WLW Realty Partners v. Continental Partners

WLW Realty Partners, LLC v. Continental Partners VIII, LLC, 2015 MT 312 (Nov. 3, 2015) (Cotter, J.) (5-0, rev’d)

Issue: (1) Whether Continental preserved its argument about the legal requirements of negligent misrepresentation by raising it in a reply brief supporting a motion in limine; (2) whether the district court erred by imposing liability on Continental for negligent misrepresentation; and (3) whether the district court erred by finding Continental violated the Montana Consumer Protection Act.

Short Answer: (1) Yes; (2) yes; and (3) yes.

Reversed and remanded for entry of judgment for Continental

Facts: Continental bought a lot with two building parcels from Yellowstone Development in 2004. In the buy-sell, the parties agreed that Yellowstone Development would provide the lots with ski-in and ski-out access. Yellowstone provided Continental with a map depicting the access, and a Continental employee helped design and prepare architectural plans for the two homes. Continental began construction and sold both homes to separate buyers during construction. The managing member of WLW, William Weidner, bought one of the houses in 2007 as a ski home for his family. Ski-out access had not yet been constructed. Weidner reviewed the map showing the proposed ski-out access and the buy-sell agreement demonstrating Continental’s right to have ski-out access built by Yellowstone. Continental confirmed that ski-out access would be ready after 2008. Continental’s managing member, James Murphy, knew that access was a factor in Weidner’s decision to buy the home. WLW and Continental signed a buy-sell in August 2007.

In November 2008, before ski-out access construction had begun, the Yellowstone Club filed bankruptcy. The subsequent owners told Weidner the plans for the Club had changed and ski-out access to his house would not be built. Weidner filed a claim in bankruptcy court which eventually approved a payment of $225,000 to WLW, the approximate amount Weidner spent designing and building a rope tow for ski-out access.

Two weeks later, WLW Realty filed this action against Continental alleging breach of contract, negligent misrepresentation and violation of the Montana Consumer Protection Act. The district court granted Continental’s motion for summary judgment on the contract claims but allowed the remaining claims to go to trial. Continental moved in limine to limit the trial to claims WLW pled in the Complaint, i.e., that Continental was responsible for building the ski-out access. WLW conceded in its response brief that Continental was not responsible for building the ski-out access, but had misrepresented that there would be ski-out access. In reply, Continental cited several decisions addressing negligent misrepresentation, arguing that it must relate to a past or existing material fact and must have been untrue when made.

Procedural Posture & Holding: The district court denied Continental’s motion in limine without addressing the merits of the argument Continental raised in its reply brief., and after a bench trial, entered judgment for WLW for $2 million for negligent misrepresentation and $232,386 for violations of the MCPA. Continental appeals and the Supreme Court reverses.

Reasoning: (1) The purpose of a reply brief is to respond to arguments raised in a response brief. The Court “will not fault a party for waiting until the reply brief to respond to an argument or evidence that was first raised in a response brief.” ¶ 20. WLW changed its allegation from a factual one in the Complaint – that Continental said it would build ski-out access – to a legal one in its response to the motion in limine – that Continental said Yellowstone Club would build ski-out access. Continental sufficiently preserved its argument in the reply brief for appeal.

(2) WLW sought to prove that Continental misrepresented to Weidner that the home was going to have ski-out access before construction of the home was complete. Its representation was about a future event, which fails to satisfy the first element of negligent misrepresentation. Continental’s representation was not untrue when it was made. The Yellowstone Club’s bankruptcy filing prevented Continental from enforcing its contractual right. WLW thus fails to prove the second element of negligent misrepresentation.

(3) The district court properly held that WLW need not prove Continental intended to deceive WLW to recover under the MCPA. In fact, Continental did not have to know its representation was untrue to be liable for unfair or deceptive acts. However, the representation must have been untrue at the time it was made. There is no evidence Continental anticipated the Yellowstone Club bankruptcy or had facts that it withheld from WLW. The district court erred in holding Continental violated the MCPA.