NO. 87-230
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
CANDACE WAGNER,
Re r p n d e n t
Plaintiff and - ,
a
-vs-
EARL CUTLER and the Corporation of the
Presiding Bishop of the CHURCH OF JESUS
CHRIST OF THE LATTER-DAY SAINTS, a Utah
Corporation,
Defendants and Appellants.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph B. Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Michael C. Coil, Bozeman, Montana
For Respondent:
Morrow, Sedivy & Bennett; Lyman H. Bennett, 111,
Bozeman, Montana
Submitted on Briefs: May 19, 1988
Decided: June 15, 1988
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Defendant, Church of Jesus Christ of the Latter-Day
Saints (LDS) appeals the January 20, 1987, bench decision of
the Eighteenth Judicial District Court, Gallatin County. The
court ordered that LDS pay $15,203.19 to plaintiff Wagner in
compensation for defects in a house which LDS sold to Wagner.
We affirm.
LDS raises four issues for our review:
1. Did the District Court properly consider the "as
is" language and the "independent investigation" clause
contained in the Earnest Money Receipt and the Special War-
ranty Deed?
2. Did the District Court properly grant amendments to
the pleadings seven months after the close of the trial?
3. Is the District Court's decision regarding negli-
gent misrepresentation supported by substantial evidence?
4. Did the District Court properly consider the duty
of LDS to disclose defects and the defense of contributory
negligence?
LDS employed Earl Cutler as an educator in Bozeman,
Montana. Cutler owned a three-quarter-acre lot in Gallatin
County. In July of 1973, Cutler hired several contractors to
build a house on the lot. One of the contractors was CAPP
Homes, which erected the framing, doors, windows and
unshingled roof. After occupying the new house in the summer
of 1975, Cutler experienced problems with the septic system,
the lawn sprinkler system, and flooding in the basement.
In July of 1980, LDS transferred Cutler to Missouri.
Cutler tried to sell his house, but was unsuccessful. The
house remained vacant for over a year. In the fall of 1981,
LDS briefly inspected the house and bought it from Cutler.
LDS never occupied the house.
On October 28, 1981, LDS entered a listing agreement
with realtor Paul Lytle. The listing agreement stated that
the house was four years old and well-built. LDS disclosed
no defects to the real estate agent, as shown by this clause:
To the best of my knowledge, the follow-
ing items are in good repair and working
condition, and I am unaware of anything
wrong with the foundation, roof, siding,
wiring, drainage, heating, plumbing or
sanitation system except: none
Realtor Lytle sent for publication in the Multiple
Listing Service an advertisement relating to the property in
dispute. The advertisement sent to Multiple Listing Service,
which was published in substantially the same wording, read
in essential part as follows:
Remarks: Excellent home with Timberline
wood burner on brick hearth on upper
level & large rock fireplace in family
room on lower level. Large deck on two
sides. Basement level needs some fin-
ishing & carpet, but is mostly done.
Well suited for a large family.
In April of 1982, Wagner arrived in Bozeman from Los
Angeles. She was interested in buying a house. Wagner
contacted Carmen Murphy, a real estate agent for ERA Landmark
of Bozeman. Murphy showed the LDS house to Wagner. She also
provided Wagner with a copy of the ad in the Multiple Listing
Service. Murphy knew that the house was a "CAPP Home" but
did not disclose that fact to Wagner. Murphy represented to
Wagner that the house was "well built" according to "code."
Murphy also gave Wagner a document from the Gallatin County
Sanitarian representing the document to be an approval by
Gallatin County of the septic system. Wagner liked the house
and toured it several more times.
After some negotiations, Wagner and LDS agreed on a
purchase p r i c e of $78,500. On July 15, 1982, the sale was
closed. LDS received $15,500 down. The balance of $63,000
was carried by LDS on a contract for deed at 13 percent with
a balloon payment due after five years.
Upon taking possession, Wagner encountered numerous
problems with the house. Wagner then sued to recover damages
for misrepresentation, violation of duty to inspect and
disclose defects, and breach of the implied warranty of
habitability. The court dismissed the breach of habitability
cause. During the trial, the court also dismissed defendant
Cutler from the case.
