### No. 81-100 INTHE SUPREME COURT OF THE STATEOF MONTANA

TIMOTHY LITTLE and SHARONLITTLE, Plaintiffand Respondent,

GRIZZLYMANUFACTURING, FRED J. BERNATZ,BOLIVER REALTY and DON CROSLEY, Defendant and Appellant.

Appeal from: District Court of the Second JudicialDistrict, In and for the County of Silver Bow Honorable Arnold Olsen, Judgepresiding. Counsel of Record: ForAppellant: SchultzLaw Firm,Hamilton, Montana JeffreyH. Langton argued,Hamilton,Montana For Respondent: John L. Hamner argued, Butte,Montana

Submitted: October 26, 

### 1981

Filed: 

## 25

## 1981Mr. Chief ~ustice Frank I. Haswell delivered the Opinion of the Court. The Littlesbrought this action in the District Court, SilverBow County, 

### to recover damages for the alleged negligence, breach of contract and breach of general warranties (sections 30-11-214 

### to 30-11-216, MCA)

## ,arising from the 

### sale of 

### a modular home by GrizzlyManufacturing to the Littles. The jury returned

a verdict for the plaintiffs in the amount of $9,000. A 

### crossclaim involving Don Crosleyof Bolever Realty 

### was 

### also tried, but there 

### is no appeal from thisportion of the 

### case. InAugust, 1977, the Littlesentered into a purchase order fora home manufactured by GrizzlyManufacturing of Hamilton, Montana. The Littleshad visited the manufacturing plant and participated in the design of the home. The house purchased by the Littles

### was a modul.ar house which 

### was constructed atthe plant in

### two sections and shipped to the Littlest homesite in Butte, Montana. According 

### to specifications furnished by Grizzly, the Littles constructed a foundation for the house which



### was approved by Grizzly representatives. InNovember, 1977

## ,Grizzlyemployees delivered the house to the site and the 

### two halves 

### were placed on the Littles' foundation, one section 

### at a 

### time. Timothy Little testified that

### two steel 

### rails

### were laid 

### across the foundation 

### to support the 

### sections 

### as they 

### were pulled 

### across the foundation. The installers experienced difficultywith the firstsection due to the weight of a stone fireplace which had been built into the section at the factory. As this section

### was pulled 

### across it bowed because there was no support in the middle. Only 

### tworails

### were used to roll the house across. Grizzlyemployees told Tim Little that three rails should have been used due to the fireplace, and that the fireplace should have been installed afterdelivery. Once the house 

### was on the foundation it 

### was "stitched" together and support beams 

### were set up in the basement. On her first inspection of the home, 

### Mrs. Little 

### saw thatthe fireplace 

### was about four inches from the ceiling and there were cracks in the wall. There 

### were also defects in the linoleum, the countertops, the windows and the patio door. Apparently

### most of these defects

### were fixed afterMrs. Little complained to Fred Bernatz, president of Grizzly. Grizzlyemployees jacked up the house so that the fireplace

### met the ceiling. There 

### were several defectswhich had not been cured attimeof trial. The roof leaked, the fireplacemantel 

### was warped, and there was a noticeable variation inheight between the 

### twohalves of the house. The linen closet door 

### was four inches shortof the floor and the kitchen 

### closet was defective and unfinished. Grizzlyemployees attempted to fix the leaking roof and the variation in the floor but the repairs 

### were unsuccessful. The purchase price of the home was $38,001. Attimeof trial the Littleshad paid allbut $397.24 of the purchase price and had lived in the home for almost three years. The Littles admitted removing 

### twoof the support posts in the basement in order to build a basement wall. 

### 'I'im Little stated he informed a Grizzly representative of hisplans 

### to build the wall. Bernatz testified he did not authorize the removal of the support posts. Testimonyon damages 

### was given by Robert Alden, the father of Sharon Little. Mr. Alden 

### was a certified 

### real estate appraiser. He testified that the value of the home with 

### its defects

### was $5,000 

### lower than it would be without the defects in 1979, and that the discrepancy invalues would be greater at present due 

### to inflation. He further testified over objection that the hump in the floor could be repaired for $2,000, and the mantelpiece replaced by a carpenter and perf-a-taper working at approximately $100 per day 

### for one week. Fred Bernatz testified thatthe mantel could be replaced for a couple hundred dollars. Mr. Alden testified the roof would have to be removed and replaced, but he gave no 

### estimate of the 

### cost. There 

### was no further evidence on damages. The jury rendered a verdict infavor of the Littles for $9,000. Appellants Fred Bernatz and GrizzlyManufacturing, Inc., raise the following issues: 1)Whether the District Court erred indenying Fred Bernatzlsmotion thathe be dismissed as a party defendant because he 

### was merely an agent for the corporation and therefore not personally liable; 2)Whether the District Court erred inrefusing defendants' offered instructionsbased upon the Montana Uniform Commercial Code; 3)Whether the District Court erred ingiving an instruction on the doctrine of 

