United States v. Millsap

• Decision Date: 07 September 1962
• Docket Number: Civ. No. 4395.
• Citation: 208 F. Supp. 511
• Parties: UNITED STATES of America, Plaintiff, v. Howard L. MILLSAP and Violet E. Millsap, Defendants.
• Court: U.S. District Court — District of Wyoming

208 F. Supp. 511

UNITED STATES of America, Plaintiff, v. Howard L. MILLSAP and Violet E. Millsap, Defendants.

Civ. No. 4395.

United States District Court D. Wyoming.

September 7, 1962.

COPYRIGHT MATERIAL OMITTED

Robert N. Chaffin, U. S. Atty., Cheyenne, Wyo., for plaintiff.

G. L. Spence, of Spence, Hill, Oeland & Tschirgi, and Norman V. Johnson, Riverton, Wyo., for defendants.

KERR, Judge.

The United States has moved for judgment in accordance with its prior motion for directed verdict. It now contends that it established a prima facie case by showing that between 1953 and 1955 the defendants (hereinafter referred to as "Millsaps") executed the four promissory notes in issue and that there was an unpaid balance due on said notes. They conceded that they executed the notes in the aggregate amount of $18,000.00, and that the unpaid balance as of May 24, 1960, is $4,863.36. Millsaps denied, however, that the unpaid balance is due and owing the government. The case was tried before a jury, which returned its verdict in favor of Millsaps. The Court withheld the entry of judgment on the verdict in order to more thoroughly examine the regulations, statutes and decided cases. This has been done.

It is the position of the government that the record contains no evidence that either Millsaps or the officers of the government did what was required of them by the Code of Federal Regulations to effectuate a bona fide settlement, compromise or cancellation of the debt. The government avers that the facts fail to prove as a matter of law that the notes were cancelled, or that any agreements regarding settlement, cancellation or adjustment of the debt were made within the scope of the authority of the employees of the Farmers Home Administration or of the Department of Justice.

Millsaps contend that this litigation involves solely a factual issue. They argue that the government had complete control and supervision over the financial situation of the defendants. They assert that the agents of the government made certain representations to them upon which they relied to their detriment. They conclude that the government is now estopped from asserting any claim or demand against them and that the government is bound by the conduct of its employees and agents.

The jury was instructed that in order to bind the government "anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. * * *" Federal Crop Insurance Corp. v. Merrill et al., 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947). The regulations pertaining to the making or approving compromises, adjustments and to the cancelling of debts due the United States were also read to the jury.

At the close of all the evidence the government moved for a directed verdict, which was denied. Under Rule 50(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A., when the Court overrules a motion for directed verdict, it is deemed to have submitted the cause to the jury, conditioned upon the possibility that the Court may at a later date determine whether or not the defendant was legally entitled to judgment. Newton et al. v. Glenn et al., 5 Cir., 149 F.2d 879 (1945), cert. den. 326 U.S. 758, 66 S.Ct. 100, 90 L.Ed. 456.

Mine is not to reason why or speculate how the jury concluded that the agents and employees of the government and the debtors succeeded in cancelling the debt in accordance with the applicable rules and regulations. Mine is to ascertain whether such conclusion is supported by the facts and squared by the law of the case.

The authority of a trial judge to disturb jury verdicts is limited. Kippen v. Jewkes et al., 10 Cir., 258 F.2d 869, 873 (1958); Brodrick v. Derby et al., 10 Cir., 236 F.2d 35, 37 (1956). The propriety of the government's motion turns on the authority of the employees of the Department of Agriculture and of the Justice Department and whether they conducted themselves within and in accordance with such authority. If the County Supervisor, State Director and United States Attorney did have authority to cancel the debt in the manner alleged by them then it was proper to try the case on its merits and to submit it to the jury. If, on the other hand, such representatives of the government did not have the authority relied upon by Millsaps then the government is entitled to judgment. United States of America v. Swint, D.C., W.D.Ark., 185 F.Supp. 678 (1960).

Viewing all the evidence in the light most favorable to Millsaps, and assuming for the purposes of the motion that the facts elicited at the trial are true and undisputed, I am nevertheless persuaded that reasonable minded persons could not possibly draw different conclusions from the evidence. There is but one possible conclusion, namely, that the acts of the agents and employees of the government were not performed in accordance with the controlling rules and regulations and they did not lawfully cancel Millsaps' indebtedness.

They contend that the evidence proved to the jury that the alleged cancellation was effected by novation, set-off, liquidation, compromise, and estoppel. I shall briefly allude to each one of these defenses and illustrate how the evidence forecloses any conclusion that the regulations were adhered to.

They did not prove that the County Committee received or recommended the approval of any application by them for the settlement of their debt as required by 6 C.F.R. Section 364.2 (d). They attempted to prove that the County Supervisor, not the County Committee, agreed to a novation arrangement whereby they would obtain a qualified borrower who would assume their obligations to the government in exchange for a discharge by the government of the notes. If this purported assumption agreement were accepted by an agent of the government he did so beyond the bounds of his authority for he did not comply with 6 C.F.R. Section 371.39, which requires the prior approval by the National Office "when it is determined that such action will be to the advantage of the Government and the interested parties". The evidence does not show the requisite determination nor the prior approval by the National Office. Furthermore, Section 371.39 provides that the original borrower is not to be released from liability by an assumption agreement. The jury, therefore, was not warranted in finding that the debt was cancelled by an unauthorized and unapproved novation agreement.

Millsaps claim they were entitled to a set-off or credit which should be credited to their indebtedness to the government. Mr. Millsap testified that the County Supervisor orally agreed to credit his account with approximately $1,625.00 representing the value of hay which they delivered to another farm loan debtor, the time spent on that other debtor's affairs and the pasturing of his cattle, and the amount allegedly due from the sale of some mortgaged property. Mr. Millsap admitted that he has never filed a claim for these alleged credits. They do not urge that these so-called set-offs amounted to a cancellation of their debt. The jury could not find as a matter of fact that the sum of $1,625.00 was supposed to offset the $4,863.36 debt.

In their attempt to sustain the burden of their defense that the unpaid balance had been cancelled by an officer or agent of the government, they introduced evidence to show that the County Supervisor of the Farm Home Administration office represented to them that if they would liquidate all their chattels mortgaged by them to the government and apply the proceeds therefrom to their debt that the government would discharge the notes and release the mortgages. They asserted that they did sell the mortgaged chattels and delivered the proceeds to the government in full discharge of the notes. Section 364.2(g) is unequivocally opposed to any such arrangement. That regulation expressly provides that proceeds realized from the sale of security property "will not be used in making a compromise or adjustment offer." Under this section a debtor may...