Case Title: ALEXANDER v. MEDUNA

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 2002-05-30T00:00:00Z

Document:
ALEXANDER v. MEDUNA2002 WY 8347 P.3d 206Case Number: 00-324Decided: 05/30/2002

APRIL TERM, A.D. 2002

                                                                                                            

JAMES 
R. ALEXANDER and

RITA 
J. ALEXANDER, husband and wife, 

Appellants(Defendants),

v.

DONALD 
J. MEDUNA and LINDA

MEDUNA, 
husband and wife; and DONALD

MEDUNA, 
Trustee of the Meduna Red Angus

Ranch 
Trust, dated December 11, 1996, 

Appellees(Plaintiffs).

Appeal 
from the District Court of Park County

The 
Honorable Gary P. Hartman, Judge

Representing 
Appellants:

Micheal 
K. Shoumaker, Westminster, Colorado; and Virgil G. Kinnaird, Sheridan, 
Wyoming  

 Representing 
Appellees:

            
Joseph E. Darrah and S. Joseph Darrah of Darrah & Darrah, P.C., 
Powell, Wyoming  

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, 
JJ.

 

            
KITE, Justice. 

[¶1]      James and Rita 
Alexander (the sellers) sold their home of many years to Donald and Linda Meduna 
and Meduna Red Angus Ranch Trust (the buyers).  Before contracting, the buyers viewed 
the property and were advised by the sellers there was no groundwater seepage or 
structural defects.  The basement 
flooded shortly after the buyers took possession.  At the bench trial, an engineer 
testified he discovered evidence of long-term structural damage under paneling 
and carpet and in crawl spaces.  The 
trial court found the sellers' fraudulent representations induced the buyers to 
contract and awarded punitive damages.  
We affirm in part, reverse in part, and remand for correction of the 
compensatory damages associated with the Northwest Rural Water District 
hookup.

[¶2]      In February 1996, 
the sellers listed their home of over twenty years, including approximately 
forty acres of land, a residence, and a mobile home office, for sale through 
Alexander Realty with Mrs. Alexander as the listing broker.  The buyers and their real estate agent 
first viewed the property on or about December 9, 1996. 

[¶3]      The real estate 
agent prepared a purchase offer for the buyers within approximately one day of 
the first property showing.  A copy 
of a property condition statement completed by Mrs. Alexander was delivered to 
the buyers before they made their first offer and was attached to all offers 
that went back and forth between the parties.

[¶4]      The buyers' 
original proposed contract to purchase was submitted on or about December 11, 
1996.  The sellers counteroffered 
the same day, and the buyers accepted on December 12, 1996, with some additional 
terms.  The contract provided 
standard form language regarding the buyers' right to inspect the property.1

[¶5]      The buyers did not 
have professional inspections performed. The property closing occurred on or 
about April 11, 1997, and the buyers did not take physical possession until 
approximately June 10, 1997, because they had to complete personal business and 
make moving arrangements.  

[¶6]      In the latter part of 
June 1997, the buyers experienced a number of problems including flooding in the 
residence basement, roof disrepair, and leakage in the mobile home office; the 
inability to grow any produce in the garden; and the discovery the Northwest 
Rural Water District hookup costs would be in excess of $8,000.  They filed a 
lawsuit against the sellers seeking recovery on two causes of action: (1) fraud 
and deceit and (2) infliction of severe emotional distress.2  After a lengthy 
bench trial, the trial court found the buyers had proved the sellers' multiple, 
intentional fraudulent misrepresentations by clear and convincing evidence but 
had not established intentional infliction of emotional distress by a 
preponderance of the evidence.  Subsequent to a punitive damages hearing, the 
trial court awarded the buyers judgment and damages of $100,840.94, attorney 
fees of $38,045, costs of $9,228.42, and punitive damages of $25,000.  The sellers 
appealed.  

[¶7]      

Schlesinger v. Woodcock, 2001 WY 
120, ¶13, 35 P.3d 1232, ¶13 (Wyo. 
2001) (some citations omitted); see also Polo Ranch Company v. City of Cheyenne, 969 P.2d 132, 136 (Wyo. 
1998).  

[¶8]      We will not supplant 
the fact-finder, but, in reviewing the sellers' arguments, we must keep in mind 
the elements of intentional misrepresentation (fraud) and the requisite clear 
and convincing standard of proof.  Dewey v. 
Wentland, 2002 WY 2, ¶10, 38 P.3d 402, ¶10 (Wyo. 
2002); Sundown, Inc. 
v. Pearson Real Estate Company, Inc., 8 P.3d 324, 330 (Wyo. 
2000).  
Intentional misrepresentation is established when three elements are 
proven:  "(1) 
the defendant made a false representation intended to induce action by the 
plaintiff; (2) the plaintiff reasonably believed the representation to be true; 
and (3) the plaintiff relied on the false representation and suffered 
damages."  Sundown, Inc., 8 P.3d  at 330.

