Harper v. Federal Land Bank of Spokane, Civil No. 88-449-PA.

• Decision Date: 27 June 1988
• Docket Number: Civil No. 88-449-PA.
• Citation: 692 F. Supp. 1244
• Parties: Myron HARPER and Jane Harper and Robert Garnett and Carol Garnett, Plaintiffs, v. FEDERAL LAND BANK OF SPOKANE, a corporation; the United States of America, acting through the Farmers Home Administration; Willamette Production Credit Association, a corporation in liquidation; Merle Thomas Henny and Darlene F. Henny, husband and wife; Thomas Henny Nursery, Inc., a corporation; Frank W. Naylor, Jr., in his capacity as Chairman and a member of the Farm Credit Administration Board; Jim R. Billington and Marvin R. Duncan, each in his capacity as a member of the Farm Credit Administration Board; the Farm Credit Administration; and Kenneth P. Krueger, in his capacity as President and Chief Executive Officer of the Federal Land Bank of Spokane, Defendants.
• Court: U.S. District Court — District of Oregon

692 F. Supp. 1244

Myron HARPER and Jane Harper and Robert Garnett and Carol Garnett, Plaintiffs, v. FEDERAL LAND BANK OF SPOKANE, a corporation; the United States of America, acting through the Farmers Home Administration; Willamette Production Credit Association, a corporation in liquidation; Merle Thomas Henny and Darlene F. Henny, husband and wife; Thomas Henny Nursery, Inc., a corporation; Frank W. Naylor, Jr., in his capacity as Chairman and a member of the Farm Credit Administration Board; Jim R. Billington and Marvin R. Duncan, each in his capacity as a member of the Farm Credit Administration Board; the Farm Credit Administration; and Kenneth P. Krueger, in his capacity as President and Chief Executive Officer of the Federal Land Bank of Spokane, Defendants.

Civil No. 88-449-PA.

United States District Court, D. Oregon.

June 27, 1988.

Michael J. Martinis, Webb & Martinis, Salem, Or., James T. Massey, Farmers' Legal Action Group, Inc., St. Paul, Minn., Lawrence B. Rew, Corey, Byler, Rew, Lorenzen, Hojem, Pendleton, Or., for plaintiffs.

John D. Albert, Paul R.J. Connolly, Churchill, Leonard, Brown & Donaldson, Salem, Or., for defendant Willamette Production Credit Ass'n.

John A. Bryan, Sherman, Bryan, Sherman & Murch, Salem, Or., for defendants Federal Land Bank of Spokane and Kenneth Krueger.

Philip J. Hand, Klein & Hand, P.C., Woodburn, Or., for defendants Merle and Darlene Henny and Thomas Henny Nursery, Inc.

John R. Bolton, Asst. Atty. Gen., Charles H. Turner, U.S. Atty., Theordore Hirt, Neal Dittersdorf, Asst. U.S. Attys., Civil Div., Dept. of Justice, Washington, D.C., for federal defendants.

OPINION

PANNER, Chief Judge.

Plaintiffs Myron and Jane Harper and Robert and Carol Garnett bring this action against the Federal Land Bank and its president (FLB), the Willamette Production Credit Association (WPCA), the United States of America acting through the Farmers' Home Administration (FmHA), Merle and Darlene Henny and the Thomas Henny Nursery, Inc. (the Hennys), and the Farm Credit Administration and its board members (FCA).

On May 2, 1988, after a hearing, I granted the Harpers' motion for a preliminary injunction and enjoined defendants from transferring the Harpers' property pending resolution of their claims. On June 10, 1988, I granted the Garnetts' motions to join this action and for a temporary restraining order enjoining FLB from evicting the Garnetts from their property. On June 20, 1988, plaintiffs and FLB agreed to the continuation of an injunction against FLB concerning the Garnetts' property.

On June 21, 1988, a court trial was held on the Harpers' claims against FLB, WPCA, and the Hennys. The Harpers allege violations of the Agricultural Credit Act of 1987, 12 U.S.C. §§ 2001-2279aa-14 (1988). The parties agreed and I ordered that all other claims would be addressed separately at a later date.

At the trial, I allowed plaintiffs until June 22, 1988 to submit an additional affidavit of Myron Harper. I allowed defendants to depose the Harpers' previous attorney and file that deposition by June 23, 1988. I also allowed all parties to file supplemental briefs by June 23, 1988. Defendants, without prior approval, submitted a second affidavit of Chris Blumfield. Plaintiffs object to that affidavit. Because the record remained open after trial only for a very limited purpose, I strike the second affidavit of Chris Blumfield.

Based on the record, I find in favor of the Harpers.

BACKGROUND

The Harpers own and operate a farm in Marion County, Oregon. The Harper family has owned the property since 1853. The property consists of two separate tracts of land. The Hennys are tenants on one tract of land.

