This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).







AgCountry Farm Credit Services,

FLCA as assignee of AgStar Farm

Credit Services, ACA,





Robert Oelke, et al., defendants and

third party plaintiffs,





River Ridge Dairy, LLP,

Third Party Defendant.


Filed August 16, 2005


Willis, Judge


Kittson County District Court

File No. C1-04-26



Jon R. Brakke, Leah Marie Warner, Vogel Law Firm, 218 NP Avenue, P.O. Box 1389, Fargo, North Dakota  58107 (for respondent)


Rex A. Hammarback, Hammarback, Dusek & Associates, PLC, 712 DeMers Avenue, P.O. Box 4, East Grand Forks, MN  56721 (for appellants)


            Considered and decided by Willis, Presiding Judge; Klaphake, Judge; and Shumaker, Judge.

U N P U B L I S H E D   O P I N I O N


            Appellants guarantors challenge the summary judgment granted to respondent creditor.  We affirm.



During 1998 and 1999, in two promissory note/loan agreements, respondent Farm Credit Services (FCS) lent River Ridge Dairy (RRD) almost $3 million. RRD’s assets secured the loans, which were made on condition that RRD obtain “Personal Guarantees totaling $932,000.”

Appellants Robert and Beth Oelke were among those from whom RRD obtained personal guarantees.  They guaranteed payment of amounts due up to $52,000 and any costs and attorney fees incurred by FCS in enforcing the guarantee.  The guarantee could be “enforced by [FCS] without first resorting to or exhausting any other security or collateral and without first having recourse to the Obligations or any of the remedies provided by the Obligations through foreclosure proceedings or otherwise.”

In 2002, RRD defaulted on payments on the notes.  In 2003, FCS and RRD executed a forbearance agreement providing that, inter alia, RRD would quitclaim to FCS the real property that guaranteed the loan; in exchange, FCS agreed not to foreclose.  RRD subsequently quitclaimed its property to FCS. 

FCS brought this action against the Oelkes to enforce their guarantee, seeking $52,000 plus costs and attorney fees.  FCS was granted summary judgment.  The Oelkes now challenge that judgment, arguing (1) that genuine issues of material fact preclude summary judgment on their claimed defenses of payment, accord and satisfaction, fraudulent conveyance, breach of fiduciary duty, and negligent misrepresentation;[1] (2) that the increase in appellants’ risk has caused the guarantee to be discharged as a matter of law; and (3) that the district court abused its discretion in not granting the Oelkes’ motion to compel discovery.


1.         Genuine Issues of Material Fact


            A genuine issue for trial must be established by substantial evidence.  DLH, Inc. v. Russ, 566 N.W.2d 60, 69-70 (Minn. 1997). 

[T]here is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party’s case to permit reasonable persons to draw different conclusions.


  Id. at 71.  “[T]he party resisting summary judgment must do more than rest on mere averments.”  Id.  The Oelkes allege that genuine issues of material fact preclude summary judgment on five claimed defenses.

            a.         Payment[2]

            The Oelkes argue that the delivery to FCS of a quitclaim deed to RRD’s property was payment of RRD’s debt, so that nothing is now owed to FCS, or, in the alternative, that the deed is ambiguous and there is a genuine issue of material fact as to whether anything is owed to FCS.

The relevant passages of the forbearance agreement provide that:

3.         [RRD] shall execute a nonmerger quit claim deed . . . conveying the Mortgaged Property to [FCS].  . . . Notwithstanding delivery and recordation of the Deed and/or sale of the Mortgaged Property by [FCS], [FCS] shall retain all rights as to the Personal Property Collateral and to seek recovery from [RRD] and/or any guarantors of the Indebtedness (however, Guarantors are not providing any warranty as to [FCS’s] rights as against other guarantors of the Indebtedness).  Even if [FCS] acquires the Mortgaged Property by recordation of the Deed and/or foreclosure of the Mortgages, this shall not satisfy the Indebtedness other than with respect to the proceeds realized by [FCS] upon sale of the Mortgaged Property, which proceeds will be applied to the Indebtedness. [It is undisputed that FCS has not sold the property.]


4.         . . . [N]one of the terms or conditions of this Agreement are intended to release such other guarantees or impair enforceability of the same and it is the intent of the parties hereto that all other individuals guaranteeing the Indebtedness shall remain fully liable on their guarantees.


The relevant passage of the quitclaim deed states that:

This deed is executed and delivered to [FCS] herein in lieu of foreclosure against [RRD] of the mortgages described above and [RRD] acknowledges that such Deed is executed for valuable consideration, which consideration consists of, among other things, forbearance of legal action.  [RRD] further acknowledges that the present market value of the property does not exceed the present amount of the debt secured by the mortgages.


