U.S. v. Johnson

• Decision Date: 12 November 1996
• Docket Number: Civil No. 95-C-838W.
• Citation: 946 F.Supp. 915
• Parties: UNITED STATES of America, Plaintiff, v. Jamis M. JOHNSON, Defendant.
• Court: U.S. District Court — District of Utah

Page 915

946 F.Supp. 915

UNITED STATES of America, Plaintiff, v. Jamis M. JOHNSON, Defendant.

Civil No. 95-C-838W.

United States District Court, D. Utah, Central Division.

November 12, 1996.

John S. Gygi, Salt Lake City, UT, for Plaintiff.

Victor Lawrence, Salt Lake City, UT, for Defendant.

MEMORANDUM DECISION AND ORDER GRANTING THE UNITED STATES' MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING JOHNSON'S MOTION FOR SUMMARY JUDGMENT

WINDER, Chief Judge.

This matter is before the court on the United States of America's (the "United States") motion for partial summary judgment and Jamis M. Johnson's ("Johnson") cross-motion for summary judgment. The court held a hearing on both motions on October 9, 1996. At the hearing, John S. Gygi represented the United States and Victor Lawrence represented Johnson. Before the hearing, the court considered carefully the memoranda and other materials submitted by the parties relating to their cross-motions. The court had also read certain of the authorities cited by each of the parties. Following oral argument, and after taking the motions under advisement, the court has further considered the law and facts related to each motion. Having now fully considered the issue in this case, and good cause appearing, the court enters the following memorandum decision and order.

I. BACKGROUND

On May 31, 1990, Red Rock Saddle Company, Inc. ("Red Rock Saddle") executed and delivered to Rio Blanco State Bank a promissory note in the principal amount of $215,000.00 (the "Note"). On the same day, Johnson executed a guaranty agreement by which he personally guaranteed repayment of the Note. The Small Business Administration (the "SBA"), an agency of the United States government, is a successor-in-interest to the Note and Johnson's guaranty.

Red Rock defaulted under the terms of the Note. Following the default, and beginning in November 1991, the SBA made repeated demands on Johnson to pay the amounts due and owing under the Note pursuant to the terms of his guaranty. Johnson, however, did not make payment as demanded. Subsequently, the SBA scheduled a foreclosure sale on the real and personal property owned by Red Rock Saddle. One month before the scheduled sale, the trustee under the trust deed sent notice of the sale by certified mail to Johnson. The letter went unclaimed by him. On November 3, 1994, the SBA held the foreclosure sale as scheduled and sold Red Rock Saddle's real property for $37,000.00 and its personal property for $5,000.00. The SBA incurred a total of $7,487.64 in costs and expenses in conjunction with the sale of the real and personal property. Approximately ten months later, on September 14, 1995, the SBA brought this action against Johnson under the Small Business Act, 15 U.S.C. § 631 et seq., to enforce the terms of Johnson's guaranty. As of that date, the outstanding balance of the Note was $280,199.47, which included a principal balance of $177,599.55 and accrued interest of $102,599.92.

On October 16, 1995, Johnson filed an answer to the SBA's complaint and therein stated that the "allege[d] claim of the complaint is barred by the applicable statute of limitations, and more particularly UCA § 57-1-[32]."¹ The relevant portion of § 57-1-32 provides:

At any time within three months after any sale of property under a trust deed, ... an action may be commenced to recover the balance due upon the obligation for which the trust deed was given as security....

Utah Code Ann. § 57-1-32 (1994) (emphasis added).²

On May 16, 1996, the SBA filed a motion for partial summary judgment seeking an order from the court declaring that the SBA is not bound by the three-month statute of limitations found in Utah Code Ann. § 57-1-32.³ The SBA argued that because federal law governs the SBA nationwide loan program, the federal statute of limitations found in 28 U.S.C. § 2415(a) is the appropriate law to apply in this action to enforce Johnson's guaranty. Section 2415(a) states: "[E]very action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues." 28 U.S.C. § 2415(a) (1994). The SBA contends that its action against Johnson on his guaranty is founded upon a contract and is thus governed by the six-year federal statute of limitations and not a shorter state statutory period. In addition, the SBA claims that both the common law and the SBA regulations immunize the SBA from state statutes of limitation. The SBA contends that as an agency of the United States, it is immune from state statutes of limitation and that the SBA regulation, which states that a person receiving assistance from the SBA "shall not be entitled to claim or assert any local immunity to defeat the obligation such person incurred," precludes Johnson's attempt to use the state statute of limitations as a defense. United States' Memorandum in Support of Partial Summary Judgment at 5 (citing 13 C.F.R. § 101.1(d)).

