Federal
Credit Union Prevails in Misrepresentation Action
By Charles Harroun, Attorney
Feb 27, 2004, 04:34

In Randy Pieper v. Melrose Credit Union (Court of Appeals of Minnesota, No. C7-92-1474), Randy Pieper was discussing possible financing for the purchase of an apart-
ment building with a loan officer of Melrose Credit Union. The loan officer told Pieper that a local gas station was for sale and the purchase of the gas station would be a better investment than the apartment building. The loan officer also allegedly stated that purchase of the gas station would be a “sound investment.” The loan officer’s brother owned the gas station.

Pieper conducted his own investigation as to the profitability of the prospec-
tive purchase of the gas station and concluded that it would be a good investment. Pieper and his wife later purchased the gas station. They oper-
ated the station for two years without much profit. Piepers were then forced to file bankruptcy due to the station’s failure to produce profits.

Pieper sued the credit union for negligent and intentional misrepresen-
tation of material facts and breach of a fiduciary duty to Pieper. Pieper argued that the credit union’s loan officer made false representations as to the financial profitability of the gas station. Pieper also alleged that the credit union should have advised him that the seller, the loan officer’s brother, had debts owing to the credit union.

The court held that the credit union’s loan officer was merely expressing an opinion as to the favorable investment opportunity in the gas station. The court found that the credit union loan officer neither intentionally nor negligently misrepresented any facts to Pieper.

The court also found that there was not a duty for the credit union to disclose to Pieper the fact that the seller of the station (loan officer’s brother) had outstanding debts owing to the credit union. In fact, the court noted that disclosure of that type of information could even constitute a breach of the confidential relationship between the seller, who was a credit union member, and the credit union. The credit union is ordinarily under a duty to refrain from disclosing the financial condition of any of its depositors.

The court further found that the financial failure of the gas station was, in part, attributable to other factors, such as capital gains taxes owing by Pieper from the sale of a previous investment, loss of a tenant in the station’s garage and Pieper’s cost for required franchise remodeling.

Judgment was entered in favor of the credit union on all counts. The trial court judgment was also affirmed on Pieper’s appeal to the Court of Appeals of Minnesota.