Hill v. Farm Credit Bank of St. Louis

• Decision Date: 06 December 1989
• Docket Number: No. N 88-0079 C.,N 88-0079 C.
• Citation: 726 F. Supp. 1201
• Parties: H. Roger HILL, et al., Plaintiffs, v. FARM CREDIT BANK OF ST. LOUIS, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

726 F. Supp. 1201

H. Roger HILL, et al., Plaintiffs, v. FARM CREDIT BANK OF ST. LOUIS, et al., Defendants.

No. N 88-0079 C.

United States District Court, E.D. Missouri, N.D.

December 6, 1989.

COPYRIGHT MATERIAL OMITTED

Fredrich J. Cruse, Vicki A. Dempsey and D. Terrell Dempsey, Hannibal, Mo., for plaintiffs.

Harry B. Wilson and Kathleen M. Whitby, St. Louis, Mo., for defendants.

MEMORANDUM

GUNN, District Judge.

Plaintiffs Roger and Samantha Hill ("the Hills") bring this action against the Farm Credit Bank of St. Louis ("the FCB"), Kenneth Niemeyer, Joe G. Richardson, Thomas J. Deveny and Walter L. Plefka ("the individual defendants").¹ The Hills allege that defendants 1) violated Title I of the Agricultural Credit Act of 1987, Pub.L. No. 100-233, 101 Stat. 1568, codified at 12 U.S.C. § 2001 et seq. ("the 1987 Act") by failing to give them notice of an opportunity to restructure their past-due FCB loan obligations; 2) violated the equal protection and procedural due process clauses of the fifth amendment to the Constitution by foreclosing on the property without affording them notice of an opportunity to restructure; and 3) committed a prima facie tort under Missouri law. The FCB has counterclaimed for the deficiency allegedly due on the FCB loan, ejectment, conversion, and holdover damages.

By stipulation the parties have submitted this suit to the Court for decision on the basis of briefs and stipulations of fact, deposition testimony, affidavits and exhibits. The Court, having considered all of the aforementioned materials and the applicable law, now enters judgment in favor of defendants on plaintiffs' claim and in favor of the FCB on its counterclaim and makes the following findings of fact and conclusions of law in accordance with Rule 52, Fed.R.Civ.Pro.

Findings of Fact

With the additions hereafter noted, the Court adopts in their entirety the joint stipulations of fact filed by the parties on October 7, 1988 and October 18, 1988.

Plaintiffs Roger and Samantha Hill are farmers who reside in Adair County, Missouri. Defendant, the Farm Credit Bank of St. Louis, is a private farmer-owned cooperative chartered by the United States for the purpose of making agricultural loans to farmers. The FCB is an instrumentality of the United States under 12 U.S.C. § 2011 and an arm of the Farm Credit System. The FCB makes loans in the Sixth Farm Credit District which encompasses Missouri, Arkansas and Illinois.

On June 17, 1977 the Hills pledged their farmland as security for a $215,000.00 loan from the FCB. The Hills made the required payments under the loan through December 1982, but since that time they have made only two payments on the loan. The loan was restructured in 1984 pursuant to a voluntary reamortization agreement and in 1986 under a Chapter 11 reorganization plan which was confirmed by the United States Bankruptcy Court for the Eastern District of Missouri. On December 1, 1987 the Hills failed to make the payment on their FCB loan as required under the confirmed Chapter 11 reorganization plan.

On December 11, 1987 defendant Richardson, acting in his official capacity as an agent of the FCB, sent letters to the Hills demanding payment of the 1987 installment on their FCB loan and advising the Hills of their right to apply for forbearance on their loan under the 1985 Amendments to the Farm Credit Act of 1971. On December 23, 1987 the Hills submitted a forbearance application to the FCB. On December 30, 1987 the FCB through Mr. Richardson sent the Hills a letter notifying them that their forbearance application had been denied.

On January 6, 1988 the Agricultural Credit Act of 1987 was signed into law. Beginning in January 1988 and continuing through February and March 1988, the Hills and various employees of the FCB engaged in an ongoing dialogue regarding the Hills' loan. The purpose of this dialogue was to reach an agreement for a restructuring of the Hills' loan satisfactory to both the Hills and the FCB. On February 13, 1988 the Hills sent a letter to the FCB requesting that they be given "all borrowers rights" as provided in the 1987 Act. On March 1, 1988 the FCB notified the Hills that they were in default and accelerated the amounts due on the loan. On March 2, 1988 defendant Niemeyer, acting in his capacity as an agent of the FCB, responded to plaintiffs' February 13, 1988 letter and forwarded them a copy of the FCB's distressed loan restructuring policy. The FCB did not send the Hills a restructuring application when it sent the Hills a copy of the Bank's distressed loan restructuring policy.

