Lindberg v. Roseth

• Citation: 46 P.3d 518,137 Idaho 222
• Decision Date: 29 April 2002
• Docket Number: No. 25952.,25952.
• Parties: Richard C. LINDBERG and Deborah J. Lindberg, husband and wife, Plaintiffs-Appellants, v. Henry H. ROSETH, deceased, and Audrey A. Roseth, husband and wife, Defendants-Respondents.
• Court: United States State Supreme Court of Idaho

46 P.3d 518

137 Idaho 222

Richard C. LINDBERG and Deborah J. Lindberg, husband and wife, Plaintiffs-Appellants, v. Henry H. ROSETH, deceased, and Audrey A. Roseth, husband and wife, Defendants-Respondents.

No. 25952.

Supreme Court of Idaho, Cd'A, October 2001 Term.

April 29, 2002.

Paine, Hamblen, Coffin, Brooke & Miller, Coeur d'Alene, for appellants. Michael B. Hague argued.

Fender and Fender, Coeur d'Alene, for respondents. J. Stephen Fender argued.

TROUT, Chief Justice.

This is an appeal from the district court's judgment denying Richard and Deborah Lindberg's ("Lindbergs") claim for fraud and breach of express warranty related to the purchase of a home.

I. FACTUAL AND PROCEDURAL BACKGROUND

This case involves the purchase and sale of a home in Coeur d'Alene, Idaho. The purchasers, the Lindbergs, claim that the sellers, Henry and Audrey Roseth ("Roseths") misrepresented the condition of the house and breached an express warranty concerning the roof of the house.

The parties entered into a written sales agreement ("Sales Agreement") for the sale of the home on September 26, 1996. Prior to entering into the Sales Agreement, the Lindbergs inspected the house on several occasions. On October 5, 1996, following an official inspection of the home, the Lindbergs provided the Roseths with a list of deficiencies concerning the condition of the house, which the Roseths subsequently cured. The Lindbergs soon thereafter received two home disclosure questionnaires regarding potential problems known about the home. On October 23, 1996, instructions were given to the escrow agent to proceed with the closing on November 10, 1996. The transaction finally closed on November 15, 1996. The Lindbergs moved into the home in January 1997. During the period of time between the closing and the Lindbergs taking possession, the home was unoccupied. During this same period of time, the Coeur d'Alene area experienced a severe winter ice storm. Subsequent to moving into the house, the Lindbergs experienced numerous problems with the home, such as roof leaks, ice dams, blown off shingles, problems with the chimney, foundation leaks and instances of dry rot.

The Sales Agreement provided that the house was to be sold "AS IS," subject only to certain specified written warranties obligating the Roseths' "to correct items reasonably objected to in writing as identified in the Home Inspection Report." The Roseths specifically warranted that "on the date possession is made available to Buyer: (1) Roof shall be free of known leaks."

The Lindbergs filed a complaint on August 25, 1997, alleging fraud or intentional misrepresentation, and breach of express warranties in connection with the purchase/sale of the home. A five-day court trial was commenced on December 28, 1998, and at the conclusion, the court ordered closing arguments submitted in writing.

The Lindbergs filed a motion to amend the complaint to conform to the evidence on April 14, 1999. The district court issued an order on September 29, 1999, denying the Lindbergs' motion to amend and their claims for fraud and breach of warranty. The district court filed an amended judgment on December 15, 1999, awarding the Roseths costs and attorney's fees.

II. STANDARD OF REVIEW

The party alleging intentional misrepresentation or fraud has the burden of proving the elements of fraud by clear and convincing evidence. G & M Farms v. Funk Irrigation Co., 119 Idaho 514, 808 P.2d 851 (1991). If the district judge's findings of fact are supported by substantial and competent evidence, the appellate court will not disturb those findings. Carney v. Heinson, 133 Idaho 275, 985 P.2d 1137 (1999).

This Court exercises free review over the district judge's conclusions of law. Carney v. Heinson, 133 Idaho 275, 278, 985 P.2d 1137, 1140 (1999); Marshall v. Blair, 130 Idaho 675, 679, 946 P.2d 975, 979 (1997).

