Hern Farms Inc. v. Mutual Benefit , 53 State Rptr. 1478 ( 1996 )


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  •                                     No.      96-405
    IN THE SUPREMECOURT OF THE STATE OF MONTANA
    1996
    HERN FARMS, INC.,         a Montana Corporation,
    Plaintiff     and Appellant,
    v.
    THE MUTUAL BENEFIT LIFE INSURANCE
    COMPANY, a New Jersey Corporation,
    Defendant     and Respondent.
    CERTIFIED QUESTION FROM: United States                  Court of Appeals
    for the Ninth                  Circuit
    COUNSEL OF RECORD:
    For Appellant:
    Thomas M. Welsch;        Poore,     Roth & Robinson,      Butte,
    Montana
    Urban L. Roth,       Attorney      at Law, Polson,     Montana
    For Respondent:
    Dirk A. Williams;   Church, Harris,            Johnson    &
    Williams, Missoula,   Montana
    Robert J. Phillips;         Phillips      & Boyer,   Missoula,
    Montana
    Submitted      on Briefs:       December 12, 1996
    Decided:    December 31, 1996
    Filed:
    Justice       W. William            Leaphart         delivered              the Opinion              of the Court.
    The United           States       Court      of Appeals             for     the Ninth           Circuit,           has
    certified           to this        Court       the following                two questions:
    1.       Under 5 25-13-902(2),                     MCA (no longer              effective            after         June
    30, 1996),           is a seller           of foreclosed              agricultural               land required                to
    offer       the     land     to the        immediately              preceding           owner under               the      same
    terms       and conditions              contained            in a third             party       offer        the     seller
    finds       acceptable?
    2.       Under § 25-13-902(2),                     MCA (no longer              effective            after         June
    30, 19961,           is a seller           of foreclosed              agricultural               land required                to
    offer       the land to the immediately                        preceding            owner for           cash equal to
    the      present           value      of       a    third          party       offer           the      seller            finds
    acceptable?
    We answer            the      first        question           in     the      negative;             as      to     the
    second,       the seller            can either              sell     to the preceding                   owner on the
    same terms           and conditions                as the time/price                   offer         or it    can offer
    to sell       for     the time/price                offer      discounted              to present            value.
    For purposes           of submitting               the two certified                   questions          to this
    Court,        the     following            facts      are          taken      from      the      Ninth        Circuit's
    Certification              Order     dated         June 20, 1996:
    In 1985, Hern Farms, Inc. mortgaged a farm to the
    Mutual Benefit       Life Insurance Company to secure payment
    of a $1.8 million        promissory  note.     Hern Farms defaulted
    on the note.           Mutual Benefit      instituted     foreclosure
    proceedings       in the District      Court      for the Twentieth
    Judicial    District     for the State of Montana.      Judgment was
    entered    in favor       of Mutual Benefit        in April    1988, a
    sheriff's    sale was held, andMutual Benefit purchased the
    property.      In the summer of 1990, Mutual Benefit             agreed
    to sell the farm to Lake Seed Company for $1.1 million
    over 25 years,          and to finance           $900,000 of the purchase
    price at 9.5% per annum, with an adjustment                         to the market
    interest      rate on August 1, 2000.                  The present          value of
    Lake Seed's offer was less than the offer's                         face value of
    $1.1 million.
    By the terms of Mont. Code Ann. § 25-13-902,                             when
    Mutual       Benefit        determined          Lake     Seed's         offer       was
    acceptable,         it was required         to make a "good faith              offer"
    to sell the land to Hern Farms for "the same price"                               Lake
    Seed had offered.              On July 2, 1990, Mutual Benefit                    sent
    a letter     notifying        Hern Farms that a sale was planned and
    that Hern Farms could exercise its right of first                             refusal
    by paying Mutual Benefit                  $1.1 million          cash within           60
    days.      Hern Farms asserted it had the statutory                         right     to
    purchase the property             under the same terms and conditions
    offered     to Lake Seed, and asked Mutual Benefit                        to reveal
    the terms of the proposed sale.                    Mutual Benefit           refused.
    Hern Farms then sued in the District                    Court for the Second
    Judicial       District        of the State           of Montana,           alleging
    Mutual Benefit          had violated         Mont. Code Ann. § 25-13-902
    and seeking to enjoin the sale.
    Mutual       Benefit      removed the suit               to the Butte
    Division       of the United           States District            Court for the
    District      of Montana.            Judge Paul Hatfield              conducted a
    hearing September 18, 1990 on Hern Farms' motion for a
    preliminary        injunction.        At the hearing, Mutual Benefit's
    counsel      summarized the findings                 of Thomas Copley,                an
    accountant        who calculated            the present          value of Lake
    Seed's offer          at $1,043,957.73.             Hern Farms claims that
    several days later,            it orally       offered     $l,OSO,OOO for the
    property,       but Mutual Benefit            rejected      the offer.
    The district      court denied the preliminary                 injunction
    on October 5, 1990, and Mutual Benefit                         gave Hern Farms
    until     October 11, 1990 to exercise                   its right         of first
    refusal     by paying Mutual Benefit                 $1.1 million           in cash.
