Opinion
Case No. 1:02 CV 00060 TC
October 29, 2003
REPORT AND RECOMMENDATION
Defendant Holman's Motion to Dismiss and Plaintiffs Motion for Summary Judgment in the above entitled case were referred to the undersigned under 28 U.S.C. § 636(b)(1)(B). The undersigned was directed to hear oral arguments and submit to the District Judge a report and recommendation for the proper resolution of dispositive matters presented.
Docket no. 14, filed June 9, 2003.
Docket no. 27, filed August 1, 2003.
The undersigned has reviewed the papers submitted in connection with the above motions, and has heard counsel in oral argument.
Nature of this Case
SunAmerica, a lender, seeks to recover against Holman, a guarantor. The principal debtor on this loan secured by a golf course project filed for Chapter 11 bankruptcy. The real property security was foreclosed after a release from the automatic stay was obtained.
Issues Presented by Motions
Two categories of issues are presented by Holman's Motion to Dismiss and SunAmerica's Motion for Summary Judgment. One is legal and the other is factual.
First, has SunAmerica proceeded in the appropriate way against Holman?
Second, if the first issue — the legal barrier — is passed, what is the appropriate amount for entry of judgment?
Each of the issues involves many facets of Utah law governing this lending transaction entered into in Utah with regard to Utah real estate.
The first issue, the legal issue, is the substance of the motion to dismiss, and mentioned in the opposition to the motion for summary judgment. The second issue is the heart of the motion for summary judgment.
Undisputed Facts
There are substantial undisputed facts outlined in the Memorandum in Support of SunAmerica's Motion for Summary Judgment ("SunAmerica Memorandum"). Most of these facts are established by admissions in the answer as to allegations in the complaint. Additional support is found in the Declaration of Howard Heitner in Support of SunAmerica's Motion for Summary Judgment ("Heitner Dec.").
Docket no. 28, filed August 1, 2003, pages 2-6.
Docket no. 29, filed August 1, 2003.
Holman's Memorandum in Opposition to SunAmerica's Motion for Summary Judgment ("Holman's Memorandum") supplies a statement of contested facts and a statement of additional uncontested facts which all relate to the value of the property foreclosed, and do not impinge on any of the following undisputed facts recited in SunAmerica's memorandum. The district judge should therefore find the following facts established pursuant to Rule 56(d), Federal Rules of Civil Procedure,
Docket no. 36, filed September 9, 2003, pages 2 — 5.
If on motion under this rule judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel, shall if practicable ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just. Upon the trial of the action the facts so specified shall be deemed established, and the trial shall be conducted accordingly.
1. Holman was a member of River Oaks and the President and a director of Overland Management Realty Corporation ("Overland"), the managing member of River Oaks.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 1, citing Answer, ¶ 2; see Complaint ¶ 2.
2. Pursuant to a Construction/Term Loan Agreement dated December 29, 1999, First Security Bank, N. A. ("First Security") agreed to loan River Oaks up to $7,500,000.00 ("Loan Agreement"). In connection with the Loan Agreement, River Oaks simultaneously executed certain other documents, including a Construction/Term Promissory Note with an original face amount of $7,500,000.00 ("Promissory Note"), and a Construction/Term Loan Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing ("Trust Deed"). (The Loan Agreement, Promissory Note, Trust Deed are referred to collectively as the "Loan Documents").
SunAmerica Memorandum Statement of Undisputed Facts ¶ 2, citing Answer ¶ 6; Complaint ¶ 6; Heitner Dec. ¶ 3.
3. Pursuant to the Trust Deed, the Promissory Note was secured by certain real and personal property of River Oaks, including, but not limited to, an 18-hole golf course located in Salt Lake County, Utah ("Real Property"), and all of River Oaks' goods, equipment, fixtures, inventory, present and future accounts, general intangibles, documents, and chattel paper relating to the Real Property (collectively, the "Collateral").
SunAmerica Memorandum Statement of Undisputed Facts H 3, citing Heitner Dec. ¶ 4; see Answer ¶ 7; Complaint, ¶ 7.
