Case Title: LITTLE v GRIZZLY MANUFACTURING

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1981-11-25T00:00:00Z

Document:
No. 81-100 IN THE SUPREME COURT OF THE STATE OF MONTANA TIMOTHY LITTLE and SHARON LITTLE, Plaintiff and Respondent, GRIZZLY MANUFACTURING, FRED J. BERNATZ, BOLIVER REALTY and DON CROSLEY, Defendant and Appellant. Appeal from: District Court of the Second Judicial District, In and for the County of Silver Bow Honorable Arnold Olsen, Judge presiding. Counsel of Record: For Appellant: Schultz Law Firm, Hamilton, Montana Jeffrey H. Langton argued, Hamilton, Montana For Respondent: John L. Hamner argued, Butte, Montana Submitted: October 26, 1981 Filed: 2 5 1981 M r . Chief ~ u s t i c e Frank I. H a s w e l l d e l i v e r e d t h e Opinion of t h e Court. The L i t t l e s brought t h i s a c t i o n i n t h e District C o u r t , S i l v e r Bow County, to r e c o v e r damages f o r t h e a l l e g e d n e g l i g e n c e , b r e a c h o f c o n t r a c t and breach of g e n e r a l w a r r a n t i e s ( s e c t i o n s 30-11-214 to 30-11-216, MCA) , a r i s i n g from t h e sale of a modular home by G r i z z l y Manufacturing to t h e L i t t l e s . The j u r y r e t u r n e d a v e r d i c t f o r t h e p l a i n t i f f s i n t h e amount of $9,000. A crossclaim i n v o l v i n g Don C r o s l e y of Bolever R e a l t y was also t r i e d , b u t t h e r e is no a p p e a l from t h i s p o r t i o n of t h e case. I n August, 1977, t h e L i t t l e s e n t e r e d i n t o a purchase o r d e r f o r a home manufactured by G r i z z l y Manufacturing of Hamilton, Montana. The L i t t l e s had v i s i t e d t h e manufacturing p l a n t and p a r t i c i p a t e d i n t h e d e s i g n of t h e home. The house purchased by t h e L i t t l e s w a s a modul.ar house which was c o n s t r u c t e d a t t h e p l a n t i n t w o s e c t i o n s and shipped t o t h e L i t t l e s t homesite i n B u t t e , Montana. According to s p e c i f i c a t i o n s f u r n i s h e d by G r i z z l y , t h e L i t t l e s c o n s t r u c t e d a f o u n d a t i o n f o r t h e house which was approved by G r i z z l y r e p r e s e n t a t i v e s . I n November, 1977 , G r i z z l y employees d e l i v e r e d t h e house t o t h e site and t h e t w o h a l v e s were placed on t h e L i t t l e s ' foun- d a t i o n , one s e c t i o n a t a t i m e . Timothy L i t t l e t e s t i f i e d t h a t t w o s t e e l r a i l s were l a i d across t h e f o u n d a t i o n to s u p p o r t t h e sec- t i o n s as t h e y were p u l l e d across t h e f o u n d a t i o n . The i n s t a l l e r s e x p e r i e n c e d d i f f i c u l t y w i t h t h e f i r s t s e c t i o n due to t h e weight o f a s t o n e f i r e p l a c e which had been b u i l t i n t o t h e s e c t i o n a t t h e f a c t o r y . A s t h i s s e c t i o n was p u l l e d across it bowed because t h e r e w a s no s u p p o r t i n t h e middle. Only t w o r a i l s were used to r o l l t h e house a c r o s s . G r i z z l y employees t o l d Tim L i t t l e t h a t t h r e e r a i l s should have been used due to t h e f i r e p l a c e , and t h a t t h e f i r e p l a c e should have been i n s t a l l e d a f t e r d e l i v e r y . Once t h e house was on t h e f o u n d a t i o n it was " s t i t c h e d " t o g e t h e r and s u p p o r t beams were set up i n t h e basement. On h e r f i r s t i n s p e c t i o n of t h e home, Mrs. L i t t l e saw t h a t t h e f i r e p l a c e was a b o u t f o u r i n c h e s from t h e c e i l i