Farmers Mill & Elevator, Inc., Appellant,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-1432

Farmers Mill & Elevator, Inc.,
Appellant,

vs.

Ivan D. Kohout,
Defendant,

Roundbank,
Respondent.

Filed May 24, 2021
Affirmed
Ross, Judge

Scott County District Court
File No. 70-CV-19-9204

Jared D. Peterson, Fafinski Mark & Johnson, P.A., New Ulm, Minnesota; and

Tyler P. Brimmer, Jamie P. Briones, Fafinski Mark & Johnson, P.A., Eden Prairie,
Minnesota (for appellant)

Michael S. Dove, Rhett P. Schwichtenberg, Gislason & Hunter LLP, New Ulm, Minnesota
(for respondent)

Considered and decided by Connolly, Presiding Judge; Ross, Judge; and Smith,
Tracy M., Judge.
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NONPRECEDENTIAL OPINION
ROSS, Judge
This case involves a lien-priority dispute between a bank and a grain elevator, each
having a security interest in a farmer’s harvested crops based on the bank’s issuing the
farmer a loan and the grain elevator’s later supplying the farmer with crop-production
inputs. The grain elevator followed the statutory procedure to attempt to leapfrog the
bank’s lien priority by notifying the bank of the elevator’s crop-production-input interest.
The bank responded with a letter rejecting the elevator’s lien claim but did not use the same
terms used in the lien- priority statute. The district court concluded that the bank’s letter
was sufficient and granted it summary judgment in this priority suit. We hold that the
bank’s letter sufficiently indicates its refusal to issue a letter committing to extend credit
for the cost of the crop-production inputs, meeting the statutory requirement and thwarting
the elevator’s priority-change attempt. We therefore affirm.
FACTS
This priority dispute concerns competing liens on crops produced on Ivan and
Pamela Kohout’s Scott County farm. In 2011, Roundbank extended the Kohouts credit
secured by a lien on future crops. In 2017, g rain-elevator Farmers Mill & Elevator Inc.
supplied Ivan Kohout with crop- production inputs secured by a lien on the crops. On
March 29, 2018, Farmers Mill used a statutory tool to establish lien priority over
Roundbank’s lien, sending Roundbank a letter through counsel along with a
“Lien-Notification Statement.” Roundbank responded by letter on April 2, 2018, rejecting
the elevator’s claimed lien. Farmers Mill replied 23 days later, asserting that Roundbank’s
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response letter failed to constitute either a letter of commitment or written refusal to issue
a letter of credit, which are the responses designated by Minnesota Statutes section
514.964, subdivision 3(d) (2020). Farmers Mill asserted alternatively that Roundbank
failed to send the Kohouts a copy of its response within ten days after receiving the
lien-notification statement, as also required under the same statute. Farmers Mill insisted
that these two failures gave its lien automatic priority over Roundbank’s lien for the
Kohouts’ 2017 crops. The next day, April 23, Roundbank sent its April 2 response letter to
Ivan Kohout.
Farmers Mill sued R oundbank seeking a judgment declaring its lien superior to
Roundbank’s. The parties submitted cross- motions for summary judgment. The district
court reasoned that the language in Roundbank’s April 2 response letter was sufficien t
under the statute to maintain Roundbank’s priority, and it reasoned that the bank’s missing
the statutory ten- day notice-to-farmer requirement did not disqualify it f rom maintaining
lien priority. It therefore denied summary judgment for Farmers Mill and granted summary
judgment for Roundbank.
Farmers Mill appeals.
DECISION
Farmers Mill appeals from the district court’s grant of summary judgment favoring
Roundbank. We review a grant of summary judgment de novo to determine whether
genuine issues of material fact exist and whether the district court erred in applying the
law. Montemayor v. Sebright Prod., Inc., 898 N.W.2d 623, 628 (Minn. 2017); Minn. R.
Civ. P. 56.01. We view the facts and resolve all doubts and inferences in the light most
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favorable to the party opposing the summary-judgment motion. Montemayor, 898 N.W.2d
at 628. The parties do not dispute the facts.
Our opinion will therefore turn on how we apply Minnesota Statutes section
514.964. That statute governs the creation, perfection, and priority of agricultural liens,
including Farmers Mill’s crop-production-input lien. When multiple parties have security
interests in the same crops, the statute determines the priority and provides a means for a
crop-production-input supplier to advance its lien ahead of a lender’s earlier lien. Minn.
Stat. § 514.964, subds. 3, 7 (2020). A crop-production-input supplier must first “notify a
lender of a crop production input lien by providing a lien -notification statement
[containing specific information] to the lender in an envelope marked
‘IMPORTANT - LEGAL NOTICE.’” Id., subd. 3(b)-(c) (2020). The statute directs how a
lender can prevent the crop-production-input supplier’s lien from taking priority:
Within ten calen dar days after receiving a
lien-notification statement, the lender must respond to the
supplier with either:

(1) a letter of commitment for part or all of the retail
cost or anticipated costs of the crop production input as set
forth in the lien-notification statement; or

(2) a written refusal to issue a letter of commitment.
A copy of the lender’s response must be provided to the person
for whom the financing was requested.

