NO. 88-297
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
EARL BATTEN, individually and d/b/a
RIMROCK HONDA-HARLEY DAVIDSON,
PI-aintif and Appellant,
f
-vs-
WATTS CYCLE AND MARINE, INC., AND OAKLANP
& COMPANY,
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial Ditrict,
In and for the County of Yellowstone,
The Honorable G. Todd Raugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Timothy J . Whalen; Whalen & Whalen, Billings, Montana
For Respondent:
T. Thomas Singer; Moulton, Bellingham, Longo & Mather,
Billings, Montana
James A. Poore, 111; Poore, Roth & Robinson, Butte,
Montana
Submitted on Briefs: Sept. 15, 1989
Decided: November 30, 1989
Filed:
-- I
Clerk
Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiff (Batten) purchased a motorcycle dealership
from defendants. When the business failed, he sued Watts,
the seller, and his real estate agent, Oakland, under theo-
ries of fraud, constructive fraud, and negligent misrepresen-
tation, seeking compensatory and punitive damages. The
District Court for the Thirteenth Judicial District,
Yellowstone County, granted summary judgment in favor of
defendants. From this judgment, Batten appeals. We affirm.
The issues presented on appeal are:
1. Did the District Court err in grantinq summary
judgment in favor of defendants?
2. Did the District Court err in its award of costs and
attorney fees to the defendants?
Defendant Watts purchased Billings Honda-Harley Davidson
(BHHD) from Arnie Brey in 1976, and operated the business
profitably for a number of years. Batten became interested
in purchasing a motorcycle business due to his persanal
interest in motorcycle riding. He had an educational back-
ground which included a Bachelor of Arts Degree, a Bachelor
of Science in Geology, several graduate courses in business,
and he had studied for the Colorado real estate exam. He had
read a significant amount about the motorcycle industry, and
the various makes of motorcycles and their sales records. He
looked at various dealerships, and in 1981, responding to an
advertisement in Cycle News Magazine, became interested in
purchasing BHHD.
After seeing another ad in the Denver Post, Batten
called Watts' agent, Gary Oakland, to inquire about the
dealership, and was sent a copy of the brochure which includ-
ed the financial statements for the fiscal year ended Novem-
ber 2 9 , 1-981. Because the representations in the brochure
are central to this case, we will set forth the brochure in
pertinent part:
PRICE: $360,000.00
DOWN PAYMENT: $160,000.00
EARNEST MONEY
REQIJIRED : $ 15,000.00
DESCRIPTION: Billings Honda-Harley Davidson is the
largest dealer for Honda and
Harley-Davidson motorcycles in the state
of Montana. The price includes the parts
inventory, used cycles, shop tools,
dealership agreement, leasehold improve-
ments, trade name, etc. The new merchan-
dise inventory is priced above
$360,000.00 and is financed on a
floor-plan arrangement.
In 1981, the company sold over 450
Honda ' s and 72 Harley-Davidson
motorcycles.
The real estate is leased at the rate of
$2,700.00 per month. It consists of
approximately 14,400 square feet. The
facility is in good condition, is attrac-
tive, and has ample parking. The rent is
presently $2.25 per square foot including
utilities and other expenses.
The business is completely staffed with
a sales manager, parts manager, service
manager, 5 mechanics, and
bookkeeper-secretary. It is understood
that these people wish to remain with the
firm.
The seller will agree to a covenant of
non-competition.
OWNER : Ronald J. Watts
BROKER: Gary Oakland
Upon his request, Batten was later provided with finan-
cial statements for other years. He and his family then
visited the dealership to inspect the business and the Bill-
ings business community. Both the local and out-of-state
advertisements put out by Oakland, represented BHHD as the
leading dealership in Montana; as making profits on both
Honda and Harley-Davidson; that the business had strong
assets; was well run and had a nice facility with a complete
sales service and office staff. Batten maintains that these
representations convinced him to purchase the business.
After a series of negotiations with Gary Oakland, Batten
signed a purchase agreement and deposit receipt in August,
1982. The deal was closed in October of that year.
During the first year of ownership, gross sales were
$1.6 million which were higher than any of the previous six
years under Watts' management. Batten had profits of approx-
imately $20,000 to $24,000. In November, 1983, Batten
changed the location of the business, changed the name and
the product mix, and fired many of the employees. After
1983, sales dropped and the business did not show a profit.
