Onita Pacific Corp. v. Trustees of Bronson

Argued 28, 1991, August Appeals and submitted decision Court of reversed in part; Appeals case remanded to Court of for further consideration 31, 1992 December

ONITA PACIFIC CORPORATION,

an Oregon corporation, John A. Dante, Dante and Jeanine wife,

husband and Respondents Review, on TRUSTEES OF BRONSON, CHARLES D. Erwin,

and Warde H. Purcell Clyde Swarens, and L.A. Review,

Petitioners ERWIN, Lawrence W.

John K. Compton, Douglas Siebert and Dorothy Siebert, wife, L. husband and

and Douglas Cascade Corporation, Oregon corporation,

an

Defendants. (CC S37945) A8607 04518; A46940; CA SC S37818,

843 P2d 890 Spears Lubersky, Clarke, James H. of Lane Powell Port- argued petition petitioners land, the cause and filed the review Purcell and Swarens. Cosgrave, Vergeer Brown,

Thomas W. Kester, & Port- argued petition petitioners land, the cause and filed the review Erwin and Trustees of D. Charles Bronson. Bailey, Pendergrass Lear, Bullivant,

LisaE. Houser, & argued response Hoffman, Portland, the cause and filedthe petition respondents on review. With her on the response were I. Franklin Hunsaker and James G. Driscoll.

GaryM. Berne, D. Larson, Stoll, Steven and Allen Field, Lokting, Gary Grenley Stoll, & Portland; Berne I. and Mic- Henry Zusman, Portland; hael G. and Kantor, Pozzi, O’Leary Conboy, Wilson, Atchison, Portland, & filed brief Oregon Lawyers on behalf ofamicus curiae Trial Association. Lippold, Salem, Michael C. McClinton and Steven M. filed Oregon a brief on behalf amici curiae Association of Oregon Defense Counsel Association Realtors. PETERSON, J.

151-a opinion. filed an dissented and

Fadeley, J., concurred and J., an Unis, opinion. filed dissented

151-b 152

PETERSON, J.

This a the stems from proceeding dispute regarding real trial, terms of a estate At after development agreement. the in court directed verdict favor of defendants1 on plain- claim, tiffs’2 in of fraud returned verdict favor jury plaintiffs on their claim for The negligent misrepresentation. trial new granted court thereafter defendants’ motion for a trial on the that instruction on was ground jury damages erroneous. Plaintiffs that the trial court asserting appealed, trial, erred a new in granting awarding attorney fees, and in dismissing other claims for of plaintiffs’ relief. Court It verdict on the for Appeals reversed. claim upheld vacated the trial court’s order negligent misrepresentation, trial, a new and reinstated the verdict on granting jury’s that to the instruction had not been ground objection jury granting and thus that court erred trial preserved Bronson, Onita v. Trustees 104 Or Corp. new trial. Pacific of 711-12, P2d 696, 709, 756 App review, we although for petitions On defendants’ some negligent be recoverable agree damages may for negligent misrepresentation a claim misrepresentations, Therefore, we present made under the facts here. not out the verdict reinstating of decision Appeals’ reverse the Court negligent misrepresentation.3 on their claim for plaintiffs plaintiffs’ of did address Appeals Because the Court a verdict directing the trial court erred contentions of claim for breach and in their dismissing their fraud claim to the faith, remand the case we good covenant implied The Court of those issues. for consideration Appeals Court of “defendants,” noted, we when we refer to opinion, otherwise unless In this Erwin, Bronson, D. and Warde H. referring Trustees of Charles to defendants are court, but Purcell, in the were defendants trial Clyde There other and L.A. Swarens. appeal. only in the case on remain these four noted, “plaintiffs,” we are we when refer opinion, otherwise unless In this Siebert, Dorothy Siebert, and Douglas L. K. referring to nominal defendants also Corporation Douglas were Cascade Douglas Corporation. The Sieberts Cascade Dante, Dante, Pacific Onita plaintiffs A. Jeanine joint with John venturers they assigned their interests plaintiffs action until Corporation in this and were Corporation. joint Dantes and Onita Pacific to the venture misrepre holding claim for plaintiffs have no actionable Our Appeals unnecessary whether the Court us to address it renders sentation regarding the preserve of error their claim holding failed that defendants erred in given. instruction also should reconsider its decision Appeals concerning fees of its ultimate attorney light disposition appeal.

In Camomile Betty entered into a land sale (Camomile contract) contract with defendants to sell three large tracts real The Camomile property. contract provided for a stream of payments over time to Camomile as the real and sold. In property developed defendants sold their in two three rights parcels Robert Hatch aby (Hatch land contract), sale contract which that a provided deed each lot would be in an placed escrow with instruc- tions its release on resale. Hatch then his interest assigned to John with Compton, defendants’ and Camomile’s consent. decided to sell Subsequently, Compton his interest in the two under the parcels Hatch contract.

Plaintiffs were interested purchasing Compton’s interest. Camomile refused to consent to Compton’s delega- tion of his to her obligations under the Hatch and Camomile contracts. In order to eliminate the need for Camomile’s consent, plaintiffs agreed to make a payment $200,000 that would be used by defendants to the balance to pay owing Camomile. Plaintiffs transferred worth property approx- imately $850,000 to Compton for his interest in the Hatch contract and borrowed $200,000 in cash from to Compton $200,000 make the to payment defendants. Plaintiffs gave $200,000 note for Compton promissory and inter- security ests in their interest as assignees Hatch contract and in other that property they owned.

Defendants, plaintiffs, and Compton negotiated of Agreement,” “Modification which pursuant the parties some of agreed change on the restrictions development of the lots for resale. After forth the modifications to setting development plan, Modification of Agreement provided:

“In all other respects the contract between CHARLES D. BRONSON, PURCELL, CLYDE L.A. SWARENS and ERWIN, joint venture, WARDEH. and ROBERT HATCH and JOHN COMPTON shall remain in full force and effect. hereby

“Vendors-sellers consent [defendants] to sale- assignment by JOHN COMPTON to DOUGLAS K. SIEBERT, WIFE, and his and and to DR. MRS. JOHN DANTE, A.

‘JACK’ DOUGLAS CASCADE COR- CORPORATION, PORATION and ONITA PACIFIC as ten- common, ants in to be jointly severally each liable and responsible performance of the contract above referenced and herein modified.” contract,

The Hatch to which the Modification of Agreement referred, a clause included that that are provided “[t]here no representations or warranties made by except either party contained this document.” There is no written memoran- dum in the record that reflects details of the sale- assignment by Compton plaintiffs.

Plaintiffs contend to make they agreed that $200,000 payment because defendants them that lots told $200,000 worth would be to them. Specifically, released Dou- Erwin, attor- Siebert testified that Lawrence defendants’ glas $200,000 had assured him that would be ney, payment the escrow held the and that the through deeds processed $200,000 lots worth to plaintiffs.4 escrow would release he Lawrence represen- Siebert testified that relied on Erwin’s Erwin him tations, had told because defendant Warde on defen- negotiations Lawrence Erwin would handle close, transaction was to Law- dants’ behalf. Just before the that defendants wanted to use rence Erwin informed Siebert and that to avoid a fee they a different escrow processing Law- be processed through payment plaintiffs’ proposed Erwin assured Lawrence client trust account. rence Erwin’s as it would be treated that the would just Siebert payment the escrow and that original if processed through have been as the same instructions the the new escrow would have existing that the escrow Siebert, who believed one. previous resale, agreed of lots without releases instructions permitted of plaintiffs. on behalf procedure this to and executing the $200,000 payment making After the requested Agreement, plaintiffs of Modification the refused to $192,000. Defendants worth of lots release contract the Hatch the that ground on 16 lots release Erwin resale. Lawrence upon lots only releases of required clearly that new escrow for instructions drafted then upon lot release of deed for a provided for the instructions The escrow require explicitly did not instructions receipt price. The escrow of lot escrow’s released. lot be would resale before third-party Further, in his of resales. limited releases lots proposed accompanying new escrow instruc- letter cover acknowledged Douglas Erwin Siebert tions, Lawrence availability may releases of about the have been confused plaintiffs lots, had a resale. Without the released lots without financing develop unable to obtain no collateral and were obligation they resale, and on their the lots for defaulted security, plaintiffs’ Compton. Compton i.e., foreclosed on the assignees plaintiffs’ Hatch contract and interests as property pledged security for the that had been other $200,000 loan. seeking brought against defendants suit

Plaintiffs Modification of the Hatch contract and the reformation of upon payment Agreement provide of lots for the release sought damages by plaintiffs. $200,000 Plaintiffs also of fraud, implied misrepresentation, negligent breach of the good interference with faith, and intentional covenant of tried to the The claim was contractual relations. reformation stating that reformation, first. The trial court denied court intentionally prove plaintiffs that defendants had failed to regarding plaintiffs the release of lots and deceived authority to have to bind Lawrence Erwin was not shown representations. The trial also dis- his court defendants implied plaintiffs’ covenant of claims for breach of the missed good interference with contract. faith and for intentional negligent misrepresentation fraud and Plaintiffs’ plaintiffs’ jury. At close of then tried to the claims were granted motion for defendants’ evidence, the trial court jury thereafter on the fraud claim. verdict directed plaintiffs negligent their a verdict favor returned judgment misrepresentation moved for Defendants claim. Oregon arguing notwithstanding law does verdict, negligent recognize and, the tort circumstances. not arise these did, that it would even if it arguing trial, that, assum- moved for a new Defendants also ing sufficiency plaintiffs’ legal claim damages misrepresentation, instruction on the trial court’s judgment court denied the motion The trial was incorrect. granted notwithstanding motion for a new the the verdict and damages stating on was incorrect. its instruction trial, Plaintiffs as error trial the appealed, assigning court’s of the new trial based on the granting damages instruction, the trial court’s award of fees to defen- attorney dants, the claim for breach of the dismissal plaintiffs’ faith, and the of defen- good granting covenant implied plaintiffs’ dants’ motions for directed verdict on fraud claim. the cross-assigned Defendants Purcell and Swarens as error trial denial of their motion for directed verdict on court’s claim for Defendants plaintiffs’ negligent misrepresentation. cross- Warde Erwin and Trustees of Charles D. Bronson their error the trial court’s denial of assigning as appealed, on their verdict, ruling for directed the trial court’s motion and negligent misrepre- defense to the fraud issue preclusion court’s the bench findings claims based on the sentation motion claim, and the denial of their the reformation trial on were not the that plaintiffs on summary judgment ground real interest. parties the tort Concerning reversed.

