In re Kjeldahl
| Decision Date | 15 February 1985 |
| Docket Number | Bankruptcy No. 3-82-1651,Adv. No. 82-0420 |
| Citation | 52 BR 916 |
| Parties | In re Willie Ole KJELDAHL, Debtor. Willie Ole KJELDAHL, Plaintiff, v. UNITED STATES of America and its agents, John R. Block, Secretary of Agriculture; H. Allen Brock, Deputy Administrator for Farmer Programs, Farmers Home Administrator; Russ Bjorhus, State Director for the State of Minnesota, Farmers Home Administration; Gary K. Pender, District Director, Farmers Home Administration; and John Strand, Pope County Supervisor, Farmers Home Administration, Defendants. |
| Court | U.S. District Court — District of Minnesota |
COPYRIGHT MATERIAL OMITTED
Thomas Racette, Atlanta, Ga., for plaintiff.
Mary Carlson, Asst. U.S. Atty., Minneapolis, Minn., for defendants.
Before the court are defendants' motions to dismiss pursuant to Fed.R.Civ.P. 12 and for summary judgment pursuant to Fed.R. Civ.P. 56. Thomas Racette appeared for plaintiff. Mary Carlson appeared for defendants.
On September 11, 1981 the North American State Bank of Belgrade (Bank) foreclosed its mortgage on plaintiff's farm property. Nearly one year later, on August 30, 1982, plaintiff filed for bankruptcy under Chapter 11 and commenced this adversary proceeding seeking a stay of the redemption period following the foreclosure on his real property. By order dated September 3, 1982, the bankruptcy court stayed the redemption period. On or about October 3, 1983 the government moved for declaratory judgment or for relief from the automatic stay following the Eighth Circuit Court's decision in Johnson v. First National Bank of Montevideo, 719 F.2d 270 (8th Cir.1983), cert. denied, ___ U.S. ___, 104 S.Ct. 1015, 79 L.Ed.2d 245 (1984). In response, the plaintiff moved to have this adversary proceeding transferred to the district court. The transfer took place April 13, 1984 pursuant to the bankruptcy court's order.
The crux of plaintiff's case may be found in his pretrial statement filed July 6, 1984. In that statement plaintiff made the following allegations:
In the motion now before this court, the government asks that this adversary proceeding be dismissed for several reasons. First, the plaintiff has failed to state a claim for which relief can be granted. Second, the court lacks subject matter jurisdiction with respect to certain of plaintiff's claims. Third, the individual defendants are entitled to absolute or qualified immunity from personal liability. Finally, the government moves for summary judgment with respect to plaintiff's claim that the foreclosure sale constitutes a voidable fraudulent transfer under the federal bankruptcy law.
Plaintiff is a farmer who lives in the St. Cloud area of Minnesota. His homestead is located on a 145 acre tract of land in Stearns County. This property was purchased in 1968 by plaintiff with a loan from the Federal Land Bank. In 1974, plaintiff bought two contiguous tracts of land in Pope County, about five miles from his home tract. The Pope County property, 290 acres, was purchased with two contracts for deed. On June 28, 1976 plaintiff completed the purchase of this property with a $43,000 loan from the Bank and a $25,000 loan from FmHA. The Bank and FmHA loans were both secured by mortgages to each lender describing both the Stearns County and Pope County property. FmHA subordinated its mortgage to the Bank.
Since 1975, plaintiff has received many loans from FmHA, all were secured by mortgages on the real property.1 Plaintiff defaulted on his loans to FmHA and the Bank on January 1, 1978. No payments have been made on the loan since then.
Plaintiff applied for a loan with the FmHA in 1979. The loan was denied. He then pursued his right of administrative appeal to the national office, but the denial was upheld.
Plaintiff alleges that the national office of the FmHA advised him that the agency would do everything it could to try to help plaintiff preserve the home tract if he would voluntarily liquidate the Pope County property. Plaintiff states that he did place the Pope County tract up for sale and at one time had a purchaser who indicated he would make an offer which was within $5,000 of the total principal and interest of plaintiff's obligations to the FmHA and the Bank. Plaintiff further alleges that the FmHA chilled the negotiations when the FmHA told the prospective purchaser that he would have to pay the entire outstanding indebtedness before FmHA would release its lien on the property and that FmHA was considering foreclosing on the property.
