January 28 2008
DA 07-0061
IN THE SUPREME COURT OF THE STATE OF MONTANA
2008 MT 17
JAMES M. WALTERS and DIANE M. WALTERS,
Plaintiffs and Appellee,
v.
LARRY LULOFF, JANET PERKINS LULOFF,
PHYLLIS WEBSTER and THE BROKERS
A REAL ESTATE CO., P.C.,
Defendants and Appellants.
APPEAL FROM: District Court of the Twenty-Second Judicial District,
In and For the County of Carbon, Cause No. DV 03-57
Honorable Blair Jones, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
W. Scott Green, Patten, Peterman, Bekkedahl & Green, Billings, Montana
For Appellee:
Kathryn S. Syth, LaRance & Syth, Billings, Montana
Submitted on Briefs: November 21, 2007
Decided: January 28, 2008
Filed:
__________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.
¶1 Larry Luloff and Janet Perkins Luloff (collectively, Luloffs) appeal from an order of
the Twenty-Second Judicial District Court, Carbon County, granting James M. Walters’s and
Diane M. Walters’s motion for summary judgment. The Luloffs also appeal the District
Court’s determination of damages and award of attorney fees to the Walters. We affirm in
part, vacate the award of attorney fees, and remand for further proceedings.
¶2 We review the following issues on appeal:
¶3 Did the District Court err in granting the Walters’ motion for summary judgment?
¶4 Did the District Court commit an abuse of discretion in its determination of damages?
¶5 Did the District Court commit an abuse of discretion when it awarded attorney fees to
the Walters?
FACTUAL AND PROCEDURAL BACKGROUND
¶6 The Stormitt Butte Subdivision sits just south of Boyd, Montana, in Carbon County.
The Luloffs owned the subdivision. James M. Walters (Jim) and Diane M. Walters
(collectively, Walters) entered into a buy-sell agreement on May 11, 2000, to purchase Lot
Six of the Stormitt Butte Subdivision from the Luloffs.
¶7 The Luloffs’ real estate agent informed the Walters that the well on Lot Six produces
two and one-half gallons of water per minute. The Luloffs’ agent provided a well log report
(Well Log One) to the Walters at the signing of the buy-sell agreement. Well Log One
indicated that the well runs 801 feet deep. Well Log One denoted the well’s production as
two and one-half gallons of water per minute.
¶8 The Walters, the Luloffs, and the Luloffs’ real estate agent met to close the sale of Lot
Six on June 2, 2000. The Luloffs assured the Walters that the well produces clear drinking
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water. Jim Walters inquired again concerning Well Log One and the well’s production.
Larry Luloff asserted that Well Log One accurately reflected both the well’s depth and the
well’s production. Larry Luloff asserted that the well produces two and one-half gallons of
water per minute. The Walters received an additional copy of Well Log One and the parties
closed the sale.
¶9 The Walters purchased Lot Six from the Luloffs for $41,824 under a contract for
deed. The contract for deed included a provision requiring the Walters to keep the property
free of liens and encumbrances, an acceleration clause, and an attorney fee provision.
¶10 The Walters built a home on the property and had a pump placed in the well. The
pump initially failed to work. The pump ultimately produced a limited amount of dirty water
and would run dry after approximately thirty minutes. The Walters refused to pay for the
pump, and the installation company filed a construction lien against the property. The
Luloffs then declared a default of the contract for deed and demanded the purchase price
under the acceleration clause. The Walters refinanced in order to avoid forfeiture of Lot Six.
¶11 The Walters contacted Mike Keele (Keele), an employee of Aqua Drilling, Inc.,
regarding the well on Lot Six. Keele had assisted in drilling the well on Lot Six. Keele
informed the Walters that, according to his company records, the well produces only half of
a gallon of water per minute.
¶12 Keele accompanied Jim Walters to Lot Six to examine the well in the fall of 2001.
Larry Luloff arrived at the site. Luloff gave Walters another well log report (Well Log
Two). Well Log Two indicated that the well on Lot Six produces one and one-half gallons
of water per minute. Well Log One and Well Log Two bear the same date and signature.
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The reports appear identical except for the different figure denoting the well’s rate of
production.
¶13 Keele examined Well Log Two and informed the Walters that it incorrectly recorded
the well’s production rate. Keele stated that someone “obviously” had “altered” the report.
Keele then examined Well Log One and confirmed that it too incorrectly denoted the well’s
production rate. Keele advised the Walters to examine the well log information on file with
the Montana Bureau of Mines and Geology Ground Water Information Center (Bureau of
Mines and Geology). Information on file with the Bureau of Mines and Geology confirms
that the well on Lot Six produces only half of a gallon of water per minute. The well’s
limited production forced the Walters to install a cistern system on Lot Six. The Walters had
to haul water to the cistern in order to service their home.
¶14 The Walters filed suit against the Luloffs and their real estate agent on June 27, 2003.
