Alexander v. Meduna

• Citation: 2002 WY 83,47 P.3d 206
• Decision Date: 30 May 2002
• Docket Number: No. 00-324.,00-324.
• Parties: James R. ALEXANDER and Rita J. Alexander, husband and wife, Appellants (Defendants), v. Donald J. MEDUNA and Linda Meduna, husband and wife; and Donald Meduna, Trustee of the Meduna Red Angus Ranch Trust, dated December 11, 1996, Appellees (Plaintiffs).
• Court: United States State Supreme Court of Wyoming

47 P.3d 206

2002 WY 83

James R. ALEXANDER and Rita J. Alexander, husband and wife, Appellants (Defendants), v. Donald J. MEDUNA and Linda Meduna, husband and wife; and Donald Meduna, Trustee of the Meduna Red Angus Ranch Trust, dated December 11, 1996, Appellees (Plaintiffs).

No. 00-324.

Supreme Court of Wyoming.

May 30, 2002.

Micheal K. Shoumaker, Westminster, Colorado; and Virgil G. Kinnaird, Sheridan, Wyoming, Representing Appellants.

Joseph E. Darrah and S. Joseph Darrah of Darrah & Darrah, P.C., Powell, Wyoming, Representing Appellees.

Before LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ.

KITE, Justice.

[¶ 1] James and Rita Alexander (the sellers) sold their home of many years to Donald and Linda Meduna and Meduna Red Angus Ranch Trust (the buyers). Before contracting, the buyers viewed the property and were advised by the sellers there was no groundwater seepage or structural defects. The basement flooded shortly after the buyers took possession. At the bench trial, an engineer testified he discovered evidence of long-term structural damage under paneling and carpet and in crawl spaces. The trial court found the sellers' fraudulent representations induced the buyers to contract and awarded punitive damages. We affirm in part, reverse in part, and remand for correction of the compensatory damages associated with the Northwest Rural Water District hookup.

FACTS

[¶ 2] In February 1996, the sellers listed their home of over twenty years, including approximately forty acres of land, a residence, and a mobile home office, for sale through Alexander Realty with Mrs. Alexander as the listing broker. The buyers and their real estate agent first viewed the property on or about December 9, 1996.

[¶ 3] The real estate agent prepared a purchase offer for the buyers within approximately one day of the first property showing. A copy of a property condition statement completed by Mrs. Alexander was delivered to the buyers before they made their first offer and was attached to all offers that went back and forth between the parties.

[¶ 4] The buyers' original proposed contract to purchase was submitted on or about December 11, 1996. The sellers counteroffered the same day, and the buyers accepted on December 12, 1996, with some additional terms. The contract provided standard form language regarding the buyers' right to inspect the property.¹ [¶ 5] The buyers did not have professional inspections performed. The property closing occurred on or about April 11, 1997, and the buyers did not take physical possession until approximately June 10, 1997, because they had to complete personal business and make moving arrangements.

[¶ 6] In the latter part of June 1997, the buyers experienced a number of problems including flooding in the residence basement, roof disrepair, and leakage in the mobile home office; the inability to grow any produce in the garden; and the discovery the Northwest Rural Water District hookup costs would be in excess of $8,000. They filed a lawsuit against the sellers seeking recovery on two causes of action: (1) fraud and deceit and (2) infliction of severe emotional distress.² After a lengthy bench trial, the trial court found the buyers had proved the sellers' multiple, intentional fraudulent misrepresentations by clear and convincing evidence but had not established intentional infliction of emotional distress by a preponderance of the evidence. Subsequent to a punitive damages hearing, the trial court awarded the buyers judgment and damages of $100,840.94, attorney fees of $38,045, costs of $9,228.42, and punitive damages of $25,000. The sellers appealed.

STANDARD OF REVIEW

[¶ 7]

"When a trial court in a bench trial makes express findings of fact and conclusions of law, we review the factual determinations under a clearly erroneous standard and the legal conclusions de novo." Rennard v. Vollmar, 977 P.2d 1277, 1279 (Wyo.1999). This court does not weigh the evidence de novo; therefore, findings may not be set aside because we would have reached a different result. Moreover, the appellant bears the burden of persuading the appellate court that the finding is erroneous.

Schlesinger v. Woodcock, 2001 WY 120, ¶ 13, 35 P.3d 1232, ¶ 13 (Wyo.2001) (some citations omitted); see also Polo Ranch Company v. City of Cheyenne, 969 P.2d 132, 136 (Wyo. 1998)

.

