924 N.W.2d 381
N.D.2019Background
- Baker Boyer loaned $1,077,600 to JPF Enterprises to buy 30 mobile homes from Vindans; Foust personally guaranteed the loan.
- JPF defaulted in November 2015; Baker Boyer sued to repossess collateral and obtain money judgment; district court awarded $858,135.47 to Baker Boyer.
- JPF counterclaimed for fraud in the inducement, alleging Baker Boyer (through loan officer Sentz) failed to disclose Vindans’ financial/asset problems and misrepresented rental income projections.
- JPF asserted a fiduciary duty existed because Baker Boyer: (1) required JPF to contract with Greenflex to manage/rent the homes; and (2) failed to send a declination letter after initially telling Foust financing was not viable.
- The district court granted summary judgment for Baker Boyer on both its contract claim and JPF’s fraud counterclaim, finding no genuine issue that a fiduciary relationship existed.
Issues
| Issue | Plaintiff's Argument (Baker Boyer) | Defendant's Argument (JPF) | Held |
|---|---|---|---|
| Whether special circumstances created a fiduciary duty making nondisclosure actionable | Relationship was an ordinary lender-borrower; no control or day-to-day involvement | Bank’s underwriting, insistence on Greenflex management, and communications created special circumstances and fiduciary duty | No fiduciary duty; ordinary lending relationship as a matter of law |
| Whether requiring a management/lease agreement converted lender role into control | Requiring competent management is a normal underwriting condition, not control | Requirement of Greenflex showed bank exercised control over operations | Requirement was a normal underwriting term; did not create fiduciary relationship |
| Whether failure to send a declination letter gave rise to duty or constructive fraud | No adverse action requiring an adverse action notice; letter omission doesn’t create fiduciary duty | Failure to disclose initial declination and reasons showed nondisclosure and breached duty | Omission of declination letter did not create fiduciary duty or support fraud claim |
| Whether there was sufficient evidence to survive summary judgment on fraud-in-the-inducement | Undisputed facts show ordinary lending; JPF produced no admissible evidence of domination, trust, or dependence | Emails and underwriting communications raise triable issues about bank’s role and representations | Summary judgment affirmed; JPF failed to raise genuine issue of material fact on fiduciary duty |
Key Cases Cited
- Am. Bank Ctr. v. Wiest, 793 N.W.2d 172 (N.D. 2010) (special circumstances can create fiduciary duty where loan officer’s role exceeded ordinary functions)
- Wenco v. EOG Res., Inc., 822 N.W.2d 701 (N.D. 2012) (summary judgment standards and review)
- Union State Bank v. Woell, 434 N.W.2d 712 (N.D. 1989) (bank-customer relationship presumptively non-fiduciary; fiduciary requires domination/control)
- First Nat’l Bank & Trust Co. v. Brakken, 468 N.W.2d 633 (N.D. 1991) (existence of fiduciary relationship depends on special circumstances)
- Erickson v. Erickson, 782 N.W.2d 346 (N.D. 2010) (actual vs. constructive fraud and consent to contract)
- Baker Boyer Nat’l Bank v. Foust, 431 P.3d 131 (Wash. Ct. App. 2018) (similar facts; no fiduciary duty where bank’s actions were normal underwriting)