n g and t h e r e were c r a c k s i n t h e w a l l . There were also d e f e c t s i n t h e l i n o l e u m , t h e c o u n t e r t o p s , t h e windows and t h e p a t i o d o o r . A p p a r e n t l y most of t h e s e d e f e c t s were f i x e d a f t e r Mrs. L i t t l e complained to Fred B e r n a t z , p r e s i d e n t of G r i z z l y . G r i z z l y employees jacked up t h e house s o t h a t t h e f i r e p l a c e m e t t h e c e i l i n g . There were s e v e r a l d e f e c t s which had n o t been cured a t t i m e of t r i a l . The roof l e a k e d , t h e f i r e p l a c e mantel was warped, and t h e r e w a s a n o t i c e - a b l e v a r i a t i o n i n h e i g h t between t h e t w o h a l v e s of t h e house. The l i n e n c l o s e t door w a s f o u r i n c h e s s h o r t of t h e f l o o r and t h e k i t c h e n closet was d e f e c t i v e and u n f i n i s h e d . G r i z z l y employees a t t e m p t e d to f i x t h e l e a k i n g roof and t h e v a r i a t i o n i n t h e f l o o r b u t t h e r e p a i r s were u n s u c c e s s f u l . The purchase p r i c e of t h e home was $38,001. A t t i m e of t r i a l t h e L i t t l e s had paid a l l b u t $397.24 o f t h e purchase p r i c e and had l i v e d i n t h e home f o r almost t h r e e y e a r s . The L i t t l e s a d m i t t e d removing t w o of t h e s u p p o r t p o s t s i n t h e basement i n o r d e r to b u i l d a basement w a l l . 'I'im L i t t l e s t a t e d he informed a G r i z z l y r e p r e s e n t a t i v e of h i s p l a n s to b u i l d t h e w a l l . Bernatz t e s t i f i e d he d i d n o t a u t h o r i z e t h e removal of t h e s u p p o r t p o s t s . Testimony on damages was g i v e n by Robert Alden, t h e f a t h e r o f Sharon L i t t l e . M r . Alden was a c e r t i f i e d real estate a p p r a i s e r . H e t e s t i f i e d t h a t t h e v a l u e of t h e home w i t h its d e f e c t s was $5,000 lower t h a n it would be w i t h o u t t h e d e f e c t s i n 1979, and t h a t t h e d i s c r e p a n c y i n v a l u e s would be g r e a t e r a t p r e s e n t due to i n f l a t i o n . H e f u r t h e r t e s t i f i e d o v e r o b j e c t i o n t h a t t h e hump i n t h e f l o o r could be r e p a i r e d f o r $2,000, and t h e man- t e l p i e c e r e p l a c e d by a c a r p e n t e r and p e r f - a - t a p e r working a t a p p r o x i m a t e l y $100 p e r day for one week. Fred Bernatz t e s t i f i e d t h a t t h e mantel could be r e p l a c e d f o r a c o u p l e hundred d o l l a r s . M r . Alden t e s t i f i e d t h e roof would have t o be removed and r e p l a c e d , b u t he gave no estimate of t h e cost. There was no f u r t h e r e v i d e n c e on damages. The j u r y rendered a v e r d i c t i n f a v o r of t h e L i t t l e s f o r $9,000. A p p e l l a n t s Fred B e r n a t z and G r i z z l y Manufacturing, I n c . , raise t h e f o l l o w i n g i s s u e s : 1) Whether t h e District Court e r r e d i n denying Fred B e r n a t z l s motion t h a t he be dismissed as a p a r t y d e f e n d a n t because he was m e r e l y an a g e n t f o r t h e c o r p o r a t i o n and t h e r e f o r e n o t p e r s o n a l l y l i a b l e ; 2 ) Whether t h e District Court e r r e d i n r e f u s i n g d e f e n d a n t s ' o f f e r e d i n s t r u c t i o n s based upon t h e Montana Uniform Commercial Code; 3 ) Whether t h e District Court e r r e d i n g i v i n g an i n s t r u c - t i o n on t h e d o c t r i n e of res i p s a l o q u i t u r ; 4 ) Whether t h e