Williams v. Butz

• Decision Date: 03 May 1988
• Docket Number: No. 87-8094,87-8094
• Citation: 843 F.2d 1335
• Parties: Lucious WILLIAMS, Jr., et al., Plaintiffs-Appellees, v. Earl BUTZ, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1335

843 F.2d 1335

11 Fed.R.Serv.3d 48

Lucious WILLIAMS, Jr., et al., Plaintiffs-Appellees, v. Earl BUTZ, et al., Defendants-Appellants.

No. 87-8094.

United States Court of Appeals, Eleventh Circuit.

May 3, 1988.

Kenneth C. Etheridge, Asst. U.S. Atty., Savannah, Ga., Jeffrey Clair, Alfred Mollin, Robert S. Greenspan, Dept. of Justice, Washington, D.C., for defendants-appellants.

Kay Y. Young, Georgia Legal Services Program, Atlanta, Ga., for plaintiffs-appellees.

Appeal from the United States District Court of the Southern District of Georgia.

Before RONEY, Chief Judge, HATCHETT, Circuit Judge, and HAND, ^* Chief District Judge.

RONEY, Chief Judge:

The Farmers Home Administration (FmHA) appeals the denial of its motion to modify a consent decree which required it to use only judicial proceedings to foreclose mortgages on homes purchased under the Rural Housing loan program of Section 502(a), Title V of the Housing Act of 1949, 42 U.S.C.A. Sec. 1472 et seq. (1980) (the Act). In view of changes in the agency's regulations, which it contends corrected the due process default which led to the consent decree, the agency sought a court ordered modification to permit foreclosure proceedings under the new regulations. Without examining the new regulations, the district court denied relief on the ground that the parties to the consent decree had agreed that modification would be appropriate only in the event that the consent decree was rendered illegal by subsequent court decisions. The court held that the FmHA neither submitted evidence that the decree violated constitutional, statutory or decisional law, which would render it invalid, nor showed "the kind of extreme, unexpected oppression and hardship which would justify modification of the Court's decree." Because the district court applied the wrong legal principles in refusing to review the proposed modification, we vacate and remand.

This is the latest case in a series that have challenged FmHA foreclosure procedures. See Curry v. Block, 738 F.2d 1556 (11th Cir.1984); Johnson v. U.S. Dept. of Agriculture, 734 F.2d 774 (11th Cir.1984). In 1977, FmHA entered into a consent decree with a class of Georgia residents, represented by Lucious Williams, Jr., who have purchased or will purchase homes under the Act and whose mortgages are or will be held by FmHA. The decree provides that when "foreclosure is still recommended by the United States, it will be processed judicially, and each class member will have the opportunity to raise any legal or equitable defense, including the affirmative defense of their claim to moratorium or interest credit." The decree also requires that borrowers be made aware of the availability of relief such as moratorium or interest credit at pre-loan interviews, loan closings and after a missed payment. The agency consented to be restricted to judicial foreclosure proceedings after the borrowers complained that nonjudicial methods authorized under Georgia law violated their right to procedural due process.

Congress has since amended the Act, requiring the FmHA to issue regulations giving Section 502 borrowers a right to notice and an impartial administrative hearing before foreclosure. 42 U.S.C.A. Sec. 1480(g). The regulations were promulgated in 1978, and amended several times, most recently in 1985. The 1978 regulations were challenged by a class of Alabama citizens.

While not deciding the validity of the regulations, this Court in Johnson v. U.S. Dept. of Agriculture, 734 F.2d 774 (11th Cir.1984), ordered a preliminary injunction requiring only judicial foreclosures until the challenge to nonjudicial foreclosures was decided. There was never a judicial determination concerning the validity of nonjudicial foreclosures under the amended regulations in Johnson, because that case was subsequently settled by a consent decree permitting the FmHA to "use nonjudicial foreclosure in Alabama for all Rural Housing borrowers whose accounts are accelerated on or after July 8, 1985."

The Court in Johnson questioned why the FmHA had not requested modification of the Williams decree in light of the regulatory changes that had occurred since the entry of that decree. In September 1986, following the conclusion of the Johnson litigation and the promulgation of the revisions to the FmHA's appeal regulations, the FmHA filed a motion to modify the Williams consent decree, asserting that it was filed in response to this Court's comments in Johnson.

Pursuant to Paragraph 8 of the consent decree, the district court had retained jurisdiction "for the sole purpose of entertaining a motion to modify this order on the grounds that it, or any part of it, is in direct conflict with a specific holding of the United States Supreme Court, the Fifth Circuit, or its successor rendered subsequent to the date of this Order." In our judgment, the district court too narrowly limited its authority to amend the prospective effect of the decree only upon a judicial decision that directly conflicted with it or upon a showing of hardship by the agency.

Without regard to the terms of the decree, a court acting in equity has inherent power to modify the prospective effect of its decree in response to changed circumstances. See System Federation No. 91 v. Wright, 364 U.S. 642, 646-47, 81 S.Ct. 368, 371, 5 L.Ed.2d 349 (1961); United States v. Swift & Co., 286 U.S. 106, 114, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932); Roberts v. St. Regis Paper Co., 653 F.2d 166, 172 (5th Cir.1981 Unit B). See also Fed.R.Civ.P. 60(b)(5) (court can modify a judgment when it is no longer equitable that the judgment should have prospective application). That a consent decree is contractual in nature does not relinquish a court's power to revise it in the future. Swift & Co., 286 U.S. 106, 52 S.Ct. 460; System Federation No. 91, 369 U.S. 642, 81 S.Ct. 368.

The district court's reaction to the requested modification might well be correct as it might change procedures that would apply to mortgages negotiated prior to the amendments. The Government might not be able to in effect unilaterally change procedures concerning existing mortgages controlled by the consent decree. Two classes of mortgagors are not in the same situation, however: those with mortgages executed after the change in regulations, but before any modification in the consent decree; and those future mortgagors who will purchase homes financed under Section 502(a) of the National Housing Act of 1949 and whose mortgages will be held by FmHA.

The district court's refusal to consider modification of the requirements as to prospective application raises serious constitutional questions about the ability of a Government official to bargain away the discretionary duties vested in his office that sound rules of construction...