____________ No. 95-2898

____________
Bank of America National Trust * and Savings Association, as * Trustee for Farmer Mac * Agricultural Real Estate Trust, * Series 1992-2, * * Appellant, * * v. * * Bobby T. Shirley; Patricia E. * Shirley, Shirley AG Service, * Inc., * Appeal from the United States * District Court for the Appellees. * Southern District of Iowa *

------------- * * Equitable Life Assurance * Society of the United States; * Western Farm Credit Bank; * Federal Agricultural Mortgage * Corporation; Iowa Bankers * Association, * * Amicus Curiae. *

____________ Submitted: December 11, 1995 Filed: September 25, 1996

____________ Before McMILLIAN, JOHN R. GIBSON and BEAM, Circuit Judges.

____________ McMILLIAN, Circuit Judge.

Ba nk of America National Trust & Savings Association (BOA) , as trustee for the Farmer Mac Agricultural Real Estate Trust , Series 1992-2, appeals from a final order entered in the District Court for the Southern District of Iowa granting partial summary-2-

judgment in favor of Bobby T. Shirley, Patricia Shirley and Shirley Ag-Ser vice, Inc. (appellees). Bank of America National Trust & Saving s Ass’n v. Shirley , No. 1-93-CV-100033 (S.D. Iowa May 19 , 1994) (order granting partial summary judgment). For reversal BOA argues the district court erred in (1) construing Iowa Code Ann

. § 5 35.9(2) (West 1987) to bar enforcement of a contractua l prohibition against prepayment and (2) holding Iowa Code Ann

. § 535 .9(2) was not expressly preempted by federal law. For th e reasons discussed below, we hold federal law expressly preem pts the state law and accordingly reve rse the order of the district court.

The followi ng statement of facts is taken in large part from the district court’s order gra nting partial summary judgment. The materi al facts are not disputed. In December 1990 appellee s borrowed $3 million which they promised to repay pursuant to a schedule set forth in a promissory note payable to 3 River s Investment, Inc. (3 Rivers). The loan was secured by a mort gage on several parcels of agricultural land. The note provided for a n initia l interest-only payment and then semi-annual payments o f interest and principal in the amount of $175,560.76, over a term of 15 years, beginning on July 1, 1991, and ending on January 1 , 2006. The pr omissory note included the following prohibition agains t prepayment, set forth in capit al letters above the signature line: PAYMENTS IN EXCESS OF THE PAYMENTS PROVIDED FOR IN THIS NOTE AR E NOT PERMITTED.

3 Rivers then sold the loan to Prudential Insurance Co. an d Prudential Agricultural Credit, Inc. (together Prudential)

. Prudential provided the funds that were distributed to appellees. After performing an updated appraisal of the mortgaged property , Prudential pooled the loan with other agricultural loans and sold the po ol into the “secondary market” pursuant to the Federa l Agricultural Mortgage Corp. program (Farmer Mac), and assigned it-3-

to BOA as trustee for Farmer Mac Agricultural Real Estate Trust , Series 1992-2. As a result, BOA owns the loan in its capacity as-4-

trustee for the holders of certain securities (certificate h olders) pursuant to the pooling and se rvicing agreement between Prudential and BOA. Farmer Mac guarantees payment to the senior certificate holders.

In late June 1993 appellees contacted Prudential and asked fo r
a “pay-off figure” so they could prepay the note. Prudentia l advi sed appellees that the note did not permit prepayments

. Appellees responded that they had the right to prepay the note , regardless of the note’s expre ss terms, pursuant to Iowa Code Ann. § 535.9(2), which provides in pertinent part:

Whenever a borrower under a loan prepays part or all of the outstanding balance of the loan the lende r shall not receive an amount in payment o f interest which is greater than the amoun t determined by applyingthe rate of interest agreed upon by the lender and the borrower to the unpaid bala nce of the loan for a period of time durin g which the borrower had the use of the money loaned ; and the lender shall not impose any penalty o r other charge in additi on to the amount of interest due as a result of the repayment of that loan at a date earlier than is required by the terms of the loan agreement.

