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United States v. Pratt

United States District Court, D. Idaho

September 29, 2017



          Honorable David C. Nye United States District Court


         The United States of America, acting on behalf of the Farm Service Agency (“FSA”) brought this action to foreclose on real estate mortgages and security agreements. FSA has a stipulated Order for Judgment with Hopkins Mortgage Fund, LLC (Dkt. 27) and a Default Judgment against Connie L. Pratt-Schmidt and Dustin Kukla (Dkt. 29). The only Defendant remaining in the case is James Pratt, who, with his wife (now divorced), executed the mortgages and security agreements in favor of FSA. The Court has before it FSA's motion for summary judgment (Dkt. 47) against James Pratt and Pratt's motion to seal various documents (Dkt. 67). Having reviewed the record and briefs, the Court finds that the facts and legal arguments are adequately presented. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court will decide the motions without oral argument. See Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). The Court issues this decision granting the motion for summary judgment and denying the motion to seal.


         Except as otherwise noted, the following facts come from the Declaration of Aaron W. Johnson. Dkt. 47-2. Early in 1990, FSA, formerly known as the Farmers Home Administration (“FmHA”), made a $90, 000 loan to Defendant James Pratt and his wife so that they could purchase 40 acres with a house and outbuildings in Melba, Idaho. This property was formerly a dairy operation. Repayment of the loan was to begin on June 1, 1991, with annual payments of $8, 979.00 for 25 years. As part of the loan terms, the Pratts agreed to pay all taxes when due and to give FSA receipts showing those payments.

         The Pratts gave FSA a mortgage to secure the promissory note and encumber the real property. The Pratts also gave FSA a security interest in all of the dairy, milking, and farming equipment they owned or would afterwards acquire. FSA recorded both the mortgage and the security interest.

         The Pratts defaulted on their repayment obligation when they paid only $1, 000.00 in 1991 and $1, 000.00 during the first half of 1992. The parties reamortized the loan in October of 1992. As part of the terms of the reamortization, the Pratts added as collateral, two residential rental lots in Nampa, Idaho, a hay crop, and a field corn crop. Again, in 1994, the Pratts defaulted on their repayment obligation under the reamortized terms. FSA sent the Pratts notice of the delinquencies and of the failure to pay 1991 and 1992 real estate taxes. In response to the notice, the Pratts paid $2, 000.00 in November, 1994, and $2, 500.00 in December, 1994. Also, on March 6, 1995, the Pratts paid $666.00.

         On May 30, 1995, FSA received a check for $24, 617.83 from the sale of one of the secured rental lots in Nampa. FSA placed the $24, 617.83 into a Supervised Banking Account (“SBA”) at West One Bank in Caldwell, Idaho. This SBA required signatures from FSA and one of the Pratts before any funds could be withdrawn. Pratt then asked FSA to release the sold rental lot from the mortgage. FSA agreed to do so and the sold lot was released on June 22, 1995. In July, 1995, FSA wrote three checks from the SBA account. One check paid the real estate taxes for 1992, 1993, and 1994. One check reimbursed Pratt $1, 384.00 for work done on the home residence, and one check went to FSA for $6, 575.00 to make the June 1995 loan payment.

         On or about May 20, 1997, Pratt attempted to again reamortize his loan with FSA. FSA's Canyon County Committee declined to reamortize. Pratt appealed to the FSA State Committee. That committee also declined to reamortize the loan. Pratt appealed to the National Appeals Division (“NAD”) of the United States Department of Agriculture (“USDA”). In 1998, the NAD determined that the local agency did not err in its decision.

         On or about July 1, 1998, Pratt filed a Program Discrimination Complaint against FSA in an administrative action. FSA decided to not take any foreclosure action or other adverse action against Pratt until the Complaint was resolved by FSA's Office of Civil Rights. In December of 1999, FSA used $1, 762.26 of the funds in the SBA account to pay back real estate taxes at Pratt's request. Then, in October of 2000, FSA used $400.86 of the SBA funds to cover plumbing expenses in Pratt's residence.

         For the next several years the parties remained in communication with each other. FSA did not initiate a foreclosure action because of Pratt's discrimination claim. Pratt did not make all of his annual payments and did not pay the real estate taxes on his property. In March of 2006, FSA paid the real estate taxes due for 2003 in the amount of $2, 788.48 to avoid a pending tax deed. Again, in January of 2007, FSA paid the 2004 real estate taxes in the amount of $2, 321.80. This pattern continued for several years with FSA paying the 2005 to 2013 real estate taxes three years or so after the taxes were due.

         In May of 2011, Pratt informed FSA that he had been included in the Keepseagle class action lawsuit and settlement.[1] However, on October 30, 2012, FSA received notice from the Keepseagle Claims Administrator that Pratt's claim in the Keepseagle settlement was denied for failure to prove discrimination. Dkt. 47-8. Pratt filed for bankruptcy under Chapter 13 on February 26, 2013. FSA filed a Proof of Claim in the bankruptcy on March 14, 2013. Hopkins Mortgage Fund, LLC, filed an objection to Pratt's Chapter 13 plan and the bankruptcy was dismissed on May 2, 2013.

         Pratt's discrimination claim was closed by USDA on February 27, 2013, because Pratt was involved in the Keepseagle class action and fell within the terms of that action's settlement agreement. FSA received notice of the closure of the discrimination claim on April 23, 2013. FSA then began proceedings on Pratt's default by sending him a “Notification of Potential Non-Monetary Default” on June 12, 2013 and scheduling an appointment with Pratt for June 21, 2013, to discuss the servicing option for the delinquent loan. At Pratt's request, the meeting was rescheduled for June 27, 2013. Nothing was accomplished at the meeting and FSA sent Pratt letters outlining the servicing options available. These letters gave notice that the delinquent debt was now $126, 987.06. Pratt applied for loan re-servicing, which FSA denied because the application was incomplete. On September 4, 2013, FSA sent Pratt an “Intent to Accelerate Notice, ” which informed Pratt that FSA was proceeding with foreclosure. On October 17, 2013, Pratt asked for reconsideration. FSA scheduled a meeting for October 30, 2013, to discuss reconsideration with Pratt. Pratt rescheduled the meeting twice, but it was finally held on November 22, 2013. The request for reconsideration was denied because Mrs. Pratt, now known as Ms. Schmidt, would not apply for servicing. On March 5, 2014, FSA sent a Notice of Acceleration of Farm Loan Program Accounts to both Pratt and Schmidt. On August 18, 2014, the Office of General Counsel referred the case to the U.S. Attorney's Office in Boise, Idaho for filing a foreclosure action. Pratt filed another Civil Rights complaint with FSA causing the foreclosure action to be put on hold. A Final Agency Decision on the discrimination claim was issued on December 9, 2015. That decision did not support a finding of discrimination. On or about January 28, 2016, FSA received clearance from the National Office to proceed with foreclosure.

         The last voluntary payment made by Pratt on the loan was $6, 575.00 made on July 26, 1995. As of December 19, 2016, Pratt is past due on the 2014 and 2015 real estate taxes in the amount of $3, 644.06. Also, Pratt currently owes $1, 858.76 for the 2016 taxes. That is a total due for real estate taxes of $5, 502.82. Also as of December 19, 2016, Pratt has an unpaid balance on the loan of $133, 095.07, with interest of $118, 502.92, for a total of $251, ...

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