McBride v. Coleman
| Decision Date | 18 March 1992 |
| Docket Number | No. 89-5135,89-5135 |
| Citation | 955 F.2d 571 |
| Parties | Patrick McBRIDE and Sonya McBride, Appellees, v. Dwight COLEMAN, Lester Crowsheart, Sharon Crowsheart, Russel Folmer, Anna Mae Folmer, George Hatfield, June Hatfield, Donna McCabe, Diane McCabe, on behalf of themselves and others similarly situated, Gary A. Barrett, Rosemary K. Barrett, Richard L. Harmon, Betty J. Harmon, Larry L. Robertson, Nancy K. Robertson, Ross Wade and Maureen Wade, v. Clayton YEUTTER, Secretary of Agriculture, Charles W. Shuman, Administrator of the Farmers Home Administration, Ralph W. Leet, State Director of the Farmers Home Administration; Harold T. Aasmundstad, Glen W. Binegar, Allen G. Drege, Dennis W. Larson, Odell O. Ottmar, and Joseph J. Schneider, as District Directors of the Farmers Home Administration of North Dakota; Samuel Delvo, Lorace Hakanson, Larry Leier, Charles Schaefer and James Well as County Supervisors of the Farmers Home Administration in North Dakota, David Marshall, Dwight Sewell and Steve Taylor, Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Michael Robinson, Washington, D.C., argued (Stuart E. Schiffer, H. Gary Annear, Robert S. Greenspan and Robert K. Rasmussen, on the brief), for appellants.
Anthony P. Shusta, Madison, Me., argued, for appellees.
Before LAY, * Chief Judge, BOWMAN and WOLLMAN, Circuit Judges.
The Secretary of Agriculture and two employees of the Department of Agriculture appeal an order of the District Court finding them in civil contempt and awarding compensatory damages, attorney fees, and costs. We affirm in part and reverse in part.
This proceeding is ancillary to a nationwide class action, Coleman v. Block, which challenged the Farmers Home Administration's (FmHA) loan liquidation foreclosure procedures on statutory and constitutional grounds. 1 The District Court's nationwide preliminary injunction in Coleman v. Block was filed on November 14, 1983 and required the FmHA, inter alia, to give at least thirty days notice of its loan deferral program, see 7 U.S.C. § 1981a (1988), before demanding voluntary conveyance by a farmer or depriving a farmer of property in which the agency has a security interest. Coleman v. Block, 580 F.Supp. 192, 193-94 (D.N.D.1983). The injunction was made permanent in Coleman v. Block, 580 F.Supp. 194, 210-12 (D.N.D.1984), and was vacated as moot (because of the enactment of the Agricultural Credit Act of 1987) in Coleman v. Lyng, 864 F.2d 604 (8th Cir.1988), cert. denied, 493 U.S. 953, 110 S.Ct. 364, 107 L.Ed.2d 351 (1989).
During 1973 and 1974, Patrick and Sonya McBride decided to enter the poultry farming business in Maine. They located a suitable farm and began planning for construction of a broiler barn. In order to finance these plans, the McBrides went to Skowhegan Savings Bank (the Bank) and received a $40,000.00 real estate loan that was secured by a first mortgage on the realty. The FmHA also agreed to provide the McBrides with a $94,000.00 construction loan and a $29,000.00 operating loan for equipment. The FmHA received a second mortgage on the realty. 2 When completed, the farm contained such amenities as a swimming pool and a horse barn.
In 1981, the poultry business in Maine collapsed. Although the McBrides ceased making payments on their loans, neither the Bank nor the FmHA foreclosed immediately. Ultimately, by certified letter dated June 4, 1982, the Bank informed the McBrides that it was necessary to proceed with foreclosure. Although the record indicates that Sonya McBride's mother had a sum of money sufficient to pay off the mortgage to the Bank, and offered it to the McBrides for that purpose, the McBrides did not avail themselves of her offer, at least in part because of certain assurances, which we will come to momentarily, given them by one of the defendants.
The couple arranged a meeting at their home on June 11, 1982 with various FmHA officials, including Dwight Sewell, the State Director of the FmHA in Maine, and Steve Taylor, the McBrides' FmHA county agent. While those present discussed a number of possible options, ultimately nothing was resolved. The next meeting took place in Taylor's office on June 29, 1982. When again nothing was resolved, the McBrides contacted Sewell to discuss their financial situation. Sewell directed them to work with Taylor.
