Court Opinion

ID: 9823709
Source: CourtListenerOpinion
Date Created: 2023-09-01 10:07:45.411943+00
Date Added: 2024-06-11T07:39:25.638629
License: Public Domain

CROTHERS, Justice,
concurring specially.
[¶ 27] Based on the record in this case, I agree with the result and the rationale underpinning the majority opinion. I again write separately about the distinction between fraud and deceit, here discussing the impact on claims asserted in the Trust’s counterclaims.
[¶ 28] “A party who has been induced to enter a contract by fraudulent misrepresentations may elect to rescind the contract, or to affirm the contract and recover damages.” Majority opinion, ¶ 15. This holding is consistent with the difference between fraud and deceit:
“Both fraud and deceit claims are provided for by statute. Fraud is part of the chapter on consent to contractual obligations. See N.D.C.C. ch. 9-03. Deceit is part of the chapter on obligations imposed by law. See N.D.C.C. ch. 9-10. My persistent writings on the distinction between fraud and deceit are more than academic discussions because the claims have similar but different proof requirements and result in different remedies. Erickson, 2008 ND 57, ¶¶ 59-93, 747 N.W.2d 34 (Crothers, J., concurring in part and dissenting in part).”
Podrygula v. Bray, 2014 ND 226, ¶ 30, 856 N.W.2d 791 (Crothers, J., specially concurring).
[¶ 29] Here, the Trust counterclaimed for rescission of the contract for deed and recovery of damages. The Trust clearly sought alternative remedies. In paragraphs 24 through 30 of the Counterclaim the Trust asserts what it labeled a fraud claim, expressly relying on N.D.C.C. § 9-03-08. The Trust alleged “Defendant relied to her detriment on the misleading statements, omissions, and actions of Plaintiff that led her to forgo rescinding the contract for deed and deprived her of the ability to make several other educational loans to college students and receive the accrued interest on these loans.” This allegation is inconsistent with a fraud claim because rescission of the contract is the remedy that avoids the transaction and puts the parties back into their pre-contracting positions to the extent possible. See Erickson v. Brown, 2008 ND 57, ¶ 66, 747 N.W.2d 34 (“Overt affirmation of the contract, failure to seasonably restore to the other party everything of value, or conduct inconsistent with rescission is an election to ratify the contract. N.D.C.C. §§ 9-03-24 and 9-03-25.”). “Upon ratification, the opportunity to avoid the contract is waived, an action for fraud is no longer available, and a beguiled party seeking redress must proceed in tort to recover for deceit.” Id.
[¶ 30] Here, proving fraud would permit the Trust to rescind the contract for deed; it would not excuse one from “forgoing] rescinding the contract for deed.” That is more in the nature of an estoppel claim. See Erickson, 2008 ND 57, ¶ 35, 747 N.W.2d 34.
[¶ 31] The Trust also alleged fraud when “Defendant reasonably relied on Plaintiffs misleading actions and represen*727tations in deciding to amend the contract for-deed and mortgage agreement, instead of rescinding it in 1997.” Again, the deception or misrepresentation sued on as fraud provides for the remedy of rescission. Erickson, 2008 ND 57, ¶ 62, 747 N.W.2d 34. The Trust’s failure to pursue a fraud claim can be one of several things: (1) the loss of the claim under the statute of limitations due to passage of time; (2) the affirmance of the contract, waiver of the fraud and an election to sue in deceit for money damages; or (3) a claim of estoppel. But it is not a fraud claim.
[¶ 32] Notwithstanding inconsistencies within the Trust’s pleading, the district court and the majority opinion treats the Trust’s fraud counterclaim as an effort to rescind the contract for deed, which would make it a nullity. I agree with that approach and conclusion.
[¶ 33] The Trust’s second counterclaim alleges breach of contract. There, the Trust alleged, “In the event that this Court determines not to rescind the contract for deed, by reason of Plaintiffs fraud and misrepresentation, Defendant has been damaged in the amount to be determined at trial but at least $100,000 and in such further amounts as may be proven at trial.”
[¶ 34] This request for alternative relief clearly seeks recovery of damages for breach of contract if the contract is not rescinded due to fraud. To prevail on the damage claim, the Trust must affirm its consent to the contract, waive the fraud and sue for damages. Id. at ¶ 62. From the counterclaim and briefing, it appears the Trust altogether waived its potential deceit claims relating to the misrepresentation and only sought damages related to Holverson’s breach of the contract for deed. But the counterclaim is not entirely clear on this question.
[¶ 35] The Trust argued in its brief opposing summary judgment that Holver-son should not prevail, stating:
“This opposition is based on the fact that there are triable issues of fact regarding: (1) whether Plaintiffs actions constitute fraud under NDCC 9-03-08 (such that a reasonable trustee would not have discovered or have reason to discover) and, as a result, render specific performance unenforceable against Defendant, and, instead, entitle Defendant to rescission of the contract; and (2) in the alternative, whether Plaintiffs admitted default in payments entitle Defendant to damages equal to the current value of the land; the unpaid balance remaining in March 1988 and interest accrued on the unpaid balance; or the unpaid balance remaining in November 1997 and the interest accrued on the unpaid balance.”
[¶ 36] This briefing clarifies that the Trust asserts Holverson’s fraud allows for rescission of the contract for deed. The briefing also confirms that, if the contract is not rescinded, the Trust seeks damages for Holverson’s breach of the contract. A serious legal question exists whether such damages are recoverable by a contract for deed vendor against the vendee. See Langenes v. Bullinger, 328 N.W.2d 241, 246 (N.D.1982) and In re Faiman, 70 B.R. 74, (Bankr.D.N.D.1987) (damages normally recoverable in breach of contact action are not recoverable on a contract for deed cancellation due to anti-deficiency laws in N.D.C.C. ch. 32-19).
[¶ 37] As it pertains to this writing, the Trust has not -asserted a deceit claim; rather it seeks money damages for Holver-son’s breach of the contract. It is because of the posture of the pleadings in this case that I agree with the majority opinion. In the context of the counterclaims, the majority correctly holds that “[a] party who *728has been induced to enter a contract by fraudulent misrepresentations may elect to rescind the contract, or to affirm the contract and recover damages.” Majority opinion, ¶ 15. In the fraud counterclaim, as explained in its .briefing, the Trust seeks rescission of the contract for deed due to fraud, or damages if- the contract is not rescinded. This is legally correct because, if the contract is rescinded due to the fraud, no agreement exists and the issue of breach and damages goes away. But if the contract is affirmed by consent obtained after the fraud was discovered, damages may be sought for deceit and for the ultimate breach of contract (the later subject to limitation of remedies for breaches of contracts for deed, as explained above).
[¶ 38] Here,- the Trust did not sue to recover damages'for "deceit. It sued to rescind for fraud and, only if the contract for deed was not rescinded, it alternatively sought- damages for breach of the contract for deed. By my reading of the complaint and the Trust’s filings on summary judgment, it did not sue for damage arising out of the underlying misrepresentation (deceit) connected to the Trust staying in the deal and I do not-believe the majority opinion should be read ;to suggest otherwise.
[¶ 39] DANIEL J. CROTHERS