Hkm Assoc. v. Northwest Pipe Fittin ( 1995 )


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  •                               No.    94-546
               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                        1995
    
    
    HKM ASSOCIATES,
              Plaintiff and Appellant,
    
    
    NORTHWEST PIPE FITTINGS, INC.,
    a Montana corporation, and
    J-M MANUFACTURING COMPANY, INC.,
    a Delaware corporation,
              Defendants and Respondents.
    
    
    
    APPEAL FROM:      District Court of the Thirteenth Judicial District,
                      In and for the County of Yellowstone,
                      The Honorable G. Todd Baugh, Judge presiding.
    
    
    COUNSEL OF RECORD:
              For Appellant:
                      David A. Veeder, Veeder Law Firm,
                      Billings, Montana
              For Respondents:
                      Damon L. Gannett, Gannett, Anderson & Liechty,
                      Billings, Montana (for Northwest Pipe Fittings)
                      Paul D. Miler and Patricia D. Peterman,
                      Holland & Hart, Billings, Montana
                      (for J-M Manufacturing Company)
    
    
                                        Submitted on Briefs:   May 18, 1995
    
                                                    Decided:   August 1, 1995
    Filed:
    Justice William E. Hunt, Sr., delivered the opinion of the Court.
    
             Appellant HKM Associates appeals from two orders of the
    
    Thirteenth        Judicial   District   Court,   Yellowstone   County,   granting
    
    respondents Northwest Pipe Fittings, Inc.'s,            and J-M Manufacturing
    
    Company, Inc.'s,        motions to dismiss appellant's claim of indemnity
    and granting respondents' motions for summary judgment as to the
    
    remainder of appellant's claims.
    
         We affirm.
    
         Appellant raised the following issues on appeal:
    
             1.      Do genuine issues of material fact exist as to whether
    
    HKM relied upon J-M's and Northwest's fraudulent                 misrepresenta-
    
    tions,        and whether HKM was damaged as a result?
    
             2.      Do genuine issues of material fact exist as to whether
    
    HKM could have discovered all of the facts constituting the fraud
    
    prior to April 26, 1989?
    
             3.      Do genuine issues of material fact exist as to whether
    HKM's fraud claims are barred by the doctrine of collateral
    
    estoppel?
    
             4.      Do genuine issues of material fact exist as to whether
    J-M and Northwest fraudulently concealed from HKM the material
    
    facts of HKM's fraud claims?
    
             5.      Do genuine issues of material fact exist as to whether
    Hm is barred by the doctrine of collateral estoppel from bringing
    
    its claim for indemnification?
    
             We restate the issues as follow:
    
    
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           1.    Did the District Court err in granting respondents'
    motions to dismiss appellant's claim for indemnity?
    
           2.    Did the District Court err         in   granting     respondents'
    
    motions for summary judgment as to appellant's remaining claim of
    
    fraudulent    misrepresentation?
    
           In 1985,   the Lockwood Water Users Association (LWUA) hired
    
    appellant HKM to design the plans and specifications for a pipeline
    
    project.     HKM acted as the project engineer and Jim's Excavating
    
    Service,    Inc. (JES), acted as the general contractor.
    
           A section of the pipeline was to be laid through an "S" curve
    
    which required the pipe to be either deflected at the appropriate
    joint or to be laid with special            fittings.     HKM designed the
    
    project to use deflectable, ductile iron pipe, rather than special
    
    fittings.     Prior to releasing the original bid form, HKM amended
    
    the bid to solicit alternative bids for using PVC pipe.
    
           Respondent J-M Manufacturing informed HKM that 24-inch PVC
    
    pipe (Big Blue) could be deflected up to 3 degrees at the joint.
    
