This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).







Groth Lumber Company, LLC,





Robert Dahl,



Mary Roe, et al.,



Filed June 27, 2006


Hudson, Judge


St. Louis County District Court

File No. 69-C7-03-603538


David E. Albright, 7814 West 131st Street, Apple Valley, Minnesota 55124 (for respondent)


John H. Bray, Kanuit & Bray, Ltd., 4815 West Arrowhead Road, Suite 230, Hermantown, Minnesota 55811 (for appellant)


            Considered and decided by Toussaint, Chief Judge; Hudson, Judge; and Worke, Judge.

U N P U B L I S H E D   O P I N I O N


This is an appeal from a decision in a contract dispute regarding the cost of building materials for a house, in which the court entered judgment in favor of respondent and authorized a constitutional lien.  Appellant contends that the court erred in concluding that the account balance for construction materials purchased on his behalf to build his own residence constituted an “open-ended credit plan” under Minn. Stat. § 334.16 (2004) and was, therefore, not subject to the usual usury limits.  We affirm.


            Appellant Robert Dahl purchased a plot of land in December 2002, intending to design and build a home.  Tyson Warner is a general contractor and Dahl’s friend.  Dahl asked Warner to frame a house and garage that Dahl had sketched.  Dahl authorized Warner to determine what materials were needed and to purchase those materials from respondent Groth Lumber Company, LLC (Groth Lumber) on Dahl’s behalf.  Dahl and Warner agreed that Dahl would use Warner’s existing account with Groth Lumber to purchase materials, but Dahl understood that he (Dahl) was ultimately responsible for the bill. 

In March 2003, Dahl went to Groth Lumber for a materials estimate.  Dahl showed his plans to Cal Jacobson, the owner of Groth Lumber, who provided an estimate in April 2003. 

            The estimate contained the following notice:

Terms: All accounts due the 10th of [the] month following date of purchase.  Finance charge is computed by a periodic rate of 1.50% per month applied to the previous balance after deducting current payments and/or credits appearing on this statement.  This is an annual percentage rate of 18%. 


The estimate was for $38,335.55 and expired on April 14, 2003.

Dahl and Jacobson met again in July 2003.  Dahl submitted an amended building plan.  He and Jacobson discussed the billing process, and they decided to bill through Warner’s existing account with Groth Lumber rather than open an account for Dahl.  Jacobson told Dahl that he (Dahl) would receive the normal contractor’s discount of 10%, provided that Dahl paid each bill by the 10th of the month.  Under the agreement, if Dahl paid by the 10th, Groth Lumber would not assess financing and service charges. 

The price of materials increased significantly over the summer.  Jacobson discussed these price increases with Dahl, who did not object.  Jacobson did not submit a new estimate at that time. 

            Warner began the framing of Dahl’s home in August 2003.  Although Dahl did not hire a general contractor, Dahl believed that Warner was in charge of administration at the site.  Jacobson and Warner worked from Dahl’s sketches, as opposed to an architectural plan, and they had to meet on several occasions to make adjustments.  Dahl did not keep track of materials, and Groth Lumber delivered the invoices to the job site.  On September 24, 2003, Groth Lumber sent Dahl an updated estimate in the amount of $41,681.19.  At that point, Groth Lumber had ordered most of the materials and delivered them to the construction site.  Groth Lumber did not deliver the insulation and materials to finish the interior of the home.

            On September 24, 2003, when Warner had completed most of the framing, Groth Lumber sent Dahl a bill for materials for roughly $39,000.  The bill stated that the amount listed was the amount due if paid by the 10th of October.  Dahl gave Groth Lumber a check on October 10 for roughly $34,000.  Dahl acknowledged at trial that the invoices represented materials actually purchased, delivered, and used in the construction of the home.  But after meeting with Warner, Dahl determined that he would have to spend roughly $7,500 in materials to complete the framing and deducted a portion of that amount from the bill.  Dahl could not explain in his testimony exactly how he arrived at that figure.  Warner testified that Dahl referred to the original estimate in his calculation. 

            Dahl conditioned acceptance of his check on full and final satisfaction of the debt.  Groth Lumber did not endorse or cash Dahl’s check.  Dahl has not paid Groth Lumber for any of the materials. 

            Groth Lumber filed suit against Dahl in December 2003, alleging breach of contract and seeking damages equal to the unpaid balance and a 1.50% finance charge per month.  Dahl’s answer asserted as an affirmative defense that Groth Lumber’s claim was barred as usurious. 

The district court held a bench trial in February 2005.  The district court found that all parties knew that Warner’s account was a revolving account and not subject to the usual usury limits.  Dahl was allowed to make purchases from time to time, he had the privilege of paying the balance in full or in installments, and he was assessed a finance charge on outstanding unpaid balances.  Accordingly, the district court concluded that the 1.50% interest rate that respondent charged was lawful for an open-end credit plan under Minn. Stat. § 334.16 (2004).  The district court further found that the final cost of the materials that Groth Lumber ordered and used to build Dahl’s home was $47,342.66.  The district court ordered judgment in that amount and pre-judgment interest.  The district court entered judgment on June 9, 2005.  This appeal follows.


Dahl argues that the 1.50% finance charge that Groth Lumber charged was usurious as a matter of law.  Construction of a usury statute is a question of law that this court reviews de novo.  Peterson v. Gustafson, 584 N.W.2d 660, 662 (Minn. App. 1998), review denied (Minn. Nov. 17, 1998).

