(Unenforceable Terms, Expressio Unius, and the Right of Redemption)
Minnesota courts enforce contracts. Someone who signs an agreement cannot later escape it by saying he never read it,[1] and or that it is harsh.[2] A little hyperbolically, Minnesota courts occasionally explain that contracts must be enforced or else “chaos would prevail in our business relations.”[3]
And yet.
In certain circumstances, a Minnesota court will refuse to enforce the plain terms of a contract. One example of particular importance to borrowers and lenders is the statutory right of redemption of foreclosed property. The Minnesota Court of Appeals has decided this right cannot be waived. If the borrower signs an agreement waiving it, the waiver is not enforceable.[4]
The facts in that case, at least with respect to this issue, were relatively simple. RBP Realty borrowed $7.5 million, giving a mortgage against the Riverview Business Plaza in St. Paul as security. RBP Realty defaulted on the loan. After the default, RBP Realty negotiated an agreement with the lender which stated, “Borrower waives its right of redemption.” The lender later foreclosed. After the foreclosure sale, RBP Realty paid the sheriff the necessary amount to exercise its right of redemption for the property, as permitted by statute. The lender argued RBP Realty could not do this, since it had contractually waived its right of redemption. RBP Realty argued that waiver of the right of redemption is not possible under Minnesota law. Both the district court and the Court of Appeals agreed with RBP Realty.
Don’t rely on a waiver of the right of redemption, if you are a Minnesota lender.
A little attention to the Court of Appeals’s explanation for its decision in RBP Realty yields some further, more complex information about Minnesota law. The opinion provides an example of a kind of legal reasoning that regularly recurs with respect to both statutes and contracts, and that reasoning as it was applied in RBP Realty doubly underscores the importance of the statutory right of redemption.
Minnesota’s statutory right of redemption arises, unsurprisingly, from a statute: Minn. Stat. § 580.23 subd. 1(a). In rough terms, the statute says that when land is sold through a foreclosure by advertisement, the borrower who was foreclosed upon may redeem the land within six months of the foreclosure sale by paying the same price as the foreclosure sale price (plus interest). Subd. 2 of § 580.23 extends the redemption period to twelve months under seven specific circumstances, including if the loan secured by the land has already been paid down by 1/3 or more, or if the land covers more than forty acres.
In RBP Realty, both parties made arguments based on subd. 1(a) and 2 of § 580.23. The lender said that nothing in these sections prohibits a borrower and a lender from entering into a contract that waives the right of redemption granted to the borrower by the statute. Therefore, according to the lender, such a contract may be made and, if so, should be enforced by the court. In response, RBP Realty argued that the statutory right to redeem is absolute and unqualified – after all, nothing in the statute says that it may be waived – and therefore a borrower cannot by contract relinquish this right.[5]
Both of these arguments are arguments about silence: how should the court interpret a statutory provision that says nothing specific about the question disputed by these two parties? The Court of Appeals resolved the dilemma by applying an interpretive technique with a Latin name (expressio unius est exclusio alterius) that is simpler and more common-sense than the name might lead one to believe.[6]
The mention of one thing excludes the other.
The principle is this: If a rule[7] provides a list of specifics, then similar specifics that are not stated in the rule are excluded from the rule. For example, a rule might say “The race sponsor will pay for all bicycles in the race to be painted on the day before the race. Bicycles are not permitted to be painted orange or red.” This rule does not specifically mention blue paint. However, because the rule specifically prohibits orange and red paint, we can infer that the rule would have mentioned blue if it meant to prohibit blue as well. Because blue is not mentioned, it is not included within the prohibition. Blue paint is allowed.
In RBP Realty, then, the Court of Appeals reasoned:
- Subd. 1(a) gives a mortgagor six months to redeem;
- Subd. 2 alters that period of six months to twelve months in only a few specified circumstances, and a few other provisions, Minn. Stat. §§ 582.32 and 582.032, change the redemption period to two months or to five weeks under other specified circumstances;
- Because the statute lists some exceptions to the six month redemption period but does not list an exception allowing the borrower to waive the redemption period altogether, the statute implicitly excludes the borrower from waiving the redemption period altogether.[8]
This is an aggressive application of expressio unius. In the bicycle race example mentioned above, the same reasoning might yield the conclusion that a race participant could not agree to abandon his right to have his bicycle painted at the race sponsor’s expense – merely because the rule excludes the use of orange or red paint without mentioning the possibility of entirely waiving the right to paint the bicycle. That interpretation is highly questionable.
Expressio unius makes the most sense as a method of interpretation when the thing not mentioned in the rule logically parallels the things that are mentioned (as blue paint parallels orange and red paint) so that the reader would expect the excluded item to be expressly mentioned if it was intended to be included. Expressio unius makes less sense when the included and excluded things are fundamentally different in some way so that the reader would not necessarily expect the thing excluded to be expressly mentioned if the rule was intended to apply to it. (The bike race rule excluding orange and red paint doesn’t expressly exclude contestants from painting defamation of the race sponsor on their bikes, but that doesn’t mean a defamatory paint job would be allowed by the race organizers.) Also, the structure of a rule may signal that it is not intended to be comprehensive. A rule specifically permitting ferrets in a pet race would not necessarily signal that the race organizers meant to exclude garter snakes; it could just mean that the race organizers didn’t think of garter snakes when they wrote the rule, but they anticipated controversy about ferrets.
In any event, the RBP Realty case applies expressio unius to a Minnesota mortgagor’s statutory right of redemption, and questionable links in the logical structure of the court’s opinion only underscore how important the right of redemption is. Minnesota courts will go out of their way to preserve the right, even if doing so requires them to strain a bit in their reasoning and hold a fairly bargained-for contract provision unenforceable.
[1] Jansen v. CNH America, LLC, sl. op. at 12 (Minn. Ct. App. Dec. 27, 2011).
[2] Minneapolis Pub. Housing Auth. v. Lor, 591 N.W.2d 700, 704 (Minn. 1999).
[3] Kamboo Market, LLC v. Sherman Assocs., Inc., no. A10-1810, sl. op. at 9 (Minn. Ct. App. June 27, 2011). The statement appears to have originated in a 1960s trial judge’s opinion. See Watkins Prod., Inc. v. Butterfield, 274 Minn. 378, 380, 144 N.W.2d 56, 58 (1966).
[4] U.S. Bank, N.A. v. RBP Realty, LLC , nos. A16-0073, A16-0258 (Minn. Ct. App. Dec. 27, 2016).
[5] Id. sl. op. at 5-6.
[6] The Court of Appeals chose not to deploy the Latin name for this doctrine in its RBP Realty opinion. Translated, the Latin means that the mention of one thing excludes the other.
[7] Or an agreement.
[8] Id. sl. op. at 7-9.
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