*1 JACK MATTINGLY, Appellant, Plaintiff and v. OF GERRY LINCOLN, MALEK,
FIRST BANK
MALEK
REALTY;
d/b/a
HABETS,
AUGUST “GUS”
Respondents.
Defendants
No. 96-678.
Submitted on Briefs June
1997.
Decided
1997.
October
St.Rep.
For Sherwood; Helena. Reynolds, Motl and *3 (for Murfitt; Gary Davis; L. Luxan & Helena Respondents: For Lincoln). Respondent of the Court. Regnier Opinion delivered the
Justice Mattingly and Jack filed an action July plaintiff appellant In District in and Clark Court for the First Judicial Lewis in the District Lincoln, agent Gerry Malek, real estate County against First Bank of damages to recover incurred in connection with August and Habets Lincoln, station located in and sale of a service purchase alleging pur- that at the time he Mattingly brought Montana. suit Habets, defendants, including station from chased the service financing, knew of whom obtained through First Bank station but failed on the service underground contamination presence. to disclose First Bank for constructive claims
Mattingly asserted punitive and negligent misrepresentation, fraud, negligence, summary judg Bank subsequently filed a motion for damages. in a June order. granted the District Court ment, which pursuant to Rule a motion to alter or amend timely filed a overlooked M.R.Civ.P., arguing improperly the court 59(g), number of issues of material August 11, fact. On 1995, the District Court denied Mattingly’s motion to alter or amend. Mattingly appeals the decision of the District Court granting First Bank’s motion for summary judgment. For the reasons below, discussed we reverse.
We find the following issues dispositive on appeal: 1. With respect to Mattingly’s claim for negligent misrepresentation, did the District Court err in finding that First Bank made repre- sentation to upon which he might rely to his detriment? With to Mattingly’s claim for fraud, constructive did the District Court err in no special circumstances giving rise to a duty on the part of First Bank to disclose to Mattingly any informa- tion it have had regarding the contamination? respect Mattingly’s
3. With claim for did the District Court err in finding that gained no advantage by failing to presence disclose the of the contamination?
4. Did the District Court err in granting First Bank’s motion for judgment Mattingly’s punitive damages?
FACTUAL BACKGROUND July 1983, In while line installing new sewer on the south side of Highway 200 in city center, Lincoln’s a construction crew discovered a pocket gasoline floating groundwater depth at a of six feet. Further investigation by the Quality (WQB) Water Bureau and the (DHES) Montana Department of Health and Environmental Sciences indicated that petroleum leaking from underground storage tanks at three gasoline retail businesses operating at the main intersection of Highway 200 Stemple Pass Road had contaminated approximately 1.4 acres of land in the area. One of the three involved, service stations Exxon,” “Gus’s was owned at the time Habets. WQB, at the behest of the Stiller and completed Associates (Stiller study report) which presence confirmed the of gasoline groundwater
contaminated in the quarter mile area stretching west- ward from the main intersection location of the gasoline three service Following press stations. various accounts of the spill, and virtue of the fact that Lincoln community, small general knowledge the contamination became widespread throughout area, the Lincoln organization Indeed, and within the First Bank itself. First *4 property proximity rested such close to the contaminated area part investigation of its initial sought DHES permission president from then bank Susan Hemmer to excavate on the bank’s property ‘leading edge plume.” near the real Exxon” for sale with Malek’s May 1987, Habets listed “Gus’s month, Mattingly entered into brokerage firm. Later same
estate agreed purchase to pursuant Habets to which contract with ability to obtain institutional $79,000, contingent upon station property that the did not disclose to financing. Habets contaminated. been Joe Dolan to then met with First Bank Vice-President At the property. a loan obtaining purchase about
