Joe P. Emerson - Administrative Offset Decision

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In the Matter of JOE P. EMERSON, Petitioner	HUDBCA No. 86-1283-F290 Claim No. 7-65083271-0
Mr. Joe P. Emerson Route 3, Box 8 Cordell, Oklahoma 73632	Petitioner, Pro se
Gladys C. Gallagher, Esquire Office of General Counsel Room 10240 Department of Housing and    Urban Development Washington, D. C. 20410	For the Secretary

Petitioner was notified by a Notice of Intent date October 17, 1985, that pursuant to 31 U.S.C. §3720A, the Secretary ("Secretary") of the U.S. Department of Housing and Urban Development ("HUD") intended to seek offset by the Internal Revenue Service ("IRS") of any 1985 tax refund due to the Petitioner against a claimed past-due legally enforceable debt of the Petitioner to HUD. Petitioner filed a timely request to present evidence that the debt was not past-due or not legally enforceable. As a result of that request, referral of the debt for offset by IRS was temporarily stayed. A Decision and Order vacating the stay and authorizing the Secretary to refer the debt to the IRS in accordance with 31 U.S.C. §3720A for offset against any refund which is owing to the Petitioner with respect to 1985 tax returns was issued on January 8, 1986. This is the full text of the decision entered in this case.

1. On March 20, 1982, Petitioner executed and delivered to A-l, Inc. an installment contract in the amount of $67,860.03. On the same date, A-l, Inc. assigned the contract to National Mortgage Corporation of America ("NMCA"). The contract was given for a manufactured home loan that was insured against nonpayment by the Secretary of HUD pursuant to Title I of the National Housing Act, 12 U.S.C. §1703. (Govt. Exh. A.)

2. Petitioner failed to make payments as agreed in the installment contract. By letter dated February 10, 1984, NMCA sent written notice to Petitioner by certified mail that his mobile home would be sold at a private sale after March 10, 1984, and that the proceeds from that sale would be "applied in the manner required by law." The letter further advised Petitioner that he would be liable for any deficiency after the proceeds of the sale were applied to the debt. (Govt. Exh. C.) Petitioner was not notified of the time or place of the sale (Petitioner' s submission)

3. Subsequent to the sale of the mobile home by NMCA, NMCA assigned the contract to the United States of America in accordance with 24 C.F.R. §201.665. The Secretary of HUD is the holder of the contract on behalf of the United States of America. (Govt. Exh. A., page 3.) The assignment took place because the proceeds of the sale of the mobile home did not cover Petitioner's entire debt on the installment contract.

4. Petitioner is currently in default on the installment contract. The Secretary has made efforts to collect from the Petitioner other than by offset but has been unsuccessful. The Secretary claims that the following amounts are due and owing by Petitioner: (a) $8,177.16 as the unpaid principal balance as of November 25, 1985; (b) $3,213.64 as the unpaid interest on the principal balance at 18% per annum through October 31, 1985; and (c) interest on said principal balance from November 1, 1985 at 18% per annum until paid. (Govt. Exh. B.)

Petitioner has raised three defenses to the claim by the Secretary. He contends that HUD lacks privity of contract with him and that the Secretary has no right to bring this claim against Petitioner, particularly because Petitioner was not notified by NMCA that HUD had any interest in his contract. Petitioner further states that no notice was given to him of the time and place of the sale. He contends that because of this lack of notice, he has no way of knowing whether a good faith sale was conducted that resulted in a deficiency. Finally, Petitioner contends that the statute of limitations has run as to any legal action.

The Secretary of HUD is the holder of Petitioner's contract on behalf of the United States of America, as assignee. Petitioner's contract expressly provides for assignment of it by the lender and contains no prohibitions against assignment to a Government entity. The assignee assumes all rights of the assignor under the contract. There is no requirement in the contract that Petitioner be notified in advance of any or all possible assignees. The Secretary's action against Petitioner is expressly provided for by the Deficit Reduction Act, 31 U.S.C. §3720A, which authorizes Federal agencies to refer debts to the IRS for offset against Federal tax refunds otherwise due to debtors. The Secretary's action is not barred by law, the contract, or lack of privity.

Petitioner is correct that he received no notice of the actual time and place of the sale. However, he was sent a written notice dated February 10, 1984 that a private sale would take place after March 10, 1984 if he did not redeem the mobile home. Oklahoma law requires that "reasonable notification of the time after which a private sale or other intended disposition is to be made shall be sent by the secured party to the debtor.... 12A Okla. Stat. 9-504. The Secretary submitted evidence that a letter was sent by the lender to Petitioner by certified mail one month before the sale was to be made. Even if Petitioner did not actually receive that letter, the mailing of it nonetheless constituted reasonable notification of the sale under Oklahoma law. Beneficial Finance Company v. Young, 612 p. 2d 1357 (Okla. 1980); In the Matter of Charles Rhyne, HUDBCA No. 86-1321-F337 (January 7, 1986). I find that the debt of Petitioner to the Secretary is not rendered unenforceable by the form of notice of sale used by the lender.

Finally, no state statute of limitations bars this action. This case arises under a Federal statute, the Deficit Reduction Act, which states at 31 U.S.C. §3716 that a head of an agency may collect a claim by administrative offset "... except that no claim under this Act that has been outstanding for more than ten years may be collected by means of administrative offset." The applicable statute of limitations for this offset action is ten years. The Secretary's claim has not been outstanding for more than ten years. Thus, it is not barred by a statute of limitations. See In the Matter of Helen Gardella, HUDBCA No. 86-1089-F97 (January 7, 1986.)

For all of the foregoing reasons, I find that Petitioner's debt to HUD is past-due and legally enforceable in the amount claimed by the Secretary.

ORDERED that the Secretary of Housing and Urban Development is authorized to refer the debt in the amount claimed by the Secretary to the Internal Revenue Service in accordance with 31 U.S.C. §3720A for offset against any refund which is owing to the Petitioner with respect to his 1985 tax return.

March 13, 1986