This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Harry and Arthurine Ponzo,
Affordable Homes of Rochester, LLC,
Olmsted County District Court
File No. C4-02-2977
Duane A. Kennedy, Kennedy Law
Firm, 3 Durst Building,
Harry Ponzo, Arthurine Ponzo, 3228 Avalon Cove Lane Northwest, Rochester, MN 55901 (pro se respondents)
Considered and decided by Peterson, Presiding Judge; Schumacher, Judge; and Wright, Judge.
In this dispute over the sale of a manufactured home, appellant-seller argues that the district court abused its discretion in permitting respondent-buyers to amend the complaint shortly before the commencement of trial. Appellant-seller also challenges the rescission remedy imposed, arguing that (a) determining the proper remedy was a jury question; (b) the buyers’ ratification of the contract bars rescission; and (c) the availability of an adequate remedy at law precludes imposition of an equitable remedy. We affirm.
On July 29, 2000, respondents Harry
and Arthurine Ponzo (the Ponzos) contracted with appellant Affordable Homes of
The Ponzos immediately complained to Affordable Homes. A representative from Affordable Homes inspected the home and advised the Ponzos that they had received a 1999 display model. The Ponzos sent a letter to Affordable Homes on November 6, 2000, stating that a used 1999 model had been mistakenly delivered and requesting its replacement with the 2000 model that they purchased. In March 2001, an inspector hired by Affordable Homes to assess the defects in the home verified that the manufactured home they received was a 1999 model. But Affordable Homes never replaced the 1999 model home with the 2000 model.
On June 1, 2001, the Ponzos sued Affordable Homes, alleging breach of warranty, negligent delivery and set-up of the home, and unlawful practices under the Minnesota Prevention of Consumer Fraud Act (Consumer Fraud Act). The complaint cited Minn. Stat. § 325F.67 (2004), the false-statement-in-advertising provision of the Consumer Fraud Act. The Ponzos sought rescission of the purchase agreement and reimbursement for incidental expenses, including interest payments on their home loan. Following extensive discovery, the Ponzos filed a trial memorandum that identified Affordable Homes’s liability under the unlawful-practices provision of the Consumer Fraud Act, Minn. Stat. § 325F.69 (2004), as the primary issue at trial.
The Ponzos dismissed the negligence and breach-of-warranty claims on the eve of trial. On the day of trial, the Ponzos clarified that they were proceeding solely on the section 325F.69 consumer-fraud claim. Objecting to the late notice of this legal theory, Affordable Homes moved for a continuance. Due to inadequate notice of the fraud claim, Affordable Homes argued, it was not prepared to proceed. The district court denied the motion, concluding that the substance of the complaint as well as the Ponzos’ April trial memorandum made clear that the Ponzos were pursuing a consumer-fraud claim under Minn. Stat. § 325F.69. The trial proceeded as scheduled.
The jury returned a verdict in favor of the Ponzos, finding that Affordable Homes made misrepresentations to the Ponzos when selling the manufactured home, in violation of the Consumer Fraud Act and that the Ponzos were entitled to relief. On May 24, 2004, a bench trial was held to determine the proper remedy. Finding that “[n]o amount of money damages will convert the 1999 model home [the Ponzos] occupy into the 2000 model that was represented to them,” the district court ordered rescission of the sales transaction. The district court ordered Affordable Homes to pay the Ponzos costs in the amount of $8,529.23 in order to “return the parties to a position as close as reasonably possible to that which they occupied prior to the transaction.” This appeal followed.
Affordable Homes initially argues that the district court abused its discretion by granting the Ponzos’ oral motion to amend the complaint with a consumer-fraud claim under Minn. Stat. § 325F.69 (2004). Our review of the record, however, establishes that the Ponzos did not move to amend the complaint. Thus, Affordable Homes’s argument is misplaced.
At trial, the Ponzos maintained that the complaint properly stated a misrepresentation claim under the Consumer Fraud Act, thereby precluding the need for amendment. The Ponzos admitted that the complaint incorrectly cited section 325F.67 (false advertising) instead of section 325F.69 (unlawful practices). But they contended that the substance of the complaint adequately stated a fraud claim. The district court agreed and permitted the Ponzos to proceed under the original complaint. Although the district court noted that it would “permit [the Ponzos] to amend” their complaint “if amendment of the complaint [was] necessary,” it took no further action.
Had the district court permitted amendment of the complaint,
Affordable Homes’s argument nevertheless would be unavailing here because Affordable
Homes did not challenge the purported amendment to the pleadings in a motion for
a new trial. Absent a post-trial motion
challenging the purported amendment of the complaint or the denial of Affordable
Homes’s motion for a continuance, appellate review of these issues is
precluded. Kulkay v. Allied Cent. Stores, Inc., 398 N.W.2d 573, 579 (Minn.
App. 1986), review denied (Minn. Feb.
