Laue v. Production Credit Ass'n of Blooming Prairie

390 N.W.2d 823, 1986 Minn. App. LEXIS 4534

• Court: Court of Appeals of Minnesota
• Decided: July 22, 1986
• Docket: CX-86-617, C1-86-652
• Status: Published

Opinions

OPINION

POPOVICH, Chief Judge.

Petitioners seek writs of mandamus directing the trial courts to stay collection actions pending against their agricultural property. Both trial courts found the 1986 Farmer-Lender Mediation Act, 1986 Minn. Laws ch. 398, art. 1, inapplicable to proceedings initiated before the Act’s effective date. We stayed further collection proceedings, ordered briefing and granted the State of Minnesota leave to intervene. We grant mandamus.

FACTS

By summons and complaint served on March 12, 1986, respondent Production Credit Association of Blooming Prairie (PCA) sought (1) a money judgment against petitioner Walter Laue for unpaid loans and (2) recovery of secured collateral. Simultaneously, PCA sought pretrial possession of the property pursuant to Minn. Stat. § 565.23 (1984). A hearing on that motion was scheduled for April 7, 1986.

Petitioners Charles, Lois and Michael Kelly had problems with repayment of loans secured by a mortgage on their farm in 1983. Their petition for bankruptcy was dismissed in December 1984, after the bankruptcy court found reorganization of the farming operation was not economically feasible. Foreclosure proceedings began in May 1985. In August, the district court denied a petition for stay of foreclosure pursuant to the mortgage moratorium act, Minn.Stat. §§ 583.04-.05 (Supp.1985), finding additional time would not permit petitioners to cure the default.

Negotiations between the Kellys and the Federal Land Bank (FLB) continued in an attempt to arrange an alternative to foreclosure. New foreclosure proceedings commenced and a sale was scheduled for January 1986. That sale was cancelled after negotiation progress was made. A proposal for petitioners to sell their land to a relative was never completed, however, and a new foreclosure proceeding was brought in February 1986 with a sale scheduled for April 16.

The Minnesota Legislature adopted an omnibus farm bill in March 1986, after foreclosure and replevin proceedings had been served against all petitioners in this case. Chapter 398, art. 1, 1986 Minnesota Laws, is the Farmer-Lender Mediation Act (hereinafter the Act), which became effective on March 22, 1986, the day after it was signed by Governor Perpich.

The Act requires creditors desiring “to garnish, levy on, execute on, seize, or attach agricultural property” to first serve notice on the debtor of the right to mandatory mediation. Id. § 11, subd. 1. If the debtor promptly requests mediation, debt proceedings may not continue until 90 days after mediation is concluded or until a mediation agreement is reached. Id. subds. 2, 5. If a debtor has not received a mediation notice, the debtor may request mediation. Id. subd. 2(c).

Petitioners Laue and Kelly did not receive mediation notices. Laue requested mediation on April 3, after the claim and delivery hearing was already scheduled for April 7. At that hearing, Laue argued further proceedings should be stayed pending mediation. The trial court ruled the Act did not stay proceedings brought before the Act’s effective date, and granted relief to PCA.

On April 8, Laue brought an ex parte motion for a temporary restraining order before a different judge of the district court. The motion was denied, based upon the prior ruling. Laue now seeks a writ of mandamus compelling the trial court to stay proceedings pending mandatory mediation.

Petitioners Kelly sought a stay of the April 16 foreclosure sale pending mediation. On April 14, the trial court denied injunctive relief, finding the Act applies only to proceedings commenced after its effective date. The Kellys seek a writ of mandamus compelling the trial court to stay foreclosure pending mediation.

ISSUES

1. Does mandatory mediation apply to proceedings begun before March 22, the effective date of the Act?

2. Does application of the statutory provisions result in an unconstitutional impairment of contract?

ANALYSIS

1. Scope of Review

The primary objective of courts interpreting statutes is to ascertain and give effect to legislative intent. Stawikowski v. Collins Electric Constr. Co., 289 N.W.2d 390, 395 (Minn.1979). Our interpretation is guided by the principles of statutory construction adopted by our legislature. See MinmStat. §§ 645.01-.49 (1984).

Statutes must be construed to give effect to all provisions.

When the words of a law are not explicit, the intention of the legislature may be ascertained by considering, among other matters:

(1) The occasion and necessity for the law;

(2) The circumstances under which it was enacted;

(3) The mischief to be remedied;

(4) The object to be attained;

(5) The former law, if any, including other laws upon the same or similar subjects;

(6) The consequences of a particular interpretation;

(7) The contemporaneous legislative history; and

(8) Legislative and administrative interpretations of the statute.

