CarMath, Inc. v. FirstBank Antlers

Filing 59

OPINION AND ORDER by Magistrate Judge Kimberly E. West granting 42 Motion for Summary Judgment. (sjr, Chambers)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
CARMATH, INC.,
Plaintiff,
v.
FIRSTBANK; and
J. DAVID BURRAGE,
Defendants.

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Case No. CIV-16-094-KEW

OPINION AND ORDER

This matter comes before the Court on Defendants’ Motion for
Summary Judgment (Docket Entry #42).

On March 6, 2011, Defendant

David J. Burrage, President of FirstBank (“Burrage”), authored a
letter which read:
To Whom It May Concern:
Jim Berry, President of Berry Energy Services, Inc. has
been a customer of FirstBank since 2009, prior to that
time I personally loaned Mr. Berry over $550,000. During
the 2 years that Mr. Berry did business with me
personally he paid as agreed. Currently, Mr. Berry is
the guarantor or maker on loans totaling $589,000 at
FirstBank. All loans have paid as agreed. I have also
followed Mr. Berry’s progress in the energy business and
have been impressed with his success.
Should you need anything further please don’t hesitate to
call me.
At the time that these representations were made by Burrage:
(1) Berry Energy Services, Inc. was not a customer of FirstBank and
has never been a customer of the bank; (2) Jim Berry was a customer
of FirstBank and had successfully paid off two loans and maintained

two

active

loans

with

the

bank;

and

(3)

no

negative

credit

reporting of Jim Berry had occurred.
On October 25, 2011, Berry Energy Services, Inc. completed a
document

entitled

“Credit

Application”

for

TransMatrix,

Inc.

(“TransMatrix”), the broker providing credit verification services
to Plaintiff CarMath, Inc. (“CarMath”) on the lease agreement.
Among the information provided on the form was the identification
of five credit references:

FirstBank with Burrage as the contact,

Red Flint Sand & Stone, Flash Trucking, American Express Trucking,
and Union Pacific Railroad.
Berry.

The application was signed by Jim

TransMatrix then sent representatives of American Express

Trucking, Flash Trucking, and Red Flint Sand & Stone individual
letters which indicated that it was “Requesting Credit Information
on Berry Energy Services, Inc.”

American Express Trucking rated

Berry Energy Services, Inc.’s account with it as “excellent” noting
“good customer, pays on time!”

Flash Trucking also rated the

account with the company as “excellent.”

Red Flint Sand & Stone

rated the account “good”, stating the company “always pays within
1-2 days of net 15.”

The Burrage letter was sent by e-mail by

Nicholas Berry, an employee of Berry Energy Services, Inc., to
TransMatrix on October 25, 2011.

After receiving the Burrage

letter,

CarMath

neither

TransMatrix

nor

attempted

to

contact

Burrage to verify that the information contained in the letter

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pertained to Berry Energy Services, Inc. or whether the information
had changed in the seven months since the letter was written.
On November 3, 2011, CarMath entered into a five year lease
agreement with Berry Energy.

CarMath leased Berry Energy 22 rail

cars for use in the transportation of frac sand.

Jim Berry was not

a party to the lease agreement and did not provide a guaranty for
the obligation.
Berry Energy subsequently defaulted on the lease obligation.
On April 16, 2015, a default judgment was entered by the Circuit
Court, Second Judicial Circuit, State of South Dakota, County of
Minnehaha.
On March 11, 2016, CarMath initiated this action alleging
claims against Defendants arising from the letter proffered by
Burrage for (1) fraudulent misrepresentation; (2) fraud in the
inducement; and (3) negligent misrepresentation.
Summary judgment is appropriate only if there is no genuine
dispute of material fact and the moving party is entitled to
judgment as a matter of law.

Fed. R. Civ. P. 56(a); Celotex Corp.

v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter–Chem Coal
Co., Inc., 41 F.3d 567, 569–70 (10th Cir. 1994).

Whether there is

a genuine dispute as to a material fact depends upon whether the
evidence presents a sufficient disagreement to require submission
to a jury or is so one-sided that one party must prevail as a

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matter of law.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

251–52 (1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132, 1136
(10th Cir. 2000).

