may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Linda Koch, et al.,
W.W. Holes Manufacturing Company
d/b/a St. Cloud Marine Outlet,
Filed October 28, 1997
Sherburne County District Court
File No. CX951860
Roger W. Kuehn, Jensen & Swanson, P.A., Suite 201, 8525 Edinbrook Crossing, Brooklyn Park, MN 55443 (for respondents)
Brian L. Williams, Frank J. Rajkowski, Rajkowski Hansmeier Ltd., 11 Seventh Avenue North, P.O. Box 1433, St. Cloud, MN 56302 (for appellant)
Considered and decided by Crippen, Presiding Judge, Parker, Judge, and Short, Judge.
Finding that appellant W.W. Holes made false representations to induce the purchase of a boat by respondents Linda and Dennis Koch, the trial court rescinded the purchase and awarded respondents damages. The court also found that appellant's defense was frivolous and awarded attorney fees of $4,339 to respondents. On appeal, appellant contends that false representations were not made or were immaterial, that it is entitled to recover the value of services to repair the boat, and that the fee award was an abuse of the trial court's discretion. We affirm and award respondents $2,000 as attorney fees incurred on appeal.
The trial court found that respondents misrepresented to appellant that the prior owner of the boat had returned it because of his financial problems, that the boat had been checked out and was running properly, and that it had a 30-day warranty beginning after the thaw. The court also found that appellant failed to disclose that the boat had more than one previous owner.
The occurrence of each of these false representations is substantiated by the evidence. Appellant's agent, who knew the boat's ownership and repair history, withheld the information he knew and misstated the ownership history to respondents. See National Equip. Corp. v. Volden, 190 Minn. 596, 600, 252 N.W. 444, 445 (1934) (holding fraud of the agent is fraud of the party).
At the show where respondents saw the boat, appellant's agent told respondents that the boat was repossessed because its owner lost his job. In fact, the two previous owners returned the boat because it was malfunctioning. Further, because the boat did not work well from the first time respondents used it, it was adequately shown that appellant's agent misrepresented the boat's condition and the fact that it had been "checked out" and was working. Finally, appellant misrepresented that the boat was under a 30-day warranty. The purchase agreement disclaimed the existence of warranties, but appellant's agent had previously, repeatedly told respondents the boat would be under a warranty and that the warranty would begin in May, after the lakes thawed.
Appellant contends that it had no duty to disclose under the circumstances, citing Klein v. First Edina Nat'l Bank, 293 Minn. 418, 420-21, 196 N.W.2d 619, 622 (1972). Appellant's reliance on Klein is misplaced. The general rule from Klein does not govern a situation in which the seller knew substantial material facts and the buyer had no access to this information. See id. (explaining that one of the exceptions to the general rule is that "[o]ne who has special knowledge of material facts to which the other party does not have access to may have a duty to disclose these facts * * *"). The evidence in this case shows that appellant's knowledge of facts was superior to respondents'.
Appellant contends that none of its representations was material to the transaction because the respondents signed a written agreement excluding all warranties. But representations are still material if they "would naturally affect the conduct of the party addressed." Yost v. Millhouse, 373 N.W.2d 826, 830 (Minn. App. 1985). The trial court found that appellant's misrepresentations were material to respondents' purchase, notwithstanding the written agreement. The record indicates that the boat's condition and ownership history were critical to the respondents' decision to buy the boat. Moreover, respondents presumed that appellant knew the truth, because they were led to believe that appellant had made all the repairs on the boat and had all the ownership records. See Spiess v. Brandt, 230 Minn. 246, 254, 41 N.W.2d 561, 567 (1950) (stating where one party is presumed to know the truth, reliance is assumed; citing Anderson v. Donahue, 116 Minn. 380, 133 N.W. 975 (1911)). The trial court did not err in finding that appellant's misrepresentations were material.
Appellant asserts that the trial court erred by denying its counterclaim for costs, in the amount of $847.34, for the boat's repair. As appellant acknowledged at oral argument, this issue need not be addressed in the absence of a decision to reverse the trial court's rescission decision.
Finally, appellant contends that the trial court abused its discretion in awarding attorney fees. As the trial court determined, nothing in the record justifies appellant's persistent refusal to acknowledge the legal effect of its misrepresentations. Appellants contentions before this court perpetuate the injustice announced by the trial court, and we award respondents $2,000 as attorney fees on appeal. See Hughes v. Sinclair Mktg., 389 N.W.2d 194, 200 (Minn. 1986) (recognizing need for award of appellate fees to avoid dilution of trial court's fee award).