U.S. v. Markgraf

• Decision Date: 15 June 1984
• Docket Number: No. 83-2492,83-2492
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Eugene T. MARKGRAF and Nancy J. Markgraf, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1179

736 F.2d 1179

UNITED STATES of America, Plaintiff-Appellee, v. Eugene T. MARKGRAF and Nancy J. Markgraf, Defendants-Appellants.

No. 83-2492.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 16, 1984.

Decided June 15, 1984. ^*

Roy T. Traynor, Traynor Law Office, Wausau, Wis., for defendants-appellants.

Stephen J. Liccione, Asst. U.S. Atty., Milwaukee, Wis., for plaintiff-appellee.

Before BAUER, COFFEY, and FLAUM, Circuit Judges.

FLAUM, Circuit Judge.

This appeal from a judgment of foreclosure entered against appellants Eugene and Nancy Markgraf raises several issues regarding the Secretary of Agriculture's duties under 7 U.S.C. Sec. 1981a (1982). Section 1981a provides generally that the Secretary may permit deferral of repayment or may forego foreclosure on loans granted by the Farmers Home Administration (FmHA). The district court held that the Secretary was not required to implement section 1981a at all. Thus, the Secretary did not have to consider whether to defer repayment before foreclosing on FmHA loans. We affirm the entry of the judgment of foreclosure, although for reasons different from those stated by the district court. ¹

I.

Between 1976 and 1979, the Markgrafs obtained a series of loans from the FmHA. These loans varied in purpose, amount, and terms. In May 1978, the Markgrafs began to default on their loans. The Markgrafs have not made any payments on any of their loans since March 31, 1980.

In April 1979, the FmHA district director prepared a problem case report on the Markgrafs after reviewing their account. The district director concluded that the Markgrafs' account probably would require liquidation if they failed to repay a 1979 loan. The Markgrafs failed to repay this loan.

In March 1980, the Markgrafs discussed the status of their loans with their FmHA county supervisor and requested further financing for 1980. The supervisor told the Markgrafs that he would not recommend further financing.

By letter dated August 15, 1980, the FmHA notified the Markgrafs that it was accelerating the unpaid balance of their loans. ² It is undisputed that the Markgrafs never received notice of the availability of relief under section 1981a. The United States instituted foreclosure proceedings in November 1981.

The district court entered summary judgment of foreclosure against the Markgrafs. The district court held that the Secretary's authority to implement section 1981a was discretionary. Given that the Secretary did not have to implement the statute at all, the court ruled that he did not have to provide personal written notice of the availability of section 1981a or promulgate regulations embodying procedural and substantive standards to be used in applying section 1981a.

On appeal, the Markgrafs argue that the FmHA is required to implement section 1981a. They contend that Congress intended the Secretary of Agriculture's discretion under section 1981a to extend only to whether to grant relief in individual cases. The Markgrafs assert that the FmHA must provide each borrower with personal written notice of the availability of relief under section 1981a before it decides to accelerate or foreclose on a loan. They further argue that section 1981a requires the Secretary to promulgate regulations providing procedural and substantive guidelines to be used in determining whether to grant section 1981a relief in an individual case. The Markgrafs assert that because they never received notice of the availability of relief under section 1981a and because the Secretary has not promulgated regulations, judgment of foreclosure was improper.

The United States argues that section 1981a is permissive, and therefore, the Secretary does not have to implement it. The government principally relies on the fact that the statute uses the permissive term "may." Thus, the government argues, regulations and written notice are not required. If regulations are required under section 1981a, the government maintains that existing regulations satisfy these requirements. Therefore, the United States argues, judgment of foreclosure was proper.

II.

The first issue we address is whether the Secretary of Agriculture must implement section 1981a. It is not clear under what circumstances an administrative agency properly may determine not to implement statutory powers given it by Congress. Compare Rank v. Nimmo, 677 F.2d 692, 700-01 (9th Cir.), cert. denied, 459 U.S. 107, 103 S.Ct. 210, 74 L.Ed.2d 168 (1982) with id. at 702-06 (Reinhardt, J., dissenting). We need not delineate here the precise scope of agency discretion on this issue. It is clear that an agency must implement its statutory powers where the statute itself or the legislative history indicates that Congress intended to require implementation. Id. at 701 (citations omitted). Our task, then, is the same as it is in any case involving statutory interpretation: to determine congressional intent. In determining this intent, courts customarily look to several factors: the language of the statute; the legislative history; and the interpretation given by the administrative agency charged with enforcing the statute. See Director, Office of Workers' Compensation Programs v. Forsyth Energy, Inc., 666 F.2d 1104, 1107 (7th Cir.1981).

