86-295
IN THE SUPREME COURT OF NEBRASKA
THE FEDERAL LAND BANK OF OMAHA,
Appellee,
vs.
ROLLAND L. VICTOR and MARJORIE M. VICTOR,
Appellants.
APPEAL FROM THE DISTRICT COURT
OF W A Y N E COUNTY, NEBRASKA
HONORABLE MERRITT C. WARREN, DISTRICT JUDGE
BRIEF OF APPELLEE, THE FEDERAL LAND BANK OF OMAHA
Dennis W. Collins
Jewell, Gatz, Collins & Dreier
105 South 2nd Street
Norfolk, NE
68701
Attorney for Appellee
J A N 1 5 1988
i
INDEX
Subject
Index
Pages
Statement of the Case
Nature of the Case
Issues Actually Tried in the Court
How the Issues were Decided
Below
1
1
1
1
Propositions of Law
2
Statement of the Facts
4
Argument:
Proposition of Law I.
Neither the Farm
Credit Act of 1971 nor the Farm Credit
A m e n d m e n t s Act of 19 85 create a private
cause of action or affirmative defenses in
favor of a borrower
7
Proposition of Law II.
Forbearance is not
a defense to a mortgage foreclosure action
under the Farm Credit Act of 1971 or the
Farm Credit Amendments Act of 1985
15
Proposition of Law III.
A third party's
failure
to provide
borrowers
with
the
money needed to make mortgage
payments
does not constitute a defense to a
mortgage foreclosure action
19
Conclusion
20
CASES CITED
Aberdeen Production Credit Association v.
Jarrett Ranches, Inc., 638 F . Supp. 534,
537 (D.S.D. 1986)
9
Apple v . Miami Valley Production Credit
Association, 614 F. Supp. 119, 122
(S.D. Ohio 1985), aff'd on other grounds
804 F.2d 917 (6 Cir. 1986)
9, 12
ii
Bowling v. Block, 785 F.2d 556 (6th Cir.
1986), cert, denied, 107 S.Ct. 112, 93
L.Ed.2d 60 (1986)
8 , 10 , 11,
Brekke v. Volcker, 652 F. Supp. 651,
654 (D. Mont. 1987)
14
Cort v. Ash, 422 US 66, 45 L.Ed.2d
95 S.Ct. 2080 (1975)
11, 12
26,
Corum v. Farm Credit Services, 628 F. Supp.
707 , 719-20 (D. Minn. 1986)
9
Creech v. Federal Land Bank of Wichita,
647 F. Supp. 1097 , 1101 (D. Colo. 1986)
9
Farmers Production Credit Association
of Ashland v. Johnson, 24 Ohio St.3d 69,
493 N.E.2d 946 (1986), cert, denied,
107 S.Ct. 878
19
Federal Land Bank Association of Springfield
v. Saunders, 108 App. Div2d 838, 485 N.Y. S.2d
342 (1985)
9 , 16
Federal Land Bank of Omaha v. Raymond Forsithe
Farms Corp., Equity No. 40770 (D.Ct. Fayette Co.,
Ia. Dec. 3, 1985)
9
Federal Land Bank of Omaha v. Griffith,
Equity No. 17581 (D.Ct. Audubon Co., Ia.
Sept. 9, 1985)
9
Federal Land Bank of Omaha v. Jensen,
415 N.W.2d 155 (S.D. 1987)
14 , 16
Federal Land Bank of Omaha v. Ruth,
Equity No. 6209 (D.Ct. Calhoun Co., Ia.
Aug. 1, 1985)
9
The Federal Land Bank of St. Louis v. Hopmann,
658 F. Supp. 92 (E.D. Ark. 1987)
14,.17
Federal Land Bank of St. Paul v. Asbridge,
414 N.W.2d 596 (N.D. 1987)
18
Federal Land Bank of St. Paul v. Overboe,
404 N.W.2d 445 (N.S. 1987)
18
The Federal Land Bank of St. Paul v. Wallace,
366 N.W. 2d 444 (N.D. 1985)
19
iii
The Federal Land Bank of Wichita v. Read,
237 Kan. 751, 703 P.2d (1985)
15
Federal Land Bank v. Lower, No. 19660
(D. Ct. Iowa Co., Ia. Jan 20 , 1986)
9
Hagemeie v. Block, 806 F.2d
(8th Cir. 1986)
9
197
Hartman v. Farmers Production Credit
Association of Scottsburg, 628 F. Supp.
218, 222 (S.D. Ind. 1983)
9
Hillesland v. Federal Land Bank Association
of Grand Forks, 407 N.W.2d 206 (N.D.S. Ct. 1987)
8, 9, 18
Hunt v. Federal Intermediate Credit Bank
of Omaha, No. CV85-566-B (S.D. Iowa, Central
Div. Dec. 19. 1985)
9
Johansen v. Production Credit Association
Marshall-Ivanhoe, 378 N.W.2d 59, 62
(Minn. Ct. App. 1985)
9
of
Lincoln Production Credit Association v. Hall,
No. CV83-L-82 (Fed. D. Ct. Neb. Nov. 2, 1983);
9
Lo-Mar Farms, Inc. v. Defiance PCA,
No. Misc. 83-80 (N.D. Ohio, Western Div.
A p r . 24, 1984) ;
9
Mellor v. Mattern, No. CV82-L-631
(Fed. D. Ct. Neb. June 29, 1983)
9
Mendel v. Production Credit Association,
656 F. Supp. 1212 (S.D. 1987)
14
Miller v. Federal Land Bank of
586 F. 2d 415 (9th Cir. 1978)
8 , 12
Spokane,
Olson v. Mattern, No. CV83-L-203
(Fed. D. Ct. Neb. July 26 , 1983);
Overvaag v. Production Credit Association
of the Midlands, CIV. 86-4049
(Fed. D. Ct. S.D. July 8, 1987)
Production Credit Association of Worthington v.