    Hern Farms declined,             saying it was unwilling               to pay more
    than the present             value of Lake Seed's offer.                       Mutual
    Benefit     subsequently         sold the property.           Because the sale
    mooted Hern Farms' prayer                   for injunctive            relief,       the
    district       court      granted       partial      summary judgment               for
    Mutual Benefit.               Both parties         then moved for summary
    judgment on the remaining                  claims.       The district            court
    granted summary judgment for Mutual Benefit                          on April 14,
    1995, holding            Mutual      Benefit       had complied            with     the
    statute     when it offered            the land to Hern Farms for the
    face value of Lake Seed's offer.                           Hern Farms timely
    appealed.         [Footnotes        omitted.]
    The    certified        questions        present       a question          of    statutory
    interpretation.           At issue     is Montana's        moratorium       statute,      § 25-13-
    3
    902, MCA (no longer             effective         after     June 30, 1996),       which    provides
    as follows:
    (1) A holder of foreclosed               agricultural        land shall,
    when leasing such land or any portion                     thereof      to a third
    party,     make a good faith              offer     to lease the land or
    portion      thereof      to the immediately             preceding        owner if
    such owner has financial               resources        and farm management
    skills    and experience           to assure a reasonable prospect                of
    success in the proposed farming operation.                         The offer      to
    lease land to the immediately                    preceding      owner must be
    upon the same terms and conditions                       offered      by a third
    party that are acceptable               to the lessor.
    (2) A holder of foreclosed               agricultural        land shall,
    when selling       such land or any portion               thereof      to a third
    party,      make a good faith              offer     to sell       the land or
    portion      thereof     to the immediately             preceding       owner for
    the same price              offered      by a third            party      that    is
    acceptable       to the seller.
    (3) An offer to lease to the immediately                        preceding
    owner is required           each time the foreclosed               agricultural
    land is leased to a third                 party,      except that once the
    immediately       preceding owner fails             to meet the terms of a
    lease     offer,       the      right     to meet future               offers     is
    extinguished       and no offer to lease is required.                     An offer
    to sell to the immediately                 preceding       owner is required
    only the first           time the property             is sold to a third
    party.
    (4) An offer         sent by certified         mail to the name and
    address filed         by the immediately            preceding        owner under
    25-13-904 is a good faith               offer.
    (5)      This section         does not apply to foreclosed
    agricultural        land if such land is owned by the state
    pursuant      to The Enabling Act (Act of February 22, 1889,
    Ch. 180, 25 Stat. 676).               (Terminates June 30, 1996--sec.
    6,   Ch.    472,   L.   1987.)
    When Mutual        Benefit        Life    (MBL) acquired       the Hern farm through
    foreclosure,         a right         of   first      refusal     accrued     in   Hern     Farms to
    repurchase         the farm from MBL for              the same price        offered      by a third
    party    that      was acceptable           to MBL.
    In June of 1990, MBL received                       an acceptable     time/price       offer
    from Lake Seed Company to purchase                        the farm on the following          terms:
    $1.1 million         payable      as follows:             $200,000   down at closing        and the
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    balance         of $900,000            at 9.5% per annum over                          twenty-five             years       with
    principal          payments           of     $40,000         annually,            the         first      to     be due in
    August,          1994        and      with         the      possibility                 of      an      interest           rate
    adjustment           on August              1,    2000.        Receipt            of     this         offer      triggered
    MBL's       duty      under        the      moratorium            statute          to        extend        a good faith
    offer      to sell           to Hern Farms for                 the     "same price"                   offered          by Lake
    Seed Company.
    The question              presented         is whether           "same price"                 when applied              to
    a contract           for     a term of years               means a cash equivalent                            of the total
    principal          paid      over the term of the contract;                                  a cash payment equal
    to the present               value        of the total         principal            payout;           or an extension
    of credit          financing              through        a time/price             offer          on the         same terms
    and conditions               as those            offered      to a third               party.
    We note that           subsections                (1) and (2) of the moratorium                               statute
    use      different            wording.              Subsection              (1)        requires            a holder              of
    foreclosed           land      who proposes                to lease         the land             to offer          to lease
    the      land    to the        immediately               preceding          owner "upon                the      same     terms
    and conditions               offered         by a third           party      that        are acceptable                 to the
    lessor."
    Subsection              (2),     on the         other      hand,         requires             the     holder          of
