U.S. v. Rode Corp., 91-3806

• Decision Date: 14 June 1993
• Docket Number: No. 91-3806,91-3806
• Citation: 996 F.2d 174
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. RODE CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 174

996 F.2d 174

UNITED STATES of America, Plaintiff-Appellee, v. RODE CORPORATION, Defendant-Appellant.

No. 91-3806.

United States Court of Appeals Seventh Circuit.

Argued Nov. 2, 1992.

Decided June 14, 1993.

Richard D. Humphrey, Madison, WI (argued), for U.S.

Karl Green, Alan J. Strohschein (argued), Stoltz & Strohschein, Columbus, WI, for Rode Corp.

Before RIPPLE and ROVNER, Circuit Judges, and ENGEL, Senior Circuit Judge. ^*

RIPPLE, Circuit Judge.

This is an appeal from a district court order holding that Rode Corporation (Rode) is unlawfully occupying a property that the United States purchased on June 8, 1982, at a foreclosure sale. The district court granted summary judgment for the United States and directed Rode to vacate the property and to surrender possession to the United States. For the reasons that follow, we affirm the judgment of the district court.

I BACKGROUND

A. Statutory Framework

This case involves a relatively unfamiliar and complex statutory scheme. Accordingly, at the outset, we set forth the basic framework.

1. The 1985 Act

The Farmers Home Administration (FmHA) is the agency charged with administering a federal loan program intended to help farmers finance their property through low-interest government mortgages. In response to an industry-wide financial crisis in the late 70's and early 80's, Congress enacted The Farm Credit Amendments Act of 1985 (1985 Act). The 1985 Act gave certain rights to financially distressed FmHA borrowers who would otherwise be unable to pay their mortgages and, consequently, risked losing their farms. Specifically, financially distressed farmers were given the opportunity to apply for debt restructuring or for participation in the "leaseback/buyback" program. The leaseback/buyback program allows a previous farm owner who defaulted on an FmHA loan and lost his farm to "leaseback" his entire farm from the United States with the option to buy the farm back at any time during the lease.

2. The 1987 Act

In 1987, Congress amended The Agricultural Credit Act (1987 Act). The 1987 Act became effective on January 6, 1988. The 1987 Act provides that the Secretary of FmHA (Secretary) must notify eligible program participants of their rights. The two most significant program changes made by the 1987 Act were more lenient leaseback/buyback provisions and homestead protection. These leaseback/buyback and homestead protection rights are set forth as separate and distinct provisions. See 7 U.S.C. § 1985 and § 2000 (1988). We describe each in some detail in the following two paragraphs.

a. The leaseback/buyback provisions of the 1987 Act apply fully to "borrowers." Under the 1987 Act a borrower includes any farm borrower who "has outstanding obligations to ... FmHA under any Farmer Program Loan(s), ... but does not include any such debtor all of whose loans and accounts have been foreclosed or liquidated, voluntarily or otherwise." 7 C.F.R. § 1951.906 (1993) (emphasis supplied). If FmHA exercises its right to foreclose on a defaulting debtor, and the United States purchases the property that secured the debt, the property goes into FmHA's "inventory" and becomes "CONACT" property. The leaseback/buyback provisions also apply to prior owners of CONACT property, but only if they were not given previous notice of the leaseback/buyback options under the 1985 Act.

b. The homestead protection provisions of the 1987 Act differ from the leaseback/buyback provisions in that they give the defaulter the opportunity to remain on his residence without purchasing the entire acreage originally mortgaged to FmHA. The 1987 Act defines "homestead property" to include the "principal residence, ... a reasonable number of outbuildings[,] ... and [up to] 10 acres of adjoining land that is used to maintain the family of the individual." 7 U.S.C. § 2000(a)(3). The homestead protections are only available for farmers who have resided continuously on their farms for the six years prior to foreclosure, but the provisions apply to both borrowers and prior owners. The Secretary must "make a good faith effort to notify the borrower of the availability of homestead protection rights ... within 60 days [of January 6, 1988, when the statute was enacted]." 7 U.S.C. § 2000(c)(6). To take advantage of the homestead protections, a borrower or prior borrower must file an application with FmHA either within 90 days after FmHA acquires title to his property or, for property already in inventory on January 6, 1988, within 90 days of that date. 7 U.S.C. § 2000(c)(1)(A).

3. The 1990 Act

In 1990 the Agricultural Credit Act was amended again (1990 Act). See 7 U.S.C. § 1985(e)(1)(A)(iv) (West Supp.1993). The 1990 Act requires that any borrower or "prior borrower" who has leased the property within the preceding twelve months must be given an option to repurchase the property. The 1990 Act became effective in November 1990.

B. Facts

Rode Corporation is a family-run farm corporation that purchased an 1100-acre farm (the "property") in Columbia County, Wisconsin, in the early 1960's. Hubert and Eldon Rode are officers of Rode and had resided continuously on the property, with their families, during all times relevant to this appeal. ¹ The property was financed with a mortgage secured through FmHA. In the late 1970's, Rode defaulted on its FmHA loan, and the United States, acting through FmHA, foreclosed on the property in 1982. The United States purchased the property at the resulting marshal's sale on June 8, 1982. The sale was confirmed by the United States District Court for the Western District of Wisconsin on August 19, 1983, and the United States recorded the deed to the property with the Columbia County Registrar of Deeds on September 19, 1983.

By letter dated November 10, 1986, Rode was advised by FmHA of its leaseback/buyback rights under the 1985 Act. In accordance The Farmers Home Administration (FmHA) has acquired farm real estate property, which was previously pledged as security for your FmHA farm loan(s). The homestead portion of the property may be available for you to lease with an option to purchase, under new, less restrictive, eligibility criteria set forth by the Agricultural Credit Act of 1987. Regulations implementing the revisions have not been issued, but should be available in this office in the near future.

                with these rights, Rode leased the property from the United States from April 1, 1987, until March 31, 1988, and again from April 1, 1988, until March 31, 1989. 2  Each lease was for a one-year term and explicitly noted that Rode had the right to purchase the entire property back at any time during the life of the lease.   Rode did not exercise its purchasing option under either lease.   In addition to the express option to purchase the entire property that was provided in the lease, on February 29, 1988, Rode received a letter from FmHA entitled "Notice of the Availability of Dwelling Retention."   In relevant part the notice provided
                

In order for you to be considered for dwelling retention under the new legislation YOU MUST CONTACT AND MAKE APPLICATION AT THE LOCAL FmHA COUNTY OFFICE, NO LATER THAN APRIL 5, 1988.

Plaintiff's Ex. B. (emphasis in the original). Subsequently, the Secretary promulgated regulations, effective September 14, 1988, specifying the content of the notice required under the 1987 Act. The main difference between the notice Rode actually received and the notice required by the FmHA regulations is the latter's inclusion of a more precise definition of "homestead property" as including up to ten acres of adjacent land and outbuildings. Rode did not request homestead protection prior to the April 5 deadline. However, Rode did enter a one-year lease with FmHA that commenced on April 1 of the same year.

After the expiration of the 1988-89 lease, the United States and Rode did not extend the lease or enter into a new lease. Nonetheless, Rode remained on the property until it was evicted in 1992 pursuant to this litigation. On February 5, 1990, Rode wrote to FmHA and made an offer to repurchase the property. FmHA denied the offer and Rode requested reconsideration of that denial. Ronald Caldwell, Wisconsin State Director of FmHA, responded in a letter dated March 26, 1991. That letter stated in part:

[T]he decision by the County Supervisor is supported by facts. Your client was given every opportunity within our regulations to purchase the property. Your client failed to meet the terms of the lease, and failed to exercise their option to purchase the farm before the March 31, 1989 option deadline.

R.15, Attachment C, at p 2. The letter also stated that, if Rode did not vacate the property within thirty days, FmHA would initiate eviction proceedings. Id. at p 3. Rode did not vacate the property.

On July 10, 1991, the United States initiated this action to evict Rode. On August 16, the district court entered a preliminary pretrial conference order requiring that motions for summary judgment and supporting materials be filed with the court by October 15. On October 11, the United States moved for summary judgment. On November 8, Rode filed a Memorandum of law in Opposition to the Government's Motion for Summary Judgment, along with a joint affidavit of Hubert and Eldon Rode. On November 25, the district court entered summary judgment for the United States. 825 F.Supp. 221. Ten days later, on December 5, Rode filed notice of appeal to this court.

II DISTRICT COURT PROCEEDINGS

The district court held that the United States owns the property in fee simple and On November 26, the day the district court filed its memorandum opinion granting summary judgment for the United States, Rode filed, in the district court, a supplemental affidavit in opposition to summary judgment. The supplemental affidavit was jointly executed by Hubert and Eldon Rode. Paragraph 3 of the affidavit stated:

                granted summary judgment for the government.   The district court

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