Allied Home Mortgage Capital Corp. v. United States

Decision Date11 November 2010
Docket NumberNo. 10-66C,10-66C
PartiesALLIED HOME MORTGAGE CAPITAL CORPORATION, Plaintiff, v. UNITED STATES, Defendant.
CourtU.S. Claims Court

Motion to Dismiss; Lack of Subject Matter Jurisdiction; Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994, 7 U.S.C. § 6901, et seq.; United States Department of Agriculture National Appeals Division; Breach of Contract; Quantum Meruit.

Robert Wayne Bond, Womble Carlyle Sandridge & Rice, PLLC, Atlanta, GA, for the plaintiff.

Courtney Sheehan McNamara, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for the defendant. With her were Jeanne E. Davidson, Director, Commercial Litigation Branch, and Tony West, Assistant Attorney General, Civil Division.

OPINION

HORN, J.

Before the court is the government's motion to dismiss the complaint filed by plaintiff Allied Home Mortgage Capital Corporation (Allied). The plaintiff states in its complaint that it seeks "recovery of amounts owed under a Contract and approved Liquidation Plan entered into between Allied and the United States Department of Agriculture ('USDA')," or, alternatively, recovery under the theory of quantum meruit. The defendant argues, however, that this court should dismiss the complaint pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims (RCFC) (2010), for lack of subject matter jurisdiction, based on the provisions of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994, Pub. L. No. 103-354, 108 Stat. 3178 (codified at 7 U.S.C. § 6901, et seq. (2006)) (the Reorganization Act). The defendant argues that pursuant to the Reorganization Act and the enabling regulations, 7 C.F.R. § 11.1, et seq. (2010), United States District Courts possess exclusive jurisdiction to entertain claims, such as those presented by plaintiff Allied, which arise from participation in a loan guarantee program administered by the USDA's Rural Development division. According to the defendant, the claims presented by the plaintiff are nothing more than a dispute "involving the USDA's Rd [Rural Development] division's loan note guarantee programs." Moreover, the defendant argues that the plaintiff was first required to exhaust administrative remedies at the USDA, through the agency's mandatory appeals process, including a review by the USDA National Appeals Division (NAD), before filing a complaint in a federal District Court. Defendant asserts that jurisdiction to review a decision by the NAD is available only in the appropriate United States District Court, not in the United States Court of Federal Claims. Finally, defendant argues that plaintiff's case does not present the necessary, limited circumstances pursuant to which quantum meruit relief may be granted in the United States Court of Federal Claims.

In its response to the defendant's motion to dismiss, plaintiff argues that the Liquidation Plan entered into by Allied and the USDA is a "separate" contract which includes an agreement to reimburse Allied for expenses incurred while carrying out the Liquidation Plan. Allied, therefore, claims that jurisdiction to review plaintiff's claims is proper in the United States Court of Federal Claims pursuant to the Tucker Act, 28 U.S.C. § 1491(a)(1) (2006). Plaintiff also asserts its right to recover in the Court of Federal Claims based on quantum meruit for services performed.

FINDINGS OF FACT

In the complaint filed in this court, plaintiff states that it is "in the real estate mortgage business and participates in USDA-approved loan programs throughout the United States." According to the complaint, in early 2003, the plaintiff became the servicer of a real estate development project known as the Blues Alley Project, involving the construction of lower-income, multi-family housing in Clarksdale, Mississippi (the Project). The Project was funded by bonds, the proceeds of which were held in trust by Wells Fargo Bank and were loaned to the borrower and developer of the Project, Blues Alley Estates, L.P. (Blues Alley), to complete the Project. The USDA subsequently repurchased the loan from Wells Fargo. The USDA guaranteed a large portion of the loan for the Project through the Rural Housing Service program administered by the USDA's Office of Rural Development.

