Court Opinion

ID: 9789111
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:28:16.175046+00
Date Added: 2024-06-11T07:37:19.635316
License: Public Domain

SCHUMAN, J.,
dissenting.
Plaintiffs brought this action for negligent misrepresentation against the City of Salem, alleging that they had incurred economic damages because the city first told them that they could operate a used car lot on a particular parcel of land and certified that conclusion to the Oregon Department of Transportation (a certification without which plaintiffs could not obtain a business license), and then, after plaintiffs had leased the land and invested money in opening the business, told them that the operation was unlawful. The trial court granted the city’s motion for summary judgment, reasoning that, because plaintiffs’ damages were purely economic, defendant could be liable only if it owed a duty to plaintiffs over and above the general common-law duty to avoid unreasonable risk of foreseeable harm — and that defendant owed no such duty. Unlike the majority, I conclude that defendant owed plaintiffs a heightened duty. I therefore dissent.
In Oregon, a person ordinarily is not liable for negligently causing purely economic loss unless the negligent act is the breach of a “duty outside the common law of negligence,” Hale v. Groce, 304 Or 281, 284, 744 P2d 1289 (1987), that is, a duty beyond the general duty to exercise reasonable care to avoid foreseeable harm, see Fazzolari v. Portland School Dist. No. 1J, 303 Or 1, 17, 734 P2d 1326 (1987). That general rule applies to negligent misrepresentations. Onita Pacific Corp. v. Trustees of Bronson, 315 Or 149, 159, 843 P2d 890 (1992). Duties “outside the common law of negligence” might be imposed by statute, or they might arise from the nature of a “special relationship” between the alleged tortfeasor and the plaintiff. Conway v. Pacific University, 324 Or 231, 239-41, 924 P2d 818 (1996) (special relationship); Onita Pacific Corp., 315 Or at 160-61 (same); SFG Income Fund, LP v. May, 189 Or App 269, 274-75, 75 P3d 470 (2003) (statute). I agree with the majority that, in the present case, no statute imposed a duty running from defendant to plaintiffs.
*513The nature of the relationship between defendant and plaintiffs, however, did give rise to a heightened duty. The kinds of relationships that give rise to liability for negligently caused economic damages have been described as follows, with the caveat that the determination is always fact specific:
“In Onita, this court described the relationships * * * as those in which the party who owes a duty of care is acting, ‘at least in part, * * * to further the economic interests of the “client,” the person owed the duty of care.’ 315 Or at 161. Another way to characterize the types of relationships in which a heightened duty of care exists is that the party who owes the duty has a special responsibility toward the other party. This is so because the party who is owed the duty effectively has authorized the party who owes the duty to exercise independent judgment in the former party’s behalf and in the former party’s interests. In doing so, the party who is owed the duty is placed in a position of reliance upon the party who owes the duty; that is, because the former has given responsibility and control over the situation at issue to the latter, the former has a right to rely upon the latter to achieve a desired outcome or resolution.
“This special responsibility exists in situations in which one party has hired the other in a professional capacity, as well as in principal-agent and other similar relationships. It also exists in the type of situation * * * in which one party has relinquished control over the subject matter of the relationship to the other party and has placed its potential monetary liability in the other’s hands. In all those relationships, one party has authorized the other to exercise independent judgment in his or her behalf and, consequently, the party who owes the duty has a special responsibility to administer, oversee, or otherwise take care of certain affairs belonging to the other party. That special responsibility carries with it a duty to exercise reasonable care to avoid making negligent misrepresentations.”
Conway, 324 Or at 240-41 (emphasis in original). We must therefore determine whether defendant’s employees, in their official capacity, agreed to exercise independent judgment for the purpose of promoting plaintiffs’ economic interest, thereby putting plaintiffs in a position in which they had to rely on defendant’s judgment, in a relationship that was *514“similar” to a professional-client relationship or a principal-agent relationship.
In applying these precepts, I note an important distinction between plaintiffs’ different contacts with defendant. Nothing in the record indicates that the two telephone conversations between plaintiff Melinda Loosli and defendant’s employee were anything beyond relatively anonymous inquiries regarding the zoning status of a parcel of property. Nothing in the record, in other words, implies that defendant knew that plaintiffs would rely on the information in trying to meet the statutorily required certification that the property was usable as a car lot or in deciding whether or not to proceed with a plan to lease the property for that use. Plaintiffs were therefore in a situation that is indistinguishable from the plaintiffs in SFG Income Fund, LP. In that case, the plaintiffs were damaged because a county employee negligently gave them erroneous zoning information. They argued that, “because the county planners’ work required them to use their professional expertise to provide zoning and land use information to members of the public, there exists a special relationship of entrustment in which the county has assumed a duty to plaintiffs to avoid providing inaccurate information.” 189 Or App at 280. We rejected that argument:
“On the facts of this case, there is no reasonable inference to be drawn that the county planner who provided information to [one of the plaintiffs] had a special relationship with her. No communication took place between the planner and [her] that indicates that the planner assumed a duty other than that provided to any member of the public. Nor did the county and plaintiffs reach an understanding that the county would take on a particular responsibility or that plaintiffs entrusted the planner with the responsibility of exercising independent judgment on their behalf or furthering their economic interests. The relationship between plaintiffs and the county differs in its nature from those instances where there is a special relationship between the parties. No professional, formal or financial relationship existed between these parties. As real estate appraisers, plaintiffs and their employees made numerous telephone calls to the county planners to gather zoning information on properties. Plaintiffs spoke with whomever had counter duty that day. Their phone calls received the *515same kind of response that would be received by other appraisers or members of the public making such an inquiry. They did not pay for the information received from the person on duty.”
Id. at 281. In concluding that no special relationship existed, then, we emphasized several aspects of the situation. As far as the county employee knew, the request for information was the same as all other requests from the general public. The employee had no reason to believe that providing the information would induce any particular action by the plaintiffs or that plaintiffs sought the information to advance their economic interests. No money changed hands. All of those facts underlying our decision in SFG Income Fund, LP, apply to the two telephone conversations between plaintiff Loosli and the city in the present case. Insofar as those conversations are concerned, plaintiffs and defendant were not in a special relationship.
I reach a different conclusion, however, with respect to the relationship that was in effect when defendant signed the written certification of zoning compliance. When that event occurred, defendant’s employee, acting within the scope of her employment, signed the following statement:
“As the zoning official for the locality in which this business is located, I verify by my signature below that the location of this business as stated on this application, complies with any land use ordinances and business regulatory ordinances of the city or county, as appropriate pursuant to ORS 822.025[(6)].”
That statement defined a new relationship between plaintiffs and defendant. In signing it, defendant acknowledged that it knew that plaintiffs planned to submit the certification in their application to the Department of Transportation in order to obtain a vehicle dealer license so that they could go into business; the reference to ORS 822.025(6) could not imply anything else. Further, defendant was the only entity that could provide the necessary certification; plaintiffs, in other words, had to rely on the requested information, and defendant knew that as well. Plaintiffs, in essence, informed defendant that the economic viability of their business at that specific location depended on defendant’s exercise of its *516unique, statutorily imposed authority to obtain information and, based on that information, to certify to state regulators that plaintiffs were in compliance with applicable regulations. For the performance of that task, plaintiffs paid defendant a fee. In terms used by the Supreme Court, the city was acting “at least in part, * * * to farther the economic interest” of plaintiffs; plaintiffs had “effectively * * * authorized” the city to “exercise independent judgment” in the plaintiffs’ behalf and interest;1 plaintiffs were “placed in a position of reliance” on the city; the city had “responsibility and control over the situation”; plaintiffs had “relinquished control over, the subject matter” to the city and “placed its potential monetary liability” in the city’s hands. Conway, 324 Or at 240-41.
Further, unlike the relationship defined by plaintiffs’ earlier telephone conversations with a city employee, the relationship defined by the city’s certification on plaintiffs’ behalf to the state was not a two-party interaction in which the parties were dealing with each other at arm’s length; rather, it involved the city stepping into plaintiffs’ shoes in order to do something with a third party, on plaintiffs’ behalf, that plaintiffs themselves could not perform. See Onita, 315 Or at 161 (drawing distinction).
Although the relationship between plaintiffs and defendant was not between a professional and client, nor between an employee and an employer, it was a “similar relationship [ ].” Conway, 324 Or at 240. In determining whether a relationship is “special” so as to impose a duty beyond the common-law duty to exercise reasonable care to avoid foreseeable harm, we conduct a functional as opposed to a formal inquiry. In other words, we are guided not by the name of the relationship (“lawyer-client,” “student-teacher”) but by the roles that the parties assume in a particular interaction. Shin v. Sunriver Preparatory School, Inc., 199 Or App 352, 366, 111 P3d 762, rev den, 339 Or 406 (2005); Strader v. Grange Mutual Ins. Co., 179 Or App 329, 334, 39 P3d 903, rev *517den, 334 Or 190 (2002). Had plaintiffs been seeking the certification to government authorities of information in the context of tax or accounting regulations, and had defendant been their attorney or accountant, and had defendant’s negligence caused economic damage, we would have a classic case of recoverable economic damages, because plaintiffs would have “relinquished control over the subject matter of the relationship to the other party and * * * placed its potential monetary liability in the other’s hands.” Conway, 324 Or at 241. That is what occurred here. I therefore conclude that, by virtue of the relationship established when defendant’s employee signed the certification, defendant incurred a duty to plaintiffs.2
In my opinion, the court erred in granting defendant’s motion for summary judgment. Although defendant had no relationship-based duty to plaintiffs until defendant signed the application erroneously verifying plaintiffs’ compliance with zoning and land use ordinances so that plaintiffs could obtain a business license, a relationship-based duty arose at that time. Plaintiffs are entitled to the opportunity to prove that some of their damages resulted from that erroneous certification and not from the earlier negligent misrepresentations.
Landau and Wollheim, JJ., join this dissent.

