Farm Credit Bank of Texas v. Farish, s. 94-40176

• Decision Date: 16 September 1994
• Docket Number: 94-40424,Nos. 94-40176,s. 94-40176
• Citation: 32 F.3d 184
• Parties: FARM CREDIT BANK OF TEXAS, Plaintiff-Appellee, v. Andre C. FARISH, Defendant-Appellant, FEDERAL LAND BANK OF JACKSON, In Receivership f/k/a Federal Land Bank of New Orleans, Plaintiff, v. Andre C. FARISH, Defendant Counter Claimant-Appellant, v. FARM CREDIT BANK OF TEXAS, Counter-Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 184

32 F.3d 184

FARM CREDIT BANK OF TEXAS, Plaintiff-Appellee, v. Andre C. FARISH, Defendant-Appellant,

FEDERAL LAND BANK OF JACKSON, In Receivership f/k/a Federal

Land Bank of New Orleans, Plaintiff, v. Andre C. FARISH, Defendant Counter Claimant-Appellant, v. FARM CREDIT BANK OF TEXAS, Counter-Defendant-Appellee.

Nos. 94-40176, 94-40424

Summary Calendars.

United States Court of Appeals,

Fifth Circuit.

Sept. 16, 1994.

Patrick L. Boothe, Smith, Taliaferro, V. Russell Purvis, Seibert & Purvis, Jonesville, LA, for appellant in Nos. 94-40424, 94-40176.

Michael E. Kramer, Winnsboro, LA, Jean M. Sweeney, Milling, Benson, Woodward, Hillyer, Pierson & Miller, New Orleans, for appellee in No. 94-40176.

Jean M. Sweeney, William C. Gambel, Ann C. Dowling, Milling, Benson, Woodward, Hillyer, Pierson & Miller, New Orleans, LA, for appellee in No. 94-40424.

Appeals from the United States District Court for the Western District of Louisiana.

Before GARWOOD, SMITH and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

The Farm Credit Bank of Texas (FCBT) sued Andre C. Farish to recover payment on a defaulted loan. After a bench trial, the district court ruled in favor of the FCBT. In a separate suit involving the same facts, Farish sued the FCBT for damages and injunctive relief. The same district court granted FCBT summary judgment. Having consolidated Farish's appeals, we now affirm the district court's two rulings.

I.

A.

We begin by reciting the facts and procedure relevant to case number 94-40176, which is Farish's appeal of FCBT's suit against him. In 1980, pursuant to the Farm Credit Act of 1971, 12 U.S.C. Secs. 2001-2279bb-6, Farish borrowed $355,000 from the Federal Land Bank of New Orleans (FLB) and executed a promissory note and a mortgage affecting real property in Louisiana. As a condition to obtaining the loan, the Act required Farish to purchase 3,550 shares of FLB stock at a par value of $5 per share. The statute also provided that upon repayment or default, the stock was to be cancelled and a credit in the amount of the book value thereof applied to the loan balance. 12 U.S.C. Sec. 2034. The Farm Credit Act also provided that the FLB would have (1) first lien on the stock for the payment of any liability of the shareholders and (2) the discretion to cancel the stock when the debtor defaulted. 12 U.S.C.S. Sec. 2054. In 1986, Farish stopped making payments on his loan. The FLB declared the loan to be in default and accelerated his note. Farish then attempted to pursue loan restructuring under the Farm Credit Act, whereby he requested that the FLB provide an appraisal of the mortgaged real property. The FLB denied Farish's restructuring proposal and advised Farish of its intention to move forward with foreclosure proceedings. In order to reduce Farish's outstanding loan balance, Farish agreed that his FLB stock would be cancelled. In June 1989, the FLB cancelled the stock and applied the par value to his delinquent loan balance.

The FLB then informed Farish of his right to request review of the FLB's decision and directed him to submit a request no later than June 23, 1989. But Farish did not respond until June 26, 1989. Three months later, the FLB sued Farish in state court to foreclose the real property mortgage and recover the delinquent balance of the note. Farish responded by seeking to enjoin the FLB's collection efforts. The state court ruled in favor of Farish in August 1990. The court temporarily enjoined the FLB from foreclosing because the FLB had not given him adequate time under the Farm Credit Act to request review. The court's ruling meant that the FLB was enjoined from foreclosing until it complied with the Farm Credit Act's procedures. The state court did not say that the FLB could never collect. The FLB ultimately assigned its rights and obligations under the note and mortgage to the FCBT and moved to dismiss the state foreclosure suit. The state court granted the FLB's motion to dismiss. Shortly thereafter, the FCBT sent two loan restructuring application packages to Farish informing him of his rights under the Farm Credit Act to pursue another restructuring application. Farish again failed to respond. The FCBT therefore filed this diversity suit in January 1992, seeking collection of the outstanding balance on the loan that the FLB had assigned to it.

