FARGO, N.D. - The trustee for the bankrupt McM Inc. farm is asking a judge to approve a $1.3 million bid on a lake property the farm had transferred to Island Lake Irrevocable Trust, according to documents filed in federal court.
The motion filed on June 19 in Fargo states the Island Lake property, northeast of Detroit Lakes, Minn., will close on Aug. 1. If no one objects by July 10, the judge can grant the motion without a hearing. In the event of an objection, a hearing date has been set July 17. The sale of the property is part of a settlement agreement made on May 8.
Ron G. McMartin Jr., of St. Thomas, ND., was chief executive officer of McM, Inc., a farm that had as many as 50,000 acres of high-value crops in the 2000s. The farm was one of the most high-profile growers of sugar beets, potatoes, edible beans, corn and soybeans.
McM Inc. filed Chapter 7 bankruptcy on Feb. 10, 2017, with some $62 million in claims, including a single claim of $43 million from BMO Harris Bank.
According to earlier motions, the McMartin organized a transfer of the lake property from McM to the Island Lake Irrevocable Trust, whose beneficiaries were Ron McMartin Jr.'s two grown daughters, Rachel McMartin and Laura Hagemeister. The daughters since then became trustees for the irrevocable trust. The trust believed that was an insider transfer and that its net value belongs to the trust.
The sale agreement allocates $1,189,250 to the real estate and $110,750 to personal property. It will pay off principal and interest on a mortgage of $760,377 through a Detroit Lakes branch of First Security Bank-Sleepy Eye, Minn.
According to earlier documents, McM had purchased the 50-acre property for $1.3 million in 2011 and had substantially added to it until was valued by his accountants at $2.5 million, but it was subsequently appraised and valued in the company's books at $1.3 million.
After buying the property at 41106 County Road 126, McM had "dramatically improved the Island Lake Property," including adding a large shop and a "bar known as the Sugar Hill Tavern," according to earlier court documents.According to a feature article in a real estate magazine, McMartin said he was planning to build a master cabin on the property although the place already had two smaller, older cabins.
According to the sale agreement, the daughters' trust would receive 25 percent of the proceeds in the sale, after the mortgage and expenses were paid. The daughters had an option of out-bidding the buyer by $10,000 to retain ownership, but a 48-hour deadline passed without a counter-bid. Century 21 Vista will receive a 5 percent fee, or $65,000.
Erik Ahlgren, a Fergus Falls, Minn., attorney who is the trustee for the McM bankruptcy, said he has yet to discuss an agreement with David G. Velde of Alexandria, Minn., trustee in the McMartin Jr. personal Chapter 7 bankruptcy, about a split between the corporate and personal bankruptcy estates.
Ahlgren said he continues to have an active case against McMartin's parents, Ron McMartin Sr. and his wife, Bonita A. "Bonnie" McMartin. Ahlgren alleges they were involved in improper transfers totaling nearly $2 million. Ahlgren wants the court to order those transfers void and the money returned to the creditors. The transfers are described as civil "fraud" but no criminal charges have been filed.