Bukaske v. U.S. Dept. of Agr., CIV. 00-1011.

Citation193 F.Supp.2d 1162
Decision Date27 March 2002
Docket NumberNo. CIV. 00-1011.,CIV. 00-1011.
PartiesDarrell BUKASKE, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Farm Service Agency and Ann Veneman, Secretary of Agriculture, in her official capacity, Defendants.
CourtUnited States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
193 F.Supp.2d 1162
Darrell BUKASKE, Plaintiff,
v.
UNITED STATES DEPARTMENT OF AGRICULTURE, Farm Service Agency and Ann Veneman, Secretary of Agriculture, in her official capacity, Defendants.
No. CIV. 00-1011.
United States District Court, D. South Dakota, Northern Division.
March 27, 2002.

Page 1163

Randall Briggs Turner, Attorney at Law, Aberdeen, SD, for Plaintiff.

Stephanie Carlson Bengford, U.S. Attorney's Office, Sioux Falls, SD, for Defendants.

ORDER

KORNMANN, District Judge.


INTRODUCTION

[¶ 1] The Farmer's Home Administration ("FmHA"), the predecessor to the Farm

Page 1164

Service Agency ("FSA"), was "a lender of last resort for farmers who cannot obtain credit from private lenders." Moseanko v. Yeutter, 944 F.2d 418, 421 (8th Cir.1991). Unlike private lenders, FmHA exercised wide authority to compromise or adjust loans. Coleman v. Block, 562 F.Supp. 1353, 1364 (D.N.D.1983). 7 U.S.C. § 1981a provided authority for FmHA to compromise, adjust, or reduce claims, to adjust and modify the terms of mortgages, to defer principal and interest and to forego foreclosure for such period as the Secretary deems necessary. Curry v. Block, 541 F.Supp. 506, 512 (S.D.Ga.1982).

[¶ 2] In 1977, farmers began experiencing financial difficulties, due in large part to adverse weather and economic conditions. Curry v. Block, 541 F.Supp. at 509. Following widespread notices of intent to foreclose, class action litigation commenced in the early 1980's in Georgia, challenging FmHA's failure to provide borrowers with personal notice of and an opportunity to apply for deferral relief under 7 U.S.C. § 1981a and failure to promulgate regulations implementing that statute. The district court in Georgia directed the United States Department of Agriculture ("USDA") and FmHA to provide the plaintiffs with personal notice of the provisions of § 1981a and to promulgate regulations on the eligibility criteria of § 1981. Curry v. Block, 541 F.Supp. at 525-26.

[¶ 3] Class action litigation challenging FmHA's practices also was commenced in North Dakota. In 1983, the USDA and FmHA were enjoined from three activities, namely terminating a farmer's living and operating allowance, accelerating indebtedness and instituting foreclosure proceedings with the injunction to continue until borrowers were given prior notice of the reasons for the proposed action, an explanation of the eligibility for loan deferral options under § 1981a, and of their right to a hearing. Coleman v. Block, 562 F.Supp. 1353, 1367 (D.N.D.1983). The district court subsequently certified a national class of FmHA borrowers and, on November 14, 1983, the injunction was extended to apply to the national class and became a permanent injunction. Coleman v. Block, 580 F.Supp. 192 (D.N.D.1983).

[¶ 4] On November 1, 1985, in response to the various court rulings, regulations were enacted pursuant to § 1981a. 50 Fed.Reg. 45,740. Those regulations provided that three forms were to be sent to delinquent borrowers, including forms describing debt servicing options available to borrowers. See Coleman v. Block, 632 F.Supp. 1005, 1007-08 (D.N.D.1986). Those forms were challenged on several grounds. The District of North Dakota rejected many of plaintiffs' challenges to the new regulations but accepted a due process challenge, finding that they gave inadequate notice to delinquent borrowers of their loan servicing options, particularly in conjunction with the fact that borrowers who sought additional information from county FmHA offices received inadequate or misleading information. Coleman v. Block, 663 F.Supp. 1315, 1332 (D.N.D.1987). On May 7, 1987, USDA and FmHA were ordered to amend the forms. Coleman v. Block, 663 F.Supp. at 1333.

[¶ 5] Both sides appealed the 1987 Coleman order. During the pendency of the appeal, Congress enacted the Agricultural Credit Act of 1987, Pub.L. No. 100-233, 101 Stat. 1568 (1988). Title VI of the Act made extensive changes in the statutory provisions which had formed the background for the Coleman litigation, the changes being designed to carry out the intent of the Coleman decisions. Coleman v. Lyng, 864 F.2d 604, 608-9 (8th Cir. 1988). Congress essentially required USDA and FmHA to do everything the district court ordered, rendering the appeals moot. Id. at 609-12.