III. DISCUSSION

A. The district judge did not err in denying the Lindbergs' motion to amend the pleadings to conform to the evidence.

Rule 15(b) of the Idaho Rules of Civil Procedure provides:

When issues not raised by the pleading[s] are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party's action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.

The purpose of the Lindbergs' motion to amend was to ensure their claims relating to the chimney were included in their claim. They argue that the Roseths impliedly consented to litigating the defects in the chimney, evidenced by an answer to an interrogatory, the relation to the leaking roof, and inconsistent defenses offered by the Roseths.

The determination whether an issue has been tried with the consent of the parties is within the trial court's discretion, and such determination will only be reversed when that discretion has been abused. Smith v. King, 100 Idaho 331, 335, 597 P.2d 217, 221 (1979); Lynch v. Cheney, 98 Idaho 238, 561 P.2d 380 (1977). In reviewing an exercise of discretion, this Court must consider (1) whether the trial court correctly perceived the issue as one of discretion; (2) whether the trial court acted within the outer boundaries of its discretion and consistently with the legal standards applicable to the specific choices available to it; and (3) whether the trial court reached its decision by an exercise of reason. Continental Cas. Co. v. Brady, 127 Idaho 830, 834, 907 P.2d 807, 811 (1995); Sun Valley Shopping Ctr. v. Idaho Power Co., 119 Idaho 87, 94, 803 P.2d 993, 1000 (1991).

Here, the district judge perceived the issue as one of discretion, and correctly set out and applied the standard for a motion to amend. The district judge reached his decision by an exercise of reason illustrated by his statement that: (1) the Lindbergs' motion was untimely; (2) the Lindbergs' pleadings did not give notice of the chimney issue; and (3) while some discovery touched upon the issue, the Roseths were not given the opportunity to meet the chimney evidence.

The record fully supports this finding. First, the Lindbergs' motion was filed approximately four months after the last evidence was presented. Second, the district judge articulated his reasons for finding the Lindbergs' pleadings did not give notice of the chimney issue, stating that although some discovery touched upon the issue, it was insufficient. Finally, the Roseths expressly articulated in their trial brief their specific intent to try only those issues framed by the pleadings.

Because the record fully supports the district judge's determination, there is no abuse of discretion and the decision to deny the Lindbergs' motion is affirmed.

B. The district judge erred in holding the Lindbergs did not rely and had no right to rely upon representations by the Roseths.

The Lindbergs alleged the Roseths made misrepresentations concerning leaks in the house's roof and basement, and the structural soundness of the walls, ceilings, floors and foundation. To prevail on an action for fraud or misrepresentation, the following elements must be established by clear and convincing evidence:

(1) a statement or a representation of fact;

(2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity; (5) the speaker's intent that there be reliance; (6) the hearer's ignorance of the falsity of the statement; (7) reliance by the hearer; (8) justifiable reliance; and (9) resultant injury.

Hines v. Hines, 129 Idaho 847, 851, 934 P.2d 20, 24 (1997).

The district judge concluded that the Lindbergs failed to prove, by clear and convincing evidence, a claim for misrepresentation because the Lindbergs had no right to rely on representations made by the Roseths, and the Lindbergs did not rely on such representations. The district judge did not make any findings as to whether the Roseths made these representations alleged. Rather, the district judge concluded, as a matter of law, the Lingbergs did not rely upon the representations and in fact, had no right to rely on them.

1. Actual Reliance

The district judge determined that the Lindbergs did not rely on the representations contained in the Seller's Property Condition Disclosure and PRDS Supplemental Seller Checklist because their decision to purchase was finalized prior to the receipt of such documents. The Sales Agreement was executed September 26, 1996, the Seller's Property Condition Disclosure and PRDS Supplemental Seller Checklist were signed and delivered to the Lindbergs on November 10, 1996, and the closing of escrow occurred November 15, 1996. In his holding, the district judge overlooked the right of rescission provided by Idaho Code § 55-2515.¹ The right of rescission provided by Idaho Code § 55-2515 only arises after the parties have entered into their real estate contract. It is based upon the contents of a property disclosure form, or an amendment thereto, delivered by the seller to the purchaser after their contract has been executed. As the statute provides:

[I]f a transferee of residential real property receives a property disclosure form or an amendment of that form ..., after the transferee has entered into a transfer agreement with respect to the property, the transferee, after his receipt of

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