IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 95-30534
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
GEORGE EAMES AND PATSY SMOTHERS EAMES,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
(CA-93-916-A)
_________________________________________________________________
November 28, 1995
Before KING, SMITH, and BENAVIDES, Circuit Judges.
PER CURIAM:*
The district court entered a judgment that George Eames and
Patsy Smothers Eames were personally liable to the United States
on the portion of their indebtedness to the Small Business
Administration that had not prescribed. Additionally, the
judgment awarded the Government an in rem judgment for the full
unpaid balance of their indebtedness, since the debt was secured
by a mortgage on property owned by the Eameses. The Government
*
Local Rule 47.5 provides: "The publication of opinions
that have no precedential value and merely decide particular
cases on the basis of well-settled principles of law imposes
needless expense on the public and burdens on the legal
profession." Pursuant to that Rule, the court has determined
that this opinion should not be published.
used the proceeds of a foreclosure sale of the property to
satisfy the in rem judgment. The Eameses filed a "Motion to Show
Cause Why Judgment Should Not Be Cancelled," arguing that the
sale proceeds, which totalled more than the personal judgment
against them, should have been credited first against their
personal liability. The district court denied their motion and
the Eameses appeal. We affirm the ruling of the district court.
I. BACKGROUND
A. Facts
In 1979, George and Patsy Smothers Eames (the "Eameses"),
husband and wife, borrowed $190,400 from the Small Business
Administration (the "SBA"). To evidence the indebtedness, they
executed and delivered to the SBA a promissory note (the "Note")
bearing interest at the rate of three percent (3%) per annum.
The Note provided, inter alia, that on non-payment of the loan
the SBA could sell the Eameses' collateral and apply the proceeds
to the payment of the Eameses' debt as the SBA saw fit. In 1982,
to secure the indebtedness evidenced by the Note, the Eameses
executed a mortgage on a 225-acre parcel of real estate in
Concordia Parish, Louisiana (the "Collateral").
The Eameses paid the SBA a total of $111,605 in five
payments of $22,321 each between February 4, 1980, and February
2, 1984. Then they stopped making payments. The SBA did not
demand payment on the entire balance due until April 1991, at
2
which time it sought $98,244.25 principal and $21,244.98
interest. In February 1993, the SBA again demanded payment, this
time in the amount of $124,098.65.
B. Procedural History
Seeking payment of the indebtedness secured by the Note, the
SBA filed a complaint against the Eameses on May 26, 1993. The
Government sought to reduce the full amount of its claim to a
personal judgment against the Eameses. The Eameses denied any
liability on the Government's claim on the ground that the
statute of limitations had run--in other words, the debt had
prescribed.2 In its First Amended Complaint, the Government
conceded that a portion of its claim had prescribed and it sought
to limit the personal judgment against the Eameses to that
portion of the debt that was not barred by prescription. In
addition, the Government sought to pursue an in rem action
against the Collateral to satisfy its claim for the full amount
due on the Note.
2
The federal statute of limitations governing enforcement
of the Note is set forth in 28 U.S.C. § 2415(a), which provides
in relevant part:
[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
cause of action accrues . . . .
28 U.S.C. § 2415(a).
The district court found that the operative date for
purposes of computing the prescriptive period was the date that
the SBA filed its complaint, May 26, 1993.
3
On April 15, 1994, the district court granted summary
judgment for the Government. The district court also ruled that
the Government's claims for payments originally due before 1988
were barred by the statute of limitations. On April 29, the
district court entered a final judgment (the "Judgment") (which
is not a model of clarity) holding that the Eameses were liable
in personam for $42,709.96 principal, plus interest. The
Judgment also held that the Eameses were responsible in rem for
the full amount of the Government's claim, $95,271.25 principal,
plus interest. Finally, the Judgment directed that the real
estate be sold and the proceeds paid to the Government to satisfy
the Eameses' debts. The Government sold the real estate for
$63,000 in December 1994, applying this amount to the in rem
claim. Thereafter, the Government continued to seek payment of
the in personam portion of the Judgment. In February 1995, in
accordance with FED. R. CIV. P. 60(b)(5),3 the Eameses filed a
pleading styled "Motion to Show Cause Why Judgment Should Not Be
Cancelled." Effectively ignoring the in rem portion of the
Judgment, the Eameses contended that the seizure and sale of the
Collateral had satisfied in full the amount of their personal
liability. Following a hearing, and after finding that it was
within the Government's discretion to choose how to apply the
3
The Federal Rules of Civil Procedure provide that a party
may move for relief from a final judgment if "the judgment has
been satisfied, released, or discharged, or a prior judgment upon
which it is based has been reversed or otherwise vacated, or it
is no longer equitable that the judgment should have prospective
application." FED. R. CIV. P. 60(b)(5).
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proceeds of the foreclosure sale, the district court denied the
Eameses' motion. Proceeding pro se, the Eameses now appeal.
II. ANALYSIS The merits of the
Judgment which precipitated the Eameses' request for relief are
not before us in this case. We have pointed out that, where no
appeal has been taken from the underlying judgment, "it goes
without saying that a Rule 60 motion is not a substitute for an
appeal." Travelers Ins. Co. v. Liljeberg Enters., Inc., 38 F.3d
1404, 1408 (5th Cir. 1994). Moreover, "in the absence of an
abuse of discretion, [we] will not review the district court's
determination" because motions for relief from a final judgment
are within the sound discretion of the district court. United
States v. Nolder, 749 F.2d 1128, 1129 (5th Cir. 1984) (internal
quotations and ellipses omitted).
