Court Opinion

ID: 8313767
Source: CourtListenerOpinion
Date Created: 2022-10-17 17:25:55.032086+00
Date Added: 2024-06-11T16:44:51.628113
License: Public Domain

Robinson, J.,
dissenting.
Because I believe that the majority draws an artificial distinction between the significance of the certifications for marketable title and their significance in verifying that the wastewater system has been inspected and was constructed as designed, and because I do not believe the majority has afforded plaintiffs the benefit of favorable inferences from this summary-judgment record, I respectfully dissent.
¶ 39. I agree with much of the majority’s analysis of the law. The majority rightly acknowledges that a claim for negligent misrepresentation does not require privity between the party who supplies false information for the guidance of others in their business transactions and the party who relies on the information. Ante, ¶ 18. The majority further acknowledges that the communication that supports a claim of negligent misrepresentation need not be made directly to the person acting in reliance on it. Ante, ¶ 19. And the majority acknowledges that plaintiffs clearly fall within the class of people for whose benefit defendant’s statutory reporting duty was created. Ante, ¶ 16. Accordingly, defendant’s duty, as described in Restatement (Second) of Torts § 552(3) (1977) [hereinafter Second Restatement] and Restatement (Third) of Torts: Liability for Economic Harm § 5(3) (Tentative Draft No. 1) *442(Apr. 4, 2012) [hereinafter Third Restatement],10 undisputedly extends to plaintiffs, without regard to whether defendant communicated the information directly to them. But the majority concludes on this summary-judgment record that neither plaintiffs nor the lawyer acting on their behalf relied on the certifications.
¶ 40. My review of this summary-judgment record is informed by two considerations. First, I would conclude that plaintiffs’ lawyer’s reliance on the certificate, if any, is tantamount to plaintiffs’ own reliance.11 I base this conclusion in part on the broad reach of the “public duty” prong of the negligent-*443misrepresentation tort. A comment to the Third Restatement explains: “The negligent defendant is presumptively liable to anyone the statute was meant to protect, and for losses sustained in whatever transactions the statute was meant to cover.” Third Restatement § 5 cmt. k. As the majority recognizes, the statute requiring the certificate at issue here was meant to protect plaintiffs in the context of this very type of transaction — purchasing property with a wastewater-disposal system on-site.
¶41. Consider the following paradigmatic illustration from the Second Restatement:
A is negotiating with X Bank for a credit of $50,000. The Bank requires an audit by independent public accountants. A employs B & Company, a firm of accountants, to make the audit, telling them that the purpose of the audit is [to facilitate A’s negotiation of a bank loan]. B & Company agrees to make the audit [with no specific understanding of which bank A is negotiating with]. X Bank fails, and A, without any further communication with B & Company, submits its financial statements accompanied by B & Company’s opinion to Y Bank, which in reliance upon it extends a credit of $50,000 to A. The audit is so carelessly made as to result in an unqualified favorable opinion on financial statements that materially misstates the financial position of A, and in consequence Y Bank suffers pecuniary loss through its extension of credit. . . . B & Company is subject to liability to Y Bank.
Second Restatement § 552 ill. 7 (a variation of ill. 5, incorporating by reference its fact pattern). The rule of law reflected in this illustration is well-accepted. If Y Bank contracts with outside counsel to perform its due diligence and prepare the loan documents, then Y Bank would not forfeit its tort-law protection against negligent misrepresentation.
¶ 42. Or consider the bean-weigher example relied upon by the majority. Ante, ¶ 19 (citing Second Restatement § 552 cmt. g). It posits a bean seller who employs a public weigher to certify the weight of the beans. The weigher prepares a certificate that misstates the weight of the beans. The buyer of the beans has an *444action for negligent misrepresentation against the weigher, even if the weigher gave the certificate to the seller, because “direct communication of the information to the person acting in reliance upon it is not necessary.” Second Restatement § 552 cmt. g. If the buyer was a restaurant owner who contracted with a local courier to buy five pounds of beans on the restaurant owner’s account and add them to the bean jar in the restaurant kitchen, the restaurant owner would still have a cause of action against the negligent weigher. A contrary suggestion would be squarely at odds with the relatively broad protection for members of the class protected by a statutory reporting requirement that is reflected in § 552(3) of the Second Restatement.
¶ 43. Established law concerning liability for fraudulent misrepresentation further supports my view. Justifiable reliance is an element of a cause of action for fraud. City of Indus. v. City of Fillmore, 129 Cal. Rptr. 3d 433, 450 (Ct. App. 2011). Courts have recognized that “[rjeliance by the plaintiffs agent may be imputed to the plaintiff.” Id., see also People v. Zimmerman, 615 N.E.2d 1008, 1009 (N.Y. 1993) (mem.) (“reliance of its agents may be imputed to the victimized bank”). The Third Restatement discusses the relationship between the torts of fraudulent misrepresentation and negligent misrepresentation:
Negligent misrepresentation is a cause of action distinct from ordinary negligence and from fraud, but including elements of both. The resemblance to a fraud claim arises from the common requirement that the defendant utter a false statement on which the plaintiff was meant to rely and did rely. But a claim of negligent misrepresentation differs from a claim of fraud because it does not require proof of an intent to deceive. The law therefore provides less generous remedies and takes a more conservative view of the defendant’s scope of liability. In other respects, a claim of negligent misrepresentation resembles an ordinary claim of negligence. The standard of care is the familiar test of reasonableness. Unlike a typical action for negligence, however, a claim for negligent misrepresentation is not founded on a general duty to all who might be harmed by the defendant’s acts. The duty runs only to particular classes of victims for particular purposes.