The Court of Appeals held of Appeals the Court misrepresentation, of negligent the jury’s was actionable and conduct that defendants’ Onita the record. by evidence supported verdict was Pacific Bronson, 710. supra, App Or at Trustees Corp. trial, Court of new the granting the order Concerning alleged the “did not preserve that defendants held Appeals based its court [trial] on which instructions] error [in ’’ Therefore, Court Id. at 711. trial. new grant decision also Appeals The Court of order. reversed that Appeals fees defendants attorney award of trial court’s reversed on had they prevailed fact that that, despite the ground parties prevailing not the claim, defendants were contract affirmed Appeals Id. 712. The Court action. in the cross- in the of error assignments defendants’ court on trial Ibid. appeal. is for negligent claim Plaintiffs’ (1977).5 They (Second) § of Torts on Restatement

based (Second) provides: § 552 of Torts Restatement or in business, employment, “(1) profession or who, his course of One interest, informa- supplies false pecuniaiy he has in which transaction other transactions, subject business in their guidance of others for the tion upon justifiable reliance by their caused to them pecuniary loss obtaining or competence in care information, reasonable to exercise if he fails communicating information. ‘‘ assert that a party who false supplies information should be liable for misrepresentations that are made negligently.” that, Defendants contend as between parties to an arm’s- transaction, length one should not party be held liable to another for economic losses party caused the latter’s reliance on the former’s negligent misrepresentations.

In Duyck v. Tualatin Valley Dist., 304 Or Irrigation 151, 157-58, (1987), 742 P2d 1176 this court traced the history the tort of negligent misrepresentation. England, though

“In the English long recognized courts had the forms of action of negligence, deceit and the House of Lords, 1889, in held that an for action deceit could not be by plaintiff maintained a who had been induced to enter into a disfavorable commercial or financial venture unless the ‘(1) false upon statement which the plaintiff relied was made (2) (3) knowingly, truth, or without recklessly, belief its ’ it Derry Peek, careless whether be true or false. v. App Cas (1889). 337, Prosser, According English to rule was that, ‘in the absence of some relation fiduciary between the parties, there was no remedy merely negligent for misrepre- sentation, believed, honestly where the harm that to resulted loss,’ plaintiff only Prosser, was pecuniary Misrepresen- (1966) Parties, 231, Third tations and 19 Vand L Rev omitted). (footnote “The best known statement for not recognizing liability loss economic from a arising negligent misrepresentation causing only Touche, appears economic loss in Ultramares v. 441, 225 NY 174 NE 74 ALR 1139 In that case the New York Appeals, fearing Court of limitless liability, accounting refused to hold an firm negligently liable for certifying a firm’s balance The sheet. claimants were third who had persons suffered economic losses in reliance Cardozo, court, Judge thereon. for the stated: “(2) (3), Except liability as stated in Subsection stated Subsection is limited to loss suffered ‘‘ (a) by person group persons one of a limited for whose benefit and guidance supply recipient he intends to the information or knows that it; supply intends to “(b) through upon reliance it in a transaction that he intends the informa- recipient substantially tion to influence or knows that the so intends or a similar transaction. “(3) liability public duty give of one who is under a to the information by any persons duty extends to loss suffered of the class of for whose benefit the created, protect of the transactions in which it is intended to them.”

“ exists, thoughtless slip or liability negligence ‘If blunder, a theft or beneath forgery the failure to detect entries, to may expose accountants deceptive the cover an indetermi- in an indeterminate amount hazards of a indeterminate class. The nate time an on these terms are so extreme business conducted may not exist doubt whether a flaw enkindle ’ consequences. these duty exposes of a implication added). (emphasis “Id. at 179-80 New distinguished an earlier “The Ultramares court 236, 135 NE case, 233 NY Shepard, York Glanzer (1922), weigher ofbeans was held apublic in which ALR 1425 —even weight statement buyer liable for an erroneous —because request was at the seller’s though weighing weight buyer rely would on the weigher knew that the distinguished Glanzer on court The Ultramares statement. for the weight ‘primarily’ that the statement ground ¿udit in Ultramares while the statement buyer, benefit of the parties. the use of third ‘incidently’ for negli recognize the tort of “Today many American courts recovery for eco scope but the of gent misrepresentation, recovery limit widely. The New York courts varies nomic loss or the is direct parties nexus between in which the to cases Co., Anderson & Corp. v. Arthur Alliance close. Credit (1985) (‘there 551, 493 NYS2d 435, 483 NE2d 110 536, NY2d the of the accountants part some conduct on must have been evinces the which parties, that or party them to linking party party’s or understanding of that accountants’ reliance’). liability is view that extreme is the At the other foresight. See of reasonable principle the by limited only Misstatements, and Eco Negligent Acts Negligent Craig, Restatement Q The Loss, Rev 213 92 Law nomic (Second) position.” an intermediate to take appears of the statute held that court Duyck the Because whether to decide necessary run, it was not had limitations the in Oregon; existed negligent of the tort 156, Id. at tort. of the the existence assumed simply court misrep- for negligent that an action court concluded 164. The deceit than rather for negligence was an action resentation date that on the accrued action thus, plaintiffs’ that and, on their reliance that known have should knew or they pecuniary a them had caused representations defendant’s of learned they which the date than on loss rather 160-64. loss. Id. at causing culpability defendant’s circumstances, that, now state under some one We others rely be hable for economic loss sustained who may In id. Duyck, made. representations negligently on one’s American courts 158, “many recog- this court observed that but the of the tort of negligent misrepresentation, scope nize rule widely.” for economic loss varies stated recovery (see (Second) ante) 5, § of Torts note is close Restatement follow, rather than But, to the mark. reasons a black letter of “rule,” opt scope we adopting develop basis, in recovery case-by-case and the of on a duty scope decisions of this court. light related claim for precedents negligence Our establish of economic losses6 caused another must be recovery duty injured on some actor to the predicated negligent beyond duty the common law to exercise reasonable party harm. Hale Groce, care to foreseeable 304 Or prevent (1987), 744 P2d 1289 states: ordinarily negligently causing is not liable for “[0]ne stranger’s purely injuring economic loss without his person does the harm is property. It not sufficethat a foreseeable consequence may conduct that make one liable else, to someone for instance to a client. Some source of duty negligence required.” outside the common law of (Citations omitted.) Hence, where the of economic losses is on a recovery sought as a theory negligence, concept duty limiting princi- takes on a than it does with ple greater importance regard recovery damages injury property personal damage.7 6 opinion In this we use the term “economic losses” to describe financial losses paid, distinguished as incurred and return of monies as from such indebtedness Head, Ore-Ida Foods v.Indian damages injury person property. See 290 Or to (1981) 909, (denying employer’s against loss claim third 627 P2d 469 economic benefits). employer compensation

person who caused to become liable workers’ 7 Groce, (1987), 281, 283, Hale v. Or 744 P2d 1989 held that an omitted 304 beneficiary negligence against a claim an intended of a deceased testator could assert attorney negligently bequest drafting when the who failed to include an intended beneficiary plaintiff will. The was both an intended of the decedent his decedent’s third-pariy beneficiary lawyer’s promise of the to his will and “a classic ‘intended’ Thus, plaintiff lawyer’s duty client.” Id. at 286. extended to the as well as to his — duty implementing client. Ibid. That to exercise reasonable care decedent’s — testamentary contractual/professional relationship from with directions arose his 284, ordinarily “[o]ne is not decedent. Id. 286-88. The court also stated that

160 tort, existence of the

Having recognized whether, during in the case becomes present central question duty in addition to a arm’s-length negotiations, the parties’ exercise reason- duty defendants owed to honesty, plaintiffs factual information to communicating prevent able care this, examine the losses to To resolve we plaintiffs. economic that relation- of the parties’ relationship compare nature on duty in which the law relationships imposes other ship themselves so as to reasonably, protect to conduct parties other to the relationship. parties care in the attorney-client

The law imposes duty Smith, Chocktoot v. P2d 567, 570, 280 Or 571 relationship. Harding Bell, v. 202, 204-05, 508 P2d (1977); 265 Or 1255 — (1973). reasonably competent to act as a That duty 216 defending interests attorney protecting — those but, well, client is owed not to the only client duty intended beneficiaries be considered may who supra, e.g., Groce, See, Hale v. 284, Or at the client. attor beneficiary intended attorney’s duty (extending client). breaches If the professional to the ney’s promise recover can beneficiary the intended client and duty, at arm’s Unlike negotiating who are losses. parties economic her use his or the client to is engaged by the attorney length, inter of the client’s and protection benefit for the expertise have any does not and should attorney generally ests. v. to the client. Schroeder is adverse interest pecuniary (1970), 450-51, P2d 720 Schaefer, 444, 258 Or modified also Bar, see State (1971); Oregon 444, 483 P2d 818 258 Or (Conflict of DR 5-101 Responsibility, of Professional Code Self-Interest). to exercise duty The tort Lawyer’s Interest: interests client’s economic protecting care reasonable client with the contracts attorney when the lawby is implied Realty Ins. Georgetown Home v. The services. legal to provide Co., P2d 7 97, 106, 831 Or may relationships or contractual professional Other care reasonable to exercise duty rise to a tort give also Securities-Intermountain interests. another’s behalf of Cf. (in “an Fuel, 289 Or P2d 1158 Sunset injuring his without stranger’s purely economic loss negligently causing a liable for Id. at 284. property.” person

161 damages against engaged provide profes- action for sional or other one to

independent services,” the statute of limita- negligence applies rather than for tions for contract actions alleged merely incorporates by “[i]f the contract reference or by implication general indepen- and care standard skill alleged contract, dent breach would also be duty”).8 Engineers breach of this noncontractual and archi- among may subject tects are those who be to to those (or of) employ who are intended beneficiaries their ser- by professional negligence. vices and who suffer losses caused (1976) (archi- Ashley Fletcher, v. 275 Or 550 P2d 1385 tect); Poole, v. 424 P2d 253, 256, Bales Food 246 Or (1967) (engineer). examples may agent

Other be cited. An owes duties loyalty principal. care and to his or her Lindland United v. Investments, 318, 324, Business 298 Or 693 P2d 20 (distinguishing loyalty between the duties of and care owed agent principal); Capwell, 200, 203, an 527 P2d 120 ato Becker v. 270 Or (1974) (real duty principal estate broker owes profit principal’s such that he must not make secret at expense). primary duty A insurer has a to excessinsurers and attempting to the insured to exercise reasonable care in third-party Bonding policy settle claims within Maine limits. Co., Ins. P2d 514, 518-19, 523, Centennial 298 Or relationships, professional

In the above who duty part, acting is, owes a of care at to further the least person duty “client,” economic interests of the owed the present contrast, of care. In case involves two adversarial parties negotiating length their own at arm’s to further economic interests. foregoing analogous authorities are the most present them,

ones that we can find case. From we arm’s-length negotiations, that, conclude economic losses Fuel, 243, 258-59, 611 In Securities-Intermountain v.Sunset 289 Or P2d 1158 (1980), general distinguished premised breach of a this court between claims contractually adopted alleging specific stan standard of care and claims breach of defendants, against engineer, an were dards. Because the claims an architect and type, applicable limitations was that for contract actions. latter statute of Id. 263-64.

arising from a are not action- able. This conclusion is in accord with the some opinions of James, commentators. have Harper, Professors and Gray the class desirability persons noted the whom limiting duty negligent misrepre- of care is owed the context of sentations economic losses. causing whole, above, provided

“On as indicated courts have negligent against for remedy misrepresentation principally in essentially those who advise an nonadversarial capacity. against presumed antagonists, As sellers and other on the hand, other of most courts has instead been tendency scienter, of rely requirement either to deceit with the (by to restitution or analogy however or to shift expanded, ** & warranty) Gray, strict James liability Harper, (2d 1986). 412-13, § of Torts 7.6 ed Law distinguishes Alfred Hill Professor Similarly, in sales adversary made an misrepresentations by between general public who out to the and one holds transaction has information and noted: that he or she supplies case of ‘antagonists.’ “The situation is different complain per buyer, son is a who does aggrieved When the of a service but rather negligent performance of the of making of a inducing by a seller contract, has different from the conceptual mold been options have been modern contract law: the inception of deceit, without a middle to sue on the contract or sue Hill, negligence.” Damages of actionable consisting ground 679, L Rev 73 Colum Misrepresentation, Innocent for (1973). misrepre- negligent allowing recovery that Hill also states would undermine bargaining process made in the sentations writ- concerning contracts, rules of law especially the law of Id. 717-18. ten contracts. The parol same result. suggest rules of law

Other frauds, ORS of statute 41.740, and the rule, ORS evidence promote law contract 41.580, rules of are substantive rely contracting parties allowing certainty commercial agreement of their expression written on the ultimate Stafford, Hatley their agreement. of the terms embodying have could Plaintiffs 530, 588 P2d 284 Or insisting case by rise to this gave avoided the problems in the written be included provisions lot-release negligent permitting damages Arguably, agreements. mis- encourage arm’s-length representation would transactions integrated complete, contracting parties con- not to draft Equity Corp. and Florida v. Standard First tracts. See 1989) (2d (Company Corp., 175, 180 Cir 869 F2d Poor’s providing held information to others securities business security negligently misrepresenting informa- not liable weigh danger position “[A] user is the best tion. inaccuracy arising particular potential of a from a use loss summary by verifying summary against exam- the cost [federally required] original documents ination of prospectus.”) misrepre- Recognition tort of bargain- parties in a this, in which in a case such as sentation agreement, contemplate would ing a later written transaction principles contract law. fundamental undermine argue that and Keeton hand, Prosser On the other very justification for not little seem to be “there would bargaining agents parties extending to a to all negligently.” making misrepresentations transaction for Prosser & they (5th 1984).9 § However, ed Keeton, Torts merely they support explain assertion; or do not acknowledge that most and Keeton do Prosser state it.10 misrepresenta- liability negligent for have restricted courts group “limit[ing] causing pecuniary of losses tions persons may liable, short of be whom the defendant foreseeability possible Further, the situations harm.” Ibid. of 9 Intentional, Negligent and Innocent Carpenter, Responsibility For See also (1930). argues Carpenter for Misrepresentation, that an action L 9 Or Rev 413 analogy negligent turning negligent misrepresentation be allowed on should provided 421-23, that a defendant who a chattel. Id. at 436. He asserts over of profit for should be liable or her business or in the course of his information relied, just plaintiff as a upon which the negligent misrepresentation of facts profit his or her business or provided in the course of a chattel defendant who causing injury to in the chattel negligent failure to discover defects be liable for would rule, would be proposed no distinction Carpenter’s Id. plaintiff. at 422. Under damage hand and injury property on the one tangible personal and made between intangible on the other. economic losses 10 liability to many extended courts have and Keeton assert Prosser dishonesty that a by inferring from the fact misrepresenters innocent and very and, “[tjhus, may not be so there person have known better would reasonable required dishonesty jurisdictions is where practical between those much difference ” recovery. Prosser & dishonesty will suffice for negligence well as and those where 1984). elsewhere, (5th not the may but it is Keeton, be true § ed That Torts Dist., 151, 158, Valley Irrigation Duyck 304 Or v. Tualatin See Oregon. in law negligence). (distinguishing deceit and between P2d 1176 they suppliers information,

that tinct from describe involve as dis-

parties bargaining transactions, in and the suppliers premised of the information on the existence of a special relationship by application third-party or benefici- ary principles. Id. at 746-47. Our conclusion also is consistent with Restatement

(Second) § of Torts 552. The text of section and suggest editors, comments and illustrations thereto using “[o]ne who, business, the words in the course of his profession employment, or in other transaction pecuniary supplies interest, which he has a false information guidance transactions,” for the of others in their business relationships relationship had in mind other than the negotiating length. persons between at arm’s The comments provide dealing illustrations with business adversaries no the conclusion of the the commercial sense. This also Georgia- Oregon Appeals Energy, Western Inc. Court apply App There, 637 P2d 223 55 Or Pacific, Appeals ing law, the Court of stated that section Louisiana parties encompass to arm’s- claims between 552 did not length stated: transactions. The court business deal § and illustrations comments to 552

“The extensive with capacity or those acting professional in a with those the infor recipient upon which special expertise some dealing illustrations We find no relying. is specially mation sense. Some in the commercial ‘adversaries’ with business Misrep Hill, Innocent commentators, Damages notably (1973), James and and resentation, L Rev 73 Colum - (1977), I, L Rev 286 37 Md Pari Misrepresentation Gray, involving a situations liability to § 552 limits indicate that professional gives special where one fiduciary duty or involving to situations ordinarily apply does not advice and 686-88[,] James Hill, supra, business adversaries. * * * Gray, supra, at 313. (4th ed Torts, Prosser, 706-07 Law “Plaintiff cites of misrepresen- negligent argument that 1971), support to in a com- adversaries between be actionable tation should professional concerns a example setting. Prosser’s mercial in contract adversary business and not a advice dispensing 24, 686-87, points n which Hill, at supra, See negotiations. in out the flaw the Prosser reasoning. ”1155 Or App at 144 n 6 original). in

(emphasis ' We read Restatement section 552 as consistent with the rule that this court has adopted negligence actions of economic recovery losses, viz., nongratuitous suppliers of information owe a to their duty clients or or to employers intended of third-party beneficiaries their contractual, pro fessional, or employment relationship exercise reasonable care to avoid facts. misrepresenting See cases discussed ante In 160-61. the case at bar, defendants and their representa tive did not owe any duty to plaintiffs during negotiations contractual, virtue of a professional, rela employment or as a tionship result any fiduciary similar relationship implied Here, the law. relationship adversarial. In an arm’s-length a negotiation, negligent misrepresentation not Hence, actionable. plaintiffs cannot maintain their claim for negligent misrepresentation against defendants.

