Court Opinion

ID: 3162374
Source: CourtListenerOpinion
Date Created: 2015-12-14 22:06:39.370064+00
Date Added: 2024-06-11T09:33:43.141140
License: Public Domain

This opinion will be unpublished and
                        may not be cited except as provided by
                        Minn. Stat. § 480A.08, subd. 3 (2014).

                             STATE OF MINNESOTA
                             IN COURT OF APPEALS
                                   A15-0275

                                   Highland Bank,
                                    Respondent,

                                          vs.

                                   Mary L. Wyatt,
                                     Appellant

                              Filed December 14, 2015
                        Affirmed in part and reversed in part
                                   Worke, Judge

                            Ramsey County District Court
                              File No. 62-CV-14-700

Garth G. Gavenda, T. Chris Stewart, Lindsay W. Cremona, Stillwater, Minnesota (for
respondent)

Karin Ciano, Minneapolis, Minnesota (for appellant)

      Considered and decided by Worke, Presiding Judge; Larkin, Judge; and Randall,

Judge.*

*
 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
                         UNPUBLISHED OPINION

WORKE, Judge

       Appellant-borrower challenges the reinstatement of a mortgage-deficiency

judgment in favor of respondent-bank on summary judgment, arguing that the district

court improperly relied upon the theory of negligent misrepresentation and that summary

judgment cannot be sustained on any other basis. Appellant also argues that there was no

basis for the award of attorney fees to respondent. Because no genuine issue of material

fact exists, we affirm the grant of summary judgment. But because there is no statutory

or contractual basis for the award of attorney fees, we reverse in part.

                                          FACTS

       In August 2006, appellant Mary L. Wyatt (Wyatt) and her then-husband Timothy

Wyatt executed and delivered a promissory note, secured in part by a properly recorded

mortgage, to respondent Highland Bank (Highland). The Wyatts subsequently defaulted

on their payments and Highland sued them for foreclosure of the mortgage and a

deficiency judgment. The Wyatts divorced in January 2010. In May 2010, the district

court granted Highland judgment and ordered foreclosure of the mortgage. After a

sheriff’s sale where Highland was the highest bidder, the district court entered a joint-

and-several deficiency judgment against the Wyatts for $409,964.13.

       During post-judgment settlement negotiations with Highland, Wyatt submitted a

financial statement showing that she had limited assets and significant debt. In December

2010, Wyatt and Highland reached a standstill agreement which settled the deficiency

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judgment for $36,453. Highland filed the satisfaction of the judgment with the district

court in October 2011.

       Highland later learned that Wyatt had a real-property interest in Iowa farmland

which was appraised at $359,100 in 2010; Wyatt’s mother had transferred the interest to

Wyatt and her siblings pursuant to a January 2003 warranty deed. Wyatt had disclosed

the interest during her divorce proceedings. After learning about the Iowa property

interest, Highland requested the prior judgment against Wyatt be reinstated, alleging

fraudulent inducement, misrepresentation, and unjust enrichment.         The district court

granted Highland summary judgment and reinstated the deficiency judgment. It found

that “[h]ad Wyatt disclosed her interest in the Iowa Property, Highland would not have

agreed to the terms of the [settlement]” and concluded that Wyatt’s failure to disclose her

interest in the Iowa property constituted a breach of her duty of reasonable care.

       Prior to the summary-judgment hearing, Highland submitted an affidavit from one

of its attorneys which stated that Highland was “entitled to an award of attorneys’ fees”

of $36,243.67, the basis for which was detailed in the affidavit. The district court found

that Highland incurred reasonable attorney fees and awarded Highland $36,443.67 in

attorney fees and costs. Wyatt appeals.

                                     DECISION

Summary judgment

       We review a district court’s grant of summary judgment de novo. Riverview Muir

Doran, LLC v. JADT Dev. Grp., 790 N.W.2d 167, 170 (Minn. 2010). “In doing so, we

determine whether the district court properly applied the law and whether there are

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genuine issues of material fact that preclude summary judgment.” Id. We view the

evidence in the light most favorable to the nonmoving party. STAR Ctrs., Inc. v. Faegre

& Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002).             But “the party resisting

summary judgment must do more than rest on mere averments.” DLH, Inc. v. Russ, 566

N.W.2d 60, 71 (Minn. 1997).

       The district court granted Highland summary judgment based on negligent

misrepresentation.

                     A misrepresentation is made negligently when the
              misrepresenter has not discovered or communicated certain
              information that the ordinary person in his or her position
              would have discovered or communicated. Proof of the
              subjective state of the misrepresenter’s mind, whether by
              direct evidence or by inference, is not needed to prove
              negligence.

Florenzano v. Olson, 387 N.W.2d 168, 174 (Minn. 1986).                    In a negligent-

misrepresentation claim, it is essential “that the alleged misrepresenter owes a duty of

care to the person to whom they are providing information.” Smith v. Woodwind Homes,

Inc., 605 N.W.2d 418, 424 (Minn. App. 2000). The duty is that of reasonable care or

competence from an objective standpoint. Florenzano, 387 N.W.2d at 174.

       But “whe[n] adversarial parties negotiate at arm’s length, there is no duty imposed

such that a party could be liable for negligent misrepresentations.” Smith, 605 N.W.2d at

424 (quotation omitted). Although a party that provides information for the purpose of

guiding others in business activities owes the duty of reasonable care to the other party, a

duty is not imposed “whenever a party gives any information to another party.” Safeco

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Ins. Co. of Am. v. Dain Bosworth Inc., 531 N.W.2d 867, 874 (Minn. App. 1995), review

denied (Minn. Jul. 20, 1995).