The Oelkes argue that the quitclaim deed should be read without reference to the forbearance agreement.  But the quitclaim deed arose out of the forbearance agreement: the two documents are clearly one transaction necessitated by RRD’s failure to make the payments on its loans from FCS.  The forbearance agreement, by stating that the guarantors were to “remain fully liable on their guarantees” regardless of the quitclaim deed, prevents the issue of whether FCS has been repaid the amount lent to RRD and guaranteed by the Oelkes from being a genuine issue of fact material to the Oelkes’ liability on their guaranty.

            b.         Accord and Satisfaction

            The Oelkes argue, in the alternative, that genuine issues of material fact exist as to whether the quitclaim deed operated to eliminate their liability by the doctrine of accord and satisfaction.  That doctrine requires (1) that the party asserting accord and satisfaction give the claimant an instrument in full satisfaction of the claim; (2) the instrument itself provides that it is tendered as full satisfaction of the claim, or an accompanying writing provides this; (3) the amount of the claim is unliquidated and subject to a bona fide dispute; and (4) the claimant obtains full payment of the instrument.  Nelson v. Am. Family Ins. Group, 651 N.W.2d 499, 512 (Minn. 2002).  All four elements must be met.  Id. at 512-13.  The first three elements are not satisfied here.  First, the Oelkes are the party asserting the doctrine, and they have given no instrument to FCS.  Second, the quitclaim deed says nothing to indicate that it is tendered in full satisfaction of FCS’s claim, and the forbearance agreement explicitly states that, even if FCS acquires the property, the acquisition “shall not satisfy the Indebtedness other than with respect to the proceeds realized by [FCS] upon sale of the Mortgaged Property, which proceeds will be applied to the Indebtedness.”  Third, the amount due to FCS was liquidated and undisputed.  There is no genuine issue of material fact as to whether the quitclaim deed given by RRD to FCS was an accord and satisfaction of the Oelkes’ guarantee of RRD’s debt to FCS.

            c.         Fraudulent Conveyance

            The Oelkes argue that genuine issues of material fact exist as to their claimed defense of fraudulent conveyance, brought under Minn. Stat. § 513.44 (2004).  In relevant part, this statute provides:

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor[.] [3]


The Oelkes allege that RRD fraudulently conveyed its assets to FCS by delivering the quitclaim deed.   But for purposes of this statute, an asset is not “property to the extent it is encumbered by a valid lien.”  Minn. Stat. § 513.41(2)(i) (2004).  RRD’s property was encumbered because of the loans from FCS; therefore, it is not a transferred asset within the meaning of the statute. 

Moreover, even if the quitclaim were declared fraudulent and void, it would not affect the Oelkes.  RRD would retain property, encumbered by a lien to FCS, on which FCS would have the right to foreclose; RRD would also be a defaulting debtor with a debt guaranteed in part by the Oelkes.  The Oelkes have not provided evidence of a defense, or of a genuine issue of material fact as to a defense, under Minn. Stat. § 513.44.

            d.         Breach of Fiduciary Duty

            The Oelkes claim that a genuine issue of material fact exists as to whether FCS had a fiduciary relationship to them that precluded it from acquiring RRD’s property.  As guarantors of RRD’s obligation to FCS, the Oelkes themselves acquired a debtor-creditor or borrower-lender relationship with FCS.  This relationship is not fiduciary.  See, e.g., Klein v. First Edina Nat’l Bank, 293 Minn. 418, 422, 196 N.W.2d 619, 623 (1972) (observing that bank has no special duty to counsel customer unless special circumstances exist and bank knows customer relies on bank for counsel and information).  

            The only evidence the Oelkes provide of the alleged fiduciary relationship is their own affidavits stating that they relied on FCS for financial information about RRD and that FCS provided some accounting services for RRD.   But a genuine issue for trial must be established by “substantial evidence.”  DLH, Inc.,566 N.W.2d at 69-70.  “[T]he party resisting summary judgment must do more than rest on mere averments.”  Id. at 71.  The Oelkes do no more than aver the existence of a fiduciary relationship.

            e.         Negligent Misrepresentation


            Negligent misrepresentation requires that false information be supplied in a business transaction, that the information be supplied by one who failed to use reasonable care in obtaining or communicating it, that the claimant justifiably rely on the information, and that the claimant be financially harmed.  Bonhiver v. Graff, 311 Minn. 111, 122, 248 N.W.2d 291, 298-99 (1976).  The provider of the information must owe a duty of care to the claimant.  Smith v. Woodwind Homes, Inc., 605 N.W.2d 418, 424 (Minn. App. 2000).   If the parties are dealing at arm’s length in a commercial transaction, no duty is owed.  Safeco Ins. Co. of Am. v. Dain Bosworth Inc., 531 N.W.2d 867, 871 (Minn. App. 1995), review denied (Minn. July 20, 1995). 

            The transaction that led to the Oelkes’ financial harm was their execution of the guarantee.  They allege no misrepresentation prior to signing.  They claim that, after they signed the guarantee, FCS omitted to tell them that RRD had quitclaimed its property to FCS, but they do not explain if or how they relied on this omission or what financial loss they suffered because of it.  Again, to resist summary judgment, the Oelkes must do more than rest on averments.  See DLH, Inc., 566 N.W.2d at 71. The Oelkes do not show a genuine issue of material fact in regard to their defense of negligent misrepresentation.

