Paul Shafer, Personal Representative of the Estate of Charles G. Truman, Appellant, vs. GSF Mortgage Corporation, Respondent, Wholesale Mortgage, Inc., and Norwest Bank Minnesota, N.A. as Trustee of Access Financial Mortgage Loan Trust 1996-2, Respondents.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C1-02-1165

 

Paul Shafer, Personal Representative

of the Estate of Charles G. Truman,

Appellant,

 

vs.

 

GSF Mortgage Corporation,

Respondent,

 

Wholesale Mortgage, Inc., and

Norwest Bank Minnesota, N.A. as Trustee of Access

Financial Mortgage Loan Trust 1996-2,

Respondents.

 

Filed May 6, 2003

Affirmed Willis, Judge

 

Goodhue County District Court

File No. C400626

 

Paul M. Zeig, Indigo Building, Suite 200, 325 Main Street, Red Wing, MN  55066 (for appellant)

 

Benjamin R. Skjold, Duckson-Carlson, LLC, 2100 Metropolitan Centre, 333 South Seventh Street, Minneapolis, MN  55402 (for respondent GSF Mortgage Corporation)

 

Darrell A. Jensen, Karin E. Simonson, Barna, Guzy & Steffen, Ltd., 400 Northtown Financial Plaza, 200 Coon Rapids Boulevard, Minneapolis, MN  55433 (for respondent Norwest Bank Minnesota, N.A.)

 

            Considered and decided by Willis, Presiding Judge, Schumacher, Judge, and Anderson, Judge.

U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

            Appellant challenges the district court's evidentiary ruling and grant of summary judgment to respondents.  Because we conclude that the district court did not abuse its discretion in the evidentiary ruling and did not err by granting summary judgment, we affirm.

FACTS

Charles G. Truman, now deceased, decided to make improvements to his house and to pay for those improvements with a loan secured by a mortgage.  Truman used the services of respondent GSF Mortgage Corporation, a mortgage broker.  On Truman's behalf, GSF applied only to respondent Wholesale Mortgage, Inc. for the loan.  Wholesale, which is now defunct, and GSF had common ownership.  In addition, Wholesale was a "sub-prime lender," lending money at interest rates higher than those charged by "prime lenders."  Truman had an "exemplary" credit history and could have qualified for a loan from a prime lender.  At the loan closing in April 1996, Truman, though suffering from heart problems and diabetes and confined to a wheelchair, received, reviewed, and signed several documents, including a form entitled "Controlled Business Disclosure," which disclosed that Wholesale and GSF had common ownership.  Wholesale ultimately assigned the mortgage to respondent Norwest Bank.

Construction of the improvements began in the spring of 1996.  Truman eventually stopped payments on the loan and received a notice of default in 1998.  After Truman's death, respondent Norwest proceeded to foreclose on the mortgage.  Appellant Paul Shafer, as personal representative of Truman's estate, commenced this suit against respondents, alleging (1) rescission of the loan agreement, (2) breach of fiduciary duty, and (3) consumer fraud.  The district court issued a temporary restraining order blocking the foreclosure, and the parties agreed to sell the house and place the proceeds from the sale in escrow pending resolution of this dispute.

Respondents moved the district court for summary judgment.  In its order granting summary judgment, the district court (1) refused to admit evidence that respondents violated the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601-17 (2000), offered by Shafer to prove fraud, on the ground that any claims that Shafer could have brought under RESPA were barred by the statute of limitations; (2) concluded that Minnesota law does not recognize a claim of breach of fiduciary duty by a borrower against a mortgage broker; and (3) concluded that, assuming Minnesota law recognized such a claim, respondents had established that there were no issues of material fact and that they were entitled to judgment as a matter of law on the claims of breach of fiduciary duty and consumer fraud.

Shafer appeals, arguing that the district court (1) abused its discretion by refusing to admit the evidence of RESPA violations and (2) erred by granting summary judgment to respondents on the claims of breach of fiduciary duty and consumer fraud.

D E C I S I O N

I.

Shafer argued to the district court that GSF's application for a loan from Wholesale at a sub-prime interest rate violated RESPA.  Because Wholesale loaned the money to Truman at a higher interest rate than that available from a prime lender, Shafer argued, Wholesale was paid a premium for its loan, and this premium amounted to a kickback prohibited by RESPA.  See 12 U.S.C. § 2607 (2000).  Shafer then offered evidence of the "kickback" as proof of fraudulent conduct on the part of GSF.

The district court concluded that because the statute of limitations had run on any RESPA claims arising from Truman's transaction with GSF and Wholesale, see id. § 2614 (2000), proof of any "acts criminalized under RESPA but not at common law, and references thereafter, are barred as evidence or proof of fraudulent or misleading behavior."  Shafer challenges the district court's conclusion.  We largely defer to the district court's evidentiary rulings and will not overturn them absent a clear abuse of discretion.  State v. Kelly, 435 N.W.2d 807, 813 (Minn. 1989).

