Coleman v. Lyng
| Decision Date | 01 February 1989 |
| Docket Number | 88-5003,Nos. 87-5477,s. 87-5477 |
| Citation | 864 F.2d 604 |
| Parties | Dwight COLEMAN, Lester Crowsheart, Sharon Crowsheart, Russell Folmer, Anna Mae Folmer, George Hatfield, June Hatfield, Donna McCabe, Diane McCabe, on behalf of themselves and others similarly situated; Gary A. Barrett, Rosemary K. Barrett, Richard L. Harmon, Betty J. Harmon, Larry L. Robertson, Nancy K. Robertson, Ross Wade, and Maureen Wade, Appellees/Cross-Appellants, v. Richard E. LYNG, Secretary of Agriculture, Charles W. Shuman, Administrator of the Farmers Home Administration, Ralph W. Leet, State Director of the Farmers Home Administration, Harold T. Aasmundstad, Glen W. Binegar, Allen G. Drege, Dennis W. Larson, Odell O. Ottmar and Joseph J. Schneider, as District Directors of the Farmers Home Administration of North Dakota and Samuel Delvo, Lorace Hakanson, Larry Leier, Charles Schaefer and James Well, as County Supervisors of the Farmers Home Administration in North Dakota, Appellants/Cross-Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Howard S. Scher, Washington, D.C., for appellants/cross-appellees.
Lynn A. Hayes, St. Paul, Minn., for appellees/cross-appellants.
Before LAY, Chief Judge, HENLEY, Senior Circuit Judge, and ARNOLD, Circuit Judge.
In this case, a nationwide class of borrowers from the Farmers Home Administration (FmHA) challenged the validity of certain FmHA loan servicing policies on statutory and constitutional grounds. The District Court dismissed all but one of the farmers' fourteen claims for relief, and awarded partial relief to members of certain subgroups of the plaintiff class on the remaining claim. Both sides appeal. After the entry of the District Court's order, Congress enacted the Agricultural Credit Act of 1987, P.L. No. 100-233, 101 Stat. 1568, a statute which provides more relief to the plaintiffs than the remedy ordered by the District Court. We hold that the passage of the Agricultural Credit Act moots both the government's appeal and the farmers' cross-appeal. Accordingly, we vacate the judgment of the District Court and remand with instructions to dismiss.
This litigation began in March 1983, when several North Dakota farmers filed suit on behalf of a state-wide class of FmHA borrowers challenging the FmHA's farm loan liquidation and foreclosure procedures. The complaint alleged that these procedures failed to include provisions for loan deferral as mandated by 7 U.S.C. Sec. 1981a, and violated the plaintiff's Fifth Amendment right to due process. The District Court subsequently certified the class and granted preliminary relief. Coleman v. Block, 562 F.Supp. 1353 (D.N.D.1983). The Court later granted the plaintiffs' motion to expand the class to a nationwide class. Coleman v. Block, 100 F.R.D. 705 (D.N.D.1983), and extended the preliminary relief to the nationwide class. Coleman v. Block, 580 F.Supp. 192 (D.N.D.1983). Following a three-day trial on the merits, the District Court issued a permanent injunction prohibiting FmHA from accelerating borrowers' loans, foreclosing on borrowers' collateral property, or liquidating the living and operating allowance from sale proceeds of crops and livestock offered as collateral for FmHA loans, unless the FmHA provided 30 days' written notice of the action with reasons for the action, a right to an appeal, and an opportunity to establish eligibility for loan deferral under 7 U.S.C. Sec. 1981a. Coleman v. Block, 580 F.Supp. 194, 210-11 (D.N.D.1984).
This appeal concerns the validity of the FmHA's response to the District Court's 1983-84 orders. After the District Court granted the preliminary injunction, the FmHA prepared a set of documents known as the "pretermination package" for use in taking adverse action against borrowers. The pretermination package replaced the previous set of forms (which the District Court had found defective) as of November 14, 1983, and remained in use until October 19, 1984. At that time, the FmHA introduced still another set of forms, designated as forms FmHA 1924-14, 1924-25, and 1924-26, 1 which superseded the pretermination package. These three documents, sent to delinquent FmHA borrowers in advance of loan acceleration, reflected new regulations governing FmHA loan servicing published on November 30, 1984 at 49 Fed.Reg. 47,007 and promulgated in final form on November 1, 1985 at 50 Fed.Reg. 45,740.
