author: McMILLAN, District Judge.

text:
    Norma G. KENNEDY, Plaintiff, v. Margaret M. HECKLER, Secretary, United States Department of Health and Human Services, Defendant.
    No. ST-C-84-51.
    United States District Court, W.D. North Carolina, Statesville Division.
    Feb. 8, 1985.

      James W. Partin, Elkin, N.C., for plaintiff.
    Clifford C. Marshall, Asst. U.S. Atty., Asheville, N.C., for defendant.
   ORDER

McMILLAN, District Judge.

Plaintiff Norma Kennedy was born on November 8, 1932 and has a college education. Over the past fifteen years she has worked as a teacher, cashier, cook, encyclopedia salesperson, census-taker, childcare worker and, for two months in 1980, as a filleter, later demoted to a janitorial worker, at a chicken factory. On June 2, 1982, she filed an application for disability insurance benefits alleging disability due to “bad nerves,” with an onset date of August 15, 1980. That application was denied on August 31, 1982. Plaintiff did not appeal. She filed a new application on December 30, 1982, alleging disability due to “mental condition, manic depressive, psychotic,” with the same onset date of August 15, 1980.

After initial administrative denials, a hearing was held by an Administrative Law Judge (AU) who, on October 27, 1983, found that:

Although claimant does have a severe psychiatric impairment, it is controlled with the use of medication and has not remained at such level of severity as to significantly limit or restrict her ability to perform basic work-related functions for the minimum statutory period of twelve continuous months.

After a final decision by the Appeals Council, issued January 23, 1984, plaintiff filed this complaint pursuant to 42 U.S.C. § 405(g) for review of the Secretary’s decision. Both parties have filed motions for summary judgment.

The AU, in making his decision, had the following evidence before him:

Plaintiff has a history of psychiatric problems, beginning soon after the birth of her fourth and youngest child in 1965. She had two admissions to Broughton State Hospital in the 1960’s. In July, 1977, she was first treated at New River Mental Health Center by Dr. Martha Warrick who described her as “very angry,” and as having a “thought disorder.” “Although she is fairly intact, I feel that with a little stress of pressure she could have a [sic] overt psychosis” (Tr. 221). In late August, 1977, she was involuntarily committed to Broughton State Hospital and diagnosed as manic-depressive. She was discharged by a court ten days later (Tr. 142). The next reports from Dr. Warrick were in October, 1978, where plaintiff appeared “very upset and agitated ... Norma is getting psychotic again, apparently going into a manic high.” Plaintiff agreed to stop, drinking and begin taking the anti-psychotic medicine prescribed to her. Five days later she appeared “much more stabilized, at least superficially____” (Tr. 227).

Plaintiff then worked for approximately a year, from 1978 to 1979, as a CETA worker; for six weeks in the spring of 1979 as a census-taker; and for two months in the fall of 1979 at a day care center. She was fired from that job because her medication made her “not alert” (Tr. 35). Her last job to date was from June to August, 1980, at a chicken factory where she began filleting chicken but was soon demoted to doing “housework” because her medicine made her too slow to meet production standards. When asked at the hearing why she had left the “housework” job, she first insisted that it was “just sort of personal,” but later admitted that when she was called into the manager’s office because of complaints that she was bothering other workers, she got angry because they were making accusations and quit (Tr. 32-34).

Plaintiff was again involuntarily committed to Broughton Hospital in March, 1982. This commitment followed a period of approximately four months of increasing hostility and aberrant behavior witnessed by plaintiff’s daughter and sister and recorded in the commitment records (Tr. 142, 64, 72). Plaintiff testified that she began to hear voices, increasingly was consumed with “religious thoughts” and began to believe that she should drink beer instead of take her medication (Tr. 48). As she stopped taking her medication and began drinking, she was eventually evicted from her house and finally committed after she allegedly went outside naked and assaulted a child (Tr. 67).

Plaintiff’s diagnosis during the March through May, 1982, commitment, was schizophrenia, chronic undifferentiated type with acute exacerbation (Tr. 150). In May she was\^ discharged to a residential halfway house program where she lived for a year before moving into housing for the handicapped (Tr. 170, 45, 31). During that commitment, her medication was changed from mellaril to stellazine and thorazine. Upon release, her daily dosage was 50 mg.; it eventually was reduced to 10 mg. per day by the time of the hearing (Tr. 75, 190).

Dr. W.L. Bundy, plaintiff’s treating psychiatrist, diagnosed her as being in an agitated paranoid state in March, 1982 (Tr. 153). In June, 1982, after discharge from Broughton, she was said to be “stable at this time on her present program,” which included living in a half-way house, receiving out-patient therapy from New River Mental Health Center and taking 40 to 50 mg. of stellazine daily (Tr. 202). On July 17, 1982, Bill McCachien, a social worker, opined, in a statement onto which Dr. Bundy signed, that plaintiff was not capable of obtaining or maintaining gainful employment (Tr. 201). In July, 1982, in a report to the Social Security Administration, Dr. Bundy described the schizophrenia as in remission and plaintiff as oriented and competent (Tr. 207). A supervisor at the mental health center, in December, 1982, said that plaintiff was stabilized and doing well at the time, although she “may not present as well after the holidays when fewer activities are available to her” (Tr. 190). In January, 1983, she was examined by Dr. Bundy who noted that she was dressed appropriately and taking her medications. (He noted a fine tremor of the hand). He stated, “This lady is assessed to be fairly well stabilized, although this possibly is a superficial evaluation in view of her tendency towards dramatization” (Tr. 190). He also stated that while she showed a satisfactory response to treatment, he retained a guarded prognosis for her (Tr. 215).

The final reports from the mental health center indicate that from June 1982 to July 1983, “Norma continues to remain stabilized, although she reports periods of depression at times” (Tr. 214). A September, 1983, report from Dr. Bundy revealed that he had last seen the plaintiff on June 22, 1983, and that she was “unstable with obvious depressive features____ In view of her mental status, I feel that she could not be gainfully employed or self-supporting” (Tr. 232).

The only other medical report in the record is based on a one-time consultation by Dr. W.J. Grant, a psychiatrist, in August, 1982. He found that plaintiff was appropriately dressed, fully oriented and cooperative. He diagnosed her as having a bipolar disorder currently controlled by medication (30 mg. daily of stellazine) (Tr. 209-210).

The AU’s finding that plaintiff does not have a severe impairment which affects her ability to do work-related functions for twelve continuous months is not supported by substantial evidence. The ALJ appears to rely on the plaintiff’s relative stabilization after her 1982 hospitalization and his own observations of her demeanor during the hearing to find that her illness was controlled and would not affect her work-related functions. This finding is not supported by the evidence.

From at least the time that plaintiff worked for Holly Farms in the summer of 1980, through the date of the AU’s opinion, the evidence shows that plaintiff has not been able to hold down a job precisely because of conditions related to her psychiatric problems. Although there is no medical evidence that plaintiff was in active decomposition during the period claimed for disability until approximately December, 1981, the testimonial evidence is that in the summer of 1980, she was not able to handle unskilled work such as being a chicken filleter because of her “slowness” (attributable to the medication she has had to take to remain stable) and she- could not handle the task of janitor because of personality-related problems.

The AU relied on the “fact” that the plaintiffs medication appears to control her illness. In doing so, however, the AU failed to take into account the testimony and medical evidence of the disabling effects of taking from ten to forty mg. of stellazine a day. Plaintiffs “stability” is clearly attributable to her heavy medication and artificially stabilized environment. There is no evidence that plaintiff can function in a normal working environment. (See Proposed New Listings for Mental Impairments, 12.00 E, F and G, reproduced in Social Security Forum, October, 1984.)

In making his determination, the AU also failed to consider the final report by Dr. Bundy dated September 16, 1983, which was submitted, with the permission of the AU, after the hearing. In that report, as set out above, the treating psychiatrist expressly stated that plaintiff was not able to work. The opinion of the treating physician is entitled to great weight and may be disregarded only if there is persuasive contradictory evidence. Evans v. Heckler, 734 F.2d 1012, at 1014 (4th Cir.1984). There is no evidence in the record that plaintiff is capable of sustaining any type of work. The only conclusion concerning plaintiffs disability made by the consulting physician, Dr. Grant, was that plaintiff is “presently capable of managing her own affairs” (Tr. 210). This does not provide substantial evidence of plaintiffs ability to do substantial gainful work.

There is no substantial evidence to support the Secretary’s conclusion that plaintiff does not have a severe impairment, lasting for at least twelve consecutive months, which has affected her ability to do basic work-related functions. There is no evidence in the record that plaintiff is capable of doing any substantial gainful activity. She must, therefore, be found disabled.