inquire First Bank had a loan committee application, time loan of Among members. the committee’s of all the bank’s board comprised Hemmer, as well as president members were bank more active John Mulcare. Mulcare also owned director and shareholder Handi-Mart, the street from the station located across operated identified as a and one of the three stations by Mattingly, purchased contamination, knew of the as the contamination. Mulcare source of 24, 1984, meeting with by his attendance at November evidenced they potential liability all during explained which DHES officials Moreover, faced due to contamination. three station owners report apportioned the 1986 copy obtained a of Stiller Mulcare to Mulcare’s for the contamination partial responsibility probable Handi-Mart, as well as to Gus’s Exxon. estate, commercial real approving loans on
Prior appraisal property some form of of it a conduct practice made a formal written require First Bank did not determine its value. Mattingly’s large payment of down in this case because appraisal approval Mattingly’s of loan Instead, prior to First Bank’s property. of the service station physical inspection conducted a Dolan request, purpose its value for the of impression regarding to obtain time secure in its loan. At the First Bank would be determining whether in the area. Dolan was aware of contamination inspection, of 8, 1987, June to determine loan committee met on First Bank’s All the loan commit- request. loan approve Mattingly’s whether Mulcare, were aware of the members, including Hemmer and tee the contami- Mulcare, knowledge had direct who contamination. from issue and abstained mention the contamination nation, did not Mattingly was a request because voting or loan discussing Hemmer, knowledge direct who had competitor. business also remained Report, of the Stiller did not know but contamination Dolan, was who of contamination. issue silent knowledge area, only general possessed Lincoln relatively new to the Report, the Stiller not know of He did the contamination. *5 essentially relied on other bank board members for information community. Without discussion of the contamina- present tion in question, the committee approved Mattingly’s loan request $56,000. the amount of Closing took place 22,1987. at First Bank’s Lincoln office on June None of the documents transaction, associated with the including buy-sell agreement, contained disclosure of the contamination.
After taking possession of the property, Mattingly wanted to re- expand business, model his applied so he with First Bank to obtain a second loan in the $127,000. amount of After meeting on 17, August 1987, First Bank’s loan committee denied Mattingly’s application. Mattingly subsequently obtained an SBA-guaranteed $105,000 loan in the amount of through Norwest Bank in Great Falls. used Mattingly money the loan pay remaining balance on the Bank, loan from First and to remodel the service station. first
Mattingly learned of the July contamination in 1991 when he process was in the of selling property. That sale fell through due contamination, prevented has since Mattingly from selling property. In a July 9, 1992, letter dated the DHES first informed of his potential liability for the clean up of the contamination. against Habets, filed this suit Malek, and First Bank in
July 1993. In his second complaint, 13,1993, amended filed December Mattingly alleged against fraud, claims Habets for actual negligent misrepresentation, violation of Montana’s hazardous waste law 75-§ 10-715(6)(d)(ii), MCA, and for punitive damages. Mattingly brought against claims Malek for actual fraud, negligent misrepresentation, statutory duty violation of his as a real estate pursuant licensee 37-51-321, MCA, punitive damages. Finally, Mattingly § brought claims for constructive negligence, negli- gent misrepresentation, and punitive damages.
Mattingly subsequently Malek, settled his claims with and Habets signed liability 22, confession of on December 1, 1995. On March 1996, the court issued an order liability, finding Habets liable for contract, negligent misrepresentation, breach and violation of 75-10-715(6)(d)(ii), Following nonjury MCA. trial on § the issue of damages, the District Court issued order Habets liable for $435,000. damages September 20, 1996, actual in the amount of On judgment case, the court entered a final in this incorporating prior summary judgment order in First Bank’s favor. appeals.
