Flood v. George, No. 424-8-03 Wncv (Katz, J., Feb. 8, 2005)

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STATE OF VERMONT                                           SUPERIOR COURT
Washington County, ss.:                              Docket No. 424-8-03 WnCv


FLOOD

v.

GEORGE, ET AL.


                                     ENTRY


       Plaintiff Allen Flood alleges that shortly after purchasing a new
home he discovered serious defects in the water and sewage systems
requiring expensive repairs. He claims that the mortgagee-lender,
Defendant Banknorth, and Banknorth’s closing agent, Defendant Gilbert
Normand, Esq., should be liable for damages because Banknorth advised
him that it would provide legal counsel for his benefit, and Attorney
Normand, Banknorth’s counsel, neither provided adequate services for him
nor timely advised him that he should obtain his own counsel. Banknorth
and Attorney Normand, separately, have filed motions for summary
judgment on all claims against them. We agree that no basis for liability is
apparent on this record and grant both motions.

       At the outset, we note that Banknorth and Attorney Normand
properly supported their separate motions for summary judgment with
separate statements of undisputed facts, each complying with Rule 56(c)(2)
and (c)(3) standards. In response, Plaintiff filed separate statements of
disputed facts not complying with Rule 56(c)(2) or (c)(3). Plaintiff’s
statements include more argument than facts, the facts are presented
incompletely, and there are nearly no citations – mandatory under Rule
56(c)(2) – to the record to support alleged facts. Though for purposes of
summary judgment no significant factual disputes are evident anyway,
Defendants’ well supported facts are deemed undisputed to the extent that
Plaintiff’s statements do not comply with Rule 56(c)(2). See V.R.C.P.
56(c)(2); Samplid Enters. v. First Vermont Bank, 165 Vt. 22, 25 (1996).
Attorneys are “on notice that they must include in their Rule 56(c)(2)
statements all of the facts that they relied on in support of or in opposition
to summary judgment, and . . . that facts that are omitted from their
statements will not be considered by the court in ruling on the motion.”
Reporter’s Notes – 2003 Amendment, V.R.C.P. 56 (emphasis added).

        Plaintiff, at the time not represented by counsel, executed the P & S
Agreement before ever approaching Banknorth for a loan. We treat as true
for the purpose of this analysis Plaintiff’s contention that in the course of
obtaining the loan, he came to believe, based on an exchange with Robin
Svarfvar, a Banknorth representative (dismissed as a defendant from this
case by stipulation), that Banknorth would get a lawyer to represent his
interests, and that lawyer may have been Attorney Normand. Plaintiff
never took any steps to confirm that he had legal representation and had no
contact whatsoever with Attorney Normand until the closing, at which
Attorney Normand specifically stated that he did not represent Plaintiff.
Until that time, Plaintiff had assumed that the attorney that he thought he
had was doing whatever that attorney was supposed to do to protect his
interests.

        Plaintiff never in the course of the purchase of the home actually
obtained his own counsel. Nevertheless, the P & S Agreement had a home
inspection clause, and the home was inspected by a home inspector prior to
the closing. The inspection uncovered some plumbing problems, which
were fixed before the closing, but apparently did not uncover other, more
expensive problems which materialized shortly after the closing, the subject
of this lawsuit.
       Plaintiff finds fault with Banknorth for leading him to believe that its
attorney also would represent him. In the complaint, he styles this claim
legally as both breach of fiduciary duty and a violation of the Consumer
Fraud Act.

