This opinion will be unpublished and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
A14-0966
The Bank of New York Mellon, for the certificateholders of CWALT, Inc.
Alternative Loan Trust 2005-6CB,
Mortgage Pass-through Certificates, Series 2005-CB,
Appellant,
vs.
Wendy S. Jacobson, et al.,
Defendants,
Stewart Title Guaranty Company,
Respondent.
Filed April 20, 2015
Affirmed
Hooten, Judge
Mille Lacs County District Court
File No. 48-CV-11-1880
Jared M. Goerlitz, PFB Law, P.A., St. Paul, Minnesota (for appellant)
Michelle E. Weinberg, Faegre Baker Daniels LLP, Minneapolis, Minnesota (for
respondent)
Considered and decided by Worke, Presiding Judge; Peterson, Judge; and Hooten,
Judge.
UNPUBLISHED OPINION
HOOTEN, Judge
Appellant bank brought a negligent misrepresentation claim against its title insurer
after the bank discovered that the property that the insurer covered did not contain a
house, and the insurer did not discover or alert the bank to this fact. Because the parties
were sophisticated business entities with no special relationship that negotiated a
commercial transaction at arm’s length, the insurer did not owe the bank a legally
recognized duty to discover or disclose that the property lacked a house. We affirm the
district court’s grant of summary judgment for the title insurer.
FACTS
Lloyd and Ione Jacobson (the parents) conveyed 15 of the 40 acres they owned in
Mille Lacs County to their son and daughter-in-law, David and Wendy Jacobson (the
Jacobsons). The Jacobsons then constructed a home on what they believed to be their
land. The home was actually built entirely on the parents’ property. The Jacobsons
mortgaged their property to Voyager Bank, and respondent Stewart Title issued Voyager
a title-insurance policy at closing. The closing instructions stated that, if Voyager
requested a plat drawing of the lot, Stewart would review the drawing and insure
Voyager against any “[u]nfiled mechanic’s or materialmen’s liens.”
Several years later, appellant Bank of New York Mellon acquired Voyager’s
mortgage interest in the property shortly before the Jacobsons defaulted. Mellon initiated
a foreclosure action and discovered that the property contained no house. Mellon filed
two title claims with Stewart, but Stewart denied each claim because the absence of a
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house did not affect the marketability of the property’s title. Mellon amended its
complaint to bring breach-of-contract claims against Stewart, arguing that Stewart failed
to obtain a survey and review the plat drawing prior to closing. The district court granted
Stewart summary judgment because Stewart’s obligation to review the drawing ripened
only if Mellon’s predecessor in interest requested review, and the record lacked any
evidence that Voyager made such a request. Mellon did not appeal this ruling.
Before the district court granted summary judgment on the contract claims, Mellon
amended the complaint to add a negligent-misrepresentation tort. The district court did
not rule on this claim when it granted Stewart summary judgment on the contract claims.
In the complaint, Mellon alleged that Stewart falsely represented that it would obtain and
review the plat drawing prior to closing but did not do so. It further contended that
Stewart’s willingness to insure against title defects misled Mellon to infer that Stewart
obtained and reviewed the plat drawing prior to closing and confirmed that the value of
the collateral was as Mellon had appraised it.
Stewart moved for summary judgment, arguing that Mellon’s tort claim was
indistinguishable from its breach-of-contract claim, and that there was no evidence that
Stewart made a false statement or that Mellon justifiably relied on that statement. Mellon
replied that the tort claim had been “substantially briefed” in its prior summary judgment
motion on the breach-of-contract claim.
The district court heard oral argument on the matter and asked the parties whether
they wanted further briefing on the issue of whether Stewart had a duty relative to the tort
allegations set forth in the amended complaint. Convinced that its position had already
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been laid out, Stewart requested that the district court “take its motion under advisement
as submitted” and argued that whether Stewart had a duty of care had been sufficiently
briefed because that element “is a question of law.” Mellon did not object or offer
supplemental briefing.
The district court granted Stewart’s motion for summary judgment. It determined
that any duty Stewart owed to Mellon arose out of a contractual relationship, and Stewart
owed no duty under existing Minnesota law relative to Mellon’s negligent-
misrepresentation tort. The district court also granted Stewart summary judgment on the
remaining tort elements. Mellon appeals.
DECISION
We review the district court’s decision to grant summary judgment de novo.
Minn. Laborers Health & Welfare Fund v. Granite Re, Inc., 844 N.W.2d 509, 513 (Minn.
2014). We analyze the record to determine if there are any factual disputes, and if there
are not, we determine whether the district court properly applied the law. Dahlin v.
Kroening, 796 N.W.2d 503, 504 (Minn. 2011). If there are no genuine disputes about
any material facts and one party is entitled to judgment as a matter of law, summary
judgment must be granted. Minn. R. Civ. P. 56.03.
