Dewey v. Stringer

375 Mont. 176

325 P.3d 1236

Jennifer DEWEY, Plaintiff and Appellant,

v.Kenneth STRINGER, Defendant and Appellee.

No. DA 13–0347.

Supreme Court of Montana.

Submitted April 2, 2014.

Decided May 27, 2014.

For Appellant: Brian J. Miller, Morrison, Sherwood, Wilson & Deola, PLLP, Helena, Montana.

For Appellee: Murry Warhank, Gough, Shanahan, Johnson & Waterman, PLLP, Helena, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Jennifer Dewey (Dewey) appeals from the order of the First Judicial District Court, Lewis and Clark County, granting summary judgment in favor of Kenneth Stringer (Stringer) on Dewey's claims for constructive fraud, deceit, and negligence. We affirm in part and reverse in part, restating the issue raised on appeal as follows:

¶ 2 Did the District Court err by dismissing Dewey's tort claims on the ground that they arose strictly out of a breach of contract?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 On March 12, 2012, Dewey and Stringer entered into a buy-sell agreement (Agreement) for the purchase of Dewey's home, located in Helena. The parties utilized a standard Montana Association of Realtors form contract and were not represented by legal counsel. Stringer agreed to pay $265,000 for Dewey's home, providing her with $2000 in earnest money. The Agreement contained a remedies provision stating:

If the Seller accepts the offer contained in this Agreement and Buyer refuses or neglects to consummate the transaction anticipated by this Agreement within the time period provided in this Agreement, the Seller may:

(1) Declare the earnest money paid by Buyer be forfeited; or

(2) Demand that Buyer specifically perform Buyer's duties and obligations under this Agreement; or

(3) Demand that Buyer pay monetary damages for Buyer's failure to perform the terms of this Agreement.

In an addendum attached to the Agreement, the parties agreed that Stringer would occupy Dewey's home from April 1, 2012 until the closing date, scheduled for September 28, 2012, and pay her $1300 in rent per month. The addendum contained a provision stating: “Buyer, at his/her expense, shall maintain heating, plumbing, lighting, ventilation, air-conditioning fixtures, built-in appliances, and other equipment included in the sale in normal working condition commencing on the date of occupancy.”

¶ 4 As agreed, Stringer moved into Dewey's home in April and began paying rent. However, on June 29, 2012, Stringer sent Dewey a letter notifying her that he had decided not to purchase the home and had vacated the premises. He paid rent for July but not August or September. Dewey retained Stringer's final rent payment as well as the $2000 earnest-money deposit.

¶ 5 On October 14, 2012, Dewey filed a complaint alleging that Stringer committed constructive fraud and deceit by making a series of false representations about his ability and intention to purchase her home. She also claimed that Stringer negligently maintained and managed her property throughout his period of occupancy. Dewey sought both actual and punitive damages. Stringer filed for bankruptcy, but dismissed his bankruptcy petition several weeks later. Stringer answered and counterclaimed, seeking a declaration that he was entitled to the return of his $2000 earnest-money deposit under the Agreement. Thereafter, Dewey and Stringer filed cross-motions for summary judgment. Following a hearing on March 20, 2013, the District Court granted summary judgment in favor of Stringer on all of Dewey's claims. The District Court also granted partial summary judgment in favor of Dewey, determining that Stringer breached the Agreement, which entitled Dewey to retain the $2000 earnest-money deposit pursuant to the remedies provision. Dewey appeals the District Court's dismissal of her remaining claims against Stringer.

STANDARD OF REVIEW

¶ 6 Summary judgment is appropriate only when “ ‘the pleadings, depositions, answers to interrogatories, and admissions on file’ ” together with any affidavits, demonstrate that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. Brothers v. Home Value Stores, Inc., 2012 MT 121, ¶ 6, 365 Mont. 196, 279 P.3d 157 (quoting M.R. Civ. P. 56(c)). Once the moving party meets its burden, the opposing party “must present substantial evidence essential to one or more elements of its case to raise a genuine issue of material fact.” Tin Cup Co. Water v. Garden City Plumbing & Heating, Inc., 2008 MT 434, ¶ 22, 347 Mont. 468, 200 P.3d 60 (citation omitted). This Court reviews de novo a district court's rulings on motions for summary judgment. Est. of Irvine v. Oaas, 2013 MT 271, ¶ 12, 372 Mont. 49, 309 P.3d 986 (citation omitted). We review a district court's interpretation of a contract for correctness. Brothers, ¶ 6.

DISCUSSION

¶ 7 Did the District Court err by dismissing Dewey's tort claims on the ground that they arose strictly out of a breach of contract?

