Opinion
No. 30326-4-II.
Filed: May 25, 2004. UNPUBLISHED OPINION
Appeal from Superior Court of Clark County. Docket No: 01-2-05026-9. Judgment or order under review. Date filed: 04/28/2003. Judge signing: Hon. John P Wulle.
Counsel for Appellant(s), Donald Arrington Greig, Landerholm Law Office, 915 Broadway, PO Box 1086, Vancouver, WA 98666-1086.
Counsel for Respondent(s), Stephen Garrett Leatham, Heurlin Potter Jahn Leatham Holtmann, 211 E Mcloughlin Blvd Ste 100, PO Box 611, Vancouver, WA 98666-0611.
Michael McDonald, doing business as McDonald Excavating Inc., sued Riverview Community Bank and its loan officer Kirk Hunter, alleging negligent misrepresentation. The trial court granted summary judgment in favor of Riverview and Hunter. McDonald appeals, arguing various trial court errors. We reverse and remand
FACTS
On March 1, 1999, McDonald submitted a $660,300 excavation bid on a subdivision project owned by Douglas Ray. Ray's engineers told McDonald that he had submitted the lowest bid. McDonald and Ray then entered into negotiations for the excavation and construction work.
McDonald wanted to confirm that Ray had sufficient funds to pay for the work. Ray directed McDonald to Riverview's loan officer Kirk Hunter. Ray authorized Hunter to provide project financing assurance to McDonald. McDonald called Ray several times seeking assurances that he would be paid for the work.
On November 8, Hunter sent a telefacsimile to McDonald noting that 'This is to confirm that Mr. Ray does have a loan approved for a line of credit. The details of the loan are confidential of course but the loan is approved and documents will be signed this week.' Clerk's Papers (CP) at 14. According to McDonald, Hunter told him before he sent the telefacsimile that Ray's financial strength was 'overwhelming' and that the loan amount was 'not quite as much as your contract, but very close.' CP at 265.
At the time, Hunter had a copy of McDonald's and Ray's approximately $660,000 contract. Hunter also knew that the property had a pre-existing $450,000 lien on it for earlier unpaid excavation work.
Hunter later claimed that he sent McDonald the telefacsimile relying on representations made by Ed Fogg of Fogg Mortgage, the co-broker, and Lynn Irons of Seattle Funding Group (SFG), the lender. Apparently though, various other lenders declined Ray's applications before SFG approved the loan.
The same day that McDonald received Hunter's telefacsimile, McDonald met with Ray and signed a construction agreement for the excavation work. McDonald began work on November 9 and Ray paid him during the next two months.
But on February 15, 2000, Ray failed to make the payment due to McDonald. On February 16, McDonald stopped work on the project. Ray could not secure additional construction financing and filed for bankruptcy. Ray ultimately lost the property when the bank foreclosed. Ray then owed McDonald Excavating approximately $375,000 for its excavation work.
McDonald sued Riverview and Hunter, (collectively Riverview) alleging negligent misrepresentation. Riverview moved for summary judgment, arguing that McDonald could not establish a negligent misrepresentation claim. McDonald moved to strike as hearsay portions of Hunter's testimony and also moved to strike portions of Riverview's briefing because it relied on unpublished case law.
The trial court denied McDonald's motions to strike and granted Riverview's motion for summary judgment. McDonald appeals.
ANALYSIS Negligent Misrepresentation
McDonald contends that the trial court erred in granting summary judgment. He asserts that questions of fact remain on his negligent misrepresentation claim.
We review an order of summary judgment de novo, engaging in the same inquiry as the trial court. Boag v. Farmer's Ins. Co., 117 Wn. App. 116, 121, 69 P.3d 370 (2003). A court should grant summary judgment when no rational fact finder could find for the nonmoving party based on the evidence before the court when viewed in the light most favorable to the nonmoving party. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). A court grants summary judgment only when reasonable minds could not differ that the pleadings, affidavits, depositions, and admissions on file demonstrate the absence of any genuine issues of material fact. CR 56(c).
