U.S. v. Thornburg

• Decision Date: 03 May 1996
• Docket Number: No. 94-16927,94-16927
• Parties: , 96 Cal. Daily Op. Serv. 3129, 96 Daily Journal D.A.R. 5157 UNITED STATES of America, Plaintiff-Appellant, v. Ruth G. THORNBURG; Michael D. Thornburg; David Jean Thornburg; Kathy Ann Northington, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 886

82 F.3d 886

64 USLW 2722, 96 Cal. Daily Op. Serv. 3129,

96 Daily Journal D.A.R. 5157

UNITED STATES of America, Plaintiff-Appellant, v. Ruth G. THORNBURG; Michael D. Thornburg; David Jean

Thornburg; Kathy Ann Northington, Defendants-Appellees.

No. 94-16927.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 13, 1996.

Decided May 3, 1996.

Sean A. Lev, United States Department of Justice, Washington, D.C., for appellant.

Bruce R. Borad, Borad and Wood, Arnold, California, for appellees.

Appeal from the United States District Court for the Eastern District of California; Dennis L. Beck, U.S. Magistrate Judge, Presiding.

Before: ALARCON, KLEINFELD, and HAWKINS, Circuit Judges.

ALARCON, Circuit Judge:

The United States appeals from the judgment entered in favor of Ruth Thornburg, Michael Thornburg, David Thornburg and Kathy Northington (collectively "the Thornburgs"), in this action for breach of a personal guaranty and foreclosure of the mortgage securing it. The district court entered its judgment after the United States stipulated that its action to enforce the personal guaranty was barred by the applicable federal statute of limitations.

The United States contends that the district court erred in holding that foreclosure of the mortgage was barred because the time for enforcement of the note and the personal guaranty had lapsed under state law. The Thornburgs contend for the first time on appeal that the United States' foreclosure action is time-barred because the Oklahoma and California statutes of limitations had run before the bank reassigned the note and the personal guaranty to the Small Business Administration ("SBA") in 1985.

We conclude that the district court erred in applying state lien expiration laws to bar the United States' mortgage foreclosure action because laws limiting the time for filing an action are inapplicable to claims filed by the United States.

I

The record of the undisputed evidence presented to the district court discloses the following facts: On December 15, 1977, the Thornburg Lumber Co., Inc., executed and delivered a promissory note ("Note") in the amount of $500,000 to the Poteau State Bank of Poteau, Oklahoma. Payment of the loan was guaranteed by the SBA. Ruth and Pete Thornburg ¹ also executed and delivered to the Bank their personal guaranty ("the Thornburgs' personal guaranty") that they would pay the amount due on the note upon default. To secure their personal guaranty, Ruth and Pete Thornburg executed a mortgage on certain real property located in Calaveras County, California ("Mortgage").

On April 15, 1980, Ruth and Pete Thornburg defaulted on the Note. Shortly thereafter, the Bank declared the entire amount of the Note immediately due and payable. After Ruth and Pete Thornburg failed to pay the Note, the SBA paid the Bank the amount owing on the Note. On December 12, 1980, the Bank assigned its interest in the Note, the Thornburgs' personal guaranty, and the Mortgage to the SBA. On May 18, 1984, the SBA assigned the Note and the Thornburgs' personal guaranty to the Bank for collection purposes. The Bank failed to collect on the Note or the Thornburgs' personal guaranty. On August 19, 1985, the Bank reassigned these documents to the SBA.

On September 23, 1985, the SBA sent a letter to Ruth Thornburg demanding payment of the unpaid balance of the Note pursuant to the Thornburgs' personal guaranty. Ruth Thornburg subsequently filed for bankruptcy on October 14, 1986. The bankruptcy proceeding was dismissed on August 12, 1988.

The SBA renewed its demand for payment of the Thornburgs' personal guaranty on April 2, 1992. After Ruth Thornburg failed to pay the amount due on the Note, the United States filed this action on June 10, 1992. The United States' complaint stated two claims. In the first claim, the United States sought enforcement of the Thornburgs' personal guaranty. In the second claim, the United States sought to foreclose the Mortgage executed by Ruth and Pete After the Thornburgs filed an answer to the complaint, the United States moved for summary judgment. In response to the United States' motion, the Thornburgs argued that the action should be dismissed because the time to file an action to enforce the Thornburgs' personal guaranty had expired. The district court determined that there were genuine issues of disputed fact that precluded summary judgment as to whether the relevant federal statute of limitations, 28 U.S.C. § 2415(a), ⁴ barred the United States from collecting on the Thornburgs' personal guaranty. The district court opined that if the United States was barred by section 2415(a) from collecting on the Thornburgs' personal guaranty, it was also barred by the law of Oklahoma and California from foreclosing on the Mortgage securing the debt. The district court reasoned that, since under the law of Oklahoma and California a lien cannot be enforced after the statute of limitations regarding the underlying debt has expired, the same procedural bar would be applicable to an attempt to foreclose on a mortgage securing payment of the debt.