Farish answered by admitting the factual allegations of the FCBT's complaint but asserting that the federal district court should have abstained from considering the FCBT's suit because it is governed by the Louisiana Deficiency Judgment Act (LDJA), LA.REV.STAT.ANN. Sec. 13:4106, and not the Farm Credit Act. He argued that the LDJA prohibits creditors from obtaining a deficiency judgment against him for any amount remaining due after applying the cancelled stock to the loan balance. Under the LDJA, a creditor who takes advantage of a waiver of appraisement and sells a debtor's property in an executory proceeding is prohibited from subsequently obtaining a judgment against that debtor. Id. Sec. 13:4106A. In effect, the creditor accepts the property of the original sale as full payment and satisfaction of the debt.

In addition to his LDJA argument, Farish raised two estoppel arguments. He first argued that the FCBT should be estopped from collecting the balance on the loan because the FLB failed to comply with the borrowers' rights provisions of the Farm Credit Act. He also asserted that the FCBT should be estopped from collection based on its own failure to comply with the Farm Credit Act.

After a bench trial, the district court ruled in favor of the FCBT in January 1994. The court first reasoned that, because the FLB proceeded against Farish's stock pursuant to the federal statute--and not by state law executory process--the LDJA was inapplicable. Therefore, the FLB's cancellation of Farish's stock did not extinguish his obligation under the note. Second, the court found that the FLB's actions did not bar the FCBT's efforts to collect because the state court's ruling was limited to the FLB's original collection efforts and not the FCBT's present efforts. Finally, the court summarily dismissed Farish's final argument that the FCBT had not complied with the Farm Credit Act. Because Farish never particularized this allegation, the court concluded that it was not obligated to consider this argument. Farish now appeals the court's ruling.

B.

We now recite the details of case number 94-40424, which is Farish's appeal of his suit against the FCBT. The facts of this case are the same but the procedural history, obviously, is different. In October 1993, just before trial was to begin in the FCBT's foreclosure suit, Farish sued the FCBT in state court, seeking damages and injunctive relief under the Agricultural Credit Act, which was passed in 1987 and amended the Farm Credit Act. The FCBT removed Farish's suit to federal district court, whereupon Farish moved to remand the case to state court. The FCBT, meanwhile, moved for summary judgment, asserting that the Agricultural Credit Act did not provide Farish a private right of action.

In January 1994, the district court stayed proceedings in Farish's suit (No. 94-40424) until the FCBT's foreclosure suit (No. 94-40176) was resolved. After ruling in favor of the FCBT in its foreclosure suit, the court then resumed proceedings in Farish's suit against the FCBT. The court first denied Farish's motion to remand in April 1994, concluding that the FCBT had properly removed Farish's suit against it. The court then granted the FCBT summary judgment on the ground that the Agricultural Credit Act does not provide borrowers a private right of action. Farish also appeals this ruling. We have consolidated his two appeals.

II.

As to the FCBT's foreclosure suit (No. 94-40176), Farish appeals two issues: (1) the district court's conclusion that the LDJA does not apply, and (2) the district court's conclusion that the FCBT is not estopped from foreclosing because of the FLB's previously enjoined collection efforts. We will discuss each in turn.

A.

Farish primarily argues in this appeal that the district court improperly concluded that the Farm Credit Act governs this dispute. Instead, he argues, the court should have concluded that the LDJA governs the FCBT's claim. He further claims that, because the FCBT's suit involves the application of state law (i.e., the LDJA), the district court should have abstained from considering the suit.

We review questions of law de novo. Sockwell v. Phelps, 20 F.3d 187, 190-91 (5th Cir.1994). We find that the district court properly concluded that the LDJA does not apply to the FCBT's suit. The Louisiana Supreme Court has established that the LDJA applies only to situations in which a debtor's property is sold pursuant to a writ of sale and seizure following an executory proceeding. ¹ Guaranty Bank of Mamou v. Community Rice Mill, 502 So.2d 1067, 1070 (La.1987); FDIC v. Kemp, 766 F.Supp. 511, 516 (E.D.La.1991). An executory proceeding is a judicial sale where there has been no judgment rendered in favor of the creditor. Id. The LDJA, however, does not protect Farish from his obligation under the note because the stock was cancelled pursuant to the Farm Credit Act, which governed this transaction from the beginning. ² Specifically, the Act requires that, in return for the loan from the Federal Land Bank, the borrower must purchase a specified amount of stock in the bank. The stock is purchased at $5 per share, and the total stock purchase must equal five to ten percent of the loan. Furthermore, the Act explicitly sets forth the mechanics and remedy by which the debtor's stock can be utilized as a source of payment towards the loan in the event of default, and does not call for a "sale" of the stock. The Act permits the bank to cancel the borrower's stock and apply its value to the outstanding balance of the loan. Additionally, federal regulations specifically...