{\rtf1\ansi\deff0\deftab720{\fonttbl{\f0\fswiss MS Sans Serif;}{\f1\fdecor\fcharset2 Symbol;}}
{\colortbl\red0\green0\blue0;}
\deflang1033\pard\plain\f0\fs17 
\par No. 95-572
\par 
\par IN THE SUPREME COURT OF THE UNITED STATES
\par 
\par OCTOBER TERM, 1995
\par 
\par M. REX LUFT AND JANICE LUFT, PETITIONERS
\par 
\par v.
\par 
\par FARMERS HOME ADMINISTRATION
\par AND CENTURY BANK STERLING
\par 
\par ON  PETITION FOR A WRIT OF CERTIORARI
\par TO THE UNITED STATES COURT OF APPEALS
\par FOR THE TENTH CIRCUIT 
\par 
\par BRIEF FOR THE FEDERAL RESPONDENT
\par IN OPPOSITION 
\par 
\par DREW S. DAYS, III
\par Solicitor General
\par 
\par FRANK W. HUNGER
\par Assistant Attorney General
\par 
\par BARBARA C. BIDDLE
\par CHRISTINE N. KOHL
\par Attorneys
\par Department of Justice
\par Washington, D.C. 20530
\par (202) 514-2217
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par QUESTION PRESENTED
\par 
\par Whether petitioners have stated a cause
\par under the Agricultural Credit Act of 1987.
\par 
\par (I)
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par TABLE OF CONTENTS
\par 
\par Page
\par 
\par Opinions below  . . . .  1
\par Jurisdiction  . . . .  1
\par Statement . . . . 2
\par Argument . . . . 3
\par Conclusion . . . . 7
\par 
\par TABLE OF AUTHORITIES
\par 
\par Cases:
\par 
\par First Nat'l Bank v. Pearson, 455 N.W. 2d 858
\par (S.D. 1990) . . . . 6
\par Grant v. Farm Credit Bank, 8 F.3d 295(5th Cir.
\par 1993) . . . . 4
\par Griffin V. Federal Landbank, 902 F.2d 22 (10th
\par Cir. 1990)  . . . . 3, 4
\par Harper v. Federal Landbank, 878 F.2d 1172 (9th
\par Cir. 1989), cert. denied, 493 U.S. 1057 (1990)  . . . . 4
\par Kinion v. United States, 8 F.3d 639(8th Cir.
\par 1993) . . . . 6
\par Lee v. Yeutter, 917 F.2d 1104(8th Cir. 1990)  . . . . 6
\par Parker v. Department of Agric., 879 F.2d 1362 (6th
\par Cir. 1989)  . . . . 6
\par Saltzman v. Farm Credit Servs. of Mid-America,
\par ACA, 950 F.2d 466(7th Cir. 1991) . . . . 4
\par United States v. Selenske, 882 F.2d 220(7th Cir.
\par 1989)  . . . . 6
\par Zajac v. Federal Land Bank, 909 F.2d 1181 (8th
\par Cir. 1990)  . . . . 3, 4
\par 
\par Statutes, regulations and rule:
\par 
\par Agricultural Credit Act of 1987, Pub. L. No. 100-233,
\par 100 Stat. 1568 . . . . 2, 3, 5
\par Farm Credit Act of 1971, Pub. L. No. 92-181, 85 Stat.
\par 583 . . . . 3
\par 7 U.S.C. 1991(a)(10) . . . . 5
\par 7 U.S.C. 1991(b)(1)  . . . . 5-6
\par 
\par (III)
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par IV
\par 
\par Statutes, regulations and rule-Continued:
\par 
\par Page
\par 
\par 7 U.S.C. 2001 . . . . 6
\par 7 U.S.C. 2001(a)  . . . . 5
\par 12 U.S.C. 2001   . . . . 3
\par 12 U.S.C. 2002  . . . . 3
\par 12 U.S.C. 2002(a)  . . . . 4 
\par 12 U.S.C. 2202a  . . . . 4
\par 12 U.S.C. 202a(a)(6)  . . . . 4
\par 12 U.S.C. 2202a(b)(3)  . . . . . 4, 5
\par 28 U.S.C. 1631  . . . . 7
\par 7 C.F.R.:
\par   Section 1980.106(b)  . . . . 6
\par   Section 1980.224 . . . . 6
\par   Section 1980.6(a)  . . . . 6
\par Fed. R. Civ. P. 12(b)(6)  . . . . 3
\par 
\par Miscellaneous:
\par 
\par 53 Fed. Reg. 50,387-50,388 (1988)  . . . . 4
\par 54 Fed. Reg. (1989):
\par p. 1534  . . . . 6
\par p. 1535  . . . . 6
\par 59 Fed. Reg. 66,537 (1994)  . . . . 4
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par In the Supreme Court of the United States
\par 
\par OCTOBER TERM, 1995
\par 
\par No. 95-572
\par 
\par M. REX LUFT AND JANICE LUFT, PETITIONERS
\par 
\par v.