*445Third Restatement § 5, Reporter’s Note. Significantly, the Reporter’s Note acknowledges that both fraudulent misrepresentation and negligent misrepresentation require reliance. In explaining the narrower reach of the negligent-misrepresentation tort, the Reporter’s Note focuses entirely on the scope of the duty in question; it says nothing to suggest that the definition of reliance is different when the reliance is on a negligent, as opposed to a fraudulent, misrepresentation. Nor does the logic of the two related torts support different definitions of reliance.
¶ 44. This view is also consistent with the well-established general rule in Vermont that the knowledge of an agent is presumed to be communicated to the principal — regardless of whether that knowledge is actually communicated. See, e.g., Agency of Natural Res. v. Towns, 168 Vt. 449, 453, 724 A.2d 1022, 1024 (1998) (“ ‘[Njotice to an agent is notice to the principal . . . regardless of whether the agent actually communicated [the] knowledge’ to the principal. Furthermore, because the relationship between attorney and client is that of agent and principal, notice or information conveyed to an attorney will be imputed to the client.”) (quoting Solomon v. Design Dev., Inc., 143 Vt. 128, 131, 465 A.2d 234, 236 (1983)); Carter v. Gugliuzzi, 168 Vt. 48, 54, 716 A.2d 17, 22 (1998) (“A fundamental tenet of agency law holds that ‘the knowledge of an agent acting within the scope of his or her authority is chargeable to the principal, regardless of whether that knowledge is actually communicated.’ ” (quoting Estate of Sawyer v. Crowell, 151 Vt. 287, 291, 559 A.2d 687, 690 (1989))).
¶ 45. The majority does not reach this question because it resolves the case on the basis of a distinct, though related, consideration. Because the principles noted above inform my review of the summary-judgment record in this case, and because I would not affirm on this point, I do address the issue.
¶ 46. The second consideration informing my view in this appeal is the well-accepted rule that in reviewing an order granting summary judgment, we draw all inferences from the information in the record in favor of the nonmoving party. See, e.g., Collins v. Thomas, 2007 VT 92, ¶ 6, 182 Vt. 250, 938 A.2d 1208 (“We review an award of summary judgment de novo, construing all doubts and inferences in favor of the nonmoving party.”). “If the evidence presented on a motion for summary judgment is subject to conflicting interpretations, or reasonable people might disagree as to its significance, summary judgment is improper.” PH W. Dover *446Prop., LLC v. Lalancette Eng’rs, 2015 VT 48, ¶ 31, 199 Vt. 1, 120 A.3d 1135 (Dooley, J., dissenting) (quotation omitted).
¶ 47. With these considerations in mind, I consider the following record evidence.12 Plaintiffs submitted an affidavit by an expert attorney who reviewed the records of the lawyer who represented plaintiffs in the underlying purchase. Those records include a title report by that lawyer noting that the applicable state wastewater permit requires a certificate from the designer or installer filed with the District Environmental Office certifying completion of the water and sewage conditions; a fax cover sheet from the seller’s lawyer to plaintiffs’ lawyer attaching the certificate; and the certificate itself. Plaintiffs’ expert opined that a competent title attorney would not have advised a client to purchase real estate for residential use that was served by an on-site wastewater-disposal system without having such a certificate.
¶ 48. The majority concludes that as a matter of law plaintiffs have not provided sufficient evidence to show reliance. The majority reasons that the only purpose for which plaintiffs’ lawyer considered the certification was to determine the marketability of seller’s title. The suggestion is that the lawyer did not care at all about the truth of the representations in the certificate, but instead was concerned only about the existence of the representations in the certificate. The majority’s argument has to be that if defendant had informed plaintiffs’ lawyer that the statements in the certificate were inaccurate, the lawyer would not have done anything different. Because the existence of the representations was all that was required to ensure marketable title, the lawyer would have simply certified title and advised the plaintiffs to move forward with the sale.
¶ 49. This suggestion defies common sense. And it ignores the fact — acknowledged by the majority — that the permitting process, and the certification requirement in particular, are designed for plaintiffs’ protection in a situation just like this. Purchasers of property with new wastewater systems, and the lawyers representing them, are squarely within the class of people for whose benefit the certification requirement exists. To say that the lawyer’s reliance on the certification does not count because *447the lawyer’s assigned task was to evaluate the marketability of title draws an artificial distinction between the significance of the certification for marketability and its significance in reassuring a prospective buyer that the newly constructed wastewater system has been duly inspected for compliance with the permitted design. This case involves the ■ most common circumstance in which a person within the class protected by the principles reflected in § 552(3) of the Second Restatement is going to seek out and rely on the certification required by Vermont’s wastewater-system permitting scheme. Most purchasers of property do rely on lawyers to advise them, and protect their interests, in connection with the transaction. To suggest that because the lawyer’s immediate task is evaluating the marketability of title, the lawyer is unconcerned with and does not rely on the truth of representations on which the marketability determination rests, is to ignore the reasons underlying § 552(3) in the first place.
¶ 50. We can easily infer from this record that the lawyer sought the certificate in order to complete his analysis of the marketability of the seller’s title. But I do not believe that we can infer as a matter of law that the lawyer, acting on plaintiffs’ behalf, did not rely on the accuracy of the representations, or that the truth of the statements in the certificate was immaterial to the lawyer’s actions. If the lawyer had known the statements were inaccurate, and for purposes of this summary-judgment motion we assume that they were, a factfinder could most certainly infer that the lawyer would not have advised the plaintiffs to proceed without taking further steps to ensure that the wastewater system was properly constructed. By inferring as a matter of law that the truth of the statements in the certificate was of no consequence to plaintiffs’ lawyer — who had a fiduciary duty to them in connection with this transaction — the majority has failed to draw reasonable inferences in favor of the nonmoving party.13
¶ 51. For the above reasons, I dissent. I would reverse the judgment of the trial court.