IT IS THEREFORE ORDERED, that the Secretary’s decision denying benefits is REVERSED.


source: Caselaw Access Project

author: BRIEANT, District Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff, v. $100,000 IN UNITED STATES CURRENCY, Defendant in Rem.
    No. 84 Civ. 7139 CLB.
    United States District Court, S.D. New York.
    Feb. 8, 1985.

      Franklin H. Stone, Asst. U.S. Atty., S.D. N.Y., New York City, for plaintiff.
    O.T. Wells, New York City, for defendant in rem.
   MEMORANDUM AND ORDER

BRIEANT, District Judge.

On October 3, 1984 the United States filed this action in rem for a forfeiture, pursuant to 21 U.S.C. § 881(a)(6) and (d) which incorporates by reference 19 U.S.C. § 1602, et seq., seeking forfeiture of the sum of $100,000 in United States currency, in the form of a certificate of deposit, said to represent funds “furnished or intended to be furnished by any person in exchange for a controlled substance, in violation of this subchapter, all proceeds traceable to such an exchange, and all moneys, negotiable instruments, and securities used or intended to be used to facilitate any violation of this subchapter____”

Claimant Jose Martinez-Torres (“Torres”) has appeared by counsel and filed a declaration that he and his wife Nancy Medina (“Medina”) are the owners of the funds and that the money comes not from the crystalline white powder but was won in the Puerto Rican lottery. The Government now seeks summary judgment in its favor, relying essentially on issue preclusion, or offensive collateral estoppel, as set forth below.

Under 19 U.S.C. § 1615 the burden of proof in forfeiture proceedings is imposed on claimants, provided that “probable cause shall be first shown for the institution of such suit or action, to be judged of by the court.” As soon as the Government has met its burden of establishing probable cause, the burden of going forward shifts to the claimant to establish that the res is not subject to forfeiture. United States v. One 1977 Lincoln Mark V, etc., 453 F.Supp. 1388 (S.D.N.Y.1978).

This Court concludes that the Government is entitled to partial summary judgment in its favor on the issue of probable cause, but that claimants are entitled to a plenary trial on the issue of whether the funds are proceeds of or intended to be used in illegal transaction^) in narcotics. On this point, claimants will have the burden of proof, but should not be precluded from trying the issue. The facts set forth below are essentially not in dispute.

On November 13, 1982 claimants Torres and Medina were each convicted under docket 82 Cr. 489 before a Judge of this Court of violations of the federal narcotics laws. The charges involved a major wholesale narcotics organization in this district which sold more than a Million Dollars worth of heroin and cocaine during the first six months of 1982. On August 30, 1982, prior to trial, the assigned judge conducted a hearing as to the source of funds offered for bail, pursuant to United States v. Nebbia, 357 F.2d 303 (2d Cir.1966) now codified by statute effective October 12, 1984 as 18 U.S.C. § 3142(g)(4). The certificate of deposit sought to be forfeited in this case is the same certificate which had been offered to secure Medina’s bail in 82 Cr. 489, and which was the subject of the Nebbia hearing.

At the Nebbia hearing, Medina testified that as she claims here, the certificate of deposit which she posted as bail was derived from money she won in a Puerto Rican lottery. The judge found this testimony incredible, observing the unlikelihood, when tested by common sense, that “someone with no job, no steady source of income, and no other bank accounts would (a) use the relatively sophisticated device of a certificate of deposit; and (b) put the entire $100,000 won in a lottery in such a certificate, making the money totally unavailable to her for a period of time.” (Op. dated August 30, 1982 in 82 Cr. 489, emphasis in original). Also relied on in addition to the inherent implausibility of claimant’s testimony was the fact that after the lottery took place, defendant had signed an affidavit stating she had no property, in order to support a request for assigned counsel in her criminal case. Id.

Also submitted by the Government in support of the instant motion is the testimony of Torres taken at a suppression hearing held October 4 and 5, 1982, in the criminal case. There, Torres testified that he had lived with claimant Nancy Medina in a Bronx apartment used from time to time as a place to warehouse and cut drugs, and conceded under oath that he was engaged in the heroin business in this district under the brand name “Latunba.” The foregoing evidence considered together with the criminal conviction of Torres and Medina is more than sufficient to discharge the Government’s initial burden to show probable cause to believe that such a substantial sum of money is more likely than not the proceeds of past unlawful dealing in controlled substances. Although the res itself is the nominal defendant, claimants are the real party in interest and should be considered so for purposes of collateral estoppel.

The difficulties with the argument on this motion that there should be issue preclusion or offensive collateral estoppel to prevent claimants from proving in this action that the funds are, as alleged, lottery winnings, or at least that they are not within 21 U.S.C. § 881(a)(6) above quoted, are both specific and general. The specific difficulty is that the Court which conducted the Nebbia hearing made only the necessary finding that the purposes of fixing bail required, namely that the contention, based solely on Medina’s interested testimony, that the funds came from lottery winnings was “incredible,” and that it was more likely that the funds “were obtained from illegal activity,” of a sort not specified, or that “defendant has another illegal source of income.” (Op. dated August 30, 1982, supra). This is not a finding that the funds were derived from or intended to be used in the heroin business or controlled substances; merely any illegal activity, state or federal. There is a more general difficulty however, which we discuss below.

Any consideration of federal issue preclusion by a prior judgment must begin with Parklane Hosiery v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). In Parklane, a stockholders’ class action alleged that Parklane Hosiery Co., Inc. and 13 of its officers, directors and shareholders had issued a materially false and misleading proxy statement used to effect a merger. Damages and rescission of the merger were sought. Defendants demanded a trial by jury. Previously, the Securities and Exchange Commission (“SEC”) had sued the same defendants in equity in this district to enjoin statutory violations, based on the same allegations that the same proxy statement was materially false and misleading. After a plenary four-day bench trial the district court found that it was, and entered a declaratory judgment to that effect which was affirmed on appeal. In the later filed stockholders’ class action, the Court of Appeals held that “a party who has had issues of. fact determined against him after a full and fair opportunity to litigate in a non-jury trial is collaterally estopped from obtaining a subsequent jury trial of these same issues of fact.” (439 U.S. 322 at 325, 99 S.Ct. 645 at 648, 58 L.Ed.2d 552). The Supreme Court affirmed, with Justice Rehnquist dissenting, and characterized the issue presented as one involving “offensive use of collateral estoppel,” citing Blonder-Tongue Laboratories v. University of Illinois Foundation, 402 U.S. 313, 328-29, 91 S.Ct. 1434, 1442-43, 28 L.Ed.2d 788 (1971), a patent case approving defensive use of collateral estoppel.

Before the Court in Parklane opened Pandora’s box to release the doctrine of offensive collateral estoppel upon litigants, the majority opinion noted that in certain cases use of its new device might be “unfair to a defendant.” Id. 439 U.S. at 330, 99 S.Ct. at 651. Cited as familiar examples of such unfairness were the case where the first suit is for small or nominal damages, not justifying a full defense, “particularly if future suits are not foreseeable”; the case where the prior judgment relied on is itself inconsistent with one or more previous judgments in favor of the defendant; and the case where the second action affords the defendant procedural opportunities “unavailable in the first action that could readily cause a different result.” Id. at 331, 99 S.Ct. at 651. As footnote 15 to the last of its series of hypotheticals, the Court postulated an “inconvenient forum,” and an inability to “engage in full scale discovery or call witnesses.” The Court held (at p. 331, 99 S.Ct. at p. 651-652):

“We have concluded that the preferable approach for dealing with these problems in the federal courts is not to preclude the use of offensive collateral, estoppel, but to grant trial courts broad discretion to determine when it should be applied [footnote 16 omitted]. The general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where, either for the reasons discussed above or for other reasons, the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel.”

The instant case would seem well within the last mentioned example of possible unfairness postulated by the Court in Park-lane, supra. A Nebbia hearing, as now codified by statute, is usually conducted on very short notice. A criminal defendant is arrested and brought before a judicial officer, an amount of bail is fixed, and, often to the surprise of that defendant, a Nebbia hearing is demanded by the Government as soon as he proffers the bail. Because liberty is at stake, the court moves promptly. The rules concerning the admissibility of evidence in criminal trials do not apply. See § 3142(f) of the Comprehensive Crime Control Act of 1984 effective October 12, 1984 but regarded as declaratory of existing law on this point. There is no time for investigation and preparation.

Besides receiving a quick and immediate hearing at which the rules of evidence don’t apply, a surety or a defendant in a bail hearing will not receive any pre-trial discovery. There is no time for it. Attendance at such hearings of non-party witnesses such as banks and lottery commissioners is rare indeed, and much for the same reasons. No jury is available, and seldom is there much opportunity for study and reflection by the judicial officer presiding, whose decision usually is rendered orally and immediately.

