Case Title: McKenney v. Pacific First Federal Sav. Bank of Tacoma, Wash.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1994-12-30T00:00:00Z

Document:
McKenney v. Pacific First Federal Sav. Bank of Tacoma, Wash.1994 WY 151887 P.2d 927Case Number: 92-170Decided: 12/30/1994Supreme Court of Wyoming
Wesley R. McKENNEY and 
Claire L. McKenney, husband and wife,

Appellants 
(Plaintiffs),

v.

PACIFIC FIRST FEDERAL 
SAVINGS BANK OF TACOMA, WASHINGTON; Campbell Land Company, Inc., a Wyoming 
corporation d/b/a Century 21-Sun Agency; and Thomas A. 
Ostlund,

Appellees 
(Defendants).

 

Appeal from District 
Court, Campbell County, Dan R. Price, II, J.

 

Stuart S. Healy, 
Sheridan, for appellants.

Thomas E. Lubnau 
II, James L. Edwards of Stevens, Edwards & Hallock, and M. Greg Carlson of 
Drew & Carlson, Gillette, for appellees.

Before 
GOLDEN, C.J., and THOMAS, CARDINE*, MACY, and TAYLOR, 
JJ.

*Retired 
July 6, 1994

THOMAS, 
Justice.

 

[¶1]      The resolution of 
this case requires the application of our defined process for resolving motions 
for summary judgment in the context of claims for fraud. Wesley R. McKenney and 
Claire L. McKenney (McKenneys) brought this action alleging fraud in the 
inducement based upon a failure to disclose an alleged defect in residential 
property. The trial court granted the defendants' motion for summary judgment 
with respect to the claims of fraud and disposed of a contractual claim as a 
matter of law. The essential issue is whether, when confronted with the factual 
demonstration by Pacific First Federal Savings Bank of Tacoma, Washington 
(Pacific First), Campbell Land Company, Inc. d/b/a Century 21-Sun Agency (Sun 
Agency), Thomas A. Ostlund (Ostlund) and Ann C. Smith (Smith) to refute 
particular elements of the claim of fraud, the McKenneys responded with factual 
information to demonstrate genuine issues of material fact. A second issue is 
presented relating to the contractual claim. Our examination of the record and 
Wyoming precedent persuades us the McKenneys did fail to make the appropriate 
factual demonstration in light of the facts presented by Pacific First, Sun 
Agency, Ostlund, and Smith, and that failure foreclosed any genuine issue of 
material fact. We hold the trial court properly entered a partial summary 
judgment in favor of the defendants on the fraud claims, and we are satisfied 
the trial court correctly interpreted the contractual language in entering a 
partial summary judgment with respect to the claim of breach of contract. The 
partial summary judgment, which incorporated the requisite finding to make it a 
final order, is affirmed in all respects.

[¶2]      The McKenneys set 
forth the issues in this way:

A. Whether Summary 
Judgment against the Appellants was proper under the two-part test of Rule 
56(c), W.R.C.P.

1. Did the District Court 
err by making findings of fact on the contract and fraud claims which should 
have been left for jury determination?

2. Are the factual 
findings and legal conclusions supported by law?

Pacific First 
makes a separate statement of those issues:

I. Whether the trial 
court properly granted partial summary judgment on the issue of fraud because 
Appellant failed to prove a prima facie case.

II. Whether the trial 
court properly interpreted the specific language of the Specific Performance 
Contract (Residential).

[¶3]      Before pursuing 
the factual background of this case in the context of the allegations of the 
complaint; the refutation of those allegations submitted by Pacific First, Sun 
Agency, Ostlund, and Smith in support of their respective motions for summary 
judgment; and the factual information submitted by the McKenneys in opposition 
to that factual showing, it is appropriate to review the elements of the 
McKenneys' fraud claims and the process for summary 
judgment.

[¶4]      The essential 
elements of the McKenneys' claims of fraud determine the materiality of any 
disputed fact in light of whether it will establish, or refute, one of those 
essential elements. In Johnson v. Soulis, 542 P.2d 867, 872 (Wyo. 1975), 
we said:

In Wyoming the elements 
of an action for fraud have been identified as a false representation by a 
defendant of material facts which are relied upon by a plaintiff to his damage. 
Davis v. Schiess, Wyo., 417 P.2d 19 (1966). Earlier this Court developed the 
concept that the asserted false representation must be one which is made to 
induce action, and that it must be reasonably believed by the plaintiff to be 
true. First National Bank v. Swan, 3 Wyo. 356, 23 P. 743 
(1890).

