Bailey v. Federal Intermediate Credit Bank, 84-0488-CV-W-6-9.

• Decision Date: 25 April 1985
• Docket Number: No. 84-0488-CV-W-6-9.,84-0488-CV-W-6-9.
• Citation: 608 F. Supp. 1009
• Parties: Clarence B. BAILEY, Plaintiff, v. FEDERAL INTERMEDIATE CREDIT BANK OF ST. LOUIS, Defendant.
• Court: U.S. District Court — Western District of Missouri

608 F. Supp. 1009

Clarence B. BAILEY, Plaintiff, v. FEDERAL INTERMEDIATE CREDIT BANK OF ST. LOUIS, Defendant.

No. 84-0488-CV-W-6-9.

United States District Court, W.D. Missouri, W.D.

April 25, 1985.

Thomas E. Hankins, Gladstone, Mo., Bruce A. Bailey, Warrensburg, Mo., for plaintiff.

James W. Byrne, St. Louis, Mo., Donald W. Giffin, Kansas City, Mo., for defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT ON COUNT I AND ORDERING PLAINTIFF TO SHOW CAUSE WHY THE REMAINING COUNTS SHOULD NOT BE DISMISSED FOR LACK OF JURISDICTION

BARTLETT, District Judge.

In Count I of his complaint plaintiff seeks a declaratory judgment that defendant was without legal authority to discharge plaintiff as executive director of the Osage Production Credit Association (the Association). Defendant moved to dismiss Count I on the ground that Count I failed to state a claim upon which relief can be granted because defendant was authorized by Congress to terminate plaintiff. Further, defendant argues that the bylaws of the Association explicitly authorized defendant to terminate the chief executive officer of the Association. In support of its motion to dismiss, defendant filed affidavits and a copy of the Association's bylaws.

Because defendant relied on information outside the pleadings, the parties were advised that defendant's motion to dismiss would be treated as a motion for summary judgment under Rules 12(b) and 56, Fed.R. Civ.P.

Plaintiff opposed defendant's motion for summary judgment and filed a cross-motion for summary judgment. Plaintiff concedes that defendant may generally supervise the Association, but plaintiff asserts that Congress intended that production credit associations should be locally managed and controlled. Plaintiff argues that local control is thwarted if defendant's general supervisory power includes the authority to remove the chief executive officer of a production credit association. Plaintiff further argues that the Association's bylaws authorizing defendant to remove the Association's chief executive officer are inconsistent with Congress' intent that associations be locally managed.

The parties agree that the issue raised by the cross motions for summary judgment is whether defendant had the legal authority to remove plaintiff from his position as the chief executive officer of the Association under the provisions of the Farm Credit Act of 1971, as amended, 12 U.S.C. §§ 2001, et seq.

Facts

In February, 1983, the Farm Credit Administration approved revised standard and optional bylaws to be adopted by production credit associations. At defendant's board meeting on April 21 and 22, 1983, defendant approved the revised bylaws. On June 23, 1983, the board of directors of the Association unanimously adopted the revised bylaws, including certain optional bylaws, subject to certification by defendant. As corporate secretary, plaintiff certified that "the board of directors of the said association duly adopted the foregoing as the bylaws of said association." The Association's revised bylaws were approved by defendant on August 8, 1983.

Plaintiff had been employed by the Association since June 10, 1963, and had been the executive director since December 1, 1965. Plaintiff did not have a written employment contract with the Association. There was no agreement between the Association and plaintiff about how or why he could be terminated.

On March 14, 1984, representatives of defendant reported to the Association's board of directors on the results of the bank's audit of the Association. Defendant requested that the Association's board of directors terminate plaintiff as the Association's chief executive officer. The Association's board of directors unanimously refused to do so. Therefore, defendant terminated plaintiff as executive director of the Association.

When plaintiff was terminated by defendant, the Association's bylaws provided in part as follows:

500.2 — Election of Chief Executive Officer and Other Officers

The board shall elect a chief executive officer who shall serve at the pleasure of the board and shall continue in office until a successor is elected and takes office unless the chief executive officer shall resign, die, retire, or be removed by the board or by the bank. Other association officers shall be a secretary, a treasurer, and any other salaried officers provided for by the board....

520—REMOVAL

The chairman and the vice chairman may be removed from their positions as officers of the board, and the chief executive officer may be removed from office at any time by a majority vote of the entire membership of the board of directors or by the bank.

Discussion

Under the Farm Credit Act of 1971, Congress established:

A System of limited-purpose, farmer-owned banks and associations designed to furnish sound, adequate, and constructive credit to farmers and ranchers and their cooperatives. The 1980 Amendments to the Farm Credit Act of 1971 expanded the classes of eligible borrowers to include producers or harvesters of aquatic products, and expanded the lending authority of System institutions to enable them to be more responsive to the credit needs of agriculture.

12 CFR 611.200.

The Farm Credit System is directed by the Farm Credit Administration (FCA) which is "an independent agency in the executive branch of the Government." 12 U.S.C. § 2241. Below the FCA are twelve farm credit districts. 12 U.S.C. § 2221. Each farm credit district has a federal intermediate credit bank that can loan money to production credit associations or can participate with associations in loaning money to eligible borrowers. 12 U.S.C. § 2074. In each farm credit district there are a number of production credit associations that make loans to eligible borrowers. 12 U.S.C. § 2096.

In 1971, when Congress decided to continue the Farm Credit System, Congress intended that the Farm Credit System furnish American farmers and ranchers "sound, adequate, and constructive credit."

It is declared to be the policy of the Congress recognizing that a prosperous, productive agriculture is essential to a free nation and recognizing the growing need for credit in rural areas, that the farmer-owned cooperative Farm Credit System be designed to accomplish the objective of improving the income and well-being of American farmers and ranchers by furnishing sound, adequate, and constructive credit and closely related services to them, their cooperatives, and to selected farm-related businesses necessary for efficient farm operations.

12 U.S.C. § 2001(a).

In the same statutory section, Congress stated that an additional objective of the Farm Credit System was "to encourage farmer and rancher-borrowers participation in the management, control and ownership of a permanent system of credit for agriculture." 12 U.S.C. § 2001(b).

Various statutory and regulatory provisions implement the objective of borrower participation in the management of the Farm Credit System. For instance, member participation in the affairs of production credit associations is assured by the statutory and regulatory provisions providing that members of an association shall serve on an association's board. 12 U.S.C. § 2092; 12 CFR 611.1080.

Congressional concern about furnishing "sound, adequate and constructive credit" was reflected in the requirement that the FCA and credit banks regulate and control the organization and operations of associations, the primary lenders in the system. For instance, the FCA

shall have the power, under rules and regulations prescribed by the FCA or by prescribing in the terms of the charter or by approval of bylaws of the association, to provide for the organization of the association, the initial amount of stock of the association, the territory within which its operations may be carried on, and to direct at any time such changes in the charter as the FCA finds necessary for the accomplishment of the purposes of this chapter.

12 U.S.C. § 2091.

Furthermore, Congress authorized and directed the FCA "to delegate to a Federal intermediate credit bank such of the duties, powers, and authority of the Farm Credit Administration with respect to and over ... production credit associations, their...