A06-513

Gesell Concrete Products, Inc., et al.,

Respondents,

vs.

David L. Anderson, et al.,

Appellants,

James R. Pulford, et al.,

Defendants.

Filed January 24, 2007

Reversed and remanded

Willis, Judge

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 (for appellant)

Considered 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

WILLIS, Judge

Appellants 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.

FACTS

In 1997, appellant David L. Anderson, a long-time farmer, and respondent Gesell Concrete Products, Inc.,[1] 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 five-year extension.

Despite 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 the property.

Gesell 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 Pulfords.

On May 13, 2003, the Pulfords entered into a contract for deed with appellant David L. Anderson Dairy, Inc. (Anderson corporation).[2] 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 trespass.”

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 the statute).

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.

Gesell 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. Hanson 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.

Gesell 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”;[3] the deed also recited that Anderson understood that the deed “forever extinguishes these rights of first refusal.”

“Waiver 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 (Minn. App. 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).

Gesell 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. Ag 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 complied with).

Because 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.

[1] Gesell Concrete Products, Inc., has been purchased by respondent North Star Concrete, Inc., which is its successor in interest. Because all of the events that form the basis of this litigation occurred before Gesell Concrete was purchased, we refer to the respondent as Gesell Concrete.

[2] Anderson and Anderson corporation both are appellants here. For convenience, we will generally refer to Anderson and Anderson corporation both as “Anderson.”

[3] The applicable provision was in section 500.24 until 1997, when it was recodified as Minn. Stat. § 500.245. 1997 Minn. Laws ch. 126, § 6.