No. 94-093
IN THE: SUPREME COURT OF THE STATE OF MONTANA
NORTHWEST TRUCK & TFLAILER SALES,
INC., a Montana corporation,
Plaintiff and Respondent,
v.
ROGER W. DVORAK and
utc 2Y 1994
PATRICIA J. DVORAK,
Defendants and Appellants
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
Honorable Maurice R. Colberg, Jr., Judge presiding.
COUNSEL OF RECORD:
For Appellants :
Jack E. Sands, Billings, Montana
For Respondent:
James P. Murphy and Stewart R. Kirkpatrick,
Murphy & Kirkpatrick, Billings, Montana
Submitted on Briefs: November 23, 1994
Decided: December 29, 1994
Filed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
In this action, Northwest Truck & Trailer Sales, Inc.
(Northwest), sought repossession of and the balance owing on a
truck it sold to Roger W. and Patricia J. Dvorak. The Dvoraks
counterclaimed, alleging fraud and breach of contract. The
District Court for the Thirteenth Judicial District, Yellowstone
County, entered summary judgment for Northwest on the Dvoraks'
counterclaim of fraud. At trial on Northwest's claims and the
remaining counterclaims, a jury found that Northwest did not breach
its contract with the Dvoraks. The court directed a verdict
awarding Northwest a deficiency judgment of $30,211.47,plus costs.
The Dvoraks appeal. We affirm.
The issues are:
1. Did the District Court err in granting Northwest's motion
for summary judgment on the counterclaim of fraud?
2. Did the court err in refusing to allow the Dvoraks'
proposed evidence that the truck was not a new truck?
3. Did the court err in directing a verdict against the
Dvoraks for $30,211.47?
4. Did the court err in refusing the Dvoraks' proposed jury
instructions?
5. Do the jury's answers on the special verdict form require
a reversal of th(3ir verdict because they are internally inconsis-
tent?
In June 1987, the Dvoraks bought a 1987 Peterbilt tractor
truck from Northwest to use in their two-person trucking business.
The $85,600 sale price of the truck was financed over a sixty-month
term. In January 1990, Northwest filed a complaint in the District
Court alleging that the Dvoraks had failed to make the required
monthly payments on the truck. It asked to be restored to
immediate possession of the vehicle and for damages, costs, and
attorney fees.
The Dvoraks counterclaimed, alleging that Northwest falsely
represented to them that the truck was new when they bought it.
They provided affidavits in which their son-in-law and four other
persons stated they had examined the truck and found signs that it
was not in its original condition. The Dvoraks asserted that
Northwest's misrepresentation constituted fraud and breach of
contract. They asked for compensatory and punitive damages and for
their attorney fees and costs.
In May 1990, following a hearing, the District Court ordered
that the truck be delivered to Northwest. Roger Dvorak admitted to
being at least eight payments in arrears at that time. Northwest
resold the truck in September of 1990 for $58,000. The truck's
odometer showed some 326,000 miles at that time.
In May 1991, the District Court granted partial summary
judgment for Northwest on the Dvoraks' counterclaim alleging fraud
and requesting punitive damages. The court ruled that the Dvoraks
had failed to establish material issues of fact concerning
necessary elements of their fraud claim.
The case proceeded to trial on Northwest's claim for a
deficiency judgment and on the Dvoraks' counterclaims that
Northwest breached the implied covenant of good faith and fair
dealing and otherwise breached the contract. In a special verdict,
the jury found that the written contract between the parties had
been altered by an oral agreement, but that Northwest had not
breached the modified contract or breached the implied covenant of
good faith and fair dealing therein. The jury further found that
Northwest had breached the implied covenant in the original written
contract, but that there were no damages from that breach. The
court directed a. verdict against the Dvoraks for the $30,211.47
deficiency proved by Northwest between the amount owing on the
contract and the resale price of the truck. The Dvoraks appeal.
This Court has previously ruled that the Dvoraks' notice of
appeal in this matter was timely filed. See Northwest Truck &
Trailer Sales, Inc. v. Dvorak (Mont. 1994), 877 P.2d 31, 51 St .Rep.
564.
Issue 1
Did the District Court err in granting Northwest's motion for
summary judgment on the counterclaim of fraud?
A motion for summary judgment is properly granted if the
record demonstrates no genuine issues of material fact and that the
moving party is entitled to judgment as a matter of law. Rule
56(c), M.R.Civ.P. A party opposing a motion for summary judgment
may not rest upon the mere allegations or denials of the pleadings,
but must set forth specific facts showing there is a genuine issue
for trial. Rule 56(e), M.R.Civ.P. This Court reviews a ruling on
a motion for summary judgment under the same standard as that used
by the district court in its ruling on the motion. Minnie v. City
of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214.