Minn.Stat. § 645.16.

2. Retroactivity

There is a presumption against retroactive application, unless legislative intent is clearly and manifestly expressed.¹ Minn.Stat. § 645.21. This court may “not give retroactive effect to a statute unless a purpose that it have such effect is implicit therein.” Schoening v. United States Aviation Underwriters Inc., 265 Minn. 119, 127, 120 N.W.2d 859, 864 (1963). We hold the statute applies to pending proceedings for the following reasons.

(a) Article 2 of chapter 398 relating to redemption of agricultural homesteads under the omnibus farm bill, explicitly applies only to:

foreclosures or executions on real property that have foreclosure notices or summons and complaint served on the mortgagor or execution notices served on the debtor on or after the effective date.

1986 Minn. Laws ch. 398, art. 2, § 5 (emphasis added). By contrast, article 1 contains no explicit statement regarding its application to pending proceedings. Since the statute is ambiguous, we must therefore construe the Act. See id. art. 1, § 19.

(b) The Act requires creditors to serve notice upon the debtor of the right to mediation. Id. § 11, subd. 1. “The creditor may not begin the [debt enforcement] proceeding until the creditor and debtor have completed mediation,” id. (emphasis added), an agreement is reached, id. subd. 5, court ordered additional suspension for lack of good faith by the creditor expires, id. § 12, subd. 3, or the mediator finds the debtor is not mediating in good faith. Id. subd. 4. For proceedings begun after the Act’s effective date, it is clear a mediation notice must be served by the creditor.

Less clear is the intent of the following passage.

(c) If a debtor has not received a mediation notice and is subject to a proceeding of a creditor enforcing a debt against agricultural property under chapter 580 or 581 or sections 336.9-501 to 336.9-508, terminating a contract for deed to purchase agricultural property under section 599.21, or garnishing, levying on, executing on, seizing, or attaching agricultural property, the debtor may file a mediation request with the commission. The mediation request form must indicate that the debtor has not received a mediation notice.

1986 Minn. Laws ch. 398, art. 1, § 11, subd. 2(c).

Respondents argue subdivision 2(c) allows only debtors who should have received a mediation notice from the creditor before the proceedings began to request mediation. Petitioners and the State of Minnesota argue the subdivision confers upon all agricultural debtors who have not received mediation notices the right to request mediation, even though notice was not required to be served when the action began.

Legislative intent is clearly expressed in findings regarding the need for adoption of the Act:

The legislature finds that the agricultural sector of the state’s economy is under severe financial stress due to low farm commodity prices, continuing high interest rates, and reduced net farm income. The suffering agricultural economy adversely affects economic conditions for all other businesses in rural communities as well. Thousands of this state’s farmers are unable to meet current payments of interest and principal payable on mortgages and other loan and land contracts and are threatened with the loss of their farmland, equipment, crops, and livestock through mortgage and lien foreclosures, cancellation of contracts for deed, and other collection actions. The agricultural economic emergency requires an orderly process with state assistance to adjust agricultural indebtedness to prevent civil unrest and to preserve the general welfare and fiscal integrity of the state.

Id. § 6.

These findings are relevant for ascertaining legislative intent. See Minn.Stat. § 645.16. The necessity for the Act and primary circumstance leading to its enactment is clearly “the agricultural economic emergency.” Its object is “to prevent civil unrest and to preserve the general welfare and fiscal integrity of the state.” Construing the legislation to exclude all debtors already subject to foreclosure, cancellation, replevin, and other collection proceedings from the benefits of mandatory mediation, “an orderly process” designed to adjust agricultural indebtedness, as advocated by respondents, is entirely inconsistent with clearly expressed legislative intent.²

(c) The “contemporaneous legislative history” indicates concern for farmers already suffering the effects of a critical agricultural economy. Subdivision 2(c) was proposed at a February 4, 1986 committee hearing for the express purpose of “allow[ing] the debtor in the process of debt collections to begin a mandatory mediation meeting.” (Emphasis added). If the legislature intended that mandatory mediation be available only to debtors against whom debt collection proceedings were begun after adoption of the Act, it could easily have said so. In fact, the legislature acted prospectively when it conferred upon debtors the right to separately redeem the homestead after foreclosure, when foreclosure proceedings against farm property are brought after the effective date of article

2. See id. art. 2, § 5.

Petitioner Laue submitted the affidavit of Representative David T. Bishop, in which Representative Bishop said “mandatory mediation was to apply to legal actions initiated prior to the effective date of the legislation.” Representative Bishop said he offered at a conference committee meeting language which would have explicitly excluded already initiated legal actions from the terms of the new bill, but his proposal was rejected as contrary to the intent of the legislation. No recorded proceedings exist of that conference committee meeting.

Subsequent to submission of this matter to the court, Representative Kenneth J. McDonald, chairman of the house agriculture committee, submitted ex parte to this court a letter stating his opinion regarding legislative intent. He claimed the omnibus farm bill was not intended to apply to collection activities initiated prior to the act’s effective date.

In ascertaining and giving effect to legislative intent, we are limited to analyzing contemporaneous legislative history. See Minn.Stat. § 645.16(7). Contemporaneous history consists of “events leading up to [the act], the history of its passage, and any modifications made during its course.” Sevcik v. Commissioner of Taxation, 257 Minn. 92, 103, 100 N.W.2d 678, 687 (1959). Clearly, statements made by legislators following passage of an act are not contemporaneous. Those statements are not based on recorded proceedings and therefore are not subject to verification.³ We cannot extend deference to subsequent statements of intent, but must instead rely upon recorded proceedings made before and during the consideration and passage of the act.

(d) The plain language of the Act allows any debtor who “has not received a mediation notice and [who] is subject to a proceeding of a creditor ” to request mediation. This language constitutes a clear and manifest expression of legislative intent to afford mediation to all agricultural debtors.

(e) The retroactive modification of remedies and applicable time limitations is an appropriate exercise of legislative power. “It is generally held that legislation dealing only with remedies and procedures [is] not- beyond the reach of retrospective legislation.” Peterson v. City of Minneapolis, 285 Minn. 282, 288, 173 N.W.2d 353, 357 (1969). The Minnesota Supreme Court in Peterson concluded “it is clear that the legislature intended to have [comparative fault legislation] apply retrospectively.” Id. at 286, 173 N.W.2d at 356.

By its terms, the statute in Peterson applied “in any action the trial of which is commenced after July 1, 1969.” 1969 Minn. Laws ch. 624, § 2. Although trial began after July 1, Peterson’s claim arose prior to adoption. The supreme court ordered the trial court to apply the comparative fault provisions, even though Peterson’s suit was pending before the effective date of the statute. Similarly, our legislature in 1986 had the power to modify the remedies and procedures for pending collection actions involving agricultural property.

3. Application Not Retroactive

We do not agree with respondents that interpretation of the Act so as to give full effect to subdivision 2(c) actually constitutes retroactive application. By its own terms, the Act allows any debtor who “has not received a mediation notice and [who] is subject to a proceeding of a creditor” to request mediation. Petitioners did not receive mediation notices and are subject to proceedings by their creditors. Our holding today is consistent with the clear language of the statute. “Here, the language of the statute is precise and unambiguous and we must give effect to the statute as written.” Christopherson v. Federal Land Bank, 388 N.W.2d 373, 374 (Minn.1986) (clear language of mortgage moratorium act, precluding relief if a second or subsequent mortgage is made against the property after May 24, 1983, given effect).

4. Impairment of Contract

Respondent FLB contends the Act results in an unconstitutional impairment of its contracts in violation of the Minnesota Constitution and deprives it of property rights without due process. See U.S. Const, amend. XIV, Minn. Const, art. 1, §11-

To evaluate a claim of impairment of contracts, we must determine whether (1) the Act imposes a substantial impairment, (2) the state has shown a significant and legitimate public purpose for the Act, and (3) the action taken by the legislature is reasonable in light of the public purpose. Christensen v. Minneapolis Municipal Employees Retirement Board, 331 N.W.2d 740, 750-51 (Minn.1983). Respondent FLB has not specifically addressed any of these factors.

(a) The Minnesota Mortgage Moratorium Law of 1933 was challenged as an unconstitutional impairment of contract. Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934). The United States Supreme Court held the law, which allowed postponement of foreclosure and execution sales and extension of redemption periods, was a valid exercise of the state’s police power. It cited the legitimate public purpose of an “economic emergency which threatened ‘the loss of homes and lands which furnish those in possession the necessary shelter and means of subsistence’ ” and the absence of actual impairment of the underlying debt. Id. at 444-45, 478, 54 S.Ct. at 242, 254.

