## Facts

- In 1982, Ronald and Susan Chappell borrowed $92,000 from the Farmers Home Administration (FmHA), a federal agency whose interest was later held by the Farm Service Agency (FSA), both agencies of the United States.
- The loan financed the purchase of a dairy farm in New Hampshire and was secured by a mortgage on the farm real estate.
- The Chappells’ dairy operation encountered serious operational problems, including seriously ill cattle, high herd mortality, low milk output, and physical defects affecting the property (structural problems with the barn, plumbing and electrical problems in the house and barn, and a septic system that did not function).
- Dairy farming in the area became less profitable, and the Chappells developed significant cash-flow problems.
- Over a number of years, the agency worked with the Chappells, including paying their state real estate taxes for about nine years and advancing additional funds.
- The advances were added to the debt, and the parties refinanced; in 1988 they executed a new mortgage deed reflecting the refinanced obligation.
- The Chappells stopped making loan payments in 1988.
- About three and one-half years later, the FSA accelerated the debt and demanded payment of the full balance.
- About a year after acceleration, the Chappells abandoned the property.
- The FSA waited another 18 months to foreclose. During the extended period of abandonment, the property deteriorated substantially, and the local real estate market experienced a major downturn.
- The foreclosure sale produced approximately $40,000, leaving an alleged deficiency of about $140,000.
- The United States, acting through the FSA, sued the Chappells to collect the deficiency. Both sides moved for summary judgment.

## Issues

1. Whether the United States was entitled to summary judgment for the post-foreclosure deficiency on the Chappells’ defaulted FmHA/FSA loan.
2. Whether the government’s delay between default, acceleration, abandonment, and foreclosure—combined with deterioration of the collateral and a declining market—could bar or reduce the deficiency as a matter of law.
3. Whether any genuine dispute of material fact required denial of summary judgment on the deficiency claim.

## Decision

- The court granted the United States’ motion for summary judgment on its deficiency claim.
- The court denied the Chappells’ motion for summary judgment.
- The court permitted recovery of the deficiency remaining after crediting the foreclosure-sale proceeds against the debt.

## Legal Principles

- When a borrower defaults on a secured loan, the lender may enforce the note and mortgage according to their terms, including acceleration, foreclosure, and collection of any remaining deficiency after sale proceeds are applied to the debt.
- A creditor’s delay in foreclosing, without a legal basis showing that the delay eliminates or limits the right to recover, does not by itself discharge the borrower’s obligation or defeat a deficiency claim.
- Deterioration of collateral value occurring after a borrower’s abandonment and during a period of nonpayment does not automatically shift the loss from the borrower to the lender in a deficiency action.
- On summary judgment, once the moving party shows entitlement to judgment on the undisputed facts of default, foreclosure, sale proceeds, and remaining balance, the nonmoving party must identify a genuine dispute of material fact or a legally recognized defense that would defeat or limit recovery.

## Conclusion

In *United States v. Chappell*, the District of New Hampshire resolved cross-motions for summary judgment in a federal deficiency action arising from an FmHA/FSA dairy-farm loan. After the Chappells defaulted, the debt was accelerated, the property was abandoned, and foreclosure occurred after additional delay in a declining market and after significant deterioration. The court granted summary judgment to the United States for the deficiency and rejected the borrowers’ attempt to avoid liability based on the timing of the government’s enforcement efforts and the resulting decline in the collateral’s value.


United States v. Chappell, 2000 WL 1507431 (2000)