    foreclosed           land,      when selling                such land,            to offer             to sell          to the
    immediately           preceding            owner "for          the same price                   offered         by a third
    party.           . .I1 In addressing                     the first        question             certified          to us, we
    attach      significance              to the fact            that    subsection                cl),     which pertains
    to       leases,           requires          the         "same       terms         and          conditions"              while
    subsection            (2),     which        pertains         to sales,            does not apply                 that      same
    5
    qualification.                          The role              of     the       Court        in    interpreting          statutory
    language            is simply                to ascertain                  and declare             what is        in terms          or in
    substance            contained                   therein,           not to insert                what has been omitted                     or
    to     omit         what        has been inserted.                               Section         l-2-101,         MCA; Goyen v.
    City     of Troy                (1996),            
    276 Mont. 213
    , 221, 
    915 P.2d 824
    ,                     829.           Since
    the     legislature                     required            that         leases        be offered           to     the preceding
    owner on the                    "same terms               and conditions"                    but did        not     specifically
    impose that                same requirement                         with       regard        to sales       of the property,
    there     is no expression                           of legislative                    intent       requiring        that      a sale
    be      offered             to          the         preceding               owner        on        the      "same      terms              and
    conditions."                     Accordingly,                  we hold            that      § 25-13-902(2),             MCA, does
    not     require             the          holder          of        foreclosed            land,       who has received                      an
    offer       to purchase                      the land,              to offer           the land           to the     immediately
    preceding            owner under                    the "same terms and conditions"                                 contained              in
    the third            party             time/price              offer.
    That        then brings                    us to the question                       as to what is required                        by
    the moratorium                        statute        when it             imposes an obligation                    to sell      to the
    preceding             owner                 at     the        "same        price?"                MBL contends               that          it
    satisfied            its         obligation              by offering                the property             to the preceding
    owner         for     the             cash price              it     would         receive          from     the     third         party
    buyer;         that             is,         the     total           of     the      principal             payments       it        would
    receive         over            the course               of the 25-year                     contract.            Although           it     is
    agreed        that         the present                value          of Lake Seed's offer                    is less         than the
    face     value             of         the        time/price              offer      of      $1.1     million,         MBL argues
    strenuously                 that             "price"               means         "price;"          that      nothing          in          the
    definition             of "price"                   requires             a reduction             to present         value.               Hern
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    Farms       contends             that             "same       price"         means          a    sum        of      money         or      its
    present         value      equivalent.
    In      interpreting                    a statute,             the     prime          consideration                    must be
    defining             the objectives                 the legislature                  sought           to achieve.                Montana
    Wildlife             Federation              v.     Sager          (1980),       
    190 Mont. 247
    ,         264,      
    620 P.2d 1189
    ,       1199.         The legislative                          intent       is    to be ascertained,                          in the
    first       instance,            from the plain                        meaning of the words used.                                 Boegli
    v. Glacier             Mountain          Cheese Co. (1989),                          
    238 Mont. 426
    , 429, 
    777 P.2d 1303
    ,       1305.          If      the        intent           of the          legislature                 can be determined
    from the plain                  meaning of the words used in the statute,                                                   the plain
    meaning is controlling                             and the Court                need not go further                         and apply
    any       other        means of               interpretation.                        Phelps           v.      Hillhaven                Corp.
    (1988),          
    231 Mont. 245
    ,           251,        
    752 P.2d 737
    ,       741.          In the          case sub
    judice,         it      is clear         from the face of the moratorium                                           statute,            § 25-
    13-902,        MCA, that           the legislature                       intended           that       the preceding                   owner
    be afforded              the opportunity                      to reacquire             the property,                      but only           on
    the condition              that         the seller                 of the foreclosed                   property             be placed
