Opinion ID: 2208079
Heading Depth: 1
Heading Rank: 2

Heading: the exemptions

Text: [T]he discretionary function or duty exemption in the State Tort Claims Act extends only to the basic policy decisions made in governmental activity, and not to ministerial activities implementing such policy decisions. [Citations omitted.] In other words, the State is liable for negligence of its employees at the operational level, where there is no room for policy judgment.... . . . . ... When one under no obligation to act does undertake action, one must act with reasonable care. Wickersham v. State, 218 Neb. 175, 180-81, 354 N.W.2d 134, 138-39 (1984). See, also, Koepf v. County of York, 198 Neb. 67, 251 N.W.2d 866 (1977); Allen v. County of Lancaster, 218 Neb. 163, 352 N.W.2d 883 (1984). Concerning misrepresentation, both parties argue that two federal cases should be considered: (1) United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614 (1961), and (2) Block v. Neal, 460 U.S. 289, 103 S.Ct. 1089, 75 L.Ed.2d 67 (1983). Both cases involve the Federal Tort Claims Act. The State relies on Neustadt, where it was held that misrepresentation under the act included willful or negligent misrepresentation, and an exemption applied where  the purchaser of a home relied upon an inaccurate inspection and appraisal made by the Federal Housing Administration. The essence of an action for misrepresentation is the communication of misinformation on which the recipient relies. FNB relies on Block, where the Court held that the claim did not arise out of misrepresentation as in Neustadt but, rather, upon the former conduct of officials of the Farmers Home Administration (FmHA) from whom the claimant, Neal, obtained a loan to purchase a house. Neal's contract with the builder provided that the work was to conform to plans and specifications approved by FmHA and that FmHA had the right to approve or reject work, materials, and workmanship. After construction and acceptance of the house, defects in workmanship appeared. Neal claimed relief under the Federal Tort Claims Act, resulting from FmHA employees' failure to inspect and to supervise construction. In approving the claim, the Court distinguished the facts from those in Neustadt: [T]he essence of an action for misrepresentation, whether negligent or intentional, is the communication of misinformation on which the recipient relies. The gravamen of the action against the Government in Neustadt was that the plaintiff was misled by a Statement of FHA Appraisal prepared by the Government. Neustadt alleged no injury that he would have suffered independently of his reliance on the erroneous appraisal.... . . . . ... FmHA's duty to use due care to ensure that the builder adhere to previously approved plans and cure all defects before completing construction is distinct from any duty to use due care in communicating information to respondent. 460 U.S. at 296-97, 103 S.Ct. at 1093-94. FNB argues that the State had a duty imposed by law to conduct periodic examinations of Commonwealth that would have revealed irregularities at that institution; that the State breached that duty by failing to conduct such examinations; and that [b]ut for that omission, the Department would not or should not have approved Appellant's takeover of [the Bank and Savings]; nor would (or should) the Department have given Appellant assurances as to the capital adequacy of these institutions. Reply brief for appellant at 5. The State Tort Claims Act excludes a cause of action based on a discretionary function or duty, § 81-8,219(1)(a), and any cause of action based on misrepresentation or deceit, § 81-8,219(1)(d). However, the act does recognize a cause of action based on the negligent breach of a duty, whether such is imposed by statute or common law. See Wickersham v. State, supra . With the bare record of the petition before us, we note that the 30-page petition, incorporating exhibits and a copy of the original claim filed with the board, is confusing in our determination of the operative facts supporting FNB's theory of recovery, i.e., that the State breached its duty to examine Commonwealth periodically as provided by law. We find these operative facts and inferences: The State failed to conduct periodic examinations of Commonwealth as provided by law; the State failed to exercise reasonable care in the operational performance of its regulatory duties; and the State improperly approved FNB's acquisition of the Bank and Savings institutions. As against these allegations, there are other and overriding allegations supporting the exemptions of discretion and misrepresentation. We agree with the trial court that the petition fails to clearly and concisely state facts alleging a cause of action in favor of FNB, and we affirm its order sustaining the demurrer. Neb.Rev.Stat. § 25-854 (Reissue 1985) provides that if a demurrer is sustained, the adverse party may amend if the defect can be remedied by amendment. This is not an absolute right, and refusal by the trial court to permit an amendment of the petition must be shown to be an abuse of discretion. See Suzuki v. Gateway Realty, 207 Neb. 562, 299 N.W.2d 762 (1980). We are reminded that it is not the purpose of a demurrer to decide what the facts are, and, recognizing the distinction  between fraud and tort, we find that it is reasonably possible that FNB may be able to state a cause of action in support of its theory of recovery. The court's order dismissing the petition without leave to amend was in error and an abuse of its discretion; that order is set aside. This cause is remanded for further proceedings. Upon receipt of the mandate by the clerk of the district court, FNB shall have 30 days to file an amended petition. AFFIRMED IN PART, AND IN PART REVERSED AND REMANDED WITH DIRECTIONS.