U.S. v. Woods

Full title: United States of America, Plaintiff, v. James A. Woods; Lan-Cat Company…

Court: United States District Court, D. Minnesota

Date published: Mar 31, 2004

Civ. No. 02-1411 (JNE/JGL) (D. Minn. Mar. 31, 2004)

Opinion

Civ. No. 02-1411 (JNE/JGL)

March 31, 2004

Roylene A. Champeaux, Esq., for Plaintiff United States of America

John R. Koch, Esq., Reichert, Wenner, Koch Provinzino, P.A., for Defendants Lan-Cat Company, Dwaine Weber, and Thomas Schaefer

ORDER

JOAN N. ERICKSEN, District Judge

The United States of America (Government)¹ brought this action against the above-named defendants seeking a determination of the amount owed on a contract for deed for 261 acres of farmland² (the Property) located in Kandiyohi County, Minnesota, a determination of the priorities of liens against the Property, a money judgment against James A. Woods, and a decree in foreclosure of the Property. The case is before the Court on the Government's motion for summary judgment and the Government's motion for default judgment and decree in foreclosure. For the reasons set forth below, the Court grants the motions.

1 The Government represents the Farm Service Agency (FSA). The FSA, formerly known as the Farmers Home Administration, is administered by the United States Department of Agriculture.

2 The Property is described as the following: The Southeast Quarter of the Northwest Quarter (SE 1/4 of NW 1/4), the South Half of the Northeast Quarter (S 1/2 of NE 1/4); the South Half of the Southeast Quarter (S 1/2 of SE 1/4); the Northwest Quarter of the Southeast Quarter (NW 1/4 of SE 1/4); the West Half of the Northeast Quarter of the Southeast Quarter (W 1/2 of NE 1/4 of SE 1/4); beginning at the Southeast corner of the Southeast Quarter of the Southwest Quarter (SE 1/4 of SW 1/4), running thence North on the East line of said SE 1/4 of SW 1/4, a distance of 80 rods to the Northeast corner of the SE 1/4 of SW 1/4, running thence West 2 rods, running thence South 80 rods, running thence East 2 rods to the place of the beginning; All of the above parcels in Section Thirteen (13), Township One Hundred Twenty North (120N), Range Thirty-Three West (33W).

I. BACKGROUND

The appearing parties agree that the following facts are undisputed. In 1976, Lorvin Urban sold James A. Woods the Property under a contract for deed. In 1978, Urban and Woods amended the contract for deed to show that the purchase price of the Property was $156,600 and that the contract "was conditioned upon" Woods receiving a loan from the FSA. After Woods received a loan in the amount of $121,000 from the FSA, Urban and Woods recorded the amended contract for deed, and the FSA recorded its mortgage. The FSA mortgage stated that it was "subject to vendor's interest." In 1979, the FSA gave Woods a second loan in the amount of $6,000, and it recorded the second mortgage. Between the years 1984 to 1987, the FSA granted Woods multiple reamortizations on the two mortgages. Woods has been delinquent on his mortgage payments since 1993.

In 1995, the FSA and Woods participated in a mediation to resolve Wood's delinquency. Urban, Shelly Engel (Urban's attorney), Dwaine Weber (Woods' attorney),³ and FSA staff attended the mediation. During the mediation, Urban submitted a "Creditor Proof of Claim Form," which stated that Woods owed "$9,208.59 plus costs to date of $2,383.20" on the contract for deed. According to Weber, Urban maintained at the mediation that the amount Woods owed on the contract for deed was approximately $13,000.

3 Weber is also a trustee of Lan-Cat Company and a defendant in this case.

Later, Lan-Cat Company (Lan-Cat) agreed to purchase Urban's interest in the contract for deed for $10,000. Urban gave Lan-Cat a draft quitclaim deed and draft assignment of contract of deed. The draft quitclaim deed stated that it was being given for "valuable consideration," which Lan-Cat states was $10,000, and the draft assignment stated the balance on the contract for deed was "$9,999.79, with interest thereon from the 25th of October, 1995." On November 14, 1995, Lan-Cat, in a document signed by Weber as its trustee, acknowledged that the quitclaim deed and assignment were "approved as to form and content." On November 15, 1995, Urban and Lan-Cat finalized the transaction. Lan-Cat gave Urban a check for $10,000, and the quitclaim deed and assignment of contract for deed, which were approved by Weber, were recorded in the Kandiyohi County Recorder's Office.

On September 3, 1996, the FSA accelerated Wood's debt. In June 2000, it began to investigate the possibility of foreclosure and attempted to ascertain the amount Woods owed on the contract for deed. Previous attempts to ascertain the amount due had been unsuccessful. The FSA obtained a copy of the recorded quitclaim deed and assignment between Urban and Lan-Cat. In March 2001, the FSA initiated a nonjudicial foreclosure on the Property. In response, Woods filed an action in Minnesota state court to stay the foreclosure. The Government and Woods reached an agreement to postpone the sale and attempt mediation, and the Minnesota state action was dismissed. The mediation was unsuccessful, and the FSA reinstated the nonjudicial foreclosure process. On March 28, 2002, the FSA received a notice of cancellation of contract for deed from Lan-Cat. In that document, as later amended, Lan-Cat claims that Woods owes $53,473.89 on the contract for deed. After receiving the notice of cancellation, the Government filed a Complaint in this Court seeking to stop the cancellation of the contract for deed. By Order of July 1, 2002, the Court temporarily enjoined Lan-Cat from canceling the contract for deed. Later, Lan-Cat withdrew its notice of cancellation.

II. DISCUSSION

A. Summary Judgment

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, Rule 56(e) requires the nonmoving party to respond by submitting evidentiary materials that designate "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

The Government moves for summary judgment, seeking a determination of the balance owed on the contract for deed. The Government asserts that estoppel by deed precludes Lan-Cat from claiming that the amount owed on the contract for deed is greater than $9,999.75, plus interest at 4% per year from October 25, 1995. In response, Lan-Cat states that it never intended to be bound by Urban's covenants. Instead, it claims that the quitclaim deed and assignment of the contract of deed show a "minimum balance" owing on the contract for deed of at least $9,999.75 and that it should be allowed to introduce additional evidence to show that the true balance due on the contract for deed is greater than $9,999.75. Specifically, Lan-Cat contends that the balance on the contract for deed at the time of the Urban-Lan-Cat assignment was $29,714.87.

Under the doctrine of estoppel by deed, "a party to a bond, or to an indenture, or to a deed of conveyance, can deny nothing which the bond in its condition, or the indenture, or deed of conveyance in their recitals aver." First Nat. Bank of Hastings v. Rogers, 13 Minn. 407, 408 (1868). Thus, estoppel by deed precludes one party to a deed and those in privity with the party from denying the truth of any material fact asserted in a particular deed. See Rogers v. Clark Iron Co., 116 N.W. 739, 750 (Minn. 1908) (noting that no person shall be allowed to dispute his own solemn deed); see also Red Wing Sewer Pipe Co. v. Donnelly, 113 N.W. 1, 2 (Minn. 1907) (noting that an allegation or recital in a bond is "conclusive").

Lan-Cat seeks to avoid the doctrine of estoppel by deed on two grounds. First, it contends that the doctrine is inapplicable because it applies to grantors, not grantees. While it is true that the doctrine is normally applied to bind grantors, the cases discussing the doctrine turn on the circumstances of the individual cases. See Rogers, 116 N.W. at 750. In this case, the assignment of the contract for deed states that Urban is conveying his "seller's interest" to Lan-Cat in the contract for deed and that the "there remains unpaid under said contract for deed the summer of $9,999.75 with interest thereon from the 25th day of October 25, 1995." Moreover, Lan-Cat agreed to be bound by the terms of the assignment when Weber approved it as to form and content. Under these circumstances, Lan-Cat's status as a grantee does not preclude the application of the doctrine of estoppel by deed. Second, Lan-Cat argues that the doctrine is inapplicable because the FSA is not in privity with Urban and Lan-Cat. Estoppel by deed applies to parties to a deed and those in privity with them. Id. The original parties to the contract for deed were Urban and Woods. After the assignment, the parties to the contract for deed were Lan-Cat and Woods. When Woods mortgaged the Property, the FSA acquired some of Wood's rights in the property. See Stannard v. Marboe, 198 N.W. 127, 127 (Minn. 1924). Thus, the real parties to the contract for deed now are Lan-Cat, Woods, and the FSA. Indeed, Lan-Cat recognizes this fact because it sent the notice of cancellation to both Woods and the FSA. Moreover, the contract for deed, which was the subject of the assignment to Lan-Cat, refers to the FSA mortgages. Based on these facts, the Court concludes that the FSA is in privity with Urban and Lan-Cat insofar as it can rely on the statements made in the quitclaim deed and assignment of contract for deed. Accordingly, Lan-Cat's second argument is unpersuasive.

