From Casetext: Smarter Legal Research

Curtis v. Farm Service Agency

United States District Court, W.D. Michigan, Southern Division
Jun 22, 2001
Case No. 4:00-CV-93 (W.D. Mich. Jun. 22, 2001)

Opinion

Case No. 4:00-CV-93

June 22, 2001


OPINION


Plaintiffs, Phillip C. and Gwendolyn Curtis ("Plaintiffs"), are farmers. They seek judicial review of a final determination by the Director ("Director") of the United States Department of Agriculture's National Appeals Division ("NAD") regarding the amount owed by Plaintiffs pursuant to a Shared Appreciation Agreement (the "Agreement") that Plaintiffs entered into with the Farm Service Agency, an agency of the United States Department of Agriculture, on October 27, 1989. Defendant claims that Plaintiffs owe $113,500. Plaintiffs claim that they owe only $32,617. It appears that Plaintiffs have exhausted their administrative remedies regarding the amount owed. Pursuant to 7 U.S.C. § 6999, a final determination of the Director is reviewable and enforceable by any United States District Court in accordance with the Administrative Procedure Act, 5 U.S.C. § 701-706.

Farm Service Agency cannot be sued separately from the United States Department of Agriculture. Owyhee Grazing Ass'n, Inc. v. Field, 637 F.2d 694, 697 (9th Cir. 1981). Therefore throughout this Opinion "Defendant" shall refer only to the Department of Agriculture.

Plaintiffs' Complaint asserts five counts: Count I — Determination Contrary to 5 U.S.C. § 701, et seq.; Count II — Deprivation of Substantive Due Process; Count III — Deprivation of Procedural Due Process; Count IV — 42 U.S.C. § 1983; Count V — Breach of Contract. Plaintiffs seek discovery and, in essence, a trial de novo before this court. Defendant claims that the breach of contract action brought by Plaintiffs belongs in the Court of Claims. Plaintiffs claim that they are not seeking money damages — only a declaratory judgment that they owe less than Defendant claims.

Count 4 must be dismissed because this is not a case against a person acting under color of state law. American Mfg. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 49-50, 119 S.Ct. 977, 985 (1999).

The debt forgiveness program and the valuation at issue in this case are part of a complicated farm program governed by statute and Department of Agriculture regulations. It appears to this Court, as it did to the Court of Appeals for the District of Columbia, that § 6999 was to simplify appeals from the National Appeals Division (NAD) regarding these programs by placing jurisdiction over them solely in the district court.Deaf Smith County Grain Processors, Inc. v. Glickman, 162 F.3d 1206, 1213 (D.C. Cir. 1998); see also Farmers Merchants Bank of Eatonton v. United States, 43 Fed. Cl. 38, 43-44 (Fed.Cl. 1999). Therefore, all claims brought by Plaintiffs are to be decided by this Court.

Background Facts

In 1989, Plaintiffs were delinquent on their farm loans. The delinquent loans were restructured pursuant to 7 U.S.C. § 2001, which provides a procedure whereby farm loans owed to the government can be restructured and forgiven if a farmer enters into a "Shared Appreciation Agreement." 7 U.S.C. § 2001(e) provides that the government, pursuant to the Shared Appreciation Agreement, shall recapture a portion of the loan write down or write off based upon an appreciation of the real property securing the loan over a period of up to 10 years. On October 27, 1989, Plaintiffs entered into a Shared Appreciation Agreement with the USDA whereby approximately $814,000 of the loans were written off. As a condition of this write off, Plaintiffs and the USDA agreed to share 50/50 in the positive appreciation in the market value of the "real security property" securing the loan measured between the commencement and expiration of the Agreement. The Agreement expired on October 27, 1999.

The parties have a dispute over the amount of appreciation that occurred to Plaintiffs' farm because each party values the farm in 1989 and 1999 differently. Defendant argues that the value of Plaintiffs' security was $290,000 in 1989, and $517,000 in 1999, for a total appreciation over 10 years of $227,000. Defendant claims that Plaintiffs owe it 50%, or $113,500, of this total appreciation. Plaintiffs claim that the value of their security was $396,766 in 1989, and $462,000 in 1999, for a total appreciation of $65, 234. Plaintiffs claim that they owe 50%, or $32, 617, of this appreciation.

