Court Opinion

ID: 4025416
Source: CourtListenerOpinion
Date Created: 2016-08-16 15:11:30.888479+00
Date Added: 2024-06-11T07:45:55.297692
License: Public Domain

MAINE	SUPREME	JUDICIAL	COURT	                                       Reporter	of	Decisions	
Decision:	 2016	ME	131	
Docket:	   Ken-15-234	
Argued:	   February	10,	2016	
Decided:	  August	16,	2016	
	
Panel:	    SAUFLEY,	C.J.,	and	ALEXANDER,	MEAD,	GORMAN,	JABAR,	HJELM,	and	HUMPHREY,	JJ.	
	
	
                 DRILLING	&	BLASTING	ROCK	SPECIALISTS,	INC.	
                                     	
                                    v.	
                                     	
                              PAUL	RHEAUME	
	
	
JABAR,	J.	

      [¶1]	 	 Drilling	 &	 Blasting	 Rock	 Specialists,	 Inc.,	 (DBRS)	 appeals	 from	 a	

summary	 judgment	 entered	 in	 favor	 of	 Paul	 Rheaume	 in	 the	 Superior	 Court	

(Kennebec	 County,	 Mullen,	 J.)	 on	 Rheaume’s	 statute	 of	 limitations	 defense	 to	

DBRS’s	 complaint	 for	 intentional	 and	 negligent	 misrepresentation.	 	 Viewing	

the	 summary	 judgment	 record	 in	 the	 light	 most	 favorable	 to	 DBRS,	 we	

conclude	 that	 the	 record	 reflects	 a	 factual	 dispute	 regarding	 the	

commencement	 of	 the	 limitations	 period	 applicable	 to	 the	 intentional	

misrepresentation	claim.		We	therefore	vacate	the	summary	judgment	in	part	

and	 remand	 for	 adjudication	 of	 this	 factual	 issue.	 	 With	 respect	 to	 the	

negligent	misrepresentation	claim,	we	discern	no	dispute	of	material	fact	and	
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conclude	 that	 the	 trial	 court	 correctly	 entered	 summary	 judgment	 in	

Rheaume’s	favor.		We	accordingly	affirm	the	judgment	in	part.		

                            I.		FACTUAL	BACKGROUND	

	     [¶2]	 	 The	 following	 facts	 are	 established	 by	 the	 parties’	 statements	 of	

material	fact	and	the	evidence	referred	to	therein,	are	viewed	in	the	light	most	

favorable	 to	 the	 nonprevailing	 party,	 and	 are	 undisputed	 unless	 otherwise	

noted.		See	Remmes	v.	Mark	Travel	Corp.,	2015	ME	63,	¶	3,	116	A.3d	466.	

	     [¶3]	 	 Rheaume	 owned	 T.W.	 Dick	 Company,	 Inc.,	 (TWD)	 from	 1995	 to	

2009.		On	March	9,	2006,	Rheaume,	acting	as	president	of	TWD,	executed	and	

delivered	a	promissory	note	and	mortgage	to	Robert	McKee	in	consideration	

for	McKee	conveying	to	TWD	a	parcel	of	real	property	located	on	Brunswick	

Avenue	 in	 Gardiner.	 	 McKee’s	 mortgage	 on	 the	 Brunswick	 Avenue	 property	

was	recorded	in	the	Kennebec	County	Registry	of	Deeds	the	following	day.		

      [¶4]	 	 In	 May	 2006,	 two	 months	 after	 TWD	 acquired	 the	 Brunswick	

Avenue	 property,	 Rheaume	 contacted	 DBRS’s	 president,	 Timothy	 Purington,	

to	ask	whether	DBRS	might	be	interested	in	purchasing	the	Brunswick	Avenue	

property	from	TWD.		In	August	2006,	TWD	conveyed	the	Brunswick	Avenue	

property	 to	 DBRS	 by	 a	 warranty	 deed	 that	 did	 not	 mention	 the	 outstanding	

mortgage	 to	 McKee	 and	 represented	 that	 the	 property	 was	 free	 of	 all	
                                                                                      3

encumbrances.	 	 At	 the	 same	 time,	 Timothy	 Purington,	 acting	 as	 president	 of	

DBRS,	 executed	 and	 delivered	 a	 promissory	 note	 and	 mortgage	 to	 TWD	 in	

consideration	for	the	conveyance	by	TWD.	

      [¶5]	 	 Rheaume	 did	 not	 tell	 anyone	 associated	 with	 DBRS	 that	 McKee	

held	 a	 first	 mortgage	 on	 the	 property	 or	 that	 TWD	 was	 obligated	 to	 make	

payments	on	the	note	held	by	McKee	for	a	period	of	fifteen	years.		TWD	was	

represented	 by	 counsel	 in	 the	 transaction	 and	 paid	 for	 a	 title	 search	 of	 the	

Brunswick	 Avenue	 property	 prior	 to	 the	 closing,	 but	 did	 not	 disclose	 the	

results	of	any	title	search	to	DBRS.			