In short, viewing the record in the light most favorable to Lan-Cat, the Court concludes that estoppel by deed applies. The Court finds that the balance owing on the contract for deed is the amount listed in the assignment of the contract for deed. Given this conclusion, the Court does not reach the issue of equitable estoppel.

B. Default Judgment and Decree in Foreclosure

Rule 12 of the Federal Rules of Civil Procedure provides that a defendant shall file his or her answer or otherwise defend within 20 days of service. If a defendant fails to do so, a default judgment may be entered. On September 5, 2002, the Government obtained a clerk's entry of default against James A. Woods, Lorvin E. Urban, the Estate of Adeline N. Urban, and Mies Equipment, Inc. (collectively, the remaining defendants) after they failed to file an answer or otherwise defend in this action. See Fed.R.Civ.P. 55(a). Now, the Government moves for default judgment against the remaining defendants pursuant to Fed.R.Civ.P. 55(b).

To enter a default judgment, a court must have jurisdiction over the defaulting party, and the defendant must have been made party to the action by proper service of process. Dodco, Inc. v. Am. Bonding Co., 7 F.3d 1387, 1388 (8th Cir. 1993). Rule 55(b) commits the entry of a default judgment to the discretion of the district court. FTC v. Packers Brand Meats, Inc., 562 F.2d 9, 10 (8th Cir. 1977). The district court can consider a number of factors including the amount of money potentially involved, whether issues of fact exist, whether the default is largely technical, and whether the grounds for default are clearly established. FTC v. Kitco. of Nevada, Inc., 612 F. Supp. 1282, 1297 (D. Minn. 1985). No hearing is required before an entry of default. See Fed.R.Civ.P. 55. If the court determines that a defendant is in default, the factual allegations of the complaint are taken as true. Thomson v. Wooster, 114 U.S. 104, 110 (1885). This rule applies to cases seeking equitable as well as legal relief. Id.

The Complaint shows that the Court has jurisdiction over the remaining defendants. The remaining defendants were properly served, as evidenced by the affidavits of service filed with the Court. The Court takes the factual allegations in the Complaint as true. There appears to be no factual dispute that Woods failed to pay the payments required under the mortgages. The FSA mortgages provide that, if default should occur in the payment of the principal sum of money, or any installments thereon, it shall be lawful for the FSA to declare the whole amount of the loans immediately due and payable. The mortgages further provide that in the event of a default, the FSA may sell the Property at public auction, with the proceeds to be applied to the debt. Given these facts, the Court grants the Government's motion for default judgment and decree in foreclosure.

III. CONCLUSION

Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:

1. The Government's motion for summary judgment [Docket No. 31] is GRANTED.

2. The balance owed under the Woods' contract for deed is $9,999.75, plus interest at 4% per year from October 25, 1995.

3. The Government's motion for default judgment against James A. Woods, Lorvin E. Urban, the Estate of Adeline N. Urban, and Mies Equipment, Inc. and a decree in foreclosure [Docket No. 38] is GRANTED.

4. As of April 25, 2003, James A. Woods owes the FSA $353,287.13, with interest accruing at a rate of $35.1221 per day computed until the date of payment, as provided in the promissory notes and mortgages, plus any protective advances that includes the funds deposited with the Court to purchase the contract for deed and the interest thereon, costs, disbursements, and expenses.

5. The interests of the remaining defendants are adjudged and decreed inferior to that of the FSA. The remaining defendants and all persons claiming under or through them are foreclosed and barred from any right, title, or interest in the Property, including all rights of redemption in the Property.

6. If the proceeds of the sale exceed the sum of money to be paid to the FSA, any such excess shall be deposited with the Clerk of Court, subject to further order of the Court.

7. The United States Marshals Service is authorized to immediately foreclose on the FSA mortgages and sell, at public auction in the manner and form prescribed by law, 28 U.S.C. § 2001-2003, the Property, as described above.

LET JUDGMENT BE ENTERED ACCORDINGLY.