On March 21, 1988 the Hills filed a voluntary petition for reorganization under Chapter 12 of the United States Bankruptcy Code. The FCB filed a motion to dismiss the Chapter 12 proceeding or, in the alternative, to obtain relief from the automatic stay. On March 25, 1988, the appointed date for foreclosure on the Hills' farm under the Chapter 11 confirmed reorganization plan, the Honorable John Barta, Judge of the United States Bankruptcy Court for the Eastern District of Missouri, Northern Division held a hearing on the FCB's motion. At the close of the hearing Judge Barta issued an order dismissing the Hills' Chapter 12 proceeding because the Chapter 11 proceeding was still active and pending before the bankruptcy court. Judge Barta also denied the Hills' motion to modify their confirmed Chapter 11 reorganization plan but offered them an opportunity to dismiss all bankruptcy proceedings in order to pursue other remedies. Judge Barta further noted that "since the post confirmation default the Debtors have elected not to avail themselves of any remedies which may be available to them under the pending Chapter 11 case." In re Roger Hill and Samantha Hill, 84 B.R. 623, 624 (E.D.Mo.1988).

Later the same day the Hills moved for reconsideration of Judge Barta's order. In moving for reconsideration the Hills raised their claim relating to the restructuring provisions of the 1987 Act. Judge Barta denied the motion for reconsideration, but offered to enter a stay pending an appeal of his order or litigation of the Agricultural Credit Act claim in the district court. As a condition of the stay, Judge Barta required the Hills to post security in the full amount of the debt. The Hills declined to post the required security and did not appeal Judge Barta's order. The foreclosure proceeded and the FCB acquired the farm at the foreclosure sale. Almost two months later the Hills filed this action.

Conclusions of Law

The Hills' Claims under the Agricultural Credit Act of 1987

The FCB asserts that plaintiffs' claim under the 1987 Act is barred by the doctrine of res judicata. Specifically, the FCB contends that the Hills should have pursued their claims under the 1987 Act in the context of their Chapter 11 bankruptcy proceeding and that their failure to do so bars relitigation of those claims in this Court. "A final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Federated Department Stores, Inc. v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 2428, 69 L.Ed.2d 103 (1981); see also Headley v. Bacon, 828 F.2d 1272, 1274 (8th Cir.1987). It is settled law that the bar extends to issues which "might have been litigated" in the prior proceeding. Edwards v. Arkansas Power & Light, 683 F.2d 1149, 1152 (8th Cir.1982).

The Hills could have asserted their claims under the 1987 Act in the context of the bankruptcy proceeding. They failed to do so until hours before the appointed time for foreclosure. At that point Judge Barta agreed to allow them to pursue those remedies, but in light of the impending foreclosure sale, he required the posting of security. Judge Barta also specifically held that the Hills had failed to pursue remedies available to them. The Hills declined to post the security and failed to appeal Judge Barta's order. Months later they filed this action seeking relief under the 1987 Act.

On the basis of these facts, the Court concludes that plaintiffs had a full and fair opportunity to litigate their 1987 Act claims in the context of the bankruptcy proceeding but that they failed to do so. Accordingly, the Hills are not entitled to relitigate these claims in this Court.

The Court notes, however, that the proper application of the 1987 Act to debtors in bankruptcy was uncertain at the time relevant to this dispute. Therefore, the Court will address the merits of the Hills' claims under the 1987 Act.

The Hills assert that they are entitled to injunctive relief and damages due to the FCB's alleged failure to provide them with an opportunity to restructure their loan prior to foreclosure. Defendants contend, in the alternative, that such relief is not available under the 1987 Act, that the 1987 Act does not apply to debtors in bankruptcy or that the FCB did not violate the Act.

With respect to defendants' first contention, the Eighth Circuit has recently ruled that "farm borrowers have a private right of action to enforce the borrowers' rights provisions" of the 1987 Act. Zajac v. Federal Land Bank of St. Paul, 887 F.2d 844, 856 (1989). The Eighth Circuit did not hold that damages were available to borrowers for violations of the borrowers' rights provisions of the 1987 Act. Id. at 857 n. 16. Thus the Hills have an implied private right of action for injunctive relief under the 1987 Act, but their request for damages must fail.

Defendants also assert that plaintiffs, as debtors in bankruptcy, may not avail themselves of the borrowers' rights established by the 1987 Act. This contention is in error. "The protections of the Agricultural Credit Act of 1987 are available to those who have filed bankruptcy petitions prior to the effective date of the Act...." In re Hilton Land & Cattle Co., 101 B.R. 604, 605 (D.Neb.1989). Upon review of the legislative history of the 1987 Act, the Court is persuaded...