Bill Text: MI SB0517 | 2017-2018 | 99th Legislature | Introduced
Bill Title: Civil procedure; alternate dispute resolution; agricultural mediation program; establish for certain qualified persons. Creates new act. TIE BAR WITH: SB 0516'17, SB 0518'17
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2017-09-06 - Referred To Committee On Banking And Financial Institutions [SB0517 Detail]
Download: Michigan-2017-SB0517-Introduced.html
SENATE BILL No. 517
September 6, 2017, Introduced by Senator SCHMIDT and referred to the Committee on Banking and Financial Institutions.
A bill to provide for the mediation of the enforcement of
indebtedness against agricultural property; to provide for the
powers and duties of state governmental officials and entities; to
provide remedies; and to require the promulgation of rules.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "farm
loan mediation act".
Sec. 2. As used in this act:
(a) "Agricultural property" means real property that is
principally used for farming and personal property that is used as
security to finance or as part of a farming operation, including
equipment, crops, livestock, proceeds of the security, and
removable agricultural structures under lease with option to
purchase. Agricultural property does not include property that is
leased to the debtor other than removable agricultural structures
under lease with option to purchase or farm machinery that is
primarily used for custom field work.
(b) "Creditor" means a person that is the holder of a mortgage
on agricultural property, a vendor of a land contract for the sale
of agricultural property, a person with a lien against or security
interest in agricultural property, or a judgment creditor with a
judgment against a debtor with agricultural property.
(c) "Director" means the director of the department of
agriculture and rural development.
(d) "Farming" means that term as defined in section 2 of the
Michigan family farm development act, 1982 PA 220, MCL 285.252.
(e) "File", with respect to a mediation request, claim form,
objection, affidavit, proof of service, or other document required
to be filed in relation to mediation under this act, means to
deliver by the required date by certified mail or by a method that
requires acknowledgment of receipt. This subdivision does not apply
to the filing of court documents.
(f) "Financial analyst" means an individual who is all of the
following:
(i) Knowledgeable in agricultural and financial matters and
able to provide financial analysis.
(ii) Able to aid the debtor in preparing financial information
as required under section 8.
(iii) Approved by the department.
(g) "Mediator" means a farm mediator appointed by the director
under section 8.
(h) "Necessary farm operating expenses" means an amount
adequate to continue, during the mediation period, farm operations
begun before the notice of default. Necessary farm operating
expenses do not include expenses for increasing the scale of an
ongoing farming operation or planting additional crops.
(i) "Person" means an individual, partnership, corporation,
association, governmental entity, or other legal entity.
(j) "Serve" means to provide a document to a person by any of
the following methods:
(i) Personally delivering the document.
(ii) Sending the document by certified mail using a return
receipt signed by the addressee only.
(iii) Providing the document and obtaining a receipt signed by
the person acknowledging receipt of the document.
(iv) If an unsuccessful attempt has been made to serve under
subparagraph (i) or (ii), sending the document by mail with a
certificate of mailing to the last known address of the person. For
purposes of service under this subparagraph, the addressee is
considered to have been served the documents 5 days after the date
on the certificate of mailing.
(k) "Start a proceeding" means to do any of the following:
(i) File an action to foreclose a mortgage or land contract
under chapter 31 of the revised judicature act of 1961, 1961 PA
236, MCL 600.3101 to 600.3185.
(ii) Publish a notice to foreclose a mortgage by advertisement
under chapter 32 of the revised judicature act of 1961, 1961 PA
236, MCL 600.3201 to 600.3285.
(iii) Commence a proceeding to recover possession of property
after forfeiture of a land contract under chapter 57 of the revised
judicature act of 1961, 1961 PA 236, MCL 600.5701 to 600.5759.
(iv) Apply for a writ of attachment or garnishment under
chapter 40 of the revised judicature act of 1961, 1961 PA 236, MCL
600.4001 to 600.4065, or a writ of execution under chapter 60 of
the revised judicature act of 1961, 1961 PA 236, MCL 600.6001 to
600.6098.