\par 
\par FARMERS HOME ADMINISTRATION
\par AND CENTURY BANK STERLING
\par                 
\par ON PETITION FOR A WRIT OF CERTIORARI TO
\par THE UNITED STATES COURT OF APPEALS
\par     FOR THE TENTH CIRCUIT
\par 
\par BRIEF FOR THE FEDERAL RESPONDENT
\par IN OPPOSITION
\par 
\par OPINIONS BELOW
\par 
\par The orders of the court of appeals (Pet. App. 10a-
\par 11a) and district court (Pet. App. 12a-15a) are un-
\par reported.
\par 
\par        JURISDICTION
\par 
\par The judgment of the court of appeals was issued on
\par April 26, 1995. A petition for rehearing was denied on
\par June 14,1995. Pet. App. 9a. The petition for a writ of
\par certiorari was filed on September 12, 1995.  The
\par jurisdiction of this Court is invoked under 28 U.S.C.
\par 1254(1).
\par 
\par (1)
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par 2
\par 
\par        STATEMENT
\par 
\par 1. Petitioners owned a farm in Sterling, Colorado,
\par which served as collateral for several loans from two
\par banks. The Farm Credit Bank of Wichita (Farm
\par Credit Bank)l held a first deed of trust on the farm,
\par and Century Bank Sterling (Century Bank)2 held a
\par second deed of trust with a right of redemption. The
\par Century Bank loans were guaranteed by the Farmers
\par Home Administration (FmHA). Pet. 2. When peti-
\par tioners defaulted on the first loan, Farm Credit Bank
\par acquired the farm at a foreclosure sale.  Century
\par Bank then exercised its right of redemption and gave
\par petitioners the opportunity to pay off their out-
\par standing loans.  Petitioners were unable to do
\par so, however, and Century Bank began eviction pro-
\par ceedings as a prelude to sale of the farm. Pet. App.
\par 13a. Petitioners then filed the instant suit in state
\par court against Century Bank and the FmHA, alleging
\par negligence, breach of contract, fraud, and breach of
\par the covenant of good faith and fair dealing. Peti-
\par tioners' claims were based on their asserted right
\par under the Agricultural Credit Act of 1987, Pub. L. No.
\par 100-233, 100 Stat. 1568, to restructure the Century
\par Bank loans. Pet. App. 12a-13a. Petitioners also
\par alleged a "taking of property without due process of
\par law in contravention of the Fifth Amendment.." Id. at
\par 14a. In addition to money damages, they sought to
\par void the sale of their farm and to compel the FmHA to
\par 
\par ___________________(footnotes)
\par          
\par 1 The petition refers to this bank as the "Federal Land
\par Bank of Wichita" (Pet. 2), while the district court order refers
\par to it as the Farm Credit Bank (Pet. App. 13a).
\par 
\par 2 Century Bank is now known as Key Bank of Colorado,
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par 3
\par 
\par offer them the opportunist y to restructure their loans.
\par Id. at 13a. The FmHA removed the action to federal
\par district court. Id. at 12a.
\par 2. Both the FmHA and Century Bank moved to
\par dismiss. The district court granted the motions, con-
\par cluding that, under Griffin v. Federal Land Bank,
\par 902 F.2d 22 (10th Cir. 1990), petitioners had no private
\par right of action to enforce the Agricultural Credit Act.
\par Pet. App. 13a. The court also dismissed the takings
\par claim pursuant to Fed. R, Civ. P. 12(b)(6). Pet. App.
\par 14a. 3. The court of appeals affirmed. Pet. App. 10a-11a.
