Gary White, Plaintiff,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A18-1200

Gary White,
Plaintiff,

Jeffrey White, et al.,
Appellants,

vs.

Premier Bank, et al.,
Respondents,

Mark Smith,
Defendant.

Filed May 28, 2019
Affirmed
Connolly, Judge

Ramsey County District Court
File No. 62-CV-17-40

Andrew J. Crowder, Juvian J. Hernandez, Robins Kaplan LLP, Minneapolis, Minnesota
(for appellants)

Edward W. Gale, Jr., Paul M. Shapiro, Thomas C. Atmore, Leonard, O’Brien, Spencer,
Gale & Sayre, Ltd., Minneapolis, Minnesota (for respondent Premier Bank)

Christopher L. Olson, Geck Duea & Olson , PLLC , White Bear Lake, Minnesota (for
respondent TCM Certified Development Company)

Considered and decided by Halbrooks, Presiding Judge; Connolly, Judge; and
Slieter, Judge.

2
U N P U B L I S H E D O P I N I O N
CONNOLLY, Judge
Appellants challenge the district court’s grant of summary judgment, arguing that
genuine issues of material fact precluded the district court from dismissing appellants’
breach of contract, unjust enrichment, and negligent misrepresentat ion claims. Because
there are no genuine issues of material fact and because respondent is entitled to judgment
as a matter of law, we affirm.
FACTS
In 2005, Max Sterling Properties, LLC (Max Sterling) obtained loans from
respondent Premier Bank (Premier) and Twin Cities -Metro Certified Development
Company (TCM). The loans were taken to fund the purchase of commercial property and
improvements, which included a retail gas station and office space. Premier agreed to lease
the office space from Max Sterling at the location.
In late 2008, Max Sterling was in default on the loans for failure to make loan
payments and pay property taxes. In June 2009, Mark Smith, a TCM employee,
approached appellant Jeffrey White and Gary White —who were highly experienced in
commercial real estate —to inquire about their interest in acquiring the property and
assuming the loans from Max Sterling. 1 Both Whites knew that Smith was a TCM
employee, the property was distressed, and the timeline to purchase the property an d
assume the loans was short.

1 Gary White is not an appellant in this matter and TCM was voluntarily dismissed as a
respondent prior to oral arguments.

3
In 2009, the Whites, through appellant Sales Dogs, LLC —formed to a cquire the
property and assume the loans—agreed to purchase the property and assume the loans from
Max Sterling. Prior to any agreement on purchasing the real estate, appellants conducted
little to no due diligence, relying on representations from Mark Smith.
In conjunction with assuming the Premier loan, Sales Dogs executed a promissory
note in favor of Premier for $926,000 , which represented the ori ginal principal amount.
Jeffrey White and Gary White each personally guaranteed the promissory note. Sales Dogs
also assumed a loan issued by TCM which totaled $667,000. The outstanding balance was
$616,199.28. Jeffrey White and Gary White personally guaranteed that loan as well.
Sometime before Sales Dogs purchased the property, TCM became aware that there
was at least one defect on the property’s title. There was apparently a 2005 recorded
mortgage encumbering a small part of the property, which was not reflected in the tit le
work that TCM had ordered. After Sales Dogs purchased the property, without informing
appellants, TCM attempted to remedy the title defect by approaching the mortgage holder
and offering to purchase it. Neither TCM nor Premier notified appellants of the mortgage.
In 2014, Sal es Dogs defaulted on its loans from Premier and TCM. P remier
subsequently foreclosed its first mortgage through court action. The foreclosure action
sought a judgment on Premier’s note, a foreclosure of the mortgage, and a deficiency
judgment against Jeffrey White and Gary White, pursuant to their guarantees . Premier
succeeded in the action.
After the foreclosure l itigation, appellants learned about the undisclosed 2005
mortgage. Appellants and Gary White sued Premier alleging breach of contract, unjust

4
enrichment, negligence, negligent misrepresentat ion, and requesting a declaratory
judgment that the loan obligations of Sales Dogs and the personal guarantees given by Gary
White and Jeffrey White are void and unenforceable . Premier filed a summary judgment
motion requesting the district court dismiss the c omplaint on the grounds of res judicata,
arguing that the claims should have been brought during the first suit concerning the
property and loan transactions. The district court granted Premier’s summary judgment
motion, dismissing appellants’ claims both on the merits and pursuant to the doctrine of
res judicata. Appellants filed a notice of appeal and argue that the district court erred when
it dismissed their negligent misrepresentation, breach of contrac t, and unjust enrichment
claims on the merits. They also argue res judicata is not applicable under the facts of this
case.
D E C I S I O N
Summary judgment should be granted “when there are no genuine issues of material
fact and either party is entitled to judg ment as a matter of law.” Rucker v. Schmidt, 794
N.W.2d 114, 117 (Minn. 2011). A genuine issue of material fact exists when a fact may
reasonably be resolved in favor of either party, but “the nonmoving party must do more
than simply show that there is some metaphysical doubt as to the mate rial facts.” DLH,
Inc. v. Russ, 566 N.W.2d 60, 69 -70 (Minn. 1997) (quotation omitted). The moving party
has the burden to show that there is no issue of material fact, and this court must view the
evidence in the light most favorable to the nonmoving party. W.J.L. v. Bugge, 573 N.W.2d
677, 680 (Minn. 1998). This court reviews de novo the district court’s grant of summary
judgment. Melrose Gates, LLC v. Moua, 875 N.W.2d 814, 819 (Minn. 2016).

