S055509, Opinion — Loosli v. City of Salem

303
Argued and submitted June 4, decision of Court of Appeals and judgment of
circuit court affirmed October 2, 2008
Byron LOOSLI
and Melinda Loosli,
husband and wife;
Ben Lemire and Cynthia Lemire,
husband and wife;
and Divine Guidance, LLC,
dba Just a Good Car Lot,
Petitioners on Review,
v.
CITY OF SALEM,
a municipal corporation,
Respondent on Review,
and
Avis B. WOODRUM
and Louise Woodrum,
husband and wife,
Defendants.
(CC 04C-17616; CAA130044; SC 8055509)
193 P3d 623

304 	Loosli v. City of Salem
CJS, Fraud § 50.
En Banc
On review from the Court of Appeals.*
Eric S. Postma, of Gary M. Bullock and Associates, PC,
Portland, argued the cause and filed the brief for petitioners
on review. With him on the briefs was Meredith Boyden.
William F. Gary, of Harrang Long Gary Rudnick PC,
Salem, argued the cause and filed the brief for respondent on
review. With him on the brief was Sharon A. Rudnick.
David F. Rees, of Stoll Stoll Berne Lokting & Shlachter
PC, Portland, filed the brief for amicus curiae Oregon Trial
Lawyers Association.
* Appeal from Marion County Circuit Court, Jamese L. Rhoades, Judge. 215
Or App 502, 170 P3d 1084 (2007).

Cite as 345 Or 303 (2008) 	305
KISTLER,J.
The decision of the Court of Appeals and the judgment of
the circuit court are affirmed.

306 	Loosli v. City of Salem
KISTLER,J.
The question in this case is when a public body that
provides information pursuant to a statute will be liable for
negligently providing incorrect information. The trial court
ruled, on summary judgment, that defendant City of Salem
owed plaintiffs no statutory or other duty and thus was not
responsible for any economic damages that plaintiffs suffered
as a result of the city's negligence in providing information. A
divided, en bane Court of Appeals affirmed. Loosli v. City of
Salem, 215 Or App 502, 170 P3d 1084 (2007). We allowed
plaintiffs' petition for review and now affirm the Court of
Appeals decision and the trial court's judgment.
Plaintiffs wanted to start a used car business in
Salem and leased property for that purpose. 1 Later, plaintiffs
applied to the Driver and Motor Vehicle Services Division
(DMV) of the Oregon Department of Transportation for a
"vehicle dealer certificate," a necessary prerequisite for oper-
ating a used car business. ORS 822.025(6) requires that
every application for a vehicle dealer certificate include,
along with other information, a certificate from a local gov-
ernment official stating that the applicant's business com-
plies with local land use and other ordinances. 2 DMVhas pre-
pared a preprinted application for a vehicle dealer certificate
that sets out, at the bottom of the application form, the fol-
lowing certification (followed by a space for the local official's
signature):
"As the zoning official for the locality in which this business
is located, I verify by my signature below that the location
of this business as stated on this application, complies with
1 In reviewing a grant of summary judgment, we view the facts from the sum-
mary judgment record and all reasonable inferences that we may draw from them
in the light most favorable to the nonmoving party-in this case, plaintiffs. Oregon
Steel Mills, Inc. v. Coopers & Lybrand, LLP, 336 Or 329, 332, 83 P3d 322 (2004).
2 ORS 822.025(6) requires that every application for a vehicle dealer certificate
include, along with other information:
"A certificate signed by a person authorized by the local governing body to do
so, stating that the location of the business as given in the application for a
[vehicle dealer] certificate complies with any land use ordinances or business
regulatory ordinances of the city or county."

Cite as 345 Or 303 (2008) 	307
any land use ordinances and business regulatory ordi-
nances of the city or county, as appropriate pursuant to
ORS 822.025[(6)]."
Melinda Loosli, one of the plaintiffs in this case,
went to the Salem planning department and submitted
plaintiffs' 	DMV 	application 	for 	the 	city's 	review 	and
approval. An associate city planner signed the bottom part of
plaintiffs' DMV application and thus certified that plaintiffs'
business complied with the city's land use and business reg-
ulatory ordinances. The associate city planner later did not
remember signing plaintiffs' application; she explained, how-
ever, that ordinarily she would have checked the business
address listed on the application against a computer data-
base before signing it .
. Plaintiffs submitted their completed application to
DMV, which approved it, and plaintiffs put additional time
and money into starting their business. Shortly after the city
signed plaintiffs' DMV application, it notified them that an
overlay zone applied to their property, that automobile sales
were not a permitted use within the overlay zone, and that
plaintiffs could not sell cars at their proposed location. After
receiving the city's notice, plaintiffs moved their business to a
different location within the city.
Plaintiffs then filed this action, alleging that the
associate city planner had been negligent when she mistak-
enly certified, on the DMV application for a vehicle dealer
certificate, that plaintiffs' business complied with local land
use ordinances. Plaintiffs alleged that they had experienced
economic losses as a result of the employee's negligence. 3 The
city moved for summary judgment on plaintiffs' negligence
claim. It argued that, even assuming that its employee had
acted negligently and that the resulting damages were
reasonably foreseeable, the city was not liable for plaintiffs'
economic losses unless it owed plaintiffs some duty above and
beyond the common-law duty to exercise reasonable care to
prevent foreseeable harm. The city contended that no such
duty existed. The trial court agreed, granted the city's
motion, and entered judgment in the city's favor. As noted, a
3 Plaintiffs also brought a claim for rescission against the persons who had
leased the land to them, a claim that the parties later settled.