As an initial matter, we note that the expiration of the
statute of limitations on an action for money damages does not
affect the in rem rights or remedies of the Government. Federal
law does define the limitation period for a suit brought by the
Government for in personam money damages founded on a contract.
28 U.S.C. § 2415. This statute, however, "by its own unambiguous
terms, does not apply to mortgage foreclosures." United States
v. Ward, 985 F.2d 500, 503 (10th Cir. 1993). Actions brought by
the Government "to establish the title to, or right of possession
of, real or personal property" are exempt from the limitations
period. 28 U.S.C. § 2415(c).
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Moreover, as a government agency, the SBA is not bound by a
state statute of limitations governing actions on mortgages.
Magnolia Fed. Bank for Sav. v. United States, 42 F.3d 968, 970
(5th Cir. 1995). Under Louisiana law, a creditor is unable to
recover in rem if its in personam claim against the debtor is
barred by the statute of limitations. LA. CIV. CODE ANN. art. 3282
(West 1994). We have noted, however, that "every federal
appellate court that has addressed whether there is a time bar on
federal agencies' pursuit of real property foreclosure actions .
. . has concluded that no such bar exists." Farmers Home Admin.
v. Muirhead, 42 F.3d 964 (5th Cir.) (holding that Mississippi
statute of limitations for collecting on underlying notes did not
bar Farmers Home Administration from foreclosing mortgage that
secured notes), cert. denied, 116 S. Ct. 50 (1995). Therefore,
as distinct from the Government's right to in personam contract
damages, the power of sale in rem contained in a mortgage
survives regardless of whether the underlying obligation is
barred by prescription. United States v. Dos Cabezas Corp., 995
F.2d 1486, 1489-90 (9th Cir. 1993).
Application of the proceeds from the sale of the Collateral
was within the sole discretion of the Government. According to
the scenario advanced by the Eameses, the Judgment stipulated
that any funds raised from the sale of the Collateral must be
used to satisfy first the Government's personal claim against
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them.4 We find, on the contrary, that the SBA was authorized to
apply the proceeds as it saw fit, to either the in rem claim or
the in personam claim. SBA regulations provide that property
pledged as collateral "may be sold in accordance with the
provisions of the related security instrument." 13 CFR §
120.204-2(c). The regulations, however, do not indicate how the
agency must apply the proceeds resulting from a foreclosure and
sale. Absent federal law to the contrary, federal courts
generally apply state law to the commercial lending activities of
government agencies. United States v. Irby, 618 F.2d 352, 355
(5th Cir. 1980). In Louisiana, "generally, a debtor has the
right to declare which of several debts his payment is to
liquidate. . . . When a debtor fails to impute payment to a
particular debt, the creditor may exercise the right." Delta
Bank & Trust Co. v. Chisholm, 601 So.2d 345, 348 (La. Ct. App.
4
The Judgment is comprised of two major sections--a section
dealing with the in personam claim and a section dealing with the
in rem claim. The Judgment reads in pertinent part:
IT IS ORDERED, ADJUDGED, AND DECREED that there be
judgment in favor of Plaintiff, the United States of
America, and against the defendants, GEORGE EAMES AND PATSY
SMOTHERS EAMES, jointly, severally, and in solido, for the
principal sum of $42,709.96 and interest . . . ;
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the
said hereinabove described property be seized and sold . . .
and the amount realized from said sale be credited "pro
tanto" upon the amount of the judgment herein . . . .
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that there
be judgment in favor of Plaintiff . . . against the
defendants . . . in rem for the full amount of the claim of
the United States of America for the principal sum of
$95,271.25, plus accrued interest . . . ; provided, however,
any sum recovered from Defendants personally shall be applied
as a credit in reduction of this in rem judgment first
against accrued interest and then principal.
7
1992); see LA. CIV. CODE ANN. art. 1864 (West 1987). In the
instant case, the language of the Note is clear. The Eameses
authorized the SBA to sell the Collateral and "[a]fter deducting
all expenses incidental to or arising from such sale or sales,
the [SBA could] apply the residue of the proceeds thereof to the
payment of the [Note], as it shall deem proper." (emphasis
added).
Therefore, we conclude that the district court did not abuse
its discretion in denying the Eameses' Rule 60(b) motion.
Although the statute of limitations barred the SBA from
prevailing against the Eameses personally on the prescribed
portion of the underlying debt, it did not bar an in rem action
against the Collateral for the full amount of the outstanding
indebtedness. The Judgment made clear that it operated both in
rem, for the full amount of the Government's claim, and in
personam, for the portion of the claim that had not prescribed.
Louisiana law provides that a debtor has the right to specify
which of several debts his payment is to liquidate. In the Note,
the Eameses expressly ceded this right to the SBA. Consequently,
the Government could apply the proceeds to the in rem claim and,
if necessary, continue to seek payment of the in personam portion
of the judgment.
III. CONCLUSION
For the reasons stated above, we AFFIRM the district court's
denial of the motion for relief from judgment.
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