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MidCountry Bank v. Anderson

Court of Appeals of Minnesota

December 23, 2013

MidCountry Bank, Respondent,
Harlan Anderson, et al., Appellants.


Wright County District Court File No. 86-CV-12-716

Dustan J. Cross, Justin P. Weinberg, Gislason & Hunter, LLP, New Ulm, Minnesota (for respondent)

Larry J. Peterson, Krista L. Hiner, Peterson, Logren & Kilbury, P.A., St. Paul, Minnesota (for appellants)

Considered and decided by Schellhas, Presiding Judge; Stauber, Judge; and Bjorkman, Judge.

Bjorkman, Judge

Appellants challenge the district court's dismissal of their counterclaims in this foreclosure action, arguing that (1) the district court erred by concluding that two of the counterclaims are based on federal laws that do not apply in this case and (2) material fact issues preclude summary judgment as to the remaining counterclaims. We affirm.


Appellants Harlan Anderson and Mary Anderson own 500 acres of land in Wright County, which they have farmed for more than 40 years. They currently use the land for crop farming and manufacturing a cubed-hay product that they sell to the horse industry "mainly on a research basis." The Andersons have historically funded their farming operations in part with loans secured by a variety of machinery and equipment and operating notes. They began banking with respondent MidCountry Bank in the late 1990s when their loan officer, David Larson, left another bank and began working for MidCountry. MidCountry loan officer David Resch took over their loan portfolio when Larson left MidCountry at the end of 2009.

Some of the loans MidCountry extended to the Andersons were guaranteed by the United States Department of Agriculture's (USDA) Farm Services Agency (FSA). Those loans matured or had principal payments due on April 1, 2009. Larson assigned to Resch the responsibility of preparing an application to renew the loan guarantee, which Resch submitted to the FSA on March 31, 2009. The application sought a 90% guarantee of a loan in the amount of $1, 094, 000, and proposed as security the Andersons' grain inventory valued at $1, 267, 325, machinery valued at $635, 400, cubing equipment valued at $674, 500, and real estate (the "Martin" farm) valued at $300, 000. The FSA subsequently informed MidCountry that it would guarantee the loan if the Andersons provided additional security in the form of more than $2.8 million in real estate located in Cokato Township. The Andersons were unwilling to include any of their Cokato Township land or the cubing equipment as collateral. Consequently, MidCountry did not pursue the FSA loan guarantee further.

During the summer of 2009, MidCountry discussed with the Andersons the possibility of obtaining a loan guarantee from the Small Business Administration (SBA). But after reviewing the Andersons' hay-cubing operation, MidCountry determined that this venture and the scope of the desired financing did not meet its underwriting standards and decided not to proceed with an SBA loan-guarantee application.

Instead, MidCountry proposed seeking a Business and Industrial (B&I) loan guarantee through the USDA's Rural Development Program. MidCountry applied for a 80% guarantee for two $450, 000 loans, which Rural Development approved on December 23, 2009. The Andersons and MidCountry closed on the B&I loans on March 9, 2010. Later that month, MidCountry extended to the Andersons a $280, 000 loan payable on demand but not later than the end of that year. And on August 6, MidCountry provided the Andersons a $190, 000 three-year loan for construction of a barn.

In January 2011, the Andersons requested additional financing to purchase two $60, 000 stand mixers for use in their hay-cubing business. After initial discussions, the Andersons believed MidCountry would finance the full cost of the mixers. But MidCountry ultimately agreed to finance only 70% of the purchase price ($42, 000) and required security interests in the mixers, the Andersons' nonconsumer personal property, and their 2011 crops.

The Andersons were approached by a broker in the spring of 2011 about marketing their cubed-hay product. To obtain new working capital, Harlan Anderson contacted MidCountry. When he received no response to his request for a line of credit, he decided not to make the April payment on the Andersons' outstanding loans to get MidCountry's attention. Shortly thereafter, he met with Resch and two MidCountry corporate officers to discuss ...

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