Matzke v. Block

• Decision Date: 21 May 1982
• Docket Number: Civ. No. 82-1075.
• Citation: 542 F. Supp. 1107
• Parties: Alvin MATZKE, William Leonard, Janice Stoss, Don Lorlovick, Delmar Turley, and Cheryl Turley, on behalf of themselves and all others similarly situated, Plaintiffs, v. John BLOCK, Individually and in his capacity as Secretary of Agriculture, United States Department of Agriculture; Allen Brock, Individually and in his capacity as Deputy Administrator and former Acting Administrator of the Farmers Home Administration; Charles Shuman, Individually and in his capacity as Administrator of the Farmers Home Administration; Larry Davis, Individually and in his capacity as State Director for Kansas Farmers Home Administration, United States Department of Agriculture, Defendants.
• Court: U.S. District Court — District of Kansas

542 F. Supp. 1107

Alvin MATZKE, William Leonard, Janice Stoss, Don Lorlovick, Delmar Turley, and Cheryl Turley, on behalf of themselves and all others similarly situated, Plaintiffs, v. John BLOCK, Individually and in his capacity as Secretary of Agriculture, United States Department of Agriculture; Allen Brock, Individually and in his capacity as Deputy Administrator and former Acting Administrator of the Farmers Home Administration; Charles Shuman, Individually and in his capacity as Administrator of the Farmers Home Administration; Larry Davis, Individually and in his capacity as State Director for Kansas Farmers Home Administration, United States Department of Agriculture, Defendants.

Civ. No. 82-1075.

United States District Court, D. Kansas.

May 21, 1982.

Donald B. Clark, Wichita, Kan., Fred G. Brown and Thomas D. Kershal Jr., American Constitutional Rights Association, Klamath Falls, Or., for plaintiffs.

Jackie Williams, Asst. U. S. Atty., Wichita, Kan., Robert L. Purcell and Dick Sherbondy, U. S. Dept. of Agriculture, Kansas City, Mo., for defendants.

MEMORANDUM AND ORDER

CROW, District Judge.

Plaintiffs Alvin Matzke, William Leonard, Janice Stoss, Donald Lorlovick, Delmar Turley and Cheryl Turley are seeking preliminary and permanent injunctive relief and declaratory relief for themselves and other similarly situated Kansas farmers against John Block, Secretary of Agriculture, United States Department of Agriculture and the Administrator and other subordinate officials of the Farmers Home Administration, a government agency. Plaintiffs are recipients of farmer program loans administered by the Farmers Home Administration (FmHA) under the Consolidated Farm and Rural Development Act, Pub.L. No.87-128, 75 Stat. 307 (codified as amended in scattered sections of 7 U.S.C.).

The plaintiffs allege the Secretary and the FmHA accelerated delinquent loan accounts and made demand for payment without affording due process of law under the Fifth Amendment. Further, plaintiffs allege the Secretary and the FmHA have refused, and are refusing to implement the provisions of 7 U.S.C.A. § 1981a (West Supp.1982) (loan moratorium and policy on foreclosure). As a result, plaintiffs may lose the tools of their trade, their home places or their livestock because of government foreclosure and liquidation of FmHA secured property. In short, plaintiffs livelihoods are at stake.

On April 5, 1982, plaintiffs requested preliminary injunctive relief pursuant to Rule 65(a), Fed.R.Civ.P. The issue was briefed by the attorneys for plaintiffs and for the government, and oral arguments were heard on behalf of the parties on April 30, 1982. Janice W. Stoss, a plaintiff, testified at the hearing. Another plaintiff, Donald D. Lorlovick, provided a handwritten affidavit to the court. Four other witnesses who are not named parties testified: Wayne Leonard, Vernon Patten, Kent Ochsner and Lloyd Howard. After a careful review of the authorities, arguments, and testimony, the court is now ready to rule on the motions. The court grants the application for preliminary injunction of Janice W. Stoss, subject to the conditions stated in the order. The court denies the application for preliminary injunction of Donald D. Lorlovick.

Evidence of a right to injunctive relief sought because of irreparable injury which will result if it is not granted was not produced as to any of the other named parties. Therefore, the application for preliminary injunctive relief on behalf of all other parties who did not testify either in person, or by affidavit, is denied at this time.

The court will not determine an application for preliminary injunction on behalf of non-party witnesses. The government had no notice of who would be present and testifying as witnesses and was not able to prepare its defense. Therefore, non-party witnesses are not eligible for preliminary injunctive relief until they are made a party to the litigation.

This action has not been certified as a class action pursuant to Rule 23, Fed.R. Civ.P. Class-wide injunctive relief will not be considered until a certified class exists. Even assuming it were certified as a 23(b)(2) class, the rule provides for "final injunctive relief" rather than preliminary injunctive relief as was requested in this hearing.

