Wilkinson v. U.S., 04-2185.

• Decision Date: 13 March 2006
• Docket Number: No. 04-2185.,04-2185.
• Citation: 440 F.3d 970
• Parties: Virgil WILKINSON; Charles Wilkinson; Alva Rose Hall; Wilbur D. Wilkinson, for themselves and as heirs of Ernest Wilkinson, Mollie Wilkinson, Harry Wilkinson and Virginia Wilkinson, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

440 F.3d 970

Virgil WILKINSON; Charles Wilkinson; Alva Rose Hall; Wilbur D. Wilkinson, for themselves and as heirs of Ernest Wilkinson, Mollie Wilkinson, Harry Wilkinson and Virginia Wilkinson, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

No. 04-2185.

United States Court of Appeals, Eighth Circuit.

Submitted: June 20, 2005.

Filed: March 13, 2006.

Robert E. Goodman, Jr., argued, Dallas, Texas (Richard L. Howell, Dallas, Texas, on the brief), for appellant.

Cameron W. Hayden, Asst. U.S. Atty., argued, Bismarck, North Dakota, for appellee.

Before MELLOY, HEANEY, and GRUENDER, Circuit Judges.

MELLOY, Circuit Judge.

The plaintiffs allege that they held current or prospective possessory interests in allotted Indian Trust Land. They also allege that a Bureau of Indian Affairs (BIA) officer improperly leased the allotted land without legal authority and diverted a portion of the income from those unauthorized leases to the Farm Service Administration (FSA)¹, a mortgage creditor. The plaintiffs present claims for damages under the Federal Tort Claims Act, 28 U.S.C. § 1346(b), based on conversion and trespass. They also present direct claims against several federal employees under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), alleging procedural and substantive due process violations under the Fifth Amendment of the United States Constitution. The district court dismissed all claims on jurisdictional grounds, finding that the plaintiffs lacked standing. Because we conclude upon de novo review that the plaintiffs have standing, we reverse and remand for consideration of the claims on their merits.

I. Facts

A. The Underlying Debt

Ernest and Mollie Wilkinson, husband and wife, were registered members of the Three Affiliated Tribes of the Fort Berthold Reservation in North Dakota. They owned descendable possessory interests in allotted Indian Land held in trust for them by the BIA. Included among these lands were Allotments 3016 (a.k.a. Allotment 176A), 1366, 1357, and 371. Ernest and Mollie, through a family farming enterprise with their children, farmed these lands together with land that the children owned. Starting in the 1970s, Ernest and Mollie borrowed against their own land with mortgage loans from the FSA, and the Secretary of the Interior approved the mortgage loans.² Ernest and Mollie also executed assignments of income from trust land for all land that they owned on the Fort Berthold Reservation. Ernest and Mollie repeatedly rescheduled their mortgage debt. They also received a substantial write-down of the outstanding balance on their mortgage debt in 1990. It is undisputed that, at all times relevant to this case, the amount of the outstanding mortgage debt exceeded the value of the land. It is also undisputed that the mortgages gave the FSA the right, through the proper legal channels, to "take possession of, operate or rent the property" or to foreclose upon the mortgage.

B. Succession of Interests in the Land

Mollie died in 1991. The Department of the Interior probated her estate and, in 1993, ordered the Superintendent of the Fort Berthold Reservation to distribute her real property in part to her husband Ernest and in part to two of her children, Harry and Virginia Wilkinson. Ernest was to receive Allotment 1366 consisting of five acres. Harry was to receive Mollie's interest in Allotment 176A consisting of 133.42 acres. Virginia was to receive Allotments 371 and 1357 collectively consisting of 80 acres. Virginia and another child, Charles D. Wilkinson, were to receive the rest and residue of Virginia's estate. The plaintiffs allege that the Superintendent failed to carry out the final probate order and that distribution under Mollie's estate never occurred. The defendants do not appear to contest this fact. An Individual Indian Money account held by the BIA in Mollie's name remains open.

In 1994, Harry died. His estate was probated in 1997, and it was determined that Ernest was Harry's sole heir. Accordingly, Harry's land passed to Ernest. Also, land that Harry did receive or should have received from Mollie's estate passed or should have passed to Ernest.

Ernest died on November 28, 1997. Probate proceedings regarding Ernest's estate were not commenced until 2003, after the filing of this action. Although the parties agree that probate is still open on Ernest's estate, the plaintiffs allege that Ernest's heirs are Virgil, Charles, and Wilbur Wilkinson.