In an analogous situation, Judge Keenan of this Court recognized that offensive collateral estoppel should not be invoked when to do so would be unfair. In SCAC Transport (USA) Inc. v. S.S. DANAOS, etc., 578 F.Supp. 327 (S.D.N.Y.1984), it appeared that maritime arbitrators had found in a proceeding between a vessel owner and the charterer, that damage suffered by the vessel in a loading accident was the fault of the stevedore employed by the charterer, rather than due to a defect in the vessel’s equipment. The stevedore had been invited to defend the arbitration (“vouched in”) but declined. In subsequent litigation between the charterer and the stevedore, the Court declined to invoke Parklane, holding:

“This court is reluctant to bind [stevedore] to the findings of the London arbitrators. Although given an opportunity to join in that proceeding, [stevedore] did not participate in it. One consideration in determining whether a party should be estopped from litigating an issue determined in a prior action is whether the subsequent action affords the party to be etopped procedural opportunities unavailable in the first action that could readily cause a different result. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 323, 331-32, 99 S.Ct. 645, 647, 651-52, 58 L.Ed.2d 552 (1979). Arbitration permits a relatively prompt and inexpensive resolution of contractual disputes by avoiding time-consuming court procedures and is subject to limited review. See Sperry International Trade, Inc. v. Israel, 532 F.Supp. 901, 905 (S.D.N.Y.1982), affirmed, 689 F.2d 301 (2d Cir.1982). Parties are bound by the results of these proceedings because they have agreed to resolve their disputes in an arbitral, rather than judicial, forum. See United States Steel Workers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1352, 4 L.Ed.2d 1409 (1960); Coudert v. Paine Webber, 705 F.2d 78, 81 (2d Cir.1983). By consenting to arbitration a party relinquishes certain rights and safeguards provided by the judicial system. [Citations omitted]. If a party does not consent to arbitration, however, it retains these rights and should not be bound by an arbitration award.
In this case, [stevedore] did not consent to the resolution of its disputes by arbitrators in London. All of the cases cited by the movants to support the validity of voucher in arbitration proceedings involved their parties that in some manner had consented to be bound by arbitration of the dispute in question.” 578 F.Supp. at 330.

We do not suggest that the factual findings at a Nebbia hearing could never give rise to offensive collateral estoppel under Parklane, but certainly such cases will be rare. Given time enough and some pre-trial discovery from third parties, claimants in this case might be able to develop a paper trail left by the money on its claimed journey from the lottery commissioners or wherever to the issuing bank, Banco Popular. Ordinary banking practice suggests that a customer file is usually created by a bank before it engages in a transaction of this magnitude and such records if they exist may resolve the ease without dependence on the oral testimony of felons interested in the outcome. Contemporaneous records of the lottery may also assist in resolving the remaining issues in this case. Winnings of such size as this are generally publicized by the lottery in order to induce others to invest therein, and usually the seller and the issuer find a need to possess contemporaneous records. Rather than be precluded under Parklane, claimants should have an opportunity with adequate investigation and pre-trial preparation, to attempt to discharge their burden of proof that these funds have a legitimate source and do not represent the proceeds of federal crimes.

A pre-trial status and scheduling conference of counsel will be held before the Court on March 27, 1985 at 9:30 A.M. in Courtroom 705.

So Ordered.


author: LEIGHTON, District Judge.

text:
    Dennis KASZA, Plaintiff, v. COMMONWEALTH EDISON, et al., Defendants.
    No. 84 C 2082.
    United States District Court, N.D. Illinois, E.D.
    Feb. 8, 1985.
    Larry B. Lichtenstein, Christine A. Foh, Law Offices of Larry B. Lichtenstein, Eugene F. Friedman, Eugene F. Friedman, Ltd., Chicago, Ill., for plaintiff.
    Gregory Kulis, James Ryan, Asst. Corp. Counsels, James D. Montgomery, Corp. Counsel, Chicago, Ill., for City of Chicago, Fred Rice, John Schmidt.
    Peter C. John, Robert J. Bates, Jr., Phelan, Pope & John, Ltd., Chicago, Ill., for Commonwealth Edison, Donald Garling.
    Gregory Kulis, James Ryan, Chicago, Ill., for Richard Brzeczek.
   MEMORANDUM

LEIGHTON, District Judge.

This cause is before the court on the motion of defendants City of Chicago, Richard Brzeczek, and John Schmidt, to dismiss Counts III, IV, V and VI of plaintiff’s complaint, alleging state law claims. They base the motion on the Illinois Tort Immunity Act, Ill.Rev.Stat., ch. 85 §§ 8-102, 8-103, which requires that a cause of action against a local public entity or its employees “shall be dismissed” if no statutory notice is served within one year from the date that the action arose. Plaintiff’s cause of action arose during November and December of 1982; however, his complaint fails to allege notice given to the City of Chicago and its employees within one year of that time. Defendants contend, therefore, that plaintiff’s state claims must be dismissed, as failure to comply with the requirements of local law deprives this court of its subject matter jurisdiction over the pendent claims. The following is a brief recapitulation of the facts and procedural history of this case.

Plaintiff brought suit under 42 U.S.C. §§ 1983, 1985, and state law, alleging that his civil rights were violated during a series of interrogations conducted by certain employees and agents of defendant Commonwealth Edison Company (“Edison”), including an off-duty Chicago Police Officer, a part-time employee of the company. Plaintiff, a long-time employee of Edison, worked as a senior cashier at one of its service centers. In November, 1982, he came under suspicion for the theft of $500. Subsequently, he was removed from his regular position, and reassigned to an allegedly demeaning job, while Edison conducted an internal investigation regarding the theft. According to plaintiff, that investigation constituted a continuing course of interrogation and harassment which violated his civil rights and deprived him of due process of law. To support his claim that defendants were acting “under color of state law” in allegedly depriving him of his constitutional rights, plaintiff alleged that defendant City of Chicago, through its superintendents Brzeczek and Rice, authorized the practice whereby off-duty police officers maintained part-time private jobs, and thus willfully participated in Edison’s alleged violations of his civil rights.

Defendants Commonwealth Edison, City of Chicago, Richard Brzeczek, Fred Rice and John Schmidt brought motions to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim. After careful review of the complaint, the court concluded that plaintiff might be able to prove some set of facts to support his claim that defendants Commonwealth Edison and John Schmidt, the off-duty Chicago policeman, were acting under color of state law when the alleged constitutional deprivations occurred. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). The court also concluded that plaintiff’s allegations were sufficient against Richard Brzeczek and the City of Chicago to withstand a motion to dismiss. As to Fred Rice, however, the court granted the motion to dismiss, stating that the necessary personal involvement was not alleged as to this defendant’s conduct to sustain a civil rights claim against him. Rizzo v. Goode, 423 U.S. 362, 96 S.Ct. 598, 46 L.Ed.2d 561 (1976). The court also ordered dismissal of plaintiff’s claims against all defendants under 42 U.S.C. § 1985(3), for the reason that the complaint did not allege the supposed conspiracy against him was motivated by animus akin to racial discrimination. United Brotherhood of Carpenters & Joiners v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983). The effect of the court’s ruling, therefore, was to leave only Commonwealth Edison, City of Chicago, Richard Brzeczek, John Schmidt and Donald Garling as defendants; and to drop Count II from the complaint, leaving only Count I (the Section 1983 claim), and Counts III, IV, V and VI (the pendent state claims at issue here).

In answering defendants’ motion to dismiss these claims, plaintiff states that Counts III and VI do not even allege claims against these defendants. According to plaintiff, only the allegations contained in Counts IV and V are properly addressed by the motion. He opposes dismissal of Count IV on the ground that this is a federal claim for “invasion of privacy,” thus Illinois law requiring statutory notice is inapplicable. Plaintiff also opposes dismissal of Count V, alleging false imprisonment, by stating that it is properly governed by the Illinois two-year Statute of Limitations.

Defendants reply by arguing that Counts III and VI do implicate them, as each count realleges claims which were made in prior counts. This court agrees. Accordingly, because they are state law claims, Counts III and VI are dismissed for failure to comply with the notice provisions of Illinois law.

As to Count IV, accepting as true that it is a federal claim, and not a state claim, defendants believe that plaintiff has failed to state a claim for invasion of privacy under federal law because his allegations are conclusory only, and do not give an indication of how any constitutional rights were violated. In defendants’ words, “merely asking the plaintiff about his finances falls far short of violating one’s constitutional rights.” This court agrees that Count IV fails to state a claim of constitutional proportion. Accordingly, defendants’ motion to dismiss Count IV is granted.

Defendants argue that plaintiff’s opposition to dismissal of Count V misses the mark: what is at issue is not the statute of limitations, but failure to adhere to the notice requirement of the Tort Immunity Act. Defendants do not dispute that plaintiff has two years in which to bring his claim for false imprisonment. They only challenge the mandatory failure to plead notice under Illinois law. The court concludes that defendants’ reading of applicable law is a correct one, and that Count V must be dismissed for failure to comply with the notice requirements of local law.

