Federal Land Bank of St. Paul v. Lillehaugen

Decision Date16 April 1987
Docket NumberNo. 11254,11254
Citation404 N.W.2d 452
PartiesThe FEDERAL LAND BANK OF ST. PAUL, a corporation, Plaintiff and Appellee, v. Maynard T. LILLEHAUGEN and Delores Lillehaugen, husband and wife, And all other persons unknown claiming any estate or interest in or lien or encumbrance on the property described in the Complaint, Defendants and Appellants. Civ.
CourtNorth Dakota Supreme Court

Theodore M. Camrud, of Degnan, McElroy, Lamb, Camrud, Maddock & Olson, Grand Forks, for plaintiff and appellee.

Gary D. Kanwischer (argued) of Sortland Law Office, Fargo, and John Remington

Graham, of Milloy & Graham, Brainerd, Minn., for defendants and appellants.


Maynard T. Lillehaugen and Delores Lillehaugen appealed from a district court judgment which granted the Federal Land Bank of St. Paul (FLB) foreclosure of its mortgage on land owned by the Lillehaugens. We affirm in part, reverse in part, and remand for further proceedings.

On June 18, 1980, FLB loaned the Lillehaugens $36,000. The Lillehaugens executed a promissory note secured by a mortgage on approximately 150 acres of land. The Lillehaugens defaulted on the note and FLB brought this foreclosure action during June 1984. A default judgment was entered against the Lillehaugens, but in Federal Land Bank of St. Paul v. Lillehaugen, 370 N.W.2d 517 (N.D.1985), we reversed the district court's denial of the Lillehaugens' motion to vacate that judgment. After our remand, the Lillehaugens answered and counterclaimed, and a trial was held on February 19, 1986.

At trial the Lillehaugens presented evidence in support of two defenses. Maynard Lillehaugen and Dr. Roger Johnson, an agriculture economist at North Dakota State University, testified in support of the confiscatory-price defense. See Secs. 28-29-04, 28-29-05, and 28-29-06, N.D.C.C. Lillehaugen testified about the income he was receiving for farm commodities, as well as the costs incurred in producing those commodities, and Dr. Johnson testified to the effect that the cost of producing spring wheat, flax, and sunflowers is greater than the prices received for those products. Lillehaugen also testified in support of the asserted defense that FLB breached a fiduciary duty owed to the Lillehaugens by failing to disclose the actual cost of credit associated with their loan.

In its oral ruling from the bench at the close of the evidence, the trial court rejected both defenses and granted FLB foreclosure of the mortgage. In its written findings of fact, conclusions of law, and order for judgment the trial court found that, with regard to the non-disclosure defense, "[t]he Defendants at all pertinent times knew the credit terms, [and] made no factual showing that there was any undisclosed terms, including the payments that were to be made, ..." The basis for the trial court's rejection of the confiscatory-price defense is less clear. In its oral ruling the trial court held that the confiscatory-price defense statutes are pre-empted by the Farm Credit Act of 1971, 12 U.S.C. Secs. 2001, et seq. Although expressing "doubts as to whether [the Lillehaugens] have established confiscatory price as a defense in this case," the trial court stated that "I make that comment but not as a specific ruling on whether or not that defense was or was not established." The trial court's written findings and conclusions, however, do not mention the Federal pre-emption ruling, but contain a finding that "[t]here has not been convincing evidence" to establish the confiscatory-price defense.

Generally, a trial court's written findings of fact prevail when a discrepancy exists between those findings and the court's prior memorandum opinion or oral ruling. See Schmidt v. Plains Elec., Inc., 281 N.W.2d 794 (N.D.1979). Although there are variations between the trial court's oral ruling and its written findings and conclusions in this case, we do not believe that they evidence a "discrepancy" in the sense that a recognition of both would create a truly inconsistent trial court result. Compare Moore v. North Dakota Workmen's Compensation Bureau, 374 N.W.2d 71, 72 n. 1 (N.D.1985) [judgment which denied attorney fees controlled over order for judgment which allowed the fees]. Accordingly, we interpret the primary basis for the trial court's decision in this case to be that the confiscatory-price defense statutes are pre-empted by Federal law. 1 We consider the trial court's finding that the Lillehaugens failed to establish the confiscatory-price defense to be an alternative basis for its decision.


