Parker v. U.S. Dept. of Agriculture

Decision Date04 October 1989
Docket NumberNo. 88-5694,88-5694
Citation879 F.2d 1362
PartiesWilliam G. PARKER and Julia Parker, Plaintiffs-Appellants, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Richard Lyng, Secretary; Lawrence Mashburn; and Union National Bank, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Christopher Driver (argued), Tullahome, Tenn., for plaintiffs-appellants.

Christopher Driver, Tullahome, Tenn., for Julia Parker.

Gary Humble, Asst. U.S. Atty. (argued), Chattanooga, Tenn., Marilyn L. Hudson, Asst. U.S. Atty., Knoxville, Tenn., for U.S. Dept. of Agriculture.

Marilyn L. Hudson, Asst. U.S. Atty., Knoxville, Tenn., for Richard Lyng.

R. Whitney Stevens (argued), Fayetteville, Tenn., for Lawrence Mashburn and Union Nat. Bank, a corp. doing business in Tennessee.

Before KEITH and KENNEDY, Circuit Judges, and McQUADE, District Judge. *

KEITH, Circuit Judge:

Appellants, William G. Parker and his wife Julia Parker, appeal the order of the district court denying their request for a preliminary injunction in this action to prevent foreclosure. The Parkers contend that they are entitled to certain appeal rights under the Consolidated Farm and Rural Development Act, as amended, 7 U.S.C. Sec. 1921. For following reasons, we AFFIRM.

I.

On June 29, 1984, the Parkers received two guaranted loans through the United States Department of Agriculture, Farmers Home Administration ("FmHA") 1 for a total of $400,000 from Union National Bank, now Dominion Bank ("the Bank"), and secured by their 1100 acre farm in Lincoln County, Tennessee. In 1985, the Parkers defaulted on their loan payments. The Bank and FmHA met with the Parkers in 1986 to discuss how to resolve their indebtedness. The Bank recommended that the Parkers sell some of their land and scale down their farming operation to reduce their financial burden. On October 25, 1986, the Parkers voluntarily sold 640 acres of their farm to avoid complete foreclosure on all 1100 acres. The proceeds from this transaction failed to satisfy the Parkers' indebtedness, and in 1987, Mr. Parker filed for bankruptcy under Chapter 12. The bankruptcy court, however, dismissed that petition on March 9, 1988. The Parkers have made no other attempts to repay their debt and have been continuously in default since 1985.

The Bank arranged several meetings and proposed several plans to help the Parkers resolve their financial problems before initiating the foreclosure proceedings on the remaining property. The Parkers, however, rejected each plan proposed by the Bank. On April 20, 1988, the Parkers applied for a temporary restraining order to prevent the Bank from foreclosing on their farm and to prohibit FmHA from approving the foreclosure or otherwise assisting in any way to liquidate the property through foreclosure. The district court granted the temporary restraining order as to the Bank and denied the application prohibiting FmHA from cooperating with the Bank.

At an evidentiary hearing held on May 2, 1988, the Parkers requested that the district court prevent the Bank from foreclosing on their property prior to final resolution of this lawsuit. The Parkers also asked that the district court require the government to confer upon them specific appeal rights as borrowers they allegedly claim they were entitled to having obtained a FmHA guaranteed loan. After reviewing the testimony given at this hearing, 2 the district court denied the Parkers' requests. This appeal followed.

II. The Farmer's Home Administration Program

In 1972, Congress gave the Secretary of Agriculture the authority to guarantee loans made to farmers by private lending institutions. 7 U.S.C. Sec. 1929(h) provides that:

The Secretary may provide financial assistance to borrowers for purposes provided in this chapter by guaranteeing loans made by any Federal or State chartered bank, savings and loan association, cooperative lending agency, or other legally organized lending agency.

7 U.S.C. Sec. 1929(h). Although the Secretary is permitted to guarantee these loans, whether the loan is actually made is left to the discretion of the lending institution. If a lender elects to make a loan guaranteed by the Secretary through FmHA, the lender must submit a Request for Guarantee form to the FmHA. The individual borrower is not involved in this procedure and does not sign the request form. FmHA may then advise the lender that the guarantee loan request is approved "subject to the completion of all conditions and requirements set forth in 'Conditional Commitment for Contract of Guarantee.' " 7 C.F.R. Sec. 1980.6(a)(4). This form is signed only by FmHA. Once the lender has satisfied its obligations, it may enter a Lender's Agreement with FmHA. The borrower does not sign this agreement and is not a party to the transaction between the lender and FmHA.