Postponement of foreclosure sales in the 1933 Act, like the stay pending mediation provided by the 1986 Act, did not impair the creditor’s contract on the debt itself. A change of remedy which does not materially lessen the value of the contract is valid. State ex rel. Lichtscheidl v. Moeller, 189 Minn. 412, 417, 249 N.W. 330, 332 (1933) (upholding 1933 act permitting sheriff to postpone foreclosure sales for 90 days).⁴

(b) The seriousness of the farm crisis and its orderly alleviation are legitimate public purposes for legislative action. By limiting the time for mediation, imposing obligations of good faith upon participating debtors and creditors, and repealing the Act effective July 1, 1988, the legislature has carefully tailored the means to protect the public purpose without unreasonably burdening creditors.

(c) Respondent PLB also argues by interfering with its contract rights, the Act violates due process. Due process requires that legislation which interferes with protected property rights must be rationally related to a legitimate governmental purpose. AFSCME Councils 6, 14, 65 & 96 v. Sundquist, 338 N.W.2d 560, 574-75 (Minn.1983). As noted, the Act does not defeat the creditor’s interest in the secured collateral and is clearly related to the pressing governmental concern of alleviating the farm crisis.

(d) The comments of the Minnesota Supreme Court in 1933 upholding, against an impairment of contract challenge, a statute permitting postponement of foreclosure sales for 90 days, are equally appropriate here:

The legislature, coming from all parts of the state, at the time it passed [the act] had full knowledge of the critical situation then existing and deemed it necessary to enact the law as an emergency measure, under the police power, temporarily to protect owners of property and homes and for the public welfare and protection. The act, not being shown to cause any serious or substantial damage to holders of mortgages, was a valid exercise of that power and is not unconstitutional.

State ex rel. Lichtscheidl v. Moeller, 189 Minn, at 419, 249 N.W. at 333.

5. Additional Issues

Because petitioners are entitled to stays pending mediation under the Act, it is not necessary to rule on the alternative bases for injunctive relief raised by them. Laue challenged the sufficiency of notice given by PCA regarding the specific property to be seized. See Minn.Stat. § 565.23 (1984). The Kellys argued they were entitled to a stay of foreclosure because FLB allegedly violated provisions of the federal Farm Credit Act of 1971, as amended. See 12 U.S.C. §§ 2001-2259 (1982), amended by Farm Credit Amendments Act of 1985, Pub.L. No. 99-205, 99 Stat. 1678.

DECISION

The Farmer-Lender Mediation Act of 1986 requires mediation in this case before further foreclosure and seizure proceedings. This application of the Act is consistent with legislative intent and does not result in an unconstitutional impairment of contract.

Mandamus granted.

FOLEY, J., concurs in part and dissents in part.

1 . The dissent erroneously relies in great part on Lovgren v. Peoples Electric Co., 380 N.W.2d 791 (Minn.1986). While that decision states basic principles for interpretation of statutes, which are adhered to here, a delayed effective date was the sole basis for determining whether the legislature intended retroactive application. Here, no such delay in effective date exists and other manifest expressions of legislative intent confirm our application of the involved statute.

2 . The dissent seemingly argues this legislation need not apply to already initiated proceedings because so few initiated proceedings exist. We disagree on two grounds. First, the dissent’s estimate of commenced actions is not based on the record, is erroneous, without merit, and arbitrary. State officials have publicly requested all creditors to stay proceedings against agricultural property until this court rules in this matter. See Minnesota Government Report May 8, 1986, p. 4. Second, the number of farmer-lender relationships affected by this litigation is irrelevant. Even if the petitioners in these cases were the only affected parties, this court could not avoid its responsibility to construe the Act and give effect to legislative intent.

3 . The dissent's citation of Starkweather v. Blair, 245 Minn. 371, 71 N.W.2d 869 (1955) is somewhat misplaced. At the time of that decision, recordings of committee and floor proceedings were not made. Now such meetings are recorded, providing evidence of contemporaneous legislative history to verify legislative intent.

4 . The dissent attempts to distinguish between impairment of farmer-lender contractual rights arising before and after the effective date of the involved legislation based on an erroneous application of the vested rights doctrine. Here, lien enforcement proceedings have merely begun. No "liability" has been determined. Cf. Yaeger v. Delano Granite Works, 250 Minn. 303, 84 N.W.2d 363 (1957) (liability for benefits payable to employee's survivors were fixed by statute effective at date of employee’s death and could not be shifted subsequently by later-enacted statute). Contractual rights continue to exist and are not affected by the stay; their enforcement is merely postponed. The lenders’ rights, vested either at signing of the contract or at completion of foreclosure, are unaffected by commencement of enforcement proceedings.