Trial was held without a jury on January 30, 1986, and
subsequently continued until June 5, 1986, when all the
testimony was completed. On October 29, 1986, the District
Court found that many of the defects were noticeable prior to
Wagner's purchase of the house. These noticeable defects
included the unfinished basement, unfinished steps leading to
the basement, light fixtures which were not in their sockets,
cracks in the patio pavement, and incomplete heating ducts.
The court disallowed recovery for items which were clearly
observable upon inspection of the residence.
However, the court found twenty-three other defects
which were latent and undiscoverable prior to occupancy. The
court further found that LDS was not aware of the latent
defects and that LDS performed no positive acts of wrongdo-
ing. The latent defects included a hazardous chimney, poor
ceiling insulation, broken sewage pump, and faulty lawn
sprinkler system.
On April 7, 1987, the court amended its conclusion in
response to a motion by LDS. The court concluded that Wagner
relied on LDS's representation that the home was "well built"
to "code," and that LDS failed to exercise reasonable care in
communicating the true condition to Wagner. The court award-
ed Wagner $15,203.19 in damages.
Issue 1. "As is" and "independent investigation" clauses.
a. Earnest money receipt.
The earnest money receipt signed by LDS and Wagner
contained the following clauses: "Purchaser agrees to accept
- is'
property and and appliances in 'as - condition unless
otherwise provided for .. ." and "Purchaser enters into this
agreement in full reliance upon his independent investigation
and judgment." (Emphasis added.)
LDS contends that Wagner agreed to the "as is" clause
and therefore bought the property subject to any defects,
both observable and latent. LDS also asserts that it had no
knowledge of any defects. LDS argues that the "independent
investigation" clause and "as is" clause should "trigger the
purchasing party's obligation to thoroughly investigate the
property to his own satisfaction" and "dispel any misconcep-
tion that the buyer had the right to rely on any information
supplied by the seller." LDS concludes that Wagner failed to
thoroughly investigate and is now barred from any recovery.
In analyzing this issue, we note that an "independent
investigation" clause does not preclude justifiable reliance
by a buyer upon the misrepresentations of the seller and its
realtor. Parkhill v. Fuselier (Mont. 1981), 632 P.2d 1132,
1135, 38 St.Rep. 1424, 1427.
In the instant case, the court found no willful misrep-
resentation: ". . . the Defendant, Church, did not construct
said premises and was no more aware of the latent defects
than was the Plaintiff, that the Church performed no positive
wrongful acts ... " However, LDS bears responsibility for
the actions of its real estate agent. Section 28-10-602,
MCA. Wagner relied on the material misrepresentations of LDS
as they appeared in the written listing agreement prepared by
LDS's realtor. Wagner was under no additional duty to dis-
cover the latent defects in the house. Parkhill v. Fuselier,
632 P.2d at 1135, 38 St.Rep. at 1427. We find that the
District Court considered the clauses and properly held that
Wagner was not responsible for the latent defects.
b. Special Warranty Deed.
LDS conveyed the real estate to Wagner in a document
entitled, "Special Warranty Deed," which stated in part:
". . . Grantor, of Salt Lake County, State of Utah, hereby
conveys and warrants, against all acts of itself, and none
other, to all claiming by, through or under it to CANDACE A.
WAGNER, Grantee, .. .
. the following parcel . ." (Emphasis
added. )
LDS contends that the warranty clause limits the lia-
bility of LDS to its own acts. LDS contends that it did not
cause the defects and is therefore not responsible for the
defects. LDS concludes that the warranty clause should have
alerted Wagner, who "should bear the responsibility of having
improperly proceeded in light of the Special Warranty Deed,
and the language contained therein."
In reviewing this issue, we note that all sale docu-
ments were drafted by LDS or its agent. Wagner relied on
LDS's misrepresentations to her detriment. In the plain
language of the contractual clause, LDS warranted the house.
Having done so, LDS contractually obligated itself to the
veracity of the warrant. Section 28-3-401, MCA. Any uncer-
tainty over "what was warranted" in the deed should be inter-
preted most strongly against the party who drafted it.
Section 28-3-206, MCA. We find that the District Court
properly considered the language of the deed and held LDS
liable for the latent defects.
Issue 2. Amendments.
