Allison v. BlockAllison v. Block
- Reporters:
- ,
- Before:
- Heaney
In 1978, Congress enacted
I
BACKGROUND
The Allisons own and operate a farm in Howard County, Missouri. On December 20, 1977, they obtained FmHA financing under the CFRDA in the amount of $103,-800, secured by a deed of trust on their realty. Because of adverse weather conditions in 1977 and low grain and livestock prices in 1978, they failed to turn a profit on the operation of the farm during those years. On December 22, 1978, Roger Allison applied for an FmHA economic emergency loan. The FmHA Howard County Committee denied the application. On appeal, the State Director of the FmHA approved a $29,000 operating loan but denied refinancing assistance. On June 26, 1979, the Assistant Administrator of the FmHA reversed the State Director’s decision insofar as it denied Allison’s reorganization loan request, holding that the denial “was unreasonable because [he] met the eligibility requirements * * * [and] the proposed Farm and Home Plan submitted by Allison on April 9,1979, showed reasonable repayment ability.” Allison v. Block, supra, 556 F.Supp. at 402. On August 24, 1979, the Allisons received a $190,000 reorganization loan, secured by a deed of trust on their farm. On April 28, 1980, they received a $29,750 operating loan, secured by a deed of trust and liens on their equipment, livestock, supplies, and inventory.
Adverse weather and economic conditions continued to hamper the Allisons’ farming operations. In 1979, a dry planting season followed by an early frost reduced their crop yield significantly. In 1980, a severe drought contributed to an eighty-seven percent reduction in corn yield and a sixty-eight percent reduction in bean yield. Fol*633lowing these losses, the Allisons became delinquent on their FmHA loan payments.
On November 6, 1980, an FmHA County Supervisor advised Roger Allison to sell the Allisons’ breeding stock and equipment in order to make payments on their loans. Allison complied and, in the spring of 1981, the FmHA applied the proceeds of these sales to reduce the delinquency on the Allisons’ April 28, 1980, operating loan.
On May 14, 1981, the FmHA accelerated the Allisons’ indebtedness, as to both principal and interest, for failure to make timely payments and failure to pay real estate taxes. It notified them that their loans, which were classified as emergency (EM) and economic emergency (EE) loans, would be foreclosed unless the total indebtedness was paid by June 15, 1981. The Allisons appealed the acceleration notice to the FmHA District Director and Assistant Administrator; both upheld the decision. The Allisons then brought their final administrative appeal before the Administrator of the FmHA (Administrator). Pending this appeal, Roger Allison read in a farming magazine about possible loan deferral relief under federal statute and requested such relief from the Administrator. On August 10, 1982, the Program Assistant to the Administrator denied the Allisons’ appeal, rejecting the alternatives of consolidation, rescheduling, reamortization, or deferral because the Allisons “did not have the potential to generate sufficient farm income to repay family living and farm operating expenses plus debt service even if a deferral had been granted.” Allison v. Block, supra, 556 F.Supp. at 403 (quoting statement from FmHA Program Assistant).
On October 27,1982, the Allisons filed the present action requesting declaratory and injunctive relief from the acceleration of their loans and foreclosure on their property. They alleged that the Secretary’s failure to promulgate adequate procedural and substantive regulations creating a program for loan deferrals under
II
STATUTORY REQUIREMENTS
On appeal, the Secretary asserts that the district court erred in requiring special procedures or standards to be followed by virtue of
In addition to any other authority that the Secretary may have to defer principal and interest and forego foreclosure, the Secretary may permit, at the request of the borrower, the deferral of principal and interest on any outstanding loan made, insured, or held by the Secretary under this chapter, or under the provisions of any other law administered by the Farmers Home Administration, and may forego foreclosure of any such loan, for such period as the Secretary deems necessary upon a showing by the borrower that due to circumstances beyond the borrower’s control, the borrower is temporarily unable to continue making payments of such principal and interest when due without unduly impairing the stan*634dard of living of the borrower. The Secretary may permit interest that accrues during the deferral period on any loan deferred under this section to bear no interest during or after such period: Provided, That if the security instrument securing such loan is foreclosed such interest as is included in the purchase price at such foreclosure shall become part of the principal and draw interest from the date of foreclosure at the rate prescribed by law.
The Secretary would have us hold that this statute requires no adjudicatory or regulatory administrative action because it creates no administrative procedural requirements nor any substantive right to relief from loan acceleration or foreclosure. We refuse to so hold. In our view,
A. Procedural Requirements
We agree with several federal district courts which have held that, reading the statute as a whole and giving meaning to each word therein, Congress intended the Secretary to give notice of the availability of
Furthermore, the legislative history underlying the statute supports the conclusion that the Secretary is required to give notice to defaulting CFRDA borrowers and to create a procedure for asserting
More specifically, the House report made an explicit comparison between the House version of
The House conference report, which was a joint explanatory statement on the 1978 agricultural credit legislation, noted that the original House version of
Although the change between the House and Conference versions of
In addition to the official reports preceding
I should note that the original form of my amendment gave the Secretary of Agriculture no discretion in the implementation of the loan deferral program. However, as the result of the personal assurance I have received from the Secretary of Agriculture that the loan deferral program will be carried out without interest being charged on interest, I have modified my amendment so that this deferral program will be within the Secretary’s discretionary authority.