FLB claims an interest in the property under mortgages executed in 1970 and 1975. WPCA claims an interest in the property under mortgages executed in 1976, 1980, and 1981. FmHA claims an interest in the property under a mortgage executed in 1979.

In the 1980s, the Harpers experienced financial difficulties. WPCA rejected the Harpers' request for a loan renewal. In October 1984, WPCA filed a foreclosure action in state court. In February 1985, the Harpers filed an action in this court against numerous institutions and officers of the farm credit system, including many of these defendants. The Harpers sought, inter alia, an order enjoining the WPCA's state foreclosure proceeding. On June 4, 1985, I denied the Harpers' motion for an injunction and dismissed the action. Harper v. Farm Credit Admin., 628 F.Supp. 1030 (D.Or.1985).

The state court action proceeded. The Harpers filed a Chapter 11 bankruptcy petition. In July 1986, WPCA obtained relief from the automatic stay and the state court foreclosure action was reinstated. In January 1987, upon the Harpers' motion, the bankruptcy court dismissed their petition.

In January 1987, FLB filed a foreclosure action against the Harpers in state court. In the spring and summer of 1987, the Harpers negotiated with WPCA, FLB, FmHA, and the Hennys without success. On September 3, 1987, the state court entered a default judgment of foreclosure in favor of FLB. On October 9, 1987, the state court entered a stipulated judgment of foreclosure in favor of WPCA.

After the judgments entered, the Harpers filed a Chapter 12 bankruptcy petition. On February 18, 1988, the bankruptcy court dismissed their petition.

In March 1988, a sheriff's sale was held on the Harpers' property. FLB purchased one tract of land, and the Hennys purchased the other. FLB moved for an order confirming the sale. The Harpers moved to set aside the judgment. Prior to a hearing on those motions, the Harpers filed this action. The state court denied the Harpers' motion to set aside the judgment and, over the Harpers' objection, confirmed the sale.

DISCUSSION

The Agricultural Credit Act of 1987 (Act) took effect on January 6, 1988. The Act provides that when a lender determines that a loan is or has become distressed, the lender shall provide written notice to the borrower that the loan may be suitable for restructuring. 12 U.S.C. § 2202a(b)(1). If the lender determines that the potential cost of restructuring the loan is less than or equal to the potential costs of foreclosure, the lender shall restructure the loan. Id. at § 2202a(e)(1). No lender may foreclose or continue any foreclosure proceeding with respect to any distressed loan before the lender has completed any pending consideration of the loan for restructuring. Id. at § 2202a(b)(3).

The Harpers contend that when the Act took effect in January 1988 FLB and WPCA should have made the calculations to determine whether it was cost-effective to restructure their loans. The Harpers seek an order enjoining FLB and WPCA from continuing the foreclosure proceeding until this calculation is completed.

FLB and WPCA move for summary judgment on the grounds that 1) there is no private right of action under the Act, 2) defendants did not violate the Act, 3) the relief sought is prohibited by the Anti-Injunction Act, 4) the relief sought is prohibited by the tenth amendment, 5) the Harpers are estopped from seeking restructuring, and 6) the complaint fails to state a claim against WPCA.

1. Private Right of Action.

The Act does not expressly provide for a private right of action. In determining whether to infer a private right of action from a federal statute, the focal point is Congress' intent when enacting the statute. Thompson v. Thompson, ___ U.S. ___, 108 S.Ct. 513, 518, 98 L.Ed.2d 512 (1988). As a guide to discerning that intent, the Supreme Court set forth four factors to be considered:

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?

Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 L.Ed.2d 26 (1975) (citations omitted).

Congress entitled Title I of the Act "Assistance to Farm Credit System Borrowers." In that Title, Congress established broad rights for borrowers and mandatory duties for lenders. The Harpers are borrowers within the farm credit system and, as such, are one of the class for whose especial benefit the statute was enacted.

The legislative history supports an implied right of action. Defendants contend that because Congress considered enacting an express right of action and later deleted that section, no right of action may be implied. Generally this would demonstrate congressional intent to deny a private right of action. Here, however, a close look at the legislative history demonstrates Congress' intent to provide such a right.

On May 6, 1987, Senators Pryor, Cochran, Fowler, and Sanford proposed the 1987 Act, which included an express private right of action. S. 1156, 100th Cong., 1st Sess., 133 Cong. Rec. 6105 (May 6, 1987). The section by section analysis states, "Section 302 adds a new section 5.38 to the Farm Credit Act of 1971 to affirm that borrowers have a right to sue, in federal court ..." Id. at 6107 (emphasis added). Senator Fowler stated:

I am particularly proud to be the sponsor of legislation that spells out a borrowers' bill of rights. The borrowers in this system have been abused, mislead, coerced by Farm Credit Administration banks and officials who have sought to remake this system along new lines, but to the detriment of local control and cooperative principles. To protect against such abuses in the future, the bill provides borrowers with specific rights, including the following: ... Borrowers have the

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