Allied signed and entered into a "Lender's Agreement" with the USDA, by which Allied was "approved to process and request Loan Note Guarantees and to service those loans as authorized herein and under 7 C.F.R. part 3565." The plaintiff described its role in the Project as to "service the loan" and to ensure that USDA requirements were satisfied. Selected text from the Lender's Agreement is instructive and explicitly covers how Allied, as the lender, should proceed in the event of a failing or failedproject, including submission of a Liquidation Plan. The Lender's Agreement also specifically refers to and incorporates 7 C.F.R. Part 3565, titled "Guaranteed Rural Rental Housing Program." The Lender's Agreement states in part:

VII. Liquidation
If the Lender concludes pursuant to Government regulations that liquidation of a guaranteed loan account is necessary because of one or more defaults or third party actions that a Borrower cannot or will not cure or eliminate within a reasonable period of time, liquidation may be considered. If the Lender concludes that liquidation is necessary, it must request the Government's concurrence. When the Government concurs with the Lender's conclusion, or at any time concludes independently that liquidation is necessary, it will notify the Lender and the Lender will liquidate the loan unless [the] Government, at its option, decides to carry out liquidation.
A. Lender's proposed method of liquidation. Within 30 days after the decision to liquidate, the Lender will advise the Government in writing of its proposed detailed method of liquidation ("liquidation plan") and will provide the Government with:
1. Such proof as the Government requires to establish the Lender's ownership of the guaranteed loan promissory notes and related security instruments;
2. Information lists concerning the property's assets including real and personal property, fixtures claims, contracts inventory accounts receivable, personal and corporate guarantees, and other existing and contingent assets and advice as to whether or not each item is serving as collateral for the guaranteed loan;
3. A proposed method of making the maximum collection possible on the indebtedness; and
4. If the outstanding principal loan balance including accrued interest is less than $200,000, the Lender will obtain an estimate of the market and potential liquidated value of the collateral. On loss balances in excess of $200,000, the Lender will obtain an independent appraisal report on all collateral securing the loan, which will reflect the current market value and potential liquidation value.... The appraisal report is for the purpose of permitting the Lender and the Government to determine the appropriate liquidation actions.
B. The Government will inform the Lender in writing whether it concurs in the Lender's liquidation plan. Should the Government and the Lender not agree on the Lender's liquidation plan, negotiations will take placebetween the Government and the Lender to resolve the disagreement. The Lender will ordinarily conduct the liquidation; however, should the Government determine that it will conduct the liquidation, the parties will proceed as follows:
D. Liquidation: Accounting and Reports. When the Lender conducts the liquidation, it will account for funds during the period of liquidation and will provide the Government with periodic reports on the progress of liquidation, disposition of collateral, resulting costs and additional procedures necessary for successful completion of liquidation. The Lender will transmit to the Government the pro rata share, of any payments received from the delinquent Borrower, and of liquidation or other proceeds etc. when the Government is the holder of a portion of the guaranteed loan using Form RD 1980-43, "Lender's Guaranteed Loan Payment to Agency." When the Government liquidates, the Lender will be provided with similar reports on request.
E. Determination of Loss and Payment. In all liquidation cases, final settlement will be made with the Lender after the collateral is liquidated. The Government will have the right to recover losses paid under the guarantee from any party liable.
4. Form RD 449-30, "Loan Note Guarantee Report of Loss," will be used for calculations of all estimated and final loss determinations. Estimated loss payments may be approved by the Government after the Lender has submitted a liquidation plan approved by the Government. Payments will be made in accordance with applicable Government regulations.
5. When the Lender is conducting the liquidation, and owns any of the guaranteed portion of the loan, it may request a tentative loss estimate by submitting to the Government an estimate of loss, that will occur in connection with liquidation of the loan. The Government will agree to pay an estimated loss settlement to the Lender provided the Lender applies such amount due to the outstanding principal balance on the guaranteed debt. Such estimate will be prepared and submitted by the Lender on Form RD 449-30, "Loan Note Guarantee Report of Loss," using the basic formula as provided on the report except that the appraisal value will be used in lieu of the amount received from the sale of collateral. The Lender will discontinue interest accrued on the defaulted loan and the loss claim will be promptly processed in accordance with the applicable Government regulations. After the Report of Loss estimate has been approved by the Government, and within 30 days thereafter, the Government willinstitute procedures to cause the issuance of payment of the estimated amount due the Lender.
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