Petsche v. EMC Mortg. Corp.

• Decision Date: 15 November 2011
• Docket Number: Civil No. 10–4750 (JRT/TNL).
• Citation: 830 F.Supp.2d 663
• Parties: Denise A. PETSCHE and Jay R. Petsche, Plaintiffs, v. EMC MORTGAGE CORPORATION and Gurstel Chargo, P.A., Defendants.
• Court: U.S. District Court — District of Minnesota

830 F.Supp.2d 663

Denise A. PETSCHE and Jay R. Petsche, Plaintiffs,

v.EMC MORTGAGE CORPORATION and Gurstel Chargo, P.A., Defendants.

Civil No. 10–4750 (JRT/TNL).

United States District Court, D. Minnesota.

Nov. 15, 2011.

John A. Hamer, Hoffman Law Office, Faribault, MN, for plaintiffs.

Curtis D. Ripley, Leonard Street and Deinard, PA, Minneapolis, MN, for defendant EMC Mortgage Corporation.

Bridget A. Sullivan, Gurstel, Staloch & Chargo, P.A., Golden Valley, MN, for defendant Gurstel Chargo, P.A.

MEMORANDUM OPINION AND ORDER ON CROSS SUMMARY JUDGMENT MOTIONS

JOHN R. TUNHEIM, District Judge.

Defendant EMC Mortgage Corporation (“EMC”) obtained a judgment against plaintiffs Denise and Jay Petsche (“the Petsches”) in the amount of $33,258.95 stemming from the Petsches' default on a mortgage. Following protracted negotiations to settle the debt through Defendant Gurstel Chargo (“Gurstel”), EMC's counsel and collection agent, EMC garnished approximately $37,000 from the Petsches' bank account. The Petsches claim that the parties had reached a $4,000 settlement agreement, and brought this action seeking to recover the difference between the settlement and the garnished amount. The complaint alleges four counts: (1) breach of contract, (2) conversion, (3) fraud, and (4) violation of the Federal Fair Debt Collection Practices Act (“FDCPA”). The Petsches and Gurstel have moved for summary judgment; EMC has joined Gurstel's motion. Because the Court finds that the settlement agreement is a valid contract that was breached by Gurstel, the Court will grant the Petsches' motion as to the breach of contract count. The Court will grant Gurstel's motion as to the remaining claims and the conversion, fraud, and FDCPA counts are dismissed as to both defendants.

BACKGROUND

EMC brought a lawsuit against Denise and Jay Petsche in Minnesota state court on a note it held related to the Petsches' second mortgage on an investment property the Petsches lost through foreclosure. The Petsches had secured the loan from EMC to finance a rental property managed by Northmarx Properties. Northmarx Properties, previously JRP Properties, was an incorporated entity that the Petsches wholly owned. (Third Aff. of Bridget Sullivan, Ex. A, Dep. of Jay R. Petsche, at 13–14, 19, 39–40, July 26, Docket No. 32.) The rental income Northmarx/JRP Properties received was used almost entirely to pay the expenses of managing the properties and not retained by the Petsches as personal income. ( Id. at 14.) EMC obtained a judgment against the Petsches in the amount of $33,258.95 on March 11, 2010. (Aff. of Bridget A. Sullivan, Ex. D, June 27, 2011, Docket No. 20; Decl. of Amy M. Goltz ¶ 4, Aug. 1, 2011, Docket No. 27.)

I. Negotiations Leading Up to the July 16, 2010 Call

In November 2008, well before obtaining the state court judgment, EMC retained Gurstel to collect the unpaid loan from the Petsches. Settlement negotiations between Gurstel and Jay Petsche started shortly afterwards. (Aff. of Albert Llaurado ¶¶ 3–15, June 27, 2011, Docket No. 19.) From late 2008, Jay Petsche offered to settle the debt for amounts ranging from $750 to $2,000. ( Id. ¶¶ 4–10.) EMC typically countered that it would not accept less than 50% of the total amount owed. ( Id. ¶¶ 5, 7, 9.) On one occasion—April 5, 2010—Petsche offered to settle the debt for $4,000. Gurstel at first rejected this amount. ( Id. ¶ 9.)

Petsche submitted a hardship document to EMC in February 2009, and EMC requested financial information to evaluate the hardship request. ( Id. ¶¶ 6, 10.) Following EMC's review of the Petsches' financial situation, on June 28, 2010, EMC offered through Gurstel to settle the debt for a lump sum of $4,000, which it specified must be paid by July 25, 2010. ( Id. ¶ 11.) ¹ Petsche said he could not pay this amount. The following week, on July 7, 2010, Petsche faxed to Gurstel an offer to settle in full for $2,000, which Gurstel immediately rejected by letter. ( Id.) That same day, Gurstel mailed a garnishment summons to Wells Fargo, the Petsches' bank. Two days later, on July 9, the bank froze approximately $37,000 in the Petsches' account. ( Id. ¶ 12.) On July 12, Gurstel sent a letter to the Petsches informing them of the garnishment summons. ( Id.)