Id., subd. 3(d) (2020). “If a lender responds with a refusal to provide a letter of
commitment, the rights of the lender and the supplier are not affected.” Id., subd. 3(e)
(2020). But “[i]f a lender does not respond under paragraph (d) to the supplier within ten
calendar days after receiving the lien-notification statement,” the lender’s lien loses priority
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to the supplier’s lien. Id. subd. 3(f) (2020). This appeal requires us to decide whether
Roundbank’s response letter constitutes “a written refusal to issue a letter of commitment”
and, if so, whether its failure to send its responsive letter to the Kohouts within ten days
after receiving the elevator’s lien-notification statement disqualifies it from maintaining
lien priority.
For the following reasons, we conclude that Roundbank’s response letter constitutes
a written refusal to issue a letter of commitment. The bank’s response plainly rejected the
elevator’s claimed lien:
Today Roundbank received a Lien Notification Statement from
your firm claiming a lien for Farmers Mill & Elevator, Inc.
against Ivan D. Kohout and Pamela J. Kohout. Roundbank
rejects the lien claim and asserts it[s] rights to the collateral and
proceeds thereof.

The bank’s letter clearly does not parrot the terms used in the statute, “refusal” and
“letter of commitment.” But the statute does not state that those precise terms are necessary
for a response to constitute a written refusal. Farmers Mill essentially asks us to require
those terms. We decline to do so. Under the separately assigned roles of government
divided into distinct branches, it is neither our duty nor within our authority in the judiciary
to add to a statute a requirement the legislature chose not to include. Genin v. 1996 Mercury
Marquis, 622 N.W.2d 114, 119 (Minn. 2001) . And we can see in other provisions that,
when the legislature wants to require parties to use specific language in a communication,
the legislature knows how to do so. In secured-transaction statutes, the legislature tends to
specify when it requires exact language, by using quotations marks and capitalized text.
See, e.g., Minn. Stat. §§ 336.9-601(i), 550.365, subd. 2, 559.209, subd. 2, 582.039,
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subd. 2 (2020). Even in this very statute at issue here, the legislature requires a
crop-production-input supplier to send its notification letter in an envelope marked with
exact, specified words denoted with quotation marks and capitalized text, and for the letter
to include precise information. See Minn. Stat. § 514.964, subds. 3(b)–(c). The bank was
not required to use any particular phrases or words to state a refusal.
Our question then becomes whether the terms used in Roundbank’s letter
sufficiently communicate that it was refusing to issue a letter of commitment to cover the
costs of the crop-production input indicated in Farmers Mill’s notification. A “letter of
commitment,” which is undefined by statute, is “[a] lender’s written offer to grant a
mortgage loan. The letter generally outlines the loan amount, the interest rate, and other
terms.” Black’s Law Dictionary 340 (11th ed. 2019). This current definition is the same
one the legislature was presumably operating under in 2000 when it enacted the statute.
See Black’s Law Dictionary 266 (7th ed. 1999). Put simply, a written refusal to issue a
letter of commitment is a written refusal to extend a loan.
Although we see this as a close case, we think Roundbank’s imprecise response
language sufficiently communicated that it did not intend to extend credit to cover the cost
of the production inputs. The statute requires a lender to respond “under paragraph (d)” by
either extending a letter committing to extend credit or stating that it is refusing to issue
such a letter. See Minn. Stat. § 514.964, subds. 3(d)–(f). The circumstances leading to the
letter here (including the elevator’s notice of its interest, the elevator’s reference to the
priority-shifting statute, and the timing of Roundbank’s notice months after the elevator
supplied the crop-production input rather than contemporaneously) tend to inform the
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meaning of Roundbank’s immediate and express rejection of the elevator’s claimed lien. It
is self-evident that Roundbank was responding “under paragraph (d),” and it did so in a
writing that, as between including a letter of commitment or refusing to extend one, can
only be interpreted as refusing. Under these circumstances, we hold that in expressly and
unqualifiedly “reject[ing] the lien claim” that Farmers Mill had asserted in its lien notice,
Roundbank implicitly insisted on remaining the priority lienholder and therefore impliedly
declared its refusal to accept any role in covering the cost of the crop-production inputs,
including by extending credit. Although using the statutory language would have made its
intentions clearer, we hold that the district court correctly construed Roundbank’s
responsive letter.
Again declining Farmers Mill’s invitation to add language to the statute, we also
hold that Roundbank did not lose its lien priority by waiting more than ten days to provide
the Kohouts with its responsive letter. Although the statute requires a lender to provide the
crop-production-input buyer with its letter responding to the crop-production-input
supplier’s lien notification, it imposes the ten-day deadline only on providing the letter to
the supplier, not to the buyer. Minn. Stat. § 514.964, subd. 3(d) (“Within ten calendar days
after receiving a lien- notification statement, the lender must respond to the supplier .”
(emphasis added)). Equally fatal to the elevator’s position, the statute also attaches the
consequence for failing to meet the deadline only to the lender’s duty to respond to the
supplier, not to its duty to provide it also to the buyer. Id. subd. 3(f) (2020) (“If a lender
does not respond under paragraph (d) to the supplier within ten calendar days after
receiving the lien-notification statement,” the lender’s lien loses priority to the supplier’s
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lien. (emphasis added)). Because the legislature placed the ten-day deadline only on the
lender’s response to the supplier and directs the deadline penalty to apply only to the
lender’s failure to timely respond to the supplier, the district court correctly refused to alter
the lien priority based on the timing of Roundbank’s notice to the Kohouts.
Affirmed.