Ly v. Nystrom

• Decision Date: 03 August 2000
• Docket Number: No. C6-99-565.,C6-99-565.
• Citation: 615 N.W.2d 302
• Parties: Hoang Minh LY d/b/a Lee's Garden, petitioner, Appellant, v. Kim NYSTROM, et al., Respondents.
• Court: Minnesota Supreme Court

615 N.W.2d 302

Hoang Minh LY d/b/a Lee's Garden, petitioner, Appellant, v. Kim NYSTROM, et al., Respondents.

No. C6-99-565.

Supreme Court of Minnesota.

August 3, 2000.

Barbara R. Kueppers, Mpls., Ksenia Rudensiuk, St. Paul, for appellant.

Stephen William Hance, Martin & Squires, P.A., St. Paul, for respondents.

Mike Hatch, Atty. Gen., Prentiss Cox, St. Paul, for amicus curiae State of Minn.

Thomsen & Nybeck, P.A., Donald D. Smith, David J. McGee, Edina, for amicus curiae Minn. Assn. of Realtors.

Will Mahler Law Office, Will Mahler, Rochester, for amicus curiae Council on Asian-Pacific Minnesotans.

Meagher & Geer, P.L.L.P., William H. Hart, Thomas E. Propson, Jenneane L. Jansen, Minniapolis, for amicus curiae Legal Aid Society of Minneapolis.

Winthrop & Weinstein, P.A., Thomas H. Boyd, Charles Schoenwetter, St. Paul, for amicus curiae Southern Minnesota Regional Legal Services.

Lind, Jensen, Sullivan & Peterson, P.A., William L. Davidson, Minneapolis, for amicus curiae Minn. Defense Lawyers Assn.

Heard, considered and decided by the court en banc.

OPINION

STRINGER, Justice.

During negotiations between appellant Hoang Minh Ly and respondent Kim Nystrom for the purchase of respondent's restaurant, respondent made misrepresentations to appellant relating to monthly profits and the condition of the restaurant and its inventory. The restaurant never made a profit and discussion between the parties led to a contract cancellation. Appellant then brought suit alleging common law fraud and a violation of Minnesota's Consumer Fraud Act (CFA), Minn.Stat. § 325F.69, subd. 1 (1998), and included a claim for attorney fees under the Private Remedies section of the Attorney General Statute (Private AG Statute), Minn.Stat. § 8.31, subd. 3a (1998). The trial court ruled that respondent defrauded appellant and awarded him a common law fraud damage remedy but denied his motion for attorney fees finding that there was no violation of the CFA because respondent's representations were not made to a large number of consumers. The court of appeals affirmed. See Ly v. Nystrom, 602 N.W.2d 644, 647 (Minn.App.1999)

. We reverse in part and affirm in part.

In 1981 appellant Hoang Minh Ly came to the United States from Vietnam at the age of 32. When first arriving in the U.S. he worked in various Chinese restaurants as a dishwasher and cook's assistant, positions neither requiring nor providing any business or management experience. In 1989 he met respondent Kim Nystrom while employed as a cook's assistant and she as a waitress at May Ninh restaurant in Maple Grove. Appellant speaks, reads and writes very little English and his formal education ended in Vietnam at the second grade. Respondent is also from Vietnam but speaks and reads English.

A few weeks after the two met respondent left the May Ninh restaurant to work at another restaurant, and between 1990 and 1995 appellant and respondent spoke periodically regarding jobs at various restaurants, including a Shakopee restaurant called Chin Yung, the subject of this litigation. In June of 1996 respondent told appellant she had bought the Chin Yung in 1994 and that she was having trouble hiring people, she wanted to sell the restaurant and encouraged him to consider buying it.

A few days later, on approximately June 14, 1996,¹ appellant visited the restaurant before it opened in the morning. Respondent told appellant "this is a very good place, and it's a good business," and that she would sell the restaurant for $100,000. Appellant called the next day asking respondent to lower the price; she refused, warning him that someone else wanted to buy it so if he was interested he should decide soon. Respondent then represented to appellant that the restaurant's estimated monthly gross revenue was between $25,000 and $30,000 and the monthly profits between $6,000 to $7,000. Respondent told appellant it was a good business and that she would not trick him because they were friends.