308 	Loosli v. City of Salem
divided Court of Appeals affirmed the trial court's judgment,
and we allowed plaintiffs' petition for review.
The issue on review is narrow. Plaintiffs do not dis-
pute that" '[o]ne ordinarily is not liable for negligently caus-
ing a stranger's purely economic loss without injuring his
person or property.'" Oregon Steel Mills, Inc. v. Coopers &
Lybrand, LLP, 336 Or 329, 341, 83 P3d 322 (2004) (quoting
Hale v. Groce, 304 Or 281, 284, 744P2d1289 (1987)). Nor do
they dispute that "liability [in negligence] for purely eco-
nomic harm 'must be predicated on some duty of the negli-
gent actor to the injured party beyond the common law duty
to exercise reasonable care to prevent foreseeable harm.' "Id.
(quoting Onita Pacific Corp. v. Trustees of Bronson, 315 Or
149, 159, 843 P2d 890 (1992)). It follows from those decisions
that, even if it was reasonably foreseeable that plaintiffs
would suffer economic loss as a consequence of the city's
actions, that fact is not sufficient to state a negligence claim
against the city. "Some source of a duty outside the common
law of negligence is required." Hale, 304 Or at 284. 4
Before the Court of Appeals, plaintiffs argued that a
"source of a duty outside the common law of negligence" could
be found either in ORS 822.025 or in their relationship with
the city. On review, plaintiffs acknowledge that the city did
not owe them any duty under ORS 822.025. They argue, how-
ever, that their relationship with the city imposed a duty on
it to protect their economic interests. That relationship (and
the 	city's resulting 	duty) 	arose, 	plaintiffs 	argue, 	when
Melinda Loosli submitted plaintiffs' DMV application to a
city employee for her certification and the city employee
signed it. 5 In arguing that that transaction gave rise to a rela-
tionship that imposed a duty on the city, plaintiffs note that
4 In this case, plaintiffs alleged a negligence claim against the city; they did not
allege a negligent misrepresentation claim. The city has argued that the economic
loss doctrine, summarized in the text above, bars plaintiffs' claim. That argument
applies equally to negligence and negligent representation claims, and the validity
of the city's argument is the only issue before us. We express no opinion on whether
the evidence was sufficient to establish other elements of plaintiffs' claim.
5 In the trial court and also in the Court of Appeals, plaintiffs relied on state-
ments that city employees made to them during earlier telephone calls. On review,
plaintiffs do not rely on those calls; instead, they base their relationship with the
city solely on their submission of the DMV application to the employee and the
employee's signing it.

Cite as 345 Or 303 (2008) 	309
they paid the city a fee for signing the certification on their
DMV application, that ORS 822.025 required them to get the
certification from the city, and that they relied on the certifi-
cation. The city responds that, in signing the certification, it
was carrying out its role in a regulatory scheme that is
intended to protect the public's interests, not plaintiffs'. The
city reasons that, ifthe statutory scheme imposes no duty on
it to protect plaintiffs' interests, as plaintiffs acknowledge,
then any relationship that arose solely out of the city's com-
pliance with ORS 822.025(6) cannot impose any greater duty
on the city than the statute does. In short, the city argues
that its regulatory role in this case both defines and limits the
nature of its relationship with plaintiffs.
In analyzing the parties' arguments, we begin with
the relevant statutes. Generally, a person may not engage in
the business of buying, selling, or trading new or used vehi-
cles without first obtaining a vehicle dealer certificate. See
ORS 822.005 (making it an offense to engage in those acts
without a vehicle dealer certificate); ORS 822.007 (authoriz-
ing an injunction to prevent engaging in those acts without a
vehicle dealer certificate). To obtain a vehicle dealer certifi-
cate, a person must submit an application to DMV together
with proof that the person meets certain bonding, insurance,
education, and other requirements. See ORS 822.020 (stating
those requirements). The application must contain the appli-
cant's contact information,6 the business's name, the busi-
ness's location, and a certificate signed by a local official that
the proposed business complies with "any [local] land use
ordinances or business regulatory ordinances." See ORS
822.025 (setting forth these and other requirements for the
application).
The statutes provide that DMV shall examine the
application and may investigate any statements in the appli-
cation. ORS 822.035(1). If DMV is satisfied that an applicant
is entitled to a vehicle dealer certificate, it shall issue a certif-
icate that allows the dealer to conduct business under the
certificate. ORS 822.035(2). If a dealer wishes to expand its
" If the applicant is a partnership or corporation, the application must include
the names and residences of either the partnership's members or the corporation's
principal officers. ORS 822.025(1).