[¶9]      At trial, the buyers' 
expert witness, a registered professional engineer, testified regarding his July 
1997 inspection of the property, his written report based on that inspection, 
and what, in his opinion, caused the structural damages and defects.  The gist of his 
testimony was that the problems had existed for a long period of time.  He noted evidence 
of water damage in the basement including heavy salt deposits and peeling paint 
on the basement walls, extensively rusted and corroded heat registers, spalling 
of the masonry and significant alkali deposits in the west crawl space, and 
bulging of the east and west walls.  The engineer opined that excessive migrating 
groundwater and inadequate subsurface drainage away from the residence existing 
for not less than three to five years caused water to permeate the inadequately 
damp proofed foundation walls, swelling the soil and causing the east and west 
walls to buckle inward.  He also concluded the damage was not caused 
by excessive lawn watering.  He testified the foundation walls would have 
to be exposed, sandblasted, and damp proofed to prevent complete failure.  This would require 
emptying the basement; removing the electrical wiring, plumbing, and carpeting; 
and excavating the soil from the foundation perimeter.  Cracks and heaves 
in the basement floor would likewise need repair.  He noted the excavation would disrupt the 
existing landscaping which would require repair after the foundation was 
secured.  The 
engineer also testified the mobile home office roof was in poor condition.  Significant leaks 
and buckling in the roof would require extensive repairs.  In the interior 
northwest corner of the mobile home office, an additional layer of sheetrock had 
been installed on the ceiling which concealed signs of water leakage.  

  

[¶10]   An experienced building contractor 
testified he saw bulging of the east basement wall which was causing the center 
wall support to move and the center-bearing wall to wrinkle at the basement 
ceiling.  He 
also observed cracks and heaves in the floor, metal heat registers severely 
rotted from water and salts coming through the walls, and heavy salt deposits on 
the walls where the buyers had removed the paneling just after they moved into 
the house.  

[¶11]   Mr. Meduna and his real estate agent 
testified that the sellers knew the buyers needed to generate supplemental 
income from the property by using the mobile home office as a business and 
selling produce and crops from the garden and other acreage.  Before entering 
into the contract, the sellers showed them around the property including the 
residence, a separate workshop, the mobile home office, the garden, the 
irrigated acreage, and a pig barn.  The sellers each made representations 
regarding the property condition and suitability for the buyers' stated 
needs.  Neither 
Mr. Meduna nor his agent saw visible evidence of water damage.  They were not shown 
the crawl spaces, and the walls of two bedroom closets could not be seen because 
they were covered over by boxes and other items.  During the showing, as witnessed by the real 
estate agent, the sellers represented to the buyers that: (1) the basement had 
water leakage due to a water softener defect and a downspout malfunction, both 
of which had been repaired; (2) the garden had been fertilized and was 
sufficiently productive to permit Mrs. Alexander to can produce; and (3) 
Northwest Rural Water District water could be accessed at the property line by 
the road for approximately a $2,000 tap fee and a $1,500 trench cost.  The buyers received 
the property condition statement listing only the two repaired leakage incidents 
prior to making their initial offer.  That statement also provided:

The undersigned Seller . . . completes 
and executes this Addendum to such listing contract in order to comply with 
Seller's obligation to reasonably discover and fully disclose to all parties any 
and all information regarding the condition of such property, does hereby make 
the following statement and representation concerning the present description 
and condition of subject property.

 The buyers relied heavily on the sellers' oral 
and written representations of the property condition in making an offer to 
purchase and believed the disclosures were honest and complete.  

 [¶12]  Mr. Meduna testified about how he first 
became aware of the water problem in the basement and the steps he took to have 
it evaluated and repaired.  He testified as to advice he received 
regarding the garden and the fact the soil had been sterilized through use of a 
weed killing chemical, about how he became aware of the Northwest Rural Water 
District hookup costs, and regarding the steps he took to mitigate the damage to 
the house, garden, and mobile home.  He also stated these efforts were hampered by 
the buyers' lack of sufficient finances to adequately correct all the 
defects.  

[¶13]   The sellers' former housekeeper 
testified that, approximately six years prior to the house sale, she 
periodically cleaned salt residue off the basement carpet.  The former owner of 
the home testified that, during the time he lived in the home, he installed 
paneling in only one basement bedroom and did no other paneling or painting; the 
groundwater level was significantly below the foundation level; and there were 
no irrigation lines in place.  

[¶14]   Mrs. Alexander initially testified she 
was unaware of any excessive water issues in her former home.  However, she later 
admitted the sellers recarpeted the basement many times during their twenty-year 
residency but denied that the frequent replacement was due to excessive 
groundwater leakage.  
She acknowledged as a realtor she was aware that sellers are required to 
fully disclose any known property defects on the property condition 
statement.  She 
also eventually acknowledged she was aware of the salt buildup on the basement 
walls and this was a defect she had failed to disclose.  Mrs. Alexander 
initially testified the sellers did not panel or paint the basement prior to 
offering the property for sale but then equivocated stating she was not sure 
whether they had made the improvements.  She testified the water leakage could have 
come from over watering the lawn or wet weather and she had advised the buyers 
not to water the lawn area for more than fifteen minutes at a time.  She acknowledged 
she told the buyers she had grown and canned produce from the garden and still 
had canned goods in the basement.  However, she admitted this was over ten years 
ago and did not specifically recall whether she had advised the buyers of this 
fact.  

[¶15]   Mr. Alexander similarly denied 
knowledge of the water leakage issue or efforts on his part to conceal the water 
damage through cosmetic repairs of the walls and floors.  His testimony 
regarding paneling and painting was equivocal as well.  In due course, 
he  conceded he 
was aware of the salt deposits and did not advise the buyers of this orally or 
on the property condition statement.

