Yankton Production Credit Ass'n v. Jensen

• Decision Date: 21 May 1987
• Docket Number: 15623,Nos. 15614,s. 15614
• Citation: 416 N.W.2d 860
• Parties: YANKTON PRODUCTION CREDIT ASSOCIATION, Plaintiff and Appellee, v. Jerome E. JENSEN and Connie M. Jensen, Defendants and Appellants. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 860

416 N.W.2d 860

YANKTON PRODUCTION CREDIT ASSOCIATION, Plaintiff and Appellee, v. Jerome E. JENSEN and Connie M. Jensen, Defendants and Appellants.

Nos. 15614, 15623.

Supreme Court of South Dakota.

Considered on Briefs May 21, 1987.

Decided Dec. 9, 1987.

Steven M. Johnson of Brady, Kabeiseman, Reade & Johnson, Yankton, for plaintiff and appellee.

Roger W. Hunt, and Fred Hendrickson, Sioux Falls, for defendants and appellants.

MORGAN, Justice.

Defendants and appellants, Jerome E. Jensen and Connie M. Jensen (Jensens), appeal from a judgment of foreclosure entered following a court trial. Plaintiff and appellee, Yankton Production Credit Association (PCA), filed a notice of review. We affirm the trial court on Jensens' appeal.

For some years prior to 1980, Jensens borrowed money from the PCA to finance their farming operation. The loans were evidenced by duly executed promissory notes, secured by mortgages and security agreements. As was the case with many farmers, Jensens ran into financial problems in the early 1980s and began falling into default on their payments to PCA. Beginning in 1983, PCA urged Jensens to find other financing or to liquidate because PCA could no longer carry them. The maturity date of the loan was extended to November 1, 1984, based on a memorandum of understanding, signed by the parties, signifying that PCA was to be paid in full and would not continue financing Jensens. The November 1 date passed without payment and PCA finally instituted this action for foreclosure on March 13, 1985.

Jensens responded with an answer alleging affirmative defenses of failure of PCA to grant forbearance and other violations of the Farm Credit Act (FCA) ( 12 U.S.C. § 2001, et seq. (1980)). Jensens also filed a counterclaim, in five counts, asking unspecified actual damages and for punitive damages in the sum of $250,000. Several of these counts were based on alleged noncompliance with the FCA.

The trial court took evidence on the foreclosure action on October 9 and 10 and entered its first memorandum opinion on January 10, 1986. Upon motion for reconsideration, the trial court amended the first decision and rendered a second opinion denying Jensens' affirmative defenses to foreclosure and dismissed such counts of the counterclaim as were based on the FCA. The trial court, however, denied PCA's motion to dismiss all of the counts of the counterclaim, preserving those based on state claims. Judgment of foreclosure was entered and Jensens appeal this adverse judgment. From the trial court's refusal to dismiss all counts of Jensens' counterclaim, PCA filed notice of review.

Jensens state the issue generally, "whether the trial court erred in dismissing appellant's (sic) affirmative defenses based upon the bank's violation of certain mandates of the Farm Credit Act of 1971, as amended." More specifically, they urge two points: 1) The trial court erred in applying the "no private right of action" theory to this case; and 2) the Act, as amended, and the forbearance requirements (12 C.F.R. § 614.4510), provided a valid defense to foreclosure.

At the outset, we should note that this case is a companion case to Federal Land Bank v. Jensen, 415 N.W.2d 155 (S.D.1987), in conference, but the issues are quite different. One primary distinction is that this case centers on the FCA as it was prior to the 1985 Amendments. The foreclosure action in this case was commenced and judgment entered before the effective date of the 1985 Amendments. We would further express our dissatisfaction with the many references to the trial court's memorandum opinions in appellants' brief, particularly the references to the first opinion, which was reconsidered by the trial court on motion by PCA and materially changed by the second opinion. This court has repeatedly held that the memorandum opinion is merely an expression of the trial court's opinion of the facts and the law. It has no binding effect. The findings of fact and conclusions of law and judgment, as signed by the judge, are the binding statement of adjudication. Connelly v. Sherwood, 268 N.W.2d 140 (S.D.1978); Christiansen v. Strand, 82 S.D. 416, 147 N.W.2d 415 (1966). Yet, in this case, appellants' brief refers constantly to the trial court's memorandum opinions. We must disregard all such references. We will, instead, rely on the trial court's findings of fact and conclusions of law to express its decision.

The thrust of this appeal is Jensens' claim that the trial court erred in adopting the holding in Smith v. Russellville, 777 F.2d 1544 (11th Cir.1985), when he said in Finding of Fact No. 14: "That the forbearance policy of the Yankton Production Credit Association is not mandatory as to any particular borrower." Jensens would have us eschew the Smith holding and adopt the holding of a federal district court judge in DeLaigle v. Federal Land Bank of Columbia, 568 F.Supp. 1432 (S.D.Ga.1983).

Both decisions involved the effect of 12 C.F.R. § 614.4510(d)(1), which provides in pertinent part:

(d) In the development of the bank and association policies and procedures, the following criteria shall be included:

(1) ... The policy shall provide a means of forbearance for cases when the borrower is cooperative, making an honest effort to meet the conditions of the loan contract, and is capable of working out of the debt burden.

In the Smith case, Smith and others sought compensatory and punitive damages against the Federal Land Bank for, among other things, violations of the requirements of the FCA and the regulations promulgated thereunder. The 11th Circuit panel held, in essence, that the FCA and the regulations did not give borrowers private rights which would give rise to a cause of action against the lender because the regulation was not a substantive rule; but, rather, it fell into the category of interpretive rule, general statement of policy, or rule of agency organization, procedure, or practice.

In DeLaigle, an action seeking a temporary injunction to halt a nonjudicial foreclosure of plaintiff's real property securing farm loans, the district judge first determined that the regulation was a substantive rule, duly adopted by authority of the FCA and in accord with the procedural requirements of the Administrative Procedures Act.

While both sides argued the merits of the respective rationale, we find that, in view of the record before us, we do not have to decide which rationale we should adopt. This will become apparent as we discuss the issues raised by Jensens in inverse order.

In the second issue, Jensens argue that violation of the forbearance requirement of the regulation constitutes a valid defense to the foreclosure action. How a right of action for damages under the DeLaigle rule would constitute a condition precedent to a foreclosure action they do not explain, nor do they furnish any authority to support that leap of logic. But that is immaterial, for although Jensens assert in their brief: "If, as the trial court found in the present case, forbearance has not been provided, then that failure on the part of the PCA should be permitted as an affirmative defense in resistance to foreclosure," the record says otherwise. The trial court's Finding of Fact No. 15 specifically found: "That the Yankton Production Credit Association, in actuality, forbore its rights to foreclose against the [Jensens] for at least three (3) years prior to this action being commenced." The statement in the brief is such a bald-faced misstatement of a crucial factual holding that it is hard to conceive that it was merely a misinterpretation. Nowhere in their brief do Jensens raise any issue as to the sufficiency of the evidence to support the trial court's findings so that issue is waived. It is our determination, therefore, that in view of the fact that Jensens did in fact receive forbearance for a period of three years, they suffered no loss of rights under either view of the regulation and we affirm the decision of the trial court on that issue.

We turn then, briefly, to the first issue raised by Jensens. They argue that even the cases that hold that the FCA does not grant a private right of action make an exception as to 12 U.S.C. §§ 2201 and 2202 and counsel states in his brief: "The trial court in the present case clearly determined that the PCA had violated 12 U.S.C. Sections 2201 and 2202...