r e was s u f f i c i e n t e v i d e n c e to s u p p o r t t h e damages awarded by t h e j u r y ; 5 ) Whether t h e j u r y was p r o p e r l y allowed to c o n s i d e r t h e e f f e c t s of in£ l a t i o n i n a s s e s s i n g damages; 6 ) Whether a real estate a p p r a i s e r w a s q u a l i f i e d to t e s t i f y as to cost of c u r i n g t h e d e f e c t s i n t h e home. On t h e b a s i s of numerous e r r o r s committed by t h e t r i a l c o u r t , we r e v e r s e and remand f o r a new t r i a l . I. L i a b i l i t y of C o r p o r a t e Agent. Judgment was e n t e r e d a g a i n s t Fred Bernatz , i n d i v i d u a l l y , and G r i z z l y Manufacturing, I n c . A p p e l l a n t s contend t h a t B e r n a t z , who was p r e s i d e n t of G r i z z l y Manufacturing, should have been d i s m i s s e d as a p a r t y . The l i a b i l i t y of an a g e n t to a p a r t y d e a l i n g w i t h t h e p r i n c i p a l or c o r p o r a t i o n is covered by s e c t i o n 28-10-702, MCA, as f o l l o w s : "One who assumes to act as an a g e n t is respon- s i b l e to t h i r d p e r s o n s a s a p r i n c i p a l f o r h i s acts i n t h e c o u r s e of h i s agency i n any of t h e f o l l o w i n g cases and i n no o t h e r : "1) When, w i t h h i s c o n s e n t , c r e d i t is g i v e n to him p e r s o n a l l y i n a t r a n s a c t i o n ; " 2 ) when he e n t e r s i n t o a w r i t t e n c o n t r a c t i n t h e name of h i s p r i n c i p a l w i t h o u t b e l i e v i n g i n good f a i t h t h a t he h a s a u t h o r i t y t o do so; or - 4 - " 3 ) when h i s acts are wrongful i n t h e i r n a t u r e ." There was no e v i d e n c e t h a t Fred Bernatz r e c e i v e d p e r s o n a l c r e d i t o r a c t e d w i t h o u t a u t h o r i t y o r a c t e d o u t s i d e t h e scope of h i s agency. I n o r d e r f o r Bernatz to be p e r s o n a l l y l i a b l e , t h e r e f o r e , t h e r e must be e v i d e n c e t o s u p p o r t a f i n d i n g t h a t he was per- s o n a l l y n e g l i g e n t or t h a t h i s a c t i o n s o r o m i s s i o n s were t o r t i o u s i n n a t u r e . M r . Bernatz was n o t p r e s e n t when t h e modular home was i n s t a l l e d on t h e L i t t l e s ' f o u n d a t i o n . H e t e s t i f i e d , "There could have been bad h a n d l i n g o r something i n t h e p r o c e s s of t h e t r a n s f e r from t h e t r a i l e r to t h e f o u n d a t i o n , b u t nothing I a m aware of or was r e p o r t e d by o u r people." H e s t a t e d t h a t he had been through t h e home w i t h t h e L i t t l e s when it was being c o n s t r u c t e d a t t h e p l a n t . Mrs. L i t t l e c a l l e d him on s e v e r a l o c c a s i o n s w i t h c o m p l a i n t s , and a G r i z z l y r e p r e s e n t a t i v e would make a s e r v i c e c a l l . Bernatz p e r s o n a l l y d i d n o t know of any case where t h e company f a i l e d t o respond to a c o m p l a i n t . There was no e v i d e n c e t h a t he w a s aware of any n e g l i g e n t c o n s t r u c t i o n , or t h a t h e p a r t i c i p a t e d i n t h e a c t u a l c o n s t r u c t i o n p r o c e s s . A p p l i c a t i o n of t h e d o c t r i n e of " p i e r c i n g t h e c o r p o r a t e v e i l " to avoid f r a u d o r i n j u s t i c e is i n a p p r o p r i a t e h e r e . I n Montana, o f f i c e r s of a c o r p o r a t i o n have been h e l d p e r s o n a l l y l i a b l e where it was shown t h a t t h e c o r p o r a t i o n was m e r e l y an " a l t e r