Page 1165

[¶ 6] Various provisions of the Agriculture Credit Act of 1987 once again bring USDA and FmHA's successor before the courts. One of the debt restructuring options set forth in the Act is the "writing down of principal and accumulated interest charges" on FmHA loans. 7 U.S.C. § 1991(b)(3)(C). For qualified delinquent debtors, the debt could be written down to a level at which a feasible plan of repayment could be developed; the write-down was to provide a return to the federal government equal to the net recovery from an involuntary liquidation at the time of the write-down. 7 CFR § 1951.902 (1989). Net recovery value is the estimated amount the government would recover from the sale of a debtor's mortgaged property, minus expenses, after an involuntary liquidation. 7 U.S.C. § 2001(c)(2) (1988). A borrower who qualified for a write-down of an FmHA loan was required to enter into a shared appreciation agreement ("SAA"). 7 C.F.R. § 1951.909(e)(4)(vi) [formerly 7 C.F.R. § 1951.909(e)(5)(iii)(D)].

[¶ 7] Darrell and Velda Bukaske qualified for a write-down and, on July 19, 1989, they entered into a SAA with FmHA. The term of the SAA was ten years, expiring on July 19, 1999. In connection with a divorce between the Bukaske's, Velda conveyed her interest in the property, subject to all existing contracts, to Darrell ("Bukaske"). On May 17, 1994, FSA released Velda from personal liability with regard to the loan. Bukaske is thus the sole debtor potentially liable under the terms of the SAA.

[¶ 8] The essential terms of the SAA are as follows:

As a condition to, and in consideration of, FmHA writing down the above amounts and restructuring the loan, Borrower agrees to pay FmHA an amount according to one of the following payment schedules:

1. Seventy-five (75) percent of any positive appreciation in the market value of the property securing the loan as described in the above security instrument(s) between the date of this Agreement and either the expiration date of this Agreement or the date the Borrower pays the loan in full, ceases farming or transfers title of the security, if such event occurs four (4) years or less from the date of this Agreement.1

2. Fifty (50) percent of any positive appreciation in the market value of the property securing the loan above as described in the security instruments between the date of this Agreement and either the expiration date of this Agreement or the date Borrower pays the loan in full, ceases farming or transfers title of the security, if such event occurs after four (4) years but before the expiration date of this Agreement.

The amount of recapture by FmHA will be based on the difference between the value of the security at the time of disposal or cessation by Borrower of farming and the value of the security at the time this Agreement is entered into. If the borrower violates the term (sic) of this agreement FmHA will liquidate after the borrower has been notified of the right to appeal.2

[¶ 9] The value of the real estate securing the loan at the time the SAA was entered into was $212,700.00. The total amount of the write-down was $177,404.57. Shortly before the expiration of the SAA, FSA caused the land to be appraised and the

Page 1166

appraisal value was $395,000.00. On May 19, 1999, FSA notified Bukaske that the SAA had "matured" and that FSA had calculated the shared appreciation due at $91,150, fifty percent of the total increase in value, i.e. $182,300.00.

[¶ 10] Bukaske claims not to owe any shared appreciation. He claims he has complied with the terms of the SAA, i.e. he did not cease farming, transfer title to the real estate, or pay his loan in full. Bukaske sought reconsideration based upon claimed ambiguity in the SAA and his alternative claim that the appraisal value used to calculate shared appreciation due was too high so that the amount of the recapture should be lower. The local farm loan officer denied reconsideration based upon her claimed lack of "authority to make a decision on these matters." Bukaske appealed to the National Appeals Division of USDA based upon the claim that no shared appreciation is due under the terms of the SAA. The National Appeals Division hearing officer held that the "question of ambiguity of the SAA may be a legal matter which is beyond the administrative authority of this hearing determination" and that the "Agency's decision to determine the Appellant owed $91,150 under a SAA was not erroneous." Bukaske requested that the director of the National Appeals Division review the hearing officer's determination, contending that the SAA had expired and thus no shared appreciation is due. He also objected to the hearing officer's conclusion that, "under shared appreciation, $91,150 is owed to the Agency." The director upheld the hearing officer's decision.

[¶ 11] Moving next to federal court, Bukaske filed an amended complaint, seeking judicial review of the final decision of USDA pursuant to the Administrative Procedures Act, 5 U.S.C. § 706, as authorized by 7 U.S.C. § 6999. Bukaske also advances a claim for declaratory relief under 28 U.S.C. §§ 2201, 2202. This court previously ruled that Bukaske may allege jurisdiction only under 7 U.S.C. § 6999. Defendants filed a motion for summary judgment.

DECISION

[¶ 12] Pursuant to 7 U.S.C. § 6999, a final determination of the Director of the National Appeals Division of the USDA is reviewable and enforceable by any United States District Court in accordance with the Administrative Procedure Act, 5 U.S.C. §§ 701-706. The standard of review is defined by § 706 of the Administrative Procedures Act:

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  • Stahl v. U.S. Dept. of Agriculture, 02-2915.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • May 6, 2003
    ...Although we agree with appellants that the Agreement does not represent the pinnacle of the drafter's art, see Bukaske v. USDA, 193 F.Supp.2d 1162, 1167 (D.S.D.2002) ("[The Agreement] is poorly drafted."), its terms are reasonably plain and in any case may not be construed to conflict with ......
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    • United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa
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    ...FSB and other state-chartered banks for CRU services and through having to reimburse FSB for the fees it pays SHAZAM. Metrobank, 193 F. Supp. 2d at 1162; see also Bank One, 190 F.3d at 850-51 (concluding that Bank One had established irreparable harm where "in the absence of an injunction t......

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