NO. 80-414 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

ROBERT V. WHITE and KAREN WHITE, Plaintiffs and Respondents,

FRANK LOBDELL and KATHRYN LOBDELL and PONDEROSA REAL ESTATE, Defendants and Respondents, and FIDELITY REAL ESTATE, Defendant and Appellant.

Appeal from: District Court of the Fourth Judicial District, In and for the County of Missoula Honorable Jack L. Green, Judge presiding Counsel of Record: For Appellant: Milodragovich, Dale and Dye, Missoula, Montana Michael J. Milodragovich argued, Missoula,Montana For Respondents: William R. Baldassin argued, (Lobdell),Missoula, Montana Datsopoulos,MacDonald & Lind,Missoula, Montana Christopher Swartley argued (White)Missoula, Montana

Submitted: September 23, 1981 Decided: ;i!f{ 

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# Iq'gZ Filed: !I.

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# 9Mr. Justice John C. Sheehy delivered the Opinion of the Court. Fidelity Real Estate appeals from a judgment against it in the District Court, Fourth Judicial District,Missoula County, in favor of Roger V. White and Karen White, in the sum of $10,255.00 and costs. We affirm the judgment in favor of Frank and Kathryn Lobdell and reverse the remainder of the judgment and remand the case for a new trial. On December 19, 1978, Frank G. Lobdell entered into an exclusive listing agreement with Ponderosa Realty, a Missoula realtor, to sell his residence located on Lot 13A, Block 3, Hillside Homes Addition No. 1,Missoula County, Montana. In the listing agreement, the irregular four-sided lot was shown as having dimensions of 214.5 feet, 190.2 feet, 92.4 feet and 130 feet. At the time, Ponderosa Realty was a participant in the Missoula Multiple Listing Service. That service sent out to the participating Missoula realtor offices a multiple listing document which showed Ponderosa Realty as the listing office, and repeated in a diagram the above dimensions for the Lobdell lot shown on the original Ponderosa listing. Fidelity Real Estate, also a Missoula realtor,received a copy of the multiple listing as a participant in the Missoula Multiple Listing Service. RobertWhite, a civil engineerwith the United States Forest Service, came to Missoula on January 26, 1979, to look for a home. He and his wife Karen White were shown the Lobdell residence by Valerie Ann Demos of Fidelity Real Estate. The Whites personally examined the realproperty involved,and on January 29, entered into a buy-sell agreement

### through Fidelity Real Estate. They subsequently obtained a warranty deed from the Lobdells onMarch 13, 1979, conveying the property described as Lot 13A,Block 3, 

### Hillside Homes No. 1,Missoula County,Montana. After the transactionwas completed, the Whites learned through a VeteransAdministration survey encroachment document that the actual dimensions of the lot which they had purchased

were 170.52 feet by 122.73 feetby 84.95 feetby 80 feet. The latter dimensions contained 11,349 square feet whereas the dimensions shown in the listing agreement diagram contained 19,107 square feet. The Whites filed suit in Missoula County District Court against Frank Lobdell and Kathryn Lobdell as sellers of the realproperty, Robert Payne and James Payne,d/b/a Ponderosa Realty, and Fidelity Real Estate. The complaint charges the defendantswith negligence, actual fraud and constructive fraud in connectionwith the sale of the house. The Lobdells, Robert and James Payne, and Ponderosa Realty filed an answer and cross-complaint,denying any liability to the Whites and cross-claiming against Fidelity Real Estate on the ground that Fidelity Real Estatewas acting as agent of the Whites and failed in its duties as their agent in closing the real estate transaction. Fidelity Real Estate answered the Whites' complaintby general denial, answered the cross-claim by general denial and alleged that the damages of the Whites were the direct and proximate result of the errors and omissions of the Lobdells and PonderosaRealty. A pretrial order was entered by the District Court on June 25, 1980. It lists the contentions of the Whites against the various defendants. The only defendants' contentions

### listed are those of Fidelity Real Estate to the effect that the Whites may not recover because of comparative negligence and that any damages that the Whites may have suffered are the result of the acts of the other defendants. On the morning that the case came on for jury trial, it

was disclosed to the District Court that although defendants Robert Payne and James Payne had been sued "d/b/a Ponderosa Realty," itwas nevertheless true that Ponderosa Realty

was a corporate entity. No issue had been raised by any party prior thereto, by pleading or otherwise, that Robert Payne and James Payne were not proper parties doing business

as Ponderosa Realty. The colloquy between Court and counsel connectionwith that development follows: "THECOURT: Do the DefendantsLobdells and Payne have any objection? "MR. MILODRAGOVICH: None, Your Honor. One question I have for purposes of clarity of the record, when the captionwas originally established on this the Defendantswere Robert and Jim Payne; I think since then it's been stipulated that Ponderosa Real Estate, which was the organization that they were working for, was the actual party in interest and that Payneswere taken out of it. I don't know what the status of that is as far as at the present time. I knowwe show it as Ponderosa Realty in the pretrial order. "MR. SWARTLEY: For the record, Your Honor, the complaint was originally drawn reflecting Ponderosa Realty as a partnership or sole proprietorship; we later learned itwas a corporation,and Ibelieve still has corporate existence. "MR. BALDASSIN: That is correct. "MR. SWARTLEY: And if that is the case, then the individual DefendantsRobert and James Payne were 

### -- as I

### am sure that the evidence will develop, were acting merely as either officers, agents, or employees of the corporation,and we would be willing to stipulate to that fact. "THE

### COURT: Robert Payne and James Paynewill be stricken as parties Defendant. Itwill be Frank Lobdell and Kathryn Lobdell, Ponderosa Realty Company and Fidelity Real Estate? "MR. SWARTLEY: Correct.Based on the special verdict, the District Court entered judgment againstFidelity Real Estate. This defendant moved for a new trialand forremittitur of the damage award on theground that itwas not supported on the evidence. The court denied themotion for a new trial orremittitur and the appeal here ensued. Fidelity RealEstateraises these issues: 1. The District Court erred indismissing Ponderosa Realty on the basis of Stateex rel. City of Havre v. District Court, which eitherdoes not apply tothis case or should be overruled by thisCourt. 2. Itwas error tofindthatFidelitywas an agent of theWhites. 3. Fidelity acted as a subagent of Ponderosa Realty and therefore Ponderosa Realty is liable forthe conduct of Fidelity. 4. Liability for a defectivelegaldescription in multiple listing should be placed on the listingrealtor and not upon the subagent, the sellingrealtor. 5. The damage award isunsupported by the evidence. The most important issueon appeal is thepropriety of thedismissal of Ponderosa Realty as a party defendant. Aswe have noted, theWhites named intheir complaint the defendants, "Robert Payne and James Payne d/b/a Ponderosa Realty." There isnothing alleged inthe complaint other than inthecaption of the cause to show the type of legal entity thatPonderosa Realty is orwas. From the caption, however, itmight be assumed thatPonderosa Realty was

a partnership orjoint venture. When theremaining parties filedanswers, they adopted the caption of the complaint naming the Paynes under the styleof "d/b/a Ponderosa Realty." As such, they, including

### "THECOURT: Very well.

### " Following the noon recess, when counsel were in the District Court's chambers, the attorney for Ponderosa Realty brought the subject up again: "MR. BALDASSIN: I have two requests. First one is, at an earlier conference in chambers the Defendants,Robert Payne and James Payne, were dismissed as parties Defendant; in discussing the matter with them, they were a little unsure as to the legal implicationsof that, so I have asked counsel whether we could go on the record and formally stipulate that the Defendants,Robert Payne and James Payne, are hereafter dismissed or hereby dismissed with prejudice. "MR. MILODRAGOVICH: We have no objection. "MR. SWARTLEY: I will stipulate to that. "THECOURT: Very well, the names of Robert and James Paynewill be dismissed with prejudice." At the close of the plaintiffs' case inthe jury trial, counsel for PonderosaRealty moved, and the District Court ordered, that Ponderosa Realty be dismissed as a party defendant on the basis of this Court's ruling in State ex rel. City of Havre v. ~istrict Court (1980),

### -Mont

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### The causewas thereafter submitted to the jury as between Roger and Karen White, as plaintiffs, and Frank Lobdell, Kathryn Lobdell and FidelityReal Estate as defendants. The jury returned a special verdict inwhich itwas determined that the Lobdellswere not guilty of any fraud or negligence in connection with the sale to the Whites. The jury found that Fidelity Real Estate was guilty of 

### fraud and negligence, and found Robert and Karen white's damages in the sum of $10,255.00. In attributing negligence, they found Fidelity Real Estate 40 percent negligent, and "other parties" 60percent negligent. They also found that Fidelity Real Estatewas the agent of the Whites.

### action might be subject to amotion formisjoinder, but Rule 21,M.R.Civ.P. provides that a misjoinder of the parties is not a ground for dismissal and that parties may be dropped

or added by order of the court onmotion of any party or of its own initiativeat any stage of the action and on such terms as are just. The court in this case simply added a party, the corporation,and dropped a party, the alleged copartnership. In addition,under the state of the record here, at the time of the purported dismissal with prejudice by the District Court, the Paynes had earlier been eliminated from the cause asparty defendantsby an order of the court. Therefore, those parties were not before the court for a dismissal with prejudice. In view of the state of the record,and the circumstances under which PonderosaRealty was substituted as a defendant corporate entity in this cause, it is not necessary for to review our decision in 

### -- City of Havre, supra. The case is not applicablehere. The order of the District Court dismissing Ponderosa Realty as a corporate entity must therefore be vacated, and the cause sent back for retrial between the Whites as plaintiffs and FidelityReal Estate and Ponderosa Realty as defendants. As to the Lobdell defendants, a jury has already determined that they were not negligent or fraudulent in connection with the sale of the property to the Whites. Moreover, neither by appeal nor by cross-appeal does any party raise any issue



### as to the propriety of the judgment in favor of the Lobdell defendants. Since this causemust be retried, we discuss the remaining issues raised by the appellant only for the guidance of the District Court.

### Ponderosa Realty, cross-claimed against Fidelity Real Estate for any liability thatmight be found against them in the suit. In none of the responsive pleadings did the other defendants, including Ponderosa Realty, raise the status of PonderosaRealty as a legal entity, either through answer or by special defense. The pretrial order of the District Court continued the caption adopted from the original complaint, showing Ponderosa Realty as the "d/b/aw defendant. In the 4 

### defendants.contentions in the pretrial order, there is nothing

as to the status of Ponderosa Realty. In State ex rel. City of Havre 

### v. DistrictCourt (1980), Mont

# . , 609 P.2d 275, 37 

### St-Rep.552, 

### this Court - 

### - sustained an order of the District Court granting summary judgment in favor of the City of Havre and Hill County upon the ground that since the plaintiff had earlier dismissed with prejudice his claim against an agent or employee of the city and county, the summary judgmentwas proper because the liability of the city and county could only be vicarious or derivative. It was on the authority of that holding that the District Court in the case at bar decided that the dismissal with prejudice of James Payne and Robert Payne, in effect, was a dismissal of Ponderosa Realty, since the corporation could only be liable through the actions of its employees or agents. We determine,however, that the -- 

### City of Havre rationale

was improperly applied in this case. What occurred here was not a substantive dismissal with prejudice of an agent or employee,but rather the substitution of a proper party before the court. The District Court simply struck the entity of a copartnership and inserted the entity of a corporation. If the corporation had not been added, the

### service. Under the instruments that are in evidence in this case, each of the realtor agencies were acting as agents for the sellers, independentof one another, except for the duty of dividing the commission if the property was sold by a realtor other than the original listing agency. Since the cause will be retried, there is no necessity to discuss the other issues raised by the appellant. Accordingly this cause is affirmed as to the judgment in favor of Frank Lobdell and Kathryn Lobdell; it is reversed and remanded for a new trial as to the defendants Fidelity Real Estate and Ponderosa Realty; and the order of the District Court dismissing Ponderosa Realty with prejudice is vacated. Costs of appeal shall be borne by Ponderosa Realty.

