Opinion ID: 2521038
Heading Depth: 2
Heading Rank: 3

Heading: Was Finding of Intentional Misrepresentation Supported by Clear and Convincing Evidence?

Text: [¶ 19] The sellers contend the trial court's finding of clear and convincing evidence of fraud was erroneous due to its reliance on an unqualified expert, the failure to disclose does not constitute fraudulent misrepresentation, the duty to disclose was delegated to the buyers by contract, and fraud was not established by the evidence.
[¶ 20] Prior to trial, the sellers apprised the trial court of their objection to the buyers' expert witness' testimony alleging he was unqualified and failed to perform certain tests to confirm his opinion. During the course of the engineer's testimony, the objection was renewed with regard to admission of his written report. The court overruled the motion stating it would decide what weight, if any, the report should be given after it had received all the evidence. As is apparent from the court's opinion letter and findings, the testimony and report were ultimately accorded considerable weight. [¶ 21] As noted by the sellers, we have adopted the federal Daubert model, imposing gatekeeping responsibilities on trial courts to decide whether scientific or technical expert testimony is admissible. Chapman v. State, 2001 WY 25, ¶ 8, 18 P.3d 1164, ¶ 8 (Wyo.2001); Bunting v. Jamieson, 984 P.2d 467, 471 (Wyo.1999) (citing Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 592-93, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993)). However, as recently reiterated in Chapman, we did not `abandon our own precedent regarding the admissibility of expert testimony.' 2001 WY 25, ¶ 8, 18 P.3d 1164 (quoting Bunting, 984 P.2d at 471). Under the Daubert model, the trial court must first determine whether the expert's methodology is reliable; then the court must determine whether the proposed testimony `fits' the facts of the particular case. Id. In Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), the United States Supreme Court further clarified the scope of Daubert, holding the gatekeeping duties of the trial judge apply to all expert testimony, whether such testimony is based on scientific, technical, or other specialized knowledge. Smith v. Ingersoll-Rand Company, 214 F.3d 1235, 1243 (10th Cir.2000). Kumho also made it clear the gatekeeping function is a flexible and commonsense responsibility. The trial judge is granted broad latitude in deciding the means to determine reliability as well as in ultimately deciding whether the testimony is reliable. Id. (citing Kumho Tire Co., Ltd., 526 U.S. at 141-42, 119 S.Ct. 1167). [¶ 22] The Daubert gatekeeping function is not intended to measure every expert by an inflexible set of criteria but rather is to ensure an adequate inquiry to `make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.' Id. (quoting Kumho Tire Co., Ltd., 526 U.S. at 152, 119 S.Ct. 1167). We agree that, as gatekeepers of expert testimony, judges must always perform some form of reliability analysis; however, we have overtly declined to `shackle the district court with a mandatory and explicit' reliability proceeding. Chapman, 2001 WY 25, ¶ 23, 18 P.3d 1164 (quoting Hoult v. Hoult, 57 F.3d 1, 5 (1st Cir.1995)). Instead, ... we `assume that the district court performs such an analysis sub silencio throughout the trial with respect to all expert testimony.' Id. (quoting Hoult, 57 F.3d at 5). The decision to admit or reject expert testimony is exclusively within the trial court's discretion. Id. at ¶ 8, 18 P.3d 1164; Seivewright v. State, 7 P.3d 24, 29 (Wyo.2000). [¶ 23] At trial, the buyers' expert testified at length regarding his educational background in civil engineering and experience designing and inspecting residential buildings. He testified he had been a consulting engineer in self-practice for approximately eight years in the Cody area. In that time, he had completed more than fifty building inspections to determine whether there was water permeation damage to basements made of concrete block and concrete. He explained the inspection process and that a normal inspection does not entail tearing off paneling, running soil or cement samples, or performing other invasive procedures. The engineer then specifically and incrementally described his July 1997 inspection of the property and his final conclusions. [¶ 24] The sellers have the burden to demonstrate admission of this evidence was an abuse of discretion, and, upon our review, we must conclude they have failed. At a minimum, they should have provided evidence contesting the validity of the methodology and the reliability of the results. This was not the course they chose at trial; therefore, their appeal presents little more than unfounded assertions. Due regard is given to the trial judge's opportunity and ability to assess credibility, and our review does not entail weighing disputed evidence. Scherer Construction, LLC v. Hedquist Construction, Inc., 2001 WY 23, ¶ 30, 18 P.3d 645, ¶ 30 (Wyo.2001); Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531, 538 (Wyo.1993). The evidence in the record supports the findings that the engineer was qualified and his testimony was relevant and reliable. The trial court appropriately overruled the objection and advised the parties it would determine the weight the evidence was to be given at the close of the trial. We conclude the trial court's analysis was conducted sub silencio through the course of the proceeding and in light of all the evidence received. Admission of the expert testimony and report was not clearly erroneous or an abuse of discretion.
