Continental Clay Company Inc, Respondent,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A24-0380

Continental Clay Company Inc,
Respondent,

vs.

Foundry L.L.C.,
Appellant.

Filed December 16, 2024
Affirmed in part, reversed in part, and remanded
Johnson, Judge

Hennepin County District Court
File No. 27-CV-22-3004

Christopher L. Olson, Peter J. Frank, GDO Law, White Bear Lake, Minnesota; and

Nicholas H. Jakobe, Erstad & Riemer, P.A., Minneapolis, Minnesota (for respondent)

David J. Krco, Elizabeth R. Cox, Allison L. Dohnalek, Best & Flanagan, L.L.P.,
Minneapolis, Minnesota (for appellant)

Considered and decided by Bentley, Presiding Judge; Johnson, Judge; and Bratvold,
Judge.
NONPRECEDENTIAL OPINION
JOHNSON, Judge
This appeal arises from a dispute between parties to a commercial lease. The
landlord alleges that the tenant breached the lease by placing too much weight on the floor
of its leased space. T he tenant alleges that the landlord breached the lease by not giving
2
the tenant proper notice of the tenant’s alleged breach. We conclude that the district court
did not err by granting the tenant’s motion for summary judgment on the landlord’s claims.
But we also conclude that the district court erred by granting the tenant’s motion for
summary judgment on the tenant’s own breach-of-lease claim. We further conclude that,
in light of that reversal, the district court erred by granting the tenant’s motion for attorney
fees. Therefore, we affirm in part, reverse in part, and remand for further proceedings.
FACTS
Continental Clay Company Inc. sells clay and other products that are used by
potters. Since 1990, Continental Clay has leased space on the first floor of a building in
northeast Minneapolis. Continental Clay stores clay products in the leased space on
wooden pallets, each of which weighs approximately 2,000 to 3,000 pounds when full.
The company usually stacks two or three pallets on top of each other, resulting in loads of
between 6,000 and 9,000 pounds in the area of each pallet stack.
Between 1990 and 2021, the building was owned by a partnership known as Cathay.
In 2011, Cathay discovered cracks in the ceiling of the basement below Continental Clay’s
space. Cathay hired the Thatcher engineering firm to inspect the ceiling and its structural
supports. The Thatcher firm recommended that Continental Clay temporarily reduce the
weight loads on the floor of its leased space by stacking no more than two pallets of clay
products. Cathay made certain repairs, such as filling some cracks with epoxy and
installing steel beams to reinforce the floor, at its own expense. After those repairs were
completed, Cathay informed Continental Clay that it could return to its prior practice of
stacking pallets three-high.
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Nine years later, in December 2020, Continental Clay and Cathay executed a new
lease for an additional ten-year term. Four months after that, in April 2021, Cathay sold
the building to Foundry LLC. When the transaction was completed, Cathay assigned
Continental Clay’s lease to Foundry. The assignment document states, “[Cathay] hereby
assigns, transfers, conveys and sets over to [Foundry] all of [Cathay’s] right, title and
interest, if any, in and to the Leases and Contracts.”
Approximately four or five months after purchasing the building, Foundry learned
of the ceiling cracking that had occurred below Continental Clay’s space in 2011. Foundry
spoke with Continental Clay, inspected its space, and observed pallets stacked three-high.
Foundry contacted the then-former Thatcher engineer who had examined the cracking in
2011 and asked him to inspect the building again. Foundry requested that Continental Clay
reduce the weight of the clay products on its floor by stacking pallets only two-high .
Foundry then hired a different engineering firm, Herzog Engineering , to test and analyze
the floor of Continental Clay’s space. A Herzog engineer determined that the maximum
load capacity of the floor would allow Continental Clay to stack pallets three -high in only
a part of a storage room and to stack only one pallet in the remainder of its space. In
February 2022, after receiving Herzog’s written report, Foundry requested that Continental
Clay reduce the weight on its floor in accordance with the Herzog report.
Later that month, an attorney representing Foundry sent Continental Clay a two-
page letter captioned “30-day notice of lease violation.” In the letter, Foundry stated that
Continental Clay had breached the lease by “constant overloading of the floor . . . with
heavy equipment and concrete mix, ” resulting in damage to the building and unsafe
4
conditions. The letter gave Continental Clay 30 days to cure the violation and stated that
Foundry would commence an eviction action if Continental Clay did not cure within that
period.
In March 2022, Continental Clay commenced this action against Foundry. One
week later, Foundry commenced an eviction action against Continental Clay, which later
was consolidated with this action. In April 2022, Continental Clay amended its complaint.
Continental Clay’s amended complaint requests a declaratory judgment that Continental
Clay has not breached its lease; that any breach-of-contract claim asserted by Foundry is
barred by the statute of limitations and the equitable doctrines of laches, waiver, and
estoppel; that Foundry’s February 2022 letter is an invalid notice because it is too vague
and ambiguous; and that Foundry may not terminate the lease or recover possession
because Foundry did not give valid notice of Continental Clay’s breach, as required by the
lease. Continental Clay’s amended complaint also alleges that Foundry breached the lease
by commencing an eviction action without giving Continental Clay proper notice of its
alleged breach. In September 2022, Foundry served an answer in which it alleged
counterclaims of breach of contract, negligence, and eviction.
In January 2023, the parties filed cross-motions for summary judgment. Continental
Clay sought summary judgment on all of Foundry’s counter-claims. Foundry sought
partial summary judgment on its first and third counterclaims (but not its second
counterclaim for negligence) and on all of Continental Clay’s claims.
In July 2023, the district court filed an order on the parties’ cross-motions. The
district court first ruled that Foundry’s counterclaims are barred by Continental Clay’s
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equitable defenses of laches, waiver, and equitable estoppel. The district court next ruled,
as a matter of law, that Foundry breached the lease by not giving Continental Clay valid
notice of its alleged breach of the lease before commencing an eviction action. The district
court then determined that its rulings had effectively resolved Continental Clay’s claim for
a declaratory judgment and that no justiciable controversy remain ed. Accordingly, the
district court granted Continental Clay’s motion and denied Foundry’s motion. One week
later, the district court administrator entered judgment in favor of Continental Clay.
In September 2023, Continental Clay filed a motion for attorney fees, costs, and
expenses. Continental Clay argued that it is entitled to reimbursement pursuant to
paragraph 19 of the lease, which provides that the prevailing party in an action to enforce
the lease may obtain attorney fees, costs, and expenses from the losing party. Continental
Clay sought approximately $118,000. In January 2024, t he district court granted the
motion and awarded Continental Clay most of the amount sought. One week later, the
district court administrator entered judgment in favor of Continental Clay in the amount of
approximately $105,000.
Foundry appeals from the July 2023 judgment and the January 2024 judgment.
DECISION
I. Continental Clay’s Equitable Defenses to Foundry’s Counterclaims
Foundry argues that the district court erred by concluding that its counterclaims are
barred by Continental Clay’s equitable defenses of laches, waiver, and equitable estoppel.
A district court must grant a motion for summary judgment if it finds “that there is
no genuine issue as to any material fact and that either party is entitled to a judgment as a
6
matter of law.” Minn. R. Civ. P. 56.01. A genuine issue of material fact exists if a rational
trier of fact, considering the record as a whole, could find for the non-moving party. Frieler
v. Carlson Mktg. Grp., Inc., 751 N.W.2d 558, 564 (Minn. 2008) (quotation omitted). This
court applies a de novo standard of review to a grant of summary judgment and views the
evidence in the light most favorable to the non-moving party. Valspar Refinish, Inc. v.
Gaylord’s, Inc., 764 N.W.2d 359, 364 (Minn. 2009). A de novo standard of review applies
even with respect to equitable claims and defenses. Herlache v. Rucks, 990 N.W.2d 443,
450 n.4 (Minn. 2023); SCI Minn. Funeral Servs., Inc. v. Washburn-McReavy Funeral
Corp., 795 N.W.2d 855, 860-61 (Minn. 2011).
Continental Clay ’s equitable defenses to Foundry’s counterclaims are based on
evidence that, in 2011 and thereafter, Cathay expressly allowed Continental Clay to stack
three pallets of clay products on top of each other. Continental Clay argued to the district
court that, in light of Cathay’s permission, stacking three pallets of clay products is not a
breach of the lease.
Continental Clay’s equitable defenses are based on the legal premise that Foundry’s
rights under the lease are derivative of the rights of Cathay, which assigned Continental
Clay’s lease to Foundry. The district court agreed with that premise, reasoning that
“Foundry, as Cathay’s successor-in-interest, steps into the shoes of Cathay, assuming the
same rights that Cathay would have had before the assignment.” The district court’s
reasoning is consistent with Minnesota caselaw, which provides, “An assignment operates
to place the assignee in the shoes of the assignor, and provides the assignee with the same
7
legal rights as the assignor had before assignment.” Illinois Farmers Ins. Co. v. Glass Serv.
Co., 683 N.W.2d 792, 803 (Minn. 2004).
On appeal, Foundry argues that the district court erred for three reasons. First,
Foundry argues that the district court erroneously relied on events occurring during the
term of a prior lease, not the lease that Cathay and Continental Clay entered into in 2020,
which was the lease in effect when the parties’ dispute arose in 2021. But Cathay’s
approval of Continental Clay’s pallet-stacking practices was not limited to the period of
the prior lease. There is no evidence in the record that Cathay retracted its approval after
the execution of the 2020 lease. Furthermore, Foundry does not contend that the terms of
the lease in effect in 2011 were different from those of the 2020 lease. In fact, there is no
evidence in the record that the relevant provisions of the two leases differed in any way.
For purposes of Foundry’s equitable defenses, whether Cathay’s express approval of
Continental Clay’s pallet-stacking practices originated under a prior lease is not a material
fact.
Second, Foundry argues that the district court erroneously determined its rights
under the lease by relying not on the written terms of Cathay’s lease but, rather, on Cathay’s
conduct. Foundry contends the district court “imputed” Cathay’s conduct to Foundry and
that such imputation is not supported by caselaw. Foundry does not cite any Minnesota
caselaw to support its contention. It appears that Foundry’s contention is inconsistent with
supreme court caselaw stating that a third party “may assert all equities and defenses
against the assignee that were available against the assignor.” Illinois Farmers, 683
N.W.2d at 803 (citing Dennis v. Swanson, 223 N.W. 288, 290 (Minn. 1929)). In this
8
respect, Minnesota law appears to be consistent with well-established common-law
principles, such as, “The right of an assignee is subject to any defense or claim of the
obligor which accrues before the obligor receives notification of the assignment . . . .”
Restatement (Second) of Contracts § 336(2) (Am. L. Inst. 1981). In addition, a comment
to this section of the Restatement provides that “the assignee’s right is subject to defenses
and claims arising from dealings between assignor and obligor in relation to the contract.”
Restatement (Second) of Contracts § 336(2), cmt. b (Am. L. Inst. 1981) (emphasis added).
Foundry has not cited any caselaw, from Minnesota or elsewhere, that limits the effect of
an assignment to the written terms of a contract , without regard for the conduct of the
parties to the contract.1

1Foundry cites two opinions from other jurisdictions that purportedly “limited the
application of defenses against an assignee when those defenses are based on an assignor’s
conduct.” See 2301 M Street Coop. Ass’n v. Chromium LLC, 209 A.3d 82, 84 (D.C. 2019);
In re Marriage of Comer, 927 P.2d 265, 266 (Cal. 1996). But n either of those opinions
supports Foundry’s broad argument. In the first cited opinion, the court reasoned that, if a
lease agreement were modified by the assignor-landlord and the tenant before an
assignment, the assignee-landlord “would only be bound by the modification if it had actual
or constructive notice of the modification.” 2301 M Street, 209 A.3d at 89. The 2301 M
Street opinion is inapplicable because this case does not concern a “modification” of a lease
and, in any event, Foundry does not claim that it did not have constructive notice of the
conduct on which Continental Clay’s equitable defenses are based. In the second cited
opinion, the court reasoned that a parent’s assignment of child-support payments to a
county agency is not subject to the doctrines of laches or equitable estoppel because of a
strong public policy “adopted for the benefit of the public” that protected the county’s right
to the assigned payments and because the conduct on which the equitable defenses were
based occurred after the assignment. Comer, 927 P.2d at 274, 277. The Comer opinion is
inapplicable because it is not concerned with a commercial lease, the policies relevant to
child support do not apply to commercial leases, and the relevant conduct occurred after
the assignment. Thus, the applicable law is found in the Minnesota caselaw and
Restatement provision discussed above.
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Third, Foundry argues that the district court erred by reasoning that its counterclaim
is barred by laches. Foundry contends that the doctrine of laches does not apply if a statute
of limitations applies. The applicable rule of law is that “laches has no application where
the main action is brought within the time prescribed by our statute of limitations.”
Aronovitch v. Levy, 56 N.W.2d 570, 573 (Minn. 1953) (emphasis added); see also Hanson
v. Northern States Power Co., 268 N.W. 642, 643 (Minn. 1936). A six-year statute of
limitations applies to a breach-of-lease claim. Minn. Stat. § 541.05, subd. 1(1) (2022);
Erickson v. Abby Science, Inc., No. A17-0661, 2018 WL 256732, *5-6 (Minn. App. Jan. 2,
2018). Cathay did not assert a breach-of-lease claim against Continental Clay within six
years of 2011, when Continental Clay resumed its practice of stacking pallets three-high
after receiving Cathay’s permission to do so. Thus, the district court did not err by applying
the doctrine of laches.
Foundry also contends that the district court erred on the ground that “it did not
consider Continental Clay’s unclean hands.” But Foundry never presented an unclean-
hands argument to the district court. Consequently, the district court did not err by not
considering the issue, and the argument may not be made for the first time on appeal. See
Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).
Foundry does not specifically challenge the district court’s application of the
doctrines of waiver and estoppel. Accordingly, the district court’s conclusions concerning
those two equitable defenses are unchallenged, and each is an additional independent basis
for summary judgment on Foundry’s counterclaims. See Hunter v. Anchor Bank, N.A., 842
N.W.2d 10, 17 (Minn. App. 2013), rev. denied (Minn. Mar. 18, 2014).
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Thus, the district court did not err by granting Continental Clay’s summary-
judgment motion on Foundry’s counterclaims based on Continental Clay’s equitable
defenses of laches, waiver, and estoppel.2
II. Continental Clay’s Claim Based on Foundry’s Notice of Lease Violation
Foundry also argues that the district court erred by ruling that, as a matter of law, it
did not give proper notice to Continental Clay of Continental Clay’s alleged breach of the
lease. To reiterate, we apply a de novo standard of review to the district court’s grant of a
motion for summary judgment. See Valspar Refinish, 764 N.W.2d at 364.
As stated above, Continental Clay alleges that Foundry breached the lease by
commencing an eviction action without giving Continental Clay proper notice of
Continental Clay’s alleged breach of the lease. Continental Clay’s breach-of-lease-by-
insufficient-notice claim is based on paragraph 16 of the lease, which states:
Default. If an uncured default be made in the payment
of the rent, or any party thereof, or in any of the covenants
herein contained to be kept by the Lessee, Lessor may, after
fifteen (15) days for unpaid rent or any other amount owing
under this Lease, and thirty (30) days written notice for all
other defaults (except that such thirty (30) day period shall be

2Foundry also argues that the district court erred by excluding a supplemental report
of an expert witness and by excluding hearsay evidence of the out-of-court statements of
the Thatcher engineer. The district court expressly noted that the supplemental exp ert
report did not “factor into [its] analysis on the issues of waiver, laches, or estoppel.”
Foundry challenges that ruling only for purposes of a remand, stating that this court should
“reverse the district court’s ruling and direct the district court to consider the supplemental
expert report as part of the record in any further proceedings on remand.” (Emphasis
added.) Similarly, Foundry seeks reversal of the hearsay ruling for purposes of “any further
proceedings on remand.” But there will be no further proceedings on Foundry ’s
counterclaims because we have concluded that the district court properly granted summary
judgment to Continental Clay on those claims. Thus, we need not resolve Foundry’s
arguments concerning the supplemental expert report or the excluded hearsay evidence.
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extended for a reasonable period of time if the alleged default
is not reasonably capable of cure and Lessee proceeds to
diligently cure the default, for a period not to exceed ninety
(90) days), and at its election declare said Term ended and
reenter the Premises or any part thereof, with or (to the extent
permitted by law) without notice or process of law, and remove
Lessee or any persons occupying the same, without prejudice
to any remedies which might otherwise be used for arrears of
rent, and Lessor shall have at all times the right to distrain for
rent due.

