Opinion ID: 2111067
Heading Depth: 3
Heading Rank: 1

Heading: Material Misrepresentation

Text: First, we must ascertain whether the district court abused its discretion when it found that Gully materially misrepresented his financial situation. A material misrepresentation consists of two elements. The first element is that Gully must have made a misrepresentation. An individual makes a misrepresentation by either making an affirmative statement that is itself false or by concealing or not disclosing certain facts that render the facts that are disclosed misleading. M.H. v. Caritas Family Servs., 488 N.W.2d 282, 289 (Minn.1992). The second element is that the misrepresentation is material to the issue at hand. A misrepresentation is material when it relates to a matter upon which a plaintiff could be expected to rely in determining whether to engage in the conduct in question. Black's Law Dictionary 977 (6th ed.1990); see also Lunning v. Land O'Lakes, 303 N.W.2d 452, 458 (Minn.1980) (stating that in the context of equitable estoppel for breach of contract [a] fact is material if it is germane to the unconscionable conduct alleged and works a prejudice to the party); Preferred Risk Mutual Ins. Co. v. Anderson, 277 Minn. 342, 349, 152 N.W.2d 476, 482 (1967) (stating that in the context of rescission of an insurance contract a misrepresentation is material when a party relie[s] on [the misrepresentation] or suffer[s] detriment thereby). Here, a specific provision in the 1991 modification order required Gully to provide the county with paystubs on a monthly basis and income tax returns on an annual basis. An obvious reason for this provision was to separate Gully and Fjerstad as completely as possible because of the domestic abuse that had occurred during the marriage. Moreover, in his 1997 memorandum accompanying his order of retroactive modification, the same judge who issued that 1991 order expressly stated two additional reasons he had included this provision. First, the provision was designed to relieve Fjerstad of the burden of hiring an attorney to gain access to Gully's financial information. Second, the provision was intended to insure that [Gully's] support obligation could continue to be assessed. Thus, Gully was under a continuing obligation to provide financial information to the county and he failed to do so. The record in this case supports a conclusion that, by continually failing to disclose his financial situation as required by the 1991 modification order, Gully rendered incomplete, as well as misleading, the financial information he had disclosed in 1991. See Caritas Family Servs., 488 N.W.2d at 289. More specifically, each time Gully failed to submit a paystub or an income tax return, the county, the district court, and Fjerstad were left unaware that his financial situation had improved dramaticallyfrom an imputed income of $ 4.25 per hour to an actual full-time income of between $15 and $17.50 per hour. His financial situation had changed substantially since 1991, but the financial information disclosed in 1991 continued to constitute the basis for calculating the proper amount of his child support obligation. Thus, the record supports a conclusion that, on an ongoing basis since January 1992, Gully has misrepresented his financial situation. Accordingly, we conclude that the court did not abuse its discretion when it determined that Gully misrepresented his financial situation. We also conclude that the district court did not abuse its discretion when it concluded that Gully's misrepresentation was material. His failure to comply with the 1991 order defeated the purpose of the order, which was to continuously monitor and appropriately modify his child support obligation. Therefore, his changing financial situation was a matter upon which: (1) Fjerstad could be expected to rely in determining whether to bring a motion for modification of child support, and (2) the county, which was effectively acting for Fjerstad, could be expected to rely in proposing appropriate modifications of his child support obligation. Fjerstad relied on her expectation that Gully was complying with the 1991 modification order and providing the county with his paystubs and income tax returns. Because she was unaware that he was failing to comply with the 1991 modification order, Fjerstad had no reason to know whether it was proper to bring a motion for modification. The county also would have relied on documentation of Gully's changing financial situation had he provided that information to the county on an ongoing basis as he had been ordered to do. When Gully failed to disclose his financial situation to the county on an ongoing basis, the county was unable to continually assess his income. Thus, the county did not have the information it needed to propose appropriate modifications to Gully's child support obligation. The fact that the county proposed a substantial modification to Gully's child support obligation on December 4, 1994, as soon as the county's review of Fjerstad's case was completed, is perhaps the clearest evidence of the materiality of Gully's failure to comply with the 1991 modification order. Gully contends that he did not make a material misrepresentation of his financial situation because he did not intend to do so. He contends that we should read the term material misrepresentation in Minn.Stat. § 518.64, subd. 2(d)(1) as requiring an intent element and then conclude that he did not intend to misrepresent his financial situation. He points specifically to the tort of intentional misrepresentation in support of his assertion. The court of appeals agreed with Gully's reference to intentional misrepresentation when, on appeal, it found that Gully did not intend to materially misrepresent his financial situation. Resolution of this case does not require us to reach this specific issue of whether the term material misrepresentation as used in Minn.Stat. § 518.64, subd. 2(d)(1) requires an intent element. Here, even if intent is a requirement of material misrepresentation, we conclude that the district court did not abuse its discretion when it rejected Gully's assertion that he did not materially misrepresent his financial situation because he did not know he was required to comply with the 1991 modification order. The record clearly supports the court's conclusion that Gully wilfully failed to comply with the [1991] order. Gully failed to comply with the clearly-worded 1991 modification order, declined to provide his financial information to the county when directly asked to do so during the county's 1996 review of his child support obligation, refused during an administrative hearing to disclose his income tax returns to the court, and responded 12 days late to Fjerstad's discovery requests for his financial documents. His assertion that he was in constant contact with the county has no support in the record. Gully's intent was not lost on the district court.