United States v. Hump
| Citation | 515 F.Supp.3d 1015 |
| Decision Date | 27 January 2021 |
| Docket Number | 3:19-CV-03020-RAL |
| Court | U.S. District Court — District of South Dakota |
| Parties | UNITED STATES of America, Plaintiff, v. David HUMP, and Karen Hump, Individually, and d/b/a Bear Coat Bison, f/k/a Bear Coat Bison LLC, Defendants. |
Cheryl Schrempp DuPris, U.S. Attorney's Office, Pierre, SD, for Plaintiff.
James P. Hurley, Hurley Law Office, Rapid City, SD, for Defendants.
The United States brought a lawsuit against David and Karen Hump (collectively "the Humps") seeking to foreclose on Indian trust land located within the Cheyenne River Sioux Indian Reservation. Doc. 1. The United States filed a motion for summary judgment, Doc. 6, which the Humps oppose, Doc. 19.1 For the reasons explained herein, this Court now grants the United States’ motion for summary judgment.
In 1974, Congress authorized the creation of the Indian Loan Guarantee and Insurance Program (ILGP). 25 U.S.C. § 1481. Under the ILGP, the Secretary of Interior may guarantee up to 90 percent of the unpaid principal and interest due on loans made by lenders to qualified Indian2 borrowers. 25 U.S.C. § 1481. By reducing the risks normally associated with lending in Indian country,3 the program is meant to encourage lenders to offer conventional financing to Indian tribes and individuals. 25 C.F.R. § 103.2. The effect is that qualified Native borrowers obtain reasonable interest rates that would otherwise be unavailable to them. Id.
When an Indian borrower defaults on a loan guaranteed under the ILGP, the lender can submit a claim for loss to the Department of Interior (DOI). 25 C.F.R. §§ 103.36(d)(1), 103.37(a). Assuming the DOI accepts the lender's claim for the loss, the DOI will pay the lender the guaranteed portion of the loan. 25 C.F.R. § 103.37(e). The lender then must assign to the DOI its rights under the loan agreement, and the DOI is immediately subrogated to all rights of the lender under the loan agreement and can pursue collection efforts against the borrower. 25 U.S.C. § 1492 ; 25 C.F.R. § 103.38.
Since 1994, the Humps have been loan customers of the Farmers State Bank of Faith, South Dakota (the Bank). Doc. 7 at ¶ 1; Doc. 15 at ¶ 1. By January 2004, the Humps applied for additional loan funds from the Bank so that they could acquire interests in Indian trust land. Doc. 7 at ¶ 2; Doc. 15 at ¶ 2. The Bank sought loan guarantees from the DOI under the ILGP, and the DOI issued loan guarantees on February 4, 2004. Doc. 7 at ¶ 4; Doc. 15 at ¶ 4. Shortly thereafter, the Bank consolidated the Humps’ earlier notes and closed on three loans with the Humps. Doc. 7 at ¶ 5; Doc. 15 at ¶ 5. The Humps signed promissory notes and security agreements covering their livestock, machinery, and equipment, and the notes were cross-collateralized. Doc. 7 at ¶ 5; Doc. 15 at ¶ 5.
In October 2005, the Humps filed a Chapter 12 bankruptcy petition. Doc. 7 at ¶ 7; Doc. 8 at ¶ 5; Doc. 15 at ¶ 7. As required by regulation, the Bank submitted a claim of loss for $1,411,362.25 to the DOI.5 Doc. 7 at ¶ 8. In January 2007, the DOI paid the Bank's claim, and the Bank assigned their three loans to the United States. Doc. 7 at ¶ 9; Doc. 15 at ¶ 9. As of September 4, 2007, the total due to the DOI from the Humps on all three loans combined was $1,513,324.45. Doc. 8-1 at 5.
The Humps’ Chapter 12 Plan of Reorganization was confirmed on September 25, 2007. Doc. 7 at ¶ 10; Doc. 15 at ¶ 10. Under the plan, the Humps agreed to pay the United States $1 million. Doc. 7 at ¶ 11; Doc. 8 at ¶ 7; Doc. 15 at ¶ 11. To memorialize the terms of the plan, the DOI refinanced $1 million of the Humps’ unpaid debt with a new loan. Doc. 8 at ¶ 8. The Humps executed and delivered a promissory note in favor of the United States. Doc. 7 at ¶ 11; Doc. 8 at ¶ 9; Doc. 15 at ¶ 11. Under the 2008 promissory note, the Humps were to pay the Bureau of Indian Affairs (BIA) of the DOI the principal amount of $1 million plus interest. Doc. 1-1; Doc. 7 at ¶ 11; Doc. 15 at ¶ 11. Specifically, the Humps were to repay the loan over 27 years, with six percent interest per annum on $874,250, plus an additional balloon payment of $125,750 (without interest accrual) to be paid on September 1, 2034.
Doc. 1-1; Doc. 7 at ¶ 11; Doc. 15 at ¶ 11. The promissory note allowed for acceleration of the entire debt in the event of default. Doc. 1-1 at 1; Doc. 7 at ¶ 19; Doc. 15 at ¶ 19. The Humps also executed and delivered a real estate mortgage to 1,740.67 acres of Indian trust land in Ziebach County to the United States as security for the new loan. Doc. 1-4; Doc. 7 at ¶¶ 12–13; Doc. 15 at ¶¶ 12-13.
The remaining debt, $450,642.69, was unsecured. Doc. 8-1; Doc. 8-2; Doc. 8 at ¶ 13. Because the Humps’ 2008 promissory note and mortgage replaced the original three loans assigned by the Bank, the Secretary of the Interior decided to cancel the unsecured portion of the three loans assigned by the Bank pursuant to his authority under the Indian Financing Act. Doc. 8-1; Doc. 8 at ¶ 13. As required by Internal Revenue Service (IRS) regulation, the Humps received IRS Form 1099-Cs totaling $450,642.69 in 2018. Doc. 8-2; Doc. 8 at ¶ 13; Doc. 16-1 at 3–5.
The Humps defaulted on the 2008 promissory note; their last partial payment on the debt was made on December 30, 2014. Doc. 7 at ¶¶ 17–18. In 2018, the DOI accelerated the Humps’ loan and declared the remaining debt immediately due and payable. Doc. 1-2; Doc. 7 at ¶ 19; Doc. 15 at ¶ 19. The amount that the Humps currently owe to the United States is $1,211,782.16.6 Doc. 1-3; Doc. 7 at ¶ 20. After all other efforts at collection failed, Doc. 7 at ¶ 22, the United States brought this action to foreclose the mortgage, sell the property, and collect any remaining deficiency.
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment should be granted "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." A party opposing a properly made and supported motion for summary judgment "may not rely merely on allegations or denials in its own pleading; rather, its response must—by affidavits or as otherwise provided in this rule—set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e). "To survive summary judgment, a plaintiff must substantiate his allegations with enough probative evidence to support a finding in his favor." Adam v. Stonebridge Life Ins. Co., 612 F.3d 967, 971 (8th Cir. 2010) (quoting Roeben v. BG Excelsior Ltd. P'ship, 545 F.3d 639, 642 (8th Cir. 2008) ). In a determination of whether summary judgment is warranted, the evidence is "viewed in the light most favorable to the nonmoving party." True v. Nebraska, 612 F.3d 676, 679 (8th Cir. 2010) (quoting Cordry v. Vanderbilt Mortg. & Fin., Inc., 445 F.3d 1106, 1109 (8th Cir. 2006) ). "If opposing parties tell two different stories, the court must review the record, determine which facts are material and genuinely disputed, and then view those facts in a light most favorable to the non-moving party, as long as those facts are not so blatantly contradicted by the record that no reasonable jury could believe them." Id. ().
At the outset, the Humps challenge whether this Court has jurisdiction over this case and argue that the United States is required to exhaust its remedies in tribal court. Doc. 19 at 1–7. Of significance here is 28 U.S.C. § 1345, which states, "Except as otherwise provided by Act of Congress, the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress." From this statute, it follows that "district courts have original jurisdiction over suits brought by the United States to foreclose mortgages on realty situated within the district." United States v. American Horse, 352 F. Supp. 2d 984, 987 (D.N.D. 2005) (citation omitted). Included within this category of mortgages are mortgages executed on Indian trust land, where the loan itself is a product of a federal lending program. Id. at 986–990 ; see also United States v. Big Crow, CIV 15-5008, 2016 WL 884901, at *2 (D.S.D. Mar. 2, 2016) (); United States v. Crow Eagle, No. CIV 10-3004-RAL, 2010 WL 3942849, at *2 (D.S.D. Oct. 5, 2010) ().
Further, "The tribal exhaustion doctrine is based on a ‘policy of supporting tribal self-government and self-determination’ ... and it is prudential, rather than jurisdictional." Gaming World Int'l Ltd. v. White Earth Band of Chippewa Indians, 317 F.3d 840, 849 (8th Cir. 2003) (citations omitted). "Exhaustion is mandatory, however, when a case fits within the policy" of supporting tribal self-government and self-determination. Id. (citation omitted); Burlington N. R.R. Co. v. Crow Tribal Council, 940 F.2d 1239, 1245 (9th Cir. 1991). Tribal self-government or self-determination is not implicated merely because the United States seeks to foreclose on Indian trust land. United States v. Vanderwalker, No. CIV 10-3008-RAL, 2010 WL 5140476, at *3 (D.S.D. Dec. 10, 2010). This is especially true when the tribe is not involved in the action, id., and "the loan itself was authorized in accordance with a federal lending program," ...
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