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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1985 

                         CHAPTER 276-H.F.No. 35 
           An act relating to agriculture; making certain changes 
          in the family farm security program; amending 
          Minnesota Statutes 1984, sections 41.56, subdivisions 
          3, 4, and 4a; 41.57, subdivisions 2 and 3; 41.59, 
          subdivision 1; and 41.61, subdivision 1; 223A.01; 
          336.9-307; proposing coding for new law in Minnesota 
          Statutes, chapter 92.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 41.56, 
subdivision 3, is amended to read: 
    Subd. 3.  [DEFAULT, FILING CLAIM.] Within 90 days of a 
default on a guaranteed family farm security loan, the lender 
shall send notice to the applicant participant stating that the 
commissioner must be notified if the default continues for 180 
days, and the consequences of that default.  The lender and 
the applicant participant may agree to take any steps reasonable 
to assure the fulfillment of the loan obligation. 
    If a participant cannot meet scheduled loan payments 
because of unique or temporary circumstances and the participant 
proves sufficiently to the commissioner that the necessary cash 
flow can be generated in the future, the commissioner may use 
money in the special account in section 41.61, subdivision 1, to 
meet the participant's loan obligation for up to two consecutive 
years. This money must be paid back within eight years with 
interest at an annual percentage rate four percent below the 
prevailing Federal Land Bank rate. 
    A contract for deed participant may enter into an agreement 
with the commissioner whereby the outstanding principal balance 
of the loan is reduced by a minimum of ten percent, the loan is 
re-amortized for the years remaining, and the commissioner 
agrees that the state shall pay the lender 100 percent of the 
sum due and payable if a default occurs during the remaining 
term of the re-amortized loan.  
    After 180 days from the initial default, if the applicant 
participant has not made arrangements to meet his obligation, 
the lender shall file a claim with the commissioner, identifying 
the loan and the nature of the default, and assigning to the 
state all of the lender's security and interest in the loan in 
exchange for payment according to the terms of the family farm 
security loan guarantee.  In the case of a seller-sponsored 
loan, the seller may elect to pay the commissioner all sums owed 
the commissioner by the applicant participant and retain title 
to the property in lieu of payment by the commissioner under the 
terms of the loan guarantee.  If the commissioner determines 
that the terms of the family farm security loan guarantee have 
been met, he shall authorize payment of state funds to the 
lender, and shall notify the defaulting party.  The state of 
Minnesota shall then succeed to the interest of the mortgagee or 
the vendor of the contract for deed.  Taxes shall be levied and 
paid on the land as though the owner were a natural person and 
not a political subdivision of the state.  The commissioner may, 
on behalf of the state, commence foreclosure or termination 
proceedings in the manner provided by law. 
    Sec. 2.  Minnesota Statutes 1984, section 41.56, 
subdivision 4, is amended to read: 
    Subd. 4.  [SALE OF DEFAULTED PROPERTY.] In the event that 
title to any property is acquired by the state, upon conveyance 
of title to the state and expiration of the period of 
redemption, the commissioner shall, within 15 days of the 
expiration of the period of redemption, undertake to sell the 
property by publishing a notice of the impending sale at least 
once each week for four successive weeks in a legal newspaper 
and also in a newspaper of general distribution in the county in 
which the property to be sold is situated.  The notice must 
describe the lots or tracts to be offered and the terms of 
sale.  Except as further provided, the terms and method of sale 
shall be determined by the commissioner.  
    The commissioner shall first attempt to sell the property 
to a person who is eligible for a family farm security loan.  If 
the commissioner is unable to effect a sale to an eligible 
person, the commissioner shall attempt to sell the property for 
cash as provided in subdivision 4a.  If the commissioner is 
unable to effect a sale to an eligible person or for cash, or if 
the commissioner finds that sale to an eligible person or for 
cash would not best protect the interests of the state, the 
commissioner may sell the property on terms which the 
commissioner finds will best protect the interests of the state. 
The commissioner may lease any real property which he is unable 
to sell with reasonable promptness.  In any event, any acquired 
farm property must be sold within two three years after the 
conveyance of title to the state or after the expiration of the 
period of redemption.  The commissioner may contract for the 
services of a licensed real estate agent or broker to assist in 
selling any property acquired under this section and may pay for 
the services from the proceeds of the sale before proceeds are 
distributed under subdivision 4b. 
