Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-05020/USCOURTS-caDC-98-05020-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 9, 1998 Decided January 19, 1999

No. 98-5020

Independent Bankers Association of America and

American Bankers Association,

Appellants

v.

Farm Credit Administration,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 97cv00695)

Michael F. Crotty argued the cause for appellants. With

him on the briefs were John J. Gill and Leonard J. Rubin.

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Michael S. Raab, Attorney, U.S. Department of Justice,

argued the cause for appellee. With him on the brief were

Frank W. Hunger, Assistant Attorney General, Wilma A.

Lewis, U.S. Attorney, and Mark B. Stern, Attorney, U.S.

Department of Justice.

Arvid E. Roach, II, argued the cause and filed the brief for

amicus curiae Farm Credit Council.

Before: Silberman, Rogers and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Since 1916, the federal government

has provided assistance to farmers in securing agricultural

loans. With the enactment of the Federal Farm Loan Act,

ch. 245, 39 Stat. 360 (1916), and the Farm Credit Act of 1933,

ch. 98, 48 Stat. 257 (1933), Congress established a system of

banks and cooperative lending associations, known as the

Farm Credit System, designed to provide credit to agricultural producers and farm-related businesses. In 1971, Congress

revised the System in the Farm Credit Act of 1971, Pub. L.

No. 92-181, 85 Stat. 583 (1971) (codified as amended at 12

U.S.C. s 2001, et seq.). At issue here are the regulations

promulgated by the Farm Credit Administration on January

30, 1997, to expand the availability of credit to farmers and

certain businesses. See 62 Fed. Reg. 4429 (1997) (codified at

12 C.F.R. pts. 613-615, 618-620, and 626). Several commercial banks opposed the revised regulations on the ground that

they exceeded the scope of the agency's authority under the

statute. When the agency rejected these contentions, two

national trade groups, appellants Independent Bankers Association and American Bankers Association, filed suit. Objecting to the expansion of Farm Credit System loan availability

to farm-related service businesses, processing and marketing

operations, legal entities in general, and rural home owners,

appellants argued that only Congress can authorize these

expansions of credit to individuals and entities that previously

had been barred by the regulations from receiving System

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loans.1 The district court granted summary judgment to the

agency and denied appellants' cross-motion for summary

judgment. See Independent Bankers Ass'n of Am. v. Farm

Credit Admin., 986 F. Supp. 633 (D.D.C. 1997). We hold

that, with two exceptions, the revised regulations are consistent with the statute. The two exceptions are the regulations

allowing Farm Credit Banks to extend loans to farm-related

businesses for activities beyond those listed in s 2019(c)(1),

and rural housing loans to non-owner-occupied residences.

Accordingly, we affirm in part and reverse in part.

I.

The Farm Credit Administration regulates a system of

banks and cooperative lending associations designed to improve "the income and well-being of American farmers and

ranchers by furnishing sound, adequate, and constructive

credit and closely related services to them, their cooperatives,

and to selected farm-related businesses necessary for efficient

farm operations." 12 U.S.C. s 2001(a) (1994). Congress

sought to assure that "American farmers have available a

dependable supply of credit on terms tailored to their special

needs and capabilities and adjusted regularly to changing

economic and agricultural conditions." S. Rep. No. 92-307, at

7 (1971). The Farm Credit Loan System currently includes,

according to the agency's brief, over 200 cooperative lending

associations and eight banks--six Farm Credit Banks, one

bank for cooperatives, and one agricultural credit bank. See

generally 12 U.S.C. s 2002(a) (1994).

On September 11, 1995, the agency announced a proposed

revision to its regulations that would modify eligibility requirements and the scope of permissible lending, with the

intent "to eliminate unnecessary regulatory restrictions and

__________

1 In the district court, appellants also objected to a new regulation regarding System lending to service cooperatives. The district

court accepted the agency's representation that this modification

did not affect any substantive change to the old regulation and

found that "[p]laintiffs at this time have no basis to challenge the

agency's new regulation." Independent Bankers Ass'n of Am. v.