Van Iperen, 396 N.W.2d 35, 37 (Minn. Ct. App. 1986)
9
9
14, 16
iv
Redd v. Federal Land Bank of St. Louis,
661 F. Supp. 861 (E.D. Mo. 1987)
Schroder v. Volcker, 646 F. Supp. 132,
(D. Colo. 1986)
14
134-35
9
Smith v. Russellville Production Credit
777 F. 2d 1544 (11th Cir. 1985)
Association,
8, 9, 10
Spring Water Dairy, Inc. v. Federal Intermediate
Credit Bank of St. Paul, 625 F. Supp. 713, 717-20
(D. Minn. 1986)
8 , 12
United States of America v. Shald, No.
(Fed. D. Ct. Neb., Nov. 15, 1983);
9
CV82-0-245
Zmek v. Federal Land Bank of Omaha,
No. CV84-L-477 (Fed. D. Ct. Neb. April 15, 1985);
STATUTES
9
CITED
Sections 25-1081 et al., R.R.S. 1943
7
12 U.S.C. Section 2001, et seq
8, 10
12 U.S.C.A. Section 2002
8
12 U.S.C.A. Section 2207(a)
10
LEGISLATIVE MATERIALS
1985 U.S. Code Cong. & Ad. News
(99 Stat. 1678-1712), 1678
8, 13,
STATEMENT OF THE CASE
Nature of the Case
This
Bank
of
is
Omaha,
a
to
suit
real
plaintiff-appellee,
a
Rolland
mortgage
L.
Victor
the plaintiff-appellee
receiver and applied
the
the
foreclose
defendants-appellants,
In addition,
by
estate
on
land
and
owned
Marjorie
M.
by
Land
the
Victor.
the appointment
of a
for the rents, issues, crops and profits
from
by
reason
of
reguested
Federal
its
mortgage.
The
receivership
hearing was held but an actual trial on the foreclosure has not yet
occurred.
Issues Actually
On
March
5,
1986
and
heard evidence on the application
and
the application
the real
for
the
Tried
March
10 ,
1986 , the
trial
court
for the appointment of a receiver
rents,
issues,
crops
and
profits
from
estate.
How the Issues Were Decided
The
granting
of
the
a receiver
trial
court
entered
plaintiff-appellee's
and
appointed
The defendants-appellants,
an
order
application
LeDioyt
Land
on
March
for
the
Company
14,
1986
appointment
as the
receiver.
Rolland L. Victor and Marjorie M. Victor
then elected to appeal the appointment of that
receiver.
PROPOSITIONS OF LAW
I.
Neither
Amendments
Act
the Farm Credit Act of
of
1985
create
a
1971 nor the Farm
private
cause
of
Credit
action
or
affirmative defenses in favor of a borrower.
Bowling
v.
Block,
785
F.2d
denied, 107 S.Ct. 112, 93 L.Ed.2d 60
Smith v. Russellville
F. 2d 1544
556
(6th
Cir.
1986),
cert,
(1986)
Production
Credit Association,
7 77
(11th Cir. 1985)
Miller v. Federal Land Bank of Spokane, 586 F.2d 415
(9th
Cir. 1978)
Redd v. Federal Land Bank of St. Louis, 661 F. Supp. 861
(E.D. Mo. 1987)
The
Supp. 92
Federal
Land
Bank
of
St.
Louis
v.
Hopmann,
658
F.
(E.D. Ark. 1987)
Brekke v. Volcker, 652 F. Supp. 651, 654
Spring
Water
Dairy,
Inc. v.
Federal
Bank of St. Paul, 625 F. Supp. 713, 717-20
Corum v. Farm Credit
(D. Minn.
Services,
(D. Mont. 1987)
Intermediate
Credit
(D. Minn. 1986)
628 F.
Supp.
707,
719-20
1986)
Aberdeen
Production
Credit
Ranches, Inc., 638 F. Supp. 534, 537
Creech
1097, 1101
v.
Federal
Land
Association
v.
Jarrett
(D.S.D. 1986)
Bank
of
Wichita,
647
F.
Supp.
(D. Colo. 1986)
Schroder v. Volcker,
646 F. Supp.
132,
134-35
(D. Colo.
1986)
Apple v . Miami Valley Production
F.
Supp.
F. 2d 917
119,
122
(S.D.
Ohio
1985),
Credit Association,
aff'd
on
other
grounds,
Springfield
v.
Saunders,
614
804
(6 Cir. 1986)
Federal
Land
Div.2d 838, 485 N.Y.S.2d
Bank
342
of
(1985)
10 8 App.
Hartman
v.
Farmers
Production
Scottsburg, 628 F. Supp. 218, 222
Hillesland
Forks, 407 N.W.2d
v.
Iperen, 396 N.W.2d
Credit
35, 37
Johansen
Marshall-Ivanhoe,
Association
of
(S.D. Ind. 1983)
Land
Bank
Association
of
Grand
(N.D. 1987)
206
Production
Federal
Credit
Association
of
Worthington
v.
Van
(Minn. Ct. App. 1986)
v.
Production
378 N.W.2d 59, 62
Credit
Association
(Minn. Ct. App.
of
1985)
PROPOSITIONS OF LAW
II.
Forbearance
action
under
the
Amendments Act of
Federal
is
Farm
not
a
Credit
defense
to
Act
1971
of
a mortgage
or
the
foreclosure
Farm
Credit
1985.
Land
Bank
of
Omaha
v.
Jensen,
415
N.W.2d
155
(S.D. 1987)
The
Supp. 92
Federal
(E.D. Ark.
Land
Bank
of
St.
Louis
v.
Hopmann,
658
F.
1987)
Federal Land Bank of St. Paul v. Asbridge, 414 N.W.2d
596
(N.D. 1987)
Farmers
Production
Credit
Association
Johnson, 24 Ohio St.3d 69, 493 N.E.2d 946
S.Ct. 878, 93 L.Ed.2d
832
Production
Van Iperen, 396 N.W.2d
The Federal
703 P.2d
of
Ashland
v.
(1986), cert, denied,
107
(1987)
Credit
35
Association
of
Worthington
v.
(Minn. App. 1986)
Land
Bank of Wichita v. Read,
237 Kan.
751,
(1985)
Federal
Land
Div.2d 838, 485 N.Y.S.2d
Bank
342
of
Springfield
(1985)
-3-
v.
Saunders,
10 8
App.
