Lead Opinion
OPINION
Aрpellants Production Resource Group, L.L.C. (PRG), Haas Multiples Environmental Marketing and Design, Inc., d/b/a Entolo-Minneapolis, and Entolo, Inc. (collectively, appellants), seek review of a court of appeals decision reversing the trial court’s decision partially dismissing on summary judgment a lawsuit brought by respondents Hoyt Properties, Inc., and Hoyt/Winnetka, L.L.C. (collectively, Hoyt). Hoyt alleged that a settlement agreement it signed with appellants, which included a release provision relieving PRG of any future liability, was invalid because the release provision in the agreement was induced by a material fraudulent misrepresentation. The district court concluded that the alleged misrepresentation was a legal opinion, not a rеpresentation of fact; the court of appeals reversed on grounds that the alleged misrepresentation both implied and directly asserted facts. We affirm the court of appeals and remand the case to the district court for further proceedings.
The record in this case shows the following. Steve Hoyt is an attorney who owns and operates Hoyt Properties, Inc., and Hoyt/Winnetka, L.L.C., two Minnesota corporations engaged in the real estate business. In 2001, the parties executed a multimillion dollar lease whereby Hoyt Properties leased office and warehouse space to Haas. Before Haas took possession of the leased space, Haas assigned the lease tо its successor corporation, Entolo, and Hoyt Properties subsequently assigned the lease to Hoyt/Winnetka. Ento-lo eventually defaulted on the lease and Hoyt filed an unlawful detainer action. On the day of the eviction hearing, Hoyt and Entolo reached a settlement under which Hoyt agreed to allow Entolo to continue occupying a portion of the leased premises for about two months in exchange for payment of approximately $104,000 in rent. Hoyt retained the right to sue Entolo for the remaining unpaid balance due under the lease; however, at the request of appellants’ counsel, Hoyt agreed to a provision releasing Entolo’s parent corporation, PRG, and its other affiliates from liаbility, save for two circumstances not at issue here.
Steve Hoyt alleges that Hoyt agreed to the provision releasing PRG from liability because of representations made to him by PRG’s attorney on the day of the eviction hearing. Steve Hoyt asserts that when he learned of the request to release PRG, he
After signing the settlement agreement, Hoyt learned of a lawsuit brought by a third party against Entolo that alleged breach of contract by Entolo but sought to hold its parent company, PRG, liable by piercing the corporate veil. The complaint alleged, among other things, that Entolo failed to observe corporate formalities, was operated by PRG as a division rather than a separate corporation, and was undercapi-talized by PRG. Upon learning of this litigation, Hoyt filed suit against appellants, seeking to rescind the settlement agreement and to pierce the corporate veil to hold PRG liable for Entolo’s breach of the lease. Hoyt alleged in its complaint that the representations PRG’s attorney made to Steve Hoyt were false and that the attorney either knew or should have known that the representations were false.
In granting summary judgment to appellants, the district court found that the alleged representations at issue constituted a nonactionable legal opinion, that the alleged representations were not false, and that Hoyt failed to assert any facts demonstrating that any reliance on the alleged representations was reasonable. The court of appeals concluded that the alleged representations were actionable because they both implied facts and directly asserted facts. Hoyt Props. Inc., v. Prod. Res. Group,
I.
Appellants first assert that the court of appeals erred in reversing the district court’s grаnt of summary judgment because the representations PRG’s attorney allegedly made expressed only the attorney’s legal opinion and therefore were not actionable. When reviewing a grant of summary judgment, we review the record to determine: “(1) whether there are any genuine issues of material fact for trial; and (2) whether the trial court erred in its application of the law.” See Nicollet Restoration, Inc. v. City of St. Paul,
To make out a claim for fraudulent misrepresentation, the plaintiff must establish that:
(1) there was a false representation by a party of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or madе 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 suffered] pecuniary damage as a result of the reliance.
Specialized Tours, Inc. v. Hagen,
As the court of appeals noted, abstract statements of law or pure legal opinions are not actionable; however, a mixed statement of law and fact may be actionable “if it amounts to an impliеd assertion that facts exist that justify the conclusion of law which is expressed” and the other party would ordinarily have no knowledge of the facts. Miller v. Osterlund,
a statement that one mortgage has priority over another may imply an assertion that one was made before the other; and a statement that a corporation has the legal right to do business in a state may carry with it an assurance that it has as a matter of fact taken all of the steps necessary to be duly qualified.
Id.
