opinion will be unpublished and
may not be cited except as
Minn. Stat. § 480A.08, subd. 3
STATE OF MINNESOTA
IN COURT OF APPEALS
Willmar Unclaimed Freight, Inc.,
Edina Realty, Inc.,
Robert L. Larson, et al.,
Filed July 19, 2005
Affirmed in part, reversed in
part, and remanded
County District Court
File No. CX-03-1365
John E. Mack, Mack
& Daby, P.A., 26 Main Street, P.O. Box 302, New London, MN 56273 (for
Stanford P. Hill,
Anne C. Towey, Kelly A. Putney, Bassford Remele, P.A., 33 South Sixth Street,
Suite 3800, Minneapolis, MN 55402 (for respondent)
and decided by Halbrooks,
Presiding Judge; Lansing,
Judge; and Minge,
U N P
U B L I S H E D O P I N I O N
Appellant challenges summary judgment dismissing its
claims arising out of damage to a commercial building that respondent’s agent
leased to appellant. Because a leasing
agent may be reasonably well informed regarding building codes and because the
misrepresentation regarding “grandfathering” that the agent allegedly made involved
a misrepresentation of law that includes an implied assertion that facts exists
to justify that assertion of law, we reverse in part and remand. Because the district court did not err in
concluding that respondent had no generalized duty to discover and to disclose
to appellant dangerous conditions, we affirm in part.
July 1999, Dawn Holmes inherited property in Willmar, Minnesota,
including the property that is the subject of this action. Holmes, who lives in Nevada, entered into an agreement in May
2000 with Dick Arne to manage the property.
Arne is a real estate broker who has been licensed to sell real estate
since 1976 and is an agent of respondent Edina Realty (Edina).
2002, Arne negotiated a commercial lease for a building on the property with
appellant Willmar Unclaimed Freight, Inc. (WUF). Glenn Smogoleski, one of the owners of WUF,
represented WUF. WUF claims that before
the lease was signed, Smogoleski and Arne visited the building and Smogoleski
asked Arne about leaks in the roof and whether the building complied with the
building code. According to Smogoleski,
Arne replied that although the building would not meet the then-current
building code, it was “grandfathered in” so that it only had to comply with the
code in effect when it was built. Edina states that this
building visit occurred after the lease was signed and denies Arne made this
statement. A lease dated July 31, 2002,
was executed between Holmes and WUF for the period between August 1, 2002, and
August 31, 2004. The lease does not
mention anything about the condition of the building or compliance with
codes. WUF used the building for a
June 24, 2003, the building was damaged in a storm when water leaked through
the roof and walls, causing the ceiling to collapse. The material from the ceiling was determined
to contain asbestos and much of WUF’s inventory was contaminated. After the storm, a fire marshal and building
official inspected the building. They
declared the building unfit for commercial use for many reasons, including
dangers related to the electrical system, the heating unit, the structural
soundness of the second floor, and the inadequacy of the emergency exits and
fire extinguishers. The foregoing conditions
predated the storm.
In August 2003, WUF brought suit against Edina and Holmes to
recover damages arising out of the collapse of the ceiling and contamination of
the inventory. Immediately after discovery
was completed, Edina
moved for summary judgment on WUF’s claims of negligence in leasing the
property and misrepresentation inducing WUF to enter the lease. Edina
argued that it was entitled to summary judgment both because its agent did not
have any duty to inspect the property to discover problems with the building
and because WUF did not rely on any statements made by Arne in entering into the
lease. After a hearing on these issues,
the district court granted Edina’s motion for summary judgment on the following
grounds: (1) any representation by Edina about the property’s grandfathered
compliance with the building codes was a non-actionable misrepresentation of
law; and (2) Edina did not breach any duty to WUF because Edina and Arne, its
agent, did not have a duty to inspect the property, discover dangerous
conditions, and inform appellant of the conditions. WUF moved to reconsider on the duty to inform
issue, objected to the court’s sua sponte raising the defense of non-actionable
issue of law, and requested an opportunity to more fully brief and argue that
issue. The district court denied WUF’s
motion; this appeal follows.