[¶ 25] The sellers contend failure to disclose a fact does not constitute fraud. However, they ignore the reality that they acknowledged making a number of false statements. It is in light of these false statements that the nondisclosures became part and parcel of the fraudulent acts: Conduct or words which tend to produce an erroneous impression may satisfy the plaintiff's burden. In addition, even if someone is not under a duty to speak, if he does speak, he is under a duty to speak truthfully and to make a full and fair disclosure. Reliance is reasonable when false representations have occurred prior to the execution of the contract which is sought to be avoided or for which damages are sought to be recovered. Sundown, Inc., 8 P.3d at 330-31 (emphasis added and citations omitted). By way of example, Mrs. Alexander acknowledged the sellers' duty to complete the property condition statement honestly and fully. Both sellers acknowledged they knew of the salt deposits, and yet they failed to disclose this information on the property condition statement, thereby making an affirmative false statement. Likewise, they admitted they advised the buyers of two specific excess water incidents but failed to advise them of any other defects. They also acknowledged saying the garden was in good condition but not advising the buyers the soil had been sterilized and nothing had been grown in over ten years. The trial court determined the sellers' disclosures, both verbally at the initial showing of the property and in the written property condition statement, reinforced the buyers' confidence the property was in good condition as the sellers reported. [¶ 26] The foregoing list of the sellers' misleading statements and actions is by no means all-inclusive; rather, it is merely illustrative of the definitive point that, regardless of whether there was a duty, once the sellers started making disclosures, they had a duty to do so completely and truthfully. The disclosures and concomitant duty preceded the buyers' determination to make the initial offer to contract and all parties' entering into the ultimate contract to purchase. On the basis of our holding in Sundown, Inc. and the facts of this case, the sellers' contention that their failure to disclose cannot constitute fraud is without merit. [¶ 27] The sellers maintain no evidence was presented to prove positive acts of fraudulent concealment. This argument is really something of a nonsequitar. No cause of action for fraudulent concealment was pleaded. Rather, the cause of action was fraudulent misrepresentation, and conduct or words which tend to produce an erroneous impression satisfy the plaintiff's burden. Sundown, Inc., 8 P.3d at 330. The evidence established the foundation defects and damage were physically concealed and cosmetically repaired. To the extent this conduct tended to produce an erroneous impression, it supported the cause of action as pleaded.
[¶ 28] The sellers also contend the duty to disclose was somehow delegated to the buyers by contract. This argument puts the proverbial cart before the horse. The fraudulent misrepresentations, as determined by the trial court, occurred before the contract was entered into and were the inducement to enter into the contract reasonably relied upon by the buyers. The fact that, once they entered into the contract, the as is clause and inspection provisions were in effect did not excuse or nullify the original fraudulent representations, intended inducement, and reasonable reliance which led to the contract being made. An as is clause will not relieve the sellers of liability in the case of an actual misrepresentation or fraud. Richey v. Patrick, 904 P.2d 798, 803 (Wyo. 1995).
