Opinion ID: 2785351
Heading Depth: 2
Heading Rank: 1

Heading: St. Jude’s Collection Claim

Text: Tormey contends the district court erred by granting judgment as a matter of law on St. Jude’s claim for repayment of the $650,000 loan. Tormey argues the district court should have instead found sufficient evidence existed to support two affirmative defenses asserted by Tormey. Tormey’s first defense is that St. Jude breached a material term of the representative agreement by failing to hire a TSS for Tormey. Under Minnesota law, which applies in this case, see Chew v. American Greetings Corp., 754 F.3d 632, 635 (8th Cir. 2014), “a party who first breaches a contract is usually precluded from successfully claiming against the other party,” gScribe, Inc. v. Soteria Imaging Services, LLC, No. A11-265, 2011 WL 4008303, at  (Minn. Ct. App. Sept. 12, 2011) (internal quotation marks and citation omitted). Accordingly, Tormey asserts, when considering all of the agreements Tormey executed with St. Jude as one unitary agreement, this first material breach by St. Jude relieved Tormey from meeting his sales quotas and ultimately his obligation to repay the loan. Assuming St. Jude’s failure to provide Tormey with TSS support until October 2003 constituted a breach of the unitary agreement, we find it did not excuse Tormey’s failure to repay the note. The continued recognition of a contract as still binding after a breach is a waiver of the breach. See Wolff v. McCrossan, 210 -7- N.W.2d 41, 43 (Minn. 1973) (“Generally, where a defendant has orally waived certain conditions of a written contract, he is estopped from asserting the nonperformance of those conditions as a defense in a suit upon the contract.”); Cut Price Super Mkts. v. Kingpin Foods, Inc., 98 N.W.2d 257, 267 (Minn. 1959) (“The right to rescind [a contract] must therefore be exercised promptly on discovery of the facts from which it arises and it is clear under the law that it may be waived by continuing to treat the contract as a subsisting obligation.”); see also 17A Am. Jur. 2d Contracts § 715 (“An election by a party to perform notwithstanding a breach, and thus waiving the breach, is conclusive, in the sense of depriving that party of any excuse for ceasing performance, with the result that the party at fault may require that the other party perform.”). Under Minnesota law, a waiver is the “intentional relinquishment of a known right.” White v. City of Elk River, 840 N.W.2d 43, 51 (Minn. 2013). Here, although St. Jude had yet to provide Tormey with TSS support in September 2003, Tormey continued to treat his contract with St. Jude as though it remained in effect. This is evidenced by Tormey suggesting and accepting reduced sales quotas which he acknowledged he could perform himself. Consequently, Tormey bound himself to the provisions of the unitary agreement as a whole, including meeting these sales quotas and repaying the note to St. Jude, regardless of St. Jude’s first breach. Accordingly, we conclude Tormey waived his ability to rely on a first-breach defense as an excuse for failing to repay the note. Tormey’s second asserted affirmative defense relies on the “walk-away agreement,” arguing St. Jude and Tormey settled the debt Tormey owed. According to Tormey, the district court erred by instructing the jury to consider the existence of the “walk-away agreement” under the clear and convincing evidence standard. Instead, relying on Bolander v. Bolander, 703 N.W.2d 529, 541 (Minn. Ct. App. 2005), Tormey contends the district court should have instructed the jury to review the agreement based on the preponderance of the evidence standard because the “walk-away agreement” was not a modification to the agreements existing between -8- St. Jude and Tormey. Rather, like the agreement made in Petsche v. EMC Mortgage Corp., 830 F. Supp. 2d 663, 672 (D. Minn. 2011), the “walk-away agreement” was the settlement of a debt which is not considered a modification. Moreover, because the agreement was the settlement of a debt, it cannot be considered a credit agreement and need not be in writing to be enforceable. Id. Tormey concedes, however, if the “walk-away agreement” was an oral modification or a credit agreement, then it needed to be memorialized in writing to satisfy the Minnesota statute of frauds for credit agreements. Although Tormey frames the initial issue as an objection to the district court’s jury instructions, because the district court granted judgment as a matter of law, in substance, Tormey is objecting to the burden of proof applied by the district court when it reached its conclusion on Tormey’s defense. To address Tormey’s arguments, however, we need only consider whether the alleged “walk-away agreement” was a credit agreement within the meaning of Minnesota statute § 513.33, which maintains credit agreements must be in writing. Minn. Stat. § 513.33, subd. 2; see also Greuling v. Wells Fargo Home Mortg., Inc., 690 N.W.2d 757, 761-62 (Minn. Ct. App. 2005) (“[C]laims on agreements falling under section 513.33 fail as a matter of law if the agreement is not in writing.”). A credit agreement within the meaning of § 513.33 is “an agreement to lend or forbear repayment of money, goods, or things in action, to otherwise extend credit, or to make any other financial accommodation.” Minn. Stat. § 513.33, subd. 1. First, we find Tormey’s reliance on Petsche is misplaced and the case is not controlling. Instead, we find Tormey’s circumstances are much like those found in Loan Store v. McConnell, No. A06-122, 2006 WL 3490807, at  (Minn. Ct. App. Dec. 5, 2006) (“Even if we were to interpret [§ 513.33] very narrowly, an agreement that would excuse remaining payment on the debt would fall under forbearing repayment of money.”), and Carlson v. Estes, 458 N.W.2d 123, 128 (Minn. Ct. App. 1990) (finding where a lender waived a claim to some monetary value, the agreement -9- was a credit agreement under § 513.33 because it clearly constituted a financial accommodation and was an action to forbear the repayment of money), which determined the agreements were oral modifications to the original agreements and therefore credit agreements. Tormey’s case is also distinguishable from Bolander, which discussed whether the existence of a new “promise to pay” for services rendered after expiration of the original contract was a modification to the original contract. 703 N.W.2d at 542. Additionally, the “walk-away agreement” by itself constitutes a credit agreement regardless of whether it modified the terms of the original agreements because it was an agreement to forbear repayment. See BankCherokee v. Insignia Dev., LLC, 779 N.W.2d 896, 902 (Minn. Ct. App. 2010) (“Among the agreements subject to [the] requirements [of § 513.33] are many that commonly would serve as the basis for affirmative defenses, such as agreements to ‘forbear repayment of money’ or make some ‘other financial accommodation.’”); Greuling, 690 N.W.2d at 762 (“The plain and unambiguous language of [§ 513.33] clearly prohibits a claim that a new credit agreement is created unless the agreement is in writing, expresses consideration, sets forth all relevant terms and conditions, and is signed by the creditor and debtor.”). Consequently, because Tormey did not present evidence that the “walk-away agreement” was in writing as required by § 513.33, we find the district court did not err by granting judgment as a matter of law on this defense or on St. Jude’s collection claim.