Ag Services of America, Inc., an Iowa Corporation, Respondent, vs. Mary Schroeder, et al., Appellants, Rosemary Stalter, et al., Defendants.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C3-02-1989

 

Ag Services of America, Inc.,

an Iowa Corporation,

Respondent,

 

vs.

 

Mary Schroeder, et al.,

Appellants,

 

Rosemary Stalter, et al.,

Defendants.

 

Filed June 24, 2003

Reversed and remanded

Gordon W. Shumaker, Judge

 

Houston County District Court

File No. C902295

 

 

Reed H. Glawe, Peter D. Favorite, Gislason & Hunter LLP, 2700 South Broadway, P.O. Box 458, New Ulm, MN 56073-0458 (for respondent)

 

William L. French, 627 Woodhaven Court Northeast, P.O. Box 6323, Rochester, MN 55903-6323; and

 

Mark A. Merchlewitz, Benson & Merchlewitz, 174 Main Street, Winona, MN 55987 (for appellants)

 

 

            Considered and decided by Shumaker, Presiding Judge, Anderson, Judge, and Halbrooks, Judge.

U N P U B L I S H E D   O P I N I O N

GORDON W. SHUMAKER, Judge

            After a family farm was sold to the mortgagee in a mortgage-foreclosure sale and the redemption period ran, the mortgagee entered into a purchase agreement with a third-party purchaser.  The purchaser's title company raised an objection to the title, and the mortgagee brought a quiet-title action.  The mortgagors counterclaimed, contending that they had an interest in the land because of their right of first refusal under Minn. Stat. § 500.245 (2002).  The mortgagee moved for summary judgment and the mortgagors sought a continuance to engage in discovery.  The district court resolved the quiet-title action and granted summary judgment to the mortgagee on the counterclaim.  We reverse and remand to allow the mortgagors to engage in discovery.

FACTS

            Respondent Ag Services of America, Inc. foreclosed its mortgage on the family farm of the Schroeders, appellants, and became record owner of the property after purchasing it at the October 17, 2000, foreclosure sale.  Although the Schroeders negotiated extensively with Ag Services regarding their attempts to redeem during their one-year redemption period, no agreement was ever reached.

            On November 20, 2001, an Ag Services employee met with the Schroeders in their home to discuss the further possibility of their repurchase of the property.  She left the meeting with the belief that the Schroeders "had no reasonable hope of purchasing the real estate."  The Schroeders contend that they were very close to reaching a final agreement, and that the employee never advised them that Ag Services had received any offers for the property or was actively negotiating with any other party.  But as the meeting was ending, the employee informed them that she was going to meet with Ken Vagts, Ag Services' real estate agent, about finding other purchasers.

            Also on November 20, Vagts discussed with Ag Services the possibility that he personally would purchase the property.  The next day, Vagts and Ag Services signed a purchase agreement for the sale of the land.  And an Ag Services employee hand-delivered copies of Ag Services' purchase agreement with Vagts to the Schroeders.  On November 30, 2001, Ag Services sent the Schroeders a notice by certified mail of an offer to buy agricultural land under the Schroeders' statutory right of first refusal.  This included a copy of the purchase agreement between Ag Services and Vagts as well as notice that the Schroeders must accept the offer in writing within 65 days and then accept by performance within 10 days of their written acceptance.  On February 1, 2002, Mary and Dean Schroeder faxed a letter to Ag Services in which they promised to perform, but no payment was ever received.  Around this same time, Dean Schroeder had placed advertisements in several newspapers offering the property for sale.

            The closing date was extended until Vagts's financer could confirm that the right of first refusal had expired and could examine the updated title abstracts.  In early March, the title company raised a title objection, and Ag Services commenced this quiet-title action.  The Schroeders counterclaimed, raising various issues regarding the right of first refusal.  Ag Services moved for summary judgment and the Schroeders sought a continuance to conduct discovery.  Without explicitly addressing the Schroeders' motion for a continuance, the district court resolved the title issue and granted summary judgment to Ag Services on the counterclaim.  The Schroeders bring this appeal challenging summary judgment as to the counterclaim and the implicit denial of their motion for a continuance to conduct discovery.  Resolution of the quiet-title action is not at issue.

