Harbal v. Federal Land Bank of St. Paul, s. C1-89-830

Decision Date19 December 1989
Docket NumberNos. C1-89-830,C5-89-894,s. C1-89-830
Citation449 N.W.2d 442
PartiesCarl HARBAL, et al., Respondents, v. The FEDERAL LAND BANK OF ST. PAUL, et al., Defendants, MHF of Freeborn County, Inc., Appellant (C1-89-830), Defendant (C5-89-894), and Magnuson Farms, Inc., applicant for intervention, Appellant (C5-89-894).
CourtMinnesota Court of Appeals

Syllabus by the Court

1. While title does not vest until the redemption period following a sheriff's sale has run, agricultural land is "acquired" within the meaning of Minn.Stat. § 500.24, subd. 6, when the foreclosing party receives a sheriff's certificate following the sale.

2. The assignment of a sheriff's certificate prior to the running of the statutory period for redemption is tantamount to a sale of the property within the meaning of Minn.Stat. § 500.24, subd. 6, and may not be used to circumvent the first refusal right of an immediately preceding former owner.

3. A party may not intervene as of right where its motion is untimely, after summary judgment has been ordered, and where its rights are adequately represented by existing parties.

David A. Joerg, Joerg & Benson, Preston, for respondents.

Henry J. Savelkoul, Daryl D. Bail, Christian, Slen, Savelkoul, Johnson, Broberg & Kohl, Albert Lea, for appellant (C1-89-830), defendant (C5-89-894).

Heard, considered and decided by FOLEY, P.J., and KALITOWSKI and STONE *, JJ.

OPINION

BRUCE C. STONE, Judge.

This appeal involves two actions. The first and principal action arises out of an entry of summary judgment by the Freeborn County District Court voiding the transfer of foreclosed agricultural property and requiring the mortgagee to offer the property on the same terms to the foreclosed mortgagor pursuant to the right of first refusal mandated by Minn.Stat. § 500.24, subd. 6(a) (Supp.1987). The second action arises out of the trial court's order denying a former vendee's motion to intervene in the principal action. By this court's order, the actions were consolidated.

FACTS

On April 19, 1979, respondent's Carl and Elizabeth Harbal (Harbals) sold agricultural property located in Freeborn County to appellant (and applicant for intervention) Magnuson Farms, Inc. (Magnuson Farms) pursuant to a contract for deed for $1,000,000. As part of this transaction, the Harbals mortgaged the property to respondent Federal Land Bank of St. Paul, now Farm Credit Bank of St. Paul (FLB) for $440,000. Magnuson Farms took possession of the land but subsequently defaulted on its payments. Thereafter, the Harbals commenced cancellation proceedings on the contract for deed pursuant to Minn.Stat. § 559.21 (1986).

The Harbals recorded their notice of cancellation of the contract for deed and affidavit of noncompliance and attempted to take possession of the farm. Magnuson Farms, however, refused to vacate. Consequently, the Harbals filed an unlawful detainer action which later was properly converted to an ejectment action. The trial court entered partial summary judgment for the Harbals, finding that the Harbals had been entitled to possession of the farm since the expiration of the 60-day cancellation period.

During the dispute over the property, the Harbals were unable to make payments to the FLB and defaulted under the terms of their mortgage and promissory note. The FLB foreclosed on the property and a sheriff's sale was held on August 20, 1987. The FLB bid in the total amount of the mortgage debt, $581,690.50, and received a sheriff's certificate for the foreclosed property.

On March 21, 1988, the FLB entered into a purchase agreement with appellant MHF of Freeborn County, Inc. (MHF), an entity with substantial family ties to Magnuson Farms. Pursuant to the purchase agreement, the FLB agreed to assign to MHF the sheriff's certificate for the foreclosed property for $350,000. The purchase agreement was made specifically subject to "any state or federal rights of first refusal claimed or in fact owned by the aforesaid former owners." FLB subsequently executed and delivered to MHF a document of assignment.

Prior to the assignment, the FLB neither notified the Harbals of its offer to transfer the property to MHF, nor gave the Harbals the opportunity to purchase the property for the price offered by MHF.

The Harbals' statutory right of redemption under Minn.Stat. § 580.23, subd. 2 (1986) was not exercised and expired on August 20, 1988, one year after the sheriff's sale. Thereafter, MHF leased the property to Magnuson Farms.