PROPOSITIONS OF LAW
III.
A
money
third
needed
party's
to
make
failure
mortgage
to
provide
payments
defense to a mortgage foreclosure
borrowers
does
not
the
constitute
a
action.
The Federal Land Bank of St. Paul v. Wallace,
(N.D. 1985)
444
with
366 N.W.2d
STATEMENT OF THE FACTS
A
petition
for
the
foreclosure
of
a
first
mortgage
was
filed by the appellee against the appellants and the State National
Bank
and
Trust
mortgage,
County,
on
Company,
February
Nebraska.
mortgaged
Wayne,
25,
1986,
Paragraph
Nebraska,
in
18 of
property was probably
the
the
which
District
petition
insufficient
held
a
Court
of
alleged
(T6).
Wayne
that
to discharge
thereon and that a receiver should be appointed
second
the
the debt
In addition,
the appellee filed an application for the "Rents, Issues, Crops and
Profits" from the real estate
A
hearing
application
for
the
the District Court
evidence
of
received
March,
finding
1986,
that
on
the
rents,
appointment
issues,
crops
of
a
and
profits
of Wayne County on March
on March
the
the
(T25).
10,
District
appellants
1986.
Court
had
5,
receiver
failed
to
an
was
1986, with
Thereafter,
entered
and
in
further
on the 14th
order
state
held
the
day
specifically
a defense
to
the
appellee's application for a receiver or the application for rents,
issues,
crops
plaintiff
and
and
profits
secured
by
and
a
that
lien
the
indebtedness
against
the
real
owed
to
the
estate
in
question was in excess of the fair market value of the real estate.
The court then appointed LeDioyt Land Company as a receiver
(T47).
Thereafter, on March 27, 1986, the appellants filed their notice of
appeal.
An amended notice of appeal was filed on April 1, 1986.
-4-
At
March
5,
the
1986,
testified
as
appellants
(11:4).
hearing
Mr.
to
Chris
the
(7:1; 8:1)
Mr. Alt
due January
on
the
Alt,
a
original
and
loan
note
to the
testified
appointment
that
officer
and
fact
the
of
a
with
mortgage
that
receiver
the
appellee,
signed
the note was
installments
1st of each year beginning January
on
by
January
almost
13
1,
1986
months
from
before accelerating
Mr.
with
the
payment
Alt
the
was
not
the note
1, 1977
problems
appellants
that
several
in
of
the
the
first
(10:22)
Federal
times
an
December
due January 1, 1985
In
to
the
work
fact,
Bank
the
employees
first
out
1,
1985 , to make
the
appellants
with
specifically
the
appellants'
granted
the
including
payment
that
was
(14:1-4).
the
efforts
their
of
financial
testified
were delivered
met
delinquent
appellee
to make the installment payments that were due.
about
1985
payment
In spite of this forbearance, the appellants still
extensively
but
waited
delinquent
Land
after
effort
(13:17-25).
until
1,
appellee
"forbearance" over an extended period of time,
them
were
(12:20-24).
testified
made,
Therefore
date
the note
appellants
financial
giving
(11:1-10).
the
delinquent
the appellants had failed to make the payments due January
and
held
that
the
to the appellants
the
appellee
difficulties
policy
Mr. Alt
testified
to
help
the
during
1985
and
guidelines
on approximately
failed
on
forbearance
October
29, 19 85
(16:2-7).
Mr. Alt
the
requirements
stated that the appellants
of
the
forbearance
appellee did not take any
policy
legal action
failed
to meet all of
(16:9-24)
ana
yet
the
for over a year and a month
(17:1) .
Mr.
appraiser,
value
of
Ransom
also
the
G.
Roman,
testified
remaining
a
licensed
Nebraska
on March
5, 1986,
as to the
real
estate
indebtedness owed to the appellee.
appraiser, Mr. Roman
of Nebraska
(39:2-4).
that
was
the
real
estate
fair
security
market
for
the
In addition to being a licensed
is a licensed real estate broker
in the
State
He had 15 years of real estate experience in
Northeast Nebraska and was
familiar with real estate values
-5-
in
the
area
the
(39:17-23).
real estate
Mr. Roman testified that it was his opinion
in question
on March 5, 1986
Mr.
testified.
except
had
a fair market value
Rolland
the
L.
Victor,
one
of
the
State
National
Bank
and
Trust
appellants,
action
Company
Wayne,
work
something
"communications
After
its
out
plaintiff
indebtedness
also
specifically
defense
to
the
found
and
there
written
had
and
been
some
numerous
telephone
all
of
the
the
evidence,
receiver
on
the
trial
court
approximately
March
finding that the real estate in question was
to
forth
is a lien
loan,
(65:5-10).
appointing
insufficient
set
the
that
reviewing
order
as
on
besides
14, 1986, specifically
"probably
relationship"
4 times after January 1, 1985, in an attempt
conversations as well."
entered
of
Mr. Victor admitted that the Federal Land Bank had met
with him approximately
to
also
foreclosure
Nebraska, had failed to "honor their long-term credit
(52:18-20).
$96,000.00
(42:4-5).
He stated no defense to the mortgage
that
of
that
discharge
in
the
the
indebtedness
plaintiff's
against the real estate."
that
application
the
for
rents, issues, crops and profits
appellants
a receiver
(T48).
-6-
had
or
owed
to
petition,
(T47).
failed
the
The
the
which
court
to state
application
a
for
ARGUMENT
I.
NEITHER
AMENDMENTS
THE FARM CREDIT ACT OF
ACT
OF
19 85
CREATE
A
19 71 NOR
PRIVATE
THE FARM
CAUSE
OF
CREDIT
ACTION
OR
AFFIRMATIVE DEFENSES IN FAVOR OF A BORROWER.
This
Federal
Court
the
Land
is
Bank
appointed
pendency
Federal
a
of
Land
a
mortgage
of
receiver
the
Bank
Omaha
foreclosure
against
the
to
charge
take
foreclosure.
failed
action
to
The
meet
brought
defendants.
of
the
claim
requirements
the
District
property
appellants
the
The
by
during
that
of
The
the
Farm
Credit Act and therefore the receiver is improperly appointed.
appellants
do not
the requirements
claim
authority
no doubt
evidence
mortgaged
property
under
arguments
at
to
the receivership
25-1081,
into
two
hearing
that
showed
to
discharge
1943.