Once FmHA grants the guarantee, a contractual relationship between FmHA (guarantor) and the lender (guarantee) is created. FmHA approves the lender's request for a guarantee in consideration for the lender's promise to approve the borrower's loan and advance the funds requested. There is no privity of contract between the borrower and FmHA, and the borrower provides no consideration. The borrower is only a party to the contract with the lender; and exchanges a promise to repay the loan at some date in the future for the lender's promise to approve the loan. This promise is between the borrower and the lender and not FmHA. Additionally, the lender is not an agent of FmHA nor is the lender permitted to act as the agent or representative of FmHA. The funds advanced are those of the lender and not FmHA. FmHA and the lender are completely autonomous organizations and have no authority to influence the actions of one another. Although the lender may behave in a manner that affects its right to demand payment under the guarantee agreement, that conduct will not influence the lender's rights and duties with respect to the borrower.

III.

The Parkers argue that they may challenge FmHA's approval of the Bank's decision to foreclose by exercising the appeal procedures outlined in 7 C.F.R. Sec. 1980.80 and Subpart B, Part 1900.

A.

The Parkers erroneously rely on the appeal procedures established for the benefit of applicants of FmHA guaranteed loans as specified in 7 C.F.R. Sec. 1980.80 which provides that:

Only the borrower and the lender can appeal an FmHA decision. They must jointly participate in the written request for review of the alleged adverse decision made by FmHA. In cases where FmHA has denied or reduced the amount of final loss payment to the lender, the adverse decision may be appealed by the lender only. Appeals from decisions involving ... Economic Emergency loan guarantees will be handled in Subpart B of Part 1900 of this chapter.

7 C.F.R. Sec. 1980.80 (emphasis added). In this case, however, the Parkers are no longer applicants, having already received two FmHA guaranteed loans from the Bank; therefore, they are not entitled to these appeal rights.

B.

Since this was an Economic Emergency loan, Subpart B of Part 1900 is applicable. This section is identified as "Farmers Home Administration Appeal Procedure" and reads in pertinent part as follows:

If an adverse decision is made by FmHA on a guaranteed loan application, the borrower and the lender must participate jointly in any appeal. In cases where FmHA has denied or reduced the amount of final loss payment to the lender, the adverse decision may be appealed by the lender only.

7 C.F.R. Sec. 1900.51 (emphasis added).

According to the plain language of these sections, both the lender and the borrower must challenge the rejection of an application for a loan guarantee. This requirement underscores the importance of the lender's relationship with FmHA, because it would be futile for the borrower to appeal unless the lender wants to make the loan. Even if the borrower's appeal was successful, the borrower would still be forced to deal with the lender's decision to reject the loan. We therefore agree with the district court's conclusion that there is no language in these regulations to support their claim that they are entitled to appeal the FmHA's approval of the Bank's decision to foreclose. 3

In resolving this issue we also find it important to examine the agency's interpretations of the regulations. According to the testimony of Frank Rodgers, Chief of FmHA's Farmer's Programs, the agency intended for borrowers to have the right of appeal only through the application process, and then, only if the lender joined the borrower in the appeal. See Memorandum Opinion at 12-13. A court should defer to an agency's interpretation of its own regulations so long as that interpretation is reasonable. See Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965); Monger v. Bowen, 817 F.2d 15, 18 (4th Cir.1987).

The Parkers also rely on 7 U.S.C. Sec. 1983b to bolster their argument that they are entitled to appeal the decision to foreclose on their property. Although 7 U.S.C. Sec. 1983b specifically addresses appeals, it is limited to the following conditions: The Secretary shall provide an applicant for or borrower of a loan, or an applicant for or recipient of a loan guarantee, under this chapter who has been directly and adversely affected by a decision of the Secretary made under this chapter (hereafter in this section referred to as "appellant") with written notice of the decision, an opportunity for an informal meeting, and an opportunity for a hearing with respect to such decision, in accordance with regulations issued by the Secretary consistent with this section.

7 U.S.C. Sec. 1983b. The regulations referred to in this code section restrict the right of appeal to an applicant or recipient of a loan guarantee. In this case, the Bank is the recipient of the loan guarantee; and the Parkers are neither applicants nor recipients.

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