### res ipsa loquitur; 4)Whether there 

### was sufficientevidence 

### to support the damages awarded by the jury; 5)Whether the jury 

### was properly allowed 

### to consider the effectsof in£lation in assessing damages; 6)Whether a 

### real estate appraiser 

### was qualified to testify as 

### to cost of curing the defects in the home. On the basis of numerous errors committed by the trial court, 

### we reverse and remand for a new 

### trial. I. Liability of CorporateAgent. Judgment was entered against Fred Bernatz

## , individually, and GrizzlyManufacturing, Inc. Appellants contend that Bernatz, who 

### was president of GrizzlyManufacturing, should have been dismissed 

### as a party. The liabilityof an agent to a party dealing with the principal 

### or corporation is covered by section 28-10-702, MCA, as follows: "One who assumes to act as an agent is responsible to third persons as a principal forhis acts in the course of hisagency in any of the following cases and inno other: "1)When, with his consent, credit 

### is given 

### to him personally in 

### a transaction; "2) when he enters into a written contract in the name of hisprincipal without believing ingood faith that he has authority to do so; 

### or -4-"3)when his 

### acts are wrongful intheir nature

# ."
There 

### was no evidence that Fred Bernatz received personal credit

oracted without authority oracted outside the scope of his agency. In order forBernatz 

### to be personally liable, therefore, theremust be evidence to support a finding thathe was personallynegligent 

### or that his actions oromissions 

### were tortious innature.

Mr. Bernatz 

### was not present when the modular home 

### was installed on theLittles' foundation. He testified

## , "There could have been bad handling or something inthe process of the transfer from the 

### trailer 

### to the foundation, but nothing I 

### am

aware of 

### or was reported by our people." He stated thathe had been through the home with the Littleswhen it 

### was being constructed atthe plant. Mrs. Littlecalled him 

### on several occasions with complaints, and a Grizzly representative would make 

### a service call. Bernatz personallydid not know of any 

### case where the company failed torespond to a complaint. There 

### was no evidence thathe 

### was 

### aware of any negligent construction, 

### or that he participated in the actual construction process. Application of the doctrine of "piercing the corporate veil" 

### to avoid fraud or injustice is inappropriatehere. In Montana, officers of a corporation have been held personally liablewhere it 

### was shown that the corporation 

### was merely an "alterego" for 

### a person using a shield forpurposes of fraud. See Shaffer v. Buxbaum (1960)t 137Mont. 397, 352 P.2d 83; Wilson v. Milner Hotels, Inc. (1944), 116Mont. 424, 154 P.2d 265. There is no evidence that the corporation was defectively formed or that it 

### was formed with the intent to avoid personal liability. As a matter of public policy, the officers and agents of a corporation must be shielded from personal liability for acts taken on behalf of the corporation in furtherance of corporate goals, policies and business interests. Phillipsv. Montana Ed. Assln (1980), Mont

# . ,610 P.2d 154, 37 St.Rep.821. The exception 

### to thispolicy is where the officer personallycommitted 

### a tort. There 

### is no evidence 

### to support a finding that Bernatz committed a 

### tort. Therefore, the motion 

### to dismiss him 

### as a party defendant should have been granted. 11. Applicabilityof Uniform 

### Commercial Code. The trial court, over a p p e l l a n t s g o b j e c t i o n s , gave three jury instructionsbased on the general statutorywarranties of sections 30-11-214 

## ,30-11-215 

## , and 30-11-216, MCA. Appellants argued that these instructions

### were inapplicable on the ground thatthe Uniform Commercial Code applied to the transaction and precluded the use of the general statutorywarranties. Appellants contend the trial court erred in refusing theirproposed instructions based on the U.C.C. 

## ,sections 30-2-606, 30-2-607 30-2-717 30-2-714( 2), 30-2-605 and 30-2-314, MCA. We agree. Article 2 of the Uniform Commercial Code applies 

### to sales of "goods." "Goods" is defined in section 30-2-105, MCA, 

### as follows: "(1) 'Goodsg means all things (including speciallymanufactured goods) which are movable at the timeof identification to the contract for sale other than the money inwhich the price is 

### to be paid, investment securities

# . . . and things in action

# .

# .. "(2)Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are 'future

### ' goods. A purported present 

### sale of future goods 

### or of any interest therein operates as a contract to sell." The question of whether a sale of 

### a modular home is governed by the U.C.C. has been decided by only 

### two courts. The Indiana Court of Appeals held that the sale of a modular home was a sale of "goods" and therefore governed by the U.C.C. Stephenson v. Frazier (~nd.Ct.~pp., 1980)