ego" f o r a person using a s h i e l d f o r purposes of f r a u d . See S h a f f e r v. Buxbaum ( 1 9 6 0 ) t 137 Mont. 397, 352 P.2d 83; Wilson v. Milner Hotels, Inc. ( 1 9 4 4 ) , 116 Mont. 424, 154 P.2d 265. There is no e v i d e n c e t h a t t h e c o r p o r a t i o n w a s d e f e c t i v e l y formed o r t h a t it was formed w i t h t h e i n t e n t t o avoid p e r s o n a l l i a b i l i t y . A s a matter of p u b l i c p o l i c y , t h e o f f i c e r s and a g e n t s o f a c o r p o r a t i o n must be s h i e l d e d from p e r s o n a l l i a b i l i t y f o r acts taken on b e h a l f of t h e c o r p o r a t i o n i n f u r t h e r a n c e of cor- p o r a t e g o a l s , p o l i c i e s and b u s i n e s s i n t e r e s t s . P h i l l i p s v. Montana Ed. A s s l n ( 1 9 8 0 ) , Mont . , 610 P.2d 154, 37 St.Rep. 821. The e x c e p t i o n to t h i s p o l i c y is where t h e o f f i c e r per- s o n a l l y committed a tort. There is no e v i d e n c e to s u p p o r t a f i n d i n g t h a t Bernatz committed a tort. T h e r e f o r e , t h e motion to d i s m i s s him as a p a r t y d e f e n d a n t should have been g r a n t e d . 11. A p p l i c a b i l i t y of Uniform Commercial Code. The t r i a l c o u r t , o v e r a p p e l l a n t s g o b j e c t i o n s , gave t h r e e j u r y i n s t r u c t i o n s based on t h e g e n e r a l s t a t u t o r y w a r r a n t i e s of s e c t i o n s 30-11-214 , 30-11-215 , and 30-11-216, MCA. A p p e l l a n t s argued t h a t t h e s e i n s t r u c t i o n s were i n a p p l i c a b l e on t h e ground t h a t t h e Uniform Commercial Code a p p l i e d to t h e t r a n s a c t i o n and p r e c l u d e d t h e use of t h e g e n e r a l s t a t u t o r y w a r r a n t i e s . A p p e l l a n t s contend t h e t r i a l c o u r t e r r e d i n r e f u s i n g t h e i r pro- posed i n s t r u c t i o n s based on t h e U.C.C. , s e c t i o n s 30-2-606, 30-2-607 30-2-717 30-2-714( 2 ) , 30-2-605 and 30-2-314, MCA. W e a g r e e . Article 2 o f t h e Uniform Commercial Code a p p l i e s to sales o f "goods." "Goods" is d e f i n e d i n s e c t i o n 30-2-105, MCA, as f o l l o w s : " ( 1 ) 'Goodsg means a l l t h i n g s ( i n c l u d i n g spe- c i a l l y manufactured goods) which are movable a t t h e t i m e of i d e n t i f i c a t i o n to t h e c o n t r a c t f o r sale o t h e r t h a n t h e money i n which t h e p r i c e is t o be p a i d , investment s e c u r i t i e s . . . and t h i n g s i n a c t i o n . . . " ( 2 ) Goods must be both e x i s t i n g and i d e n t i f i e d b e f o r e any i n t e r e s t i n them c a n p a s s . Goods which are n o t both e x i s t i n g and i d e n t i f i e d are ' f u t u r e ' goods. A purported p r e s e n t sale of f u t u r e goods or of any i n t e r e s t t h e r e i n o p e r a t e s as a c o n t r a c t t o s e l l . " The q u e s t i o n of whether a sale of a modular home is governed by t h e U.C.C. h a s been decided by o n l y t w o c o u r t s . The I n d i a n a C o u r t of Appeals held t h a t t h e sale of a modular home was a sale o f "goods" and t h e r e f o r e governed by t h e U.C.C. Stephenson v. F r a z i e r ( ~ n d . C t . ~ p p . , 1980) , 399 N.E.2d 794. I n Cates v. Morgan p o r t a b l e ~ u i l d i n g Corp., ( 7 t h C i r . 