Turner v. United States Small Business Administration, No. 4:00-CV-833 CAS (E.D. Mo. 9/10/2001)

• Decision Date: 10 September 2001
• Docket Number: No. 4:00-CV-833 CAS.,4:00-CV-833 CAS.
• Parties: WILLIAM TURNER, et al., Plaintiffs, v. UNITED STATES SMALL BUSINESS ADMINISTRATION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

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WILLIAM TURNER, et al., Plaintiffs, v. UNITED STATES SMALL BUSINESS ADMINISTRATION, et al., Defendants.

No. 4:00-CV-833 CAS.

United States District Court, E.D. Missouri, Eastern Division.

September 10, 2001.

MEMORANDUM AND ORDER

CHARLES SHAW, District Judge.

This matter is before the Court on remaining defendant Small Business Administration's ("SBA") motion to dismiss or in the alternative for summary judgment.¹ Plaintiffs oppose the motion. For the following reasons, defendant's motion to dismiss and alternative motion for summary judgment will be granted.

Background.

Plaintiffs William and Mary Turner originally filed their Petition for Temporary Restraining Order, Temporary Injunction and Permanent Injunction in the Circuit Court of St. Louis County, Missouri on May 10, 2000. Plaintiffs sought to restrain the SBA from foreclosing on certain real property located at 828 North Rock Hill in St. Louis County (the "Property"). The petition alleges that although the SBA claims it has a deed of trust on the Property, plaintiffs deny that SBA has a deed, and assert that any claim of SBA to the Property is barred by the statute of limitations, and was discharged in plaintiffs' bankruptcy proceeding in 1973. Plaintiffs also contend that a title search conducted by Netco Title Company did not reveal an SBA deed of trust on the Property, and that Netco Title Company had received a release from the SBA stating it had no claim on the Property.

The state court issued a temporary restraining order on May 10, 2000, and the SBA moved to dismiss the restraining order, but the state court denied the motion on May 15, 2000. The SBA removed the action to this Court on May 18, 2000. SBA filed its answer, which asserts that plaintiffs' petition fails to state a claim upon which relief may be granted, it has a valid first deed of trust on the Property, and the release relied upon by Netco is a forgery.

The SBA moves to dismiss plaintiffs' claims for failure to state a claim upon which relief can be granted, or in the alternative for summary judgment. Neither the SBA's motion nor its memorandum in support indicate the basis for its motion to dismiss, but the notice of motion states in part, "The defendant submits that it cannot be enjoined . . . ." The Court concludes the basis for the SBA's motion to dismiss is contained in the third argument in its memorandum in support, that pursuant to 15 U.S.C. § 634(b)(1), the SBA may not be enjoined from exercising its administrative powers in foreclosing its deed of trust. The SBA also asserts that it holds a valid, recorded deed of trust on the Property by assignment, and that (1) plaintiffs' bankruptcy discharge does not discharge the in rem lien of the deed of trust; (2) statutes of limitation are not a bar to foreclosure by the United States; (3) the purported release is a forgery; and (4) laches is not a bar to a federal action.

Plaintiffs do not respond to the assertion that a federal statute precludes any attempt to enjoin the SBA from carrying out the foreclosure. Plaintiffs respond that any debt they owed to SBA was discharged in bankruptcy in 1973, and that it would constitute unjust enrichment to permit defendant to foreclose on the Property because they have maintained and upgraded it while SBA has taken no action to foreclose on the deed of trust for 28 years. Finally, plaintiffs argue that SBA released its deed of trust on the Property, and cannot attack the recorded release with an affidavit.

Standards of Review.

The purpose of a motion to dismiss for failure to state a claim is to test the legal sufficiency of the complaint. A complaint shall not be dismissed for failure to state a claim for which relief can be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim entitling her to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The issue is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence in support of his or her claim. Id.; see also Neitzke v. Williams, 490 U.S. 319, 327 (1989). When ruling on a motion to dismiss, this Court must take the allegations of the complaint as true. The Court must liberally construe the complaint in a light most favorable to the plaintiff. Midwestern Machinery, Inc. v. Northwest Airlines, Inc., 167 F.3d 439, 441 (8th Cir. 1999); Springdale Educ. Ass'n v. Springdale Sch. Dist., 133 F.3d 649, 651 (8th Cir. 1998).