II. Jay Petsche's July 16, 2010 Phone Call with Albert Llaurado

The parties' dispute centers around a July 16, 2010 phone conversation between Jay Petsche and Albert Llaurado, the Gurstel employee assigned to the Petsches' account. At the time of the conversation, Llaurado was not aware that Wells Fargo had frozen the Petsches' funds. ( Id. ¶¶ 13–14.) Petsche called to accept the $4,000 offer that he had previously declined, though he requested to break the payment into two installments. ( Id.) Unaware that Wells Fargo was holding the $37,000 per the garnishment summons, Llaurado reiterated the offer that Petsche pay $4,000 by July 26. ( Id.) Petsche stated that he would “get it done.” ( Id. ¶ 14.) Gurstel recorded the payment as paid in full after the phone conversation. (Second Aff. of Bridget A. Sullivan, Ex. C, Excerpts of Gurstel Chargo's Files at 33, Aug. 1, 2011, Docket No. 26.) After another Gurstel employee found out that Wells Fargo was already holding the approximately $37,000 and relayed the information to Llaurado, Llaurado phoned Petsche on July 19 to tell him that the settlement offer was no longer on the table, and that Gurstel would levy on the full amount. (Llaurado Aff. ¶ 15.) Petsche first spoke with Llaurado's supervisor and later called back to say that his attorney would go after Gurstel for reneging on the settlement agreement. ( Id. ¶ 16.)

III. Post–Call Events

On July 26, 2010—ten days after the “get it done” call—Jay Petsche personally dropped off a $4,000 check at Gurstel Chargo's offices. (Sullivan Aff. ¶ 5.) Gurstel returned the check three days later. ( Id.) The Petsches filed exemption claims to the garnishment, which the Minnesota state court heard and rejected; on August 19, 2010, the court ordered Wells Fargo to release the Petsches' funds to Gurstel. ( Id. Ex. D.)

Several months after release of the funds, on October 25, 2010, Denise and Jay Petsche filed a complaint in Minnesota state court alleging breach of contract, conversion, fraud, and violation of the FDCPA. Gurstel removed the case to federal court on the basis of the alleged FDCPA violation.

ANALYSIS

I. STANDARD OF REVIEW

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is material if it might affect the outcome of the suit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A party moving for summary judgment should “identify [ ] each claim or defense—or the part of each claim or defense—on which summary judgment is sought.” See Fed.R.Civ.P. 56(a). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences that can be drawn from those facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

II. SUMMARY JUDGMENT MOTIONS

The Petsches and Gurstel both move for summary judgment on all counts. The Court will grant the Petsches' motion on the breach of contract claim, and Gurstel's motion on the FDCPA, conversion, and fraud claims. Because both motions raise the same issues, the Court addresses them simultaneously.

A. Breach of Contract

The Petsches' breach of contract claim presents two central issues: (1) whether the July 16, 2010 phone call gave rise to a contract as a matter of law, and (2) whether any settlement agreement falls within the ambit of the Minnesota Statute of Frauds relating to credit agreements.² The Court will grant the Petsches' motion on the breach of contract claim because the phone call of July 16, 2010 gave rise to a contract as a matter of law, and the settlement agreement does not fall within the Minnesota statute of frauds.

1. The July 16 Phone Conversation Gave Rise to a Contract as a Matter of Law

Under Minnesota law, “the test of contractual formation is an objective one, to be judged by the words and actions of the parties and not by their subjective mental intent.” Hill v. Okay Const. Co., Inc., 312 Minn. 324, 252 N.W.2d 107, 114 (1977); see also Riley Bros. Constr., Inc. v. Shuck, 704 N.W.2d 197, 202 (Minn.Ct.App.2005). “The agreement necessary to form a contract ... may be implied from circumstances that clearly and unequivocally indicate the intention of the parties to enter into a contract.” Webb Bus. Promotions, Inc. v. Am. Elecs. & Entm't Corp., 617 N.W.2d 67, 75 (Minn.2000). “The formation of a contract requires communication of a specific and definite offer, acceptance, and consideration.” Commercial Assocs., Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn.Ct.App.2006).

A reasonable jury must find that the July 16, 2010 conversation gave rise to a contract. Gurstel offered to settle the debt for $4,000. ( E.g., Llaurado Aff. ¶ 11.) While Petsche turned down this offer on June 28, 2010, telling Gurstel's Albert Llaurado that “he could not make this payment because he didn't have the money,” Llaurado again extended the offer during the July 16, 2010 phone call. ( Id.) It is thus immaterial that Jay Petsche's initial rejection of the $4,000 deal functioned to terminate the offer—as, in any event, did his July 7 counteroffer of $2,000. See Ellison v. Premier Salons Int'l, Inc., 164 F.3d 1111, 1113 n. 3 (8th Cir.1999). It remains undisputed that (1) Gurstel as EMC's agent again issued the $4,000 offer on the July 16 call, (2) Petsche “said ok” that he “will get it done,” and (3) that Gurstel's...