In 1981, plaintiff requested a three-year moratorium for payments on his FmHA loans. That request was denied.
On July 15, 1981, the Bank started foreclosure action by serving plaintiff with notice of mortgage foreclosure sale of the entire farm by the Pope County sheriff. The Bank also published notice of the sale in the newspaper. The foreclosure sale took place on September 11, 1981 at the Pope County Courthouse. The entire 435 acres was sold to FmHA for $273,335; this amount was the principal and interest owing on the Bank's mortgage and FmHA's mortgages, plus the costs and expenses of the sale. Plaintiff was present at the courthouse the day of the sale. The sale took place between 9:00 a.m. and sunset and was attended by several neighborhood farmers, Chad Kjeldahl, the plaintiff's son, a representative from the Bank, the Bank's attorney and John Strand from the FmHA.
Prior to the sale plaintiff consulted with an attorney, Jim Gilbert, of the Meshbesher, Singer and Spence law firm. The plaintiff did not object, either in writing or verbally, to the sale of the homestead. He did not ask the sheriff to sell the Pope County, or non-homestead property first.
During the period of redemption and prior to the filing of bankruptcy on August 30, 1982, plaintiff attempted to get a loan "through some operation out of Colorado", applied for an economic emergency loan, applied for a Federal Land Bank loan, and went to four or five banks. Kjeldahl Deposition at 40-42. Apparently, plaintiff has been unable to refinance or sell the Pope County property in order to redeem his farm.
As mentioned before, the redemption period under state law would have expired September 11, 1982, twelve months following the foreclosure sale. Minn.Stat. § 580.23. However, on September 3, 1982, the bankruptcy court entered an order staying the running of the redemption period. Since the entry of that order, plaintiff has not attempted to exercise his right of redemption. Plaintiff has leased the property to his son, Chad. The cash flow statements required to be filed by a Chapter 11 debtor with the U.S. Trustee's Office show no significant cash sales or receipts as of August 7, 1983 and from August 7, 1983 to September 16, 1984 had an accumulated positive cash flow of $2,187.31. (Affidavit of Rob Neill dated November 3, 1983 and filed with the bankruptcy court and Affidavit of John Hedback).
In its moving papers defendants ask the court to dismiss plaintiff's claim regarding the foreclosure sale pursuant to Fed.R. Civ.P. 12. Since matters outside the pleadings have been presented to this court the court will treat the motion as one for summary judgment.
The property for sale included both the Stearns County and the Pope County properties. The Pope County sheriff conducted the sale and therefore may sell all of the property as long as a portion of the property is located within his county. The sale, therefore, did comply with this statute.
Second, plaintiff contends that the mortgaged property was sold as a single tract in violation of Minn.Stat. § 580.08 which provides:
If the mortgaged premises consist of separate and distinct farms or tracts, they shall be sold separately and no more farms or tracts shall be sold than are necessary to satisfy the amount due on such mortgage at the date of notice of such sale, with interest, taxes paid, and costs of sale.
The Minnesota Supreme Court has held that this statute is not mandatory, but rather provides advisory guidance; that noncompliance with this statute does not make a sale void, but only voidable for good cause shown. John W. Swenson & Sons, Inc. v. Aetna Life Ins. Co., 571 F.Supp. 895, 901 (D.Minn.1983); Clark v. Kraker, 51 Minn. 444, 448, 53 N.W. 706, 708 (1892); Willard v. Finnegan, 42 Minn. 476, 478, 44 N.W. 985, 985-86 (1890). Furthermore, because Minn.Stat. § 580.08 is not mandatory, the mortgagor may waive his right to a separate sale. In Clark v. Kraker, 51 Minn. 444, 448 53 N.W. 706, 708 (1892), the waiver was implied from the mortgagor's failure to object to...
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In re Berger, Case No.: 12-24891 (MBK)
...redemption where there exists fraud, mistake, accident or erroneous conduct on the part of the foreclosing officer. See In re Kjeldahl, 52 B.R. 916, 923 (D.Minn.1985)(citing Johnson v. First National Bank of Montevideo, 719 F.2d 270, 275 (8th Cir. 1983)); see also In re 210 Roebling, LLC, 3......