These elements 
of the cause of action for fraud have consistently been invoked by this court. 
E.g., Lavoie v. Safecare Health Serv., Inc., 840 P.2d 239 (Wyo. 1992); 
Britton v. Bill Anselmi Pontiac-Buick-GMC, Inc., 786 P.2d 855 (Wyo. 
1990); Rocky Mountain Helicopters, Inc. v. Air Freight, Inc., 773 P.2d 911 (Wyo. 1989); Garner v. Hickman, 709 P.2d 407 (Wyo. 1985); Duffy v. 
Brown, 708 P.2d 433 (Wyo. 1985).

[¶5]      With respect to 
claims for fraud, we have applied rather literally the requirements of 
WYO.R.CIV.P. 9(b) that "[i]n all averments of fraud or mistake, the 
circumstances constituting fraud or mistake shall be stated with particularity." 
Shriners Hospitals for Crippled Children, Inc. v. First Sec. Bank of Utah, 
N.A., 835 P.2d 350 (Wyo. 1992); Johnson v. Aetna Cas. Ins. Co. of 
Hartford, Conn., 608 P.2d 1299 (Wyo. 1980), appeal dismissed, cert. 
denied, 454 U.S. 1118, 102 S. Ct. 961, 71 L. Ed. 2d 105 (1981), reh'g 
denied, 455 U.S. 1039, 102 S. Ct. 1743, 72 L. Ed. 2d 157 (1982). Furthermore, 
our rule is that fraud is to be established by clear, unequivocal, and 
convincing evidence, and it will never be presumed. Duffy; Kincheloe v. 
Milatzo, 678 P.2d 855 (Wyo. 1984). These same concepts have been applied in 
addressing motions for summary judgment in the context of claims of fraud. 
Laird v. Laird, 597 P.2d 463 (Wyo. 1979). Assuming the pleadings allege 
fraud with sufficient particularity, and the parties accused of fraud, in 
support of a motion for summary judgment, have presented facts that refute those 
allegations of fraud, the party relying upon the fraud claim then must 
demonstrate the existence of genuine issues of material fact by clear, 
unequivocal, and convincing evidence presented in opposition to the motion for 
summary judgment. Albrecht v. Zwaanshoek Holding En Financiering, B.V., 
762 P.2d 1174 (Wyo. 1988); Duffy.

[¶6]      It is against 
this background of substantive rules as applied in the summary judgment process 
that we analyze the facts of this case. The general background involves the 
desire of the McKenneys to purchase a house located at 811 Ventura Street in 
Gillette, which was owned by Pacific First. Pacific First had listed the 
property for sale with Sun Agency. Ostlund was the licensed broker for Sun 
Agency, and Smith was a selling agent for Sun Agency. The McKenneys submitted an 
offer on that property through Smith. Prior to making the offer, the McKenneys 
had been approved for a Veterans Administration insured loan with respect to 
their financial capabilities.

[¶7]      The problems 
relate to a retaining wall on the north side of the property. A survey in the 
record indicates it was primarily situated on the property to the north, but at 
the eastern end it gravitated across the property line of the 811 Ventura 
property. The retaining wall was leaning outward. The essence of the McKenneys' 
claims is that the property could not be financed with a Veterans Administration 
(VA) or Federal Housing Administration (FHA) insured loan because of this 
defect. They assert Smith, Ostlund, Sun Agency, and Pacific First were aware of 
the defect and its effect on insured financing, but failed to disclose those 
matters prior to obtaining an Offer, Acceptance & Receipt submitted by the 
McKenneys on November 11, 1988.