The next day, approximately June 15, appellant and his wife went to the restaurant at about 8:00 p.m. The restaurant was not busy and when appellant asked why there were so few patrons respondent replied that customers in Shakopee usually eat and go to sleep earlier because they commute to work. When appellant's wife asked to see the books respondent said that they were not there but a lawyer did not need to review them because she would not lie to appellant. Respondent agreed to lower the purchase price from $100,000 to $90,000 with a cash down payment of $20,000. She also agreed to charge appellant $2,000 a month for rent, $1,200 a month for taxes and a 9% interest rate on the business loan. That night appellant decided to buy the restaurant because he thought $90,000 was a fair price to pay for a restaurant taking in $25,000 to $30,000 a month and because he trusted that respondent would not misrepresent the business.

On June 19, 1996, the parties met again and appellant's wife wrote a check for $5,000, leaving blank the payee designation on the check at respondent's request. The remaining $15,000 was to be paid before June 30. Appellant wanted to show his lawyer the agreement but decided not to do so after respondent assured him that he did not need a lawyer because they were friends and she would not cheat him. When the check was returned to appellant the payee was designated "Anderson Produce."

On June 25, 1996, at around 2:00 p.m. the parties met to sign the lease agreement and promissory note, which respondent prepared, and she again told appellant he did not need a lawyer. Appellant signed the documents without reading them and respondent did not review the documents with him.²

At the closing on June 30, 1996, appellant delivered checks for the down payment balance-one for $10,000 and another for $5,000-and respondent again asked appellant to leave the payee designations blank.³ Appellant also bought food inventory from respondent for $3,990.27 but a few days later about 50% of the meat and all of the shrimp was unusable and about 60% of the canned food was unusable because the cans were swollen. Respondent agreed to reduce the purchase price of the inventory by subtracting the value of the unusable food but the parties could not agree on the amount of the reduction. Appellant estimated the inventory to be worth a little over $1,000.

Appellant retained the original menu, the sign and the lunch buffet for a couple of weeks after opening the restaurant but took in only a little over $200 daily. When appellant told respondent that the restaurant was not taking in $700 a day she suggested that he change the sign, menu and buffet. Appellant followed the suggestions and with radio ads and coupons business increased slightly but profits did not increase. The restaurant never made $700 a day and never turned a profit. Appellant estimated his sales per month to be about $6,000 to $7,000, not the $25,000 to $30,000 respondent represented. The physical facilities presented additional problems with the plumbing backed up, the refrigerator and dishwasher not working, the roof leaking, faulty wiring and a parking lot with many potholes. Respondent later told appellant that this may be his fate and to see a fortune teller. She also told him that she would lower his rent but she never did.

Appellant paid respondent about $4,000 in July and August but as his loans increased the amount he could pay decreased-to $3,000 in September, $1,000 in October and $1,000 in November. Respondent refused his offer of a payment of $1,000 for December, warning him that he owed her three months rent and she was going to evict and sue him. In December, respondent called almost every day to ask for payment and told appellant that if he did not give her back the restaurant she would take him to court where he would lose his credit and his home would be seized. During this period appellant was able to keep the restaurant open by running up a $45,000 credit card debt and borrowing approximately $30,000 from friends and family.

On December 22, 1996, an insurance agent went with respondent to the restaurant "with papers * * * declar[ing] the contract null." When appellant said that he wanted his lawyer to evaluate the papers respondent told him that if he did not sign the papers by the next day "the police will come and lock the doors and you cannot bring anything out of the restaurant. And if you try to get in, they will take you away. They will lock you up."

The next day, December 23, 1996, respondent went to appellant's house, again with an insurance agent, and told him that he either had to pay her the full amount he owed or sign a contract stating that all prior contracts were cancelled, and if he did not do either she would take appellant to court because his rent was three months late. Appellant signed the contract declaring all prior contracts "null." Respondent also gave appellant a check for $2,500 to help him pay bills and support his family, but she stopped payment on the check.⁴ Respondent sold the restaurant to another purchaser later that day.

Appellant filed a complaint on October 21, 1997 alleging, among other counts, that respondent defrauded appellant and violated the CFA, and requested damages in excess of $50,000, attorney fees and costs pursuant to the Private AG Statute and pre- and post-judgment interest. After a three-day trial the court ruled that respondent defrauded appellant and that the value of the restaurant was $65,000 at the time of the sale. The court applied the damage award formula for common law fraud-the difference between what appellant paid for the restaurant and the fair market value of the restaurant, plus damages resulting from reasonable attempts to mitigate-and reasoned that since appellant bought the restaurant for $90,000 and the fair market value of the restaurant was $65,000, appellant was entitled to judgment for $25,000.⁵ The court made no ruling regarding application...