        We discern no fiduciary relationship between Plaintiff and
Banknorth. Absent special circumstances, Banknorth, as the
creditor/mortgagee in an ordinary debtor/mortgagor–creditor/mortgagee
relationship with Plaintiff, would have no such duty to Plaintiff. See Fuller
v. Banknorth Mortg. Co., 173 Vt. 488, 490-91 (2001) (citing relevant
Vermont cases). Plaintiff’s counsel argues that Plaintiff approached
Banknorth, and Robin Svarfvar specifically, as a consultant for the purpose
of advising him on all aspects of the sale of the home, the loan, and the
mortgage, and Banknorth acted in that capacity. As an incident of that
relationship, Plaintiff, an obviously unsophisticated first-time home buyer,
was led to believe that he did not need his own legal representation because
Banknorth had undertaken the task of obtaining representation for him.
While we accept that Plaintiff did not get his own counsel because of the
mistaken impression that Banknorth would do that, the record lacks
evidentiary support that Banknorth or Svarfvar acted as a consultant to
Plaintiff outside the debtor-creditor relationship or that Plaintiff believed
that Banknorth or Svarfvar was acting in such a role. On those issues, the
record includes only the argument of Plaintiff’s counsel. Moreover, the
record includes no evidence whatsoever that Banknorth or Svarfvar
reasonably should have had any idea that Plaintiff might have been relying
on them for advice outside the immediate debtor-creditor relationship. At
most, Plaintiff relied (reasonably or not) on a misrepresentation outside the
debtor-creditor relationship that he knew was the purpose of their
relationship. We do not believe that Plaintiff’s reliance only, in
circumstances such as these, is sufficient to charge Banknorth with a duty
to act as a fiduciary for Plaintiff’s benefit.

        Even if Banknorth had such a duty, however, Plaintiff still must
connect the breach of that duty to his claimed damages. But the damages
all arise physical problems with the property not of an obvious nature.
Plaintiff has failed to make a meaningful showing that his lack of legal
representation had any connection to the damages he suffered. The home
did not go uninspected prior to the closing. Plaintiff’s argument is that the
home would have been inspected differently. As we understand it, one
manifestation of his argument is something like this: 1) competent counsel
would have known about environmental regulations requiring a particular
permit for a septic system failing after 2007; 2) knowing that, competent
counsel would have advised Plaintiff specifically to ensure the integrity of
the septic system prior to closing; 3) Plaintiff would have heeded such
advice and had the septic system specifically examined; 4) the examination
would have revealed the problems with the system; 5) which would have
been corrected or otherwise dealt with prior to closing; 6) but because he
had no counsel, the inspection never occurred and he never learned of the
problem; 7) therefore, the lack of counsel was a proximate cause of his
damages. While this analysis has a ring of logic, it is wholly unsupported
by the record.

        First, Plaintiff does not cite to the environmental regulations upon
which his theory is premised, or explain specifically how the regulation
affects the quality of title. He offers no law or expert testimony to support
his claims about what his would-be counsel’s advice to him should have
been under the circumstances, or how a potential future septic problem
would prevent marketable title now. Additionally, he offers no expert
testimony to the effect that the examination of the system would have
revealed whatever the defects were, or that they even existed at the time
they might have been discovered before the closing.

        Moreover, nearly none of the steps in the causal chain, even if true,
are so non-technical as to be in the province of a reasonable jury to
determine without the benefit of substantial factual development aided by
the testimony of experts, of which Plaintiff presents none. It is not enough
to say, as Plaintiff does, that the absence of such testimony does not mean
that Plaintiff cannot obtain it, and may yet present such testimony at trial.
To defeat summary judgment, Plaintiff is required to demonstrate that a
triable issue exists. Samplid Enterprises, Inc. v. First Vermont Bank, 165
Vt. 22, 25 (1996). This he has not done with regard to this issue despite
plenty of time for discovery. We therefore conclude that Plaintiff has not
made any threshold showing of causation. See Cannata v. Wiener, 173 Vt.
528, 531 (mem.) (some “quantum of evidence” establishing causation
necessary to survive summary judgment).

        Plaintiff’s consumer fraud claim against Banknorth also is not
viable. The Consumer Fraud Act bars “[u]nfair methods of competition in
commerce, and unfair or deceptive acts or practices in commerce.” 9
V.S.A. § 2453(a). For a claim of consumer fraud to arise, “(1) there must
be a representation, practice, or omission likely to mislead the consumer;
(2) the consumer must be interpreting the message reasonably under the
circumstances; and (3) the misleading effects must be ‘material,’ that is,
likely to affect the consumer’s conduct or decision with regard to a
product.” Greene v. Stevens Gas Serv., 2004 VT 67, ¶ 15 (quoting
Peabody v. P.J.’s Auto Village, Inc.,153 Vt. 55, 57 (1989). Assuming
without deciding that the circumstances of this case could meet the first two
elements, nevertheless, the third element cannot be met. The alleged
misrepresentation on which the claim is predicated is not “material” to the
decision to buy the house or obtain the loan. Both of those decisions were
made without any interest in legal representation and prior to the alleged
misrepresentation. The only connection between the misrepresentation
about who would obtain counsel and a decision to buy something would
have to be predicated on the effect of the would-be attorney’s advice. But
the failure of Plaintiff’s causation argument reveals the inadequacy of that
theory; Plaintiff cannot show that such advice would have had any relevant
effect.

