STATE OF MINNESOTA
IN COURT OF APPEALS
Rebecca A. Gray, et al.,
Rebecca A. Gray,
Katherine M. Gray,
Charles Conrad and Arlene J. Conrad,
individually and as Agents for ReMax Realty,
defendants and third-party plaintiffs,
individually and d/b/a Coldwell Banker Jambor,
Filed July 21, 1998
Affirmed in part, reversed in part, and remanded;
Ramsey County District Court
File No. C99410712
Kevin E. Giebel, Mark E. Gilbert, Giebel & Gilbert, P.L.L.P., 2233 North Hamline Avenue, Suite 620, St. Paul, MN 55113 (for respondent)
William J. Egan, Brian K. Jackson, Rider, Bennett, Egan & Arundel, LLP, 2000 Metropolitan Centre, 333 South Seventh Street, Minneapolis, MN 55402 (for appellants)
Considered and decided by Kalitowski, Presiding Judge, Randall, Judge, and Schumacher, Judge.
U N P U B L I S H E D O P I N I O N
Appellants Charles and Arlene Conrad contest the district court’s rescission of the contract to sell their home to respondent Rebecca Gray. They claim: 1) respondent did not prove damages, and, thus, the district court erred in finding appellants committed fraud on respondent; 2) respondent could not return the home in its status quo ante, and, therefore, the district court improperly awarded respondent rescission of the contract; 3) the district court violated the law of the case by granting respondent damages in addition to rescission; 4) respondent’s motion for attorney fees was untimely, and thus, the district court lacked jurisdiction to award attorney fees; and, 5) because the district court did not make a specific finding that appellants violated the Consumer Fraud Act and any misrepresentation was made to private individuals, not the general public, it was improper to grant attorney fees authorized under the private attorney general statute. Respondent argues that appellants included information outside of the record in the appendix to their brief. We affirm in part, reverse in part, and remand, and deny respondent’s motion to strike.
This case arises out of appellants’ sale of a duplex to respondent, who claims that appellants fraudulently misrepresented to her that no pets had lived in the home. Respondent’s granddaughter’s health concerns prohibited respondent from purchasing a home that pets had lived in. Respondent’s appeal of the first district court decision in this matter resulted in this court remanding the issue of rescission. Gray v. Conrad, No. C4-96-1182, 1996 WL 665992 (Minn. App. Nov. 19, 1996) (Gray I). Appellants have now appealed the district court’s decision on remand to grant respondent rescission of the contract. Appellants separately challenged the award of attorney fees to respondent. Both cases have been consolidated into this appeal.
D E C I S I O N
Appellant argues that respondent cannot receive rescission in a claim of misrepresentation without proof of damages. We disagree.
"[W]e are not concerned in an action for rescission with a question of damages." Spiess v. Brandt, 230 Minn. 246, 255, 41 N.W.2d 561, 568 (1950). The supreme court has also found proof of damage in an action for rescission to be "a wholly unnecessary element." Kirby v. Dean, 159 Minn. 451, 454, 199 N.W. 174, 175 (1924). We conclude the district court did not err in determining appellants made an actionable misrepresentation to respondent.
II. Equitable Relief
The granting of equitable relief is within the district court’s discretion; we will reverse only a clear abuse of 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 (Minn. 1993).
"A contract is voidable if a party’s assent is induced by a fraudulent misrepresentation on which the party is justified in relying." MCC Investments v. Crystal Properties, 415 N.W.2d 908, 911 (Minn. App. 1987), review denied (Minn. Feb. 12, 1988) (MCC Investments I). Rescission is also appropriate "[w]here the injury caused by the breach of contract is irreparable, or where the damages would be inadequate or difficult or impossible to determine." Johnny’s, Inc. v. Njaka, 450 N.W.2d 166, 168 (Minn. App. 1990).
That a party seeking rescission of a contract must return, or offer to return, what he has received under it, and thus put the other party as nearly as is possible in his situation before the contract, is the law. But this rule is wholly an equitable one; impossible or unreasonable things, which do not tend to accomplish equity in the particular transaction, are not required.
MCC Investments I, 415 N.W.2d at 911 (quotations omitted).
Appellants argue that because the house was sold to respondent as a suitable dwelling, she is obligated to return it to them as a legally suitable dwelling as well. Appellants complain the duplex is now an unsuitable dwelling place because the windows were replaced with windows that do not meet building code and violate the city’s requirements.
We conclude, however, that the district court could have assumed from the evidence that either the city would likely give appellants a variance or that rescission was equitable because the new windows were intended as an improvement and should not be used to prevent rescission on a $132,500 home. The district court did not abuse its discretion in granting respondent a rescission.
