from the District Court of McKenzie County, Northwest
Judicial District, the Honorable Daniel S. El-Dweek, Judge.
A. Hunter (argued), Williston, ND, and Todd Reuter (on
brief), Spokane, WA, for plaintiff and appellee.
J. Wild, Bowman, ND, for defendant and appellant.
JPF Enterprises, LLC, appeals from a summary judgment
awarding Baker Boyer National Bank $858, 135.47 on its breach
of contract claim and dismissing JPF's counterclaim for
fraud in the inducement. JPF argues the district court erred
in granting summary judgment on the counterclaim for fraud in
the inducement. We conclude JPF failed to raise a genuine
issue of material fact about the existence of a fiduciary
relationship, and affirm the summary judgment.
Baker Boyer loaned money to JPF for the purchase of thirty
mobile homes from Jason Sundseth and his company, Vindans
LLC, for use as rental housing in western North Dakota. In
2013, Vindans owned the homes and rented them to oil field
workers through Greenflex Housing, LLC, and Greenflex's
rental manager, Badlands, LLC. Vindans purchased the homes
with financing from Baker Boyer.
In the summer of 2013, James Foust, managing owner of JPF,
and Sundseth began negotiations for JPF to purchase the homes
from Vindans, and JPF sought financing for the purchase from
Baker Boyer. According to Foust, Baker Boyer's loan
officer, Chris Sentz, obtained rental information from
Greenflex Housing indicating the monthly rental proceeds from
the thirty homes was $9, 600 and would not service JPF's
anticipated monthly payments of about $15, 000 for the loan.
Foust also claimed Baker Boyer required JPF to contract with
Greenflex Housing to rent the homes to oil field workers and
informed him the arrangement would result in a return of $45,
000 per month for the thirty homes. According to Foust,
Vindans' loan with Baker Boyer was near foreclosure and
Baker Boyer failed to inform him that his purchase of the
homes would not be profitable.
On August 20, 2013, Sentz emailed Foust that the requested
financing for the purchase was "no longer a viable
possibility" and that he would be sending an
"official declination letter in the mail." Foust
testified in his deposition that the denial was because
Sundseth "was absolutely impossible to deal with"
and Foust told Sentz he was "out of the deal."
Foust also testified the denial had nothing to do with the
"soundness of [his] financials." Baker Boyer did
not send Foust a declination letter in the mail. On August
26, 2013, Sentz emailed Foust that "things have
occurred" to allow Baker Boyer to again consider
financing JPF's purchase of the homes. According to JPF,
the subsequent development was the availability of
Foust's personal guaranty of JPF's loan.
On September 24, 2013, JPF and Vindans executed an asset
purchase agreement for JPF to purchase the thirty homes
contingent on JPF obtaining financing from Baker Boyer. The
purchase agreement stated the purchase price for the homes
was a $1, 000, 000 payoff of Baker Boyer's loan to
Vindans and a $245, 000 payment to Vindans.
In October 2013, Baker Boyer and JPF executed loan documents
for JPF to borrow $1, 077, 600 from Baker Boyer to finance
JPF's purchase of the homes from Vindans. The loan
documents included a promissory note, a business loan
agreement, a commercial guaranty of JPF's loan by Foust,
a security agreement listing the mobile homes as collateral
for the loan, and financing statements. Foust's personal
guaranty stated "that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of
its relationship with Borrower."
In November 2015, JPF defaulted on its loan from Baker Boyer,
and Baker Boyer sued JPF in North Dakota to enjoin JPF
from transferring or disposing of the loan collateral, to
take possession of the collateral, for appointment of a
receiver, for sale of the collateral and for a money
judgment. JPF answered and counterclaimed, admitting payments
were not made as agreed and alleging fraud in the inducement.
JPF claimed Baker Boyer acted as an intermediary for
JPF's purchase of the homes from Vindans and failed to
disclose information to JPF about the physical condition of
the homes, the financial condition of Vindans, and the
uncertain financial viability of the home rentals. JPF sought
an order requiring Baker Boyer to refund more than $600, 000
that JPF paid to Baker Boyer in exchange for JPF transferring
all right, title and interest in the homes to Baker Boyer.
The district court granted Baker Boyer's motion for
summary judgment, ruling Baker Boyer was entitled to judgment
as a matter of law on its claim for damages against JPF and
awarding Baker Boyer $858, 135.47. The court also concluded
Baker Boyer was entitled to judgment as a matter of law on
JPF's counterclaim for fraud in the inducement, ruling
JPF failed to provide competent admissible evidence
establishing a genuine issue of material fact about the
existence of a fiduciary relationship between Baker Boyer and
JPF. The court said:
"The Defendant relies upon American Bank Center v.
Wiest, 2010 ND 251 to support its counterclaim. However,
unlike this case, Wiest involves the bank admitting
that there was fraud committed by its agent, a loan officer.
Also unlike this case, Wiest involves numerous
material misrepresentations by the bank's loan officer
which induced the debtor to borrow money. Furthermore, it is
clear that the loan officer in Wiest was more than
just a loan officer. Here, it does not appear that the bank
was doing more than a bank loan officer typically would do.
Therefore, there is no evidence of [a] fiduciary [ ]
relationship between the parties in this matter.
"The Defendant contends that the bank had a duty to
disclose that the loan involving these trailers was
nonperforming. As a knowledgeable investor, the Defendant had
to know that banks sometimes make loans on assets that turn
out to be nonperforming. Furthermore, a change in ownership
or management of a real estate investment can often turn an
unprofitable investment in the right direction. Therefore,
the mere fact that the loans on these assets were
nonperforming is not something that the bank would
necessarily need to disclose. Moreover, as a non-party to the
purchase agreement of these trailers, [the] bank had no duty
to disclose that the assets were not profitable up to this
"The Court also is [ ] persuaded that having a lease
agreement in place prior to the loan of $1 million would be
part of the normal underwriting process, and not the result
of a fiduciary relationship. Having such agreements in place
reduce the risk of default, which is a legitimate goal of the
lending process. Requiring such an agreement does not create
a fiduciary or special relationship between the parties.
Because there must be a fiduciary ...