D E C I S I O N
When reviewing summary
judgment, an appellate court asks two questions: (1) are there any genuine
issues of material fact and (2) did the district court err in its application
of the law? State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
Summary judgment is proper when the evidence in the record, including pleadings,
depositions, answers to interrogatories, admissions on file, and affidavits
show that there is no genuine issue of material fact and one party is entitled
to a judgment as a matter of law. Minn. R. Civ. P. 56.03; DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).
“On appeal, the reviewing court must view the evidence in the light most
favorable to the party against whom judgment was granted.” Fabio
v. Bellomo, 504 N.W.2d 758, 761 (Minn.
1993). A genuine issue for trial must be
established by substantial evidence. D.L.H., 566 N.W.2d at 69-70.
The first issue is whether Arne’s alleged statement
that the building was “grandfathered in” was a non-actionable misrepresentation
of law. Generally, misrepresentations of
law are not actionable. Northernaire Prods., Inc. v. County of Crow
Wing, 309 Minn.
386, 388-89, 244 N.W.2d 279, 281 (1976).
However, there are two primary exceptions: (a) where the “person
misrepresenting the law is learned in the field and has taken advantage of the
solicited confidence of the party defrauded,” and (b) where a fiduciary or
other similar relationship exists between the parties. Id.at 389, 244 N.W.2d at 281-82.
for the rule that misrepresentations of law are not actionable is that the law
is presumed to be equally within the knowledge of both parties. Miller v. Osterlund, 154 Minn. 495, 496, 191 N.W.
919, 919 (1923). “Ordinary vigilance
will disclose the truth or falsehood of representations as to matters of law.” State v. Edwards, 178 Minn. 446, 448, 227 N.W. 495, 495
(1929). “[A]n erroneous statement of the
law is regarded as a mere expression of opinion on which the hearer has no
right to rely.” Pieh v. Flitton, 170 Minn.
29, 31, 211 N.W. 964, 965 (1927).
Situations in which misrepresentations of law occur include a party
representing the legal effect of language in a contract, the rights given under
a contract, liability on a certificate of stock in a corporation, the legal
effect of an endorsement, or the interpretation of a zoning ordinance. Northernaire
Prods., 309 Minn. at 388, 244 N.W.2d at
281; Miller, 154 Minn. at 496, 191 N.W. at 919.
A. Mixed Law/Fact
If a misrepresentation of
law includes an implied assertion that facts exist to justify that conclusion
of law, it is actionable as a misrepresentation of fact. Miller,
154 Minn. at
496, 191 N.W. at 919. The court in Miller held that when a foreign
insurance company falsely stated that it had the right to write insurance in Minnesota, this misrepresented factual matters, including
that the company had complied with the Minnesota
laws and had received proper authority to transact business here. Id. at 497,
191 N.W. at 919. Similarly, the court in
Pieh held that where a party selling
land represented to the purchasers that they could purchase the land free of a
statutory reservation of minerals by the federal government, this included an
actionable factual misrepresentation.
at 30-31, 211 N.W. at 964-65. In Simonsen v. BTH Props., this court held
that, in connection with the sale of a six-unit apartment building on a lot
that was only zoned for a five-unit building, because the representation that
the building was in compliance with the law may have included a
misrepresentation of fact, summary judgment was improper. 410 N.W.2d 458, 461 (Minn. App. 1987), review denied (Minn. Oct. 21, 26 1987).
misrepresentation in the present case is the statement allegedly made by Arne
that the building was “grandfathered in.” This alleged statement implied that the building
could be used regardless of current code requirements, presumably because it
met code when it was built. Whether this
is the correct meaning of the phrase “grandfathered in” and whether codes
allowed for “grandfathering” are legal questions. However, the question of whether this
building met the requirements in order to be legally “grandfathered in” is
factual. That type of factual
misrepresentation was the basis for the Simonsen
decision that ruled summary judgment improper.
410 N.W.2d at 461. We conclude
that Arne’s alleged statement is a misrepresentation of law that includes an
implied assertion that facts exist to justify that assertion of law and that
the district court erred to the extent it treated it as entirely a question of
law and granted summary judgment.