Farm Credit Admin., 986 F. Supp. 633, 643 (D.D.C. 1997). Appellants do not challenge this ruling on appeal.

implement statutory changes" from the early 1990s. See 60

Fed. Reg. 47103, 47103 (1995). This effort included removing

regulatory restrictions on lending that the agency concluded

were not required by the statute. In promulgating its final

rule on January 30, 1997, see 62 Fed. Reg. 4429 (1997), the

agency rejected the argument of several commercial banks

that the statute and its legislative history mandated that the

Farm Credit System be "a lender of last resort serving only

those rural credit markets that have been abandoned by

other lenders." Id. at 4434. The agency expanded who

qualified for System loans and the circumstances under which

the System would make loans available. Appellants object to

six of these changes, which took effect on March 11, 1997.

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As to farm-related businesses, the agency adopted a revised version of 12 C.F.R. s 613.3020(a), which provides that

"[a]n individual or legal entity that furnishes farm-related

services to farmers and ranchers that are directly related to

their agricultural production is eligible to borrow from a

Farm Credit bank or association that operates under titles I

or II of the Act."2 The new regulations removed the prior

requirement that farm-related businesses were eligible for

lending only if they engaged in providing "custom-type farmrelated services directly related" to farmers' "on-farm operating needs." 12 C.F.R. s 613.3050(a) (repealed 1997).3 These

services are defined as "tasks that farmers and ranchers can

perform for themselves, but instead hire outside contractors

to perform." 62 Fed. Reg. at 4438. The agency explained

the change by noting that the statute did not mention the

term "custom-type services" and that a reasonable interpretation of the term "farm-related services" should include tech-

__________

2 Title I governs federal land banks and federal land bank

associations, while Title II governs federal intermediate credit

banks and production credit associations. See Farm Credit Act of

1971, 85 Stat. at 583. Farm Credit Banks are banks established by

a merger of a federal intermediate credit bank and a federal land

bank, see 12 U.S.C. s 2011 (1994), and are governed by 12 U.S.C.

ss 2011-2023.

3 All further citations to farm credit regulations are in Title 12

of the Code of Federal Regulations, unless otherwise indicated.

nologically advanced services that directly relate to agricultural production but which farmers could not provide for

themselves. Id.

The agency also expanded the type of farm-related business activities that qualify for lending. Under the old regulation, a farm-related business could receive "long-term real

estate mortgage loans ... for necessary sites, capital structures, equipment, and initial working capital for such services." s 613.3050(c)(1) (repealed 1997). The new regulation, however, permits financing for "[a]ll of the farm-related

business activities" of a business, provided that a majority of

its income arises from furnishing farm-related services.4

s 613.3020(b)(1) (1998).

Finally as to farm-related businesses, the new regulation

removes the former prohibition on lending to commercial

businesses that "purchase farm products from or sell inputs

to farmers or ranchers unless substantially all of such inputs

handled are used incident to the services provided."

s 613.3050 (b)(2) (repealed 1997). The regulations eliminate

this requirement, as s 613.3020 now allows "whole-firm financing" of businesses that derive a majority of their income

from providing farm-related services. See 62 Fed. Reg. at

4438.

As for processing and marketing loans, the agency loosened

the ownership requirements for loan applicants. Previously,

the agency had required that "bona fide farmers"5 and other

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agricultural producers own 100 percent of a processing and

marketing operation if the operation and its owners produced

__________

4 If the borrower derives 50 percent or less of its income from

such services, however, the regulation limits the approval of loans to

"farm-related services...directly related to the agricultural production of farmers and ranchers." s 613.3020(b)(2) (1998).

5 The regulation defines the term "bona fide farmer" as "a

person owning agricultural land or engaged in the production of

agricultural products, including aquatic products under controlled

conditions." s 613.3000(a)(1) (1998).

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under 50 percent of the annual "throughput."6

s 613.3045(b)(2)(iii) (repealed 1997); see also 61 Fed. Reg. at

42,105. Under the new regulation, a legal entity engaging in

processing and marketing qualifies for financing so long as

"eligible borrowers under s 613.3000(b) own more than 50

percent of the voting stock" and the entity or its owners

"regularly produce[ ] some portion of the throughput."7

s 613.3010(a)(1)-(2) (1998). The agency explained that this

revision expanded the pool of potential borrowers yet still

reflected a congressional concern that farmers exercise "substantial control" over the borrowing entity--in this case, a

majority interest. 62 Fed. Reg. at 4437.

The agency also changed the ownership requirements for

legal entities in general. Previously, legal entities were eligible for credit only if (1) they were majority owned by

agricultural producers, (2) a majority of their assets related

to agricultural production, or (3) a majority of their income

arose from farming or the harvesting of aquatic products.

s 613.3020(b) (amended 1997). The agency repealed these

restrictions so that "all legal entities ... will now be eligible

for [System] financing on the same basis as other farmers."

62 Fed. Reg. at 4437. The new regulations, however, retain a

prior limitation that restricts credit to farmers "as the emphasis moves away from the full-time bona fide farmer" to

businesses whose focus is "essentially other than farming."

Compare s 613.3005(a) (1998) with s 613.3005(a) (amended

1997). Both new and old regulations state that

[i]t is the objective of each bank and association, except

for banks for cooperatives, to provide full credit, to the

__________

6 "Throughput" is the raw materials used in the processing and

marketing operation. See S. Rep. No. 101-357, at 14-15, 258 (1990),

reprinted in 1990 U.S.C.C.A.N. 4656.

7 Section 613.3000(b) defines an eligible borrower as "a bona

fide farmer or rancher, or producer or harvester of aquatic products."

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extent of creditworthiness, to the full-time bona fide

farmer (one whose primary business and vocation is

farming ...); and conservative credit to less than fulltime farmers for agricultural enterprises, and more restricted credit for other credit requirements as needed to

ensure a sound credit package ... as long as the total

credit results in being primarily an agricultural loan.

s 613.3005 (1998); see also s 613.3005(a) (repealed 1997)

(using almost identical language).

Further, the new regulations expand who qualifies for rural

home loans. Prior to the revisions, the Farm Credit System

provided financing only for those rural residences that were

owner-occupied. s 613.3040(b) (repealed 1997). The old regulation explicitly prohibited loans "to purchase or construct a

rural residence for the express purpose of rental or resale."

s 613.3040(c) (repealed 1997). The new regulations provide

that "[a]ny rural homeowner is eligible to obtain financing on

a rural home," although he or she is only eligible for loans on

"one rural home at any one time." s 613.3030(b) (1998).

Both versions limit these loans to "buying, building, remodeling, improving, repairing," or refinancing rural homes. Compare s 613.3030(c) (1998), with s 613.3040(c) (repealed 1997).

Appellants filed suit in the district court, alleging that the

regulations violated the plain language of the statute as well

as congressional intent. They also asserted that the adoption

of ss 613.3020 (financing for farm-related service businesses),

613.3100 (domestic lending), 613.3010 (financing for processing and marketing operations), 613.3000 (definitions), and

613.3030 (rural home financing) was arbitrary and capricious,

in violation of the Administrative Procedure Act, 5 U.S.C.

s 706(2). The district court granted summary judgment to

the agency, concluding that "[t]he broad, permissive language

of the statute clearly covers the more expansive lending

under the new regulations.... [T]he mere fact that the

agency had not seized upon the full scope of its lending

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authority in the past in no way precludes it now from

reasonably adopting such regulations."8 Independent Bankers, 986 F. Supp. at 640.

II.

This court reviews de novo the district court's grant and

denial of the parties' motions for summary judgment. See

Heller v. Fortis Benefits Ins. Co., 142 F.3d 487, 491-92 (D.C.