[¶8]      More 
specifically, the McKenneys alleged in the fraud count of their complaint that 
they made the offer to purchase "expressly conditioned upon Plaintiffs' ability 
to obtain financing supported by the Department of Urban Development/Veterans 
Affairs loan guarantees * * *." They alleged that offer was amended on November 
23, 1988, and there was a further amendment by an agreement executed on January 
20, 1989, providing an extension of the closing date to January 31, 1989. The 
complaint alleged knowledge on the part of all of the adverse parties of the 
fact that a concrete retaining wall separating the 811 Ventura Street property 
from the adjacent property to the north was "in a defective condition and 
represented an immediate landslide danger to the residence and its occupants." 
The complaint also alleged all of the defendants knew, or had reason to know, 
the property would not qualify for either VA or FHA financing in the absence of 
a qualified engineering report concerning the retaining wall and the completion 
of any necessary repairs recommended by such a report. Specificity was added by 
asserting the defendants knew these latter facts because of the failure of the 
property to qualify for FHA financing in October of 1988 due to the defective 
condition of the retaining wall. The McKenneys alleged that the defendants 
intentionally concealed this information in order to induce the sale of the 
property at an inflated price. The complaint then alleged that the defendants, 
individually or as agent for some other defendant, with knowledge of the agent's 
principal, intentionally or recklessly made certain representations as to the 
soundness and safety of the property, its market value, and the ability of the 
plaintiffs to qualify for financial assistance from an agency of the U.S. 
Department of Housing and Urban Development, which were untrue and known to be 
untrue by each of the defendants.

[¶9]      The McKenneys 
further allege they reasonably relied upon the misrepresentations of fact, and 
they were reasonably deceived by the concealment of other material information. 
The complaint then alleged that, about January 25, 1989, the McKenneys learned 
of the condition of the retaining wall and its significance by virtue of an 
instrument entitled "Endorsement to Certificate of Reasonable Value" issued on 
that date on behalf of the Administrator of Veteran's Affairs. This document 
specified the additional requirement for a statement from a professional 
engineer certifying the safety and adequacy of the retaining wall as a condition 
to loan guarantees from the VA.

[¶10]   The McKenneys alleged that, after 
January 25, 1989, Ostlund and Smith, as agents for Sun Agency, induced them to 
enter into a second written agreement for the purchase of the subject property 
and secured an additional cash deposit of $500 by representing to the McKenneys 
that the problem with the retaining wall noted by the VA was of no major 
structural significance; the wall was located on adjacent property and would 
have to be repaired by the adjacent landowners at their cost; and, if not 
repaired, it would be taken care of by Pacific First at no expense to McKenneys. 
The McKenneys then alleged the representation was made that, as a result of the 
repairs, the property would qualify for VA financing and, if not, it would 
qualify for FHA financing. The complaint alleged the property did not qualify 
for VA or FHA financing and, in the meantime, the McKenneys were required to 
vacate their rental premises and move into the 811 Ventura property. They 
alleged, in April of 1989, they received notification from First Guaranty 
Savings and Loan (First Guaranty) that their application for an FHA insured 
mortgage loan was being denied because of poor credit ratings and insufficient 
cash reserves. The McKenneys alleged no other alternative financing was 
available because the property failed to qualify for VA or FHA insured 
financing. The McKenneys alleged damage for loss of the opportunity to make a 
favorable purchase and the failure to have their deposits returned and 
compensatory damages in the amount of $3,000 for improvements they made to the 
property, as well as damages for mental suffering, legal fees and costs, and 
punitive damages.

[¶11]   We commend the approach taken by 
the defendants in pursuing summary judgment. They carefully analyzed the claims 
for fraud and attacked specific elements by reference to the record and the 
articulation of facts by affidavit. This methodology precisely comports with the 
analysis of material facts found in Soulis. The several defendants filed 
individual motions for summary judgment which are somewhat different in terms of 
the premise for the motion, but each of them relies upon the arguments of the 
others.