4. In consideration of the loan to River Oaks, Holman executed the Guaranty which is the subject of this action. The Guaranty provides that Holman "absolutely and unconditionally, guarantees and promises to pay . . . the indebtedness described below."
A copy of the Guaranty is attached to the Heitner Declaration as Exhibit A.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 4, citing Answer ¶ 8; Complaint ¶ 8; Guaranty at 1; Heitner Dec. ¶ 5.
5. The "indebtedness" is described in the Guaranty as follows:
Guarantor understands that the term "indebtedness" as used in this guaranty is used in its most comprehensive sense and does not refer solely to the evidences of such indebtedness. It includes any and all credits, loans, advances, debts, overdrafts, obligations and liabilities now owed by or hereafter incurred by Borrower, whether such indebtedness is voluntary or involuntary, contingent or absolute, liquidated or unliquidated, determined or undetermined, arising under that certain Construction/Term Promissory Note dated as of even date herewith, made by Borrower and payable to Lender in the original principal amount of $7,500,000, as amended from time to time (the "Note") and the Construction/Term Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing securing the same (the "Trust Deed"), as well as any other related or connected instruments, agreements or contracts, including the Construction/Term Loan Agreement and Environmental Indemnity Agreement, also as of even date herewith between Lender and Borrower. Guarantor guarantees and promises to pay any and all of such indebtedness of Borrower with interest on said indebtedness according to the terms of the respective obligations or according to law, including all renewals, extensions of time, or modifications of such indebtedness. Guarantor agrees to pay said indebtedness of Borrower after default as defined in the Trust Deed, whether Borrower may be liable individually or jointly with others, or whether recovery of such indebtedness may be or hereafter become barred by any statute of limitations, or whether such indebtedness may be or hereafter become otherwise unenforceable.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 5, citing Guaranty ¶ 1; see Answer ¶ 8; Complaint ¶ 8.
6. Pursuant to paragraph 11 of the Guaranty, Holman further agreed:
SunAmerica Memorandum Statement of Undisputed Facts ¶ 6, citing Guaranty ¶ 11; see Answer ¶ 9; Complaint ¶ 9.
to pay all reasonable attorney's fees, paralegals' fees, and other expenses incurred by Lender in the enforcement of its rights hereunder, including such expenses incurred before legal action, during the pendency of any such legal action, and continuing to all such expenses in connection with any appeal to higher courts arising out of matters associated herewith, as well as all such expenses incurred by Lender in any bankruptcy proceedings involving Borrower or Guarantor.
7. Pursuant to certain documents and instruments executed on January 19, 2001, First Security sold, assigned, and transferred to SunAmerica all of its rights, title, and interest in the Loan Documents and the Guaranty.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 7, citing Heitner Dec. ¶ 6; see Answer ¶ 11; Complaint ¶¶ 11.
8. As a result of River Oaks' default of its obligations under the Loan Documents, SunAmerica issued a Notice of Default and demand for payment on the Promissory Note in the amount of River Oaks' outstanding indebtedness on March 12, 2001.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 8, citing Answer ¶ 12; Complaint, ¶ 12; Heitner Dec. ¶ 7.
9. Thereafter, River Oaks failed to comply with the terms of SunAmerica's demand for payment to cure the default under the Promissory Note. Accordingly, on April 23, 2001, the trustee of the Trust Deed ("Trustee") recorded a Notice of Default against the Collateral in the Salt Lake County Recorders Office.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 9, citing Heitner Dec. f 8; see Answer 113; Complaint 113.
10. On July 23, 2001, the Trustee issued a Notice of Trustee's Sale providing notice that the Collateral was to be sold on August 22, 2001,
SunAmerica Memorandum Statement of Undisputed Facts ¶ 10, citing Answer ¶ 14; Complaint ¶ 14.
11. On August 20, 2001, two days prior to the scheduled trustee's sale, Holman caused River Oaks to file a Voluntary Petition under Chapter 11 of the United States Bankruptcy Code. River Oaks' bankruptcy reorganization case was before the United States Bankruptcy Court for the District of Utah, Central Division, as Case No. 01-32191 GEC
SunAmerica Memorandum Statement of Undisputed Facts ¶ 11, citing Answer ¶ 15; Complaint ¶ 15; Heitner Dec. ¶ 9.
12. In Debtor's Schedules filed with the bankruptcy court on August 31, 2001 ("Schedules"), Holman declared under penalty of perjury that the SunAmerica held a secured claim against River Oaks in the amount of $6,200,000.00 and that such claim was not disputed by River Oaks.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 12, citing the certified copy of the Schedules is attached to the Heitner Dec. as Exh. B.
13. On December 14, 2001, SunAmerica filed a motion requesting that the automatic stay in effect pursuant to 11 ILS.C. § 362 be terminated and that SunAmerica be allowed to assert its state law rights and remedies in the Collateral pursuant to its rights under the Trust Deed and other Loan Documents,
SunAmerica Memorandum Statement of Undisputed Facts ¶ 13, citing Heitner Dec. ¶ 11.
14. After extended discovery and a full-day evidentiary hearing, the bankruptcy court granted SunAmerica's motion for relief from the automatic stay and, by Order Granting Relief from Automatic Stay entered February 21, 2002 ("Order"), permitted SunAmerica to assert its state law rights and remedies in the Collateral.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 14, citing Heitner Dec, ¶ 11. A copy of the Order is attached to the Heitner Dec. as Exhibit C.
15. In its Order, the bankruptcy court specifically found that SunAmerica's security interests in the Collateral were properly perfected and that as of the petition date, August 20, 2001, River Oaks owed SunAmerica $6,881,043.00.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 15, citing Order at 2.
16. After entry of the Order, the Trustee issued a Notice of Trustee's Sale providing notice that the Collateral would be sold on April 4, 2002.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 16, citing Answer ¶ 17; Complaint ¶ 17; Heitner Dec. ¶ 13.
17. At the Trustee's Sale on April 4, 2002 ("Trustee's Sale"), SunAmerica purchased the Collateral for $4.5 million.
SunAmerica Memorandum Statement of Undisputed Facts ¶ 17, citing Answer ¶ 18; Complaint ¶ 18.
18. The amount due under the Promissory Note was, as of April 11, 2002:
SunAmerica Memorandum Statement of Undisputed Facts ¶ 19, citing Heitner Dec. 116; Complaint ¶ 20; Answer ¶ 20.
Principal $6,295,722.00 Interest $943,687.00 Late Charges $47,814.00 Attorney's Fees and Other Costs $61,799.00 Total $7,349,022.00
ANALYSIS
On the background of these undisputed facts, examination of the legal issue shows SunAmerica has proceeded appropriately against Holman, but summary judgment may not be entered in SunAmerica's favor because of the single and significant factual issue that is in genuine dispute.
Issue No. 1: Has SunAmerica proceeded in the appropriate way against Holman?
Holman claims that SunAmerica cannot sue him because it "failed to seek a deficiency judgment against River Oaks Golf Club, L.L.C., ("ROGC") within three months of the date of the foreclosure sale in this case." Holman's position is that "he has no liability as surety" because "there is no `debt' because none has been established, using the means required under Utah real property foreclosure statutes."
In the present case, Sun America did not bring a deficiency action against ROGC within three months of the date of the foreclosure sale. Under the holding in Concepts, Inc., v. First Security Realty Services, Inc., 743 P.2d 1158 (Utah 1987), that failure `terminated all of [ROGC's] remaining obligations.'
Holman's Memorandum, pages 1 — 2. See also Memorandum of Defendant Holman Supporting Motion to Dismiss ("Holman's Dismissal Memorandum"), docket no. 15, filed June 9, 2003, page 3.
Holman's Dismissal Memorandum, pages 3-4.
Holman's Memorandum, page 6.
"Absent a deficiency judgment against ROGC," Holman says, "there is no debt to enforce."
Holman Memorandum, page 5 (subtitle of argument).
Holman also claims that SunAmerica is bound to proceed against ROGC before proceeding against him because another Utah case, Surety Life Insurance Co. v. Smith, 892 P.2d 1 (Utah 1995), requires that proceedings against guarantors conform to the statute governing deficiency actions against debtors.