13, 1987); see also Sauter v. Wasemiller,
389 N.W.2d 200, 201 (
Affordable Homes next challenges the rescission remedy imposed. The basis for this challenge is three-fold. Affordable Homes contends that (1) the nature of the appropriate remedy is an issue that should have been submitted to a jury; (2) rescission was improper because the Ponzos ratified the fraud; and (3) rescission was unwarranted because adequate remedies exist at law.
a threshold matter, we consider whether rescission of a purchase agreement is a
permissible remedy in an action under the Consumer Fraud Act. Statutory interpretation presents a question
of law, which we review de novo. Eischen Cabinet Co. v. Hildebrandt, 683
N.W.2d 813, 815 (Minn. 2004). When
discerning the meaning of a statute,
our primary purpose is to give effect to legislative intent as expressed in the
statutory language. Minn. Stat. § 645.16 (2004); Olmanson v. LeSueur
County, 693 N.W.2d 876, 879 (Minn. 2005).
When the meaning of a statute’s language is clear and unambiguous, we
interpret the language according to its plain meaning without resorting to
Section 325F.69 of the Consumer Fraud Act provides, in relevant part:
The act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with the intent that others rely thereon in connection with the sale of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby, is enjoinable[.]
In addition to the remedies otherwise provided by law, any person injured by a violation of any of the laws referred to in subdivision 1 [including the Consumer Fraud Act] may bring a civil action and recover damages, together with costs and disbursements, including costs of investigation and reasonable attorney’s fees, and receive other equitable relief as determined by the court.
Although Minnesota courts have not specifically addressed whether rescission of a contract is a permissible form of equitable relief under section 8.31, the private-attorney-general statute plainly allows a plaintiff to seek injunctive relief in a private action under Minnesota’s consumer-fraud statutes. Wexler v. Bros. Entm’t Group, Inc., 457 N.W.2d 218, 221 (Minn. App. 1990); see generally Bob Cohen, Annotation, Right to Private Action Under State Consumer Protection Act—Equitable Relief Available, 115 A.L.R.5th 709, 735 § 3(a) (2004) (injunctive relief). And a majority of the foreign jurisdictions that have considered this question have acknowledged that rescission is a permissible remedy for consumer fraud or other deceptive consumer practices under their particular statutory schemes. See, e.g., Augustine v. Rogers, 710 N.E.2d 1030, 1032 (Mass. App. Ct. 1999) (noting that rescission is available remedy under consumer-protection statute); Scott v. Mayflower Home Improvement Corp., 831 A.2d 564, 572-73 (N.J. Super. Ct. Law Div. 2001) (concluding that contracts obtained by practices actionable under consumer-fraud act are void and unenforceable); Lorentz v. Deardan, 834 S.W.2d 316, 318-19 (Tenn. Ct. App. 1992) (holding that because statutory language empowers court to grant “necessary and proper” relief, rescission of a contract is a proper remedy under consumer-protection statute); Schenck v. Ebby Halliday Real Estate, Inc., 803 S.W.2d 361, 366 (Tex. Ct. App. 1990) (holding that language authorizing courts to grant “orders necessary to restore . . . money or property” entitled plaintiff to seek equitable remedy of rescission); Allen v. Am. Land Research, 631 P.2d 930, 936-37 (Wash. 1981) (holding that, based on the district court’s inherent authority to fashion judgments, rescission is permissible remedy under consumer-protection statutes). These consumer-protection statutory schemes, like Minnesota’s Consumer Fraud Act, do not expressly provide for rescission. But in interpreting general language authorizing courts to grant equitable or “necessary” relief, these jurisdictions have concluded that rescission is a cognizable remedy for a violation of the consumer-protection laws. While not precedential, this authority is highly persuasive.
8.31 plainly provides that any person injured by a violation of the Consumer Fraud
Act may bring an action for damages and “receive
other equitable relief as determined by the court.”
We next consider whether the district court erred in declining to permit the jury to determine the remedy. Affordable Homes repeatedly argues that the issue of “damages” should have been presented to a jury. But the Ponzos did not seek damages. The relief they sought was rescission of the purchase agreement.
Minnesota Constitution provides, “The right of trial by jury shall remain
inviolate, and shall extend to all cases at law without regard to the amount in
the complaint, the Ponzos sought rescission of the purchase agreement. Although the Ponzos initially sought incidental
and consequential damages in addition to rescission, they later abandoned their
claim for this form of relief and clarified in their pretrial brief that
rescission was “the only remedy they [were] interested in pursuing.” Rescission is an equitable remedy. Liebsch
v. Abbott, 265
Here, the district court bifurcated the trial. Issues of liability were tried to a jury. The district court then resolved the remedy issues—namely whether the Ponzos were entitled to rescission, attorney fees, and costs and disbursements. This was more than the district court was constitutionally required to do. Accordingly, Affordable Homes’s argument that the remedy issues should have been submitted to a jury fails.
Homes also contends that the district court erred in rescinding the purchase
agreement because (1) the Ponzos ratified the fraud and (2) adequate remedies
existed at law. The decision to grant equitable
relief is within the district court’s discretion. State
by Humphrey v. Alpine Air Prods., Inc., 490 N.W.2d 888, 896 (Minn. App.