B.        Summary 
of Trial Court Findings of Fact

[¶16]   In a decision letter dated January 26, 
2000, the trial court set out thirty-one detailed findings of fact.  We present these in 
summary fashion:  
The trial court found the buyers' expert witness was qualified to present 
technical evidence regarding the condition of the property, causation of 
structural damages, and defects.  This testimony was deemed credible and 
unrefuted.  
Conversely, the trial court found Mr. Alexander testified in a 
conflicting manner regarding certain matters and rejected portions of his 
testimony.  
Further, certain aspects of the sellers' testimony, by which they 
endeavored to exonerate their misrepresentations and failure to disclose, were 
found not to be credible. 

[¶17]   The trial court determined:  (1)  The 
sellers were, or reasonably should have been, aware of, and failed to disclose, 
defects and damage to the basement foundation, walls, floor, and heat registers; 
(2)  the sellers bolstered the buyers' trust in their representations 
through statements during the initial showing that two excessive water incidents 
had been corrected and by pointing out an indention of the living room floor; 
(3) undisclosed leaks and buckling in the mobile home office would require 
extensive repairs; (4) the sellers were aware of the buyers' interest in water 
from Northwest Rural Water District and represented the fees would be $3,500, 
though the actual expense was in excess of $8,000; (5) the sellers failed to 
disclose the garden had not grown crops in ten years and soil sterilizing weed 
killer had been applied; (6) the buyers relied on the property condition 
statement representation that the identified problems had been fully repaired 
and there were no other defects whatsoever; and (7) neither the preprinted 
contract nor the standard inspection clause language was negotiated.  The trial court 
found the clear and convincing evidence demonstrated the sellers made material 
misrepresentations regarding structural defects, both verbally and through the 
property condition statement, and breached their duty to disclose all defects 
which, if known, would have caused the buyers not to rely upon the property 
condition statement and, to their detriment, subsequently purchase the 
property.  

[¶18]   In contrast, the trial court determined 
the buyers (A) acted in good faith and reasonably relied on the sellers' 
representations in purchasing the property; (B) were attentive at the initial 
showing; and (C) believed, as did their real estate agent, that the information 
disclosed in the property condition statement was candid and accurate.  Despite reasonable 
efforts to mitigate the damages, the buyers sustained special and specific 
damages for repair and restoration in the total amount of $100,840.94,3 attorney fees, and costs.  The trial court 
further found the sellers' conduct was willful, wanton, and in reckless 
disregard of the buyers' rights which entitled the buyers to a hearing on 
punitive damages.  

C.        Was 
Finding of Intentional Misrepresentation Supported by Clear and Convincing 
Evidence?

[¶19]   The sellers contend the trial court's 
finding of clear and convincing evidence of fraud was erroneous due to its 
reliance on an unqualified expert, the failure to disclose does not constitute 
fraudulent misrepresentation, the duty to disclose was delegated to the buyers 
by contract, and fraud was not established by the evidence.  

            
i.          
The Expert Witness "Daubert" Objection 

[¶20]   Prior to trial, the sellers apprised 
the trial court of their objection to the buyers' expert witness' testimony 
alleging he was unqualified and failed to perform certain tests to confirm his 
opinion.  
During the course of the engineer's testimony, the objection was renewed 
with regard to admission of his written report.  The court overruled the motion stating it 
would decide what weight, if any, the report should be given after it had 
received all the evidence.  As is apparent from the court's opinion 
letter and findings, the testimony and report were ultimately accorded 
considerable weight.

[¶21]   As noted by the sellers, we have 
adopted the federal Daubert model, imposing gatekeeping responsibilities on 
trial courts to decide whether scientific or technical expert testimony is 
admissible.  Chapman v. State, 
2001 WY 25, ¶8, 18 P.3d 1164, ¶8 (Wyo. 
2001); Bunting v. 
Jamieson, 984 P.2d 467, 471 (Wyo. 
1999) (citing Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 592-93 (1993)).  However, as recently reiterated in Chapman, we did not 
"abandon our own precedent regarding the admissibility of expert 
testimony.'"  
2001 WY 25, ¶8 (quoting Bunting, 984 P.2d 
at 471).  
"Under the Daubert model, the trial court must first determine 
whether the expert's methodology is reliable; then the court must determine 
whether the proposed testimony fits' the facts of the particular case."  Id.  In Kumho Tire Co., Ltd. v. 
Carmichael, 526 U.S. 137 (1999), the 
United States Supreme Court further clarified the scope of Daubert, holding 
the gatekeeping duties of the trial judge apply to all expert testimony, whether 
such testimony is based on scientific, technical, or other specialized 
knowledge.  Smith v. Ingersoll-Rand 
Company, 214 F.3d 1235, 1243 
(10th Cir. 2000).  Kumho also made it clear the gatekeeping function is a 
flexible and commonsense responsibility.  The trial judge is granted broad latitude in 
deciding the means to determine reliability as well as in ultimately deciding 
whether the testimony is reliable.  Id. (citing Kumho Tire Co., Ltd., 526 U.S. at 141-42). 