Cir.), cert. denied, 119 S. Ct. 337 (1998); Consumer Fed'n of

Am. v. United States Dep't of Health & Human Serv., 83

F.3d 1497, 1501 (D.C. Cir. 1996). In evaluating an agency's

interpretation of a statute it administers, courts apply the

deferential standard articulated in Chevron U.S.A., Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

Under this test, courts must consider

[f]irst, ... whether Congress has directly spoken to the

precise question at issue. If the intent of Congress is

clear, that is the end of the matter; for the court, as well

as the agency, must give effect to the unambiguously

expressed intent of Congress. If, however, the court

determines Congress has not directly addressed the precise question at issue, the court does not simply impose

its own construction on the statute.... Rather, if the

statute is silent or ambiguous with respect to the specific

issue, the question for the court is whether the agency's

answer is based on a permissible construction of the

statute.

Id. at 842-43. With the exception of regulations governing

rural housing and certain Farm Credit Bank loans to farmrelated businesses, we hold that the agency's regulations are

__________

8 The district court also ruled that "Plaintiffs clearly have

associational standing in this case to bring the claim on behalf of

their members." Independent Bankers, 986 F. Supp. at 639. The

agency no longer challenges appellants' standing in light of National Credit Union Admin. v. First Nat'l Bank & Trust Co., 118 S. Ct.

927 (1998).

consistent with the statute's language and congressional intent.

Farm-Related Businesses. Appellants object to three

aspects of the new regulations regarding farm-related services: (1) the expansion of credit by farm credit banks for all

of a farm-related businesses' activities, rather than just for

"necessary sites, capital structures, equipment and initial

working capital," see s 613.3050(c) (repealed 1997), (2) the

removal of the requirement that the services be "custom-type

services" that farmers could otherwise do by themselves, and

(3) the agency's alleged failure to restrict sufficiently loans to

businesses providing goods, rather than services, to farmers.

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vices authorized in this subchapter may be made available ...

[to] persons furnishing to farmers and ranchers farm-related

services directly related to their on-farm operating needs."

12 U.S.C. s 2017 (1994). It further provides that loans by

farm credit banks "to persons furnishing farm-related services ... may be made for the necessary capital structures

and equipment and initial working capital for such services."9

12 U.S.C. s 2019(c)(1). The district court found that the

language of these provisions was permissive and therefore did

not restrict the Farm Credit System to providing loans only

for the circumstances explicitly listed in the statute. See

Independent Bankers, 986 F. Supp. at 641. It therefore

reasoned that the agency had not exceeded the scope of the

statute by permitting loans to "[a]ll of the farm-related

business activities of an eligible borrower who derives more

than 50 percent of its annual income ... from furnishing

__________

9 Production credit associations are governed on this point by

12 U.S.C. s 2075(a)(3) (1994), which provides that loans may be

made to "persons furnishing to farmers and ranchers farm-related

services directly related to their on-farm operating needs." Appellants acknowledge that s 2019(c) does not apply to production

credit associations and other providers of short-term and

intermediate-term loans.

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farm-related services that are directly related to the agricultural production of farmers and ranchers." See

s 613.3020(b)(1) (1998).

Appellants, however, contend that s 2019(c)(1) limits Farm

Credit Bank lending to the purposes listed in the statute,

such as "necessary sites, capital structures." They note that

s 2019(a), which governs lending to farmers, uses much

broader language, in that a Farm Credit Bank may make

loans for "any agricultural or aquatic purpose and other

credit needs of the applicant." 12 U.S.C. s 2019(a)(1) (1994).

The agency, in turn, responds that the statute uses permissive language, such as "may," and that the list of activities in

s 2019(c)(1) is illustrative rather than exclusive. In addition,

appellants maintain that, if Congress intended s 2019(c)(1) to

cover activities as extensively as s 2019(a), it could have used

similarly broad language rather than listing specific qualifying purposes for the extension of credit. We agree. If

Congress had wanted businesses providing farm-related services to receive loans from farm credit banks on the same

basis as farmers, it could easily have used expansive language

in subsection (c)(1). " '[W]here Congress includes particular

language in one section of a statute but omits it in another

section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.' "10 Russello v. United States, 464 U.S. 16,

__________

10 The Senate Report states that "loans to persons furnishing

farm related services to borrowers ... will include credit for capital

equipment and initial working capital...." S. Rep. No. 92-307, at

20 (emphasis added); see also H.R. Rep. No. 92-593, at 17 (1971),

reprinted in 1971 U.S.C.C.A.N. 2091 (regarding House version of

the bill). This language suggests that Congress did not contemplate that Farm Credit Banks would provide credit to farm-related

services other than for "the necessary capital structures and equipment and initial working capital" listed in the statute. Cf. Halverson v. Slater, 129 F.3d 180, 187 n.10 (D.C. Cir. 1997).