        The problem in Plaintiff’s proof is magnified by his citation to
Carter v. Gugliuzzi, 168 Vt. 48 (1998) in support of the propositions that
the Consumer Fraud Act applies in the home-selling context and may apply
to individuals other than the seller-owner, such as the broker. See id. at 53
(real estate broker subject to the Act). Banknorth replies that the Act does
not apply as a matter of principle to purely financial transactions by banks,
an issue not decided in Vermont. At least some courts hold to the contrary.
See, e.g., Raymer v. Bay State Nat. Bank, 424 N.E.2d 515, 521 (Mass.
1981) (state consumer fraud statute applies to banks and banking
transactions); Mid-American Nat. Bank. of Chicago v. First Savings and
Loan Assoc. of South Holland, 515 N.E.2d 176, 182 (Ill. App. 1987) (“we
believe that the Consumer Fraud Act may be applied to mortgage-lenders”).
The immediate problem here, however, is not with the identities of the
consumer and the seller, or the type of transaction, but the nature and
function of the misrepresentation (i.e., materiality). In Carter, the broker
was held responsible for misrepresentations about the house (the thing
being sold) which induced the sale of the house and benefitted the broker,
exactly the sort of situation the Act is intended to protect against. Here, the
misrepresentation had nothing to do with the fact of or terms of the sale of
the home or the loan. In other words, the operative misrepresentation is
material only to the decision to hire an attorney, which Plaintiff has not
shown to be related to the decision to buy the house or take the loan. It
therefore is not material in the sense that matters for the consumer fraud
claim, which consequently fails. See Carter, 168 Vt. at 56 (discussing
materiality).

       We agree, however, with Plaintiff’s comment that he should have
characterized his claim against Banknorth as negligent misrepresentation.
Negligent misrepresentation is described as follows:

       One who, in the course of his business, profession or
       employment, or in any other transaction in which he has a
       pecuniary interest, supplies false information for the guidance
       of others in their business transactions, is subject to liability
       for pecuniary loss caused to them by their justifiable reliance
       upon the information, if he fails to exercise reasonable care or
       competence in obtaining or communicating the information.

Restatement (Second) of Torts § 552(1) (1977), quoted in Limoge v.
People’s Trust Co., 168 Vt. 265, 269 (1998). Such a claim more
meaningfully fits the facts of this case than the breach of fiduciary duty and
consumer fraud claims. Assuming the other elements could be met, the
claim still does not survive summary judgment, however, for lack of a
sufficient showing of causation, as discussed above in the context of
Plaintiff’s breach of fiduciary duty claim. Even if Plaintiff justifiably relied
on Banknorth’s negligent misrepresentation about counsel, Plaintiff has not
made a sufficient showing that his damages flowed from that
misrepresentation.

        The claims against Attorney Normand fare no better. No evidence
suggests that any attorney-client relationship between Plaintiff and
Attorney Normand ever came into existence. Nor do any other special
circumstances imply any fiduciary duty running from Attorney Normand to
Plaintiff. The two had no contact whatsoever until the closing, at which
time Attorney Normand stated – and Plaintiff understood – that Attorney
Normand did not represent Plaintiff. Even if Banknorth were to incur
liability for inducing Plaintiff to believe that Attorney Normand represented
him, that alone would not be sufficient to give rise to a duty on Attorney
Normand’s part. Plaintiff’s only argument in this regard seems to be that
the misrepresentation by agent Svarfvar is attributable to principal
Banknorth and then again to Attorney Normand, another of Banknorth’s
agents, as a mere incident of the agent-principal relationship. We are
unaware of and decline to recognize such an application of agency law and
Plaintiff cites to no law in support of it.

      Lastly, with no misrepresentation of any kind attributable to
Attorney Normand, there can be no consumer fraud claim.

                                  ORDER


     Banknorth’s and Attorney Normand’s motions for summary
judgment are granted.




       Dated at Montpelier, Vermont, _______________________, 20__.


                                            __________________________
Judge