In June, 1985, Batten filed a complaint against Watts and
Oakland seeking compensatory and punitive damages. However,
he continued to operate the business until May 4, 1988, when
he filed a Chapter 7 Petition in Bankruptcy.
I
Did the District Court err in granting summary in favor
of defendants?
Batten urges that the representations made by defendants
concerning the business amounted to fraud, constructive
fraud, or negligent misrepresentation. Summary judgment is
only proper when there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of
law. Rule 56 (c), M . R . C i v . P . Any inferences to be drawn from
the factual record must be resolved in favor of the party
opposing summary judgment. Simmons v. Jenkins (1988), 750
P.2d 1067, 45 St.Rep. 328. Summary judgment is never a
substitute for a trial on the merits. Kronen v. Richter
(1984), 211 Mont. 208, 211, 683 P.2d 1315, 1317.
Here, the materials submitted on summary judgment by
defendants successfully show that there are no genuine issues
of material fact. Thus, the burden of proof shifts to Batten
to prove a prima facie case of fraud, constructive fraud, or
negligent misrepresentation.
In order to prove fraud Batten must. prove all of its
nine elements. The elements are:
1. a representation;
2. its falsity;
3. its materiality;
4. speaker's knowledge of the falsity or igno-
rance of its truth;
5. speaker's intent that the representation be
relied upon;
6. hearer's ignorance of the falsity;
7. hearer's reliance on the representation;
8. hearer's right to rely on the representation;
and
9. hearer's consequent and proximate iniury
caused by the reliance.
Sprunk v. First Rank W. Mont., Missoula (Mont. 1987), 741
P.2d 766, 44 St.Rep. 1429. Fraud, an intentional act of
misrepresentation, Gregory v. City of Forsyth (1980), 187
Mont. 132, 609 P.2d 248, can never be presumed but must be
proved by a preponderance of the evidence. Wright v. Blevins
(1985), 217 Mont. 439, 705 P.2d 113. Mere suspicion of fraud
is not sufficient. In Re Marriage of Hoyt (1985), 215 Mont.
449, 698 P.2d 418.
Constructive fraud, unlike actual fraud, does not re-
quire dishonesty of purpose or intent to deceive. Section
28-2-406(l), MCA; Moschell v. Hulse (19801, 190 Mont. 532,
622 P.2d 155. A plaintiff's opinions alone do not provide a
sufficient basis in fact to prove constructive fraud when
there is no evidence of any breach of duty or of a fraudulent
act or omission. Westlake v. Osborne (Mont. 1986), 220 Mont.
91, 713 P.2d 548. Breach of duty to disclose material facts
is an indispensable element of constructive fraud. Mends v.
Dykstra (1981), 195 Mont. 440, 637 P.2d 502.
Negligent misrepresentation has a lesser standard of
proof. It does not require intent to misrepresent, but
rather a failure to use reasonable care or competence in
obtaining or communicating the information. However, liabil-
ity is limited to the loss suffered by the person(s) relying
on the information. See State Bank of Townsend v. Maryann's,
Inc. (1983), 204 Mont. 21, 33, 664 P.2d 295, 301. In
State Bank of Townsend, we cited the Restatement (Second) of
Torts S 552, in part, as follows:
The liability stated in this Section is likewise
more restricted than that for fraudulent misrepre-
sentation stated in s531. When there is no intent
to deceive but only good faith coupled with negli-
gence, the fault of the maker of the misrepresenta-
tion is sufficiently less to justify a narrower
responsibility for its consequences.
Batten sets forth several factual contentions in an
attempt to prove fraud, constructive fraud or negligent
misrepresentation. In summary, Batten contends that there
were misrepresentations regarding "current" inventory; the
condition of the premises, the capabilities of the staff, and
the operation of the business; the sales volume of the busi-
ness; the value of the business; the financial status of the
business; the inventory of the business; the unit sales of
the business and the floor plan financing; and the amount of
the rent for the location of the business. Defendants main-
tain that Batten fajl-ed to prove that there were any
misrepresentations made by the defendants, whether inten-
tional, constructive or negligent. We agree.
