White v. Longley
358 Mont. 268
Mont.2010Background
- In 2006 Steve and Donna White purchased 28 acres in Montana to build a retirement home and hired Tom Longley/Castle Homes, LLC as contractor.
- Whites met Longley, reviewed designs, and hired him after he presented credentials and a positive map of Castle Homes materials; disclosures about Longley’s degree were inaccurate (agricultural vs. civil engineering).
- January 2007 contract: Castle Homes would perform foundation/framing; remainder by subcontractors; Whites paid $2,000 down and agreed to costs plus 30%.
- A month later Longley provided floor plans with little framing detail; project suffered from understaffing and poor expertise; Ellis (Longley’s employee) worked on site amid tensions and frequent travel between Washington and Montana.
- The roof design revealed substantial structural concerns; Longley ordered an undersized roof package against advice, causing further credibility issues when his crew conflicted with installation and supervision.
- In June–August 2007, Whites faced escalating bills; a proposed $30,000 buyout of the contract was accepted to continue partial work through winter, but no material improvement occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there breach of contract after the buyout? | Whites allege Longley/Castle Homes breached contracts post-buyout. | Argue that buyout terminated or altered contractual duties; arbitration clause controls disputes. | Yes; the court affirmed breach despite buyout and lack of full rescission. |
| Whether Longley/Castle Homes committed constructive fraud? | Longley misrepresented credentials, capabilities, project progress, and future repair plans. | Dispute that misrepresentations were material or intentional. | Yes; court upheld constructive fraud finding based on multiple misrepresentations and nondisclosures. |
| Whether Longley can be personally liable despite LLC status? | Longley’s personal conduct caused damages; LLC shield should not bar personal liability. | LLC structure should shield members/managers from personal liability. | Yes; Longley personally liable; court held §35-8-304 allows personal liability for conduct in an individual capacity; joint/several liability affirmed. |
| Did the district court err in staying arbitration? | Arbitration clause should compel arbitration of disputes. | No valid basis for arbitration after buyout; arbitration provisions were moot. | Yes; district court correctly denied arbitration and stayed related proceedings. |
| Was an emotional distress award appropriate in a damage claim? | Damages for emotional distress recoverable where negligence/constructive fraud found. | Emotional distress not recoverable absent physical injury in contract actions. | Yes; damages for emotional distress upheld as parasitic to other torts/claims, consistent with Jacobsen v. Allstate. |
Key Cases Cited
- Town of Geraldine v. Mt. Municipal Ins. Auth., 200 MT 411 (Mont. 2008) (standard for constructive fraud elements and reliance)
- Jacobsen v. Allstate Ins. Co., 2009 MT 248 (Mont. 2009) (parasitic emotional distress claims no heightened threshold)
- First Bank v. Clark, 236 Mont. 195 (Mont. 1989) (emotional distress recovery limitations in contract claims)
- Sacco v. High Country Independent Press, 271 Mont. 209 (Mont. 1995) (emotional distress standards in Montana law)
- Ioerger v. Reiner, 2005 MT 155 (Mont. 2005) (recognition of LLC separate legal entity with limited liability)