Holman's Dismissal Memorandum, page 13.
Utah's Deficiency Limitation Statute
Utah Code Ann. § 57-1-32 governs deficiency proceedings after a power of sale foreclosure. The statute requires that an action to collect a deficiency be commenced not more than three months after the foreclosure sale. The statute also states the deficiency judgment will be the amount by which the debt, on the date of the sale, exceeded the greater of (a) the amount for which the property was sold and (b) the fair market value of the property at the date of sale. The statute provides important protections to those against whom deficiencies are alleged.Holman cites many cases in his discussions of foreclosure law but two are key in his arguments. In Concepts, Inc., v. First Security Realty Services, Inc., 743 P.2d 1158 (Utah 1987), the creditor was denied the right to pursue the debtor on a deficiency action because the creditor failed to comply with the three month limitation period of Utah Code Ann, § 57-1-32. Surety Life Insurance Co. v. Smith, 892 P.2d 1 (Utah 1995) held that a deficiency action against a guarantor was subject to the three month limitation period and to the deficiency judgment amount limitations of Utah Code Ann. § 57-1-32.
Holman's Dismissal Memorandum at notes 4 and 6, and pages 5-14 and notes on those pages.
Holman takes a position not supported by either case. Holman claims that a creditor must proceed against a debtor in a deficiency action or even obtain a deficiency judgment against a debtor before a guarantor may be sued. Neither case so holds. Concepts deals with rights against a debtor, so it is factually distinguishable.
Surety Life did hold that Utah Code Ann. § 57-1-32 applied to suits against guarantors, but did not hold that remedies against guarantors were secondary to remedies against debtors. In fact, Surety Life was a suit against guarantors only — the debtor was not a party.
The analysis of the statute in Surety Life is actually inconsistent with Holman's position. The Utah Supreme Court applied Utah Code Ann. § 57-1-32 to guarantors because the statute's language made it applicable to "an action . . . to recover the balance due upon the obligation for which the trust deed was given as security" and not to an action on a specific obligation. The Surety Life suit, like SunAmerica's complaint, was "based on the guarantees, not on the trust deed note."
The Act does not concern itself with which contract or instrument the action is founded on. . . . The Act makes no distinction as to whether the [deficiency] action is brought against the debtor or a guarantor.Surety Life recognizes that under Utah Code Ann. § 57-1-32 an action to collect the balance due on a secured obligation may be sought in an action on the obligation (the note) against the obligor (the debtor or maker) or in an action on a guaranty of the obligation, against the guarantor. Holman cites no case law or statutory language making action against the debtor a condition precedent to action against the guarantor.
Utah Code Ann. § 57-1-32 (emphasis added).
Id.
Holman uses language from Concepts to argue that SunAmerica has no "obligation" on which it can sue. Concepts relied on the statute's clear language to hold that a deficiency action against a debtor is barred if not brought within three months of the power of sale foreclosure. The creditor had completed a foreclosure sale, and then almost a year later, tried to bring a deficiency action. The debtors immediately asserted the three month limitation period as a defense. The creditor scrambled to discover a technical defect in the notice of sale, and claimed it was entitled to conduct another foreclosure sale to correct the defect — and, incidentally, revive the deficiency claim. The Utah Supreme Court found that the technical defect in the sale did not invalidate the sale, and declared that the second sale and any deficiency action were therefore barred by the clear statutory three month limitation.
The last sentence of the Concepts opinion gives Holman, a guarantor, his argument that the obligation against him is extinguished:
[Creditors's] failure to bring a deficiency action within three months after the sale of the property terminated all of [borrower's] remaining obligations, and [creditor's] attempt at rescheduling the same property for a second sale was improper as a matter of law.