¶ 8 As a general rule, when a party's claim is based solely upon a breach of the specific terms of an agreement, the action sounds in contract. Billings Clinic v. Peat Marwick Main & Co., 244 Mont. 324, 338, 797 P.2d 899, 908 (1990). However, “ ‘a ground of liability in tort may coexist with a liability in contract, giving the injured party the right to elect which form of action he will pursue.’ ” Garden City Floral Co. v. Hunt, 126 Mont. 537, 543, 255 P.2d 352, 356 (1953) (citation omitted); accord Corp. Air v. Edwards Jet Ctr., Mont., Inc., 2008 MT 283, ¶ 49, 345 Mont. 336, 190 P.3d 1111. Such circumstances exist “if a defaulting party, by breaching the contract, also breaches a duty which he owes to the other party independently of the contract.” Boise Cascade Corp. v. First Sec. Bank, 183 Mont. 378, 392, 600 P.2d 173, 181 (1979). Separate tort liability depends on whether the breaching party violated a legal duty that would exist in the absence of a contract. Boise Cascade Corp., 183 Mont. at 392, 600 P.2d at 181–82 (citing Battista v. Lebanon Trotting Assn., 538 F.2d 111 (6th Cir.1976)). Liability imposed under a statute exists independent of contractual duties concerning the same subject matter. Abraham v. T. Henry Constr., Inc., 350 Or. 29, 249 P.3d 534, 540 (2011). There must be active negligence or misfeasance to support an independent tort claim. Garden City Floral Co., 126 Mont. at 543, 255 P.2d at 356 (citations omitted) (“There must be some breach of duty distinct from breach of contract.”).

A. Constructive Fraud and Deceit

¶ 9 Montana's constructive-fraud statute defines constructive fraud as:

(1) any breach of duty that, without an actually fraudulent intent, gains an advantage to the person in fault or anyone claiming under the person in fault by misleading another person to that person's prejudice or to the prejudice of anyone claiming under that person; or

(2) any act or omission that the law especially declares to be fraudulent, without respect to actual fraud.

Section 28–2–406, MCA. In order to make out a prima facie case of constructive fraud, a plaintiff must establish the following elements: a representation; the falsity of that representation; the materiality of that representation; the speaker's knowledge of that representation's falsity or ignorance of its truth; the hearer's ignorance of that representation's falsity; the hearer's reliance upon the truth of that representation; the hearer's right to rely upon that representation; and the hearer's consequent and proximate injury or damage caused by reliance on that representation. White v. Longley, 2010 MT 254, ¶ 28, 358 Mont. 268, 244 P.3d 753 (citing Town of Geraldine v. Mt. Municipal Ins. Auth., 2008 MT 411, ¶ 28, 347 Mont. 267, 198 P.3d 796). Montana's deceit statute provides, in relevant part:

(1) One who willfully deceives another with intent to induce that person to alter the person's position to the person's injury or risk is liable for any damage that the person suffers.

(2) A deceit, within the meaning of subsection (1), is either:

(a) the suggestion as a fact of that which is not true by one who does not believe it to be true;

(b) the assertion as a fact of that which is not true by one who has no reasonable ground for believing it to be true;

(c) the suppression of a fact by one who is bound to disclose it or who gives information of other facts that are likely to mislead for want of communication of that fact; or

(d) a promise made without any intention of performing it.

Section 27–1–712, MCA.

¶ 10 In support of her constructive fraud and deceit claims, Dewey contends that at the time she and Stringer entered into the Agreement, Stringer informed her that he was in the process of selling a home he owned in California, but that execution of the Agreement did not depend upon that sale. Stringer also purportedly told Dewey that he had sufficient funds to close on her home. Based on these representations, Dewey alleges that she agreed to purchase another home for herself and her daughter. Dewey further alleges that Stringer purchased property located in Boulder, Montana while living in her home, even though he claimed to be broke at the time he moved out. Based on this conduct, Dewey states that she “now believe[s] that Mr. Stringer was intentionally false and misleading in his statements and representations ... about his intention to purchase her home.” She also “think[s] Mr. Stringer's conduct was malicious.”

¶ 11 The District Court dismissed Dewey's tort claims on the ground that her injuries resulted strictly from Stringer's breach of contract. The court reached this conclusion after applying our holding in Story v. City of Bozeman, 242 Mont. 436, 450–52, 791 P.2d 767, 775–76 (1990), where we determined that in order to establish a duty of good faith and fair dealing, absent specific statutory provisions, the parties must have a “special relationship.” The court concluded there was “no special relationship between Dewey and Stringer to...