U S v. McCall

• Decision Date: 15 December 2000
• Docket Number: No. 99-2166,99-2166
• Citation: 235 F.3d 1211
• Parties: (10th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff-Appellant, v. WILLIAM MCCALL, Defendant-Appellee
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1211

235 F.3d 1211 (10th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff-Appellant, v. WILLIAM MCCALL, Defendant-Appellee.

No. 99-2166

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

December 15, 2000

Appeal from the United States District Court for the District of New Mexico. (D.C. No. CV-95-846M)

Thomas M. Bondy, Appellate Staff Attorney, Civil Division, Department of Justice, Washington D.C. (David W. Ogden, Acting Assistant Attorney General, Washington D.C., John J. Kelly, United States Attorney, New Mexico, and Barbara C. Biddle, Appellate Staff Attorney, Civil Division, Department of Justice, Washington D.C., with him on the on the brief), for Plaintiff-Appellant.

Roger Eaton, of Eaton, Martinez & Hart, P.C., Albuquerque, New Mexico, for Defendant-Appellee.

Before SEYMOUR, Chief Circuit Judge, MURPHY, Circuit Judge and KANE, District Judge.^*

KANE, Senior District Judge.

The United States filed this appeal after judgment was entered against it in a foreclosure action against Defendant McCall and sanctions imposed. We AFFIRM.

After a bench trial to determine whether the Farmers Home Administration (FmHA)¹ was entitled to foreclose against property pledged to secure several notes on which the Defendant had defaulted and collect a 10% surcharge pursuant to 28 U.S.C. 3011, the district court entered judgment against the government and in favor of McCall. The district court found the foreclosure action "frivolous and groundless" in light of the parties' binding settlement agreement which served as an accord and satisfaction of the debt owed and therefore barred the action. Mem. Op. & Order, No. 95-CV-846M, pp. 1-2, 13-14 (Appellant's App. at pp. 70-71, 82-83). "[T]o deter frivolous and groundless filings in the future, as well as to compensate defendants for the economic harm incurred" as a result of Plaintiff's "unreasonable conduct," the court also imposed financial sanctions against the government in the form of Defendant's costs, litigation expenses and attorney fees. (Id. at p. 15.)

The government appeals, arguing the district court's decision is "fundamentally mistaken in law and in fact." The government denies McCall ever accepted FmHA's offer in settlement because, as a matter of law, an acceptance of the offer could only have been made by a tender of the settlement amount by the September 6, 1995 offer expiration date, and contends neither McCall nor anyone acting on his behalf ever did so. McCall asserts this is a significant departure from the government's position at trial, where the significance of McCall's failure to tender the settlement amount was neither addressed nor raised, and maintains the evidence and record presented to the district court support the decision made.

Upon careful review of the record, including the trial transcript, and considering the parties' arguments on appeal, we affirm for substantially the reasons given by the district court in its Memorandum Opinion and Order.

I. THE NATURE AND EXISTENCE OF AN AGREEMENT TO SETTLE THE DEBT FOR $84,000.

At issue is the form and the amount of the offer in compromise extended by FmHA to McCall during prolonged settlement negotiations in the spring and summer of 1995. In concluding the agency had "clearly put forward an offer to compromise [McCall's debt] for a specific sum within a specific time . . . [with] no conditions or prerequisites which allow modification or revocation [thereof] after acceptance," the district court reviewed a series of letters and communications between McCall and Assistant United States Attorney Manuel Lucero between March and July 1995. (Mem. Op. & Order at pp. 4-7.)

The communications began on March 17, 1995, when an Assistant Regional Attorney for the agency notified the United States Attorney's Office in Albuquerque of McCall's debt and recommended commencement of a foreclosure action. Letter, dated 3/17/95 from Abeita to Kelly (Appellant's App. at p. 186-88). In a "Special Remarks" section attached to the letter, the agency attorney stated "[t]he amount the agency will settle this account for is $76,894.00." The letter was forwarded to Lucero, who commenced negotiations with McCall in accordance therewith.

The settlement negotiations culminated in a June 26, 1995 letter from Lucero to McCall. After rejecting a series of counteroffers from McCall, Lucero wrote as follows:

I have contacted the agency regarding your offer to settle this matter for $70,000; however, the Farmers Home Administration would like me to proceed with the foreclosure action unless you can pay to this office on or before July 15th $84,000. If that is not possible, I will file the foreclosure action on July 17th.