The nine elements of fraud are:
1. A representation;
2. Falsity of the representation;
3. Materiality of the representation;
4. The speaker's knowledge of the falsity of the representa-
tion or ignorance of its truth;
5. The speaker's intent that the representation shall be
relied upon;
6. The hearer's ignorance of the falsity of the representa-
tion;
7. The hearer's reliance on the representation;
8. The hearer's right to rely upon the representation;
9. Consequent and proximate injury caused by the reliance on
the representation.
Wiberg v. 17 Bar, Inc. (1990), 241 Mont. 490, 496, 788 P.2d 292,
295. The District Court ruled that the Dvoraks failed to establish
elements 2, 5, 6, and 9.
The Dvoraks claim that contrary to the District Court's
ruling, they produced evidence creating genuine issues of material
fact concerning whether the truck was used and rebuilt before they
bought it. They claimed damages because a rebuilt truck is worth
less than a new one.
Attached to the Dvoraks' brief in opposition to Northwest's
motion for claim and delivery were affidavits signed by the
Dvoraks' son-in-law and four other individuals. The affidavits
were identical and were all dated April 20, 1990. Attached to each
affidavit was a list of thirty-two observed defects in the Dvoraks '
truck. Each affidavit stated:
From my personal observations noted on Exhibit 1, it is
my opinion that the truck either is not a factory-built
new truck, or has had major components replaced and had
repainting done to conceal the work done on the truck.
The affidavits were dated almost three years after the Dvoraks
purchased the truck. At that time, the Dvoraks had driven the
truck over 300,000 miles. The affidavits do not state when the
observations about the truck were made. They state no opinion as
to who created the alleged defects in the truck or when they were
created. Moreover, the affidavits do not demonstrate that
Northwest knew or should have known of the claimed defects in the
truck.
The Dvoraks essentially argue that "because we did not tamper
with the truck, Northwest must have." However, this general
assertion does not satisfy the Dvoraks' obligation to prove their
claim of fraud with particularity. See Rule 9(b), M.R.Civ.P. We
conclude that the District Court did not err in ruling that the
Dvoraks failed to establish element 2 of their claim of fraud.
The District Court observed as to the sixth element of the
fraud claim that, within a few days after he bought the truck,
Roger Dvorak had it inspected by a qualified person engaged in the
truck repair business. That person stated by deposition that he
did not note the defects listed in the above-mentioned affidavits.
As to the ninth element of fraud, damages, Northwest cited
Roger Dvorak's deposition testimony that the truck ran okay and he
had been satisfied with its condition. The Dvoraks, in rebuttal,
6
maintained "it is common knowledge that trucks which have been
wrecked and rebuilt are worth far less than those which have not."
However, they offered no specific proof of their damages to support
this allegation. An April 29, 1991 affidavit of the Dvoraks' son-
in-law, to which. they refer in their briefs on appeal, does not
appear in the record nor is it listed on the court's docket. We
conclude that the court did not err in ruling that the Dvoraks
failed to present a genuine issue of material fact as to the ninth
element of their claim of fraud.
We hold that the District Court did not err in granting
Northwest summary judgment on the counterclaim of fraud.
Issue 2
Did the court err in refusing to allow the Dvoraks' proposed
evidence that the truck was not a new truck?
In its memorandum accompanying the order granting partial
summary judgment for Northwest, the District Court stated:
In addition, there being no substantial evidence to
establish that the plaintiff did not sell the defendants
a new truck, no evidence on this issue of the alleged
breach of the contract by the plaintiff will be permitted
at the trial.
The Dvoraks argue that this was error because it precluded a
contract claim for the difference between the contract price and
the value of a used/wrecked truck. The Dvoraks maintain that the
ruling "had additional far-reaching consequences for the remaining
portion of the Dvoraks' counterclaims which eventually went to the
j u r y e . , breach of contract, breach of the covenant of good
faith and fair dealing, and odometer tampering."
Under any counterclaim based on the alleged used condition of
the truck, the Dvoraks would be obliged to prove damages therefrom.
As discussed above in regard to the motion for summary judgment,
they failed to provide evidence of any damages resulting from their
claim that the truck was not new when they bought it. Moreover,
Northwest produced evidence at trial that the resale price of the
truck was above the average price for a truck with that many miles
on it.