    Based on this information, HKM determined that 24-inch PVC pipe
    
    could be laid and deflected through the "S" curve without special
    
    fittings.
           The amended bid proposal did not contain any specifications
    
    that fittings were to be used on the "S" curve.           JES purchased PVC
    pipe   manufactured   by   J-M   from   respondent   Northwest.     Northwest
    
    certified and subsequently verified to HKM that 24-inch              PVC pipe
    
    
    
    
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    manufactured by J-M could be deflected up to three degrees at the
    joint.      HKM ultimately approved of the bid submitted by JES.
    
             Following the start of construction in September 1985, J-M
    
    informed JES that the 24-inch PVC pipe could not be deflected and
    
    that special fittings would have to be installed to accommodate the
    I s ,1   curve.     Construction at the            "S" curve was halted until the
    
    necessary         fittings      could   be   delivered.    Work on the "S" curve
    
    resumed after the fittings arrived on July 14, 1986.                       During a
    September         10,   1986,    inspection,       HKM discovered that the cement
    
    linings of the fittings were cracked and had to be removed.                      NWJ
    fittings arrived at the project on October 5, 1986.
    
             On May 8, 1987,          JES filed a complaint against HKM and LWUA
    
    claiming,         inter alia,      delay and extra work damages caused as a
    
    result of HKM's negligent design and supervision of the pipeline
    
    project.          In Jim's Excavating Service, Inc., v. HKM Associates
    
    (1994),     
    265 Mont. 494
    , 
    878 P.2d 248
    , we affirmed the jury verdict
    
    of $381,000 in favor of JES.
    
             On April 26, 1991,             HKM filed a complaint against J-M and
    
    Northwest,         claiming      negligence    and    negligent   misrepresentation.
    
    Northwest brought a motion to dismiss, and J-M filed a motion for
    
    summary judgment.            On August 27, 1992, HKM filed its first amended
    
    complaint,         adding a claim for fraudulent misrepresentation.              J-M
    
    and Northwest filed motions to dismiss all claims pursuant to
    
    Rule 12(b)(6), M.R.Civ.P. The District Court treated these motions
    
    as motions for summary judgment and ruled that HKM's claims for
    
    
                                                   4
    negligence     and negligent misrepresentation were barred by the
    statute of limitations.         At the same time, the District Court held
    
    that HKM's claim for fraudulent misrepresentation was not barred by
    
    the statute of limitations or the doctrine of res judicata.
    
            On September 13, 1993, HKM filed its second amended complaint,
    
    adding a      claim   for    indemnification.   J-M and Northwest filed
    
    motions to dismiss HKM's indemnity claim, which the District Court
    
    granted on December 10, 1993.
    
            In June 1994,       J-M and Northwest filed renewed motions for
    
    summary judgment on the remaining fraud claims.               On August 26,
    
    1994,    the District Court granted those motions, concluding that
    HKM's fraud claims were barred by the statute of limitations and
    
    res     judicata.     The court also concluded that the fraud claims
    lacked the elements of reliance and damages.         HKM appeals from the
    
    District Court's orders of December 10, 1993, and August 26, 1994.
    
                                        ISSUE 1
    
            Did the District Court err in granting respondents' motions to
    
    dismiss appellant's claim for indemnity?
    
            "in reviewing a motion to dismiss, we construe the complaint
    
    in the light most favorable to the plaintiff and take the
    
    allegations of the complaint as true."           Goodman    Realty,   Inc. v.
    
    Monson (1994), 
    267 Mont. 228
    , 231, 
    883 P.2d 121
    , 123.             Our scope of
    
    review     is broad and we examine the entire              case   and make a
    
    determination based on that examination. Goodman, 883 P.2d at 123.
    We will affirm the dismissal only if we find that the plaintiff is
    
    
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    not entitled to relief under any set of facts which could be proved
    in support of the claim.          Goodman,   883 P.2d at 123.
           HKM added a count to its second amended complaint seeking
    
    indemnification from J-M for the $381,000 judgment against HKM
    
    rendered in Jim's Excavatinq.         J-M and Northwest Pipe filed motions
    
    to dismiss HKM's claim for indemnification.
    