We analyze a negligent misrepresentation by asking whether: (1) the defendant made a negligent misrepresentation; (2) a party relied on the misrepresentation causing the party harm; and (3) the party was justified in relying on the misrepresentation. Restatement (Second) of Torts sec. 552 (1977); Lawyers Title Ins. Corp. v. Baik, 147 Wn.2d 536, 545, 55 P.3d 619 (2002). If McDonald can demonstrate that material issues of fact remain on these questions, his claims survive summary judgment. We address each question in turn.
'Washington has adopted the Restatement (Second) of Torts with respect to the elements of negligent misrepresentation.' ESCA Corp. v. KPMG Peat Marwick, 135 Wn.2d 820, 826, 959 P.2d 651 (1998).
Negligence
McDonald asserts that Riverview negligently supplied him with false information knowing that he would rely on it. We agree that issues of fact remain on this element.
On October 21, 1999, SFG pre-approved Ray for a loan. In his deposition, Hunter testified that on November 8, he received verbal confirmation from Irons and Fogg that SFG approved Ray for a $400,000 loan. Hunter was incorrect as SFG had approved only a $285,000 loan.
On November 8, Hunter sent McDonald a telefacsimile indicating that Ray had a line of credit loan approved for an undisclosed amount. Also, prior to sending the telefacsimile, Hunter told McDonald that Ray's financial strength was 'overwhelming' and that the loan was 'very close' to the amount of McDonald's contract with Ray. CP at 265.
Riverview may dispute whether Hunter negligently supplied McDonald with false information, but clearly a factual question remains regarding what Hunter knew about the loan specifics and about Ray's ability to pay McDonald. Hunter told McDonald that Ray had a loan for an amount close to McDonald's contract price and that Ray's financial strength was 'overwhelming.' McDonald could reasonably have believed that Ray could pay him for the work, based on Hunter's representations. According to McDonald, Hunter knew that McDonald would rely on his information. In his deposition, McDonald testified that when he first spoke with Hunter, he said: I'm Michael McDonald with McDonald Excavating. Mr. Doug Ray had given me your name as the contact person for the lending institution for this project at Riverview Terrace. I wanted to go through this process and make sure I understand your billing procedures and how I'm going to get paid for this work that I do. CP at 262. If Hunter knew that Ray could not pay him, or knew that he did not have all of the information, then he made a negligent representation to McDonald.
Riverview argues that 'Hunter was only secondarily 'in the loop' regarding Ray's financing efforts through SFG' and that Fogg acted as the primary intermediary between Ray and SFG. Respondent's Brief at 27. Accordingly, Riverview argues that Hunter could not be negligent because he had no reason not to believe what he had been told. But according to McDonald, Hunter also told him that Ray's financial strength was 'overwhelming' and that he had a loan 'close' to the amount of McDonald's contract. A question of material fact precludes summary judgment.
Reliance and Harm
McDonald also asserts that he relied on Hunter's negligent misrepresentation to his detriment. McDonald testified that he relied on Hunter's representations regarding Ray's loan when he decided to work for Ray. McDonald also met with Ray and signed a construction agreement immediately after receiving Hunter's telefacsimile informing him about Ray's loan approval.
Riverview does not dispute that McDonald relied on Hunter's representation. Instead, it argues that Hunter's statements did not proximately cause McDonald's loss. Specifically, Riverview asserts that Ray's failure to pay was an independent, intervening, cause and Hunter's representation 'had nothing to do' with Ray's decision. Respondent's Brief at 26. We disagree. McDonald testified that he would not have begun work without a guarantee of financial backing from Hunter. Thus, a fact finder could decide that Hunter's misrepresentation caused McDonald to begin work and therefore to suffer a loss.
Riverview also argues that because McDonald first sued Ray to cover his losses, McDonald acknowledges that Hunter did not cause McDonald's loss. Riverview offers no legal authority for this proposition, and we do not consider it. RAP 10.3.
Justifiable Reliance
Although Riverview does not dispute that McDonald relied on Hunter's statements, it nevertheless asserts that because McDonald did not take steps to assure that Ray could pay for the excavation, he unjustifiably relied on Hunter's statements.