The Dvoraks were allowed to try to the jury their counter-
claims concerning warranties, modification to and breach of
contract, and odometer tampering. We hold that the District Court
did not err in refusing to allow evidence at trial that the truck
was not new when the Dvoraks bought it.
Issue 3
Did the court err in directing a verdict against the Dvoraks
for $30,211.47?
The Dvoraks contend no deficiency judgment should have been
granted because the sale was not done in a commercially reasonable
manner for the following reasons: (1) the repossession affidavit
signed by the bank officer was false; and (2) Northwest improperly
refused to credit. the Dvoraks with credit life and credit disabili-
ty insurance refunds which Northwest got back when it foreclosed
and cancelled the Dvoraks' insurance. The Dvoraks maintain that
commercial reasonableness is a question of fact for the jury.
The Dvoraks have not demonstrated any way in which the bank's
affidavit changed the amount of money received from the sale or
credited to the Dvoraks. Also, the evidence showed that the
Dvoraks' maintenance account on the truck was credited with the
insurance refund .
During the presentation of Northwest's deficiency case at
trial, the Dvoraks stipulated that they received notice of the sale
and that Northwest obtained a commercially reasonable price for its
resale of the truck. The Dvoraks did not raise an issue at trial
as to the time, place, or advertising of the sale of their truck.
This Court generally will not review issues raised for the first
time on appeal. Weinberg v. Farmers State Bank of Worden (1988),
231 Mont. 10, 19, 752 P.2d 719, 724. We therefore affirm the
District Court's directed verdict against the Dvoraks for
$30,211.47.
Issue 4
Did the court err in refusing the Dvoraks' proposed jury
instructions?
The standard of review for a trial court's refusal to give
jury instructions is whether the trial court abused its discretion.
Hislop v. Cady (1993), 261 Mont. 243, 247, 862 P.2d 388, 390. A
court may refuse instructions when the facts proven at trial do not
show a basis for the instructions requested. Bushnell v. Cook
(1986), 221 Mont. 296, 300, 718 P.2d 665, 668.
Two sets of proposed instructions are at issue. One set would
have instructed the jury on the Uniform Commercial Code (UCC)
measure of damages. The other set would have instructed on the
Dvoraks' claims that Northwest had improperly sold insurance in
violation of Montana's laws.
The rights of and remedies for a buyer claiming breach in a
sale of goods under the UCC are listed at §§ 30-2-601 and -711,
MCA. In this case, the evidence showed that the Dvoraks did not
reject the truck upon delivery, as described under § 30-2-602,MCA.
Absent rejection of nonconforming goods, the UCC requires notice to
the seller within a reasonable time. See 5 30-2-607, MCA. The
evidence also showed that the Dvoraks failed to notify Northwest of
the alleged nonconformity of the trcck until after Northwest filed
suit to recover the truck, when they filed their counterclaims. It
does not appear therefore that the Dvoraks were entitled to any
damages under the UCC.
The second set of offered instructions concerned the unlawful
sale of insurance by Northwest. This related to a policy of
insurance on Roger Dvorak's life which the Dvoraks purchased when
they entered the financing agreement. The Dvoraks failed to
introduce any evidence at trial to show who sold the insurance or
who received the commissions, or that Northwest received any
commission.
Because the facts proven at trial did not show a basis for the
above jury instructions offered by the Dvoraks, we hold that the
District Court did not abuse its discretion in refusing them.
Issue 5
Do the jury's answers on the special verdict form require a
reversal of their verdict because they are internally inconsistent?
The jury answered "no" to question no. 2 on the special
verdict form, whether Northwest breached the modified contract or
breached the covenant of good faith and fair dealing implied by law
in the modified contract. In question no. 4, the jury answered
"yes" to the question of whether Northwest breached the implied
covenant of good faith and fair dealing in the written contract
between Northwest and the Dvoraks. The Dvoraks maintain that this
is inconsistent.
At trial, the Dvoraks introduced evidence that the written
financing agreement was altered to allow them to make late payment.
The jury accepted this argument, because it found in question no.
1 that the contract was modified. In answer to question no. 2,
however, the jury found that the modified contract was not
breached.
The Dvoraks also introduced evidence at trial that Northwest
breached, in other ways, the covenant of good faith and fair
dealing implied in the written contract. The jury found that this
covenant was breached, but found no damages from this breach.
The Dvoraks' counterclaims included several separate theories.
We hold that the Dvoraks have shown no inconsistency in the jury's
verdict which warrants reversal.
We affirm the judgment of the District Court.
1 We concur:
Justice Terry N. Trieweiler dissenting.
