Zajac v. Federal Land Bank of St. Paul
| Decision Date | 07 December 1989 |
| Docket Number | No. 88-5353,88-5353 |
| Parties | Raymond P. ZAJAC and Helen Ann Zajac, Appellants, v. FEDERAL LAND BANK OF ST. PAUL, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Richard J. Linnerooth, Fargo, N.D., for appellants.
James B. Loken, Minneapolis, Minn., for appellee.
Before HEANEY * and FAGG, Circuit Judges, and HANSON, ** Senior District Judge.
Raymond and Helen Zajac, a North Dakota farm couple, appeal from a decision of the district court holding that the Agricultural Credit Act of 1987 (Act) does not provide the Zajacs with a private right of action to enjoin the Federal Land Bank of St. Paul (Bank) from foreclosing on the Zajacs' property until the Bank honors their request that an independent appraiser be appointed to appraise their property for purposes of restructuring their distressed loan with the Bank.
We hold that the Zajacs have a private right of action under the Act to require the appointment of an independent appraiser and remand to the district court for action consistent with this opinion.
In 1980, the Zajacs borrowed $250,000 from the Bank. By 1986, they were unable to continue making payments, and the Bank commenced foreclosure proceedings in state court. The Zajacs raised a number of defenses to the action. On December 14, 1987, the state court issued a decision in favor of the Bank.
The Bank delayed entry of its state court foreclosure judgment to afford the Zajacs an opportunity to restructure their loan under sections 102 and 106 of the Agricultural Credit Act of 1987, 12 U.S.C. Secs. 2202 and 2202a.
The Zajacs submitted an application for restructuring, which was considered but denied by the Bank on April 15, 1988, on the ground that the Bank would incur a greater loss under the Zajacs' restructuring proposal than would occur through a sale of the property at foreclosure. The Zajacs appealed that decision to the Bank's credit review committee. They asked the committee to appoint an independent appraiser pursuant to procedures required by the Act. The committee refused and, after a hearing, denied the Zajacs' application for restructuring. Judgment of foreclosure was entered by the state court on May 6, 1988.
The Zajacs appealed the judgment of foreclosure to the Minnesota Supreme Court and moved for a stay of judgment. The motion was denied, and the trial court was affirmed.
At that point, the Zajacs asked the United States District Court to enjoin the Bank from conducting a sheriff's sale on their land until it had complied with certain borrowers' rights provisions of the Act, including the provision mandating an independent appraisal. 1 The district court denied the Zajacs' motion after hearing. It held that there is no expressed or implied private right of action for failure to comply with the borrowers' rights provisions of the Act, that the Act did not require an independent appraisal of the Zajacs' land, 2 that the Bank's decision to deny restructuring was a commercial banking decision and that the relief requested would violate the Federal Anti-Injunction Act, 28 U.S.C. Sec. 2283.
The Agriculture Credit Act of 1987 does not provide an explicit private right of action to a borrower. Thus, the question is whether a borrower has an implied cause of action to enforce the independent appraisal procedures required by the Act.
The Act provides detailed procedures and formulae under which a borrower can seek to have a distressed loan restructured. 3 The bank is to restructure loans unless the cost of restructuring exceeds the cost of foreclosure. 4 Restructuring is defined as follows:
The terms "restructure" and "restructuring" include rescheduling, reamortization, renewal, deferral of principal or interest, monetary concessions, and the taking of any other action to modify the terms of, or forbear on, a loan in any way that will make it probable that the operations of the borrower will become financially viable.
12 U.S.C. Sec. 2202a(a)(7). If the lender rejects the request for restructuring, further procedures can be instituted by the borrower. The borrower can request a review of that decision. 12 U.S.C. Sec. 2202(b)(1). As an aspect of that review, the Act grants a borrower the right to an independent appraisal. 12 U.S.C. Sec. 2202(d).