In order to evaluate the statement at issue in this case, it is helpful to review the standard courts use to determine whether to pierce the corporate veil. A court may pierce the corporate veil to hold a shareholder liable for the debts of the corporation when the shareholder is the alter ego of the corporation. Victoria Elevator Co. v. Meriden Grain Co.,
insufficient capitalization for purposes of corporate undertaking, failure to observe corporate formalities, nonpayment of dividends, insolvency of debtor corporation at time of transaction in question, siphoning of funds by dominant shareholder, nonfunctioning of other officers and directors, absence of corporate reс*319 ords, and existence of corporation as merely facade for individual dealings.
Id.
Appellants assert that the representations PRG’s attorney allegedly made were statements of the attorney’s legal opinion only and thus were not actionable. Appellants argue that Steve Hoyt’s question, “I don’t know of any reason how we could pierce the veil, do you?,” solicited the view of PRG’s attorney regarding a legal claim, to which PRG’s attorney responded with the legal opinion “There isn’t anything.” As to the second part of the alleged representation, “PRG and Entolo are totally separate,” appellants argue that this was also a legal opinion, and that the word “separate” is a legal term of art thаt “does not describe a particular factual predicate in a piercing-the-veil case, but rather, a general legal conclusion that piercing is not warranted.” Hoyt asserts that the representation that “There isn’t anything” “implied that PRG’s and Entolo’s business operations justified [the attorney’s] conclusion that there was not ‘anything’ to a good-faith piercing claim” and that the representation that “PRG and Entolo are totally separate” was a direct factual statement bolstering the assertion that there were no facts supporting a veil-piercing claim. Hoyt further asserts that Steve Hoyt had no knowledge of the facts underlying PRG’s corporate relationship with Haas and Entolo.
Here, the question allegedly askеd by Steve Hoyt was, “I don’t know of any reason how we could pierce the veil, do you?” Hoyt alleges that the response was “There isn’t anything.” When viewed in the light most favorable to Hoyt, as is required under the summary judgment standard, the representation “There isn’t anything” is a representation that no facts exist that would support a piercing claim against PRG—for example, no facts indicating that Entolo did not maintain corporate formalities. Even if we assume, as appellants argue, that the alleged statement made by PRG’s attorney was an expression of his legal opinion, that representation implies that the attorney was aware of facts supporting that opinion, namely, that there were no facts to support a claim to pierce the corporate veil. Because the representation was not an expression of pure legal opinion (for example, “I do not think someone could pierce the veil but I am not sure”), but rather a statement implying that facts existed that supported a legal opinion, we conclude that the representation is actionable. See Osterlund, 154 Minn, at 496,
We conclude that the second alleged representation, “PRG and Entolo are totally separate,” is also actionable. Again viewed in the light most favorable to Hoyt, the second representation constitutes a direct factual assertion that the relationship between PRG and Entolo is such that no facts exist that would allow the corporate veil to be pierced; for example, that no facts existed that would demonstrate that Entolo was a facade for PRG’s own dealings. As such, it is the kind of representation that we have traditionally held to be actionable. See, e.g., Davis v. Re-Trac Mfg. Corp.,
II.
Having determined that the representations are actionable, we must next determine whether they create a genuine issue for trial. We have explained that, in order for the representation to be fraudulent, it must be “made with knowledge of the falsity of the representation or made
Appellants assert that the representations allegedly made by PRG’s attorney were not false, much less knowingly false. Hoyt alleges that they were known or should have been known to be false when made. At this stage of the proceedings, the record as to whether the representations were knowingly false when made consists solely of the parties’ assertiоns. Accordingly, the only way for the district court to have concluded that the representations were not knowingly false was to have weighed the evidence and assessed the credibility of the parties. Weighing the evidence and assessing credibility on summary judgment is error. Fairview Hosp. & Health Care Servs. v. St. Paul Fire & Marine Ins. Co.,
The record is sufficient for us to conclude that there are also genuine issues of material fact for trial as to whether PRG’s attorney made the representations at issue without knowing whether they were true or false. In his deposition, the attorney admitted that before he made the representations at issue he “knew what was contained in” the complaint brought by the third party. The complaint alleges a number of facts that, if true, would support the conclusion that PRG and Entolo did not maintain corporate formalities and that PRG would, therefore, be susceptible to a piercing claim. In his deposition, PRG’s attorney also admitted that when he made the alleged representations at issue he had not yet formed an opinion, one way or the other, about the facts alleged in the complaint. Given these admissions, a finder of fact could conclude that when PRG’s attorney responded to Steve Hoyt’s question he did not know whether his representations were true. As such, there is a genuine issue of material fact for trial as to whether he made the representations “without knowing whether [they were] true or false.” Specialized Tours,
III.
