Higgins v. Harold-Chevrolet-Geo, Inc., No. A04-596 (MN 11/23/2004), A04-596.

CourtSupreme Court of Minnesota (US)
PartiesTravis Higgins, Appellant, v. Harold-Chevrolet-Geo, Inc., et al., Respondents.
Docket NumberNo. A04-596.,A04-596.
Decision Date23 November 2004

Page 1

Unpublished Opinion

Travis Higgins, Appellant,
Harold-Chevrolet-Geo, Inc., et al., Respondents.
No. A04-596.
Court of Appeals of Minnesota.
Filed November 23, 2004.

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).

Appeal from the District Court, Hennepin County, File No. CT0216097.

Thomas J. Lyons, Jr., John H. Goolsby, Consumer Justice Center, and

Thomas J. Lyons, Sr., Thomas J. Lyons & Associates, P.A., (for appellant).

Michael S. Kreidler, Louise A. Behrendt, Stich, Angell, Kreidler & Dodge, P.A., (for respondents).

Considered and decided by Halbrooks, Presiding Judge, Schumacher, Judge, and Parker, Judge.*



Appellant challenges the district court's grant of summary judgment to respondent on appellant's claims for damages under the Minnesota Prevention of Consumer Fraud Act, contending that the court erred (1) in finding that appellant failed to prove damages or establish a causal nexus between respondent's actions and the alleged damages and (2) in granting summary judgment sua sponte on the issue of whether loans were included under the 1996 version of the Act. Appellant also challenges the district court's grant of summary judgment to respondent on appellant's claim for common-law conversion. Because we conclude that the district court did not err in granting summary judgment on appellant's failure to prove damages, failure to establish a causal nexus, and on appellant's conversion claim, we affirm on those bases. While we determine that the district court erred in granting summary judgment to respondent on the issue of whether loans were included in the 1996 Act without giving appellant an opportunity to be heard, we conclude that the error is harmless.


In November 1996, appellant Travis Higgins bought a used Chevrolet Cavalier from respondent automobile dealership, Harold Chevrolet-Geo, Inc. Appellant financed $9,866.02 of the total purchase price of the car through the dealership. The amount financed included $1,270.02 for credit insurance. The retail installment contract (RIC) included the following under the "Itemization of Amount Financed":

(4) Amounts Paid on Your Behalf

. . . .
 To Insurance Companies for
                 Vehicle Insurance $N/A
                 Credit Life Insurance $371.55
                 Credit Disability Insurance $898.47

The contract did not disclose to appellant that respondent would retain a portion of the cost of this insurance as a commission. Appellant also testified during his deposition that respondent's "finance person" led appellant to believe that all of the money would be paid to the insurance company.1 In fact, respondent retained as a commission $552.93 of the total cost of the credit insurance.

In September 2002, appellant sued respondent, alleging violation of the Minnesota Prevention of Consumer Fraud Act, Minn. Stat. §§ 325F.68-.70 (1996) (the CFA), and common-law conversion. The claims were based on respondent's retention of $552.93 of the credit-insurance payment.

Although appellant was not certain, he testified at his deposition that respondent "probably" discussed credit insurance with him before the RIC was drawn up and that he decided to accept this insurance before seeing the RIC. Appellant was aware that credit insurance was optional, that he could buy the vehicle even if he rejected the coverage, and that the cost of the insurance would increase his monthly payments. Appellant also knew that he could cancel the credit insurance, but he elected to keep it the entire time he owned the car because he "believed that it was a good thing to have." Appellant also initially financed a service contract on the Cavalier. He eventually cancelled the service contract and was sent a refund check by respondent.

During his deposition, appellant was asked what he "would have done differently had [he] known" that respondent would be keeping part of the price of the credit insurance as a commission. Appellant responded, "I would have probably tried to negotiate the price or not take it at all. I'm not sure what I would have done. I wasn't offered a choice." Appellant also stated that he did not ask whether the price of the credit insurance was negotiable or whether he could get that price reduced.

In July 2003, respondent moved for summary judgment on both of appellant's claims. The district court granted respondent's motion. The court found that "[c]redit life insurance is regulated by Minnesota law. The Commerce Commissioner determines whether the premium rates are acceptable and takes into consideration allowances for underwriting expenses, including commissions. Minn. Stat. § 62B.07. The premium rates, including commissions, are fixed by the insurance company."2 Based on the affidavit of Robert O'Brien, respondent's former finance manager, the district court also found that respondent does not negotiate insurance premiums with its customers.

The district court concluded that appellant's CFA claim failed for two reasons. First, the court held, sua sponte, that the claim was not actionable because at the time of the alleged misrepresentation, loans were not considered merchandise within the meaning of the statute.3 Second, the court held that appellant failed to show a causal nexus between the actions of respondent and his alleged damages, or, in fact, that appellant sustained actual damages as a result of respondent's alleged misrepresentation. The court concluded that appellant's conversion claim failed because there was no evidence that appellant paid too much for his credit insurance, that he could have purchased it elsewhere for less, or that he would have looked elsewhere for the insurance. This appeal follows.


On appeal from summary judgment, this court asks whether there are any genuine issues of material fact and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). No genuine issue of material fact exists "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (alteration in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)).

To defeat a motion for summary judgment, a plaintiff must produce sufficient evidence to show a genuine issue of material fact as to each element of the claim. Rouse v. Dunkley & Bennett, P.A., 520 N.W.2d 406, 410-11 (Minn. 1994). Damages are a necessary element of an action under the CFA. D.A.B. v. Brown, 570 N.W.2d 168, 172 (Minn. App. 1997). Moreover, a causal nexus must be shown between such damages and the alleged wrongful conduct complained of. Group Health Plan, Inc. v. Philip Morris Inc., 621 N.W.2d 2, 14 (Minn. 2001).

Minn. Stat. § 8.31, subd. 3a (2002), authorizes any person "injured by a violation" of the CFA to sue for damages. The CFA prohibits

[t]he 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.

Minn. Stat. § 325F.69, subd. 1 (2002). To state a claim alleging a violation of Minn. Stat. § 325F.69, subd. 1, a plaintiff must plead (1) an intentional misrepresentation relating to the sale of merchandise, and (2) damages to the plaintiff caused by the misrepresentation. Group Health, 621 N.W.2d at 12.

Appellant argues that the court erred in failing to find evidence that appellant sustained actual damages. In Minnesota, fraud damages are generally measured following the out-of-pocket rule. Yost v. Millhouse, 373 N.W.2d 826, 830 (Minn. App. 1985). Under this rule, the measure of damages is the difference between the amount the defrauded person paid for merchandise and the actual value of the merchandise, plus any other damages proximately caused by the fraud. Id. at 830-31. Here, nothing in the record shows that the value of the contract insurance purchased by appellant was less than he paid for it. There is no testimony regarding the "market value" of such insurance. Further, appellant knew that the credit insurance was optional and that he could cancel the insurance if he no longer wanted it. Nonetheless, he never gave any consideration to doing so and, in fact, kept the insurance the entire time he owned his car, because he thought that the credit insurance "was a good thing to have." This indicates that, for appellant, the cost of the credit insurance did not exceed its value. Thus, the district court did not err in concluding that appellant...

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