This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Filed April 17, 2001
Philip K. Jacobson, 220 South Sixth Street, Suite 215, Minneapolis, MN 55402 (for appellant)
U N P U B L I S H E D O P I N I O N
Appellant Brian Kyllonen challenges the trial court’s determination that he was liable for misrepresenting the condition of the roof on a house he sold to respondents Darrick and Ann Olson. Because we conclude that the trial court erred when it construed the statement at issue to have the same effect as if it were a warranty, we reverse.
On January 17, 1999, the Olsons entered into an agreement to purchase a house from Kyllonen. The purchase agreement contained a number of statements concerning the condition of the property. The purchase agreement reads: “Seller has/has not had a wet basement and has/has not had roof, wall or ceiling damage caused by water or ice build-up.” The statement was boilerplate language in an Edina Realty purchase agreement form; the seller was to circle either “has” or “has not.” Kyllonen circled “has not” as to whether he had had roof, wall, or ceiling damage caused by water or ice build-up.
The sale was subject to the buyers’ right of inspection. The Olsons retained an inspector, who conducted an inspection of the house on January 22, 1999. The inspector was not able to inspect the roof because it was snow-covered. The parties closed on the house on March 22, 1999.
In April 1999, when snow and ice melted, Darrick Olson observed that shingles on the roof had substantially deteriorated, with granules having fallen off or been washed away. The Olsons received an estimate that it would cost $7,795 to replace the roof. The Olsons sued Kyllonen in conciliation court for misrepresentation and obtained a judgment of $7,530, which was stayed. Kyllonen removed the case to district court. The district court held a trial on May 15, 2000, at which three witnesses testified: Darrick Olson; Kevin Laleman, the Olsons’ inspector; and Edward Betker, an expert witness called by Kyllonen. Kyllonen did not testify.
Darrick Olson testified that the roof was “one of our biggest concerns” and that he and his wife had relied on Kyllonen’s representation in the purchase agreement when the Olsons raised the price they were willing to pay. Laleman, the Olsons’ inspector, testified that he was not able to do a complete review of the roof and its condition at the time of the January 1999 inspection because it was snow covered. He re-inspected the roof the week before the district court trial, and described the granular deterioration. He testified that the roof was at or near the end of its useful life, estimating the roof to be 18 years old. He further testified that there had been some ice damage to the roof. Betker, Kyllonen’s expert, who had inspected the roof several months before trial, testified that he did not observe any damage to the roof caused by ice or water build-up. Rather, he testified that the roof “was deteriorated from normal long-term weathering conditions.”
In a June 13, 2000, order, the trial court ordered a $7,550 judgment against Kyllonen. The trial court’s memorandum explained that the 11 elements for fraud had been satisfied. The court found that “the roof was damaged by water or ice build-up[,]” and concluded that the statement in the purchase agreement — that the house had not had roof damage by water or ice build-up — was false. The court ruled that Kyllonen had a duty to disclose the actual condition of the roof.
In a September 5, 2000, order, the trial court denied Kyllonen’s motion for a new trial or amended findings. The trial court reiterated its finding that the roof had been damaged by water or ice build-up, and noted that there was testimony that the damage could have been caused by repeated cycles of freezing and thawing, and wetting and drying of shingles. At no time did the court make a specific finding as to whether the damage was caused by water or whether it was caused by ice build-up. The trial court further noted that its conclusion that Kyllonen
had misrepresented the condition of the roof * * * was also based on the principle that even if the disclosure statement, by its written terms, did not require disclosure of the damaged condition of the roof, the law imposes a duty on Defendant to disclose the actual condition of the roof so as not to render misleading any disclosure statement given to Plaintiff.
The trial court also addressed Kyllonen’s argument that the damages awarded were excessive, ruling that the cost of a replacement roof was an accurate measure of damages. Kyllonen appeals.
On appeal from a denial of a motion for a new trial, the verdict must stand unless it is manifestly and palpably contrary to the evidence, viewed in a light most favorable to the verdict.
ZumBerge v. N. States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992), review denied (Minn. Apr. 29, 1992).
The existence of a duty is generally a question of law. Sandborg v. Blue Earth County, 615 N.W.2d 61, 62 n.2 (Minn. 2000). The construction and effect of a contract are also questions of law. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). Whether a contract is ambiguous (reasonably susceptible to more than one construction) is a question of law, which the appellate court reviews de novo. Blackburn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643-44 (Minn. App. 1985), review denied (Minn. June 24, 1985).
Kyllonen argues the trial court erred in holding him liable for misrepresentation. A misrepresentation claim generally requires a plaintiff to prove that the defendant (1) made a representation (2) that was false (3) having to do with a past or present fact (4) that is material (5) and susceptible of knowledge (6) that the representer knows to be false or asserts without knowing whether the fact is true or false (7) with the intent to induce the other person to act (8) and the person in fact is induced to act (9) in reliance on the representation (10) that the plaintiff suffered damages (11) attributable to the misrepresentation. Florenzano v. Olson, 387 N.W.2d 168, 174 n.4 (Minn. 1986). Here, the trial court determined that all 11 elements had been satisfied.
