728 F.3d 832
8th Cir.2013Background
- In 2006 the Roerses contracted to buy a property described (and appraised by LandSafe) as a 45-acre ranch for about $4.1M; Countrywide provided financing.
- Cynthia mortgaged three separately owned nonmarital parcels (total encumbrance $1,146,800) to help secure the purchase after Countrywide allegedly assured them the front 20 acres could be subdivided and sold to pay those debts.
- Closing occurred but the deed only conveyed the rear 25 acres; the front 20 acres remained with the seller. The Roerses later settled with the seller; the front 20 acres were not sold.
- Cynthia sued Countrywide (and LandSafe) for misrepresentation and sought rescission of the mortgages on her nonmarital properties based on mutual mistake; Alan sued for negligent misrepresentation, breach of fiduciary duty, and rescission of all four mortgages.
- The district court granted summary judgment for Countrywide on all claims; the Roerses appealed. The Eighth Circuit affirmed on the misrepresentation and fiduciary-duty claims but reversed and remanded as to rescission of the mortgages on Cynthia’s nonmarital properties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mutual mistake permits rescission of mortgages on Cynthia's nonmarital properties | Roerses: both parties mutually mistaken that entire 45-acre ranch (including front 20 acres) was being conveyed and financed; mistake was basic and material, making contract voidable | Countrywide: mortgage is a financial instrument independent of exact metes-and-bounds; mistake only affected value, not basic assumption; Roerses are not the adversely affected party | Reversed and remanded: factual dispute exists on whether acreage was a basic assumption and material; Roerses may be adversely affected and entitled to seek rescission under Restatement §152(1) — factfinder must decide |
| Whether Ennen/Countrywide owed a duty of care (negligent misrepresentation) or a fiduciary duty | Alan: Ennen fostered a special relationship by "quarterbacking" the deal, inducing Cynthia to encumber her properties, and assuring subdividability | Countrywide: general rule — lenders owe no fiduciary duty; no evidence of the special fiduciary factors (trust, superiority, confidential relationship, disparate business sophistication) | Affirmed for Countrywide: no duty shown; summary judgment proper on negligent misrepresentation and breach of fiduciary duty claims |
| Whether other claims were preserved on appeal (intentional/negligent misrepresentation; rescission of ranch mortgage) | Roerses: appealed district court's summary judgment generally | Countrywide: those issues were disposed below; appellant must assign specific error | Held: Roerses waived issues not argued on appeal; court affirmed district court as to those unbriefed claims |
| Standard for summary judgment and allocation of factual issues on rescission claim | Roerses: factual disputes (appraisals, assurances, expectations) preclude summary judgment on rescission | Countrywide: argued no genuine dispute on legal requirements for rescission | Held: applied de novo review; factual disputes exist as to mutual mistake materiality and adverse effect, so remand required |
Key Cases Cited
- Jaurequi v. Carter Mfg. Co., 173 F.3d 1076 (8th Cir. 1999) (standard of review for summary judgment)
- Dush v. Appleton Elec. Co., 124 F.3d 957 (8th Cir. 1997) (viewing evidence for summary judgment)
- F.D.I.C. v. Bell, 106 F.3d 258 (8th Cir. 1997) (summary judgment standards and evidentiary view)
- Winter v. Skoglund, 404 N.W.2d 786 (Minn. 1987) (adopting Restatement (Second) of Contracts §152 for mutual mistake)
- Aronovitch v. Levy, 56 N.W.2d 570 (Minn. 1953) (existence of mutual mistake is a question of fact)
- Gartner v. Eikill, 319 N.W.2d 397 (Minn. 1982) (materiality requires mistake to go to the nature of the property)
- Sheng v. Starkey Labs., Inc., 117 F.3d 1081 (8th Cir. 1997) (misconception must be more than value error to void contract)
- Florenzano v. Olson, 387 N.W.2d 168 (Minn. 1986) (elements of negligent misrepresentation)
- Domagala v. Rolland, 805 N.W.2d 14 (Minn. 2011) (elements of negligence: duty, breach, injury, proximate cause)
- Klein v. First Edina Nat'l Bank, 196 N.W.2d 619 (Minn. 1972) (bank-customer special relationship / reliance)
- Midland Nat'l Bank of Minneapolis v. Perranoski, 299 N.W.2d 404 (Minn. 1980) (bank superiority and influence)
- May v. First Nat'l Bank of Grand Forks, 427 N.W.2d 285 (Minn. Ct. App. 1988) (confidential relationship and access to facts)
- Murphy v. Country House, Inc., 240 N.W.2d 507 (Minn. 1976) (disparate business experience as a factor for fiduciary-like duties)