I dissent from the majority's conclusion that the District
Court correctly dismissed the Dvoraks' counterclaim for punitive
damages based on fraud.
Pursuant to Rule 56, M.R.Civ.P., summary judgment is only
appropriate where there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law. In
deciding whether there is an issue of fact, the party opposed to
summary judgment is entitled to all reasonable inferences which may
be drawn from the offered proof. Brown v. Merrill Lynch (1982), 197
Mont. 1, 9, 640 P.2d 453, 457; Reavesv. Reinbold (1980), 189 Mont. 284,
287, 615 P.2d 896, 898. Any doubt is to be resolved in favor of
the party opposing summary judgment. Reagan v. Union Oil Co. (1984) , 208
Mont. 1 , 7, 675 P.2d 953, 956.
I conclude that the affidavits attached to the Dvoraks'
memorandum in opposition to Northwest's motion for summary judgment
were sufficient to raise factual issues regarding the Dvoraks'
claim that they were induced to purchase a truck from Northwest by
fraudulent representations.
For example, Robert G. Wittman operates a service shop where
trucks are rebuilt and serviced, and where body work is performed.
He inspected the truck purchased by the Dvoraks and swore in his
af fidavit that the truck had, at some time, sustained damage to its
body, the engine had been in another truck, and numerous parts were
not installed at the factory. The affiant also stated that the
truck had been painted somewhere other than at the factory and that
the new paint did not match the factory paint. In fact, there was
evidence that the entire cab had been removed and substantial work
done on the truck.
The Dvoraks testified that none of the work described in
Wittman's affidavit was done while they owned and operated the
truck, and that no one else had possession of the truck for a
sufficient period of time within which to perform such extensive
work after its purchase.
Northwest represented to Dvoraks that the truck it sold them
was new. The affidavits offered evidence that it was not new.
Obviously, the dealer's representation was material to the Dvoraks'
decision to purchase the truck.
Knowledge of the speaker's falsity can never be proven
directly unless the speaker admits that he lied. Therefore, to
prove fraud, knowledge must normally be inferred based on all of
the circumstances. In this case, the truck in question was
delivered to Northwest in December 1986 and was in its possession
until sold to Dvoraks on June 1, 1987. The truck was presumably
inspected by Northwest after delivery from the factory and prior to
resale. If the conditions which were noted by those persons who
filed affidavits in support of Dvoraks' claim were present prior to
sale, it can be inferred that they were equally apparent to the
qualified service people working for Northwest.
Likewise, it can be inferred that when a purchaser comes into
a new car or truck dealership, the dealer intends that person to
rely on his or her representations that the vehicle being sold is
new, as opposed to used. Finally, it can be inferred that when a
purchaser pays the price appropriate for a new vehicle, as opposed
to a discounted price for a used or damaged vehicle, that purchaser
relied on representations by the dealer that the vehicle was new.
It was not necessary in order for the Dvoraks to prevail on
their claim for fraud that they prove appreciable out-of-pocket
loss. Section 27-1-204,MCA, provides that " [wlhen breach of duty
has caused no appreciable detriment to the party affected, he may
yet recover nominal damages." Furthermore, § 27-1-221, MCA,
provides that "reasonable punitive damages may be awarded when the
defendant has been found guilty of actual fraud . . . ."
In Laumanv.Lee (1981), 192 Mont. 84, 89, 626 P.2d 830, 833, we
held that nominal damage may serve as the basis for a punitive
damage award, even where the amount of actual damage is elusive.
Certainly, in this case, if the Dvoraks purchased a used and
repaired truck for the price of a new truck, they received less
than they bargained for at the time of sale, even though over the
long term, their use of the truck was not adversely affected. As
pointed out in Lauman, where some actual damage can be presumed,
based on the breach of a legal duty, punitive damages may be
awarded even where the finder of fact assigns no value to the
actual damages sustained.
For these reasons, I would reverse the District Court's
dismissal of the Dvoraks' claim based on fraud, and remand this
case to the District Court for retrial of all issues, including the
claims of fraud and breach of contract. Based on this conclusion,
I would not address the remaining issues discussed in the majority
opinion.
Justice William E. Hunt, Sr., joins in the foregoing dissenting
opinion.
December 29, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Jack E. Sands
Attorney at Law
100 North 27th St., #250
Billings. MT 59101
James P. Murphy & Stewart R . Kirkpatrick
MURPHY & KIRKPATRICK
2929 Third Avenue North
Billings, MT 59101
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA
BY: d-
Deputy