                Thornburg as security for the loan.   The district court had jurisdiction over the United States' action pursuant to 28 U.S.C. § 1345 2 and 15 U.S.C. § 634(b)(1). 3
                

After the district court entered its order denying the United States' motion for summary judgment, the parties stipulated that prosecution of the United States' claim on the Thornburgs' personal guaranty was barred by the federal statute of limitations for contract actions contained in 28 U.S.C. § 2415(a). Thereafter, the district court entered final judgment in favor of the Thornburgs. The district court held that the United States could not foreclose on the Mortgage because the time had expired for the filing of an action to seek enforcement of the Note and the Thornburgs' personal guaranty under Oklahoma and California law.

II

The Thornburgs contend for the first time on appeal that the right to enforce the Thornburgs' personal guaranty and to foreclose on the Mortgage expired under Oklahoma or California law while the Bank was holding the Thornburgs' personal guaranty. According to the Thornburgs, the Bank's right to enforce the Thornburgs' personal guaranty accrued when the Bank demanded payment in April of 1980. They argue that under California law the Bank's right to bring an action on the Note or the Thornburgs' personal guaranty expired four years later in April of 1984. The Oklahoma statute of limitations barred the filing of an action by the Bank in April of 1985. ⁵ Accordingly, the Thornburgs assert that when the Bank subsequently reassigned the Thornburgs' personal guaranty to the SBA on August 19, 1985, the SBA was barred from enforcing the right to collect under the Thornburgs' personal guaranty, or to foreclose on the Mortgage, because the Bank's right to file an action had previously expired under the applicable state law. "It is settled law that state limitations statutes are relevant in determining a claim's viability at the time the federal agency acquires the claim.

If the state statute of limitations has expired before the government acquires a claim, that claim is not revived by transfer to a federal agency." FDIC v. Former Officers & Directors of Metro. Bank, 884 F.2d 1304, 1309 n. 4 (9th Cir.1989), cert. denied, 496 U.S. 936, 110 S.Ct. 3215, 110 L.Ed.2d 662 (1990).

Although the general rule in this circuit is that an appellate court will not consider an issue raised for the first time on appeal, we will reach the question if it is purely one of law and the opposing party will suffer no prejudice because of failure to raise it in the district court. United States v. Carlson, 900 F.2d 1346, 1349 (9th Cir.1990). Whether the six-year federal limitation period continued to apply after the SBA reassigned the Note and the Thornburgs' personal guaranty to the Bank for collection purposes is an issue of law. Because the United States has argued the merits of this contention in its reply brief, we have concluded that it will not be prejudiced if we address this question.

The United States maintains that its right to enforce the Note and the Thornburgs' personal guaranty did not expire under state law following the May 18, 1984 reassignment of these documents to the Bank for the purpose of collection. The United States correctly asserts that the state statute of limitations no longer applied following the assignment of the Note and the Thornburgs' personal guaranty to the SBA on December 12, 1980. See Industrial Indem. Ins. Co. v. United States, 757 F.2d 982, 987 (9th Cir.1985) (six-year federal limitations period became applicable when the United States acquired claims from the Union Pacific Railroad within the five-year state limitation period).

The United States argues that the applicability of section 2415(a) was not affected by the assignment of the Note and the Thornburg's personal guarantee for the purpose of collection. We agree.

Our research has not disclosed any decision that has considered the question whether the six-year federal statute of limitations applies where the federal government has not sold its right to collect on a debt but has merely assigned that debt to a private party for collection purposes. Section 2415(a) is silent concerning the applicability of the six-year federal statute of limitations to an assignee of the federal government.

With one exception, each of the federal and state courts that has considered the question has concluded that an assignee of the federal government may invoke the six-year statute of limitations in enforcing its right to collect on the debt. In FDIC v. Bledsoe, 989 F.2d 805 (5th Cir.1993), State Federal Savings and Loan Association ("State Federal"), a private loan institution, purchased a note and a personal guarantee possessed by the Federal Savings and Loan Insurance Corporation ("FSLIC"), as the receiver of the assets of an...