III. Law of the Case - Damages
The appellate courts developed the law of the case doctrine to effectuate the finality of their decisions. Loo v. Loo, 520 N.W.2d 740, 744 n.1 (Minn. 1994). Ordinarily, it applies when an appellate court has decided a legal issue and has remanded the case to the district court for further proceedings. Id. "The issue decided becomes ‘law of the case’ and may not be relitigated in the trial court or reexamined in a second appeal." Sigurdson v. Isanti County, 448 N.W.2d 62, 66 (Minn. 1989).
In our first decision regarding this matter, this court reinstated only the rescission claim. Gray I, 1996 WL 665992, at *2. In Gray I we upheld the district court’s grant of a directed verdict against respondent on her theory of fraudulent misrepresentation and against her daughter on a claim of third-party breach of contract, precluding a damages award. Id. at *5. Appellants correctly argue that the district court cannot later proceed under a different theory and award damages previously denied by this court. The district court’s jurisdiction was limited to a determination of whether the evidence supported the equitable relief of a rescission.
In rescission "the parties must be put in the same position they would have been had the contract never existed." Johnny’s, Inc., 450 N.W.2d at 168.
If * * * the defrauded contractor rescinds, * * * he is not entitled to damages because there are none. The theory is that he is not damaged at all by the other party’s wrong because he escaped that wrong by rescinding and thereby avoiding the contract, and recovering, not damages, but simply that with which he parted by reason of the contract. The status quo ante is restored. Consequently, no one is damaged.
Kirby, 159 Minn. at 453, 199 N.W. at 175. However,
[i]t is not the purpose of rescission to award to the offending party a windfall when that party’s conduct has occasioned the rescission. Rescission requires that a party return what he has received under a contract.
MCC Investments v. Crystal Properties, 451 N.W.2d 243, 247 (Minn. App. 1990), review denied (Minn. Mar. 27, 1990) (MCC Investments II). If a purchaser makes improvements prior to the rescission of the property, the purchaser is entitled to recover their reasonable value. Id. at 248. The purpose in compensating the purchaser for these improvements is to prevent the seller from being unjustly enriched by the return of the property. Id.
Appellants correctly argue that the district court improperly granted respondent damages in the form of an alleged increase in the market value of the property. This appreciation was irrelevant to the determination of status quo. We conclude, however, as the district court did, that as an element of rescission, respondent is entitled to reimbursement for the money she actually spent on improvements to the duplex. This amount is not classical damages, but rather part of returning both parties to the status quo ante. A return to the status quo ante is an equitable part of rescission. Respondent should receive the $15,255.93 she spent on improvements, less the $3,000 the district court found was necessary to make the house saleable. Respondent is also entitled to a return of her down payment and the money she paid to reduce the principal. At or about the time of the district court’s June 1997 order, $132,500 was the sale price of the duplex, $93,228.89 remained on the mortgage, and $3,119.58 in interest had been paid. These figures should be updated to the time rescission is completed. The district court correctly concluded that respondent should get back what she paid down on the mortgage but should not get back the interest portion of her several months of house payments because otherwise, she will have, in effect, lived there rent free once this matter is concluded. Respondent is now able to give the house back, get a return of the down payment and payments to principal, and receive money for the improvements she has made.
We affirm the district court’s finding that certain repairs need to be made to place the property in substantially the same condition as it was at the time of purchase. We are not requiring respondent actually to perform the work, but are subtracting from her damage award the sum of $3,000 for the modest improvements the district court found necessary to restore both appellants and respondent equitably to the status quo ante. We reverse and remand for further findings consistent with this opinion. On remand, the district court and counsel will have to fine-tune for the final transfer the issues of how much respondent paid on the principal, all the debits and credits, and a proper apportionment of closing fees (we cannot calculate exact amounts because the final closing will take place weeks after the date of this opinion). We affirm the district court’s conclusion that both parties are ordered to execute the necessary legal documents to effectuate rescission and transfer.
IV. Attorney Fees - Consumer Fraud Act
As we discussed above, the only determination on remand the district court was to make was whether respondent was entitled to rescission. Because this court originally affirmed the district court on the other issues, the district court was divested of jurisdiction of these issues, and was not in a position to hear arguments by respondent for attorney fees under the Consumer Fraud Act (CFA). Thus, the district court’s award of attorney fees pursuant to the CFA was inappropriate under the doctrine of the law of the case.
Although the court’s June order did mention the acts of misrepresentation by appellants, the court did not even by implication reference the CFA. Those findings on misrepresentation went to the district court’s conclusion that rescission was justified. We agree with that conclusion. But the district court's June order did not hold open for later respondent’s subsequent claim for attorney fees under the private attorney general statute.
Even assuming the issue was somehow left open, we conclude that the CFA contains no provision that covers this case. The private attorney general statute provides:
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 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.
Minn. Stat. § 8.31, subd. 3a (1996).
