Baker Boyer National Bank v. JPF Enterprises, LLC
2019 ND 76
| N.D. | 2019Background
- Baker Boyer loaned $1,077,600 to JPF Enterprises to buy 30 mobile homes from Vindans LLC; Foust (JPF owner) provided a personal guaranty.
- Foust alleged Baker Boyer (through loan officer Sentz) represented projected rental revenues much higher than prior rents and required a management/lease agreement with Greenflex Housing as a loan condition.
- Sentz initially emailed that financing was "no longer a viable possibility," then later revived financing consideration; Baker Boyer never mailed a declination letter.
- JPF defaulted in 2015; Baker Boyer sought possession and a money judgment; district court awarded Baker Boyer $858,135.47 on its breach of contract claim.
- JPF counterclaimed for fraud in the inducement, alleging Baker Boyer failed to disclose material information and breached a fiduciary duty; district court granted summary judgment for Baker Boyer, dismissing the counterclaim.
- On appeal, the Supreme Court affirmed, concluding JPF failed to raise a genuine issue of material fact that a fiduciary relationship or special circumstances existed to support constructive fraud.
Issues
| Issue | Plaintiff's Argument (Baker Boyer) | Defendant's Argument (JPF) | Held |
|---|---|---|---|
| Whether special/fiduciary relationship existed between lender and borrower | Relationship was ordinary lender-borrower; no fiduciary duty | Bank assumed special role (unique underwriting, required Greenflex), creating fiduciary duty | No fiduciary relationship as a matter of law; summary judgment affirmed |
| Whether failure to send declination letter created duty or actionable fraud | No adverse action requiring a declination; no duty arose | Failure to send declination under 15 U.S.C. §1691(d) evidences nondisclosure and duty | No duty created; lack of declination did not establish fiduciary duty |
| Whether loan officer’s communications established a "rogue" actor or special circumstances | Communications reflect normal underwriting, not domination or control | Sentz’s emails and conduct show more-than-ordinary involvement | Evidence did not show day-to-day control or domination; not a "rogue" loan officer case |
| Whether requiring a management/lease agreement converted ordinary underwriting into control | Requiring competent management is normal underwriting, not control | Requiring Greenflex as condition imposed operational control and dependence | Conditioning loan on a management agreement is a normal underwriting requirement and does not create a fiduciary relationship |
Key Cases Cited
- Am. Bank Ctr. v. Wiest, 793 N.W.2d 172 (N.D. 2010) (fiduciary relationship may arise where lender’s conduct goes beyond ordinary lending; loan officer’s special role can impose duty of disclosure)
- Wenco v. EOG Res., Inc., 822 N.W.2d 701 (N.D. 2012) (summary judgment standard and review explained)
- Union State Bank v. Woell, 434 N.W.2d 712 (N.D. 1989) (bank–customer relationship is ordinarily debtor–creditor; fiduciary duty requires domination/control and borrower’s dependence)
- Erickson v. Erickson, 782 N.W.2d 346 (N.D. 2010) (actual vs. constructive fraud distinctions and consent requirements)
- First Nat’l Bank & Trust Co. v. Brakken, 468 N.W.2d 633 (N.D. 1991) (existence of fiduciary relationship depends on special circumstances)
- Baker Boyer Nat’l Bank v. Foust, 431 P.3d 131 (Wash. Ct. App. 2018) (applying similar facts: experienced business owner, underwriting conditions, and no fiduciary duty of disclosure)