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Adams v. United States

February 17, 2009


The opinion of the court was delivered by: Craig M. Kellison United States Magistrate Judge


Pending before the court are separate renewed motions*fn1 for default judgment (Docs. 187 and 188) filed by plaintiffs Ohm Ranch, Charles T. Ohm, Barbara A Ohm, John C. Ohm, and Susan L. Ohm ("Ohm plaintiffs"), Melvin Thompson and Mary Thompson ("Thompson plaintiffs"), and Douglas Hammond and Rhonda Hammond ("Hammond plaintiffs"), against defendant Donna Gordy ("Gordy"). These motions are before the undersigned pursuant to Eastern District of California Local Rule 72-302(c)(19).

Plaintiffs' action proceeds on the amended complaint (Doc. 14) filed on September 3, 2004. Plaintiffs assert civil rights claims against defendant Gordy, who at the times relevant to this action was a Credit Manager at the Farm Service Agency ("FSA") of the United States Department of Agriculture, pursuant to Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971). Plaintiffs' claims are based on an alleged pattern of fraud, misrepresentation, failure to act, failure to follow published regulations, and breach of fiduciary duty, all done in defendant's capacity as a federal employee. Defendant Gordy was personally served on October 14, 2004 (see Doc. 19). After defendant Gordy failed to respond to the amended complaint, plaintiffs requested entry of default by the Clerk of the Court on December 27, 2004 (Docs. 21 and 22). The Clerk of the Court entered defendant Gordy's default on the same day (Doc. 23). Almost four years later, Gordy filed a motion to be relieved from default (Doc. 183). Following hearing, the court concluded that Gordy had not established Rule 60(b) F.R.C.P grounds for relief and denied said motion (Doc. 198 ).

In the present case, the court has reviewed and considered the Amended Complaint (Doc. 14); plaintiffs' points and authorities in support of their motion (Docs. 187 and 188); the declarations of David C. Nicholson, James D. Van Ness, Kathryn York, Mary Thompson, Julie Sutterfield, John Ohm, Douglas Hammond, Brian Russell (Docs. 187 and 188) and the declaration of Nels Christiansen (Doc. 128) in support of FSA's Motion for Summary Judgment (Doc. 126) which sets forth the long and rather complex loan history of the plaintiffs with FSA.


The FSA is authorized to make various kinds of loans, including farm loans, to farmers and rural residents. A primary purpose of FSA, and its predecessor FmHA, is to function as a "form of social welfare ... primarily designed to assist farmers ... [who] cannot obtain funds from private lenders on reasonable terms." United States v. Kimbell Foods. Inc., 440 U.S. 715, 735 (1979). FSA also exercises wide authority to compromise or adjust loans. See Coleman v. Block, 562 F. Supp. 1353, 1364 (D.N.D. 1983). 7 U.S.C. § 1981a provides authority for FSA to compromise, adjust, or reduce claims, to adjust and modify the terms of mortgages, to defer principal and interest and to forego foreclosure for such periods as the Secretary deems necessary. See Cuny v. Block, 541 F. Supp. 506, 512 (S.D. Ga. 1982).

Each of the plaintiffs established a lending relationship with FSA as direct loan borrowers. The term "borrower" is defined in each of the loan programs' section entitled definitions. See 7 CFR § 1941.4 (1988) and 7 CFR § 1943.4 (1988).

In the landmark decision, Coleman v. Block, supra, the court enjoined the United States from foreclosing on farm program loans prior to giving personal notice of the borrower's rights to apply for deferral relief under § 1981a and the opportunity for a hearing. The court characterized the agency's actions as involving more than borrowing on the part off farmers, and found that 7 U.S.C. §1981a imposed procedural duties on the United States, namely preventing the United States from terminating a farmer's living and operating allowance, accelerating indebtedness and instituting foreclosure proceedings until borrowers were given prior notice of the reasons for the proposed action, an explanation of the eligibility for loan deferral options under § 1981a, and of their right to a hearing. Coleman v. Block, 562 F. Supp. at 1367.

The Agricultural Credit Act allows FSA to use several loan servicing options to restructure or reduce debts of farmer program borrowers who were 180 days or more delinquent. FSA could restructure a delinquent borrower's debt, including writing down debt, to an adjusted value of the collateral securing the debt (net recovery value). Borrowers who were unable to develop a feasible plan of operations with restructuring could pay FSA the net recovery value buy-out amount and end their FSA debt obligation.

The FSA in the present case was mandated to take specific precautions when plaintiffs became 180 days delinquent on their debt. The first step was for FSA to provide a notice, via certified mail, of the availability of loan servicing options. See 7 CFR § 1951.907(c) (1988)12; Moseanko v. Yeutter, 944 F.2d 418,423-24 (8th Cir.1991); Coleman v. Lyng, 864 F.2d 604,608-09 (8th Cir.1988), cert. denied, 493 U.S. 953 (1989).

This initial notice became know as the "1951-S loan servicing package." Chamblee v. Espy. 100 F.3d 15, 16 (4th Cir. 1996). Following receipt of this notice, plaintiffs would then have had 60 days to return the completed package of forms and supporting data to FSA. See 7 CFR § 1951.907 (e) (1988). From the date the completed package was returned, FSA would then have 90 days to complete their review, and thereafter inform plaintiffs of the results. FSA had absolute control of the 1951-S servicing process.

Absent the initial 1951-S loan servicing package being sent by FSA, the plaintiffs herein were prevented from initiating the loan servicing process. During the loan restructuring process, FSA also prepares a computer printout depicting each borrower's history which is then used to process his or her 1951-S package to determine loan servicing alternatives. In the present case, none of the plaintiffs received this information from Gordy.

If a borrower's farming operation indicated that, with restructuring and/or debt write-down, a positive financial margin resulted, than said servicing would then be offered to the borrower. See 7 CFR § 1951.907 (d) (1988). When a loan is restructured (consolidated or reamortized), the borrower would then be provided the choice between the original loan interest rate or the rate in existence at the time of the restructure, whichever is lower. See 7 CFR § 1951.909 (e)(I)(xii) (1988).

Key to that lender borrower relationship was the County Supervisor. At all relevant times, Defendant Gordy was the FSA County Supervisor with respect to plaintiffs' loans. The County Supervisor is the highest level employee of the FSA in that County and ...

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