124 Cong.Rec. 12133 (1978) (remarks of Sen. Eagleton).
Senator Dole, on the date of the passage of
Against this backdrop of statutory language and legislative history, we cannot accept the Secretary’s assertion that Congress left the implementation of
The Secretary also contends that currently published regulations fulfill whatever notice or hearing requirements which were created by
We therefore affirm the injunction against foreclosure of the Allisons’ farm until the Secretary has complied with his responsibilities to provide adequate notice and procedures under which the Allisons may make the requisite prima facie showing and otherwise demonstrate their eligibility for a
B. Substantive Standards
The district court found that the Secretary abused his discretion in dealing with the Allisons “by failing to fully consider the applicability of
We cannot accept the Secretary’s implicit assertion that the discretion to decide individual cases includes the authority to decide, without formal rulemaking, that — regardless of a borrower’s request and prima facie showing, and the particular facts of the case — no CFRDA borrower is eligible for
[The highway appropriation statute does not create] discretion in the Secretary to withhold approval on projects Congress has specifically directed because of a system of priorities the Executive chooses to impose on all expenditures. The Congressional intent is that the Secretary may exercise his discretion to insure that the roads are well constructed and safely built at the lowest possible cost, all in furtherance of the Act, but when the impoundment of funds impedes the orderly progress of the federal highway program, this hardly can be said to be favorable to such a program. Indeed, it is in derogation of it. It is difficult to perceive that Congress intended such a result.
State Highway Commission v. Volpe, 479 F.2d 1099, 1114 (8th Cir.1973). In like manner,
Furthermore, the legislative history behind
We do not decide in what manner the Secretary must develop the substantive *638standards applicable to
If regulations of general applicability were formulated, it would of course be possible to explain individual decisions by reference to the appropriate regulation. It may well be, however, that standards * * * can best be developed piecemeal, as the Secretary evaluates [particular cases]. Even so, he has an obligation to articulate the criteria that he develops in making each individual decision. We cannot assume, in the absence of adequate explanation, that proper standards are implicit in every exercise of administrative discretion.
Environmental Defense Fund, Inc. v. Ruckelshaus, 439 F.2d 584, 596 (D.C.Cir.1971). Although we believe that formal rulemaking would better insure a uniform set of substantive standards to govern
For purposes of the present appeal, we affirm the injunction against foreclosure on the Allisons’ farm not only pending proper notice of the procedures developed to process section 1981a requests, as previously discussed, but also pending publication of uniform substantive regulations or a reasoned decision on their particular request consistent with section 1981a requests nationwide.3 We emphasize that, should the Secretary decide to develop substantive criteria through case-by-case adjudication, he cannot achieve this goal by considering each case in isolation. The Supreme Court succinctly stated, “No matter how rational or consistent with congressional intent a particular decision might be, the determination of eligibility cannot be made on an ad hoe basis by the dispenser of the funds.” Morton v. Ruiz, 415 U.S. 199, 232, 94 S.Ct. 1055, 1073, 39 L.Ed.2d 270 (1974). Thus, even if the Secretary does not publish formal findings of fact and conclusions of law in each case, he must clearly articulate the reasons for each section 1981a decision in a manner susceptible to judicial review for an abuse of discretion. See City of West Chicago v. United States Nuclear Regulatory Commission, 701 F.2d 632, 648 (7th Cir. 1983).
Ill
CONCLUSION.
We realize that the plight of many farmers throughout the nation is so bleak that the forbearance of creditors will not save their operations. We are also aware, however, that the agricultural industry is especially vulnerable to the changing winds of time, nature, fate, and the economy; farmers of skill, perseverance, and dedication are no less vulnerable. Congress in 1978 clearly expressed its intent to assist farmers blown astray by these winds by granting those who could show that their inability to meet their financial obligations was temporary more time to repay their debts to the government. It commissioned the Secretary to implement this intent not as a private banker, but as a public broker. We view the Secretary’s conscious disregard of section 1981a as contrary to that commission, and therefore affirm the injunction on foreclosure of the Allisons’ farm until the intent of Congress becomes the action of the Secretary.
Notes
. The district court found it unnecessary to reach the constitutional claims raised by the Allisons because of the statutory violation. We also decline to meet the constitutional issues.
. We refer generally to the subject of
. To the extent that the Secretary argues that the FmHA in fact made a reasoned decision to deny deferral relief to the Allisons, we affirm the district court’s holding that the reasons given for that denial were “conclusory, unsupported, and contradictory,” and the decision was thus an abuse of discretion. Allison v. Block, 556 F.Supp. 400, 405 (W.D.Mo.1982).