215
DISCUSSION summary appeals of review in from This Court’s standard State Farm Mut. Auto. Ins. is de novo. Treichel v. rulings judgment 661, 446, (citing P.2d 663 Motarie v. (1997), 443, Mont. 930 Co. (1995), 239, Dist. Mont. Disposal Montana Joint Northern Refuse M.S.B., (1994), 154, 156; v. Inc. 264 Mont. Mead 242, 907 P.2d 785). summary judgment reviews a This Court 470, 872 P.2d 56, M.R.Civ.P., on the same to Rule based pursuant entered order Treichel, 280 Mont. at by the district court. applied criteria (1995), 272 Mont. County Yellowstone (citing Bruner v. P.2d at 663 903). 261, 264, 900 P.2d appropriate: proving that no issues of material genuine must demonstrate
The movant *6 the then shifts accomplished, this has been burden fact exist. Once prove by more than mere denial and non-moving party to the determined genuine Having that a issue does exist. speculation exist, fact do not the court must issues of material genuine judgment is entitled to moving party whether the then determine legal the determinations [This Court] matter of law. reviews erred. district court as to whether the made the court 264-65, at 903. Bruner, Mont. at 900 P.2d 272 showing the Moreover, “moving party has burden all facts considered any genuine issue as to complete absence moving that entitle the principles of the substantive light material in inferences as a matter of law and all reasonable party party opposing judgment.” drawn in favor are 266, 867, 869. (1996), 262, 280 Mont. 929 P.2d Bergo Kolar v. ISSUE negligent misrepresentation, claim for respect to With repre made no Court err in that First Bank did the District might rely to his detriment? Mattingly upon which sentation to negligent misrepresentation definition of adopted Court has This (Second) See Durbin v.Ross of Torts 552. § in the Restatement set forth 758, provides: 463, 472, 916 P.2d 764. Section 552 (1996), 276 Mont. (1) business, employ- or who, profession the course of his in One pecuniary in he has a any transaction ment, or in other of others guidance information for interest, false supplies loss liability pecuniary for transactions, subject their business information, justifiable upon reliance them their caused to if he fails to exercise reasonable care or competence obtaining or communicating information. In Kitchen v. (1990), Eastside Bank Montana 242 Mont. Krafters (overruled
155,
a) the representation defendant made a past as to a or existing fact; material
b) representation untrue; must have been c) regardless belief, of its actual the defendant must have made representation ground without reasonable believing it true; to be
d) representation must have been made with the intent to rely it; induce the plaintiff
e) plaintiff must falsity have been unaware of the it representation; must have acted in reliance upon the truth of the and it
representation justified must have been in relying upon the representation;
f)
reliance,
the plaintiff, as a result of its
must
damage.
sustain
Krafters,
Kitchen
Mont. at
Although
negligent
misrepresentation may give rise to actual
so, may
or constructive
where it is insufficient to do
it
“never
give
theless
rise to negligence liability
27-1-701, MCA,
under §
ordinary
through want of
care of the
managing
defendant
person.”
(1989),
or
Bottrell v. American Bank
237 Mont.
773 P.2d
A threshold element in
for negligent misrepresenta
tion is that
the defendant make
as to a
or
past
*7
existing
upon
material fact
which the claim is based. Kitchen Kraf
ters,
The District Court First Bank’s motion for to Mattingly’s negligent misrepre- grounds. First, on two the that sentation court found First Bank had appraisal not conducted a formal and had accordingly made no representation Mattingly regarding property’s Second, to the value. the found could repre- court not have relied on deciding purchase property. sentations First Bank before to the finding, money Mattingly so the court noted that First Bank loaned already buy-sell agreement after he had entered into a with Habets. the record, Court concludes District the this review of Following the record matter of law that determining erred Court made statements misleading of no evidence contained the purchasing relied in might have upon which Mattingly and summary judgment, considering a motion When station. service this favorable to the light in the most the evidence must view (1996), 276 Mont. v.McDonald the motion. Bowen party opposing jury that a we conclude 201, 205. perspective, From this 199, 915 P.2d representation. Bank’s conduct as a viewed First might well have prior to perform appraisal an practice Bank’s It First was Accordingly, prior to First real estate. a loan on commercial approving inspected Dolan Mattingly’s request, loan approval Bank’s the property that Dolan visited Bank concedes subject property. its impression regarding an “to obtain inspection and conducted First Bank would determining whether purpose value for subsequently ap- committee Bank’s loan loan.” First in its secure $56,000. in the amount of request loan Mattingly’s proved The facts, however, parties dispute. are Beyond these bare Bank’s nature, import of First scope, the true dispute parties additionally whether First They dispute property. of the evaluation of Mat- subsequent approval property of the appraisal Bank’s representation property a that constituted tingly’s request loan $56,000. appraisal First Bank’s at least Whether had a value of loan subsequent approval along with its property, a property that the value representation constitutes request, fact. $56,000 of material least of at constituted an appraisal First Bank’s Assuming value, par- Mattingly regarding representation affirmative upon in fact relied such additionally dispute whether ties found The District Court property. purchasing representation value Mat- property’s misrepresented had First that even purchasing have relied on could not tingly only “after correctly noted it was the court concluding, In so property. that he con- buy-sell agreement” into the had entered [Mattingly] However, Mattingly expressly financing. the Bank to secure tacted ability his property upon purchase commitment conditioned therefore, was, of the sale financing. Finalization to obtain and, application of his loan approval contingent upon amount worth the property was that the its determination arguably, any repre- relied on Therefore, whether the loan. *8 Bank sentation First with respect property’s to the value in finalizing the sale is an question additional of material fact.