Letter, Tr. Ex. 22 (Appellant's App. at p. 165). At trial, Lucero stipulated that on July 17th he extended the offer expiration date to September 6, 1995. Trial Tr. at 5:17-22 (Appellant's App. at p. 92). Based on his review of these communications and the testimony at trial, the district court concluded the June 26th letter, as modified by Lucero's representations on July 17th, constituted an unconditional offer by the agency, not subject to revocation or modification if accepted before the September 6th offer expiration date, to settle McCall's debt for $84,000. (Mem. Op. & Order at 7-8.)

On September 5, 1995, Blagg, a neighbor of McCall and owner of land adjacent to the property that was the subject of the threatened foreclosure action, called Lucero to notify him of an agreement he had reached with McCall to loan McCall the $84,000 to pay off the FmHA loan and clear title to his property "pursuant to the offer that had been communicated by Manuel Lucero to William McCall in the letter of June 26, 1995." See 4/14/97 Affid. of David Blagg (Appellant's App. at p. 196, 2). Blagg stated in his affidavit that he understood from Lucero at the time of the conversation that his offer "would be acceptable to FHA and that a closing would be arranged in the near future." (Id. 3.)

Rather than call Blagg to testify at trial so he could be questioned directly about this statement, Lucero stipulated to the admission of the affidavit and simply declared, at the outset of the trial proceedings, that his handwritten notes of his conversation with Blagg indicated otherwise. Referring to his notes (also admitted by stipulation as trial Exhibit 24), Lucero stated that "basically, Exhibit 24 says that when I spoke to Mr. Blagg [I told him] that a new appraisal had to be [done]." Trial Tr. at 6:7-14 (Appellant's App. at p. 93).²

It is clear from the court's findings and conclusions that it rejected Lucero's interpretation of the events. In its findings and conclusions, the district court noted that the June 26 letter set forth no conditions or prerequisites that would allow the modification, after acceptance, of such a critical term as the $84,000 amount. (Mem. Op. & Order at 7.) The court also noted that the $84,000 offer remained pending for "several weeks" before both the original and extended expiration dates, during which time the Agency "neither undertook an appraisal nor communicated an appraisal requirement to defendants." (Id.) "An agreement was completed," the court concluded, "[by] September 6, and McCall reasonably expected his case had been resolved." (Id.) In reference to Lucero's arguments at trial and the testimony of Agency representative Hutton, the district court observed that

. . . FmHA or the Farm Service Agency may have intended to lock in an amount to be paid, acquire a new appraisal, and then enforce the amount agreed upon should the appraisal be lower than anticipated, and reject it should the appraisal be higher than anticipated. Hopefully, this is an erroneous perception and FmHA was not working, as it might appear, to take unfair advantage. But even if the agency intended to modify the payout amount to correspond to a current appraisal, regardless of which side received the benefit of the change, it cannot impose a condition on an offer or on an agreement to settle that has never been communicated.

Mem. Op. & Order at 8.

With regard to the standard of review on appeal, McCall characterizes the district court's decision as primarily a factual decision that must stand unless clearly erroneous. The government contends the issue is primarily one of formation of contract reviewable de novo, but says the decision to throw out its foreclosure case was so flawed that "reversal would be required even under the clearly erroneous standard of review."

Issues involving the formation, construction and enforceability of a settlement agreement are resolved by applying state contract law. Carr v. Runyan, 89 F.3d 327, 331 (7th Cir. 1996). Here, the district court applied New Mexico law and general common law principles of offer and acceptance to conclude that the agency, through Assistant United States Attorney Lucero and McCall, through Blagg, on September 5, 1995 consummated a binding agreement to settle the case for $84,000. We agree with McCall that this conclusion turned primarily on factual determinations regarding the history of the parties' settlement negotiations, their intent, and the nature and amount of settlement offer ultimately extended. These factual determinations formed the basis for the district court's legal conclusions and will be accepted on review unless clearly erroneous. See Naimie v. Cytozoyme Lab., Inc., 174 F.3d 1104, 1111 (10th Cir. 1999)(question of whether a contract exists is a mixed question of law and fact reviewed "'under either the clearly erroneous standard or de novo standard depending on whether the mixed question involves primarily a factual inquiry or the consideration of legal principles'") (quoting Armstrong v. Comm'r, 15 F.3d 970, 973 (10th Cir. 1994)).

If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of...