[¶12]   The first motion for summary 
judgment was filed by Smith. Smith urged the McKenneys did not rely upon any of 
her representations, and they suffered no damage as the result of any 
representations she may have made. Her motion focused upon the allegation by the 
McKenneys in their second cause of action for negligence that she 
made:

[M]aterial 
misrepresentations of fact as to the character and quality of the property sold 
by them [Defendants] to the Plaintiffs and/or by inducing the sales contract(s) 
with Defendant Pacific First Federal by negligently representing the ability of 
the Plaintiffs to qualify for VA financing in accordance with their credit and 
the structural soundness of the property * * *,

and on the 
allegation of the third cause of action that:

[T]he Defendants knew, or 
should have known, that the retaining wall located on the property line was 
defective, that it posed an imminent danger to the real estate and structural 
improvements and persons located upon 811 Ventura, that the value of such 
property was greatly diminished by the danger presented by this retaining wall, 
that the Plaintiffs could not qualify for VA, FHA or conventional financing in 
view of the structural defect of this wall, and that neither the adjacent land 
owner, the City of Gillette, nor the Seller, Pacific First Federal would assume 
the financial responsibility for correcting these defects to the satisfaction of 
the government agencies and lending institutions. Each of these facts was 
material to the formation of the contract between the Plaintiffs and Defendant 
Pacific First Federal. Each of the Defendants intentionally concealed or 
intentionally misrepresented one or more of these material facts with the 
purpose of inducing the purchase of this property by Plaintiffs at a 
unconscionable and unrealistic price. The Plaintiffs reasonably relied upon 
these misrepresentations and were otherwise innocently deceived by the 
concealment of other material facts to their corresponding 
injury.

[¶13]   The second motion for summary 
judgment was filed on behalf of Sun Agency and Ostlund. The argument on this 
motion describes the essence of the McKenneys' complaint as amounting to an 
allegation the defendant misrepresented to them the property would qualify for 
federally insured financing, notwithstanding the condition of the retaining 
wall. These defendants contended, contrary to the allegations of the complaint, 
they had demonstrated, through affidavits, that the property did qualify for FHA 
financing without any qualified engineering report because the wall was on the 
adjacent property. They contended this was the information available to Ostlund 
and the other defendants at the time the statements about which the McKenneys 
complain were made, and the statements were not false or misleading. They argued 
there was no factual dispute about what was said by the several defendants, and 
those statements were true based on the information available at the time the 
representations were made. They also urged the refusal of the loan to McKenneys 
was premised upon their failure to qualify financially and had nothing at all to 
do with the retaining wall. Sun Agency and Ostlund adopted the arguments of 
Smith and Pacific First relative to the damage issues 
presented.

[¶14]   Pacific First was the last 
defendant to move for summary judgment. Pacific First contended there was no 
transaction through which the property was purchased and, further, in accordance 
with the arguments of Smith, the elements of the claim for fraud were not 
established. In addition, Pacific First relied upon the fact the contract was 
conditioned upon financing being obtained, and it would become null and void if 
the loan could not be obtained.

[¶15]   Following a hearing at which the 
parties appeared and argued their respective positions, the trial court ruled in 
favor of the McKenneys on their contract claim for the return of their earnest 
money deposit, and that ruling is appealed only because the court did not award 
attorney fees. The trial court dismissed the McKenneys' claim for fraud and 
dismissed Pacific First's claim for rent. The court retained for trial the 
issues with respect to negligence on the part of Smith and 
Ostlund.

[¶16]   In the course of the Partial 
Summary Judgment, the trial court reviewed the chronology of the case and found, 
among other things:

9. There is absolutely no 
evidence to show that defendants Ostlund and Smith knew that a concrete 
retaining wall north of the property "was in a defective condition and 
represented an immediate landslide danger to the residence and its occupants" as 
alleged in plaintiffs' amended complaint.

* * * * * 
*

13. There is no evidence 
that the defendants intentionally concealed the FHA Conditional Commitment 
issued October 3, 1988, in order to induce the sale of the property to the 
plaintiffs.

14. There is no evidence 
that the defendants intentionally or recklessly made various representations as 
to the soundness and safety of the property, its market value, and the ability 
of the plaintiffs to qualify for financial assistance from an agency of the U.S. 
Department of Housing and Urban Development.

* * * * * 
*

23. Representations by 
the defendants to the plaintiffs to induce the plaintiffs to enter into the 
second offer, acceptance and receipt were not known to be false by the 
defendants and in fact were thought to be true at the time the representations 
were made.

In essence, the 
trial court found and held the misrepresentations claimed by the McKenneys were 
not known to be false when they were made, or they were not false at all, and 
ruled no cause of action could be maintained for fraud.