We that some recognize jurisdictions allow damages for negligent contexts similar to the case at However, bar.12 jurisdictions those either treat tort as a specie of fraud or are more willing “duty” a imply than our precedents permit. alone is not a Foreseeability sufficient basis to permit the recovery economic losses on a Groce, theory Hale v. negligence. 304 Or at supra, 284.13 argues Hill Professor that the fourth edition of Prosser’s treatise on torts is misleading characterizing somewhat regard the state of the law with misrepresentation. Hill, Damages Misrepresentation, Innocent L 73 Colum Rev (1973). 679, Specifically, 688-87 n 24 Professor Hill notes that did Prosser distinguish negligence liability against between aas basis for business adversaries as opposed suppliers Prosser, only of information and that one case cited a 1925 case, Hampshire supported negligence theory by buyer against New a seller. Ibid. See, e.g., 328, Seney, Martens Chevrolet 292 Md v. 439 A2d 534 (finding duty negligent misrepresentations arm’s-length negotiations); to avoid (Mont 1988) (seller Cutler, Wagner may reasonably 757 P2d 779 be liable for discoverable, unknown, represents but latent defects when seller that item is free of (Ariz 1987) defects); Park, App (rejecting Formento v. Encanto Business 744 P2d 22 parol by policy fostering honesty rule evidence rationale as overridden fair fraud). transactions; dealing treating negligent misrepresentation like Unlike jurisdictions, negligence those we believe that the essence of the claim is rather than Dist., Duyck Valley Irrigation deceit. v. Tualatin 304 Or 742 P2d 1176 1J, 1, 10, 17, Fazzolari v. Portland School Dist. 303 Or 734 P2d No. (1987), True, that, does not dictate a different result. the court there noted status, parties relationship, particular “unless the invoke a or a standard of creates, defines, duty,

conduct that or limits the defendant’s issue 166 their

Plaintiffs cannot maintain action for defen- dants’ allegedly negligent misrepresenta- nonfraudulent tions, and of the Court decision Appeals’ reinstating the verdict is of reversed. Because the Court did Appeals not address plaintiffs’ contentions on trial appeal that the court directed verdict on their claim and improperly fraud their improperly dismissed claim for breach of the implied faith, good covenant of we this remand case to the Court of for of Appeals consideration those unresolved issues and for in reconsideration of its decision fees concerning attorney the of its ultimate light disposition appeal.

The Appeals reinstating decision Court of reversed, is verdict and the to the Court of case remanded for with Appeals further consideration consistent this opinion.

FADELEY, J., concurring dissenting. found, This is a case. As jury (Erwin) Dante joint to the joint represented Erwin venture (Dante) large venture that a number of lots the Wildhorse be released to Dante when real estate would development Acting $200,000 to the benefit Erwin. paid Dante (also Dante “Onita” by on called reliance that representation, $200,000 to Erwin’s majority) paid borrowed and 1 worth of estate $850,000 Dante real paid benefit. also depends resulting properly actually from conduct for harm defendant’s protected unreasonably to a created a foreseeable risk whether that conduct plaintiff.” harm that befell the Id. at 17. interest of kind of traditionally However, negligence law of has recognized that the common Fazzolari reach, including “solely “predictable” from its types harms some * * * excluded 7, injuries,” plaintiffs’ essence of claims herein. id. at which are the economic (decided Fazzolari-, Groce, 6, supra at 284 after v. note 304 Or also Hale See personal negligence those for distinguishing economic losses and claims for between Hosp., Intercommunity Presbyterian 293 Or injury property damage); Norwest (1982) recovery damages (denying child P2d foreseeable negligence bodily general injury, part law because mother’s as result of sustained damages psychic injuries suffered recognize recovery Oregon does not conduct). directly injured one arbitrarily promise withhold signed a to not Although had written Erwin §200,000 paid as a condition of assignment, be Erwin demanded consent assign buyer’s interest buyer, Compton, could one consent that its Erwin’s inaccurately majority that Mrs. states The and Meadows Dante. Plains Wildhorse pleadings parties’ Erwin, Camomile, made the demand. originally sold to who buyer’s covering interest under a land sale contract Wild- horse Meadows and Plains.

But Erwin refused to release the lots. After the money paid, unilaterally pre- Erwin took actions that vented the lot release as follows:

(1) existing changed terminated the escrow and companies; escrow issued written escrow instructions that con

tained a new condition that Erwin knew would thwart release lots to Dante. losing

Because the lots released, were not failed, Dante its property already paid, cash and real and also its interest in complaint claiming Wildhorse. Dante filed a both fraud and negligent misrepresentation. judge

The trial removed the fraud claim from the jury negligent misrepresentation but submitted Dante’s against jury claim Erwin. The returned its verdict for Dante against and damages. Erwin in a substantial amount of economic judge giving

The trial set it aside, as his reason one concerning damages. of his instructions the measure of The Appeals Court of reinstated the verdict. majority

On court, review this holds that there negligent misrepresentation Oregon. is a tort I concur. majority prevent But, the then create a new rule of law to recovery party transaction, usual business not- withstanding party negligent that the acted in reliance on a party of the other to the transaction. majority jury Based on that rule, overthrows the I verdict. dissent. majority’s newly created rule of law is based on proposition that: show that misrepresen- Erwin made the demand and that it led to the lot-release

tation. thwarting place, After the condition was in Erwin wrote a letter to Dante and permit by stating others that excused Erwin’s refusal to the release of the lots that Erwin) lawyer (Larry making Erwin’s repre “hadn’t read the contract” before sentation that the lots be would released. person legal business in Oregon duty

A owes no accurately represent care the material facts of a commercial transaction another person business during arm’s-length negotiations related that duty, legal though transaction. There is no even rely will first knows second the facts entering when into that transaction. represented legal duty, though There is no even the first has a pecuniary persuading substantial interest the sec- ond to enter into the transaction. disagree proposition newly

I with that and the created com- represents. my policy that, it It is view of the law mercial when the falsifier intends reliance another who economically of that intended risks and loses because misrepresent- by negligently reliance, the risk of loss caused ing important be shifted from the information should not misrepresentation. It to the one who relies on falsifier most certainly here, the where, be shifted should not keeps economicbenefit a substantial falsifier obtains disseminating part, received, as a result at least misrepre- Shifting from the the risk of loss false information. misrepresentation, gain onto from the senter, who stands to rely misrepresenta- do on the are intended to and those who tion will have profound and commercial on the moral effects culture. fabric of our proposition, majority’s Restate- In to the contrast 552(1) (Second) (1977), § be states the law to Torts, of

ment that: business, or profession of his who, in course

“One the he has a in which transaction or in other employment, guid- the information for interest, false supplies pecuniary transactions, subject is to business in their ance of others justifiable by them their to pecuniary loss caused for information, reason- if he fails to exercise upon the reliance communicating the obtaining or competence care or able information.” turning the to before are in order more facts

A few relies for it on which majority’s of “authorities” discussion (Erwin), joint ven- et al Erwin, rule. Defendants new this from Cam- parcels contract land on bought three ture, (Wildhorse parcels the three two of then sold Erwin omile. Meadows) separate sale land aon Wildhorse and Plains consent, to who, assigned Compton. Hatch with contract to seller, Hatch, and Erwin, as and contract between — from Dante as whom buyer assignee Compton, Hatch’s — releases under separate called for lot assignment bought by instructions. escrow dated, Erwin Larry April

In a letter from Dante, following repre- to asked the questions by responding of lots payment were made about the release upon sentations of incremental sums: escrow as to Wildhorse [Camomile’s]

“Her instructions plain and flood are to deliver each of the Meadows his of Hatch or upon deeds footnote: direction [text when joint by to venture or as directed them assignee] delivery by company sums are received escrow for certain deed is to be until the plain to her. The flood delivered full. paid Camomile contract in escrow as

“There were 41 deeds delivered to Wildhorse with the deeds to or directed Plains instructions deliver to and joint venture under same escrow instructions applied on the same terms as Wildhorse Meadows. turn,

“In escrow joint [Erwin] venture delivered regard escrow to the same agent instructions the same Hatch to prospective deeds to deliver each as directed $12,000. parcels for all east of upon purchasers payment $18,000. parcels Camp all west of Polk Road Camp Road, Camomile the amounts Betty and to pay Polk under escrow instructions release required her $7,000 [$4,000 lot] or to remit per deed applicable joint to the venture. balance ** * directly Betty will from Cam- go “A therefore deed * * * (or titleholder) (the assignee) to Hatch his record

omile required has [i.e., paid when Hatch plaintiffs Dante] (or could, $12,000. assignee) $18,000., and Hatch his or price for whatever desired.” course, sell property added.) (Emphasis states seen, clearly the representation As can be to Hatch’s go directly in escrow would already the deeds $12,000. required has paid “when Hatch assignee referred to instructions, Erwin’s escrow $18,000. [per lot].” his order to Hatch or delivery deeds above, provided Dante) follow- in the Compton’s assignee, (i.e., Compton terms: ing

“Thirty-five deeds for numbered parcels property of real located in County, Oregon, Deschutes and identified as Wild * * * Horse Meadows have been delivered agent, as escrow along with Betty instructions from grantor Camomile as deliver said undersigned deeds to the or their order upon $4,000. receiving Road for each parcel lying east of Polk Camp $7,000. parcel lying and for each west of Camp Polk Road, and to deliver and undersigned release all deeds to the agent when said has in its possession satisfactory evidence undersigned’s obligation that the tract with payment for under a con- Camomile, Betty 31, dated March been has satisfied full.

