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

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-
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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
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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
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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
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