Share
The Supreme Court of Montana has ruled that a broker who refuses to comply with discovery orders can be found liable by the court for the allegations made in the complaint and can also be liable for punitive damages.
C.M. Fishel ("Seller") decided to sell 74.6 acres from a parcel of land that he owned adjoining Glacier National Park. During the prior years, his neighbors, Kenneth and Dawn Maloney ("Neighbors"), had expressed on numerous occasions their interest in purchasing the parcel. When the Seller decided to list the property for sale, he visited Kalispell Century 21 ("Brokerage") and spoke with Sharon Constantino ("Licensee"). He stated that he wanted to list his property for sale, but wanted the Neighbors and another adjacent landowner to be able to make the first offer on the property. The Brokerage was owned by broker Larry Lee ("Broker"), and he was the Licensee's supervising broker. The Seller communicated a minimum price per acre that he expected to receive from the sale. He later testified that at that moment, he really wanted the Licensee to give him a price evaluation on the property.
The Licensee immediately prepared a listing agreement, but the Seller refused to sign it because he didn't want to get locked into a price. Forty-five minutes after he left the Brokerage, he received a call from the Licensee, who stated that she had received $1,000 in earnest money from an interested third party at the price the Seller had mentioned. Although the Seller was upset that the Licensee was marketing the property without a listing agreement, he proceeded with the sale. The Seller later learned that the Licensee had not offered the property to either of the parties that he had requested. He also learned that the buyer had also promised to list another property with the Licensee, thereby potentially earning the Licensee another commission. There also had been a provision in the proposed listing agreement that if the Neighbors or the other adjacent landowner purchased the property, the commission paid to the Brokerage would be cut in half.
The Neighbors filed a lawsuit against the Broker and the Licensee alleging that they tortiously interfered with the Neighbors' ability to purchase the property. The allegations were for intentional interference with prospective economic advantage, emotional distress, and a claim for punitive damages. Following the filing of the lawsuit, the discovery process became a lengthy legal odyssey, with numerous orders for discovery violations entered against the Broker. Ultimately, the Broker was the only remaining defendant in the lawsuit, as the Licensee fled the state and had a default judgment entered against her. Finally, after five years of delay, the trial court ruled that the Broker's willful violations of discovery orders required a severe sanction. Therefore, the court ruled that the punishment would be that all of the allegations in the Neighbor's complaint would be taken as established facts, and a trial would be conducted only on the damages. A bench trial was conducted and damages in the amount of $464,249 were entered in favor of the Neighbors. The Broker appealed.
The Supreme Court of Montana partially affirmed and partially reversed the trial court decision. First, the court considered whether the punishment for discovery abuses imposed by the trial court was too severe. The court ruled that the sanction was appropriate, finding that the Broker had spent three years ignoring orders from the lower court, and so deserved to be severely sanctioned.
The Broker next argued that an action for "interference with prospective economic advantage" did not exist in Montana. The Neighbors brought this cause of action in support of their claims that the Broker interfered with their ability to purchase the parcel of land. The court ruled that a contract did not need to exist between the parties under this theory; instead, all that was required was a "malicious interloper" who interfered with another's business relationship. Therefore, the court affirmed this ruling as well.
Next, the court considered the Broker's challenge to the damage calculations used in determining the award amount. The Broker argued that he should not be required to compensate the Neighbors for the sudden appreciation in the value of the property, which the court found ironic since land appreciation was such an important part of his brokerage business. The court ruled that the proper calculation method would be the difference between the actual purchase price for the property and a subsequent appraisal valuation. Since the lower court calculated these damages in a slightly different way, the court ruled that the lower court was reversed on this point and damages should be recalculated in this manner.
The court next considered whether the Neighbors were entitled to recover damages from the Broker for negligent infliction of emotional distress. The Broker argued that the harm alleged by the Neighbors did not rise to the level of harm required by other cases. The court disagreed, ruling that the Neighbors were entitled to these damages, due to the shock, anger, and disappointment caused by the lack of opportunity to purchase the property, which was further exacerbated by the fact that they constantly had to look at the lost opportunity, i.e., the house next door.
The court finally determined that punitive damages were appropriate in this case. It stated that because the allegations in the complaint were taken as established facts, the Neighbors had established a basis for punitive damages. Thus, this ruling was also affirmed by the court.
Maloney v. Home and Inv. Ctr., Inc., 298 Mont. 213, 994 P.2d 1124 (2000).