Ashbrook v. Block

• Decision Date: 25 October 1990
• Docket Number: No. 89-1443,89-1443
• Citation: 917 F.2d 918
• Parties: , 20 Bankr.Ct.Dec. 1927, Bankr. L. Rep. P 73,667 Robert Charles ASHBROOK, Rose Marie Elaine Ashbrook, Plaintiffs-Appellants, v. John BLOCK, Individually and in his capacity as Secretary of U.S. Department of Agriculture; Allen Brock, Individually and in his capacity as Acting Assistant Administrator of the Farmers Home Administration; Charles Shuman, Individually and in his capacity as Acting State Director for Michigan; Calvin Lutz, Individually and in his capacity as District Director; Richard Keech, Individually and in his capacity as District Director; William J. Gregor, Individually and in his capacity as County Supervisor; United States Department of Agriculture, United States of America, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 918

917 F.2d 918

59 USLW 2296, 20 Bankr.Ct.Dec. 1927,

Bankr. L. Rep. P 73,667

Robert Charles ASHBROOK, Rose Marie Elaine Ashbrook, Plaintiffs-Appellants, v. John BLOCK, Individually and in his capacity as Secretary of

U.S. Department of Agriculture; Allen Brock, Individually

and in his capacity as Acting Assistant Administrator of the

Farmers Home Administration; Charles Shuman, Individually

and in his capacity as Acting State Director for Michigan;

Calvin Lutz, Individually and in his capacity as District

Director; Richard Keech, Individually and in his capacity

as District Director; William J. Gregor, Individually and

in his capacity as County Supervisor; United States

Department of Agriculture, United States of America,

Defendants-Appellees.

No. 89-1443.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 5, 1989.

Decided Oct. 25, 1990.

Paul B. Newman (argued), Newaygo, Mich., for plaintiffs-appellants.

Edith A. Landman (argued), Office of the U.S. Atty., Grand Rapids, Mich., for defendants-appellees.

Before MARTIN, JONES and GUY, Circuit Judges.

NATHANIEL R. JONES, Circuit Judge.

Plaintiffs-appellants, Robert Charles Ashbrook and Rose Marie Elaine Ashbrook (the Ashbrooks) appeal the dismissal of their lawsuit against the United States, the Farmers Home Administration (FmHA) and various federal and local officials within the FmHA. The Ashbrooks' action, sounding in tort, contract law and constitutional tort, was brought as an adversary proceeding in the United States Bankruptcy Court for the Western District of Michigan pursuant to 11 U.S.C. Sec. 106(a). Although the Ashbrooks raise several issues on appeal, we believe the most significant question presented is whether a counterclaim brought pursuant to 11 U.S.C. Sec. 106(a) or (b) (1988) seeking damages against an agency of the United States obviates the filing of an administrative claim pursuant to the Federal Tort Claims Act (FTCA), 28 U.S.C. Secs. 1346(b) and 2671 et seq. We hold that it does.

I.

The Ashbrooks have operated a hog and apple farm in Van-Buren County, Michigan since 1976. They had acquired several loans from the FmHA totalling $659,355.73 as of October 10, 1985. Although the Ashbrooks have not made a payment on their indebtedness since 1979, the FmHA had not, as of the date this appeal was briefed, accelerated the Ashbrooks' account or foreclosed on their farm. The Ashbrooks' first loan from the FmHA was in part for the purpose of constructing a farrowing barn. The Ashbrooks hired Jerry L. Brower to construct the barn, but Brower delayed to the point that the Ashbrooks sought the assistance of William J. Gregor, a County Supervisor for the FmHA, in order to coax Brower into performing.

The Ashbrooks maintain that when they began looking for other contractors in November of 1979, Gregor informed them that they would have to allow Brower to complete the barn, even though Brower's initial work was slow and defective. However, the record reflects that Gregor merely informed the Ashbrooks that the FmHA would not pay the difference if they hired a more expensive contractor. J.App. at 127-28. Soon after Brower completed the barn, a section of its floor collapsed while hogs were upon it. The Ashbrooks attempted to acquire another loan from the FmHA to replace the injured livestock, but they were informed that they did not qualify. Brower refused to repair the barn until the Ashbrooks cleaned the site. Gregor also determined that the Ashbrooks should clean the site prior to requiring Brower to repair the floor. The Ashbrooks were unable to meet this demand, and the barn was left unrepaired. The Ashbrooks sued Brower for his faulty construction of the farrowing barn. The suit was settled in 1984 but the Ashbrooks' total unrecovered loss was $73,741.60.

