[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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FILED
U.S. COURT OF APPEALS
No. 97-3286 ELEVENTH CIRCUIT
________________________ 11/18/98
THOMAS K. KAHN
D. C. Docket No. 93-29 CIV-T-25C CLERK
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
KEITH L. BEGIN,
DEBORAH BEGIN,
Defendants/Appellants.
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Appeal from the United States District Court
for the Middle District of Florida
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(November 18, 1998)
Before ANDERSON and BARKETT, Circuit Judges, and RONEY, Senior Circuit Judge.
RONEY, Senior Circuit Judge:
Defendants Keith and Deborah Begin appeal from a judgment entered against them and in
favor of plaintiff, the United States of America, on a promissory note. We hold that, contrary to the
decision of the district court, the United States’ claim was barred by the six-year limitations period
set forth in 28 U.S.C. § 2415(a), and reverse.
In 1980, the Begins executed a promissory note to Southeast Bank in the principal amount
of $100,000. The Begins used the loan proceeds to purchase commercial property in Pinellas
County, Florida. The note was secured by a mortgage on the commercial parcel and by a separate
mortgage on the Begins’ personal residence. The Small Business Administration (SBA) guaranteed
the note and mortgages.
In 1984, the Begins conveyed title to the commercial parcel to AKO Painting, Inc., a
corporation owned by Alfred Koch. Koch agreed to assume the mortgage debt and make the
required payments under the note. In November, 1984, Koch defaulted on the note. In 1985, the
note and mortgages were assigned to the SBA.
Between 1985 and 1992, neither the Begins nor Koch made any payments on the note. In
January, 1992, the Begins paid the SBA $15,000.00 to obtain a release of the lien on their residence.
On January 6, 1993, the United States commenced this action. The United States sought
foreclosure of the commercial property and, if the sums received from the foreclosure did not satisfy
the United States’ claim, a deficiency judgment against the Begins.
In a motion for summary judgment, the Begins argued that the six-year statute of limitations
barred any in personam deficiency claim against them. The United States took the position that the
Begins’ $15,000.00 payment in 1992 recommenced the limitations period. The government did not
dispute the Begins’ contention that in the absence of a partial payment, the limitations period expired
before the government commenced this action. The district court denied the Begins’ motion, finding
that the Begins’ $15,000.00 payment was a “partial payment on their overdue debt [which]
reinstated the six year statute of limitation[s] under 28 U.S.C. § 2415.” The court granted the United
States’ motion for a foreclosure judgment on the commercial property. The court determined that
under the promissory note, the United States was owed $209,999.98.
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Pursuant to the foreclosure judgment, the United States sold the commercial property for
$32,000.00. The United States then moved for a deficiency judgment against the Begins. The
district court granted the motion for deficiency judgment. The court found the fair market value of
the property at the time of the foreclosure to be $100,000.00. The court determined that there were
$22,500.00 in unpaid ad valorem taxes, and reduced the fair market value by that amount. The court
entered a deficiency judgment of $133,716.82 in favor of the United States and against the Begins.
The Begins asserted that the six-year limitations period set forth in 28 U.S.C. § 2415(a)
barred the United States’ claim for a deficiency judgment. That section provides:
[E]very action for money damages brought by the United States or an officer or
agency thereof which is founded upon any contract express or implied in law or fact,
shall be barred unless the complaint is filed within six years after the right of action
accrues . . . . Provided, That in the event of a later partial payment or written
acknowledgment of debt, the right of action shall be deemed to accrue again at the
time of such payment or acknowledgment . . . .
28 U.S.C. § 2415(a) (1994). This six-year statute of limitations applies to the claim of the United
States in this case. See United States v. Alvarado, 5 F.3d 1425, 1428 (11th Cir. 1993).
The United States argued, and the district court found, that the Begins’ 1992 payment of
$15,000.00 to obtain a release of the lien on their residence was a “partial payment” which
recommenced the six-year limitations period, pursuant to 28 U.S.C. § 2415(a). The decision on this
appeal turns on whether the payment was a “partial payment” of the “debt” under the statute. A
careful analysis of the law as applied to the undisputed facts in this case shows it was not.
To accurately interpret the statute, it is important to determine whether the “debt” is an in
personam debt or an in rem debt. An action for money damages based on breach of a promissory
note is an in personam action by which “the creditor seeks to recover money from the debtor.”
Alvarado, 5 F.3d 1425, 1429 (11th Cir. 1993). A foreclosure action, on the other hand, is not a suit
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against a debtor. Instead, it is an action in rem, a proceeding against the property “for the legal
determination of the existence of the mortgage lien, the ascertainment of its extent, and the
subjection to a sale of the estate pledged for its satisfaction.” Alvarado, 5 F.3d at 1429 (quoting 55
Am. Jur. Mortgages § 553). The limitations period set forth in 28 U.S.C. § 2415(a) applies only to
“action[s] for money damages,” but does not apply to in rem foreclosure proceedings. See Alvarado,
5 F.3d at 1429. Therefore, the United States must bring an in personam action for money damages
based on breach of a promissory note within six years of the date the cause of action accrued, but
may bring a foreclosure action on a mortgage securing the promissory note “at any time.”
Alvarado, 5 F.3d at 1431; see id. at 1428 (“[T]he United States is not bound by state statutes of
limitation . . . .”) (internal quotation marks omitted).
Because of these differences between a lien and a personal debt and between the actions
which may be brought upon each, a property owner’s acknowledgment that his or her property is
subject to a lien is not equivalent to an acknowledgment that the property owner owes a personal
debt to the lien holder. Even when the property owner has not acknowledged the existence of an
underlying in personam debt, he or she may pay the lien holder solely to obtain a release of the lien.
In such circumstances, a payment made solely to obtain a release of a property lien does not, without
more, constitute payment or acknowledgment of any debt personal to the property owner.
This is precisely what occurred in this case. The Begins made a $15,000.00 payment to
obtain a release of the lien on their residence, and therefore avoided a potential in rem foreclosure
action against the property. They did not make a payment on any personal debt.
The United States argues that the Begins’ attorney, in a January 28, 1992 letter,
acknowledged that the $15,000.00 payment was a partial payment on the promissory note. Contrary
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to the government’s assertion, the 1992 letter unambiguously stated that the $15,000.00 payment
was made only for “settlement of the release of the lien on [the Begins’] residence.” The letter
clarified that the Begins would make no “further financial commitments at th[at] time.” The letter
did not suggest that the Begins made, or would make, any payments on the promissory note.
The United States also relies on the Begins’ attorney’s earlier letter of January 18, 1991 in
support of its contention that the $15,000.00 payment was a partial payment of the Begins’ debt.
That letter does not support the government’s position. Instead, it stated only that the Begins were
willing to make a settlement offer “in order to clear the second mortgage lien on their
residence . . . .” It further stated the Begins’ belief that Mr. Koch’s corporation, not the Begins,
was required to make payments on the SBA loan, and suggested that “the SBA initiate foreclosure
proceedings on th[e] commercial real estate property so that its mortgage obligation may be
satisfied.” This letter did not acknowledge any debt or indicate any intent by the Begins to pay a
portion of any personal debt.
The United States did not present to the district court any other evidence that the Begins
made a partial payment on a debt. The uncontroverted evidence demonstrates that the Begins settled
only the in rem claim against their personal residence. Therefore, the United States’ cause of action
did not “accrue again at the time of [the $15,000.00] payment . . . .” 28 U.S.C. § 2415(a). This
action is barred by the applicable six-year statute of limitations.
A “written acknowledgment of debt” would also recommence the six-year limitations period.
28 U.S.C. § 2415(a). In the district court, the United States stated that it was “utilizing discovery
to determine if such written acknowledgment is present in the case at bar.” Mem. of Law in
Opposition to Begins’ Cross-Motion for Summ. J., at 4 n.1. The government did not, however,
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argue before the district court or this Court that the Begins’ made such a written acknowledgment
of debt. Reviewing the Begins’ attorneys’ January, 1991 and January, 1992 letters, we conclude that
the statements that the Begins would “consider a possible settlement” after foreclosure proceedings,
and other similar statements, did not constitute an acknowledgment of a debt personal to the Begins
which would have revived the limitations period.
Since the action is barred by the statute of limitations, it is not necessary to consider the other
issues raised on this appeal.
REVERSED.
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