Robert Charles ASHBROOK, Rose Marie Elaine Ashbrook, Plaintiffs-Appellants, v. John BLOCK, Individually and in his capacity as Secretary of U.S. Department of Agriculture; Allen Brock, Individually and in his capacity as Acting Assistant Administrator of the Farmers Home Administration; Charles Shuman, Individually and in his capacity as Acting State Director for Michigan; Calvin Lutz, Individually and in his capacity as District Director; Richard Keech, Individually and in his capacity as District Director; William J. Gregor, Individually and in his capacity as County Supervisor; United States Department of Agriculture, United States of America, Defendants-Appellees
No. 89-1443
United States Court of Appeals, Sixth Circuit
Decided Oct. 25, 1990
917 F.2d 918 | 59 USLW 2296 | 20 Bankr.Ct.Dec. 1927 | Bankr. L. Rep. P 73,667
Before MARTIN, JONES and GUY, Circuit Judges.
Edith A. Landman (argued), Office of the U.S. Atty., Grand Rapids, Mich., for defendants-appellees.
NATHANIEL R. JONES, Circuit Judge.
Plaintiffs-appellants, Robert Charles Ashbrook and Rose Marie Elaine Ashbrook (the Ashbrooks) appeal the dismissal of their lawsuit against the United States, the Farmers Home Administration (FmHA) and various federal and local officials within the FmHA. The Ashbrooks’ action, sounding in tort, contract law and constitutional tort, was brought as an adversary proceeding in the United States Bankruptcy Court for the Western District of Michigan pursuant to
The Ashbrooks have operated a hog and apple farm in Van-Buren County, Michigan since 1976. They had acquired several loans from the FmHA totalling $659,355.73 as of October 10, 1985. Although the Ashbrooks have not made a payment on their indebtedness since 1979, the FmHA had not, as of the date this appeal was briefed, accelerated the Ashbrooks’ account or foreclosed on their farm. The Ashbrooks’ first loan from the FmHA was in part for the purpose of constructing a farrowing barn. The Ashbrooks hired Jerry L. Brower to construct the barn, but Brower delayed to the point that the Ashbrooks sought the assistance of William J. Gregor, a County Supervisor for the FmHA, in order to coax Brower into performing.
The Ashbrooks maintain that when they began looking for other contractors in November of 1979, Gregor informed them that they would have to allow Brower to complete the barn, even though Brower‘s initial work was slow and defective. However, the record reflects that Gregor merely informed the Ashbrooks that the FmHA would not pay the difference if they hired a more expensive contractor. J.App. at 127-28. Soon after Brower completed the barn, a section of its floor collapsed while hogs were upon it. The Ashbrooks attempted to acquire another loan from the FmHA to replace the injured livestock, but they were informed that they did not qualify. Brower refused to repair the barn until the Ashbrooks cleaned the site. Gregor also determined that the Ashbrooks should clean the site prior to requiring Brower to repair the floor. The Ashbrooks were unable to meet this demand, and the barn was left unrepaired. The Ashbrooks sued Brower for his faulty construction of the farrowing barn. The suit was settled in 1984 but the Ashbrooks’ total unrecovered loss was $73,741.60.
In 1983, Robert Ashbrook filed a petition for relief under Chapter 11 of the Bankruptcy Code. In 1985, Rose Marie Ashbrook also filed a Chapter 11 petition. Robert and Rose Marie‘s cases were consolidated on December 31, 1985. The FmHA filed a proof of claim on June 23, 1983 for $573,160.87. On August 20, 1985, the Ashbrooks filed what purported to be a compulsory counterclaim under
Total failure to comply with the aforesaid CFRDA and its regulations ... specifically but not limited to failure to provide management assistance and supervision, credit counselling, and failure to defer or extend payments as provided for in the aforesaid regulations.
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Failure to provide reduction of payments to provide sufficient monies to pay living and operating expenses as provided by
7 U.S.C. 1981a .Failure to inform Plaintiff of his rights to consolidation, rescheduling, remortization and deferral of his indebtedness to the FmHA.
Refusing and denying Plaintiff‘s requests and applications for Operating and Emergency Loans.
Wrongfully denying Plaintiff income to which he was otherwise entitled to from the operation of his pig herd.
Wrongfully accusing Plaintiff of poor management and laziness when FmHA was remiss in its obligation to assist Plaintiff in the management of his farm.
Id. at 82 (quoting “Complaint” at p. 8).
On September 3, 1985, the defendants-appellees moved to dismiss the Ashbrooks’ action, or in the alternative, for summary judgment. Pursuant to
An appellate court‘s review of a district court‘s grant of summary judgment is de novo. Pinney Dock and Transport Co. v. Penn Corp., 838 F.2d 1445, 1473 (6th Cir.1988), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988).
