Opinion
No. C8-97-1101.
Filed November 25, 1997.
Appeal from the District Court, Hennepin County, File No. 971106.
Bradlee Karan, (for appellant).
Jeffrey B. Oberman, Joel E. Abrahamson, Doherty, Rumble Butler, (for respondent).
Considered and decided by Huspeni, Presiding Judge, Klaphake, Judge, and Harten, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. sec. 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Mark Grin appeals from a judgment dismissing his misrepresentation action for failure to state a claim. We reverse and remand.
FACTS
Appellant Mark Grin and respondent BBRZ, Inc. entered into a contract wherein Grin agreed to procure ball bearings and nesting dolls from the territories of the former Soviet Union for BBRZ. BBRZ paid Grin in accordance with a commission schedule set out in the contract. In 1994, the parties entered into a second contract, which terminated all obligations under the original agreement. The termination contract states, among other things:
2. MUTUAL RELEASE. Subject to the satisfaction of all conditions and obligations described herein, GRIN, on the one hand, and BBRZ, on the other hand, do hereby mutually release and discharge each other from and against any claims, rights, causes of actions, sums of money due or claimed to be due, now or in the future, whether now known or unknown, direct, or indirect, contingent or absolute, arising out of or related to the Agreements.
* * * *
(e) This Agreement evidences the entire agreement between GRIN and BBRZ and supersedes in all respects any and all prior oral 1or (sic) written agreements or understandings pertaining to the Agreements.
Grin claims that the termination agreement should be rescinded because it was fraudulently induced by BBRZ. His amended complaint alleges that BBRZ made the following misrepresentations: (1) that BBRZ had substantially satisfied its obligations to Grin under the commission agreement, (2) that BBRZ had lost money by importing the goods that were the subject matter of the agreement, (3) that BBRZ was facing bankruptcy, and (4) that the documentation of purchases that BBRZ provided was accurate. The amended complaint incorporates by reference both the original contract and the termination contract.
Pursuant to Minn.R.Civ.P. 12.02(e), BBRZ filed a motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted. The district court granted BBRZ's motion. It reasoned that the clause stating that the termination contract superseded all prior agreements or understandings applied to Grin's misunderstandings. It then gave effect to the mutual release in the termination contract. Relying on Thistlethwaite v. Grover , 405 N.W.2d 534 (Minn.App. 1987), the district court decided that Grin could not rescind the termination contract merely because he did not understand its ramifications. It found that the language in the termination contract was clear and that there was no basis for rescission.
DECISION
Sufficiency of the complaint is a question of law. A reviewing court need not defer to a trial court's decision on a purely legal issue. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n , 358 N.W.2d 639, 642 (Minn. 1984).
On review of a dismissal for failure to state a claim, the only question before us is whether the complaint sets forth a legally sufficient claim for relief. Elzie v. Commissioner of Pub. Safety , 298 N.W.2d 29, 32 (Minn. 1980) (quoting Royal Realty Co. v. Levin , 244 Minn. 288, 290, 69 N.W.2d 667, 670 (1955)). It does not matter whether appellant can prove the facts alleged. Royal Realty Co. , 244 Minn. at 290, 69 N.W.2d at 670. A complaint "will be dismissed only if it appears to a certainty that no facts, which could be introduced consistent with the pleading, exist which would support granting the relief demanded." Northern States Power Co. v. Franklin , 265 Minn. 391, 395, 122 N.W.2d 26, 29 (1963).
"In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Minn.R.Civ.P. 9.02. As applied here, the elements of fraud are:
[A] false representation pertaining to a material past or present fact susceptible of human knowledge, knowledge by the person making the representation of its falsity or assertion of it without knowledge of its truth or falsity, an intention that the other person act on it, or circumstances justifying the other person in so acting, and the other person being in fact reasonably induced to act upon the representation, relying upon it and suffering damage attributable to the misrepresentation.
In re Strid , 487 N.W.2d 891, 893-94 (Minn. 1992) (citation omitted).
Grin's amended complaint alleges four misrepresentations. BBRZ responds that the alleged misrepresentations pertain to opinions and future predictions rather than past or present facts. We disagree. The allegations are factual in nature and Grin's ability or inability to prove them at trial does not change their character. The amended complaint also alleges that BBRZ knew the representations were false, that Grin reasonably relied on the representations, that the representations induced Grin to enter into the termination contract, and that Grin suffered damages as a result. Grin has alleged sufficiently all elements of fraud.
BBRZ argues, and the district court found, that even if Grin has stated the elements of fraud, dismissal for failure to state a claim nonetheless was appropriate because the release and supersession provisions in the termination contract bar the cause of action.
