STATE OF MINNESOTA
IN COURT OF APPEALS
Joan L. Rossbach,
FBS Mortgage Corporation,
Roderick N. and Mary P. Houdek,
on behalf of themselves and all
others similarly situated,
Firstar Bank, N.A.,
General Electric Mortgage
Filed April 7, 1998
Hennepin County District Court
File No. 9510046
Barry G. Reed, Ronald S. Goldser, J. Gordon Rudd, Jr., Zimmerman Reed, P.L.L.P., 5200 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402-4123 (for appellants)
James K. Langdon II, Dorsey & Whitney LLP, Pillsbury Center South, 220 South Sixth Street, Suite 1300, Minneapolis, MN 55402-1498 (for respondent FBS Mortgage Corporation)
John Dawson, Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, WI 53202-5367 (for respondent Firstar Bank, N.A.)
Considered and decided by Shumaker, Presiding Judge, Amundson, Judge, and Mansur, Judge.
S Y L L A B U S
1. A mortgage loan servicer is not subject to claims by a mortgagor under the Consumer Fraud Act, Minn. Stat. § 325F.69, subd. 1 (1996), because it is not involved in the sale of any merchandise as required by the act.
2. A mortgage loan servicer who collects escrow fees pursuant to a contract with the mortgage lender does not owe the mortgagor a fiduciary duty beyond collecting the monthly escrow fees and forwarding them in a timely manner to the correct agencies and therefore has no duty to disclose to the mortgagor its opportunity to cancel the primary mortgage insurance.
3. Knowledge of the mortgage lender's policy for cancellation of primary mortgage insurance does not constitute special knowledge and does not impose a duty to disclose that policy to the mortgagor.
4. A mortgage loan servicer cannot be guilty of conversion by collecting primary mortgage insurance premiums where the mortgagor had no absolute right to cancel the primary mortgage insurance, the servicer had no duty to disclose to the mortgagor its opportunity to cancel the insurance, and the mortgagor willingly paid the insurance premiums to the servicer.
O P I N I O N
Appellant Joan L. Rossbach seeks reversal of the district court's decision to grant respondent FBS Mortgage Corporation's motion for summary judgment. She argues that, as servicer of her mortgage loan, FBS is subject to the Consumer Fraud Act, that FBS had a duty to disclose to her the opportunity to cancel her private mortgage insurance (PMI), and that FBS committed conversion by collecting the PMI when she had the opportunity to cancel it.
Because we conclude that: (1) a mortgage loan servicer is not subject to claims by mortgagors under the Consumer Fraud Act because the servicer does not participate in the sale of any merchandise as required by Minn. Stat. § 325F.68, subd. 1 (1996); (2) a mortgage loan servicer who acts pursuant to a contract with a mortgage lender does not owe a fiduciary duty to mortgagors beyond the collection and timely payment of their escrow fees; (3) a mortgage loan servicer has no duty to disclose to a mortgagor the opportunity to cancel the PMI; and (4) a mortgage loan servicer cannot be guilty of conversion for collecting PMI premiums where the mortgagor had no absolute right to cancel the PMI, the servicer had no duty to disclose the opportunity to cancel the PMI, and the mortgagor willingly paid the PMI premiums, we affirm.
On August 27, 1987, appellant Joan L. Rossbach purchased a home with a $54,500 mortgage secured through Old Stone Mortgage Corporation. The mortgage was immediately sold on the secondary market to Minnesota Housing Finance Agency (MHFA); mortgage servicing rights were given to Metropolitan Federal Savings Bank. In 1995, respondent FBS Mortgage Corporation (FBS) acquired from Metropolitan the servicing rights to appellant's mortgage.
As the mortgage loan servicer, FBS collected various escrow fees from appellant including hazard insurance, property taxes, and private mortgage insurance (PMI) premiums and forwarded them to the requisite agencies. The PMI premiums, which amounted to $158.16 per year, were paid by FBS directly to GEMICO, the insurance provider.  FBS did not receive any compensation from GEMICO or any additional compensation from MHFA for collecting the premiums.
In June 1995, appellant filed suit against FBS and GEMICO alleging that they fraudulently collected PMI premiums beyond the time when the premiums could have been cancelled.  In April 1997, appellant filed a motion for class action certification. FBS filed a motion for summary judgment.
The district court granted FBS's motion, finding that FBS's actions did not qualify as the sale of any merchandise and therefore were not subject to the Consumer Fraud Act, that appellant did not have an absolute right to cancel her PMI, that FBS did not have a duty to disclose the potential PMI cancellation to appellant, that FBS did not violate the Uniform Deceptive Trade Practices Act, and that FBS did not commit conversion by collecting the PMI premiums after the date when appellant may have qualified for cancellation.
