United States v. Med O Farm, Inc. William J. Osborn and Marylyle Osborn, Husband and Wife and Double E Ranch, Inc.

We must decide whether the Farmers Home Administration (FmHA) may enforce the “due-on-sale” provision of a federal loan made pursuant to the Emergency Agricultural Credit Adjustment Act of 1978. We affirm the district court’s decision that the clause is enforceable in this case.

In February 1979, appellant Med O Farm obtained an Economic Emergency (EE) loan in the sum of $96,040 for the purpose of continuing farming operations. The government’s security consisted of both a promissory note signed by the sole shareholders of Med 0 Farm, the Osborns, and a real estate mortgage. The mortgage provided that “[n]either the property nor any portion thereof or interest therein shall be leased, assigned, sold, transferred or encumbered, voluntarily or otherwise, without the written consent of the Government.” It also empowered the government to require payment of the entire amount outstanding and to enforce the instrument through foreclosure if Med 0 Farm failed to discharge any mortgage obligation. The promissory note incorporated these provisions.

In March 1980, the Osborns, without government consent, sold all of the stock of the farm to the Double E Ranch. The buyer attempted to…