2.         Increased Risk

            The Oelkes claim that the district court erred by not finding that, because their risk had increased, their guarantee was discharged as a matter of law.  This is a mixed question of law and fact.  When reviewing mixed questions of law and fact, an appellate court will correct erroneous applications of law but accord the district court discretion in its ultimate conclusions and review such conclusions under the abuse-of-discretion standard.  Rehn v. Fischley, 557 N.W.2d 328, 333 (Minn. 1997). 

The Oelkes rely on Estate of Frantz v. Page, 426 N.W.2d 894, 898 (Minn. App. 1988) (“When an assignment increases the guarantor’s risk beyond that to which he or she agreed, the guarantor’s obligation is discharged.”), review denied (Minn. Sept. 16, 1988).  The Oelkes assert that the guarantee that they signed provided that proceeds from the sale of RRD’s assets would go to satisfy its obligation to FCS and that their risk increased dramatically when those assets were transferred to FCS with the quitclaim deed.  But their risk did not increase:  FCS had the same interest in RRD’s property whether it foreclosed the mortgage or acquired the property by a quitclaim deed.  The district court did not err by failing to find that the Oelkes’ obligation had been discharged because their risk had increased.

3.         Discovery[4]

            “[T]he trial judge has wide discretion to issue discovery orders and, absent clear abuse of that discretion, normally its order with respect thereto will not be disturbed.”  Shetka v. Kueppers, Kueppers, Von Feldt & Salmen, 454 N.W.2d 916, 921 (Minn. 1990).       

FCS initially refused the Oelkes access to their loan file on RRD because of privacy concerns.  The Oelkes moved to compel discovery.  The district court dismissed the  motion “[s]ubject to [the Oelkes] obtaining written consent from [RRD].”  FCS asserts that “[w]hen the Oelkes provided written authorization from [RRD] to review the file, [FCS] permitted discovery” and that “at the summary judgment proceeding, the Oelkes’ attorney admit[ted] he had an opportunity to review the file.”  The Oelkes do not refute these assertions.

            The Oelkes object that access to the file was restricted to their attorney and an expert but do not explain why anyone else would have needed, or been entitled to, access to the file.  They also object to a shortness of time to conduct discovery, but they did not move for a continuance, nor do they explain what harm was caused by the shortness of time.  The Oelkes have not shown that the district court abused its discretion by providing them with access to FCS’s file on the RRD loan only after RRD gave its consent.

No genuine issue of material fact precluded a grant of summary judgment to FCS. The Oelkes’ liability was not discharged as a matter of law, and the denial of their motion to compel discovery was not an abuse of discretion. 


[1] The Oelkes also argue that a genuine issue of material fact exists as to a sixth claim, negligent supervision.  But that argument is moot: the Oelkes suffered no personal injury, and personal injury is an element of a negligent-supervision claim.  See Bruchas v. Preventive Care, Inc., 553 N.W.2d 440, 443 (Minn. App. 1996) (“Because the record contains no evidence that appellant suffered from personal injury, her claims for negligent retention and negligent supervision fail as a matter of law.”)  The Oelkes argue further that Minnesota should recognize a new cause of action for negligent supervision with no requirement of physical harm, but recognizing new causes of action is not a function of this court. See Stubbs v. North Mem’l Med. Ctr., 448 N.W.2d 78, 81 (Minn. App. 1989) (“It is not, however, the function of this court to establish new causes of action.”), review denied (Minn. Jan. 12, 1990).

[2] As a threshold matter, this issue is not before us because it was not properly presented to the district court.  See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (noting that this court does not generally consider matters not presented to the district court).  Payment is an affirmative defense and must be raised in a responsive pleading.  Minn. R. Civ. P. 8.03.  The Oelkes did not raise the defense of payment in their answer and counterclaim, nor did they deny FCS’s assertion that the loans were in default and that a balance in excess of $2 million was owed; they said instead that they lacked sufficient knowledge to admit or deny the claim. But, in the interests of completeness, we will address whether a genuine issue of material fact precludes summary judgment for the Oelkes on their claimed defense of payment.  See Minn. R. Civ. App. P. 103.04 (permitting this court to address any issue in the interest of justice).

[3] A threshold question is whether the Oelkes have standing to assert a fraudulent conveyance, which can be asserted only by a creditor of the party alleged to have made the fraudulent transfer. The Oelkes argue that RRD’s pre-existing debt to Robert Oelke, evidenced in the 2001 Amended Partnership Agreement of RRD, made him a creditor and conferred standing.  But this argument was not before the district court, which found that  “there was no evidence [on the fraudulent-conveyance defense] submitted to the court that would raise questions of fact.”  In the interests of completeness, we will assume, without deciding, that the Oelkes have standing and address this issue.

[4] FCS contends that this issue is not before this court because, in their notice of appeal, the Oelkes said they were appealing only from the summary judgment, not from the denial of the motion to compel.  But in the statement of the case filed with the notice of appeal, they listed the denial of their discovery motion as an issue on appeal, so FCS was notified of their intent to challenge the denial.  See Kelly v. Kelly, 371 N.W.2d 193, 195-96 (Minn. 1985) (stating that notice of appeal must notify opposing party of issues intended to be litigated).