Once the moving party meets its initial burden

of demonstrating an absence of a genuine dispute of material fact,
the burden then shifts to the nonmoving party to demonstrate the
existence of a genuine dispute of material fact to be resolved at
trial.

See 1–800–Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229,

1242 (10th Cir. 2013)(citation omitted).

A fact is “material” if

it pertains to an element of a claim or defense; a factual dispute
is “genuine” if the evidence is so contradictory that if the matter
went to trial, a reasonable jury could return a verdict for either
party.

Anderson, 477 U.S. at 248.

The facts must be considered in

the light most favorable to the nonmoving party.

Cillo v. City of

Greenwood Vill., 739 F.3d 451, 461 (10th Cir. 2013)(citations
omitted).
The Court will not consider statements of fact, or rebuttals
thereto, which are not material or are not supported by competent
evidence.

Fed. R. Civ. P. 56(c)(1)(A), 56(e)(2), 56(e)(3). Only

admissible evidence may be considered when ruling on a motion for
summary judgment.

Jaramillo v. Colorado Judicial Dep't, 427 F.3d

1303, 1314 (10th Cir. 2005)(citation omitted) (holding that hearsay
evidence is not acceptable in opposing a summary judgment motion);
World of Sleep, Inc. v. La–Z–Boy Chair Co., 756 F.2d 1467, 1474

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(10th Cir. 1985).

Affidavits must be based on personal knowledge

and must set forth facts that would be admissible evidence at
trial.
1995)

Murray v. City of Sapulpa, 45 F.3d 1417, 1422 (10th Cir.
(quotations

and

citation

omitted).

self-serving affidavits are not sufficient.”
In

order

to

prevail

on

a

“Conclusory

and

Id.

claim

for

fraudulent

misrepresentation, CarMath must demonstrate that Defendants (1)
made a material misrepresentation; (2) it was false; (3) made the
representation knowing it was false or in reckless disregard of the
truth; (4) made it with the intention that it should be acted upon
by CarMath; (5) CarMath acted in reliance upon it; and (6) CarMath
thereby suffered injury.

Sturgeon v. Retherford Pubs., Inc., 987

P.2d 1218, 1228 (Okla.Civ.App. 1999).

In analyzing CarMath’s

claim, this Court must necessarily examine the content of Burrage’s
letter and consider that which the letter stated not what it might
have stated.
The subject matter of the content of the letter was clearly
Jim Berry.

Despite attaching a title to Jim Berry’s name, Burrage

only references his dealings both personally and through FirstBank
with Jim Berry individually.

Moreover, no evidence has been

presented in connection with the Motion which would indicate
Burrage or FirstBank had ever had a credit relationship with Berry
Energy Services, Inc. such that a credit history and an opinion on

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credit worthiness for that entity could be provided.
“The materiality of a misrepresentation is a mixed question of
law and fact that under most circumstances should be determined by
the trier of fact.”

See Turley v. State Farm Mut. Auto. Ins. Co.,

944 F.2d 669, 672 (10th Cir. 1991); Long v. Insurance Co. of N.
Am., 670 F.2d 930, 934 (10th Cir. 1982). However, materiality “can
be decided as a matter of law if reasonable minds could not differ
on the question.”

Long, 670 F.2d at 934; see also Claborn v.

Washington Nat'l Ins. Co., 910 P.2d 1046, 1049 (Okla. 1996).1

In

this case, reasonable minds could not differ that Burrage’s and
FirstBank’s experience with Jim Berry’s credit was immaterial to
CarMath’s credit decision to enter into lease agreements with Berry
Energy Services, Inc.

Nothing in the recitation of Burrage’s

experience with lending would lead to the conclusion that the
information and opinions provided applied to Berry Energy Services,
Inc. - the sole signatory to the lease agreement with CarMath.

