Farm Credit Bank of Texas v. Farish

Citations: 32 F.3d 184; 1994 WL 468241Docket: 94-40176, 94-40424

Court: Court of Appeals for the Fifth Circuit; September 15, 1994; Federal Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The United States Court of Appeals for the Fifth Circuit affirmed the district court's rulings in two consolidated appeals involving André C. Farish and the Farm Credit Bank of Texas (FCBT). In the first case, FCBT sued Farish for repayment of a defaulted loan originally taken from the Federal Land Bank of New Orleans (FLB) in 1980, which required Farish to purchase FLB stock as a loan condition. Farish defaulted in 1986, prompting the FLB to accelerate the loan and initiate foreclosure proceedings. Farish sought loan restructuring, which the FLB denied, leading to the cancellation of his stock and its application to his loan balance. 

Farish's request for review of the stock cancellation was submitted late, and after FLB's foreclosure efforts, a state court temporarily enjoined the FLB from proceeding due to inadequate time provided for review under the Farm Credit Act. The FLB later assigned its rights to FCBT, which subsequently attempted to restructure the loan again, but Farish failed to respond to the new applications. The court concluded that the district court's rulings in favor of FCBT were justified based on the procedural history and actions taken by both parties.

In January 1992, the FCBT filed a diversity suit to collect an outstanding loan balance assigned to it by the FLB. Farish admitted the factual allegations but contended that the federal district court should abstain from the case, arguing that the Louisiana Deficiency Judgment Act (LDJA) applies, which prohibits creditors from obtaining deficiency judgments after applying cancelled stock to a loan balance. Under the LDJA, a creditor selling a debtor's property in an executory proceeding cannot pursue further judgments against the debtor, effectively accepting the sale as full payment of the debt.

Farish raised two estoppel arguments: first, that FCBT should be barred from collecting due to FLB’s noncompliance with borrowers' rights under the Farm Credit Act; second, that FCBT should be estopped based on its own failure to comply with the Act. After a bench trial, the district court ruled in favor of FCBT in January 1994, determining that the LDJA did not apply since FLB acted under federal law, which did not extinguish Farish's obligation. The court also reasoned that the state court's ruling on FLB’s collection efforts did not impede FCBT's collection actions. Farish’s argument regarding FCBT’s noncompliance with the Farm Credit Act was dismissed for lack of specificity.

In a related case (No. 94-40424), filed by Farish in October 1993 for damages and injunctive relief under the Agricultural Credit Act, the FCBT successfully removed the case to federal court. The district court stayed Farish's suit until the outcome of FCBT's foreclosure suit was known. After ruling in favor of FCBT in the foreclosure case, the court denied Farish's motion to remand and granted summary judgment, concluding that the Agricultural Credit Act does not grant a private right of action to borrowers. Farish appeals both rulings from the foreclosure case and the summary judgment in the subsequent suit, focusing on the applicability of the LDJA and estoppel issues related to FLB's collection efforts.

A. Farish contends that the district court wrongly determined the applicability of the Farm Credit Act to the dispute, asserting instead that the Louisiana Debt Judgment Act (LDJA) should govern the FCBT's claim. He argues that, since the case involves state law, the district court should have abstained from adjudicating it. However, the court correctly ruled that the LDJA does not apply to the FCBT's suit, as established by Louisiana Supreme Court precedent, which limits the LDJA's scope to instances of judicial sales following executory proceedings. The LDJA does not exempt Farish from his obligations under the loan note because the stock involved was cancelled under the Farm Credit Act, which primarily governs the transaction. This Act mandates that borrowers purchase a specified amount of stock in the Federal Land Bank, with defined mechanics for the stock's cancellation and application to outstanding loans in case of default. The Act allows for stock cancellation without necessitating state foreclosure proceedings, rendering the lack of stock appraisal irrelevant, as the stock’s value is predetermined at $5 per share. Consequently, the LDJA's potential applicability would be preempted by the Farm Credit Act, as federal law supersedes state law when it comprehensively regulates the matter and when state law obstructs federal objectives.

The Farm Credit Act governs the issuance and cancellation of FLB stock, and due to conflicts with the LDJA that hinder FLB stock cancellation, federal law preempts state law. Consequently, the district court's ruling that the LDJA is inapplicable is upheld, affirming that Farish's obligations under the note remain intact. Farish's claim that a state court injunction against FLB collection efforts bars FCBT from collecting on the note misinterprets the injunction's scope, which only applied to the FLB's collection actions at the time. The state court specified that the FLB had not adhered to borrower rights provisions of the Farm Credit Act and could only proceed with foreclosure after compliance. Although FCBT, as the FLB's successor, attempted to comply and grant Farish additional time, he failed to respond, thus affirming that FCBT's collection efforts are not barred by the state court's injunction.

Farish also appeals two issues regarding his suit against FCBT: the denial of his motion to remand and the grant of summary judgment for FCBT. Under 28 U.S.C. § 1446(b), the period for removal is a year from the case's commencement. The district court correctly identified that Farish's October 1993 filing in state court was the relevant date for assessing removal, as a new action was required following the FLB's assignment of rights to FCBT. Therefore, the district court's denial of the remand motion is affirmed. Regarding the summary judgment, the court ruled that the Agricultural Credit Act does not allow borrowers to enforce its provisions through lawsuits, aligning with other circuit decisions that limit borrowers' remedies to those within the Act. The district court's summary judgment for FCBT is thus also affirmed. Overall, the rulings in both cases are upheld.