The
categories
that
have
argument.
discussed
later,
No
two
points
citations
essentially
is against the appellants'
-7-
is
the
the
of a
been
issue:
The claim that the Federal Land Bank must
follow a "forbearance" procedure before it
can bring a foreclosure action.
these
is
appellants'
2.
appellants'
question
There
The claim that The Farm Credit Act of 1971
and the Farm Credit Amendments Act of 19 85
create
a private
cause
of
action
for
Federal Land Bank borrowers, which then is
a
defense
to
a
mortgage
foreclosure
action; and
of
meet
1943, which
1.
Each
to
for the appointment
R.R.S.
addressed by many other courts on this
As
failed
of receivers.
insufficient
is one of the bases
fall
Bank
25-1081 et al., R.R.S.
"probably
Section
appear
Land
for the appointment
was
mortgage debt", which
receiver
the Federal
of Sections
the Nebraska
the
that
The
seem
for
all
of
to
the
weave
argument
the
position.
through
are
authority
the
given.
on
the
Authority
Omaha
is
found
2001,
et
seq.,
1985.
The
and
procedure
in the Farm
as
1986.
in
December
Farm
23,
1678-1712),
1678,
Consequently,
Farm
1971,
brief
Land
Bank
12 U.S.C.
Credit
their
of
U.S.
become
to
the
Act
Farm
Farm
Cong.
&
Credit
Ad.
Act
Code
of
1985
Cong.
30
&
Ad.
days
System,
in
approved
on
News
(99
thereafter.
Stat.
Id.
22, 1986.
(99
judicial decisions
at
See
annotation.
A m e n d m e n t s Act
and
to
effective
was
the effective date was January
Credit
News
of
Credit
of
198 5 is entitled,
Act to amend the Farm Credit Act of 19 71, to restructure and
the
of
Section
Amendments
1985, which became
effective
also 12 U.S.C.A. Section 2002,
The
Farm
Amendments
1985
to
of
Federal
We assume that appellants are referring
Credit
1985,
the
Act
the
Credit Amendments Act
The
1709.
by
refer
A m e n d m e n t s Act of 1986.
the Farm
Credit
amended
appellants
for
for
Stat.)
other
1678.
interpreting
purposes."
It
1985
follows,
and construing
"An
reform
U.S.
Code
therefore,
that
the Farm
Credit
Act
of 1971 continue to apply to the Farm Credit Act as changed by the
1985
amendments,
court
opinions
unless
which
the
amendments
interpret
the
specifically
Act
as
it
abrogate
existed
the
prior
to
December 23, 1985.
It is clear that the Farm Credit Act as it existed
to
the
1985
amendments
did
not
create
private
rights
prior
in
the
borrowers, to be asserted either as causes of action for damages or
as defenses in foreclosure actions.
stated
that
the
is no private
Act
and
Forks,
cases
appellants'
that
have
1986), cert, denied,
Cir.
1985);
(9th Cir.
are
1978);
Credit Bank of St. Paul,
Water
entities of
Federal
209
Bowling
v . Federal
Spring
v.
decided
Credit
"unanimously"
against
206,
107 S.Ct.
Production
Miller
have
Hillesland
407 N.W.2d
position
Russellville
courts
cause of action
regulations.
of Grand
many
federal
The North Dakota Supreme
Land
(N.D. 1987).
this
point
v. Block,
Association,
Land
Bank
Dairy,
of
the Farm
Bank
60
777
Inc. v.
Credit
Included
556
(1986);
F.2d
Spokane,
Federal
there
Association
adversely
625 F. Supp. 713, 717-20
-8-
concluded
785 F.2d
112, 93 L.Ed.2d
Court
in the
to
the
(6th
Cir.
Smith v.
1544
586
(11th
F.2d
415
Intermediate
(D. Minn.
1986);
Corum v . Farm Credit
1986) ; Aberdeen
Services,
Production
Inc. , 638 F. Supp.
534,
Credit
537
647 F. Supp.
v.
F.
646
Miami Valley
(S.D.
Ohio
Supp.
Production
1985),
Land
134-35
Credit
Aff'd
19 86) ;
Federal
Div.2d
838, 485 N.Y.S.2d
on
Bank
1986);
1097, 1101
132,
v.
(D.
Colo.
1986);
614 F.
grounds,
804
v.
206
Association
1985).
Johansen
v.
378 N.W.2d
decisions
of
addition,
are
a
of
Urbom
in
Nebraska.
the
United
See,
e.g.,
States
Association of the Midlands, CIV. 86-4049
20,
No.
CV85-566-B
Land
1986);
Bank
of
Hunt v. Federal
(S.D.
Omaha
Iowa,
v.
Raymond
40770
(D.Ct. Fayette Co.,
Omaha
v. Griffith,
Forsithe
Ia. Dec.
Equity No.
Div.
v.
Ind.
Forks,
Credit
of
unreported
including
Court
for
Production
the
Credit
(D. Ct. Iowa Co.,
Credit Bank of
Dec.
19.
Farms
3, 1985);
17581
App.
(Fed. D. Ct. S.D. July 8,
Intermediate
Central
10 8
1986).
District
1987); Federal Land Bank v. Lower, No. 19660
Jan
Cir.
(Minn. Ct. App.
number
Overvaag
(6
Production
(8th Cir.
great
122
(S.D.
that hold there is no private cause of action,
Judge
District
there
119,
of Grand
59, 62
Cf. Hagemeie v. Block, 806 F.2d 197
v.
Production
628 F. Supp. 218, 222
1987);
of Marshall-Ivanhoe,
In
those
(N.D.
Apple
917
Saunders,
Land
Schroder
Supp.
F.2d
19 83); Hillesland v. Federal Land Bank Association
N.W.2d
Ranches,
1986);
(1985); Hartman v. Farmers
Credit Association of Scottsburq,
407
(D. Minn.
Jarrett
(D. Colo.
Springfield
342
719-20
Creech v. Federal
Association,
other
of
707,
Association
(D.S.D.
