Opinion ID: 1116419
Heading Depth: 1
Heading Rank: 4

Heading: did the trial court err in allowing instruction p-1 and denying the bank's motion for directed verdict, both matters relating to the issue of negligent misrepresentation?

Text: In the first issue presented to this Court for review, The Bank of Shaw argues that the trial court erred in instructing the jury on the issue of negligent misrepresentation, through instruction P-1, and erred in denying the Bank's motion for a directed verdict on that issue. Instruction P-1 instructed the jury as follows: Negligence is the failure to use reasonable care. Reasonable care is that degree of care which a reasonably careful person would use under like, or similar, circumstances. Negligence may consist either in doing something that a reasonably careful person would not do under like, or similar, circumstances, or in failing to do something that a reasonably careful person would do under like, or similar, circumstances. If you, the jury, find by a preponderance of evidence that The Bank of Shaw, by and through its agent, Glenn Sandroni, negligently misrepresented to John Posey and Danny Watkins that The Bank of Shaw would provide them short-term interim financing and would thereafter provide long-term financing either directly or in conjunction with the SBA and the Defendant Bank failed to provide such financing and that such representation was material and that in so representing, Sandroni failed to exercise that degree of diligence and expertise that the public is entitled to expect of a reasonably competent bank officer and that Posey and Watkins relied upon Sandroni's misrepresentation and as a result of reasonable reliance John Posey and Danny Watkins suffered damages; Then you should find for the Plaintiffs John Posey and Danny Watkins on the issue of negligent misrepresentation. However, if you believe that the Plaintiffs have failed to prove any one of these elements by a preponderance of the evidence in this case, then your verdict shall be for the defendant. The Bank of Shaw contends that the instruction was erroneously given because: (1) Posey and Watkins' argument, in regard to the interim financing, rests entirely on incompetent oral testimony in violation of the parol evidence rule. [3] (2) The alleged misrepresentation concerning long-term financing was not a representation about an existing fact but was promise of future conduct which will not support an action for negligent misrepresentation. According to Posey and Watkins, the negligent misrepresentation occurred when Sandroni, as an officer of The Bank of Shaw, allegedly (1) committed to lend them approximately $125,000.00 to be invested in their new business and represented to them, that at the conclusion of a one-year period, a renewal note of all interim loans would be made financing the principal and interest for a five-year period; and (2) advised Watkins and Posey that, if the SBA rejected their loan application, The Bank of Shaw would lend them $362,000.00 on the same terms and conditions as they were seeking from the SBA. This Court, in First Money, Inc. v. Frisby, 369 So.2d 746 (Miss. 1979), adopted the view that: The basis for damages resulting from negligent misrepresentation is the lack of care; the basis for damages resulting from fraud is the want of honesty. See Restatement of the Law of Torts (Second) sections 549 and 552 (1977). The lack of care in negligent misrepresentation and the want of honesty in fraudulent misrepresentation in business transactions give rise to distinct causes of action, the one in tort, the other in fraud. First Money, Inc. v. Frisby, 369 So.2d 746, 750 (Miss. 1979). In order to recover on a theory of negligent misrepresentation, Posey and Watkins were required to prove by a preponderance of the evidence: (1) a misrepresentation or omission of a fact; (2) that the representation or omission is material or significant; (3) that the person charged with the negligence (here, Sandroni, the loan officer) failed to exercise that degree of diligence and expertise the public is entitled to expect of such persons; (4) that they reasonably relied upon the bank officer's misrepresentation or omission; (5) that they suffered damages as a direct and proximate result of such reasonable reliance. Berkline Corp. v. Bank of Mississippi, 453 So.2d 699, 702 (Miss. 1984). We agree with The Bank of Shaw that the first element of negligent misrepresentation was not proven at trial and that the trial court should not have allowed that issue to go to the jury. It is true that there was a dispute of fact as to whether or not Sandroni made the representation that the plaintiffs claim he made. It is also true, however, that even if he had made the representation, it was a promise of future conduct and not a statement of fact sufficient to constitute the kind of representation which would support a claim of negligent misrepresentation. It is well settled law that, except in cases of fraud, the first element of the tort of negligent misrepresentation must involve a representation concerning a past or present fact. Jury instruction P-1 improperly instructed the jury that if Sandroni negligently made a promise of future conduct, then the Bank was liable to Posey and Watkins for any damages which flowed from their reliance on that promise. The promise of future conduct is, as a matter of law, not such a representation as will support recovery under a theory of negligent misrepresentation. This Court has made it clear that even in cases where fraud is alleged, a promise of future conduct does not meet the requirement of a representation unless the promise was made with the present intent not to perform: [F]raudulent representations upon which a party may predicate any demand for relief must relate to past or presently existing facts, as facts, and cannot consist of promises, except in some cases when a contractual promise is made with the present undisclosed intention of not performing it. McMullan v. Geosouthern Energy Corp., 556 So.2d 1033, 1037 (Miss. 1990) quoting Credit Industrial Co. v. Adams County Lumber and Supply Co., 215 Miss. 282, 290, 60 So.2d 790, 794 (1952), quoting McArthur v. Fillingame, 184 Miss. 869, 876, 186 So. 828, 829 (1939). See also Shogyo International Corporation v. First National Bank of Clarksdale, 475 So.2d 425 (Miss. 1985) (the first element necessary to recovery on a theory of negligent misrepresentation is that the representation concern a fact, as contrasted with an opinion ). This Court's view that a representation of a past or present fact is necessary to an action for misrepresentation is consistent with the position taken in other jurisdictions. See Margrove Incorporated v. Lincoln First Bank of Rochester, 54 A.D.2d 1105, 388 N.Y.S.2d 958 (N.Y. 1976) (a future promise does not qualify as an existing material fact under the elements of negligent misrepresentation); Murray v. Xerox Corporation, 811 F.2d 118 (2nd Cir.1987) (negligent misrepresentation claims, all suffer from a common defect. Promises of future conduct are not actionable as negligent misrepresentations.). Having determined that it was error to grant instruction P-1, The Bank of Shaw's claim that its motion for directed verdict should have been granted must now be examined. A motion for a directed verdict allows the court to determine whether there is any question of fact to be submitted to the jury and whether any verdict other than the one directed would be erroneous as a matter of law. Comment to Rule 50(a) Miss.R.Civ.P. In paragraph thirteen of their complaint, Posey and Watkins stated that the negligent misrepresentation occurred when Sandroni allegedly promised to provide financing to their business. The proof at trial was the same effect. Since Watkins and Posey predicated their claim of negligent misrepresentation on a promise of future conduct, they failed to prove an essential element of their claim and the trial court should have granted The Bank of Shaw's motion for a directed verdict on the issue of negligent misrepresentation at the close of the plaintiff's case-in-chief.