Wagner v. Pennwest Farm Credit , 109 F.3d 909 ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
4-2-1997
Wagner v. Pennwest Farm Credit
Precedential or Non-Precedential:
Docket 96-3197,96-3198,96-3199
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1997
Recommended Citation
"Wagner v. Pennwest Farm Credit" (1997). 1997 Decisions. Paper 74.
http://digitalcommons.law.villanova.edu/thirdcircuit_1997/74
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1997 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 96-3197
DEWEY A. WAGNER,
Appellant
v.
PENNWEST FARM CREDIT, ACA; A CORPORATION
No. 96-3198
DEWEY A. WAGNER,
Appellant
v.
PENNWEST FARM CREDIT, ACA; A CORPORATION;
GARY J. GAERTNER, Trustee; JAMES L. WITHERUP;
KATHY L. WEAVER
No. 96-3199
DEWEY A. WAGNER,
Appellant
v.
PENNWEST FARM CREDIT, ACA; A CORPORATION
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Nos. 95-cv-00006E, 95-cv-00007E, 95-cv-00008E)
Submitted Pursuant to Third Circuit LAR 34.1(a)
March 24, 1997
Before: SLOVITER, Chief Judge,
STAPLETON and ALDISERT, Circuit Judges
(Opinion filed April 2, 1997)
1
Stephen H. Hutzelman
Shapira, Hutzelman, Berlin & May
Erie, PA l6507
Attorney for Appellant
Louis J. Stack
Shafer, Swick, Bailey, Irwin,
Stack & Millin
Meadville, PA 16335
Attorney for Appellee
Pennwest Farm Credit
Henry W. Gent, III
Gent, Gent & Snyder
Franklin, PA l6323
Attorney for Appellees
James L. Witherup and
Kathy L. Weaver
OPINION OF THE COURT
2
SLOVITER, Chief Judge.
This appeal comes before us on the contention of
appellant Dewey A. Wagner that the bankruptcy court, in an order
affirmed by the district court, erred in holding that debtor
Wagner's statutory right of first refusal under the Agricultural
Credit Act (“ACA” or "Act"), 12 U.S.C. § 2001--2279aa-14 (1988),
was not property of the bankruptcy estate. In order to decide
that issue we confront the underlying question whether there is
an implied private right of action under the Agricultural Credit
Act, an issue this court has not yet decided.
I.
Most of the facts in this case relevant to that issue
are not in dispute. On April 4, 1980, Wagner signed a loan
agreement with PennWest Farm Credit, ACA, ("PennWest"), secured
by a mortgage on a nineteen acre piece of property in Venango
County, Pennsylvania. PennWest is a corporation organized and
existing under the federal Farm Credit System. See 12 U.S.C. §
2091. After Wagner defaulted on the payments due, PennWest
obtained judgment against Wagner in the Venango County Court of
Common Pleas and took title to the property following a sheriff's
sale.
The ACA requires an institution of the Farm Credit
System that acquires agricultural real estate as a result of a
loan foreclosure to provide the previous owner a right of first
refusal. See 12 U.S.C. § 2219a(a). This is effected by
requiring an institution that elects to sell acquired real estate
to notify the previous owner within fifteen days of such election
3
of that owner's right to purchase the property at its fair market
value as established by an accredited appraiser or to offer to
purchase it at a lesser price. See 12 U.S.C. § 2219a(b)(1). If
the previous owner offers to purchase the property at the
appraised value within thirty days after receiving the notice of
first refusal, the Act requires that the institution "shall,
within 15 days after the receipt of such offer, accept such offer
and sell the property to the previous owner." 12 U.S.C. §
2219a(b)(3). If the previous owner's offer is for less than the
appraised value, the institution must notify the previous owner
within fifteen days whether it is accepting or rejecting that
bid. See 12 U.S.C. § 2219a(b)(4).
PennWest’s certified appraiser valued the property at
$65,000. By letter dated November 16, 1993, PennWest offered to
sell back the property to Wagner at $65,000. The terms set forth
in PennWest’s letter were cash sale, with the sale to be closed
within fifteen days of PennWest’s receipt of Wagner’s offer.
Wagner did submit an offer to purchase the property at the
appraised price, but he did not close within the fifteen days nor
within the two deadline extensions ending on March 3, 1994.
PennWest then began a competitive bidding process, and
advertised in several newspapers that it was accepting a minimum
$65,000 bid on the property. There were approximately fifty
inquirers and information packets were sent to each of them.
Because there were no bids at that price, PennWest eliminated the
minimum bid requirement entirely and sent a second bid packet to
the same fifty inquirers, requesting them to submit bids by May
4
4, 1994. The highest bid received was from James Witherup and
Kathy Weaver (“the Buyers”) in the amount of $44,000.
