Georgens v. Federal Deposit Ins. Corp., C9-86-1760

Decision Date26 May 1987
Docket NumberNo. C9-86-1760,C9-86-1760
Citation406 N.W.2d 95
PartiesHelene GEORGENS, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Respondent.
CourtMinnesota Court of Appeals

Syllabus by the Court

Evidence contained in the record sufficiently supports the trial court's order denying appellant's claim that she was entitled to an interest in the crop used to secure loans with respondent.

Richard H. Bins, Brown & Bins, Rochester, for appellant.

David A. Joerg, Joerg & Benson, Preston, Bruce A. Beneke, St. Paul, for respondent.

Maureen M. Byron, Berry D. Friesen, Mankato, for amicus curiae Minn. Family Farm Law Project of Southern Minn. Regional Legal Services.

Heard, considered and decided by CRIPPEN, P.J., and WOZNIAK and MULALLY, * JJ.

OPINION

EDWARD D. MULALLY, Acting Judge.

This is an appeal from an amended judgment denying appellant Helene Georgens' claim that she is entitled to an interest in crops grown on land owned by her and her husband and used to secure loans with respondent Federal Deposit Insurance Corporation. Appellant contends the trial court erred in its determination because (1) appellant and her husband did not operate a farming partnership; (2) appellant was not estopped from denying respondent's security interest; and (3) respondent's security interest is subject to a statutory exemption in favor of appellant. We affirm.

FACTS

Appellant and her husband, Kenneth Georgens, have been married for 32 years. Prior to 1976, appellant and Georgens resided in their jointly owned personal residence in St. Paul. In late 1976, the couple purchased a farm in Filmore County. The Filmore farm was sold in 1979 and the proceeds were used to purchase a farm in Winona County. Both the Filmore and Winona farms were purchased in joint tenancy.

From approximately 1977 through 1983, Georgens obtained a series of operating loans and machinery purchase loans from the First National Bank of Rushford. Repayment of these loans was secured by two security agreements signed and delivered to the bank by Kenneth Georgens. Collateral for the security agreements includes all farm products, all present and future crops, and all real estate where the crops are growing. The last promissory note signed by Kenneth Georgens evidencing this debt is dated April 12, 1983, in the principal amount of $75,275. Appellant did not sign any of the promissory notes or security agreements, although she was aware of Kenneth Georgens' borrowing and the collateral used to secure the notes. The bank was also aware of Kenneth Georgens' marital status. The bank's interest has since been assumed by the Federal Deposit Insurance Corporation (FDIC).

Appellant contends that over the years she assisted with the daily farming operations. Appellant worked full-time off the farm from October 1983 to October 1984, at which time she moved back to her St. Paul residence. It is her claim that her off-farm income was used for family living expenses and farm operating expenses. Appellant does not recall the precise amount of her contribution to the farming expenses.

Kenneth Georgens planted and harvested the 1984 crop, apparently with some assistance from appellant and their son. The crops were harvested and sold after October 1, 1984. Presently, the net proceeds from the crop sale are being held in escrow pending resolution of this action.

Appellant contends she is entitled to one-half of the 1984 crop grown on the farm jointly owned by her and Kenneth Georgens, or the proceeds thereof. Respondent contends it is entitled to all of the crop proceeds according to the security agreement executed by Georgens. Initially, the trial court found that appellant and Kenneth Georgens were partners engaged in the farming business and that appellant derived her interest in the crops through her status as a partner. The trial court then found appellant entitled to $5000 of the crop proceeds because she qualified for a statutory exemption.

Both parties moved for amended findings of fact, conclusions of law and order for judgment. In its amended order, the trial court concluded that appellant and Georgens operated as a partnership; that appellant was estopped from denying respondent's security interest; and that appellant did not qualify for a statutory exemption because the exemption only applies to natural persons.

ISSUES

1. Did the trial court err in concluding appellant and her husband operated a farming partnership?

2. Did the trial court err in concluding appellant was estopped from denying respondent's security interest?

3. Did the trial court err in concluding appellant did not qualify for a statutory exemption?

ANALYSIS

1. Although the facts in this matter would support a conclusion that at no time did appellant acquire a definitive legal ownership interest in the 1984 corn crop, the trial court found that appellant possessed an interest in the 1984 crop through her status as a partner in the couple's farming partnership. It appears to reach this determination by finding that both partners contributed their manual labor and economic funds to the farming operation. The trial court made no findings regarding the existence of a formal partnership agreement, the filing of partnership tax returns or the specific interests of appellant and Kenneth Georgens.

A partnership is a contractual arrangement established by the consent of the contracting parties. Spearman v. Salminen, 379 N.W.2d 627, 631 (Minn.Ct.App.1986). Following the law of contracts, a partnership becomes an objective thing requiring the manifestation of mutual assent. Bergstedt, Wahlberg, Berquist Associates, Inc. v. Rothchild, 302 Minn. 476, 479, 225 N.W.2d 261, 263 (1975). If a contract fails to disclose an express agreement, the law may imply one based upon the circumstances or acts of the parties. No legal distinction results from a contract expressed in writing, verbally, through actions or by a combination of the three. Id.

Here, the trial court finds a partnership between appellant and her husband based upon the couple's actions. It is clear that in Minnesota a husband and wife may form a legally binding partnership. The parties owned the farm jointly and appellant testified that she considered herself Kenneth Georgens' partner. Whether a contract is to be implied is usually a question for the trier of fact as an inference to be drawn from the conduct and statements of the parties. Id. at 479-80, 225 N.W.2d at 263. Although both parties now deny the existence of a partnership, in absence of conclusive evidence to the contrary, the trial court's conclusion must be upheld. In Cyrus v. Cyrus, 242 Minn. 180, 64 N.W.2d 538 (1954), the court said:

* * * Except in those rare cases where the evidence is conclusive, partnership or no partnership is a question of fact. Since there is no arbitrary test for determining the existence of a partnership, each case must be decided according to its own peculiar facts; and upon appeal this court will not disturb findings of the trier of fact unless the evidence is conclusive.

Id. at 183, 64 N.W.2d at 541 (footnotes omitted).

In its amicus curiae brief, the Minnesota Family Farm Law Project of Southern Minnesota Regional Legal Services recognizes that courts should be hesitant to find the existence of a partnership relationship in situations such as the present. The trial court, however, has found the existence of a partnership relationship and there is no conclusive evidence negating its existence. Therefore, the trial court's determination that a partnership existed must stand and is controlling as to all issues in the case.

2. Although the trial court provided appellant a property interest in the crops pursuant to her partner status, it estopped her from protecting that interest from respondent's security interest. The trial court found that:

although [appellant] did not herself execute either of the documents associated with the loan, she was aware of their existence and did not at any time prior to the 1984 harvesting season inform [respondent] of any alleged lack of authority in her husband to execute the documents or to bind any and all interest which she might have in the property covered by them.

Based upon this finding, the trial court concluded:

that in signing the note and security agreement, [appellant's] husband had an apparent authority to bind [appellant's] interest in the crops, which apparent authority was never denied nor withdrawn by [appellant], whose...

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