Loosli v. City of Salem

Decision Date02 October 2008
Docket NumberCC 04C17616.,CA 130044.,SC S055509.
PartiesByron 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.
CourtOregon Supreme Court

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.


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 banc Court of Appeals affirmed. Loosli v. City of Salem, 215 Or.App. 502, 170 P.3d 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 operating 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 government official stating that the applicant's business complies with local land use and other ordinances.2 DMV has prepared a preprinted application for a vehicle dealer certificate that sets out, at the bottom of the application form, the following 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 any land use ordinances and business regulatory ordinances 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 regulatory ordinances. The associate city planner later did not remember signing plaintiffs' application; she explained, however, that ordinarily she would have checked the business address listed on the application against a computer database 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 mistakenly 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 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 dispute that "`[o]ne ordinarily is not liable for negligently causing 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 P.3d 322 (2004) (quoting Hale v. Groce, 304 Or. 281, 284, 744 P.2d 1289 (1987)). Nor do they dispute that "liability [in negligence] for purely economic harm `must be predicated on some duty of the negligent 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 P.2d 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, 744 P.2d 1289.4

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, however, 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 relationship that imposed a duty on the city, plaintiffs note that 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 certification. 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, if the 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 compliance 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 vehicles 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 (authorizing an injunction to prevent engaging in those acts without a vehicle dealer certificate). To obtain a vehicle dealer certificate, 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 applicant's contact information,6 the business's name, the business'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 application. ORS 822.035(1). If DMV is satisfied that an applicant is entitled to a vehicle dealer certificate, it shall issue a certificate that allows the dealer to conduct business under the certificate. ORS 822.035(2). If a dealer wishes to expand its business to an additional location or wishes to move an existing 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 minimum 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 dealers, 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...

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