Finally, we address the district court’s finding that “Hoyt’s reliance on opposing counsel’s remarks was unreasonable as a matter of law.” The court of appeals reviewed each of the factors relied on by the district court in making that finding and concluded that none of the factors demonstrated that Hoyt’s reliance was unreasоnable as a matter of law. Hoyt,
To prevail on a claim of fraudulent misrepresentation, the complaining
Whether a party’s reliance is reasonable is ordinarily a fact question for the jury unless the record reflects a complete failure of proof. Id. Accordingly, to survive a motion for summary judgment, the nonmoving party must come forward with some facts supporting a conclusion of reasonable reliance. See id. We have held that a party can reasonably rely on a representation unless the falsity of the representation is known or obvious to the listener. Spiess v. Brandt,
Here, Hoyt contends that its reliance was reasonable because the falsity of the representations made by PRG’s attorney was not known or obvious to Steve Hoyt. Appellants argue that the court of appeals’ conclusion that a reasonable jury could find Hoyt’s reliance was reasonable is flawed because it fails to consider the cumulative effect of Steve Hoyt’s legal training, business experience, and normal business practices. Appellants do not explain, however, why those three factors make Hoyt’s reliance unreasonable as a matter of law. Nor can we, without stepping into the role of the trier of fact and weighing the evidence, conclude that Hoyt’s reliance was unreasonable as a matter of law. While these factors might well, on this record, lead a trier of fact to conclude that Hoyt’s reliance was in fact unreasonable, that determination is properly one for the trier of fact. Therefore, we conclude, as did the court of appeals, that the district court erred when it found that Hoyt’s reliance was unreasonable as a matter of law.
Because we hold that Hoyt established genuine issues of material fact for trial as to the required elements of a fraudulent misrepresentation claim, we affirm thе court of appeals’ decision and remand to the district court for further proceedings.
Affirmed.
Notes
. Appellants raise two additional issues in their brief: (1) whether the court of appeals erred in construing Hoyt's complaint as alleging a cause of action for total rescission of the settlement agreement; and (2) whether the district court abused its discretion in dismissing some of Hoyt's claims with prejudice. Those two issues were not raised in appellants' petition for review and are therefore beyond the scope of this appeal and will not be considered in this opinion. See Anderly v. City of Minneapolis, 552 N.W.2d 236, 239-40 (Minn.1996) (explaining that "this court may decline to hear an issue if it is not raised in either a petition for further review or a conditional petition for further review”).
Dissenting Opinion
DISSENT
(dissenting).
I respectfully dissent. I disagree with the majority’s conclusion that respondents Hoyt Properties, Inc., and Hoyt/Winnetka, L.L.C. (collectively, Hoyt Properties), established genuine issues of material fact for trial. On this record, Hoyt Properties failed to establish the required elements of fraudulent misrepresentation as a matter of law. Therefore, I would affirm the district court’s summary judgment ruling in favor of appellants Production Resource Group, L.L.C. (PRG), Haas Multiples En
In Minnesota, a claim of fraudulent misrepresentation requires that the plaintiff establish the following five elements:
(1) there was a false representаtion by a party of a past or existing material fact 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[ed] pecuniary damage as a result of the reliance.
Specialized Tours, Inc. v. Hagen,
PRG moved for summary judgment, in part, on the grounds that Hoyt Properties’ evidence of fraudulent misrepresentation was insufficient to establish a legal basis to rescind the settlement agreement. After briefing and a hearing, the district court granted summary judgment in favor of PRG. The district court concluded that the alleged representations by PRG’s attorney constituted a nonactionable legal opinion, that the alleged representations were not false, and that reliance on the alleged representations was unreasonable as a matter of law. The court of appeals reversed.
