No. 87-409b 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

ERNEST E. TOOKE and PEGGY TOOKE, 

Plaintiffs and Appellants, 

THE MILES CITY PRODUCTION CREDIT ASSOCIATION, 

a corporation, THE INTERSTATE PRODUCTION 

CREDIT ASSOCIATION, a corporation, and ALBERT 

VAN HAMLRYCK, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Sixteenth Judicial District, 

In and for the County of Carter, 

The Honorable Peter L. Rapkoch, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Gene Huntley, Baker, Montana 

For Respondent : 

George W. Huss, Brown and Huss; Miles City, Montana 

John D. Alexander, IJgrin, Alexander, Zadick & Slovak; 

Great Falls, Montana 

Submitted on Briefs: January 14, 1988 

Decided: March 31, 1988 

Clerk 
Mr. Justice R. C. McDonough delivered the Opinion of the 

Court. 

This is an appeal from the Sixteenth Judicial District 

Court, Carter County. The only issue is whether the District 

Court properly dismissed Appellants Tookes' tort claim 

against Respondents Miles City Production Credit Association, 

Interstate Production Credit Association, and Albert Van 

Hemlryck, (MCPCA) , for lack of subject matter jurisdiction. 

We affirm. (Production credit associations in general are 

hereinafter referred to as PCA's, and the Federal Tort Claims 

Act is hereinafter referred to as the FTCA). 

Tookes alleged that MCPCA's actions on the Tookes' loan 

application amounted to breach of fiduciary duty and 

constituted constructive and actual fraud. MCPCA moved to 

dismiss the suit contending that under the Federal Tort 

Claims Act subject matter jurisdiction for torts alleged 

against PCA's rested exclusively in federal court. See 28 

U.S.C. 1346 (b) (1982) . The District Court agreed citing In 

the Matter of Sparkman (9th Cir. 1983), 703 F.2d 1097, and 

Towery v. Willamette Production Credit Association (D.C.Ore. 

filed Sept. 19, 1983), No. 83-28BE. Towery relied on 

Sparkman to dismiss a tort claim in state court against an 

Oregon production credit association for lack of subject 

matter jurisdiction. 

On appeal, Tookes argue that Sparkman does not apply, 

and that PCA's are exempted from FTCA coverage. Their 

arguments are premised on the fact that; (1) Congress 

authorized suit against PCA's in the Farm Credit System 

legislation, (2) Congress provided for an exemption for 

PCA's in the FTCA, and (3) under the test set out in Lewis v. 

United States (9th Cir. 1982), 680 F.2d 68, PCA's are not 

instrumentalities for purposes of the FTCA. Tookes have also 
made a motion for judgment on this appeal contending that 

MCPCA waived objections to subject matter jurisdiction by 

filing a separate action in state district court to foreclose 

Tookes' mortgage. 

MCPCA responds that; (1) Sparkman controls the extent of 

the waiver of sovereign immunity granted by the Farm Credit 

System legislation for tort claims against PCA's, (2) PCA's 

were not exempted from FTCA coverage even though some of the 

Farm Credit System's components are arguably exempted, and 

(3) Sparkman provides the test for determining whether PCA's 

are instrumentalities for purposes of the FTCA. MCPCA has 

also responded to Tookes' motion for judgment contending that 

subject matter jurisdiction cannot be created by consent. We 

will address the parties' contentions on the issue 

separately, beginning with the argument over the 

applicability of Sparkman. 

I. 

MCPCA points out that tort claims against 

instrumentalities acting primarily as agents of the United 

States must be pursued according to the FTCA. 28 U.S.C. S 

2679 (1982). And tort claims cognizable under the sovereign 

immunity waiver in the FTCA must be brought in federal 

district court. 28 U. S.C. S 1346 (b) (1982) . The farm credit enabling legislation provides 

instrumentality status for PCA's. 12 U.S.C. S 2091 (1982). 

And at least in regard to state taxation, Congress protected 

PCA1s by granting them instrumentality status. 12 U.S.C. S 

2098 (1982). MCPCA argues that these statutes and Sparkman 

demonstrate that PCA's are instrumentalities for purposes of 

applying the FTCA. 

Tookes argue that despite the instrumentality status of 

PCA's, they are subject to state court jurisdiction on tort 

claims. To support this proposition, Tookes cite Birbeck v. 
Southern New England Production Credit Association (D.Conn. 

1985), 606 F.Supp. 1030. The plaintiffs in Birbeck had 

agreed to transfer real and personal property to their 

creditor PCA in exchange for a release from debt. After 

execution of the settlement agreement, the plaintiffs brought 

an action in federal district court to have the agreement set 

aside contending that federal statutes granting federal 

courts subject matter jurisdiction to adjudicate alleged 

constitutional and federal common law violations made their 

claim cognizable in federal court. The Court held that no 

grant of subject matter jurisdiction existed under the law 

cited by the plaintiffs. Birbeck, 606 F.Supp. at 1046. 

However, the plaintiffs in Birbeck did not allege that the 

FTCA granted subject matter jurisdiction for the claim, and 

"the relief plaintiffs seek rests on principles of state 

contract law." Birbeck, 606 F.Supp. at 1038. Thus, Birbeck 

is not authority for deciding the issue of whether a tort 

claim against a PCA should proceed according to the 

provisions of the FTCA. 

However, Sparkman does not directly settle the issue 

either. In Sparkman the Ninth Circuit Court of Appeals 

reviewed an appeal from bankruptcy court where the debtor's 

counterclaim in tort sought punitive damages from the 

creditor PCA. Although the bankruptcy court cited the FTCA 

when it refused to hold the PCA liable for punitive damages, 

the Circuit Court of Appeals relied on general principles of 

sovereign immunity to affirm the decision. Sparkman, 703 

F.2d at 1100. The fact that Sparkman relied on general 

principles of sovereign immunity rather than the FTCA is 

evident by its citation of Painter v. Tennessee Valley 

Authority (5th Cir. 1973), 476 F.2d 943. Painter held that 

sovereign immunity protected the Tennessee Valley Authority 

from punitive damages. Painter, 476 F.2d at 944. However, 
Painter is not a FTCA case because the Tennessee Valley 

Authority is specifically exempted from the agencies and 

instrumentalities covered in the FTCA. 28 U.S.C. S 2680(1) 

(1982). Thus, Sparkman did not decide the issue before us in 

this case. 

Nevertheless, Sparkman stands for the proposition that 

current federal law grants some of the benefits of sovereign 

immunity to PCA1s. According to the Court, 

The sovereign, along with its agencies and 

instrumentalities, enjoys immunity from suit unless 

it waives that i&unity. Federal Housing 

Administration v. Burr, 309 U.S. 242, 244, 60 S.Ct. 

488, 490, 84 L.Ed. 724 (1940). A federal 

instrumentality, therefore, retains its immunity 

from punitive damages unless Congress explicitly 

authorizes liability for such damages. 

(Emphasis in original). Sparkman, 703 F.2d at 1101. The 

case also makes it clear that the waiver of sovereign 

immunity as found in the sue and be sued provision in the PCA 

enabling legislation does not waive all sovereign immunity 

protections. Sparkman, 703 F.2d at 1101. We note on the 

other hand, however, that sue and be sued provisions in 

general should he construed to include actions sounding in 

tort, as well as those sounding in contract. Keifer v. 

Reconstruction Finance Corp. (1939), 306 U.S. 381, 395-96, 59 

S.Ct. 516, 520-21, 83 L.Ed.2d 784, 792-93. Thus, under 

Sparkman, some sovereign immunity protection exists for 

PCA1s, but the extent of this protection is a difficult issue 

to resolve. 

MCPCA contends that since Sparkman makes PCA's 

instrumentalities in regard to sovereign immunity protection 

from punitive damages, they must also be instrumentalities 

for the purposes of the FTCA, (absent an explicit waiver). 

MCPCA also cites a recent United States Supreme Court opinion 
in support of this contention. See Library of Congress v. 

Shaw (1986), - U.S. - , 106 S.Ct. 2957, - L.Ed.2d - . Shaw 

states that in analyzing whether Congress waived the immunity 

of the United States, "we must construe the waiver strictly 

in favor of the sovereign ... and not enlarge the waiver 

'beyond what the language requires'". Shaw, 106 S.Ct. at 

2963. We agree with MCPCA that Sparkman read together with 

the rule of construction in Shaw leads to the conclusion that 

PCA's should be sued for torts under the FTCA. However, in 

addition to Birbeck, Tookes argue that Lewis should control 

over Sparkman. 

Tookes argue that the test as set out in Lewis on 

whether an entity is an instrumentality for purposes of 

applying the FTCA should control over the strict construction 

of the waiver of sovereign immunity as it appears in 

Sparkman. The critical element of the test set out in Lewis 

for finding the FTCA applicable is the existence of federal 

government control over the entity's detailed physical 

performance and day to day operation. Lewis, 680 F.2d at 

1240. Other factors include: whether the entity is an 

independent corporation; whether the government is involved 

in the entity's finances; and whether the mission of the 

entity furthers the policy of the United States. Lewis, 680 

F.2d at 1240-41. Weighing these factors the Court in Lewis 

held that the federal reserve banks are not instrumentalities 

under the FTCA. Tookes argue a similar result should be 

reached here. 

Sparkman distinguishes the current case from Lewis. 

Lewis emphasizes the lack of federal control in the 

operations of the federal reserve banks, Lewis, 680 F.2d at 

1241, while Sparkman emphasizes pervasive federal involvement 

in PCA's. Sparkman, 703 F.2d at 1101. Lewis also cites the 
sue and be sued provision in the federal reserve bank's 

authorizing legislation to support the proposition that the 

FTCA does not apply to federal reserve banks. Lewis, 680 

F. 2d at 1242. This treatment of sue and be sued provisions 

runs contra to Sparkman's analysis of the PCA sue and be sued 

provision. Sparkman, 703 F.2d at 1101. Furthermore, the 

United States Supreme Court's decision in Shaw requires 

specificj-ty in sovereign immunity waivers. Shaw, 106 S.Ct. 

at 2963. The -- Lewis analysis lacks adequate consideration of 

this rule of construction. Thus, we hold that absent a 

specific exclusion, PCA' s should be treated as 

instrumentalities for purposes of the FTCA. 

Tookes argue that a specific exclusion for PCA's exists. 

In 1959 Congress excluded from coverage under the FTCA any 

claim arising from the activities of a federal land bank, a 

federal intermediate credit bank, or a bank for cooperatives. 

28 U.S.C. S 2680(n) (1982). This exclusion has been 

interpreted to encompass PCA's. Sterrett v. Milk River 

Production Association (D.Mont. 1986), 647 F.Supp. 299. 

We must give due regard to decisions of the federal 

Circuit Courts of Appeals and the federal District Courts. 

United States ex rel. Lawrence v. Woods (7th ~ir. 1970), 432 

F.2d 1072, 1075. However, the decisions of these courts do 

not control our decisions on issues of federal law. 

Lawrence, 432 F.2d at 1075. 

We conclude that Sterrett's analysis of the exemption in 

28 U.S.C. S 2680(n) is incorrect. The exemption fails to 

mention PCA's. The legislative history also lacks any 

mention of PCAts in regard to exemption from the FTCA. H.R. 

Rep. No. 287, 86th Cong., 1st Sess. 9, reprinted - in 1959 U.S. 

Code Cong. & Ad. News 2123, 2131. And in other parts of the 

history, PCA's are dealt with separately. H.R. Rep. No. 287, 
86th Cong., 1st Sess. 4-5, reprinted - in 1959 U.S. Code Cong. 

& Ad. News 2123, 2126. Furthermore, even if PCA's were 

included in the exemption provided by 28 U.S.C. § 2680(n), it 

does not necessarily follow that they may be sued for torts 

in state or federal court. See Kolb v. Naylor (N.D.Iowa 

1987), 658 F.Supp. 520, 526 (exception from FTCA under 28 

U.S.C. S 2680 (n) means that no waiver of sovereign immunity 

for tort claims exists for components of the farm credit 

system which are included in the exemption). 

We hold that the lack of a specific exemption resolves 

this issue in favor of MCPCA. Under Shaw, we are bound to 

strictly construe waivers of sovereign immunity. Shaw, 106 

S.Ct. at 2963. Sterret's expansion of the waiver to 

include PCA's in the specifically exempted components of the 

farm credit system cannot be reconciled with Shaw's mandate 

that the waiver not be enlarged beyond what its language 

requires. Congress could have mentioned PCA's in the 

exemption provided for federal land banks, federal 

intermediate credit banks, and banks of cooperatives. It did 

not, and we decline to expand the waiver and interpret it as 

was done in Sterret. 

In regard to Tookes' motion for judgment, we agree with 

MCPCA1s contention that subject matter jurisdiction cannot be 

conferred by consent, and we deny the motion. Affirmed. 

We Concur: