No. 92-313 IN THE SUPREME COURT OF THE STATE OF MONTANA 1993

JOHN WILLIAMS and BARBARA WILLIAMS, Plaintiffs and Respondents,


### v. ALVIN DeVINNEY, Defendant and Appellant. 

### .

## k, JYLZL! CLERKOFSUPREMECOURT STATEOF MONTANA

APPEAL FROM: District Court of the Eleventh Judicial District, In and for the County of Flathead, The Honorable Leif B. Erickson and The Honorable Robert J. Boyd, Judges presiding.

COUNSEL OF RECORD: For Appellant: Richard DeJana, Attorney at Law, Kalispell, Montana For Respondents: Marshall Murray and Ann E. Clark, Murray & Kaufman, Kalispell, Montana

Filed: Submitted on Briefs: February 18, 1993 Decided: July 15, 1993

dlerkJustice Terry N. ~rieweiler delivered the opinion of the Court. Defendant ~lvin DeVinney appeals from the findings of fact, conclusions of law, and judgment entered in favor of John and Barbara Williams by the District Court for the Eleventh Judicial District, Flathead County, on April 16, 1992. 

### The court found DeVinney liable for negligent misrepresentation and awarded plaintiffs damages in the amount of $17,092.50. We affirm the District Courtts judgment of liability and remand to the ~istrict Court for a hearing to determine damages. The following issues are raised 

### on appeal: 1. Was the District Courtgs finding that the property DeVinney sold theplaintiffs was unsuitable forthe installationof



### a modular home clearly erroneous? 2. Did the court err when it concluded that DeVinney was personally liable for his negligent misrepresentations? 3. Was there any evidence to support the amount of damages awarded by the District Court? 4. Did the District Court err when it concluded that plaintiffsgaction is not barred by the statute of limitations? InAugust 1987, plaintiffs

### Johnand BarbaraWilliamspurchased

a parcel of land from Alvin and Donna DeVinney 

### in the DeVinneysl Flathead County subdivision known as Addison Square. Plaintiffs also purchased a modular home from Kalispell Home Center, Inc. (KHC), which was to be placed on the parcel. Alvin De~inney was employed by KHC, and acted as the salesagent for this transaction.The purchase contract for the land provided that DeVinney would level and prepare the land for plaintiffs prior to the installation of the structure,and the agreementwith KHC was that KHC would install the foundation and the modular home. Although Barbara Williams wanted a full,permanent foundation placed under thehome,DeVinney advisedplaintiffs that installingthe structure on piers, in accordance with the manufacturer's specifications, rather than on a full foundation, was more reasonable considering price and usefulness. According to Barbara Williams, DeVinney assured them that the piers would provide an adequate foundation and that the groundwas sound. However,DeVinneyhad not performed any specific soil testsprior to selling the land to determine its suitability for installation of a modular home on concrete piers. The installation was completedandplaintiffsmoved into their home in the fall of 1987. Shortly thereafter, plaintiffs began experiencing problems with the house, but on each occasion, KHC made repairs to plaintiffs' satisfaction. However, during the spring of 1989, rain began to pour down the inside walls of the bedrooms. Due to the seriousness of this problem, plaintiffs contacted a civil engineer, Robert Hafferman, to inspect both the modular home and the property. Hafferman found that the soil underneath the structure contained significant amounts of debris from the remains of a house which had burned down. He concluded that this debris did not allow the soil toproperly compact,which caused instability of the foundation, uneven settling, and eventually, damage to the structure itself.Plaintiffs commenced this action against Alvin and Donna DeVinney on March 1, 1990, for intentional or negligent misrepresentation, alleging that they had relied on Alvin DeVinneygsfalse representation that the parcel had been properly prepared forthe installationof theirmodularhome. The DeVinneys filed an answer and counterclaim on May 15, 1990, alleging that plaintiffsmaliciously slanderedthemanddamaged theirreputation. The DeVinneysl motions to strike and for partial summary judgment were denied, and in a pretrial order dated October 29, 1991, District Court Judge Leif 3. Erickson established the following two issues to be determined at a nonjury trial: 1. Whether the Defendants defrauded the Plaintiffs and/or negligently prepared the site in such 

### a manner that itproximately caused the damagesto the Plaintiffs1 mobile home, the amount of said damages, and whether punitivedamagesapplyunder the circumstance,and if so, the amount thereof. 2. DidthePlaintiffsdefame theDefendants, and 