“You are authorized to each of said accept deeds behalf ofthe undersigned and to hold the delivery same toRobert for order[3] A. Hatch or his when you your possession have $12,000. delivery undersigned, the sum of for each of $18,000. said east of parcels lying Camp Polk Road and lying for each of said west of parcels Camp Polk Road.” added.) (Emphasis

On the of this document and the other strength representa- $12,000 lots would be released to Dante when tions that $18,000 the better Dante paid, paid some lots or lots was $200,000, which was distributed as Erwin directed. made and

After the lot-release was representation received, Erwin, and after the and money paid Compton, into a “Modification of Agreement” pro- Dante entered follows: vided as leaving a agreed space deeds [Erwin’s]

“It is further as each lot in said subdivision conveying in blank for Grantee lots in conveying title to said placed he escrow platted shall from Camomile and [from now in escrow of deeds place 10, 11, 9, for lots and deeds which shall be canceled Erwin] an easement to be 8, subject to Block shall be and the con- concerning subject to a restriction and described in or of Creek. Squaw of dams restrictions struction D. CHARLES between the contract respects “In all other PURCELL, BRONSON, L. A. SWARENS CLYDE venture, HATCH and ROBERT ERWIN, joint H. WARDE and effect. remain full force shall JOHN COMPTON whereby Erwin sold the in the contract designated “Purchaser” Hatch was assignees. parcels his to Hatch “or” two sale-assignment hereby consent “Vendors-sellers SIEBERT, and his K. to DOUGLAS COMPTON JOHN DANTE, and ‘JACK’ A. WIFE, DR. MRS. JOHN and to and ONITA CASCADE CORPORATION the to DOUGLAS common, each to CORPORATION, as tenants PACIFIC perfor- responsible liable and jointly severally be modified.” as herein above referenced of the contract mance new call for a did not of Agreement Modification the Although unilaterally, instructions, Erwin, acting or new escrow this escrow, earlier reported entire restructured opinion. facts the Restatement that on the foregoing

I believe subject on the Oregon the law of with formulation coincides (Second) Torts Restatement negligent misrepresentation. 552, states: 126-27, § “(1) business, who, profession of his in the course One a in which he has transaction or in other

employment, guid- interest, false information for supplies pecuniary transactions, subject in their business ance of others justifiable their to them pecuniary loss caused liability for reason- information, if he fails to exercise upon the reliance communicating the obtaining or competence able care information. “(2) (3), liability stated as stated Subsection Except loss suffered is limited to

in Subsection

* * * *

“(b) he it in a transaction through upon reliance or knows that to influence information intends the * * *.” so intends recipient states: to section Comment with in connection information “Rather, upon who relies one reasonably expect to hold may transaction commercial * ** in which circumstances care duty of maker to a informa- which the the use to manifestly aware of was maker ’’ purpose. it for that supply and intended put tion was to be use to aware manifestly were Defendants supply intended to They put. would be the information which their to risk to plaintiffs as an inducement that purpose, it for the transaction. on the success interests economic had the for all parties have succeeded would transaction representation held up. That section states the law proper Oregon and its commercial future. —

But the has a majority different view that arm’s- length negotiations and the fear of limitless liability excuse the misrepresentations and prevent any harm suffered reliance on the misrepresentations. The ration- ales offered for the result majority’s are founded on two different assumptions of fact that cannot exist logically together because the are assumptions mutually exclusive. One requires be a plaintiff party transaction who negotiated at arm’s with length the defendant when the made; the other requires be so much plaintiff to the stranger transaction that misrepresented information was not intended or expected be for his or her use.

First, it is said the by majority that “arms-length negotiations” prevent liability. That party assumes that who disseminates the negligently inaccurate information and were, who relies on it parly time, at the negotiating business transaction with each other. Such is this factually case.

Second, it is said that liability should not be extended to who were any persons “strangers” to the transaction in which the misrepresentation was uttered. Based on concern that liability should not extend to courts of other strangers, “ ” states, ‘fearing limitless have held lia- liability,’ that no bility exists to those not a party to the transaction or expressly “ because, intended to be by otherwise, affected it ‘liability an indeterminate amount for an to an indeterminate time ” indeterminate class’ would arise. 315 Or at 158. The second — — rationale limitless to a avoiding bability bmitless class be, it to this case. appealing though may simply apply does not seeks to buyer responsible Here hold seller for the losses buyer because information that seller gave directly incurred $200,000 to to induce to to sellers’ buyer, intending buyer pay benefit, was to “strangers”4 false. There are no negbgently — — transaction no bmitless class here.5 4 (1987) (“one Groce, 281, 284, ordinarily Or 744 P2d 1289 is not Hale v. 304 loss”). causing stranger’s purely negligently liable for economic 5 none, none, cited, Oregon Accordingly, repeat, nor the of the case decisions strangers law, They liability apply New decisional to this case. are about York

173 The majority first indicates that the rule in Restate (Second) § ment of Torts 552 is “close to the mark.” 315 Or at But 159. would action for majority deny remedy an negligent misrepresentation to a who had dealt with the party defendant arm’s-length an transaction. This modification of the Restatement is and unwarranted unsupported by authority cited The majority opinion itself. crucial distinction is not whether a transaction is “arm’s length” — —§ distinction not found but rather whether the defendant knew that was the plaintiff recipient information and would rely it. Here defendants uttered the inaccurate representation plaintiffs intending plain unknown, tiffs to rather than an rely, plaintiffs being simply .6 552(2) “foreseeable,” it, § but As injured party puts for negligent misrepresentation is “limited to loss suffered * * * by the or one of the limited person group persons benefit and he whose intends to the informa guidance supply or tion knows intends to it.” recipient supply § states that and majority and its comments “suggest” illustrations it does not apply parties in an transaction.7 Or at 164. On engaged arm’s-length Moreover, authority by majority the transaction. the New York cited has been Co., origin, Corp. modified its state of Credit Alliance v. Arthur & Anderson (1985) 536, 551, 435, 483 (recovery permitted NY2d 493 NYS2d NE2d 110 where close); parties Anderson, Ossinging the nexus between the is direct or School v. (1989) 417, 425, (declaring NY2d 541 NYS2d 539 NE2d 91 the test “(1) misrepresentation liability reports to be awareness that the were to be used for a (2) particular purpose purposes; party parties reliance a known or in fur purpose; linking of that therance some conduct the defendants them to the reliance”). party parties evincing understanding defendant’s of their This test incorporate does length. factor in the decision whether the encounter is at arm’s support recovery These later cases here. 6 brother, J., my Unis, majority incorrectly” agree While I with that “the denies case, liability present as a matter of law under the facts of this I find no reason here to liability negligent misrepresentation announce a rule of for that “extends to include (Unis, J., reasonably plaintiffs.” dissenting). 180 Here there all foreseeable 315 Or at recipient liability beyond is no need to “extend” the utterer’s the direct and intended misrepresentation, made receives a benefit from the other’s of the one who reliance on it. 7 suggested It is true some commentators and courts have this limitation. majority opinion unsupported The criticizes as Prosser and Keeton’s assertion justification denying parties arm’s-length there for in an transaction the is little However, remedy negligent misrepresentation. for 315 Or at 163. the benefit of a ‘ ’ ‘unsupported’ suggestion quote by Arthur Hill in a brief source of the is a Professor negligent misrepresentation in his article on innocent discussion of contained

174 the § of 552 the contrary, language explicitly applies case; situation the present negligent misrepresentation applies to: who, business,

“One in the course of his profession employment, or in other transaction in which he has a interest, pecuniary supplies guid- false information for the transactions, ance subject of others their business liability pecuniary justifiable for loss them by caused to their information, upon reliance if he fails to exercise reason- competence obtaining communicating able care or added.) (Emphasis information.” The and illustrations do not commentary “sug- definitely gest” that an transaction is One com- arm’s-length exempt. § ment to of the 552 of one who has contracted speaks ability for the information to a and a “elect” between contract Hill, misrepresentation; comprehensive analysis. Damages it is far from a for 679, Besides, Misrepresentation, Innocent 73 Colum L Rev 685-88 Hill’s — major appellate adopted premise have that no additional state courts cause arm’s-length negotiation negligent misrepresentation for made in an business action — promulgated currently E.g., § is not accurate. since Restatement 552 was first (1976 (1974-75 Supp); Supp); id. at in the Courts 835-36 id. at 502-03 Restatement (1972-73 176, citing appellate Supp), from text decisions 397-98 see infra herein. other western states James, Gray: majority followingby Harper, quotes Professors The also above, whole, provided remedy “On the as indicated courts have against negligent misrepresentation principally in an essen- those who advise * * presumed tially against capacity *. As sellers and other nonadversarial hand, tendency antagonists, has instead been on the other most courts scienter, expanded, rely requirement or to with the however either to shift on deceit * * warranty) liability analogy Or at (by to strict 315 to restitution or added) (footnotes omitted; Harper, Gray, emphasis (quoting & 2 James 1986). (2d 412-13, § ed Law of Torts 7.6 rule, arm’s-length “desirability” as is stated This does discuss Also, “tendency instead, majority, merely ofmost courts.” Ibid. describesthe but ‘ rely liability or ‘deceit part quotation that most courts on strict ofthe that states remedy scienter, expanded,” for the requirement indicates that however with its negligent misrepresentation available, applied may label is be whatever occurs in the text position ofthis treatise remedy. discussionofthe true Ibid. Further post at 177. (Second) any interpretation ofTorts questioned of the Restatement Others have Note, arm’s-length See parties transactions. § which excludes Misstatement and the Right Precontractual Balancing Buyer’s to Recover Warranties, 1203 n 61 Minn L Rev Ability Express to Disclaim Seller’s (Illinois’ arm’s-length (1992) barring transac- interpretation the Restatement Comment, Freedom to narrow[]”); Examining Restraints “extremely tions is Industry, Computer in the Approach Purchase an Contract as Dissatisfaction dispute some courts (Expressing disbelief that some L Rev Calif (Second) setting). applies § in a contract of Torts 552 the Restatement whether remedy. misrepresentation negligent that the This indicates remedy misrepresentation is available between (Second) contracting parties. arm’s-length Restatement (1977). g § at 132 Torts comment liability present upholding apt in the to Even more provides: h, which 4 from comment is illustration case sale, supplies misinforma- “A, having negligently lots board, for the purpose a real estate concerningthe lots to tion multi- incorporated the board’s having the information board lots, by is distributed listing available which ple of land each 1,000 purchasers prospective approximately to B, and in reliance by the board to listing is sent month. one of A’s lots and B purchases the misinformation upon subject A is loss. pecuniary suffers consequence at 134. B.” Id. analyzing noted illustration, it first must be

In this by misrepresentation middle- promulgation of A’s present A where in our case estate board” is man “real misrepresentation. directly It is not B relied on the B told being held liable for board,” A, but who is “real estate the negligent example. in the Restatement anything than B other that A and are There is no indication arm’s-length negotiators the sale of land. a contract for very at issue to the situation case is similar This illustrative negligently jury defendants found that Here, this case. they plaintiffs were supplied while information to incorrect negotiating interest in land. the sale of an a contract for excep- arm’s-length majority, has no 552, cited Section liability. tion to practices ethics of business norm