       Because Wyatt and Highland are adverse parties, we conclude that negligent

misrepresentation is an improper basis for summary judgment. Wyatt owed no duty to

Highland; she did not provide them guidance and was not otherwise in a fiduciary

position (in fact, Highland was more sophisticated in this arm’s-length transaction).1

       This court “may affirm a grant of summary judgment if it can be sustained on any

grounds.” Doe v. Archdiocese of St. Paul, 817 N.W.2d 150, 163 (Minn. 2012). Highland

asserts that it was fraudulently induced into the settlement when Wyatt did not disclose

her Iowa property interest and that this provides a basis for summary judgment.

Fraudulent representation occurs when:

               (1) there was a false representation by a party of a past or
              existing material fact susceptible of knowledge; (2) made
              with knowledge of the falsity of the representation or made as
              of the party’s own knowledge without knowing whether it
              was true or false; (3) with the intention to induce another to
              act in reliance thereon; (4) that the representation caused the
              other party to act in reliance thereon; and (5) that the party
              suffer[ed] pecuniary damage as a result of the reliance.

Hoyt Props., Inc. v. Prod. Res. Grp., L.L.C., 736 N.W.2d 313, 318 (Minn. 2007)

(quotation omitted). But except in special circumstances, a party has no duty to disclose

material facts to the other party. Richfield Bank & Trust Co. v. Sjogren, 309 Minn. 362,

365-66, 244 N.W.2d 648, 650 (1976). Moreover, nondisclosure of a fact constitutes

1
  The parties dispute whether the district court should have addressed the affirmative
defense of comparative negligence to the negligent-misrepresentation claim. Because we
conclude that negligent misrepresentation is not a basis for summary judgment, we need
not reach this issue.

                                             5
fraud only if there is “suppression of facts which one party is under a legal or equitable

obligation to communicate to the other, and which the other party is entitled to have

communicated to him.” Id. at 365, 244 N.W.2d at 650. However, a party “who speaks

must say enough to prevent his words from misleading the other party.” Klein v. First

Edina Nat’l Bank, 293 Minn. 418, 421, 196 N.W.2d 619, 622 (1972).

       Because Wyatt submitted a document that purported to contain all of her assets

and liabilities but omitted her most significant asset, she made a false representation. It is

irrelevant whether Wyatt acted in bad faith or intended to deceive Highland: fraudulent

representation requires only the intent to induce action with reliance, not the intent to

deceive.    See Hoyt, 736 N.W.2d at 318.            We therefore conclude that Wyatt’s

nondisclosure constitutes fraud that permits vacating the original settlement.

       Wyatt further argues that the reasonableness of Highland’s reliance on the

financial statement, the harm done, and the damages suffered are questions of fact the

district court should not have decided on summary judgment. “There is no genuine issue

of material fact . . . when the nonmoving party presents evidence which merely creates a

metaphysical doubt as to a factual issue and which is not sufficiently probative with

respect to an essential element of the nonmoving party’s case to permit reasonable

persons to draw different conclusions.” DLH, Inc., 566 N.W.2d at 71. Wyatt’s potential

fact questions do not create genuine issues of material fact that preclude summary

judgment. A determination of the exact value of the Iowa property is unnecessary for this

grant of summary judgment given that it is undisputed that it has significant value,

particularly in comparison to Wyatt’s other assets. Moreover, Highland relied upon

                                              6
Wyatt’s financial statement because her financial position was essential to the original

settlement.   Because there are no genuine issues of material fact and fraudulent

representation provides a basis for reinstating the original judgment, we affirm the district

court’s grant of summary judgment.

Attorney fees and costs

       We generally review an award of attorney fees for an abuse of discretion. Carlson

v. SALA Architects, Inc., 732 N.W.2d 324, 331 (Minn. App. 2007), review denied (Minn.

Aug. 21, 2007).2    In Minnesota, attorney fees “are not recoverable in litigation unless

there is a specific contract permitting or a statute authorizing such recovery.” Dunn v.

Nat’l Beverage Corp., 745 N.W.2d 549, 554 (Minn. 2008). Neither party sets forth a

statutory basis for attorney fees; thus, any such award must be based on a specific

contract permitting such recovery.      The district court concluded that Highland had

incurred reasonable attorney fees and was entitled to them based on the underlying

promissory note and standstill agreement.

       The note states that “Lender may hire or pay someone else to help collect this note

if [borrower] do[es] not pay, [borrower] will pay Lender that amount.” But the attorney

fees awarded here stem from the underlying standstill agreement, unrelated to the

2
  The parties dispute whether the award of attorney fees is appealable. Highland did not
specifically plead attorney fees, but instead submitted an affidavit detailing the fees.
Attorney fees were not discussed at the summary-judgment hearing and the district court
accepted Highland’s proposed findings on attorney fees verbatim. Wyatt had no
meaningful opportunity to contest attorney fees prior to their award and therefore, in the
interests of justice, we address the issue here. See Minn. R. Civ. App. P. 103.04 (noting
that appellate courts may address issues as “the interest of justice may require”).

                                             7
collection of the note. Therefore, the note does not create a contractual obligation for

attorney fees in this set of claims.

       The standstill agreement states that Wyatt

              agrees to pay all costs and expenses including, but not limited
              to, attorneys’ fees of Lender in connection with the
              preparation, interpretation, and/or enforcement of this
              Agreement and any other agreements or documents . . .
              including, but not limited to, those costs, expenses, and
              attorneys’ fees of Lender for trial or defense of any litigation
              [or] appellate . . . proceeding.

Under the plain language of the agreement, an action to reinstate the judgment is not the

“preparation, interpretation, and/or enforcement” of the agreement. Because attorney

fees are not recoverable absent a specific contract, Highland is not contractually entitled

to recover attorney fees based on the standstill agreement. Therefore, we reverse the

award of attorney fees.

       Affirmed in part and reversed in part.

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