Condor Enterprises, Inc. v. Boise Cascade Corp.

Citations: 856 P.2d 713; 71 Wash. App. 48; 1993 Wash. App. LEXIS 349Docket: 14459-0-II

Court: Court of Appeals of Washington; August 19, 1993; Washington; State Appellate Court

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Condor Enterprises, Inc. appealed the summary judgment dismissal of its negligent misrepresentation claim against Boise Cascade Corporation and Norris, Beggs, Simpson/Hart and Fuller, Inc. The case arose when Boise sought to lease or sell lots 27, 28, and 29 at the Yearout Business Park, engaging Norris to market the properties. Condor, needing a new location for its operations, entered negotiations with Norris’s agent Eric Fuller in mid-1987. During discussions, Condor's president, Steve Goodin, inquired about zoning issues, to which Fuller assured him there were none based on the presence of similar businesses nearby.

On December 15, 1987, Condor received a lease offer that included a $125,000 construction allowance but contained a diagram that inaccurately depicted the desired dock location. Goodin, after raising concerns, was reassured by Fuller that the diagram was merely a rough draft. Condor's attorney suggested obtaining a title insurance policy to clarify property encumbrances, but Goodin did not pursue this or investigate further.

When presented with a final lease on March 30, 1988, the incorrect diagram was again included. Despite Goodin's objections, Fuller reassured him that modifications could be made, leading Goodin to sign the lease. The lease placed the responsibility for investigating property restrictions on Condor and stated that Boise made no warranties regarding the premises. 

On April 21, 1988, Goodin discovered that the lots were subject to restrictive covenants prohibiting loading or unloading on the street side, conflicting with Condor's plans to build docks facing the street, ultimately necessitating a redesign to face east.

Condor filed a lawsuit against Boise, alleging negligent misrepresentation that caused significant damages. Boise sought summary judgment, arguing that Condor could not have justifiably relied on statements made by Fuller due to several factors: the casual nature of Fuller's statements suggested the need for further investigation; the lease required Condor to conduct additional research; Condor disregarded legal advice to secure title insurance; and any investigation would have revealed existing restrictive covenants. The trial court ruled in favor of Boise, leading to Condor's appeal. 

Under the Restatement (Second) of Torts, § 552, negligent misrepresentation occurs when a party, while engaged in business, provides false information without exercising reasonable care, leading to pecuniary loss due to justifiable reliance on that information. However, § 552A states that if the recipient is negligent in their reliance, they cannot recover damages. Washington case law aligns with the Restatement, confirming that a plaintiff must demonstrate justifiable reliance on negligently provided information and that contributory negligence is a complete bar to recovery, rather than a factor for comparative fault. Thus, the standard of justification is based on ordinary care.

The Supreme Court's position indicates that a party’s negligence in failing to verify another party's representations can influence the defense against claims for avoidance. Specifically, while negligence in trusting a misrepresentation does not absolve a party from the consequences of willful fraud, it may be relevant when the misrepresenting party's conduct is merely negligent. Current legal consensus supports the idea that contributory negligence can serve as a defense in cases of misrepresentation, aligning with views expressed by notable commentators and the American Law Institute.

In reviewing the case at hand, the trial court's decision is evaluated de novo, affirming dismissal only if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. The record reveals that Fuller was uncertain about zoning issues but suggested there were none, that the lease placed the responsibility for investigating encumbrances on Condor, and that Condor’s attorney advised ordering a title report before signing. These facts suggest that Condor did not exercise due diligence, indicating negligent reliance on Fuller’s statements. Consequently, Condor's negligence is deemed a proximate cause of its damages, negating the possibility of recovery due to lack of justifiable reliance.

Thus, the trial court's granting of summary judgment for dismissal is upheld, confirming that Condor could not succeed in its claims.

Since 1977, courts have employed comparative negligence in negligent misrepresentation cases, as seen in several rulings: Robinson v. Poudre Vly. Fed. Credit Union, Florenzano v. Olson, Bottrell v. American Bank, and Pastor v. Lafayette Bldg. Ass'n. Conversely, the Washington Supreme Court has not adopted this approach, as indicated in Skagit State Bank v. Rasmussen. There is a potential argument under RCW 4.22.005 suggesting that the Washington Legislature may require comparative negligence in all fault-related cases, including negligent misrepresentation; however, this argument is not presented by either party in the current case. Moreover, Barnes v. Cornerstone Invs., Inc. does not contradict this notion, as it does not address an appraiser's duty of care but asserts that a lack of justifiable reliance precludes recovery. The commentary in Barnes regarding a defendant's duty in relation to a plaintiff's reliance does not explore or resolve the issue of defining a defendant's duty based on the plaintiff's conduct.