[¶22]   The Daubert gatekeeping 
function is not intended to measure every expert by an inflexible set of 
criteria but rather is to ensure an adequate inquiry to "make certain that an 
expert, whether basing testimony upon professional studies or personal 
experience, employs in the courtroom the same level of intellectual rigor that 
characterizes the practice of an expert in the relevant field.'"  Id. (quoting Kumho Tire Co., 
Ltd., 526 U.S. at 152).  We agree that, as gatekeepers of expert 
testimony, judges must always perform some form of reliability analysis; 
however, we have overtly declined to "shackle the district court with a 
mandatory and explicit'" reliability proceeding.  Chapman, 2001 WY 
25, ¶23 (quoting Hoult v. Hoult, 57 F.3d 1, 5 (1st Cir. 1995)).  "Instead, 
. . . we assume that the district court performs such an 
analysis sub 
silencio throughout the trial with respect to all expert testimony.'"  Id. (quoting Hoult, 57 F.3d at 
5).  The 
decision to admit or reject expert testimony is exclusively within the trial 
court's discretion.  
Id. at ¶8; Seivewright v. 
State, 7 P.3d 24, 29 (Wyo. 
2000).  

[¶23]   At trial, the buyers' expert testified 
at length regarding his educational background in civil engineering and 
experience designing and inspecting residential buildings.  He testified he had 
been a consulting engineer in "self-practice" for approximately eight years in 
the Cody area.  
In that time, he had completed more than fifty building inspections to 
determine whether there was water permeation damage to basements made of 
concrete block and concrete.  He explained the inspection process and that 
a "normal" inspection does not entail tearing off paneling, running soil or 
cement samples, or performing other invasive procedures. The engineer then 
specifically and incrementally described his July 1997 inspection of the 
property and his final conclusions. 

[¶24]   The sellers have the burden to 
demonstrate admission of this evidence was an abuse of discretion, and, upon our 
review, we must conclude they have failed.  At a minimum, they should have provided 
evidence contesting the validity of the methodology and the reliability of the 
results.  This 
was not the course they chose at trial; therefore, their appeal presents little 
more than unfounded assertions.  Due regard is given to the trial judge's 
opportunity and ability to assess credibility, and our review does not entail 
weighing disputed evidence.  Scherer Construction, LLC v. Hedquist Construction, 
Inc., 2001 WY 23, ¶30, 18 P.3d 645, ¶30 (Wyo. 
2001); Hopper v. All 
Pet Animal Clinic, Inc., 861 P.2d 531, 538 (Wyo. 1993).  The evidence in the record supports the 
findings that the engineer was qualified and his testimony was relevant and 
reliable.  The 
trial court appropriately overruled the objection and advised the parties it 
would determine the weight the evidence was to be given at the close of the 
trial.  We 
conclude the trial court's analysis was conducted sub silencio 
through the course of the proceeding and in light of all the evidence 
received.  Admission of 
the expert testimony and report was not clearly erroneous or an abuse of 
discretion.  

[¶25]   The sellers contend failure to disclose 
a fact does not constitute fraud.  However, they ignore the reality that they 
acknowledged making a number of false statements.  It is in light of these false statements that 
the nondisclosures became part and parcel of the fraudulent acts:  

Conduct or words which tend to produce an erroneous 
impression may satisfy the plaintiff's burden.  In addition, even if someone is not under a duty to speak, 
if he does speak, he is under a duty to speak truthfully and to make a full and 
fair disclosure.  Reliance is reasonable when false 
representations have occurred prior to the execution of the contract which is 
sought to be avoided or for which damages are sought to be recovered.

Sundown, Inc., 8 P.3d  at 
330-31 (emphasis added and citations omitted).  By way of example, Mrs. Alexander 
acknowledged the sellers' duty to complete the property condition statement 
honestly and fully.  Both sellers acknowledged they knew of the 
salt deposits, and yet they failed to disclose this information on the property 
condition statement, thereby making an affirmative false statement.  Likewise, they 
admitted they advised the buyers of two specific excess water incidents but 
failed to advise them of any other defects.  They also acknowledged saying the garden was 
in good condition but not advising the buyers the soil had been sterilized and 
nothing had been grown in over ten years.  The trial court determined the sellers' 
disclosures, both verbally at the initial showing of the property and in the 
written property condition statement, reinforced the buyers' confidence the 
property was in good condition as the sellers reported.  

[¶26]   The foregoing list of the sellers' 
misleading statements and actions is by no means all-inclusive; rather, it is 
merely illustrative of the definitive point that, regardless of whether there 
was a duty, once the sellers started making disclosures, they had a duty to do 
so completely and truthfully.  The disclosures and concomitant duty preceded 
the buyers' determination to make the initial offer to contract and all parties' 
entering into the ultimate contract to purchase.  On the basis of our holding in Sundown, Inc. and 
the facts of this case, the sellers' contention that their failure to disclose 
cannot constitute fraud is without merit.

[¶27]   The sellers maintain no evidence was 
presented to prove positive acts of fraudulent concealment.  This argument is 
really something of a nonsequitar.  No cause of action for fraudulent concealment 
was pleaded.  
Rather, the cause of action was fraudulent misrepresentation, and conduct 
or words which tend to produce an erroneous impression  satisfy the 
plaintiff's burden.  
Sundown, 
Inc., 8 P.3d  at 330.  The evidence established the foundation 
defects and damage were physically concealed and cosmetically repaired.  To the extent this 
conduct tended to produce an erroneous impression, it supported the cause of 
action as pleaded.  

            
iii.        Effect of 
the Contract Inspection Clause

[¶28]   The sellers also contend the duty to 
disclose was somehow delegated to the buyers by contract.  This argument puts 
the proverbial cart before the horse.  The fraudulent misrepresentations, as 
determined by the trial court, occurred before the contract was entered into and 
were the inducement to enter into the contract reasonably relied upon by the 
buyers.  The 
fact that, once they entered into the contract, the "as is" clause and 
inspection provisions were in effect did not excuse or nullify the original 
fraudulent representations, intended inducement, and reasonable reliance which 
led to the contract being made.  An "as is" clause will not relieve the 
sellers of liability in the case of an actual misrepresentation or fraud.  Richey v. Patrick, 
904 P.2d 798, 803 (Wyo. 
1995).  