Though Concepts was only a suit between borrowers and the creditor and no guarantor was involved, Holman claims the foregoing paragraph means that once a deficiency action is barred against a borrower, the "obligation" is extinguished. Therefore, he says, there is nothing for him to guarantee. If failure to sue a borrower under Utah Code Ann. § 57-1-32 obliterates all related obligations, failure to bring a deficiency action against an insolvent or bankrupt borrower would release any guarantors or personal property security, because the obligation vanishes. The statute does not say this, however. Concepts, a case not involving a guarantor, did not hold this. The Surety Life case, which was only brought against guarantors, and not against the borrower, did not hold that failure to sue the borrower barred action against the guarantor but stated "[t]he Act makes no distinction as to whether the [deficiency] action is brought against the debtor or a guarantor."
Id.
The result Holman argues is also at odds with the language of the Guaranty which states that Holman "agrees to pay said indebtedness of Borrower after default as defined in the Trust Deed . . . whether recovery of such indebtedness may be or hereafter become barred by any statute of limitations, or whether such indebtedness may be or hereafter become otherwise unenforceable." Unavailability of remedies against the maker does not excuse this guaranty.
A copy of the Guaranty is attached to the Heitner Declaration as Exhibit A.
One Action Rule
At length, Holman also refers to Utah's one-action rule (Utah Code Ann. § 78-37-1) and cases relying on it. The one-action rule requires that security must be exhausted first before a creditor may bring suit for personal judgment, set-off against credits in hand or attach other property of the debtor. Holman admits that a decision of the U.S. Bankruptcy Court for Utah holds that the one action rule does not apply to an action against a guarantor. But he claims a Nevada court's reading of the Utah statute is better precedent. The decisions in these cases considered whether the one-action rule barred suit against a guarantor even though the property was not yet foreclosed. That fact situation is not present here, where SunAmerica has foreclosed on the property, so both cases discussed here are distinguishable from Holman's circumstance.
There can be but one action for the recovery of any debt or the enforcement of any right secured solely by mortgage upon real estate which action must be in accordance with the provisions of this chapter. Judgment shall be given adjudging the amount due, with costs and disbursements, and the sale of mortgaged property, or some part thereof, to satisfy said amount and accruing costs, and directing the sheriff to proceed and sell the same according to the provisions of law relating to sales on execution, and a special execution or order of sale shall be issued for that purpose.
Holman's Dismissal Memorandum, page 4 and note 6; pages 10-14 and note 12.
Boucofski v. Jacobsen, 104 P. 117 (Utah 1909).
Zion's Saving Bank v. Rouse, 47 P.2d 617 (Utah 1935).
Bank of Ephraim v. Davis, 581 P.2d 1001 (Utah 1978).
In re SLC Ltd. K., 152 B.R. 755 (Bankr. D. Utah 1993).
Component Systems Corporation v. Eighth Judicial District Court, 692 P.2d 1296 (Nevada 1985).
See discussion in Holman' s Dismissal Memorandum, page 14.
The opinion of Judge Boulden, in the Utah Bankruptcy case noted "[t]here is no reported Utah case law directly analyzing the effect of the one-action rule on an action against a guarantor of a debt secured solely by real property." But after careful examination of Utah case law, she concluded that the guarantor was exposed to suit, even though the real property security was not yet foreclosed.
In re SLC Ltd., 152 B.R. 755, 769 (Bankr. D, Utah 1993)
Regardless of the shortage of case law in this state specifically related to real property, a rational extension of the existing case law leads this court to conclude that, in this case, the one-action rule does not prevent a creditor on a debt secured by real property from pursuing an action against the guarantors based on the guarantee without first foreclosing on the security.
Id.
Judge Boulden's opinion is that the one-action rule has no effect on guarantors.
The Nevada opinion is, as Holman says, to the contrary. But it did not examine Utah case law. After observing that Utah and Nevada one-action statutes were consistent, the Nevada court applied a Nevada remedy of involuntary release of collateral because the creditor brought a personal action before completing foreclosure on its security.
Component Systems Corporation, 692 P.2d at 1298, footnote 1.
Id. at 1301, applying NRS 40.430.
Because Heller, Inc. had initiated a trustee's sale . . . its counterclaims on the underlying corporate loans and guaranties violated the "one action" rules of Nevada and Utah.
Id. at 1299.
Neither of these cases apply because the real property in this case has been foreclosed, but Judge Boulden's opinion is clear and her analysis is sound in concluding that the one-action rule does not apply to guarantors. Holman has no valid defense in the one-action rule.