By letter of May 9, 1994, PennWest advised Wagner that
it had accepted a bid for $44,000 and that he had a statutory
right of first refusal under the same terms and conditions, which
included a cash sale to be closed within fifteen days of receipt
of the offer. Wagner exercised his right of first refusal and
made a timely offer to purchase the property for $44,000. The
closing date was fixed for June 29, 1994. However, Wagner did
not tender the sales price on that day. Upon inquiry, Jeffrey
Trotten, Wagner’s agent, told PennWest's representative that
Wagner had withdrawn his application for financing the day
before.
Instead, Wagner followed a different course. On June
29, the day fixed for the closing, Wagner filed a quiet title
action in Venango County which prevented PennWest from selling
the property to the Buyers. Then, on July 12, 1994 Wagner filed
a petition under Chapter 12 of the Bankruptcy Code. Wagner also
filed a determination of property rights in the bankruptcy court,
stating a claim almost identical to that in his quiet title
action. His quiet title action was removed to the bankruptcy
court as an adversary proceeding.
On September 14, 1994, a hearing was held in the
bankruptcy court in which three matters were raised: the removed
quiet title action, the action for determination of property
rights, and PennWest's request for relief from the automatic
stay. The bankruptcy court found that Wagner had been adequately
5
informed by PennWest of his rights of first refusal and that
Wagner had failed to exercise those rights in a timely manner.
Bankruptcy Ct. Op. (Nov. 23, 1994). Since Wagner's right of
first refusal had expired, the bankruptcy court concluded that
Wagner’s property was no longer part of the bankruptcy estate.
Id.
Wagner appealed this order to the district court,
arguing that his right of first refusal had not expired because
PennWest failed to follow required statutory procedures.
Specifically, Wagner argued that PennWest violated the ACA by
requiring that the closing occur within fifteen days and by
failing to provide Wagner with the terms and conditions of the
competitive bidding process. The district court affirmed,
holding that Wagner had failed to close within a timely manner so
lost his right of first refusal. See Dist. Ct. Op. at 19 (Feb.
29, 1996). Wagner appeals to this court.
II.
Wagner recognizes that the initial question on this
appeal is whether the right of first refusal provided under the
ACA is property of the bankruptcy estate. See Appellant's brief
at 15. Subsumed in Wagner's argument that PennWest failed to
comply with the mandatory notification to him as required by 12
U.S.C. § 2219a(d)(1) is the implicit assumption that Wagner would
have a cause of action for that violation. The district court
noted that there is “an emerging line of authority which holds
that there is no express or implied private right of action under
the Agricultural Credit Act of 1987," Dist. Ct. Op. at 9 n.2, but
6
did not decide the issue since neither party had raised it.
Instead, the district court turned to the merits of Wagner's
claim. After affirming the bankruptcy court's decision that
PennWest's use of an in-house appraiser was permissible, the
district court reviewed seriatim each of Wagner's claims as to
PennWest's alleged failure to comply with the ACA and rejected
them, holding that Wagner's right of first refusal expired prior
to his bankruptcy filing. Id. at 9-19.
PennWest now argues on appeal that the bankruptcy and
district courts should have dismissed Wagner’s actions for
failure to state a claim since the ACA provides no private right
of action. We are cognizant that PennWest did not raise this
issue in the district court. While we will ordinarily not
consider issues raised for the first time on appeal, we have
recognized that in exceptional circumstances we may consider such
issues if it would be just under the circumstances. O’Neill v.
United States, 411 F.2d 139, 143-44 (3d Cir. 1969). In this
case, the existence (or, more accurately, the non-existence) of a
private right of action under the ACA is so fundamental to the
claims alleged in the district court that we cannot address the
issues raised by the parties without first deciding whether there
is a private right of action. Furthermore, an appellate court
may uphold a judgment on any proper theory, even if not raised by
the parties first in the district court, as long as there is no
prejudice to the other party. See Altman v. Altman, 653 F.2d
755, 758 (citing Jurinko v. Edwin L Weingard Co., 477 F.2d 1038(3d Cir.), vacated on other grounds, 414 U.S. 970 (1973)).
7
The issue of whether there is such a private right of
action has been considered by at least seven courts of appeals.
They have uniformly held that there is no private right of action
under the ACA or its predecessor, The Farm Credit Act of 1971.
See Grant v. Farm Credit Bank of Texas, 8 F.3d 295, 296 (5th Cir.
1993); Saltzman v. Farm Credit Services of Mid-America, ACA, 950
F.2d 466, 467-69 (7th Cir. 1991); Zajac v. Federal Land Bank of
St. Paul, 909 F.2d 1181, 1182-83 (8th Cir. 1990)(en banc);
Griffin v. Federal Land Bank of Wichita, 902 F.2d 22, 24 (10th
Cir. 1990); Harper v. Federal Land Bank of Spokane, 878 F.2d
1172, 1177 (9th Cir. 1989), cert. denied, 498 U.S. 1057 (1990);
Bowling v. Block, 785 F.2d 556, 557 (6th Cir.)(holding that the
Farm Credit Act of 1971, the precursor to the ACA, has no private
right of action), cert. denied sub nom., Bower v. Lyng, 479 U.S.