[¶17]   The following facts are 
demonstrated by the documents in the record. On October 6, 1988, a letter from 
First Guaranty was addressed to Ostlund which enclosed a copy of an FHA 
conditional commitment directed to another client of Sun Agency which alluded to 
a requirement for an "[e]ngineer's report on present condition of the retaining 
wall & who is responsible to fix the wall in the future." That conditional 
commitment related to 811 Ventura in Gillette. On November 11, 1988, the 
McKenneys submitted an Offer, Acceptance & Receipt to Sun Agency relating to 
this property. There was a Counter Offer by Pacific First on November 19, 1988, 
which encompassed a disclaimer, dated November 23, 1988, signed only by Claire 
McKenney. The thrust of the disclaimer is that the property was sold "as is," 
without representations or warranties of any kind, and the buyers had a 
reasonable opportunity to inspect and investigate the property and the 
improvements and were not relying on any representation by seller or its 
agents.

[¶18]   On November 23, 1988, the critical 
dates for closing the transaction were extended. That was followed by a VA 
certificate of reasonable value addressed to McKenneys on December 14, 1988, 
which set the value at $59,000. Then, on January 13, 1989, Provident Federal 
Savings & Loan Association of Casper (Provident Federal) made its loan 
commitment to the McKenneys in the amount of $46,460. However, on January 25, 
1989, the VA issued an Endorsement to Certificate of Reasonable Value, which 
alluded to a letter from a professional engineer at Professional Consulting 
Associates. That letter contained the following relating to the retaining 
wall:

2. North 
Side

d. There is a concrete 
retaining wall on or near the north property line. The top of this wall is 
leaning out (to the south). There are large steel plates with large bolts 
through them intermittently along the length of the wall (suggesting a "dead 
man" type support). There are several cracks in the wall.

The letter 
continued at a later point with this language:

[T]here is one immediate 
area of structural concern. That is the retaining wall along the north property 
line. I have no direct knowledge of where the property line is, nor on which lot 
the retaining wall may be. Regardless, there is considerable leaning in the wall 
and it is of such a degree to cause me to doubt its structural 
integrity.

Even if this retaining 
wall is not on this property, its potential failure could significantly impact 
this home, and endanger the health, safety and welfare of the public. All 
affected parties and the public should be made aware of this 
condition.

[¶19]   On February 22, 1989, a new Offer, 
Acceptance & Receipt was submitted from the McKenneys to Sun Agency. That 
document specifically addressed the retaining wall and provided that it 
was:

[C]onditioned upon 
purchaser obtaining a VA loan to be secured by the property in the amount of 
$45,500 for 30 years. Purchaser to apply said loan as soon as the retaining wall 
is repaired. If said loan cannot be obtained, this contract shall become null 
and void and all earnest monies hereby receipted for shall be returned to 
Purchasers without recourse.

[¶20]   On February 27, 1989, Claire 
McKenney sent a letter to Provident Federal asking it to forward the VA file to 
First Guaranty in Gillette. The letter stated it would take a long time to 
attend to the retaining wall, and Mr. Campbell of First Guaranty had indicated 
he could close within a little more than a month. Provident Federal then 
rejected the McKenneys' loan application on March 1, 1989, specifically alluding 
to the structural engineer's report stating the "retaining wall in back of 
property appears to be structurally unsound" and "must be repaired." 

[¶21]   On April 3, 1989, the McKenneys' 
application to First Guaranty was rejected. The reasons specified were 
delinquent past or present credit obligations with others and insufficient funds 
to close without borrowing, insufficient cash reserves, and insufficient monthly 
cash residual after debt payment. Previously, on March 2, 1989, the Professional 
Consulting Associates had sent to Smith a copy of a letter of demand upon the 
owner of the adjacent property that the retaining wall at 3407 Crestline was in 
need of repair. The record also contains a survey showing the retaining wall is 
primarily on the adjacent property but crosses at one end so it is, in part, on 
the 811 Ventura property.