    Sec. 3.  Minnesota Statutes 1984, section 41.56, 
subdivision 4a, is amended to read: 
    Subd. 4a.  [SALE FOR CASH.] When the commissioner sells any 
farm property for cash, he shall follow the procedures provided 
in this subdivision.  If the sale will be completed more than 15 
days after the last published notice of sale as provided in 
subdivision 4, the commissioner shall publish another notice as 
provided in that subdivision.  The commissioner shall may sell 
the property to the highest bidder by taking sealed bids or, by 
bids at public auction, or through negotiation.  The 
commissioner may refuse to accept any or all bids.  If a bid is 
accepted, the successful bidder shall be selected within 15 days 
of the date of the last published notice of sale.  The 
successful bidder shall submit bid security in the form of a 
certified check or bid bond, money order, or bank draft in the 
amount of two five percent of the bid price on the day of 
selection and shall remit the balance of the purchase price 
within 90 days of the date of sale.  Upon remittance by the 
purchaser of the balance within 90 days of the date of sale, the 
commissioner shall transfer title to the property, including any 
acquired mineral rights, to the purchaser by quitclaim deed.  In 
the event that the purchaser fails to remit all of the balance 
within 90 days of the date of sale, the purchaser forfeits all 
rights to the property and any money paid for the property and 
the commissioner shall recommence the sale process specified in 
this subdivision.  
    Sec. 4.  Minnesota Statutes 1984, section 41.57, 
subdivision 2, is amended to read: 
    Subd. 2.  [PAYMENT ADJUSTMENT.] To be eligible for payment 
adjustment a family farm security loan shall have a maximum term 
of 20 years and shall provide for payments at least annually so 
that the loan shall be amortized over its term with equal annual 
payments of principal and interest, adjusted for variable 
interest rates, except that a loan to be amortized over a term 
of ten years or less need not provide for equal annual payments 
of principal and interest.  During the first ten years of a 
family farm security loan, the commissioner shall annually pay 
to the lender four percent of the outstanding balance due at the 
beginning of that year and the applicant participant shall pay 
the remainder of the payment due.  After the tenth year, the 
applicant participant shall make payments according to the 
stated interest rate.  The applicant participant may petition 
the commissioner for one ten year renewal of the payment 
adjustment.  If a renewal is granted, in the 21st year 
the applicant participant shall reimburse the commissioner for 
the sums paid on the applicant's participant's behalf under this 
subdivision.  If no renewal is granted, the applicant 
participant shall reimburse the commissioner in the 11th year 
for the sums paid on the applicant's participant's behalf under 
this subdivision.  The obligation to repay the payment 
adjustment is a lien against the property.  If the applicant 
participant does not reimburse the state within the required 
time period, the commissioner may charge interest at the rate of 
two percent above the prevailing rate charged by the Federal 
Land Bank of St. Paul on the net amount owed for the period of 
delinquency.  To recover the adjustment payment due in 
delinquency cases, the commissioner may proceed to foreclose by 
advertisement on the lien as if it were a real estate mortgage 
following the procedures in chapter 580.  
    Sec. 5.  Minnesota Statutes 1984, section 41.57, 
subdivision 3, is amended to read: 
    Subd. 3.  [ANNUAL REVIEW OF NET WORTH.] The 
applicant participant, his dependents and spouse shall annually 
submit to the commissioner a statement of their net worth.  If 
their net worth in any year exceeds the sum of $135,000, 
the applicant participant shall be ineligible for a payment 
adjustment in that year. 
    Sec. 6.  Minnesota Statutes 1984, section 41.59, 
subdivision 1, is amended to read: 
    Subdivision 1.  [IMMEDIATE REPAYMENT OF LOAN.] Any 
applicant participant who sells or conveys the property for 
which a family farm security loan was issued shall immediately 
retire the entire indebtedness still owed to the lender and the 
commissioner.  The new owner may negotiate a family farm 
security loan in his own right, but under no circumstances may 
the original loan be assumed by the new owner.  If the new owner 
is granted a family farm security loan, the new owner may agree 
to assume the original applicant's participant's responsibility 
to reimburse the commissioner for a payment adjustment received, 
as a portion of the total purchase price.  That portion of the 
purchase price may not be included under the guarantee or 
considered when calculating the payment adjustment for the new 
owner.  This subdivision is not intended to prohibit 
the applicant participant from granting a security interest in 
the property for the purposes of securing an additional loan. 
    Any applicant participant who fails to personally maintain 
the land covered by a family farm security loan in active 
agricultural production for a period of time longer than one 
year is in default.  The default may be waived by the 
commissioner in the event of a physical disability or other 
extenuating circumstances.  
    Sec. 7.  Minnesota Statutes 1984, section 41.61, 
subdivision 1, is amended to read: 
    Subdivision 1.  [SPECIAL ACCOUNT; STANDING APPROPRIATION.] 
There is created a special account in the state treasury for the 
purposes of financing the family farm security program.  
    The amount needed from time to time to pay lenders for 
defaulted loans and make other payments authorized by this 
chapter including insurance premiums and, taxes, repairs and 
maintenance costs, advertising, and other sales expenses on 
defaulted farms is appropriated from the special account to the 
commissioner.  Money is also appropriated to the commissioner 
from the special account so that the commissioner may purchase 
the rights of first lienholders at mortgage foreclosure 
sales and satisfy certain fixture loans.  The sum of all 
outstanding family farm security loans guaranteed by the 
commissioner at any time may not exceed $100,000,000. 
    Sec. 8.  [92.501] [LEASING OF PEAT LANDS FOR WILD RICE 
FARMING.] 