Pleading Requirements
Holman may also be claiming that the complaint is defective because it does not specifically refer to Utah Code Ann. § 57-1-32. He says:
Plaintiff . . . has never attempted to state a deficiency claim against ROGC or Defendant under [Utah Code Ann. § 57-1-32].
The complaint . . . fails to state a claim upon which relief may be granted. . . . Compliance with the Utah [statutes] is a condition precedent to the establishment of a debt in connection with the guaranty. . . . SunAmerica has not alleged compliance with this condition in the complaint.
Holman's Memorandum, pages 7-8.
Holman's Dismissal Memorandum, page 15.
The statute does not require that pleadings refer to it by citation. The statute does not require that a pleader use the word "deficiency." The statute does require that "the complaint shall set forth the entire amount of the indebtedness that was secured by the trust deed, the amount for which the property was sold, and the fair market value of the property at the date of sale." SunAmerica's complaint includes these references. There is no defect in SunAmerica's pleadings.
Complaint, ¶¶ 16-19.
Holman has not identified any defect in the foreclosure proceeding by SunAmerica or any bar to the present action against him. Were it not for the one genuine issue of material fact, summary judgment might be entered in favor of SunAmerica. Holman's motion to dismiss may, however, be denied.
Issue No. 2: What is the appropriate amount for entry of judgment?
The amount of the debt is not in dispute. The sale price of the land at the foreclosure sale is not in dispute. But the statute makes fair market value a control on any deficiency award.
SunAmerica claims that judgment should be entered in its favor for $2,849,022.00, which it claims is the difference between the debt and the sale price of the property at the date of sale, together with interest, costs and attorneys fees. It also alleges that the fair market value of the property was not greater than the sale price, Factually, SunAmerica offers the Declaration of Howard Heitner authenticating the order of the bankruptcy court finding that "[t]he Debtor has no equity in the Collateral." An appraisal used in that proceeding is also submitted, with the sworn declaration of the appraiser. The appraisal and affidavit give a fair market value as of the date of the sale of $1,800,000.00. SunAmerica alleged that "Holman has not retained a state certified real estate appraiser, and therefore has no basis to claim the Collateral's fair market value exceeded $4,500,000.00 as of the date of the Trustee's Sale."
Complaint, ¶ 20.
Complaint, ¶ 19.
Exhibit C to Heitner Dec.
The appraisal is Exhibit A to Declaration of J. Philip Cook, docket no. 30, filed August 1, 2003.
SunAmerica Memorandum, page 11.
Defendant Holman, who says he is qualifying as an M.A.I, appraiser, counters with his own sworn declaration as to a value of $7,500,000.00 and a declaration authenticating a feasibility study for the golf course project, but not opining as to value.
Declaration of Kenneth T. Holman, docket no. 37, filed September 9, 2003.
Declaration of Patrick H. Brophy, docket no. 38, filed September 9, 2003.
The sworn statements place the fair market value of the property squarely in dispute. Therefore, an evidentiary hearing will be needed to determine that issue, which is critical in determining the amount of the deficiency judgment.
Recommendation
The undersigned recommends that
• Defendant Holman's Motion to Dismiss be DENIED;
• Plaintiffs Motion for Summary Judgment be GRANTED IN PART; and
• an order be entered pursuant to Rule 56(d), Fed.R.Civ.P. finding the facts recited above exist without substantial controversy and that the only material fact actually and in good faith controverted is "the fair market value of the property at the date of sale" and directing a hearing on that issue.
Docket no. 14, filed June 9, 2003.
Docket no. 27, filed August 1, 2003.
Within 10 days after being served with a copy of this recommended disposition, a party may serve and file specific, written objections. A party may respond to another party's objections within 10 days after being served with a copy thereof. The rules provide that the district judge to whom the case is assigned shall make a de novo determination upon the record, or after additional evidence, of any portion of the magistrate judge's disposition to which specific written objection has been made in accordance with this rule. The district judge may accept, reject or modify the recommended decision, receive further evidence, or re-commit the matter to the magistrate judge with instructions.