           In   Jim's   Excavating,    the jury returned a special verdict
    
    finding,that    HKM was negligent in preparing the plans and specifi-
    cations of the LWUA project, and that HKM's negligence was a cause
    
    in fact of JES's damages.             The District Court concluded that
    
    "because negligence was the subject of the previous action, HKM
    
    could have and should have asserted indemnity against J-M and
    
    Northwest Pipe at that time.           The issue of negligence cannot be
    
    re-litigated and [HKMI       's claim for indemnification is barred by
    
    application of the doctrine of collateral estoppel."
    
           The right to indemnification is an equitable principle based
    
    on the theory that a party compelled to pay for damages caused by
    another should be able to seek recovery from that party.            Paulsen
    
    v. Treasure State Industries, Inc. (19811, 
    192 Mont. 69
    , 
    626 P.2d 872
    .    Collateral estoppel bars an action, including an action for
    
    indemnification,     when:    (1) the issue presented in a later action
    
    has been decided in a prior adjudication; (2) a final judgment in
    
    the action was issued; and (3) the party against whom collateral
    
    estoppel    is asserted was a party to the previous             litigation.
    
    Berlin v. Boedecker (1994), 
    268 Mont. 444
    , 453, 
    887 P.2d 1180
    ,
    
    
                                            6
    1185; Farmers Plant Aid, Inc. v. Huggans (1994), 
    266 Mont. 249
    ,
    254,     
    879 P.2d 1173
    ,    1176.      Of the three criteria needed to
    
    establish        collateral     estoppel,        identity of issues is            the   most
    
    important and requires that the precise issue has been litigated in
    
    the prior actions.          Berlin, 887 P.2d at 1185.             It is not necessary,
    however,        that there be an identical cause of action, but rather,
    
    there must be an identical issue.                   Boyd v. First Interstate Bank
    
    (1992),        
    253 Mont. 214
    , 218, 
    833 P.2d 149
    , 151.
    
            The record shows that the issue of HKM's negligence was raised
    
    in     Jim’s   Excavatinq.       The jury determined that HKM was negligent
    
    and a final judgment was entered.                     Finally,    HKM was a party to
    
    Jim's     Excavatinq.       The criteria for collateral estoppel has been
    
    met,    therefore,       HKM is prevented from re-litigating the issue of
    
    negligence.            Because re-litigating the issue of negligence is
    
    necessary        to     litigating       HKM's    claim    of   indemnification,         the
    
    District Court properly granted J-M's and Northwest Pipe's motions
    
    to dismiss HKM's indemnification                  claim.    See Auto Club Ins. Co. v.
    
    Toyota Motor Sales, U.S.A., Inc. (19751, 
    166 Mont. 221
    , 225, 
    531 P.2d 1337
    , 1339.
            We hold that the District Court did not err in granting
    
    respondents'          motions   to   dismiss     appellant's      claim   for   indemnity.
    
                                              ISSUE 2
    
            Did the District Court err in granting respondents' motions
    
    for     summary        judgment as to          appellant's       remaining        claim of
    
    fraudulent        misrepresentation?
            Our    standard    of    review   on   a    grant   of    summary     judgment   is
    identical to that of the district court.                          Cooper v. Sisters of
    Charity (1994), 
    265 Mont. 205
    , 207, 
    875 P.2d 352
    , 353.                             Summary
    
    judgment is only proper when there is no genuine issue of material
    
    fact,    and the moving party is entitled to judgment as a matter of
    
    law.      Rule 56(c),           M.R.Civ.P.;        Spain-Morrow    Ranch,     Inc. v. West
    
