Helgeson v. Bureau of Indian Affairs, Dept. of Interior, No. 97-35974

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: THOMAS
• Citation: 153 F.3d 1000
• Decision Date: 27 August 1998
• Docket Number: No. 97-35974
• Parties: 98 Cal. Daily Op. Serv. 6639, 98 Daily Journal D.A.R. 9252 Kenneth HELGESON; Florence Helgeson, husband and wife; Gene Helgeson; Nancy Helgeson, husband and wife; Leon Helgeson, Plaintiffs-Appellants, v. BUREAU OF INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR, United States of America, Defendant-Appellee.

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153 F.3d 1000 98 Cal. Daily Op. Serv. 6639, 98 Daily Journal
D.A.R. 9252 Kenneth HELGESON; Florence Helgeson, husband and wife;
Gene Helgeson; Nancy Helgeson, husband and wife;
Leon Helgeson, Plaintiffs-Appellants,
v.
BUREAU OF INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR, United
States of America, Defendant-Appellee. No. 97-35974. United States Court of Appeals,
Ninth Circuit. Argued and Submitted May 21, 1998.
Decided Aug. 27, 1998.

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Robert M. Kampfer, Great Falls, Montana, for plaintiffs-appellants.

H. Thomas Byron III, United States Department of Justice, Washington, D.C., and Sherry Scheel Matteucci, United States Attorney, Billings, Montana, for defendant-appellee.

Appeal from the United States District Court for the District of Montana; Paul G. Hatfield, District Judge, Presiding. D.C. No. CV-96-00069-PGH.

Before: PREGERSON, TASHIMA, and THOMAS, Circuit Judges.

THOMAS, Circuit Judge:

This appeal challenges the denial of an Indian Revolving Fund loan application by the Bureau of Indian Affairs ("BIA"). The district court granted the BIA summary judgment, holding that its actions were not arbitrary, capricious or an abuse of discretion. We agree, albeit on a somewhat different ground.

I

Dora Helgeson, the eighty-year-old mother of Kenneth, Gene, and Leon Helgeson (the

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latter three are collectively referred to as the "Helgesons"), owned a cattle ranch encompassing 1444 acres of trust property on the Fort Belknap Indian Reservation in Montana. One mortgage on this property secured a delinquent debt of approximately $220,000 that Dora owed to the Federal Land Bank ("FLB"), while a second mortgage secured another debt of approximately $103,000 to the Farmers Home Administration ("FmHA"). The delinquent FLB debt was in the process of foreclosure. In addition, Kenneth owned 240 acres of trust land that was also mortgaged to secure the FLB debt. Kenneth and Florence were contractually liable for the entire amount of the FLB debt.

To fulfill their goal of taking over and operating Dora's ranch, the Helgesons, all enrolled members of the Assiniboine Tribe, sought assistance from the BIA's Indian Revolving Loan Fund after they had failed to secure credit from other sources. Congress established this fund "to provide credit [to Native Americans] that is not available from private money markets, or to supplement funds from private lenders." 25 U.S.C. § 1461. Direct loans may be made from this fund "for any purpose which will promote the economic development of (a) the individual Indian borrower ... and (b) the Indian organization and its members." 25 U.S.C. § 1462. However, Congress expressly required the Secretary of the Interior (the "Secretary") to condition the availability of loans upon the existence of "a reasonable prospect of repayment." 25 U.S.C. § 1463. The regulations interpreting and implementing the direct loan program contain an identical prohibition against loans from the revolving loan fund unless "there is a reasonable prospect of repayment." 25 C.F.R. § 101.3.

On October 17, 1994, Kenneth, Gene and Leon Helgeson each applied for a direct loans, each in the amount of $168,065, proposing to use the funds to pay off the FLB debt, purchase additional livestock, and cover some costs of ranch operation. Although these applications were separate, each proposal depended upon the others for its success. On October 31, 1994, the Fort Belknap Agency, the local BIA office on the Fort Belknap Indian Reservation, forwarded the Helgesons' loan applications and documentation to the BIA Area Director in Billings, Montana. The cover memorandum and the accompanying credit memorandum recommended approval of the loan applications. However, the BIA's Office of Economic Development, from whom the Area Director had sought technical assistance, concluded that the Helgesons' plan "d[id] not appear approvable because of undue risk," and "repayment appear[ed] improbable." In addition, the BIA Billings Area Office conducted its own detailed financial, market, and organization and management analyses of the Helgesons' proposals. This review revealed several substantial weaknesses in the Helgesons' applications, including Kenneth and Florence Helgesons' liability for the full amount of the FLB loan; the absence of balance sheets for previous years; the fact that the total real estate debt would exceed the value of the property securing that debt; the need for annual operating loans; the relatively weak financial positions of the applicants; and the annual payments required to keep the FmHA debt current. Thus, while the Billings Area Office observed that the Helgesons' plan, "as presented," demonstrated "repayment ability," it also noted that 1) the absence of historical statements and the structure of the Helgesons' loan requests made it difficult to analyze the success of their project; and 2) the repayment of the loan hinged upon the assumptions that the Helgesons would receive future loans for operating expenses and that Dora would continue to be able to make payments on the FmHA loan.

On April 7, 1995, the Acting Area Director of the Billings Area Office notified the Helgesons in three separate letters that their applications had not been approved "because of undue risk and the lack of a reasonable prospect of repayment." The letters focused upon three flaws in the Helgesons' plan: "the absence of any adverse conditions for a considerable period of time; reliance on constant annual operating cost borrowing; and ... the maintenance of additional annual debt service on the $103,000 real estate debt owed to Farmers Home Administration by [Dora]." The Helgesons appealed these decisions to the Interior Board of Indian Appeals (the "IBIA"). Affirming the Acting Area Director's decisions on March 25, 1996, the

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IBIA found that these decisions were "amply supported by the record in this case, including the analyses in the Agency and Area credit memoranda and the advice given in a March 15, 1995 memorandum from the Director of the Office of Economic Development in BIA's Central Office." Hence, the IBIA declined to disturb the Acting Area Director's judgment that there was "no reasonable prospect of repayment."

The Helgesons subsequently instituted the instant action in United States District Court for the District of Montana on June 10, 1996, seeking 1) judicial review of the BIA's decision pursuant to 7 U.S.C. § 706; and 2) a determination that...