[¶22]   In addition, the record encompasses 
an affidavit by James Campbell, who represented First Guaranty, in which he 
stated he had processed a loan application on that property prior to the time 
the McKenneys applied for a loan. He stated the property qualified for FHA 
financing without a qualified engineering report concerning the retaining wall 
between 811 Ventura and 3407 Crestline, provided ownership of the retaining wall 
could be determined, and the retaining wall was not part of the 811 Ventura 
property. Mr. Campbell stated he was aware of the condition of the wall at the 
time he processed the prior loan application, upon which the McKenneys relied to 
establish knowledge of the defective wall, and he was aware the City of Gillette 
had a procedure for correcting the problem with the wall. He said the wall 
problem was not an impediment to obtaining financing on 811 Ventura because the 
wall was located on the adjacent property. He then stated the McKenneys failed 
to qualify for a loan for reasons not related to the retaining 
wall.

[¶23]   In addition, Ostlund filed an 
affidavit stating he was able to determine the retaining wall belonged to the 
property at 3407 Crestline, and this determination was based on a review of 
documents in his file including a diagram attached to his affidavit. An 
affidavit from the chief building inspector for the city stated his familiarity 
with the retaining wall and the fact the city had adopted a code for abatement 
of dangerous buildings. He averred the retaining wall was subject to the code, 
and he caused letters to be sent to the owner of 3407 Crestline advising of the 
problems and the need to have the wall repaired. He said, under the code, the 
wall posed a danger to the 3407 Crestline property, but it did not pose a danger 
to the 811 Ventura property. He also stated there were procedures for repair of 
the retaining wall in event the homeowner failed to make the necessary repairs. 
Those procedures had been available since February 6, 
1989.

[¶24]   This case presents a classic 
example of the object of a motion for summary judgment, which is to separate 
what is formal or pretended in denial or averment from what is genuine and 
substantial, so that only the latter may subject a suitor to the burden of 
trial. Reno Livestock Corp. v. Sun Oil Co. (Delaware), 638 P.2d 147 (Wyo. 
1981); Siebert v. Fowler, 637 P.2d 255 (Wyo. 1981); Weaver v. Blue 
Cross-Blue Shield of Wyoming, 609 P.2d 984 (Wyo. 1980); Vipont Mining Co. 
v. Uranium Research & Dev. Co., 376 P.2d 868 (Wyo. 1962). Even affording 
the McKenneys the most generous view of the information in the record, and the 
benefit of any appropriate inferences that could be drawn, it is clear the 
allegations of the facts constituting fraud in their complaint are refuted by 
the information in the record and the factual showing by the defendants. There 
is no demonstration by the McKenneys of any other facts giving rise to any 
genuine issue of material fact as to fraud. They presented no evidence to the 
contrary other than their argumentative and counsel-assisted speculations which 
were not supported by any facts.

[¶25]   At the time of the submission of 
the Offer, Acceptance & Receipt and the acceptance of Counter Offer by the 
McKenneys, the information available to Sun Agency was that a letter had been 
sent from First Guaranty addressed to Ostlund which enclosed a copy of an FHA 
conditional commitment. That conditional commitment alluded to a requirement for 
an "[e]ngineer's report on present condition of the retaining wall & who is 
responsible to fix the wall in the future." As the trial court correctly noted, 
that is far different from knowledge on the part of the adverse parties that the 
concrete retaining wall "was in a defective condition and represented an 
immediate landslide danger to the residence and its occupants." Neither does it 
suffice to inform the defendants the property would not qualify for either VA or 
FHA financing in the absence of a qualified engineering report and the 
completion of any necessary repairs.

[¶26]   While it is true the McKenneys were 
not informed of the correspondence from First Guaranty, that failure to inform 
does not constitute an intentional withholding of the information described in 
the McKenneys' complaint. A fair understanding of the record leads to the 
conclusion the allegations in the complaint were premised upon information 
developed after the initial offer to purchase and could not have been related to 
any inducement to enter into the transaction so far as McKenneys were concerned 
nor could it have been relied upon by them.

[¶27]   The first transaction never was 
consummated by the parties. In February, after additional information had been 
developed with respect to the retaining wall, a new Offer, Acceptance & 
Receipt (Specific Performance Contract) (Residential) was entered into between 
the McKenneys and Pacific First. By that time, the impact of the professional 
engineer's report with respect to the retaining wall was known, and it was 
contemplated by language in the contract that conditioned the transaction upon 
the purchaser obtaining a VA insured loan to be applied as soon as the wall was 
repaired. It is clear the initial $500 in earnest money was credited toward the 
$1,000 earnest money deposit required in connection with this new agreement. The 
agreement did provide that, in the event of default or breach, the defaulting or 
breaching party should pay reasonable attorney fees and other expenses incurred 
by the non-breaching or non-defaulting party in enforcing the 
agreement.

