This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2012).
STATE OF MINNESOTA
IN COURT OF APPEALS
A14-0073
Mike Weinandt,
Appellant,
vs.
Burl Peckman, et al.,
Respondents,
Markit County Grain, LLC, judgment creditor,
Respondent,
The Harris Weinandt Living Trust,
Appellant.
Filed July 14, 2014
Affirmed
Stauber, Judge
Roseau County District Court
File No. 68CV1146
Dennis H. Ingold, Alan B. Fish, Alan B. Fish, P.A., Roseau, Minnesota (for appellants
Mike Weinandt and Harris Weinandt Living Trust)
Michelle E. Moren, Law Offices of Patrick D. Moren, Roseau, Minnesota (for
respondents Burl Peckman, et al.)
Caren L. Stanley, Vogel Law Firm, Fargo, North Dakota (for respondent Markit County
Grain)
Considered and decided by Stauber, Presiding Judge; Worke, Judge; and
Larkin, Judge.
UNPUBLISHED OPINION
STAUBER, Judge
In an appeal from summary judgment directing disbursement of settlement funds
held by appellant-trust to respondent-creditor, appellant argues that the district court erred
by granting summary judgment because appellant-trust held a perfected security interest
in the settlement funds based upon a duly filed financing statement and that the
assignment of the settlement proceeds to appellant-trust was not a fraudulent transfer.
We affirm.
FACTS
Appellant Mike Weinandt (Weinandt) is a farmer who, for several years, borrowed
money to fund his farm business from appellant Harris Weinandt Living Trust (trust).1
Weinandt’s father, Harris Weinandt, is the sole trustee of the trust. In 2008, 2009, and
2010, Weinandt completed a standard form Uniform Commercial Code (UCC) financing
statement by hand that named himself as the debtor and the trust as the secured party, and
listed crops, machinery, and livestock as collateral. These financing statements were
filed with the secretary of state. No security agreement supporting the UCC filing was
ever memorialized in a separate writing.
In 2009, Weinandt entered into a three-year farm lease agreement with
respondents Burl Peckman, Gary Peckman, and Dennis Peckman (the Peckmans). In
October 2010, Weinandt filed a complaint against the Peckmans, alleging that they
“interfered with the quiet use and enjoyment of the property and tortiously interfered with
1
Weinandt and the trust will be referred to collectively as “appellants.”
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contractual agreements associated with, and necessary for [Weinandt’s] quiet use.” On
November 29, 2012, the parties entered into a confidential settlement agreement. On
December 3, 2012, Weinandt assigned the proceeds of the confidential settlement
agreement over to the trust.
On December 6, 2012, Weinandt and the Peckmans were served a garnishment
summons by respondent Markit County Grain, LLC (Markit). Markit holds a judgment
against Weinandt, docketed on February 6, 2012, for $89,822.55. On January 2, 2013,
the district court granted the Peckmans’ request to deposit the disputed funds with the
district court. On March 22, 2013, Markit filed a complaint in interpleader asking the
district court to disburse the disputed funds to Markit. Markit’s complaint alleged that
their claim to the settlement funds should take priority and that Weinandt’s assignment of
the funds to the trust was a fraudulent transfer under the Minnesota Uniform Fraudulent
Transfer Act (MUFTA). Weinandt and the trust filed a motion for summary judgment, as
did Markit.
On November 22, 2013, the district court issued an order granting Markit’s motion
for summary judgment and disbursing the disputed funds to Markit. The district court
found that there was no actual dispute that Weinandt did not sign or authenticate the UCC
financing statement, and that no separate security agreement existed, and therefore
Weinandt failed to perfect the trust’s security interest in the settlement proceeds. The
district court also concluded that Weinandt’s assignment of the settlement proceeds to the
trust was a fraudulent transfer because Weinandt made the transfer with actual intent to
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defraud his creditors and also because the transfer was made to an insider, and Weinandt
was insolvent when the transfer was made. This appeal followed.
DECISION
This court “review[s] a district court’s summary judgment decision de novo. In
doing so, [this court] determine[s] whether the district court properly applied the law and
whether there are genuine issues of material fact that preclude summary judgment.”
Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn.
2010). This court “view[s] the evidence in the light most favorable to the party against
whom summary judgment was granted.” STAR Centers, Inc. v. Faegre & Benson, L.L.P.,
644 N.W.2d 72, 76-77 (Minn. 2002). “When the district court grants a summary
judgment based on its application of statutory language to the undisputed facts of a
case, . . . its conclusion is one of law and our review is de novo.” Lefto v. Hoggsbreath
Enters., Inc., 581 N.W.2d 855, 856 (Minn. 1998).
