Velarde v. U.S.
| Decision Date | 22 January 1998 |
| Docket Number | No. Civ.A. 95-WM-1806.,Civ.A. 95-WM-1806. |
| Citation | 992 F.Supp. 1235 |
| Parties | Frank VELARDE and Lydia Velarde, Plaintiffs, v. UNITED STATES of America, Department of Agriculture, Farmers Home Administration, Defendants. |
| Court | U.S. District Court — District of Colorado |
Richard T. Wehrle, Denver, CO, for Plaintiffs.
Robert D. Clark, Denver, CO, for Defendants.
This matter is before me on the parties' cross motions for summary judgment. The parties agree that no material fact remains in dispute. For the reasons set forth below, both motions are granted in part and denied in part.
Plaintiffs are husband and wife. Defendant is the United States of America, acting through the Farm Service Agency, formerly known as the Farmers Home Loan Administration ("FmHA"). Plaintiffs owned agricultural land in Las Animas County, Colorado (the "Ranch"), which, as a result of their borrowing, was encumbered by a first deed of trust for the benefit of the Federal Land Bank and a second deed of trust for the benefit of the defendant in 1980. In 1983, after plaintiffs were in default on both their obligations, the Federal Land Bank foreclosed and defendant redeemed the ranch, adding the cost of redemption to plaintiffs' loan balance. An extensive history of litigation followed. (This is the third or fourth case in a series of legal disputes arising out of defendant's acquisition of the Ranch by reason of plaintiffs' defaults).
In 1984, plaintiffs resisted defendant's effort to evict them from the Ranch and, instead, applied to defendant for a loan to finance a repurchase the ranch in January 1985. Defendant rejected the loan application because it did not comply with applicable regulations. Plaintiffs appealed the rejection to the United States Claims Court, but the case was dismissed for lack of jurisdiction in 1989 (Velarde v. The United States, U.S. Claims Ct., No. 785-87C).
Defendant then brought an action in ejectment in this court and plaintiffs counterclaimed alleging wrongful denial of their loan application. Plaintiffs counterclaims were dismissed on summary judgment, and plaintiffs were ordered evicted from the Ranch in late 1991. United States v. Velarde, Case No. 90-B-1369, (D.Colo.1991). The District Court judgment was upheld on appeal. United States v. Velarde, 945 F.2d 412, 1991 WL 191068 (10th Cir.1991).1
In 1995, defendant advertised the Ranch for sale. Plaintiffs did not apply or bid to purchase the Ranch; instead they initiated this action to prevent its sale, claiming that they were deprived of certain rights mandated by statute, namely, rights to notice of, and preference in, the sale of the Ranch. They also claim that, following defendant's acquisition of title to the Ranch in 1984, defendant failed to provide plaintiffs with adequate notice of their rights established by law to reacquire ten acres of the Ranch as "Homestead Protection property" and to participate in a "leaseback/buyback" program.
Accordingly, this case raises two issues in the context of agricultural lending by the government:
1. Is a claim that a government agency failed to provide adequate notice of statutory rights barred by the statute of limitations if filed more than six years after the agency gave notice?
2. Does a defaulting government borrower, whose land was acquired by the government through foreclosure in 1984, nevertheless still have certain rights upon the ultimate sale of the land by the government in 1995?
Jurisdiction over this action is proper pursuant to 28 U.S.C. § 1346 and the Administrative Procedure Act, 5 U.S.C. §§ 701-706 ("APA"). In particular, I am asked to review the defendant agency's action to see if I should set aside any unlawful action and/or compel any action unlawfully withheld. 5 U.S.C. § 706.
Summary Judgment is proper if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). By their cross motions for summary judgment and their statements to the court, the parties have stipulated there is not any dispute of material fact and this matter should be decided by me as matter of law.
Defendant is the agency charged with administering the Agricultural Credit Act, 7 U.S.C. § 1921 et seq., a federal loan program designed to help farmers finance their property. Plaintiffs' loan from the defendant was subject to that act and the accompanying regulations. The act has undergone a series of changes over the time period relevant to this litigation, and analysis of plaintiffs' claims is facilitated by an overview of those amendments.
Congress enacted The Farm Credit Amendments Act of 1985 ("1985 Act") in response to a financial crisis in the farming industry. "The act gave certain rights to financially distressed FmHA borrowers who would otherwise be unable to pay their mortgages and, consequently, risked losing their farms." United States v. Rode Corp., 996 F.2d 174, 175 (7th Cir.1993). The 1985 act is codified at 7 U.S.C. §§ 1985 and 2000.
In 1986, § 1985 required defendant to sell or lease farmland which it held in inventory. Pursuant to section 1985(e)(3)(B), defendant promulgated regulations which gave the previous owner of a farm acquired by defendant first priority in leasing the farm with or without an option to purchase, if certain requirements were met. 7 C.F.R. § 1955.66(c)(2) (1986). The County Supervisor was to "notify the previous owner ..., by certified letter, return receipt requested, of the availability of the property for lease as soon as it [became] available for lease." Id. The previous owner then had 30 days to give notice of his or her interest in leasing the property. Id.
Section 2000, as originally enacted on December 23, 1985, provided "homestead protection" rights. The previous owner of a farm that had been acquired by defendant had the opportunity to lease a homestead portion of the farm for a period of 3-5 years, with an option to purchase at the end of the lease term. 7 U.S.C. § 2001(b)(3) (1986). Defendant promulgated regulations setting forth the terms and conditions for exercising homestead protection rights (7 C.F.R. § 1955.73 (1987)), as well as the notice required to be given to eligible farmers. 7 C.F.R. § 1955.18(h) (1987).
In 1987, Congress amended 7 U.S.C. §§ 1985 and 2000 further enhancing the rights of eligible farmers to protect their interests. United States v. Rode Corp., 996 F.2d at 176. Most significantly here, those amendments included a preference scheme for the benefit of the "immediate previous borrower-owner" in case of "sale or lease with option to purchase, of property ... foreclosed, redeemed, or otherwise acquired by the secretary." 7 U.S.C. § 1985(e) (1988). In addition, § 1985 was amended to require "written notice reasonably calculated to inform the immediate previous owner" if defendant determined that suitable farmland was available for disposition under § 1985(e). 7 U.S.C. § 1985(e)(6) (1988).
For property that already had been acquired through foreclosure on January 6, 1988, the amendments required defendant to "make a good faith effort to notify the borrower of homestead protection rights within 60 days" of January 6, 1988. 7 U.S.C. § 2000(c)(1)(6) (1988). Participation in the homestead protection program for such borrowers was limited to those who applied within 90 days of January 6, 1988, 7 U.S.C. § 2000(c)(1)(A) (1988).
Plaintiffs are husband and wife and have lived together continuously at all times relevant to this action. As described above, defendant acquired the Ranch in 1984 as the result of plaintiffs' defaults. On May 19, 1986, defendant mailed a notice (Exhibit D-19) to Mr. Velarde advising him that
The Farmers Home Administration (FmHA) has acquired real property that may be available for you to lease, with an option to purchase, under certain conditions set out in FmHA dwelling retention regulations. If you would like to be considered for dwelling retention, please contact this office within 30 days of the date of this letter.
Two days later, a second letter (Exhibit D-21) was mailed to Mr. Velarde which read as follows:
In a recent letter, we advised you of our dwelling retention program. This letter was to include our program to lease back the property to you. The statement was left out by mistake.
In order to participate in this program, you must contact this office within thirty days.
Plaintiffs, through their attorney at the time, responded to the letters within thirty days of their mailing.3 The attorney requested details regarding the programs mentioned in the letters. Defendant responded stating that the complexity of the program prevented it from sending details by mail and that plaintiffs would have to come to defendant's office to get further details. Plaintiffs never went to the office for more information, but their attorney made another request for information, which defendant denied by letter of June 11, 1986 (Exhibit D-25). Plaintiffs never applied to participate in those programs.
On December 30, 1988, Mr. Velarde signed an acknowledgment (Exhibit D-47) that he had received notice explaining various programs available to help him keep the Ranch. Defendant then informed Mr. Velarde by certified letter of March 8, 1989 (Exhibit D-48) that
The time for submitting ... your application for Farmers Home Administration (FmHA) primary and preservation loan servicing actions has expired. You were contacted in writing on January 20, 1989[,] informing you of your incomplete application and requesting the necessary information to proceed with the analysis. The information was not submitted.4
In June 1995, defendant advertised the Ranch for sale by running the following advertisement in various local newspapers:
Notice is given that the United States of...
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