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In ruling on a motion for summary judgment, the Court is required to view the facts in the light most favorable to the non-moving party and must give that party the benefit of all reasonable inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir. 1987). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Fed.R.Civ.P. 56(c).

Once the moving party has met its burden, the non-moving party may not rest on the allegations of its pleadings but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(e). Anderson, 477 U.S. at 257; City of Mt. Pleasant, Iowa v. Associated Elec. Coop., Inc., 838 F.2d 268, 273-74 (8th Cir. 1988). Rule 56(c) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

Discussion.

I.

The Court first addresses SBA's motion to dismiss, which asserts that dismissal is required because 15 U.S.C. § 634(b)(1) precludes the issuance of injunctive relief against the SBA. This section provides in pertinent part:

(b) In the performance of, and with respect to, the functions, powers, and duties vested in him by this chapter the Administrator may (1) sue and be sued in . . . any United States District Court, and such jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Administrator or his property.

15 U.S.C. § 634(b)(1).

This provision waives sovereign immunity by allowing the SBA's Administrator to sue and be sued and confers jurisdiction on the district courts to hear actions against the Administrator. See Expedient Services, Inc. v. Weaver, 614 F.2d 56, 58 (5th Cir. 1980). The SBA has cited no case law interpreting the provision, but the Court in independent research has found cases which state that it prohibits the issuance of an injunction against the Administrator. See, e.g., Emplanar, Inc. v. Marsh, 11 F.3d 1284, 1290 (5th Cir.), cert. denied sub nom Emplanar, Inc. v. West, 513 U.S. 926 (1994); Little v. United States, 489 F. Supp. 1012, 1016 (C.D.Ill. 1980), aff'd, 645 F.2d 77 (7th Cir. 1981) (unpublished table decision); Expedient Services, 614 F.2d at 58 ("a suit praying solely for injunctive relief against the Administrator is barred by the language of section 634(b)(1)"); Mar v. Kleppe, 520 F.2d 867, 869 (10th Cir. 1975); Palmer v. Weaver, 512 F. Supp. 281, 285 (E.D.Pa. 1981); Jets Services, Inc. v. Hoffman, 420 F. Supp. 1300, 1308-09 (M.D.Fla. 1976); cf. Mueller v. Abdnor, 1989 WL 62191, *1, No. 87-1965C(6) (E.D.Mo. June 7, 1989) (holding that language of 15 U.S.C. § 634(b)(1) precluded claim for injunctive relief in the nature of specific performance).

Other courts, however, have found that § 634(b)(1) does not bar injunctions in all circumstances. See Ulstein Maritime, Ltd. v. United States, 833 F.2d 1052 (1st Cir. 1987) (holding that declaratory judgment invalidating an SBA certificate of competency was not the equivalent of injunctive relief against SBA; stating in dicta that even if declaratory judgment were to be considered injunctive relief, district court had jurisdiction to enter injunction by virtue of 28 U.S.C. § 1491(a)(3)); Cavalier Clothes, Inc. v. United States, 810 F.2d 1108, 1111-12 (Fed. Cir. 1987); Related Indus., Inc. v. United States, 2 Cl.Ct. 517 (Cl. Ct. 1983). These decisions are readily distinguished because each was based on 28 U.S.C. § 1491(a)(3), now repealed, which specifically authorized the United States Court of Federal Claims to issue injunctive relief against the SBA. A few other decisions have stated that injunctive relief may be available against the Administrator when he exceeds his authority, but in each case the court refused to issue such relief. See, e.g., Valley Forge Flag Co., Inc. v. Kleppe, 506 F.2d 243, 245 (D.C. Cir. 1974); Ricks v. United States, 434 F. Supp. 1262, 1272 (S.D.Ga. 1976); Dubrow v. Small Business Admin., 345 F. Supp. 4, 7 (C.D.Cal. 1972).

The Eighth Circuit does not appear to have addressed this issue. This Court is inclined to agree with the weight of authority and hold that the plain language of § 634(b)(1) precludes the issuance of injunctive relief against the SBA. As plaintiffs' complaint seeks only injunctive relief, it should therefore be dismissed for failure to state a claim.

II.

In the alternative, in the event it is appropriate to determine whether the SBA has attempted to act outside of its authority prior to determining if injunctive...