Nor does Oregon support currently from recov- the exclusion extant Oregon majority. norm, ery business In the announced negligently party care to not takes a transaction each rely party on the misrepresent who will to another mislead property involving has been real representation. The norm P235 687 405, 412, Helm, 114 Or stated Leach plaintiff misrepresented which the defendants There, jury upholding verdict parcel sale. Before land was for misrepresenta- “guilty of the defendant stated that said: court tions,” the fact, fact, if

“The it be a that defendant was honestly mistaken in the matter of locating plaintiff is immaterial. Defendant had reason to believe that representations his pointed being to the land out were upon by plaintiff, relied obliged and he was therefore to speak correctly concerning Co., the same: Jackman v. Northwestern Trust 87 Or. 209 (170 304) Pac. As stated in Cawston v. Sturgis, [1918]. 29 Or. (43 656) 331[, 335] [1896]: Pac. “ ‘When a undertakes to make party representations concerning bargaining a matter that he is about with another, true, he know he be if he represents must what relying knows that the other is his party upon statements. equally responsible actually He is held whether he knew that false, or whether he representations negligently were knowing without whether were representations they made ” true or false.’ Ibid. (1) case, In defendants knew: the present be used negotiation in contract would given information of the con- desirability proposed plaintiffs evaluating (2) what would on information about tract; rely that plaintiffs the land meant because involving contracts previous into the negoti- were to be incorporated these contracts prior (3) defendants, contract; directly negotiating ated were the best source of agent, their through with plaintiffs intended to contracts were information as to what previous provide. misrepresenters do not exclude the norms

Oregon major The damaged thereby. to a reliant party from liability anach Oregon lonely make ethics will view of business ity’s liable holding from our region For cases ronism in the west. see, e.g., setting, estate sale in a real negligent misrepresenter Park, 154 495, Ariz 744 Business Encanto App Formento v. § 522 to (1987) from Restatement the rule 22 (applying P2d vendor to purchaser made by misrepresentation negligent Insurance Title v. Oakland Hawkins transaction); real estate 742, 747 116, P2d 2d 331 Co., Cal Guaranty App Lincoln v. McCarty statute); (1958) and a §on (relying (1980) 1221, 1225 (recog P2d Green, Inc., 306, 620 Mont misrepresentation); damages nizing right 573, 513 P2d Balch, Motors, App 9 Wash Inc. Burien (failure restriction law zoning to disclose 586-87 status). zoning law ignorance

In 2 Harper, James & The Law of Torts nn Gray, (2d 20ff, 1986), § 7.6 ed recognize those authors and endorse section liabilities under 552 of the Restatement in the type advocate, factual case before us. As James & Harper, Gray, innocent, even where the misrepresentation recognition “What is needed is the the damage remedy * * * should be available prevent wherever its effect will be to unjust enrichment.” Id. at 418. rule,

The reference to the majority’s evidence parol 315 Or at also seems out of place this case. The was in misrepresentation writing, admissions it are proving writing. Modification of con- Agreement expressly tinues in effect, reference, the escrow instructions quoted above about which the was made. It con- tains no clause all integrating negotiating representations within its text.8 To the it all contrary, expressly says that other contracts and escrow instructions remain in force as they were written. The meaning these in-full-force writ- ings was the subject It did not misrepresentation. change term, or modify any as our of those docu- quotations ments show. previously Moreover, defendants a uni- needed lateral in the escrow change instructions to do what they wanted. future commercial

Oregon’s interests, its including for international trade prospect are not to be growth, likely served an outmoded rule9 that one in by a business party transaction not on what may rely she, he, or it is told the by other will party. Oregon be best served care to by requiring not mislead business I think your “partners.” that Ore- gonians believe and the best expect business is where both sides to a transaction make a profit are able to invest 8 Hatley Stafford, 523, 588 majority The cites 284 Or P2d 603 It does support excluding evidence of the here. The court stated that * * * exclusionary “only apply parties writing effect would the where intended the to complete agreement.” be a final and statement of their Or 284 at 532. 9 Indeed, practices by predatory permitted majority the the seem more related Fisk, century ago, practices today’s to the era of Gould and over a than to the Oregon They savagery an business mainstream. seem based on urban where all are “limiting notion” of “us versus them.” See The New Frohnmayer, divided (No. 1992). Tribalism, 1958, Or Bar Bull 54 As M.C. Escher in Dec. said Every unity “Nobody splits can draw a line that not a border line. line a into a is multiplicity.”

in new activities. If the law this dissent were supported by this followed, both sides of transaction could still be business verdict, I so uphold jury remanding winners. would that a on that be entered.10 judgment may verdict UNIS, J., dissenting.

This grant court exercised its to discretionary power review in this case to resolve the confusion and conflict that (1) in exists the trial bench and bar this state as to among is negligent misrepresentation whether actionable Oregon so, and, for economic alone if what is (pecuniary) damages for the Today majority recog- tort. scope is actionable, nizes that 315 Or negligent misrepresentation 159-60, but scope. majority at does not define its dis- during arm’s-length negotia- cusses “whether, parties’ tions, duty honesty, addition to defendants owed care in plaintiffs duty communicating to exercise reasonable prevent plaintiffs,” factual information economic losses that, negotia- “in arm’s-length Or at and concludes from a tions, negligent misrepresen- economic losses arising Or are at 161-62. More tation not actionable.” that, states because “defendants majority specifically, any plaintiffs did not owe representative duty and their contractual, profes- of a virtue during negotiations result of relationship as a sional, employment ** *, implied in the law relationship or similar fiduciary claim for negligent misrepre- cannot maintain their plaintiffs 315 Or 165. against sentation defendants.” misrepresen majority I with the agree 1I alone. for economic Oregon damages is actionable tation sufficiency Failingthat, of the fraud claim evidence next consideration jury’s majority overturning verdict and is adamant line. Given theory, claim related to the negligence I concur that fraud damages award on damages be considered remand. same should authority majority its pleased that the has asserted common-law 1I am to see judicial self-imposed methodology considering recognize without its a new tort 54, Inc., 59, Hospitals, Or 757 Kaiser 306 in G.L. v. Foundation restraint outlined (1988), recently applied v. Central Lane Communica and in Hammond P2d 1347 (1991), Washington County, Center, 17, 816 Keltner v. 310 Or P2d 593 and 312 tions (1990). my disagreement 499, 800 expressed those restraints I have with P2d 752 Or (Unis, J., Keltner, Hammond, (Unis, dissenting), 310 Or at 510 and in J., 312 Or at 28 fact, majority its common-law dissenting). In now is determined exercise misrepresenta developing authority case-by-case tort basis 315 Or at 159. tion. would hold scope liability for negligent misrepre- sentation extends to persons and groups persons who were foreseen, either because the defendant intended the informa- tion for their benefit or because defendant knew that it would be used by them, who, and as a result of their actual and justifiable reliance on negligently-made representations, suf- fer I economic loss. would that, conclude on the facts of this case, plaintiffs have established a claim for negligent misrep- resentation I against would, defendants. therefore, affirm the decision of the Court of Appeals, but part different reasons than those advanced by that court.

I. SCOPE OF LIABILITY FOR NEGLIGENT MISREPRESENTATION

While the majority recognizes that the tort of negli- gent exists Oregon, the closest majority comes to what it explaining involves is its statement (Second) rule “[t]he stated in Restatement § of Torts * * * is close to the mark.” 315 Or at I that, 159. believe recognizing tort, new the court should it, define majority misunderstands and misapplies the difference between duty and that the foreseeability, incor- majority rectly denies liability as matter of law under the facts of this case. three

Essentially different standards, with varia tions, have been adopted by the American courts to define the scope liability for the tort of negligent misrepresentation: (1) the Ultramares rule, which was stated in Ultramares v. (1931).2 Touche, 255 NY 170, 174 NE 441 The Ultramares rule extends economic loss only those persons with whom defendant is in a akin relationship to privity;3 (Second) 552(2) (a) (Restate the Restatement § of Torts rule ment rule), under which a defendant is liable for the economic loss suffered “the or one of person a limited group persons for whose benefit and guidance he intends to supply summary jurisdictions For a recent purport of those which to follow the Co., another, Bily Ultramares rule in one Young Arthur form see 3 Cal 4th 370, 11 Rptr Cal 2d 834 P2d 752-55 Corp. Co., Credit Alliance In v.Arthur Andersen & 536, 493 NY 2d NYS 2d 435, 483 (1985), rule, NE2d 110 the New York.court reaffirmed the Ultramares but relationships practically extended it equivalent privity. which are

180 knows the information” or will receive and on the rely infor- (3) and rule which mation;4 foreseeability the under liability for extends to include all negligent misrepresentation reason- who, as a result of their actual and ably plaintiffs foreseeable on made justifiable negligently misrepresentations, reliance economic damages.5 suffer Ultramares

The rule is based on the essentially of It defines and limits the of privity. scope contract principle and the defendant’s state of mind the duty according to an underlying agreed-upon expectations parties contractual relation. Agency, Inc., Ins. Martini v. Beaverton

In 314 Or (1992), P2d con- 200, apply 838 1061 this court declined claim, rules negligence recognizing tract to a principles for a action for a may proper be contract are proper from this majority departs principle action. negligence analysis principles in this tort case. 315 Or at its of contract 160-63. is a and dis- separate