(v) Enforce a security interest under subpart 1 of part 6 of
article 9 of the uniform commercial code, 1962 PA 174, MCL 440.9601
to 440.9624.
Sec. 3. (1) Except as provided in subsection (2), this act
applies to a debt if the amount of the debt exceeds $5,000.00 and
if the subject of the debt is agricultural property, the debt is
secured by agricultural property, the debt is sought to be enforced
against agricultural property, or the debt in any other way relates
to agricultural property.
(2) This act does not apply if either of the following applies
to the debtor:
(a) The debtor owns and leases less than 60 acres of land and
had less than $20,000.00 in gross sales of agricultural products in
the year preceding the year in which the creditor wishes to start a
proceeding against the debtor.
(b) The debtor filed a petition in bankruptcy after July 1,
1987, under chapter 7, 11, 12, or 13 of the bankruptcy code, 11 USC
701 to 784, 1101 to 1174, 1201 to 1231, and 1301 to 1330.
(3) This act does not apply to a debt that is any of the
following:
(a) A debt that was listed as a scheduled debt in a bankruptcy
proceeding or as to which a creditor filed a proof of claim form in
a bankruptcy proceeding.
(b) A debt that was previously the subject of mediation under
this act to which either of the following applies:
(i) The mediation was unresolved.
(ii) A mediation agreement with respect to the debt was
signed.
(c) A debt as to which the creditor served a mediation notice
under this act, the debtor failed to make a timely request for
mediation, and within 60 days after the debtor's failure, the
creditor started a proceeding to enforce the debt against the
agricultural property of the debtor.
(d) A debt as to which the creditor has received a mediation
notice under this act and the creditor and debtor have restructured
the debt and signed a separate mediation agreement.
Sec. 4. A debtor that owns agricultural property or a creditor
may request voluntary mediation of the indebtedness by a mediator
by applying to the director. The director shall make application
forms for voluntary mediation under this section available through
MSU Extension county offices. The director shall evaluate each
request under this section and may direct a mediator to meet with
the debtor and creditor to assist in mediation.
Sec. 5. (1) A creditor that wishes to start a proceeding to
enforce a debt to which this act applies shall serve on the debtor
and the director a mediation notice under section 3104, 3204, 4010,
or 5726 of the revised judicature act of 1961, 1961 PA 236, MCL
600.3104, 600.3204, 600.4010, and 600.5726, or section 9601 of the
uniform commercial code, 1962 PA 174, MCL 440.9601, as applicable.
The creditor shall also file with the director a proof of service
that includes the date the mediation notice was served on the
debtor. The creditor shall not start the proceeding until allowed
to do so under subsection (2) or (3) or another section of this
act.
(2) Except as provided in subsection (3), if a creditor
receives a mediation proceeding notice under section 8, the
creditor shall not start or continue a proceeding to enforce a debt
against agricultural property of the debtor if the debt is subject
to this act until 90 days after the date the debtor files a
mediation request under this act with the director.
(3) Notwithstanding subsection (2), a creditor may start or
continue proceedings to enforce a debt against agricultural
property of the debtor as follows:
(a) After the creditor receives a mediator's affidavit of the
debtor's lack of good faith under section 12.
(b) Five business days after the date the debtor and creditor
sign an agreement allowing the creditor to proceed to enforce the
debt if the debtor has not rescinded the agreement within the 5
days.
Sec. 6. (1) A debtor that receives a mediation notice under
section 5 and that wishes to have the debt mediated under this act
shall file a mediation request form with the director within 14
days after receiving the mediation notice.
(2) In a mediation request under this section, the debtor
shall state all of the following:
(a) All known creditors of the debtor that have debts secured
by agricultural property of the debtor.
(b) At the discretion of the debtor, any unsecured creditors
to whom payment is necessary for continuing the farming operation
of the debtor.
(c) The date that the notice was served on the debtor.
(3) A debtor that fails to file a timely mediation request
waives the right to mediation under this act for that debt. If a
debtor fails to file a timely mediation request, the director shall
notify the creditor that served the mediation notice that the
creditor may start a proceeding to enforce the debt.
