Harper v. Federal Land Bank of Spokane, s. 88-4033

• Decision Date: 27 June 1989
• Docket Number: 88-4120,Nos. 88-4033,s. 88-4033
• Citation: 878 F.2d 1172
• Parties: Myron S. HARPER, Jane Harper, Plaintiffs-Appellees, v. FEDERAL LAND BANK OF SPOKANE, a corporation; Willamette Production Credit Association, a corporation in liquidation; Kenneth P. Krueger, in his capacity as President and Chief Executive Officer of the Federal Land Bank of Spokane, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1172

878 F.2d 1172

58 USLW 2029

Myron S. HARPER, Jane Harper, Plaintiffs-Appellees, v. FEDERAL LAND BANK OF SPOKANE, a corporation; Willamette

Production Credit Association, a corporation in liquidation;

Kenneth P. Krueger, in his capacity as President and Chief

Executive Officer of the Federal Land Bank of Spokane,

Defendants-Appellants.

Nos. 88-4033, 88-4120.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 4, 1989.

Decided June 27, 1989.

Richard A. Edwards, James N. Westwood, Miller, Nash, Wiener, Nash, Wiener, Hager & Carlsen, Portland, Or., John D. Albert, Churchill, Leonard, Brown & Donaldson, Salem, Or., for defendants-appellants.

James T. Massey, Farmers' Legal Action Group, Inc., Sisters, Or., Michael J. Martinis, Webb and Martinis, Salem, Or., for plaintiffs-appellees.

Jocelyn F. Olson, Asst. Atty. Gen., State of Minn., St. Paul, Minn., for amici curiae.

Richard W. Brunette, Jr., Marsha D. Galinsky, Sheppard, Mullin, Richter & Hampton of Los Angeles, Cal., for amicus curiae Western Farm Credit Bank.

Appeal from the United States District Court for the District of Oregon.

Before TANG, SKOPIL and KOZINSKI, Circuit Judges.

SKOPIL, Circuit Judge:

The primary issue on appeal is whether there is an implied private right of action to enforce the Agricultural Credit Act of 1987 ("1987 Act"), 12 U.S.C. Secs. 2001-2279aa-14. The district court held that the 1987 Act creates such an action and found that the Federal Land Bank ("FLB") and Willamette Production Credit Association ("WPCA") violated the statute. Harper v. Federal Land Bank of Spokane, 692 F.Supp. 1244, 1252-53 (D.Or.1988). We hold there is no implied private right of action for the 1987 Act. We reverse.

FACTS AND PRIOR PROCEEDINGS

Myron and Jane Harper ("the Harpers") own and operate a farm in Oregon encumbered by mortgages held by FLB and WPCA. The Harpers began having difficulty with loan repayments in the early 1980's. In May 1984 WPCA rejected the Harpers' loan renewal request and filed a foreclosure action against them five months later in state court. In February 1985 the Harpers filed a complaint against numerous institutions and officers of the Farm Credit System seeking, inter alia, an order enjoining WPCA's state foreclosure proceeding. The district court denied the Harpers' motion for an injunction and dismissed the action. Harper v. Farm Credit Admin., 628 F.Supp. 1030, 1033-34 (D.Or.1985).

After several continuances of the state court's foreclosure trial, the Harpers entered into a settlement agreement to restructure the WPCA debt. Instead of performing the settlement, however, the Harpers filed a Chapter 11 bankruptcy petition on May 30, 1986. In July 1986 WPCA obtained relief from the automatic stay, and the state foreclosure action was reinstated.

In September 1986 FLB obtained relief from the automatic stay and filed a foreclosure complaint against the Harpers in January 1987. In June 1987 the Harpers asked FLB about possible forbearance on their FLB loans. FLB supplied them an application form and requested financial information but received neither an application for forbearance nor financial data from the Harpers until April 21, 1988.

On September 3, 1987 the state court entered a default judgment of foreclosure in favor of FLB. On October 9, 1987 WPCA secured a judgment of foreclosure by stipulation. FLB scheduled a sheriff's sale for November 17, 1987. On November 13, 1987 the Harpers filed a Chapter 12 bankruptcy petition, thereby staying the sheriff's sale. In February 1988, on the Harpers' motion, the bankruptcy court dismissed the petition. The sheriff's sale was held in March 1988.

The Harpers thereafter moved to set aside the judgments. The state court found that the judgments were authorized by the Harpers' prior attorney, denied the Harpers' motion to set aside the judgments, and ruled that the order confirming the sale could be entered.

The Harpers then filed this action in federal district court seeking an injunction barring continuation of the state court process.

