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Darren v. Coldwell Banker Landmark

December 23, 2010

DARREN G. KUHN, AN INDIVIDUAL, SCHEI DEVELOPMENT CORPORATION, AN IDAHO CORPORATION, ROGER J. SCHEI, AN INDIVIDUAL, AND FRANCES R. SCHEI, AN INDIVIDUAL, PLAINTIFFS-RESPONDENTS,
v.
COLDWELL BANKER LANDMARK, INC. N/K/A LANDMARK REAL ESTATE, INC., AN IDAHO CORPORATION, KELLY FISHER, AN INDIVIDUAL, TODD BOHN, AN INDIVIDUAL, AND JOHN MERZLOCK, AN INDIVIDUAL DEFENDANTS-APPELLANTS, AND PROFESSIONAL ESCROW SERVICES, INC., AN IDAHO CORPORATION, AND RONALD BITTON, AN INDIVIDUAL, DEFENDANTS.



Appeal from the District Court of the Sixth Judicial District of the State of Idaho, Bannock County. Honorable Peter D. McDermott, District Judge.

The opinion of the court was delivered by: J. Jones, Justice.

Pocatello, September 2010 Term

2010 Opinion No. 138

Stephen W. Kenyon, Clerk

The judgment of the district court is affirmed in part, reversed in part, and the case is remanded.

This is an appeal from a substantial jury verdict and judgment against appellants, arising out of a complicated real estate transaction. Pursuant to the final judgment, respondent Kuhn was awarded $896,531.70 in compensatory and punitive damages and respondents Schei were awarded $494,033.74. We affirm except for a portion of the attorney fee award.

I.

Factual and Procedural History

Darren and Jacquie Kuhn and Roger and Francis Schei (Darren Kuhn and Roger and Francis Schei are collectively referred to as the "respondents") entered into a multi-faceted real estate transaction in 1997. Both couples were represented by real estate agents working at

Coldwell Banker Landmark, Inc. (Landmark). The Kuhns were represented by Todd Bohn, and the Scheis were represented by John Merzlock. Kelly Fisher was the designated broker of Landmark at the time of this transaction (Merzlock, Bohn, Fisher, and Landmark are collectively referred to as the "appellants"). The respondents alleged that in their efforts to complete the transaction, Bohn, Merzlock, Fisher and others, made material misrepresentations, breached contractual, fiduciary, and statutory duties, and engaged in conduct that was an extreme deviation from the standard of care expected of real estate agents.

The Scheis owned a home at 13235 Manning Lane in Tyhee, Bannock County, Idaho, which was a new construction "spec" home, built with their savings for the purposes of sale. In 1997, the Scheis hired Merzlock to list the Manning Lane property through Landmark for $349,500. Jacquie Kuhn saw the Manning Lane property and contacted Bohn, who had previously served as the Kuhn's real estate agent, to show them the property. At this time, the Kuhns owned a home at 712 Mountain Park, Chubbuck, Bannock County, Idaho, which they had purchased through Bohn in 1996 for approximately $179,000.

Starting in July of 1997, the Kuhns and the Scheis made a series of offers and counteroffers on the Manning Lane property, and ultimately settled on a purchase price of $296,500. The Kuhns took possession of the Manning Lane property shortly thereafter, but before a closing had occurred. Because the Scheis could not obtain financing for the Mountain Park property, Bohn executed a lease of the Mountain Park property to the Scheis on July 25, 1997. The lease was listed as a source of income on the Kuhns' loan paperwork for the purchase of the Manning Lane property. On October 17, 1997, in a closing at First American Title, the Scheis conveyed the Manning Lane property to the Kuhns via warranty deed for $296,500. In turn, the Kuhns executed a promissory note in favor of the Scheis for $21,313.30 secured by a deed of trust on the Manning Lane property. The amount represented the equity the Kuhns had in the Mountain Park property. The Kuhns intended to pay the $21,313.30 note, which was due within a year of its execution, by the sale of the Mountain Park property. The Scheis also carried $14,875 of the financing obtained by the Kuhns in order to purchase the Manning Lane property. To do so, the Kuhns executed another promissory note in favor of the Scheis for $14,875, secured by a deed of trust on the Manning Lane property.

To complete the trade for the Mountain Park property, the respondents executed a lease with the option to purchase, requiring the Scheis to pay the Kuhns $1,407.50 in monthly rent. The Kuhns also signed a warranty deed conveying the Mountain Park property to the Scheis, which was to remain unrecorded at Professional Escrow Services until the Mountain Park property was sold. The Kuhns also executed a note in the amount of $7,080 in favor of Landmark, secured by a deed of trust on the Manning Lane property. The note was for real estate commissions.