(4) If a proceeding to enforce a debt against agricultural
property has been started against a debtor and the debtor has not
received a mediation notice under section 5, the debtor may file a
mediation request with the director. The debtor shall state in the
mediation request that the debtor has not received a mediation
notice.
Sec. 7. (1) A debtor that, in violation of a security
agreement, fraudulently conceals, removes, or transfers
agricultural property in which the debtor knows there is a security
interest without remitting the proceeds to the secured party is
ineligible for mediation under this act.
(2) If a debtor described in subsection (1) has filed a
mediation request under section 6, the secured party may petition
the circuit court for the county where the debtor resides for an
order permitting the secured party to start proceedings to enforce
the security interest. A petition under this subsection must be
brought within 1 year after the concealing, removing, or
transferring occurred.
(3) Within 7 days after a petition is filed under this
section, the court shall issue a summons commanding the debtor to
appear for a hearing before the court on the petition on a day that
is not less than 7 and not more than 14 days after the summons is
issued. The court shall deliver findings within 10 days after the
close of the hearing.
(4) A secured party shall not file a petition under this
section if the secured party has served a mediation notice on the
debtor under section 5.
Sec. 8. (1) After receiving a mediation notice under section
5, the director shall provide the debtor with a list of farm
advocates that may be available without charge to assist the debtor
and a financial analyst provided under subsection (2).
(2) Within 3 business days after receiving a mediation request
under section 6, the director shall provide a financial analyst to
meet with the debtor and assure that information relative to the
finances of the debtor is prepared for the initial mediation
meeting. The financial analyst must review and, if necessary,
prepare the debtor's financial records before the initial mediation
meeting.
(3) Within 10 days after receiving a mediation request under
section 6, the director shall send both of the following:
(a) A mediation proceeding notice to the debtor and to all
creditors listed by the debtor in the mediation request. The
mediation proceeding notice must state all of the following:
(i) The name and address of the debtor.
(ii) That the debtor has requested mediation under this act.
(iii) The time and place for the orientation session under
subsection (5).
(iv) The time and place for the initial mediation meeting
under subsection (6).
(v) A list of the names of 3 mediators who may be assigned to
the proceeding, with background information on each mediator,
including biographical information, a summary of previous mediation
experience, and the number of agreements signed by parties to
previous mediations conducted by the mediator.
(vi) That the debtor and the initiating creditor may each
request the director to exclude 1 mediator as provided under
subsection (7).
(vii) That instead of having the director assign a mediator,
the debtor and any 1 or more of the creditors may agree to select
and pay for a mediator as provided in subsection (8).
(viii) That, with certain exceptions, this act prohibits the
creditor from starting or continuing a proceeding to enforce the
debt against agricultural property for 90 days after the debtor
files a mediation request with the director.
(ix) That by the initial mediation meeting the creditor must
provide the debtor with documents as required under section 9.
(b) A claim form to all creditors stated by the debtor in the
mediation request and who have filed mediation notices sent to the
debtor under section 5.
(4) If, before sending a notice under subsection (3), the
director receives mediation notices to the debtor under section 5
from more than 1 creditor, the director shall combine all the debts
in the notices for purposes of sending the notice under subsection
(3). The creditor whose notice the director received first is the
initiating creditor for purposes of this act.
(5) The director shall schedule an orientation session to be
held 5 or more days before the initial mediation meeting. The
debtor, the financial analyst provided under subsection (2), and a
mediator shall participate in the orientation session. The mediator
that participates in the orientation session need not be the
mediator assigned to the mediation. Creditors participating in the
mediation may participate in the orientation session. At the
orientation session, the financial analyst shall review the
debtor's financial and inventory records to determine if they are
adequate for the mediation and inform the debtor of any
inadequacies, and the mediator shall inform the debtor of the
requirements of the mediation process.
(6) The director shall schedule an initial mediation meeting
to be held within 20 days after the director sends the notice under
subsection (3).
(7) Within 3 days after receiving a notice under subsection
(3), the initiating creditor and the debtor may each file with the
director a written request to exclude 1 mediator named in the list
contained in the notice. After the expiration of sufficient time to
allow for the receipt of requests under this subsection, the
director shall appoint a mediator from the list, excluding any
individuals requested to be excluded under this subsection.