1. Did the district court err in finding that the Consumer Fraud Act did not apply to this transaction?
2. Did the district court err in finding that FBS did not have a duty to disclose to appellant that she had the opportunity to cancel her PMI?
(a) Resulting from a fiduciary relationship;
(b) Resulting from special knowledge.
3. Did the district court err in finding that FBS did not commit conversion by collecting the PMI premiums?
On appeal from summary judgment, we ask whether there are any genuine issues of material fact and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
1. Consumer Fraud Act
Whether the Consumer Fraud Act, Minn. Stat. §§ 325F.68-.70, applies to this transaction is a question of statutory construction. Construction of a statute is clearly a question of law and thus fully reviewable by an appellate court. Hibbing Educ. Ass'n v. Public Employment Relations Bd., 369 N.W.2d 527, 529 (Minn. 1985). Consumer protection statutes are remedial in nature and are to be liberally construed in favor of protecting consumers. Boubelik v. Liberty State Bank, 553 N.W.2d 393, 402 (Minn. 1996).
The Consumer Fraud Act states in part:
The act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with intent that others rely thereon in connection with the sale of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby, is enjoinable as provided herein.
Minn. Stat. § 325F.69, subd. 1 (1996). Merchandise is defined as any objects, wares, goods, commodities, intangibles, real estate, or services. Minn. Stat. § 325F.68, subd. 2 (1996).
The district court found that because appellant's claim against FBS was part and parcel of her mortgage, it was a bank loan and therefore not subject to the Consumer Fraud Act, relying on the Boubelik holding that the Consumer Fraud Act does not apply to bank loans because they are not services within the meaning of the statute. 553 N.W.2d at 394.
In Boubelik, the plaintiffs were attempting to sue the bank that lent them money to open a bar because the loan officer knew that the plaintiffs' partner intended to use the money to pay off his existing debt. In holding that bank loans are not services for purposes of the Consumer Fraud Act, the supreme court noted that the legislature could have specifically included bank loans in its extensive definition of merchandise, but chose not to. Id. at 403.
For the purposes of the Consumer Fraud Act, there is no functional difference between a commercial loan acquired for the purpose of purchasing a bar and a mortgage loan acquired for the purpose of purchasing a home. In both cases, the bank simply provides money to the borrower for some purchase. The Boubelik holding that the Consumer Fraud Act does not apply to bank loans is logically extended to mortgage loans.
Appellant has two bases for arguing that the Consumer Fraud Act applies to FBS. First, she argues that FBS, in its role as mortgage servicer, provided a service and is therefore subject to the act. This argument, however, ignores the fact that FBS operates through a contract with MHFA. Any service FBS provided was according to that contract and for the benefit of MHFA. FBS did not provide services directly to appellant.
Next, appellant argues that by forwarding the money to pay for the PMI, FBS is providing merchandise to appellant, relying on Beernink v. Rodwell, 455 N.W.2d 87, 89 (Minn. App. 1990) (holding that life insurance is merchandise for the purposes of interpreting Minn. Stat. § 181.145 (1986)). In holding that life insurance is merchandise, however, Beernink stated that the insurance company was providing the merchandise to the insured in exchange for premium payments. Id. FBS, however, is not acting as an insurance company merely because it forwards the premiums from appellant to an insurance company. It is acting only as a facilitator of the payments and only for the benefit of MHFA. FBS did not sell insurance to appellant. 
As the mortgage loan servicer, FBS acted only to collect escrow fees and forward them to the proper agencies; it was never involved in the sale of any merchandise to appellant. The court did not err in dismissing appellant's claim under the act.
2. Duty to Disclose
Appellant argues that FBS had a duty to disclose to her that she had an absolute right to cancel her PMI. As a preliminary matter, we address appellant's contention that her ability to cancel was absolute. Whether a contract is ambiguous is a legal determination in the first instance. Blattner v. Forster, 322 N.W.2d 319, 321 (Minn. 1982). Appellant argues that paragraph two of the mortgage agreement creates an ambiguity as to the length of the PMI requirement.
2. Funds for Taxes and Insurance * * * Borrower shall pay to Lender * * * until the Note is paid in full, a sum * * * equal to one-twelfth of * * * yearly hazard insurance premiums; and (d) yearly mortgage insurance premiums, if any. These items are called escrow items.