829 (1986); Smith v. Russellville Production Credit Ass’n, 777
F.2d 1544 (11th Cir. 1985); cf. Jarrett Ranches, Inc. v. Farm
Credit Bank of Omaha, 128 B.R. 263, 264-65 (N.D.S.D. 1990)
(specifically finding no private right of action afforded to
farmer/borrowers under the ACA to enforce their rights of first
refusal); Rennick Brothers, Inc. v. Federal Land Bank Ass’n of
Dodge City, 721 F. Supp. 1198, 1200 (D.Kan. 1989); Neth v.
Federal Land Bank of Jackson, 717 F. Supp. 1478, 1479 (S.D. Ala.
1988).
In light of such an array of precedent, we would
require a compelling basis to hold otherwise before effecting a
circuit split. Nonetheless, we examine the issue independently
and find no reason to disagree with the other courts.
8
The Supreme Court's decision in Cort v. Ash, 422 U.S.
66, 78 (1975), set forth four factors for determining whether a
federal statute provides a private cause of action. “First, is
the plaintiff 'one of the class for whose especial benefit the
statute was enacted' . . . ? 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 . . . ?” Id. (citations
omitted). In a later opinion, the Court explained that the
"focal point" for finding a private right of action is
congressional intent in enacting the statute. Thompson v.
Thompson, 484 U.S. 174, 179 (1988). The Court stated, “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.” Id. (internal quotations omitted).
In applying this mode of analysis to the Agricultural
Credit Act, the most persuasive indication of legislative intent
is Congress's decision to delete a proposed private right of
action provision from the final version of the Act. In Harper,
one of the earliest appellate decisions under the ACA, the Court
of Appeals for the Ninth Circuit reviewed the legislative history
of the ACA. The court noted that the House version of the bill
contained an express private right of action, that some Senators
also sought to include such a provision and that ultimately
9
"[t]he Senate opposed the House provision and it was deleted from
the final 1987 Act. H.R. 3030, 100th Cong., 1st Sess., 133 Cong.
Rec. 11820 (December 18, 1987)." 878 F.2d at 1175. The Ninth
Circuit recognized that there were some ambiguous statements on
the Senate floor that suggested that some legislators may have
been under the impression that such a right of action already
existed, but the court stated that it was clear "that there
existed no implied private right of action under the various
predecessor statutes or regulations in force prior to the 1987
Act." Id. The court cited the Supreme Court's statement in
Midlantic Nat'l. Bank v. New Jersey Dept. of Envtl. Protection,
474 U.S. 494, 501 (1986), that "[t]he normal rule of statutory
construction is that if Congress intends for legislation to
change the interpretation of a judicially created concept, it
makes that intent specific." Harper, 878 F.2d at 1176.
The decision of the Court of Appeals for the Seventh
Circuit in Saltzman, 950 F.2d at 468, also focused on the
deletion of the express provision for a private right of action.
The court noted that this deletion took place “against the
backdrop of numerous court decisions (interpreting the Farm
Credit Act of 1971) concluding no private right of action was
implied,” and viewed this as bolstering the conclusion that
Congress did not intend an implied right of action under the ACA.
Id.The issue was also the subject of an en banc decision
in the Eighth Circuit where the court held, over a vigorous
dissent, that there was no private right of action. Zajac, 909
10
F.2d at 1182-83. The court noted that Congress enacted a
comprehensive legislative scheme which, by the absence of any
specific provisions for a private right of action, militates
against finding a private remedy. Indeed, as the Zajac court
pointed out, it would be inappropriate to infer a private right
of action in the area of foreclosure, which is an area
traditionally controlled by state law. See id.
We are aware of only one district court decision that
has not been overturned holding that the ACA establishes a
private right of action. See Leckband v. Naylor, 715 F. Supp.
1451, 1453 (D.Minn. 1988). However, the Eighth Circuit's
decision in Zajac came later and thus is dispositive. In any
event, the reasoning in Leckband has been rejected by the
numerous appellate decisions that followed.
We can find no persuasive basis for rejecting the
reasoned analysis of the numerous courts that have addressed this
issue. We join them in holding that the Agricultural Credit Act
does not contain an implied private right of action. It follows
that Wagner had no asset in the right of first refusal when the
matter came before the bankruptcy court.
III.
For the reasons set forth we do not address the merits
of Wagner's claim that PennWest did not comply with the statutory
right of first refusal and we will affirm the judgment of the
district court, albeit for reasons other than those on which it
decided.
11