The Harbals brought this action on June 17, 1988, alleging violations of their state and federal rights of first refusal. The Harbals requested that the FLB be ordered to extend to them a right of first refusal to repurchase their farm and, if the Harbals accepted the offer and performed in accordance with the requirements of the statute, that the transfer of the property to MHF be adjudged void.

The Harbals subsequently moved for summary judgment in the district court action. The parties initially agreed to present a stipulation of facts upon which the motion was to be decided. The parties, however, failed to agree on a stipulation and each presented the court with a proposed stipulation. In their cover letter enclosing their proposed stipulation, however, appellants acknowledged that "defendants concur that there are no material facts in dispute * * *." With minor exceptions, the trial court adopted the Harbals' proposed stipulation of facts, incorporating it into its own findings.

The trial court granted the Harbals' motion for summary judgment on February 13, 1989. The judgment provided that the sale from FLB to MHF was subject to the Harbals' right of first refusal and required the FLB to extend the Harbals the opportunity to repurchase the property. The judgment also provided that in the event the Harbals elected to purchase the farm from FLB, the transfer of the property from the FLB to MHF and MHF's assignment of the sheriff's certificate to the First National Bank of Austin as collateral for a loan would be null and void.

The FLB complied with the trial court's judgment and extended to the Harbals its notice of offer to sell agricultural land pursuant to the statute. The Harbals exercised their statutory right and repurchased their farm.

Less than a month after entry of summary judgment, on March 6, 1989, Magnuson Farms moved to intervene in the underlying action. At the hearing to determine the motion for intervention, the trial court repeatedly raised the issue of whether Magnuson Farms and MHF were the same entity. Magnuson Farms, Inc. and MHF of Freeborn County, Inc. are both Minnesota corporations and are owned, controlled and operated by the Magnuson family or for the benefit of the Magnuson family. Dennis Magnuson is the president of both corporations. His wife Diana is an officer of both and records the minutes at the board meetings of both corporations. Dennis and Diana Magnuson own all the shares of Magnuson Farms, Inc. The sole shareholder of MHF of Freeborn County, Inc. is a trust for the benefit of the Magnusons' children. Diana Magnuson handles the day-to-day financing of both corporations.

ISSUES

1. Did the trial court err in granting summary judgment holding that appellant FLB "acquired" the property within the meaning and intent of Minn.Stat. § 500.24 and thereby entitling respondent Harbals to a statutory right of first refusal with respect to their foreclosed agricultural property?

2. Did the trial court err in ruling the assignment of the sheriff's certificate by FLB to MHF was a sale of property subject to Minn.Stat. § 500.24?

3. Did the trial court err in denying appellant Magnuson Farms' motion to intervene?

ANALYSIS

In order to extend to financially distressed farmers who had lost their farms to corporate lenders an opportunity to repurchase their farms, the legislature included in the Omnibus Farm Bill of 1986 a right of first refusal. Minn.Stat. § 500.24, subd. 6(a) (Supp.1987) provides in part that:

A state or federal agency or a corporation, other than a family farm corporation or an authorized farm corporation, may not lease or sell agricultural land or a farm homestead that was acquired by enforcing a debt against the agricultural land or farm homestead, including foreclosure of a mortgage, accepting a deed in lieu of foreclosure, terminating a contract for deed, or accepting a deed in lieu of terminating a contract for deed, before offering or making a good faith effort to offer the land for sale or lease to the immediately preceding former owner at a price no higher than the highest price offered by a third party that is acceptable to the seller or lessor.

(Emphasis added).

1. In this case, appellants argue that the trial court erred in granting summary judgment and in broadly construing Minn.Stat. § 500.24, subd. 6 to require the FLB to extend a right of first refusal to the Harbals. The standard of review for summary judgment is whether the trial court erred in applying the law and whether there are any genuine issues of material fact. Betlach v. Wayzata Condominium, 281 N.W.2d 328, 330 (Minn.1979).

The construction of a statute is a question of law for the court and thus is subject to this court's de novo review on appeal. See Hibbing Education Association v. Public Employment Relations Board, 369 N.W.2d 527, 529 (Minn.1985); In re Welfare of M.J.M., 416 N.W.2d 142, 146 (Minn.Ct.App.1987).

Appellants argue that by focusing on the word "acquired" in the statute, the trial court erroneously extended the operation of the statute beyond its plain meaning. Appellants urge that while a holder of a sheriff's certificate may become the owner of land, title does not vest until the statutory redemption period has run. Appellants contend that because FLB assigned the sheriff's certificate to MHF before the running of the redemption period, FLB never acquired the land within the meaning of the statute and had no obligation to...

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