Accordingly, defendants’ motion to dismiss Counts III, IV, V, and VI of plaintiff’s complaint is granted. Because this order and the preceding one markedly change the complexion of plaintiff’s lawsuit, the court orders plaintiff to submit an amended complaint, detailing his allegations against the remaining defendants, in accordance with the court’s rulings. Defendants have 21 days to answer the amended complaint, or otherwise plead, which would include their right to file a motion to dismiss, or a properly supported motion for summary judgment.

So ordered.

      . The court’s ruling denying the motion to dismiss of Commonwealth Edison would also in-elude defendant Donald Garling, who joined in his employer’s motion to dismiss.


author: STANLEY S. HARRIS, District Judge.

text:
    UNITED STATES of America v. Walter McKETHAN, Defendant.
    No. Cr. 84-466.
    United States District Court, District of Columbia.
    Feb. 8, 1985.

      Theodore A. Shmanda, Asst. U.S. Atty., Washington, D.C., for plaintiff.
    William J. Garber, Washington, D.C., for defendant.
   MEMORANDUM OPINION AND ORDER

STANLEY S. HARRIS, District Judge.

Defendant was arrested in this case on November 16, 1984, and was charged with the possession of both heroin and cocaine with the intent to distribute those controlled substances. He was released after posting a $3,000 surety bond at the station house. On November 20, 1984, he was processed before United States Magistrate Dwyer. Magistrate Dwyer continued defendant’s release upon the $3,000 surety bond, subject to a number of conditions. One was that defendant not be arrested while on release. The release order indicated that if defendant were rearrested on probable cause, his $3,000 bond would be revoked and a new surety bond of $10,000 would be set.

A preliminary hearing was held on November 28, 1984; Magistrate Dwyer found probable cause to bind the defendant pending grand jury action. On December 6, 1984, defendant was charged in a two-count indictment with violations of 21 U.S.C. § 841(a), asserting possession of heroin and cocaine with the intent to distribute such drugs. He was arraigned on December 18, 1984, before this Court.

On January 22, 1985, defendant was arrested again, based upon a tip from a reliable informant. In his possession were found 28 packets of white powder, which were in three separate groupings held together by rubber bands. One packet was field-tested; it was positive for heroin. On the next day, the Government requested a 10-day hold of defendant in his second case pursuant to the provisions of the new 18 U.S.C. § 3142(d)(l)(A)(i). That request was granted by Magistrate Dwyer. Later on January 23, the Government filed a motion under the Bail Reform Act of 1984 for the revocation of defendant’s release in this— the original — case. That motion was based upon the new § 3148 of Title 18. It was opposed by the defendant on January 28, 1985. The principal thrust of the opposition was that the defendant, with a number of community ties, was unlikely not to appear for future scheduled court dates.

On the afternoon of February 1, 1985, this Court held a two-hour hearing. It had two purposes. First, it was a probable cause hearing to determine whether defendant should be held for grand jury action with respect to the second charged offense. Second, it was a hearing under 18 U.S.C. § 3148(b) to determine whether there was probable cause to believe that defendant had committed a crime while on release in his first case.

Following the conclusion of the testimony of the Government’s witness (the arresting officer), the Court made dual findings of probable cause. Under 18 U.S.C. § 3148(b)(2)(B), the Court’s finding that there was probable cause to believe that defendant committed a felony while he was on release in this case gave rise to “a rebuttable presumption ... that no condition or combination of conditions will assure that the person will not pose a danger to the safety of any other person or the community.”

The Bail Reform Act of 1984 is a part of the Comprehensive Crime Control Act of 1984. Those statutes were passed in the latter days of 2d Session of the 98th Congress, and their specific legislative history is slender. However, the provisions which were enacted had extensive prior legislative histories in the United States Senate. Thus, the principal legislative history source for the Comprehensive Crime Control Act of 1984 (which, as noted, includes the Bail Reform Act of 1984) is Senate Report No. 98-225 of the 98th Congress, 1st Session, the Report of the Committee on the Judiciary of the United States Senate on S. 1762, which was the never-enacted Comprehensive Crime Control Act of 1983. At pp. 35-36 of that Report, the following was stated:

Thus, while the Committee is of the view that commission of a felony during the period of release generally should result in the revocation of the person’s release, it concluded that the defendant should not be foreclosed from the opportunity to present to the court evidence indicating that the sanction is not merited. However, the establishment of probable cause to believe that the defendant has committed a serious crime while on release constitutes compelling evidence that the defendant poses a danger to the community, and, once such probable cause is established, it is appropriate that the burden rest on the defendant to come forward with evidence indicating that this conclusion is not warranted in his case.

The Government expressed no concern as to defendant’s likelihood of fugitivity (although the defendant is facing mandatory consecutive sentences pursuant to 18 U.S.C. § 3147(1) if he is found guilty of having committed the second offense), but was concerned as to his danger to the community. The defendant presented one witness, his brother, who testified that he believed he could help assure no further criminality by the defendant if he again were conditionally released. After the presentation of evidence, the Court heard from counsel, including both of the separate attorneys which defendant has in his two cases. Various constitutional objections were presented to the relevant provisions of the Bail Reform Act of 1984; the Court found them unpersuasive. In then considering whether defendant’s release in this case should be revoked, the Court quoted and relied upon the following language from the Senate Report, supra, at 13:

The Committee also emphasizes that the risk that a defendant will continue to engage in drug trafficking constitutes a danger to the “safety of any other person or the community.”

The Court agrees fully with that assessment of the impact of drug trafficking upon our society. Based upon the evidence and the law, having found probable cause pursuant to § 3148(b)(1)(A), the Court also found pursuant to § 3148(b)(1)(A) and (B) that no condition or combination of conditions of release would assure that defendant would not “pose a danger to the safety of any other person or the community.” Accordingly, the Court concluded that defendant’s conditions of release should be revoked and, derivatively, that he should be detained pending trial.

It is believed that this is the first case in this Circuit to present these issues. By virtue of that fact, three factors should be discussed briefly.

First, one purpose of the February 1 hearing was the conducting of a preliminary hearing on the second charge, which necessarily involved dealing with defendant’s release status in that case. Defendant’s counsel in the second case took the position, and the Government agreed, that whatever was decided as to defendant’s status in his first case should be the ruling in his second case. The Court does not believe that to be correct. Defendant’s” bond in the first case was revoked, as a consequence of which he is to be detained pending trial, solely upon facts which brought into play the applicability of the provisions of 18 U.S.C. § 3148. In the Court’s view, defendant could not properly be ordered detained in his second case without careful compliance with the terms of § 3142(e), (f), (g), and (i), which have strict prerequisites for what might be referred to as pure pretrial detention. Accordingly, rather than ordering detention in the second case, the Court set a $100 surety bond in it.

Second, apparently in the interest of caution, the Government submitted a proposed detention order which tracked the provisions of § 3142(i). However, consistent with what was stated in the preceding paragraph, the Court concluded that such a formal order is unnecessary. Sections 3142 and 3148 provide quite different avenues to detention pending trial. Defendant was not in the position of one whose pretrial detention was sought pursuant to § 3142; there is probable cause to believe he committed a felony while on release, thereby bringing into play the notably dissimilar provisions of § 3148. When, as here, an order of revocation (and, hence, of detention) is sought by the Government based upon a charge that a defendant has committed a felony while on release, § 3142 does not come into play unless and until the judicial officer finds under § 3148(b)(2)(B) that the defendant has overcome the statutory rebuttable presumption and concludes “that there are conditions of release that will assure that the person will not flee or pose a danger to the safety of any other person or the community, and that the person will abide by such conditions____” This is not such a case.

Thirdly, counsel for the defendant in this case argued that the Magistrate’s statement on the release order that rearrest would result in a $10,000 bond (as opposed to his original $3,000 bond) should be controlling. That is not persuasive; the Magistrate’s statement on the release order may not override § 3148 should the Government seek to rely upon that statute and the clear intent of Congress in enacting it.

Accordingly, for all of the foregoing reasons, it hereby is

ORDERED, that the Court’s oral ruling of February 1,1985, that defendant’s conditions of release in this case are revoked and that, as a consequence thereof, he shall be detained pending trial, is reaffirmed.

SO ORDERED.

      . This is not to say that some sort of detention order might not be appropriate in other circumstances. It happens that this defendant is charged with both offenses in this district and in this court. If he had been on release from another court, this court would have no authority to revoke his conditions of release; that decision would be up to the original court. If that court declined revocation, then this court necessarily would have to issue some sort of an order of detention to hold a defendant. Where, however, as is true here both offenses are charged in the same court, the revocation of release is the only one of § 3148(a)'s three sanctions which needs to be imposed. While detention thus is "ordered,” it essentially is automatic upon revocation.


author: TELESCA, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. George WHITNEY, Defendant.
    No. CIV-83-1257T.
    United States District Court, W.D. New York.
    Feb. 11, 1985.

