Legal Memorandum: Unsigned Credit Agreement in MN

Issue: Can an affirmative defense be based on an unsigned oral credit agreement that does not comply with Minn. Stat. 513.33?

“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.”  Minn. Stat. § 513.33, subd. 2.  This prohibition applies to a defendant’s affirmative defenses, as well as to a debtor-plaintiff’s cause of action.  BankCherokee v. Insignia Development, LLC, 779 N.W.2d 896, 902 (Minn. Ct. App. 2010).  Moreover, a “credit agreement” subject to the statute may include, alleged modifications to a written guaranty:

A “credit agreement,” as that phrase is used in section 513.33, refers not only to an agreement to lend money but also to an agreement to “forbear repayment of money, goods, or things in action, to otherwise extend credit, or to make any other financial accommodation.”  Id., subd. 1(1).

Here, the oral agreements appellant sought to prove include promises, allegedly made prior to the September 2007 signing of the personal guaranty at issue here, that respondent would (1) satisfy any default on the loan by collecting against other developments’ equity before enforcing any guaranty against appellant; (2) allow Insignia and appellant a cure period for any defaults that would last until the real-estate market recovered; and (3) accept a corporate guaranty, rather than appellant’s personal guaranty, in restructuring the loan.  All of these agreements amount to promises to forbear repayment of money or make some other financial accommodation and, therefore are “credit agreements” within the […]