To prevail on a negligent-misrepresentation claim, a plaintiff must demonstrate
that (1) the defendant owed the plaintiff a duty of care, but (2) supplied the plaintiff with
false information, which (3) the plaintiff justifiably relied on, and (4) the defendant failed
to exercise reasonable care in communicating the information. Williams v. Smith, 820
N.W.2d 807, 815 (Minn. 2012).
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The district court granted summary judgment after determining that Mellon could
not demonstrate that Stewart owed it a duty of care because Stewart’s only obligations
concerning the plat drawing were contractual. The district court is correct. An alleged
breach of contract may not support a tort claim when the alleged “breach of duty is
indistinguishable from the breach of contract.” Hanks v. Hubbard Broad., Inc., 493
N.W.2d 302, 308 (Minn. App. 1992), review denied (Minn. Feb. 12, 1993) (quotation
omitted). The test for whether the tort action is independent of the contract claim is
“whether a relationship would exist which would give rise to the legal duty without
enforcement of the contract promise itself.” Id.
Mellon claims that Stewart owed it a duty to obtain and review the plat drawing
and that Stewart negligently misrepresented the value of the underlying collateral by
issuing a title policy without discovering or disclosing that no house was located on the
property. But this purported duty arose from the title-insurance policy, and any breach of
this duty was “indistinguishable” from the breach of contract. See id. Mellon can point
to no relationship giving rise to a legal duty without enforcement of the contract. Two
sophisticated business entities negotiating a commercial transaction at arm’s length do
not owe each other a duty not to negligently misrepresent. See Smith v. Woodwind
Homes, Inc., 605 N.W.2d 418, 425 (Minn. App. 2000).1
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Commercial parties may not fraudulently misrepresent facts or generally act in bad
faith. See Florenzano v. Olson, 387 N.W.2d 168, 173–74 (Minn. 1986).
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And, there is no evidence in the record of any relationship between the parties that
could support Mellon’s negligent-misrepresentation allegations in its amended complaint.
At oral argument before this court, Mellon’s counsel conceded that the parties had no
special legal relationship, they were not fiduciaries, and their only professional
relationship was that of contracting parties. Without one of these relationships, Mellon
cannot demonstrate that Stewart owed it a duty of care necessary to support its negligent
misrepresentation claim. See Williams, 820 N.W.2d at 817–18 (analyzing relationships
necessary for sophisticated business entities negotiating a commercial transaction to be
potentially liable for negligent misrepresentation).
Mellon did not attempt to rebut these legal principles on appeal. Instead, Mellon
argued that the district court denied it the opportunity to adequately brief the issue of
whether such duty existed and stated that it would not consider that issue in ruling on
Stewart’s motion for summary judgment on the tort claim. But this is not an accurate
characterization of the record. Rather than stating it would not consider the issue, the
district court asked whether the parties wanted further briefing on the duty issue, and if
not, whether they wanted a ruling on that issue. In response, Stewart asked the district
court to rule on the issue, pointing out that both parties had previously addressed the issue
in conjunction with its prior summary judgment motion and that the duty issue involved a
purely legal matter. Mellon neither objected to Stewart’s request nor offered any
supplemental briefing. On this record, it was reasonable for the district court to infer
from Mellon’s silence that Mellon was satisfied that its position had been sufficiently
briefed.
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We also note that district courts retain the “inherent power” to “dispose summarily
of litigation when there remains no genuine issue as to any material fact and judgment
must be ordered for one of the parties as a matter of law.” Del Hayes & Sons, Inc. v.
Mitchell, 304 Minn. 275, 280, 230 N.W.2d 588, 591–92 (1975). To exercise this power,
the “same conditions must exist as would justify a summary judgment on motion of a
party.” See id. at 280, 230 N.W.2d at 592. These conditions existed because the question
of whether a duty exists in a particular relationship is a question of law, Williams, 820
N.W.2d at 816, and the district court correctly applied the existing law. Mellon cannot
demonstrate any prejudice from the district court’s decision to analyze the duty element
because its theory of duty fails as a matter of existing law. See id.
Mellon nevertheless contends that the district court’s order prevented the bank
from establishing facts creating a new duty outside the “four corners of the title
commitment.” But, at oral argument, counsel for Mellon could not identify any facts it
hoped to discover to support this purely legal argument. And, to the extent that Mellon is
seeking a new tort action in Minnesota, it is not for us or the district court to decide; that
authority belongs to our supreme court. Glorvigen v. Cirrus Design Corp., 796 N.W.2d
541, 557 (Minn. App. 2011), aff’d, 816 N.W.2d 572 (Minn. 2012).
Stewart does not provide information about the value of collateral; it indemnifies
policy holders against defects in title. Mellon cannot sustain its argument that Stewart’s
willingness to cover title defects acted as an appraisal of the value of the underlying
collateral. And even if it could, Mellon’s claim that Stewart legally owed it the duty to
disclose this appraisal is not recognized under existing Minnesota law as the two parties
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are sophisticated business entities with no special legal relationship that negotiated a
commercial transaction at arm’s length. We affirm the district court’s well-reasoned
decision because Stewart is entitled to judgment as a matter of law.
Affirmed.
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