\par Relying on Griffin and on Zajac v. Federal Land
\par Bank, 909 F.2d 1181 (8th Cir. 1990), the court held
\par that there is no private right of action under the
\par Agricultural Credit Act and that "[t]he exclusive
\par remedy for a violation of the borrower's rights under
\par the Act is administrative review." Pet. App. 11a.
\par 
\par         ARGUMENT
\par 
\par Petitioners have no entitlement under the Agri-
\par cultural Credit Act to restructure the FmHA-
\par guaranteed loans obtained from Century Bank.
\par Although two different provisions of the Act require
\par that borrowers be given the opportunity in certain
\par circumstances to restructure their loans, neither
\par provision is applicable to the loans at issue here. The
\par judgment of the court of appeals is therefore correct,
\par and further review is not warranted.
\par 1. a. Under one provision of the Agricultural
\par Credit Act, which amended the Farm Credit Act of
\par 1971, "qualified lender[s]" within the Farm Credit
\par System (see 12 U.S.C. 2001, 2002) are prohibited from
\par foreclosing on a "distressed loan before the lender has
\par completed any pending consideration of the loan for
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par 4
\par 
\par restructuring." 12 U.S.C. 2202a(b)(3); see 12 U.S.C.
\par 2202a(a)(6) (defining "qualified Tender"). "For at least
\par three reasons, that provision affords no help to
\par petitioners here. First, Century Bank is not a part of
\par the Farm Credit System, 3. and its loans were there-
\par fore not subject to the restructuring requirements of
\par 12 U.S.C. 2202a(b)(3). Second, even with respect to
\par loans that are subject to Section 2202a(b) (3)'s require-
\par ments, the courts of appeals have uniformly held, and
\par petitioners concede (Pet. 3), that there is no private
\par right of action in court. See. Grant v. Farm Credit
\par Bank, 8 F.3d 295, 296 (5th Cir. 1993); Saltzman v.
\par Farm Credit Servs. of Mid-America, ACA, 950 F.2d
\par 466,469 (7th Cir. 1991); Zajac v. Federal Land Bank,
\par 909 F.2d 1181,1183 (8th Cir. 1990); Griffin v. Federal
\par Land Bank, 902 F.2d 22,24 (10th Cir. 1990); Harper v.
\par Federal Land Bank, 878 F.2d 1172, 1177 (9th Cir.
\par 1989), cert. denied, 493 U.S. 1057 (1990). The remedy
\par for noncompliance by a farm credit bank lies instead
\par with the administrative review process. Zajac, 909
\par F.2d at 1183. Finally, the FmHA has no admini-
\par strative responsibility for the Farm Credit System,
\par which is instead subject to regulation by the Farm
\par Credit Administration.  12 U.S.C. 2002(a). Section
\par 
\par ___________________(footnotes)
\par              
\par 3 A financial institution that belongs to the Farm Credit
\par System is readily identified by its name, which must include a
\par statutory or regulatory designation or acronym, such as
\par "Farm Credit Bank," " Production Credit Association; "PCA,"
\par or "Federal Land Credit Association." See "Policy Statement
\par Concerning Official Names of Farm Credit System Institu-
\par tions," 59 Fed. Reg. 6%,537 (1994); see also 53 Fed. Reg. 50,387-
\par 50,388 (1988).
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par 5
\par 
\par 2202a therefore provides no basis for petitioners'
\par claims against either Century Bank or the FmHA. 4.
\par b. A separate restructuring obligation is created
\par by other provisions of the Agricultural Credit Act-
\par provisions that amended the Consolidated Farm and
\par Rural Development Act, under which the FmHA
\par administers its farm loan program. Those provisions,
\par however, are also inapplicable to the present case.
\par The Act directs the Secretary of Agriculture to
\par "modify delinquent farmer program loans made or in-
\par sured [by the FmHA] or purchased from the lender."
\par 7 U.S.C. 2001(a).  "[F]armer program loans" are
\par identified in 7 U.S.C. 1991(a) (10), and a "borrower"
\par eligible for restructuring under Section 2001 is "any
\par farm borrower who has outstanding obligations to the
\par Secretary under any farmer program loan." 7 U.S.C.