A. Jurisdiction Under 11 U.S.C. Sec. 106(a)
The Ashbrooks contend they are not required to file an administrative claim with the FmHA before countersuing that agency in bankruptcy court because
In gleaning the legislative intent of these two statutes, we are guided by the Supreme Court‘s teachings in Morton v. Mancari, 417 U.S. 535, 551 (1974): “The courts are not at liberty to pick and choose among congressional enactments, and when two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective. ‘When there are two acts upon the same subject, the rule is to give effect to both if possible.... The intention of the legislature to repeal must be clear and manifest.’ ” (Citations omitted.)
The 1966 amendments to the FTCA creating an absolute requirement of administrative exhaustion were “intended to ease court congestion and avoid unnecessary litigation, while making it possible for the Government to expedite the fair settlement of tort claims asserted against the United States.” S.Rep. No. 1327, 89th Cong., 2d Sess., reprinted in 1966 U.S.Code Cong. & Admin.News 2515, 2516. Congress concluded that federal agencies should be empowered to settle the claims against them because the agencies have the best information concerning the events which gave rise to the claims. Id. at 2517 & 2519. A conclusion that the administrative exhaustion requirement of
We have found such an indication in the relevant portion of the legislative history of the Bankruptcy Reform Act of 1978:
Section 106 provides for a limited waiver of sovereign immunity in bankruptcy cases. Though Congress has the power to waive sovereign immunity for the Federal government completely in bankruptcy cases, the policy followed here is designed to achieve approximately the same result that would prevail outside of bankruptcy.
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There is, however, a limited change from the result that would prevail in the absence of bankruptcy.... [T]he filing of a proof of claim against the estate by a governmental unit is a waiver by that governmental unit of sovereign immunity with respect to compulsory counterclaims, as defined in the Federal Rules of Civil Procedure. The governmental unit cannot receive a distribution from the estate without subjecting itself to any liability it has to the estate within the confines of a compulsory counterclaim rule. Any other result would be one-sided.
As the legislative history makes clear, Congress was cognizant at the time of
The Ashbrooks, however, have failed to meet an additional requirement of
- Is there a logical relationship between the two claims?
- Are the issues of fact and law raised by the claim and counterclaim largely the same?
- Would res judicata bar a subsequent suit on the counterclaim if the court were not to take jurisdiction?
- Would substantially the same evidence support or refute both the claim and the counterclaim?
Maddox v. Kentucky Finance Co., Inc., 736 F.2d 380, 382 (6th Cir.1984). We are unable to answer any of these questions in the affirmative. The Ashbrooks seek to establish that FmHA officials’ failure to render credit and management counselling and denial of operating and emergency loans caused them personal injury. In filing its proof of claim, however, the FmHA merely seeks to establish that the Ashbrooks owe the government a stated sum. The FmHA‘s claim and the Ashbrooks’ counterclaim are incomparable. Accordingly, we hold that the Ashbrooks may not avail themselves of
B. Jurisdiction Under 11 U.S.C. Sec. 106(b)
Although the district court in the instant case concluded that the jurisdictional prerequisites of the FTCA and
The Ashbrooks contend that they may maintain a Bivens3 action against the United States and the individual defendants-appellees for deprivation of property rights under the fifth amendment to the United States Constitution. According to the Ashbrooks, the loan servicing and emergency loan provisions of the CFRDA and its applicable regulations are analogous to the property interests enunciated by the Supreme Court in Board of Regents v. Roth, 408 U.S. 564 (1972), and Perry v. Sindermann, 408 U.S. 593 (1972). Hence, once a farmer borrows money from the FmHA, he is entitled to loan servicing and emergency loans and cannot be deprived of these entitlements without due process of law.
The Ashbrooks’ Bivens claim against the United States is barred by sovereign immunity. See Jaffee v. United States, 592 F.2d 712, 717 (3d Cir.1979) (Bivens action may be brought against government officials, not the government itself). The fifth amendment claim against the individual defendants also fails for several reasons. Insofar as the Ashbrooks’ fifth amendment claim is based on the FmHA‘s failure to inform them of their rights of consolidation, rescheduling or deferral, this court has held that there is no due process right to formal notice of these options. Ramey v. Block, 738 F.2d 756, 762 (6th Cir.1984). Likewise, the Ashbrooks do not possess a protected property interest in additional FmHA funding. DeJournett v. Block, 799 F.2d 430, 431 (8th Cir.1986); Carson v. Block, 790 F.2d 562, 567 (7th Cir.1986), cert. denied, 479 U.S. 1017, 107 S.Ct. 669, 93 L.Ed.2d 721 (1986).