### if so, what amount of damages, ifany, shouldbe awarded against them. The trial was held on November 26 and 27, 1991, and in the findings of fact and conclusions of law issued on January 6, 1992, Judge Erickson concluded that Alvin LIeVinney was liable for negligently misrepresenting toplaintiffs that thepropertyhe sold them was fit for the placement of the home they purchased. Donna DeVinney was dismissed as a party to the action on the basis that she had notmade the representations upon which plaintiffs relied. Judge Erickson specified which damages were to be compensated,and unless an agreement could be reached, ordered a post-trial hearingto determine the amount due plaintiffs. Finally, Judge Erickson found thatBarbara ~illiams had defamedAlvin DeVinney,and awarded DeVinney $1100 in nominal and punitive damages. Plaintiffs subsequently moved for an order determining damages, based upon an affidavit of their professional engineer. DeVinney responded with a brief inwhich he argued that a hearing would be required, and that the damages requested by plaintiffs were in excess of what was specified in Judge Erickson's order. Three additional affidavits were filed by DeVinney, countering the affidavit submitted by plaintiffs. After considering all of the affidavits

## , and without an evidentiary hearing, Judge Robert J. Boyd, who had replaced Judge Erickson, rendered judgment in favor of plaintiffs, and ordered DeVinney to pay John and Barbara Williams $17,092.50, plus their costs of suit. From this judgment,and the District Court's findings of fact and conclusions of law, DeVinney appeals. I. Was the District Court's finding that the property DeVinney sold plaintiffs was unsuitable for the installation of a modular home clearly erroneous? DeVinney asserts that the court's finding that the soil was improperly compacted and caused the damage to plaintiffs' home was contraryto the evidence. He contends that the evidencebefore the court was that the damage was due to the installation of the structure on piers which did not extend below the frost line. DeVinneyquotes plaintiffs' engineer, RobertHafferman,as stating:

5'@It was that itwas not designed on a permanent foundation,and the modular home has got to be on 

### a permanent foundation 

# . . . 

# . tt DeVinney insists that, according to this testimony of plaintiffs'

own expert, it was KHC1sinstaller who improperly installed the home by not placing 

### it on a 8tpermanent1t foundation consisting of piers extending below the frost line. Thus, DeVinneytscontention 

### is that plaintiffsi only claim against 

### him was that he failed to properly prepare the site,but that the evidence demonstrated that an improper installationby KHC caused the problems to plaintiffsg home.This Court will affirm the findings of a trial court sitting without a jury unless the findings are clearly erroneous. Rule 52(a), M.R.Civ.P. InInterstatePt-oductionCreditv.DeSaye (1991),250Mont. 320, 323, 820 P.2d 1285, 1287, we adopted a three-part test to determine if the findings are clearly erroneous in a nonjury case: A finding 

### is clearly erroneous if it 

### is not supported by substantial credible evidence, if the court misapprehended the 

### effect of 

### the evidence, 

### or, if 

### after review of the record, 

### this Court is left 

### with a definite and firm conviction that 

### a mistake has been committed. After 

### a careful reviewof the record in this case,we conclude the District Court did 

### not err when it found that a cause of the plaintiffs' damage was the unsuitability of the soilwhere thehome

was located. In his brief, DeVinney isolates certain statements by Hafferman concerning the consequences of failing to place the 6

### structure on apermanent foundation. However, when the evidence 

### is considered in its entirety, there is support for the finding that Hafferman indicated the piers would have provided an adequate foundation if 

### theyhad beenplaced below 

### the frost line were in good 

### bearing soil. 

### Although conflictsmay exist in 

### the evidence 

### presented, it is the duty of the trial judge to resolve such conflicts. Due regard is to be given the trial court's ability to judge the credibility of 

### thewitnesses, and it is not this Court's function to substitute its judgment for that of the trier of fact. DeSaye, 820

### P.2d at 1287-88; 

### Danielsv.Dean (1992), 253

### Mont. 465, 471,
833 P.2d 1078, 1082. 

### Furthermore,the

### recordcontains substantialevidence that the soil under the structure was not good bearing soil. It contained debris and could not evenly compact. Thus, the piers placed in this soil could not support the structure. Finally, there was 

### evidence that DeVinney did represent to plaintiffs that the property was 

### suitable for the placement of a modular home on a concrete pier foundation, but that 

### he neither tested the site for its suitability 

### nor properly prepared the site. We 

### conclude therewas substantial.credible evidence to support the District Court's findings. We cannot conclude that the court misapprehended the effect of the evidence, nor does our review of the record leave us 