      [¶6]		At	the	closing,	DBRS	was	not	represented	by	counsel,	and	Timothy	

Purington,	as	president	of	DBRS,	signed	a	“Notice	of	Representation,”	agreeing	

that	 if	 DBRS	 had	 “any	 legal	 questions”	 regarding	 the	 sale	 of	 the	 property	 it	

“should	 discuss	 them	 with	 independent	 counsel.”	 	 DBRS	 relied	 upon	 the	

representations	contained	in	the	warranty	deed	with	respect	to	the	absence	of	

encumbrances	 on	 the	 Brunswick	 Avenue	 property.	 	 It	 would	 not	 have	 gone	

through	with	the	transaction	if	it	had	known	that	McKee	held	a	first	mortgage	

on	the	property.	
4

      [¶7]		According	to	Rheaume,	DBRS	contacted	him	about	one	week	after	

the	 sale	 and	 requested	 a	 “bill	 of	 sale”	 from	 McKee.	 	 DBRS	 denies	 this	

statement,	and	asserts	that	it	did	not	learn	of	the	McKee	mortgage	until	2013.			

      [¶8]	 	 At	 some	 point	 after	 DBRS	 acquired	 the	 Brunswick	 Avenue	

property,	TWD	defaulted	on	the	promissory	note	and	mortgage	held	by	McKee	

and	 McKee	 sought	 to	 foreclose	 on	 the	 property	 now	 owned	 by	 DBRS.	 	 DBRS	

asserts	 that	 it	 has	 been	 frustrated	 in	 its	 plan	 to	 use	 the	 Brunswick	 Avenue	

property	 for	 storage,	 and	 has	 incurred	 damages	 as	 a	 result	 of	 the	 McKee	

mortgage	and	foreclosure.	

                            II.		PROCEDURAL	HISTORY	

	     [¶9]	 	 In	 October	 2013,	 DBRS	 filed	 a	 complaint	 against	 Rheaume	 and	

TWD,	 seeking	 compensatory	 and	 punitive	 damages	 for	 negligent	 and	

intentional	misrepresentation	regarding	the	representation	of	the	absence	of	

encumbrances	 on	 the	 Brunswick	 Avenue	 property.	 	 In	 August	 2014,	 after	 a	

hearing	 on	 damages,	 the	 court	 entered	 a	 judgment	 against	 TWD,	 awarding	

DBRS	 damages	 in	 the	 amount	 of	 $180,925,	 plus	 interest	 and	 costs.	 	 The	

judgment	did	not	resolve	DBRS’s	claims	against	Rheaume.	

	     [¶10]	 	 In	 October	 2014,	 Rheaume	 moved	 for	 summary	 judgment,	

contending	that	DBRS	could	not	establish	the	elements	of	its	claims	and	that	
                                                                                         5

those	 claims	 were	 barred	 by	 the	 six-year	 limitations	 period	 generally	

applicable	 to	 civil	 actions.	 	 See	 14	 M.R.S.	 §	 752	 (2015).	 	 In	 opposition,	 DBRS	

argued	that	its	misrepresentation	claims	were	not	subject	to	the	general	civil	

limitations	period	prescribed	by	section	752,	but	were	instead	governed	by	an	

extended	 limitations	 period	 for	 claims	 grounded	 in	 fraud,	 which	 tolls	 the	

limitations	 period	 until	 “6	years	 after	 the	 person	 entitled	 [to	 such	 an	 action]	

discovers	 that	 he	 has	 just	 cause	 of	 action.”	 	 14	 M.R.S.	 §	 859	 (2015).	 	 DBRS	

argued	 that	 the	 extended	 limitations	 period	 of	 section	 859	 would	 have	

commenced	 in	 2013—when	 it	 first	 discovered	 McKee’s	 mortgage	 on	 the	

Brunswick	Avenue	property—and	not	at	the	time	of	the	transaction	in	2006,	

because	 it	 had	 relied	 upon	 the	 warranty	 deed’s	 free-of-encumbrance	 clause	

and	had	no	duty	to	investigate	whether	the	property	was	encumbered.			

	      [¶11]	 	 Rheaume	 replied	 that	 section	 859	 was	 inapplicable	 to	 DBRS’s	

negligent	 misrepresentation	 claim	 because	 that	 claim	 was	 not	 “grounded	 in	

fraud.”		Rheaume	also	argued	that,	even	if	the	extended	limitations	period	of	

section	859	applied	to	DBRS’s	claims,	that	period	would	not	have	been	tolled	

by	 operation	 of	 the	 statutory	 discovery	 rule.	 	 Quoting	 Kobritz	 v.	 Severance,	

2007	 ME	 3,	 ¶	 13,	 912	A.2d	 1237,	 Rheaume	 asserted	 that	 the	 “limitations	

[period]	 begins	 to	 run,	 pursuant	 to	 section	 859,	 when	 the	 existence	 of	 the	
6

cause	of	action	or	fraud	.	.	.	should	have	been	discovered	by	the	plaintiff	in	the	

exercise	of	due	diligence	and	ordinary	prudence.”		(Quotation	marks	omitted.)		

