This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. 480A.08, subd. 3 (1996).

STATE OF MINNESOTA

IN COURT OF APPEALS

C1-97-2090

Michael P. Zwiefel, et al.,

Appellants,

vs.

Barton H. Schmidt, et al.,

defendants and third-party plaintiffs,

Respondents,

vs.

Marsha Peterson, et al.,

Third-Party Defendants.

Filed June 30, 1998

Reversed and remanded

Amundson, Judge

Dakota County District Court

File No. C3-96-8245

James T. Hynes, Stapleton, Nolan, Hynes & McMcloughan, P.A., 2300 Firstar Center, St. Paul, MN 55101 (for appellants)

Ronald J. Riach, Franke & Riach, P.A., 200 Rosedale Towers, 1700 West Highway 36, Roseville, MN 55113 (for respondents)

Robert G. Haugen, Johnson & Lindberg, P.A., 8500 Normandale Lake Blvd., Suite 1610, Minneapolis, MN 55437-3828 (for third-party defendants)

Considered and decided by Peterson, Presiding Judge, Amundson, Judge, and Shumaker, Judge.

U N P U B L I S H E D O P I N I O N

AMUNDSON, Judge

Appellants challenge summary judgment in favor of respondents and third-party defendants on appellants' claims of fraudulent misrepresentation, negligent misrepresentation, and violation of the Minnesota Consumer Fraud Act. We reverse the grant of summary judgment and remand.

FACTS

In the fall of 1993, appellants Michael P. Zwiefel and Colleen M. Moran purchased a home from respondents Barton H. and Barbara J. Schmidt. Prior to execution of the purchase agreement, appellants were given a written statement indicating that the area surrounding the home had been a dumping area for rubber deposits. Respondents, however, verbally stated that the rubber deposits on the property were "not significant" and had "no unusual affects [sic] [on the property] whatsoever." Beginning in the summer of 1994 and continuing through that fall, the rubber deposits presented a significant obstacle for appellants when constructing a new deck and retaining wall. Appellants later learned that respondents had encountered similar difficulties.

In 1995, appellants moved for rescission of the purchase agreement or alternatively for damages arising out of respondents' fraudulent and/or negligent misrepresentation as to the rubber deposits and for violation of the Minnesota Prevention of Consumer Fraud Act. See Minn. Stat. 325F.69 (1994). Respondents subsequently brought a third-party action against their realtor, Marsha Peterson, and against JS Investments, Inc., and SL&M Properties, Inc., both doing business as Coldwell Banker American Heritage (Coldwell Banker), for failing to advise them of their obligation to disclose their full knowledge of the rubber deposits.

Both respondents and Peterson moved for summary judgment. The district court granted both motions and dismissed appellants' action with prejudice. This appeal followed.

D E C I S I O N

On review of a grant of summary judgment, this court determines whether any genuine issues of material fact exist and whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). This court must view the evidence in a light most favorable to the party against whom judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

Misrepresentation

To establish a prima facia case of fraud, a party must show that:

(1) there was a false representation by a party of a past or existing material fact that is susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made as of the party's own knowledge without knowing whether it was true or false; (3) with the intention to induce another to act in reliance thereon; (4) that the representation caused the other party to act in reliance thereon; and (5) that the party suffer pecuniary damage as a result of the reliance.

Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 532 (Minn. 1986). To establish a prima facia case for negligent misrepresentation, a party must show that: (1) the defendant had a pecuniary interest in the transaction; (2) the defendant supplied false information for the guidance of others; and (3) the information was reasonably and justifiably relied upon to the pecuniary loss of others. Bonhiver v. Graff, 311 Minn. 111, 121-22, 248 N.W.2d 291, 298-99 (1976).

While the district court based its grant of summary judgment in large part on the fact that appellants admitted that respondents' use of the word "significant" was an opinion, the district court erred by stating that an opinion could not be relied on as a misrepresentation of material fact.

An opinion may be the basis of fraud if it is reasonably understood and relied upon by the representee to be a statement of fact. Kennedy v. Flo-Tronics, Inc., 274 Minn. 327, 329, 143 N.W.2d 827, 828 (1966). In Kennedy, the court held that a defendant may be liable for misrepresentation based on an opinion of future value or future profits. A fraud case requires the defendant to have superior knowledge of the subject that justifies the plaintiff's reliance on the defendant's opinion. 1

See id. at 333, 143 N.W.2d at 831; see also Midland Nat'l Bank v. Perranoski, 299 N.W.2d 404, 412-13 (Minn. 1980) (opinion as to future value may be actionable if the one making statement is relied upon for expertise with respect to subject of statement).

The district court concluded that appellants had not relied on respondents' characterization of the rubber deposits because appellants, through their realtor and private housing inspector, conducted their own investigation. The Minnesota Supreme Court, however, has held that

if the buyer, instead of investigating as fully as he might, made only a partial investigation, and relied in part upon such investigation and in part upon the representations of the adverse party, and was deceived by such representations to his injury, he may maintain an action for such deceit. * * * An independent investigation without more may suggest, but does not establish, nonreliance.

Berryman v. Riegert, 286 Minn. 270, 277, 175 N.W.2d 438, 444 (1970) (citations omitted).

The extent to which appellants relied on respondents' statement is a material fact for the jury to determine. See id. at 278, 175 N.W.2d at 443 (question of reliance ordinarily for jury to decide).

Here, the jury may have found either that appellants reasonably understood respondents' opinion to be a statement of fact or that appellants reasonably relied on respondents' statement. Appellants presented uncontroverted evidence that respondents had more knowledge of the rubber deposits than they disclosed, in contrast to appellants, who had limited knowledge. The district court erred in granting summary judgment.

Minnesota Consumer Fraud Act

Negligent or unintentional misrepresentation violates the Minnesota Prevention of Consumer Fraud Act. See Church of the Nativity of Our Lord v. WatPro, Inc., 474 N.W.2d 605, 612 (Minn. App. 1991) (act not limited to cases of intentional wrongdoing), aff'd, 491 N.W.2d 1 (Minn. 1992). Therefore, the success of appellants' consumer fraud claim is contingent on the outcome of their misrepresentation claims.

Reversed and remanded.