I. Security interest
Minnesota statutes define when a security interest is enforceable against the debtor
or against third parties.2 See Minn. Stat. § 336.9-203 (2012). A security interest is only
enforceable if (1) value has been given; (2) the debtor has rights in the collateral; and
(3) “the debtor has authenticated a security agreement that provides a description of the
2
Minnesota has adopted the UCC. See Minn. Stat. §§ 336.1-101 to .9-809 (2012).
“Uniform laws are interpreted to effect their general purpose to make uniform the laws of
those states which enact them.” NHF Hog Mktg., Inc. v. Pork-Martin, LLP, 811 N.W.2d
116, 117 (Minn. App. 2012) (quotation omitted), review denied (Minn. Mar. 20, 2012).
Appellate courts “give great weight to other states’ interpretations of a uniform law.” Id.
(quotation omitted).
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collateral.”3 Minn. Stat. § 336.9-203(b). “Security agreement” is defined as “an
agreement that creates or provides for a security interest.” Minn. Stat. § 336.9-
102(a)(74).
Appellants argue that because Weinandt filed a financing statement in compliance
with the UCC, the security agreement was evidenced by a writing that conforms to Minn.
Stat. § 336.9-203(b)(3)(A). A “financing statement” is “a record or records composed of
an initial financing statement and any filed record relating to the initial financing
statement.” Minn. Stat. § 336.9-102(a)(39) (2012). A financing statement “serves the
purpose of putting nonparties such as other subsequent creditors on notice that the
debtor’s property is encumbered.” Allete, Inc. v. GEC Engineering, Inc., 726 N.W.2d
520, 523 (Minn. App. 2007) (quotation omitted). A financing statement is sufficient only
if it (1) names the debtor; (2) names the secured party or its representative; and
(3) indicates the collateral covered by the financing statement. Minn. Stat. § 336.9-502
(2012).
There is no dispute that the financing statement Weinandt filed in 2010 met the
requirements of Minn. Stat. § 336.9-502. But the parties dispute whether the financing
statement, without more, constitutes an authenticated security agreement under Minn.
Stat. § 336.9-203(b). The UCC “must be liberally construed and applied to promote its
underlying purposes,” which are to “simplify, clarify, and modernize the law governing
commercial transactions” and to “permit the continued expansion of commercial
3
Minn. Stat. § 336.9-203(b)(3), provides for other acceptable evidence where a security
agreement does not exist, but these alternatives are not at issue here.
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practices through custom, usage, and agreement of the parties.” Minn. Stat. § 336.1-
103(a). “Although no precise words are required in the Code, the definitions given
indicate that there must be some language in the [security] agreement actually conveying
a security interest.” Shelton v. Erwin, 472 F.2d 1118, 1120 (8th Cir. 1973).
There are few Minnesota cases on point, but in Allete, this court addressed
whether a financing statement could modify the express terms of a security agreement.
726 N.W.2d at 523. This court stated that the UCC contemplates a distinction between a
security agreement and a financing statement because the two terms are defined by
separate statutory provisions. Id. The difference between the two documents is that
“[t]he security agreement must somehow state that a lien is created in identifiable
collateral.” Id. But “the financing statement is a bare-bones document that simply gives
names and addresses and a description of property.” Id. This court recognized that
courts in other jurisdictions have held “that a financing statement, in conjunction with
other writings, constitutes a security agreement creating a security interest in property.”
Id. at 524 (citing In re Numeric Corp., 485 F.2d 1328, 1332 (1st Cir. 1973)). But “no
court . . . has held that a standard financing statement, standing alone or with only parol
evidence, is sufficient as a matter of law to create a security interest in collateral.” Id.;
see also Shelton, 472 F.2d at 1120 (“Although a financing statement conceivably could
create a security interest, they usually do not contain the necessary grant of an interest
section 9-203(1)(b) requires.”).