On November 29, 1985, the plaintiffs filed a supplemental complaint 2 which raised fourteen claims for relief, challenging both the pretermination package and the superseding 1924 series of FmHA forms under the Administrative Procedure Act, 5 U.S.C. Secs. 551-706, and the Due Process Clause. Ten of these claims have been resolved or dismissed by the District Court without appeal. 3 Three of them have lost practical significance. 4 Only the tenth claim for relief, and the scope of the remedy ordered for this claim, are at issue in this appeal.
The tenth claim for relief alleges that forms FmHA 1924-14, 1924-25, and especially 1924-26 deprive FmHA borrowers of property without due process of law. (The property right involved, according to plaintiffs' theory, is the right, created by statute, to be considered for various alternatives to foreclosure.) These documents are the first materials the FmHA sends to borrowers who are behind in their loan repayments, and whose loans may be accelerated. Form FmHA 1924-25, "Notice of Intent to Take Adverse Action," informs the borrower that his or her account is delinquent, or that the borrower has otherwise violated the FmHA loan agreement. Form 1924-25 notifies the borrower of the opportunity to appeal the intended adverse action, and indicates the availability of servicing options provided by statute. Form FmHA 1924-14 describes these options, which include various types of loan deferral, and refinancing. The borrower has thirty days after receipt of this notice to complete Form FmHA 1924-26, "Borrower Acknowledgment of Notice to Take Adverse Action." Form FmHA 1924-26 requires the borrower to choose one of four possible courses in response to the intended adverse action:
(1) The borrower may apply for one or more of the seven loan servicing actions listed in Form 1924-25;
(2) The borrower may appeal the intended adverse action to an FmHA hearing officer; (3) The borrower may elect to cure the default by paying the delinquent account or making restitution for any unauthorized disposition of security; or
(4) The borrower may elect to liquidate the account by selling or transferring the secured assets.
These three FmHA forms are the first step in a process that often culminates in the foreclosure of the mortgage on the farmer's land, and the liquidation of all crops, livestock, and equipment which have secured the defaulted FmHA loan.
The farmers' tenth claim for relief incorporates several grievances concerning the clarity and completeness of the 1924 series of forms. The farmers allege that these forms are unreadable, and that they misrepresent or fail to mention important features of loan servicing options under Sec. 1981a. In effect, the farmers argue, the FmHA forms deprived borrowers of their statutory rights throughout the foreclosure and acceleration process. The District Court rejected the farmers' criticisms of the wording and thoroughness of the notice forms, observing that the improvements that the farmers sought would only make the forms longer and more difficult to understand. See Coleman v. Block, 663 F.Supp. 1315, 1331-32 (D.N.D.1987). The Court found that the FmHA's general scheme, in which the forms would provide borrowers with general notice of their options and direct them to the county FmHA offices for a more thorough explanation, was "a constitutionally permissible, and even preferable, alternative." Id. at 1332.
The District Court found, however, that this system of notice, though sound in principle, failed in practice because county FmHA agents were unprepared to provide the information borrowers requested. According to the plaintiffs' uncontradicted evidence, county agents for the FmHA provided "inadequate or misleading information, or no information at all" to borrowers seeking further explanation of their options listed in the 1924 series of forms. Id. at 1332. The District Court concluded that the inability of the county FmHA agencies to explain the available alternatives to loan acceleration under Sec. 1981a constituted a denial of notice and a violation of the farmers' rights to due process. Id. at 1332-33.
The District Court also found an arbitrary deprivation of a protected property right in one element of Form FmHA 1924-26. That form directs delinquent borrowers to choose one, and only one, of four available liquidation options, in spite of the fact that a single Notice of Adverse Action may be used to cover more than one kind of loan. The District Court reasoned that FmHA borrowers are entitled to make a separate election of liquidation options for each loan and each reason for the proposed adverse action, and concluded that Form 1924-26 deprived borrowers of this entitlement to a mix of options by limiting them to a single choice. Id. at 1333. As a remedy for these asserted constitutional deficiencies, the District Court ordered the FmHA to amend Form 1924-26 by including a prominent statement that explanations of the various options available to borrowers would be available at county FmHA offices. The FmHA was further required to prepare a comprehensive packet of information explaining the requirements, terms, restrictions, and benefits of each option for dissemination to county FmHA agents. Finally, the District Court ordered the FmHA "to amend form FmHA 1924-26 to allow borrowers a separate election of options for each loan accelerated and for each reason given for each proposed action." Id.
In this order, which was entered on May 7,...
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