(8) Instead of the director assigning a mediator under
subsection (7), the debtor and any 1 or more of the creditors may
agree to select and pay for a professional mediator for the
mediation. The director must approve the professional mediator
before assigning the mediator to the mediation. The director shall
not approve a professional mediator unless the professional
mediator prepares and signs an affidavit that does all of the
following:
(a) Discloses any biases of the mediator and any relationship
or previous association that the mediator has with the debtor or
creditors.
(b) States the mediator's certifications, training, or
qualifications as a professional mediator.
(c) Discloses fees that the mediator will charge, or a rate
schedule of the mediator's fees, for the mediation.
(d) Affirms that the mediator will uphold this act.
Sec. 9. By the initial mediation meeting, a creditor that
receives a notice under section 8 shall provide the debtor with
copies of notes and contracts for debts that are subject to this
act and a statement of interest rates on the debts, delinquent
payments, unpaid principal balances, all collateral securing the
debts, the creditor's estimate of the value of the collateral, and
debt restructuring programs available from the creditor.
Sec. 10. After a debtor requests mediation under section 6, a
creditor that is participating in the mediation and that has a
security agreement relating to agricultural property under the
debtor's control may inspect the property on 24 hours' notice to
the debtor. An inspection under this section must be conducted
between 8 a.m. and 6 p.m. on a day other than Sunday or a holiday
of this state or the United States.
Sec. 11. (1) An individual who has a conflict of interest that
does not allow the individual to be impartial shall not serve as a
mediator under this act. A conflict of interest includes, but is
not limited to, being a director or officer of a creditor.
(2) During the 60 days after the initial mediation meeting,
the mediator may call subsequent mediation meetings.
(3) At an initial mediation meeting and subsequent mediation
meetings, the mediator shall do all of the following:
(a) Listen to the debtor and the creditors that desire to be
heard.
(b) Attempt to mediate between the debtor and the creditors.
(c) Advise the debtor and creditors of assistance programs
that are available.
(d) Attempt to arrive at an agreement to fairly adjust,
refinance, or pay the debts.
(e) Advise, counsel, and assist the debtor and creditors in
attempting to arrive at an agreement for the future conduct of
financial relations among them.
(4) A mediator is immune from civil liability for conduct
within the scope of the duty of the mediator. A mediator does not
have a duty to advise a creditor or debtor about the law or to
encourage or assist a debtor or creditor in reserving or
establishing legal rights. This subsection is in addition to and
not a limitation of immunity otherwise accorded to the mediator
under law.
(5) A mediator cannot be examined about a communication or
document, including work notes, made or used in the course of or
because of mediation under this act. This subsection does not apply
to examination by the debtor or a creditor in an action to set
aside or reform a mediated settlement agreement. A communication or
document otherwise not privileged does not become privileged
because it is used in the course of mediation. This subsection does
not limit any privilege accorded to communication during mediation
by common law.
Sec. 12. (1) The parties to mediation under this act shall
participate in mediation in good faith. Not participating in good
faith includes any of the following:
(a) Failure on a regular or continuing basis to attend and
participate in mediation sessions without cause. This subdivision
does not apply to a creditor that elects to proceed as provided in
section 19.
(b) Failure to provide full information regarding the
financial obligations of the parties and other creditors, including
the obligation of a creditor to provide information under section
9.
(c) Lack of a written statement of debt restructuring
alternatives and a statement of any reasons why alternatives are
unacceptable.
(d) For a creditor, failure to designate a representative to
participate in the mediation with the authority to make within 1
business day binding commitments to fully settle, compromise, or
otherwise mediate the matter. This subdivision does not apply to a
creditor that elects to proceed as provided in section 19.
(e) For a creditor, failure to release money from the sale of
farm products to the debtor for necessary living expenses and
necessary farm operating expenses as described in section 13.
(f) For a debtor, during the mediation period and in violation
of a security agreement, fraudulently concealing, removing, or
transferring agricultural property in which the debtor knows there
is a security interest without remitting the proceeds to the
secured party.