Other jurisdictions have addressed whether a financing statement can substitute for
a security agreement under UCC 9-203. See Gibson Cnty. Farm Bureau Co-op. Ass’n,
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Inc. v. Greer, 643 N.E.2d 313, 318-20 (Ind. 1994) (discussing majority and minority
views on this issue). A majority of jurisdictions hold, consistent with this court’s
decision in Allete, that while no magic language is required to create a security agreement
“there must be language in the instrument which leads to the logical conclusion that it
was the intention of the parties that a security interest be created.” Id. at 319 (quotation
omitted). The Allete decision also cited favorably In re Numeric Corp., which adopted
the composite document rule. Allete, 726 N.W.2d at 523-24. That rule provides that
“although a standard form financing statement by itself cannot be considered a security
agreement, an adequate agreement can be found when a financing statement is considered
together with other documents.” In re Numeric Corp., 485 F.2d at 1332; see also Gibson
Cnty., 643 N.E.2d at 319 (discussing the composite document rule).
Appellants argue that the financing statement itself satisfies the requirements of
Minn. Stat. § 336.9-203 even though it lacks language granting a security interest because
granting language is unnecessary. Appellants rely upon language by one of the drafters
of the original UCC Article 9 which criticized an earlier decision holding that granting
language was necessary. See Gibson Cnty., 643 N.E.2d at 318 (quoting 1 Gilmore,
Security Interests in Personal Property § 11.4, 342-48 (1965)). As the court in Gibson
Cnty. recognized, Grant Gilmore stated that “[c]ertainly nothing in § 9-203 requires that
the ‘security agreement’ contain a ‘granting’ clause. The § 9-[5]02 financing statement
contained all that was necessary to satisfy the § 9-203 statute of frauds as well as being
sufficient evidence of the parties’ intention to create a security interest.” Id. (quoting
Gilmore, supra). But, at the time this criticism was written, the UCC required a
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financing statement to contain more than merely the names of the parties and a
description of the collateral. The UCC also required that a financing statement be signed
by the debtor, who was also the party to be bound by any security agreement. Minn. Stat.
Ann. § 336.9-502, U.C.C. cmt. 3, para. 3. The statute-of-frauds requirement contained
within Minn. Stat. § 336.9-203 mandates that “the debtor must authenticate a security
agreement that provides a description of the collateral.” Minn. Stat. Ann. § 336.9-203,
U.C.C. cmt. 3. Because “authenticate” also means “sign,” a financing statement signed
by the debtor that describes the collateral could logically satisfy the section 336.9-203
evidentiary requirement. See Minn. Stat. § 336.9-102(a)(7). But since the 1999 revisions
to the UCC, which Minnesota subsequently adopted, a “financing statement cannot alone
provide the necessary ‘authentication.’” 4 James J. White & Robert S. Summers,
Uniform Commercial Code § 31-3, at 120 (6th ed. 2010).
Appellants argue that the financing statement was authenticated by Weinandt
when he completed the statement by hand and deposited it at the filing office. In order
for the financing statement to qualify as a security agreement under Minn. Stat. § 336.9-
203 it must have been “authenticated.” “Authenticate” means “to sign” or “with present
intent to adopt or accept a record, to attach to or logically associate with the record an
electronic sound, symbol, or process.” Minn. Stat. § 336.9-102(a)(7). UCC Article 1
defines “signed” as “using any symbol executed or adopted with present intention to
adopt or accept a writing.” Minn. Stat. § 336.1-201(b)(37) (2012). We conclude that
merely hand-writing the financing statement and submitting it to the filing office is not
sufficient to constitute a “symbol” of an intention to adopt a security agreement. See
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White & Summers, supra § 31-3, at 120 (stating that a financing agreement which lacks
the debtor’s signature does not satisfy the statute of frauds requirement for an enforceable
security agreement). Appellants further argue that it is a question of fact for a jury, and
therefore there is a genuine issue of material fact precluding summary judgment. But we
conclude that the threshold question of whether there exists a writing satisfying the
statute of frauds requirement under UCC § 9-203 is a question of law. See Gibson Cnty.,
643 N.E.2d at 319-20 (stating that most courts hold that whether a financing statement
may serve as a security agreement is treated as a question of law, and that even where it
is treated as a mixed question of law and fact, the statute-of-frauds inquiry is treated as a
question of law).
Appellants also argue that this court should look to extrinsic evidence of the
parties’ intentions and specifically to the parties’ course of dealing as evidence that there
was a security agreement. But parol evidence cannot be used to prove the existence of a
writing that would satisfy the UCC § 9-203 statute of frauds requirement. See White &
Summers, supra § 31-3, at 116; see also In re Delta Molded Products, Inc., 416 F. Supp.
938, 942-43 (N.D. Ala. 1976) (declining to consider course of dealing evidence and
stating that “[s]ection 9-203 being in the nature of a statute of frauds, parol evidence is
not admissible to establish the statutory requirements”). Therefore, the financing
statement, without more, is insufficient to create an enforceable security interest.