Standard of Review

This court's review of the findings of the Director regarding the values of Plaintiffs' farm in 1989 and 1999 are subject to a very tough standard. The court must find that the Director's decision was "`arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law.'" Deaf Smith County Grain Processors, 162 F.3d at 1213 (quoting 5 U.S.C. § 706(2)(A)). The court must determine whether the Director's decision was based upon a consideration of the relevant factors and whether there has been a clear error of judgment as well as whether the Department of Agriculture followed the necessary procedural requirements for reaching its decision. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416-17, 91 S.Ct. 814, 824 (1971). This Court is prohibited from substituting its judgment for that of the agency, and the agency's decisions are "entitled" to a presumption of "regularity." Id. at 415-16, 91 S.Ct. at 823-24; see also Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 442 (1975). Furthermore, the agency's action may not be attacked or supported in court by new evidence. 5 U.S.C. § 706; Tagg Bros. Moorhead v. United States, 280 U.S. 420, 444, 50 S.Ct. 220, 226 (1930).

After a hearing in which he took testimony from the parties, the Hearing Officer who heard the dispute sided with Defendant. Plaintiffs appealed to the Director. The Director affirmed the Hearing Officer. The question before this Court, then, is whether the decision of the Department of Agriculture, acting through the NAD and its Director, was arbitrary and capricious, an abuse of discretion, or was otherwise not in conformance with the law.

Decision

The record shows that Plaintiffs actually entered into two Shared Appreciation Agreements. The first Shared Appreciation Agreement, which Plaintiffs signed, listed the value of the "property securing the loans" at $290,000. (AR 157-158.) Therefore, the Plaintiffs must have known of the $290,000 valuation. This value was supported by an appraisal of Charles Bender, which Plaintiffs claim not to have seen but which was, nonetheless, in their file. (AR 117-118.) Subsequent to this first Shared Appreciation Agreement, the parties entered into another Shared Appreciation Agreement for the same loan restructuring, which was called a "Shared Appreciation Agreement (Corrected)." The so-called "Shared Appreciation Agreement (Corrected)" has the following:

"Market value of the property securing loan (s) $396,766.00." (AR 161.) The number $396,766 is the sum of the real estate appraisal of $290,000, which was the value of the security set forth in the original Shared Appreciation Agreement, plus the value of the personal property which also had been given as security for the loan. The Hearing Officer explained that the 1989 appraisal of the real property was $290,000, and that the value of the personal property, "chattel", was $106,766, for a total of $396,766. (AR at 343-44.) The Director accepted the finding that the initial value of the real estate was $290,000. (AR at 487.) The Director determined the shared appreciation due only by looking at the value of the real security property. (AR at 488-89.) This is the correct approach because only "real security property" is subject to shared appreciation. 7 U.S.C. § 2001(e). Furthermore, the NAD decision is supported by the provision of the contracts which provides that "[b]orrower agrees to pay FmHA an amount according to one of the following schedules:. . . . 2. Fifty (50) percent of any positive appreciation in the market value of the property securing the loan above as described in the security instruments between the date of this Agreement and . . . the expiration date of this Agreement." (AR at 157-58; 160-61 (emphasis added).) The security instruments are listed in the original Shared Appreciation Agreement and the "Corrected" version and refer to the real property. Finally, the Defendant is not now attempting to collect the difference between the initial value of only the real property and the current value of both the real property and the chattels, but is only attempting to collect the difference between the initial and the current values of the real property as described in the security instruments.

Plaintiffs also claim that the 1999 Bender appraisal of $517,000 was not rendered pursuant to the Uniform Standards of Appraisal Practice. At the hearing before the Hearing Officer, Defendant did not produce the person who actually made the appraisal, Charles Bender, as a witness. However, Defendant did produce Dennis Liles, who testified that Bender's appraisal was done pursuant to legal requirements. Plaintiffs produced as an expert appraisal witness, Terrell Oetzel, who criticized Bender's appraisal on several fronts and rendered his own appraisal of $462,000. The NAD held that the determination of the 1999 values was made pursuant to law.