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23 (1983) (quoting United States v. Wong Kim Bo, 472 F.2d

720, 722 (5th Cir. 1972)); see also Halverson v. Slater, 129

F.3d 180, 185 (D.C. Cir. 1997). For these reasons, we conclude that the agency's extension of Farm Credit Bank loans

for any business activities of a farm-related service business

is contrary to the language of the statute and congressional

intent.

Appellants also challenge the change relating to customtype services. Prior to the new regulations, the agency

defined farm-related services to include only those "[c]ustomtype services ... that farmers and ranchers can perform for

themselves, but instead hire outside contractors to perform."

See 62 Fed. Reg. at 4438. In removing this restriction, the

agency explained that the statute itself never mentions

custom-type services, that the examples of custom-type services listed in the legislative history are "illustrative," see id.,

and that eliminating this requirement advances the broad

purpose of the statute "because farmers today rely on technologically advanced services that they cannot perform for

themselves." 61 Fed. Reg. at 42,108. The use of these

services, in turn, allows farmers to "(1) [i]ncrease their income; (2) reduce their operating costs; (3) improve farm

productivity; and (4) satisfy consumer demands for improved

food quality and specialty food products." Id.

The plain language of the statute does not mandate that

farm-related services only include "custom-type services."

Section 2017(2) provides that loans may be made available to

"persons furnishing to farmers and ranchers farm-related

services directly related to their on-farm operating needs."

12 U.S.C. s 2017(2) (1994). The use of technologically advanced services that farmers cannot provide for themselves

appears to qualify as a "farm-related service[ ] directly related" to the farmer's operational needs. 12 U.S.C. s 2075(a)(3)

(1994). Allowing financing for services that modern farming

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requires but which farmers could not traditionally provide for

themselves is reasonably consistent with the statute's broad

purposes.

"Where, as here, the plain language of the statute is clear,

the court generally will not inquire further into its meaning,

at least in the absence of a clearly expressed legislative intent

to the contrary." Lin Qi-Zhuo v. Meissner, 70 F.3d 136, 140

(D.C. Cir. 1995) (citations and internal quotation marks omitted). Appellants contend, however, that the term "farmrelated services" had an accepted meaning at the time of the

law's adoption to include only custom-type services. For

support, they cite several arguably ambiguous portions of the

legislative history discussing the need to extend financing to

businesses providing custom-type services, without necessarily excluding other types of businesses.11 None of the passages relied upon indicate that Congress ascribed a special

meaning to the term "farm-related services," only that some

individuals may have wanted lending to farm-related businesses to be limited to custom-service providers. The court

has previously avoided giving undue weight to the testimony

of witnesses at congressional hearings because their views

__________

11 For example, the governor of the Farm Credit Administration, testified that financing "should be limited to those [farm

related businesses] who are providing services to the farmer ...

which he traditionally has done himself but which, in the light of

modern-day technology and conditions in agriculture, can be done

more efficiently or effectively by a custom service or other business

service." Farm Credit Act of 1971: Hearings on S. 1483 Before the

Subcomm. on Agric. Credit and Rural Electrification of the Senate

Comm. on Agric. and Forestry, 92d Cong. 211 (1971) (emphasis

added). To the same effect, the chairman of the Senate Committee

on Agriculture and Forestry noted that "farmers frequently turn to

custom operators who provide on-the-farm services," and that to

assure lending to such businesses "would not take in the entire

agribusiness area, the committee restricted loans to persons furnishing services directly related to farm operating needs. These

would be services which the farmer, under ordinary circumstances,

would provide for himself." 117 Cong. Rec. 27,992 (1971).