In response to the SBA's motion for partial summary judgment, Johnson filed a cross-motion for summary judgment on June 21, 1996, seeking an order from the court: (1) adopting Utah Code Ann. § 57-1-32 as the federal rule of decision in this case; and (2) dismissing the SBA's action as barred by the Utah statute. Johnson agrees with the SBA that federal law governs actions involving nationwide federal loan programs. However, he contends that the six-year federal statute of limitations found in 28 U.S.C. § 2415(a) does not pre-empt the three-month statute of limitations found in Utah Code Ann. § 57-1-32. Johnson argues that if his guaranty was "a separate unsecured obligation," § 2415(a) would apply and the SBA could bring an action to recover under the guaranty anytime within six years. However, Johnson contends that because his guaranty was secured by real property, the sale of the real property securing the agreement invokes the time limitation found in § 57-1-32. Johnson argues that where the SBA availed itself of the benefits of the Utah statute by bringing a nonjudicial foreclosure, it should not be allowed to avoid complying with the time restriction in the statute to "bail [itself] out of its predicament."

II. SUMMARY JUDGMENT STANDARD

Summary judgment is proper "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." Fed.R.Civ.P. 56(c). In applying this standard, the court must construe all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Chiles v. Ceridian Corp., 95 F.3d 1505, 1510 (10th Cir.1996).

Once the moving party has carried its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by ... affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986) (quoting Fed. R.Civ.P. 56(e)); see also Gonzales v. Millers Cas. Ins. Co., 923 F.2d 1417, 1419 (10th Cir.1991).⁴ The non-moving party must "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, 477 U.S. at 322, 106 S.Ct. at 2552.

In considering whether there exist genuine issues of material fact, the court does not weigh the evidence but instead inquires whether a reasonable jury, faced with the evidence presented, could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986); Clifton v. Craig, 924 F.2d 182, 183 (10th Cir.1991).⁵ Finally, all material facts asserted by the moving party shall be deemed admitted unless specifically controverted by the opposing party. D.Utah R. 202(b)(4).

III. DISCUSSION

It is well settled that federal law controls the government's rights and responsibilities under nationwide programs like the SBA's federal loan program. See United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 1457, 59 L.Ed.2d 711 (1979); United States v. Ward, 985 F.2d 500, 503 (10th Cir.1993); United States v. Lattauzio, 748 F.2d 559, 561 (10th Cir.1984). However, where no specific federal statute or regulation governs the case at hand, "it is for the federal courts to fashion the governing rule of law according to their own standards." Clearfield Trust Co. v. United States, 318 U.S. 363, 367, 63 S.Ct. 573, 575, 318 U.S. 744, 87 L.Ed. 838 (1943). In fashioning a rule of law where no specific federal law governs, federal courts will occasionally select state law to fill the void. Id.; Lattauzio, 748 F.2d at 561-62. Johnson argues that there is no specific federal law which addresses the rights of parties in post-foreclosure deficiency actions brought by the SBA. Therefore, he asks this court to adopt the three-month statute of limitations found in Utah Code Ann. § 57-1-32, Utah's deficiency judgment statute, as the governing rule of law. The SBA, however, argues that 28 U.S.C. § 2415 is specific federal law which governs this case and thus there is no void to be filled by state law. Aside from that argument, the SBA also contends that the Utah statute of limitations cannot be applied in this case because it is a state statute of limitations from which the SBA, as an agency of the United States, is immune.

The court has carefully considered all of the arguments made by both parties and finds the SBA's immunity argument persuasive. The United States Supreme...