1

The Honorable David S. Doty, United States District Judge for

the District of Minnesota. 

___________

No. 95-4137

___________

United States of America, *

*

Appellee, *

* Appeal from the United States

v. * District Court for the 

* District of Minnesota.

Weldon B. Nelson; Grace M. *

Nelson, *

* Appellants. *

__________

 Submitted: October 24, 1996

 Filed: December 6, 1996 __________

Before MAGILL, ROSS, and MURPHY, Circuit Judges.

 ___________

MAGILL, Circuit Judge.

Weldon and Grace Nelson appeal the decision of the district

court1 in this Farmers Home Administration (FmHA) recovery action.

The district court granted summary judgment in favor of the

government and denied the Nelsons' motion for summary judgment.

The district court held that when the FmHA executed a series of

partial releases of property that secured defaulted promissory

notes, the FmHA had not effected a foreclosure, and that therefore

the FmHA was not precluded from suing on the promissory notes. We

affirm.
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Because we conclude that Minnesota law does not bar the

government from proceeding on the notes and neither party contends

that any other rule of decision would bar the government from

proceeding on the notes, we do not reach the question of whether

Minnesota state law should be the federal rule of decision in this

case.

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I.

The Nelsons executed three promissory notes in favor of the

FmHA in May 1989. The 1989 notes were part of a restructuring plan

for loans in the principal amounts of $371,401.24, $430,179.32, and

$340,921.99. The Nelsons incurred these loans in 1979 and 1980 for

the purpose of raising and selling poultry. Both the original

loans and the 1989 notes were secured in part by a mortgage on the

Nelson farm in Clearwater County, Minnesota.

In March 1993, at the request of the Nelsons, the FmHA

executed a series of partial releases that allowed the Nelson farm

to be sold at its fair market value, $250,000, to the Nelsons'

children. The proceeds of the sale were applied to the amount

owing on the 1989 notes, after which the Nelsons made no further

payments and defaulted on the notes. Consequently, on January 19,

1996, the United States sued the Nelsons on the 1989 notes in

federal district court.

Before the district court, the parties submitted the case on

cross-motions for summary judgment. The district court held that,

assuming arguendo that Minnesota law is applicable, the government

is entitled to recover on the notes.2 

II.

We review the district court's grant of summary judgment de

novo. Johnson v. Baptist Med. Ctr., 97 F.3d 1070, 1072 (8th Cir.

1996). Summary judgment is appropriate when (1) there are no
 3

Minn. Stat. § 582.31 provides as follows:

(a) For a mortgage on property used in agricultural

production entered into on or before March 22, 1986, the

mortgagee may only proceed to:

(1) obtain a personal judgment for the debt owed on

the note secured by the mortgage and execute on the

judgment; or

(2) foreclose the mortgage and obtain a deficiency

judgment, if allowed.

(b) An action under paragraph (a), either clause (1)

or (2), bars an action under the other clause.

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genuine issues of material fact, and (2) the moving party is

entitled to judgment as a matter of law. See Stevens v. St. Louis

Univ. Med. Ctr., 97 F.3d 268, 270 (8th Cir. 1996); see also Fed. R.

Civ. P. 56(c) (1996). Because both parties have agreed that there

is no genuine issue of material fact in this case, we are left to

decide only whether the government is entitled to judgment as a

matter of law. 

The Nelsons argue that Minn. Stat. § 582.31 (1996) bars the

government from bringing suit against them on the notes.3 This

section precludes a mortgagee of property used for agricultural

production from both (1) obtaining a personal judgment for the debt

secured by the mortgage and (2) foreclosing on the mortgage and

obtaining a deficiency judgment. See Ed Herman & Sons v. Russell,

535 N.W.2d 803, 806-07 (Minn. 1995) (applying Minn. Stat.

§ 582.31). All parties agree that the land in question is used for

agricultural production. The Nelsons contend, however, that when

the FmHA released the mortgaged property for sale to the Nelsons'

children, the FmHA foreclosed on the mortgaged property. As a

result, according to the Nelsons, the United States is now barred

by § 582.31 from suing the Nelsons personally on the notes. We

disagree.
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Minnesota statutory provisions provide only two methods of

foreclosure. One is by advertisement (public auction), pursuant to

Minn. Stat. § 580.01 (1992), and the other is by judicial action,

pursuant to Minn. Stat. § 581.01 (1992). Minnesota's statutes

clearly define these two methods of foreclosure, and they provide

for no other method of foreclosure. Thus, under Minnesota law, if

the FmHA did not foreclose by either advertisement or judicial

action as described by the Minnesota foreclosure statutes, the FmHA

could not have effected a foreclosure.

When the FmHA released the land for sale to the Nelsons'

children, the release was not pursuant to a Minnesota foreclosure

statute. The FmHA did not act pursuant to either Minn. Stat.

§ 580.01 or § 581.01; instead, the FmHA executed a series of

partial releases to facilitate the Nelsons' request to sell their

farm to their children. Because the FmHA did not act pursuant to

either § 580.01 or § 581.01, the FmHA did not foreclose on the

property under Minnesota law. Accordingly, § 582.31--which applies

only to foreclosures--does not bar the government from now suing on

the notes. 

The Nelsons contend that § 582.31 must be interpreted to bar

a suit on a note whenever the security holder has recovered on the

secured property, even if the secured party's recovery was not

pursuant to a Minnesota foreclosure statute. This interpretation,

however, ignores a basic rule of Minnesota statutory construction.

The Minnesota Supreme Court has held that "[w]here the statutory

language is clear and unambiguous, courts must give effect to its

plain meaning." Green Giant Co. v. Commissioner of Revenue, 534

N.W.2d 710, 712 (Minn. 1995). The Minnesota foreclosure statutes

make it clear by which procedure a foreclosure is effected, and

Minn. Stat. § 582.31 plainly applies only to foreclosures. It

would be contrary to the rules of Minnesota statutory construction

for us to add to the statute clauses concerning actions that are

not foreclosures, as the Nelsons would have us do. Because
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§ 582.31 plainly applies only to foreclosures, we reject the

Nelsons' proffered interpretation. 

Finally, the Nelsons also argue that subdivisions 4 and 6 of

Minn. Stat. § 582.30 (1996) bar the United States from suing on the

notes. The Nelsons' reliance on § 582.30, however, is misplaced.

This section concerns deficiency judgments and is only triggered if

there has been a foreclosure. See, e.g., Minn. Stat. § 582.30

subd. 1 ("a person holding a mortgage may obtain a deficiency

judgment against the mortgagor if the amount a person holding a

mortgage receives from a foreclosure sale is less than [a specified

amount]"); see also Ed Herman & Sons, 535 N.W.2d at 806 n.1

(discussing § 580.30 in the context of foreclosures). Because the

FmHA never foreclosed on the Nelsons' farm, § 582.30 is not

applicable to this case.

III.

For the reasons discussed above, we affirm the decision of the

district court.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.