Rheaume	 further	 asserted	 that	 DBRS	 would	 have	 discovered	 the	 McKee	

mortgage	if	it	had	searched	the	registry	at	the	time	of	the	sale,	and	that	DBRS’s	

failure	to	search	the	registry	rendered	its	claims	untimely	as	a	matter	of	law.	

	     [¶12]	 	 In	 April	 2015,	 the	 court	 entered	 a	 summary	 judgment	 in	

Rheaume’s	 favor,	 concluding	 that	 DBRS’s	 negligent	 misrepresentation	 claim	

was	 time-barred	 by	 the	 limitations	 period	 of	 section	 752,	 and	 that	 its	

intentional	misrepresentation	claim	was	time-barred	by	the	limitations	period	

of	section	859.		DBRS	appealed	to	us.		See	14	M.R.S.	§	1851	(2015).	

                                 III.		DISCUSSION	

	     [¶13]	 	 The	 question	 presented	 is	 whether	 the	 trial	 court	 erred	 in	

entering	 summary	 judgment	 based	 on	 Rheaume’s	 statute	 of	 limitations	

defense	 to	 DBRS’s	 claims	 that	 Rheaume	 should	 be	 held	 personally	 liable	 for	

intentionally	 and	 negligently	 misrepresenting	 that	 there	 were	 no	

encumbrances	on	the	Brunswick	Avenue	property.		

A.	   Standard	of	Review	

	     [¶14]	 	 We	 review	 the	 entry	 of	 a	 summary	 judgment	 de	 novo,	 viewing	

the	evidence	and	any	reasonable	inferences	that	may	be	drawn	therefrom	in	
                                                                                        7

the	light	most	favorable	to	the	nonprevailing	party	to	determine	whether	the	

summary	 judgment	 record	 supports	 the	 conclusion	 that	 there	 is	 no	 genuine	

issue	 of	 material	 fact	 and	 that	 the	 moving	 party	 is	 entitled	 to	 judgment	 as	 a	

matter	of	law.		See	Brawn	v.	Oral	Surgery	Assocs.,	2003	ME	11,	¶	15,	819	A.2d	

1014.	 	 “We	 will	 vacate	 a	 summary	 judgment	 if	 there	 is	 a	 genuine	 issue	 of	

material	 fact	 or	 [if]	 the	 trial	 court	 committed	 a	 legal	 error.”	 	 Id.	 (citation	

omitted).		“We	will	affirm	the	judgment	if	the	record	reflects	that	there	is	no	

genuine	 issue	 of	 material	 fact	 and	 the	 movant	 is	 entitled	 to	 a	 judgment	 as	 a	

matter	of	law.”		Francis	v.	Stinson,	2000	ME	173,	¶	37,	760	A.2d	209	(quotation	

marks	omitted).		“A	fact	is	material	if	it	has	the	potential	to	affect	the	outcome	

of	the	suit,	and	a	genuine	issue	of	material	fact	exists	when	a	fact-finder	must	

choose	 between	 competing	 versions	 of	 the	 truth,	 even	 if	 one	 party’s	 version	

appears	 more	 credible	 or	 persuasive.”	 	 Angell	 v.	 Hallee,	 2014	 ME	 72,	 ¶	 17,	

92	A.3d	1154	(quotation	marks	omitted).		

       [¶15]		When	a	defendant	asserts	in	a	motion	for	summary	judgment	the	

affirmative	 defense	 of	 the	 expiration	 of	 a	 limitations	 period,	 the	 defendant	

bears	 the	 burden	 of	 assembling	 a	 record	 of	 undisputed	 facts	 demonstrating	

that	 the	 plaintiff’s	 action	 is	 time-barred	 by	 the	 applicable	 statute	 of	

limitations.	 	 Baker	 v.	 Farrand,	 2011	 ME	 91,	 ¶	 31,	 26	A.3d	806.	 	 To	 survive	 a	
8

limitations	defense	raised	at	summary	judgment	and	proceed	to	adjudication	

of	 the	 facts,	 a	 plaintiff,	 either	 with	 or	 without	 statements	 of	 additional	

material	fact,	see	M.R.	Civ.	P.	56(h)(2),	bears	the	burden	of	demonstrating	that	

the	summary	judgment	record	generates	a	factual	dispute	about	the	running	

of	the	limitations	period,	see	Brawn	v.	Oral	Surgery	Assocs.,	P.A.,	2006	ME	32,	

¶	10,	893	A.2d	1011.		“When	the	plaintiff	fails	to	set	forth	facts	showing	that	

there	is	a	genuine	issue	for	trial	on	a	statute	of	limitations	defense,	summary	

judgment	 may	 be	 granted	 on	 the	 ground	 that	 the	 applicable	 statute	 of	

limitations	has	run.”		Id.	