The Luloffs declined to obtain counsel and filed an answer pro se. The Luloffs filed
numerous motions and documents with the District Court, including an affidavit submitted
on September 16, 2003. The Luloffs assert in the affidavit that they did not convey any
information to the Walters concerning Lot Six’s well “prior to June 2, 2000, which was the
date of the closing on the lot.” The Luloffs also provided an answer to the Walters’
discovery request. The Luloffs’ answer provides: “My knowledge is that the well was
drilled to 800 feet, filled back to 400 feet and cased to that depth. The volume of water at
that time was 700 gallons per day . . . .”
¶15 The Walters filed a motion for summary judgment on March 13, 2006. The court held
a hearing on the motion on June 20, 2006, after postponing the hearing at the Luloffs’
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request. The Luloffs failed to appear at the hearing. The District Court granted the Walters’
motion for summary judgment on the issue of liability on July 18, 2006.
¶16 The District Court held a hearing on damages on November 13, 2006. The Luloffs
appeared pro se at the hearing. The Luloffs obtained counsel for the first time in this matter
on November 29, 2006. The District Court determined the amount of damages and awarded
the Walters attorney fees in its Findings of Fact, Conclusions of Law, and Order entered on
January 11, 2007. The Luloffs appeal the District Court’s grant of summary judgment, its
determination of damages, and the award of attorney fees to the Walters.
STANDARD OF REVIEW
¶17 We review de novo a district court’s decision to grant summary judgment, using the
criteria applied by the district court under M. R. Civ. P. 56. Farmers Cooperative Assoc. v.
Amsden, LLC, 2007 MT 286, ¶ 24, 339 Mont. 445, ¶ 24, 171 P.3d 690, ¶ 24. A district court
properly grants a motion for summary judgment when no genuine issue of material fact
exists and the moving party is entitled to judgment as a matter of law. Farmers Cooperative,
¶ 24. We review a district court’s determination of damages and award of attorney fees for
abuse of discretion. Weimar v. Lyons, 2007 MT 182, ¶ 17, 338 Mont. 242, ¶ 17, 164 P.3d
922, ¶ 17; Rosenthal v. County of Madison, 2007 MT 277, ¶ 23, 339 Mont. 419, ¶ 23, 170
P.3d 493, ¶ 23.
DISCUSSION
ISSUE ONE
¶18 Did the District Court err in granting the Walters’ motion for summary judgment?
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¶19 The Luloffs argue that the District Court improperly granted summary judgment by
default. The Luloffs further contend that the affidavit filed with the court on September 16,
2003, raised a genuine issue of material fact that precluded the grant of summary judgment.
The Luloffs also argue for the first time on appeal that the Walters’ original complaint
alleged only actual fraud. This court generally will not address an issue that a party did not
raise before the district court. Owens v. Montana Dept. of Revenue, 2007 MT 298, ¶ 2, 340
Mont. 48, ¶ 2, ___ P.3d ___, ¶ 2. Accordingly, we address only those issues that the Luloffs
properly preserved for appeal.
¶20 A party seeking summary judgment must provide the court with evidence that
demonstrates the absence of genuine issues of material fact. Bradley v. Crow Tribe of
Indians, 2005 MT 309, ¶ 13, 329 Mont. 448, ¶ 13, 124 P.3d 1143, ¶ 13. We look to the
pleadings, depositions, answers to interrogatories, admissions on file, and affidavits to
determine the existence of genuine issues of material fact. Bradley, ¶ 12. The burden shifts
to the non-moving party to demonstrate that a genuine issue of material fact exists. Bradley,
¶ 14. The non-moving party has an affirmative obligation to respond by affidavits or other
sworn testimony to raise genuine issues of fact. HKM Assoc. v. Northwest Pipe Fittings, 272
Mont. 187, 193, 900 P.2d 302, 305-06 (1995). A district court may not grant summary
judgment against a party, however, simply “because they did not respond to the motion, or
did not show up at the hearing.” Bradley, ¶ 26.
¶21 A court properly grants a motion for summary judgment on a claim for negligent
misrepresentation when the record affirmatively establishes (1) that the defendant made a
false representation as to a past or existing material fact without any reasonable ground for
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believing it to be true, regardless of his or her actual belief, with the intent to induce the
plaintiff’s reliance; and (2) that the plaintiff, unaware of the falsity of the representation,
justifiably relied on the representation and suffered damage as a result of that reliance.
Cechovic v. Hardin & Associates, Inc., 273 Mont. 104, 112, 902 P.2d 520, 525 (1995).
¶22 The Walters filed documentary evidence and an affidavit in support of their motion
for summary judgment. The Walters established that they inquired about the quantity of the
water produced by Lot Six’s well on numerous occasions, and that they specifically inquired
about the well’s production at the closing of the sale. The Walters established that Larry
Luloff responded at the closing that the well produces two and one-half gallons of water per
minute. The Walters demonstrated this statement’s falsity through Keele’s affidavit, the
report from the Bureau of Mines and Geology, and a second well report provided by Larry
Luloff that denoted the well’s production at only one and one-half gallons of water per
minute.
