                                                                                                                           Opinions of the United
1997 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-2-1997

Wagner v. Pennwest Farm Credit
Precedential or Non-Precedential:

Docket 96-3197,96-3198,96-3199




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Recommended Citation
"Wagner v. Pennwest Farm Credit" (1997). 1997 Decisions. Paper 74.
http://digitalcommons.law.villanova.edu/thirdcircuit_1997/74


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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT



                    No. 96-3197


                 DEWEY A. WAGNER,
                                 Appellant
                        v.

     PENNWEST FARM CREDIT, ACA; A CORPORATION



                    No. 96-3198


                 DEWEY A. WAGNER,
                                 Appellant
                        v.

     PENNWEST FARM CREDIT, ACA; A CORPORATION;
   GARY J. GAERTNER, Trustee; JAMES L. WITHERUP;
                  KATHY L. WEAVER



                    No. 96-3199


                 DEWEY A. WAGNER,
                                 Appellant
                        v.

     PENNWEST FARM CREDIT, ACA; A CORPORATION


   On Appeal from the United States District Court
      for the Western District of Pennsylvania
(D.C. Nos. 95-cv-00006E, 95-cv-00007E, 95-cv-00008E)



  Submitted Pursuant to Third Circuit LAR 34.1(a)
                   March 24, 1997

         Before: SLOVITER, Chief Judge,
      STAPLETON and ALDISERT, Circuit Judges

          (Opinion filed       April 2, 1997)



                           1
Stephen H. Hutzelman
Shapira, Hutzelman, Berlin & May
Erie, PA l6507

          Attorney for Appellant


Louis J. Stack
Shafer, Swick, Bailey, Irwin,
  Stack & Millin
Meadville, PA 16335

          Attorney for Appellee
          Pennwest Farm Credit

Henry W. Gent, III
Gent, Gent & Snyder
Franklin, PA l6323

          Attorney for Appellees
          James L. Witherup and
          Kathy L. Weaver

                      OPINION OF THE COURT




                                  2
SLOVITER, Chief Judge.

           This appeal comes before us on the contention of

appellant Dewey A. Wagner that the bankruptcy court, in an order

affirmed by the district court, erred in holding that debtor

Wagner's statutory right of first refusal under the Agricultural

Credit Act (“ACA” or "Act"), 12 U.S.C. § 2001--2279aa-14 (1988),

was not property of the bankruptcy estate.   In order to decide

that issue we confront the underlying question whether there is

an implied private right of action under the Agricultural Credit

Act, an issue this court has not yet decided.
                                 I.

           Most of the facts in this case relevant to that issue

are not in dispute.   On April 4, 1980, Wagner signed a loan

agreement with PennWest Farm Credit, ACA, ("PennWest"), secured

by a mortgage on a nineteen acre piece of property in Venango

County, Pennsylvania.    PennWest is a corporation organized and

existing under the federal Farm Credit System.    See 12 U.S.C. §

2091.   After Wagner defaulted on the payments due, PennWest

obtained judgment against Wagner in the Venango County Court of

Common Pleas and took title to the property following a sheriff's

sale.

           The ACA requires an institution of the Farm Credit

System that acquires agricultural real estate as a result of a

loan foreclosure to provide the previous owner a right of first

refusal.   See 12 U.S.C. § 2219a(a).   This is effected by

requiring an institution that elects to sell acquired real estate

to notify the previous owner within fifteen days of such election


                                 3
of that owner's right to purchase the property at its fair market

value as established by an accredited appraiser or to offer to

purchase it at a lesser price.    See 12 U.S.C. § 2219a(b)(1).    If

the previous owner offers to purchase the property at the

appraised value within thirty days after receiving the notice of

first refusal, the Act requires that the institution "shall,

within 15 days after the receipt of such offer, accept such offer

and sell the property to the previous owner."    12 U.S.C. §

2219a(b)(3).   If the previous owner's offer is for less than the

appraised value, the institution must notify the previous owner

within fifteen days whether it is accepting or rejecting that

bid.   See 12 U.S.C. § 2219a(b)(4).

           PennWest’s certified appraiser valued the property at

$65,000.   By letter dated November 16, 1993, PennWest offered to

sell back the property to Wagner at $65,000.     The terms set forth

in PennWest’s letter were cash sale, with the sale to be closed

within fifteen days of PennWest’s receipt of Wagner’s offer.

Wagner did submit an offer to purchase the property at the

appraised price, but he did not close within the fifteen days nor

within the two deadline extensions ending on March 3, 1994.

           PennWest then began a competitive bidding process, and

advertised in several newspapers that it was accepting a minimum

$65,000 bid on the property.     There were approximately fifty

inquirers and information packets were sent to each of them.

Because there were no bids at that price, PennWest eliminated the

minimum bid requirement entirely and sent a second bid packet to

the same fifty inquirers, requesting them to submit bids by May


                                  4
4, 1994.    The highest bid received was from James Witherup and

Kathy Weaver (“the Buyers”) in the amount of $44,000.

            By letter of May 9, 1994, PennWest advised Wagner that

it had accepted a bid for $44,000 and that he had a statutory

right of first refusal under the same terms and conditions, which

included a cash sale to be closed within fifteen days of receipt

of the offer.    Wagner exercised his right of first refusal and

made a timely offer to purchase the property for $44,000.      The

closing date was fixed for June 29, 1994.    However, Wagner did

not tender the sales price on that day.    Upon inquiry, Jeffrey

Trotten, Wagner’s agent, told PennWest's representative that

Wagner had withdrawn his application for financing the day

before.

            Instead, Wagner followed a different course.   On June

29, the day fixed for the closing, Wagner filed a quiet title

action in Venango County which prevented PennWest from selling

the property to the Buyers.    Then, on July 12, 1994 Wagner filed

a petition under Chapter 12 of the Bankruptcy Code.     Wagner also

filed a determination of property rights in the bankruptcy court,

stating a claim almost identical to that in his quiet title

action.    His quiet title action was removed to the bankruptcy

court as an adversary proceeding.

            On September 14, 1994, a hearing was held in the

bankruptcy court in which three matters were raised:    the removed

quiet title action, the action for determination of property

rights, and PennWest's request for relief from the automatic

stay.   The bankruptcy court found that Wagner had been adequately


                                 5
informed by PennWest of his rights of first refusal and that

Wagner had failed to exercise those rights in a timely manner.

Bankruptcy Ct. Op. (Nov. 23, 1994).    Since Wagner's right of

first refusal had expired, the bankruptcy court concluded that

Wagner’s property was no longer part of the bankruptcy estate.

Id.

           Wagner appealed this order to the district court,

arguing that his right of first refusal had not expired because

PennWest failed to follow required statutory procedures.

Specifically, Wagner argued that PennWest violated the ACA by

requiring that the closing occur within fifteen days and by

failing to provide Wagner with the terms and conditions of the

competitive bidding process.   The district court affirmed,

holding that Wagner had failed to close within a timely manner so

lost his right of first refusal.     See Dist. Ct. Op. at 19 (Feb.

29, 1996).   Wagner appeals to this court.
                               II.

          Wagner recognizes that the initial question on this

appeal is whether the right of first refusal provided under the

ACA is property of the bankruptcy estate.     See Appellant's brief
at 15.   Subsumed in Wagner's argument that PennWest failed to

comply with the mandatory notification to him as required by 12

U.S.C. § 2219a(d)(1) is the implicit assumption that Wagner would

have a cause of action for that violation.     The district court

noted that there is “an emerging line of authority which holds

that there is no express or implied private right of action under

the Agricultural Credit Act of 1987," Dist. Ct. Op. at 9 n.2, but


                                6
did not decide the issue since neither party had raised it.

Instead, the district court turned to the merits of Wagner's

claim.   After affirming the bankruptcy court's decision that

PennWest's use of an in-house appraiser was permissible, the

district court reviewed seriatim each of Wagner's claims as to

PennWest's alleged failure to comply with the ACA and rejected

them, holding that Wagner's right of first refusal expired prior

to his bankruptcy filing.   Id. at 9-19.

           PennWest now argues on appeal that the bankruptcy and

district courts should have dismissed Wagner’s actions for

failure to state a claim since the ACA provides no private right

of action.   We are cognizant that PennWest did not raise this

issue in the district court.    While we will ordinarily not

consider issues raised for the first time on appeal, we have

recognized that in exceptional circumstances we may consider such

issues if it would be just under the circumstances.    O’Neill v.

United States, 411 F.2d 139, 143-44 (3d Cir. 1969).    In this

case, the existence (or, more accurately, the non-existence) of a

private right of action under the ACA is so fundamental to the

claims alleged in the district court that we cannot address the

issues raised by the parties without first deciding whether there

is a private right of action.    Furthermore, an appellate court

may uphold a judgment on any proper theory, even if not raised by

the parties first in the district court, as long as there is no

prejudice to the other party.   See Altman v. Altman, 653 F.2d
755, 758 (citing Jurinko v. Edwin L Weingard Co., 477 F.2d 1038
(3d Cir.), vacated on other grounds, 414 U.S. 970 (1973)).



                                 7
          The issue of whether there is such a private right of

action has been considered by at least seven courts of appeals.

They have uniformly held that there is no private right of action

under the ACA or its predecessor, The Farm Credit Act of 1971.

See Grant v. Farm Credit Bank of Texas, 8 F.3d 295, 296 (5th Cir.

1993); Saltzman v. Farm Credit Services of Mid-America, ACA, 950

F.2d 466, 467-69 (7th Cir. 1991); Zajac v. Federal Land Bank of

St. Paul, 909 F.2d 1181, 1182-83 (8th Cir. 1990)(en banc);

Griffin v. Federal Land Bank of Wichita, 902 F.2d 22, 24 (10th

Cir. 1990); Harper v. Federal Land Bank of Spokane, 878 F.2d

1172, 1177 (9th Cir. 1989), cert. denied, 498 U.S. 1057 (1990);

Bowling v. Block, 785 F.2d 556, 557 (6th Cir.)(holding that the

Farm Credit Act of 1971, the precursor to the ACA, has no private

right of action), cert. denied sub nom., Bower v. Lyng, 479 U.S.