(g) For a debtor, failure to permit an inspection under
section 10 or destruction or waste of agricultural property that is
mortgaged, the subject of a land contract, or subject to a security
interest.
(h) Other similar behavior that evidences lack of good faith.
A failure to agree to reduce, restructure, refinance, or forgive a
debt does not, in itself, evidence lack of good faith by a
creditor.
(2) If the mediator determines that either party to a
mediation under this act is not participating in good faith as
defined in subsection (1), the mediator shall file an affidavit
indicating the reasons for the finding with the director and with
parties of the mediation.
Sec. 13. (1) The amount that a creditor is required to release
for necessary living expenses to be participating in mediation
under this act in good faith under section 12 is limited to
$1,600.00 per month less the debtor's nonfarm income.
(2) If a debtor and creditor do not agree on the amount of
necessary living expenses to be released under this section, the
debtor or creditor may file a complaint requesting the circuit
court in the county where the debtor resides to make a
determination of the amount to be released. The court must make the
determination within 10 days after the complaint is filed.
(3) If a debtor and creditor do not agree on the amount of
necessary living expenses or necessary farm operating expenses to
be released under this section, the debtor or a creditor that has
requested the release of necessary living expenses or necessary
farm operating expenses may file a complaint requesting the circuit
court for the county where the debtor resides to make a
determination of the amount to be released. After a hearing, the
court shall make a determination of the amount of living and
operating expenses to be released within 10 days after the
complaint is filed. The court shall also add or subtract up to 10
days to or from the time when the creditor can begin to enforce a
proceeding to collect the debt against agricultural property of the
debtor and assess costs, including any attorney fees, among the
parties to the court action. The court shall equitably adjust the
time to begin a creditor's proceeding and the assessment of costs
based on the parties' good-faith claim to the amount of living and
operating expenses to be released.
Sec. 14. (1) If a mediator determines that a creditor has not
participated in mediation in good faith and files an affidavit
under section 12, the debtor may request court-supervised mandatory
mediation by doing all of the following:
(a) Filing with the circuit court for the county where the
debtor resides the affidavit and a complaint for court supervision
of mediation.
(b) Serving a copy of the complaint on the creditor.
(2) On request under subsection (1), the court shall order
both parties to mediate under the supervision of the court in good
faith for not more than 60 days and order all creditor remedies to
be suspended during the mediation period. The court may issue
orders necessary to effect good-faith mediation.
(3) Following the mediation period under subsection (2), if
the court finds that the creditor has not participated in mediation
in good faith, the court shall order the creditor's remedies
suspended for an additional 180 days.
(4) A creditor that a mediator determines under section 12 to
not have participated in good faith shall pay costs and attorney
fees of the debtor requesting court supervision of mediation under
this section.
Sec. 15. If a mediator determines that a debtor has not
participated in mediation in good faith and files an affidavit
under section 12, a creditor may immediately start proceedings
against the debtor's agricultural property.
Sec. 16. (1) On petition by a debtor or creditor, a court may
review a mediator's filing of or failure to file an affidavit under
section 12. A review under this subsection is limited to whether
the mediator committed an abuse of discretion in filing or failing
to file the affidavit. The court shall review a petition filed
under this subsection within 10 days after the petition is filed.
(2) After reviewing a petition under subsection (1), if the
court finds that the mediator committed an abuse of discretion in
filing or failing to file an affidavit, the court may do any of the
following:
(a) Reinstate mediation and the stay of creditor's enforcement
actions.
(b) Order court-supervised mediation.
(c) Allow creditors to proceed immediately with creditor's
remedies.
(3) The mediator may, but is not required to, offer testimony
as part of the court's review under subsection (1).
Sec. 17. (1) If there is a dispute between the debtor and a
creditor concerning the market value of real property involved in a
mediation under this act, the true and acceptable market value must
be determined by an appraisal performed by an accredited appraiser
and made within 45 days after the date of the dispute. The
accredited appraiser shall be selected by the following procedure:
(a) The mediator shall submit the names of 3 accredited
appraisers to the principal creditor and the debtor.