1 9 7 9 ) , 591 F.2d 1 7 , t h e c o u r t approved of t h e lower c o u r t g s c o n c l u s i o n t h a t t w o p r e f a b r i c a t e d modular h o t e l u n i t s were "goods" under U.C.C. s 2-105. The r e s p o n d e n t s have argued t h a t G r i z z l y Manufacturing had c h a r g e of t h e home u n t i l a f t e r it w a s permanently a f f i x e d to t h e f o u n d a t i o n , a t which p o i n t it no l o n g e r had m o b i l i t y . However, t h e t i m e of i d e n t i f i c a t i o n to t h e c o n t r a c t is n o t dependent upon c o n t r o l of t h e goods by e i t h e r p a r t y o r upon d e l i v e r y . According t o Anderson, Uniform Commercial Code S 2-501:4: " I n t h e case of t h e manufacture of goods t o t h e b u y e r ' s s p e c i f i c a t i o n s , t h e f a c t t h a t t h e goods a r e to t h e b u y e r ' s s p e c i f i c a t i o n s is a s u f - f i c i e n t i d e n t i f i c a t i o n of t h e goods to t h e c o n t r a c t . Consequently t h e r e is an iden- t i £ i c a t i o n of t h e goods from t h e moment when t h e f i r s t s t e p of p r o d u c t i o n is made w i t h t h e raw materials which are intended to be f i n a l l y worked i n t o t h e goods r e q u i r e d by t h e b u y e r ' s c o n t r a c t . " The e v i d e n c e shows t h a t t h e modular home was manufactured to t h e L i t t l e s ' s p e c i f i c a t i o n s w i t h regard t o d e s i g n and d e c o r a t i o n . Thus t h e t i m e of i d e n t i f i c a t i o n t o t h e c o n t r a c t was t h e time of t h e f i r s t s t e p i n p r o d u c t i o n . A t t h a t t i m e t h e modular home was movable. The Uniform Commercial Code t h e r e f o r e governs t h i s case and t h e g e n e r a l s t a t u t o r y w a r r a n t i e s of s e c t i o n s 30-11-201 e t s e q . , MCA are i n a p p l i c a b l e by v i r t u e of s e c t i o n 30-11-224, MCA. 111. R e s I p s a L o q u i t u r I n s t r u c t i o n . A p p e l l a n t s contend t h e j u r y i n s t r u c t i o n on t h e d o c t r i n e of res i p s a l o q u i t u r should n o t have been g i v e n by t h e trial c o u r t . They o b j e c t on t h e b a s i s t h a t t h e d e f e c t i n t h e f l o o r could have been caused by t h e L i t t l e s ' s t r u c t u r a l remodeling and t h a t t h e L i t t l e s had e x c l u s i v e c o n t r o l of t h e house b e f o r e t h e l e a k i n t h e r o o f developed. The d o c t r i n e of res i p s a l o q u i t u r is s t a t e d i n Whitney v. Northwest Greyhound L i n e s ( 1 9 5 2 ) , 1 2 5 Mont. 528, 533, 242 P.2d " [W] hen an i n s t r u m e n t a l i t y which c a u s e s i n j u r y , w i t h o u t any f a u l t of t h e i n j u r e d p e r s o n , is under t h e e x c l u s i v e c o n t r o l of t h e d e f e n d a n t a t t h e time of t h e i n j u r y , and t h e i n j u r y is such as i n t h e o r d i n a r y c o u r s e of t h i n g s does not o c c u r i f t h e one having such c o n t r o l u s e s p r o p e r care, t h e n t h e law i n f e r s n e g l i g e n c e on t h e p a r t of t h e one i n c o n t r o l as t h e cause of t h e i n j u r y . " A l l o f t h e e l e m e n t s must be found to e x i s t b e f o r e t h e i n f e r e n c e o f n e g l i g e n c e may be drawn. Where, as h e r e , t h e r e is a f a c t u a l q u e s t i o n as to whether t h e e l e m e n t s of res i p s a l o q u i t u r e x i s t , t h e i n s t r u c t i o n must be s t a t e d i n c o n d i t i o n a l terms r a t h e r t h a n mandatory terms. The i n s t r u c t i o n g i v e n was taken d i r e c t l y from t h e Montana J u r y I n s t r u c t i o n Guide, J u r y I n s t r u c t i o n N o . 