829 (1986); Smith v. Russellville Production Credit Ass’n, 777

F.2d 1544 (11th Cir. 1985); cf. Jarrett Ranches, Inc. v. Farm

Credit Bank of Omaha, 128 B.R. 263, 264-65 (N.D.S.D. 1990)

(specifically finding no private right of action afforded to

farmer/borrowers under the ACA to enforce their rights of first

refusal); Rennick Brothers, Inc. v. Federal Land Bank Ass’n of
Dodge City, 721 F. Supp. 1198, 1200 (D.Kan. 1989); Neth v.

Federal Land Bank of Jackson, 717 F. Supp. 1478, 1479 (S.D. Ala.

1988).

          In light of such an array of precedent, we would

require a compelling basis to hold otherwise before effecting a

circuit split.   Nonetheless, we examine the issue independently

and find no reason to disagree with the other courts.


                                8
            The Supreme Court's decision in Cort v. Ash, 422 U.S.

66, 78 (1975), set forth four factors for determining whether a

federal statute provides a private cause of action.      “First, is

the plaintiff 'one of the class for whose especial benefit the

statute was enacted' . . . ?   Second, is there any indication of

legislative intent, explicit or implicit, either to create such a

remedy or to deny one?   Third, is it consistent with the

underlying purposes of the legislative scheme to imply such a

remedy for the plaintiff?   And finally, is the cause of action

one traditionally relegated to state law . . . ?”    Id. (citations

omitted).   In a later opinion, the Court explained that the

"focal point" for finding a private right of action is

congressional intent in enacting the statute.   Thompson v.

Thompson, 484 U.S. 174, 179 (1988).    The Court stated, “unless

this congressional intent can be inferred from the language of

the statute, the statutory structure, or some other source, the

essential predicate for implication of a private remedy simply

does not exist.”    Id. (internal quotations omitted).

            In applying this mode of analysis to the Agricultural

Credit Act, the most persuasive indication of legislative intent

is Congress's decision to delete a proposed private right of

action provision from the final version of the Act.      In Harper,
one of the earliest appellate decisions under the ACA, the Court

of Appeals for the Ninth Circuit reviewed the legislative history

of the ACA.   The court noted that the House version of the bill

contained an express private right of action, that some Senators

also sought to include such a provision and that ultimately


                                 9
"[t]he Senate opposed the House provision and it was deleted from

the final 1987 Act.     H.R. 3030, 100th Cong., 1st Sess., 133 Cong.

Rec. 11820 (December 18, 1987)."        878 F.2d at 1175.   The Ninth

Circuit recognized that there were some ambiguous statements on

the Senate floor that suggested that some legislators may have

been under the impression that such a right of action already

existed, but the court stated that it was clear "that there

existed no implied private right of action under the various

predecessor statutes or regulations in force prior to the 1987

Act."   Id.    The court cited the Supreme Court's statement in

Midlantic Nat'l. Bank v. New Jersey Dept. of Envtl. Protection,

474 U.S. 494, 501 (1986), that "[t]he normal rule of statutory

construction is that if Congress intends for legislation to

change the interpretation of a judicially created concept, it

makes that intent specific."     Harper, 878 F.2d at 1176.

              The decision of the Court of Appeals for the Seventh

Circuit in Saltzman, 950 F.2d at 468, also focused on the

deletion of the express provision for a private right of action.

 The court noted that this deletion took place “against the

backdrop of numerous court decisions (interpreting the Farm

Credit Act of 1971) concluding no private right of action was

implied,” and viewed this as bolstering the conclusion that

Congress did not intend an implied right of action under the ACA.

Id.
              The issue was also the subject of an en banc decision

in the Eighth Circuit where the court held, over a vigorous

dissent, that there was no private right of action.         Zajac, 909


                                   10
F.2d at 1182-83.   The court noted that Congress enacted a

comprehensive legislative scheme which, by the absence of any

specific provisions for a private right of action, militates

against finding a private remedy.     Indeed, as the Zajac court

pointed out, it would be inappropriate to infer a private right

of action in the area of foreclosure, which is an area

traditionally controlled by state law.    See id.

           We are aware of only one district court decision that

has not been overturned holding that the ACA establishes a

private right of action.   See Leckband v. Naylor, 715 F. Supp.

1451, 1453 (D.Minn. 1988).   However, the Eighth Circuit's

decision in Zajac came later and thus is dispositive.    In any

event, the reasoning in Leckband has been rejected by the

numerous appellate decisions that followed.

           We can find no persuasive basis for rejecting the

reasoned analysis of the numerous courts that have addressed this

issue.   We join them in holding that the Agricultural Credit Act

does not contain an implied private right of action.    It follows

that Wagner had no asset in the right of first refusal when the

matter came before the bankruptcy court.
                               III.

           For the reasons set forth we do not address the merits

of Wagner's claim that PennWest did not comply with the statutory

right of first refusal and we will affirm the judgment of the

district court, albeit for reasons other than those on which it

decided.




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