\par 199103)(1) (emphasis added). See 7 C.F.R. 1980.106(b)
\par          
\par ___________________(footnotes)
\par 
\par 4 The loan that petitioners obtained from the Farm Credit
\par Bank was subject to restructuring under Section 2202a(b)(3)
\par upon their request.  There is no indication, however, that
\par petitioners applied to the Farm Credit Bank for restructuring,
\par nor is the Farm Credit Bank a party to the instant action. The
\par statute does not, in any event, afford a private right of action
\par for breach of Section 2202a(b) (3)'s requirements, see page 4,
\par supra, and the FmHA had no involvement in the Farm Credit
\par Bank's loan to petitioners. Petitioners rely (Pet. 4-6) on various
\par state and federal court decisions holding that a borrower may
\par raise as an equitable defense to a foreclosure action the bank's
\par failure to comply with the requirements of the Agricultural
\par Credit Act. Those decisions are inapposite here. Whatever de-
\par fenses petitioners might have raised in the earlier foreclosure
\par action filed by Farm Credit Bank, the present case does not
\par involve the propriety of that foreclosure.  Petitioners seek
\par instead to use the Act as the basis for suit against a bank that is
\par not subject to Section 2202a(b) (3)'s requirements, based on that
\par bank's exercise of its right of redemption under a second deed
\par of trust.
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par 6
\par 
\par (definition of "borrower" under FmHA regulations],
\par 1980.124- (loan restructuring provisions apply to
\par FmHA "borrowers").5
\par A debtor on an FmHA-guaranteed loan is not a
\par "borrower" of the FmHA for purposes of restructur-
\par ing under 7 U.S.C. 2001. First Nat'l Bank V. Pearson,
\par 455 N.W. 2d 858, 861 (S.D. 1990). Such loans are made
\par by private lending institutions, with the FmHA's
\par guaranty that it will cover up to 90% of the private
\par lender's loss after a foreclosure. Ibid. See 7 C.F.R.
\par 1980.6(a) ('guaranteed loan" is "made and serviced by
\par a lender"). Cf. Parker v. Department of Agric., 879
\par F.2d 1362, 1364-1365 (6th Cir. 1989) (in FmHA-guaran-
\par teed loan, borrower has contractual relationship with
\par private lender, not with FmHA).
\par By petitioners' own description, their Century
\par Bank loans were "guaranteed" by the FmHA. Pet. 2;
\par see 7 C.F.R. 1980.6(a). Accordingly, petitioners were
\par not FmHA "borrowers," and they had no right under
\par 7 U.S.C. 2001 to restructure those loans. See 54 Fed.
\par Reg. 1534, 1535 (1989) (in a guaranteed loan, "[t]he
\par borrower is still a borrower of the lender unless the
\par lender assigns its portion of the loan to FmHA, and
\par only then would the borrower be entitled to FmHA's
\par insured servicing_ options").  Petitioners therefore
\par failed to state a claim upon `which relief could have
\par been granted, and their complaint was properly
\par dismissed.
\par 2. Petitioners'  argument that the district court
\par and court of appeals should have transferred their
\par 
\par ___________________(footnotes)                
\par          
\par 5 For examples of cases in which FmHA borrowers sought
\par to restructure their loans, see Kinion v. United States, 8 F.3d
\par 639 (8th Cir. 1993); Lee v. Yeutter, 917 F.2d 1104 (8th Cir. 1990);
\par United States v. Selenske, 882 F.2d 220 (7th Cir. 1989).
\par 
\par ---------------------------------------- Page Break ----------------------------------------
\par 
\par 7
\par 
\par action to the Court of Federal Claims similarly does
\par not warrant this Court's review. Under 28 U.S.C.
\par 1631, a court can transfer a case over which it lacks
\par jurisdiction to a court where the action might have
\par been filed, if the court finds that the transfer "is in
\par the interest of justice." Because neither the FmHA
\par nor Century Bank was subject to any legal obligation
\par to restructure the loans at issue here, there is no
\par basis for petitioners' suggestion that "the interest of
\par justice" would have warranted (let alone required) the
\par lower courts' exercise of discretion to transfer this
\par case to any other court.
\par 
\par        CONCLUSION
\par 
\par The petition for a writ of certiorari should be
\par denied.
\par 
\par Respectfully submitted.
\par 
\par DREW S. DAYS, III
\par Solicitor General
\par 
\par FRANK W. HUNGER
\par Assistant Attorney General
\par 
\par BARBARA C. BIDDLE
\par CHRISTINE N. KOHL
\par Attorneys
\par 
\par DECEMBER 1995
\par 
\par 
\par 
\par }