Denson v. Merchants & Farmers Bank
| Decision Date | 28 June 1996 |
| Docket Number | Civil Action No. 3:96-cv-18WS. |
| Citation | 946 F.Supp. 470 |
| Parties | Joe Earl DENSON, Heirs of Joe Earl Denson, Plaintiffs, v. MERCHANTS & FARMERS BANK, et al., Defendants. |
| Court | U.S. District Court — Southern District of Mississippi |
Joe E. Denson, Clinton, MS, pro se.
Heirs, of Joe E. Denson, Clinton, MS, pro se.
Donald A. McGraw, Jr., Montgomery, Smith-Vaniz & McGraw, Canton, MS, Rebecca B. Cowan, Montgomery, Smith-Vaniz & McGraw, Jackson, MS, for Merchants & Farmers Bank, Richard Jackson.
This matter is before the court pursuant to the motion of the defendants to dismiss the plaintiffs' pro se complaint for lack of subject matter jurisdiction or a genuine federal question.1 This court has heard the arguments of the parties and finds the motion to dismiss for lack of jurisdiction well taken.
Plaintiff Joe Earl Denson (hereinafter "Denson") is a totally disabled veteran who qualified for assistance to obtain specially adapted housing pursuant to the Veterans Rehabilitation Act, Title 38 U.S.C. § 2101, which provides in pertinent part that, "[t]he Secretary (of Veterans Affairs) is authorized, under such regulations as the Secretary may prescribe, to assist any veteran who is entitled to compensation under chapter 11 of this title for permanent and total service-connected disability ... in acquiring a suitable housing unit with special fixtures or movable facilities made necessary by the nature of the veteran's disability...."
On April 13, 1995, Denson entered into an Escrow Agreement which was executed by himself, by Clarence Chinn, a contractor and proprietor of C-C Building Enterprises, Inc. (hereinafter "the contractor") chosen by Denson to perform the construction of his new home, and by the Merchants & Farmers Bank,2 a state chartered bank3 (hereinafter also referred to as "the lender"). The Escrow Agreement provided that Denson was entitled to receive financial assistance from the Department of Veterans Affairs in the amount of $38,000.00 pursuant to Title 38 U.S.C. § 2102(a).4 The Escrow Agreement also authorized a temporary "Consumer-Construction" loan of $184,025.00 from the lender — Merchants & Farmers Bank — to complete the construction of Denson's home. Denson was to apply for a loan which would be automatically guaranteed pursuant to Title 38 U.S.C. § 3703(a)(1)(A).5 Meanwhile, in order to proceed with construction, Denson signed a "Multipurpose Note and Security Agreement" with the lender wherein he promised to pay the lender in full by August 13, 1995. The parties expected that by then construction would be completed and that upon its final report the Department of Veterans Affairs would approve the structure for permanent financing.
After the construction of Denson's new home began, a dispute arose between Denson and the contractor over various aspects of the contract, including but not limited to the height of the shower curtain; whether a security system should be installed; location of a flushing device; whether inserts should be installed in the fireplace; whether carpet should be installed on porches; and whether paneling should be painted or unpainted. According to Denson, these matters became the focus of litigation between him and the contractor.6 Meanwhile, the lender's Multipurpose Note and Security Agreement was not paid in full on August 13, 1995. According to the lender's counterclaim against the plaintiffs in the instant case, just over $102,000.00 is still owed because permanent financing was never sought and obtained by Denson or any of the other plaintiffs.
On October 12, 1995, the Department of Veterans Affairs sent a letter to Denson listing the aforesaid disputes with the contractor. The letter, written by Bobbe Burkhalter, Chief of Loan Services & Claims, Property Management Section, acknowledged that these matters might be the subject of litigation between Denson and the contractor, but the letter also noted that these matters did not affect the ability of the plaintiff to live in the house. The letter informed the plaintiff that a representative would conduct a final compliance inspection of the house and that a report of substantial conformance would issue in the event the inspector found no other problems.
