This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).







Jane E. Wolf,





Ahmad Kian, et al.,




Filed September 12, 2000

Affirmed in part and reversed in part

Amundson, Judge


Hennepin County District Court

File No. 997175


Richard M. Carlson, Morris, Carlson & Hoelscher, P.A., 7380 France Avenue South, Suite 200, Minneapolis, MN 55435 (for respondent)


Clarance E. Hagglund and Britton D. Weimer, Hagglund, Weimer & Speidel, 5101 Olson Memorial Highway, 4000 Water Park Place, Minneapolis, MN 55422 (for appellants)


            Considered and decided by Toussaint, Chief Judge, Amundson, Judge, and Parker, Judge.*

U N P U B L I S H E D   O P I N I O N


Appellants owned certain real estate, which they sold to respondent in two separate contracts for deed.  After respondent failed to make initial payments, the contracts for deed were restructured.  This occurred several times with late payment fees being assessed against respondent.  When respondent again failed to make the necessary payments, appellants moved to cancel the contract for deed.  The district court ruled that the late payment fees were usurious and enforced the contracts.  Appellants challenge this determination, alleging that (a) usury laws do not apply to the sale of property; (b) the contract for deed is neither a loan nor a forbearance of funds, but an installment sale; (c) because the contract for deed is a sale of real estate, there is no repayment of principal; (d) the statutory exception of Minn. Stat. § 47.20, subd. 4(a) (1998) to the general usury rules does not apply here because when the contracts for deed were restructured and consolidated, the principal of the contract for deed exceeded the $100,000 limit set forth in the statute; (e) the amounts assessed against appellant here were not interest, but expenses; (f) even if the amounts at issue here were, in fact, interest, the district court failed to address the period of time over which that interest accrued; and (g) generally, the question of whether something is usurious is determined at the inception of the transaction, and at the inception of this transaction there was no intent to evade the usury law.  By notice of review, respondent challenges the district court’s decision not to award attorney fees.  We affirm in part and reverse in part.


On August 26, 1996, Jane Wolf entered into two contracts for deed (first agreement) to purchase two vacant lots ("lot 3" and "lot 4") from Ahmad and Sogand Kian.  The lot 3 contract specified a total sale price of $98,400 with $1,000 in earnest money paid at signing, $14,000 due at closing on August 30, 1996, a payment of $33,400 due on January 3, 1997, and a balloon payment of $50,000 on December 31, 1998, with monthly interest payments charged at 6% per annum and commencing August 31, 1996.  The lot 4 contract had similar terms: the principal was $85,000 with $6,000 due at closing, $19,000 due on January 3, 1997, and a $60,000 balloon payment due on December 31, 1998, again with monthly interest payments at 6% per annum, commencing August 31, 1996.

After Wolf failed to make the January 3, 1997 payments (of $33,400 and $19,000 respectively), she requested additional time.  The parties agreed upon a revised payment agreement (second agreement).  Under this agreement, written September 2, 1997, the amounts of the final balloon payments were consolidated into one $110,000 balloon payment.  The extension agreement provided that the outstanding amount be paid with a 9.5% interest starting on the payment due June 3, 1997.  This revised agreement also provided for a monthly 10% penalty for failure to timely make the additional payments, which resulted in Wolf paying $4,070.00 in late fees from October 9, 1997 to October 31, 1997.

On October 9, 1997, Wolf, at Ahmad Kian’s direction, drafted another agreement (third agreement), which included two interim payments of $15,000 due on October 31, 1997 and November 28, 1997, both subject to a 10% per month late fee.  This agreement included the $4,070 of previous late fees, which were not credited towards the principal and kept the $110,000 final balloon payment.

Wolf did not pay the $15,000 due on November 28, 1997.  On June 2, 1998, the parties drafted yet another agreement (fourth agreement) to further extend Wolf’s payments.  This included one $837.50 interest payment and a $30,000 principal payment due June 6, 1998, six monthly $600 interest payments commencing June 30, 1998, and a $12,500 late fee due December 31, 1998.  The $110,000 balloon payment remained in effect.