      Salvatore R. Martoché, U.S. Atty., Buffalo, N.Y. (Frank P. Geraci, Jr., Asst. U.S. Atty., Rochester, N.Y., of counsel), for plaintiff.
    Solin, Polito & Anderson, Rochester, N.Y. (Richard F. Anderson, Rochester, N.Y., of counsel), for defendant.
   MEMORANDUM DECISION and ORDER

TELESCA, District Judge.

BACKGROUND

In this action, the United States seeks to collect from a veteran, defendant George Whitney, a deficiency which arose out of the foreclosure of a mortgage by Community Savings Bank on property originally purchased by Whitney. The mortgage was guaranteed by the Veterans’ Administration. As a condition of securing the mortgage, Whitney agreed to remain personally liable on the mortgage debt, even though there might be a subsequent transfer of the property and assumption of the mortgage by others.

Four years after Whitney sold the property, the last purchaser of the property defaulted, and Community Savings Bank foreclosed. There is no dispute that the veteran Whitney was not a party to the foreclosure proceeding brought by Community. The property was purchased by the V.A., which later resold it. The sale was insufficient to satisfy the unpaid balance of the mortgage, and the V.A. reimbursed Community for the deficiency.

The United States now seeks summary judgment against Whitney for the deficiency incurred (approximately $4,000.00). Defendant has cross-moved for summary judgment, claiming that he was released from liability since he was never made a party to the original foreclosure proceeding and hence denied due process of law.

DISCUSSION

I.

It is undisputed that Whitney was never made a party to the mortgage foreclosure proceeding. In a letter dated June 6, 1978, James Wolfe, Loan Service Representative for the V.A., acknowledged that defendant and his wife “were not listed in the summons and complaint by bank attorneys”. Plaintiff does not deny that no efforts were made, either by the bank or the Government, to notify Whitney of the default of the mortgage or the subsequent foreclosure. Rather, the Government has taken the position that there is no duty on either the V.A. or the mortgagee to notify the veteran liable for a mortgage which is being foreclosed. That position, which is contested by Whitney, must be addressed with respect to both New York State law and Federal constitutional law.

A. New York Mortgage Procedure

1. The applicable law

Under New York law, as discussed more fully below, a person responsible for the payment of a debt secured by a mortgage is entitled to personal service of notice of the mortgage foreclosure. Before turning to the applicable provisions of New York law, the threshold question to be resolved is whether the notice requirements under state law are applicable to the foreclosure of a mortgage guaranteed by the Veterans’ Administration, and otherwise generally governed by federal regulations. (38 C.F.R. Section 36.4300 et seq.)

In United States v. Shimer, 367 U.S. 374, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961), the United States brought an action against a veteran for reimbursement of a deficiency incurred after foreclosure of a mortgage guaranteed by the V.A. The veteran argued that, under the Pennsylvania Deficiency Judgment Act, he was discharged from any obligation by the failure of the mortgagee to bring a proceeding to obtain a court determination of the fair market value of the mortgaged property within six months of the foreclosure sale. The Supreme Court disagreed, holding that the foreclosure of a mortgage guaranteed by the V.A. is governed by federal regulations, and is not subject to a state law requiring judicial appraisal of the mortgaged property. “The Regulations promulgated by the Veterans’ Administration make clear that they were intended to create a uniform system for determining the Administration’s obligation as guarantor, which in its operation would displace state law.” Id., at 377, 81 S.Ct. at 1557.

In subsequent cases involving the foreclosure of mortgages guaranteed by the V.A., several circuit courts have summarily rejected the application of state laws governing mortgage foreclosure, citing Shim-er for the proposition that V.A. regulations “displace state law” — apparently proceeding on the unwarranted assumption that the federal regulations preempt state law altogether in this area. See, e.g., Mortgage Associates, Inc. v. Cleland, 653 F.2d 1144, 1147 (7th Cir.1981); United States v. Rossi, 342 F.2d 505 (9th Cir.1965). The Fifth Circuit also adopted and relied upon such an interpretation of Shimer in United States v. Wells, 403 F.2d 596, 597-8 (5th Cir.1968) in concluding that “The national loan program of the Veterans[’] Administration cannot be subjected to the vagaries of the various state laws which might otherwise control all or some phases of the loan program.” (emphasis added). For the following reasons, I respectfully disagree, and conclude that a more discriminating analysis of federal preemption is demanded by Shimer.

Although the supremacy clause of the United States Constitution, Article VI, Clause 2, reserves a superior status for federal law, it is settled that the preemptive effect of federal statutes and regulations may be either partial or complete in any given area of law. Fidelity Federal Savings and Loan Association v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982). “Congress’ intent to supersede state law altogether”, Id., may be inferred, for example, in a field of law “in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject,” or where “[t]he scheme of federal regulation may be so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it”. Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947). Neither inference is permissible in the case of V.A. regulations governing mortgage foreclosure, however, and neither inference has ever been drawn by the Supreme Court.

Although the court held in Shimer that V.A. regulations “displace state law” in the field of mortgage foreclosure, the court never implied that state regulation of the area had been “completely displaced”. Indeed, the opposite conclusion is compelled by the V.A. regulations themselves, which explicitly contemplate that at least some aspects of foreclosure procedure will continue to be governed by state and local law. On the contrary, the Supreme Court’s holding in Shimer was based on its conclusion that the rival schemes under Pennsylvania law and federal regulations for calculating the value of mortgaged property were “intended to remedy the same abuses” and therefore “inconsistent”. Shimer, 367 U.S. at 380, 81 S.Ct. at 1559. The court concluded that the V.A. regulations were, “to this extent, meant to displace inconsistent state law”. Id., at 381, 81 S.Ct. at 1559 (emphasis added). As the Court of Appeals from this Circuit has correctly observed, the Shimer court “refused to apply the [Pennsylvania] statute to the Veterans’ Administration on the ground that the Pennsylvania scheme was inconsistent with Veterans’ Administration regulations”. United States v. Merrick Sponsor Corp., 421 F.2d 1076, 1079 n. 1 (2d Cir.1970).

For the foregoing reasons, I conclude that the V.A. regulations governing mortgage foreclosure were not intended to completely displace all state laws in that field. As Shimer and its legitimate progeny have recognized, “where Congress has not completely displaced state regulation in ' a specific area, state law is nullified to the extent that it actually conflicts with federal law”. Fidelity Federal Savings and Loan Association, supra, 458 U.S., at 153, 102 S.Ct., at 3022. Next to be resolved, therefore, is whether such a conflict exists between the V.A. regulations and a state law requiring notice of a foreclosure to the original veteran mortgagor. As the Supreme Court has stated, “[s]uch a conflict arises when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress”. ■ Id. (citations and quotation marks omitted). These two criteria must be considered individually.

It is clear that there would be no “physical impossibility” in complying with both the notice provisions of the V.A. regulations and the New York law requiring notice to the mortgagor. The pertinent federal statutes and regulations outline the notice which must be given to the Veterans’ Administration concerning guaranteed loans to veterans, but they are completely silent as to whether the veteran himself is to receive any notice of the foreclosure, or how such notice is to be given. Consequently, there would be no inherent incompatibility in providing notice to the mortgagor, as required by New York law, while complying fully in every detail with all of the federal regulations concerning V.A. home loans.

Even where state and federal law are logically compatible, the state law might still be “inconsistent”, and therefore preempted, where it poses an obstacle to the accomplishment of the full purposes and objectives of the federal scheme. Fidelity Federal Savings, supra, 458 U.S., at 153, 102 S.Ct., at 3022. Indeed, this was precisely the sort of “inconsistency” found by the Supreme Court in Shimer between Pennsylvania and federal law, after noting that there was (at least in theory) no logical inconsistency between the two. Shimer, supra, 367 U.S. at 382-83, 81 S.Ct. at 1560. The court reasoned that federal statutes and regulations in this area of law, broadly stated, evidenced two congressional objectives: (1) “to enable veterans to obtain loans and to obtain them with the least risk of loss upon foreclosure, to both veteran and the Veterans’ Administration as guarantor of the veteran’s indebtedness,” and (2) “to induce prospective mortgagee-creditors to provide 100% financing for a veteran’s home.” Id., at 383, 81 S.Ct. at 1560. With respect to the proper method of calculating the value of foreclosed property, the Pennsylvania and federal schemes presented different, and to that extent “inconsistent”, attempts at balancing these two objectives. The Supreme Court held that the V.A.’s choice “represents a reasonable accommodation of [these] conflicting policies,” since it was one which “the agency could allowably view as a more effective reconciliation of these twofold ends than might be accomplished by a complete or partial adoption of the law of a State such as Pennsylvania”. Id.