The McBrides met with Taylor a third time on July 22, 1982 and notified him that the Bank intended to proceed with the foreclosure. While the parties dispute the events of the meeting, the McBrides claim that Taylor advised them to allow the Bank to continue with the foreclosure procedure and assured them that the FmHA would purchase the mortgage and thereafter would work with them. The McBrides say that based on these assurances they declined to use the money then available from Sonya McBride's mother to pay off the Bank mortgage. In any event, after this meeting the McBrides instructed the Bank to proceed with foreclosure.
The Bank filed an action for foreclosure on October 13, 1982 and obtained a judgment of foreclosure on January 14, 1983, at which time the statutory one-year period of redemption began to run. In February 1983, with Taylor's knowledge, the McBrides began growing replacement chickens on their farm for Dorothy Egg Farms.
As previously noted, the District Court's nationwide preliminary injunction in Coleman v. Block issued on November 14, 1983. Coleman v. Block, 580 F.Supp. 192 (D.N.D.1983). On November 23, 1983, Sewell began a program of notice to field officers regarding that order. The injunction was made permanent on February 17, 1984.
The McBrides again visited Taylor on February 16, 1984. At this meeting, Taylor explained to the McBrides that they could either voluntarily convey the property to the FmHA and extinguish their debt or be foreclosed and owe any unliquidated balance. He also mentioned the possibility of refinancing upon proof of the McBrides' arrangement with Dorothy Egg Farms. The McBrides contacted Sewell, who confirmed these suggestions and referred them back to Taylor.
Shortly thereafter, the McBrides telephoned Taylor and directed him to prepare the conveyance documents. Taylor did so, and, on February 21, 1984, the McBrides executed an offer for a voluntary conveyance to the FmHA. 3 Taylor says that a pretermination notice package prepared in response to the Coleman v. Block injunction was included with the conveyance documents; the McBrides say they have no recollection of any such notice.
After the documents were signed, the state FmHA office added a notation to the effect that the FmHA would accept the McBrides' offer of voluntary conveyance if it received marketable title. On or about February 27, 1984, Taylor informed the McBrides that their offer was rejected as the impending judicial sale of their property prevented the FmHA from receiving marketable title. The Bank's foreclosure sale was held March 1, 1984, at which time the FmHA as junior lienholder bought the land for $51,875.37. On July 2, 1984, the FmHA sold the business fixtures for $8,990.00 and the real estate for $60,000.00.
On April 25, 1986, the McBrides filed a motion to find contempt against the United States Department of Agriculture, the Secretary of Agriculture, and various FmHA officials, including Taylor and Sewell. Following an evidentiary hearing, the District Court, in a memorandum and order filed January 4, 1989, concluded that Taylor and Sewell had violated the Coleman v. Block injunction by failing to give the McBrides adequate and meaningful notice of the loan deferral program before depriving them of property in which the FmHA had only a security, not a possessory, interest and before demanding voluntary conveyance. It further found the Secretary of Agriculture to be in contempt based upon a respondeat superior theory. 4
In reaching its decision, the District Court recognized that actions that occurred prior to the issuance of its preliminary injunction in Coleman could not be in violation of the injunction. It also took the view, however, that such "actions may be relevant as coloring or confirming actions taken or statements made after [the issuance of the preliminary injunction]." McBride v. Lyng, No. A1-83-47-09, slip op. at 12 (D.N.D. Jan. 4, 1989) (hereinafter "Memorandum and Order"). Upon examining the conduct of Taylor and Sewell both before and after the issuance of the preliminary injunction in Coleman, the court concluded that they not only had violated the injunction, but "elemental principles of contract law" as well. Memorandum and Order at 15. In addition, the court also found that in demanding that the McBrides make a voluntary conveyance Taylor and Sewell had "clearly committed the tort of duress." Memorandum and Order at 16.
Turning to the question of damages, the court found that the McBrides, "although traumatized by the destruction of the chicken raising business by factors beyond their control, were further and severely traumatized by the misconduct of Taylor and Sewell." Memorandum and Order at 16-17. The court then proceeded to award damages of $131,143.04 (plus interest) based on the "unjustified failure to forgive the balance of the debt upon the McBrides' offer to convey." Memorandum and Order at 17. An additional $50,000.00 was awarded for the McBrides' "extended emotional distress, inconvenience, and embarrassment," Memorandum and Order at 17, along with attorney fees and costs in an amount yet to be determined.
On appeal to this Court the government's main points, buttressed by various supporting arguments, are: (1) the District Court exceeded its jurisdiction when it considered the McBrides' contract and tort claims, as these claims were not based on the injunction, which was the predicate for the McBrides' contempt motion; (2) even if Taylor and Sewell violated the injunction...
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