Upon execution of the lease, the Scheis listed Mountain Park with Landmark through Merzlock. When the property failed to sell, the Scheis listed Mountain Park with another agent who was also unsuccessful in finding a buyer. In 1999, the Scheis defaulted on the lease payment multiple times, resulting in a default on the Kuhn's mortgage on Mountain Park. The mortgage lender on Mountain Park ultimately foreclosed in October of 2000, and obtained a $20,000 deficiency judgment against the Kuhns.

The respondents filed suit against the appellants, along with others who are not relevant to this appeal, for breach of contract, unjust enrichment, fraud and misrepresentation, breach of the duty of good faith and fair dealing, breach of statutory duties, and civil racketeering. The complaint was later amended to include breach of fiduciary duties and punitive damages. After a four-week trial, the jury found the appellants liable for breach of fiduciary duty, negligence, breach of express or implied contract and unjust enrichment, and imposed punitive damages against Merzlock, Bohn, and Landmark. The appellants filed multiple post-trial motions, which were denied. The appellants timely appealed to this Court.

II.

Issues on Appeal

I. Whether the district court erred in denying the appellants' post-trial motions?

II. Whether the district court erred in its formulation of jury instructions and the special verdict form?

III. Whether the court erred in excluding fact testimony?

IV. Whether the district court erred in allowing the respondents to amend their complaint to state a claim for punitive damages?

V. Whether the district court erred in allowing expert testimony on the issue of outrageous conduct?

VI. Whether the punitive damages awarded by the jury were unconstitutionally excessive?

VII. Whether the district court should have awarded attorney fees and whether the fee award was excessive?

VIII. Whether the respondents are entitled to attorney fees on appeal?

III.

Discussion

It must be said at the outset that this case does not readily lend itself to review. On occasion, the parties make assertions in their briefs that are not supported by citations to the record. The parties hotly contest factual issues, each claiming that the other side is obfuscating or misrepresenting facts. The jury found appellants liable to respondents on three claims--breach of fiduciary duty, negligence, and breach of contract. The jury was instructed that "[t]he defendant realtors herein owed a fiduciary duty to each of the Plaintiffs." Although appellants objected at trial to this and other fiduciary duty instructions, they have not raised the issue on appeal. There is no indication in the record as to how the fiduciary duty arose, particularly in light of Idaho Code section 52-2094, which provides that "the duties and obligations owed to a represented client in a regulated real estate transaction are not fiduciary in nature" absent a written agreement to the contrary.*fn1 There were a number of contracts entered into between and among the parties and additional contracts asserted by some parties. The parties have not made clear which contract the jury determined to have been breached. The parties vigorously disagree as to whether the damages, particularly the punitive damages, were excessive and whether there might have been duplicate awards. However, there is no indication by the parties as to how the elements of damage might have been presented to the jury, or calculated and allocated by the jury, so that the Court could make an informed determination of the damage issues. The lion's share of the punitive damages were awarded against Landmark, which subsequently went bankrupt. The Court is in the dark as to whether any award against Landmark is collectible and, if not, whether the Landmark awards are moot. With that preface, the various issues will be examined in the order listed above.

A. Post-Trial Motions

1. J.N.O.V. Motion

Appellants contend that the district court erred by denying their motion for judgment notwithstanding the verdict (J.N.O.V.) under I.R.C.P. 50(b), arguing that: (1) there was no evidence indicating the appellants had altered an exhibit; (2) Bohn had permission from Jacquie Kuhn to sign the lease; and (3) there is no evidence that the appellants' conduct caused damages to the respondents. The respondents counter by arguing that the appellants' arguments are contrary to the great weight of the evidence in this case.

When considering an I.R.C.P. 50(b) motion, the district court must decide "whether there is substantial evidence in the record upon which the jury could properly find a verdict for the party against whom the [J.N.O.V.] is sought." Schwan's Sales Enters., Inc. v. Idaho Transp. Dep't, 142 Idaho 826, 830, 136 P.3d 297, 301 (2006). On a motion for a J.N.O.V., the moving party admits the truth of the adverse evidence and every inference that may legitimately be

While this act is intended to abrogate the common law of agency as it applies to regulated real estate transactions, nothing in this act shall prohibit a brokerage from entering into a written agreement with a buyer or seller which creates an agency relationship in which the duties and obligations are greater than those provided in this act. However, unless greater duties are specifically agreed to in writing between the brokerage and a represented client, the duties and obligations owed to a represented client in a regulated real estate transaction are not fiduciary in nature and are not subject to equitable remedies for breach of fiduciary duty.

I.C. ยง 54-2094. In this case, there was no contractual agreement in the record establishing a fiduciary relationship between the parties. Thus, the cause of action did not appear to be available to the respondents. drawn from the evidence. Id. In this case, the district court found that "there was sufficient evidence of quantity, quality, ...


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