In Sep tember 1993 BOA filed an action seeking declarator y judgment that Iowa Code Ann. § 535.9(2) did not make th e no-pre payment term unenforceable. BOA argued that the stat e stat ute precluded penalties for prepayment but did not preclud e prohibitions against prepaymen t, and, if the state statute did bar proh ibitions against prepayment, federal law (Title VIII of th e FarmCredit Act, 12 U.S.C. § 2279aa-12(d)) preempted the stat e stat ute. The parties filed cross-motions for summary judgment

. The di strict court granted partial summary judgment in favor o f appellees. The district court construed Iowa Code Ann. § 535.9(2) to prohibit prepayment penalties in the form of interest or other-5-

finance charges as well as contractual terms that prevent bo rrowers from prepaying any portion of the loan. The district court-6-

reas oned that the complete prohibition against prepayment is i n effect a penalty of the most extreme kind. For this reason, th e district court held that the promissory note term prohibitin g prepayment was unenforceable. Slip op. at A-6 to A-9 (pagination
as reproduced in addendum to Brief for Appellant), citing Lo s Quatros, Inc. v. State Farm Life Insurance Co. , 110 N.M. 750, 800 P.2d 184 (1990), and Naumburg v. Pattison , 103 N.M. 649, 711 P.2d 1387 (19 85). Accord Groseclose v. Rum , 860 S.W.2d 554 (Tex. Ct

. App. 1993) (statute providing that prepayment charge or pena lty may not be collected on loan construed to mean that a provision barring prepayment is a “penalty”). The district court also held tha t federal law, 12 U.S.C. § 2279aa-12(d), did not apply because th e loan was not made by an “originator or certified facility.” Slip op. at A-10. The district court found that the loan wa s "originated" by 3 Rivers, whic h is not an “originator or certified facility” under Farmer Mac, and not by Prudential, which is both an “origi nator,” 12 U.S.C. § 2279aa(7), and a “certified facility, ” id. § 2279aa(3)(A). Slip op. at A-10.
Appellees h ad filed a counterclaim and third-party complaint against Prudential. Appellees dismissed their claims withou t pre judice, and both sides filed motions for entry of fina l judgment. The district court entered final judgment in favor o f appellees and this appeal followed.

We review a grant of summary judgment de novo. The question before the district court, and this court on appeal, is whet her the record, when viewed in the light most favorable to the non-moving party, shows that there is no genuine issue as to any materi al fact and th at the moving party is entitled to judgment as a matter o f law. Fed. R. Civ. P. 56(c); see, e.g., Celotex Corp. v. Catrett , 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249-50 (1986); Get Away Club, Inc. v. Coleman , 969 F.2d-7-

664, 666 (8th Cir. 1992); St. Paul Fire & Marine Insurance Co. v. FDIC , 968 F.2d 695, 699 (8th Cir. 1992). Where the unresolved-8-

issues are primarily legal rather than factual, summary judgment is particularlyappropriate. E.g., Crain v. Board of Polic e Commissioners , 920 F.2d 1402, 1405-06 (8th Cir. 1990). We agre e wit hthe district court that the only issues presented ar e questions of law; unlike the district court, however, we hold the federal law expressly preempts the state statute.

BOA first argues that the district court erroneously construe d Iowa Code Ann. § 535.9(2) to bar enforcement of contractual terms prohibiting prepayment. BOA a rgues that the plain language of the state statute indicates that the statute does not apply to th e right to prepay but only provides that lenders cannot enforce any prepayment penalties. In other words, BOA argues the state statute does not grant borrowers a right to prepay; rather, the stat e statute addresses the rights o f borrowers and lenders when a right to prepay exists . BOA argues that the state statute does no t address whether or in what cir cumstances a borrower may prepay; it merely bars enforcement of any penalties for prepayment. Mo reover, BOA argues that a right to prepay should not be inferred from the silen ce in § 535.9(2). BOA contrasts § 535.9(2) with the stat e leg islature’s express provision of a right to prepay granted fo r real est ate loans made by savings and loans in § 534.21(10) (no w repealed) or by credit unions in § 533.16(11).

BOA also ar gues that construing Iowa Code Ann. § 535.9(2) to grant borrowers a right to prepay is inconsistent with Iowa cas e law. BOA argues that, for more than 100 years, Iowa has followed the common law “perfect tender in time” rule under which len ders do not have to accept prepayment and can enforce the payment sc hedules set f orth in promissory notes. Anderson v. Haskell , 45 Iowa 4 5 (1876). BOA further argues th at the Iowa Supreme Court reaffirmed the perfect tender in time rule in 1981, after the stat e-9-

legislature enacted Iowa Code Ann. § 535.9(2). Lett v. Grummer , 300 N.W.2d 147, 150 (Iowa 1981) (decision does not mention th e statute).-10-

We need not decide this difficult question of state la w because we hold that federal l aw expressly preempts application of Iowa Code Ann. § 535.9(2) to agricultural loans made by a n originator or certified facility guaranteed by Farmer Mac. Whether
or not Iowa Code Ann. § 535.9(2) merely bars enforcement o f
con tractual terms that prohibit borrowers from prepaying an y portion of their loans as unlawful penalties or affirmativel y grants borrowers the right to prepay is irrelevant when cons idering whether the state law is preempted.

