Hoyt Props. v. Prod. Res. Grp., L.L.C. - 736 N.W.2d 313 (Minn. 2007)

Rule:

To make out a claim for fraudulent misrepresentation, a plaintiff must establish that: (1) there was a false representation by a party of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made as of the party's own knowledge without knowing whether it was true or false; (3) with the intention to induce another to act in reliance thereon; (4) that the representation caused the other party to act in reliance thereon; and (5) that the party suffered pecuniary damage as a result of the reliance.

Facts:

Steve Hoyt was an attorney who owned and operates respondent Hoyt Properties, Inc., and Hoyt/Winnetka, L.L.C., two Minnesota corporations engaged in the real estate business. The parties executed a multimillion-dollar lease whereby respondent leased office and warehouse space to appellants Production Resource Group, Haas Multiples Environmental Marketing and Design, Inc., d/b/a Entolo-Minneapolis, and Entolo, Inc. Before appellant lessee took possession of the leased space, it assigned the lease to its successor corporation and respondent subsequently assigned the lease, likewise, to its successor. When the appellant lessee's successor defaulted on the lease, respondent lessor agreed to release the appellant lessee and its other affiliates from liability allegedly because the appellant lessee's attorney stated that the corporate veil could not be pierced and that the appellant lessee and its successor were separate entities. Respondent lessor learned of a third-party lawsuit in which the corporate veil of the appellant lessee was being pierced and claimed fraudulent misrepresentation. The trial court concluded that the alleged misrepresentation was a legal opinion but the court of appeals reversed on grounds that the alleged misrepresentation both implied and directly asserted facts. Appellants sought a review of a court of appeals decision reversing the trial court's decision partially dismissing on summary judgment a lawsuit brought by respondents. Respondents alleged that a settlement agreement it signed with appellants, which included a release provision relieving appellant of any future liability, was invalid because the release provision in the agreement was induced by a material fraudulent misrepresentation. The district court concluded that the alleged misrepresentation was a legal opinion, not a representation of fact. The court of appeals reversed on grounds that the alleged misrepresentation both implied and directly asserted facts. 

Issue:

Did the court of appeals err in reversing the trial court’s order on the grounds that the alleged misrepresentation both implied and directly asserted facts?

Answer:

No.

Conclusion:

The court found that in the statement there was no way to pierce the corporate veil as there was no expression of pure legal opinion but rather a statement implying that facts existed that supported a legal opinion. On the second alleged representation, the court held that the appellant lessee and its successor were separate, was also actionable as a direct factual assertion that the corporate veil could not be pierced. The court concluded that there were genuine issues of material fact about whether the representations were actionable and whether the lessor's reliance on the statements were reasonable. Thus, the court remanded the case to the district court for further proceedings.