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may not reflect those of the legislators who actually voted on

the bill. See Austasia Intermodal Lines, Ltd. v. Federal

Maritime Comm'n, 580 F.2d 642, 645 (D.C. Cir. 1978). Likewise, "[t]he remarks of a single legislator, even the sponsor,

are not controlling in analyzing legislative history." Chrysler

Corp. v. Brown, 441 U.S. 281, 311 (1979). Given the clear

language of the statute, selected and arguably ambiguous

snippets of the legislative history are insufficient to undermine that language. See Avco Corp. v. United States Dep't of

Justice, 884 F.2d 621, 623 (D.C. Cir. 1989).

Nor, as appellants contend, is the agency's interpretation

due "considerably less deference" because it "is a major

deviation" from the agency's position at the time the statute

was enacted--i.e., the agency itself limited lending to customservice providers only. The Supreme Court has noted, that,

although long-standing agency interpretations may have "a

certain credential of reasonableness, ... neither antiquity nor

contemporaneity with the statute is a condition of validity."

Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 740

(1996). "An initial agency interpretation is not instantly

carved in stone. On the contrary, the agency, to engage in

informed rulemaking, must consider varying interpretations

and the wisdom of its policy on a continuing basis." Chevron,

467 U.S. at 863-64. In the instant case, given the absence of

any restrictive language within the statute and given the

agency's judgment that providing financing for technologically advanced services furthers the broad goals of the statute,

the agency's removal of the custom-services requirement

reflects a permissible interpretation.

Appellants also raise a goods-versus-services objection.

The old regulations provided that "[l]oans shall not be made

to commercial businesses which purchase farm products from

or sell inputs to farmers or ranchers unless substantially all

of such inputs handled are used incident to the services

provided." s 613.3050(b)(2) (repealed 1997). The new regulations lack this requirement. Under the new s 613.3020, a

legal entity that derives more than 50 percent of its annual

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income from furnishing farm-related services is eligible for

"whole firm" financing--i.e., it can obtain loans for "[a]ll of

[its] farm-related business activities." If, however, the legal

entity derives 50 percent or less of its income from such

services, loans will be available only for its "farm-related

services activities."

Section 2019(c)(1) provides that "[l]oans to persons furnishing farm-related services to farmers and ranchers directly

related to their on-farm operating needs may be made for the

necessary capital structures and equipment and initial working capital of such services." 12 U.S.C. s 2019(c)(1) (1994).

Sections 2017(2) and 2075(a)(3), in turn, permit loans to

persons who furnish "farm-related services directly related to

... on-farm operating needs." The agency argues that

"[n]othing in the statute renders [these] persons ineligible to

obtain System credit for the purchase or sale of farm-related

goods."12

Appellants do not object to the prior regulation, which

allowed lending to businesses dealing in "inputs" to farmers if

"substantially all of such inputs" were used in the providing of

services. Yet, this prior regulation allowed lending to businesses who sold goods. The new regulation, like the old, ties

the availability of loans to the provision of services: either (1)

the business must make a majority of its income from providing services or, (2) if it does not, it may only obtain loans for

the provision of services. Hence, it is unclear why appellants

object to the new regulation and not the old, as both allow

loans to businesses that furnish goods so long as those goods

__________

12 Appellants highlight a colloquy between two senators in the

legislative history, in which the chairman of the Senate Committee

on Agriculture and Forestry assures another that credit would not

extend to "agribusiness operations which would deliver gas and oil

to farms ... because those are products, and not services." 117

Cong. Rec. 27,993 (1971). The agency notes, however, that the

example cited involved a business "engaged exclusively or predominantly in the sale of goods or products rather than services" and

that such businesses would not receive loans "to finance the operations relating to such sales" under the new regulations.

are tied to services. If the concern is providing loans to

businesses that provide goods, the old regulation would also

seem, under appellants' view, to be an unwarranted expansion

of the agency's authority. The new regulations, however, are

consistent with the plain language of ss 2017(2) and

2075(a)(3), which contemplate loans to businesses that furnish

services, without limiting financing to exclude all goods. The

agency's adoption of these modifications is a reasonable interpretation of the statute.

