Sibley v. Federal Land Bank of New Orleans

• Decision Date: 20 June 1979
• Docket Number: No. 77-1817,77-1817
• Citation: Sibley v. Federal Land Bank of New Orleans, 597 F.2d 459 (5th Cir. 1979)
• Parties: 1979-1 Trade Cases 62,714 John D. SIBLEY, Plaintiff-Appellant, v. The FEDERAL LAND BANK OF NEW ORLEANS, Defendant-Appellee, and Board of Commissioners of the Mississippi State Bar, Intervenor-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 459

597 F.2d 459

1979-1 Trade Cases 62,714

John D. SIBLEY, Plaintiff-Appellant, v.The FEDERAL LAND BANK OF NEW ORLEANS, Defendant-Appellee and Board of Commissioners of the Mississippi State BarIntervenor-Appellant.

No. 77-1817.

United States Court of Appeals Fifth Circuit.

June 20, 1979.

Leslie Darden, Lester F. Sumners, New Albany, Miss., C. Michael Malski, Amory, Miss., for plaintiff-appellant.

Grady F. Tollison, Mary Ann Connell, Oxford, Miss., for defendant-appellee.

Appeals from the United States District Court for the Northern District of Mississippi.

Before TUTTLE, TJOFLAT and HILL, Circuit Judges.

TUTTLE, Circuit Judge:

The Federal Land Bank of New Orleans ("Bank") reduced by approximately seventy percent the number of Mississippi attorneys on its list of attorneys approved to conduct loan closings for the Bank.The appellants, an individual attorney and the Commissioners of the Mississippi State Bar, brought this action seeking to enjoin the Bank from cutting down its list.The district court granted summary judgment in favor of the Bank, and we affirm.

I.

The Federal Land Bank of New Orleans is one of twelve such banks chartered by the United States pursuant to the Federal Farm Loan Act of 1916, 39 Stat. 360(1917), and continued under the Farm Credit Act of 1971, 12 U.S.C. § 2001 Et seq.The Bank is part of the nation's Farm Credit System, which includes the federal land bank associations, the federal intermediate credit banks, the production credit associations, and the banks for cooperatives, all under the supervision of the Farm Credit Administration.12 U.S.C. § 2002;See generally12 C.F.R. ch.VI.

The role of the federal land banks in this system is to make rural real estate loans primarily to farmers and ranchers.This they do through the federal land bank associations, of which there are 34 chartered by the Federal Land Bank of New Orleans.The associations own all the voting stock of the Bank; ¹ each subscribes to stock in the Bank in proportion to the amount of the aggregate loans held or applied for by members of the association.12 U.S.C. § 2013.In turn, when a bank makes a loan to a farmer or rancher, the loan applicant subscribes to stock in the association in an amount between five and ten percent of the full amount of the loan, the exact percentage determined by the Bank. 12 U.S.C. § 2034.

All the funds loaned by the Bank come from its own operations.The Bank lends no government funds and receives no government guarantees of its loans or its obligations.²The Bank is governed by a seven person board of directors, two elected by land bank associations, another four elected by other entities in the farm credit system, and a seventh appointed by the Governor of the Farm Credit Administration.12 U.S.C. § 2223(a).

The Bank's loans for rural real estate are very specifically limited to adequately secured first mortgages.12 U.S.C. § 2017 requires that "(l)oans shall not exceed 85 per centum of the appraised value of the real estate security, and shall be secured by first liens on interest in real estate of such classes as may be approved by the Farm Credit Administration."Accord12 C.F.R. §§ 600.20(1977), 614.4230 (1977).³The statutes and regulations governing the Bank leave to the Bank the methods for ascertaining that its loans meet these requirements.Nevertheless, they make clear that the responsibility to do so is the Bank's.12 C.F.R. § 615.5060(a)(1977) provides:

If the chief counsel for a Federal Land Bank has determined in writing that bank procedures provide sufficient safeguards to assure that a loan made by the bank will be secured by a first lien or its equivalent on interest in the primary real estate security, an attorney lien certification need not be obtained at the time a note is accepted for collateral.The note shall be withdrawn from collateral upon the expiration of one year from the date of loan closing, unless before the end of such period, an attorney has certified that the interest of the bank in the primary real estate security for that loan is a first lien on the borrower's interest or its equivalent from a security standing point.

Thus, the Bank either may accept an attorney's lien certification or it may rely on its own procedure to fulfil its obligations to loan only on the security of a first lien.

