and the Complaint was amended to assert a cause of action
against only Golden Elevator to collect on the promissory note
with all other claims and defendants being dropped. After the
Complaint was amended, Golden Elevator filed a new motion to
dismiss asserting that the Government had failed to plead a
cause of action upon which relief could be granted.
Golden Elevator's motion to dismiss was denied. This Court
held that under Illinois law the contract action on the note
was separate and distinct from the claims that were dismissed
for failure to prosecute and that the dismissal for failure to
prosecute did not preclude bringing the contract action. After
the motion to dismiss was denied, Golden Elevator answered the
Amended Complaint raising six affirmative defenses.
On October 20, 1994, the Government moved for summary
judgment contending that Defendant had admitted most of the
allegations in the Amended Complaint and that no genuine issues
of material fact remain. Additionally, the Government asserts
that Golden Elevator's affirmative defenses are deficient as a
matter of law.
In response, Golden Elevator contends that three asserted
affirmative defenses preclude summary judgment. Specifically,
Defendant contends that because the Government failed to
provide notice and grant administrative rights, failed to plead
the Federal Debt Collection Procedures Act, and failed to plead
a cause of action upon which relief can be granted, summary
judgment should be denied.
I. Summary Judgment
Summary judgment shall be granted if the record shows 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."
Black v. Henry Pratt Co., 778 F.2d 1278, 1281 (7th Cir. 1985).
The moving party has the burden of showing the absence of a
genuine issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). A
genuine issue of material fact exists when "there is sufficient
evidence favoring the nonmoving party for a jury to return a
verdict for that party." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). In
determining whether a genuine issue of a material fact exists,
the evidence is to be taken in the light most favorable to the
non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144,
157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Once the
moving party has met its burden, the opposing party must come
forward with specific evidence, not mere allegations or denials
of the pleadings, which demonstrates that there is a genuine
issue for trial. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th
The Government has put forth uncontroverted evidence that the
Defendant made, executed and delivered a written promissory
note on August 14, 1980, for $315,000.00, to Farmers State Bank
of Camp Point. It is also not in dispute that the SBA is the
present owner and holder of said note with assignment occurring
on October 11, 1985. Additionally, Defendant's agents have
admitted that Defendant defaulted on payments due under the
note and that the note matured with a balance due and owing.
Finally, the evidence shows that the Government made a written
demand for payment on the note on August 3, 1993. Thus, the
Government has demonstrated the elements necessary for relief.
See Fed.R.Civ.P. Official Form 3.
A. Administrative Remedies
Defendant claims Plaintiff is not entitled to summary
judgment because three affirmative defenses preclude relief.
First, Defendant argues that summary judgment is not warranted
because the Government failed to provide "notice of, or the
opportunity to apply for administrative remedies prior to the
initiation of the foreclosure." (Def.'s Resp. p. 2). In
support, Defendant cites Coleman v. Block, 580 F. Supp. 192
In Coleman, the court held that the Farmers Home
Administration could not act to liquidate a mortgage without
first providing notice and a chance to be heard. Id. at 208.
The holding in Coleman and similar Farmers Home Administration
has never been extended to SBA procedures. See United States v.
Don B. Hart Equity Pure Trust, 818 F.2d 1246 (5th Cir. 1987).
Moreover, the acceleration language in the form contract signed
by Robert Leenerts, as President of Golden Elevator, has been
upheld as binding by numerous courts. See e.g., Bernie's Custom
Coach of Texas, Inc. v. Small Business Administration,
987 F.2d 1195 (5th Cir. 1993); United States v. Rollinson, 866 F.2d 1463
(D.C. Cir. 1989). Because Defendant's agents signed the
contract, they either knew or should have known that
acceleration could occur if they failed to make payments. See
SBA Form 147.
Defendant's related argument that it was denied an
opportunity to exhaust administrative remedies is also flawed.
First, the SBA does not have an obligation to inform borrowers
of any deferral rights they might have. Don B. Hart Equity Pure
Trust, 818 F.2d 1246, 1250 (5th Cir. 1987). Second, Defendant
is charged with knowledge of the contents of federal
regulations. Federal Crop Insurance Co. v. Merrill,
332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947). Thus, Defendant, not the
SBA, had the obligation to request administrative relief. See
13 C.F.R. § 131.3(a) (1994). Third, because Defendant received
two deferments, reduced and seasonal loan payments, an extended
time in which to work out its difficulties, an extended period
operating in a state of arrears, and a release of liens, it was
not denied administrative consideration. The SBA did not act
arbitrarily and capriciously when it accelerated the loan.
B. Federal Debt Collection Procedures Act
Defendant's second argument why summary judgment should not
be allowed claims that the Plaintiff improperly failed to base
jurisdiction on the Federal Debt Collection Procedures Act,
28 U.S.C. § 3001. In support, Defendant cites United States v.
Gelb, 783 F. Supp. 748, 752 (E.D.N.Y. 1991). In Gelb, Judge
Platt of the Eastern District of New York held that the FDCPA
applied to an action by the government to set aside two real
estate conveyances. Id. at 752. In the case, Judge Platt denied
defendant's motion for summary judgment and instructed the
government that it "should amend" the complaint to plead the
FDCPA. Id. at 758. Judge Platt, however, did not hold that the
government failed to state a valid claim when it failed to
plead the FDCPA.
By asserting that it is necessary for the Government to plead
the FDCPA, Defendant overlooks the fact that the FDCPA is not
a jurisdictional grant but instead provides the exclusive
procedural rules for debt collection by the federal government.
28 U.S.C. § 3001(a).*fn1 This is important because Federal
Rule of Civil Procedure 8 mandates that a complaint must state
"the grounds upon which the court's jurisdiction depends."
The Government claims this Court has jurisdiction pursuant to
28 U.S.C. § 1345. Section 1345 authorizes district courts
jurisdiction when an agency of the United States, authorized to
sue, brings a civil action. 15 U.S.C. § 634(b)(1) provides the
congressional authorization for the SBA to sue. Therefore, it
is not necessary for this action to arise under the FDCPA in
order for the Court to have subject matter jurisdiction.
The case United States v. Personal Computer Center, Inc.,
1992 WL 166977 (D.Kan.), supports the Government's position
that it is not essential that the complaint be brought pursuant
to the FDCPA. In Personal Computer Center, Inc., the SBA
brought a contract action against the maker and the guarantor
of two promissory notes. Id. at *1. Judge Saffels held that
under Kansas law the SBA was entitled to summary judgment. Id.
at *4. Judge Saffels, however, refused to allow the government
to untimely amend the complaint to pray for a 10 percent
surcharge pursuant to the FDCPA. Id.
In this case, the Government's attempt to collect on the
promissory note is based on Illinois law. Nevertheless,
Defendant is correct that the FDCPA could apply to this
action. See 28 U.S.C. § 3001. However, 28 U.S.C. § 3003 states
that the FDCPA only preempts state law to the extent such law
"is inconsistent with this chapter." 28 U.S.C. § 3003.
Defendant has failed to demonstrate how Illinois law, as it
relates to this case, is inconsistent with the FDCPA. Thus, the
Government was not required to plead the FDCPA. Conversely,
because they did not plead the FDCPA, the Government is not
entitled to the surcharge provisions in 28 U.S.C. § 3011.
United States v. Personal Computer Center, Inc., 1992 WL 166977
C. Failure To State A Cause Of Action
Defendant's third contention why summary judgment should not
be granted is that the Government failed to state a cause of
action upon which relief could be granted. However, as
discussed above and in two previous Orders, the Government has
stated a claim upon which relief can be granted. Thus, there is
no merit to the Defendant's third argument.
Because the Defendant has failed to raise a question of
material fact and the three asserted affirmative defenses are
without merit as a matter of law, the Government is entitled to
Ergo, motion (d/e 38) is ALLOWED. Plaintiff is awarded the
sum of $289,637.06, plus additional interest of $59.79 per day
from September 23, 1994, to the date of entry of this judgment.