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 
Mr. Chief ~ustice Frank I. Haswell delivered the Opinion of the 

Court. 

The Littles brought this action in the District Court, 

Silver Bow 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 Grizzly Manufacturing to the Littles. The jury returned 

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

crossclaim involving Don Crosley of Bolever Realty was also 

tried, but there is no appeal from this portion of the case. 

In August, 1977, the Littles entered into a purchase order 

for a home manufactured by Grizzly Manufacturing of Hamilton, 

Montana. The Littles had 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 at the 

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. 

In November, 1977 , Grizzly employees 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 difficulty with the first section 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 two rails were used to 

roll the house across. Grizzly employees told Tim Little that 

three rails should have been used due to the fireplace, and that 

the fireplace should have been installed after delivery. 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 that 
the 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 after Mrs. Little complained to Fred 

Bernatz, president of Grizzly. Grizzly employees jacked up the 

house so that the fireplace met the ceiling. There were several 

defects which had not been cured at time of trial. The roof 

leaked, the fireplace mantel was warped, and there was a noticeable variation in height between the two halves of the house. 

The linen closet door was four inches short of the floor and the 

kitchen closet was defective and unfinished. Grizzly employees 

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. At time of 

trial the Littles had paid all but $397.24 of the purchase price 

and had lived in the home for almost three years. The Littles 

admitted removing two of the support posts in the basement in 

order to build a basement wall. 'I'im Little stated he informed a 

Grizzly representative of his plans to build the wall. Bernatz 

testified he did not authorize the removal of the support posts. 

Testimony on 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 in values 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 

that the 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 in 
favor of the Littles for $9,000. 

Appellants Fred Bernatz and Grizzly Manufacturing, Inc., 

raise the following issues: 

1) Whether the District Court erred in denying Fred 

Bernatzls motion that he 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 in refusing 

defendants' offered instructions based upon the Montana Uniform 

Commercial Code; 

3) Whether the District Court erred in giving an instruction on the doctrine of res ipsa loquitur; 

4) Whether there was sufficient evidence to support the 

damages awarded by the jury; 

5) Whether the jury was properly allowed to consider the 

effects of 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 Corporate Agent. 

Judgment was entered against Fred Bernatz , individually, 

and Grizzly Manufacturing, Inc. Appellants contend that Bernatz, 

who was president of Grizzly Manufacturing, should have been 

dismissed as a party. 

The liability of 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 for his 

acts in the course of his agency in any of the 

following cases and in no 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 his principal without believing in good 

faith that he has authority to do so; or 

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"3) when his acts are wrongful in their nature ." 

There was no evidence that Fred Bernatz received personal credit 

or acted without authority or acted outside the scope of his 

agency. In order for Bernatz to be personally liable, therefore, 

there must be evidence to support a finding that he was personally negligent or that his actions or omissions were tortious 

in nature. 

Mr. Bernatz was not present when the modular home was 

installed on the Littles' foundation. He testified , "There could 

have been bad handling or something in the process of the 

transfer from the trailer to the foundation, but nothing I am 

aware of or was reported by our people." He stated that he had 

been through the home with the Littles when it was being 

constructed at the plant. Mrs. Little called him on several 

occasions with complaints, and a Grizzly representative would 

make a service call. Bernatz personally did not know of any case 

where the company failed to respond to a complaint. There was no 

evidence that he was aware of any negligent construction, or that 

he participated in the actual construct ion process. 

Application of the doctrine of "piercing the corporate 

veil" to avoid fraud or injustice is inappropriate here. In 

Montana, officers of a corporation have been held personally 

liable where it was shown that the corporation was merely an 

"alter ego" for a person using a shield for purposes of fraud. 

See Shaffer v. Buxbaum (1960)t 137 Mont. 397, 352 P.2d 83; 

Wilson v. Milner Hotels, Inc. (1944), 116 Mont. 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. Phillips v. 

Montana Ed. Assln (1980), Mont . , 610 P.2d 154, 37 St.Rep. 
821. The exception to this policy is where the officer personally committed 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. Applicability of 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 instructions based on the general statutory warranties of 

sections 30-11-214 , 30-11-215 , and 30-11-216, MCA. Appellants 

argued that these instructions were inapplicable on the ground 

that the Uniform Commercial Code applied to the transaction and 

precluded the use of the general statutory warranties. 

Appellants contend the trial court erred in refusing their proposed 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 specially manufactured goods) which are movable at 

the time of identification to the contract for 

sale other than the money in which 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), 591 F.2d 17, the court 

approved of the lower courtg s conclusion that two prefabricated 

modular hotel units were "goods" under U.C.C. s 2-105. 
The respondents have argued that Grizzly Manufacturing had 

charge of the home until after it was permanently affixed to the 

foundation, at which point it no longer had mobility. However, 

the time of identification to the contract is not dependent upon 

control of the goods by either party or upon delivery. According 

to Anderson, 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 suff icient identification of the goods to the 

contract. Consequently there is an identi£ ication of the goods from the moment when the 

first step of 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 time of identification to the contract was the time of 

the first step in production. At that time the modular home was 

movable. The Uniform Commercial Code therefore governs this case 

and the general statutory warranties 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 instruction on 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' structural remodeling and that the 

Littles had exclusive control of the house before the leak in the 

roof developed. 

The doctrine of res ipsa loquitur is stated in Whitney v. 

Northwest Greyhound Lines (1952), 125 Mont. 528, 533, 242 P.2d 

" [W] hen an instrumentality which causes injury, 

without any fault of 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 ordinary course of things does not 

occur if the one having such control uses proper 

care, then the law infers negligence on the part of 
the one in control as the cause of the injury." 

All of the elements must be found to exist before 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 instruction must be stated in conditional terms rather than 

mandatory terms. 

The instruction given was taken directly from the Montana 

Jury Instruction Guide, Jury Instruction No. 22.00. It is made 

conditional on the finding by the jury that all of the elements 

of res ipsa loquitur exist. Therefore the instruction as given 

was proper. 

IV. Damages. 

The case was submitted to the jury on two theories : 1) 

negligence and 2) breach of general statutory warranties. 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 for breach of general warranty. Further, we 

have decided that the U.C.C. should have been applied, thereby 

precluding the general statutory warranties instructions. There 

is no way to determine whether the jury relied on negligence or 

breach of warranty in reaching its verdict of $9,000 in favor 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 sufficient evidence. Mr. Alden, certified real estate appraiser, 

testified the value of the home with its defects was $5,000 less 

than it would have been without defects in 1979, and that the 

market value of the home had increased by date of trial due to 

inf lation. He testified that as the value of the home goes up, 

the discrepancy in value due to the defect also increases. 

No percentage 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 

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was not qualified to testify as to the cost of cure. He 

testified that he had at one time worked as a 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) 163 Mont. 

270, 517 P.2d 370. See also 11 Moore1s Federal practice 

S 702.10[3]. The degree of a witness1 qualification affects the 

weight rather than the admissibility of his testimony. Nesbitt 

v. City of Butte (1945), 118 Mont. 84, 163 P.2d 251. The trial 

court did not abuse its discretion in allowing Mr. Alden to 

testify. 

However, the jury must have considered the effects of 

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 this case there was insufficient evidence 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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