Ramey v. Block, 83-5167

• Decision Date: 11 July 1984
• Docket Number: No. 83-5167,83-5167
• Citation: 738 F.2d 756
• Parties: Rex RAMEY, et al., Plaintiffs-Appellants, v. John BLOCK, Secretary of Department of Agriculture, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 756

738 F.2d 756

Rex RAMEY, et al., Plaintiffs-Appellants, v. John BLOCK, Secretary of Department of Agriculture, et al Defendants-Appellees.

No. 83-5167.

United States Court of Appeals Sixth Circuit.

Argued March 27, 1984.

Decided July 11, 1984.

Will Dunn (argued), Dayton, Tenn., for plaintiffs-appellants.

John W. Gill, Jr., U.S. Atty., J. Michael Haynes (argued), Asst. U.S. Atty., Knoxville, Tenn., for defendants-appellees.

Before JONES and CONTIE, Circuit Judges, and CHURCHILL, District Judge. ^*

CONTIE, Circuit Judge.

The Secretary of Agriculture (Secretary) is authorized under the Consolidated Farm and Rural Development Act (CFRDA), 7 U.S.C. Secs. 1921-1996, to make loans to farmers who are "unable to obtain sufficient credit elsewhere to finance [their] actual needs at reasonable rates and terms." 7 U.S.C. Sec. 1983(a). The recipients of CFRDA loans are personally liable for the obligation and must provide such security as the Secretary may require. 7 U.S.C. Secs. 1927(c), 1946(a)(1), and 1964(d). This appeal represents significant questions regarding the extent to which the Secretary must implement 7 U.S.C. Sec. 1981a, the CFRDA's loan moratorium provision. The district court adopted the position that the Secretary is under no obligation to implement Sec. 1981a. We reverse.

I.

Plaintiffs Rex and Tex Ramey are dairy farmers in Roane County, Tennessee. In November 1965, they obtained the first of a series of CFRDA loans from the Farmers Home Administration (FmHA). ¹ Several of these loans were secured by real estate and other chattel property owned by the plaintiffs. These security interests were held by the Federal Land Bank of Louisville, Kentucky and the FmHA. Thereafter, the plaintiffs suffered a series of economic setbacks due to drought and low market prices. When the plaintiffs failed to make their scheduled payments on several loans, the Federal Land Bank commenced foreclosure proceedings on a portion of plaintiffs' farm. The FmHA, in an effort to protect its junior lien interest, purchased the property for $292,000.00. On November 16, 1981, the FmHA notified the plaintiffs that it was accelerating their loan accounts due to (1) their failure to make scheduled note payments, (2) their failure to pay scheduled taxes, and (3) their unauthorized disposition of secured property. The notice also stated that the FmHA would commence foreclosure proceedings on the aforementioned property if full payment was not received by December 8, 1981. The plaintiffs appealed pursuant to FmHA regulations, but the decision was ultimately upheld.

Prior to the foreclosure sale, the plaintiffs learned of the loan deferral provisions set forth in 7 U.S.C. Sec. 1981a from sources other than the FmHA. Section 1981a provides as follows:

In addition to any other authority that the Secretary may have to defer principal and interest and forego foreclosure, the Secretary may permit, at the request of the borrower, the deferral of principal and interest on any outstanding loan made, insured, or held by the Secretary under this chapter, or under the provisions of any other law administered by the Farmers Home Administration, and may forego foreclosure of any such loan, for such period as the Secretary deems necessary upon a showing by the borrower that due to circumstances beyond the borrower's control, the borrower is temporarily unable to continue making payments of such principal and interest when due without unduly impairing the standard of living of the borrower. The Secretary may permit interest that accrues during the deferral period on any loan deferred under this section to bear no interest during or after such period: Provided, That if the security instrument securing such loan is foreclosed such interest as is included in the purchase price at such foreclosure shall become part of the principal and draw interest from the date of foreclosure at the rate prescribed by law.

On September 21, 1982, the plaintiffs initiated this lawsuit. The plaintiffs alleged, inter alia, that the Secretary had abused his discretion by failing to implement Sec. 1981a through the promulgation of "adequate loan servicing regulations." The plaintiffs also contended that the Secretary had a duty to inform them of the deferral provisions prior to the acceleration of their loans. The plaintiffs sought (1) a declaratory judgment that the Secretary had a duty to promulgate regulations to implement Sec. 1981a, and (2) an injunction to stop the foreclosure sale until the plaintiffs had the opportunity to apply for deferral relief pursuant to those regulations. On September 28, 1982, the district court entered an order which enjoined the foreclosure sale pending the final disposition of this case. Thereafter, both parties filed motions for summary judgment and agreed to a limited stipulation of facts. On January 20, 1983, the district court granted the Secretary's summary judgment motion after ruling that "the legislative history of the 1978 amendments indicates that the Secretary would have discretion under the Act in the implementation of the loan deferral program." Plaintiffs appeal.