In essence, paragraph 16 of the lease allows the landlord to terminate the lease, remove the
tenant, and re-enter the premises if the landlord gave the tenant written notice of the
tenant’s default (other than a failure to pay rent) at least 30 days earlier, or as much as 90
days earlier if more time was reasonably necessary to allow the tenant to cure the default
and the tenant was attempting to do so.
Foundry’s notice of default is a two-page letter signed by its attorney. The pertinent
portions of the letter state as follows:
[Y]ou are in violation of Section 2 of the Lease. Section 2 of
the Lease provides in part: “Lessee shall, at all times through
the Term of this Lease, including renewals and extensions, and
at its sole expense, keep and maintain the Premises in a clean,
safe, sanitary and first class condition and in compliance with
all applicable laws , codes, ordinances, rules and regulations
. . . .”

Further, you are in violation of Section 3 of the Lease.
Section 3 of the Lease provides in part: “Lessee will not allow
the Premises to be used for any purpose that will increase the
rate of insurance thereon, nor for any Purpose other than that
hereinbefore specified, and will not load floors with machinery
or goods beyond the floor load rating prescribed by applicable
municipal ordinances.”

Further, you are in violation of Section 12 of the Lease.
Section 12 of the Lease provides in part: “Lessee will not . . .
12
in any way change any . . . structural portions of the Building
without the prior written consent of Lessor . . . .”

These violations have been caused by Continental Clay
Company’s constant overloading of the floor of the Premises
with heavy equipment and concrete mix. This overloading of
the floor has (1) damaged the Building ’s floor/ceiling/support
structures; (2) created an unsafe condition; and (3) changed the
floor by causing deterioration and excessive wear and
weakening. The floor simply cannot withstand the excessive
loading that Continental Clay Company is subjecting it to on a
daily basis. If the overloading continues, it could very well
result in a massive failure of the flooring system. This situation
is not acceptable, and it cannot be allowed to continue.

If you do not cure this lease violation within thirty (30)
days of the date of this notice, I will commence an eviction
action against you, and you will be responsible for the cost of
that eviction action. Further, you must refrain from future lease
violations in order to avoid lease termination.