    in no worse a position                             than       it    would have been had it                           accepted             the
    third       party         offer.                  In      light        of    that       intent,              we reject                 MBL's
    contention              that       "price"                means the            cash equivalent                      of      the        total
    principal              payments          MBL would                  receive          from       the        third         party         buyer
    over       the         course           of         the        25year           time/price                  offer.             Such           an
    interpretation                  would         put         MBL in a better                   position               than     under         the
    time/price              installment                 contract            with     the        third          party         buyer         since
    MBL would              have immediate                     use of         the $1.1           million              to invest              at      a
    higher         interest          rate.
    Noticeably                    absent                from          MBL's             argument                        is      any          substantive
    discussion                   of the           meaning                of the             word        "same"               as it             modifies                 "price"
    in      the         moratorium                 statute.                        The        statute             requires                      that             the         seller
    offer               the      property                    for         a         price            which               is             the          "same"               or        the
    equivalent                   of        the     price                offered               to      the         third                 party.                   Same means
    identical,                   equal,            equivalent,                        BLACK's LAW DICTIONARY, 1341                                                     (6th        ed.
    1990).                 As       any          banker             or         financial                 advisor                        would             attest,                $1.1
    million              paid         over        a period                    of     25 years               simply                 is         not         the        "same"            as
    or      equivalent                    to      $1.1            million              in        cash        paid                 at         closing.                   We hold
    that            there             are        two          methods                 by           which          the                  seller              can          achieve
    equivalency                     and thereby                    honor             the        preceding                    owner's                 right             of      first
    refusal              without               placing              itself             in       a worse            position.                             MBL can offer
    to      sell         to      Hern          Farms          at        the        same time/price                            offer                 of     $1.1         million
    and       on the              same           terms             and        conditions;                    that                 is,         $200,000                  down           at
    closing               with        the        balance                of         $900,000             paid            over             a 25-year                     contract
    at      9.5%          per         annum.                 In     the            alternative,                    if         MBL does                      not         wish           to
    assume               the        risk          of          extending                     credit           to              Hern              Farms             through                 a
    time/price                   offer,            it        can offer                   to      sell        to         Hern             Farms             for         the       $1.1
    million               price,               discounted                     to      present               value,                      payable                 in      full           at
    closing.
    In     summary,               we hold                 that          § 25-13-902,                          MCA, does                      not         require
    MBL to               offer          the        property                    to        Hern           Farms            on             the         same             terms         and
    conditions                   offered                to        the        third            party         buyer.                       Thus            we answer                 the
    first               certified                question                     in      the           negative.                            As          to         the          second
    question,                  we hold            that            the     statutory                   requirement                            that         the        seller            of
    the       foreclosed                    property                offer             the        property                    to         the      preceding                     owner
    8
    at the "same price"              means that            the seller         has two options.            It   can
    either     sell    to the preceding                 owner on the same terms and conditions
    as the time/price             offer      or it        can offer     to sell     for     the time/price
    offer     discounted        to present              value.
    The     statute        does        not      contain     a formula           for     determining
    present      value.         Thus,       if     the     parties      are    unable      to     agree    as to
    present     value,      the      court       will      have to entertain            expert       financial
    testimony         and make a judicial                 finding     as to present             value.
    We c oncur:
    -H-N
    Chief      Justice                /I
    9
    

Document Info

Docket Number: 96-405

Citation Numbers: 280 Mont. 436, 53 State Rptr. 1478

Filed Date: 12/31/1996

Precedential Status: Precedential

Modified Date: 1/12/2023