Title VIII of the Farm Credit Act, 12 U.S.C. § 2279aa-12(d), at the time of the district court's decision, provided in pe rtinent part:

Any provision of the Constitution or law of an y State which expressly limits the rate or amount of interest, discount points, finance charges or othe r ch arges that may be charged, taken, received, o r re served by agricultural lenders or certifie d facilities shall not apply to any agricultural loa n made by an originator or a certified facility i n accordance with this [ subchapter] that is included in a pool for which [Farmer Mac] has provided a guarantee.

BOAargues that this subsection is not limited to preemption o f sta te usury laws (the subsection heading is “state usury law s superseded”) and preempts all state statutes that limit any charges
or otherwise limit the amount of interest that a lender ca n receive. BOA argues that the Iowa statute in question expressl y limits interest penalties that an agricultural lender can asses s and, by granting borrowers the right to prepay, prevents lendersThe Federal Agricultural Mortgage Corp. (Farmer Mac) filed a 1 brief as amicus curiae in support of BOA on this issue. Far mer Mac argues that Title VIII of the Farm Credit Act prohibits appl ication of the s tate statute to appellees’ loan. For this reason Farme r Mac takes no position on whether the district court correctl y construed the Iowa statute to bar prepayment. Farmer Mac thu s argues the term barring prepayment is enforceable. Farmer M ac also agrees with BOA that, contrary to the district court’s finding , Prudenti al was an “originator” of the loan and that the loan wa s made in accordance with the Farmer Mac program. Equitable Life Assurance Society/ Western Farm Credit Bank a nd the Iowa Bankers Association also filed amicus briefs in sup port of BOA. -11- fr omcollecting the amount of interest agreed to by the parties. 1

The district court did not decide the preemption issue becaus e it held that federal law, 12 U.S.C. § 2279aa-12(d), did not apply to app ellees' loan. Slip op. at A-10. The district court foun d that the loan was originated by 3 Rivers, which is not a n “origi nator or certified facility” under Farmer Mac, and not b y Prudential, which is both an “originator,” 12 U.S.C. § 2279aa(7), and a “certified facility,” id. § 2279aa(3)(A).

As discusse d below, we hold that the federal law applies and that the federal law expressly preempted the state statute.

Co ngress’ intent is the touchstone of ou r analysis of whether [t he federal law] preempts the [state statute]. Congress’ intent may b e “explicitly stated in the statute’s language o r implicitly

contained in its structure and purpose. ” WhenCongress has not spoken expressly, a state la w is preempted if it conflicts with federal law or i f fe deral law “occupies a legislative field, ” indicating that Congre ss intended to leave no room for the states to supplement the federal law. Whe n Congress has spoken expressly, however, the preemptive scope of a federal law is governed-12-

entirely by the express language. “When Congres s has considered the issue of pre-emption and ha s included in the enacted legislation a provisio n explicitly addressing that issue, and when tha t provision provides a ‘reliable-13-

indicium of congressional intent with respect t o sta te authority,’ ‘there is no need to infe r congressional intent to pre-empt state laws fro m the substantive provisions’ of the legislation.”

Weber v. Heaney , 995 F.2d 872, 875 (8th Cir. 1993) (citation s omitted).

Al though § 2279aa-12(d) did not contain the term “preempt, ” it plainly provided that a state law “which expressly limits th e rate o r amount of interest, discount points, finance charges o r other charges . . . shall not applyto any agricultural loan made byan originator or a certified facility in accordance with thi s [subchapter] that is included in a pool for which [Farmer Mac] has provided a guarantee.” (Emphasis added.) The subsection heading even included the term “superseded.” We think § 2279aa-12(d) was
an explicit statement by Congress of its intent to preempt stat e law. Our task is therefore to identify the domain expressl y pre -empted by § 2279aa-12(d). Freightliner Corp. v. Myrick , 11 5 S. Ct. 1483, 1488 (1995).

