No. 94-546
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
HKM ASSOCIATES,
Plaintiff and Appellant,
NORTHWEST PIPE FITTINGS, INC.,
a Montana corporation, and
J-M MANUFACTURING COMPANY, INC.,
a Delaware corporation,
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable G. Todd Baugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
David A. Veeder, Veeder Law Firm,
Billings, Montana
For Respondents:
Damon L. Gannett, Gannett, Anderson & Liechty,
Billings, Montana (for Northwest Pipe Fittings)
Paul D. Miler and Patricia D. Peterman,
Holland & Hart, Billings, Montana
(for J-M Manufacturing Company)
Submitted on Briefs: May 18, 1995
Decided: August 1, 1995
Filed:
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Appellant HKM Associates appeals from two orders of the
Thirteenth Judicial District Court, Yellowstone County, granting
respondents Northwest Pipe Fittings, Inc.'s, and J-M Manufacturing
Company, Inc.'s, motions to dismiss appellant's claim of indemnity
and granting respondents' motions for summary judgment as to the
remainder of appellant's claims.
We affirm.
Appellant raised the following issues on appeal:
1. Do genuine issues of material fact exist as to whether
HKM relied upon J-M's and Northwest's fraudulent misrepresenta-
tions, and whether HKM was damaged as a result?
2. Do genuine issues of material fact exist as to whether
HKM could have discovered all of the facts constituting the fraud
prior to April 26, 1989?
3. Do genuine issues of material fact exist as to whether
HKM's fraud claims are barred by the doctrine of collateral
estoppel?
4. Do genuine issues of material fact exist as to whether
J-M and Northwest fraudulently concealed from HKM the material
facts of HKM's fraud claims?
5. Do genuine issues of material fact exist as to whether
Hm is barred by the doctrine of collateral estoppel from bringing
its claim for indemnification?
We restate the issues as follow:
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1. Did the District Court err in granting respondents'
motions to dismiss appellant's claim for indemnity?
2. Did the District Court err in granting respondents'
motions for summary judgment as to appellant's remaining claim of
fraudulent misrepresentation?
In 1985, the Lockwood Water Users Association (LWUA) hired
appellant HKM to design the plans and specifications for a pipeline
project. HKM acted as the project engineer and Jim's Excavating
Service, Inc. (JES), acted as the general contractor.
A section of the pipeline was to be laid through an "S" curve
which required the pipe to be either deflected at the appropriate
joint or to be laid with special fittings. HKM designed the
project to use deflectable, ductile iron pipe, rather than special
fittings. Prior to releasing the original bid form, HKM amended
the bid to solicit alternative bids for using PVC pipe.
Respondent J-M Manufacturing informed HKM that 24-inch PVC
pipe (Big Blue) could be deflected up to 3 degrees at the joint.
Based on this information, HKM determined that 24-inch PVC pipe
could be laid and deflected through the "S" curve without special
fittings.
The amended bid proposal did not contain any specifications
that fittings were to be used on the "S" curve. JES purchased PVC
pipe manufactured by J-M from respondent Northwest. Northwest
certified and subsequently verified to HKM that 24-inch PVC pipe
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manufactured by J-M could be deflected up to three degrees at the
joint. HKM ultimately approved of the bid submitted by JES.
Following the start of construction in September 1985, J-M
informed JES that the 24-inch PVC pipe could not be deflected and
that special fittings would have to be installed to accommodate the
I s ,1 curve. Construction at the "S" curve was halted until the
necessary fittings could be delivered. Work on the "S" curve
resumed after the fittings arrived on July 14, 1986. During a
September 10, 1986, inspection, HKM discovered that the cement
linings of the fittings were cracked and had to be removed. NWJ
fittings arrived at the project on October 5, 1986.
On May 8, 1987, JES filed a complaint against HKM and LWUA
claiming, inter alia, delay and extra work damages caused as a
result of HKM's negligent design and supervision of the pipeline
project. In Jim's Excavating Service, Inc., v. HKM Associates
(1994), 265 Mont. 494, 878 P.2d 248, we affirmed the jury verdict
of $381,000 in favor of JES.
On April 26, 1991, HKM filed a complaint against J-M and
Northwest, claiming negligence and negligent misrepresentation.