                The district court granted a preliminary injunction and enjoined FLB and WPCA (together "the Lenders") from transferring the property pending resolution of the Harpers' claims.  After a court trial the district court held that the Lenders violated the 1987 Act.  Harper, 692 F.Supp. at 1253.    The court concluded that the Lenders had a duty under federal law to "weigh the costs of foreclosure against the costs of restructuring prior to proceeding with the sheriff's sale."    Id.  The Lenders were enjoined from evicting the Harpers from their property.  Id.  The district court also issued an order directing the parties to apply to state court for an order rescinding the sheriff's sale
                

On appeal, the Lenders contend the 1987 Act does not provide an implied private right of action. Alternatively, they argue (1) they have not violated the 1987 Act; (2) the actions taken by the district court were prohibited by the Anti-Injunction Act, 28 U.S.C. Sec. 2283 (1982); (3) the district court did not have the authority to command the parties to stipulate in state court to an order rescinding a completed sheriff's foreclosure sale or to restrain the purchasers from taking possession of the property; and (4) the district court's findings as to WPCA are clearly erroneous. We decide only that there exists no private right of action and therefore we do not reach the alternative arguments.

DISCUSSION

I.

In Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2087-88, 45 L.Ed.2d 26 (1975), the Supreme Court set forth four factors to determine whether Congress intended to imply a private cause of action in a federal statute.

First, is the plaintiff one of the class for whose especial benefit the statute was enacted--that is, does the statute create a federal right in favor of plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Id. at 78, 95 S.Ct. at 2088 (internal quotations and citations omitted) (emphasis in original). Subsequent to Cort, the Court has indicated that the second and third factors are determinative of whether a court should imply a private right of action from a statutory scheme. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 145, 105 S.Ct. 3085, 3091-92, 87 L.Ed.2d 96 (1985); see also In re Washington Public Power Supply Sys. Sec. Litig., 823 F.2d 1349, 1354 (9th Cir.1987) (en banc) ("a failure to satisfy these two factors is determinative"). Moreover, it is now clear that the focal point of our inquiry is the second factor--the intent of Congress. See Thompson v. Thompson, 484 U.S. 174, 108 S.Ct. 513, 516, 98 L.Ed.2d 512 (1988) (unless congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, a private remedy simply does not exist). Nevertheless, we look to all four factors "[a]s guides to discerning that intent." Id.

1. Especial Benefit of Plaintiffs

The district court concluded that the Harpers satisfied the first factor as "one of the class for whose especial benefit the statute was enacted" because Title I of the 1987 Act, entitled "Assistance to Farm Credit System Borrowers," established broad rights for borrowers and mandatory duties for lenders. Harper, 692 F.Supp. at 1247. We agree that one of the purposes of the 1987 Act was to provide borrowers with certain limited rights, including the right to restructure distressed loans and the right of first refusal by the previous owner when the lenders elect to sell acquired property. We look at the overall purpose of the 1987 Act, however, and conclude that the major impetus for the legislation was the financial crisis of the Farm Credit System. "[The bill] is necessary to reassure both American farmers and our financial markets that the Farm Credit System will remain a viable entity next year and into the 21st century." 133 Cong.Rec.S. 16831 (Dec. 1, 1987) (remarks of Sen. Leahy). "[The bill] has two major objectives: First, provide meaningful assistance to the system; and second, minimize to the greatest extent possible exposure to the Federal budget." 133 Cong.Rec.S. 16833 (Dec. 1, 1987) (remarks of Sen. Boren).

Our conclusion that the financial crisis of the Farm Credit System was the primary purpose of the 1987 Act is further reinforced by the fact that a borrower's right to restructure a delinquent loan is limited to situations in which the cost of restructuring is less than or equal to the cost of foreclosure. 12 U.S.C. Sec. 2202a(e)(1). In other words, restructuring is not always available to borrowers but is limited to situations involving no additional expense to the system.

2. Legislative Intent

The district court concluded that the legislative history supports an implied right of action, even though Congress considered enacting an express private right of action and later deleted that section. Harper, 692 F.Supp. at 1247-49. The court reasoned that the express provision was eliminated because some members of Congress "were under the misperception that the farmers already had the right to sue." Id. at 1248. Senators Pryor, Cochran, Fowler, and Sanford, for example, sought to include an express private right of action "to affirm that borrowers have a right to sue." S. 1156, 100th Cong. 1st Sess. 133 Cong.Rec. 6105 & 6107 (May 6, 1987). One version of the Senate bill included an express private right of action. S. 1665, 100th Cong., 1st Sess., 133 Cong.Rec. 11750 (August 7, 1987).

A proposed House bill also contained an express private right of action....