In the p resent case, the question is whether Iowa Code Ann

. § 535.9(2) is a state law which “expressly limits the rate o r amount of interest, discount points, finance charges or othe r charg es.” In our view, Iowa Code Ann. § 535.9(2) clearly fall s wit hin the domain expressly preempted by § 2279aa–12(d). Ou r reading of the scope of § 2279aa-12(d) was confirmed by it s
ame ndment in 1996. Leaving the sub-section heading the same , Congress struck subsection (d) and replaced it with the following:

A provision of the Constitutio n or law of any State shall not apply to an agricultural loan made by a n orig inator or a certified facility in accordance wit h this title for sale to the Cor poration or to a certified facili tyfor inclusion in a pool for which th e-14-

Corporation has provided, or h as committed to provide, a guarantee, if the loan, not later than 180 days after th e date the loan was made, is sold to the Corporation or-15- in cluded in a pool for which the Corporatio n has provided a guarantee, if the provision-- (1) limits the rate or amount o f interest, discount points, fin ance charges, or other charges that may be charged, taken , received, or reserved by an agricultura l lender or a certified facility; or (2) limits or prohibits a prepaymen t penalty(either fixed or declining), yiel d maintenance, or make-whole pay ment that may be charged, taken, or received by an agricultural lender or a certified facility in connectio n with the full or partial payment of th e princi pal amount due on a loan by a borrowe r in advance of the scheduled date for th e payment under the terms of the loan, otherwise known as a prepayment of the loan principal.

FarmCredit System Reform Act of 1996, § 112, 1996 U.S.C.C.A.N

. (10 6 Stat.) 162, 165-66 (to be codified at 12 U.S.C

. § 2279aa-12(d)) (effective Feb. 10, 1996). Thus, the version o f § 2279aa-12(d) now in effect expressly refers to state laws which limit or prohibit prepayment penalties. Cf. Smiley v. Citiban k (South Dakota), N.A. , 116 S. Ct. 1730, 1733-35 (1996) (defer ring to regulation interpreting statutory term “interest” to include credit card late-payment fees).

As noted above, the district court held § 2279aa-12(d) did n ot applyto appellees’ loan because 3 Rivers closed the loan an d 3 Rivers was not an originator or a certified facility. We do not agree. Section 2279aa-12(d) applies to any loan that is “made by
an originator or a certified facility in accordance with thi s [subchapter] that is included in a pool for which [Farmer Mac] has provided a guarantee.” (The 1996 amendment applies to any loa n “made by an originator or a certified facility in accordance with this title for sale to the Corporation or to a certified facility for inclusion in a pool for wh ich the Corporation has provided, or-16-

has committed to provide, a guarantee.”) It is undisputed t hat the loan was originally closed by 3 Rivers and that 3 Rivers was not an-17-

originator or a certified facility. It is also undisputed t hat the loan was “included in a pool f or which [Farmer Mac] has provided a guaran tee.” However, we think 3 Rivers’s status is irrelevant

. Rather, it is Prudential’s status that is dispositive, at le ast for purposes of the Farmer Mac loan program.
Prudential is an originator and a certified facility. Title 12 U.S.C. § 2279aa(7) provides that “[t]he term ‘originator’ means any . . . entity that originates and services agricultural m ortgage loans.” However, the statute does not define “originates.” Farmer Mac has interpreted the term “originates” to include causing th e performance of an updated appraisal or reappraisal of an existing loan, “regardless of the identity of the entity in whose name the loan was originally closed.” Federal Agricultural Mortgage Corp., Securities Guide §§ 3.38(e), 4.6(e) (1990). Under this defi nition, an originator can be an entity (e.g., Prudential) that purch ases an “existing loan” from another entity that actually closed the loan (e.g., 3 Rivers) and performs an updated appraisal or reappraisal of an existing loan. “Existing loans” are qualified loans fo r which the most recent appraisa l (excluding an updated appraisal or reappraisal) precedes the application for a Farmer Mac Guara ntee by
more than 180 days. Id . at 4. Appellees’ loan was an “existin g loan” because the original appraisal was performed on July 12 , 1990, approximately 5 months before the loan closed in Decembe r 1990. Prudential’s application for a Farmer Mac Guarantee wa s dated May 31, 1992. Thus, in accordance with the definition o f “existing loan,” the original appraisal on appellees’ loan p receded the application for a Farmer Mac Guarantee by more than 180 days. Prudential caused an updated a ppraisal of the loan to be performed on May 1, 1992, so that the loan could be pooled in accordan ce with the requirements of the Securi ties Guide. Because appellees’ loan was an existing loan and Prude ntial caused an updated appraisal to-18-

be performed, Prudential is deemed to be the originator of th e loan, even though 3 Rivers originally closed the loan. For this-19-

reason , appellees’ loan was “made by an originator or certifie d facility in accordance with” Title VIII, that is, Prudential.

In sum , we hold that 12 U.S.C. § 2279aa-12(a) expressl y preempts application of Iowa Code Ann. § 535.9(2) to agricultural loans made by an originator or certified facility guaranteed b y Farmer Mac. Accordingly, we reverse the order of the distric t court granting partial summary judgment in favor of appellees.

A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.