United States v. Ford, EC 82-8-WK-P.

• Decision Date: 08 December 1982
• Docket Number: No. EC 82-8-WK-P.,EC 82-8-WK-P.
• Citation: 551 F. Supp. 1101
• Parties: UNITED STATES of America, Plaintiff, v. John R. FORD, et al, Defendants and Counterplaintiffs, v. Billy O. HUGHES, Third-Party Defendant.
• Court: U.S. District Court — Northern District of Mississippi

551 F. Supp. 1101

UNITED STATES of America, Plaintiff, v. John R. FORD, et al, Defendants and Counterplaintiffs, v. Billy O. HUGHES, Third-Party Defendant.

No. EC 82-8-WK-P.

United States District Court, N.D. Mississippi, E.D.

December 8, 1982.

Falton O. Mason, Asst. U.S. Atty., Oxford, Miss., for plaintiff.

Clencie Cotton, Tupelo, Miss., for the Weatherspoons.

Frank Russell, Fulton, Miss., for Billy O. Hughes.

MEMORANDUM OPINION

KEADY, District Judge.

This case was initiated on January 11, 1982, by the United States as plaintiff against John R. Ford and Barbara D. Ford seeking to evict defendants from the possession of their residential property in Itawamba County, Mississippi, on the ground that the rural housing loan made to them by Farmers Home Administration (FmHA) had been foreclosed for default in payment of the mortgage indebtedness and the property sold at foreclosure sale to the United States as the highest bidder. The named defendants answered denying validity of the foreclosure and asserted a counterclaim for injunctive relief against FmHA from conducting unlawful nonjudicial foreclosure proceedings against persons of counter-claimants' class having rural housing loans and to require FmHA to resort to judicial foreclosures. Supplemental proceedings as to the Fords resulted in the government's confession as to the invalidity of the Ford foreclosure. This resulted in dismissal of the government's original suit without prejudice.

Meanwhile, Archie L. Weatherspoon and Jessie C. Weatherspoon, husband and wife, had, pursuant to an order of the United States Magistrate entered on April 21, intervened to propound their claims against the government. The Weatherspoons, hereinafter plaintiffs, alleged in their counterclaim that their own residential property, also located in Itawamba County, was unlawfully foreclosed on February 1, 1982, in a nonjudicial sale conducted by FmHA, and that Billy O. Hughes had bought the property as highest bidder. Plaintiffs alleged that their property was foreclosed without personal notice to them or an opportunity to present their defenses to foreclosure and also without being advised of their right to apply for moratorium relief and other benefits provided by federal law.

Thereafter the government as counterdefendant and the Weatherspoons as counter-plaintiffs filed cross motions for summary judgment. Both motions were denied. On July 19, the court granted Weatherspoons' motion to stay an action in the Chancery Court of Itawamba County by Hughes seeking an injunction for the Weatherspoons to surrender possession of the house to him as the present owner. The case was set for trial on the merits August 23, and Hughes was granted leave to file a claim against the government for refund of the purchase price in event the foreclosure was voided, or, if it was held valid, against Weatherspoons for possession of the house and for reasonable rent from the date of foreclosure. To this end Hughes timely filed appropriate pleadings. The court conducted an evidentiary hearing as scheduled. Following oral argument and having maturely considered the matter, the court finds that the case is ripe for decision and incorporates herein findings of fact and conclusions of law as follows:

I. FACTS

On February 15, 1972, the Weatherspoons consummated a rural housing loan for $12,000 with FmHA, the proceeds of which were used to purchase a dwelling house eight miles southwest of Fulton. The indebtedness was secured by a first deed of trust on the residence payable over a period of 33 years commencing January 1, 1974, and carrying an interest rate of 7¼% per annum. Although the note stipulated annual payments commencing at $866 and increasing to $966, monthly installments of $80.50 beginning January 1, 1974, were provided for. The loan was serviced by FmHA's Itawamba County office. In the ensuing years the Weatherspoons became delinquent in paying taxes for five years ending 1979, and failed to pay insurance premiums against the residence for three years. FmHA made advances to cover these items. Because of the delinquency, the account was several times placed in liquidation but then reinstated as the borrowers made payments on the delinquent balance. In December 1976 the Weatherspoons filed a petition in bankruptcy. FmHA's security was released from the bankruptcy proceeding, and the Weatherspoons on August 2, 1977, executed a new promise to FmHA to pay the mortgage indebtedness.

Thereafter, the borrowers were habitually in arrears in monthly payments. As relevant to the present case, the delinquency continued to exist on April 13, 1978, and even though they made a payment of $870 in 1980, they were still behind. On October 9, 1981, the Weatherspoons reported a joint annual income of $11,000. At that time, Archie Weatherspoon was notified that the account had to be made current if he wished to keep the house.

Notwithstanding FmHA's collection efforts, the delinquency persisted until June 26, 1981, when Archie Weatherspoon appeared at the FmHA County office and conferred with Donald F. Holley, County Supervisor. At this meeting, Holley informed Weatherspoon that the account had a delinquency of $1,474.33. Holley also advised Archie Weatherspoon of the conditions set forth in FmHA's prior letter to him dated May 26, 1981, the relevant portions of which are set forth in the margin below.¹ On that date, Archie Weatherspoon made a $500 payment and agreed to pay FmHA $100 each week until the account was brought current. The various options set forth in the FmHA letter to Weatherspoons were discussed. Despite this promise, the Weatherspoons made no payments thereafter.

Between April 13, 1978 and May 26, 1981, the Weatherspoons were sent five notices by the FmHA County office which contained an identical paragraph as to moratorium relief. Note 1. The Weatherspoons never asked for moratorium relief nor inquired of Holley or any other FmHA official whether they were eligible for such relief to defer the monthly payments during a period of financial crisis. Both Archie and Jessie were regularly employed, and there is no evidence that either became disabled because of accident, illness or injury to them or any family dependent, nor is there evidence of any circumstance brought to FmHA's attention indicating financial crisis such as to impair their standard of living.

FmHA determined to accelerate the debt and proceed with foreclosure. On August 27, 1981, FmHA mailed the Weatherspoons OGC Form 1438 Notice of Acceleration of Indebtedness and Demand for Payment. This notice read in part as follows:

You have breached the obligations under said deed(s) of trust by:

Failure to pay the principal and interest as same became due and payable.

Failure to keep the security property insured as required.

Therefore, the United States of America is hereby informing you of its election to accelerate the indebtedness secured by said deed(s) of trust.

Accordingly, the United States of America declares that the entire unpaid indebtedness is due and payable immediately. The indebtedness referred to consists of the

principal sum of $12,272.69 plus interest of $483.39

accrued through July 27, 1981, with interest accruing thereafter at the daily rate of $2.3417. You are hereby notified that unless said indebtedness is paid in full within 20 days from the date of this notice, the United States of America will take action to foreclose. Any negotiation by the United States of America of any remittance tendered by you, whether mailed to the National Finance Office or whether paid directly to the County Supervisor or State Director's Office, will not constitute a waiver of this acceleration or institution of foreclosure action. Payment of the indebtedness should be made by cashier's check, certified check, or postal money order payable to the Treasurer of the United States and delivered or mailed either to this office or to our Farmers Home Administration County Supervisor, Donald F. Holley, whose address is Spencer Building, 302 West Cedar Street P.O. Box 159, Fulton, MS 38843.

HOWEVER, YOU HAVE THE OPPORTUNITY TO HAVE A MEETING BEFORE THIS FORECLOSURE TAKES PLACE. If you wish to make use of this opportunity to meet because you believe that the United States is in error in accelerating your account(s) and proceeding with the foreclosure, or because you have not been advised of your right to request a moratorium on payments on your rural housing loan account, you should IMMEDIATELY contact the District Director of the Farmers Home Administration in writing at the following address:

Mr. Johnny H. Dean Old Bank Building P.O. Box 27 Calhoun City, MS 38916

You should set out all the information you believe should be considered by the Farmers Home Administration. You may also request to appear in person to present your information. The District Director will arrange a mutually convenient time for such a meeting. The District Director will also inform you of the location of the meeting. It will either be in the County Office or the District Office.

Please remember that if you wish to take advantage of this opportunity to be heard, you may IMMEDIATELY contact the District Director because the United States plans to proceed with foreclosure proceedings shortly after September 16, 1981.

The above notice was sent by certified mail to the Weatherspoons at their usual mailing address. A notice of certified mail was placed in their rural mail box and on September 4 Linda Weatherspoon, the 20 year old daughter of Archie and Jessie Weatherspoon, received the letter, signing for the certified mail, opened the envelope, read the notice and placed it on the breakfast table in the family home. Linda was a high school graduate with one year of junior college. She routinely read letters to her parents since neither of them could read. It was customary for Linda and at times her older sister, Evelyn, who was 25 and had junior...