22.00. It is made c o n d i t i o n a l on t h e f i n d i n g by t h e j u r y t h a t a l l of t h e e l e m e n t s o f res i p s a l o q u i t u r e x i s t . T h e r e f o r e t h e i n s t r u c t i o n a s g i v e n was p r o p e r . I V . Damages. The case was submitted to t h e j u r y on t w o t h e o r i e s : 1) n e g l i g e n c e and 2 ) breach of g e n e r a l s t a t u t o r y w a r r a n t i e s . The j u r y was i n s t r u c t e d on t h e measure of damages f o r n e g l i g e n c e , s e c t i o n 27-1-317, MCA, b u t t h e y were not i n s t r u c t e d as to t h e measure of damages f o r breach of g e n e r a l warranty. F u r t h e r , we have decided t h a t t h e U.C.C. should have been a p p l i e d , t h e r e b y p r e c l u d i n g t h e g e n e r a l s t a t u t o r y w a r r a n t i e s i n s t r u c t i o n s . There is no way t o d e t e r m i n e whether t h e j u r y r e l i e d on n e g l i g e n c e or b r e a c h of w a r r a n t y i n r e a c h i n g i t s v e r d i c t of $9,000 i n f a v o r of t h e r e s p o n d e n t s . W e cannot be c e r t a i n t h a t t h e j u r y d i d n o t r e l y on an improper t h e o r y i n a s s e s s i n g t h e damages. Even assuming arguendo t h a t t h e j u r y r e l i e d on t h e n e g l i - gence t h e o r y , t h e award of damages was n o t supported by s u f - f i c i e n t e v i d e n c e . M r . Alden, c e r t i f i e d real estate a p p r a i s e r , t e s t i f i e d t h e v a l u e of t h e home w i t h its d e f e c t s was $5,000 less t h a n it would have been w i t h o u t d e f e c t s i n 1979, and t h a t t h e market v a l u e of t h e home had i n c r e a s e d by d a t e of t r i a l due to i n f l a t i o n . H e t e s t i f i e d t h a t as t h e v a l u e of t h e home g o e s up, t h e d i s c r e p a n c y i n v a l u e due to t h e d e f e c t also i n c r e a s e s . N o p e r c e n t a g e r a t e of i n f l a t i o n was g i v e n to t h e jury. M r . Alden's estimates on t h e cost to c u r e t h e d e f e c t s t o t a l l e d a p p r o x i m a t e l y $3,000. A p p e l l a n t s argue t h a t M r . Alden - 8 - was n o t q u a l i f i e d to t e s t i f y as t o t h e c o s t of c u r e . H e t e s t i f i e d t h a t he had a t one t i m e worked a s a manager of t h e remodeling department of a lumber company. The trial c o u r t h a s broad d i s c r e t i o n i n d e t e r m i n i n g whether a w i t n e s s may q u a l i f y as a n e x p e r t . Mets v. Granrud (1980) Mont. 606 P.2d 1384, 37 St.Rep. 313; Haynes v. County of Missoula (1973) 1 6 3 Mont. 270, 517 P.2d 370. See a l s o 1 1 Moore1s F e d e r a l p r a c t i c e S 702.10[3]. The d e g r e e of a w i t n e s s 1 q u a l i f i c a t i o n a f f e c t s t h e w e i g h t r a t h e r t h a n t h e a d m i s s i b i l i t y of h i s testimony. N e s b i t t v. C i t y of B u t t e ( 1 9 4 5 ) , 118 Mont. 84, 1 6 3 P.2d 251. The t r i a l c o u r t d i d n o t abuse its d i s c r e t i o n i n a l l o w i n g M r . Alden to t e s t i f y . However, t h e j u r y must have c o n s i d e r e d t h e e f f e c t s of i n £ l a t i o n i n o r d e r t o reach t h e amount of $9,000. They d i d s o i n t h e absence of s p e c i f i c g u i d e l i n e s d e r i v e d from t h e e v i d e n c e . W e conclude t h a t i n t h i s case t h e r e w a s i n s u f f i c i e n t e v i d e n c e on which t h e j u r y could have c o n s i d e r e d in£ l a t i o n . Reversed and remanded f o r a new t r i a l to be l i m i t e d to t w o b a s e s of l i a b i l i t y : n e g l i g e n c e and breach of o b l i g a t i o n under t h e Uniform C o m m e r c i a l Code. Chief J u s t i c e --me---