Wolf refused to pay these penalties, so the Kians commenced proceedings to cancel the contracts.  Wolf then brought suit to prevent cancellation and to have the late payments declared usurious.  After a trial, the court concluded that the late fees equaling 10% of the outstanding balance created a loan yield exceeding the maximum lawful rate of interest and that the imposition of late fees was unreasonable and usurious under Minn. Stat. §47.20.  The district court denied Wolf’s request for attorney’s fees.  The court ordered the Kians to sell the lots to Wolf.  The Kian’s subsequently appealed the court’s order.  By notice of review, Wolf appealed the court’s denial of attorney fees.  During the pending appeal, the Kians, under protest, sold the lots to Wolf.



This appeal arises from the district court’s judgment after a court trial.  This court need not defer to the district court’s application of the law when the material facts are not in dispute.  Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).  But, “this court will only reverse a district court’s findings of fact if, upon review of the entire evidence, we are ‘left with the definite and firm conviction that a mistake has been made.’”  In re Guardianship of Dawson, 502 N.W.2d 65, 68 (Minn. App. 1993) (quoting Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987)), review denied (Minn. Aug. 16, 1993).

To establish a usury claim, a party must prove four elements:

1.)       a loan of money or forbearance of debt,

2.)       an agreement between the parties that the principal shall be repayable absolutely,

3.)       the exaction of a greater amount of interest or profit than is allowed by law, and

4.)       the presence of an intention to evade the law at the inception of the transaction.


Citizen Nat’l Bank of Willmar v. Taylor, 368 N.W.2d 913, 918 (Minn. 1985).  The applicable usury statute here is Minn. Stat. § 47.20 (1998), which forbids a contract for deed vendor from charging interest on contracts for deed at an interest rate in excess of the Federal National Mortgage Association (FNMA) posted yields on 30-year mortgage commitments for delivery within 60 days on standard conventional fixed-rate mortgages, plus four percentage points.  Minn. Stat. § 47.20, subds. 3, 4a.  These limitations on interest are only applicable to a contract for deed for an amount less than $100,000.  Minn. Stat. § 47.20, subd. 2(2).  For the district court to find that the transaction involved a sum less than $100,000, the court had to find the sale of lots 3 and 4 to be discrete and separate transactions because their combined value clearly exceeded $100,000.

The first agreement did contain two entirely separate contracts for deed.  The subsequent revisions, however, (second, third and fourth agreements) all effectively revised the payment schedule, and did so by consolidating the amounts due.  Regardless of the fact that there were two separate contracts for deed at the time of the first agreement, in the subsequent agreements, the remaining balances had been co-mingled such that the agreement then required one final balloon payment of $110,000.  Once the amounts due had been merged, subsequent separation by the court was improper.  The fourth agreement specified that the final payment of $110,000 would secure the purchase of lots 3 and 4.  There was no separate option to pay an amount less than $100,000 and purchase one lot and not the other, and their consanguinity no longer permitted separation.  Accordingly, the usury limits of Minn. Stat. § 47.20 do not apply to the fourth agreement appellants seek to enforce here.  Because we find that the district court erred in applying the usury limitations found in Minn. Stat. § 47.20, we need not address the other issues raised by the Kians.


By notice of review, Wolf argues that the district court erred by not awarding attorney fees. “On review, this court will not reverse a district court’s award or denial of attorney fees absent an abuse of discretion.”  Becker v. Alloy Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (Minn. 1987).  The award of attorney fees, in this situation, is controlled by Minn. Stat. § 47.20, subd. 13a, which states:

Persons who have paid usurious interest may recover an amount not to exceed five times the usurious portion of the interest paid under the contract for deed * * * plus attorneys’ fees from the person to whom the interest has been paid.

Id. (emphasis added).  As the contract for deed here is not usurious, attorney fees are improper.  Regardless, the statute clearly indicates that the amount of the recovery is discretionary.  Accordingly, the court did not abuse its discretion in failing to award attorney fees.

Affirmed in part, reversed in part.


* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.