In re Massengill
| Decision Date | 26 May 1988 |
| Docket Number | No. 87-821-CIV-5.,87-821-CIV-5. |
| Citation | 100 BR 276 |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | In re Durwood Rufus MASSENGILL and Laura Faye Massengill, Debtors. The FEDERAL LAND BANK OF COLUMBIA and South Atlantic Production Credit Association, Appellants, v. Durwood Rufus MASSENGILL and Laura Faye Massengill, Appellees. |
Mark C. Kirby, Stephen B. Brown, Wyrick, Robbins, Yates, Ponton & Kirby, Raleigh, N.C., for the Federal Land Bank of
Columbia, and South Atlantic Production Credit Ass'n.
Richard M. Stearns, Kinston, N.C., for trustee.
John W. Morris, Mast, Tew, Morris, Hudson & Schulz, Smithfield, N.C., for debtors.
This is an appeal by the creditors, The Federal Land Bank of Columbia (hereinafter "Land Bank") and South Atlantic Production Credit Association (hereinafter "PCA") from the Order of the Bankruptcy Court entered July 8, 1987, confirming the debtor's Chapter 12 plan. The court has received briefs from all parties and oral arguments were heard on April 1, 1988. The issue before the court is whether the debtors, as part of their Chapter 12 plan, may surrender Land Bank and PCA stock to Land Bank and PCA in satisfaction of an equivalent amount of debt owed to appellants. Appellants contend that the provisions of the Farm Credit Act, 12 U.S.C. § 2001 et seq. prohibit such stock transfers.
The Massengills are indebted to Land Bank in an amount in excess of $88,000.00, and to PCA in an amount in excess of $6,000.00. The Land Bank indebtedness is fully secured by, among other things, $5,000.00 in Land Bank stock. The PCA indebtedness is fully secured by, among other things, $925.00 in PCA stock.
On April 17, 1987, the Massengills filed an Amended Chapter 12 Plan. The Plan provides, among other things, that upon confirmation the Massengills would transfer their stock in Land Bank to Land Bank and that Land Bank would then "credit Debtors' account $5,000.00." In addition, the Plan provides that upon confirmation the Massengills would transfer their stock in PCA to PCA and that PCA would then "credit Debtors' account $925.00." The debtors' plan also provides that the Massengills will maintain a borrowing relationship with Land Bank and PCA during the life of their Chapter 12 Plan. In the Plan, the debtors restructure the debts which they owe to the Land Bank and PCA to provide for payment over a period of twenty years and four years, respectively, in annual installments which include interest at the Land Bank's and PCA's prevailing interest rates.
On June 5, 1987, the Bankruptcy Court entered a written Opinion finding that the Massengills could compel Land Bank and PCA to accept the Massengills' Land Bank and PCA stock and credit the par value of such stock against the Massengills' debts to Land Bank and PCA, by so providing in their Plan, 73 B.R. 1008 (1987). On July 6, 1987, the Bankruptcy Court entered an Order confirming the Plan containing the stock transfer and crediting provisions.
Appellants contend that the Bankruptcy Court erred when it confirmed the Massengills' Chapter 12 Plan containing the stock transfer provisions because such provisions are in contravention of applicable sections of the Farm Credit Act. In support of this contention, appellants argue that authoritative case law prohibits the establishment of a plan whereby one federal statute contravenes another when a non-conflicting interpretation is possible. Appellants argue that the stock "surrender" and "credit" provisions are actually a forced, involuntary "retirement" and that the right to retire Land Bank and PCA stock is vested solely in the Land Bank and PCA respectively pursuant to the Farm Credit Act. 12 U.S.C. § 2001, et seq. Appellants argue that the Farm Credit Act requires all borrowers to own and maintain stock in Land Bank and PCA and that the Plan impermissibly allows the Massengills to remain borrowers without owning such stock. Thus, the argument follows, the Bankruptcy Court's approval of the Plan pursuant to Sections 1222(b)(8) and 1225(a)(5)(C) of the Code is in direct contravention of the Farm Credit Act.
The debtors contend, on the contrary, that the plan does not conflict with the provisions of the Farm Credit Act because it requires only a "transfer" of the stock which is not prohibited, rather than a "retirement" which is prohibited. The debtors also contend that the Farm Credit Act does not require Land Bank and PCA borrowers to continually maintain stock ownership.
