Opinion ID: 1962817
Heading Depth: 1
Heading Rank: 9

Heading: fraudulent and negligent misrepresentation claims

Text: The estate contends that the court erred when it dismissed the estate's claims for intentional misrepresentation and intentional concealment and its claims for negligent misrepresentation and negligent concealment. In its brief, the estate synonymously uses the terms misrepresentation and concealment. It has not cited any authority recognizing a claim of negligent concealment in a commercial context. [7] It is true that we have recognized a claim for fraudulent concealment in a business transaction. [8] But the estate did not allege separate claims of misrepresentation and concealment, nor did the court interpret the estate's complaint as alleging separate claims. And so we will consider only whether the court's order dismissing the estate's claims for fraudulent and negligent misrepresentation was reversible error. Although fraud is often a component of other torts, including torts involving negligent conduct, the distinct tort of fraud or misrepresentation is generally an economic tort against financial interests, asserted to recover pecuniary loss. [9] One who makes a fraudulent or negligent misrepresentation in a business transaction is normally liable only for the recipient's pecuniary losses. [10] And a pecuniary loss is a loss of money or of something having monetary value. [11] For misrepresentation claims, a defendant's liability for pecuniary losses is generally limited to the plaintiff's out-of-pocket losses or sometimes benefit-of-the-bargain losses, depending upon the context and type of misrepresentation. [12] But the estate argues that permitting plaintiffs to recover only pecuniary losses for a misrepresentation claim is contrary to § 557A of the Restatement which provides: One who by a fraudulent misrepresentation or nondisclosure of a fact that it is his duty to disclose causes physical harm to the person or to the land or chattel of another who justifiably relies upon the misrepresentation, is subject to liability to the other. [13] Section 557A clearly imposes liability for physical harm caused by a person's fraudulent misrepresentation or non-disclosure. But it leaves open important questions: For what loss is the defendant liable? Is liability limited to pecuniary losses? We conclude that when read consistently with its comments and other Restatement sections, § 557A provides scant support for permitting noneconomic damages. Section 557A first appeared in the 1965 tentative draft of the Restatement. [14] In a note to that tentative draft, the American Law Institute authors stated that this section was added to permit parties to maintain an action for deceit when a misrepresentation results in physical harm. But the authors have also stated that § 557A is subject to the rules for fraudulent misrepresentations stated in §§ 525 to 551, except for § 548A. [15] Section 548A is not applicable to our analysis. Section 549, however, does apply to claims under § 557A. Section 549 sets out the measure of damages for fraudulent misrepresentations. It limits a plaintiff's recovery to pecuniary losses. And pain and suffering are not a component of pecuniary loss. It does appear that the American Law Institute authors intended to impose greater liability on defendants when their fraudulent misrepresentations result in physical harm. The Restatement's § 525 states the liability rule for fraudulent misrepresentations. But comment h. states that this is not the liability rule when a misrepresentation causes physical harm and refers the reader to § 557A. In distinguishing between the pecuniary losses permitted under § 525 and the general economic losses permitted under § 557A, comment h. provides in part: This Section (and this Chapter) covers pecuniary loss resulting from a fraudulent misrepresentation, and not physical harm resulting from the misrepresentation. As to the latter, see § 557A, which also covers the economic loss deriving from the physical harm. This type of economic loss is not intended to be included in the term, pecuniary loss, as used in this Chapter. [16] Comment a. to § 557A similarly provides that when physical harm occurs to a person, land, or chattel because of a person's justifiable reliance on a fraudulent misrepresentation, the defendant's liability also extends to the economic loss resulting from the physical harm. [17] By including liability for economic loss, the authors apparently meant that a defendant would be liable for the pecuniary loss normally allowed for misrepresentations and for other, additional economic losses. Economic losses can include more than out-of-pocket and benefit-of-the-bargain losses. They include monetary losses for medical expenses, loss of earnings and earning capacity, funeral costs, loss of use of property, costs of repair or replacement, costs of domestic services, loss of employment, and loss of business or employment opportunities. [18] But economic losses are still monetary losses. And nothing in § 557A or its comments extends a defendant's liability for a fraudulent misrepresentation to noneconomic losses. In contrast to economic losses, noneconomic losses are nonmonetary losses, which include pain, suffering, and other losses that cannot be easily expressed in dollars and cents. [19] In sum, pain and suffering are neither a pecuniary loss nor an economic loss. And remember, the estate's claims are for Frances' pain and suffering. We recognize that some courts have permitted plaintiffs to recover noneconomic damages under a theory of intentional fraud. [20] But we do not believe permitting pain and suffering damages for a misrepresentation theory is appropriate in this case for two reasons. First, other theories of action have been sufficient to deal with non-pecuniary damage, and resort to theory of deceit is usually unnecessary. [21] For example, here, all of the damages the estate seeks under its misrepresentation claims were alleged under its negligence claim. Second, a party may not have double recovery for a single injury or be made more than whole by compensation which exceeds the actual damages sustained. [22] The estate did not specifically allege pain and suffering damages for its misrepresentation claims. If it had, those damages would have duplicated the pain and suffering damages it claimed under its negligence cause of action. But the estate complains that the court's instruction limited damages for Frances' pain and suffering to that which occurred in the last 5 days of her life. It is true that the court's jury instructions on the estate's negligence claim limited the defendants' negligence liability to Mumm's conduct from June 27 until July 1, 2004, the day Frances died. In the negligence instruction, the court did not specifically instruct the jury that the estate claimed Hospice House's conduct had caused Frances pain and suffering for the entire time that she was a resident. But instruction No. 11 informed the jury that it could consider Frances' physical pain and mental suffering during her time at Hospice House. Thus, the jury arguably considered Frances' pain and suffering for the entire time that she stayed at Hospice House. To the extent that the negligence instruction failed to specifically state that the estate claimed Hospice House had been negligent even before these final 5 days, the estate failed to object and seek a clearer instruction. It now seeks to piggyback Frances' pain and suffering damages for her entire stay onto its misrepresentation claims. But, as noted, the estate alleged these damages as part of its negligence claim. In its negligence claim, the estate alleged Frances had suffered pain during the final 22 days of her life because of the inappropriate and insufficient care she received. It further alleged that Hospice House had breached a duty to have trained staff for the care of terminally ill persons. Yet the court submitted its jury instructions to the parties for review and gave them an opportunity to object. And despite alleging that Hospice House's negligence had caused Frances pain and suffering during her entire stay, the estate did not object that it claimed liability for pain and suffering before the period from June 27 to July 1, 2004. Failure to object to a jury instruction after it has been submitted to counsel for review precludes raising an objection on appeal absent plain error. [23] An issue not presented to or passed on by the trial court is not appropriate for consideration on appeal. [24] Here, the estate's failure to object and request a clearer instruction on its negligence claim does not present a compelling reason for this court to recognize pain and suffering under a misrepresentation theory. While different facts could present a compelling reason to permit noneconomic damages, they are not present here. We decline to recognize noneconomic damages for a misrepresentation claim.