Bank of Wichita,
Volcker,
628 F. Supp.
1985);
Corp.,
Federal
(D.Ct. Audubon
Ia.
Omaha,
Federal
Equity
Land
No.
Bank
Co. , Ia.
9, 1985); Federal Land Bank of Omaha v. Ruth, Equity No. 6209
of
Sept.
(D.Ct.
Calhoun Co., Ia. Aug. 1, 19 85); Zmek v. Federal Land Bank of Omaha,
No.
CV84-L-477
(Fed.
D.
Ct.
Neb.
April
Inc. v. Defiance PCA, No. Misc. 83-80
24,
1984); United
D. Ct. Neb., Nov.
v.
Hall,
No.
15,
1985);
Lo-Mar
(N.D. Ohio, Western Div. Apr.
States of A m e r i c a v. Shald, No. CV82-0-245
15, 19 83); Lincoln Production Credit
CV83-L-82
(Fed. D.
Farms,
Ct. Neb.
Nov.
2,
(Fed.
Association
1983);
Olson
v.
Mattern, No. CV83-L-203
(Fed. D. Ct. Neb. July 26, 1983); Mellor v.
Mattern, No. CV82-L-631
(Fed. D. Ct. Neb. June 29,
In
777
F. 2d
Smith
1544
v.
(11th
Russellville
Production
Cir.
borrowers
1985),
1983).
Credit
of
the
Association,
Russellville .
Production
Credit
Association
(a part of the Farm
Credit
System),
filed a complaint against the PCA seeking compensatory and punitive
damages
for alleged violations
trial court granted
of both
federal and state law.
The
summary judgment to the PCA on the question
whether the Farm Credit Act created a private cause of action.
borrowers
assigned
Circuit.
In
this
sustaining
states in part as
as
the
error
trial
in
their
court,
appeal
the
to
the
11th Circuit
of
The
11th
opinion
follows:
"Appellants
contend
that
a
statutory
requirement that PCAs prepare a program for
furnishing
credit to
'young, beginning,
and
small
farmers',
See
12
U.S.C.A.
Section
2207(a),
imposes
affirmative
duties
on
the
PCAs.
This argument must be rejected.
It is
clear that the statutory provisions creating
the PCAs did not confer substantive rights on
behalf
of any class
of farmers
to
receive
credit, but, rather, set forth a general goal
of channeling credit to the farming community
and established the machineries through which
to achieve this goal.
See Bowling v. Block,
602 F.Supp. 667, 670-71 (D. Ohio 1985)."
Id.
at 1547.
The
Associations
same
also
act
which
creates
the
created
Federal
the
Land
Production
Credit
Banks.
U.S.C.
12
Section 2001 et seq.
As the Act gives no substantive rights to PCA
borrowers,
no
borrowers
it
gives
on
States District
cited by the Eleventh Circuit
appeal
rights
to
Federal
Land
Bank
either.
The United
Block,
substantive
by
the
United
States
Court's opinion
in Smith,
Court
Circuit in Bowling v. Block, 785 F.2d 556
of
in Bowling
supra, was
Appeals
(6th Cir.
for
"We agree w i t h the district court that the Farm
Credit Act 'does not create special enforceable
[sic]
rights
which
would
necessitate
the
existence
of
a
private
right
of
action,'
Bowling
v.
Block,
602 F.Supp.
667,
670-71
(S.D.Ohio 1985) and that there is no support
for the conclusion that Congress intended to
create a private right of action under the Farm
Credit Act in favor of these appellants."
Id.
at 557.
-10-
affirmed
the
1986):
v.
Sixth
In
its
analysis
of the borrowers'
claims
under
the
Credit Act, the Federal District Court in Bowling v. Block
Farm
said:
"Plaintiffs'
first
claim
against
the
non-federal defendants [including the Federal
Land Bank of Louisville]
is that they have
violated numerous specific sections of the Farm
Credit Act.
The non-federal defendants respond
to plaintiff's
allegations
by
arguing
that
plaintiffs cannot maintain their claims because
the Farm Credit Act does not create a private
right of action.
It is clear that the Farm
Credit
Act
does
not
contain
an
express
provision granting such a right."
602 F. Supp.
at 670.
The Court then went on to analyze whether the Farm Credit
Act
contained
applied
95
the
S.Ct.
an
implied
analysis
2080
of
(1975).
factors set forth as
private
Cort
v.
This
is
right
Ash,
a
of
422
four
US
part
action.
66,
45
The
Court
L.Ed.2d
analysis
with
26,
the
follows:
"In determining whether a private remedy is
implicit in a statute not expressly providing
one, several factors are relevant.
First, is
the plaintiff
'one of the class
for
whose
especial benefit the statute was enacted,' . .
. that is, does the statute create a federal
right in favor of the plaintiff?
Second, is
there any indication
of legislative
intent,
explicit or implicit, either to create such a
remedy or to deny one? . . . Third, is it
consistent with the underlying purposes of the
legislative scheme to imply such a remedy for
the plaintiff?
. . .
And, finally, is the
cause of action one traditionally relegated to
state law, in an area basically the concern of
the States, so that it would inappropriate to
infer a cause of action based solely on federal
law?"
Id. at 78, 45 L.Ed.2d at 36.
As
Bowling
found
a result of the Cort v. Ash
test,
the trial
that:
"It is readily apparent that the Farm Credit
Act merely established the machinery by which
its purpose, to augment the amount of credit
available to the farming community, would be
-11-
court
in
effected.
It
does
not
create
specific
enforceable rights w h i c h would necessitate the
existence
of
a
private
right
of
action.
Further, the Act intimates that the specific
entities
it
creates
for
the
purpose
of
providing
the
needed
credit—the
production
credit
associations,
the
federal
land
bank
associations
and
the
banks
for
c o o p e r a t i v e s — a r e to be operated much like any
other private lending institution.
Therefore,
whatever disputes arise between plaintiff and
the non-federal defendants must be resolved in
the same manner that such a dispute would be
resolved if the defendants were common banks or
savings and loans."
Id. at 670-71.