### with a definite and firm conviction that a 

### mistake has 

### been committed. Therefore, we hold the court s 

### findings with 

### respect to the unsuitability of 

### the site were 

### not clearly erroneous. 7Did the court err when it concluded that DeVinney was personally liable for his negligent misrepresentations? ~eVinney argues that thedamage toplaintiffs1homewas caused by the installation of an improper foundation. His contention is that he made no misrepresentations to plaintiffs concerning 

### the foundation, and therefore, cannot be held liable 

### for negligent misrepresentation. Moreover, he challenges the courtts determination that he was personally liable. He argues that any statements in regard to the foundationwere made inhis capacityas an agent of KHC, and were made in good faith and with reasonable

care. Therefore, DeVinney contends that he cannot be held liable for acts or representationsmade on behalf of his employer. InKitchenKraftem

### v.EastsideBank (1990) 

### , 242 Mont

# . 155, 789 P.2d 567, we reaffirmed the definition of negligent misrepresentation which we adopted in State Bank 

### of Townsendv. Maryannls, Inc. (1983)

### , 204 Mont. 21, 664 P.2d 295. 

### In summary, to prove negligent misrepresentation, theplaintiff 

### must establish that thedefendant made a false representation of a past or existing material fact without reasonable grounds for believing the representation to be true, and the representation induced the plaintiff to rely upon it and resulted in damage to the plaintiff. In this instance, after making its findings, the court concluded that, as a matter of law, DeVinneytsconduct satisfied 

### the elements of 

### the tort 

### of negligent misrepresentation. 

### Becauseof DeVinneyls unique position as both owner of the property and as the KHC salesman, the court concluded that the duty DeVinney was under was of a personal nature. In its conclusions of law, the court stated the following: That Alvin DeVinney, as owner of the property sold to the Williams and as salesman for themobile home sold to the Williams, was under a duty,when he took it upon himself to suggest an appropriate foundation for [the] home, to be aware of the suitabilityof the property for that type of foundation. Plaintiffs were entitled to rely upon his expertise since he held himself out as an expert and since he would be in an apparently superior position to know the nature of the property he was selling. In response to his argument that he, in fact, did not know the nature of the subject property, suffice it to say that in such an instance he should not have thus represented its suitability. When he decided to sell the property as appropriate for mobile homes and then presumed to know what type of foundation was satisfactory he created a duty to the Plaintiffs which they relied upon to their detriment. First, we have already held that there was substantial evidence to support the finding that the damage was caused by the unsuitability of the site. Although DeVinney asserts that he should be immune under agency principles, we note that the representations concerningthe suitabilityof thepropertywere not made on behalf of KHC; these representations were made for the purpose of DeVinneylssale of the property to plaintiffs. Next, even though DeVinneyls statements in which he recommended a suitable foundationmay have been made on behalf of KHC, and therefore,were made in an agency capacity, § 28-10-702, MCA, specifies that an agent may be personally liable to a third person in certain situations. Specifically, this sectionprovides that an agent is responsible to third persons for acts undertakenin the course of his agency, "when his acts are wrongful in their nature." Here, implicit in the court's conclusion is its determination that DeVinney's actions were wrongful because he decided to sell the property as appropriate for mobile homes and then represented its suitability for the type of foundation he recommended,without any reasonable grounds for doing so. Thus, based on the court's conclusions with respect to the unique position DeVinney occupied, we find no grounds to shield DeVinney from liability under an agency theory. We hold that the District Court did not err when it concluded that, as a matter of law, DeVinney's actions created personal liability. 111. Was there any evidence to support the amount of damages awarded by the court? In the January 6, 1992, order, Judge Erickson held that plaintiffs were entitled to recover the following damages: 1. The cost of removing the mobile home from the present footings, 2. The cost of the original placement of the mobile home on those footings,and 3. The cost of replacing the mobile home on the permanent foundation. Judge Erickson then ordered a hearing to determine the specific breakdown of these costs, unless an agreement could be reached by the parties. As described earlier, both parties submitted affidavits concerningthecostsbut no further evidentiaryhearings wereheld.When Judge Boyd took over the case following Judge Ericksonts resignation, the affidavits were considered and a judgment was entered in favor of plaintiffs. DeVinney was ordered to pay plaintiffs $17,092.50, plus their costs of suit. DeVinney challenges this determination on two bases. First, he asserts that there was not sufficient evidence to support the award and that there should have been an evidentiary hearing. Second,DeVinney contends that the amount awarded included certain items specifically excluded from the order issued by Judge Erickson