            On appeal, Shafer cites persuasive authority stating that the running of the statute of limitations on one claim does not bar the introduction of evidence of that claim to prove a second claim not barred by the statute of limitations.  But even if we assume that Shafer correctly states the law in Minnesota, here the evidence of RESPA violations must still meet the admissibility requirements of the rules of evidence.  Evidence that is not relevant is not admissible.  Minn. R. Evid. 402.  Relevant evidence is defined as

evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable than it would be without the evidence.

 

Minn. R. Evid. 401.

Here, Shafer alleges that GSF committed fraud.  To prevail on a consumer-fraud claim, a plaintiff must show (1) the use of fraud, false promise, misrepresentation, misleading statement, or deceptive practice; (2) in connection with the sale of merchandise; and (3) with the intent to induce reliance.  See Minn. Stat. § 325 F. 69, subd. 1 (2002).  To establish a kickback prohibited by RESPA, a plaintiff must prove a more specific set of elements, such as (1) that the lender did not actually furnish goods or services in return for the payment of any premium and (2) that the payment of a premium is not reasonably related to the value of goods and services actually furnished.  See Schmitz v. Aegis Mortgage Corp., 48 F. Supp. 2d 877, 881 (D. Minn. 1999).

Evidence that GSF's conduct violated a specific federal statute regulating the sale of real estate is not of consequence to the broader issue of whether GSF is liable for consumer fraud.  We fail to see how evidence of any RESPA violation is relevant to the consumer-fraud claim, and we decline to conclude that the district court abused its discretion by refusing to admit such evidence.

II.

On an appeal from summary judgment, this court asks two questions:  (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its interpretation of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  No genuine issue of material fact exists where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.  DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).  The nonmoving party must do more than rest on mere averments; a genuine issue for trial must be established by substantial evidence.  See id. at 69-71.  "On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).

            A.         Breach of fiduciary duty

The district court concluded that Minnesota law does not recognize a cause of action for breach of fiduciary duty by a borrower against a mortgage broker.  In support of its conclusion, the district court cites Schmitz v. Aegis Mortgage Corp., 48 F. Supp. 2d 877 (D. Minn. 1999).  But Schmitz does not stand for the proposition that Minnesota law does not recognize such a cause of action.  Rather, the Schmitz court "assume[d] that this claim is cognizable under Minnesota law."  Id. at 884.  For his part, Shafer cites no authority indicating that Minnesota law recognizes such a cause of action.

It is not the function of this court to establish new causes of action, even if such actions appear to have merit.  Stubbs v. N. Mem'l Med. Ctr., 448 N.W.2d 78, 80-81 (Minn. App. 1989), review denied (Minn. Jan. 12, 1990).  "[T]he task of extending existing law falls to the supreme court or the legislature, but it does not fall to this court."  Tereault v. Palmer, 413 N.W.2d 283, 286 (Minn. App. 1987), review denied (Minn. Dec. 18, 1987).  We therefore conclude that the district court did not err by granting summary judgment on Shafer's claim of breach of fiduciary duty.

            B.         Consumer fraud

Shafer also argues that a genuine issue of material fact exists as to whether GSF is liable for consumer fraud under Minn. Stat. § 325 F. 69 (2002).  The statute prohibits the use of any "fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice" in connection with the sale of any merchandise, intangible, or service.  See id. § 325 F. 68, subd. 2 (2002), .69, subd. 1.

Shafer maintains that the grant of summary judgment was error because (1) GSF, having run a credit report, knew of Truman's good credit history; (2) GSF nonetheless placed Truman's loan with a sub-prime lender; (3) though GSF disclosed the fact of common ownership before the closing, it did not send the common-ownership disclosure "in a timely manner"; (4) Truman rescinded his acceptance of the loan; and (5) Wholesale attempted to induce Truman to cancel the rescission.

These facts would not allow a reasonable finder of fact to conclude that respondents used fraud or were otherwise false in dealing with Truman, with the possible exception of the alleged attempt to have Truman cancel a rescission of the loan agreement.  In opposition to respondents' motion for summary judgment, Shafer offered a letter that (1) apparently had been prepared for Truman's signature, (2) stated that Truman did not wish to cancel his loan with Wholesale, (3) contained a note asking Truman to sign the letter, and (4) was mailed in an envelope bearing Wholesale's name and logo.  But this letter, without more, does not amount to substantial evidence of an issue of material fact with respect to consumer fraud.  While one might speculate that Wholesale prepared the letter with the intent to induce Truman to cancel his rescission of the loan agreement, raising mere speculation or "metaphysical doubt" is insufficient to reverse a grant of summary judgment.  See DLH, 566 N.W.2d at 71.  We therefore conclude that the district court did not err by granting summary judgment on the consumer-fraud claim.

            Affirmed.