       [¶16]	 	 Which	 limitations	 period	 applies	 to	 a	 given	 claim	 is	 a	 matter	 of	

statutory	 construction,	 reviewed	 de	 novo.	 	 See	 Dowling	 v.	 Salewski,	 2007	ME	

78,	 ¶	 10,	 926	 A.2d	 193.	 	 Whether	 a	 claim	 is	 barred	 by	 the	 applicable	

limitations	 period	 is	 a	 question	 of	 law,	 McKinnon	 v.	 Honeywell	 Int’l,	 Inc.,	

2009	ME	69,	¶	9,	977	A.2d	420,	but	whether	a	plaintiff	has	exercised	sufficient	

diligence	to	avoid	a	finding	that	it	“should	have	discovered”	the	cause	of	action	

earlier	 for	 purposes	 of	 determining	 when	 the	 limitations	 period	 on	 a	 fraud	

claim	 commenced	 is	 “ordinarily	 .	 .	 .	 a	 question	 of	 fact,”	 Kobritz,	 2007	 ME	 3,	

¶	16,	912	A.2d	1237.				
                                                                                                         9

B.	     The	Timeliness	of	DBRS’s	Intentional	Misrepresentation	Claim	

	       [¶17]	 	 The	 statute	 of	 limitations	 applicable	 to	 actions	 for	 fraud	 and	

fraudulent	concealment	provides	as	follows:	

      If	a	person,	liable	to	any	action	mentioned,	fraudulently	conceals	
      the	cause	thereof	from	the	person	entitled	thereto,	or	if	a	fraud	is	
      committed	which	entitles	any	person	to	an	action,	the	action	may	
      be	 commenced	 at	 any	 time	 within	 6	 years	 after	 the	 person	
      entitled	thereto	discovers	that	he	has	just	cause	of	action,	except	
      as	provided	in	section	3580.1	
      	
14	 M.R.S.	 §	 859.	 	 The	 parties	 stipulate,	 and	 we	 agree,	 that	 section	 859	

prescribes	 the	 limitations	 period	 that	 applies	 to	 DBRS’s	 intentional	

misrepresentation	claim	because	that	claim	is	a	variant	of	a	cause	of	action	for	

fraud,2	which	action	will	lie	where	a	person	

     (1)	 makes	 a	 false	 representation	 (2)	 of	 a	 material	 fact	 (3)	 with	
     knowledge	 of	 its	 falsity	 or	 in	 reckless	 disregard	 of	 whether	 it	 is	
     true	 or	 false	 (4)	 for	 the	 purpose	 of	 inducing	 another	 to	 act	 or	 to	
     refrain	 from	 acting	 in	 reliance	 on	 it,	 and	 (5)	 the	 other	 person	
     justifiably	relies	on	the	representation	as	true	and	acts	upon	it	to	
     the	damage	of	the	plaintiff.		
     	
Sherbert	 v.	 Remmel,	 2006	 ME	 116,	 ¶	 4	 n.3,	 908	 A.2d	 622	 (quotation	 marks	

omitted).	

    1		Title	14	M.R.S.	§	3580	(2015)	concerns	fraudulent	transfers	and	is	inapplicable	here.		

    	
   2	 	 See	 Goody	 v.	 Md.	 Cas.	 Co.,	 25	 P.2d	 1045,	 1046	 (Idaho	 1933)	 (“A	 false	 and	 fraudulent	

representation,	 by	 one	 who	 assumed	 to	 have	 personal	 knowledge,	 to	 the	 purchaser	 of	 real	 estate	
that	 there	 is	 no	 encumbrance	 thereon,	 and	 upon	 which	 representation	 the	 purchaser	 relies,	 and	
acts	to	his	injury,	will	sustain	an	action	for	the	tort	.	.	.	.”	(quotation	marks	omitted)).		
10

	     [¶18]	 	 Even	 before	 Maine	 separated	 from	 Massachusetts	 to	 assume	

independent	 statehood,	 the	 common	 law	 afforded	 an	 extended	 limitations	

period	for	actions	sounding	in	fraud.		See	First	Mass.	Tpk.	Corp.	v.	Field,	3	Mass.	

(3	 Tyng)	 201,	 207	 (1807).	 	 The	 Maine	 Legislature	 first	 codified	 an	 extended	

limitations	period	for	fraud	claims	in	1841.		See	Appeal	of	Deake,	80	Me.	50,	56,	

12	 A.	 790	 (1888)	 (discussing	 R.S.	 ch.	 146,	 §	 18	 (1841)).	 	 That	 early	 statute	

contained	 a	 discovery	 rule	 nearly	 identical	 to	 the	 discovery	 rule	 of	

section	859.		Compare	R.S.	ch.	146,	§	18,	with	14	M.R.S.	§	859.		Pursuant	to	the	

text	 of	 section	 859,	 a	 six-year	 time-bar	 begins	 to	 run	 on	 a	 fraud	 claim	 when	

the	plaintiff	“discovers”	the	claim.		14	M.R.S.	§	859.		This	discovery	rule	exists	

to	protect	a	plaintiff	from	the	injustice	of	a	time-bar	that	begins	to	run	while	a	

claim	remains	undiscoverable.		Kobritz,	2007	ME	3,	¶	13,	912	A.2d	1237.			