1992), aff’d, 500 N.W.2d 788 (
Homes’s ratification claim is based on its contention that the Ponzos waived
the right to rescission of the purchase agreement by accepting the manufactured
home with the knowledge that it was a 1999 model. This argument raises questions of fact, which
we review for clear error. Carpenter v. Vreeman, 409 N.W.2d 258,
a fraud case involving a contract, the plaintiff must promptly notify the other
party of the intention to rescind the contract and refrain from engaging in
conduct inconsistent with that intention.
Gaertner v. Rees, 259
of when the plaintiff acquired actual knowledge of the nature and extent of the
fraud is critical to establish that the contract was ratified.
sufficient knowledge of the fraud is established, then proof that the plaintiff
committed an act of ratification is required.
Ratification occurs when a party accepts and retains the benefits of the
contract. Proulx v. Hirsch Bros. Inc., 279
Based on the district court’s conclusions, however, we can assume that the district court found that the Ponzos did not waive the right to rescind. The record contains controverted evidence as to the date on which the Ponzos learned of the fraud. At trial, Affordable Homes maintained that the Ponzos learned of the misrepresentation even before the home was delivered in September 2000. Affordable Homes introduced a title application dated August 18, 2000, and signed by the Ponzos, which stated that the Ponzos owned a 1999 manufactured home. Affordable Homes also produced a letter dated November 6, 2000, in which the Ponzos acknowledged that they had received a 1999 home.
But Harry and Arthurine Ponzo testified that, although they suspected fraud in late 2000, their suspicions were not confirmed until March 2001 when an inspector advised them that they had received a 1999 model. Harry Ponzo testified that the Affordable Homes representative proffered differing explanations for the defective home, such that the Ponzos were not sure what they had received until a third party verified their suspicions. The district court acted within its discretion in rejecting Affordable Homes’s interpretation of the facts and accepting the Ponzos’ testimony. Minn. R. Civ. P. 52.01 (credibility determinations are for court in “all actions tried upon the facts without a jury”). Such a credibility determination is exclusively the province of the district court and will not be disturbed on appeal. Tonka Tours, Inc., 372 N.W.2d at 726.
the Ponzos became aware of the fraud, they acted promptly in notifying
Affordable Homes of their intent to rescind.
The Ponzos filed suit on June 1, 2001, less than three months after they
learned that they had been defrauded. Moreover,
ever since the defective home was delivered in September 2000, the Ponzos
repeatedly complained to Affordable Homes about the home they had
received. Although the Ponzos continued
to live in the 1999 model, the Ponzos never gave Affordable Homes the
impression that they would simply accept the 1999 home in lieu of the home they
actually purchased. Accordingly, the
district court did not err in finding that the Ponzos did not waive their right
to rescind the purchase agreement by ratifying the contract. See First
Nat’l Bank of St. Paul v. Blocker, 150
Affordable Homes also contends that the district court erred by rescinding the contract because the Ponzos had an adequate remedy at law—namely out-of-pocket damages. Whether damages are adequate to compensate a plaintiff also is a factual determination, which we review for clear error. In re Digital Res., 246 B.R. at 369.
Rescission ordinarily is available when damages at law
are inadequate or when such damages would be difficult or impossible to
determine. Marso v. Mankato Clinic, Ltd., 278 Minn. 104, 116, 153 N.W.2d 281,
290 (1967); see also Johnny’s, Inc. v.
Njaka, 450 N.W.2d 166, 168 (Minn. App. 1990) (rescinding contract when it
was impossible to measure money damages for loss of customers and good
will). This rule comports with the
underlying principle that equitable relief is only available when damages at
law are inadequate. See generally 27A Am.Jur.2d Equity
§ 30 (1996). But to be required to
pursue a legal remedy, the legal remedy must be as practical, as efficient, and
as complete as the equitable one. Boyce’s Ex’rs v. Grundy, 28
Here, the district court rescinded the purchase agreement after finding that “no amount of money damages will convert the 1999 model home [the Ponzos] occupy into the 2000 model that was represented to them.”
The typical measure for out-of-pocket damages is the difference between the value of the property received and the price paid. In this case, out-of-pocket damages, although calculable, would have provided an incomplete remedy. Accordingly, the district court did not abuse its discretion by ordering rescission of the purchase agreement and assessing costs in an attempt to return the parties to the status quo.
We note at the outset that, if a plaintiff complains about an individual
experience with a seller and cannot produce evidence that the seller made misrepresentations
to the public at large, a plaintiff is barred from raising claims under the
Consumer Fraud Act. Davis v. U.S. Bancorp, 383 F.3d 761, 768 (8th Cir. 2004); Ly v. Nystrom,615 N.W.2d 302, 314 (Minn. 2000) (holding that litigation over an
alleged misrepresentation that was made only to one person “does not advance
state interests and enforcement has no public benefit”); Jensen v.