[¶28]   The McKenneys occupied the home at 
811 Ventura, and it appears they were there from late March or early April of 
1989 until August of 1989. They contended they had effected $3,000 worth of 
improvements to the property during the time they lived there. They refused to 
pay any rent for their occupancy of the premises. When it became apparent the 
sale of the home would not be completed, Pacific First directed Sun Agency to 
not return the $1,000 earnest money because of the dispute over rent and the 
claim by the McKenneys of their right to recover for improvements to the 
property. There was no agreement by Pacific First to pay for the improvements, 
and the McKenneys never executed any lease requiring payment of rent. The effect 
of the trial court's determination on those issues was that, in the absence of 
an agreement, there was no right for either party to recover from the 
other.

[¶29]   The agreement under which the 
earnest money was paid provided it should be null and void upon the failure of 
the financing arrangements. The trial court ordered the purchase money should be 
returned and correctly construed the contract in determining there had been no 
breach of the agreement because it became null and void. For that reason, no 
attorney fees are recoverable by the McKenneys.

[¶30]   While the McKenneys endeavor to 
relate information that became available to the defendants at a later time to 
the inception of this transaction, the substantive rules relating to summary 
judgment do not yield to obfuscation or argument. The McKenneys were unable to 
articulate any facts that would demonstrate an intentional misstatement or an 
intentional withholding of information material in inducing them to enter into 
the first transaction. By the time the subsequent contract was made, the 
McKenneys could not have relied upon misinformation with respect to the 
retaining wall because they were aware of the same facts Sun Agency 
knew.

[¶31]   Furthermore, because of the very 
nature of this transaction, the McKenneys did not incur damages based upon the 
claimed fraud arising out of misstatements of fact or withholding of 
information. While they appear to contend that, with the correct information, 
they would have been able to purchase the property at a reduced price, there was 
nothing to suggest the claimed fraud resulted in damage to the McKenneys. They 
never did incur any financial obligation with respect to this transaction, and 
their only possible loss was with respect to the time and effort devoted to 
obtaining financing, which would be involved in the transaction in any 
event.

[¶32]   While the McKenneys assert 
consequential damages in the form of physical inconvenience and mental suffering 
because of the conduct of the defendants, the standard rule is that those are 
not appropriate damages arising out of the claim for fraud in connection with a 
contract even though there may have been some improper inducement. Toho 
Bussan Kaisha, Ltd. v. American President Lines, Ltd., 265 F.2d 418 (2d Cir. 
1959); Kantor v. Comet Press Books Corp., 187 F. Supp. 321 (S.D.N.Y. 
1960); Newman v. Smith, 77 Cal. 22, 18 P. 791 (1888); Chandler v. 
Ziegler, 88 Colo. 1, 291 P. 822 (1930); Ellis v. Crockett, 51 Haw. 
45, 86, 451 P.2d 814 (1969); Harsche v. Czyz, 157 Neb. 699, 61 N.W.2d 265 
(1953); Aaron v. Hampton Motors, Inc., 240 S.C. 26, 124 S.E.2d 585 
(1962); Hudson & Hudson Realtors v. Savage, 545 S.W.2d 863 
(Tex.Civ.App. 1976). The district court did not invoke the failure to allege or 
provide evidence of damage as a ground for the summary judgment, but it serves 
as an appropriate additional basis for affirming the partial summary judgment 
entered.

[¶33]   In summary, we agree with the trial 
court there was no genuine issue of material fact with respect to the element of 
false representations by the defendants. The record is clear the representations 
made either were true or believed by the defendants to be true at the time they 
were made. In addition, there was no damage to the McKenneys arising out of the 
inability to complete the purchase of this house. The trial court correctly 
construed the contract as being null and void upon failure of the condition 
relating to financing.

[¶34]   The Partial Summary Judgment 
entered in the trial court is affirmed in all respects.