Mannos v. Moss

Decision Date22 February 2007
Docket NumberNo. 31958.,31958.
Citation155 P.3d 1166,143 Idaho 927
PartiesTyler MANNOS, an individual; Tyler Mannos on behalf of Idaho Peterbuilt, Inc., as a 30% shareholder, Plaintiff-Appellant, v. Todd MOSS; Terry Lawrence; and Lloyd Lawrence; individuals; individuals Does I-X; and Corporation Does I-X, Defendants-Respondents. Terry Lawrence, individually and on behalf of Idaho Peterbuilt, Inc., an Idaho corporation, Counterplaintiff, v. Tyler Mannos, Counter defendant. Todd Moss, Counterclaimant, v. Tyler Mannos, Counter defendant. Terry Lawrence and Lloyd Lawrence, husband and wife, Cross Claimants, v. Todd Moss, Cross Defendant.
CourtIdaho Supreme Court

Manuel Murdoch, Blackfoot, and Callister & Reynolds, Las Vegas, for appellants.

R. Duane Frizell argued. Eberle, Berlin, Kading, Turnbow & McKlveen, Boise, for respondents Terry Lawrence and Lloyd Lawrence. Neil D. McFeeley argued.

Patrick D. Furey, Boise, for respondent Todd Moss. Patrick D. Furey argued.

JONES, Justice.

This case derives from the sale of stock in Idaho Peterbilt, Inc. ("Peterbilt") and GRM Leasing, Inc. ("GRM"). The stock purchaser, appellant Tyler Mannos, sued the sellers, Terry Lawrence and Lloyd Lawrence, and a third party, Todd Moss (collectively "the defendants"), alleging eleven causes of action after Peterbilt, Inc. proved economically unviable. The district court granted summary judgment in favor of the defendants, dismissing all of Mannos' claims. We affirm in part and vacate and remand in part.

I.

Peterbilt was a closely-held Idaho corporation primarily engaged in the commercial sale, lease, and repair of Peterbilt trucks and truck-related products. Prior to July 5, 2001, Terry owned seventy percent of Peterbilt's outstanding stock, and Todd owned the remaining thirty percent. GRM is or was a closely-held Idaho corporation primarily engaged in the leasing of equipment and trucks to businesses and consumers. Prior to July 5, 2001, Terry, Lloyd, and Todd each owned a one-third ownership interest in the company. Beginning in October 2000, Todd and Mannos started discussing the possibility of changing Peterbilt's ownership structure. Specifically, Todd inquired whether Mannos would be interested in purchasing thirty percent of Peterbilt from Terry and becoming Peterbilt's co-owner and operating manager. At the time, as Terry later testified, she was interested in selling all of her holdings in Peterbilt for the purpose of converting her relatively illiquid stock into cash. Todd proposed that if Mannos purchased thirty percent of Peterbilt from Terry, he would purchase her remaining shares over the next five years, and the two would become co-owners of the corporation.

Sometime in January 2001, Todd provided Mannos with Peterbilt's financial statement from the previous year, along with supporting documentation and records, and granted Mannos access to the premises to conduct physical inspections. The parties dispute whether the financial statement and supporting documentation accurately represented the financial condition of Peterbilt at the time. On July 5, 2001, Mannos and Terry executed a stock purchase agreement under which Mannos agreed to purchase thirty percent of Peterbilt's outstanding stock from Terry for $499,200. Todd subsequently purchased the remainder of Terry's outstanding stock. On that same day, Mannos executed a separate stock purchase agreement with Lloyd, wherein he purchased a one-third interest in GRM. Shortly after making his investment, Mannos became Peterbilt's operating manager. By June 2003, Peterbilt was in dire financial straits and Mannos and Todd sold Peterbilt's assets in an effort to salvage any value left in the company. Although some assets of GRM were sold, others were retained to continue some business operations.

Mannos subsequently filed suit against Todd and the Lawrences, asserting: (1) breach of fiduciary duty to Mannos; (2) breach of fiduciary duty to Peterbilt; (3) fraud; (4) breach of contract; (5) unjust enrichment; (6) civil conspiracy; (7) negligence; (8) racketeering; (9) declaratory relief; (10) violation of the Idaho Securities Act; and (11) indemnification. In response, Todd filed a counterclaim against Mannos for breach of the duty of care. The Lawrences filed a counterclaim against Mannos, as well as a third party complaint against Todd. The Lawrences then filed a motion for partial summary judgment, as did Todd. The district court granted summary judgment in favor of all the defendants, dismissing all eleven of Mannos' causes of action. The district court did not make any determination as to Todd's counterclaim, the Lawrences' counterclaim, or the Lawrences' third party claims against Todd. Instead, the district court included an Idaho Rule of Civil Procedure 54(b) certificate with its judgment, which provided that "there is no just reason for delay of the entry of a final judgment and . . . the above Judgment shall be a final judgment from which an appeal may be taken." Mannos appeals from this judgment.