B. Learned in the Field
district court also ruled as a matter of law that the alleged statement does
not fall into the exception for a misrepresentation of law by a person learned
in the field who has taken advantage of the solicited confidence of the person
defrauded. Because the parties have
raised and addressed this issue on appeal and its resolution may affect
subsequent proceedings, we will address this issue. In Northernaire
Productions, plaintiffs asked a group of government officials involved with
county zoning and planning whether a permit was necessary to hold a rock
festival on a certain piece of property.
at 387, 244 N.W.2d at 281. The plaintiff
was erroneously told that a permit was not required. Id. The supreme court held that the exception was
not applicable because “there was no allegation that the individual defendants
took advantage of or personally benefited from plaintiffs’ reliance on their
advice.” Id.at 389, 244 N.W.2d at 282. In contrast, the court in Stark v. Equitable Life Assurance Soc’y held
that when an insurance agent told an insured that his disability insurance did
not apply, it was a misrepresentation by one learned in the field who was
taking advantage of the solicited confidence of a person. 205 Minn.
138, 140, 144, 285 N.W. 466, 467, 469 (1939).
the district court stated that there was no evidence that Arne was learned in
the subject of building codes. The
district court relied on the Northernaire
Productions decision, where the misrepresentation about a zoning question
was made by the chair of a county board of commissioners, the chair of a planning
and zoning commission, and a member of a planning and zoning commission. 309 Minn.
at 387, 244 N.W.2d at 281. The supreme
court in Northernaire Productions did
not examine whether the government officials were learned in their field, but
rather found that the exception did not apply because the government officials
did not take advantage of or personally benefit from the misrepresentation. Id. at 389,
244 N.W.2d at 282. Unlike those
officials, Arne and respondent Edina
would benefit from the alleged misrepresentation to WUF because they received a
commission for renting the property and fees for managing it.
The evidence on the record
shows that Arne has been a licensed real estate broker since 1976 and has taken
numerous hours of continuing education. The
court in Stark found that an
insurance agent was clearly learned in the field of insurance policies. 205 Minn.
at 144, 285 N.W. at 469. A real estate
broker who has been licensed and working in this occupation since 1976 is
likely to have knowledge of building codes and occupancy of buildings that is
greater than the general public. In the
absence of specific evidence of actual knowledge, such experience and licensure
at least creates a genuine issue of fact preventing summary judgment on this
issue. This is especially true where
this issue was decided sua sponte by the district court and appellant did not
have a chance to investigate Arne’s knowledge of building codes.
The next issue is whether
Arne and respondent Edina had a general duty to inspect
the property, and to discover and inform WUF about dangerous conditions in the
building and its lack of compliance with the building codes, even if Arne and Edina did not know of
those conditions. WUF cites several bases
for this duty. First, WUF argues by analogy
to a statutory duty to inform a tenant about “citations.” Minn.
Stat. § 504B.195 (2004). However, there
is no evidence of any citations being issued in this case. Furthermore, because this section refers to
“citations” that a “housing inspector” identifies as important, this section applies
to residential leases and not commercial leases. Id.
WUF also urges that there is
a duty to inform based on the statute that requires a real estate agent to
disclose to a prospective purchaser
any material facts about the property of which the agent is aware. Minn. Stat. § 82.22, subd. 8 (2004). However, this statute applies to the purchase
as opposed to the lease of property. Id. More importantly, there is no evidence that
Arne or Edina
knew of any building-code violations on the property or any other material
problems with the property. Thus, this
statutory duty would not apply to them.
WUF also argues that the
Minnesota Supreme Court has determined that landlords may be liable for
dangerous conditions on the premises if the landlord should have known of the
danger and if the tenant, exercising due care, would not discover the danger. Gradjelick
v. Hance, 646 N.W.2d 225, 231 (Minn. 2002). The Gradjelick
case is factually distinguishable because the present case involves a
commercial rather than a residential lease, and the leasing agent rather than
the owner is being sued. Id. The agent will not have the detailed
experience with property that is necessary to create a “should have known”
Even if Edina
had a duty to discover and disclose dangerous conditions in the building, there
is no evidence that Arne or Edina
was aware of any of these conditions. WUF
gives no reason why an agent leasing commercial property has a duty to inspect
the premises for dangerous conditions. We
conclude the district court did not err in dismissing the claim that Arne and Edina had a duty to inspect the premises in
order to discover dangerous conditions and make a disclosure to WUF.
Affirmed in part, reversed in part, and