This opinion will
be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
Products, Inc., et al.,
David L. Anderson, et
James R. Pulford, et
Filed January 24, 2007
Reversed and remanded
Clearwater County District Court
File No. C6-04-0345
Robert M. Wallner, Fuller,
Wallner, Cayko & Pederson, Ltd., 514
America Avenue Northwest, P.O. Box 880, Bemidji,
MN 56601 (for respondent)
Kevin T. Duffy, P.O. Box 715, Thief
River Falls, MN 56701
and decided by Peterson, Presiding Judge; Willis, Judge; and Wright, Judge.
U N P U B L I S H E D O P I N I O N
challenge the district court’s determination on summary judgment that
respondent has a valid leasehold interest in appellant’s property. Appellants argue that the lease violates Minn.
Stat. § 500.245, subd. 1 (2006), because appellant David L.
Anderson was not offered the right of first refusal to lease the property as
required by the statute. Because we
conclude that the lease violates the statute, we reverse and remand for further
proceedings consistent with this opinion.
1997, appellant David L. Anderson, a long-time farmer, and respondent Gesell
Concrete Products, Inc.,
entered into a lease that permitted Gesell Concrete to mine for earth, gravel,
sand, and clay on Anderson’s
property. The lease was to expire on
June 1, 2010, but granted Gesell Concrete the right of first refusal for a
a representation to the contrary in the lease, Anderson had two mortgages on
his property—one with an entity known as Capital Seekers and another with the
First State Bank of Clearbrook, Minnesota. Anderson failed to make payments on his two
mortgages, and both mortgagees began foreclosure proceedings. Capital Seekers initiated a foreclosure by
advertisement and purchased the property at the sheriff’s sale, but Anderson later redeemed
the property. First
State Bank initiated a foreclosure by
action against Anderson, and, on December 31,
2001, the district court ordered Anderson’s
property foreclosed and ordered a sheriff’s sale at which the bank purchased
Concrete continued to mine the property and to make payments to Anderson during the
one-year redemption period following the sheriff’s sale to the bank. The record does not show—and neither party has
identified—the date of the sheriff’s sale, but on July 30, 2002, the bank and Gesell
Concrete entered into an agreement (2002 agreement) that provided that the 1997
lease would remain in effect if Anderson failed to redeem the property and the
bank acquired fee title. The 2002
agreement was not recorded with the Clearwater County Recorder’s office until
May 2, 2003.
Anderson did not redeem
the property after the bank’s foreclosure of its mortgage; and on May 6, 2003,
he quitclaimed the property to the bank. In the quitclaim deed, Anderson acknowledged that he waived any “rights
of first refusal . . . under Minnesota Statute § 500.24.” That same day, the bank quitclaimed the
property to defendants James and Janice Pulford, who “were working with Anderson” and who paid
the bank the outstanding balance due on the mortgage. By affidavit, Anderson states that he quitclaimed the
property to the bank to ensure that the bank cooperated with the sale to the
On May 13, 2003, the Pulfords
entered into a contract for deed with appellant David L. Anderson Dairy, Inc. (Anderson corporation). Anderson,
in his affidavit, states that the purpose of organizing Anderson corporation was “to make sure that
there was no longer any leasehold interest on behalf of [Gesell Concrete].” On May 14, 2003, the Pulfords’ counsel wrote
to Gesell Concrete to inform it that Gesell Concrete no longer had any interest
in the property and that any further entry by Gesell Concrete “would be considered
Gesell Concrete brought a
declaratory-judgment action against Anderson, Anderson corporation, and the Pulfords,
seeking a determination that it had a valid leasehold interest in the property.
The district court granted Gesell
Concrete’s motion for partial summary judgment, concluding that it had a valid
leasehold interest. At Anderson’s request, the district court further
found that there was no just reason to delay entry of judgment. Anderson
appealed, but this court dismissed the appeal because the district court’s partial
judgment did not fully dispose of the issues arising from the lease. On remand, the district court entered an order
in which it reaffirmed its earlier determination that Gesell Concrete held a
valid leasehold interest and resolved all remaining claims relating to the
lease. This appeal follows.
D E C I
S I O N
Anderson argues that the 2002
agreement between Gesell Concrete and the bank violated his right of first
refusal under Minn. Stat. § 500.245, subd. 1 (2006), and is
consequently void. Anderson also argues, in the alternative,
that the 2002 agreement is unenforceable because many of its essential terms
are indefinite. When reviewing a grant
of summary judgment, this court determines whether a review of the record as a
whole shows any genuine issue of material fact and then determines whether the
district court erred in its application of the law. State by
Cooper v. French, 460 N.W.2d 2, 4 (Minn.
1990). We must consider the record in a
light most favorable to the non-movant. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). The application of a statute to undisputed
facts is a question of law, which we review de novo. O’Malley
v. Ulland Bros., 549 N.W.2d 889, 892 (Minn. 1996).
Anderson first argues that the
district court erred by determining that Gesell Concrete had a valid leasehold
interest in Anderson’s property despite the fact that Anderson was not offered
the right of first refusal to lease the property, as required by Minn. Stat. §
500.245, subd. 1. Section 500.245 is
part of a package of farm reforms enacted in 1986 that were intended to “encourage
and protect the family farm as a basic economic unit.” Crowell
v. Delafield Farmers Mut. Fire Ins. Co., 463 N.W.2d 737, 739-40 (Minn. 1990) (quotation
omitted). Under the statute, before a
corporation that “acquired . . . property by enforcing a debt against
. . . agricultural” property may lease or sell that property to a
third party, it must first offer or make a good-faith effort to lease or sell
the property to the immediately preceding property owner “at a price no higher
than the highest price offered by a third party that is acceptable to the
seller or lessor.” Minn. Stat. § 500.245, subd. 1. This right of first refusal may be waived by
an “express statement signed by the immediately preceding owner,” but that
waiver must be in a form permitted by statute. See Minn.
