Ehresmann v. Muth

757 N.W.2d 402

2008 SD 103

Scott EHRESMANN, Plaintiff and Appellant, v. Douglas R. MUTH, Defendant and Appellee.

No. 24734.

Supreme Court of South Dakota.

Argued August 27, 2008.

Decided October 29, 2008.

Michael A. Henderson of Cadwell, Sanford, Deibert & Garry, LLP, Sioux Falls, SD, for plaintiff and appellant.

Steven J. Morgans and Daniel R. Fritz of Lynn, Jackson, Shultz & LeBrun, PC, Sioux Falls, SD, for defendant and appellee.

KERN, Circuit Judge.

[¶ 1.] Scott Ehresmann (Ehresmann) purchased two four-plexes and one ten-plex pursuant to a contract for deed and subsequent warranty deed listing Doug Muth and his wife Charity Muth as the sellers. A prior purchase agreement between the parties listed Cisco Financial Group as the seller. Ehresmann experienced continuing problems with the four-plexes' vinyl siding. He brought suit against Doug Muth alleging fraud and deceit, negligent misrepresentation, negligent construction, and breach of implied warranty. The circuit court granted summary judgment for Doug Muth, holding that the property transaction was between Ehresmann and Cisco Financial Group; Doug Muth only acted in an agency capacity.

[¶ 2.] We reverse and remand.

BACKGROUND

[¶ 3.] In 2001 and 2002 Doug Muth served as general contractor for the construction of two four-plexes and one ten-plex on his real property in Sioux Falls. Subcontractors constructed the property and installed the vinyl siding on the two four-plexes. Construction was completed in approximately April, 2002 and the buildings were operated as rental properties.

[¶ 4.] The properties were listed for sale with real estate agent Jeremy Muth who prepared a real estate listing sheet. This listing was provided to potential buyers. It described the buildings as "new construction" and stated that the siding was "maintenance free." Ehresmann viewed the property with Jeremy Muth and was given a copy of the listing sheet. At that time, Ehresmann alleges that Jeremy Muth confirmed that the vinyl siding on the two four-plexes was "maintenance free."

[¶ 5.] On March 28, 2003, Ehresmann entered into a purchase agreement to purchase the two four-plexes and one ten-plex. The purchase agreement identified Cisco Financial Group as the seller. Doug and Charity Muth signed their names on the purchase agreement followed by the words "for Cisco Financial Group." Cisco Financial Group is a limited liability company in which Doug Muth has an ownership interest. The purchase agreement specified a closing date of April 30, 2003.

[¶ 6.] The sale did not close as contemplated. Instead, on May 15, 2003, Ehresmann and Doug and Charity Muth executed a contract for deed. The contract for deed did not mention Cisco Financial Group. It listed Doug and Charity Muth as the sellers.

[¶ 7.] After the contract for deed had been paid in full, the Muths executed a warranty deed conveying title to Ehresmann. The warranty deed did not mention Cisco Financial Group. Doug and Charity Muth signed the warranty deed without any reference to Cisco Financial Group.

[¶ 8.] Shortly after taking possession, Ehresmann began experiencing problems with the vinyl siding on the two four-plexes. In June 2003 the siding buckled and strong winds loosened several pieces. Ehresmann made the necessary repairs and discovered that a number of screws had been installed in the siding after the original installation but before he took possession. In December 2003 or January 2004 strong winds again damaged the siding which Ehresmann repaired. Ehresmann alleges that following these winds several other pieces of siding suffered substantial damage that he has not repaired due to the expense. The problems with the siding are purportedly the result of improper installation.

[¶ 9.] In March 2006 Ehresmann brought suit against Doug Muth alleging fraud and deceit, negligent misrepresentation, negligent construction, and breach of implied warranty. Ehresmann based his claims on the problems with the siding and the representations made in the real estate listing sheet and by the real estate agent.

[¶ 10.] Doug Muth moved for summary judgment. The circuit court granted summary judgment holding that in all matters relevant to the construction and sale of the property, Doug Muth merely acted as an agent for Cisco Financial Group. Therefore, Doug Muth did not owe Ehresmann any duty and could not be held personally liable.

[¶ 11.] On appeal Ehresmann asserts that the circuit court erred when it granted summary judgment for Doug Muth. Ehresmann raises the following issues:

Did the circuit court err in granting summary judgment to Doug Muth with respect to Ehresmann's claims for fraud and deceit and negligent misrepresentation?

Did the circuit court err in granting summary judgment to Doug Muth with respect to Ehresmann's negligent construction and implied warranty claims?