The Ashbrooks’ broad complaint that FmHA officials failed to provide management assistance and credit counseling pursuant to CFRDA regulations cannot be employed as a catchall basis for a fifth amendment claim. The Supreme Court has recognized that regulations which are mandatory in nature and leave officials little discretion in the manner in which they carry out a program may confer upon intended beneficiaries an interest protected by the due process clause. See Hewitt v. Helms, 459 U.S. 460, 469-72 (1983) (explicitly mandatory language in state regulations regarding administrative segregation within prisons sufficient to conclude that state created a protected liberty interest for inmates). However, the regulations on which the Ashbrooks rely are largely, if not wholly, discretionary in nature.
Sec. Supervision.
(a) Purpose. Supervision will be given by the County Supervisor to protect the government‘s interest and to accomplish the purpose of the loan.
(b) Responsibility of County Supervisor. The County Supervisor will determine and select the appropriate method of supervision to be used for each borrower.
(c) Supervisory Methods. Supervision may be given through farm visits, review of farm records, collateral inspections, meetings with borrowers on an individual or group basis, letters, telephone, etc. A complete record of each visit, meeting, or other contact will be made in the case file running record, underscoring those items which require follow-up action. The record must state the advice that was given and any problems noted.
We agree with the court‘s analysis in Bass v. United States Dept. of Agriculture, 737 F.2d 1408, 1415 (5th Cir.1984), a case in which a farmer challenged FmHA officials’ denial of an emergency loan request:
What [the plaintiff‘s] contention does not face is that if his view were to prevail, every case involving a discretionary administrative decision would automatically become a constitutional case merely by allegation that the law was otherwise than the decision reached. Yet the entire issue in the judicial review of administrative action always is whether the administrative decision was erroneous. The Constitution is not implicated unless the decision goes beyond mere error to an intentional or reckless disregard of the constitutional rights of the person against whom the administrative decision is made. Mere failure to make the ‘correct’ administrative decision does not rise to the level of a constitutional violation. (Emphasis added.)
We note that even if the failure to provide loan servicing and emergency loans were cognizable as a Bivens action, the individual FmHA officials are protected by qualified immunity. The constitutional violation for which a government official is held liable must be clearly established under existing precedent. Anderson v. Creighton, 483 U.S. 635, 639 (1987); Poe v. Haydon, 853 F.2d 418 (6th Cir.1988), cert. denied, 488 U.S. 1007, 109 S.Ct. 788, 102 L.Ed.2d 780 (1989). As the foregoing discussion illustrates, it was not clearly established at the times in question that CFRDA regulations created an entitlement in loan recipients to credit counseling and continued financial assistance.
IV.
The Ashbrooks claim a private right of action against the defendants-appellees for their alleged violations of CFRDA. A private right of action may be implied from a regulation if: 1) the statute under which the rule was promulgated can fairly be said to imply a private right of action, and 2) the regulations under the statute can be read to imply a private right of action. Argelastro v. Prudential-Bache Securities, 764 F.2d 939, 947 (3d Cir.1985), cert. denied, 474 U.S. 935, 106 S.Ct. 267, 88 L.Ed.2d 274 (1985).
The Secretary is authorized to make such rules and regulations, prescribe the terms and conditions of making or insuring loans, security instruments and agreements, except as otherwise specified herein, and make such delegations of authority as he deems necessary to carry out this chapter.
In examining this statute, our “central inquiry [is] whether Congress intended to create, either expressly or by implication, a private cause of action.” Touche Ross & Co. v. Reddington, 442 U.S. 560, 575 (1979). On its face,
V.
The Ashbrooks also allege a cause of action under Michigan‘s “good samaritan” doctrine. The doctrine provides that when one voluntarily performs services for another, he must exercise due care in the course of his performance or be liable to the recipient of his services for any harm resulting from his failure to exercise due care. Smith v. Allendale Mut. Ins. Co., 410 Mich. 685, 303 N.W.2d 702, 706 (1981). The Ashbrooks contend that because they are worse off than if the FmHA had complied with the law, FmHA is liable to them under the good samaritan doctrine.
The good samaritan doctrine, however, requires that the defendant undertake to act and do so negligently. Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956). In the instant case, the Ashbrooks complain that FmHA officials failed to act by not providing them loan servicing. “The plaintiffs do not allege that the individuals or the government undertook to render services to them and performed those services negligently.... The plaintiffs have thus failed to allege a fundamental element of a ‘good samaritan’ action.” Matter of Kenny, 75 B.R. at 526.
The Ashbrooks state a claim for breach of contract based on the failure of FmHA to abide by the loan servicing regulations which was incorporated by reference into the loan agreements between FmHA and the Ashbrooks. Because the regulations on which the Ashbrooks premise their contract claim are discretionary, the FmHA did not obligate itself to fulfill any duties besides providing the Ashbrooks with the stated amounts of the loans. We therefore find this claim to be without merit.
VII.
The Ashbrooks finally urge this court to apply equitable subordination against the FmHA‘s claim pursuant to
VIII.
For the foregoing reasons, the district court‘s grant of summary judgment is AFFIRMED.