II. MUFTA
Appellants also argue that the district court erred by concluding that the
assignment of the settlement proceeds to the trust was a fraudulent transfer under
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MUFTA. Statutory interpretation is a question of law that this court reviews de novo.
Swenson v. Nickaboine, 793 N.W.2d 738, 741 (Minn. 2011). MUFTA permits a creditor
to attach proceeds of a fraudulent “transfer or obligation.” Minn. Stat. § 513.47(a)(2)
(2012). A transfer is voidable if made with either actual fraud or constructive fraud. See
Minn. Stat. § 513.44-.47 (2012); New Horizon Enterprises, Inc. v. Contemporary Closet
Design, Inc., 570 N.W.2d 12, 15 (Minn. App. 1997). MUFTA defines two types of
constructive fraud. Constructive fraud occurs where the debtor did not receive a
reasonably equivalent value in exchange for the transfer or obligation and the transfer or
obligation would essentially render the debtor insolvent. Minn. Stat. § 513.44(a)(2),
.45(a). Or, constructive fraud occurs where the creditor’s claim arose when (1) the debtor
made the transfer “to an insider for an antecedent debt;” (2) the debtor was insolvent at
the time of the transfer; and (3) the insider “had a reasonable cause to believe that the
debtor was insolvent.” Minn. Stat. § 513.45(b). But a transfer is not voidable if the
transfer results from “enforcement of a security interest in compliance with article 9 of
the [UCC].” Minn. Stat. § 513.48(e)(2) (2012).
Appellants argue that the assignment of the settlement proceeds to the trust was
not fraudulent because it was made to enforce a perfected security interest under UCC
article 9. But as previously explained, Weinandt failed to perfect the security interest in
the proceeds derived from his crops. Therefore, the assignment of the settlement
proceeds to the trust was not made to enforce a security interest.
Appellants also argue that they are entitled to a trial to determine whether the
assignment of the settlement proceeds to the trust was made with actual intent to defraud
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Markit. But actual fraud is only one type of fraudulent transfer under MUFTA. See
Minn. Stat. § 513.44(a)(1) (defining as fraudulent transfers made with “actual intent to
hinder, delay, or defraud any creditor of the debtor”). MUFTA also defines several types
of constructive fraud under which actual intent is not required. See Minn. Stat.
§§ 513.44(a)(2)(i), (ii), 513.45(a), (b). Markit argues that the transfer was constructively
fraudulent under Minn. Stat. § 513.45(b) because the assignment was made to an insider.
Markit points out that the sole trustee of the trust was Weinandt’s father and that
Weinandt was a beneficiary of the trust. See Minn. Stat. § 513.41(7)(i)(A) (2012); Unif.
Fraudulent Transfer Act § 1, cmt. (7), &A U.L.A. 17 (2006) (stating that “a trust may be
found to be an insider of a beneficiary”). Markit also argues that Weinandt was insolvent
at the time the assignment was made. Under MUFTA, “a debtor is insolvent if the sum
of the debtor’s debts is greater than all of the debtor’s assets.” Minn. Stat. § 513.42(a)
(2012). At the time the assignment was made, Weinandt had numerous judgments
against him amounting to hundreds of thousands of dollars in debt. Weinandt also owed
the trust significant sums of money for having purchased foreclosed farmland for
Weinandt. Weinandt testified that he had about $300 in cash and that he had no other
assets aside from money owed on a $500 judgment.
Normally, a creditor bears the burden of showing that a transfer is fraudulent.
Snyder Elec. Co. v. Fleming, 305 N.W.2d 863, 867 (Minn. 1981). “[B]ut the relationship
between the parties to a transaction may shift this burden to varying degrees.” Id.
Transactions involving insiders “are to be regarded with skepticism by the courts and
closely scrutinized.” Id. In order to overcome the presumption that a transaction is
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fraudulent based on insider dealing, the debtor “must show by clear proof he acted with
impartiality and fairness.” Id. Here, appellants have not presented sufficient evidence to
overcome the presumption that the assignment was constructively fraudulent under
MUFTA. Therefore, Markit was entitled to summary judgment. See DLH, Inc. v. Russ,
566 N.W.2d 60, 71 (Minn. 1997) (“[W]hen the nonmoving party bears the burden of
proof on an element essential to the nonmoving party’s case, the nonmoving party must
make a showing sufficient to establish that essential element.”).
Affirmed.
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