A more recent analysis of the Cort decision which
exactly
the
same
result
may
be
found
in the
case
of
reaches
Spring
Water
Dairy, Inc. v. Federal Intermediate Credit Bank of St. Paul, 625 F.
Supp.
that
713
the
(D. Minn.
1986) , in which
borrowers
could
regulations
to
Act. See also
implement
not
the
the
force
policy
court
the
specifically
Credit
required
by
Bank
the
614 F. Supp. 119
(S.D. Ohio,
to
Farm
Apple v . Miami Valley Production Credit
found
issue
Credit
Association,
1985).
The Ninth Circuit Court of Appeals has also held that
is
not
the
business
of
the
courts
workings of the Federal Land Banks.
Spokane,
587 F.2d 415
(9th Cir.
to
supervise
the
it
ordinary
Miller v. Federal Land Bank of
1978).
The Miller case involved
a
decision by the Federal Land Bank of Spokane as to how much of the
proceeds
of
a
settlement
condemnation
should
the proceeds
the borrower
of
the
be distributed
was
entitled.
"[S]upervision
to
Administration,
Farm
supervision
to
the
of the
supervision
supervision
Farm
Credit
Credit
Secretary
of
the
In
Administration
and
brief,
land
faced
which
Court
in
enunciated
Id.
at
422.
Bank of Omaha
not
to
the
turn
It
with
to how much
of the Bank has been
courts."
Land
their
The
of Agriculture.
of the Federal
below should, therefore, be
of
to the Bank and
following principle,
the
sale
is
under
follows
The
the
entrusted
is entrusted
courts.
the
entrusted
is not
It
of
to
that
the
decision
affirmed.
the
appellants
assert
an
affirmative
defense against a mortgage foreclosure and a receivership, but they
do not state any court opinion
finding such a private right, nor do
-12-
they
cite
which
a
specific
create
such
section
a right.
or
provision
Because
of
the
1985
the great weight
amendments
of
authority
is that no such private right of action existed before December 23,
1985,
that
there
it
must
be
a clear
intended
to
create
amendments.
A
careful
statement
a private
examination
of
or
declaration
right
by
the
Farm
by
means
Congress
of
Credit
the
1985
Amendments
Act of 19 85 shows that Congress did not change the state of the law
with respect to a private cause of action.
Title III of the 1985 Amendments is entitled,
for
Farmers
and
Other
Code Cong. & Ad. News
the
19 85 Act
touch
Farm
Credit
System
(99 Stat.) 1707.
"Protection
Borrowers."
1985
U.S.
None of the other titles of
on anything which could
create
a private
right
or affirmative defense to a foreclosure.
The main
Credit
Amendments
protection
Act
of
provisions
19 85,
as
of Title
reported
in
III of
U.S.
Code
Ad. News are:
1.
Disclosure.
For all loans not subject to the
Truth in Lending Act, meaningful and timely
disclosure of the current rate of interest, the
amount and frequency by which variable rate
loans can be increased, the effect of required
purchase of stock on the effective rate of
interest, and any changes in the interest rate
applicable to the borrower's loan; and develop
and
provide
borrowers
with
a copy
of
the
institution's policy regarding forbearance at
such
time
or
times
as
the
Farm
Credit
Administration shall provide in regulations.
2.
Access to Documents and Information.
Provide
borrowers, at the time of execution of loans,
copies of all documents signed by the borrower.
3.
Reconsideration.
Provide for reconsideration
by a review committee at the request of an
applicant when a decision was made to deny or
reduce the loan applied for.
4.
Restructure.
Review each loan that has been
placed
in
non-accrual
status
by
such
institution to determine whether such loan may
be restructured and notify the borrower of each
such loan of the provisions of this section.
Id. at 1707-1709.
-13-
the
Farm
Cong.
&
There are no provisions in Title III, or anywhere else in
the
Farm
private
Credit
right
Amendments
of
action
Act
or
the
the overwhelming
19 8 5
private
action
rights
for
in
of
the
borrowers,
damages
or
as
for
which
an
give
alleged
borrowers
failure
to follow the procedures
weight
Amendments—that
1985,
defense
Federal Land Bank Association
Thus,
of
authority
as
Farm
Credit
be
asserted
to
defenses
in
does
either
foreclosure
a
of the Act.
it existed
Act
by
a
prior
not
as
to
create
causes
of
actions—remains
the law after passage of the 19 8 5 Amendments.
To
since
the
the
new
appellee's
Farm
Credit
knowledge,
all
Amendments Act
of
of
affirmed
the rulings which preceded
the Act.
Bank
St.
F.
of
Louis
v.
Hopmann,
658
Supp.
Redd v. Federal Land Bank of St.. Louis,
1987);
(S.D.
1987);
Federal
1987);
Land
Brekke
Bank
v.
Association
Volcker,
652
Production Credit Association
396 N.W.2d
35, 38
As
stated
656 F. Supp. 1212
by
Judge
cases
1985 was
vs
F.
have
See The Federal
Land
92
(E.D.
Jensen,
Supp.
decided
passed
Ark.
6 61 F. Supp. 861
415
651,
of Worthington
(Minn. Ct. App. 1986).
Credit Association,
the
1987) ;
(E.D. Mo.
N.W.2d
654
(D.
v. Van
Cf. Mendel v.
155
Mont.
Iperen,
Production
(S.D. 1987) .
Filippine
of
the
United
States
District Court for Missouri:
"The Court finds that the language of the [Farm
Credit
Amendments
Act
of
19 85]
and
the
legislative history do not show an intent to
create an implied right of action."
Redd v.
Federal Land Bank of St. Louis, 661 F. Supp.
861 (E.D. Mo. 1987).
The appellants
it has
claim
the appellee cannot proceed
"not complied with various
terms of which
are not
spelled
conditions precedent,"
out.
Appellants'
Brief
because
the
exact
at page
8.
Appellants also claim the Land Bank must "comply" with the 1985 Act
before
by
The
it can proceed.
the Arkansas
Federal
Land
United
Bank
Such an argument was
States District
of
St.
Louis
-14-
v.
Court
specifically
on March
Hopmann,
658
19,
F.
rejected
1987
in
Supp.
92
(E.D.
Ark.
1987) .
