The Honorable Lawrence L. Piersol, United States District

Judge for the District of South Dakota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 95-3848

___________

In re: Heine Feedlot Company, *

*

Debtor, *

 *

*

Farm Credit Services, also *

known as Production Credit *

Association, *

*

Appellee, *

*

v. * Appeal from the United States

* District Court for the District

Heine Feedlot Company, * of South Dakota.

*

Appellant. *

___________

 Submitted: October 24, 1996

 Filed: February 26, 1997

___________

Before MAGILL, ROSS and MURPHY, Circuit Judges.

___________

ROSS, Circuit Judge.

Heine Feedlot Company (debtor) appeals from the district

court's decision denying its Motion to Compel Interest Adjustments 1

on a debt owing to Farm Credit Services, also known as Production
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Credit Association of the Midlands (PCAM). We affirm.

Debtor filed a voluntary petition under Chapter 11 on March 6,

1986. The bankruptcy court entered an order confirming the Chapter

11 plan on January 27, 1988. The terms of the order incorporated

by reference a "Stipulation between [PCAM] and Debtors Regarding

Secured Status and Plan Treatment," which obligated the debtor to

pay PCAM's remaining claim of $788,672.45 over a 20-year period.

According to the agreement, payments included interest

at the existing variable "A" rate of the PCAM as from

time to time may exist . . . , commencing January 1,

1988, and continuing each year thereafter in like fashion

until January 1, 1997, when the final balloon payment is

due. The parties agree that B-stock in the amount of

$93,340.00 shall be retired by PCAM.

At the time the parties negotiated for the variable "A"

interest rate, PCAM offered five rate classifications enumerated as

"AAA," "AA," "A," "B" and "C." Following confirmation of debtor's

plan, PCAM discontinued the "C" classification, and eventually

cancelled its alphabet pricing altogether. 

On November 1, 1988, PCAM notified its borrowers that interest

on all alphabetical loans would effectively increase by .75% if the

borrower did not own B-stock. Because debtor had previously

retired its B-stock, this action raised debtor's interest rate from

11.2% to 11.95% and remained in effect until debtor paid off its

loan. 

On February 2, 1989, debtor and PCAM entered into a second

stipulation to reflect that debtor's payment of $264,899.35 had

reduced the outstanding principal balance to $514,579.01. Adopting

language from the original stipulation, the modified stipulation

defined the applicable interest as "the variable 'A' rate of the

PCAM as from time to time may exist." The debtor then commenced

making payments pursuant to the terms of the modified stipulation,
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eventually acquiring other financing and paying PCAM in full on

December 23, 1992.

Debtor filed a Motion to Compel Interest and Legal Fee

Adjustments on January 3, 1992, arguing that the post-confirmation

interest rates failed to reflect the "A" accrual rate as agreed

upon by the parties, and that when PCAM discontinued its alphabet

pricing, it imposed a new, arbitrary interest rate accrual.

On June 8, 1994, the bankruptcy court conducted a hearing on

the debtor's motion and, over PCAM's objections, allowed debtor to

introduce evidence regarding the parties' understanding of what was

meant by the variable "A" rate of interest. Specifically, the

debtor, through its president, Allen Heine, was asked what rate

classification had been negotiated. In response, Heine testified

that it was the "middle rate" of all PCAM borrowers. The

bankruptcy court rejected PCAM's objection that this testimony was

improper parol evidence, and accordingly entered an order granting

debtor's motion to compel interest adjustments and awarding debtor

$20,044.68, plus interest. 

On appeal, the district court reversed the decision of the

bankruptcy court and denied debtor's motion to adjust the interest.

The court ruled that the bankruptcy court lacked jurisdiction to

determine the reasonableness of the interest rate and that the

bankruptcy court erred in permitting the debtor to testify as to

the parties' intentions regarding the negotiated "A" rate of

interest. 

On appeal, debtor first challenges the district court's

conclusion that the bankruptcy court did not have jurisdiction to

consider the "reasonableness" of the "A" interest rate. Debtor

argues that the January 27, 1988 order confirming the plan and

discharging the debtor explicitly allowed the bankruptcy court to

retain jurisdiction to determine if post-confirmation payments were

reasonable and that such post-confirmation payments remained
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subject to court approval. Paragraph 4B of the order provided:

Any such payment made before confirmation of the plan is

reasonable; or if such payment is to be fixed after

confirmation of the plan, such payment is subject to the

approval of the court as reasonable.

While we acknowledge that a bankruptcy court may explicitly

retain jurisdiction in the plan itself related to its

administration and interpretation, United States v. Unger, 949 F.2d

231, 234 (8th Cir. 1991), we reject debtor's argument that

paragraph 4B of the order conferred upon the bankruptcy court the

jurisdiction to determine the reasonableness of the "A" interest

rate. Paragraph 4B allowed the court to only determine the

reasonableness of payments "fixed after confirmation of the plan."

However, in the present case, the parties agreed prior to

confirmation that the variable "A" interest rate would apply. As

such, the imposition of the variable "A" interest rate was fixed by

agreement of the parties prior to confirmation and the bankruptcy

court was without jurisdiction to determine its reasonableness. 

We also reject debtor's argument on appeal that the parol

evidence rule does not preclude the debtor from explaining the

terms and conditions of the stipulation. Here, the district court

determined that the bankruptcy court erred when it allowed parol

evidence to be introduced in the form of debtor's testimony about

the negotiations culminating in the original stipulation,

specifically that the "A" interest rate actually meant the "middle

rate" of interest charged to all PCAM borrowers. 

Under South Dakota law, "[t]he execution of a contract in

writing, whether the law requires it to be written or not,

supersedes all the oral negotiations or stipulations concerning its

matter which preceded or accompanied the execution of the

instrument." S.D. Codified Laws Ann. § 53-8-5. Further, the

"written agreement supersedes all previous understandings and the

intent of the parties must be ascertained therefrom, except, of
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course, in cases involving fraud, mistake or ambiguity." Quick v.

Bakke, Kopp, Ballou & McFarlin, Inc., 380 N.W.2d 364, 366 (S.D.

1986). A writing is considered ambiguous when it is reasonably

capable of being understood in more than one sense. Id. 

Here, the language in the original stipulation is not

ambiguous. The stipulation clearly stated that debtor would make

payments "including interest at the existing variable 'A' rate of

the PCAM as from time to time may exist (the present rate is 10.9%

per annum)." The parties' written agreement expressly recognized

that the "A" rate was variable and would change "from time to

time." The parties did not state, as they could have, that debtor

was entitled to the "middle rate of all PCAM borrowers," but only

that they agreed upon the variable "A" rate. Moreover, the

agreement of the parties to adopt a variable "A" rate was further

acknowledged in the second, modified stipulation which repeated a

pertinent portion of the language from the original stipulation,

again with no mention of any "middle rate." Therefore, we agree

with the district court that the stipulation language was not

ambiguous and that the bankruptcy court erred in permitting the

debtor to testify and present evidence of its own interpretation of

the agreement. We also reject the argument that PCAM's postconfirmation cancellation of its alphabet pricing created an

ambiguity in an otherwise unambiguous agreement. According to the

clear and unambiguous language of the stipulation, the parties

agreed to a variable rate of interest, and not to a "middle rate."

The district court did not err in concluding that debtor's motion

to compel interest adjustments should be denied.

Accordingly, the judgment of the district court is affirmed.
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A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.