 The provisions of the Third Restatement cited in this opinion were approved by the American Law Institute in 2012. 89th Annual Meeting: 2012 Proceedings, Discussion of Restatement of the Law Third, Torts: Liability for Economic Harm, 89 A.L.I. Proc. 22, 46-47 (2012). The A.L.I. states that “[o]nce it is approved by the membership at an Annual Meeting, a Tentative Draft . . . represents the most current statement of the American Law Institute’s position on the subject and may be cited in opinions or briefs . . . until the official text is published.” Am. Law Inst., Overview, Project Development, http://www.ali.org/index.efm?fuseaetion= projects.main.
With slight modifications not relevant here, § 5(3) of the Third Restatement reflects the same principles as § 552 of the Second Restatement. See Third Restatement § 5 cmt. a (“[This section] is based on the logic of Restatement Second, Torts § 552, which a majority of states have adopted. The black letter of this Section, which covers liability for negligent statements, repeats § 552 with small changes.”).
In this dissent, I draw upon both of these provisions and their associated comments and illustrations.

 Plaintiffs in this ease do not claim that they relied on the actions of a state agency or other third party that, in turn, relied on the misrepresentations. See, e.g., In re Sofamor Danek Grp., Inc., 123 F.3d 394, 403-04 (6th Cir. 1997) (holding that plaintiffs did not allege actual reliance on defendants’ misrepresentations — and thus could not rely on § 552 of the Second Restatement — where plaintiffs proffered only “fraud-on-the-market” theory, alleging that defendants’ negligent misrepresentations affected market prices, which induced plaintiffs to enter into certain transactions); Goldman Servs. Meek Contracting, Inc. v. Citizens Bank & Trust Co., 812 F. Supp. 738, 742-43 (W.D. Ky. 1992) (holding that direct reliance was not shown where plaintiffs relied on third party’s actions which were, in turn, undertaken in reliance on alleged misrepresentation by defendant); Brinkman v. Barrett Kays & Assocs., 575 S.E.2d 40, 44 (N.C. Ct. App. 2003) (holding that plaintiffs did not allege sufficiently direct reliance where allegation was that defendants misrepresented quality of their waste-removal systems in their permit application to state agency; that agency, relying on the misrepresentation, issued the permits; and that, in turn, the plaintiffs relied on the fact that the agency had issued the permits to conclude that their waste-disposal system was functioning properly). Rather, plaintiffs claim direct reliance on the misrepresentations them*443selves, which defendant made to plaintiffs’ attorney, who was acting on plaintiffs’ behalf.

 Defendant objected to plaintiffs’ submission of the evidence in question in connection with its reply in the summary-judgment briefing below. After ruling on the merits of the cross-motions for summary judgment, the trial court dismissed the motion as moot.

 The majority also cites the fact that the plaintiffs had already signed a contract for sale, and states that there is no evidence that the contract was conditioned on the finality of the wastewater-disposal system. Ante, ¶ 27. Such sales are generally contingent on marketable title, and often on satisfactory inspection. If the majority is implying that plaintiffs were obligated to go through with the purchase even in the absence of a certificate completing the wastewater-permitting process, even without marketable title, or even in the face of a demonstrated departure from the approved design in the construction of the wastewater-disposal system, there is *448simply no basis in the record to support that claim. If anything, it flies in the face of common experience.