Processing and Marketing Loans. Section 2019(a)(1)

provides that loans may be made

to farmers, ranchers, and producers or harvesters of

aquatic products ... for any agricultural or aquatic

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purpose and other credit needs of the applicant, including

financing for basic processing and marketing directly

related to the applicant's operations and those of other

eligible farmers, ... except that the operations of the

applicant shall supply some portion of the total processing or marketing for which financing is extended.13

12 U.S.C. s 2019(a)(1) (1994); see also 12 U.S.C. s 2075(a)(1)

(1994) (allowing production credit associations to make short-

__________

13 Prior to the Food, Agriculture, Conservation and Trade Act

of 1990, the statute required that System banks only finance

processing and marketing operations of farmers contributing at

least 20 percent of throughput. See S. Rep. No. 101-357, at 258;

see also 12 U.S.C. s 2019(a) (1994). Congress apparently adopted

this change to "provide greater flexibility to farmers and to prevent,

in the future, a farmer from becoming ineligible for System financing due to the success and growth of a marketing and processing

operation. The Committee specifically sets no bottom limit for

what portion the on-farm production must make up of the total

throughput." S. Rep. No. 101-357, at 258. The agency contends

that these changes demonstrate congressional intent to reduce the

restrictions placed on lending to processors and marketers.

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and intermediate-term loans under similar circumstances).

Appellants claim that the plain language of the statute requires that the applicant be an agricultural producer and

therefore only smaller, farmer-owned processing and marketing operations should be eligible for financing.

The new regulation removes the requirement that legal

entities applying for such loans be owned 100 percent by bona

fide farmers. 61 Fed. Reg. at 42105. Now, a legal entity

providing processing and marketing qualifies for financing if

bona fide farmers own more than 50 percent of the voting

stock and the applicant and its owner "regularly produce[ ]

some portion of the throughput used" by the operation.

s 613.3010(a) (1998). Under either regulation, legal entities

could obtain financing for their processing and marketing

operations, provided that they were controlled by actual

farmers. Appellants' objection is thus one of degree: how

much ownership of the legal entity is enough before the

business is no longer farmer-controlled. The statute does not

directly address this issue, and appellants fail to demonstrate

that the agency's requirement that farmers have a majorityownership of the operation is not a reasonable interpretation.14

Eligibility of Legal Entities. Appellants further contend

that the new regulations permit any corporation to be "eligible for System lending so long as it engages in farming as

any part of its business, to the extent of its involvement in

__________

14 Appellants rely on a senator's comments warning that "[w]e

do not intend that [the provisions regarding processing and marketing] should ever be used to authorize a loan to a joint venture

composed of eligible and noneligible persons if the noneligible

persons exercise substantial control of the facility or activity financed by the loan." 126 Cong. Rec. 33,982 (1980). This quote,

however, suggests that the senator understood that a joint venture

in which noneligible persons did not exercise substantial control

would be eligible for loans, thereby undercutting appellants' argument that the congressional intent mandates 100 percent control of

the operation by otherwise eligible borrowers. It appears reasonable that requiring farmers to own a majority-interest in an operation is consistent with the senator's concern that joint venture

operations not be substantially controlled by noneligible outsiders.

that business." They object that this regulation represents

an abandonment of the prior focus on natural persons as the

major beneficiaries of the statute and that it broadens lending

authority to corporations. Indeed, the new regulations remove prior requirements that legal entities either be majority

owned by farmers, have a majority of their assets related to

agricultural products, or have a majority of their income arise

from farming. See s 613.3020 (amended 1997). The new

regulation adopts a sliding scale in which banks and associations are to provide full credit to full-time bona fide farmers,

conservative credit to part-time farmers, and "more restricted

credit for other credit requirements as needed to ensure a

sound credit package ... as long as the total credit results in

being primarily an agricultural loan." s 613.3005 (1998).

