LORAS L. STEINES, PETITIONER V. ADMINISTRATOR OF VETERANS AFFAIRS No. 90-6059 In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The Illinois Appellate Court, Third Judicial District Brief For The Respondent In Opposition OPINIONS BELOW The orders of the Circuit Court for Rock Island County, Illinois, (Pet. App. D) and the Illinois Appellate Court, Third Judicial District, (Pet. App. C) are unpublished. JURISDICTION The order of the Illinois Supreme Court denying discretionary review was entered on October 3, 1990 (see Pet. App. A). The petition for a writ of certiorari was filed on October 25, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1257. QUESTION PRESENTED Whether, after petitioner defaulted on a mortgage guaranteed by the Veterans Administration (VA), he received proper consideration in an eviction proceeding of his defenses based on an employment discrimination claim against the Department of the Army and an administrative claim seeking waiver of his debt to the VA on the guaranty. STATEMENT 1. The Department of Veterans Affairs, formerly known as the Veterans' Administration (VA), provides housing assistance to veterans by guaranteeing home loans made to veterans by private lenders. Title III of the Servicemen's Readjustment Act of 1944, Pub. L. No. 346, 58 Stat. 291, codified as amended at 38 U.S.C. 1801-1834. Under the assistance program, in addition to guaranteeing veterans' home loans, the VA enables veterans generally to avoid the requirement of a down payment, see United States v. Shimer, 367 U.S. 374, 383 (1961), and imposes limits on the charges that lenders can impose for the expenses typically associated with purchasing a home, such as closing costs, 38 U.S.C. 1803(c), 38 C.F.R. 36.4312. The various rights and responsibilities of the VA, the holder of the loan obligation, and the veteran are governed by a comprehensive set of regulations. See generally Shimer, supra; 38 C.F.R. 36.4300-4364; see also 38 C.F.R. 36.4334. These regulations establish, inter alia, that any amounts paid by the VA on account of the liabilities of the veteran "constitute a debt owing to the United States" by that veteran. 38 C.F.R. 36.4323(e). If a veteran defaults on a guaranteed loan, the holder may foreclose on the property after notifying the VA of the default. See 38 U.S.C. 1832(a). Foreclosures are conducted by the holder in accordance with the law of the state in which the property is located. See 38 U.S.C. 1820(a)(6); 38 C.F.R. 36.4319, 36.4320. Foreclosures are not prosecuted by the VA unless the holder fails to exercise reasonable diligence in foreclosing on the property. 38 C.F.R. 36.4319(f). If the holder forecloses and a deficiency on the mortgage debt remains after the property is sold, the VA must reimburse the holder up to the amount of the guaranty. 38 U.S.C. 1832(c); 38 C.F.R. 36.4321. The VA may then recover the amount it paid on the guaranty either by becoming subrogated to the rights of the holder and pursuing any causes of action the holder might have had against the defaulting veteran or by seeking indemnification from the veteran on a debt in the amount of the deficiency. 38 C.F.R. 36.4323(a), (e). Before the VA may collect a debt resulting from its payment of a guaranty, a veteran may challenge the existence or amount of the debt, 38 C.F.R. 1.911(c), or request a waiver on the ground that he or she is not materially at fault and that collection would violate equity and good conscience. 38 U.S.C. 3102(b); 38 C.F.R. 1.911(c). The veteran is entitled to a hearing on a waiver request and may appeal an adverse decision to the Board of Veterans Appeals. 38 C.F.R. 1.911(c). If the waiver is granted, the veteran is no longer obligated to the VA on the debt; however, the maximum amount of the veteran's entitlement to a future VA guaranty of a mortgage will be reduced by the amount of the VA's loss. 38 U.S.C. 1802(b)(1)(B). 2. Under Illinois law at the time of the foreclosure action here, the holder of a mortgage could foreclose by instituting a judicial proceeding against the debtor in accordance with Ill. Rev. Stat. ch. 110, para. 15-108 et seq. (1984), repealed by P.A. 84-1462 Section 7, eff. July 1, 1987, codified at Ill Rev. Stat. ch. 110, para. 15-1101 et seq. (Supp. 1990). Under these provisions, a judgment of foreclosure is followed by a sheriff's sale of the mortgaged property to satisfy the judgment debt. See Ill. Rev. Stat. ch. 110, para. 12-115. The debtor has six months after the sale to redeem the property by paying the purchaser the sale price with interest from the date of the sale. Ill Rev. Stat. ch. 110, para. 12-122. If the debtor does not redeem and remains in possession of the property after the redemption period expires and after a demand for possession has been made, the judgment holder may secure possession by filing an action under Illinois' Forcible Entry and Detainer Act. Ill. Rev. Stat. ch. 110, para. 9-102(6). The only issue in a detainer action is whether the plaintiff or the defendant has a superior right to possession. Hale v. Ault, 83 Ill. App. 3d 78, 403 N.E.2d 635 (1980). 3. In 1982, petitioner obtained a VA-guaranteed home loan from WestAmerica Mortgage Company to purchase a house in Moline, Illinois. When petitioner defaulted on the loan in 1986, WestAmerica foreclosed on the mortgaged property. The circuit court of Rock Island County, Illinois entered a judgment of foreclosure in March 1987, and petitioner did not appeal that judgment. WestAmerica Mortgage Co. v. Steines, No. 86-CH-355 (March, 19, 1987). Thereafter, WestAmerica purchased the property at a sheriff's sale, see Ill. Rev. Stat. ch. 110, para. 12-115, and assigned its rights in the property to respondent, the Administrator of Veterans Affairs. Petitioner did not redeem the property during the six-month redemption period, nor did he vacate the property after that period expired. During this period, petitioner apparently did file a request with the VA for a waiver of his debt to the VA for the loss that the VA sustained on its guaranty. It appears from petitioner's assertions (Pet. 4) and documents in the appendix to the petition (Pet. App. L) that in July 1990 the VA's Committee on Waivers and Compromises granted petitioner's request, thereby waiving collection of petitioner's debt on the guaranty. In February 1989, respondent filed a detainer action against petitioner in the Circuit Court for Rock Island County, seeking possession of the property. Petitioner filed an answer and a request for appointed counsel. In his answer, petitioner alleged that he defaulted on the mortgage because he had been wrongfully terminated from his employment at Rock Island Arsenal, a facility of the Department of the Army. Petitioner's termination occurred in 1977, more than four years before he obtained the mortgage, and was apparently the basis for an employment discrimination claim pending before the Equal Employment Opportunity Commission (EEOC). See Defendant-Appellant's Brief of Interlocutory Appeal, Case No. 3-89-0377 (Aug. 31, 1989). Petitioner also alleged that he had defaulted on his mortgage because he had lost his job at the John Deere Company in 1986. Petitioner's argument appeared to be that as a matter of equity the VA could not be granted possession of the property while his employment discrimination charge was pending. The circuit court denied petitioner's request for appointed counsel and granted summary judgment in favor of respondent (Pet. App. D). Petitioner appealed to the Illinois Appellate Court for the Third Judicial District, which affirmed (Pet. App. C). The appellate court held that the lower court properly rejected petitioner's employment-discrimination defense. In so holding, the appellate court relied on Illinois precedent establishing that a claim of wrongful termination of employment is not "germane to a forcible entry and detainer action." Pet. App. C, at 3-4 (citing Bethany Reformed Church of Lynwood v. Hager, 84 Ill. App. 3d 684, 406 N.E.2d 93 (1980)). The appellate court observed that, in any event, the employment discrimination alleged here could not possibly have caused petitioner to default on the mortgage, because the alleged discrimination occurred four years before petitioner obtained the mortgage. Pet. App. C, at 2-3. The Illinois Supreme Court denied leave to appeal. Pet. App. A. ARGUMENT The unpublished order of the Illinois Appellate Court is correct and does not conflict with any decision of this Court. Further review is therefore not warranted. Contrary to petitioner's contention (Pet. 10, 16), the state courts did not err in granting possession of the property to the VA while petitioner's employment discrimination claim against the Army was pending before the EEOC. Whatever the basis for this claim (which is not clear from the record), it obviously had no bearing on the loan default that led to foreclosure. As petitioner admitted /1/ and the Illinois Appellate Court observed (Pet. App. C, at 2-3), the events underlying his discrimination claim occurred more than four years before petitioner obtained the loan. Because the EEOC claim clearly was unrelated to the detainer action, the state courts committed no constitutional error in refusing to allow petitioner to litigate this claim. Cf. Lindsay v. Normet, 405 U.S. 56, 66 (1972). Nor were the state courts barred from granting possession of the property to the VA in the detainer action pending a ruling on petitioner's request for a waiver of his debt to the VA. The pending waiver request and the detainer action involved different issues. Petitioner's waiver request concerned the debt that he incurred under federal law when the VA paid WestAmerica under the VA's guaranty agreement. /2/ The detainer action concerned the VA's right to possession of the property as an assignee of the right of WestAmerica. Contrary to petitioner's contention (Pet. 11-12, 16), the pendency of his waiver request in no way interfered with his state-law right to redeem the property. Nor did it affect the VA's right to commence the detainer action. From all that appears in the petition, the state court proceedings fully accorded with state and federal law. Petitioner does not dispute that he defaulted on the mortgage; WestAmerica was therefore clearly entitled to foreclose on the property. See Ill. Rev. Stat. ch. 110, para. 15-108; 38 U.S.C. 1832. The judgment of foreclosure, which petitioner did not appeal, entitled WestAmerica to possession of the property; thus, when WestAmerica assigned its rights to the VA pursuant to 38 U.S.C. 1832(c)(5), the VA properly proceeded under state law to seek possession of the property by filing a forcible entry and detainer action. Ill. Rev. Stat. ch. 110, para. 9-102. Finally, there is no merit to petitioner's claim (Pet. 16) that he was deprived of a right to counsel in the state proceedings. Illinois has no statutory right to counsel in foreclosure or detainer proceedings, and the Constitution does not provide such a right. See Lassiter v. Department of Social Services, 452 U.S. 18, 26-27 (1981) (indigent litigant presumptively has a right to counsel only in civil proceedings in which, if she loses, she will be deprived of personal physical liberty). Whether the trial judge had discretion to appoint counsel for petitioner and whether that discretion was properly exercised are not questions that merit consideration by this Court. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General STUART M. GERSON Assistant Attorney General LEONARD SCHAITMAN CATHERINE L. FISK Attorneys FEBRUARY 1991 /1/ Defendant-Appellant's Brief of Interlocutory Appeal, Case No. 3-89-0377, at 2. /2/ After the VA sustained a loss by paying the lender on the guaranty, the loss became a debt that the petitioner owed to the VA. 38 C.F.R. 36.4323. Because the VA appears to have waived the debt (Pet. App. L), petitioner received all the relief he sought from the VA on his administrative claim; he is no longer obligated to repay the VA for the loss it sustained as a result of his default. If petitioner wished to challenge the VA's determination of his debt or the waiver, he could not do so in Illinois state courts, but was instead required to appeal from the Board of Veterans Appeals to the Court of Veterans Appeals and thereafter to the Federal Circuit. 38 U.S.C. 4052, 4092.