Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Defendant, Church of Jesus Christ of the Latter-Day
Saints (LDS) appeals the January 20, 1987, bench decision of
the Eighteenth Judicial District Court, Gallatin County. The
court ordered that LDS pay $15,203.19 to plaintiff Wagner in
compensation for defects in a house which LDS sold to Wagner.
We affirm.
LDS raises four issues for our review:
1. Did the District Court properly consider the "as
is" language and the "independent investigation" clause
contained in the Earnest Money Receipt and the Special War-
ranty Deed?
2. Did the District Court properly grant amendments to
the pleadings seven months after the close of the trial?
3. Is the District Court's decision regarding negli-
gent misrepresentation supported by substantial evidence?
4. Did the District Court properly consider the duty
of LDS to disclose defects and the defense of contributory
negligence?
LDS employed Earl Cutler as an educator in Bozeman,
Montana. Cutler owned a three-quarter-acre lot in Gallatin
County. In July of 1973, Cutler hired several contractors to
build a house on the lot. One of the contractors was CAPP
Homes, which erected the framing, doors, windows and
unshingled roof. After occupying the new house in the summer
of 1975, Cutler experienced problems with the septic system,
the lawn sprinkler system, and flooding in the basement.
In July of 1980, LDS transferred Cutler to Missouri.
Cutler tried to sell his house, but was unsuccessful. The
house remained vacant for over a year. In the fall of 1981,
LDS briefly inspected the house and bought it from Cutler.
LDS never occupied the house.
On October 28, 1981, LDS entered a listing agreement
with realtor Paul Lytle. The listing agreement stated that
the house was four years old and well-built. LDS disclosed
no defects to the real estate agent, as shown by this clause:
To the best of my knowledge, the follow-
ing items are in good repair and working
condition, and I am unaware of anything
wrong with the foundation, roof, siding,
wiring, drainage, heating, plumbing or
sanitation system except: none
Realtor Lytle sent for publication in the Multiple
Listing Service an advertisement relating to the property in
dispute. The advertisement sent to Multiple Listing Service,
which was published in substantially the same wording, read
in essential part as follows:
Remarks: Excellent home with Timberline
wood burner on brick hearth on upper
level & large rock fireplace in family
room on lower level. Large deck on two
sides. Basement level needs some fin-
ishing & carpet, but is mostly done.
Well suited for a large family.
In April of 1982, Wagner arrived in Bozeman from Los
Angeles. She was interested in buying a house. Wagner
contacted Carmen Murphy, a real estate agent for ERA Landmark
of Bozeman. Murphy showed the LDS house to Wagner. She also
provided Wagner with a copy of the ad in the Multiple Listing
Service. Murphy knew that the house was a "CAPP Home" but
did not disclose that fact to Wagner. Murphy represented to
Wagner that the house was "well built" according to "code."
Murphy also gave Wagner a document from the Gallatin County
Sanitarian representing the document to be an approval by
Gallatin County of the septic system. Wagner liked the house
and toured it several more times.
After some negotiations, Wagner and LDS agreed on a
purchase p r i c e of $78,500. On July 15, 1982, the sale was
closed. LDS received $15,500 down. The balance of $63,000
was carried by LDS on a contract for deed at 13 percent with
a balloon payment due after five years.
Upon taking possession, Wagner encountered numerous
problems with the house. Wagner then sued to recover damages
for misrepresentation, violation of duty to inspect and
disclose defects, and breach of the implied warranty of
habitability. The court dismissed the breach of habitability
cause. During the trial, the court also dismissed defendant
Cutler from the case.
Trial was held without a jury on January 30, 1986, and
subsequently continued until June 5, 1986, when all the
testimony was completed. On October 29, 1986, the District
Court found that many of the defects were noticeable prior to
Wagner's purchase of the house. These noticeable defects
included the unfinished basement, unfinished steps leading to
the basement, light fixtures which were not in their sockets,
cracks in the patio pavement, and incomplete heating ducts.
The court disallowed recovery for items which were clearly
observable upon inspection of the residence.
However, the court found twenty-three other defects
which were latent and undiscoverable prior to occupancy. The
court further found that LDS was not aware of the latent
defects and that LDS performed no positive acts of wrongdo-
ing. The latent defects included a hazardous chimney, poor
ceiling insulation, broken sewage pump, and faulty lawn
sprinkler system.
On April 7, 1987, the court amended its conclusion in
response to a motion by LDS. The court concluded that Wagner
relied on LDS's representation that the home was "well built"
to "code," and that LDS failed to exercise reasonable care in
communicating the true condition to Wagner. The court award-
ed Wagner $15,203.19 in damages.
Issue 1. "As is" and "independent investigation" clauses.
a. Earnest money receipt.
The earnest money receipt signed by LDS and Wagner
contained the following clauses: "Purchaser agrees to accept
- is'
property and and appliances in 'as - condition unless
otherwise provided for .. ." and "Purchaser enters into this
agreement in full reliance upon his independent investigation
and judgment." (Emphasis added.)
LDS contends that Wagner agreed to the "as is" clause
and therefore bought the property subject to any defects,
both observable and latent. LDS also asserts that it had no
knowledge of any defects. LDS argues that the "independent
investigation" clause and "as is" clause should "trigger the
purchasing party's obligation to thoroughly investigate the
property to his own satisfaction" and "dispel any misconcep-
tion that the buyer had the right to rely on any information
supplied by the seller." LDS concludes that Wagner failed to
thoroughly investigate and is now barred from any recovery.
In analyzing this issue, we note that an "independent
investigation" clause does not preclude justifiable reliance
by a buyer upon the misrepresentations of the seller and its
realtor. Parkhill v. Fuselier (Mont. 1981), 632 P.2d 1132,
1135, 38 St.Rep. 1424, 1427.
In the instant case, the court found no willful misrep-
resentation: ". . . the Defendant, Church, did not construct
said premises and was no more aware of the latent defects
than was the Plaintiff, that the Church performed no positive
wrongful acts ... " However, LDS bears responsibility for
the actions of its real estate agent. Section 28-10-602,
MCA. Wagner relied on the material misrepresentations of LDS
as they appeared in the written listing agreement prepared by
LDS's realtor. Wagner was under no additional duty to dis-
cover the latent defects in the house. Parkhill v. Fuselier,
632 P.2d at 1135, 38 St.Rep. at 1427. We find that the
District Court considered the clauses and properly held that
Wagner was not responsible for the latent defects.