At the time the statements were made, the officers knew: 1) one of the developers had filed bankruptcy, 2) the developers’ account for the project had been overdrawn at least 57 times, occasionally in amounts in excess of $10,000, and 3) the real estate project could not proceed because of disputes with the building's condominium association and with the zoning authorities of the City of Chicago. Sometime later, Schrager discovered the project had no value and filed suit against NCB and the officers for negligence and fraud, asserting he had relied on the officers’ statements when agreeing to guaranty the developers’ loans.
In allowing Schrager to proceed to trial, the court found that as a general rule an expression of an opinion is not actionable. An exception exists, however, when a party states the matter as a fact without classifying the statement as an opinion. Moreover, the form of the statement is not controlling, but the sense in which the statement is understood determines whether the statement is actionable. Thus, the trier of fact could determine that the officers’ statements were factual affirmations of the developers’ “business acumen” and success, not opinion, because Schrager knew that NCB and its officers were the developers’ bankers and the officers had actual detailed knowledge about the developers’ financial condition. Therefore, the statements could form the basis for a negligent misrepresentation claim.
The court also found that Schrager could proceed to trial on a fraudulent misrepresentation claim. To proceed with such a claim, a fiduciary or a special relationship must exist between Schrager and NCB. While Schrager’s relationship with the officers was not fiduciary in nature because a fiduciary relationship does not exist between a guarantor and creditor, the court found sufficient facts existed to establish a special relationship. Schrager’s meeting with the officers for the purpose of discussing the developers and their project and the officers’ superior knowledge of the same would allow the trier of fact to conclude the officers entered into a relationship of confidence and trust with Schrager giving rise to a justifiable reliance by Schrager on the officers’ statements. Thus, the officers’ statements could provide Schrager with a false sense of security regarding his business dealings with the developers, which may have inhibited Schrager from pursuing his own due diligence. Such a relationship would trigger a duty to accurately disclose to Schrager facts regarding the developers’ business experience and financial condition.
All bankers should familiarize themselves with the holding of Schrager so they may avoid making inaccurate and inflated statements on behalf of customers.