Specifically, Riverview argues that McDonald could have (1) investigated or discussed Ray's financial situation with him; (2) asked the first contractor why it stopped work on the project and whether it had been paid; (3) checked for liens and encumbrances on the property; (4) required Ray to warrant the existence of adequate financing in the construction contract; (5) asked Ray who was lending him funds; (6) asked Ray for the loan amount; (7) asked Ray whether the loan was dedicated to pay charges; or (8) required that the funds be placed in escrow.
Generally, whether a party justifiably relied on a misrepresentation is a question of fact unless reasonable minds could not differ. Esca Corp. v. KPMG Peat Marwick, 135 Wn.2d 820, 832, 959 P.2d 651 (1998). In Esca, our Supreme Court noted that contributory negligence no longer bars recovery in tort actions, including negligent misrepresentation actions. 135 Wn.2d at 830.
To establish that McDonald did not justifiably rely on Hunter's statements such that reasonable minds could not differ, Riverview must show that McDonald's reliance was unjustified because of something other than McDonald's failure to take other steps. Unlike in Esca, the information Hunter provided McDonald did not contain disclaimers and warnings as to its accuracy. Here, the telefacsimile indicated that Hunter could provide no additional information (although according to McDonald, Hunter had already given prior verbal assurances) but implied that he provided accurate information. Finally Hunter testified via deposition that he felt McDonald reasonably relied on his representations. Accordingly, an issue of material fact remains as to whether McDonald justifiably relied on Hunter's representations. Citation to Unpublished Opinions
McDonald also contends that the trial court should have stricken portions of Riverview's briefing that cited unpublished opinions. Because we reverse the summary judgment on other grounds, we do not further address this argument. We do, however, note that we view any citation to or reliance on unpublished opinions as improper. Skamania County v. Woodall, 104 Wn. App. 525, 536 n. 11, 16 P.3d 701, review denied, 144 Wn.2d 1021 (2001); RAP 10.4(h).
Hearsay
McDonald further contends that the trial court erred in denying his motion to strike portions of Hunter's deposition testimony as hearsay. McDonald argues that Hunter's testimony that he had conversations with Fogg and Irons confirming a $400,000 SFG loan to Ray is hearsay. Although we reverse the summary judgment order on other grounds, we address this issue as it may arise during further proceedings.
We review a trial court's evidentiary rulings for abuse of discretion. Eagle Group, Inc. v. Pullen, 114 Wn. App. 409, 416, 58 P.3d 292 (2002), review denied, 149 Wn.2d 1034 (2003). A trial court abuses its discretion when it bases its decision on untenable grounds or gives untenable reasons. Loeffelholz v. Citizens for Leaders with Ethics Accountability Now (C.L.E.A.N.), 119 Wn. App. 665, 690, 82 P.3d 1199 (2004).
The evidence rules define hearsay as 'a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.' ER 801(c). If the statement is not offered for the proof of its truth, it may be admissible. ER 801. Thus, we look to the context of Hunter's testimony to determine whether his statements were offered for their truth.
McDonald asserts that the statements were hearsay because Riverview argued that the information passed on to (and later through) Hunter was not false. But McDonald misunderstands and merges Riverview's two arguments into one. A negligent misrepresentation claim requires that McDonald show that Hunter negligently passed false information to McDonald. Hunter's statements do not comprise hearsay when offered in an attempt to show that Hunter did not act negligently.
The statements might be hearsay if offered only to show the information's truth.
Here, Hunter's testimony about his conversation with Fogg and Irons relates to showing that Hunter negligently obtained or communicated false information. Thus, it is not hearsay as it is not offered for the truth of the matter asserted. See Thompson v. Peninsula Sch. Dist. No. 401, 77 Wn. App. 500, 503, 892 P.2d 760 (1995) (holding that where the District withheld payroll funds in reliance on information from the Department of Labor and Industries (LI), the LI information was not offered for the truth of the matter asserted as it showed the District's state of mind in deciding not to pay). Accordingly, the trial court did not abuse its discretion when it refused to strike portions of Hunter's statements.
Reversed and remanded for further proceedings. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
BRIDGEWATER, J. and ARMSTRONG, J., concur.