## ,399 N.E.2d 794. In Cates v. Morgan portable ~uilding Corp., (7th Cir. 1979), 591F.2d 17, the court approved of the 

### lower courtg 

### s conclusion that 

### twoprefabricated modular hotel units 

### were "goods" under U.C.C. 

## s 2-105.The respondents have argued thatGrizzlyManufacturing had charge of the home until after it 

### was permanently affixed to the foundation, atwhich point it no longer had mobility. However, the 

### timeof identification 

### to the contract is not dependent upon controlof the goods by eitherparty orupon delivery. According toAnderson, Uniform 

### Commercial Code S 2-501:4: "In the 

### case of the manufacture of goods to the buyer's specifications, the fact that the goods are to the buyer's specifications 

### is a sufficient identification of the goods 

### to the contract. Consequently there is an identi£ icationof the goods from the moment when the firststepof production is made with the raw 

### materials which 

### are intended to be finally worked into the goods required by the buyer's contract." The evidence shows that the modular home 

### was manufactured to the Littles' specifications with regard to design and decoration. Thus the 

### timeof identification to the contract 

### was the 

### time of the firststep inproduction. Atthattime the modular home 

### was movable. The Uniform Commercial Code therefore governs this

### case and the general statutorywarranties of sections 30-11-201 et seq., MCA 

### are inapplicable by virtue of section 30-11-224, MCA.

111. Res Ipsa Loquitur Instruction. Appellants contend the jury instructionon the doctrine of



### res ipsa loquitur should not have been given by the trial court. They object on the basis that the defect in the floor could have been caused by the Littles' structuralremodeling and that the Littleshad exclusive control of the house before the leak inthe roof developed. The doctrine of 

### res ipsa loquitur 

### is stated inWhitney v. Northwest Greyhound Lines (1952), 125Mont. 528, 533, 242 P.2d



### "[W]hen an instrumentality which causes injury, without any faultof the injured person, is under the exclusive control of the defendant at the 

### time of the injury, and the injury 

### is such 

### as in the ordinarycourse of thingsdoes not occur if the one having such control uses proper 

### care, then the 

### law infers negligence on the part ofthe one in control 

### as the cause of the injury." Allof the elementsmust be found 

### to existbefore the inference of negligence may be drawn. Where, as here, there is a factual question 

### as 

### to whether the elements of 

### res ipsa loquitur exist, the instructionmust be stated inconditional 

### terms rather than mandatory 

### terms. The instructiongiven 

### was taken directlyfrom the Montana Jury InstructionGuide, Jury Instruction No. 22.00. It is made conditional on the finding by the jury that allof the elements of 

### res ipsa loquiturexist. Therefore the instruction asgiven



### was proper.

IV. Damages. The 

### case was submitted 

### to the jury on 

### two theories: 1) negligence and 2) breach of general statutorywarranties. The jury 

### was instructed on the measure of damages for negligence, section 27-1-317, MCA, but they 

### were not instructed 

### as 

### to the

measure of damages forbreach of general warranty. Further, 

### we have decided that the U.C.C. should have been applied, thereby precluding the general statutorywarranties instructions. There is no way to determine whether the jury relied on negligence 

### or breach of warranty inreaching 

### itsverdict of $9,000 infavor of the respondents. We cannot be certain that the jury did not rely

on an improper theory in assessing the damages. Even assuming arguendo that the jury relied on the negligence theory, the award of damages 

### was not supported by sufficientevidence. Mr. Alden, certified real 

### estate appraiser, testified the value of the home with its defectswas $5,000 less than it would have been without defects in 1979, and that the market value of the home had increased by dateof trial due 

### to inflation. He testified that as the value of the home goes up, the discrepancy in value due to the defect also increases. Nopercentage rate of inflation was given 

### to the jury. Mr. Alden's 

### estimates on the 

### cost 

### to cure the defects totalled approximately $3,000. Appellants argue that Mr. Alden -8-

### was not qualified 

### to testify

### as to the cost of cure. He testified thathe had atone 

### timeworked asa manager of the remodeling department of a lumber company. The trial court has broad discretion in determining whether a witness may qualify as

an expert. 

### Mets v. Granrud (1980) Mont. 606 P.2d 1384, 37 St.Rep. 313; Haynes v. County of Missoula (1973) 163Mont. 270, 517 P.2d 370. See also 11Moore1sFederal practice S 702.10[3]. The degree of a witness1qualification affects the weight rather than the admissibility of his testimony. Nesbitt

v. City of Butte (1945), 118Mont. 84, 163P.2d 251. The trial court did not abuse 

### its discretion inallowing Mr. Alden to testify. However, the jurymust have considered the effectsof in£ lation in order to reach the amount of $9,000. They did so in the absence of specific guidelines derived from the evidence. We conclude that in thiscase therewas insufficientevidence on which the jury could have considered in£lation. Reversed and remanded for a new 

### trial 

### to be limited 

### to two bases of liability: negligence and breach of obligation under the Uniform Commercial Code.

Chief Justice

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