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! 

CLERK OF SUPREME COURT 

STATE OF 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 

dlerk 
Justice 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 the plaintiffs was unsuitable forthe installation of 

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 

plaintiffsg action is not barred by the statute of limitations? 

In August 1987, plaintiffs John and Barbara Williams purchased 

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 sales agent 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 agreement with KHC was that 

KHC would install the foundation and the modular home. Although 

Barbara Williams wanted a full, permanent foundation placed under 

the home, DeVinney advised plaintiffs that installing the 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 ground was sound. However, DeVinney had not performed 

any specific soil tests prior to selling the land to determine its 

suitability for installation of a modular home on concrete piers. 

The installation was completed and plaintiffs moved 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 to properly 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 

DeVinneygs false representation that the parcel had been properly 

prepared forthe installation of their modular home. The DeVinneys 

filed an answer and counterclaim on May 15, 1990, alleging that 

plaintiffs maliciously slandered them and damaged their reputation. 

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 it proximately caused the damages to the Plaintiffs1 

mobile home, the amount of said damages, and whether 

punitive damages apply under the circumstance, and if so, 

the amount thereof. 

2. Did the Plaintiffs defame the Defendants, and if so, 

what amount of damages, if any, should be 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 to plaintiffs that the property he 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 not made 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 hearing 
to determine the amount due plaintiffs. Finally, Judge Erickson 

found that Barbara ~illiams had defamed Alvin 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 in which 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 

contrary to the evidence. He contends that the evidence before the 

court was that the damage was due to the installation of the 

structure on piers which did not extend below the frost line. 

DeVinney quotes plaintiffs' engineer, Robert Hafferman, as stating: 

5 
'@It was that it was 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 KHC1s installer who improperly installed the 

home by not placing it on a 8tpermanent1t foundation consisting of 

piers extending below the frost line. Thus, DeVinneyts contention 

is that plaintiffsi only claim against him was that he failed to 

properly prepare the site, but that the evidence demonstrated that 

an improper installation by 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. In InterstatePt-oductionCreditv.DeSaye (1991), 250 Mont. 

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 review of 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 soil where the home 

was located. 

In his brief, DeVinney isolates certain statements by 

Hafferman concerning the consequences of failing to place the 

6 
structure on a permanent 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 they had been placed below the frost line were in 

good bearing soil. Although conflicts may 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 the witnesses, 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 record contains substantial evidence 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 there was 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. 

7 
Did the court err when it concluded that DeVinney was 

personally liable for his negligent misrepresentations? 

~eVinney argues that the damage to plaintiffs1 home was 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 foundation were made in his capacity as 

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 representations made on behalf of his employer. 

In Kitchen Kraftem v. Eastside Bank ( 1990 ) , 24 2 Mont . 155, 78 9 P. 2d 

567, we reaffirmed the definition of negligent misrepresentation 

which we adopted in State Bank of Townsend v. Maryann ls, Inc. ( 1983 ) , 204 

Mont. 21, 664 P.2d 295. In summary, to prove negligent 

misrepresentation, the plaintiff must establish that the defendant 

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, DeVinneyts conduct satisfied 

the elements of the tort of negligent misrepresentation. Because 
of 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 the mobile 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 suitability of 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 concerning the suitability of the property were not 

made on behalf of KHC; these representations were made for the 

purpose of DeVinneyls sale of the property to plaintiffs. 

Next, even though DeVinneyls statements in which he 

recommended a suitable foundation may 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 section provides 

that an agent is responsible to third persons for acts undertaken 
in 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 

concerningthe costs but no further evidentiary hearings were held. 
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 argument was held, oral argument is not a substitute for sworn 

testimony. 

The affidavits relied upon by 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 the matters 

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. First Montana Title Ins. 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 and determination of damages pursuantto the 

order issued by Judge Erickson. 

In response to DeVinneyts complaint that Judge Boyd had 

included costs which were not specifically provided for in the 

original order, we would simply note that Judge Ericksonvs order 

outlined the general damages to be compensated, and ordered a 

further hearing to determine the specific amount. 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 err when it concluded that plaintiffst 

action is not barred by the statute of limitations? 

DeVinneyts final contention is that 5 27-2-203, MCA, provides 

for a two-year statute of limitations for actions based on fraud or 

mistake, which includes actions based on negligent misrepresentat ion. Falls Sand & Gravel Co. v. W: Concrete, Inc. ( D . c . Mont . 19 67 ) , 2 7 0 

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 should have 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 the home and property, that they discovered the true nature 

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 of Revenue (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 

conclusion that plaintif fsl claim was filed in a timely fashion was 

not clearly erroneous. 

For the reasons stated, the judgment of the court in regard to 

DeVinneyls liability for negligent misrepresentation is affirmed. 

The District Courtls judgment regarding the amount of plaintiffs1 

13 
damages is vacated and this matter is remanded to the District 

Court for an evidentiary hearing to determine damages. 

We concur: 

Y 

Chief Justice 
July 15, 1993 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

Richard DeJana 

Attorney at Law 

P.O. Box 1757 

Kalispell, MT 59903-1757 

Marshall Murray 

Murray & Kaufman 

P.O. Box 728 

Kalispell, MT 59903-0728 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA ,