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United States v. Estate of Gallego

United States District Court, D. South Dakota, Western Division

September 20, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
THE ESTATE OF BEULAH E. GALLEGO/GALLIGO; LYNN GALLEGO a/k/a/ LYNN LEONA GALLIGO, -RANDALL, as Administrator of the Estate of Beulah E. Gallego/Galligo; FRANKEE WHITE DRESSS; THE OGLALA SIOUX TRIBE; and ANY PERSON IN POSSESSION, Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING MOTION FOR DEFAULT JUDGMENT

          Lawrence L. Piersol United States District Judge

         In this case, the United States is seeking to foreclose on a loan made under the provisions of Section 184 of the Housing and Community Development Act, 12U.S.C. § l7l5z-l3a("Section 184"), and secured by a leasehold mortgage on real property held in trust for Oglala Sioux Tribe ("the Tribe") and leased by the Tribe to Beulah E. Gallego ("Gallego), a tribal member, who died intestate on September 25, 2011. Named defendants are The Estate of Beulah E. Gallego; Frankee White Dress; The Oglala Sioux Tribe; and Any Person in Possession. Frankee White Dress is Gallego's eldest daughter and upon the government's information and belief, she inherited the majority of the real property from Gallego's estate.

         In the present case, the Government has applied to the Court for a default judgment against the Estate and a judgment of foreclosure upon the leasehold interest for the principal sum of $69, 887.89, together with interest, plus any additional sums advanced in relation to this action. Doc. 15. Additionally, the Government asks the Court to issue a decree of sale as to the leasehold interest in the real property. Doc. 15. For the following reasons, the Government's motion for order of default judgment is granted and its motion for judgment of foreclosure and decree of sale are denied.

         BACKGROUND

         I. Facts

         On November 28, 2000, the Oglala Sioux Tribe entered into a residential lease with Ernabelle Skye for a parcel of land situated on Pine Ridge Indian Reservation ("the Real Property"). Doc. 1-6. Ernabelle Skye assigned the residential lease of the Real Property to Beulah Gallego ("Gallego") and the assignment was recorded as an encumbrance in the Bureau of Indian Affairs "BIA" Title Status Report of the Real Property. Doc. 1-5. On August 1, 2007, a leasehold mortgage was executed by Gallego and delivered to Wells Fargo Bank, N.A., as security for a $55, 736.00 promissory note made by Wells Fargo to Gallego under the provisions of Section 184 of the Housing and Community Development Act, 12 U.S.C. § l7l5z-l3a ("Section 184"). Doc. 1, ¶¶ 9, 10; 1-2; 1-3. The BIA issued a certificate of approval for "the leasehold mortgage on the trust or restricted land owned or leased by BEULAH E GALLEGO, as security for a $55, 736.00 loan to be made by WELLS FARGO BANK, N.A." Doc. 1-4. The BIA's certificate of approval stated that "[s]hould foreclosure be necessary, the mortgagee shall give written notice to the [BIA] Office prior to initiation of such proceedings." Doc. 1-4.

         Under the terms of the promissory note, Gallego was required to make monthly payments on the first day of each month until the loan matured in September 2037. Doc. 1, ¶ 14. The promissory note provides that failure to pay any of the debt when due constitutes default. Doc. 1- 2. The promissory note states that upon default, the noteholder may require the borrower "to pay immediately the full amount of the [p]rincipal which has not been paid and all interest that [borrower] owe[s] on that amount. The date must be at least 30 days after the date on which the notice is mailed to [borrower] or delivered by other means." Doc. 1-2. The leasehold mortgage also provides that the lender shall give notice to the borrower prior to acceleration following borrower's breach of any covenant in the mortgage. Doc. 1-3. The leasehold mortgage provides that:

The notice shall specify: (1) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to [b]orrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by [the mortgage] and sale of the Property.

Doc. 1-3.

         The form residential lease executed by Ernabelle Skye and the Tribe and then assigned to Gallego, provides that "subsequent to the Lessee's breach of any covenant or agreement under a mortgage or other security instrument for which the Lease . . . [is] pledged as security, and upon the expiration of any applicable cure period, [the Tribe, as lessor], shall have an option [] to acquire the Lessee's Leasehold interest, (subject to all valid liens and encumbrances) upon either payment in full of all sums secured by the mortgage or assumption of the loan with the approval of the lender or the applicable Federal Agency." Doc. 1-6, ¶ 11.

         On May 8, 2011, Wells Fargo Bank sent Gallego a letter stating that she was $1, 306.04 in arrears on her note as of the date of the notice. Doc. 1-8. The notice provided that if Gallego did not pay $1, 306.04 by June 7, 2011, Wells Fargo Bank will proceed with acceleration. Doc. 1-8. The notice further provided that once acceleration has occurred, the bank may take steps to terminate Gallego's ownership in the property by a foreclosure proceeding. Doc. 1 -8.

         On June 16, 2011, Wells Fargo Bank sent Theresa Two Bulls, President of Oglala Sioux Tribe a notice that Gallego's note was in default and that the Tribe, "as lessor, had the right of first refusal to acquire the lessee's interest in the property (subject to all valid liens and encumbrances) upon (a) payment of all sums in arrears, and (b) either payment of the balance of the loan or assumption of the mortgage. Doc 1-9. In order to exercise the right of first refusal, the notice specified that the Tribe "must perform one of the following within thirty (30) days of this notice or on/or before 07/01/11:"

1. Send a written request to assume the loan with the payment of all sums in arrears to us and Beulah E. Gallego. The total arrearage if received on/or before 07/01/11 is $2, 588.26. The [t]otal arrearage if received on/or before 08/01/11, is $3, 009.00.
2. Remit the total balance due on the loan. The total balance due if received on or before 07/11/11, is $55, 410.96. The total balance due if received on/or ...

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