The
Court
held
that
the
Land
Bank
was
estopped because of its failure to service the loan and the
to
advise
the
servicing
borrower
of
appeal
procedures
or
not
failure
alternative
loan
techniques.
It
position
is
must
respectfully
fail,
both
submitted
for
that
lack .of
the
evidence
appellants'
and
lack
of
authority.
II.
FORBEARANCE
ACTION
UNDER
THE
IS
NOT
FARM
A
CREDIT
DEFENSE
TO
ACT
1971
OF
A
MORTGAGE
OR
THE
FORECLOSURE
FARM
CREDIT
AMENDMENTS ACT OF 19 85.
While
the
cases
cited
above
don't
all
deal
with
the
forbearance issue, other cases directly on point have held that the
forbearance issue is no defense.
Kansas
decided
the
237 Kan.
751,
issue
forbearance.
of
703
case
P.2d
of
For example, the Supreme Court of
Federal
Land
Bank
of Wichita
777
(1985), where
the borrowers
The
Kansas
held
Court
that
v.
Read,
raised
the
matter
forbearance is best left to those in whom the Land Bank places
responsibility,
namely
Court
authority
found
decision on
no
the
officers
for
of
the Land
judicial
review
Bank.
of
the
the
of
that
The
Kansas
Land
Bank's
forbearance:
"Under the circumstances, we know of no reason
why the trial court should be required to hear
evidence upon and redetermine
the issue
of
ability to work out of the debt burden.
That
matter is best left to those in whom the land
bank places that responsibility."
The Federal
Land Bank of Wichita v. Read, 237 Kan. 751, 703
P.2d 777 (1985) .
In
Federal
Victor.
Land
The
the
Bank
instant
of
Victors
case,
Omaha
there
granted
simply
were
-15-
is
ample
forbearance
not
able
evidence
to
to
Mr.
work
that
and
out
the
Mrs.
an
arrangement
to
Consequently,
pay
the
their
debt
Federal
despite
Land
Bank
periods
was
of
justified
forbearance.
in
foreclosing
and, as part of that action, to obtain the appointment of receiver.
A
similar
Springfield
(1985).
v.
The
guidelines
Saunders,
court
did
consequently,
the
result
reached
App.
that
have
created
borrower.
108
found
not
was
no
Div.
the
the
the
Federal
2d
838,
Federal
force
substantive
However,
in
Bank's
Bank
in
of
law
of
342
internal
of
or cause
Land
Bank
N.Y.S.2d
effect
rights
Federal
485
Land
and
Land
and,
action
that
case
by
did
grant several periods of forbearance, and the court decided that it
would
not
substitute
determining
its
whether
obligations
judgment
the
for
borrowers
if granted additional
that
of
could
the
Land
somehow
Bank
meet
relate
to
"contracts",
the Farm
Credit Act of
Bank
in
to
some
appellants
specific
manner
fail
to
argument
because
the mortgage
then the duty
comply
state
was
i.e.,
1971,
with
what
addressed
their
continuances.
Almost all of the cases cited by the appellants
brief
in
is on the
that
Act,
compliance
in
the
is
case
of
in
their
refers
Federal
even
to
Land
though
the
required.
This
Production
Credit
Association of Worthington v. Van Iperen, 396 N.W.2d
35
(Minn. App.
1386).
In that case, the theory was advanced by George T. Qualley,
who was
associated
the theory
with
Fred
Hendrickson,
Mr.
lawyer
who
advanced
for the appellants in the District Court of Wayne County
for the receivership hearing.
that
the
Qualley's
arguments
The Minnesota
had
no
Court of Appeals
merit.
As
is
true
held
in
this
case, it was argued that the "basic loan agreement incorporated
Farm Credit Act"
and therefore the Federal Land Bank was
strict compliance with
of Appeals rejected
the act's provisions".
the argument and held that it "will not
and remedy when the statute cannot be
create one."
396 N.W.2d at 38.
that
the
most
South
The most
recent
case
closely
matches
the
Dakota
Supreme
Court
on
case,
the Federal
Land
this
facts
on
Bank of Omaha v. Jensen, 415 N.W.2d
this
"bound
The Minnesota
an obligation
in
issue,
this
November
155
1987,
(S.D. 1987).
Bank of Omaha
-16-
case, was
filed
to
Court
impose
interpreted
and perhaps
4,
the
the
one
decided
Federal
to
by
Land
As is true in
a mortgage
action
against
the
borrowers,
the
Jensens.
alleging
affirmative defenses based on the Farm Credit Act and
Farm Credit Amendments Act of
here. A summary judgment was
of
the
Federal
Land
Bank
1985,
Jensens
as w a s
filed
done by
an
the
and
the
Jensens
that
the
unnecessary
numerous
advocated
procedures.
attempts
borrowers
this
theory
to
case.
made
explore
The
The
by
by
South
the
appealed.
also
appellants
Dakota
Federal
alternative
Court
the
Court
Land
The
sources,
specifically
rejected
concerning the language in the mortgage or
South
result
referred
financing
favor
essentially
would
Bank
the
appellants
sustained by the trial court in
Dakota Supreme Court rejected the Jensens' argument and
held
answer
to
in
to
the
permit
the
as
is true
the
in
argument
"contract":
"What Jensens argue, in essence, is that Bank
was under a duty to re-notify them of their
status
and
begin
the
process
anew.
(This
argument is based on the language of Jensens'
mortgage, which provides that it is, 'subject
to the provisions of the Farm Credit Act, and
all acts amendatory thereof and supplementary
thereto.')
This
argument
ignores
all
past
forbearance afforded and the clear language of
the act and applicable regulations.
We are not
convinced that had Bank sent one more letter to
Jensens advising them of their status and the
provisions of the act, the outcome would have
been different."
415 N.W. 2d at 158.
Mr. Fred
at
the
Hendrickson,
receivership
who
represented
hearing,
participated
Jensens in the South Dakota Supreme
The
arguments
many times and are "well
made
the
by
appellants
in
the
in
brief
for
case
the
Court.
appellants
have been
laid
settled":
"Defendant contends that plaintiff should be
estopped
from
foreclosing
because
of
plaintiff's
failure to properly
service
the
loan and to properly
advise him of
appeal
procedures
and
alternative
loan
servicing
techniques.