Northwest brought a motion to dismiss, and J-M filed a motion for
summary judgment. On August 27, 1992, HKM filed its first amended
complaint, adding a claim for fraudulent misrepresentation. J-M
and Northwest filed motions to dismiss all claims pursuant to
Rule 12(b)(6), M.R.Civ.P. The District Court treated these motions
as motions for summary judgment and ruled that HKM's claims for
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negligence and negligent misrepresentation were barred by the
statute of limitations. At the same time, the District Court held
that HKM's claim for fraudulent misrepresentation was not barred by
the statute of limitations or the doctrine of res judicata.
On September 13, 1993, HKM filed its second amended complaint,
adding a claim for indemnification. J-M and Northwest filed
motions to dismiss HKM's indemnity claim, which the District Court
granted on December 10, 1993.
In June 1994, J-M and Northwest filed renewed motions for
summary judgment on the remaining fraud claims. On August 26,
1994, the District Court granted those motions, concluding that
HKM's fraud claims were barred by the statute of limitations and
res judicata. The court also concluded that the fraud claims
lacked the elements of reliance and damages. HKM appeals from the
District Court's orders of December 10, 1993, and August 26, 1994.
ISSUE 1
Did the District Court err in granting respondents' motions to
dismiss appellant's claim for indemnity?
"in reviewing a motion to dismiss, we construe the complaint
in the light most favorable to the plaintiff and take the
allegations of the complaint as true." Goodman Realty, Inc. v.
Monson (1994), 267 Mont. 228, 231, 883 P.2d 121, 123. Our scope of
review is broad and we examine the entire case and make a
determination based on that examination. Goodman, 883 P.2d at 123.
We will affirm the dismissal only if we find that the plaintiff is
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not entitled to relief under any set of facts which could be proved
in support of the claim. Goodman, 883 P.2d at 123.
HKM added a count to its second amended complaint seeking
indemnification from J-M for the $381,000 judgment against HKM
rendered in Jim's Excavatinq. J-M and Northwest Pipe filed motions
to dismiss HKM's claim for indemnification.
In Jim's Excavating, the jury returned a special verdict
finding,that HKM was negligent in preparing the plans and specifi-
cations of the LWUA project, and that HKM's negligence was a cause
in fact of JES's damages. The District Court concluded that
"because negligence was the subject of the previous action, HKM
could have and should have asserted indemnity against J-M and
Northwest Pipe at that time. The issue of negligence cannot be
re-litigated and [HKMI 's claim for indemnification is barred by
application of the doctrine of collateral estoppel."
The right to indemnification is an equitable principle based
on the theory that a party compelled to pay for damages caused by
another should be able to seek recovery from that party. Paulsen
v. Treasure State Industries, Inc. (19811, 192 Mont. 69, 626 P.2d
872. Collateral estoppel bars an action, including an action for
indemnification, when: (1) the issue presented in a later action
has been decided in a prior adjudication; (2) a final judgment in
the action was issued; and (3) the party against whom collateral
estoppel is asserted was a party to the previous litigation.
Berlin v. Boedecker (1994), 268 Mont. 444, 453, 887 P.2d 1180,
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1185; Farmers Plant Aid, Inc. v. Huggans (1994), 266 Mont. 249,
254, 879 P.2d 1173, 1176. Of the three criteria needed to
establish collateral estoppel, identity of issues is the most
important and requires that the precise issue has been litigated in
the prior actions. Berlin, 887 P.2d at 1185. It is not necessary,
however, that there be an identical cause of action, but rather,
there must be an identical issue. Boyd v. First Interstate Bank
(1992), 253 Mont. 214, 218, 833 P.2d 149, 151.
The record shows that the issue of HKM's negligence was raised
in Jim’s Excavatinq. The jury determined that HKM was negligent
and a final judgment was entered. Finally, HKM was a party to
Jim's Excavatinq. The criteria for collateral estoppel has been
met, therefore, HKM is prevented from re-litigating the issue of
negligence. Because re-litigating the issue of negligence is
necessary to litigating HKM's claim of indemnification, the
District Court properly granted J-M's and Northwest Pipe's motions
to dismiss HKM's indemnification claim. See Auto Club Ins. Co. v.
Toyota Motor Sales, U.S.A., Inc. (19751, 166 Mont. 221, 225, 531
P.2d 1337, 1339.