For more than 50 years, the Bank has used outside attorneys to determine whether its interest in a real estate security meets these obligations.During this time, the Bank has maintained a list of attorneys approved to examine and certify title, record instruments, and close loans.The final selection of an attorney from this list for each transaction is made by the loan applicant.The applicant pays the attorney's fee.Originally, the list was selected according to various indicia of reputation, such as the Martindale-Hubbell directory, experience in title examination, and recommendations of Bank personnel and other practitioners.

The list grew over the years so that by 1974 the Bank's list in Alabama, Mississippi and Louisiana contained more than 1400 law firms and an estimated 3,000 to 3,500 attorneys.In Mississippi, there were 556 firms on the list.From 1922 through 1946, attorneys selected from this list would submit abstracts of title which were then reviewed and approved by the Bank's own in-house attorneys, with the outside counsel handling the rest of the closing.Beginning in 1946, the approved outside attorney would submit a certificate of title rather than an abstract.At the time of the changes at issue here, then, the procedure for obtaining a loan from the Bank was as follows.A prospective borrower would apply to the land bank association in his area, paying to the association fees for the appraisal of his real estate security and the investigation of his credit.The applicant would then choose from the Bank's approved list an attorney who would prepare the loan documents, ordinarily printed forms furnished by the Bank, conduct the search, and certify the borrower's title to the real estate security and the first lien status of the Bank's mortgage.Upon such certification, the association would prepare closing statements and issue a draft on the bank.The borrower would pay all closing expenses, as well as the fee charged by the approved attorney.

In 1974, the management of the Bank became concerned about the lapse of time between an application for a loan and the closing of a loan.⁴In an effort to make more efficient the processing of applications, the Bank instituted a new loan closing procedure.This procedure contemplated less involvement by the Bank itself and greater involvement by the land bank associations and local attorneys.As part of this new procedure, the Bank decided to reduce by 70 percent the number of attorneys approved to handle closings.To carry out this decision, the Bank's duly authorized general counsel solicited from the land bank associations under the Bank their views on the attorneys who should remain on the list.Criteria suggested to the association were admittedly subjective.They included the volume of Bank business which attorneys handled, the efficiency with which they handled it, their professional reputations and competence in title practice, as well as association personnel's own preferences.The general counsel made the final decision as to who should remain on the list.

On September 16, 1974, letters went out both to those attorneys who remained on the approved list and to those who were being dropped, informing them of the new procedure, explaining the use for it, and telling them their status.The letters acknowledged that many qualified attorneys were being dropped from the approved list; the letter to the attorneys who remained on the list stated "(m)any of the firms removed from the list are prestigious and composed of highly competent and reputable attorneys.Arbitrary decisions have been made in some instances prompted by our desire to reduce the overall numbers of attorneys involved."As the district court found, nothing said in these letters was detrimental to the attorneys dropped from the list.A subsequent letter to the dropped attorneys to "clarify and amplify" the September 16 letter explained more extensively the new procedure.Under the new system, "inputs by, and involvement of, the Bank will be reduced to a minimum (and)(l)oan closing will be handled almost exclusively by association personnel and approved closing attorneys."The second letter also stressed that the decision to drop certain firms and attorneys was not intended as any reflection on those dropped.

AppellantJohn Sibley was one of the attorneys dropped from the approved list.He filed this action individually and on behalf of all practicing attorneys in Mississippi.Subsequently, the Mississippi State Bar("Bar") was permitted to intervene on behalf of all Mississippi attorneys, ⁵ and Sibley amended his complaint to seek only individual relief.The appellants alleged that the Federal Land Bank of New Orleans is a federal instrumentality subject to the due process clause, and that the Bank violated the equal protection component of the due process clause, Cf.Bolling v. Sharpe, 347 U.S. 497, 499, 74 S.Ct. 693, 98 L.Ed. 884(1954), by not accepting loan closing services of any Mississippi attorney selected by the borrower.In the alternative, assuming the Bank is not a federal instrumentality with respect to its decision to cut the approved list, they claimed that the action restricted competition among Mississippi attorneys and thus violated the Sherman Act,15 U.S.C. § 1.After discovery, the parties stipulated that there were no material issues of fact and filed opposing motions for summary judgment.The district court granted summary judgment in favor of the Bank.

II.

Much of the argument on appeal focuses on the question whether the Bank is a federal instrumentality for the...