The District Court concluded that there were no facts
presented by Batten indicating that any of the representa-
tions were false, and that since liability for fraud will
attach only where a misrepresentation is material, Batten's
claim fails. We agree. In a detailed memorandum, the Dis-
trict Court carefully considered each of Batten's conten-
tions. Noting that "a misrepresentation is not material
unless it is significant," Bails v. Gar (1976), 171 Mont.
342, 347, 558 P.2d 458, 463, the District Court concluded
that even if some of the representations were false, none of
them were significant. Furthermore, the District Court
pointed out that many of the alleged misrepresentations were
nothing more than subjective opinions. Statements of opinion
are subject to the common law doctrine of caveat emptor.
Dolson Co. v. Imperial Cattle Co. (1981), 191 Mont. 357, 362,
624 P.2d 993, 996. Many of the defects of which Batten
complains were noticeable upon reasonable inspection, or
"even a superficial investigation" as the District Court
points out.
Batten failed to make a factual showing that any of the
representations were false. Thus, the core element of fraud,
constructive fraud and negligent misrepresentation is
missing. We hold that the District Court did not err in
granting summary judgment in favor of the defendants.
Did the District Court err in its award of costs a.nd
attorney fees to the defendants?
The District Court awarded Watts $24,743.75 in attorney
fees and $4,157.78 in disbursements for a total of
$28,901.53. The contract provided for reasonable attorney
fees and costs. The Court, notinq that this was a rather
high figure, explained that the costs were legitimate, and
that it would not reduce the award by one-half as requested
by Batten. Batten argues that the award is unreasonable. He
argues that the effect of this award is punitive and that it
will invoke a policy among courts that makes it impossible
for valid claims to be pursued by a plaintiff who could not
bear such costs.
Watts points out that the District Court properly held a
hearing and considered the contract between the parties to
determine the reasonableness of the fees. Furthermore, Watts
contends that the District Court has broad discretion in
determining what constitutes reasonable attorney fees, and
that this Court shall not disturb the lower court's judgment
in the absence of an abuse of discretion. Majers v. Shining
Mountains (Mont. 1988), 750 P.2d 449, 453, 45 St.Rep. 283,
288. We agree.
After reviewing fully briefed arguments by both parties
on this issue, the District Court specifically stated that it
considered the contract between the parties which provided
for "any costs or expenses, including reasonable attorney
fees" prior to the court's determination. It further ac-
knowledged that the amount awarded was high, however, the
award is reasonable under the circumstances of this case, a ~ d
the amount could not justifiably be reduced without being
arbitrary. Batten has failed to set forth any facts to show
that the District Court abused its discretion. We hold that
there has been no abuse of discretion and affirm the District
Court's award of costs and attorney fees to the defendant.
Batten raises additional issues on appeal which could be
significant at trial. However, in light of our decision that
summary judqment was proper, it is unnecessary to address
those issues.
Affirmed.
27czp7 +
\
C h i e f J stice
Justices
/
~usticeWilliam E. Hunt, Sr.
I dissent. This opinion is another attempt by the
judiciary in the state of Montana to divest plaintiffs of
their right to reach the jury. By stating that "the
District Court pointed out that many of the alleged
misrepresentations were nothing more than subjective
opinions," the majority makes it possible for the District
Court in a motion for summary judgment to decide as a matter
of law whether a statement is one of opinion or of fact.
However, in Dolson Co. v. ~mperial Cattle Co. (1981), 191
Mont. 357, 363, 624 P.2d 993, 996, the case cited by the
majority for the proposition that "[sltatements of opinion
are subject to the common law doctrine of caveat emptor," and
in Spence v. Yocum (1982), 201 Mont. 79, 83-84, 651 P.2d
1022, 1025, this Court emphasized that the trier of fact is
in the best position to determine whether a representation
constitutes a statement of fact or a statement of opinion.
Both Dolson and Spence involved appeals from judgments
of district court trials where the district courts sat
without juries. This case, on the other hand, involves an
appeal from a summary judgment. The ~istrictCourt in the
present case did not sit as a fact finder. Its only function
was to determine issues of law, not issues of disputed fact..
Summary judgment should not h & been granted.
a