(b) The principal creditor and the debtor may each, within a
time determined by the mediator, strike the name of 1 of the
appraisers.
(c) The accredited appraiser whose name is not stricken by
either the principal creditor or the debtor shall perform an
appraisal, which all parties to the dispute shall accept as the
true market value.
(2) The principal creditor and the debtor shall each pay 1/2
of the cost of an appraisal under this section.
Sec. 18. (1) If the debtor and 1 or more creditors in a
mediation under this act reach an agreement, the mediator shall
sign a written document that reflects the agreement, have the
debtor and creditors that have agreed sign the document, and
witness the signatures.
(2) The mediator shall provide a copy of a mediation agreement
signed under subsection (1) to the creditors who attended the
mediation meetings and who did not attend but who filed claim forms
provided under section 8.
(3) All of the following apply to the debtor and creditors
that are parties to a mediation agreement signed under subsection
(1) and to any creditors that have filed claim forms provided under
section 8 and have not objected to the mediation agreement as
provided in section 19:
(a) The debtor and creditors are bound by the terms of the
agreement.
(b) The debtor and creditors may enforce the mediation
agreement as a legal contract.
(c) The debtor and creditors may use the mediation agreement
as a defense against an action that is contrary to the mediation
agreement.
Sec. 19. (1) A creditor that is notified of an initial
mediation meeting under this act and that does not file a claim
form provided under section 8 or attend mediation meetings is
subject to and bound by a mediation agreement under section 18.
(2) If a creditor files a claim form provided under section 8
with the mediator before the initial meeting but does not attend
mediation meetings, the creditor is bound by a mediation agreement
reached at the mediation meeting unless the creditor files an
objection under subsection (3).
(3) Within 10 days after receiving a mediation agreement under
section 18, a creditor described in subsection (2) may serve a
written objection to the agreement on the mediator and the debtor.
(4) Notwithstanding the expiration of the 60-day mediation
period under section 11, if a creditor serves an objection under
subsection (3), the mediator shall meet again with the debtor and
creditors within 10 days after receiving the objection, in 1 or
more meetings as necessary, to mediate a new agreement.
Sec. 20. At the expiration of the 90-day period under section
5, the mediator shall sign and serve on the parties and the
director a termination statement. A termination statement under
this section must state that mediation has ended and describe or
reference any agreements reached between a creditor and the debtor
or among creditors. A mediation agreement under section 18 may be
included as part of the termination statement.
Sec. 21. If a creditor has a purchase money security interest
as described in section 9103 of the uniform commercial code, 1962
PA 174, MCL 440.9103, and renegotiates the secured debt under this
act to reduce the principal balance or the interest rate or to
extend the repayment period, the creditor retains the purchase
money security interest for the renegotiated debt.
Sec. 22. A court shall enforce a mediation agreement reached
under this act.
Sec. 23. A public body shall exempt records about finances of
a debtor or creditor that are created, collected, or maintained
under this act by a mediator or the director from disclosure under
the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.
Sec. 24. (1) The director shall promulgate standard forms as
required under this act and make the forms available on the website
of the department of agriculture and rural development, at MSU
Extension county offices, and otherwise as the director determines
advisable.
(2) The director shall provide training and support for
individuals to act as mediators under this act.
(3) The director shall provide mediators under this act by
contracting with qualified individuals who are experienced in farm
finance, agricultural law, and negotiation.
(4) The director shall set the compensation of individuals who
act as mediators and financial analysts under this act.
(5) The director may appoint a farm mediation administrator.
The farm mediation administrator and the director shall provide
training for farm mediators and financial analysts and coordinate
community legal education programs for farmers.
(6) The director shall promulgate rules to implement this act
under the administrative procedures act of 1969, 1969 PA 306, MCL
24.201 to 24.328.
Sec. 25. A waiver of mediation rights under this act is void
except as expressly allowed under this act.
Enacting section 1. This act takes effect 90 days after the
date it is enacted into law.
Enacting section 2. This act does not take effect unless all
of the following bills of the 99th Legislature are enacted into
law:
(a) Senate Bill No. 518.
(b) Senate Bill No. 516.