            “Usury is the taking or receiving of more interest or profit on a loan or forbearance than the law allows.”  Barton v. Moore, 558 N.W.2d 746, 750 (Minn. 1997).  Under Minn. Stat. § 334.01 (2004), “[n]o person shall directly or indirectly take or receive in money, goods, or things in action, or in any other way, any greater sum, or any greater value, for the loan or forbearance of money, goods, or things in action, than $8 on $100 for one year.”  Here, neither party disputes that collection of the finance charge would result in Groth Lumber receiving a greater value from forbearance than permitted by statute.  The issue is whether the finance charge is not subject to statutory limits on usury because Dahl and Groth Lumber entered into an open-end credit plan as defined in Minn. Stat. § 334.16 (2004). 

            A seller of goods or services may impose a finance charge on an account balance of 1.50% per month provided that “[t]he sale is a consumer credit sale pursuant to an open end credit plan, agreement, or arrangement.”  Minn. Stat. § 334.16, subd. 1(a) (2004).  Under an open-end credit arrangement:

(1) the seller may permit the buyer to make purchases from time to time from the seller or other sellers,


(2) the buyer has the privilege of paying the balance in full or in installments, and


(3) a finance charge may be computed by the seller from time to time on an outstanding, unpaid balance.


Id.  Minnesota has adopted the definition of an open-end credit plan provided in the federal Truth-in-Lending Act, which states:

The term “open end credit plan” means a plan under which the creditor reasonably contemplates repeated transactions, which prescribes the terms of such transactions, and which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance.


Id., subd. 2 (2004); 15 U.S.C. § 1602(i) (2000). 

            Generally, open-end transactions involve the carrying forward of any balance due on each previous contract.  See Wise Furniture v. Dehning, 343 N.W.2d 26, 29 (Minn. 1984) (citing Goldman v. First Nat’l Bank of Chicago, 532 F.2d 10, 17 n.11 (7th Cir. 1976) (characterizing an open-end credit plan as one in which the parties establish the credit terms initially with the opening of the account, but no fixed amount of debt is incurred at that time)).  In contrast, if the amount of debt is fixed at the time of purchase, the transaction resembles a closed-end credit transaction, even if the amount is subsequently amended.  See Wise Furniture, 343 N.W.2d at 29; see also Am. Accounts & Advisers v. Hendrickson, 460 N.W.2d 83, 85 (Minn. App. 1990) (finding a closed-end credit transaction when the seller, a funeral home, did not anticipate repeated purchases). 

            Dahl first challenges the district court’s finding that all parties understood the terms of the agreement.  According to Dahl, the record reflects a disagreement as to whether Dahl understood that materials were going to be ordered through Warner’s account and whether Groth Lumber notified Dahl that an outstanding balance on this account would be subject to a 1.50% finance charge per month.  This court will not set aside a district court’s findings of fact unless the findings are clearly erroneous and due regard is given to the opportunity of the district court to judge the credibility of the witnesses.  Minn. R. Civ. P. 52.01. 

Neither Warner nor Jacobson explicitly testified that they told Dahl that any unpaid balance would be subject to a finance charge.  But Dahl testified that he received a written estimate from Jacobson, which states the applicable finance charge.  Furthermore, Jacobson testified that he and Dahl discussed the terms of their agreement at their July meeting when the parties agreed to use Warner’s account rather than open a new account for Dahl.  Dahl testified that he brought a check to Jacobson on October 10, 2003 in order to reap the 10% contractor’s discount that Groth Lumber offered.  Therefore, Dahl acknowledged his understanding of at least one term of the agreement.  The district court’s finding that Dahl understood the corresponding terms of the agreement is not clearly erroneous. 

            Dahl next argues that the district court’s application of Minn. Stat. § 334.16 was improper because neither he nor Groth Lumber anticipated an ongoing credit relationship.  Dahl contends that Groth Lumber’s presentation of a final bill on September 24, 2003, demonstrates that Groth Lumber did not contemplate future purchases by Dahl.  We disagree.

            Dahl’s agreement with Groth Lumber constituted an open-end credit plan.  Dahl and Groth Lumber did not negotiate a fixed price for Dahl’s home.  Rather, Groth Lumber agreed to bill Dahl monthly for materials, permitting Dahl to carry a balance forward into the next month.  Then Groth Lumber would compute a finance charge on the unpaid balance that Dahl chose to carry over.  The record reflects that Groth Lumber made repeated deliveries of materials to Dahl’s construction site under separate invoices and that Warner frequently ordered new materials on Dahl’s behalf when Dahl’s sketched plans proved unworkable.  The district court did not err in concluding that the parties contemplated repeated ongoing purchases.  See Peterson v. Gustafson, 584 N.W.2d 660, 662–63 (Minn. App. 1998), review denied (Minn. Nov. 17, 1998) (holding that an attorney’s monthly interest charge on unpaid balances was not usurious when the attorney represented the client in a marriage-dissolution action on an hourly basis and billed the client monthly because the amount of the client’s debt was not fixed at the time of the agreement). 

Dahl’s receipt of the September 24, 2003 bill does not affect this analysis.  The bill was for materials delivered and used in constructing Dahl’s home as reflected in invoices through September 24.  The record shows that the parties initially anticipated purchasing materials for the interior of Dahl’s home.  The September 24 bill became the “final bill” when Dahl disputed the amount owed.  Accordingly, the district court did not err in concluding that the parties’ agreement was not subject to the statutory limits on usury.