Brooksbank v. Anderson

THOREEN, Judge

(dissenting).

I respectfully dissent.

*796Without agreeing with the trial court that consideration is necessary for the 1996 agreement, it is my opinion that there was adequate consideration for the 1996 agreement. Therefore, I would affirm the judgment based on the amended findings.

Pursuant to the 1994 agreement, respondent lent the corporation $73,739.90 for Phase 1 and 2 and appellant guaranteed one-half of these loans, with the guarantee terminating upon the entry into Phase 3. The agreement also provided that if the parties agreed to proceed to Phase 3, they would each contribute $32,000 to the capital of the corporation in exchange for an additional 32,-000 of the corporation’s common shares.

The 1995 agreement provided that respondent would make advances against a $100,000 note. Appellant agreed to guarantee one-half of the loans already made totaling $73,-739.90, and one-half of all advances against the $100,000. At this point, no amount of the $32,000 contribution to the capital of the corporation had been made. The 1995 agreement also stated that:

It is understood and agreed by and between the parties that the total aggregate loans to be made by [respondent] to the Corporation * * * shall not exceed the aggregate sum of $173,739.90 unless this Agreement is modified in writing by all parties hereto.

The 1996 agreement stated that

if a decision is made to proceed with the Phase 3 development and marketing, that both [respondent] and [appellant] will make an additional loan in the amount of $33,000 each for that purpose * * *.

The trial court, in its amended findings, found that this agreement to lend additional money to the corporation constitutes consideration for the 1996 agreement, because it imposes on respondent a new or different obligation that was not contained in the prior agreements. The majority finds that the difference between the $32,000 contribution for capital under the 1994 agreement and the $33,000 loan to the corporation under the 1996 agreement is insignificant and constitutes no consideration. I disagree.

Consideration may be found in the form of either a benefit accruing to a party or a detriment suffered by another party. C & D Investments v. Beaudoin, 364 N.W.2d 850, 853 (Minn.App.1985), review denied (Minn. June 14, 1985). Respondent’s 1996 agreement to lend the corporation an additional $33,000, after he had already lent it $173,-739.90 and contributed $1,000 in capital, when appellant had only contributed $1,000 in capital, was a detriment to respondent as well as a benefit to the corporation, which was nearly out of money. Consideration need not pass from promisee to promisor to be valid. See C & D Investments, 364 N.W.2d at 853. Respondent stated in the 1995 agreement that he would not lend more money to the corporation unless a new agreement was made; he also testified that he would not lend more money absent a new agreement because the corporation was in debt and running out of money. His subsequent promise of an additional loan was consideration. See State Bank v. Schrupp, 375 N.W.2d 48, 53 (Minn.App.1985) (finding that bank’s loan to party is sufficient consideration to support third party guarantee because guarantee made party eligible for additional loan that they otherwise would not have obtained), review denied (Minn. Dec. 13, 1985).

The majority determines that the $33,000 loan, however, is only an additional $1,000 and an insignificant difference from the original agreement to contribute $32,000 to the corporation for capital. Even if agreeing to contribute money for capital and agreeing to contribute money as a loan are regarded as equivalent obligations, there is at least a $1,000 difference, which is sufficient additional consideration to support the 1996 agreement. See Estrada v. Hanson, 215 Minn. 353, 356, 10 N.W.2d 223, 225-26 (1943) (“It is unnecessary that a consideration should be adequate. It is sufficient if it is something which the law regards as of value.”) (citation omitted). I believe that there is consideration here for the full $33,000 loan. But, because there is consideration with a value of at least $1,000, the 1996 agreement is supported by consideration.

*797In addition to the loan of $33,000, respondent also provided consideration for the agreement by forbearing from collecting on the loans that appellant personally guaranteed.

A creditor’s promise to forbear from calling in a debtor’s outstanding loans, whether verbal or implied by the circumstances, can be sufficient consideration to support a guarantee by a third-party guarantor.

Schrupp, 375 N.W.2d at 53 (citing Baker v. Citizens State Bank, 349 N.W.2d 552, 558 (Minn.1984)). Respondent testified that he would not have foregone calling the notes and that he would not have actually loaned more money to the corporation if appellant had been unwilling to sign an additional guarantee. See id. (finding that understanding that bank would forbear from calling in outstanding loans was consideration for third-party guarantee). The majority concludes, however, that the forbearance by respondent for a period of three months is not an adequate period of time for the forbearance to constitute consideration. I disagree.

“The purpose of bargaining for forbearance is to attempt to find a means to pay the outstanding debts.” Baker, 349 N.W.2d at 559. Respondent forbore for a time during which both he and appellant demonstrated their intent to continue with the purpose of the corporation, to develop and manufacture a product for mixing animal feed. Had the corporation made money, it might have been able to repay the debt. When it became apparent that the corporation would not continue to pursue its purpose, respondent called in the notes. It was clear that the corporation would not make any money; therefore, it would no longer be reasonable or necessary for respondent to continue to forbear.

Both the forbearance and the agreement to lend the corporation more money constitute more than adequate consideration. Therefore, I would affirm the judgment based on the amended findings.