The Lillehaugens assert that the trial court erred in ruling that the confiscatory-price defense statutes are pre-empted by the Farm Credit Act of 1971. We agree.

The Supremacy Clause of Article VI of the United States Constitution provides Congress with the power to pre-empt State law. Federal land banks were created by Congress and are "federally chartered instrumentalities of the United States." 12 U.S.C. Sec. 2011; see also, Federal Land Bank of Saint Paul v. Gefroh, 390 N.W.2d 46 (N.D.1986); Federal Land Bank of St. Paul v. De Rochford, 69 N.D. 382, 287 N.W. 522 (1939). As such, Congress has the authority to determine the extent to which State law is pre-empted with respect to Federal land bank activities. See First National Bank v. Missouri, 263 U.S. 640, 44 S.Ct. 213, 68 L.Ed. 486 (1924).

The United States Supreme Court has not adopted a singular approach to pre-emption issues, but has employed various formulations in identifying different instances of pre-emption:

"Pre-emption occurs when Congress, in enacting a federal statute, expresses a clear intent to pre-empt state law, Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977), when there is outright or actual conflict between federal and state law, e.g., Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962), where compliance with both federal and state law is in effect physically impossible, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963), where there is implicit in federal law a barrier to state regulation, Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the States to supplement federal law, Rice v. Sante Fe Elevator Corp., 331 U.S. 218, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947), or where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress. Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581 (1941). Pre-emption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may preempt state regulation. Fidelity Federal Savings & Loan Assn. v. De la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984)."

Louisiana Public Service Comm'n v. F.C.C., --- U.S. ----, ----, 106 S.Ct. 1890, 1898-1899, 90 L.Ed.2d 369 (1986). See generally Application of Otter Tail Power Co., 354 N.W.2d 701 (N.D.1984); Northwestern Fed. Sav., Etc. v. Ternes, 315 N.W.2d 296 (N.D.1982); Northern States Power Co. v. Hagen, 314 N.W.2d 32 (N.D.1981).

The Supreme Court has emphasized, however, that "the first and fundamental inquiry in any pre-emption analysis is whether Congress intended to displace state law, and where a congressional statute does not expressly declare that state law is to be preempted, and where there is no actual conflict between what federal and state law prescribe, we have required that there be evidence of a congressional intent to pre-empt the specific field covered by the state law." Wardair Canada, Inc. v. Florida Dept. of Revenue, --- U.S. ----, ----, 106 S.Ct. 2369, 2372, 91 L.Ed.2d 1 (1986). Because of the generally interstitial nature of Federal law, a pre-emption of State law by Federal statute or regulation is not favored, and consideration under the Supremacy Clause starts with the basic assumption that Congress did not intend to displace State law. Application of Otter Tail Power Co., supra; see also, Maryland v. Louisiana, 451 U.S. 725, 101 S.Ct. 2114, 68 L.Ed.2d 576 (1981).

Our pre-emption analysis begins with a brief review of the confiscatory- price defense statutes. 2 These statutes were adopted by our Legislature in 1933 as part of a comprehensive response to issues of farm foreclosure, farm debt, farm debtor relief, and low farm prices during the agricultural and economic crisis of the 1930s. See Production Credit Ass'n of Minot v. Lund, 389 N.W.2d 585 (N.D.1986); Lang v. Bank of North Dakota, 377 N.W.2d 575 (N.D.1985); Vogel, The Law of Hard Times: Debtor and Farmer Relief Actions of the 1933 North Dakota Legislative Session, 60 N.D.L.Rev. 488 (1984). The confiscatory-price defense statutes provide the courts with special equitable powers to protect debtors when the prices of agricultural products are below the cost of their production or when the debtor would lose his equity in a home to foreclosure or execution, and further authorize the courts to stay foreclosure proceedings on public policy grounds. See Vogel, supra. While these statutes authorize a court, in its discretion, to delay foreclosure proceedings, they do not constitute an absolute defense against foreclosure thereby relieving the mortgagor of his obligations under his contract. In applying the defense, "the court cannot force the mortgagee to accept less than the amount due under the mortgage or declare that the mortgagor is freed from making any further payments." Folmer v. State, 346 N.W.2d 731, 735 (N.D.1984). The obvious legislative purpose of the confiscatory-price defense is to provide a form of protection for the farmer-landowner during times of economic hardship. See Heidt v. State, 372 N.W.2d 857...

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