# . We agree with DeVinney's initial assertion that there was insufficient evidence to support the damages award. A review of the record demonstrates that Judge Boyd's decision was apparently based solely on the affidavits. Although the judgment states that oral argumentwas held, oral argument isnot a substitute for sworn testimony. Theaffidavits relieduponby the court,which attested to the costs of implementing Judge Ericksonts order, constituted inadmissible hearsay because they were written assertions, 

### made out-of-court, which were offered to prove the truth of thematters asserted. Rules 801 and 802,M.R.Evid. Because the court relied only upon the affidavits, and did not consider documentary or testimonial evidence which was subject to cross-examination, it failed to meet the "substantial evidence" standard necessary to sustain its judgment. Adlington

### v. FirstMontana 

### TitleIns. Co. (1990)

## , 245

### Mont. 304, 307, 800 P.2d 1051, 1053; Johnson v.Murray 

### (1982), 201 Mont. 495, 506, 656 P.2d 170, 175. Therefore, the award of damages, entered on April 16, 1992, is vacated and we remand for

an evidentiary hearing anddetermination of damagespursuantto the order issued by Judge Erickson. In response to DeVinneytscomplaint that Judge Boyd had included costs which were not specifically provided for in the original order, we would simply note that Judge Ericksonvsorder outlined the general damages to be compensated, and ordered a further hearing todetermine the specificamount. The court should properly include in its damages award the specific expenses which it finds, by implication, are necessary to satisfy the general directives of the earlier decision. IV. 

### Did the District Court errwhen it concluded that plaintiffst action is not barred by the statute of limitations? DeVinneytsfinal contention is that 

### 5 27-2-203,MCA,provides fora two-year statute of limitations for actionsbased on fraud or mistake, which includes actions based on negligentmisrepresentation. FallsSand & Gravel Co. v. W: Concrete, Inc. (

### D

# .c

## . Mont

## . 1967 )

## , 270 F. Supp. 495. Alleging that the evidence demonstrates the plaintiffs first learned of problems with the modular home in January 1988,and did not file their complaint until March 1,

### 1990, DeVinney asserts that the court shouldhave dismissed the complaint

on the basis that it was barred 

### by the statute 

### of limitations.

### Plaintiffs contend, however, that it was not until the spring of 1989,

### when the serious leaks began and they hired an engineer to inspect thehome andproperty, that they discovered the truenature of the problemThe 

### statute cited 

### by DeVinney states that a cause of action for fraud or mistake does not accrue Wntil the discovery by 

### the aggrieved party of 

### the facts constituting the 

### fraud 

### or mistake." Section 27-2-203, MCA. 

### In this instance, the time at 

### which plaintiffs discovered the facts giving rise to the cause of action is a question of fact, and therefore, is subject to a 

### clearly erroneous standard on review. Steer

### Inc. v. Department

### ofRevenue (1990)

## , 245 

### Mont. 470, 474, 803 P.2d 601, 603. 

### After reviewing the record, we conclude that there was substantial credible evidence to support the finding that plaintiffs had not discovered the source of the ongoing problems until the damage was significant enough to prompt them to hire an engineer to do 

### a thorough inspection. It was at 

### this time that plaintiffs discovered that the site, as they purchased it, 

### was unsuitable for the placement of the modular home. The complaint alleging negligent misrepresentation 

### was then filed within two years from the 

### discovery of these 

### facts. Therefore, the 

### court's conclusionthatplaintiffsl claim

### was filed ina timely fashionwas not clearly erroneous. 

### For the 

### reasons stated, the judgment of the 

### court in regard to DeVinneylsliability for negligent misrepresentation is affirmed. The District Courtlsjudgment regarding the amount of plaintiffs1 13damages is vacated and this matter is remanded to the District Court 

### for an evidentiary hearing todetermine damages.

We concur:

Y Chief JusticeJuly 15, 1993 CERTIFICATEOFSERVICE IherebycertifythatthefollowingorderwassentbyUnited Statesmail,prepaid, tothefollowing named:

RichardDeJana Attorneyat Law P.O. Box 1757 Kalispell,MT 59903-1757 MarshallMurray Murray&Kaufman P.O.Box728 Kalispell,MT 59903-0728

EDSMITH CLERKOFTHESUPREMECOURT STATEOF MONTANA 

### ,