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MEREDITH v. FEDERAL LAND BANK OF ST. LOUIS

July 28, 1988

J. D. MEREDITH and ERMIL MEREDITH, His Wife, PLAINTIFFS,
v.
FEDERAL LAND BANK OF ST. LOUIS, DEFENDANT



The opinion of the court was delivered by: WOODS

 HENRY WOODS, UNITED STATES DISTRICT JUDGE.

 The defendant, Federal Land Bank of St. Louis (FLB), has moved to dismiss the complaint filed against it by the plaintiffs, J. D. Meredith and Ermil Meredith (Merediths). For the reasons that follow the motion is granted.

 BACKGROUND

 The Merediths formerly owned a 1,529 acre tract of farmland located in Randolph County, Arkansas. The subject property was foreclosed on by the FLB in 1983 and conveyed by commissioner's deed to the FLB in 1984. It is alleged by the Merediths that between February 27, 1984 and May 20, 1988 the FLB attempted to sell the property at varying prices, the lowest of which was $ 250,000.00. They also allege that in April, 1987 the FLB sent to them a "notice of right of first refusal" to purchase the property, but that the FLB rejected their timely offer to purchase for $ 269,140.00. The notice stated that the FLB appraisal established the fair market value of the property at $ 380,000.00.

 In this suit the Merediths contend that the FLB's rejection of their offer violated the provisions of the Agricultural Credit Act of 1987, Pub. Law 100-233, 12 U.S.C. § 2219a (the Act). *fn1" Additionally, the Merediths

 DISCUSSION

 The first issue the court must decide is whether the facts alleged in counts I and II of the complaint state a claim for relief under 12 U.S.C. § 2219a(b) and (d)(3). *fn2" The question is one of statutory interpretation and, for the purposes of this motion, the facts alleged in the complaint are taken as true. Section 2219a(b) provides that agricultural real estate acquired by the FLB as the result of foreclosure shall be subject to "The right of first refusal of the previous owner to repurchase or lease the property, as provided in this section." That section makes sale to the previous owner mandatory if a timely offer to purchase for the appraised value is made, and within the FLB's discretion if an offer that is less than the appraised value is made. 12 U.S.C. § 2219a(b)(3), (b)(4). But if the FLB rejects an offer for less than market value from the previous owner, it is prohibited from selling to any other person at a price equal to or less than the rejected offer, or upon terms and conditions different from the rejected offer, unless it first affords the previous owner an opportunity to purchase at the lower price or subject to the differing terms and conditions. 12 U.S.C. § 2219a(c)(6).

 In this case it is undisputed that the Merediths, after receiving the required notice of right of first refusal, made a less than market value offer which was rejected by the FLB. But the complaint fails to allege that the property was sold to third persons for a price equal to or less than that offered by the Merediths, or upon terms and conditions different from those offered the Merediths. Instead, the Merediths rely only on 12 U.S.C. § 2219a(d) which prohibits the FLB from discriminating against the previous owner in a sale by "public offering."

 Their argument is that they were discriminated against because the FLB had previously offered the property to third parties at a price less than that offered by the Merediths. It is plainly seen, however, that the Merediths' reliance on this provision is misplaced. Subsection (d) is captioned "Public offerings" and prohibits discrimination against previous owners only when the FLB elects to sell through " public auction, competitive bidding process, or other similar public offering." (emphasis added). 12 U.S.C. § 2219a(d)(1), (d)(3). The language of subsection (d) expressly limits its application to public sales in which bids are solicited, but the complaint fails to allege any such competitive bidding. See also 12 U.S.C. § 2219a(d)(2) (priority where two or more "qualified bids" are received). The fact that the FLB entered into a series of one-on-one negotiations for sale with members of the public does not convert the ultimate sale, or the preceding negotiations into a "public offering" as defined by statute and, accordingly, the court finds that the facts alleged in counts I and II of the complaint fail to state a claim upon which relief may be granted.

 In count IV of the complaint the Merediths allege that the FLB had a duty under the Act to provide them with a notice of their right of first refusal to lease the property, and that as a result of the FLB's failure to provide such notice they suffered a loss of profits. This cause of action is based upon 12 U.S.C. § 2219a(c)(1). Just as the complaint failed to state a claim under § 2219a(d), so it fails to state a claim under subsection (c)(1).

 Under § 2219a(c)(1) the FLB must notify the Merediths of the right of first refusal to lease "within 15 days after [the FLB] first elects to lease." It is not alleged, however, that any election to lease was ever made by the FLB, or that the property was in fact ever leased to anyone. There having been no election to lease, no corresponding duty to notify the Merediths of their right of first refusal arises under subsection (c) because election is a statutory prerequisite to the duty. Moreover, even if the FLB had elected to lease, had notified the Merediths of their right of refusal and had received an offer to lease from the Merediths, the FLB still would not have been obligated to grant them a lease if it determined that (1) the Merediths did not have the resources available to conduct a successful farming operation or (2) they could not meet the payments, terms and conditions of the lease. 12 U.S.C. § 2219a(c)(3)(A), (B).

 The final count remaining is count III, in which the Merediths allege that they were damaged because the FLB failed to keep the subject property enrolled in certain federal farm programs. This count also fails to state a claim. The only legal or equitable interest in the property that the Merediths may have had are those rights granted under the Agricultural Credit Act -- all other rights having been foreclosed in 1985. But the court determined above that the Merediths complaint failed to invoke any of the Act's protections and, therefore, the Merediths have no interest in the property. Moreover, because the ...


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