In 1983, Robert Ashbrook filed a petition for relief under Chapter 11 of the Bankruptcy Code. In 1985, Rose Marie Ashbrook also filed a Chapter 11 petition. Robert and Rose Marie's cases were consolidated on December 31, 1985. The FmHA filed a proof of claim on June 23, 1983 for $573,160.87. On August 20, 1985, the Ashbrooks filed what purported to be a compulsory counterclaim under 11 U.S.C. Sec. 106(a), commencing an advisory proceeding against the Secretary of United States Department of Agriculture, John Block, individually and in his official capacity, the Department of Agriculture, and numerous federal and local officials within the FmHA: Allen Brock, individually and in his capacity as Acting Assistant Administrator for Farmer Programs and former Acting Administrator of the Farmers Home Administration; Charles Shuman, individually and in his capacity as Acting State Director for Michigan; Calvin Lutz, individually and in his capacity as Acting State Director for Michigan; Richard Keech, individually and in his capacity as District Director; William J. Gregor, individually and in his capacity as County Supervisor. The gist of the Ashbrooks' complaint is that FmHA officials failed to abide by regulations promulgated pursuant to the Consolidated Farm and Rural Development Act (CFRDA), 7 U.S.C. Sec. 1989 (1988) in their transactions with the Ashbrooks. ¹ The Ashbrooks' complaint alleges tort and contract violations as well as a violation of the due process clause of the fifth amendment based on the following conduct by FmHA officials:

Total failure to comply with the aforesaid CFRDA and its regulations ... specifically but not limited to failure to provide management assistance and supervision, credit counselling, and failure to defer or extend payments as provided for in the aforesaid regulations.

* * * * * *

Failure to provide reduction of payments to provide sufficient monies to pay living and operating expenses as provided by 7 U.S.C. 1981a.

Failure to inform Plaintiff of his rights to consolidation, rescheduling, remortization and deferral of his indebtedness to the FmHA.

Refusing and denying Plaintiff's requests and applications for Operating and Emergency Loans.

Wrongfully denying Plaintiff income to which he was otherwise entitled to from the operation of his pig herd.

Wrongfully accusing Plaintiff of poor management and laziness when FmHA was remiss in its obligation to assist Plaintiff in the management of his farm.

Id. at 82 (quoting "Complaint" at p. 8).

On September 3, 1985, the defendants-appellees moved to dismiss the Ashbrooks' action, or in the alternative, for summary judgment. Pursuant to 28 U.S.C. Sec. 157(c)(1), the bankruptcy court entered findings and recommendations in which it recommended granting the defendants-appellees' motion for summary judgment. Before submission of the matter to the district court, the bankruptcy court permitted the Ashbrooks to amend their complaint to add the United States as a defendant. By Judgment Order dated March 10, 1989, the district court adopted the bankruptcy court's report and recommendation granting the defendants-appellees summary judgment.

II.

An appellate court's review of a district court's grant of summary judgment is de novo. Pinney Dock and Transport Co. v. Penn Corp., 838 F.2d 1445, 1473 (6th Cir.1988), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). Fed.R.Civ.P. 56(c) authorizes a court to enter summary judgment on a claim if "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." The nonmoving party must make a showing adequate to establish the existence of an essential element of his case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Although the nonmoving party's evidence in opposition to summary judgment need not be of the sort admissible at trial, he must employ proof other than his pleadings and own affidavits to establish the existence of specific triable facts. Id. at 324, 106 S.Ct. at 2553. An appellate court must view the evidence in the light most favorable to the opponent of the summary judgment motion. Glenway Industries, Inc. v. Wheelabrator-Frye, Inc., 686 F.2d 415, 417 (6th Cir.1982) (per curiam).

A. Jurisdiction Under 11 U.S.C. Sec. 106(a)

The Ashbrooks contend they are not required to file an administrative claim with the FmHA before countersuing that agency in bankruptcy court because 11 U.S.C. Sec. 106(a) provides that "[a] governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose." The United States is insulated from suit by sovereign immunity unless it consents to be sued. Garrett v. United States, 640 F.2d 24, 26 (6th Cir.1981) (per curiam). "A corollary to this doctrine of governmental immunity is that, when the United States consents to be sued, Congress may define the conditions under which suit will be permitted." Id. The defendants-appellees maintain that the Ashbrooks may only sue the United States for tort damages under the FTCA, 28 U.S.C. Secs. 1346(b) and 2671 et seq. The FTCA grants exclusive jurisdiction to the district courts "on claims against the United States, for money damages, accruing on and after January 1, 1945, for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office of employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." Id. at Sec. 1346(b). ² A claimant may not file suit under the FTCA unless he first files an administrative claim with the agency against which there is a grievance. Id. at Sec. 2675(a); Garrett, 640 F.2d at 26. The Ashbrooks did not file an administrative claim prior to commencement of the instant action because they believed that 11 U.S.C....