    (1994),       
    264 Mont. 441
    , 442, 
    872 P.2d 330
    ,              332. The burden of proof
    
    rests with the party seeking summary judgment to provide the court
    
    with evidence which excludes any real doubt as to the existence of
    
    a genuine issue of material fact.                      Berens v. Wilson (19901, 
    246 Mont. 269
    , 271, 
    806 P.2d 14
    , 16.                     Only after the moving party has
    
    met this burden of proof does the burden shift to the nonmoving
    
    party to show that a genuine issue of material fact exists. Morton
    v. N.W.M., Inc.            (1994),    
    263 Mont. 245
    , 249, 
    868 P.2d 576
    , 579.
    "When raising the allegations that disputed issues of fact exist,
    
    the     nonmoving         party    has    an   affirmative        duty   to    respond   by
    affidavits or other sworn testimony containing material facts that
    
    raise genuine issues; conclusory or speculative statements will not
    
    suffice." Koepplin v. Zortman Mining (1994), 
    267 Mont. 53
    , 59, 
    881 P.2d 1306
    , 1309.
    
            The District Court granted respondents' motions for summary
    
    judgment concluding that appellant's remaining claim of negligent
    
    misrepresentation was barred by the statute of limitations and the
    
    doctrine of res judicata.
           HKM's    fraudulent   misrepresentation     claims    are   based   on   two
    installation manuals issued by J-M for its 24-inch PVC pipe.                    The
    first manual of May 1986 provides for no joint deflection.                      The
    
    second manual of           February 1987 allows for 1.5 degree joint
    
    deflection. HKM asserts that J-M's internal correspondence reveals
    
    that it        did not     actually     change   its   recommendation to no
    
    deflection, but rather, J-M always recommended joint deflection to
    
    some   degree.       HKM maintains that it did not learn that J-M's
    
    purported      "flip-flop" as to the deflectability of its 24-inch PVC
    
    pipe was false until the Jim’s Excavatinq              trial in August 1992.
    
    HKM asserts that its belief that fraud was committed was confirmed
    
    in May 1994 when HKM received a July 1986 internal correspondence
    
    which indicated that J-M's true recommendation provided for some
    
    degree of deflection at the joint.               The record does not support
    
    HKM's position.
           An   action   for   fraudulent    misrepresentation    must    be   brought
    
    within two years of discovery of the facts constituting the fraud
    
    by the aggrieved party.          Section 27-2-203, MCA.            HKM filed its
    
    complaint on April 26, 1991. However, as early as April 18, 1986,
    
    HKM learned of J-M's inconsistent position as to the deflectability
    
    of its 24-inch PVC pipe when a representative of J-M arrived at the
    
    worksite and informed HKM that J-M was requiring zero deflection at
    
    the joint and that HKM would need fittings for the pipe in order to
    
    negotiate the curve.         At HKM's request, J-M confirmed its revised
    
    "no deflection" position in June 1986.                 In November 1986, HKM
    
    
                                              9
    received     J-M's    installation    guide    which recommended no joint
    deflection for 24-inch PVC pipe.              When   a   defendant's        fraudulent
    
    concealment     prevents     a plaintiff from discovering a cause of
    
    action,    the statute of limitations is generally tolled.                     United
    
    Methodist Church v. D.A. Davidson (1987), 
    228 Mont. 288
    , 296, 
    741 P.2d 794
    ,    798; see § 27-2-102(3)      (b), MCA.       "In    a non-malpractice
    
    negligence    action, there must be an affirmative act committed by
    
    the   defendant,      and the affirmative act must be calculated to
    
    obscure the existence of the cause of action."                   United      Methodist
    
    Church, 741 P.2d at 798.         There is nothing in the record to suggest
    
    that either J-M or Northwest engaged in affirmative acts calculated
    to obscure from HKM the existence of a cause of action sufficient
    
    to toll the two-year statute of limitations.
          We conclude that HKM's claim for fraudulent misrepresentation
    
    is barred by the two-year statute of limitations.                      As a result,
    
    there exist no genuine issues of material fact.                  We hold that the
    District Court did not err in granting respondents' motions for
    
    summary    judgment    as   to   appellant's   remaining       claim   of   fraudulent
    
    misrepresentation.
          Affirmed.
    
    
    
    
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    We concur:
    
    
    
    
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