II.

The starting point in a search for legislative intent is, of course, the pertinent statutory language. Reiter v. Sonotone Corp., 442 U.S. 330, 337, 99 S.Ct. 2326, 2330, 60 L.Ed.2d 931 (1979); Piper v. Chris-Craft Industries, 430 U.S. 1, 24, 97 S.Ct. 926, 940, 51 L.Ed.2d 124 (1977). Section 1981a contains no provision for the promulgations of regulations by the Secretary and no notice requirement. It does, however, contain general standards for deferral relief which limit the scope of the Secretary's discretionary authority. Since the text of Sec. 1981a does not clearly and unequivocally resolve the issue of whether the Secretary must implement the statute, we must examine the legislative history in order to ascertain and give effect to the legislative will. See Philbrook v. Glodgett, 421 U.S. 707, 713, 95 S.Ct. 1893, 1898, 44 L.Ed.2d 525 (1975). As we embark upon this venture, we are guided by Chief Justice Burger's admonition in Piper that "[r]eliance on legislative history in divining the intent of Congress is, as has often been observed, a step to be taken cautiously." Piper v. Chris-Craft Industries, 430 U.S. at 26, 97 S.Ct. at 941.

Section 1981a was enacted as part of the Agricultural Credit Act of 1978, Pub.L. No. 95-334, reprinted in 1978 U.S.Code Cong. & Ad.News (92 Stat.) 420-434, which amended the CFRDA. The House version of the statute contained a reference to the creation of regulations by the Secretary and also contained general standards for deferral relief:

SEC. 331A. In addition to any authority under existing law which the Secretary may have, during any time that any direct or insured loan is outstanding under this title, the Secretary is authorized under regulations prescribed by him to grant a moratorium upon the payment of interest and principal on such loan for so long a period as he deems necessary, upon a showing by the borrower that due to circumstances beyond his control, he is temporarily unable to continue making payments of such principal and interest when due without unduly impairing the standard of living of the borrower. The Secretary is also authorized to forego foreclosure on loans made under this title under circumstances set forth in this section. [Emphasis added].

H.R.Rep. No. 986, 95th Cong., 2d Sess. 79.

The House Report also contains the following summary of the proposed statute:

In another amendment to title I, Mr. Moore proposed that the Secretary should have explicit authority to provide a moratorium on payment of principal and interest and to forego foreclosure on Farmers Home Administration loans, upon a showing by the borrower that due to circumstances beyond his control he was temporarily unable to meet an installment when due without unduly impairing his standard of living. Comparable language appears in the Housing Act with respect to housing loans by the Farmers Home Administration and was recommended by Mr. Moore in order to clarify the Secretary's authority. The amendment was accepted by the committee with a change offered by Mr. Moore to provide that this would be in addition to any authority the Secretary may have under existing law, so that the Secretary's authority under current law would not be reduced or impaired by the proposed amendment.

H.R.Rep. No. 986, 95th Cong., 2d Sess. 27, reprinted in 1978 U.S.Code Cong. & Ad.News 1106, 1132.

The House Report's allusion to "comparable language" is a reference to 42 U.S.C. Sec. 1475, the moratorium provision in Title V of the Housing Act of 1949, 42 U.S.C. Secs. 1471-1490j. Section 1475 also authorizes the Secretary "under regulations to be prescribed by him" to defer payment of principal and interest "upon a showing by the borrower that due to circumstances beyond his control, he is unable to continue making payments of such principal and interest when due without unduly impairing his standard of living." It is clear, therefore, that the House version of Sec. 1981a provided for the statute's implementation through the promulgation of regulations by the Secretary.

The Senate version of Sec. 1981a was introduced on the Senate floor by Senator Thomas Eagleton and read as follows:

Sec. 331A. In any area eligible for emergency loans under subtitle C [7 U.S.C. Secs. 1961-1971], the Secretary may permit, at the request of the borrower, the deferral of principal and interest on any outstanding loan made, insured, or held by the Secretary under this title, or under the provisions of any other law administered by the Farmers Home Administration, for not to exceed three years from the date of such deferral. The interest which accrues during the deferral period on any loan deferred under authority of this section shall bear no interest during or after such period; provided, however, if the security instrument securing such loan is foreclosed such...