The Minnesota Supreme Court recently affirmed the dismissal of a borrower’s claims against his bank regarding an alleged agreement to change the due date of his balloon payment on an outstanding loan balance. In Figgins v. Wilcox, — N.W.2d —, A14-1358 (Minn. June, 1, 2016), a borrower brought suit against his bank, Grand Rapids State Bank (GRSB), and its CEO, Noah Wilcox, alleging they made misrepresentations and breached an oral agreement regarding the due date of a payment on an outstanding loan. The court held Minn. Stat. § 513.33 precludes a borrower from suing a lender based on an alleged oral agreement changing a payment due date.
Figgins owned and operated a scrapyard in Grand Rapids. Figgins had several business and personal loans with GRSB. In late 2009, one of Figgins’ loans reached maturity, and the terms of the loan required Figgins to make a balloon payment. In lieu of making the balloon payment, Figgins entered into negotiations with GRSB to refinance the loan.
Figgins claimed that Wilcox, the bank CEO, orally told him he did not need to make the balloon payment while the parties negotiated refinancing. Figgins attempted to obtain refinancing from other banks, but claimed the bank’s CEO told another bank that Figgins had a poor payment history and that he was seriously delinquent on his loans. Ultimately, Figgins failed to refinance through other banks.
Figgins claimed the CEO’s alleged statements were false and any delinquency or other negative credit history incurred in or after late 2009 was due to his reliance on the CEO’s statement that Figgins did not need to make the balloon payment. As a result, Figgins alleged he was forced to pay above-market rates when he refinanced through GRSB.
GRSB moved to dismiss based on Minn. Stat. § 513.33 (2014), which reads:
A debtor may not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.”
Section 513.33 was passed in 1985 in response to the farm crisis of the 1980s. The district court agreed with defendants and dismissed the complaint with prejudice. Figgins appealed, arguing section 513.33 did not apply because there was no “agreement” due to the lack of consideration. Further, Figgins argued his claims for promissory estoppel survived as an exception to the statute.
The Supreme Court rejected Figgins’ argument that the statute only applied to enforceable contracts. The court held the Legislature’s decision to use “agreement,” rather than “contract,” shows intent to address a broader set of interactions than just those qualifying as enforceable contracts. The court also refused to create a judicial “promissory estoppel” exception to what it held is a plain, clear, and unambiguous statute which states no action on a credit agreement may be maintained unless the agreement is in writing.
The decision will no doubt be useful in many consumer law cases involving vehicle repossession. In such cases, the debtor often claims that the defendant violated the Fair Debt Collection Practices Act because there was no present right to repossession of the vehicle due to the lender’s oral agreement to modify the payment terms. See 15 U.S.C. § 1692f(6)(A). Without a present right to possession, the enforcement of the security interest through repossession is unlawful, and often exposes the lender and repossession company to strict sanctions, including attorneys’ fees. Defendants will cite the case for the proposition that, unless the modification of the terms was set forth in writing, the court should not consider any argument that the terms were modified resulting in unlawful repossession.