    Subdivision 1.  [AUTHORITY TO LEASE.] The commissioner of 
natural resources may, at a public or private lease sale and at 
the prices and under the terms and conditions the commissioner 
may prescribe, lease any state-owned lands under the 
commissioner's jurisdiction and control for the purpose of 
farming of wild rice.  The term of a lease under this section 
shall be offered for a minimum of 20 years but may be for a 
shorter period at the option of the lessee.  The lease rate 
shall be adjusted every five years to reflect market values.  
The money received from the leases under this section shall be 
credited to the account that receives the proceeds of a sale of 
the land. 
    Subd. 2.  [WILD RICE LAND DESIGNATION AND DEVELOPMENT.] The 
commissioner of natural resources shall prepare a plan including 
an inventory of the number of acres of land appropriate and 
suitable for wild rice development and leasing in each county. 
    Subd. 3.  [RULES.] The commissioner of natural resources 
may adopt rules to implement this section. 
    Sec. 9.  Minnesota Statutes 1984, section 223A.01, as added 
by S.F. No. 919, section 6, if enacted by the 1985 regular 
session, is amended to read: 
    223A.01 [FARM PRODUCTS THAT ARE BOUGHT SUBJECT TO A 
SECURITY INTEREST.] 
    Subdivision 1.  [REGISTERED BUYER TAKES FREE OF SECURITY 
INTEREST UNLESS NOTIFIED.] A buyer in the ordinary course of 
business who is a registered buyer in the county of the seller's 
residence under section 386.42, and who purchases farm products 
from a person engaged in farming operations takes free of a 
security interest created by the seller even though the security 
interest is perfected and the buyer knows of its existence, 
unless the buyer is notified of the security interest as 
provided in subdivision 4 3. 
    Subd. 2.  [BUYERS THAT PURCHASE SUBJECT TO A SECURITY 
INTEREST.] A buyer in the ordinary course of business that is 
registered under section 386.42 in the seller's county of 
residence who is notified by a secured party as provided under 
subdivision 3, purchases farm products from a person engaged in 
farming operations subject to the perfected security interest.  
A buyer who is not registered under section 386.42 in the 
seller's county of residence purchases farm products from a 
person engaged in farming operations subject to perfected 
security interests.  
    A buyer who purchases farm products subject to a security 
interest under this section subdivision shall include the name 
of the secured party as joint payee on any check or other 
instrument issued in payment for the farm products, unless the 
secured party gives the buyer written notice of waiver of this 
requirement.  Issuance of joint payment as herein required 
relieves the buyer of any further liability to the secured party.
    Subd. 3.  [NOTIFICATION OF SECURITY INTEREST.] A secured 
party may, by certified mail or another method by which receipt 
can be verified, notify a buyer that a debtor has farm products 
subject to a security interest. 
    The notification is effective upon receipt until September 
1 after the notification is made; or for a notification made 
after August 20 but before September 1, the notification is 
effective for one year beginning September 1.  A buyer who 
receives notification from a secured party under this 
subdivision shall not publicly post or disseminate to any 
person, other than its agents and employees who reasonably 
require the information for purposes related to this act 
section, any information contained in the notification. 
    A secured party that furnishes to a buyer a list of debtors 
who have farm products subject to a security interest is not 
liable to a debtor whose name is on the list for furnishing the 
list. 
    Subd. 4.  [COMMISSION MERCHANT.] Notwithstanding section 
336.1-201, subsection (9), a commission merchant or selling 
agent who sells farm products for another for a fee, that is a 
registered buyer under section 386.42, is a buyer in the 
ordinary course of business under this chapter and section 
336.9-307, subsection (1), for transactions involving farm 
products. 
    Sec. 10.  Minnesota Statutes 1984, section 336.9-307, as 
amended by S.F. No. 919, section 7, if enacted by the 1985 
regular session, is amended to read: 
    336.9-307 [PROTECTION OF BUYERS OF GOODS.] 
    (1) A buyer in ordinary course of business (subsection (9) 
of section 336.1-201) takes free of a security interest created 
by his seller even though the security interest is perfected and 
even though the buyer knows of its existence, except that a 
buyer in the ordinary course of business who purchases farm 
products from a person engaged in farming operations is subject 
to section 386.42 223A.01.  
    (2) In the case of consumer goods, a buyer takes free of a 
security interest even though perfected if he buys without 
knowledge of the security interest, for value and for his own 
personal, family or household purposes unless prior to the 
purchase the secured party has filed a financing statement 
covering such goods. 
    (3) A buyer other than a buyer in ordinary course of 
business (subsection (1) of this section) takes free of a 
security interest to the extent that it secures future advances 
made after the secured party acquires knowledge of the purchase, 
or more than 45 days after the purchase, whichever first occurs, 
unless made pursuant to a commitment entered into without 
knowledge of the purchase and before the expiration of the 45 
day period.  
    Sec. 11.  [EFFECTIVE DATE.] 
    This act is effective the day following final enactment. 
    Approved May 31, 1985