This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-2234

 

Harry and Arthurine Ponzo,
Respondents,

vs.

Affordable Homes of Rochester, LLC,
Appellant.

 

Filed August 2, 2005

Affirmed

Wright, Judge

 

Olmsted County District Court

File No. C4-02-2977

 

 

Duane A. Kennedy, Kennedy Law Firm, 3 Durst Building, 724 First Avenue Southwest, Rochester, MN  55902 (for appellant)

 

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.

U N P U B L I S H E D  O P I N I O N

 

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.

FACTS

 

On July 29, 2000, respondents Harry and Arthurine Ponzo (the Ponzos) contracted with appellant Affordable Homes of Rochester (Affordable Homes) to purchase a new 2000 model manufactured home for $81,266.  The Ponzos had inspected the 1999 model manufactured home and decided to order from the manufacturer a 2000 duplicate of the 1999 display model.  The sale was finalized in late August, and a manufactured home was delivered in September 2000.  Shortly thereafter, the Ponzos detected numerous defects in the newly purchased home, which led them to suspect that they had not received the home they had contracted to purchase. 

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.[1]

D E C I S I O N

 

I.

 

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 (Minn. 1986) (holding that matters relating to trial procedure, evidentiary issues, and jury instructions are not reviewable when a motion for new trial has not been made).

II.

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.

As 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 further construction.  Minn. Stat. § 645.16 (2004); Molloy v. Meier, 679 N.W.2d 711, 723 (Minn. 2004).  Statutes are to be construed so as not to supplant or restrict “equity’s normal function as an aid to complete justice.”  Brekke v. THM Biomedical, Inc., 683 N.W.2d 771, 776 (Minn. 2004) (quotation omitted).  And consumer-protection statutes, in particular, are liberally construed in favor of protecting consumers.  Wiegand v. Walser Auto. Groups, Inc., 683 N.W.2d 807, 812 (Minn. 2004).

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[.]

 

Minn. Stat. § 325F.69.  The private-attorney-general statute enables individuals to obtain private remedies under the Consumer Fraud Act.  It 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 [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.

 

Minn. Stat. § 8.31, subd. 3a (2004) (emphasis added).

 

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.

Section 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.”  Minn. Stat. ­§ 8.31, subd. 3a (emphasis added).  Based on the broadly worded language of section 8.31 and the liberal construction accorded the Consumer Fraud Act in favor of protecting consumers, we conclude that rescission is a permissible remedy under Minnesota’s consumer-fraud provisions. 

A.

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.

The 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 controversy.”  Minn. Const. art. I, § 4.  This right is guaranteed only in legal actions.  Rognrud v. Zubert, 282 Minn. 430, 433-34, 165 N.W.2d 244, 247 (1969).  Thus, in a legal action seeking the recovery of money, the Minnesota Constitution assures a right to a jury trial.  Olson v. Aretz, 346 N.W.2d 178, 181 (Minn. App. 1984), review denied (Minn. Oct. 30, 1984); see also Minn. R. Civ. P. 38.01 (mandating jury trial in actions for recovery of money only).  A party pursuing equitable claims is not entitled to a jury trial as a matter of right.  Georgopolis v. George, 237 Minn. 176, 186, 54 N.W.2d 137, 143 (1952).  Thus, in actions involving equitable claims, the decision to grant or deny a request for a jury trial falls within the district court’s discretion.  Banning v. Hall, 70 Minn. 89, 93, 72 N.W. 817, 818 (1897). 

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 Minn. 447, 452, 122 N.W.2d 578, 582 (1963).  Thus, the consumer-fraud action at issue here is entirely equitable in nature.  To the extent that a district court awards certain monetary allowances or “damages” in an action for rescission, the allowances are not granted as a legal right.  Speiss v. Brandt, 230 Minn. 246, 255, 41 N.W.2d 561, 568 (1950).  Rather, they are received purely as an equitable obligation between the parties to restore the status quo by awarding a party the property with which the party parted.  Id. at 256, 41 N.W.2d at 568.    

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.

B.

Affordable 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 (Minn. 1993).  Absent an abuse of that discretion, we will not disturb this decision on appeal.  Id.

1.

Affordable 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, 262 (Minn. App. 1987).  Factual findings are clearly erroneous when they are “manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole.”  Tonka Tours, Inc. v. Chadima, 372 N.W.2d 723, 726 (Minn. 1985).

In 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 Minn. 299, 303, 107 N.W.2d 365, 368 (1961).  The plaintiff’s failure to do so forfeits the right to rescind the contract.  Id.  Any act of ratification of a contract, after knowledge of the facts authorizing rescission, may terminate the right to rescind.  Beck v. Nw. Fed. Sav. & Loan Ass’n, 206 Minn. 125, 131-32, 288 N.W. 217, 220 (1939).  But courts ordinarily are reluctant to preclude a defrauded person the appropriate remedy.  Hemming v. Ald, Inc., 279 Minn. 38, 42, 155 N.W.2d 384, 388 (1967).  

Proof of when the plaintiff acquired actual knowledge of the nature and extent of the fraud is critical to establish that the contract was ratified.  Id. at 41, 155 N.W.2d at 387.  Ratification requires evidence that the plaintiff, with full knowledge of the relevant facts and legal rights, intended to relinquish them.  Freitag v. Wolf, 303 Minn. 139, 142, 226 N.W.2d 868, 870 (1975).  A claim of ratification fails if the plaintiff merely suspects fraud but has insufficient knowledge of the facts.  Speiss, 230 Minn. at 254-55, 41 N.W.2d at 567.

If 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 Minn. 157, 163, 155 N.W.2d 907, 912 (1968).  For example, continuing to make payments under the contract after discovery of the fraud or using a defective product after discovery of the fraud constitutes ratification and will result in a waiver of one’s right to rescind.  Knight Soda Fountain Co. v. Dirnberger, 192 Minn. 387, 394, 256 N.W. 657, 660 (1934); In re Digital Res., LLC, 246 B.R. 357, 369 (8th Cir. 2000).  But “[a] mere effort to avoid loss” does not constitute ratification of the contract.  Bergstrom v. Pickett, 148 Minn. 224, 228, 181 N.W. 343, 345 (1921).

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.

Once 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 Minn. 337, 343, 185 N.W. 292, 294 (1921) (stating where rescission action promptly commenced upon discovery of fraud, plaintiffs did not lose right to rescind).

2.

            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 U.S. 210, 215 (1830). 

            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.

Affirmed.