Based on the foregoing, grant- hold the District Court in erred ing summary judgment Mattingly’s with to claim respect for negli- gent misrepresentation. Specifically, we hold the court erred find- question no of fact to ing as whether First Bank made an affirmative or of regarding condition value the property upon Mattingly might have relied.
ISSUE 2 respect With to Mattingly’s fraud, claim for constructive did the err in special District Court no circumstances giving rise to a duty on part First Bank to to Mattingly any disclose informa may it regarding tion have had the contamination? negligence negligent addition claims for misrepre
sentation, Mattingly alleged a claim constructive fraud presence duty of a legal First Bank. The is an essential element of a 28-2-406, MCA, claim fraud. Section con defines as: structive fraud
(1) duty which, breach of without actually an fraudulent intent, gains advantage to the or person anyone fault claim- ing under misleading prejudice him another or to the anyone claiming him; prejudice under or (2) any such act or omission law especially as the declares to be fraudulent, respect without to actual fraud.
Thus,
addressing
motion
for constructive
this Court
first
must
determine whether
the lower court erred in concluding
duty
owed
disclose
information it
contamination.
may have had
a legal
Whether or not
exists
a
is
law for
(1988),
the court’s determination. Simmons v. Jenkins
230 Mont.
Although
legal duty
750 P.2d
1071.
which often exists
fiduciary one,
in constructive
fraud cases is a
this
has pre
viously held that Montana’s constructive
fraud statute
“does not
plaintiff
fiduciary
demonstrate
require
relationship,
[but]
merely
duty.”
requires
establishment of
McJunkin v. Kaufman
Systems (1987),
432, 439,
Mont.
& Broad Home
748 P.2d
“special circumstances,” neither a
certain
confidential nor
fiduci
Under
Drilcon,
necessary
finding of
ary relationship for a
constructive fraud.
(1988),
166, 172, 749
v.Roil Energy Corp.
1058, 1061.
Inc.
230 Mont.
P.2d
may
has held
circumstances
exist where one
special
This Court
way. Specifically,
to mislead the other
some
this
has acted
party
present
determined that constructive fraud
Court has
conduct, create
bywords
real
or
a false
property],
[of
sellers
“[w]here
concerning
important
other
mat
impairment
serious
or
impression
facts.”
subsequently
McGregor
fail to disclose
relevant
ters and
*9
109,
(1986),
98,
536,
(citing
P.2d
543
220 Mont.
714
v. Mommer
159.)
(1980),
532, 539,
155,
Mont.
622 P.2d
v. Hulse
190
Moschelle
Drilcon,
1061-62,
In
jury
the
where
question
of constructive fraud to
sellers
mission
[misleading
general
and]
“made
statements about the
gas
of a
station
at
profitability
McGregor,
of the business.”