We Concur:

pie£Justice

### We have no issuebefore us as to Fidelity's right of indemnity against PonderosaRealty since such issuewas not raised in the case below, but only upon appeal. Chadwick v. Giberson (1980),

### -Mont. - 

## , 618 P.2d 1213, 1215, 37 St.Rep. 1723, 1726. After remittitur,Fidelitymay move to amend itspleadings with respect to indemnity against Ponderosa Realty, but that is a motion which will be addressed to the sound discretion of the District Court. Rule 15(b),M.R.Civ.P.; Reilly v. Maw (1965),146Mont. 145, 156, 405 P.2d 440, 447. There should be no issue submitted to the jury as to whether one of the realtor agencies is an agent or subagent of the other. Under the listing agreement signed by Frank G. 

### Lobdell, PonderosaRealty was given an exclusive listing to sell the property, and in it Lobdell agreed that in the event that "[Ponderosa Realty] or any broker cooperating with [PonderosaRealty] shall find a buyer 

# ... Ihereby agree to pay you in cash for your services and commission equal in amount to 6%of said selling price." The listing agreement further authorized Ponderosa Realty to list the property with any multiple listing service at Ponderosa's expense and to accept the assistance and cooperation of other brokers. When the Whites signed the earnestmoney receipt and agreement to purchase, on January 29, 1979, they agreed in writing to purchase the property at the price stated and gave Fidelity Real Estate one day to secure the sellers' acceptance. The sellers accepted, and agreed to pay a commission to Fidelity of $4,085.00 for services rendered. The division of the realtor's feewas simply a matter of agreementbetween realtors utilizing the multiple listingMr. JusticeFrank B. Morrison, Jr., dissenting: I respectfully dissent from themajority opinion. Plaintiffswent to trial against Frank Lobdell, Kathryn Lobdell, Robert Payne, James Payne, Ponderosa Realty and Fidelity Real Estate. Ponderosa Realty was originally sued

asa partnership asindicated by the colloquy setforthin themajority opinion. That business was subsequently discovered tobe a corporate entity. During trial, Robert Payne and James Payne weredismissed with prejudice. The trial court thereafter dismissed their employer, Ponderosa Realty, on thebasis that the liability of Ponderosa Realty was derivative; thata dismissal with prejudice infavor of Robert Payne and James Payne adjudicated liabilityintheir favor and thereby adjudicated the liabilityof their employer, Ponderosa Realty. The trialcourt's decisionwasbased upon Stateex rel. City of Havre v. District Court (1980), Mont

# . I 609 P.2d 275, 37 St.Rep. 552. The majority opinion attempts to distinguish this case from State ex rel. City of Havre on the basis that inthe -- 

## - case atbar, there actuallywas a substitutionof parties rather than the dismissal of one defendant. The distinction iswithout a difference. This case is controlled by State

ex rel. City of Havre wherein thisCourt said: -- 

### -- "Therefore, a stipulation of dismissal with prejudice of a defendant is tantamount to a judgment on themerits; and accordingly, such a dismissal with prejudice is

## - res judicata as to every issue reasonably raised by thepleadings. Under the doctrine of respondeat superior, an employer defendant's liabilityisvicarious or derivative and does not arise until an employee actsnegligently within the scope of his employment. A dismissal of a claim with prejudice of an employee isequivalent toa finding that the employee was not negligent. Under the doctrine of respondeat superior, such a dismissal of an employee operates to exonerate the employer. This Courtwilllook atthe dismissal with 