“Negligent Young Bily Arthur v. tort, a of the tort of deceit.” tinct species Co., and 745, P2d 768 51, 74, 11 2d 834 Cal Rptr statements, believing honestly makes false person Where for such true, are but without reasonable ground they liable, certain be under I should belief, person believe that a form of circumstances, negligent misrepresentation, 552(1) (1977) (Second) § of Torts reads: Restatement who, business, employment, profession or in his or of “One the course interest, supplies pecuniary false informa- he has transaction in which other transactions, subject guidance is others in their business for the of tion liability upon by justifiable reliance pecuniary their loss caused to them obtaining information, competence to exercise reasonable care if he fails communicating information.” * * * privity support more than the of has rule somewhat “[T]he Restatement * * have endorsed relationship and federal decisions rule At least seventeen state *. * * 51, Co., Young Rptr 2d Bily and 11 Cal *.” v. Arthur [Restatement] rule 9). jurisdictions 745, (listing at note those 758-59 P2d foreseeability rule. See reasonable have endorsed the At least three states Timm, (1983); Bank v. Adler, State 461 A2d 138 Citizens 93 NJ Rosenblum (1983); Co., Ross & Co. v. Touche 2d 335 NW2d & 113 Wis Schmidt rule). (Miss 1987) (all recognizingthis See also Ins., Union 514 So2d 315 Commercial Negligent Wiener, Liability Public Accountant Law Common of Certified (1983) (advocating rejection Ultra- of Diego L Rev 233 Misrepresentation, 20 San rule). foreseeability adoption and mares rule law, deceit. In liability contract is determined limited and knowledge intention of the Plaintiffs’ com- parties. in this case neither asserts a breach of plaint contract nor attempts enforce made any promise by defendants. liability, hand, on the other based Negligence is which is paradigm different than that on fundamentally which contract In liability predicated. law, negligence scope is not determined aby contractual relation- but ship, reasonably foreseeable6 consequences one’s actions by considerations that at times policy limit liability. scope obligations “Tort in general are obligations that are imposed by law on policy considerations to avoid some kind of to They loss others. are obligations * ** imposed apart any from manifested of parties intention ato contract or other bargaining transaction.” Prosser and (5th 1984). Keeton, 656, § Torts ed The majority states that precedents “[o]ur establish that a claim negligence for the of recovery economic losses by caused another must be on predicated duty some negligent actor to the injured party beyond common law duty to exercise reasonable care prevent to foreseeable omitted). (footnote harm.” 315 Or at 159 The mis- majority understands and our misapplies precedents respects. two First, majority misunderstands the distinction between duty Second, and foreseeability. majority misapplies the limitation on damages. economic 1J,

In Fazzolari v. Portland Dist. School No. Or 17, (1987), P2d 1326 and 1, discussed quoted 165-66, Or majority footnote at this court stated: short, status, “In invoke parties unless a a relationship, creates, defines, or a particular standard of conduct that duty, limits the harm defendant’s issue actually resulting from properly the defendant’s conduct depends whether a unreasonably that conduct created negligence provide liability reasonably 6 1believe that law should foresee Forell, consequences, Replacing consequences. not for able foreseeable See Pragmatism Policy Analysis Analogy: With Justice Linde’s Contribution to Law, Oregon (suggesting 70 Or L Tort Rev 829-32 that this court “foreseeability” applies practice a the test as factual test where in it a describes test). “reasonably foreseeable” protected risk to a interest of the kind of harm foreseeable the plaintiff.” that befell

This has become critical language understanding Oregon negligence principles. majority claims this language does not dictate a different result than that reached majority, majority’s proceeds but the from the first analysis without for the part regard part the statement last of the That is, statement. the first of the statement part suggests rise a special relationships can create giving duty Thus, it a liability. majority asserts that must search for special duty: tort,

“Having recognized the existence of the the central whether, during question present in the case becomes duty arm’s-length in addition a parties’ negotiations, honesty, duty to exercise rea- plaintiffs defendants owed communicating pre- care factual information sonable 315 Or at plaintiffs.” vent economic losses 160.

Then the discusses series cases majority painstakingly that, arm’s-length negotiations, “in involving duty, concluding are economic losses from arising However, the major- Or 161-62. all that not actionable.” 315 is no has far is that there analysis special thus established ity’s part this is the first duty. only But relationship Fazzolari at that. analysis, part and the peripheral stated that “unless”

Fazzolari invoke a the parties defines, or limits defendant’s “creates, relationship (which not), “the have they concludes majority duty” from defendant’s resulting harm actually of for issue unrea- conduct whether depends conduct properly interest risk to protected a foreseeable created sonably Fazzolari v. plaintiff.” befell harm that kind of supra, 1J, Thus, Dist. No. at Portland School Or 17. 303 the rule. ignored on the exception seized has majority inquiry foreseeability proper is the suggests rule That actions. negligence regarding have times foreseeability the rules is true that

It which, policy in in situations limitations subject been liability. The support remote to is too reasons, damage in more direct statement Fazzolari foreshadowed opinion was (1987), which Groce, 304 Or 1289 281, P2d Hale Fazzolari, when it months after eight than less decided stated, in the context of harm limiting which was foreseeable remote, but that one of a example predictable but remote harm limited by common-law is negligence solely economic harm. Fazzolari 1J, v. Portland School Dist. No. supra, Groce, Or at In 7.7 Hale v. supra, 284, 304 Or at the court that, stated when economic loss alone is suffered, “[s]ome source of a duty outside the common law of negligence is required,” i.e., that foreseeability alone is not enough to establish liability. Apparently the majority seizes on its duty analysis because of statements like this which that a suggest duty required when purely economic damages are involved. The fails to majority recognize this extra “special duty” requirement in arises the context of economic which damages are, by definition, remote, very such that the special duty would create or expand The liability. precedents suggest a limitation on remote in the damages context where economic damages remote, were not a limitation on economic damages per se. majority mistakenly The language takes this in Fazzolari v. Portland School 1J, 1, (1987),

Dist. No. suggest 303 Or 734 P2d 1326 against recovery a rule purely damages solely they economic, economic 13; because are 315 Or at n 165-66 clearly damages Fazzolari referred to economic in the context of remoteness because negligence in secondary: physical normal injury the direct harm is and economic harm is ‘duty’ concept “[T]he negligence ofliabilitymustbe retained law. Bounds stated somehow if the law was not large against to make one insure the world at negligent all harm from Although negligent one’s conduct. conduct caused harm fact, might deny liability the law if this harm did not seem ‘natural’ and ‘proximate’ ‘remote,’ again but words which foreseeability focused on in a * * * setting. factual negligence But because traditionally common-law has (familiar categories quite predictable injuries excluded some and claimants solely illustrations psychic injuries, injuries include economic or due to a bystander’s injuries trespassers), failure to rescue and courts still find lack of a ‘duty’ categorical a convenient label for rulings.” these Fazzolari v. Portland (footnotes 1J, omitted). supra, School Dist. No. 303 Or at 6-7 majority’s parenthetical description The Presbyterian Intercommunity of Norwest v. Hosp., (1982), involving injuries 293 Or psychic P2d 318 itself (here, type injury psychic demonstrates that the rationale is not the non- but economic) injury. majority’s parenthetical but the remoteness of the described “denying recovery the case damages to child for sustained as a result of foreseeable bodily injury, part general negligence Oregon mother’s because law in does not recognize recovery damages psychic injuries directly suffered one not (some added). injured by emphasis conduct.” 315 Or at 165-66 n 13 Cf. Center, (Unis, Hammond supra, v. Central Lane Communications 312 Or at 28-32 J., concurring part, dissenting part); Note, Hammond v. Central Lane Commu Rejects Oregon Negligent nications Center: Severe Emotional Distress Infliction of Through Restraint, Policymaking the Back-Door L 71 Or Rev 219 ofJudicial Groce,

In Hale v. a supra, the context was claim attorney an for in against negligence a will which drafting to to provide plaintiff failed intended the testator. gift by only cognizable The tort was because of a from duty arising the intended defen- beneficiary status as plaintiffs that, dant’s court reasoned absent contrac- conduct. tort undertaking case, tual claim would “plaintiffs ordinarily confront rule that one is not liable for negli- economic loss without gently causing stranger’s purely Id. 284. injuring person property.” his or at The basis for the rule stated in Hale v. Groce is ordinarily negligently causing “one liable his person economic loss without stranger’s purely injuring or distinction between economic loss and property” not a rule, Rather, to the basis for the injury person property. 1J, No. supra, in Fazzolari v. Portland School Dist. to alluded remote at was a distinction between direct 303 Or harm is to the property where the direct harm; person too harm to a third person one economic person, resulting matter, to be remote, cognizable negligence. a policy to Groce, Or two cases supra, Hale v. support at cited Head, Indian Or Ore-Ida Foods v. In this proposition. claim (1981), by which involved a decedent’s 909, 627 P2d 469 decedent’s causing accused of against person employer harm to who then had causing employer thus of death and benefits, this court stated: pay death claims for by denial other courts of “We believe that the although persons, from third arising injury loss economic duty proximate foreseeability, of lack of terms phrased recovery cause, their decision limit actually policy reflects interests which damages. The number of economic such are, cases, practically an act some damaged be from could * * Id. 917. limitless (1968), West, 250 Or 114, 440 Snow v. P2d case, In the other lost based profits allow an recover employer this court did not defendant, his caused employees loss services of on the accident, one and killing an caused driving whose negligent Groce, Likewise, Hale the basis six injuring employees. of economic recovery the rule preventing statement to a economic injury remoteness was the alone damages s plaintiff in that case was overridden which third person, beneficiary. as a third party status contractual Thus, in these cases harm, economic fore- involving was seeability to establish enough “It liability: does not suffice that the harm is a foreseeable consequence negli- ” * * conduct that gent may make one liable to someone else *. Groce, Hale v. supra, Or at 284. The fails to majority recognize that this was true not because the harm alleged economic, but because it was too such, remote. As the major- ity’s discussion of duty, 160-61, 315 Or at is to a applicable case involving economic damage remote secondary, plain- tiffs, but that is not this case.8

Thus, economic to a third damage party based on some other while underlying injury, foreseeable, it is is too remote to be actionable as a rule. general Where the under- is itself lying economic, injury however, the same rationale for direct supports liability harm, economic with limitations for more remote economic harm.