The law recognizes three types of fraudulent misrepresentation: deceit, reckless misrepresentation, and negligent misrepresentation. Williams v. Tweed, 520 N.W.2d 515, 517 (Minn. App. 1994) (citing Florenzano, 387 N.W.2d at 177 (Simonett, J., concurring specially)), review denied (Minn. Oct. 27, 1994). As a general rule, fraud is not presumed, but must be affirmatively proved. Parrish v. Peoples, 214 Minn. 589, 591, 9 N.W.2d 225, 227 (Minn. 1943).
Deceit is an intentional tort, requiring scienter. See Florenzano, 387 N.W.2d at 173. It covers cases where the person making the statement knows that the statement is false, i.e., the person is lying. “There is no doubt of fraudulent intent when the misrepresenter knows or believes the matter is not as he or she represents it to be.” Id. (emphasis added). In the present case, Kyllonen did not testify, and there is no evidence as to what he knew or believed. The trial court did not make any findings as to his state of knowledge or belief. As a result, the record cannot support a decision based on deceit.
Reckless misrepresentation is an intentional tort, also requiring scienter, but of a different kind from the scienter present in deceit. See id. Reckless misrepresentation is defined by a statement in Florenzano, which was quoted by the trial court in the present case:
Fraudulent intent is also present when a misrepresenter speaks positively and without qualification, but either is conscious of ignorance of the truth, or realizes that the information on which he or she relies is not adequate or dependable enough to support such a positive, unqualified assertion.
Id. (emphasis added). The words, “conscious of,” and “realizes,” both bespeak a state of mind on the part of the person making the statement. As noted above, in the present case there was no evidence in the record, and no finding by the trial court, concerning what Kyllonen was conscious of or what he may have realized at the time he made the statements at issue. Hence, the record cannot support a decision based upon reckless misrepresentation.
Negligent misrepresentation may occur if a person, having a pecuniary interest in a transaction, supplies false information for the guidance of others in connection with the transaction and “fails to exercise reasonable care or competence in obtaining or communicating the information.” Colangelo v. Norwest Mortg., Inc., 598 N.W.2d 14, 19 (Minn. App. 1999) (quoting Bonhiver v. Graff, 311 Minn. 111, 122, 248 N.W.2d 291, 298 (1976)) (emphasis added), review denied (Minn. Oct. 21, 1999). The essential elements of negligent misrepresentation are (1) the defendant owed a duty of reasonable care to the person to whom the information is provided, Smith v. Woodwind Homes, Inc., 605 N.W.2d 418, 424 (Minn. App. 2000), and (2) the defendant failed to exercise reasonable care in obtaining or communicating the information. Colangelo, 598 N.W.2d at 19. In the present case, the trial court imposed a duty upon Kyllonen. However, there is no evidence and no finding on the issue of whether or not Kyllonen exercised reasonable care in attempting to ascertain the condition of the roof. As to what may have constituted such reasonable care, it is well to bear in mind that the Olsons’ professional inspector, Laleman, testified he could not inspect the roof because it was covered by snow and ice. In any case, without a finding that Kyllonen failed to exercise reasonable care, the trial court’s decision cannot rest on negligent misrepresentation.
We conclude that what the trial court did in effect was to construe the statement at issue to be a warranty. In its original order, the trial court stated, “In addition, given the apparent ambiguity of the disclosure statement, Kyllonen had a duty to disclose the actual condition of the roof.” (Emphasis added.) In its opinion denying post-trial relief, the court stated:
However, the Court’s conclusion that the Defendant had misrepresented the condition of the roof to the Plaintiff was also based on the principle that even if the disclosure statement, by its written terms, did not require disclosure of the damaged condition of the roof, the law imposes a duty on Defendant to disclose the actual condition of the roof so as not to render misleading any disclosure statement given to Plaintiff.
(Emphasis added.) As previously noted, there was neither evidence nor a finding concerning what Kyllonen knew when he made the statement. Nor was there any evidence or finding that he failed to exercise due care to learn and disclose the true condition of the roof. Given the state of the record, the only way Kyllonen could be held liable for making the statement, “Seller has not had roof damage caused by water or ice build-up,” would be if he had actually warranted that there was no such damage. Thus, when the trial court ruled that Kyllonen had a duty to disclose the “actual condition” of the roof, the court effectively ruled that he warranted that there was no such damage to the roof.
A review of the purchase agreement language reveals that where statements are intended to be a warranty, it is clearly indicated. For instance, in line 132, seller “warrants” that the property is directly connected to city sewer and city water. Similarly, in line 142, seller “warrants” that heating, plumbing, and wiring systems will be in working order on date of closing except as noted. In contrast, the statement at issue in this case does not indicate any warranty. We conclude that the trial court erred as a matter of law by construing the disclosure statement to have the same effect as if it were a warranty. We reverse and order judgment for Kyllonen. Given our decision, it is not necessary to address Kyllonen’s argument concerning damages.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.