We begin, as we must, with the language of the statute itself. Howe v. Smith, 452 U.S. 473, 480, 101 S.Ct. 2468, 2473, 69 L.Ed.2d 171 (1981). Section 1981a provides in pertinent part:

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 deferal of principal and interest on any outstanding loan ... 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.

7 U.S.C. Sec. 1981(a) (1982) (emphasis supplied). The word "may," when used in a statute, usually gives discretion to those charged with enforcement of the statute. United States v. Rodgers, --- U.S. ----, 103 S.Ct. 2132, 2149, 76 L.Ed.2d 236 (1983); see Bethlehem Steel v. Gorsuch, 726 F.2d 356, 366 (7th Cir.1984); Burglin v. Morton, 527 F.2d 486, 488 (9th Cir.1975), cert. denied, 425 U.S. 973, 96 S.Ct. 2171, 48 L.Ed.2d 796 (1976). Section 1981a thus gives the Secretary some discretion; he need not grant deferral relief to every FmHA borrower. But this does not mean that he has absolute discretion and can refuse to implement the statute altogether.

Any inferences from the statutory language of section 1981a indicate that Congress intended the Secretary's discretion to extend only to whether to grant relief in individual cases and not to whether to implement the statute. First, it is significant that the deferral relief process is initiated "at the request of the borrower." The fact that the borrower initiates the process demonstrates that Congress intended the Secretary to act on a case-by-case basis. Furthermore, if a borrower makes a request, the Secretary must take some action on that request. That action is itself an exercise of discretion, and thus, the Secretary must exercise discretion in each case. Second, section 1981a provides standards for the exercise of discretion. The Secretary may grant relief upon the borrower making the required showing. Where Congress has provided express standards to guide an agency in its exercise of discretion, we will presume that Congress did not intend the agency to substitute its own standards for discretion. See Rockbridge v. Lincoln, 449 F.2d 567, 571 (9th Cir.1971) (where statute provides standards, agency does not have unbridled discretion to refuse to regulate). An administrative agency cannot abdicate its responsibility to implement statutory standards under the guise of determining that inaction is the best method of implementation. See Federal Power Commission v. Texaco, Inc., 417 U.S. 380, 394, 94 S.Ct. 2315, 2324, 41 L.Ed.2d 141 (1974).

The legislative history also indicates that Congress intended the implementation of section 1981a to be mandatory. Congress passed section 1981a as part of the Agricultural Credit Act of 1978, which amended the Consolidated Farm and Rural Development Act of 1961, 7 U.S.C. Secs. 1921-1996 (1982). The House Report accompanying the House version of the 1978 Act states, "[W]e find FmHA's present authorities are inadequate today to meet the credit needs of farmers who qualify for the Agency's services. The purpose of this legislation is to broaden FmHA authorities to cope with today's problems and be of greater service to farmers and the rural community." H.R.Rep. No. 986 at 22, 95th Cong., 2d Sess., reprinted in 1978 U.S.Code Cong. & Ad.News 1106, 1127. It is difficult to understand how section 1981a can help farmers if the Secretary refuses to implement it. Where a statute is enacted to benefit a designated class of persons by allowing relief in a particular situation, we will presume in the absence of substantial evidence to the contrary that Congress intended the statute to be implemented.

Furthermore, the House Report compared section 1981a to "[c]omparable language" in the Housing Act with respect to housing loans made by the FmHA. See 42 U.S.C. Sec. 1475 (1976). Section 1475 authorizes the Secretary of Agriculture, under regulations to be prescribed by him, to grant a deferral of repayment of loans upon the same showing required by the borrower under section 1981a. The Secretary has implemented section 1475. The express comparison indicates that Congress intended the Secretary to implement section 1981a.

Finally, the congressional debate on the 1978 Act shows an intent to make the implementation of section 1981a mandatory. During the Senate debate, Senator Eagleton...