STANDARD OF REVIEW

[¶ 12.] "On appeal, we will affirm summary judgment when the facts and the law are clear and no genuine issues of material fact exist." Citibank South Dakota, N.A. v. Schmidt, 2008 SD 1, ¶ 8, 744 N.W.2d 829, 832 (citing Bordeaux v. Shannon County Schools, 2005 SD 117, ¶ 11, 707 N.W.2d 123, 126). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact." SDCL 15-6-56(c). "[T]he benefit of any doubt about whether there is a material issue of fact goes to the nonmoving party." Trammell v. Prairie States Ins. Co., 473 N.W.2d 460, 462 (S.D. 1991) (citations omitted).

ANALYSIS AND DECISION

[¶ 13.] In granting summary judgment, the circuit court found that Doug Muth was acting as an agent for Cisco Financial Group in the sale and construction of the two four-plexes and one ten-plex. The circuit court based this finding solely on the purchase agreement and supplemental addendum that Doug and Charity Muth signed "for Cisco Financial Group." It noted that "[i]t is inescapable that the agreement entered into for the purchase of said property was between [Ehresmann] and Cisco Financial Group." As a result, the circuit court concluded that Doug Muth owed no duty to Ehresmann and could not be held personally liable for actions taken on behalf of Cisco Financial Group. See SDCL 47-34A-303 (specifying that the "liabilities of a limited liability company, whether arising in contract, tort, or otherwise, are solely the debts, obligations and liabilities of the company.").

[¶ 14.] Ehresmann contests this characterization and emphasizes that both the contract for deed and the warranty deed, which replaced the purchase agreement, were signed by Doug and Charity Muth without any reference to Cisco Financial Group. This is significant because, even if there was a controlling agency relationship between Cisco Financial Group and Doug Muth for the sale and construction of the property, where a contract does not disclose the principal, the agent may be held personally liable. The Collegian v. Hileman, 88 S.D. 601, 605, 226 N.W.2d 163, 165 (1975).

[¶ 15.] Ehresmann further notes that there is no evidence that Cisco Financial Group owned the property at issue. Indeed, Doug Muth concedes for the sake of argument on appeal that Cisco Financial Group did not own the property at the time of conveyance. As a non-owner of the property at issue, it can be argued that Cisco Financial Group did not have a legal right to sell the property and, thus, cannot be considered an acting principal vicariously liable for the acts associated with its sale.

[¶ 16.] Whether an individual is an agent is ultimately a question of fact. A.P. & Sons Const. v. Johnson, 2003 SD 13, ¶ 21, 657 N.W.2d 292, 297. Ehresmann has submitted sufficient evidence to establish a genuine issue of material fact on the question of whether Doug Muth was acting in an individual or agency capacity when overseeing construction and sale of the property at issue. "Moreover, when there is reasonable doubt on whether a genuine issue of material fact exists, the doubt should be resolved against the movant." Berbos v. Krage, 2008 SD 68, ¶ 17, 754 N.W.2d 432, 437 (citations omitted). Thus, the circuit court erred by granting summary judgment premised on an asserted lack of personal liability.

[¶ 17.] We next determine if summary judgment is warranted on alternative grounds. At issue is whether there are genuine issues of material fact concerning Doug Muth's alleged fraud and deceit, negligent misrepresentation, negligent construction, and breach of implied warranty. "On review, we apply the same test as the trial court: we probe the record for material facts, resolve disputed facts in favor of the nonmoving party, and decide whether the moving party is entitled to judgment as a matter of law." Fisher v. Kahler, 2002 SD 30, ¶ 5, 641 N.W.2d 122, 125 (citing Sorrels v. Queen of Peace, 1999 SD 133, ¶ 5, 601 N.W.2d 606, 608).

[¶ 18.] Ehresmann contends that statements referring to the siding as "maintenance free," by the real estate agent and in the real estate listing sheet, are attributable to Doug Muth and constitute fraud and deceit or negligent misrepresentation. The circuit court dismissed this assertion finding, in part, that the real estate agent was an agent of Cisco Financial Group and, thus, Doug Muth may not be held personally liable for any actionable misrepresentations made by the real estate agent.

[¶ 19.] A principal is held liable for the misrepresentations of his agent even if "the principal was unaware of or received no benefit from his agent's conduct." McKinney v. Pioneer Life Ins. Co., 465 N.W.2d 192, 194 (S.D.1991) (citations omitted). Therefore, the individual or entity that hired the real estate agent may be exposed to potential liability for the real estate agent's alleged misrepresentations. However, there is a dispute concerning whether the real estate agent was acting on behalf of Cisco Group Financial or Doug Muth....