5
Negligent Misrepresentation
Appellants argue that the district court erred when it granted summary judgment on
their negligent misrepresentation claim because it erroneously concluded that Premier did
not owe appellants a duty of care. To prevail on a negligent misrepresentation claim, a
plaintiff must establish: (1) a duty of care owed by the defendant to the plaintiff ; (2) the
defendant supplied false information; (3) the plaintiff justifiably relied on the false
information provided by the defendant; and (4) the defendant failed to exercise reasonable
care in co mmunicating the information to the plaintiff . Williams v. Smith , 820 N.W.2d
807, 815 (Minn. 2012).
Appellants claim that Premier faile d to disclose the recorded mortgage . Even
assuming there is some evidence from which a jury could infer that Premier knew about
the recorded mortgage prior to the transaction with appellants, Premier did not have a duty
to disclose that fact to appellants. The Minnesota Supreme Court has held that “[a]s a
general rule, one party to a transaction has no duty to disclose material facts to the other.”
Klein v. First Edina Nat’l. Bank, 196 N.W.2d 619, 62 2 (Minn. 1972). Still, a duty to
disclose may arise in special circumstances. Id. In Klein, the supreme court outlined three
nonexhaustive circumstances that may create a duty to disclose: (1) “One who speaks must
say enough to prevent his words from misleading the other party”; (2) “One who has special
knowledge of material facts to which the other party does not have access may have a duty
to disclose these fa cts to the other party” ; and (3) “One who stands in a confidential or
fiduciary relation to the other party to a transaction must disclose material facts.” Id.

6
Appellants rely on the second Klein example to support their argument that Premier
had a duty to disclose the recorded mortgage. However, Premier argues that in a real estate
transaction, the purchaser/borrower—not the bank—is obligated to conduct due diligence
and take other actions to ensure all the facts surrounding the transaction are known; that a
bank only has a duty to disclose information that would otherwise be unavailable to the
borrower; and that a recorded mortgage is not the type of “special k nowledge”
contemplated by Klein. We agree.
In Boubelik v. Liberty State Bank, the Minnesota Supreme Court stated that parties
seeking to borrow money from a bank “ cannot avoid the responsibility of exercising
reasonable diligence for their own protection by relying on their bank to provide them with
information which . . . was otherwise readily available” because “[t]o adopt such a standard
would put an intolerable obligation upon banking institutions and convert ordinary day-to-
day business transaction s into fiduciary relationships where none were intended. ” 553
N.W.2d 393 , 401 -02 (Minn. 1996) (quotation omitted) . Therefore, in Boubelik, the
supreme court held that th ere was no duty to disclose when “the information plaintiffs
claim was not disclosed to them was readily available to them . . . from the publicly
recorded UCC filings.” Id. at 400.
Like a recorded UCC filing , a recorded mortgage is public ly available and
discoverable to a borrower. Further, appellants conceded at the summary judgment hearing
that the recorded mortgage could have been discovered prior to entering into the
assumption agreement. Consequently, there was no duty to disclose. The district court did
not err by dismissing appellants’ negligent misrepresentation claim.

7
Breach of Contract
Appellants next contend that the district court erred by dismissing their breach of
contract claim on summary judgment . To prevail on a breach -of-contract claim, the
plaintiff must s how (1) the formation of a contract; (2) t he plaintiff’s performance of
conditions precedent to its right to demand performance from the defendant; and (3) the
defendant’s breach of the contract. Lyon Fin. Servs., Inc. v. Illinois Paper & Copier Co. ,
848 N.W.2d 539, 543 (Minn. 2014).
Appellants claim that Premier breached the assumption agreement by consenting to
allow appellants to take title to the property from Max Sterling that was encumbered by a
prior mortgage—i.e. that Premier breached by consenting to convey more than it could
consent to —and “breached by failing to deliver the entire parcel free of the unknown
encumbrance.” But appellants’ argument mischaracterizes the transaction that took place.
First, Premier cann ot be held liable for “failing to deliver the entire parcel,” because
Premier at no point had any title to deliver. Indeed, Sales Dogs acquired title from Max
Sterling, not Premier. Second, Premier did not breach its promise to consent to the
conveyance of the property because Premier did consent to allow Max Sterling to convey
the property to Sales Dogs. In doing so, Premier made zero representations about the
character or nature of the property. Appellants’ attempt to mischaracterize the transaction
that took place is unpersuasive. Consequently, the district court did not err by dismissing
the breach of contract claim as a matter of law.

8
Unjust Enrichment
Lastly, appellants argue that they are entitled to equitable relief because Premier’s
conduct related to the title defects led to its unjust enrichment. Appellants’ unjust-
enrichment claim fails because the dispute between appellants and Premier involves
appellants’ assumption of Max Sterling’s loan, which was done through the assumption
agreement. Minnesota courts do not grant equitable relief “where the rights of the parties
are governed by a val id contract.” Midwest Sports Mktg., Inc. v. Hillerich & Bradsby of
Canada, Ltd., 552 N.W.2d 254, 268 (Minn. App. 1996) , review denied (Minn. Sept. 20,
1996). Additionally, appellants’ argument that “there was an issue of fact regarding the
character of the [p]roperty the [a]ppellants thought they were bargaining for” fails because
Premier made no representations about the character of the property.2
Affirmed.

2 Because we affirm the district court’s grant of summary judgment on the merits, we
decline to address the issue of res judicata.