Testimony of the Parties

Janice W. Stoss of Otis, Kansas is a Barton County farmer and rancher. The FmHA made economic emergency and operating loans to Ms. Stoss under the Consolidated Farm and Rural Development Act in the following amounts: $225,000 in 1978, $23,950 in 1979 and $8,500 in 1980. The loans are secured by real estate, farm machinery and cattle belonging to Ms. Stoss. The FmHA also provides management assistance to loan recipients.

The purpose of an economic emergency loan is to enable farmers or ranchers to continue operating during economic stress caused by the unfavorable relationship between production costs and prices received for agricultural commodities. 7 C.F.R. § 1945.102 (1980). The purpose of an operating loan is to provide credit and management assistance for limited resource, new or low income farmers in order to enable them to improve living conditions and economic situations to the point when they can obtain private credit. 7 C.F.R. § 1941.2 (1980).

It is undisputed that Ms. Stoss fell behind in her repayment schedule to the FmHA. On February 12, 1981, Ms. Stoss received a notice of acceleration and demand for payment from the FmHA. A copy of the notice is appended to this decision as "Appendix A." The notice contains no reference to the moratorium provision of the Agricultural Credit Act of 1978, 7 U.S.C.A. § 1981a (West Supp.1982). Ms. Stoss testified the reasons she became delinquent in her account were that her county supervisor failed to process her loan applications in time for planting, refused to permit her to employ a hired-hand, refused to let her repair farm machinery and refused to let her sell non-breeding heifers from her herd. Ms. Stoss testified that mismanagement of FmHA supervisors decreased her ability to farm. By a letter dated April 23, 1982, from her county supervisor, Ms. Stoss was denied further loan assistance from the FmHA. The specific reasons given were that the FmHA was contacted by the Barton County Humane Society on January 27, 1982 about the poor condition of plaintiff's cattle, plaintiff's crop farming was not done in a timely fashion to maximize production, plaintiff had not been able to generate enough income to pay her debts and plaintiff's loan account with FmHA was delinquent. Ms. Stoss testified that she had contacted the Barton County Humane Society herself in an attempt to convince the FmHA of her need for money for feed. Thirty-five head were lost due to lack of feed. She also stated she could not farm in a timely manner because she couldn't get funds from the FmHA at the optimum time for planting. Ms. Stoss exercised her appeal rights under regulations promulgated by the Department of Agriculture, 7 C.F.R. § 1900.51-.54 (1980). The record of her appeal was not provided to the court, nor did the government rebut her testimony. Ms. Stoss requested deferral on principal and interest but it was denied without consideration of the moratorium provision, § 1981a, so far as the record now before the court reveals. A civil action has been filed in federal court to foreclose on her account based on promissory notes and security agreements held by the government. Ms. Stoss testified that the notice of acceleration impaired her ability to obtain short term credit which a farmer must have to operate.

Donald D. Lorlovick is a Stanton County, Kansas farmer. In his affidavit to the court, Mr. Lorlovick states he received an operating loan in 1978 and an emergency loan in 1979. Due to adverse weather conditions, Mr. Lorlovick fell behind in his loan repayment. The FmHA accelerated his loans and made demand for payment without affording moratorium relief. He further alleges FmHA did not provide adequate supervision and did not disburse money in a timely fashion, thereby causing a crop loss. The records of Mr. Lorlovick's appeal of his acceleration, if any was taken, were not provided to the court, nor did the government rebut the testimony contained in the affidavit.

Testimony of Witnesses

The court accepts the testimony of plaintiffs' witnesses for the purpose of evaluating the substantiality of plaintiffs' claims and the likelihood that plaintiffs will eventually be entitled to the relief sought after a trial on the merits.

Wayne A. Leonard of Alma, Kansas has been successfully farming for 15 years. He obtained an operating loan and an emergency loan, secured by his machinery, livestock and crops, through the FmHA. Due to drought conditions, Mr. Leonard became delinquent in his loan repayment on January 1, 1981. Through its county supervisor, the FmHA sent a notice of acceleration and demand for payment on October 10, 1981. Subsequently, Mr. Leonard filed a petition in bankruptcy in the United States Bankruptcy Court. Mr. Leonard testified he was told by his county supervisor that the moratorium relief only applied to farm housing loans and not to farmer program loans.

Vernon Patten of Wooster, Kansas has been a farmer for 20 years. He obtained an FmHA operating loan in 1979 and gave a security interest in his farm machinery and crops. On May 27, 1980, Mr. Patten received a letter from the State Director of the FmHA informing him of unauthorized sales of crops in violation of his security agreement with FmHA. Mr. Patten's loans were accelerated and Mr. Patten testified he did not receive notice of moratorium relief.

Kent Ochsner of Sharon Springs, Kansas has farmed for 12 years and has lived on a farm all his life. Mr. Ochsner received an operating loan for the purchase of equipment financed through the FmHA. In 1981, Mr. Ochsner had difficulty making his loan repayment due to ill health. He requested loan deferral...