On November 2, 1995, the Department of Veterans Affairs mailed a letter and a copy of the final inspection report to the lender stating essentially that the plaintiff and the contractor were still embroiled in a dispute over the width of the sidewalk being six feet instead of seven feet; the omission of carpet on the porches; built-in appliances not being what the plaintiff specified; driveway turnaround moved from side to front due to slope of lot; and the dwelling being set back an additional fifty feet from the road. According to the letter, these deviations or substitutions ordinarily required that a change order be signed by the purchaser, the lender and the contractor before the Department of Veterans Affairs would issue a final report. Importantly, the letter says that, according to Mrs. Denson, the Densons desired to move into their new home "as it is;" that all of the disputed items were subject to litigation between the Densons and the contractor; that none of the special adaptation features of the house was affected by the dispute; that Denson had accepted the deviations; that Denson was going to pursue the contractor regarding the deviations; and that the Densons desired to "move forward with the loan closing." There is nothing in this letter to suggest that Denson planned to take action against the lender regarding the Densons' dissatisfaction with the contractor's performance. The letter leaves the impression that Denson and his family wanted to close the loan, obtain permanent financing and sue the contractor over the disputed items.
On November 6, 1995, the contractor, who had not been paid in full, placed a lien on the Denson's property for the balance he contended to be due and owing. On November 13, 1995, the lender — Merchants & Farmers Bank — informed Denson that the matter of the lien was an impediment which had to be resolved before the lender could proceed with closing and permanent financing.
On November 17, 1995, the lender's attorney informed Denson that no payments had been made on the plaintiff's temporary loan and that foreclosure proceedings would begin on December 15, 1995, if the plaintiff did not take steps to obtain permanent financing and pay the outstanding balance of the loan.
Then, on December 7, 1995, the lender sent Denson a copy of a Letter-Agreement which listed the disputed matters between the plaintiff and the contractor. The Letter-Agreement stated that Denson would agree to hold the lender harmless in his dispute with the contractor and that Denson desired to proceed with closing and permanent financing with the lender. Denson responded with a letter dated December 15, 1995, wherein he expressed his understanding that he would have to sign the Letter-Agreement and pay the contractor any balance due him in order to release the contractor's lien and proceed with closing and permanent financing. Denson stated that he would not agree to this and expressed his belief that he was being forced to sign under duress and in violation of his rights under Title 38 of the United States Code.
On December 15, 1995, prior to taking steps to consummate foreclosure, the lender's attorney asked the lender to explain the problem regarding the plaintiff's loan. The attorney was concerned that he might be improperly foreclosing a loan guaranteed pursuant to Title 38 U.S.C. §§ 3703 & 3710. The lender's fax to the attorney dated the same day explains to the attorney that there was no guarantee of the plaintiff's loan because the loan was never closed; because permanent financing was not obtained; because all liens were not paid; and because the title company had not issued an acceptable title commitment. The lender's fax also notes that the Letter-Agreement drafted by the lender's attorney had not been signed by the plaintiff. Thus, according to the lender, Denson's failure to sign indicated that he did hold the lender responsible for the contractor's problems, even though it was the plaintiff who selected the contractor and even though the lender had nothing to do with constructing the plaintiff's house. If Denson would not close the loan and obtain permanent financing, then the lender would have to proceed with foreclosure of Denson's temporary construction loan.
Advised of these circumstances, on January 8, 1996, the lender's attorney notified Denson by letter that foreclosure was rescheduled for January 12, 1996. The notice informed Denson that if he had not taken the steps necessary to satisfy the outstanding loan by that date, then foreclosure would proceed as scheduled. In response, the plaintiff filed the instant lawsuit naming Merchants & Farmers Bank and two of its employees as defendants on January 11, 1996. The complaint states that the amount in controversy exceeds $50,000.00; that the plaintiff's cause of action is based on "Title 38, Chapter 37 of the United States Code"; that the plaintiffs' rights under the Fair Trade Commission Act have been violated by the defendants' unfair practices; and that the plaintiffs' constitutional rights have been violated. The defendants answered, generally denying the plaintiffs' claims, including the assertion that the loan in question was guaranteed by the United States, and asserting a counterclaim for the unpaid balance on the Multipurpose Note and Security Agreement, plus costs and attorney fees.
The defendants subsequently filed the instant motion for dismissal, arguing that the plaintiffs cannot raise a claim in this court under the Veterans Rehabilitation Act of 1973 because, pursuant to Title 38 U.S.C. § 511(a),7 the Secretary of Veterans Affairs has exclusive jurisdiction over all veterans...
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... ... Denson v. Merchants & Farmers Bank, 946 F.Supp ... 470, 477 (S.D.Miss ... ...