      [¶19]		We	have	long	interpreted	this	discovery	rule	as	a	provision	that	

prevents	 the	 commencement	 of	 the	 limitations	 period	 until	 “the	 existence	 of	

the	cause	of	action	or	fraud	is	discovered	or	should	have	been	discovered	by	

the	plaintiff	in	the	exercise	of	due	diligence	and	ordinary	prudence.”		Westman	

v.	 Armitage,	 215	 A.2d	 919,	 922	 (Me.	1966)	 (citing	 Penobscot	 R.R.	 Co.	 v.	 Mayo,	

67	Me.	470,	473	(1878);	Appeal	of	Deake,	80	Me.	at	56,	12	A.	790).		In	this	case,	

DBRS	 asks	 us	 to	 abandon	 the	 requirement	 of	 due	 diligence	 imposed	 on	 a	
                                                                                                                 11

plaintiff	who	wishes	to	reap	the	benefits	of	section	859,	characterizing	the	due	

diligence	requirement	as	a	 “vestige	 of	 contributory	 negligence”	 that	 conflicts	

with	a	plaintiff’s	burden	of	proving	the	justifiable	reliance	element	of	a	fraud	

claim	 in	 a	 manner	 that	 is	 both	 “illogical	 and	 inequitable.”	 	 We	 reject	 DBRS’s	

assertion	 that	 the	 due	 diligence	 burden	 is	 either	 illogical	 or	 inequitable,	 and	

we	decline	its	invitation	to	overrule	our	longstanding	precedents.	

         [¶20]	 	 To	 establish	 the	 justifiable	 reliance	 element	 of	 a	 fraud	 claim,	 a	

plaintiff	need	not	investigate	the	truth	or	falsity	of	the	representation	at	issue	

unless	 the	 plaintiff	 “knows	 that	 the	 statement	 is	 false	 or	 the	 falsity	 is	

obvious.”3	 	 Francis,	 2000	 ME	 173,	 ¶	 39,	 760	 A.2d	 209.	 	 A	 failure	 to	

investigate—in	the	absence	of	knowledge	or	obvious	falsity—is	justified	“not	

only	when	an	investigation	would	involve	an	expenditure	of	effort	and	money	

out	of	proportion	to	the	magnitude	of	the	transaction,	but	also	when	it	could	

be	 made	 without	 any	 considerable	 trouble	 or	 expense.”	 	 Letellier	 v.	 Small,	

400	A.2d	371,	375	(1979)	(quotation	marks	omitted).		The	policy	behind	the	

justifiable	reliance	element	reflects	fundamental	principles	of	tort	culpability,	

which	 assign	 greater	 blame	 to	 one	 who	 intentionally	 or	 recklessly	 makes	 a	

   3		Although	a	plaintiff’s	contributory	negligence	was	once	a	bar	to	recovery	in	an	action	for	fraud,	

see	Crossman	 v.	 Bacon	 &	 Robinson	 Co.,	 119	 Me.	 105,	 109,	 109	 A.	 487	 (1920),	 Maine	 law	 has	 long	
recognized	 that	 a	 plaintiff’s	 negligence	 is	 no	 defense	 to	 a	 defendant’s	 fraud,	 see	 Letellier	 v.	 Small,	
400	A.2d	371,	375	(1979).	
12

false	 representation	 than	 to	 one	 who	 negligently	 relies	 on	 such	 a	

representation.		See	id.		

      [¶21]		Just	as	the	elements	of	a	fraud	claim	are	defined	by	reference	to	

principles	 of	 tort	 law,	 the	 contours	 of	 the	 extended	 statute	 of	 limitations	

applicable	 to	 a	 fraud	 claim	 reflect	 a	 balance	 between	 competing	 limitations	

purposes	in	the	context	of	an	action	for	fraud.			

      [¶22]	 	 To	 the	 extent	 that	 due	 diligence	 requires	 action	 by	 the	 plaintiff	

that	would	not	be	required	for	the	justifiable	reliance	element	of	a	fraud	claim	

(which	 may	 not	 require	 any	 action	 on	 the	 plaintiff’s	 part),	 any	 distinction	 is	

fully	justified	by	the	principles	of	tort	and	equity	at	play.		We	therefore	uphold	

the	due	diligence	doctrine	and	apply	it	to	the	facts	of	this	case	below.	

      1.	    Summary	Judgment	on	the	Issue	of	Due	Diligence	

	     [¶23]	 	 DBRS	 contends	 that	 the	 evidence	 compels	 a	 conclusion	 that	 it	

exercised	 due	 diligence	 sufficient	 to	 prevent	 the	 commencement	 of	 the	

limitations	 period	 until	 the	 time	 that	 it	 actually	 discovered	 the	

misrepresentation	in	the	warranty	deed	because	it	was	entitled	to	rely	upon	

the	 deed	 and	 had	 no	 reason	 to	 disbelieve	 the	 representations	 in	 it.	 	 In	 the	

alternative,	 DBRS	 argues	 that	 the	 summary	 judgment	 record	 establishes	 a	

genuine	dispute	of	material	fact	as	to	whether	it	acted	reasonably	by	relying	
                                                                                        13

on	 the	 warranty	 deed.	 	 Rheaume	 responds	 that	 there	 is	 no	 dispute	 that	 the	

limitations	 period	 began	 to	 run	 at	 the	 time	 of	 the	 transaction	 in	 2006,	 when	

DBRS	 failed	 to	 exercise	 due	 diligence	 by	 checking	 the	 registry	 to	 verify	 the	

representations	in	the	warranty	deed.	

	      [¶24]		“Whether	a	party	has	exercised	due	diligence	as	required	to	toll	

the	 statute	 of	 limitations	 in	 cases	 of	 fraud	 is	 ordinarily	 considered	 to	 be	 a	

question	of	fact.”		Kobritz,	2007	ME	3,	¶	16,	912	A.2d	1237.		However,	when	

uncontroverted	 evidence	 leaves	 no	 room	 for	 a	 reasonable	 difference	 of	

opinion	 as	 to	 whether	 the	 plaintiff	 exercised	 due	 diligence	 and	 indisputably	

demonstrates	 that	 the	 plaintiff	 should	 have	 discovered	 the	 fraud,	 the	 issue	

may	 be	 resolved	 at	 summary	 judgment	 as	 a	 matter	 of	 law.	 	 See	 Klehr	 v.	 A.O.	

Smith	 Corp.,	 87	 F.3d	 231,	 235	 (8th	 Cir.	 1996);	 Durham	 v.	 Bus.	 Mgmt.	 Assocs.,	

847	 F.2d	 1505,	 1509-10	 (11th	 Cir.	 1988);	 Kramas	 v.	 Sec.	 Gas	 &	 Oil,	 Inc.,	

672	F.2d	766,	770	(9th	Cir.	1982).	

	      [¶25]	 	 In	 Kobritz,	 we	 considered	 the	 meaning	 of	 “due	 diligence”	 in	 the	

context	 of	 a	 fraudulent	 conveyance	 of	 land	 when	 the	 conveyance	 had	 been	

recorded	 in	 the	 registry	 of	 deeds.	 	 2007	 ME	 3,	 ¶	 14,	 912	 A.2d	 1237.	 	 There,	

recognizing	 that	 the	 issue	 of	 due	 diligence	 is	 a	 factual	 question,	 and	 noting	
14

that	 there	 were	 disputed	 issues	 of	 material	 fact,	 we	 vacated	 a	 summary	

judgment.		Id.	¶	25.	

      [¶26]		The	case	of	Westman,	215	A.2d	919,	presents	another	example	of	

the	difficulty	of	deciding	the	issue	of	due	diligence	as	a	matter	of	law.		In	that	

case	a	creditor	claimed	that	he	had	been	defrauded	by	a	recorded	conveyance	

of	 the	 debtor’s	 assets	 and	 the	 debtor	 asserted	 that	 the	 creditor’s	 complaint	

was	time-barred.		Id.	at	920.		In	vacating	a	summary	judgment	entered	in	the	

debtor’s	 favor,	 we	 expressed	 the	 view	 that	 “recordation	 of	 a	 fraudulent	

conveyance	will	not	alone	suffice	to	give	constructive	notice	of	the	fraud	such	

as	will	start	the	running	of	the	statute	of	limitations.”		Id.	at	922.		We	indicated	

that	 a	 creditor	 should	 not	 be	 affirmatively	 tasked	 with	 the	 burden	 of	

examining	 public	 records	 for	 a	 debtor’s	 fraud	 unless	 a	 circumstance	 had	

transpired	 which	 would	 place	 a	 reasonable	 creditor	 on	 inquiry	 notice	 that	 a	

fraud	might	have	occurred.		Id.			

      [¶27]	 	 Many	 other	 courts	 employ	 the	 same	 concept	 of	 inquiry	 notice	

that	we	used	in	Westman	to	define	the	standard	of	diligence	that	is	sufficient	

to	prevent	the	commencement	of	the	limitations	period	on	a	fraud	claim.		See,	

e.g.,	 Brumbaugh	 v.	 Princeton	 Partners,	 985	 F.2d	 157,	 162	 (4th	 Cir.	 1993)	

(“The	.	 .	 .	 standard	 of	 due	 diligence	 requires	 reasonable	 investigation	 of	 the	
                                                                                        15

possibility	of	misrepresentation	once	an	individual	has	been	placed	on	inquiry	

notice	 of	 wrongdoing.”);	 L.C.L.	 Theatres,	 Inc.	 v.	 Columbia	 Pictures	 Indus.,	 Inc.,	

566	F.2d	494,	497	(5th	Cir.	1978)	(“One	will	not	be	charged	with	knowledge	of	

fraud	merely	because	he	has	had	the	opportunity	or	power	to	investigate	the	

fraud;	 he	 must	 be	 cognizant	 of	 facts	 that	 would	 have	 caused	 an	 ordinary,	

reasonable	 person	 to	 investigate.”).	 	 The	 First	 Circuit	 Court	 of	 Appeals	 has	

stated	that	a	plaintiff’s	duty	of	due	diligence	is	triggered	by	storm	warnings	of	

the	possibility	of	fraud.		Maggio	v.	Gerard	Freezer	&	Ice	Co.,	824	F.2d	123,	128	

(1st	Cir.	1987)	(quotation	marks	omitted).	