The District Court handed down its judgment on January
20, 1987. On January 29, 1987, LDS moved the court to amend
its findings of fact and conclusions of law, and to strike
references to the implied warranty of habitability. A hear-
ing was held on the motion on February 9, 1987. The District
Court amended its conclusions on April 7, 1987, stating that
LDS had "failed to exercise reasonable care or competence in
obtaining and/or communicating" information about the house's
condition to Wagner. LDS contends that the District Court
procedurally erred by not amending its conclusions in the
manner requested by LDS.
Amendments to judgments are discussed in Rule 52(b),
M.R.Civ.P., which states: "Upon motion of a party made not
later than 10 days after notice of entry of judgment the
court may amend its findings or make additional findings and
may amend the judgment accordingly. . ." (Emphasis added.)
LDS filed its motion and the court responded. The
amended conclusions were supported by the record. The deci-
sion to amend and manner of amendment lie squarely within the
discretion of the court. The court was under no obligation
to tailor its amendment to fit LDS's specifications. We find
that the court properly amended its judgment.
Issue 3. Negligent Misrepresentation.
As noted above, the District Court concluded that LDS
failed to exercise reasonable care in communicating the
house's condition to Wagner. LDS contends that it did not
have adequate notice of the theory of negligent misrepresen-
tation, and was thereby precluded from preparing an adequate
defense.
We disagree. The District Court discussed negligent
misrepresentation nine months before trial. In its order
with memorandum dated April 18, 1985, the court discussed
Wagner's complaint and stated: "Together, Counts I and I1
sufficiently state a cause of action for negligent misrepre-
sentation." LDS's trial brief dated January 30, 1986, spe-
cifically mentions and discusses negligent misrepresentation.
The theory of negligent misrepresentation was mentioned again
during trial in January 1986, when Wagner's counsel stated:
"The theory being present is actually fraud and misrepresen-
tation, constructive fraud, negligent misrepresentation."
Negligent misrepresentation was mentioned repeatedly
throughout the proceedings. We hold that LDS had adequate
notice of the theory.
LDS next contends that the facts do not support the
elements of negligent misrepresentation. LDS asserts that
Wagner failed to establish the proper standard of care
through some type of expert testimony, and therefore failed
to prove that LDS deviated from the standard. LDS argues
that it never knowingly supplied false information and,
therefore, was not negligent.
We are guided on this issue by Brown v. Merrill Lynch,
Pierce, Fenner, Etc. (1982), 197 Mont. 1, 12, 640 ~ . 2 d 453,
458-459, quoting the Restatement of Torts 2d S 552 (19771,
where we noted:
"One who, in the course of his business,
profession or employment, or in any
other transaction in which he has a
pecuniary interest, supplies false
information for the guidance of others
in their business transactions, is
subject to liability for pecuniary loss
caused to them by their justifiable
reliance upon the information, if he
fails to exercise reasonable - -or
care
com~etencein obtainina or communicatina
- information."
C
[EmFhasis added. l
The "standard of care" testimony was not necessary.
The test for the admissibility of expert testimony is whether
the matter is sufficiently beyond common experience that the
opinion of an expert would assist the trier of fact.
Vandalia Ranch v. Farmers Union Oil & Supply (Mont. 1986) ,
718 P.2d 647, 650, 43 St.Rep. 790, 793; Rule 702, M.R.Evid.
The instant case presented no concept or requirement of
specialized knowledge beyond the cognizance of the judge.
LDS had a duty to obtain and communicate information on
the true condition of the house. It failed to do so. We
hold that the District Court properly concluded that LDS
failed to exercise reasonable care.
Issue 4. Contributory negligence.
LDS asserts that it, like Wagner, bought without knowl-
edge of latent defects. LDS asserts that Wagner's unreason-
able failure to investigate constituted contributory
negligence.
In analyzing this issue, we note that the District
Court only allowed Wagner recovery for latent defects and
denied recovery for obvious defects. In effect, the court
found Wagner accountable for the defects a reasonable buyer
would have noticed. With that distinction, the court proper-
ly addressed Wagner's contributory conduct in the
transaction.
In conclusion, the District Court balanced the respon-
sibilities of seller and buyer in the sale. The court care-
fully apportioned the burden of the defects between the
parties. The court's decision was well reasoned and accom-
plished a just result. We hold that the District Court's
decision was proper and fully supported by the evidence in
the record.
Affirmed.
We concur: