No. 92-313
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
JOHN WILLIAMS and BARBARA WILLIAMS,
Plaintiffs and Respondents,
v. . k,
JYLZL!
CLERK OF SUPREME COURT
ALVIN DeVINNEY, STATE OF MONTANA
Defendant and Appellant.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Leif B. Erickson and The Honorable
Robert J. Boyd, Judges presiding.
COUNSEL OF RECORD:
For Appellant:
Richard DeJana, Attorney at Law,
Kalispell, Montana
For Respondents:
Marshall Murray and Ann E. Clark,
Murray & Kaufman, Kalispell, Montana
Submitted on Briefs: February 18, 1993
Decided: July 1 5 , 1 9 9 3
Filed:
dlerk
Justice Terry N. ~rieweilerdelivered the opinion of the Court.
Defendant ~ l v i nDeVinney appeals from the findings of fact,
conclusions of law, and judgment entered in favor of John and
Barbara Williams by the District Court for the Eleventh Judicial
District, Flathead County, on April 16, 1992. The court found
DeVinney liable for negligent misrepresentation and awarded
plaintiffs damages in the amount of $17,092.50.
We affirm the District Courtts judgment of liability and
remand to the ~istrictCourt for a hearing to determine damages.
The following issues are raised on appeal:
1. Was the District Courtgs finding that the property
DeVinney sold the plaintiffs was unsuitable forthe installation of
a modular home clearly erroneous?
2. Did the court err when it concluded that DeVinney was
personally liable for his negligent misrepresentations?
3. Was there any evidence to support the amount of damages
awarded by the District Court?
4. Did the District Court err when it concluded that
plaintiffsg action is not barred by the statute of limitations?
In August 1987, plaintiffs John and Barbara Williams purchased
a parcel of land from A l v i n and Donna DeVinney in the DeVinneysl
Flathead County subdivision known as Addison Square. Plaintiffs
also purchased a modular home from Kalispell Home Center, Inc.
( K H C ) , which was to be placed on the parcel. Alvin De~inneywas
employed by KHC, and acted as the sales agent for this transaction.
The purchase contract for the land provided that DeVinney
would level and prepare the land for plaintiffs prior to the
installation of the structure, and the agreement with KHC was that
KHC would install the foundation and the modular home. Although
Barbara Williams wanted a full, permanent foundation placed under
the home, DeVinney advised plaintiffs that installing the structure
on piers, in accordance with the manufacturer's specifications,
rather than on a full foundation, was more reasonable considering
price and usefulness. According to Barbara Williams, DeVinney
assured them that the piers would provide an adequate foundation
and that the ground was sound. However, DeVinney had not performed
any specific soil tests prior to selling the land to determine its
suitability for installation of a modular home on concrete piers.
The installation was completed and plaintiffs moved into their
home in the fall of 1987. Shortly thereafter, plaintiffs began
experiencing problems with the house, but on each occasion, KHC
made repairs to plaintiffs' satisfaction. However, during the
spring of 1989, rain began to pour down the inside walls of the
bedrooms. Due to the seriousness of this problem, plaintiffs
contacted a civil engineer, Robert Hafferman, to inspect both the
modular home and the property. Hafferman found that the soil
underneath the structure contained significant amounts of debris
from the remains of a house which had burned down. He concluded
that this debris did not allow the soil to properly compact, which
caused instability of the foundation, uneven settling, and
eventually, damage to the structure itself.
Plaintiffs commenced this action against Alvin and Donna
DeVinney on March 1, 1990, for intentional or negligent
misrepresentation, alleging that they had relied on Alvin
DeVinneygs false representation that the parcel had been properly
prepared forthe installation of their modular home. The DeVinneys
filed an answer and counterclaim on May 15, 1990, alleging that
plaintiffs maliciously slandered them and damaged their reputation.
The DeVinneysl motions to strike and for partial summary
judgment were denied, and in a pretrial order dated October 29,
1991, District Court Judge Leif 3. Erickson established the
following two issues to be determined at a nonjury trial:
1. Whether the Defendants defrauded the Plaintiffs
and/or negligently prepared the site in such a manner
that it proximately caused the damages to the Plaintiffs1
mobile home, the amount of said damages, and whether
punitive damages apply under the circumstance, and if so,
the amount thereof.
2. Did the Plaintiffs defame the Defendants, and if so,
what amount of damages, if any, should be awarded against
them.
The trial was held on November 26 and 27, 1991, and in the
findings of fact and conclusions of law issued on January 6, 1992,
Judge Erickson concluded that Alvin LIeVinney was liable for
negligently misrepresenting to plaintiffs that the property he sold
them was fit for the placement of the home they purchased. Donna
DeVinney was dismissed as a party to the action on the basis that
she had not made the representations upon which plaintiffs relied.
Judge Erickson specified which damages were to be compensated, and
unless an agreement could be reached, ordered a post-trial hearing
to determine the amount due plaintiffs. Finally, Judge Erickson
found that Barbara ~illiams
had defamed Alvin DeVinney, and awarded
DeVinney $1100 in nominal and punitive damages.
Plaintiffs subsequently moved for an order determining
damages, based upon an affidavit of their professional engineer.
DeVinney responded with a brief in which he argued that a hearing
would be required, and that the damages requested by plaintiffs
were in excess of what was specified in Judge Erickson's order.
Three additional affidavits were filed by DeVinney, countering the
affidavit submitted by plaintiffs. After considering all of the
affidavits, and without an evidentiary hearing, Judge Robert J.
Boyd, who had replaced Judge Erickson, rendered judgment in favor
of plaintiffs, and ordered DeVinney to pay John and Barbara
Williams $17,092.50, plus their costs of suit.
From this judgment, and the District Court's findings of fact
and conclusions of law, DeVinney appeals.
I.
Was the District Court's finding that the property DeVinney
sold plaintiffs was unsuitable for the installation of a modular
home clearly erroneous?
DeVinney asserts that the court's finding that the soil was
improperly compacted and caused the damage to plaintiffs' home was
contrary to the evidence. He contends that the evidence before the
court was that the damage was due to the installation of the
structure on piers which did not extend below the frost line.
DeVinney quotes plaintiffs' engineer, Robert Hafferman, as stating:
5
'@Itwas that it was not designed on a permanent foundation, and the
modular home has got to be on a permanent foundation . . . . tt
DeVinney insists that, according to this testimony of plaintiffs'
own expert, it was KHC1s installer who improperly installed the
home by not placing it on a 8tpermanent1t
foundation consisting of
piers extending below the frost line. Thus, DeVinneytscontention
is that plaintiffsi only claim against him was that he failed to
properly prepare the site, but that the evidence demonstrated that
an improper installation by KHC caused the problems to plaintiffsg
home.
This Court will affirm the findings of a trial court sitting
without a jury unless the findings are clearly erroneous. Rule
52(a), M.R.Civ.P. In InterstatePt-oductionCreditv.DeSaye (1991), 250 Mont.
320, 323, 820 P.2d 1285, 1287, we adopted a three-part test to
determine if the findings are clearly erroneous in a nonjury case:
A finding is clearly erroneous if it is not supported by
substantial credible evidence, if the court misapprehended the
effect of the evidence, or, if after review of the record, this
Court is left with a definite and firm conviction that a mistake
has been committed.
After a careful review of the record in this case, we conclude
the District Court did not err when it found that a cause of the
plaintiffs' damage was the unsuitability of the soil where the home
was located.
In his brief, DeVinney isolates certain statements by
Hafferman concerning the consequences of failing to place the
6
structure on a permanent foundation. However, when the evidence is
considered in its entirety, there is support for the finding that
Hafferman indicated the piers would have provided an adequate
foundation if they had been placed below the frost line were in
good bearing soil. Although conflicts may exist i n the evidence
presented, it is the duty of the trial judge to resolve such
conflicts. Due regard is to be given the trial court's ability to
judge the credibility of the witnesses, and it is not this Court's
function to substitute its judgment for that of the trier of fact.
DeSaye, 820 P.2d at 1287-88; Danielsv.Dean (1992), 253 Mont. 465, 471,
833 P.2d 1078, 1082.
Furthermore, the record contains substantial evidence that the
soil under the structure was not good bearing soil. It contained
debris and could not evenly compact. Thus, the piers placed in
this soil could not support the structure. Finally, there was
evidence that DeVinney did represent to plaintiffs that the
property was suitable for the placement of a modular home on a
concrete pier foundation, but that he neither tested the site for
its suitability nor properly prepared the site.
We conclude there was substantial.credible evidence to support
the District Court's findings. We cannot conclude that the court
misapprehended the effect of the evidence, nor does our review of
the record leave us with a definite and firm conviction that a
mistake has been committed. Therefore, we hold the court s
findings with respect to the unsuitability of the site were not
clearly erroneous.
7
Did the court err when it concluded that DeVinney was
personally liable for his negligent misrepresentations?
~eVinneyargues that the damage to plaintiffs1 home was caused
by the installation of an improper foundation. His contention is
that he made no misrepresentations to plaintiffs concerning the
foundation, and therefore, cannot be held liable for negligent
misrepresentation. Moreover, he challenges the courtts
determination that he was personally liable. He argues that any
statements in regard to the foundation were made in his capacity as
an agent of KHC, and were made in good faith and with reasonable
care. Therefore, DeVinney contends that he cannot be held liable
for acts or representations made on behalf of his employer.
In Kitchen Kraftem v. Eastside Bank ( 1990) , 242 Mont . 155, 789 P. 2d
567, we reaffirmed the definition of negligent misrepresentation
which we adopted in State Bank o Townsend v. Maryann ls, Inc. ( 1983 )
f , 204
Mont. 21, 664 P.2d 295. In summary, to prove negligent
misrepresentation, the plaintiff must establish that the defendant
made a false representation of a past or existing material fact
without reasonable grounds for believing the representation to be
true, and the representation induced the plaintiff to rely upon it
and resulted in damage to the plaintiff.
In this instance, after making its findings, the court
concluded that, as a matter of law, DeVinneyts conduct satisfied
the elements of the tort of negligent misrepresentation. Because
of DeVinneylsunique position as both owner of the property and as
the KHC salesman, the court concluded that the duty DeVinney was
under was of a personal nature. In its conclusions of law, the
court stated the following:
That Alvin DeVinney, as owner of the property sold
to the Williams and as salesman for the mobile home sold
to the Williams, was under a duty, when he took it upon
himself to suggest an appropriate foundation for [the]
home, to be aware of the suitability of the property for
that type of foundation. Plaintiffs were entitled to
rely upon his expertise since he held himself out as an
expert and since he would be in an apparently superior
position to know the nature of the property he was
selling. In response to his argument that he, in fact,
did not know the nature of the subject property, suffice
it to say that in such an instance he should not have
thus represented its suitability. When he decided to
sell the property as appropriate for mobile homes and
then presumed to know what type of foundation was
satisfactory he created a duty to the Plaintiffs which
they relied upon to their detriment.
First, we have already held that there was substantial
evidence to support the finding that the damage was caused by the
unsuitability of the site. Although DeVinney asserts that he
should be immune under agency principles, we note that the
representations concerning the suitability of the property were not
made on behalf of KHC; these representations were made for the
purpose of DeVinneylssale of the property to plaintiffs.
Next, even though DeVinneyls statements in which he
recommended a suitable foundation may have been made on behalf of
KHC, and therefore, were made in an agency capacity, § 28-10-702,
MCA, specifies that an agent may be personally liable to a third
person in certain situations. Specifically, this section provides
that an agent is responsible to third persons for acts undertaken
in the course of his agency, "when his acts are wrongful in their
nature." Here, implicit in the court's conclusion is its
determination that DeVinney's actions were wrongful because he
decided to sell the property as appropriate for mobile homes and
then represented its suitability for the type of foundation he
recommended, without any reasonable grounds for doing so.
Thus, based on the court's conclusions with respect to the
unique position DeVinney occupied, we find no grounds to shield
DeVinney from liability under an agency theory. We hold that the
District Court did not err when it concluded that, as a matter of
law, DeVinney's actions created personal liability.
111.
Was there any evidence to support the amount of damages
awarded by the court?
In the January 6, 1992, order, Judge Erickson held that
plaintiffs were entitled to recover the following damages:
1. The cost of removing the mobile home from the
present footings,
2. The cost of the original placement of the mobile
home on those footings, and
3. The cost of replacing the mobile home on the
permanent foundation.
Judge Erickson then ordered a hearing to determine the specific
breakdown of these costs, unless an agreement could be reached by
the parties.
As described earlier, both parties submitted affidavits
concerningthe costs but no further evidentiary hearings were held.