More specifically, the Supreme Court recognized that a partial incorporation of the Pennsylvania Deficiency Judgment Act might have furthered at least the former goal of protecting the veteran’s interests. But the court could not conclude with any confidence that such an adoption of Pennsylvania law would not unacceptably jeopardize the latter objective of persuading creditors to finance a veteran’s home without a downpayment. Nor could the court conclude that the V.A. had “unreasonably sacrificed ... the veteran’s protection” in striking the balance that it had between the two objectives of the Act. Id., at 385, 81 S.Ct., at 1561. Accordingly, the court refused to disturb the V.A.’s discretionary calculation of the proper balance of the protection to be given to the interests of each party.

In the context of the present case, however, neither conclusion would be difficult to draw with confidence. It could not be seriously supposed that the simple expedient of requiring foreclosure notice to the veteran would impose any hardship upon the lender or the V.A., or would ultimately provide even the slightest disincentive for prospective mortgagee creditors to accept a guaranteed loan in financing a veteran’s home. Under the present regulations, the bank’s notice of intention to foreclose to the V.A. “must plainly identify the case by setting forth the name of the original veteran obligor and the file number assigned to the case by the Administrator, if available, or otherwise the name and serial number of the veteran”. 38 C.F.R. Section 36.4332. Since the bank is already required under federal law to notify the V.A. of the identity of the veteran obligor, the additional burden of notifying the veteran would be minimal at best. Furthermore, putting the veteran on notice of the foreclosure proceeding (unlike the Pennsylvania requirement for judicial appraisal rejected by the Supreme Court in Shimer) could not possibly have the effect of ultimately decreasing the bank’s final recovery under the mortgage and bond. Indeed, placing the veteran on notice can only increase the likelihood that the default will be cured or that a greater amount will eventually be paid for the property at the foreclosure sale.

When all of the foregoing factors are weighed against the great risk faced by the veteran who is denied notice, I can safely conclude, as the Supreme Court could not in Shimer, that the V.A.’s regulations have “unreasonably sacrificed ... the veteran’s protection”, Id. at 385, 81 S.Ct. at 1561, in failing to insure that such notice is provided. Accordingly, under the standards laid down by the Supreme Court in Shimer for preemption analysis, I conclude that the provision of New York law requiring notice to the mortgagor (in this case, the veteran) is in no way inconsistent with the protections granted to the lender under V.A. regulations, and therefore is not displaced by the otherwise extensive body of federal law in this field.

2. The Notice Requirements of New York Law

It is now commonly understood that the holder of a bond and mortgage has a choice of two remedies: He may proceed at law to bring an action on the debt as evidenced by the note (or bond) or he may proceed at equity by bringing an action to foreclose the mortgage. The note represents the primary personal obligation of the mortgagor while the mortgage is merely the security for that obligation. Copp v. Sands Point Marina, 17 N.Y.2d 291, 293, 270 N.Y.S.2d 599, 217 N.E.2d 654 (1966); Seamen's Bank for Savings in the City of New York v. Smadbeck, 293 N.Y. 91, 95, 56 N.E.2d 46 (1944). Under Section 1301 of the Real Property Actions and Proceedings Law, the mortgagee must make an election as to which remedy he will pursue and cannot prosecute two actions concurrently. French v. French, 107 A.D. 107, 109, 94 N.Y.S. 1026, app. dsmd. 185 N.Y. 532, 77 N.E. 1187 (1906). Section 1301 of the Real Property Actions and Proceedings Law prevents a mortgagee of real property from seeking to enforce rights upon default by pursuing a legal remedy and an equitable remedy at the same time.

Foreclosure is an equitable proceeding devised to extinguish the equity of redemption — an important, exclusive right held by the mortgagor. Cornish v. Moulton, 138 N.Y. 133, 33 N.E. 842 (1893). It has long been the public policy of New York State “to give the court in which the foreclosure of the mortgage was. had, full jurisdiction over the whole subject ... and to allow one court to dispose of the whole subject”. This policy “is applicable to every case where the owner of the mortgage has any personal security for the mortgage debt, whether it be the bond of the mortgagor or the covenant of another person” and its purpose is “to confine all the proceedings to recover a mortgage debt to one court”. Scofield v. Doscher, 72 N.Y. 491, 493-94 (1878); State Bank of Albany v. Amak Enterprises, Inc., 77 Misc.2d 340, 342, 353 N.Y.S.2d 857 (1974). As one court recently explained:

R.P.A.P.L. 1311 codifies the equitable principle that persons holding title to the premises or acquiring any right to or lien on the property subsequent to the mortgage should be made defendants in the foreclosure action. The rationale for joinder of these interests derives from the underlying objective of foreclosure actions — to extinguish the rights of redemption of all those who have a subordinate interest in the property and to vest complete title in the purchaser at the judicial sale. Notice to interested persons provides them with the opportunity to redeem prior to sale, to bid at the sale (which conceivably might increase the sale price), and to protect their interests in a possible surplus.

Polish National Alliance of Brooklyn, U.S.A., v. White Eagle Hall Company, Inc., 98 A.D.2d 400, 403-4, 470 N.Y.S.2d 642 (2d Dept.1983) (citations omitted). Consequently, the absence of a necessary party to a foreclosure action leaves that party’s rights unaffected by the judgment of foreclosure and sale, and renders the foreclosure sale void as to that party. Id., at 406, 470 N.Y.S.2d 642.

In keeping with these policies, New York law provides that a mortgagee may recover from the mortgagor the debt remaining unsatisfied after foreclosure, but only if the person liable for the payment of the debt secured by the mortgage was made a defendant in the action, and appeared or was personally served with the summons in the action. Section 1371(1) N.Y. Real Property Actions and Proceedings Law (RPAPL). Therefore, an action to foreclose a mortgage does not automatically result in a money judgment against a person who was not made a party to the proceeding. A mortgagee waives its rights against the mortgagor on his bond by electing to foreclose without his appearance or service upon him. Federal National Mortgage Association v. Connelly, 84 A.D.2d 805, 444 N.Y.S.2d 147 (2d Dept.1981).

Therefore, it is clear that Community Savings Bank (the foreclosing mortgagee) is not entitled to a deficiency judgment against Whitney since it chose not to make Whitney a party to the foreclosure proceeding, but instead, elected to proceed against the property only and look to the statutory guarantee by the Government for the payment of any deficiency incurred as the result of the foreclosure sale. The V.A. then proceeded directly against the original mortgagor (Whitney) for satisfaction of the deficiency although he was never a party to the original mortgage foreclosure proceeding. Therefore by being denied notice of the default, the veteran was deprived of (1) an opportunity to exercise his equity of redemption, and (2) the chance, as a party to the lawsuit and a participant in the sale of the property, to make certain the price was fair and reasonable under the circumstances. In short, he is called upon to pay a deficiency over which he had no control, and of which he had no prior notice, all in clear violation of New York law.

B. The Due Process Clause

Quite apart from any consideration of New York law, the failure to place Whitney on notice of the mortgage foreclosure raises concerns of constitutional magnitude. These concerns were noted, but left unresolved, in Mortgage Associates, Inc. v. Cleland, 651 F.2d 476 (7th Cir.1981), where the holder of a mortgage guaranteed by the V.A. brought foreclosure proceedings, and later moved to set aside the foreclosure sale without providing notice to the veteran. The Court of Appeals observed in dictum that “[fjailure to give the [veteran and his wife] notice raises serious due process questions in any attempt to saddle them with an increased deficiency”. Id., at 479. The court noted without deciding “the constitutional question of due process as applied to proceedings of this type which ultimately can result in a substantial deficiency, as contrasted to a proceeding where a judgment is obtained after personal service is secured”. Id.

In Mullane v. Central Hanover Bank and Trust Company, 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950), the Supreme Court recognized that prior to an action which will affect a constitutionally protected interest in life, liberty or property, a state must provide “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections”. Invoking this “elementary and fundamental requirement of due process”, Id., the court held that published notice of an action to settle the accounts of a common trust fund was not sufficient to inform beneficiaries of the trust whose names and addresses were known. This principle was extended by the United States Supreme Court to require notice to a mortgagee in an in rem tax foreclosure proceeding brought under state law. Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983). In Mennonite, the' court held that an Indiana tax foreclosure statute which failed to provide for personal notice to mortgagees violated the Due Process Clause. “Since a mortgagee clearly has a legally protected property interest, he is entitled to notice reasonably calculated to apprise him of a pending tax sale.” Id., 103 S.Ct. at 2711.

This case is controlled by the analysis in Mullane and Mennonite. Like the mortgagee of property subject to a tax sale in Mennonite, it is clear that a mortgagor “possesses a substantial property interest that is significantly affected by a [foreclosure] sale”. Mennonite, supra, 103 S.Ct. at 2711. In the absence of meaningful notice, he is denied the opportunity to exercise his equity of redemption or to bid in on the proceeding disposing of the property. Since he clearly has a legally protected property interest in the outcome of the. foreclosure, the mortgagor is constitutionally entitled to notice reasonably calculated to apprise him of its pendency. Id.

The means employed to notify the mortgagor “must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it”. Mullane, supra, 339 U.S. at 315, 70 S.Ct. at 657. Of course, the form of notice required by the Constitution will depend in part upon the ease with which the individual can be identified and located. “Notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable.” Mennonite, supra, 103 S.Ct. at 2712.

In the present case, there is no dispute that the name and address of the veteran could have been easily ascertained prior to the foreclosure sale. Before the foreclosure proceedings could begin, the bank was required under federal regulations to notify the Veterans’ Administration of “the name of the original veteran obligor and the file number assigned to the case by the Administrator, if available, or otherwise the name and serial number of the veteran”. 38 C.F.R. Section 36.4332. Although Whitney no longer resided at the mortgaged property at the time of foreclosure, he cogently points out that the V.A. had no difficulty locating his present address when it sought reimbursement for the deficiency it had paid under its guarantee.

I therefore conclude that the failure to give adequate notice to defendant of the mortgage foreclosure proceeding deprived him of due process of law, in violation of his rights under both the Fifth and the Fourteenth Amendments.

II.

Having established that the defendant was denied his right to personal notice of the foreclosure sale, a right guaranteed him under both New York State law and the federal Constitution, the only question remaining for decision is whether he can now be held liable to the V.A. in this action for the deficiency arising out of that foreclosure. The Government contends that defendant is liable under the terms of his guarantee agreement with the Veterans Administration, independently of his obligations for repayment of the loan to the lending institution which granted the mortgage.

When the V.A. is required to make payments on a guaranteed home loan in default, it may seek reimbursement from the veteran under its guarantee either on a theory of subrogation to the mortgagee’s rights, or on an independent right to indemnity. Shimer, supra, 367 U.S. at 386, 81 S.Ct. at 1562; 38 C.F.R. Section 36.4323. The Government has failed to specify which theory of recovery it relies on in the present action, so both possibilities must be evaluated independently.

38 U.S.C. Section 1816(l)(a) provides that in the event of default in the payment to the holder (bank) of any guaranteed loan, the Veterans’ Administration shall pay to the holder the guarantee not in excess of the pro rata portion of the amount originally guaranteed, and “shall be subrogated to the rights of the holder of the obligation to the extent of the amount paid on the guaranty”. To the extent that the Government is subrogated to the rights of the bank, of course, the Government would not acquire any greater rights against the veteran than the bank would have enjoyed itself. Since the bank did not proceed against the veteran or make him a party to the proceeding with personal service of notice, the bank could not hold the veteran accountable for the resulting deficiency. This conclusion is independently compelled by both the New York Real Property Actions and Proceedings law and by the United States Constitution. Consequently, the Veterans’ Administration cannot seek recovery of the deficiency from the veteran on a theory of subrogation, since the lender itself abandoned such rights against the veteran.

Although 38 U.S.C. § 1816(l)(a) expressly speaks only of the Administrator’s right of subrogation, it is settled “that the statute affords an independent right of indemnity to the Veterans’ Administration”, Shimer, supra, 367 U.S. at 387, 81 S.Ct. at 1562, which exposes the veteran to “direct liability for amounts properly paid on his behalf by the Veterans’ Administration”. Id., at 387, 81 S.Ct. at 1562. This right of indemnity is reflected in the V.A. regulations, which hold the veteran responsible for “[a]ny amounts paid by the Administrator on account of the liabilities of any veteran”, 38 C.F.R. § 36.4323(e), and in the guarantee agreement signed by Whitney on November 4, 1968, which stated that he would be obliged “to repay any guaranty claim which the V.A. may be required to pay your lender on account of default in your loan payments”.

It is clear that the Government’s independent right to indemnity from the veteran is not extinguished merely because the bank could not have collected the deficiency directly from him. The guarantor’s rights of indemnity against the creditor are not defeated “merely because of a failure of the lender’s rights against the principal”. Id., at 387, 81 S.Ct., at 1562. Nevertheless, the V.A.’s right to indemnity is defeated in this situation, because of the Government’s intimate complicity in the violation of defendant’s statutory and constitutional rights. In bringing the foreclosure proceeding, the bank was only complying with the V.A.’s own regulations, which conspicuously fail to acknowledge or respect the veteran’s constitutionally guaranteed right to notice.

Since federal law requires the lender to deliver notice of foreclosure proceedings, along with the name of the original veteran obligor, to the V.A. thirty (30) days in advance, the Government could have easily insured that the veteran had been sent “notice by mail or other means as certain to ensure actual notice”. Mennonite, supra, 103 S.Ct. at 2712. Since the Government failed to do so, it cannot now hold the veteran liable to pay a deficiency arising out of the foreclosure proceeding without having any prior notice of that proceeding. Any contrary holding would permit the Government to circumvent and undermine the veteran’s statutory and constitutional rights to prior notice of the foreclosure proceeding.

The Government correctly observes that defendant never requested a release from the V.A. for his liability under the guarantee, pursuant to 38 U.S.C. § 1817, and that he was not relieved of liability by the mere act of transferring his interest in the property. On November 4, 1968, Whitney signed a borrower’s statement of liability which reads in part as follows: “The fact that you dispose of your property after the loan has been made will not relieve you of liability from making these payments.” The statement goes on to explain that even though the property is subsequently sold and someone else in the chain of title fails to make the payments, the veteran will still be responsible on his original guarantee. Nevertheless, in the absence of his having waived his fundamental rights of notice, the veteran cannot be called upon to pay the deficiency arising out of a foreclosure proceeding without having notice and the opportunity to make certain that his exposure is minimized by his participation in the determination of that amount.

Under the unacceptable construction of the law urged upon this Court by the Government, the veteran runs the risk of facing greater liability than he would otherwise have had if he had been an ordinary creditor of the bank and given a purchase money mortgage on the property as security for the debt. The Government would seek to hold the veteran personally obligated for any deficiency that remained after the foreclosure sale, even though he was denied the notice required by state law and was therefore precluded from presenting any defense he could have interposed, including the exercise of his equity of redemption. This Court cannot conclude that Congress intended to strip veterans of such fundamental elements of due process of law, particularly under the provisions of a federal program designed for their benefit.

CONCLUSION

In the many cases where a veteran obligor is himself delinquent in the payments on a debt secured by a federally guaranteed mortgage, the private lender will almost invariably see to it that the veteran is notified of his default and the prospects of foreclosure. But in cases such as this one, where the veteran has long since transferred the property to a third party who has fallen behind in the payments, the veteran cannot be held liable under a perpetual guarantee agreement for the outcome of a foreclosure proceeding as-to which he was provided no adequate notice. The laws of New York State clearly condemn such a result, the constitutional guarantee of due process of law forbids it, and justice cries out against it.

Accordingly, defendant’s cross-motion for summary judgment is hereby granted. Plaintiff’s complaint is dismissed, along with defendant’s third-party complaint, without costs.

ALL OF THE ABOVE IS SO ORDERED.

      . The Seventh Circuit Court of Appeals cited Shimer for the conclusion that "defendant cannot resort to Illinois law” to support an argument that its guarantee obligation had been extinguished. Mortgage Associates, supra, 653 F.2d at 1147.
      Nevertheless, the same court inexplicably adverted to Illinois law (albeit only in dictum) in Mortgage Associates, Inc. v. Cleland, 651 F.2d 476 (7th Cir.1981), which was argued the same day before the same panel but involved a different veteran. Without any discussion of the preemptive effect of the V.A. regulations, the court noted that “failure to give the [veteran] notice of the August 16, 1971, motion to set aside the prior foreclosure sale and order may have been a violation of state procedural rules. See Illinois Supreme Court Rule 105(a); Ill.Ann.Stat. ch. 110A, Section 105(a) (Smith-Hurd 1968).’’ Id., at 479.

      . United States v. Rossi, 342 F.2d 505 (9th Cir.1965), like the instant case, involved a state law which required notice of a foreclosure to the original mortgagor. Relying on Shimer for the conclusion that V.A. regulations "displace state law in their operation”, the. court held that the notice provisions of California law were inapplicable. Id. at 506. The court offered no analysis of whether those notice requirements posed any conflict with federal law, evidently proceeding on the assumption that federal preemption of this field was complete. For the reasons stated below, I cannot accept that assumption, nor the decision ultimately reached by the court in Rossi.

      . With respect to the narrow issue of the proper method for calculating the credits accruing from the proceeds of a foreclosure sale, the court held in Shimer that "the method of determining these credits is also specified in the Regulations ... in such great detail that there can be little doubt of an administrative intent that such method should provide the exclusive procedure____ We think that the Servicemen’s Readjustment Act authorized the Veterans’ Administrator to displace state law by establishing these exclusive procedures”. Shimer, supra, 367 U.S. at 379, 381, 81 S.Ct. at 1558, 1559. Yet it is clear that the court was referring here only to the "procedure” for calculating the amount of the proceeds of a foreclosure sale to be applied in reduction of the outstanding debt — not the entire area of law governing the "procedure” for foreclosing a mortgage.

      . See, for example, 38 C.F.R. Section 36.-4315(b)(2)(vii), which provides that a mortgagor’s partial payment may be returned within ten (10) days if "foreclosure has been commenced by the taking of the first action required for foreclosure under local law”.
      38 C.F.R. Section 36.4320(d) specifies the procedure for sale of security in circumstances where "a minimum bid is required under applicable State law”.
      After the V.A. makes payment under its guarantee and receives an instrument from the bank acknowledging that payment, 38 C.F.R. Section 36.4323(c) requires the V.A. to file the instrument for record "in the office of the recorder of deeds, or other appropriate office of the proper county, town or State, in accordance with the applicable State law”. The regulation goes on to provide that: "The filing or failure to file such instrument for record shall have the legal results prescribed by the applicable law of the State where the real or personal property is situated, with respect to filing or failure to so file mortgages and other lien instruments and assignments thereof.”

      . In Merrick, the Second Circuit held that the foreclosure of a mortgage insured and held by the Federal Housing Administration was not subject to a provision of New York law which requires that a motion for deficiency judgment be made within ninety (90) days after delivery of the deed following the foreclosure sale.
      In reaching that decision, however, the Court of Appeals never relied on any suggestion that federal law had completely preempted state regulation in the area of federally insured mortgages. The ninety day statute of limitations imposed under New York law, like the six (6) month limitation period of Pennsylvania law rejected by the Supreme Court in Shimer, was clearly "inconsistent" with federal regulations, Merrick, supra, at n. 1, for the same reasons. This point was later made more clear by the court in United States v. O'Connell, 496 F.2d 1329 (2d Cir.1974), in which the Government foreclosed on a mortgage which had been assigned to the Federal Housing Administration and acquired the property. The question presented was whether the property acquired by the United States through its foreclosure would include certain easements. While acknowledging that "federal law governs F.H.A. foreclosure proceedings” after U.S. v. Merrick, the Court of Appeals nevertheless held that New York State law would govern this particular question, in part because "[t]here is no suggestion here ... that state law is hostile to the federal scheme". U.S. v. O'Connell, supra, 496 F.2d at 1332 (emphasis added).

      . Upon default by a veteran on his mortgage, the private lender must notify the V.A. within forty-five (45) days, 38 C.F.R. § 36.4315, and if the lender intends to foreclose, he may not begin legal proceedings until thirty (30) days after delivering a notice of his intent to the V.A. 38 U.S.C. § 1816(a); 38 C.F.R. § 36.4317. If the lender repossesses any personal property, it must give notice of such repossession to the V.A. within ten (10) days thereafter. 38 C.F.R. § 36.4317(b). The lender must also provide notice to the V.A. of any legal or equitable proceeding to which the lender is a party, involving the guaranteed or insured indebtedness or involving title to the security. 38 C.F.R. § 36.-4319(a). The form and manner of the notice required under each of these sections is laid out in 38 C.F.R. § 36.4332.
      None of the above sections speaks in any way to the existence of any duty to notify the veteran responsible for the mortgage. Conversely, however, no regulation expressly indicates that notice to the veteran is unnecessary.

      . In the words of the court, “We cannot say that a Pennsylvania lender would not prefer a down payment to a guaranteed loan in the same amount if the Pennsylvania Deficiency Judgment Act were applicable”. Shimer, 367 U.S. at 385, 81 S.Ct. at 1561.

      . Although I conclude that the notice provisions of New York law are also applicable against the V.A., this conclusion is especially free from doubt with respect to the veteran's rights against the private lender. As the Supreme Court stressed in Shimer, 367 U.S. at 385, 81 S.Ct. at 1561, “the debtor-veteran who may be forced to reimburse the Administrator ... retains all the benefits of state law as against the mortgagee”.

      . This notice requirement of Section 1371(1) must be carefully distinguished from the distinct provisions of . 1371(2), which impose a ninety (90) day limit on the period in which to bring a motion for deficiency judgment. The latter requirement is arguably "inconsistent” with the federal regulations, and was held to be inapplicable to the foreclosure of a F.H.A. mortgage in United State v. Merrick Sponsor Corp., 421 F.2d 1076 (2d Cir.1970). But the notice requirement of Section 1371(1) was not even cited, much less considered, by the Second Circuit in that opinion. New York R.P.A.P.L. 1371(1) is not among the “inconsistent state law” displaced by the V.A. regulations, and Merrick and its progeny do not compel a different conclusion. See Footnote 5, infra.

      . In Federal Deposit Insurance Corporation v. Morrison, 747 F.2d 610 (11th Cir.1984), the Eleventh Circuit Court of Appeals recently held that a mortgagor’s equity of redemption constitutes "property" protected by the Due Process Clause. Nevertheless, the court held that a mortgagor was not "deprived” of any property rights, and therefore was not entitled to due process of law, because his equity of redemption was terminated at a foreclosure proceeding which met the procedural requirements imposed by state law. Since the mortgagor's property interests had been created by the State of Alabama, the court reasoned, those rights were necessarily subject to the Alabama rule that a mortgagee need only provide notice by publication of a foreclosure sale through which the mortgagor’s equity of redemption would be automatically terminated.
      That conclusion is not compelled in the present case, because New York law differs from Alabama law.
      In New York, unlike Alabama, a person liable for the payment of a debt secured by a mortgage may not be held liable for the deficiency remaining after foreclosure unless he is made a defendant in the foreclosure action, and has appeared or has been personally served with the summons. New York Real ¡Property Actions and Proceedings Law Section 1371(1).
      Also, it must be noted that the reasoning adopted by the Court of Appeals in Morrison is inconsistent with the result reached by the Supreme Court in Mennonite. Like the mortgagor in Morrison, the mortgagee in Mennonite held a substantial property right which was created by state law and subsequently nullified by a judicial sale conducted in accordance with state law. Nevertheless, the Supreme Court held that the termination of the mortgagee’s lien without actual notice was a violation of the Due Process Clause, even though the tax sale procedures struck down by the Court were authorized by the same state laws which had created the lien.

      . Although the Government has not contested the presence of “state action” in the present case sufficient to implicate the due process protections of the Constitution, the question warrants brief comment after the recent conclusion by one court that "foreclosure by a private lender of a mortgage in a federal mortgage guaranty program does not involve federal action sufficient to invoke the due process clause of the Fifth Amendment”. Rank v. Nimmo, 677 F.2d 692, 702 (9th Cir.), cert. denied, 459 U.S. 907, 103 S.Ct. 210, 74 L.Ed.2d 168 (1982).
      In Rank, the Court of Appeals held that the acts and omissions of a private lender do not constitute "state action” merely because the bank is heavily regulated under law. The court reasoned that: "Although the private lender was subject to extensive federal regulation under the Federal Home Loan Guarantee Program, this, alone, in our view, is insufficient to convert the actions of the private lender into governmental action.” Id. There was no other conceivable element of state action in Rank, since the property had been sold at a non-judicial foreclosure sale pursuant to California law. Id., 696. A non-judicial foreclosure by a private party does not constitute state action for due process purposes. Charmicor v. Deaner, 572 F.2d 694 (9th Cir.1978).
      In the present case, on. the other hand, the mortgage held by Community Savings Bank was foreclosed through judicial proceedings in the courts of New York State. That factor, which was not present in Rank, presents an element of state action sufficient to trigger the protections of the Due Process Clause of the. Fourteenth Amendment. As both Mullane and Mennonite recognized, "[t]he action of state courts in imposing penalties or depriving parties of other substantive rights without providing adequate notice and opportunity to defend, has, of course, long been regarded as a denial of the due process of law guaranteed by the Fourteenth Amendment". Shelley v. Kraemer, 334 U.S. 1, 16, 68 S.Ct. 836, 843, 92 L.Ed. 1161 (1948) (citations omitted).
      Of course, to the extent that the Veterans’ Administration participated in the denial of defendant’s rights to due process of law and adequate notice, through the omissions of its regulations and its failure to notify him personally of the foreclosure sale where it bought the property, there is no question that the acts and omissions of this federal agency constitute "state action" sufficient to implicate the protections of the Due Process Clause of the Fifth Amendment.

      . On July 18, 1984, after this action was commenced, but before these motions were argued, 38 U.S.C. Section 1816 was substantially revised. Public Laws 98-369, Title V, Section 2512(a). The amendments took effect on October 1, 1984, and therefore do not govern this case. The language of the statute with respect to subrogation, which is quoted in the text of this opinion in full, was completely unchanged by the 1984 amendments.