Virginia Wilkinson died November 27, 1998. The final probate order for Virginia's estate issued in 2003. This final order directed the distribution of her property in equal shares to six relatives, including plaintiffs Wilbur, Charles, and Virgil Wilkinson and plaintiff Alva Rose Hall.

C. The FSA's Demands and the BIA's Actions

In 1980-82, 1984-88, and 1991-92, the FSA sent letters to the BIA requesting payment under the assignments of income from trust property that Ernest and Mollie had executed. The plaintiffs do not allege that the BIA took action to assist the FSA until approximately November 1992, when the BIA placed holds on Ernest's and Mollie's Individual Indian Money accounts. Although the FSA communicated with the BIA, it does not appear that the FSA declared any of the loans to be in default, accelerated the balance due, or made demands to the borrowers.

On January 10, 1994, the FSA again sent a letter to the BIA requesting payment under the assignments of income from trust property that Ernest and Mollie had executed. The January 10, 1994 letter from the FSA to the BIA listed the debtors as "Ernest Wilkinson and Mollie Wilkinson Est." The FSA sent the 1994 letter after the Department of the Interior had issued the final probate order in Mollie's estate. The FSA had not made a claim against Mollie's estate during the probate proceedings.

On August 5, 1996, the FSA sent a letter to the BIA asking for assistance in the collection of payments on the mortgage loans. The August 5 letter did not state that the Wilkinsons were in default on any mortgage nor demand that the BIA lease the mortgaged land to generate income. On February 19, 1997, the BIA's Superintendent for the Fort Berthold Reservation, Adeline Brunsell, advertised certain tracts of the mortgaged land for lease, with sealed bids to be opened on March 19, 1997.

On March 13, 1997, Superintendent Brunsell sent a letter addressed to Ernest and Mollie stating that the BIA intended to lease the land because the FSA had not been receiving payments to apply to the mortgage loans. On March 18, Ernest asked Superintendent Brunsell to remove the land from the lease offering and notified her that the land she advertised for lease included the homestead as well as land that the family was actively farming. On March 24, BIA employee Angus Fox, acting on behalf of Superintendent Brunsell, informed Ernest that the land would not be removed from the lease offering because the FSA had not been receiving payment on the mortgages.

On April 3, 1997, Ernest filed a notice of appeal with Superintendent Brunsell. Superintendent Brunsell refused to stay her decision to lease the land. On April 8, Ernest filed a notice of appeal with BIA Area Director Gary Foell. On June 20, 1997, Area Director Foell denied the appeal. On August 6, 1997, Ernest, along with the plaintiffs in this case, filed a notice of appeal with the Interior Board of Indian Appeals ("Interior Board").

In their brief to the Interior Board, the plaintiffs argued that Superintendent Brunsell had no legal authority to lease the lands or place holds on Ernest's and Mollie's money accounts, that Superintendent Brunsell failed to stay her decision as required under leasing regulations, and that her actions comprised a constructive foreclosure of the Wilkinsons' family farm. The plaintiffs also requested damages. No personnel from the BIA responded to the plaintiffs' brief to the Interior Board.

The FSA claims that it sent a notice of acceleration and demand for payment to Ernest and Mollie on October 9, 1997. Mollie had been dead for six years by this time and the final order in her probate estate was four years old. The plaintiffs claim that Ernest did not receive the notice.

In an order dated July 6, 1998, the Interior Board reversed the earlier decisions of Superintendent Brunsell and Area Director Foell and held that Superintendent Brunsell had no legal authority to lease the Wilkinson's land. The Interior Board stated that neither Superintendent Brunsell nor Area Director Foell had indicated their source of authority to lease the lands. The Interior Board stated that the only possible authority would have been 25 C.F.R. § 162.2(a)(3) or (5) (1998).³ Those subsections provide, respectively, that the BIA may lease individually owned land for the benefit of undetermined heirs of an estate or for Indians who have given the Secretary of the Interior written authority to execute leases on their behalf. The Interior Board determined that because the 1993 probate order in Mollie's estate determined her heirs, subsection (a)(3) did not apply. Also, the Interior Board determined that subsection (a)(5) did not apply because the assignments of income "authorize[d the] BIA only to pay FSA from income from the trust property; it [did] not authorize [the] BIA to lease that property in order to generate income." Finally, the Interior Board held that it had no jurisdiction to award damages and remanded to the Area Director to address the issue of holds on the money accounts.

No party sought judicial review of the Interior Board's decision.⁴ On remand, the Area Director held that because the BIA lacked the authority to advertise and lease the lands, the BIA also lacked the authority to place a hold on Mollie's account and lacked the authority to pay the FSA from the proceeds of the unauthorized leases. The Area Director ordered...