When Judge Boyd took over the case following Judge Ericksonts
resignation, the affidavits were considered and a judgment was
entered in favor of plaintiffs. DeVinney was ordered to pay
plaintiffs $17,092.50, plus their costs of suit.
DeVinney challenges this determination on two bases. First,
he asserts that there was not sufficient evidence to support the
award and that there should have been an evidentiary hearing.
Second, DeVinney contends that the amount awarded included certain
items specifically excluded from the order issued by Judge
Erickson .
We agree with DeVinney's initial assertion that there was
insufficient evidence to support the damages award. A review of
the record demonstrates that Judge Boyd's decision was apparently
based solely on the affidavits. Although the judgment states that
oral argument was held, oral argument is not a substitute for sworn
testimony.
The affidavits relied upon by the court, which attested to the
costs of implementing Judge Ericksonts order, constituted
inadmissible hearsay because they were written assertions, made
out-of-court, which were offered to prove the truth of the matters
asserted. Rules 801 and 802, M.R.Evid. Because the court relied
only upon the affidavits, and did not consider documentary or
testimonial evidence which was subject to cross-examination, it
failed to meet the "substantial evidence" standard necessary to
sustain its judgment. Adlington v. First Montana Title Ins. Co. ( 1990), 245
Mont. 304, 307, 800 P.2d 1051, 1053; Johnson v. Murray (1982), 201
Mont. 495, 506, 656 P.2d 170, 175. Therefore, the award of
damages, entered on April 16, 1992, is vacated and we remand for
an evidentiary hearing and determination of damages pursuantto the
order issued by Judge Erickson.
In response to DeVinneyts complaint that Judge Boyd had
included costs which were not specifically provided for in the
original order, we would simply note that Judge Ericksonvsorder
outlined the general damages to be compensated, and ordered a
further hearing to determine the specific amount. The court should
properly include in its damages award the specific expenses which
it finds, by implication, are necessary to satisfy the general
directives of the earlier decision.
IV.
Did the District Court err when it concluded that plaintiffst
action is not barred by the statute of limitations?
DeVinneytsfinal contention is that 5 27-2-203, MCA, provides
for a two-year statute of limitations for actions based on fraud or
mistake, which includes actions based on negligent misrepresenta-
tion. .
Falls Sand & Gravel Co. v. W: Concrete, Inc. ( D c . Mont . 1967) , 270
F. Supp. 495. Alleging that the evidence demonstrates the
plaintiffs first learned of problems with the modular home in
January 1988, and did not file their complaint until March 1, 1990,
DeVinney asserts that the court should have dismissed the complaint
on the basis that it was barred by the statute of limitations.
Plaintiffs contend, however, that it was not until the spring of
1989, when the serious leaks began and they hired an engineer to
inspect the home and property, that they discovered the true nature
of the problem-
The statute cited by DeVinney states that a cause of action
for fraud or mistake does not accrue Wntil the discovery by the
aggrieved party of the facts constituting the fraud or mistake."
Section 27-2-203, MCA. In this instance, the time at which
plaintiffs discovered the facts giving rise to the cause of action
is a question of fact, and therefore, is subject to a clearly
erroneous standard on review. Steer Inc. v. Department of Revenue ( 1 9 9 0 ) ,
245 Mont. 470, 474, 803 P.2d 601, 603.
After reviewing the record, we conclude that there was
substantial credible evidence to support the finding that
plaintiffs had not discovered the source of the ongoing problems
until the damage was significant enough to prompt them to hire an
engineer to do a thorough inspection. It was at this time that
plaintiffs discovered that the site, as they purchased it, was
unsuitable for the placement of the modular home. The complaint
alleging negligent misrepresentation was then filed within two
years from t h e discovery of these facts. Therefore, t h e court's
conclusion that plaintiffsl claim was filed in a timely fashion was
not clearly erroneous.
For the reasons stated, the judgment of the court in regard to
DeVinneylsliability for negligent misrepresentation is affirmed.
The District Courtls judgment regarding the amount of plaintiffs1
13
damages i s vacated and t h i s matter i s remanded t o t h e District
Court for an e v i d e n t i a r y h e a r i n g t o determine damages.
We concur:
Y
C h i e f Justice
July 15, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
Richard DeJana
Attorney at Law
P.O. Box 1757
Kalispell, MT 59903-1757
Marshall Murray
Murray & Kaufman
P.O. Box 728
Kalispell, MT 59903-0728
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA ,