Summary of a Recent
Judicial Development in
Finance & Credit

Notice Requirements for Foreclosure and Acceleration of Notes

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In United States v. Rinehart, No. 04-CV-1028, 2005 WL 2922181 (N.D.N.Y. Nov. 4, 2005), the United States District Court for the Northern District of New York held that there was sufficient evidence presented for a trier of fact to reasonably determine that the defendant-borrower had received adequate notice of acceleration and foreclosure from the government lender, and thus denied his motion for summary judgment.

Background

Defendant obtained a mortgage from the Farm Service Agency (FSA) and a second mortgage from the Rural Housing Service. Id. at *1. The "cross default" provisions in the FSA mortgage provided that default under that mortgage would constitute default under all other government loans as well. Id. The defendant defaulted on his FSA mortgage, and the United States sought to enforce its rights under both mortgages. Id. The government claimed that it had sent a notice of acceleration and foreclosure to the defendant and advised him of his administrative options via certified mail, which was returned as "unclaimed," and that it had then sent a second notice via first class mail which was never returned. Id. The defendant claimed that he never received the notices. Id.

Arguments

The defendant argued that the foreclosure action must be dismissed because the government failed to comply with notice requirements. Id. at *2.

The government argued that it had provided notice to the defendant, and since he never contacted it to exercise alternative procedures or his right to appeal as provided within the notice, he effectively waived such rights. Id.

Analysis and Holdings

The court stated that proof that office procedures were followed in the regular course of business and that the required notice had been properly addressed and mailed creates a presumption that the notice was received, and "the mere denial of receipt does not rebut that presumption." Id. at *3. Other than his denial of receipt, the defendant had submitted no proof rebutting the presumption that notice was received, and so the court concluded that "a fair-minded trier of fact could reasonably infer that Defendant refused to claim, or chose to ignore" the notice, and that he had therefore received adequate notice. Id. The court thus denied the defendant's motion for summary judgment, and likewise denied the government's motion for summary judgment because it had failed to submit a Statement of Material Facts as required by court rules. Id. at *4.

The case was decided on November 4, 2005.