310 	Loosli v. City of Salem
business to an additional location or wishes to move an exist-
ing business to a different location, it must obtain either a
supplemental or a corrected vehicle dealer certificate from
DMV. ORS 822.040(2), (3). The failure to do so constitutes a
Class A misdemeanor. See ORS 822.045(1)(a), (b) (describing
offenses); ORS 822.045(4)(a), (b) (classifying those offenses).
These statutes reflect a comprehensive legislative
policy choice to regulate the business of buying, selling, and
trading vehicles. The requirement that dealers meet mini-
mum insurance, bonding, 	and educational requirements
serves to protect consumers. The requirement that dealers
provide the names of their principals, their addresses, and
their business locations to DMV as part of the application
serves the same purpose; it allows DMV to monitor the deal-
ers, to ensure that dealers whose vehicle dealer certificates
have been revoked do not open a new business, and to make
periodic inspections of the dealers' businesses. See ORS
822.035(5) (authorizing DMV to inspect dealer records and
inventory); 	ORS 	810.480 	(authorizing 	police 	officers 	to
inspect dealer records and inventory for compliance with the
vehicle code).
The requirement in ORS 822.025(6) that an appli-
cant for a vehicle dealer certificate include, as part of its
application to DMV, a certificate from a local government
official that the applicant's business complies with "any
[local] land use ordinances and other business regulatory
ordinances" serves a related but separate regulatory pur-
pose. It helps ensure that state and local regulatory bodies
act in a coordinated fashion. In particular, it helps DMV to
ensure that any business that it authorizes will also comply
with 	local 	regulatory 	requirements. 	As 	plaintiffs 	have
acknowledged, the certification that ORS 822.025(6) requires
is not intended to protect an applicant's interests. Rather, the
certification assists DMV in its task of deciding whether to
approve the application and thus protects the interest of the
public at large. With that statutory background in mind, we
turn to plaintifl's argument that the city's compliance with
ORS 822.025(6) gave rise to a "special relationship" between
the city and plaintiffs that imposed a duty on the city to pro-
tect plaintiffs' economic interests.

Cite as 345 Or 303 (2008) 	311
Not every relationship gives rise to a duty "beyond
the common law duty to exercise reasonable care to prevent
foreseeable harm." See Onita, 315 Or at 159 (stating stan-
dard). Determining which relationships give rise to such a
duty has not always proven easy, however. This court has
observed that section 552 of the Restatement (Second) of
Torts (1977) provides a good starting point for the analysis
when a party has been negligent in obtaining or communicat-
ing information. Id. (describing that rule as "close to the
mark"). 7 The court, however, has declined to adopt that sec-
tion of the Restatement as a "black letter 'rule,'" id.-a view
that sometimes has divided the court. Compare Conway v.
Pacific University, 324 Or 231, 244, 924 P2d 818 (1996) (hold-
ing that defendant "did not have a special responsibility to
exercise independent judgment in [the plaintiffs] behalf and
to look after [the plaintiffs] interests"); with id. 	at 251
(Durham, J., dissenting) (urging adherence to section 552).
We need not revisit the issue that divided the court
in Conway to resolve this case. Under section 552 of the
Restatement, plaintiffs' claim against the city fails. Subsec-
tion (1) of section 552 states the general rule of liability for
negligently obtaining or providing incorrect information that
results in economic damages only. Restatement at § 552 com-
ment a. It provides that a person "who, in the course of his
7 Section 552 of the Restatement (Second) of Torts defines the extent ofliability
for a person who makes certain negligent misrepresentations in the course of his or
her business, profession, or employment. It provides:
"(l) One who, in the course of his business, profession or employment, or
in any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is subject
to liability for pecuniary loss caused to them by their justifiable reliance upon
the information, ifhe fails to exercise reasonable care or competence in obtain-
ing or communicating the information.
"(2) Except as stated in Subsection (3), the liability stated in Subsection
(1) is limited to loss suffered
"(a) by the person or one of a limited group of persons for whose benefit
and guidance he intends to supply the information or knows that the recipient
intends to supply it; and
"(b) through reliance upon it in a transaction that he intends the infor-
mation to influence or knows that the recipient so intends or in a substantially
similar transaction.
"(3) The liability of one who is under a public duty to give the information
extends to loss suffered by any of the class of persons for whose benefit the duty
is created, in any of the transactions in which it is intended to protect them."