220 Mont.
714 P.2d
Similarly, Moschelle,
held special
sup
at
in
we
circumstances
543.
for
fraud
a claim
constructive
existed where sellers made
porting
physical
the
condition of
misleading
regarding
prop
statements
Moschelle,
income
erty
generated
and the
from
business.
190
539-40,
“[w]ithholding
622
159. We
that
recognized
Mont. at
P.2d at
can
a
concerning purchased property
facts
fraudulent
relevant
Moschelle,
190
622
Mont. at
P.2d at
act.”
McJunkin, buyers
brought
a
home
suit
In
of mobile
seller, asserting
claims, including
several
one for
manufacturer
at
McJunkin,
fraud.
[t]here the station. Mattingly purchasing he relied in ments It did not not to the transaction. advise party Bank was even a The way Mattingly purchase did it represent nor Moreover, Mattingly Habets. never previously dealt with the It after only Bank. was he had buy-sell agreement entered into the Thus, that he contacted the to secure financing. the Bank relationship did not have a with special Mattingly nor did it owe duty. fiduciary him a
Review of the record indicates the District Court erred summary judgment respect motion with to the Specifically, of constructive fraud. we question hold lower court in finding “[t]here erred is no that evidence the Bank made misleading statements to which he relied on purchasing the station.” above, discussed
As concluded whether First Bank made misleading statements condition or is a of fact question precluding value judgment. assuming We further concluded the presence of such question misrepresentation, ofwhether relied on that purchasing the station is an statement additional of fact. dutyA support sufficient for constructive fraud McJunkin, in a commercial transaction. at 439-40, arise Mont. Bank, conduct, P.2d at 915. Whether words or created *10 impression concerning contamination, a false the and subsequently facts, failed to disclose relevant is a question Special material fact. giving duty circumstances rise to a on the part of First Bank may of fact should a trier find First Bank misrepresented exist that the light property contamination, ofthe ofthe that Mattingly value and upon this purchasing property. relied the Furthermore, Bank peculiar First had knowledge environ- Mattingly hazard. contracted with mental First Bank to borrow money, unaware the duties and obligations financial was assum- by owner of becoming environmentally an ing damaged property. A facts jury may well conclude such would constitute special case. in this circumstances foregoing, on the we conclude that the
Based District Court erred finding summarily special giving no circumstances rise to a to part ofFirst Bank disclose information it have had to ground Mattingly. Accordingly, the contamination regarding erred in granting the District Court First Bank’s motion for hold on summary judgment Mattingly’s claim constructive fraud.
ISSUE fraud, to claim for respect Mattingly’s With did gained District err in that First advantage Court Bank no by failing presence to disclose contamination? granted
The District Court First Bank’s motion for judgment on the issue of constructive fraud on the basis additional gained advantage Mattingly by failing that First Bank no over 28-2-406, MCA, disclose the contamination. Pursuant a neces- § sary that, component of claim for constructive fraud is in breach- duty, ing party “gain advantage” one over the other. Mattingly argues advantaged by First Bank was its alleged contamination decision withhold information in a instance, respects. Mattingly number of For points out that First held the -underlying loan, that, Bank note Habets’ upon closing Mattingly, sale Bank pay First was able to the balance remaining Thus, Mattingly on Habets’loan. argues, First Bank found him a who nothing borrower knew of the contamination and who accordingly likely be less would default on his loan than would borrower, Habets, seriously such as who knew the property Mattingly argues defective. also that First by Bank was advantaged failing because, to disclose the contamination had learned of contamination, he purchased would not have properly First Bank would not have been collect able to interest income on the loan.
The District assuming Court found even First Bank knew of contamination, it gained advantage by failing to disclose its Specifically, held that presence. “[i]f court de- on the loan and the foreclosed mortgage, faulted Bank on its the Bank very might up piece well have ended with a with little value, or perhaps liability.” even constituted a financial
Notwithstanding fact, this this Court concludes that whether or over gained advantage failing not to disclose contamination, as contemplated the definition of constructive is a of material fact for the trier of fact.