Grin replies that the district court should not have considered the release or supersession provisions in the termination contract because they constitute affirmative defenses. See Searles v. Searles , 420 N.W.2d 581, 584 (Minn. 1988) ("The affirmative defenses of laches and estoppel alleged in defendant's answer are not put in issue by defendant's Rule 12 motion questioning only the sufficiency of plaintiff's complaint."). Courts have considered affirmative defenses that are put in issue by the complaint. See Pederson v. American Lutheran Church , 404 N.W.2d 887 (Minn.App. 1987) (considering the affirmative defense of statute of limitations on a motion to dismiss for failure to state a claim), review denied (Minn. June 30, 1987). Grin asserts that here, the amended complaint specifically incorporates the termination contract. Moreover, caselaw allows the court to consider, on a motion to dismiss for failure to state a claim, contracts that are central to the dispute. In re Hennepin County 1986 Recycling Bond Litigation , 540 N.W.2d 494, 497 (Minn. 1995).
It is well settled, however, that releases based on fraud or misrepresentation may be avoided. Sorensen v. Coast-to-Coast Stores (Central Org.), Inc. , 353 N.W.2d 666, 670 (Minn.App. 1984), review denied (Minn. Nov. 7, 1984). But a release will not be avoided because the party seeking to set it aside did not read it or was unaware of its true character. Yocum v. Chicago, Rock Island Pac. R.R. Co. , 189 Minn. 397, 404, 249 N.W. 672, 675 (1933); Thistlethwaite , 405 N.W.2d at 535-36.
The district court dismissal relied on Thistlethwaite and Yocum . In those cases, the court held there was no action for fraud when the plaintiff signed a contract without reading it, and the plaintiffs' claims of fraudulent inducement were directly contradicted in the writing. Yocum , 189 Minn. at 404, 249 N.W. at 675; Thistlethwaite , 405 N.W.2d at 535-36. We do not agree that the instant case is controlled by Thistlethwaite or Yocum . The termination contract does not contradict Grin's understandings — Grin understood the terms and consequences of the agreement. His misunderstandings arise from oral representations by BBRZ, which are not addressed in the contract. Under well settled law, if Grin can prove his allegations of fraudulent inducement, the release provision and the entire termination agreement can be avoided. Anders v. Dakota Land and Dev. Co. , 289 N.W.2d 161, 163 (Minn. 1980); Sorensen , 353 N.W.2d at 670. To effectuate the release, the district court relied on the termination contract clause stating that the termination contract supersedes all other agreements or understandings. The district court interpreted that clause to mean that the oral representations or misunderstandings on which Grin relied were superseded by the contract. We do not agree that "understandings and agreements" include the fraudulent misrepresentations that Grin alleges. We therefore conclude that the supersession provision does not preclude this cause of action. Accordingly, dismissal for failure to state a claim based on the release is inappropriate.
BBRZ also argues that Grin cannot rely on oral representations that contradict the written agreement. See Veit v. Anderson , 428 N.W.2d 429, 433 (Minn.App. 1988) (claim of fraudulent inducement cannot be based on an oral representation that contradicts the writing). Once again, the representations on which Grin's claim is based are not contradicted, or even mentioned, in the termination contract.
Finally, BBRZ argues that a two-year statute of limitations applies to bar Grin's cause of action. A two-year statute of limitations applies to claims:
[F]or the recovery of wages or overtime or damages, fees or penalties accruing under any federal or state law respecting the payment of wages or overtime or damages, fees or penalties * * *. (The term "wages" means all remuneration for services or employment, including commissions and bonuses and the cash value of all remuneration in any medium other than cash, where the relationship of master and servant exists and the term "damages" means single, double, or treble damages, accorded by any statutory cause of action whatsoever and whether or not the relationship of master and servant exists)[.]
Minn. Stat. § 541.07(5) (1996). Dismissal for failure to state a claim based on the statute of limitations should be granted only if the complaint clearly shows that the statute of limitations has run. Pederson , 404 N.W.2d at 889. In Pederson , the plaintiff waited 23 years to pursue his claim, and the longest statute of limitations that could apply was six years. In affirming the trial court dismissal for failure to state a claim, we explained that [a]ffirmance of the trial court in this case does not imply that in the future every complaint must allege facts to overcome a statute of limitations defense prior to the filing of an answer. The statute of limitations is still an affirmative defense that must be specially pleaded.
Id. at 889-90. There being a genuine dispute over which statute of limitations applies, it is unclear from the complaint that the limitations period has run. Dismissal is therefore inappropriate at this point.