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In appellants' view the new regulations read the word

"bona fide" out of s 2017's eligibility requirements, which

define eligible borrowers as "bona fide farmers, ranchers, or

producers or harvesters of aquatic products." The statute

does not define the term "bona fide," although the agency

defines a bona fide farmer as "a person owning agricultural

land or engaged in the production of agricultural products,

including aquatic products under controlled conditions."

s 613.3000(a)(1) (1998). The agency defines "person" to

mean "an individual who is a citizen of the United States or a

foreign national who has been lawfully admitted into the

United States...." s 613.3000(a)(3) (1998).

The prior regulations allowed a number of legal entities to

receive financing so long as a majority of their ownership,

assets, or income was related to farmers or farming. The

new regulations simply allow the agency greater flexibility in

determining whether a legal entity should receive financing,

while retaining that paramount concern that such financing

"be primarily an agricultural loan." s 613.3005 (1998). Under this system, "full-time bona fide" farmers continue to be

the most favored applicants for loans. Id. The new regulations do not conflict with the statutory scheme, and the

agency's regulation is a reasonable effort to establish a hierarchy of preferred borrowers consistent with the statute.

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Indeed, the statute itself indicates that Congress' objective

was to "encourage farmer- and rancher-borrowers participation in the management, control, and ownership of a

permanent system of credit for agriculture which will be

responsive to the credit needs of all types of agricultural

producers having a basis for credit...." 12 U.S.C. s 2001(b)

(1994) (emphasis added).

Rural Housing. Finally, appellants object to the elimination of the ban on financing of rural housing that is not

owner-occupied. The agency no longer requires applicant

owners to live in their rural residences, provided that they

receive loans on only one rural home, which must be used as a

principal residence by either their tenant or themselves. See

62 Fed. Reg. at 4438. The agency retained restrictions that

prevented lenders from financing housing in suburban and

urban areas, by defining qualifying communities as having

populations of 2,500 people or less. Id. at 4438-39.

The statute provides that "[l]oan and discounts may be

made to rural residents for rural housing financing under

regulations of the Farm Credit Administration," provided

that such housing "be for single-family, moderate-priced

dwellings and their appurtenances" in rural areas where the

population in a given community does not exceed 2,500 inhabitants. 12 U.S.C. s 2019(b)(1)-(3) (1994). Appellants interpret the phrase "rural residents" to mean that owners must

reside in the rural home to qualify for the loan. They further

maintain that this modification will "extend System financing

to wealthy, big-city dwelling passive investors who wish to

build or acquire rural housing for lease to residents." The

agency, in turn, considers that this expansion of credit is

necessary "to ensure the availability of affordable housing for

rural residents." 62 Fed. Reg. at 4438.

The statute provides that "owners of rural homes" are

eligible for "credit and financial services authorized in this

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subchapter." 12 U.S.C. s 2017 (1994). Section 2019(b), in

turn, states that the rural home financing "may be made to

rural residents." The plain language of the statute refers to

"residents" as the recipients of lending for this purpose. The

statute does not define the term "rural resident" in s 2019,

although the most natural reading of the statute suggests

that Congress contemplated individuals who actually resided

in rural areas. Although s 2017 identifies homeowners as

eligible for lending, s 2019 establishes the purposes for which

lending can be allowed and specifically notes that loans shall

be made "to rural residents." The agency's interpretation

effectively reads the statute as permitting lending to owners

if rural residents are an indirect beneficiary of such loans.

Such a reading of the statute conflicts with its plain language.15

Accordingly, we affirm in part and reverse in part the

grant of summary judgment to the agency, reversing as to

the regulations that extend lending to farm-related businesses

by Farm Credit Banks for activities beyond those listed in

s 2019(c)(1), and that allow home-owners to receive loans for

non-owner-occupied rural housing. We also reverse in part

the denial of summary judgment to appellants with respect to

these two regulations and remand that part of the case to the

district court for appropriate action.

__________

15 The legislative history also supports requiring owneroccupancy as a condition of receiving credit, as both the Senate and

House Reports contemplated lending to individuals residing in rural

areas. See S. Rep. No. 92-307, at 5; H.R. Rep. No. 92-593, at 2.

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