The court has reviewed the record, and the court holds that the NAD was not arbitrary and capricious, did not abuse its discretion, and was in accordance with the law. Plaintiffs had the 1989 $290,000 value in writing before the "Corrected" figure of $396,766 was inserted. The NAD pointed out that the $396,766 included the personal property, which also secured the loan, even though personal property was not subject to the shared appreciation. The determination as to the 1999 values was supported by two appraisers — Bender and Liles. That Oetzel was critical of Bender's methodology and conclusions is not atypical of any disputed appraisal. Plaintiffs do not show how the Bender appraisal is incompatible with the Department of Agriculture requirements for such appraisals in determining the amount of appreciation of farm realty. The Shared Appreciation Agreements list the real estate as the property subject to the appreciation.

Furthermore, this Court finds that the Hearing Officer's refusal, upon oral request, to subpoena Bender to the hearing did not violate either the law or Plaintiffs' substantive or procedural due process rights. It was represented to this Court at oral argument that at a pretrial hearing Plaintiffs orally requested that Bender be subpoenaed to the hearing on the merits. The Hearing Officer refused to issue a subpoena, but told Plaintiffs' lawyer that they could try to get Bender to appear voluntarily. Plaintiffs presented no formal document requesting a subpoena. Bender did not appear at the hearing, but Liles appeared in his place to testify that Bender's appraisal was proper. The Code of Federal Regulations provides that a hearing officer should issue subpoenas only where a witness is necessary for disclosure of all relevant facts which could impact the agency's final determination, the information cannot be obtained except through testimony of the person, and the testimony cannot be obtained without the issuance of a subpoena. 7 C.F.R. § 11.8 (a)(2)(iii)(B). In this case, Plaintiffs had the opportunity to cross-examine Liles, and they produced their own witness, Oetzel, to criticize Bender's appraisal. Plaintiffs have failed to inform this Court what Bender could have said that Plaintiffs did not develop through the cross-examination of Liles and the direct testimony of Oetzel. The alleged weaknesses in Bender's appraisals were thoroughly brought before the Hearing Officer through the examinations and cross examinations of Liles and Oetzel.

Finally, it was not incumbent upon Defendant to call Bender as its witness. Bender submitted very thorough appraisals, which this Court has examined. Liles was a witness to bolster the credibility of the Bender appraisal. Each party in a hearing can submit the best evidence it desires to support its point of view.

Conclusion

The decision of the NAD is affirmed. Defendant's motion for summary judgment will be granted. Plaintiffs owe the Farmers Home Administration the sum of $113,500. Pursuant to the Stipulation and Order entered by this Court on July 26, 2000, the requirement that Plaintiffs request amortization within 30 days of their receipt of the August 23, 1999, letter has been stayed. Plaintiffs are therefore eligible for amortization of the amount of this judgment, pursuant to the usual conditions imposed upon parties requesting amortization of amounts due Defendant in these circumstances.

A separate order will be issued.

ORDER

accordance with the Opinion entered this day,

IT IS HEREBY ORDERED that Defendant's Motion for Summary Judgment (docket no. 11) is GRANTED. Plaintiffs, Phillip C. Curtis and Gwendolyn Curtis, shall pay to the Farmer's Home Administration the sum of $113,500. Pursuant to the Stipulation and Order entered by this Court on July 26, 2000, the requirement that Plaintiffs request amortization within 30 days of their receipt of the August 23, 1999 letter has been stayed. Plaintiffs may be eligible for amortization of the amount of this judgment, pursuant to the usual conditions imposed upon parties requesting amortization of amounts due Defendant in these circumstances.


Summaries of

Curtis v. Farm Service Agency

United States District Court, W.D. Michigan, Southern Division
Jun 22, 2001
Case No. 4:00-CV-93 (W.D. Mich. Jun. 22, 2001)
Case details for

Curtis v. Farm Service Agency

Case Details

Full title:PHILLIP C. CURTIS, SR., and GWENDOLYN CURTIS, Plaintiffs, v. FARM SERVICE…

Court:United States District Court, W.D. Michigan, Southern Division

Date published: Jun 22, 2001

Citations

Case No. 4:00-CV-93 (W.D. Mich. Jun. 22, 2001)