejudgment interest and denied the
Brunners the equity in the traded property.
      A new judgment was prepared by counsel and signed by
the judge on May 7, 1987.       It is from this May 7, 198?
judgment that appellants appeal.         Appellants ask for
attorney's fees for this appeal.
      Appellants present the following issues:
       1. Whether    plaintiffs,   having    rescinded   their
contracts with defendants, are entitled to prejudgment
interest from the defendants who have had use of the monies
paid under the rescinded contracts since 1978 and 1979?
      2. Were the purchasers (Brunners) entitled to recover
the value of their equity in real property conveyed by them
to the sellers as partial consideration for the rescinded
contract?

Issue No. 1.
      It is the general rule in this state that a party
lawfully rescinding a contract is entitled "to recover the
monies they paid on the contract with interest thereon from
the date of the breach, S 27-1-314, MCA." Forsythe v. Elkins
(Mont. 1985), 700 P.2d 596, 601, 42 St.Rep. 680, 685.
Respondents contend, however, that an exception to the
general rule allowing prejudgment interest exists "where the
party seeking to recover the payments made on the purchase
price ha[ve] enjoyed the possession of the premises    ..  ."
Silfvast v. Asplund, et a1. (1935), 99 Mont. 152, 160, 42
P.2d 452, 456.   The respondents further contend the actions
of appellant Davis in 1983, allowing one Dean Clinkenbeard to
cut hay on the subject parcels on shares, constitutes
exercising possession of the property.           In denyinq
prejudgment interest to the appellants, the District Court
found exercise of dominion and control existed sufficient to
deny an award of prejudgment interest. Upon review of the
evidence presented and the authority cited, we find the
Silfvast case has been misinterpreted and the facts do not
support denial of prejudgment interest.
      The Silfvast case deals with our present S 28-7-1716,
MCA.    The statute authorizes the court to direct the
rescinding party to "make any compensation or restoration to
the other which justice may require."     Section 28-2-1716,
MCA.  This statute allows the court to balance the equities
of the parties to a rescission action.   It is in line with
the objective of rescission that the parties be returned to
their respective positions as if the contract had not been
entered.
      Respondents contend that since the District Court found
appellant Davis exercised dominion and control over the
properties in 1983, by allowing the cutting of the hay on the
properties, the Silfvast case requires an automatic finding
that appellants are not entitled to prejudgment interest.
      In Silfvast, the Court states:
           We do not feel that under [ S 28-2-1716,
           MCA], it is incumbent upon the trial
           court to allow or disallow interest in
           accordance with the strict rules of law
           which    would    apply    to    ordinary
           transactions,   but    only   to    award
           compensation as justice may require  ...
Silfvast, 42 P.2d at 456.    This language does not support
respondents1 contention that the Silfvast Court adopted the
exception as law in this state.       Further, the portion of
Silfvast respondents cite to is an excerpt of the Court's
examination of other jurisdictions on this issue.
      In the more recent case of Forsythe v. Elkins (Mont.
1985), 700 P.2d 596, 601, 42 St.Rep. 680, 685, 686, this
Court was again faced with interpreting 5 28-2-1716, MCA, and
stated:
          Although the object of § 28-2-1716, MCA,
          requiring one rescinding a contract to
          make compensation or restoration, is to
          place the other party in status quo,
          absolute and literal restoration is not
          required,   it   being    sufficient   if
          restoration is such as is reasonably
          possible or as may be demanded by the
          equities of the case.         OIKeefe v.
          Routledge (1940), 110 Mont. 138, 103 P.2d
          307.
      Looking at   the   equities   in this case we   find the
appellants were induced to enter these agreements on the
premise they could be subdivided using a gift theory which
would avoid the costly subdivision process.     Some type of
agreement existed in the first few years allowing the sellers
to hay the properties, with the purchasers to get credit for
the hay removed.   No credit on the purchase price appears to
have been given.   In 1981, after being informed the division
was not possible as planned, three of the appellants
attempted rescission.   The fourth party, the Brunners, had
signed a separate agreement to attempt to consummate the
transaction, but joined with the others in sending the 1983
rescission notice. Later in 1383, appellant Davis authorized
Clinkenbeard to cut hay on the properties on shares.
However, the appellants' share was left baled and stacked on
the property, purportedly to the time of trial. From 1984
on, by agreement the parties had cut the hay on the
properties and placed the profits in escrow.      Appellants
received no benefit from having cut the hay on the
properties. Rased on the lack of a showing of any benefit to
the appellants by this act, we find the court's holding
denying prejudgment interest is reversible error.        The
holding fails to balance the equities of this case wherein
appellants have been deprived of their monies for eight to
nine years to the date of judgment, while respondents
received or are able to receive the profits from the use of
the land for nearly all the years in question.  We therefore
reverse the District Court's judgment regarding the award of
prejudgment interest.

Issue No. 2.
      In its opinion and order of April 23, 1987, the
District Court declined to award the Brunners the equity in
the property transferred to the respondents as partial
payment. The District Court based its denial on the case of
Carey v. Wallner (Mont. 1986), 725 P.2d 557, 43 St.Rep. 1706,
agreeing with respondents argument that:
           [Rlestoration in rescission covers only
           those funds actually expended, it does
           not cover losses, which occur incidental
           to the contract, those which arise out of
           accounting   procedures   or   speculative
           losses.
The Carey case on which the court and respondents relied
dealt with rescission of a contract for deed involving the
sale of a business. The court allowed rescission based upon
mutual mistake of the parties at the time of entering the
contract, similar to this case. In restoring the parties to
their respective status quo, the court denied the Carey's
recovery of "any loss on the discounted contract for deed
which they sold." Carey, 725 P.2d at 561. The Carey case
and this case are distinguishable. In Carey, the rescinding
party sought recovery for a loss sustained when they sold a
separate contract for deed and used the proceeds to pay off
their loan obtained for converting a carport to a room. The
contract for deed which was sold covered out of state
property in no way related to the sellers.        No benefit
resulted to the sellers.
      In the case at hand the buyers transferred property to
the sellers as partial consideration paid upon the contract
in issue.   The transferred property was subject to various
indebtedness which was assumed by respondents. The Brunners
further agreed to pay $30,000 cash toward the purchase of the
property. The contract for deed, however, does not specify a
total purchase price for the parcel the Brunners purchased;
the record shows only that an exchange of the Brunners'
equity in the transferred parcel to the LaCasses occurred as
a partial down payment. It should be noted that the amount
of equity the Brunners possessed in the property when it was
transferred is estimated at $17,000 according to the
testimony of Ellis Brunner.
      Sections 28-2-1713(2) and 28-2-1715, MCA, provide "each
party must restore to the other everything of value received
under the contract.'' Carey, 725 P.2d at 561. As the equity
in the transferred property constituted partial payment on
the contract, they are entitled to its return.      For this
reason, we direct the District Court on remand to allow a
hearing at which both parties may present evidence of the
value of the equity at the time of the transfer.
      The judgment of the District Court filed May 7, 1987,
is reversed and remanded for further proceedings in
conformity with this opinion. The District Court shall also
award a fair attorney's fee for this appeal to the
appellants.
      Reversed and remanded.



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We concur:
