In re Cottrell, Civil Action No. 97-T-015-N

CourtUnited States District Courts. 11th Circuit. Middle District of Alabama
Citation213 BR 33
Docket Number97-T-016-N.,Civil Action No. 97-T-015-N
PartiesIn re Odell COTTRELL, Debtor. Odell COTTRELL, Appellant, v. UNITED STATES of America, for the United States Department of Agriculture, Rural Housing Services, f/k/a Farmers Home Administration, Appellee.
Decision Date25 August 1997

213 B.R. 33 (1997)

In re Odell COTTRELL, Debtor.
Odell COTTRELL, Appellant,
UNITED STATES of America, for the United States Department of Agriculture, Rural Housing Services, f/k/a Farmers Home Administration, Appellee.

Civil Action Nos. 97-T-015-N, 97-T-016-N.

United States District Court, M.D. Alabama, Northern Division.

August 25, 1997.

213 BR 34
213 BR 35
Thomas E. Haigh, Troy, AL, William Z. Messer, Legal Services Corporation of Alabama, Montgomery, AL, for Odell Cottrell

Kent B. Brunson, Redding Pitt, U.S. Attorney, U.S. Attorney's Office, Montgomery, AL, Steven J. Youngpeter, Office of the General Counsel, Montgomery, AL, for U.S.

Curtiss Cleveland Redinf, Jr., Montgomery, AL, trustee.



In these two appeals, appellant Odell Cottrell seeks review of the decision of the United States Bankruptcy Court for the Middle District of Alabama granting the motion for relief from automatic stay, submitted by appellant Rural Housing Services (RHS) of the United States Department of Agriculture, to allow eviction of the debtor Cottrell, and the decision denying and dismissing Cottrell's petition for Chapter 13 bankruptcy. United States District Courts are granted jurisdiction over appeals from bankruptcy courts pursuant to 28 U.S.C.A. § 158(a). Because of the interconnectedness of these two appeals, they were consolidated for consideration by this court in an order entered February 14, 1997. Upon consideration of the record, this court affirms the decisions of the bankruptcy court.


Acting in an appellate capacity, the court reviews the factual findings of the bankruptcy court under a "clearly erroneous" standard. In re Patterson, 967 F.2d 505 (11th Cir.1992). Questions of law are reviewed de novo. Id.


Cottrell purchased her home in Troy, Alabama, in April 1984, for $30,500, financed by a mortgage through RHS.1 Under the policies of RHS, Cottrell was entitled to and received interest credit assistance during her ownership of the home.

Until 1995, Cottrell worked full time as a cook. At that time, she became unable to work due to health problems and became delinquent in her mortgage payments. In July 1995, she applied for Social Security disability benefits. Cottrell then met with the county supervisor for the Pike County RHS office.: She told the supervisor of her health problems, gave the supervisor a statement from her doctor, and advised the supervisor that she had applied for disability benefits. Cottrell's income had declined to the amount she receives under the Aid for Dependent Children program.

Cottrell, who is unable to read or write, asked the supervisor if she could receive a

213 BR 36
"moratorium" under RHS regulations, which would allow her to suspend payments on her home pending a decision on her disability benefits application. She had received moratorium relief on two occasions nine years earlier, and had requested but been denied such relief on another occasion, within the year preceding this request, but before leaving her employment

According to Cottrell, the supervisor told her that she could not get a moratorium because she had already received too many. The supervisor made this representation again later at another meeting between Cottrell and the supervisor, with Cottrell's son present. Cottrell did not fill out or sign an application for a moratorium, nor was she told that she had a right to apply, and a right to appeal an adverse decision.

At trial, RHS did not offer testimony to challenge this account of the meetings, but presented the "running record" of notations on cases made the day of the meetings. The entry on the relevant day indicates that Cottrell was "advised of interest credit, moratorium, right to sell." It does not indicate that a moratorium application was entered, but rather that Cottrell was "advised she must pay account current in thirty days." The implication is that, otherwise, RHS would foreclose the mortgage.

In the fall of 1995, the mortgage was sufficiently delinquent to result in the acceleration of her account for foreclosure. A letter advising Cottrell of that development was sent by certified mail to her, but to her former home address, which she had notified RHS had been changed. Nevertheless, the return receipt was signed by her daughter. The letter states, in bold on page one:


Cottrell testified that her children told her she had received a letter telling her that her house would be foreclosed and that she took the letter to her lawyer. It is undisputed that Cottrell did not request a hearing.

On May 9, 1996, the foreclosure sale was carried out late in the afternoon. The RHS made the only bid on the property, purchasing it for $20,400. The "certificate of sale" was completed the following day, May 10. On that same day, Cottrell filed a Chapter 13 bankruptcy petition.

RHS filed a motion for relief from automatic stay to permit eviction of the debtor on May 30, 1997. Cottrell filed a complaint to declare the foreclosure sale null and void. A hearing was held on both matters on October 7, 1996. The bankruptcy court upheld RHS's foreclosure on Cottrell's home, allowed RHS relief from the automatic stay, and dismissed Cottrell's bankruptcy petition.

Appeals were taken, and the two appeals were consolidated.


Cottrell defines five issues for review by this court. They are: (1) whether an improper denial of a moratorium renders the acceleration and foreclosure on Cottrell's home invalid; (2) whether the foreclosure sale was valid under applicable state and federal law; (3) whether Cottrell's bankruptcy petition was filed before the "completion" of the foreclosure sale; (4) whether the foreclosure sale was avoidable under bankruptcy law as a fraudulent conveyance or an avoidable preference; and (5) whether resolution of any of the above issues in Cottrell's favor renders the dismissal of Cottrell's bankruptcy petition erroneous. With the exception of the first issue, which RHS contends is not properly before the court, defendant RHS concurs in the definition of the issues.


The RHS programs are designed "to ensure that in borrower supervision, servicing and collection of Single Family Housing Loan Accounts, all authorities are considered and used to assist borrowers to become successful homeowners, thereby reducing the number and amount of borrower delinquencies and borrower failures resulting in liquidation of the account." 7 C.F.R. § 1951.301. Cottrell

213 BR 37
contends that the affirmative duties placed on this agency mandate that she be given an opportunity to apply in writing for a moratorium and to appeal an adverse decision. The wrongful denial of this right, she claims, makes the subsequent acceleration of her loan, which led to the foreclosure on her home, invalid

RHS contends that this argument is foreclosed by the statutory requirement that Cottrell exhaust all administrative process before raising an issue in court. It cites the exhaustion requirement in 7 U.S.C.A. § 6912(e), passed by Congress in 1994, stating that the failure to request a hearing on a foreclosure prevents litigation of any servicing errors in court. It says that Cottrell had sufficient notice of her right to a hearing when she received the letter notifying her of the acceleration of her debt and the impending foreclosure on her home. In its view, even if there were servicing violations in the handling of moratorium matters (which it does not concede), Cottrell could have addressed and redressed those matters then.

Cottrell and RHS disagree on the nature of the exhaustion requirement in this situation. RHS asserts that "exhaustion of administrative remedies is a jurisdictional prerequisite when the requirement is mandated by statute," as is the case here.2 In support of that position, it relies upon Calhoun v. USDA Farm Service Agency, 920 F.Supp. 696, 702 (N.D.Miss.1996).

The Calhoun court recognizes two types of exhaustion requirements: (1) those which are "statutorily mandated" or which expressly require administrative exhaustion; and (2) those from which courts have inferred or may impose exhaustion. "Statutory" exhaustion may be avoided in only the most narrow of circumstances, while "non-statutory" exhaustion is subject to wider judicial discretion, and to a broader range of defenses. RHS urges the court not only to accept that distinction, but to ascribe additional characteristics to each type of exhaustion requirement. RHS argues that "statutory" exhaustion is jurisdictional, and precludes consideration by the court in any manner. In contrast, presumably, "nonstatutory" exhaustion would be subject to a wider variety of permissible defenses.

The court declines to accept Calhoun's analysis. First, the distinction drawn by courts between statutory and non-statutory exhaustion does not necessarily entail that the former is jurisdictional, and the latter purely discretionary. Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.A. §§ 1981a, 2000e through 2000e-17, for example, the stringent complaint procedures, such as requiring the filing a claim with the Equal Employment Opportunity Commission within 180 days, are properly read as conditions precedent to filing suit, rather than as jurisdictional requirements. See Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 392-95, 102 S.Ct. 1127, 1132-33, 71 L.Ed.2d 234 (1982); National Cement Co. v. Federal Mine Safety and Health Review Comm'n, 27 F.3d 526, 530 (11th Cir.1994); Fouche v. Jekyll Island-State Park Auth., 713 F.2d 1518, 1525 (11th Cir.1983) ("A11 Title VII procedural requirements to suit are henceforth to be viewed as conditions precedent to...

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