As

a result, this Court cannot conclude that the Burrage letter
pertained to any fact material to CarMath’s credit decision.
CarMath directs to certain alleged indicia in the letter which
would make its content material to CarMath’s decision.
1

CarMath

This Court acknowledges that this line of cases involve claims
for insurance fraud rather than general claims of fraudulent
misrepresentation or specific claims of fraudulent misrepresentation by
a creditor in providing information of credit worthiness. The concept
of materiality, however, should not differ greatly between the factual
circumstances of the alleged fraud.

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references the request for credit information sent by TransMatrix
which states “Jim Berry, President of Berry Energy Service, Inc.
supplied your name as a credit reference” then requests credit
information.

However, the evidence indicates this letter was sent

to American Express Trucking, Flash Trucking, Red Flint Sand &
Stone, and Union Pacific Railroad - not Burrage or FirstBank.

The

Burrage letter was instead provided directly by Nicholas Berry not
Burrage or FirstBank.
CarMath also references the testimony of Burrage wherein he
indicated that the letter would be used by Jim Berry “in whatever
he was doing, whether it was Berry Energy Services or Jim Berry or
Berry whatever he was doing.”

While Burrage may not have expected

Jim Berry to be limited in his usage of the letter, the fact
remains that its content only pertained to the credit history of
Jim

Berry

personally

as

that

was

the

only

information

and

experience Burrage possessed at the time of the construction and
execution of the letter.
The second element of the fraudulent misrepresentation claim
requires a finding of falsity of the information provided.

This

Court first rejects the notion that a creditor, including a banking
institution, has a duty to relate information concerning the credit
worthiness of a party that does not pertain to the dealings with
the institution.

Specifically, CarMath contends Burrage was aware

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that Jim Berry had lost his law license, that he had experienced
credit problems prior to his dealings with Burrage and FirstBank,
that Burrage personally purchased Jim Berry’s home from foreclosure
to assist him, and Jim Berry was late in making payments to
FirstBank.

Again, none of these facts pertained to Berry Energy

Service, Inc. Additionally, nothing in the case authority requires
that matters completely outside of the credit relationship between
Jim Berry and Burrage and FirstBank are required to be reported in
an opinion on credit.

To its illogical end, a creditor would be

required under this theory to report all unsupported rumors and
innuendo which might have a remote relevance to a customer’s credit
in any request for information.
On those matters which do relate directly to Jim Berry’s
credit, no falsity in the precise statements made in the letter can
be found.

Burrage stated in the letter that he loaned Berry

personally $550,000.00, which represented the purchase of Jim
Berry’s home.

The late payments on loans to FirstBank were

assessed by Burrage as he did all of his customers - whether the
payments were sufficiently late to warrant credit reporting.

By

all accounts, none of Jim Berry’s payments were sufficiently late
that he was considered in default by FirstBank.

Indeed, Burrage’s

letter specifically stated that Jim Berry “paid as agreed” which
did not imply or invoke the technical term of “default” as CarMath

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suggests.
The third element requires knowledge of falsity or reckless
disregard for the truth.

Since the information provided did not

relate to Berry Energy Services, Inc. and was not materially false,
this element is not satisfied.
The fourth element requires an intent that the information
provided be acted upon by CarMath.

Burrage’s testimony would

indicate that he may not have specifically intended CarMath or
TransMatrix to rely upon the information provided but to the extent
they used it to provide credit to Jim Berry, individually, he had
not objection to them doing so.
The fifth element states that CarMath must have relied upon
the information.
provided

by

CarMath states it relied upon the information

TransMatrix,

which

included

Burrage’s

letter.

Curiously, CarMath offers testimony from TransMatrix employee Chris
Huege

concerning

the

greater

weight

given

to

Burrage’s

and

FirstBank’s credit opinion despite the fact that TransMatrix does
not make credit decisions but rather only gathers the credit
information and passes it on to CarMath which is then responsible
for further inquiry into the creditworthiness of the entity to
which credit is considered.

This Court rejects the evidence

provided by Mr. Huege concerning his opinion on the letter, its
age, and its weight on this basis.

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Any reliance by CarMath must be reasonable.