[¶ 8] We will not supplant the fact-finder, but, in reviewing the sellers' arguments, we must keep in mind the elements of intentional misrepresentation (fraud) and the requisite clear and convincing standard of proof. Dewey v. Wentland, 2002 WY 2, ¶ 10, 38 P.3d 402, ¶ 10 (Wyo.2002); Sundown, Inc. v. Pearson Real Estate Company, Inc., 8 P.3d 324, 330 (Wyo.2000). Intentional misrepresentation is established when three elements are proven: "(1) the defendant made a false representation intended to induce action by the plaintiff; (2) the plaintiff reasonably believed the representation to be true; and (3) the plaintiff relied on the false representation and suffered damages." Sundown, Inc., 8 P.3d at 330.

DISCUSSION

A. Summary of Evidence

[¶ 9] At trial, the buyers' expert witness, a registered professional engineer, testified regarding his July 1997 inspection of the property, his written report based on that inspection, and what, in his opinion, caused the structural damages and defects. The gist of his testimony was that the problems had existed for a long period of time. He noted evidence of water damage in the basement including heavy salt deposits and peeling paint on the basement walls, extensively rusted and corroded heat registers, spalling of the masonry and significant alkali deposits in the west crawl space, and bulging of the east and west walls. The engineer opined that excessive migrating groundwater and inadequate subsurface drainage away from the residence existing for not less than three to five years caused water to permeate the inadequately damp proofed foundation walls, swelling the soil and causing the east and west walls to buckle inward. He also concluded the damage was not caused by excessive lawn watering. He testified the foundation walls would have to be exposed, sandblasted, and damp proofed to prevent complete failure. This would require emptying the basement; removing the electrical wiring, plumbing, and carpeting; and excavating the soil from the foundation perimeter. Cracks and heaves in the basement floor would likewise need repair. He noted the excavation would disrupt the existing landscaping which would require repair after the foundation was secured. The engineer also testified the mobile home office roof was in poor condition. Significant leaks and buckling in the roof would require extensive repairs. In the interior northwest corner of the mobile home office, an additional layer of sheetrock had been installed on the ceiling which concealed signs of water leakage.

[¶ 10] An experienced building contractor testified he saw bulging of the east basement wall which was causing the center wall support to move and the center-bearing wall to wrinkle at the basement ceiling. He also observed cracks and heaves in the floor, metal heat registers severely rotted from water and salts coming through the walls, and heavy salt deposits on the walls where the buyers had removed the paneling just after they moved into the house.

[¶ 11] Mr. Meduna and his real estate agent testified that the sellers knew the buyers needed to generate supplemental income from the property by using the mobile home office as a business and selling produce and crops from the garden and other acreage. Before entering into the contract, the sellers showed them around the property including the residence, a separate workshop, the mobile home office, the garden, the irrigated acreage, and a pig barn. The sellers each made representations regarding the property condition and suitability for the buyers' stated needs. Neither Mr. Meduna nor his agent saw visible evidence of water damage. They were not shown the crawl spaces, and the walls of two bedroom closets could not be seen because they were covered over by boxes and other items. During the showing, as witnessed by the real estate agent, the sellers represented to the buyers that: (1) the basement had water leakage due to a water softener defect and a downspout malfunction, both of which had been repaired; (2) the garden had been fertilized and was sufficiently productive to permit Mrs. Alexander to can produce; and (3) Northwest Rural Water District water could be accessed at the property line by the road for approximately a $2,000 tap fee and a $1,500 trench cost. The buyers received the property condition statement listing only the two repaired leakage incidents prior to making their initial offer. That statement also provided:

The undersigned Seller ... completes and executes this Addendum to such listing contract in order to comply with Seller's obligation to reasonably discover and fully disclose to all parties any and all information regarding the condition of such property, does hereby make the following statement and representation concerning the present description and condition of subject property.

The buyers relied heavily on the sellers' oral and written representations of the property condition in making an offer to purchase and believed the disclosures were honest and complete.

[¶ 12] Mr. Meduna testified about how he first became aware of the water problem in the basement and the steps he took to have it evaluated and repaired. He testified as to advice he received regarding the garden and the fact the soil had been sterilized through use of a weed killing chemical, about how he became aware of the Northwest Rural Water District hookup costs, and regarding the steps he took to mitigate the damage to the house, garden, and mobile home. He also stated these efforts were hampered by the buyers' lack of sufficient finances to adequately correct all the defects.

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