[¶29]   Consideration of the preceding issues 
leads us to the overarching issue of whether the evidence relied upon by the 
trial court reaches the level of clear and convincing evidence of fraud.  Clear and 
convincing evidence is the "kind of proof which would persuade a trier of fact 
that the truth of the contention is highly probable."  MacGuire v. Harriscope 
Broadcasting Co., 612 P.2d 830, 839 (Wyo. 1980); see also Dorr v. Wyoming Board 
of Certified Public Accountants, 2001 WY 
37, ¶8, 21 P.3d 735, ¶8 (Wyo. 
2001); Meyer v. 
Norman, 780 P.2d 283, 291 (Wyo. 
1989).   Evidence which 
is of such a nature that the mind readily reaches a satisfactory conclusion as 
to the existence or nonexistence of a disputed fact is, of necessity, clear and 
satisfactory.  
RS v. Johnson 
County Department of Family Services (In re JL), 989 P.2d 1268, 1271 (Wyo. 1999); Thomasi v. Koch, 660 P.2d 806, 811-12 (Wyo. 
1983); Continental 
Sheep Co. v. Woodhouse, 71 Wyo. 194, 256 P.2d 97, 99 (1953).  This definition, 
although broad and subjective in nature, in most circumstances provides 
sufficient guidance to the finder of fact.  
Meyer, 780 P.2d  at 291.  We have also adopted more objective criteria 
for clear and convincing evidence with respect to witnesses' testimony:

"[T]he witnesses to a fact must be found to be credible; 
the facts to which the witnesses testify must be distinctly remembered;  the details in 
connection with the transaction must be narrated exactly and in order; the 
testimony must be clear, direct and weighty; and the witnesses must be lacking 
in confusion as to the facts at issue."  Weigand v. Union National Bank of Wichita, [227 Kan. 
747], 610 P.2d 572, 577 (Kan. 1980).

Id.

[¶30]   The buyers' trial evidence had 
sufficient character and integrity to meet the objective "clear and convincing" 
evidence standard described in Weigand.  The buyers' witnesses testified very 
specifically and precisely.  None of their witnesses, except Mr. Meduna 
and perhaps his real estate agent, had any personal interest or apparent 
bias.  Their 
testimony was internally consistent and corroborated other testimony and 
evidence received.  

[¶31]   On the other hand, the sellers' 
testimony was fraught with internal inconsistencies, and even acknowledgement of 
some degree of misrepresentation and failure to disclose.  In fact, it is 
apparent from the cold transcript the trial court disregarded significant 
portions of their testimony because of its flawed and untruthful nature.  For example, Mrs. 
Alexander could not remember when or why they had frequently replaced the 
basement carpet although not an inconsequential expense.  Further, neither of 
the sellers testified consistently on the improvements made to the basement 
including the paneling and painting despite the fact the property condition 
statement reflected they performed the work themselves.  Called on rebuttal, 
the former owner testified he had paneled only one bedroom and did not paint the 
basement.  In 
addition, the sellers first testified they were not aware of any defects.  Thereafter, they 
both partially recanted stating they were aware of such things as the salt 
deposits but did not consider them defects.  In the end, they conceded to some extent they 
had failed to fully disclose the true property condition.  

[¶32]   Further, the sellers provided no 
evidence or expert witness to challenge the qualifications or expertise of the 
buyers' expert, the integrity of his inspection method, or his observations and 
conclusions.  
The trial court accurately found this evidence was unrefuted.

[¶33]   Upon our review, we conclude the trial 
court's findings fairly and accurately summarized the evidence presented at 
trial including over eighty exhibits and the testimony of fourteen 
witnesses.  The 
evidence the trial court relied upon constituted clear and convincing evidence 
that (1) both sellers made false representations intended to induce the buyers 
to offer to purchase the property and enter into a contract to purchase, (2) the 
buyers reasonably believed the sellers' representations as to the property 
condition were true, and (3) the buyers relied on the false representations and 
suffered damages.

[¶34]   Before leaving this issue, we briefly 
address the wording of the trial court's findings that the sellers "were aware 
or reasonably should have been aware" of the defects and damage to the west wall 
and heat registers, the serious east wall bulge, and the basement floor.  At first glance, 
the language appears to apply an incorrect standard as the sellers had to have 
intended to defraud the buyers; therefore, they had to know of the defects they 
failed to disclose or misrepresented.  In light of the record as a whole, we believe 
the language "were aware or reasonably should have been aware" was responsive to 
the sellers' implausible explanations.  We conclude the trial court was endeavoring 
in a diplomatic manner to address the untruthful nature of the sellers' 
testimony.  The 
trial court unquestionably determined there was clear and convincing evidence of 
fraud because the sellers knew of the defects and purposely made 
misrepresentations regarding the property condition to induce the buyers, to 
their significant detriment, to make a purchase offer and enter into a purchase 
contract.  
These findings are supported by clear and convincing evidence and are 
sufficient.

