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UNITED STATES v. ROYER

July 16, 1986

United States of America, Plaintiff
v.
Robert C. Royer, and Linda L. Royer, Defendants



The opinion of the court was delivered by: CALDWELL

 William W. Caldwell, United States District Judge

 I. Introduction and Background

 The parties have cross-moved for summary judgment. *fn1" The issue presented is whether the federal government obligated itself under the terms of a mortgage to comply with state law before foreclosing on a federally financed mortgage.

 On August 31, 1982, plaintiff, United States of America, filed a complaint in mortgage foreclosure on a mortgage issued to the defendants, Robert C. Royer and Linda L. Royer, by the Farmers Home Administration (FmHA). The defendants did not appear or plead and a default judgment was entered against them on January 31, 1984, authorizing foreclosure and sale of the mortgaged property, defendants' residence. Thereafter, defendants sought injunctive relief against foreclosure which was mooted by plaintiff's decision not to press a sheriff's sale of the property. The request for equitable relief was based upon a claim that the government had to comply with a Pennsylvania law, the Act of Dec. 23, 1983, P.L. 385, No. 91, § 2 et seq., 35 P.S. § 1680.401c et seq. (Purdon Supp. 1986), which imposes certain duties on a mortgagee before proceeding to foreclosure. *fn2"

 The government contends it need not comply with this law. Defendants counter that the terms of the mortgage agreement require plaintiff to abide by the state law before foreclosing on the mortgage.

 II. Discussion

 The relevant provisions of the mortgage are, in pertinent part, as follows :

 
(17) SHOULD DEFAULT occur . . . the government, at its option, with or without notice, may: . . . . (d) foreclose this instrument as provided herein or by law, and (e) enforce any and all other rights and remedies provided herein or by present or future law.
 
. . . .
 
(21) This instrument shall be subject to the present regulations of the Farmers Home Administration, and to its future regulations not inconsistent with the express provisions hereof.
 
. . . .
 
(24) Upon default by Borrower as aforesaid, the Government may foreclose this instrument as authorized or permitted by the law then existing of the jurisdiction where the property is situated and of the United States of America, on terms and conditions satisfactory to the Government.

 The government contends that these provisions permit it to use state law in foreclosing on a mortgage but do not require it to do so. Plaintiff points out that the only mandatory language is contained in paragraph 21 which provides that the "instrument shall be subject" to FmHA regulations. Those regulations refer to federal law as ...


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