The Farm Credit Act (12 U.S.C. § 2001, et seq.) governs the operation of both the Land Bank and PCA as well as other lending institutions constituting the Farm Credit System. 12 U.S.C. § 2002. These institutions make and service a variety of loans to farmer-borrowers, and farm lending institutions. 12 U.S.C. § 2002. To be eligible for such loans, Land Bank and PCA borrowers are required to purchase a certain amount of stock in the local association.1 Furthermore, Land Bank and PCA stock may be owned by active borrowers only. 12 U.S.C. §§ 2034(a) and 2094(b). Ordinarily, Land Bank and PCA stock may be retired and paid only upon the full repayment of the loan by the borrower. 12 U.S.C. §§ 2034(a) and 2094(f). However, upon default, the Farm Credit Act grants the right to retire or cancel such stock to Land Bank and PCA in the discretion of the respective lender. 12 U.S.C. § 2034(a) provides that if a Land Bank loan is in default, the Land Bank stock "may be cancelled for application on the loan ... when approved by the (district land) bank." Similarly, 12 U.S.C. § 2094(k) gives PCA the right to cancel its stock for application on its loan when a borrower is in default. Likewise, the regulations governing Farm Credit institutions vest the right to retire stock upon a borrower's default solely in the lending institution stating: "the association may, but shall not be required to retire ... all or part of the equity owned by such borrower on which the association has a lien as collateral for the debt, in total or partial liquidation of the debt." 12 C.F.R. § 615.5255(a) (1987). These provisions regarding ownership, transfer, and retirement of Land Bank and PCA stock were designed to accomplish the stated objectives of the Farm Credit Act which include the encouragement of farmer-borrower "participation in the management, control, and ownership of a permanent system of credit for agriculture which will be responsive to the credit needs of ... producers ...," 12 U.S.C. § 2001(b), and the ensurence of financial stability and continuity within the Farm Credit System. See United States v. Mississippi Chemical Corp, 405 U.S. 298, 92 S.Ct. 908, 31 L.Ed.2d 217 (1972).
The provisions of the Bankruptcy Code applicable to the issues at hand include those at Title 11 United States Code, Sections 1222(b)(8) and 1225(a)(5)(C). Title 11 U.S.C. § 1222(b)(8) states that a Chapter 12 plan may "provide for the sale of all or any part of the property of the estate or the distribution of all or any part of the property of the estate among those having an interest in such property." Title 11 U.S.C. § 1225(a)(5)(C) recognizes specifically that surrender of property securing a claim to the holder of the secured claim as a proper way to treat a secured claim in a Chapter 12 confirmation.
This Court concludes that the stock transfer and crediting provisions of the debtor's Chapter 12 Plan have the same effect as a forced stock retirement, and therefore, are in direct conflict with the provisions of the Farm Credit Act giving the Land Bank and PCA sole authority to retire their stock. Further, this Court holds that Sections 1222(b)(8) and 1225(a)(5)(C) of the Bankruptcy Code should not control over the more specific provisions of the Farm Credit Act prohibiting such forced retirements.
The Bankruptcy Court specifically held that §§ 1222(b)(8) and 1225(a)(5)(C) of the Bankruptcy Code "control" over the provisions of the Farm Credit Act which give the authority. to retire stock to Land Bank and PCA.2 In doing so, the Bankruptcy Court failed to address a line of cases which discusses how seemingly conflicting federal statutes are to be interpreted by lower courts. Generally, these decisions provide that interpretations which yield conflicting results must be avoided if possible, and that such statutes must be read to give full effect to the purposes of each. In Watt v. Alaska, the United States Supreme Court stated:
... "`repeals by implication are not favored,\'" Morton v. Mancari, 417 U.S. 535 at 549, 94 S.Ct. 2474 at 2482, 41 L.Ed.2d 290 (1974) quoting Posadas v. National City Bank, 296 U.S. 497, 503, 56 S.Ct. 349, 352, 80 L.Ed. 351 (1936). "The intention of the legislature to repeal must be `clear and manifest.\'" United States v. Borden Co., 308 U.S. 188, 198, 60 S.Ct. 182, 188, 84 L.Ed. 181 (1939), quoting Red Rock v. Henry, 106 U.S. 596, 602, 1 S.Ct. 434, 439, 27 L.Ed. 251 (1883). We must read the statutes to give effect to each if we can do so while preserving their sense and purpose. Mancari, supra 417 U.S. at 551, 94 S.Ct. at 2483; see Haggar Co. v. Helvering, 308 U.S. 389, 394, 60 S.Ct. 337, 339, 84 L.Ed. 340 (1940).
451 U.S. 259, 267, 101 S.Ct. 1673, 1678, 68 L.Ed.2d 80 (1981). Likewise, the United States Court of Appeals for the Fourth Circuit has ruled:
Should there be some inconsistency between the two statutes or sections of a single statute, courts, in construing the statutes, so far as it is possible, should seek to steer a "middle course that vitiates neither provision but implements to the fullest extent possible the directives of each." Citizens to Save Spencer County v. EPA, 600 F.2d 844, 871 (D.C. Cir.1979).
United Hospital Center, Inc. v. Richardson, 757 F.2d 1445, 1451 (4th Cir.1985). Other courts have determined that when interpreting two seemingly conflicting federal statutes, the courts are not at liberty to pick and choose between statutes. When two statutes are capable...
To continue reading
Request your trial