The Consumer Fraud Act, which is included in Minn. Stat. § 8.31, subd. 1 (1996), of the private attorney general statute, states:
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 as provided herein.
Minn. Stat. § 325F.69, subd. 1 (1996). The term "merchandise" includes real estate. Minn. Stat. § 325F.68, subd. 2 (Supp. 1997).
Appellants argue that in order for respondent to recover under the private attorney general statute, the general public must be potentially deceived or ensnared by the fraudulent conduct.
[T]he legislative intent [of the Consumer Fraud Act] is directed at deceptive practices to which the consumer public is prey, and that the legislature did not intend thereby to cover ad hoc deceptions arising in public disputes.
Church of the Nativity of Our Lord v. WatPro, Inc., 491 N.W.2d 1, 10 (Minn. 1992) (Simonett, J., concurring in part, dissenting in part). Justice Simonett expressed concern about "enterprising plaintiffs" attempting to "expand the Consumer Fraud Act beyond its intended scope." Id. Justice Simonett also advocated a test for determining whether attorney fees should be awarded:
In my view, for there to be an attorney fee recovery for a violation of the Consumer Fraud Act:
Id. at 11.
When considering the concept of private attorney general actions, the United States District Court for the District of Minnesota held:
The Senate Report for the Attorney’s Fees Awards Act makes clear that the Act is designed to sanction the "private attorney general" concept in civil rights actions. This concept is based on the rationale that counsel fees should be awarded by the court when the legal services have provided a benefit to a class of persons, not just the particular litigant.
Martin v. Hancock, 466 F. Supp. 454, 456 (D. Minn. 1979).
This court has also stated:
It is widely recognized that a dual purpose underlies private attorney general statutes: The award should eliminate financial barriers to the vindication of a plaintiff’s rights, and the award should provide incentive for counsel to act as private attorney general. Moreover, an award must take into account the degree to which the public interest is advanced by the suit. Otherwise, "every artful counsel could dress up his dog bite case" to come under an attorney’s fees statute.
Liess v. Lindemyer, 354 N.W.2d 556, 558 (Minn. App. 1984) (quoting Boland v. City of Rapid City, 315 N.W.2d 496, 503 (S.D. 1982)) (other citations omitted). This court required that the record reflect that the attorney fees award was made after considering the policies that support the private attorney general statute. Id. "When awarding attorney fees under the private attorney general statute, the trial court must consider the public interest policies underlying the statute." Wexler v. Brother Entertainment Group, Inc., 457 N.W.2d 218, 222-23 (Minn. App. 1990).
We conclude the district court erred when it determined that because appellants advertised the property to realtors and the consuming public, respondent could recover fees under the private attorney general statute. The record contains no allegations that the property was advertised "pet-free" to the world and the consuming public. This representation was made to this specific buyer, respondent. Respondent did have legitimate concerns about animals because of her granddaughter’s uncommon medical condition (adversely affected by exposure to certain animals and places where the animals have resided). The composite findings and conclusions of the district court and this court on two separate occasions recognized the legitimacy of respondent’s granddaughter’s medical condition. In fact, all parties agree that condition formed the basis for the claim of rescission. But for that very reason this case is totally fact-specific. Although we agree with the district court’s findings on appellants’ misrepresentation regarding pets, as applied to respondent, respondent’s cause of action based on a medical condition is sui generis to respondent. The CFA and the protection
of public consumers at large are not implicated in this case. Thus, we conclude it was inappropriate for this individual respondent to recover attorney fees under the private attorney general statute.
V. Motion to Strike
"The court will strike documents included in a party’s brief that are not part of the appellate record." Fabio v. Bellomo, 489 N.W.2d 241, 246 (Minn. App. 1992), aff’d, 504 N.W.2d 758 (Minn. 1993). This court has stated that there are exceptions to this rule: "‘[A]ppellate courts, in order to sustain verdicts and judgments, will permit omissions to be supplied by documentary evidence of a conclusive nature.’" Chahla v. City of St. Paul, 507 N.W.2d 29, 33 (Minn. App. 1993) (quoting Mattfeld v. Nester, 226 Minn. 106, 123, 32 N.W.2d 291 (1948)) (alteration in original), review denied (Minn. Jan. 20, 1994).
On the record here, the district court referred to the city code at issue, stating: "The windows installed were not the model ordered and do not meet Roseville code." Appellants claim the inclusion of the Roseville City Code in their appendix was not an attempt to go outside the record, but simply to put the record into its proper legal context.
We conclude appellants’ appendix simply provided easy access to the relevant law in this case, falling under Chahla’s "omissions to be supplied by documentary evidence of a conclusive nature," and further, that it is conclusive and incontrovertible. Thus, it is unnecessary to strike it from the brief. We note that its inclusion did not affect our analysis.
Affirmed in part, reversed in part, and remanded; motion to strike denied.