In determining whether the Zajacs have an implied cause of action to assert a borrower's procedural right to an independent appraisal and other mandated procedures under the Act, the question of congressional intent is the ultimate issue and "unless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist." Thompson v. Thompson, 484 U.S. 174, 108 S.Ct. 513, 520, 98 L.Ed.2d 512 (1988). We hold, however, that the necessary intent is found in the language and structure of the 1987 Act, as well as its legislative history and general purpose. 5
The 1987 Act emphasizes that borrowers have the power to initiate certain procedures. Part C of the Act is entitled "Rights of Borrowers; Loan Restructuring." One of the procedures that borrowers can initiate is the right to an independent appraisal at the credit review committee stage of a restructuring proceeding. The pertinent part of the Act reads as follows:
An appeal filed with a credit review committee under this section may include, as a part of the request for a review of the decision filed under subsection (b)(1) or (2) of this section, a request for an independent appraisal, by an accredited appraiser, of any interests in property securing the loan (other than the stock or participation certificates of the qualified lender held by the borrower).
* * *
* * *
Within 30 days after a request for an appraisal under paragraph (1), the credit review committee shall present the borrower with a list of three appraisers approved by the appropriate qualified lender from which the borrower shall select an appraiser to conduct the appraisal the cost of which shall be borne by the borrower and shall consider the results of such appraisal in any final determination with respect to the loan.
* * *
* * *
A copy of any appraisal made under this subsection shall be provided to the borrower.
12 U.S.C. Sec. 2202(d)(1), (2) and (3) (emphasis added).
The language requiring the appointment of an independent appraiser upon request is mandatory rather than permissive. The System lender is directed to follow the statutory procedure--the only discretion left to the lender and the credit review committee is to present the borrower with a list of three appraisers from which the borrower can select. Having done this, the committee is mandated to consider the results of the appraisal in any final determination with respect to the loan.
The language used by Congress with respect to the other borrowers' rights provisions is also mandatory in setting forth exceedingly detailed procedures that System lenders must follow. Thus, the Act provides, inter alia:
(a) That when it is determined that a loan made by a lender is distressed, the lender shall provide written notice to the borrower that the loan may be suitable for restructuring. 12 U.S.C. Sec. 2201(b).
(b) That not later than 45 days before a lender begins foreclosure proceedings, the lender shall notify the borrower that the loan may be suitable for restructuring. 12 U.S.C. Sec. 2202a(b)(2).
(c) That no lender may foreclose a distressed loan before the lender has completed consideration of the loan for restructuring. 12 U.S.C. Sec. 2202a(b)(3).
(d) That the lender shall provide a reasonable opportunity for the borrower to meet personally with a representative of the lender. 12 U.S.C. Sec. 2202a(c).
(e) That if the lender determines that the potential cost of restructuring a loan in accordance with a post-restructuring plan is less than or equal to the potential cost of foreclosing, the qualified lender shall restructure the loan in accordance with the plan. 12 U.S.C. Sec. 2202a(e)(1).
The detail and precision by which Congress set forth borrowers' rights under this section are powerful indications that Congress intended to confer specific enforceable rights on borrowers. A private cause of action will be readily found " 'where the language of the statute explicitly confer[s] a right directly on a class of persons that include[s] the plaintiff.' " Universities Research Ass'n v. Coutu, 450 U.S. 754, 771-72, 101 S.Ct. 1451, 1462, 67 L.Ed.2d 662 (1981), quoting Cannon v. University of Chicago, 441 U.S. 677, 690 n. 13, 99 S.Ct. 1946, 1954 n. 13, 60 L.Ed.2d 560 (1979); Miener v. State of Mo., 673 F.2d 969, 974 n. 4 (8th Cir.1982). The corollary of this is that if a System lender grants the specific rights mandated by the Act, there is no further purpose served by a judicial review of the lender's ultimate decision regarding foreclosure or restructuring. Coutu, 450 U.S. at 772, 101 S.Ct. at 1462.
The reasons why Congress found it necessary to adopt such detail and precision are set forth more fully in subsequent sections of this opinion. Suffice to say that earlier efforts of Congress to encourage restructuring of distressed loans had been ignored by many System lenders and Congress intended to remedy this situation.
The House Report sets forth the twofold purpose of the Act. It stated:
H.R. 3030 will require Farm Credit System lenders to restructure the loans of financially-stressed farmer-borrowers, in order to help keep farmers on the land and help turn around the condition of stressed System institutions.
H.R.Rep. No. 295(I), 100th Cong., 1st Sess. 52 (emphasis added), ...
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