       [¶28]	 	 This	 case	 involves	 allegations	 that	 the	 seller	 of	 real	 property	

defrauded	 a	 purchaser	 by	 misrepresenting	 that	 the	 property	 was	 free	 of	

encumbrances.		Unlike	the	plaintiffs	in	Kobritz	and	Westman,	the	plaintiff	here	

could	 have	 discovered	 the	 misrepresentation	 in	 the	 deed	 by	 checking	 the	

registry	 once,	 at	 the	 time	 of	 the	 property	 sale,	 or	 at	 any	 time	 thereafter.		

Central	 recording	 systems	 have	 long	 provided	 a	 simple,	 well-understood	

method	 of	 organizing	 and	 maintaining	 searchable	 documents	 to	 determine	

whether	title	to	property	is	clear.		The	purpose	of	the	registry,	however,	is	to	

protect	 bona	 fide	 purchasers	 for	 value	 from	 unrecorded	 property	 interests,	

not	 to	 protect	 those	 who	 engage	 in	 fraud	 or	 to	 invalidate	 the	 interest	 of	 a	
16

party	 to	 a	 property	 transaction	 vis-à-vis	 the	 other	 party	 to	 that	 transaction.		

Letellier,	400	A.2d	at	376	n.4;	14	Richard	R.	Powell,	Powell	on	Real	Property	

§	82.01[3]	(Michael	Allan	Wolf,	ed.	2005).		The	doctrine	of	constructive	notice	

that	applies	in	the	law	of	real	property	does	not	transfer	to	the	field	of	tort	law	

to	 “shield	 a	 defendant	 from	 liability	 for	 fraudulent	 misrepresentation,”	

Letellier,	 400	 A.2d	 at	 376	 n.4,	 or	 to	 otherwise	 start	 the	 limitations	 period	

running	on	the	time	for	bringing	a	fraud	claim	as	a	matter	of	law.	

      [¶29]		Though	searching	the	registry	is	arguably	the	most	basic	form	of	

diligence	that	could	be	undertaken	by	a	purchaser	in	a	property	transaction,	

when	a	warranty	deed	has	been	given	in	which	the	owner	warrants	against	all	

encumbrances,	a	failure	to	conduct	a	title	search	at	the	registry	will	not,	as	a	

matter	 of	 law,	 constitute	 a	 failure	 to	 exercise	 due	 diligence	 for	 purposes	 of	

preventing	 the	 commencement	 of	 the	 limitations	 period	 on	 a	 fraud	 claim.		

Whether	 a	 plaintiff	 exercised	 due	 diligence	 depends	 on	 the	 factual	

circumstances	of	a	given	case,	and	remains	a	question	of	fact	even	when	the	

fraud	 at	 issue	 involves	 misrepresentations	 in	 a	 warranty	 deed	 to	 real	

property.	 	 Such	 a	 factual	 issue	 may	 be	 resolved	 at	 summary	 judgment	 only	

when	the	undisputed	facts	and	reasonable	inferences,	viewed	in	the	light	most	
                                                                                     17

favorable	 to	 the	 nonprevailing	 party,	 leave	 no	 room	 for	 a	 reasonable	

difference	of	opinion.		

      [¶30]		When	viewed	in	the	light	most	favorable	to	DBRS,	the	record	in	

this	 case	 permits	 conflicting	 inferences	 as	 to	 whether	 DBRS	 should,	 in	 the	

exercise	 of	 due	 diligence,	 have	 discovered	 the	 fraud	 within	 six	 years	 of	 its	

occurrence.	 	 The	 McKee	 mortgage	 was	 recorded	 in	 the	 Kennebec	 County	

registry	 before	 DBRS	 acquired	 the	 property,	 and	 DBRS’s	 transaction	 with	

TWD	was	a	property	transfer	from	a	seller	that	was	represented	by	counsel	to	

a	 buyer	 that	 was	 not	 represented	 by	 counsel.	 	 Based	 on	 these	 facts,	 a	

fact-finder	 could	 rationally	 infer	 that	 a	 reasonably	 prudent	 property	

purchaser	 would	 verify	 the	 accuracy	 of	 the	 representations	 in	 the	 seller’s	

warranty	deed.		However,	the	record	contains	no	indication	that	DBRS	was	on	

notice	of	any	facts	that	would	necessarily	have	caused	a	reasonable	purchaser	

to	 undertake	 an	 independent	 investigation,	 and	 therefore	 a	 fact-finder	 could	

infer	 that	 DBRS	 acted	 reasonably	 by	 relying	 upon	 the	 warranty	 deed.		