D E C I S I O N

            When reviewing a summary judgment, this court will examine whether there are genuine issues of material fact and whether the district court erred as a matter of law.  Buer v. Atwater State Bank, 477 N.W.2d 782, 783 (Minn. App. 1991).  Construction of the first-refusal statute, Minn. Stat. § 500.245 (2002), raises issues of law reviewable de novo.  Buer, 477 N.W.2d at 783.  A district court's decision to deny a motion for a continuance to conduct discovery will be reviewed under an abuse of discretion standard.  Cherne Contracting Corp. v. Wausau Ins. Cos., 572 N.W.2d 339, 346 (Minn. App. 1997), review denied (Minn. Feb. 19, 1998).

            If Ag Services wished to sell the farm property to a third party after purchasing the land in the mortgage-foreclosure sale, it was required to give the Schroeders a statutory right of first refusal:

                                    A state or federal agency, limited partnership, corporation, or limited liability company may not lease or sell agricultural land or a farm homestead before offering or making a good faith effort to offer the land for sale or lease to the immediately preceding former 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(a) (emphasis added).

            In the Schroeders' counterclaim, they asserted that they continued to hold a right of first refusal.  They argued that Vagts, Ag Services' realtor, who signed the purchase agreement for the foreclosed property, was not a "third party" within the meaning of subdivision 1(a).  See Buer, 477 N.W.2d at 784 (holding that "a third party must be a stranger to the agreement between the principals").  The Schroeders also raised other challenges related to the right of first refusal.  The district court granted summary judgment on their claims.

            Before addressing the summary judgment, however, we must first review the implicit denial of the Schroeders' motion for a continuance to conduct discovery.  Generally, continuances should be liberally granted, particularly if the party seeking a continuance had insufficient time to complete discovery.  Rice v. Perl, 320 N.W.2d 407, 412 (Minn. 1982).  In deciding whether such a continuance should be granted, the district court must address two issues:

                                    (1)    Has plaintiff been diligent in obtaining or seeking discovery prior to its Rule 56.06 motion?   and

 

                                    (2)    Is plaintiff seeking further discovery in the good faith belief that material facts will be uncovered, or is she merely engaging in a "fishing expedition?"

 

Id.

            Here, Ag Services' quiet-title action was served on appellant Mary Schroeder on April 10, 2002, and on appellants Rolf and Jean Schroeder by publication thereafter.  The Schroeders' answer and counterclaim were served on April 25, 2002.  On May 21, 2002, Ag Services served its reply to the counterclaim, and on May 24, 2002, Ag Services served its motion for summary judgment.  On June 18, the Schroeders filed a memorandum in opposition and asserted that they did not have adequate time to conduct discovery.  In an attached affidavit, the Schroeders' counsel asserted that as of the date of the filing, he had not yet served any discovery requests, but he intended to take a deposition of Ag Services' representative on June 24, 2002, and to serve interrogatories and a demand for production of documents before the hearing on the motion.  He also asserted that it was crucial to take a deposition of Vagts and contended that, given the fact he served the answer barely a month before, he had not had adequate time to conduct discovery.  Ag Services asserts that it did not receive any written discovery or notice of deposition until June 21, 2002, and that the Schroeders failed to identify the facts they hoped to obtain in the discovery process as well as the impact such facts would have on the court's judgment.  The district court did not explicitly rule on the motion, but it implicitly denied the motion by granting the motion for summary judgment without a continuance.

            On this record, we cannot say that the Schroeders were not diligent in commencing discovery.  Ag Services received the discovery requests about one month after it replied to the Schroeders' counterclaim.  Further, because the Schroeders were seeking discovery on the issue raised in their counterclaim, namely Vagts' connection to Ag Services and the factual context for determining whether he is a third party within the meaning of Minn. Stat. § 500.245, subd. 1(a), there is no indication that they were engaged in a "fishing expedition."  Under these circumstances, the district court abused its discretion in failing to grant a continuance, and because the Schroeders had an insufficient opportunity to conduct discovery, the district court granted summary judgment prematurely.  See Perl, 320 N.W.2d at 412 (noting continuances should be liberally granted, particularly where party had insufficient time to conduct discovery).

            Reversed and remanded.