 Although the city official who signed plaintiffs’ certification testified that the process involved nothing more than a quick computer check, the fact remains that the city’s duty was to determine whether fixed legal standards applied to specific facts — a duty that involves the city’s exercise of independent judgment, albeit, here, not a difficult or complex exercise.

 The facts of this case are distinguishable from those in Wild Rose Ranch Enterprises v. Benton County, 210 Or App 166, 149 P3d 1281 (2006), rev den, 342 Or 504 (2007), and Indian Creek Development Co. v. City of Hood River, 203 Or App 231, 125 P3d 50 (2005). In each of those cases, applying an analysis akin to that in SFG Income Fund, LP, we held that the trial courts had erred in denying motions for directed verdicts against negligence and negligent misrepresentation claims based on public entities’ allegedly erroneous provision of land use-related information. In those cases — as in SFG Income Fund, LP, and with respect to plaintiffs’ telephone conversations with defendant here, but unlike their later interaction involving certification to the state — the defendants were not paid by the plaintiffs to provide information to third parties so that the plaintiffs could realize economic benefits. In sum, the relationship between the plaintiffs and the governmental defendants in Wild Rose Ranch Enterprises and Indian Creek Development Co. approximated the relationship between plaintiffs and defendant in this case up to the time of certification, but not after certification.