¶23 The Luloffs’ response to discovery states that Larry Luloff knew at the closing that
the well produced “700 gallons” of water per day. This discovery response reveals that
Larry Luloff did not have reasonable grounds to believe his assertion at closing that the well
produces two and one-half gallons of water per minute, or 3,600 gallons per day.
¶24 A buyer justifiably relies on a seller’s representations concerning a property’s water
supply. See Parkhill v. Fuselier, 194 Mont. 415, 419, 632 P.2d 1132, 1135 (1981). The
Walters justifiably relied on the Luloffs’ representations concerning Lot Six’s well and its
water production. The Walters verified that they suffered harm as a result of relying on the
Luloffs’ representations.
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¶25 The District Court found that the Walters had satisfied their initial burden under
summary judgment. The Luloffs, on the other hand, failed to submit any response to the
motion for summary judgment. Indeed, the Luloffs failed to attend the hearing on summary
judgment. The District Court’s order cites the Luloffs’ failure to respond as constituting a
failure to satisfy the then-shifted burden under summary judgment. The District Court did
not grant summary judgment by default.
¶26 The Luloffs assert, nonetheless, that the affidavit that they had submitted two and one-
half years earlier raised a genuine issue of material fact. The affidavit states that the Luloffs
had no contact or communication with the Walters before the closing of the sale of Lot Six.
¶27 The Walters’ motion for summary judgment faulted the Luloffs for statements made
at the closing of the sale of the property. The Luloffs’ affidavit does not raise a genuine
issue of fact with regard to the alleged statements made at closing. The District Court
properly determined that the Luloffs had failed to demonstrate the existence of a genuine
issue of fact. We conclude that the District Court properly granted the Walters’ motion for
summary judgment.
ISSUE TWO
¶28 Did the District Court commit an abuse of discretion in its determination of damages?
¶29 The Luloffs argue for the first time on appeal that the District Court failed to
apportion the damages between the Luloffs and their real estate agent. We decline to address
the issue of apportionment in light of the Luloffs’ failure to raise it in the District Court.
Owens, ¶ 2.
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¶30 With respect to the amount of damages, we note that a plaintiff is entitled to those
losses incurred in justifiable reliance upon a defendant’s negligent misrepresentations.
Bokma Farms, Inc. v. State, 2000 MT 298, ¶ 11, 302 Mont. 321, ¶ 11, 14 P.3d 1199, ¶ 11.
The District Court concluded that the Walters established the absence of any genuine fact
issue relative to a claim of negligent misrepresentation against the Luloffs. The District
Court assessed the damages in light of the Walters’ reliance on the Luloffs’
misrepresentations. The District Court’s determination of damages did not constitute an
abuse of discretion based on the record before us.
ISSUE THREE
¶31 Did the District Court commit an abuse of discretion when it awarded attorney fees to
the Walters?
¶32 The Luloffs argue that the District Court improperly awarded attorney fees to the
Walters. The Luloffs point out that the Walters did not allege a claim for attorney fees in
their complaint. The Luloffs contend that the Walters failed to assert a contract based claim
and cannot recover attorney fees on a claim for negligent misrepresentation - - the sole claim
on which the Walters prevailed.
¶33 We generally prohibit a party from recovering attorney fees absent a specific
contractual provision or statutory grant. Cechovic, 273 Mont. at 123, 902 P.2d at 532. We
have held, however, that a district court has the equitable power to award attorney fees when
justice so requires. In re Estate of McDermott, 2002 MT 164, ¶ 34, 310 Mont. 435, ¶ 34, 51
P.3d 486, ¶ 34. We quoted in McDermott the court’s account of the actions of the penalized
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party, who took “ ‘every opportunity to obstruct and avoid a resolution of the issues . . .’ ”
and held “ ‘positions that are not supported by law or facts . . . .’ ” McDermott, ¶ 33. We
further noted in McDermott that § 37-61-421, MCA, authorizes a district court to award
attorney fees when a party “ ‘multiplies the proceedings in any case unreasonably and
vexatiously . . . .’ ” McDermott, ¶ 34.
¶34 The District Court awarded attorney fees pursuant to a provision in the contract for
deed, and alternatively on the basis that “justice so requires.” We note, however, that neither
the Walters’ complaint nor their motion for summary judgment asserts a contract claim. The
District Court also failed to explain why justice required the award of attorney fees to the
Walters. The District Court maintains the best perspective for determining the
reasonableness of the Luloffs’ actions. Accordingly, we vacate the award of attorney fees.
We remand to the District Court for the sole purpose of determining whether an award of
attorney fees to the Walters remains appropriate on the basis that “justice so requires.”
¶35 Affirmed in part, vacated in part, and remanded.
/S/ BRIAN MORRIS
We Concur:
/S/ JAMES C. NELSON
/S/ JOHN WARNER
/S/ PATRICIA COTTER
/S/ JIM RICE
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