[¶ 29] Consideration of the preceding issues leads us to the overarching issue of whether the evidence relied upon by the trial court reaches the level of clear and convincing evidence of fraud. Clear and convincing evidence is the kind of proof which would persuade a trier of fact that the truth of the contention is highly probable. MacGuire v. Harriscope Broadcasting Co., 612 P.2d 830, 839 (Wyo.1980); see also Dorr v. Wyoming Board of Certified Public Accountants, 2001 WY 37, ¶ 8, 21 P.3d 735, ¶ 8 (Wyo.2001); Meyer v. Norman, 780 P.2d 283, 291 (Wyo.1989). Evidence which is of such a nature that the mind readily reaches a satisfactory conclusion as to the existence or nonexistence of a disputed fact is, of necessity, clear and satisfactory. RS v. Johnson County Department of Family Services (In re JL), 989 P.2d 1268, 1271 (Wyo.1999); Thomasi v. Koch, 660 P.2d 806, 811-12 (Wyo. 1983); Continental Sheep Co. v. Woodhouse, 71 Wyo. 194, 256 P.2d 97, 99 (1953). This definition, although broad and subjective in nature, in most circumstances provides sufficient guidance to the finder of fact. Meyer, 780 P.2d at 291. We have also adopted more objective criteria for clear and convincing evidence with respect to witnesses' testimony: [T]he witnesses to a fact must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the details in connection with the transaction must be narrated exactly and in order; the testimony must be clear, direct and weighty; and the witnesses must be lacking in confusion as to the facts at issue. Weigand v. Union National Bank of Wichita, [227 Kan. 747], 610 P.2d 572, 577 (Kan.1980). Id. [¶ 30] The buyers' trial evidence had sufficient character and integrity to meet the objective clear and convincing evidence standard described in Weigand. The buyers' witnesses testified very specifically and precisely. None of their witnesses, except Mr. Meduna and perhaps his real estate agent, had any personal interest or apparent bias. Their testimony was internally consistent and corroborated other testimony and evidence received. [¶31] On the other hand, the sellers' testimony was fraught with internal inconsistencies, and even acknowledgement of some degree of misrepresentation and failure to disclose. In fact, it is apparent from the cold transcript the trial court disregarded significant portions of their testimony because of its flawed and untruthful nature. For example, Mrs. Alexander could not remember when or why they had frequently replaced the basement carpet although not an inconsequential expense. Further, neither of the sellers testified consistently on the improvements made to the basement including the paneling and painting despite the fact the property condition statement reflected they performed the work themselves. Called on rebuttal, the former owner testified he had paneled only one bedroom and did not paint the basement. In addition, the sellers first testified they were not aware of any defects. Thereafter, they both partially recanted stating they were aware of such things as the salt deposits but did not consider them defects. In the end, they conceded to some extent they had failed to fully disclose the true property condition. [¶ 32] Further, the sellers provided no evidence or expert witness to challenge the qualifications or expertise of the buyers' expert, the integrity of his inspection method, or his observations and conclusions. The trial court accurately found this evidence was unrefuted. [¶ 33] Upon our review, we conclude the trial court's findings fairly and accurately summarized the evidence presented at trial including over eighty exhibits and the testimony of fourteen witnesses. The evidence the trial court relied upon constituted clear and convincing evidence that (1) both sellers made false representations intended to induce the buyers to offer to purchase the property and enter into a contract to purchase, (2) the buyers reasonably believed the sellers' representations as to the property condition were true, and (3) the buyers relied on the false representations and suffered damages. [¶ 34] Before leaving this issue, we briefly address the wording of the trial court's findings that the sellers were aware or reasonably should have been aware of the defects and damage to the west wall and heat registers, the serious east wall bulge, and the basement floor. At first glance, the language appears to apply an incorrect standard as the sellers had to have intended to defraud the buyers; therefore, they had to know of the defects they failed to disclose or misrepresented. In light of the record as a whole, we believe the language were aware or reasonably should have been aware was responsive to the sellers' implausible explanations. We conclude the trial court was endeavoring in a diplomatic manner to address the untruthful nature of the sellers' testimony. The trial court unquestionably determined there was clear and convincing evidence of fraud because the sellers knew of the defects and purposely made misrepresentations regarding the property condition to induce the buyers, to their significant detriment, to make a purchase offer and enter into a purchase contract. These findings are supported by clear and convincing evidence and are sufficient.