[¶35]   The sellers contend the trial court 
abused its discretion by awarding compensatory damages in excess of the amounts 
in evidence and by attempting through the award to restore the property to a 
superior condition than existed previously.  Damages are findings of ultimate fact.  A jury's 
determination of the amount of damages is inviolate absent an award either so 
excessive or inadequate as to shock the judicial conscience and raise an 
inference that passion, prejudice, or other improper cause had invaded the 
trial.  Cross v. Berg Lumber 
Company, 7 P.3d 922, 928 (Wyo. 2000).  However, the standard of review after a bench 
trial is less deferential.  Damages are reviewed as fact and are not 
reversed unless clearly erroneous. Id.

[¶36]   Compensatory damages are awarded to 
reimburse an individual for losses suffered as a result of another's failure to 
perform some duty.  
Hollon v. 
McComb, 636 P.2d 513, 516 (Wyo. 
1981); State Farm 
Mutual Automobile Insurance Company v. Shrader, 882 P.2d 813, 833 (Wyo. 
1994).  They 
are designed to make the individual whole; that is, to place him in the 
condition he would have been in if the other party had adequately performed the 
duty owed.  Id.  Damages are not 
recoverable which result from the injured party's breach of duty to take 
reasonable steps to protect himself.  Id.; Thayer v. Smith, 380 P.2d 852, 854 (Wyo. 
1963).  
Questions concerning whether an injured party has exercised reasonable 
care and diligence are for the trier of fact to decide.  Id.; Asbell Bros., Inc. 
v. Nash-Davis Machinery Company, 382 P.2d 57, 59 (Wyo. 1963).  

[¶37]   The trial court found the damage for 
"repair and restoration" due to the sellers' misrepresentations was in the 
amount of $100,840.94.  The sellers argue the amount is excessive 
because it represents payment to enhance the condition of the home to a level 
that never before existed.  However, the sellers represented to the 
buyers that the home had not experienced water damage except from the water 
softener and rain spout seepage which had been fully repaired.  Yet the foundation 
was actually in imminent danger of failure.  The compensation question is not whether the 
home was ever in such an improved state.  Rather, it is, what was the condition of the 
home as fraudulently represented by the sellers and upon which the buyers 
relied?  Simply 
put, the buyers believed they were purchasing a home with sound foundation.  Further, the buyers 
were encouraged to believe they would have a good and productive garden, a 
mobile home office appropriate and adequate to support a business endeavor, and 
the ability to connect to Northwest Rural Water District for $3,500.  

[¶38]   The record contains significant 
evidence regarding the costs to correct the property defects and the measures 
the buyers took to mitigate the damages. The sellers offered no evidence of 
their own to contest the costs of the repairs.  The only error requiring correction is the 
award of damages of $8,122 for the Northwest Rural Water District hookup.  The sellers 
represented the cost would be $3,500, and the actual cost was $8,122.  To be adequately 
compensated, the buyers are entitled to only the $4,622 difference between these 
sums.  We must, 
therefore, reverse in part and remand to the district court for correction of 
the order consistent herewith.  We cannot conclude any of the remaining 
findings are clearly erroneous and, therefore, affirm the balance of the 
compensatory damages with adjustment for the Northwest Rural Water District 
hookup.   

[¶39]   The sellers maintain the trial court 
could not award punitive damages because the buyers were awarded compensatory 
damages under the contract.  They also argue the court improperly 
determined the sellers' net worth and considered inappropriate factors in making 
the award.  

[¶40]   This court has recognized that punitive 
damages are an implement of public policy.  Shrader, 882 P.2d  at 836-37.  Punitive damages 
are not intended to compensate the plaintiff; instead, punitive damages are 
awarded to punish the defendant and deter others from such conduct in the 
future.  Id. at 837.  Punitive damages 
cannot be awarded when compensatory damages are not recoverable.  Bear v. Volunteers of 
America, Wyoming, Inc., 964 P.2d 1245, 1255 (Wyo. 1998); Cates v. Barb, 650 P.2d 1159, 1161 (Wyo. 1982).  Punitive damages 
are not favored and are to be allowed cautiously within narrow limits.  Sheridan Commercial 
Park, Inc. v. Briggs, 848 P.2d 811, 817 (Wyo. 1993); see Town of Jackson v. Shaw, 569 P.2d 1246, 1251 (Wyo. 
1977).  Such 
damages are to be awarded only for conduct involving some element of outrage 
similar to that usually found in a crime.  Id. 

[¶41]   We must determine whether the trial 
court reasonably concluded as it did because there is no right to punitive 
damages.  Sheridan Commercial 
Park, Inc., 848 P.2d  at 818; Squaw Mountain Cattle Company v. Bowen, 804 P.2d 1292, 1298 (Wyo. 
1991).  
Outrageous conduct, malice, and willful and wanton misconduct are 
sufficient bases to warrant punitive damages.  Sheridan Commercial Park, Inc., 848 P.2d  at 818.  Sometimes, it is a 
fine distinction between conduct justifying punitive damages and less culpable 
conduct.  Id.; Mayflower Restaurant 
Company v. Griego, 741 P.2d 1106, 1116 (Wyo. 1987).  However, the decision to award punitive 
damages is within the district court's discretion, and we will not reverse the 
decision on appeal without finding a clear abuse of that discretion.  Parker v. Artery, 
889 P.2d 520, 525 (Wyo. 
1995); Cates v. 
Daniels, 628 P.2d 862, 868 (Wyo. 
1981).  

[¶42]   In Farmers Insurance 
Exchange v. Shirley, 958 P.2d 
1040  (Wyo. 
1998), we adopted the punitive damages factors enunciated in BMW of North America, 
Inc. v. Gore, 517 U.S. 559 (1996) (the degree of reprehensibility, the disparity between the harm 
or potential harm suffered and the award of punitive damages, and the difference 
between punitive damages and the civil penalties authorized or imposed in 
comparable cases), and the seven factors adopted from the specially concurring 
opinion of Justice Houston in Aetna Life Insurance Company v. Lavoie, 505 So. 2d 1050, 1062 (Ala. 1987):

"(1) Punitive damages should bear a reasonable relationship 
to the harm that is likely to occur from the defendant's conduct as well as to 
the harm that actually has occurred.  If the actual or likely harm is slight, the 
damages should be relatively small.  If grievous, the damages should be much 
greater.  

"(2) The degree of reprehensibility of the defendant's 
conduct should be considered.  The duration of this conduct, the degree of 
the defendant's awareness of any hazard which his conduct has caused or is 
likely to cause, and any concealment or cover-up' of that hazard, and the 
existence and frequency of similar past conduct should all be relevant in 
determining this degree of reprehensibility.  

            
 "(3) If 
the wrongful conduct was profitable to the defendant, the punitive damages 
should remove the profit and should be in excess of the profit, so that the 
defendant recognizes a loss.  

            
 "(4) 
The financial position of the defendant would be relevant.  

            
 "(5) 
All the costs of litigation should be included, so as to encourage plaintiffs to 
bring wrongdoers to trial.  

            
 "(6) If 
criminal sanctions have been imposed on the defendant for his conduct, this 
should be taken into account in mitigation of the punitive damages award.  

            
 "(7) If 
there have been other civil actions against the same defendant, based on the 
same conduct, this should be taken into account in mitigation of the punitive 
damages award."

Shirley, 958 P.2d  at 1044 (quoting Green Oil Company v. 
Hornsby, 539 So. 2d 218, 223-24 (Ala. 1989)).  A separate punitive damages hearing was held, 
and the buyers presented witnesses on the "reprehensible" nature of the sellers' 
fraudulent conduct and their financial circumstances.  The sellers 
presented no witnesses of their own at this proceeding.

[¶43]   We have reviewed the punitive damages 
award and the record in light of the BMW of North America, Inc. factors and conclude there 
was no abuse of discretion.  The $25,000 award was slightly less than 
one-fourth of the compensatory damages.  The harm to the buyers was significant and 
included damage to their credit, their ability to mortgage the property, and 
their living conditions.  The evidence supports a determination the 
sellers' conduct was willful, wanton, and reckless.  On the basis of the 
record, the punitive damages award does not appear extreme or unconscionable. 

[¶44]   The sellers' deception and fraud were 
profitable to them because they recognized $208,000 on the sale of a property 
which required more than $100,000 in repairs to prevent its ultimate 
collapse.  The 
evidence presented at the punitive damages hearing established the sellers' net 
worth in February 2000 by their own calculation was approximately 
$418,842.11.  
Mrs. Alexander, who was called as a witness for the buyers, testified 
concerning the sellers' investments and interests in several corporations, 
trusts, and various real property as well as their continued employment income. 

[¶45]   Although the attorney fees and costs 
issue shall be considered separately below, we note the BMW of North America, 
Inc. factors include them as an appropriate aspect of punitive damages.  The trial court 
also clearly acknowledged and considered a $10,000 fine could be imposed as 
criminal sanctions for behavior similar to the sellers' fraud. Through Mrs. 
Alexander's testimony at the punitive damages hearing, the court was advised 
there was a possibility her realtor's license might be under investigation due 
to her dealings with the buyers, and this could potentially impact her future 
financial condition.  
No documentation was presented to verify this claim.   In light of 
this evidence, the punitive award does not appear unreasonable.

  

[¶46]   The trial court's decision to award 
punitive damages was expressly based on the "yardstick enunciated by Farmers Insurance 
Exchange v. Shirley, 958 P.2d 1040 (Wyo. 1998)," and found that (1) the buyers suffered substantial other 
economic loss as a result of the sellers' conduct, (2) the sellers' conduct 
constituted a wanton disregard to duty and/or gross or outrageous conduct, (3) 
the criminal fine for similar violations could be $10,000, (4) the sellers' net 
worth was approximately $418,842.11, and (5) the buyers' attorney fees and costs 
were reasonable.  
Pursuant to our analysis of the BMW of North America, Inc. factors and the record in 
this case, we conclude the trial court did not abuse its discretion in awarding 
$25,000 in punitive damages. 