We review an appeal from summary judgment to determine whether there are any genuine issues of materiаl fact and whether the district court erred in applying the law. Fin Ag, Inc. v. Hufnagle, Inc.,
The first and fourth elements of the fraudulent misrepresentation claim are at issue in this case. The first element is that “there was a false representation by a party of past or existing material fact susceptible of knowledge.” Specialized Tours,
Here, the legal opinion at issue is whether the relationship between PRG and En-tolo is sufficient to support a claim for
In Minnesota, courts apply a two-pronged test to determine whether a claimant may pierce the corporate veil and hold a shareholder or different entity liable for the actions of a corporation. Barton v. Moore,
The first element of a claim for fraudulent misrepresentation is only met if the false factual representation by the party involves a “fact susceptible of knowledge.” Specialized Tours,
The majority also accepts the characterization of PRG’s attorney’s statement that “PRG and Entolo are totally separate” as a “direct factual statement bolstering the assertion that there were no facts supporting a veil-piercing claim.” But because the two-prong test for piercing the corporate veil is a subjective test applied by the court, PRG’s attorney could not be in a position to. know (1) what facts any particular court or factfinder might find significant, and (2) which factors under the first prong the court might apply, since the enumerated factors in case law are not exhaustive. See Victoria Elevator Co. v. Meriden Grain Co.,
The majority finds support for its position in the Restatement (Second) of Torts. The majority argues that two illustrations provided by the Restatement lend support to its position that PRG’s attorney implied facts through expressing a legal opinion. The first illustration is that “a statement that one mortgage has priority over another may imply an assertion that one was made before the other.” Restatement (Second) of Torts § 545, cmt. c (1977). Whether a mortgage has priority over another mortgage has an objective basis in law. See Home Lumber Co. v. Kopfmann Homes, Inc.,
The majority citеs a second illustration from the Restatement, demonstrating how a party may imply facts through expression of a legal opinion: “a statement that a corporation has the legal right to do business in a state may carry with it an assurance that it has as a matter of fact taken all of the steps necessary to be duly qualified.” Restatement (Second) of Torts § 545, cmt. c. Similar to the first illustration, there is an objective basis in law that determines whether a corporation has the legal right to do business in a state. See, e.g., Minn.Stat. § 302A.155 (2006) (“When the articles of incorporation have been filed with the secretary of state and the required fee has been paid to the secretary of state, it is presumed that * * * the corporation has been incоrporated * * *.”). A corporation’s legal right to do business in a state is not determined by a court’s subjective analysis, like a claim for piercing the corporate veil. The two illustrations cited by the majority are legal opinions that may imply “fact[s] susceptible of knowledge” to a much greater extent than statements similar to those of PRG’s attorney.
But even if the first element is actionable, I conclude that as a matter of law, Hoyt Properties cannot meet the fourth element of fraudulent misrepresentation: “that the representation caused the other party to act in rеliance thereon.” See Specialized Tours,
My review of the record reveals little about the legal basis for Steve Hoyt’s reliance on PRG’s attorney’s statements. In his deposition, Steve Hoyt asserted that “at least in this city * * * I think lawyers are pretty forthright and honest.” He further stated, “I think when somebody asks a question, if the other person chooses to respond, * * * I think they have a duty to tell the truth. * * * [Wjhether that response is a legal opinion or whatever, I think it’s a duty to tell the truth or say nothing.”
We have concluded that in actions where a party attempts to rescind an agreement based on fraud, “the question is whether the representations were of such a character and were made under such circumstances that they were reasonably calculated to deceive, not the average man, but a person of the capacity and experience of the particular individual who was the recipient of the representations. ” Spiess v. Brandt,
• he is an attorney who practiced in the area of general business law;
• he is a sophisticated commercial businessman with significant experience, having formed 30 business entities in order to limit liability;
• he is a significant shareholder and board member of Real Estate Trust, a company worth over a billion dollars;
• he has testified as an expert regarding real estate matters;
• he has the legal and business experience necessary to understand the intricacies of corporations, corporate liability, and matters relating to piercing the corporate veil;
• he includes a standard clause in all of his leases stating “Consult Your Attorney: This document has been prepared for approval of your attorney”;
• he testified that he does not rely on the opinions of opposing counsel in business negotiations and regularly retains legal counsel to assist him in his own business practice;
• in this case, he was accomрanied by counsel when settlement negotiations occurred before the agreement was signed;
• his counsel did not hear his alleged conversation with PRG’s attorney regarding veil-piercing; and
• he never discussed the alleged conversation with his counsel before granting PRG the release in the settlement agreement.
In light of Steve Hoyt’s extensive legal and business background, his documented practice of relying on his own legal counsel in his business practices, and his standard lease clause advising others to do the
Finally, I also share the policy concerns of amicus curiae Minnesota Defense Lawyers Association that the majority’s decision will have the adverse effect of discouraging settlement among parties, based on a lack of confidence in the enforceability of settlement agreements. Fewer settlement agreements could create further demands on the court system and also create additional risk and expense for parties in litigation. Further, I am concernеd that what the majority has done with its opinion is to design a roadmap with a well-defined exit route for parties who experience remorse after entering into a settlement agreement.
For all the foregoing reasons, I would reverse the court of appeals and reinstate the district court’s summary judgment ruling in favor of appellants.
. I also note that Miller v. Osterlund, the case where we originally held that a misstatement of law is actionable "if it amounts to an implied assertion that facts exist that justify the conclusion of law which is expressed,” provides support for the distinction drawn above, Osterlund concerned a factual context where the defendant alleged that a business entity falsely represented that the entity had legal authority to conduct businеss in Minnesota. 154 Minn, at 495-96,
. The majority also cites Spiess, 230 Minn, at 253,
Dissenting Opinion
(dissenting).
I join in the dissent of Justice Paul H. Anderson.