1997 Decisions

Opinions of the United

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Precedential or Non-Precedential: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
1

 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) 
2

 

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
3

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 
4

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 
5

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 
6

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 
7

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)). 
8

 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. 
9

 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 
10

"[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 
11

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.