The district court concluded, as a matter of law, that Foundry’s notice did not
comply with paragraph 16 of the lease on the ground that the letter “only makes reference
to broad sections of the lease,” does not give Continental Clay “specifics . . . that would
provide guidance as to how to cure the alleged default,” and “provides no guideline that
Continental Clay may have used to cure the alleged default.”
Foundry contends that the district court erred for three reasons. First, Foundry
contends that “the plain language of the Lease does not require that Foundry explain how
a tenant must cure a default.” Second, Foundry contends that the notice’s descriptions of
the lease violations (“Continental Clay Company’s constant overloading of the floor of the
Premises”) is, by itself, “sufficient notice for how to cure —namely, redistributing its
products to reduce the weight of Continental Clay’s pallets stacked on the floor.” Third,
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Foundry contends that Continental Clay “knew Foundry wanted it to reduce the load on
the floor caused by its 9,000-pound stacks of pallets.”
Each of Foundry’s contentions is valid. First, paragraph 16 of the lease makes a
single reference to “written notice” but does not require that any particular information or
level of detail be included. A court should not “remake” a contract by adding terms to
which the parties did not agree. See Anderson v. Twin City Rapid Transit Co., 84 N.W.2d
593, 599 (Minn. 1957). Second, the obvious means of curing a default based on
overloading of the floors is to reduce the load. Indeed, the district court stated that “it
logically follows that the cure for such default would be to reduce the load on the floors.”
Third, Foundry submitted evidence that the parties’ prior communications had made clear
how Foundry wanted Continental Clay to reduce the weight loads on the floor of its
premises. Specifically, Foundry’s owner and president testified in a deposition that
Foundry gave Continental Clay a copy of the Herzog report, which described what
Continental Clay should do given the maximum load capacity of the floor slab, and that
Foundry specifically requested that Continental Clay not exceed that capacity.
Continental Clay contends that Foundry’s notice is non-compliant because the letter
did not cite the municipal ordinance that requires a lesser weight load. But paragraph 16
of the lease does not require legal citations in a notice of default. Such a requirement would
impose a higher standard on a landlord’s communications with a tenant than the rules of
civil procedure impose on attorneys in a civil action. See Minn. R. Civ. P. 8.01.
Thus, the district court erred by granting Continental Clay ’s motion for summary
judgment on its claim that Foundry breached the lease by not giving Continental Clay
14
proper notice of Continental Clay’s alleged breach of the lease. Therefore, we reverse the
order for summary judgment with respect to Continental Clay’s breach-of-lease claim and
remand for further proceedings on that claim.
III. Attorney Fees
Foundry last argues that the district court erred by granting Continental Clay’s
motion for attorney fees.
Continental Clay’s award of attorney fees is based on paragraph 19 of the lease,
which states, “Losing party shall pay and discharge all reasonable costs, attorney’s fees
and expenses that shall be made and incurred by the prevailing party in enforcing the
covenants and agreements of this Lease, including recovering possession of the Premises.”
In its January 2024 order, the district court reasoned that the lease allows the prevailing
party to recover attorney fees and that Continental Clay was the prevailing party.
Foundry’s argument for reversal has two parts. First, Foundry argues that, if this
court were to reverse the district court’s summary-judgment rulings, Continental Clay
would not be entitled to any attorney fees because, in that event, Continental Clay would
not be a “prevailing party” and Foundry would not be a “losing party.” Second, Foundry
argues in the alternative that, even if this court were to affirm the district court’s summary-
judgment order, the district court erred by ordering the reimbursement of three categories
of attorney fees totaling approximately $33,000. In response, Continental Clay does not
challenge the first part of Foundry’s argument but, rather, focuses on the second part.
As described above in part II, we have concluded that the district court erred by
granting Continental Clay’s motion for summary judgment on its claim that Foundry
15
breached the lease by not giving Continental Clay proper notice of Continental Clay’s
alleged breach of the lease. We are remanding for further proceedings with respect to that
claim. Our conclusion in part II means that Continental Clay is not now a “ prevailing
party” and Foundry is not now a “losing party” with respect to that claim. For that reason,
the district court erred by granting Continental Clay’s motion for attorney fees. This
conclusion is not intended to preclude a future motion for attorney fees after a final
determination of all claims.
Thus, we reverse the district court’s order granting Continental Clay ’s motion for
attorney fees.
Affirmed in part, reversed in part, and remanded.