Felix v. Lucent

Techs., Inc., 387 F.3d 1146, 1164–65 (10th Cir. 2004)(“Oklahoma law
requires . . . ‘reasonable reliance’ on misrepresentations, and .
. . ‘an action for fraud may not be predicated on false statements
when the allegedly defrauded party could have ascertained the truth
with reasonable diligence.’ ”) (quoting Silver v. Slusher, 770 P.2d
878, 882 n. 8 (Okla. 1988)); Eckert v. Flair Agency, Inc., 909 P.2d
1201, 1206 (Okla.Civ.App. 1995).

CarMath’s stated reliance upon

the Burrage letter which clearly did not pertain to the credit
worthiness

of

reasonable

given

discrepancies

Berry

or

its

Energy

Services,

content

questions

and

it

the

Inc.

was

failure

perceived

with

patently
to

verify

Burrage

not
any

before

entering into the lease agreement.
In short, CarMath has failed to sustain its burden on the
claim for fraudulent misrepresentation.

CarMath states a separate

claim for fraud in the inducement, which is defined under Oklahoma
law as a
misrepresentation as to the terms, quality or other
aspects of a contractual relation, venture or other
transaction that leads a person to agree to enter into
the transaction with a false impression or understanding
of the risks, duties or obligations she has undertaken.
Harkrider v. Posey, 24 P.3d 821, 827 (Okla. 2000).
In this case, the fraudulent inducement claim is inextricably
intertwined with the fraudulent misrepresentation claim since they
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arise from the same representations by Burrage and FirstBank.
Since CarMath failed in its evidence to demonstrate the necessary
elements of fraudulent misrepresentation, it also has failed to
prove Burrage’s and FirstBank’s actions induced it to enter into
the agreement with Berry Energy Services, Inc.
CarMath also asserts a claim for negligent misrepresentation.
The cause of action specific to the representations of creditors
was espoused in the case of MSA Tubular Products, Inc. v. First
Bank and Trust Co., Yale, Okla., 869 F.2d 1422 (10th Cir. 1989).
The Tenth Circuit recognized that
Where a bank, through one of its duly authorized officers
or agents, undertakes to supply credit information,
arguably gratuitously, the bank and its officers are
bound to use the skill and expertise which they hold
themselves out to the public as possessing. There is
ordinarily no reason why factual information given by the
bank should not be accurate. When a bank officer makes
representations or omissions of material facts false at
the time, and where that officer has not exercised
reasonable care and diligence to see that the information
dispensed is accurate, the bank may incur a liability.
Id. at 424.
The Court provided the necessary elements for the claim which
must

be

proved

misrepresentation

by

a
or

preponderance
omission

of

of
a

the

evidence

fact;

(2)

-

(1)

that

a

the

representation or omission is material or significant; (3) that in
responding to the credit inquiry the bank officer failed to
exercise that degree of diligence and expertise the public is
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entitled to expect of reasonably competent bank officers; (4) that
it reasonably relied upon the bank's misrepresentation or omission;
and (5) that it suffered damages as a direct and proximate result
of such reasonable reliance.

Id.

Without reiterating the reasoning and findings already made in
connection with the fraud claims, the evidence is lacking of a
misrepresentation, that the content of the letter was material
since it only referenced the credit performance of a non-party to
the

lease,

and

CarMath’s

reliance

reasonable under the circumstances.

upon

the

letter

was

not

As far as the due diligence

element, Burrage testified that he reviewed Jim Berry’s credit
record with FirstBank prior to providing the letter and, under the
terms of the agreements and practices of FirstBank, Jim Berry “paid
as agreed” as the letter specifically states.

Burrage was not

“responding to a credit inquiry” as the Tenth Circuit suggests but
was providing a broad-based “to whom it may concern” letter which,
at best, should have prompted further inquiry by CarMath.
IT IS THEREFORE ORDERED that Defendants’ Motion for Summary
Judgment (Docket Entry #42) is hereby GRANTED.

Judgment will be

entered for Defendant accordingly.
IT IS SO ORDERED this 3rd day of August, 2017.

______________________________
KIMBERLY E. WEST
UNITED STATES MAGISTRATE JUDGE
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