312 	Loosli v. City of Salem
business, profession or employment [negligently] * * * sup-
plies false information for the guidance of others in their
business transactions" is subject to liability for economic loss
that the false information causes.
In this case, the city did not sign the certification on
plaintiffs' DMV application "for the guidance of[plaintiffs] in
their business transactions." Rather, the city was acting pur-
suant to ORS 822.025(6). 8 As such, the city's certification on
the DMV application allowed DMV to coordinate state and
local regulatory requirements and thus provided guidance to
DMV. Because the city did not supply the information for
plaintiffs' guidance in their business transactions, plaintiffs'
claim does not satisfy one of the criteria stated in section
552(1) of the Restatement. 9
Subsections (2) and (3) of section 552 point in the
same direction. Subsection (2) limits the scope of liability
stated in subsection (1). It provides that, generally, the liabil-
ity of a person who negligently supplies incorrect information
"is limited to loss suffered [b]y the person* * *for whose ben-
efit and guidance he intends to supply the information."
Restatement at § 552(2). The limitation in subsection (2) mir-
rors one of the criteria for liability in subsection (1). See
Restatement at § 552(1) (providing for liability for negligent
misrepresentation for persons who supply information for
"the guidance of others in their business transactions"). As
explained above, the city provided the certification on plain-
tiffs' DMV application for DMV's guidance. It follows that,
under subsection (2), the city was not liable to plaintiffs.
Subsection (3) states an exception to the limitation
on liability in subsection (2). It provides that, when a person
8 Plaintiffs do not argue that the city employee signed the certification for any
reason other than to comply with ORS 822.025(6); that is, this is not a case in which
the relationship between the city and plaintiffs went beyond the city's discharge of
its duties under ORS 822.025(6).
9 Plaintiffs argue that the fact that they paid the city a fee means that the city
had a duty to protect their economic interests. Plaintiffs misperceive the role that
their payment of a fee plays. Under the Restatement (Second) of Torts, a person
who provides information gratuitously has no duty to exercise reasonable care.
Restatement at§ 552 comment c. The fact that a gratuitous transaction imposes no
duty does not mean that every nongratuitous transaction imposes such a duty.
Under the Restatement, the other criteria set out in section 552 must be met. As
explained above, plaintiffs' claim does not meet those criteria.

Cite as 345 Or 303 (2008) 	313
is under a 	public duty to provide information, liability
extends to "the class of persons for whose benefit the [public]
duty is created." Restatement at § 552(3). Liability, however,
extends no further. Not only does the latter point follow from
the fact that subsection (3) is an exception to the limitation on
liability stated in subsection (2), but the comment to subsec-
tion (3) makes that point clear. It explains:
"The scope of the defendant's duty to others in these
[public duty] cases will depend upon the purpose for which
the information is required to be furnished. The purpose
may be found to be to protect only a particular and limited
class of persons, as when a statute requires insurance com-
panies to file information concerning their finances with a
state insurance commissioner is found to be only for the
protection of those buying insurance. In such a case the lia-
bility of the company when it negligently gives false infor-
mation extends only to those who take out insurance poli-
cies and only to losses suffered through taking out the
policy."
Restatement at § 552 comment k.
For the purposes of this case, we assume that ORS
822.025(6) imposed a duty on the city to provide the certifi-
cation on plaintiffs' DMV application. 10 As explained above,
however, that certification is not intended to benefit plain-
tiffs specifically, and the comment to subsection (3) makes
clear that a person who provides information pursuant to a
statutory duty is liable only to the specific class of persons
whom the statute is intended to benefit. Subsection (3) thus
confirms that the city owes plaintiffs no duty under ORS
822.025(6) to protect their economic interests.
To be sure, plaintiffs do not rely on ORS 822.025(6)
as the source of any duty that the city owes them. Rather,
they argue that a duty arose from their relationship with the
city. However, when the only relationship with the city that
plaintiffs identify arose solely out of the city's compliance
with ORS 822.025(6), that relationship does not impose any
10 ORS 822.025(6) requires applicants to include a certification from a local
government official, but it does not explicitly place a duty on the local government
to provide the certification. The city's argument assumes, however, that ORS
822.025(6) implicitly places a public duty on it to provide the certification, and we
accept that assumption for the purposes of analyzing plaintiffs' claim.

314 	Loosli v. City of Salem
greater duty on the city than ORS 822.025(6) does. As both
the trial court and the Court of Appeals correctly recognized,
the city owed no statutory or other duty to plaintiffs that
would permit them to state a negligence claim against the
city for purely economic losses.
The decision of the Court of Appeals and the judg-
ment of the circuit court are affirmed.