(Emphasis added). Appellant argues that the language if any indicates that PMI was not required for the life of the loan. The district court, however, concluded that if any referred to those borrowers who were not required to obtain PMI at the outset of the loan and did not refer to PMI cancellation. This position is supported by case law from other jurisdictions. See, e.g., Hinton v. Federal Nat'l Mortgage Ass'n, 945 F.Supp. 1052, 1059 (S.D. Tex. 1996) ('If any' merely recognizes that payment of mortgage insurance premiums may not have been required by the lender in the origination of the loan.), aff'd, ___ F.3d ___ (5th Cir. Feb. 11, 1998).
This position is further supported by MHFA's mortgage servicing manual, which indicates that if appellant had the right to cancel the PMI, she first had to file a request with MHFA.
When the loan has reached a 75% LTV * * * and the borrower has maintained a satisfactory payment history, MHFA will consider requests to cancel the primary mortgage insurance. * * * If the LTV is not below 75% or the payment history is unsatisfactory, MHFA requires that primary mortgage insurance continue to be maintained.
(Emphasis added). This language indicates that appellant could only request PMI cancellation and that the decision to cancel was at the discretion of MHFA, not FBS. In addition, the subjective nature of the cancellation terms, e.g., maintained a satisfactory payment history, further indicates that appellant's right to cancel was not absolute, but conditional. Appellant had nothing more than a potential opportunity to cancel her PMI, and that opportunity depended on an application to the MHFA and MHFA approval.
Next, we address whether FBS owed appellant a duty to disclose the possible cancellation of the PMI on her mortgage loan. [T]he existence of a legal duty is a question of law. Boubelik, 553 N.W.2d at 397. Actions for fraudulent concealment arise only when there is suppression of facts which one party is under a legal or equitable obligation to communicate to the other. Richfield Bank & Trust Co. v. Sjogren, 309 Minn. 362, 365, 244 N.W.2d 648, 650 (1972).
Generally, one party to a transaction has no duty to disclose information to the other party. Klein v. First Edina Nat'l Bank, 293 Minn. 418, 421, 196 N.W.2d 619, 622 (1972). Disclosure is required, however, in three instances: (1) a party that speaks must disclose enough information to avoid misleading the other party; (2) a party that stands in a confidential or fiduciary relationship with the other party has a duty to disclose; and (3) a party with special knowledge of material facts that the other party lacks may have a duty to disclose. Id. 
a. Fiduciary Relationship
Because the parties have not entered into any express contract or agreement, the closest relationship that appellant and FBS have is through the mortgage lender, MHFA. Generally, a bank is not in a fiduciary relationship with a customer, rather the relationship is one of debtor and creditor. Hurley v. TCF Banking & Sav., F.A., 414 N.W.2d 584, 587 (Minn. App. 1987).
[W]hen a bank transacts business with a depositor or other customer, it has no special duty to counsel the customer and inform him of every material fact relating to the transactionincluding the bank's motive, if material, for participating in the transactionunless special circumstances exist, such as where the bank knows or has reason to know that the customer is placing his trust and confidence in the bank and is relying on the bank so to counsel and inform him.
Klein, 293 Minn. at 422, 196 N.W.2d at 623.
Nothing in the relationship between FBS and appellant indicates the presence of trust or confidence. FBS serviced appellant's loan only by collecting the monthly fees and forwarding them to the proper agencies. The most responsibility FBS had in handling appellant's money was to see that it was dispersed in a timely manner to the proper agencies. Appellant never put FBS on notice that she believed that their relationship was one of trust and confidence. FBS did not owe appellant a fiduciary duty.
To argue that FBS had a fiduciary duty, appellant relies on Mark v. KeyCorp Mortgage Inc., 1996 WL 465400 (N.D. Ill. 1996), a case from the northern district of Illinois applying New York law.  In Mark, the plaintiff argued that by demanding the deposit of too much money in plaintiff's escrow account, the defendant breached a fiduciary duty. The court found a fiduciary duty in the escrow relationship, but held that it was limited to what was contracted to between the parties. Id. at 4. Mark differs from the present case in that there is no contractual relationship between appellant and FBS, only between MHFA and FBS. In addition, there is no contract provision requiring FBS to notify appellant that she could request PMI cancellation. The analysis in Mark is unpersuasive.