Those principles are with consistent the recognition of the tort of negligent misrepresentation for economic loss alone where that economic harm is the harm primary caused by defendant’s and negligence, foreseen, is either because the defendant intended the information for their benefit or because defendant knew it that would be used by them, and

who, as a result of their actual justifiable and reliance on negligently-made representations, suffer economic loss. The is not damage so remote as to prevent a claim for negligent misrepresentation when a person represents to be something true and actually foresees, or even that identifiable expects, (to will persons on the rely statement or information their detriment if the information is which wrong, is another way saying reliance on the statement caused harm false). because the statement was If the situation is such that the plaintiffs reliance is not only foreseen reasonably defendant, but is also justified, defendant should be liable to 8 Indeed, majority’s injury produces focus on whether is economic perplexing majority’s recognition results in the context of the tort of misrepresentation. Imagine party gratuitous that a receives advice of a contrac tor, negligently misrepresents structurally not, who that a house is sound when it is accountant, negligently misrepresents company’s from an who that a books are they house, person collapses, causing when sound are not. The enters the which him bodily injury, buys company, collapses, causing serious stock in the which him Apparently majority distinguish serious economic loss. would between these two type injury plaintiff, situations based on the which befell which makes no sense injuries equally all. Both were direct. care in infor- imparting if he fails to use reasonable

plaintiff i.e., failure to mation, negligently. if he does so Defendant’s give plaintiffs meet standard should rise to harm is not if the harm is economic where the harm even remote.

I believe that this standard is consistent with the (Second) § of Torts Restatement 552: “(1) who, business, One in the course of his profession he or in other transaction in which has employment, interest, guid- for the supplies false information pecuniary transactions, subject in their business ance of others justifiable their liability for loss caused to them pecuniary information, if he fails to exercise reason- upon reliance obtaining communicating the competence in able care or information. “(2) (3), liability the stated in Subsection Except as limited to loss suffered is

stated Subsection

“(a) limited of group or one of a by person the to he intends guidance for whose benefit and persons recipient or knows that the the information supply it; supply intends

“(b) it in a transaction through upon reliance influence or knows that information to he intends the substantially in a similar so intends or recipient transaction. “(3) duty to public who is under a liability of one The . by any of the to loss suffered extends

give the information created, is duty benefit the for whose persons class of them.” protect is intended to in which it the transactions of rule the Restatement under is, That information, on rely who could not to all persons extends were who persons, of or groups persons, those only but the informa- intended defendant foreseen, because either it knew that the defendant or because their benefit tion (Second) § of Torts Restatement them. by be used would on is rule, liability imposed 552(2)(a). Restatement Under or to third persons to a person of information the supplier of scope The information. of the recipients intended are who limited be should of the tort must be loss pecuniary The respect: significant one other Restate- by justifiable caused reliance on the information. (Second) 552(1). that, in a may particular § Torts It be ment sophisticated parties, transaction between arm’s-length the other or on by party on the information provided reliance of contract is not language the other party’s interpretation case, In this this is a for the Normally question jury. justified. I their it, finding. answered and would not disturb jury is consistent majority suggests analysis its (Second) § Torts 552.315 Or at 164.1 with the Restatement First, respect states its rule with disagree. majority information” to “clients or “nongratuitous suppliers beneficiaries.” 315 Or at orto intended employers third-party limited, however, and is not The Restatement is not so 165. Rather, relationship. based on a contractual solely of fore- Restatement is based negligence principles remote and does not plaintiffs, limited to exclude seeability, obligation:9 rise to a contractual compensation giving require ‘‘ or one of a [Liability person suffered] is limited to loss persons guidance for whose benefit and he group limited recipient the information or knows that the supply intends to ** (Second) of Torts supply intends to it *.” Restatement 552(2)(a). § I the facts of this case present prime believe that in a commercial transac- type relationship example rule. Plaintiffs are the tion the Restatement contemplated defendants intended guidance for whose benefit persons a monetary gain information in order to secure supply reliance on that information. Plaintiffs through plaintiffs’ §552(1) (Second) on whether a defendant Restatement Torts The focus of transaction, pecuniary interest in the on whether the information had a c, language, explaining pecuniary provided gratuitously. interest Comment pecuniary given and the information is [defendant] “If a has no interest states: competence duty purely gratuitously, reasonable care and he is under no exercise giving explains: d it.” Comment normally pecuniary supplying will interest in the information “The defendant’s paid paid in in the course of to him for it or a transaction

lie in a consideration however, may, supplied. indirect part It be of a more and as a of which it is they personal corporation, although receive no character. Thus the officers of affairs, concerning may pecuni- giving its have a information consideration them, transactions, indirectly they profit ary stand to from interest in its since may expects have such an agent to receive a commission on a sale and an who although nothing.” he interest in it sells (Second) g § & h and illustrations 4-11. Torts comments See also Restatement real estate with the intent parcels from defendants purchased them and at a As subdividing reselling parcels profit. stated, for tort should not be previously scope liability determined contract principles.

Second, the majority suggests liability negli- in “relationships can arise other gent misrepresentation only negotiating than the between at arm’s relationship persons that, While it be may practice, 315 Or at 164.10 length.” § not extended based on 552 to liability some courts have relationship, as some negotiating an adversarial parties neither those courts suggest, authorities cited by majority is a authorities have that such result suggested nor those §of 552.1 believe that the per language se rule based on the § 552 to se per prohibit has misconstrued majority from an negotiating relationship. adversarial arising 552(1) § under is whether

Rather, the proper inquiry was fore- reliance on defendants’ representation plaintiffs’ was justified. and whether such reliance seen defendants between some Perhaps That should be a factual question. access to the critical adversaries with equal sophisticated on a rely would not be information, justified a party not clear whether from the It is adversary. representation reference contemplated by majority’s this is situation “arm’s or whether length,” to persons negotiating compo- failed to define the Having term more. encompasses is unclear how the it arm’s-length negotiations, nents of to this trans- the parties decide that summarily can majority were, they length. Perhaps at arm’s action were negotiating determined. how that is to be we are not told but the extra- introducing than that, I rather believe to determine negotiations of arm’s-length neous concept § 552. the terms of examine § we should applicability major- with the above, disagree I stated For reasons the tort of liability for scope view of the restrictive ity’s rule, majority’s Under misrepresentation. negligent the tort of based on in an action no liability would be there and their “defendants unless necessarily from a duty arise saying must Thus, majority parties to (i.e., between nongratuitous), but cannot arise relationship be contractual a contract. ** * * * * representative owe[d a] duty to'plaintiffs during the negotiations virtue of a contractual, professional, or employment or as a result of relationship or any fiduciary similar in the relationship implied law.” 315 Or at 165. sum,

In I would hold that negligent misrepresenta- tion liability extends to persons groups of persons who were foreseen either because the of the supplier information intended the information for -their benefit because the of the information supplier knew it would be used by them, who, and as a result of their actual and justifiable reliance on negligently-made suffer economic representations, loss.

II. PLAINTIFFS ESTABLISHED THEIR NEGLIGENT MISREPRESENTATION CLAIM

Plaintiffs obtained a verdict on their jury facts, therefore, claim. The are construed Penney in the light most favorable to plaintiffs. Brown v.J. C. Co., (1984). 297 Or 705, 688 P2d 811 The majority’s statement of the factual background concerning plaintiffs’ negligent misrepresentation claim is accord with that Additional principle. facts are summarized in the Court of Corp. Appeals opinion. Onita Bronson, Trustees Pacific 104 Or App 803 P2d I wish to emphasize certain are facts which central to plaintiffs’ negligent misrep- claim and which demonstrate resentation that this case did establish plaintiffs enough for a to conclude that their jury negligent misrepresentation claim was valid. Those facts are: Warde Erwin represented that deeds could be released on the payment Erwin, into escrow of a specified sum. Lawrence defendants’ attorney, that deeds could be represented $200,000 released and that would result in the payment $200,000. release to of lots worth Erwin plaintiffs Lawrence moved, if escrow were the escrow instruc- represented $200,000 tions would remain the if the same and that were (Lawrence Erwin’s) account, his trust processed through $200,000 deeds would be released on the same terms as if the had been the title escrow. How- processed through company ever, $200,000 through once the paid processed account, Lawrence Erwin’s trust defendants refused to release Defendants insisted that the deeds could be any deeds. on the a third only party. released sale of lot to Defendants also issued new instructions from prevented plaintiffs

obtaining company of the from the new title release lots plaintiffs payment that had made. escrow based As a plaintiffs deeds, refusal release of defendants’ result develop financing resale, unable to the lots were obtain they obligation Compton. Compton on their defaulted security plaintiffs pledged, had then foreclosed on assignees plaintiffs’ contract, interests as Hatch viz, property. certain well as other 552(1), § language liability is

In limited justified. jury reliance In this case situations which misrepresenta- plaintiffs’ on defendants’ that reliance found tion was recip- justified. foreseen, were intended Plaintiffs not disturb that conduct. We should ients of defendants’ conclusory concept finding by references to the extraneous arm’s-length negotiating, if it is that in some even true relationship negotiating would adversarial circumstances an ample unjustified. in the There is evidence make reliance finding support plaintiffs have of this case to record against negligent misrepresentation claim their established defendants.

III. CONCLUSION misrepresenta- agree I conclusion, In Oregon, the tort and I would define but tion is actionable against plaintiffs claim have established their hold I affirm the deci- would, therefore, for that tort. defendants Appeals, reasons than but different the Cóurt of sion of respectfully I, therefore, that court. those advanced dissent.

Case Details

Case Name: Onita Pacific Corp. v. Trustees of Bronson

Court Name: Oregon Supreme Court

Date Published: Dec 31, 1992

Citation: 843 P.2d 890

Docket Number: CC A8607 04518; CA A46940; SC S37818, S37945

Court Abbreviation: Or.