ISSUE Did the District err in motion *11 claim summary on judgment punitive damages? for By way complaint, Mattingly of second asserted a his amended punitive damages against for First Bank. Because the District claim summary in Bank’s favor Mat- judgment Court ordered First on misrepresenta- negligent fraud and claims for constructive tingly’s summary judgment for on First Bank’s motion tion, granted it also damages. punitive claim for Mat- District Court’s order with Having reversed negligent misrepresenta- fraud and claims for constructive tingly’s summary judgment on Mat- similarly grant tion, reverse we damages. punitive tingly’s 27-1-221(1), MCA, damages are available punitive to §
Pursuant actual fraud or actual malice. guilty of defendant is found where jury, reach the punitive damages for the issue Accordingly, of actual fraud or malice. evidence present must
CONCLUSION granting the District Court erred conclusion, hold that we findings summary making and in judgment motion for First Bank’s different well have reached a jury may matter of law when finding Court erred in hold the District Specifically, conclusion. he Mattingly upon which made no First Bank the District Court erred We also hold rely to his detriment. might part to a giving circumstances rise no finding special it have had any information to disclose hold the court erred in Mattingly. Finally, we contamination pres- to disclose the advantage failing no gained that First Bank’s motion for granting erred in ence of contamination damages. punitive on issue bases, the order of the District we reverse On these case for and remand the summary judgment Bank’s motion for opinion. with this consistent proceedings further HUNT, LEAPHART, TURNAGE, JUSTICES JUSTICE CHIEF HARKIN, sitting JUDGE and DISTRICT TRIEWEILER NELSON JUSTICE dissenting part. GRAY, concurring part
JUSTICE that Mat- agree one and opinion on issue in the Court’s I concur negligent misrepresen- with his proceed permitted must be tingly dissent, however, from I respectfully First Bank. tation claim his constructive may proceed on two, whether on issue opinion four, three and result, dissent from issues I also claim. As fraud I would resolution ofissue two. proper under a be reached need not which duty has been established underlying because conclude did not rest, the District Court can fraud claim *12 granting summary judgment err in First Bank’s motion for on that claim. points out, duty legal question
As the Court the existence of a is a Moreover, law for the court’s determination. issue, district the statute at MCA, 28-2-406(1), clearly duly in a requires § foundational construc- claim, by “any tive fraud defining duty constructive fraud as breach of which, actually intent, an gains advantage without fraudulent an to the anyone person by in fault or under him claiming misleading another to added.) prejudice. (Emphasis Simply ...” and plainly, statute requires existing duty, accomplishes an the breach of which an advan- by misleading to one means of tage another to the second person’s words, prejudice. breaching In other the result means of duty secondary to duty. remain the existence of the “special analysis The essentially Court’s circumstances” voids the duty ofthe requirement statutory constructive fraud claim substitut- ing breaching duty the result and means of the necessity of an duty underlying words, which can be breached. In other the Court genuine determines that material issues of fact exist that First Bank an gained advantage Mattingly by have over misleading him to his my prejudice. It view a straightforward interpretation is under ofthe statute, plain words of the questions “gain[ed] whether First Bank advantage [Mattingly] by ... over misleading prejudice” him to his are questions relating factual to a can “breach.”Because there be no “breach” if, underlying duty, without an these matters arise only when, the required by underlying duty the statute has been established matter The ofthat duty, agrees, law. existence as is a oflaw for the district court. statute,
“In judge the construction of a the office of simply therein, ascertain and declare what is in terms or substance contained 1-2-101, not... to omit has been what inserted.” Section MCA. I submit statutory that of the calling the breach-related elements constructive fraud “special judicial repeal circumstances” effectuates a duty requirement legislature. enacted Drilcon, reasons, my
For the same it is view that Inc. was an interpretation meaning 28-2-406(1), erroneous plain MCA. I § hold, regard case, would overrule that case and to issue two in this Court did the District not err motion for basis existed which to statutory fraud claim. premise a