FBS acted pursuant to its contract with MHFA and had no fiduciary relationship with appellant. Even if FBS were in the same position as MHFA as a lender, the relationship would still not be fiduciary; it would only be that of debtor and creditor. Hurley, 414 N.W.2d at 587; see also Klein, 293 Minn. at 422, 196 N.W.2d at 623 (holding that [t]he fact that plaintiff had done business with defendant for nearly 20 years could not by itself place defendant in a confidential relation to plaintiff). The court did not err in finding that no fiduciary duty existed.
b. Special Knowledge
Next, appellant argues that because FBS had access to MHFA's servicing manual, it knew of MHFA's policy regarding PMI cancellation and had a duty to disclose this special knowledge to appellant. Appellant cites no case law to support her position. The requirement to disclose special knowledge has been held to apply when: (1) parties enter into a contract with each other; (2) one party has superior knowledge not readily available to the other; and (3) that party is aware of the other's reliance on an erroneous belief. In Re TMJ Implants Prods. Liab. Litig., 880 F.Supp. 1311, 1317 (D. Minn. 1995), aff'd, 113 F.3d 1484 (8th Cir. 1997).
Appellant and FBS did not enter into a contract together so the first prong is not met. In addition, appellant's mortgage documents, including the mortgage contract, the HUD settlement statement, the financing addendum, and the payment breakdown letter, put appellant on notice that she was paying PMI premiums so the second prong is not met. Lastly, FBS became servicer of appellant's mortgage eight years after it was secured and had no way of knowing that appellant would rely on FBS for information and the final prong is not met. Any questions appellant had regarding PMI premiums could have been addressed at any time by simply contacting either MHFA or FBS.
FBS did not have a duty to disclose to appellant her opportunity to cancel the PMI simply because it was in possession of MHFA's servicing manual. The district court did not err in finding that FBS had no duty to disclose either as a fiduciary or because it possessed special knowledge. 
Appellant argues that by taking her PMI premiums every month and not notifying her that she might qualify for cancellation, FBS committed the tort of conversion. Conversion is an act of willful interference with a chattel that deprives another of its use and possession without lawful justification. Naegele Outdoor Adver., Inc. v. Minneapolis Community Dev. Agency, 551 N.W.2d 235, 238 (Minn. App. 1996) (citations omitted). The elements of common law conversion are (1) deprivation of (2) another's property interest. Lassen v. First Bank Eden Prairie, 514 N.W.2d 831, 838 (Minn. App. 1994), review denied (Minn. June 29, 1994).
Appellant had only the opportunity, not the right, to cancel her PMI. In addition, FBS was not under any duty to disclose that information. FBS merely took the money that appellant paid willingly into the escrow account and distributed it to the proper agencies according to the terms of its contract with MHFA. It did not act to willfully interfere with appellant's rights of possession, and did not deprive her of her property rights. FBS did not commit conversion and summary judgment on this issue was appropriate.
D E C I S I O N
FBS acted as mortgage loan servicer in a contract with the mortgage lender, MHFA. The transaction between FBS and appellant was part and parcel of appellant's mortgage loan and does not qualify as the sale of any merchandise for the purposes of the Consumer Fraud Act. In addition, FBS did not possess specialized knowledge and did not owe appellant a fiduciary duty. As a result, it had no duty to disclose and could not be guilty of fraudulent concealment. The district court did not err in dismissing appellant's claim on summary judgment.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
 MHFA requires PMI on mortgage loans where the loan-to-value (LTV) ratio is greater than 75% and where the borrower paid less than 25% of the appraised value of the home as a down payment. PMI protects the lender against defaults by insuring the upper 10% to 20% of the loan. At the time appellant obtained her mortgage, her LTV ratio was 78%.
 Appellant's claims against GEMICO were settled and are not a part of this appeal.
 Appellant also argues that this court should be persuaded by the analysis in Racher v. GMAC Mortgage Corp., No. C-112-95 (Super. Ct., Ch. Div., Burlington County, N.J., Jan. 7, 1997), which held that New Jersey's consumer protection statute applied to GMAC, a mortgage loan servicer, because it may have knowingly acted by not revealing that mortgage insurance would no longer be required. Racher has no precedential value for this court and is readily distinguishable. In Racher, GMAC was the originator of the mortgage and was therefore involved in the sale of real estate for the purposes of the statute. Here, FBS did not provide the initial mortgage to appellant, was not involved in the initial transaction, and was not involved in the sale of real estate.
 Appellant does not assert that FBS misled her.
 We note that this case has no precedential value in Minnesota and it was not published in the Federal Supplement.
 A recently enacted Minnesota law requires the lender to notify the borrowers of their right to cancel their PMI insurance, indicating that the legislature feels that the notification responsibilities lie with the lender. Minn. Stat. § 47.20, subd. 14(e) (Supp. 1997). The statute was created after this litigation began.