St. Louis v. Wilkinson Law Offices, P.C.
2012 ME 116, 55 A.3d 443, 2012 WL 4829494 (2012)
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Rule of Law:
A closing agent does not commit negligent misrepresentation by accurately reciting information from a third-party summary document, even if that information conflicts with the underlying loan documents, because accurately conveying the contents of the summary is not the supplying of false information.
Facts:
- Dale and Theresa St. Louis, experienced real estate developers, sought a commercial loan from Silver Hill Financial, LLC, through their mortgage broker, Northstar Mortgage.
- The Northstar broker informed the St. Louises that the loan would have a prepayment penalty of about $13,000, which was approximately 5% of the loan principal.
- Wilkinson Law Offices, P.C. was engaged by a party other than the St. Louises to act as the settlement agent for the loan closing.
- At the closing, Sarah Wilkinson, an attorney from Wilkinson Law, read aloud from a 'Funding Instructions' summary sheet, which stated the prepayment penalty was '5% of unpaid principal balance if prepaid during first 5 yrs.'
- During a discussion, Wilkinson confirmed that 5% of the principal was approximately $13,000 and commented that prepayment penalties were standard for commercial loans.
- The St. Louises had an opportunity to read the actual promissory note but signed it without doing so.
- The actual promissory note contained a prepayment penalty provision that was inconsistent with the 5% summary, resulting in a penalty of over $100,000 when the St. Louises later tried to pay off the loan.
Procedural Posture:
- Theresa and Dale St. Louis filed a complaint against Wilkinson Law Offices, P.C. and Northstar Mortgage in the Maine Superior Court (trial court).
- The claim against Wilkinson Law was for negligent misrepresentation.
- The case proceeded to a nonjury trial.
- At the close of the St. Louises' case, Wilkinson Law moved for a judgment as a matter of law.
- The trial court granted Wilkinson Law's motion, finding the St. Louises failed to prove that a misrepresentation had been made.
- The trial continued against Northstar, and the court entered judgment in favor of the St. Louises against Northstar.
- The St. Louises (appellants) appealed the judgment in favor of Wilkinson Law (appellee) to the Supreme Judicial Court of Maine.
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Issue:
Does a closing agent commit negligent misrepresentation by accurately reading the terms from a summary sheet provided by a third party, when those terms conflict with the actual loan documents that the borrowers sign without reading?
Opinions:
Majority - Alexander, J.
No. A closing agent does not commit negligent misrepresentation by accurately reciting information from a third-party document without affirmatively vouching for its consistency with the underlying loan agreements. The court reasoned that the tort of negligent misrepresentation requires the defendant to supply 'false information.' Here, Wilkinson's attorney accurately stated the contents of the 'Funding Details' summary sheet; she did not make a false statement. The court found no evidence that the attorney represented or affirmed that the summary's contents matched the actual promissory note. Her other statements—a correct mathematical calculation that 5% was about $13,000 and that prepayment penalties are standard—were also not misrepresentations. Therefore, because Wilkinson Law did not supply false information, an essential element of the claim was not met.
Analysis:
This decision clarifies and limits the scope of liability for closing agents regarding negligent misrepresentation. It establishes that an agent's duty does not automatically extend to independently verifying the consistency between third-party summary sheets and the primary loan documents they are closing. The ruling places a significant onus on borrowers to read and understand the legal documents they are signing, rather than relying solely on summaries or verbal recitations by a closing agent not retained to represent their interests. Future plaintiffs in similar situations will likely need to prove that the closing agent did more than just recite information and instead made an affirmative misrepresentation about the contents of the actual loan documents.
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