We hold that the District Court did not err in granting
respondents' motions to dismiss appellant's claim for indemnity.
ISSUE 2
Did the District Court err in granting respondents' motions
for summary judgment as to appellant's remaining claim of
fraudulent misrepresentation?
Our standard of review on a grant of summary judgment is
identical to that of the district court. Cooper v. Sisters of
Charity (1994), 265 Mont. 205, 207, 875 P.2d 352, 353. Summary
judgment is only proper when there is no genuine issue of material
fact, and the moving party is entitled to judgment as a matter of
law. Rule 56(c), M.R.Civ.P.; Spain-Morrow Ranch, Inc. v. West
(1994), 264 Mont. 441, 442, 872 P.2d 330, 332. The burden of proof
rests with the party seeking summary judgment to provide the court
with evidence which excludes any real doubt as to the existence of
a genuine issue of material fact. Berens v. Wilson (19901, 246
Mont. 269, 271, 806 P.2d 14, 16. Only after the moving party has
met this burden of proof does the burden shift to the nonmoving
party to show that a genuine issue of material fact exists. Morton
v. N.W.M., Inc. (1994), 263 Mont. 245, 249, 868 P.2d 576, 579.
"When raising the allegations that disputed issues of fact exist,
the nonmoving party has an affirmative duty to respond by
affidavits or other sworn testimony containing material facts that
raise genuine issues; conclusory or speculative statements will not
suffice." Koepplin v. Zortman Mining (1994), 267 Mont. 53, 59, 881
P.2d 1306, 1309.
The District Court granted respondents' motions for summary
judgment concluding that appellant's remaining claim of negligent
misrepresentation was barred by the statute of limitations and the
doctrine of res judicata.
HKM's fraudulent misrepresentation claims are based on two
installation manuals issued by J-M for its 24-inch PVC pipe. The
first manual of May 1986 provides for no joint deflection. The
second manual of February 1987 allows for 1.5 degree joint
deflection. HKM asserts that J-M's internal correspondence reveals
that it did not actually change its recommendation to no
deflection, but rather, J-M always recommended joint deflection to
some degree. HKM maintains that it did not learn that J-M's
purported "flip-flop" as to the deflectability of its 24-inch PVC
pipe was false until the Jim’s Excavatinq trial in August 1992.
HKM asserts that its belief that fraud was committed was confirmed
in May 1994 when HKM received a July 1986 internal correspondence
which indicated that J-M's true recommendation provided for some
degree of deflection at the joint. The record does not support
HKM's position.
An action for fraudulent misrepresentation must be brought
within two years of discovery of the facts constituting the fraud
by the aggrieved party. Section 27-2-203, MCA. HKM filed its
complaint on April 26, 1991. However, as early as April 18, 1986,
HKM learned of J-M's inconsistent position as to the deflectability
of its 24-inch PVC pipe when a representative of J-M arrived at the
worksite and informed HKM that J-M was requiring zero deflection at
the joint and that HKM would need fittings for the pipe in order to
negotiate the curve. At HKM's request, J-M confirmed its revised
"no deflection" position in June 1986. In November 1986, HKM
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received J-M's installation guide which recommended no joint
deflection for 24-inch PVC pipe. When a defendant's fraudulent
concealment prevents a plaintiff from discovering a cause of
action, the statute of limitations is generally tolled. United
Methodist Church v. D.A. Davidson (1987), 228 Mont. 288, 296, 741
P.2d 794, 798; see § 27-2-102(3) (b), MCA. "In a non-malpractice
negligence action, there must be an affirmative act committed by
the defendant, and the affirmative act must be calculated to
obscure the existence of the cause of action." United Methodist
Church, 741 P.2d at 798. There is nothing in the record to suggest
that either J-M or Northwest engaged in affirmative acts calculated
to obscure from HKM the existence of a cause of action sufficient
to toll the two-year statute of limitations.
We conclude that HKM's claim for fraudulent misrepresentation
is barred by the two-year statute of limitations. As a result,
there exist no genuine issues of material fact. We hold that the
District Court did not err in granting respondents' motions for
summary judgment as to appellant's remaining claim of fraudulent
misrepresentation.
Affirmed.
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We concur:
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