B-214696, MAY 1, 1984

B-214696, MAY 1, 1984

PRECIS-UNAVAILABLE

THE HONORABLE DANTE B. FASCELL, HOUSE OF REPRESENTATIVES:

DEAR MR. FASCELL:

THIS CONCERNS YOUR NOTE OF MARCH 14, 1984 AND ATTACHED COMMUNICATIONS REGARDING A CONSTITUENT'S INQUIRY ABOUT THE GOVERNMENT'S REDEMPTION RIGHTS ON PRIOR LIENHOLDER REAL ESTATE FORECLOSURES AND THE COMPTROLLER GENERAL'S AUTHORITY TO RELEASE LIENS IN FAVOR OF THE UNITED STATES. FOR THE REASONS GIVEN BELOW, WE FIND THAT THE COMPTROLLER GENERAL CANNOT RELEASE THE GOVERNMENT'S LIEN ON YOUR CONSTITUENT'S PROPERTY.

THE FACTS SHOW THAT YOUR CONSTITUENT, MR. JOHN F. KUHN, SR., TOGETHER WITH SEVERAL OTHER INDIVIDUALS, HELD A FIRST MORTGAGE ON CERTAIN REAL PROPERTY IN MARION COUNTY, FLORIDA. AS A RESULT OF VARIOUS DEFAULTS IN PAYMENT BEGINNING IN JANUARY 1983, THE FIRST MORTGAGEES BROUGHT AN ACTION IN THE MARION COUNTY, FLORIDA, CIRCUIT COURT TO FORECLOSE THE MORTGAGE. THE UNITED STATES, THROUGH THE FARMERS HOME ADMINISTRATION OF THE DEPARTMENT OF AGRICULTURE, WAS JOINED AS A PARTY DEFENDANT BECAUSE IT HELD A MORTGAGE, INFERIOR TO THAT OF THE PLAINTIFF, AGAINST THE PRINCIPAL DEFENDANT.

ON OCTOBER 3, 1983, THE CIRCUIT COURT RULED THAT MR. KUHN AND THE OTHER PLAINTIFFS WERE ENTITLED TO FORECLOSURE OF THEIR MORTGAGE LIEN SUBJECT TO THE UNITED STATES GOVERNMENT'S 1-YEAR RIGHT OF REDEMPTION AS PROVIDED BY SECTION 2410(C) OF TITLE 28 OF THE UNITED STATES CODE. AT THE PUBLIC SALE, THE PLAINTIFFS PURCHASED THE PROPERTY FOR ESSENTIALLY THE SAME AMOUNT AS THE FORECLOSURE AWARD. THE GOVERNMENT'S 1-YEAR RIGHT OF REDEMPTION REMAINED OUTSTANDING.

IN RESPONSE TO AN INQUIRY ON MR. KUHN'S BEHALF, THE STATE DIRECTOR OF THE FARMERS HOME ADMINISTRATION FOR FLORIDA INFORMED SENATOR LAWTON CHILES THAT THE ADMINISTRATION'S REGULATIONS ALLOW THE STATE DIRECTOR TO SELL THE GOVERNMENT'S RIGHT OF REDEMPTION FOR A PRICE EQUAL TO THE VALUE OF THE REDEMPTION RIGHT. SEE 7 C.F.R. SEC. 1872.2(C)(1)(V). ACCORDING TO THE STATE DIRECTOR, THAT VALUE IS THE DIFFERENCE BETWEEN THE PRICE THE ADMINISTRATION WOULD PAY TO REDEEM THE PROPERTY AND THE PROPERTY'S PRESENT MARKET VALUE. THE ADMINISTRATION SUGGESTED THAT IF MR. KUHN WOULD LIKE TO PURCHASE THE REDEMPTION RIGHT HE SHOULD CONTACT ITS OFFICE. MR. KUHN, HOWEVER, APPEARS NOT TO BE INTERESTED IN PURCHASING THE REDEMPTION RIGHT, AND SUGGESTS THAT THE STATUTE AUTHORIZING THE GOVERNMENT'S 1-YEAR RIGHT OF REDEMPTION IS UNCONSTITUTIONAL. HE ALSO MAINTAINS THAT, IF IT WANTED TO PROTECT ITS LIEN, THE FARMERS HOME ADMINISTRATION SHOULD HAVE BID ON THE PROPERTY AT THE SALE FOR WHAT WAS OWED TO HIM ON THE FIRST MORTGAGE.

THE GOVERNMENT'S RIGHT OF REDEMPTION ARISES UNDER SECTION 2410(C) OF TITLE 28, WHICH PROVIDES THAT "WHERE A SALE OF REAL ESTATE IS MADE TO SATISFY A LIEN PRIOR TO THAT OF THE UNITED STATES, THE UNITED STATES SHALL HAVE ONE YEAR FROM THE DATE OF THE SALE WITHIN WHICH TO REDEEM. ***" IT IS THIS RIGHT OF REDEMPTION, AND THE GOVERNMENT'S UNDERLYING LIEN, THAT YOUR CONSTITUENT WISHES THE COMPTROLLER GENERAL TO RELEASE.

SECTION 2410(E) OF TITLE 28 AUTHORIZES THE COMPTROLLER GENERAL TO ISSUE A CERTIFICATE RELEASING PROPERTY FROM A GOVERNMENT LIEN PROVIDED THAT (A) A SENIOR LIENHOLDER APPLIES IN WRITING TO THE OFFICER RESPONSIBLE FOR THE ADMINISTRATION OF THE LAWS GIVING RISE TO THE GOVERNMENT'S LIEN (IN THIS CASE THE ADMINISTRATOR OF THE FARMERS HOME ADMINISTRATION); (B) THE APPLICANT'S LIEN IS DULY RECORDED IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED; (C) THE GOVERNMENT'S LIEN IS JUNIOR TO THE APPLICANT'S LIEN AND IS NOT A TAX LIEN; AND (D) THE OFFICER TO WHOM THE APPLICATION IS MADE FINDS AND REPORTS TO THE COMPTROLLER GENERAL THAT THE PROCEEDS FROM THE PROPERTY'S SALE WOULD BE INSUFFICIENT TO WHOLLY OR PARTLY SATISFY THE LIEN, OR THAT THE GOVERNMENT'S CLAIM HAS BEEN SATISFIED OR THAT IT IS NO LONGER ENFORCEABLE BECAUSE OF LAPSE OF TIME OR FOR SOME OTHER REASON. ALL OF THESE CONDITIONS MUST BE MET BEFORE A RELEASE MAY BE GRANTED. E.G., 58 COMP.GEN. 732, 733 (1979).

MOST REQUESTS TO THE COMPTROLLER GENERAL UNDER SECTION 2410(E) ARE DENIED BECAUSE ONE OR MORE OF THE STATUTORY CONDITIONS HAVE NOT BEEN MET. THE MOST COMMON REASON FOR DENIAL IS THAT THE REQUEST IS MADE BY THE FEE SIMPLE OWNER OF THE PROPERTY WHO BOUGHT IT AT A FORECLOSURE SALE. THE OWNER OF THE PROPERTY IS NOT A LIENHOLDER AND THEREFORE DOES NOT QUALIFY UNDER THE STATUTE TO OBTAIN A CERTIFICATE OF RELEASE. E.G., 58 COMP.GEN. 732, 733 (1979); B-165746, DECEMBER 26, 1968.

APPLYING THESE PRINCIPLES TO MR. KUHN'S SITUATION, IT IS EVIDENT THAT WE CANNOT RELEASE THE GOVERNMENT'S LIEN ON THE PROPERTY CURRENTLY OWNED BY MR. KUHN AND THE OTHER PLAINTIFFS IN THE FORECLOSURE ACTION. MR. KUHN HAS NOT COMPLIED WITH THE DESCRIBED STATUTORY REQUIREMENTS, AND, MOST IMPORTANT, AS AN OWNER AND NOT A LIENHOLDER OF THE PROPERTY, HE DOES NOT QUALIFY UNDER THE STATUTE TO OBTAIN A CERTIFICATE OF RELEASE.

AS WE INDICATED ABOVE, MR. KUHN ALSO ASSERTS THAT 28 U.S.C. SEC. 2810(C) IS UNCONSTITUTIONAL. GENERALLY, THIS OFFICE DECLINES TO OFFER OPINIONS ON THE CONSTITUTIONALITY OF A STATUTE. UNDER OUR SYSTEM OF GOVERNMENT SUCH DETERMINATIONS ARE RESERVED TO THE COURTS. E.G., A 80428, NOVEMBER 1, 1977.

WE HOPE WE HAVE BEEN OF ASSISTANCE. UNLESS WE HEAR OTHERWISE FROM YOUR OFFICE, THIS OPINION WILL BE AVAILABLE FOR PUBLIC RELEASE 30 DAYS FROM TODAY.