Pursuant	 to	 its	 negotiations	 with	 TWD,	 DBRS	 obtained	 a	 warranty	 that	 the	

property	 was	 free	 of	 encumbrances,	 and	 thereby	 obtained	 an	 enforceable	

assurance	 that	 the	 property	 was	 not	 encumbered.	 	 The	 record	 does	 not	

establish	 that	 DBRS	 was	 aware	 of	 any	 facts	 that	 would	 necessarily	 have	
18

caused	 a	 reasonable	 purchaser	 to	 doubt	 the	 accuracy	 of	 the	 representations	

made	by	Rheaume	and	set	forth	in	the	deed.		

      [¶31]	 	 In	 light	 of	 these	 conflicting	 inferences,	 we	 conclude	 that	 the	

record	 establishes	 a	 genuine	 dispute	 of	 material	 fact	 as	 to	 whether	 DBRS	

exercised	diligence	sufficient	to	prevent	the	commencement	of	the	limitations	

period	 of	 section	 859.	 	 The	 question	 of	 whether	 receipt	 of	 a	

free-of-encumbrances	 representation	 in	 a	 warranty	 deed	 is	 sufficient	 to	

satisfy	 the	 duty	 of	 due	 diligence	 and	 prevent	 the	 commencement	 of	 the	

limitations	period	on	a	fraud	claim	is	a	factual	issue	that	should	be	decided	by	

a	 jury.	 	 We	 therefore	 vacate	 the	 summary	 judgment	 on	 DBRS’s	 intentional	

misrepresentation	claim,	and	remand	for	further	proceedings	consistent	with	

this	opinion.	

C.	   The	Timeliness	of	DBRS’s	Negligent	Misrepresentation	Claim	

	     [¶32]	 	 The	 second	 issue	 presented	 by	 this	 appeal	 is	 whether	 the	

summary	 judgment	 record	 establishes	 that	 Rheaume	 is	 entitled	 to	 judgment	

on	 his	 statute	 of	 limitations	 defense	 to	 DBRS’s	 claim	 for	 negligent	

misrepresentation.	 	 DBRS	 argues	 that	 the	 trial	 court	 committed	 an	 error	 of	

law	in	concluding	that	its	negligent	misrepresentation	claim	is	time-barred	by	
                                                                                                         19

the	limitations	period	of	section	752,	and	does	not	benefit	from	the	extended	

limitations	period	of	section	859.		We	disagree.			

        [¶33]		The	plain	language	of	section	859	extends	only	to	causes	of	action	

sounding	 in	 fraud	 or	 fraudulent	 concealment.4	 	 14	 M.R.S.	 §	 859.	 	 As	 noted	 in	

the	preceding	discussion,	fraud	is	defined	in	part	as	a	false	representation	of	

material	 fact	 made	 with	 knowledge	 of	 the	 representation’s	 falsity	 or	 in	

reckless	 disregard	 of	 the	 representation’s	 truth	 or	 falsity.	 	 See	 Barr	 v.	 Dyke,	

2012	ME	108,	¶	16,	49	A.3d	1280.		By	contrast,	a	negligent	misrepresentation	

claim	does	not	require	proof	of	intentional	or	reckless	fault	and	thus	does	not	

sound	 in	 fraud.	 	 See	 Chapman	 v.	 Rideout,	 568	 A.2d	 829,	 830	 (Me.	 1990)	

(explaining	that	a	misrepresentation	will	be	actionable	pursuant	to	a	theory	of	

negligent	misrepresentation	if	the	defendant	“fails	to	exercise	reasonable	care	

or	 competence	 in	 obtaining	 or	 communicating	 the	 information”)	 (quotation	

marks	 omitted).	 	 For	 this	 reason,	 such	 a	 claim	 does	 not	 benefit	 from	 the	

extended	statute	of	limitations	set	forth	in	section	859.	

   4		 In	 its	 appellate	 brief,	 DBRS	 concedes	 that	 its	 claims	 are	 not	 based	 upon	 allegations	 of	
fraudulent	concealment.	
20

         The	entry	is:	

                            Summary	 judgment	 on	 the	 negligent	
                            misrepresentation	 claim	 affirmed.	 	 Summary	
                            judgment	 on	 the	 intentional	 misrepresentation	
                            claim	 vacated.	 	 Remanded	 for	 further	
                            proceedings	consistent	with	this	opinion.	
	
	     	      	      	     	      	
	
On	the	briefs:	
	
      David	 M.	 Lipman,	 Esq.,	 and	 Peter	 B.	 Bickerman,	 Esq.,	
      Lipman,	 Katz	 &	 McKee,	 P.A.,	 Augusta,	 for	 appellant	 Drilling	
      and	Blasting	Rock	Specialists,	Inc.	
      	
      James	A.	Billings,	Esq.,	and	Matthew	D.	Morgan,	Esq.,	McKee	
      Billings,	P.A.,	Augusta,	for	appellee	Paul	Rheaume	
	
	
At	oral	argument:	
	
      Peter	B.	Bickerman,	Esq.,	for	appellant	Drilling	and	Blasting	
      Rock	Specialists,	Inc.	
      	
      Matthew	D.	Morgan,	Esq.,	for	appellee	Paul	Rheaume	
	
	
	
Kennebec	County	Superior	Court	docket	number	CV-2013-276	
FOR	CLERK	REFERENCE	ONLY