Opinion ID: 2144843
Heading Depth: 1
Heading Rank: 6

Heading: was there an effective misrepresentation?

Text: We now turn to the record to determine whether defendants successfully proved a misrepresentation. In reviewing the findings of the trial court we are unable to ascertain whether the trial court believed that plaintiff made a misrepresentation that defendants relied upon. The trial court found that on December 28, 1971, at the closing, plaintiff answered affirmatively to defendants' question whether all the coindemnitors had signed and the bank had subordinated its security interest in the Kwaske Brothers' assets, thereby making a misrepresentation. Defendants became aware that the December, 1971 misrepresentation was, or had been, false when on March 28, 1972, Neubacher gave Black a photocopy of a letter he had received from USF&G Bond Superintendent Pohl. Since the letter indicated that certain bond requirements remained unfulfilled as of February 4, 1972, the date the letter was written, defendants became aware that any representations made prior to or at the December 28, 1971 closing that the bond conditions were fulfilled were false. [11] Thus after defendants received the USF&G letter on March 28, 1972 the December 1971 misrepresentations, in and of themselves, were no longer effective. Defendants Black and Haughey, however, both claimed that Neubacher assured them upon the delivery of the USF&G letter, and subsequently, that all of the bond requirements had been satisfied since the writing of the USF&G letter. Black was very definite and unequivocal as to what took place during Neubacher's visit: [Plaintiff's Attorney Carter]: So, is it not true, from reading this [letter], you were aware that the conditions that you were relying on had not at this time been satisfied? [Defendant Black]: On the contrary because I asked Mr. Neubacher what the situation was. That does not say that on March 28th that those were not available. It says on February 4th, they were not available. Mr. Neubacher responded that those things had been taken care of and this, our signature, our indemnity was the only thing yet remaining, and if you'll read it carefully, you'll find that it says that. (Emphasis added.) Black later testified that he mailed a copy of the proposed indemnity agreement and the USF&G letter to his attorney with a handwritten note at the bottom describing the meeting with Neubacher. The note, dated March 28, 1972, and bearing a March 29, 1972 time stamp of the law office, in part stated: I told [Neubacher] the wives would not be expected to sign, and that we wanted assurance that we were limiting ourselves after Kwaske Bros. Constr. Co., Inc., and after the three brothers personally. He said thats [sic] what all these papers mean. (Emphasis in original.) Neubacher admitted visiting defendants' office to discuss the signing of the indemnity agreement but denied stating that the bond requirements had been subsequently met. [12] The trial court nevertheless found that defendants failed to show, by clear, satisfactory and convincing evidence, [13] that oral assurances were made on March 28, 1972, declaring: The equivocal nature of the defendants' testimony contrasted with the positive nature of Neubacher's does not convince me. However, at a later point in the decision, the trial judge declared: I further find that statements made by Mr. Neubacher subsequent to the closing [December 28, 1971] would constitute a misrepresentation, although there was no evidence that it was an intentional one. (Emphasis added.) The trial court's confusing and contradictory findings necessitate that we remand for clarification. The court found (1) there was a misrepresentation on December 28, 1971, (2) that defendants failed to prove by clear and convincing evidence that there was a misrepresentation on March 28, 1972, but (3) there were statements made by Mr. Neubacher subsequent to the closing of December 28, 1971 which constitute a misrepresentation. Which statements made at what time remains unclear. If any of the misrepresentations subsequent to the closing were also made subsequent to the receipt of the USF&G letter on March 28, 1972 or February 4, 1972 (for the significance of the February 4, 1972 date see Black's testimony above), then defendants may have reasonably relied on them and thereby have satisfied the first element necessary to maintain their affirmative defense of innocent misrepresentation. If, on the other hand, the trial court finds that none of the statements made by Mr. Neubacher subsequent to the closing were made on or after March 28, 1972 or February 4, 1972 then there can be no effective misrepresentation upon which defendants could have reasonably relied. Furthermore, the antepenultimate paragraph of the trial judge's ten-page findings reads as follows: As a result, I find that preliminary statements were made to the defendants and these were certainly a factor in their decision to sign the indemnity agreement. Obviously if the statements exerted a material influence on the final decision to sign the indemnity agreement, and, if they were false, as was the case, then the only logical conclusion is that there was an actionable misrepresentation. However, the trial judge in the next paragraph discusses the fact that plaintiff's misrepresentations were neither intentionally false nor made with the intention that defendants should rely upon them. Both propositions, of course, are extraneous to a consideration of innocent misrepresentation and consequently legally erroneous if applied to the findings in the antepenultimate paragraph. Nonetheless, in the ultimate paragraph, the trial judge finds that the defendants have failed to establish their affirmative defense. On the basis of the two preceding paragraphs this is a legally erroneous conclusion, and standing alone would be subject to reversal. But these three critical paragraphs do not necessarily jibe with the rest of the trial judge's findings and only add to the confusion. Therefore we remand to the trial court to find whether defendants reasonably relied upon misrepresentations made by plaintiff or his agents at the time of their signing the indemnity agreement. The trial court shall provide defendants an opportunity to present evidence concerning the discussions between the parties over establishing a priority of collection among the indemnitors. [14] Insofar as the defendants no longer allege that a priority arrangement was contracted, the testimony presented shall only be considered for its probative value concerning 1) whether there were subsequent misrepresentations that the bond requirements had been satisfied, 2) whether defendants were concerned with the scope of their potential liability and communicated this to plaintiff through its agents, and 3) whether the defendants acted in reliance on the fact that there would be other indemnitors to the agreement.