Defendant bases this defense on
the provisions of the Farm Credit Act
. . . .
The law is well settled that the regulations of
the
Farm
Credit
Act
do
not
create
any
affirmative
duties
or
prohibitions."
The
Federal Land Bank of St. Louis v. Hopmann, 658
F. Supp. 92 (E.D. Ark. March 19, 1987).
-17-
this
to
rest
The
differently
Paul v.
the
only
are
from
Overboe,
Land
Bank
cases
that
North
Dakota.
404 N.W.2d
was
approach
445
required
In
(N.D.
to
the
problem
Federal
1987),
adhere
Land
the
to
its
a
Bank
Court
own
policies, but the standard of review was "extremely
little
of
held
St.
that
forbearance
narrow":
"[A] trial court cannot overturn a Federal Land
Bank loan officer's determination of a lack of
borrower qualification for forbearance relief
unless the borrower can prove that the Bank
abused
its
discretion
by
acting
in
an
arbitrary,
capricious,
unreasonable
or
unconscionable manner."
404 N.W.2d at 450.
In
Asbridge,
a
414
later
N.W.2d
decision,
596
Federal
(N.D.
Land
1987),
the
Bank
same
of
St.
Court
summary judgment for the Federal Land Bank on the same
Paul
v.
allowed
a
issue:
"The Asbridges
did not present
evidence
by
affidavit
or
otherwise
to
refute
that
the
FLB complied with
its internal policies
in
analyzing
their
financial
information
and
determining they were unable to work their way
out of debt, that they were unable to obtain
short-term
financing
and
were
granted
an
extension of time to secure such
financing,
that they w e r e unable to work their way out of
debt with forbearance, or that the FLB abused
its discretion
and
acted
in
an
arbitrary,
capricious or unreasonable manner in reaching
its
substantive
decision
about
forbearance"
414 N.W.2d at 600.
There
is no evidence
in this case to
show that
Bank's determination on appellants' repayment ability was
in
the
any w a y .
As
Federal
Land
seen
in
Bank
the
did
testimony
follow
the
of Chris Alt
forbearance
in
still holds
Credit
Act.
indicated
that
See
under
no private
Hillesland
Proposition
cause of
v.
action
Federal
Grand Forks, 407 N.W.2d 206, 208-09
-18-
I
Land
above,
this
(N.D. 1987).
case,
that
loan.
North
exists under
Bank
Land
incorrect
procedures
were in place at the time in administering the Victors'
As
the
Dakota
the
Farm
Association
of
Similarly,
in
the
case
of
Farmers
Production
Credit
Association of Ashland v. Johnson, 24 Ohio St.3d 69, 493 N.E.2d
(1986) ,
the
foreclosure
Ohio
Supreme
Court
action
cannot
raise
held
the
that
Farm
the
defendants
Credit
Act
of
946
in
1971
a
or
regulations relating to foreclosure as a defense:
"However, the lender is the one best able to
make
the
determination
as
to
whether
the
conditions
have
been
met,
especially
with
regard to the borrowers 1
ability to pay the
debt."
The
case
law
is
clear
that
forbearance
is
not
a
valid
defense in this case.
III.
A
MONEY
THIRD
NEEDED
TO
PARTY'S
MAKE
FAILURE
MORTGAGE
appellants
seem
indebtedness
of
the
See,
not
owed
the
Bank
testimony
course, is not a valid
and
of
raised
they
to the Federal
State National
e.g.,
that
BORROWERS
WITH
DOES
NOT
CONSTITUTE
in
their
brief,
THE
A
ACTION.
specifically
to claim
PROVIDE
PAYMENTS
DEFENSE TO A MORTGAGE FORECLOSURE
While
TO
do
Land
Trust
Mr.
not
Bank
have
because
Company
Victor
a duty
to
to pay
of the
loan
them
(52:18-20).
defense:
"The Wallaces did not deny that they were in
default on the loan.
Instead, the Wallaces
claimed that their default was caused by First
National Bank's failure to provide them with
the necessary monies to make the Federal Land
Bank payment.
We agree with the trial court
that the Wallaces failed to state in their
pleadings and affidavits any facts that would
constitute a defense to default under the loan
agreement."
Federal Land Bank of St. Paul v.
Wallace, 366 N.W.2d 444 (N.D. 1985).
-19-
the
the
failure
money.
This,
of
CONCLUSION
It
failed
itself
is
respectfully
that
the
appellants
to state any valid defense to either the foreclosure
or
the
forbearance
receivership
raised
foreclosure action.
the
submitted
receiver
by
the
application.
appellants
It
is
is
not
a
In any event, the testimony
showed
that
the
Federal
Land
clear
action
that
defense
the
to
a
at the hearing
on
Bank
forbearance as required by any of its regulations
have
had
granted
in effect
at
the
time of the hearing and that more than adequate time had been
given
to the Victors to try to reinstate their loan, to no avail.
It is
respectfully
order
requested
that
the
Supreme
Court
enter
an
affirming the District Court's appointment of a receiver.
Respectfully
submitted,
THE FEDERAL LAND BANK OF OMAHA,
A Corporation, Plaintiff-Appellee,
BY JEWELL, GATZ, COLLINS
Its Attorneys.
& DREIER,
B Y _ ] \
\ Member of^the
cc:
Firm
JEWELL, GATZ, COLLINS & DREIER
William J. Rieb
Attorney at Law
P.O. Box 1682
Sioux City, IA
51102
CERTIFIED MAIL
lawyers
105 South Second Street, Sox 1 3 8 7
Norfolk, N E 8 8 7 0 1
Rolland L. Victor
Route 2, Box 141
Wayne, NE
68787
CERTIFIED MAIL
Marjorie M. Victor
Route 2, Box 141
Wayne, NE
68787
CERTIFIED MAIL
-20-
Kem Swarts
Attorney at Law
P.O. Box 427
Wayne, NE
68787
CERTIFIED MAIL
Terrance L. Michael
Attorney at Law
1500 Woodmen Tower
Omaha, NE
68101
CERTIFIED M A I L