II.

The question presented in this case is whether the district court properly dismissed all eleven of Mannos' claims on summary judgment. With respect to Mannos' fraud and Idaho Securities Act claims pertaining to the Peterbilt transaction, we vacate the judgment and remand for further proceedings. With respect to Mannos' remaining claims, we affirm the district court's grant of summary judgment.

A.

When reviewing a summary judgment order, this Court applies the same standard as the district court. Foster v. Traul, 141 Idaho 890, 892, 120 P.3d 278, 280 (2005). Summary judgment is proper when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Idaho R. Civ. P. 56(c). "If there is no genuine issue of material fact, only a question of law remains, over which this Court exercises free review." Infanger v. City of Salmon, 137 Idaho 45, 47, 44 P.3d 1100, 1102 (2002). This Court will construe all disputed facts liberally in favor of the non-moving party, and all reasonable inferences will be drawn in favor of the non-moving party. Hayward v. Jack's Pharmacy Inc., 141 Idaho 622, 625, 115 P.3d 713, 716 (2005). If the facts are such that reasonable persons could reach differing results, summary judgment is improper. Id.

B.
i.

Mannos claims that the defendants committed fraud when they provided him with misleading financial information and made certain misrepresentations to induce him to invest in Peterbilt. The defendants dispute both contentions, but argue that, even if certain misrepresentations were made, Mannos' fraud claim is unviable because he failed to prove justifiable reliance. The district court agreed and dismissed Mannos' fraud claim after determining that Mannos failed to prove the element of justifiable reliance.

To successfully bring an action for fraud, a plaintiff must establish the existence of the following elements: (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. Trees v. Kersey, 138 Idaho 3, 10, 56 P.3d 765, 772 (2002). Idaho Rule of Civil Procedure 56(c) governs the grant of summary judgment on the issue of fraud. Lettunich v. Key Bank Nat. Ass'n, 141 Idaho 362, 368 fn. 1, 109 P.3d 1104, 1110 fn. 1 (2005).

The district court relied upon this Court's holding in Faw v. Greenwood, 101 Idaho 387, 613 P.2d 1338 (1980) to establish that Mannos did not justifiably rely upon the defendant's alleged misrepresentations. In Faw, we held that "when a purchaser is given the opportunity to conduct an independent investigation of the records and does so, it is generally held that he is not entitled to rely on alleged misrepresentations of the seller." Id. at 389, 613 P.2d at 1340. That Mannos conducted his own evaluation of Peterbilt's books and records in this case is not at issue; Mannos expressly warranted and represented in the stock purchase agreement that "he has had a reasonable and adequate opportunity to review the books and records of Idaho Peterbilt, Inc., and to consult with such persons as he deems necessary or appropriate." Mannos argues that, notwithstanding his warranty, the district court erred in light of this Court's holding in Watson v. Weick, 141 Idaho 500, 112 P.3d 788 (2005) because the books and records the defendants provided did not disclose the alleged misrepresentations. In Watson, the plaintiffs sued to recover on a promissory note signed as part of the sale of a business. Id. at 504, 112 P.3d at 792. The defendants counterclaimed, alleging that the plaintiffs fraudulently provided financial data misrepresenting the true financial condition of the company. Id. at 506, 112 P.3d at 794. Relying on Faw, the district court in Watson dismissed the fraud claim on the ground that the party asserting fraud was given the opportunity to conduct an independent investigation of the records and did so, negating any justifiable reliance on the alleged misrepresentations. Id. at 506, 112 P.3d at 794. On appeal, we held that the district court erred in granting summary judgment because it failed to consider whether the records actually reviewed contained information that disclosed the inaccuracy of the alleged misrepresentations. Id. at 507, 112 P.3d at 795.

This case is factually similar to Watson. Prior to Mannos' investment in Peterbilt, Todd provided Mannos with Peterbilt's financial statement for the previous year along with supporting documentation and records. The financial statement disclosed a net worth of $883,389. Mannos contends that the financial statement did not accurately reflect...

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