[¶47]   The sellers also contend the trial 
court committed error in awarding the attorney fees. They argue attorney fees 
are damages to be awarded by application of clause XIII of the purchase contact, 
which allocates the burden of proof to the buyers, and the buyers failed to 
submit exhibits and testimony at trial to support such damages.  The sellers further 
maintain that, despite the buyers' failure to prove the attorney fees, the trial 
court ordered them to pay an unspecified amount of attorney fees in the February 
22, 2000, order.  
The very foundation of this argumentthat the award was based on the 
contract provisionis erroneous.  The buyers' causes of action were fraud and 
intentional infliction of emotional distress.  No contract action was pleaded.  

[¶48]   In an effort to support this 
contention, the sellers take out of context the following comment made by the 
trial court at the punitive damages hearing:  "The Court, when it made a determination of 
attorney fees, did not do so under the inclination of punitive damages, it was 
under contract."  
Their brief fails to accurately reflect the entire circumstance of the 
in-court exchange.  
The buyers' attorney advised the trial court that Shirley, 958 P.2d 1040, through 
adoption of the BMW 
of North America, Inc. factors, expressly provided for attorney fees and 
costs as an aspect of punitive damages.  He further advised the court, pursuant to 
that authority, an award of fees and costs incurred in the punitive damages 
phase of the litigation could be made.  Thereafter, the trial court responded:  "All right.  Mr. Darrah, I will 
give you 15 days to amend your attorney fees and costs in this matter."  In the subsequent 
order on punitive damages, the court explicitly stated:

[A]fter having reviewed the evidence on punitive damages, 
the objections to [the buyers'] attorney fees and costs, the evidence and 
supplemental evidence submitted by the [buyers'] attorneys pertaining to costs 
and attorney fees, and using the yardstick enunciated by Farmers Insurance 
Exchange v. Shirley, 958 P.2d 1040 (Wyo. 1998),  
the court finds as follows:

            
. . . 

            
5.  That 
[the buyers'] attorney fees and costs are reasonable.    

Though the trial court initially stated it was awarding the 
buyers attorney fees and costs on the basis of the contract, we conclude the 
final written order clearly established the ultimate foundation of the award was 
the BMW of North 
America, Inc. punitive damages factors. 

[¶49]   Wyoming subscribes to the American rule 
regarding recovery of attorney fees.  Schlesinger, 2001 WY 120, ¶21; Cline v. Rocky 
Mountain, Inc., 998 P.2d 946, 949 (Wyo. 2000).  Under the American rule, each party is 
generally responsible for his own attorney fees.  Id.  However, a prevailing party may be reimbursed 
for his attorney fees when express statutory or contractual authorization exists 
for such an award.  
Id.  Moreover, an 
exception may be applied in the circumstances of fraud and the corollary award 
of punitive damages.  
See Olds v. 
Hosford, 354 P.2d 947, 950 (Wyo. 
1960) (recognizing an exception to the general rule denying recovery of attorney 
fees and costs in a replevin action where "fraud, malice, oppression or 
wil[l]ful wrong" can be shown).  We conclude the trial court applied the 
punitive damages exception to award all attorney fees and costs attendant to the 
entire course of the litigation.

To determine 
the reasonableness of the attorney's fees award, Wyoming employs the two-factor 
federal lodestar test.  These factors are:  "(1) whether the 
fee charged represents the product of reasonable hours times a reasonable rate; 
and (2) whether other factors of discretionary application should be considered 
to adjust the fee either upward or downward."  It follows therefrom that the trial court's 
determination concerning attorney's fees is reviewed under an abuse of 
discretion standard.  

Schlesinger, 2001 WY 120, ¶21 (quoting 
Johnston v. 
Stephenson, 938 P.2d 861, 862-63 (Wyo. 
1997)) (some citations omitted).  Similar to the facts of the Schlesinger case, 
the buyers and their counsel provided detailed time records and attorneys' 
affidavits to support the reasonableness of the fees and costs claimed.  At the punitive 
damages hearing, the trial court provided the parties the opportunity to fully 
litigate the reasonableness of the fees and costs requested.  Numerous pleadings 
and supplemental filings were accepted and considered by the trial court.  The record leaves 
no doubt that the trial court carefully considered the lodestar factors through 
its review of the evidence supporting the request for attorney fees and costs as 
well as the sellers' objections.  We find no abuse of discretion in the trial 
court's award of attorney fees and costs.

[¶50]   Affirmed in part, reversed in part, and 
remanded for correction of the judgment consistent with this opinion.

FOOTNOTES

1

Buyer or Lender may obtain, at no expense to Seller, 
electrical, mechanical, structural, environmental and/or other inspections of 
the property by qualified professional inspectors and/or engineers, and shall 
pay for any damage to Seller's property caused by such inspectors and/or 
engineers. . . . Unless Seller receives written notice, 
signed by Buyer on or before January 15, 1997, 5:00 p.m. (Objection Deadline) of 
any defect(s) identified by inspectors or engineers that Buyer is requesting to 
be repaired, the physical condition of the property shall be deemed to be 
satisfactory to Buyer.

  2These 
are the causes of action set out in the buyers' amended complaint.

  3The 
findings break these damages out as follows: $3,571.94  Big Horn Carpet One; 
$70,371  Bromley Construction & Log Homes; $10,350  Dewey's Auto Salon, 
LLC (damp proofing basement floor); $4,500  Paul Hansen's Mobile Homes; $948  
Nielsen Plumbing & Heating, Inc.; $2,978  Northern Gardens (relandscaping 
after construction repairs); $8,122  Northwest Rural Water District.