### ---- 

# - prejudice 

### --- on its face,

## and willnot look behind thewords 'with prejudice. 111 

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# - (Emphasis added.)This case cannot be reconciled with the holding set forth above. The trial bar is, as the resultof this decision, being leftwith no guidelines for future action. In State

ex rel. City

### of Havre, where the dismissed party was a 

### -- government employee and thereby immune from execution under the tortclaims law, the court fashioned a inflexiblerule to defeat the plaintiff's claim. The court emphasized it would not look behind the words "with prejudice" todetermine what facts gave rise to the dismissal. Had the court looked to those facts, itwould have found: (1)the employee who

was dismissed should not have been joined in the firstplace because he was immune from execution under the tortclaims law, (2) no money was paid for the dismissal of the employee, and (3) itwas the intent of allparties to the stipulation of dismissal with prejudice that the employee not be put through the expense and trauma of a trialwhen no recovery could be had against the employee. State exg&. City of Havre, supra, has not been overruled and controls the outcome here. The District Court had no alternativebut to dismiss Ponderosa Realty as a party defendant. If thisCourt had overruled State ex 

### -- rel. City of 

### - Havre, supra, thereby authorizing the continuation of a claim against Ponderosa Realty, the verdict infavor of this plaintiff could notbe disturbed under the law. Only the plaintiff has any standing to claim prejudice from the dismissal of Ponderosa Realty. The theory by which Fidelity claims prejudice from such dismissal is thatFidelity thereby becomes responsible topay the entirejudgment. Of course, under well established legal principles, thisdoes not provide a basis forFidelity to raise the dismissal aserror. Plaintiffsbrought this action against these two real estate firms alleging them tobe joint tort feasors. The pre-trial order states that the listing agent, Ponderosa Realty, was guilty of negligence in failing to investigate and determine that the lot sizewas not asrepresented. Likewise, plaintiffs contended thatdefendant Fidelity Real Estate was negligent infailing tomake such an investigation prior to the time it sold the property. The liabilityof Ponderosa Realty does not depend upon the liability of Fidelity Real Estate, nor is the opposite true. The two defendants were being pursued asjoint tortfeasors. Their liabilityisjoint and several. The plaintiffs could recover against either orboth. Once the plaintiffs collected the judgment they would be able to satisfy thatjudgment against

one or allof the defendants. In this case, plaintiffs were free to sue either Fidelity Real Estate or Ponderosa Realty or both. Plaintiffswere free to collect the judgment against either or both and satisfy thatjudgment againsteither or both. his is the very essence of joint and several liability. In returning the verdict inthis case, the jury, in special interrogatories, found thatFidelity Real Estate was guilty of both negligence and fraud. The jury exonerated the owners of the lot, Frank and Kathryn ~obdell. The effect of thisCourt's decision is to say that Fidelity RealEstate, found by the jury tobe guilty of negligence and constructive fraud is entitled to contribution from Ponderosa Realty, the absent defendant. The essence of the Court's holding is thatFidelity Real Estate should not have tobear the entireburden of thisjudgment, but shouldhave the opportunity tohave another defendant share in the load.The holding of this Court violates itsprevious decision inConsolidated Freightways v. Osier (1979)

### , Mont.

-I 

### -P.2d 

### , 36 St.Rep. 1810. Ina case certified from Federal DistrictCourt, thisCourt held that, where the plaintiff elected to sue but one defendant, thatdefendant could not implead another potentially negligent defendant forpurpose of seeking contribution inthe plaintiff's case. Now this Court sees fittovacate plaintiffs' judgment againstone defendant on the basis that the defendant against whom judgment was rendered, is entitled tohave another potentially liabledefendantmade a party to the action. The resultis to force the plaintiffs to try their case again although no trial error inured toplaintiffs' benefit. Surely thismust be a firstinthe annals of American Jurisprudence. I would affirm.