2006 Minnesota Statutes

583.27 GOOD FAITH REQUIRED, COURT SUPERVISED MEDIATION.
    Subdivision 1. Obligation of good faith. (a) The parties must engage in mediation in good
faith. Not participating in good faith includes: (1) a failure on a regular or continuing basis to
attend and participate in mediation sessions without cause; (2) failure to provide full information
regarding the financial obligations of the parties and other creditors including the obligation of a
creditor to provide information under section 583.26, subdivision 5, paragraph (d); (3) failure of
the creditor to designate a representative to participate in the mediation with authority to make
binding commitments within one business day to fully settle, compromise, or otherwise mediate
the matter; (4) lack of a written statement of debt restructuring alternatives and a statement
of reasons why alternatives are unacceptable to one of the parties; (5) failure of a creditor to
release funds from the sale of farm products to the debtor for necessary living and farm operating
expenses; or (6) other similar behavior which evidences lack of good faith by the party. A failure
to agree to reduce, restructure, refinance, or forgive debt does not, in itself, evidence lack of
good faith by the creditor.
(b) The amount that the creditor is required to release for necessary living expenses under
this section is limited to $1,600 per month less the debtor's off-farm income.
(c) If the debtor and creditor do not agree on the amount of necessary living expenses to
be released, the debtor or creditor may petition conciliation court in the county of the debtor's
residence to make a determination of the amount to be released. The conciliation court must make
the determination within ten days after receiving the petition.
(d) If the debtor and creditors do not agree on the amount of necessary operating expenses or
necessary living and operating expenses to be released, the debtor or a creditor requested to release
necessary living or operating expenses may petition the district court of the debtor's residence to
make a determination of the amount to be released. The court shall hear and make a determination
of the amount of living and operating expenses to be released within ten days after receiving the
petition. The court shall also add or subtract up to ten days to the time when the creditor can begin
to enforce a proceeding to collect the debt against agricultural property of the debtor and assess
costs, including any attorney fees, among the parties to the court proceeding. The court shall
equitably adjust the time to begin a creditor's proceeding and the assessment of costs based on the
parties' good faith claim to the amount of living and operating expenses to be released.
    Subd. 2. Party's bad faith; mediator's affidavit. If the mediator determines that either party
is not participating in good faith as defined in subdivision 1, the mediator shall file an affidavit
indicating the reasons for the finding with the director and with parties to the mediation.
    Subd. 3. Creditor's bad faith; court supervision. If the mediator finds the creditor has
not participated in mediation in good faith, the debtor may require court supervised mandatory
mediation by filing the affidavit with the district court of the county of the debtor's residence with
a request for court supervision of mediation and serving a copy of the request on the creditor.
Upon request the court shall require both parties to mediate under the supervision of the court in
good faith for a period of not more than 60 days. All creditor remedies must be suspended during
this period. The court may issue orders necessary to effect good faith mediation. Following the
mediation period, if the court finds the creditor has not participated in mediation in good faith,
the court shall by order suspend the creditor's remedies for an additional period of 180 days. A
creditor found by the mediator not to have participated in good faith shall pay attorneys' fees
and costs of the debtor requesting court-supervision of mediation or additional suspension of
creditor's remedies.
    Subd. 4. Debtor's lack of good faith. (a) A debtor is not mediating in good faith if the debtor
fraudulently conceals, removes, or transfers agricultural property in which the debtor knows
there is a security interest. The concealing, removing, or transferring must be in violation of a
security agreement without remitting the proceeds to the secured party and must have occurred
during the mediation period.
(b) A creditor may immediately proceed with creditor's remedies upon receipt of a mediator's
affidavit of a debtor's lack of good faith notwithstanding any other requirements of sections
583.20 to 583.32.
    Subd. 5. Inspection of collateral. (a) After a debtor requests mediation under section
583.26, subdivision 2, a creditor who is participating in the mediation and who has a security
agreement relating to agricultural property under the debtor's control may inspect the secured
agricultural property during normal business hours on 24 hours' notice to the debtor. For purposes
of this subdivision, "normal business hours" means 8:00 a.m. to 6:00 p.m. Monday through
Saturday but excludes legal Minnesota and United States holidays.
(b) Failure to permit this inspection by the creditor, or destruction or waste of the property
securing the debt, is evidence of the debtor's lack of good faith under subdivision 1, clause (6).
    Subd. 6. Review of good faith finding. (a) Upon petition by a debtor or creditor, a court
may review a mediator's affidavit of lack of good faith or a mediator's failure to file an affidavit
of lack of good faith of a creditor under subdivision 3 or a debtor under subdivision 4. The
review is limited to whether the mediator committed an abuse of discretion in filing or failing
to file an affidavit of lack of good faith. The petition must be reviewed by the court within ten
days after the petition is filed.
(b) If the court finds that the mediator committed an abuse of discretion in filing, or failing
to file, an affidavit of lack of good faith, the court may: (1) reinstate mediation and the stay of
creditors' enforcement actions; (2) order court supervised mediation; or (3) allow creditors to
proceed immediately with creditors' remedies.
(c) A mediator may offer testimony but is not required to testify as part of the court's review.
    Subd. 7. Conversion of security. A debtor who fraudulently conceals, removes, or transfers
agricultural property in which the debtor knows there is a security interest is ineligible for
mediation under the Farmer-Lender Mediation Act if the concealing, removing, or transferring
was in violation of a security agreement without remitting the proceeds to the secured party. The
secured party must petition the district court in the county of the debtor's residence for an order
permitting the secured party to proceed with the secured party's remedies notwithstanding sections
583.20 to 583.32. The petition must be brought within one year after the concealing, removing, or
transferring occurred. The district court shall issue a summons within seven days commanding the
person against whom the petition is made to appear before the court on a day and place stated in
the summons. The appearance must be no less than seven and no more than 14 days from the
issuance of the summons. The district court must deliver findings within ten days after the close
of the hearing. A petition under this subdivision cannot be brought after the secured party has
served a mediation notice on the debtor under section 583.26.
    Subd. 8. Appraisal if value disputed. In case of a dispute between the debtor and creditors
concerning the market value of real property involved in mediation, the true and acceptable
market value must be determined by appraisal as provided in this subdivision. The appraisal to
determine true market value must be performed by an accredited appraiser and made within 45
days of the date of the dispute. The accredited appraiser shall be selected as follows:
(1) the mediator shall submit the names of three accredited appraisers to the principal
creditor and debtor;
(2) the principal creditor and the debtor may each, within a time determined by the mediator,
strike the name of one of the appraisers submitted by the mediator;
(3) the accredited appraiser whose name is not stricken by either the principal creditor or
the debtor shall perform an appraisal which shall be the true market value accepted by all parties
to the dispute.
The cost of the appraisal shall be divided equally between the principal creditor and debtor.
History: 1986 c 398 art 1 s 12,18; 1Sp1986 c 2 art 2 s 8; 1987 c 292 s 26-31,37; 1988 c 700
s 11; 1989 c 350 art 16 s 8; 1990 c 525 s 1; 1991 c 208 s 2; 1Sp1993 c 2 art 6 s 2; 1995 c 212 art
2 s 11; 1997 c 183 art 3 s 29; 1998 c 395 s 7; 1998 c 402 s 6; 1999 c 214 art 2 s 19; 2001 c 195
art 1 s 23; 1Sp2001 c 1 art 2 s 25; 1Sp2001 c 2 s 150; 2005 c 107 art 2 s 55

NOTE: This section expires June 30, 2009. Section 583.215, as added by Laws 2005,
chapter 107, article 2, section 55.