Stat. § 500.245, subd. 1(l)(1)-(5) (listing forms of waiver permitted by
Neither party disputes that the 2002
agreement falls under section 500.245 or that the bank did not offer Anderson the right of
first refusal to lease the property. Instead,
Gesell Concrete argues that the 2002 agreement did not violate section 500.245
because it did not become “effective” until after the redemption period expired
and the bank acquired fee title to the property or, in the alternative, that Anderson waived his right
of first refusal when he executed the May 6, 2003 quitclaim deed.
Concrete’s first argument is easily disposed of. While neither party has identified the date on
which the redemption period expired, nor does it appear in the record, the
redemption period is immaterial to the application of section 500.245. Unless Anderson
had previously refused to exercise his rights under the statute, the applicable
statutory provisions obligated the bank for a period of five years after the
bank acquired the property at the sheriff’s sale to give Anderson the right of first refusal to lease
the property. See Minn. Stat. §§ 500.245, subd. 1(e), (g), 500.24, subd.
2(x) (2006). Here, the 2002 agreement
was entered into less than a year after the earliest date on which the bank
could have acquired the property at the sheriff’s sale.
Further, Gesell Concrete’s argument that
the lease was not effective until the bank acquired fee title to the property confuses
the formation of a contract with a condition precedent to a duty of performance
under that contract. A condition
precedent is any fact or condition, subsequent to the formation of a contract,
that must be satisfied before a duty of immediate performance arises under the
contract. Nat’l City Bank of Minneapolis
v. St. Paul Fire & Marine Ins. Co.,
447 N.W.2d 171, 176 (Minn. 1989). Once
the condition precedent is satisfied, the parties’ duties of performance arise.
v. Moeller, 376 N.W.2d 220, 226 (Minn.
App. 1985). Here, the bank and Gesell
Concrete entered into an agreement under which the bank’s duty to lease the
property to Gesell Concrete was conditioned on the bank obtaining fee title. In other words, the duty to lease the property
to Gesell Concrete became enforceable upon the bank’s receipt of fee title to
the property. See id. (noting that a
duty of performance arises when a condition is performed or excused). But even before the bank obtained fee title,
the agreement was an enforceable contract. See In re Hennepin County 1986 Recycling Bond
Litig., 540 N.W.2d 494, 502 (Minn.
1995) (noting that parties to a contract that contains conditions precedent are
bound not to frustrate the occurrence of the conditions). Thus, regardless of when the parties’ duties
of performance arose, the 2002 agreement was an enforceable contract when it
was entered into.
Concrete next argues that Anderson
waived his right of first refusal when he executed a quitclaim deed
transferring title to the property to the bank. In the May 6, 2003 deed, Anderson
purported to waive “all rights of first refusal he would otherwise have had
under Minnesota Statute 500.24 to lease or repurchase the land”;
the deed also recited that Anderson
understood that the deed “forever extinguishes these rights of first refusal.”
is the voluntary and intentional relinquishment of a known right.” Ill.
Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d 792, 798 (Minn. 2004).
A party may waive a statutory right unless the waiver is prohibited by
public policy. A.J. Lights, LLC v. Synergy Design Group, Inc., 690 N.W.2d 567, 569
2005). Section 550.42, subdivision 1(b),
provides that only a waiver of a property owner’s right of first refusal that
is “expressly authorized by law” is valid. Minn. Stat. § 550.42, subd. 1(b) (2006). The statute authorizes five forms of waiver. Minn. Stat. § 500.245, subd. 1(l)(1)-(5)
(permitting waiver (1) by an express statement in a deed in lieu of foreclosure;
(2) by an express statement in a deed in lieu of termination of a contract for
deed for the property; (3) by an express statement conveying the right to the
corporation that acquired the property; (4) to cure title defects, by an
express statement conveying the right to purchaser of the property; and (5) by
an express statement conveying the right to a contract for deed vendee who
purchased the property from the preceding owner).
Concrete has not identified which of the five permissible forms of waiver under
section 500.245 it claims that the quitclaim deed represents, but even if we
assume that the May 6 deed is a permissible waiver, it was executed several
months after the bank and Gesell Concrete entered into the 2002 agreement. Unless a corporation complies with the
statute, it cannot, as a matter of law, contract to lease or sell the property.
Serv. of Am., Inc. v. Schroeder,
693 N.W.2d 227, 235 (Minn.
App. 2005). The statute expressly
prohibits a corporation from “leas[ing] or sell[ing] agricultural land . . .
before offering or making a good
faith effort to offer the land for sale or lease to the immediately preceding
former owner.” Minn. Stat. § 500.245,
subd. 1 (emphasis added). At the time that
the 2002 agreement was entered into, Anderson
had not waived his section 500.245 right of first refusal to lease the property.
Thus, the bank was obligated to give Anderson the right of
first refusal to lease the property before
entering into the 2002 agreement, and there is no dispute that the bank failed
to do so. Because the bank failed to
comply with the statute, the 2002 agreement is void. See Ag Serv., 693 N.W.2d at 235 (holding that
a contract to purchase property was void because section 500.245 was not
we conclude that the contract is void because of the bank’s failure to comply
with section 500.245, we do not reach Anderson’s
argument that the lease is unenforceable because many of its essential terms
are indefinite and vague. We reverse and
remand for further proceedings consistent with this opinion.
Reversed and remanded.