United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
J. BOYLE UNITED STATES DISTRICT JUDGE.
the Court is Plaintiff Sally Reaves's Motion to Remand
Wage Garnishment Determination to the U.S. Small Business
Administration (Doc. 43). For the reasons discussed below,
the Court GRANTS the Motion and
REMANDS this case to the agency for
present Motion arises out of a dispute with the Small
Business Administration (SBA) regarding a March 15, 2018
Garnishment Hearing Decision (Doc. 24-1) that permitted
Plaintiff's wages to be garnished.
2006, Plaintiff, as the owner of Sagebrush Solutions, LLC,
opened a line of credit owed to PlainsCapital Bank that the
SBA guaranteed (SBA Loan). Doc. 32, Pl.'s Am. Compl.,
¶¶ 6, 8. Sagebrush was also obligated to pay
PlainsCapital on other loans that were not guaranteed by the
SBA (Conventional Loans). Id. ¶ 7. The liens
securing the SBA Loan pre-dated the liens securing the
Conventional Loans. Id. Plaintiff pledged her
personal securities account as collateral to personally
guarantee both the SBA Loan and the Conventional Loans.
Id. ¶ 8.
2012, the SBA and PlainsCapital agreed to a loan
restructuring that gave PlainsCapital's Conventional
Loans a first lien position and subordinated the SBA loan to
a second lien position. Doc. 24-1, Hr'g Decision, 9.
Thereafter, Sagebrush defaulted on the SBA Loan and
PlainsCapital non-renewed the Conventional Loans. Doc. 32,
Pl.'s Am. Compl., ¶ 10. PlainsCapital liquidated
Plaintiff's personal securities account and applied the
funds first to pay off the Conventional Loans and then
applied the remaining funds to the SBA Loan. Doc. 24-1,
Hr'g Decision, 72-74, 76. After the liquidation, the SBA
Loan had a remaining unpaid balance of $343, 462.61.
Id. at 74. On October 7, 2015, PlainsCapital
notified Plaintiff that her securities account had been
liquidated and that the SBA Loan's remaining balance as
of October 6, 2015 was $348, 790.33, including interest.
Id. at 106-07.
March 6, 2017, the Department of the Treasury issued a wage
garnishment order to Sagebrush, and Plaintiff filed a hearing
request on March 25, 2017. Id. at 78, 108. In her
request, Plaintiff alleged that PlainsCapital violated 31
U.S.C. § 3713 and 13 C.F.R. § 120.411 by paying
itself first. Id. at 110-11. Plaintiff also alleged
that the structure of the SBA Loan and the Conventional Loans
violated the SBA's Standard Operating Procedures.
Id. at 111. On July 14, 2017, the Hearing Officer
sent a letter to Plaintiff requesting that any additional
documents she would like to provide be submitted by August
11, 2017. Id. at 79. Plaintiff responded to this
request on August 7, 2017, by sending another letter to the
Hearing Officer supporting her claims. See Id. at
Hearing Officer issued a Garnishment Hearing Decision on
March 15, 2018, finding that Plaintiff's wages should be
garnished. Id. at 2. The findings were, in relevant
A. SBA consented to a lower lien position on the SBA Loan The
SBA loan was modified fifteen times. Thirteenth modification
occurred on April 11, 2012 . . .
As part of that modification, PlainsCapital Bank sought
SBA's approval to subordinate the first position lien on
the Securities Accounts securing the SBA Loan to second
position, giving PlainsCapital Bank a first position lien to
secure its Conventional Loans. SBA approved this on April 6,
2012 . . .
Further, PlainsCapital Bank was not obligated to tell you or
to get your permission to subordinate the Securities Accounts
to another loan. As part of the original loan transaction you
signed an Unconditional Guaranty Agreement . . . that states
in pertinent part: “4. Rights of Lender . . . (c) If
any or all of the Obligations are now or hereafter secured in
whole or in part, Guarantor agrees that Lender may, from time
to time, at its discretion, and with or without valuable
consideration allow substitution, withdrawal, . . .
subordination, . . . or other impairment of all or any of
such security or collateral, without notice to or consent by
Guarantor, and without in anywise [sic] impairing,
diminishing, or releasing the liability of Guarantor
Your argument that PlainsCapital Bank improperly gave itself
a preference is incorrect. SBA had approved the change in its
lien position as to the Securities Accounts therefore
PlainsCapital Bank acted correctly and SBA was not harmed.
SBA's consent to lower its lien position is dispositive.
This results in an unpaid balance on the SBA guaranteed loan
which SBA may now collect. I find no evidence supporting the
theory that PlainsCapital Bank improperly applied payments to
itself first: you are still obligated to the SBA for the
unpaid balance on the SBA Loan.
Doc. 24-1, Hr'g Decision, 4-5.
then initiated this civil action objecting to the Hearing
Officer's decision. See Doc. 32, Pl.'s Am.
Compl. Plaintiff requested discovery outside of the
administrative record regarding the propriety of the
SBA's consent to subordination-an issue that the SBA
contends was waived by Plaintiff's failure to bring the
issue before the Hearing Officer. Doc. 41, Order. The SBA
then filed a Motion for Protective Order on discovery outside
of the administrative record, which was granted by the
Magistrate Judge on February 11, 2019. Id. The
Magistrate Judge noted that, as the SBA conceded, the
subordination issue would either be rejected as waived or
require remand for additional investigation or explanation by
the Hearing Officer. Id. This led Plaintiff to file
the present Motion to Remand to the SBA, claiming that the
SBA failed to adequately address her objections to the wage
garnishment: (1) that the SBA improperly consented to
subordination; (2) that the loans were in an improper
“piggybacking” structure; and (3) the structure
violated 31 U.S.C. § 3713. See Doc. 43,
Pl.'s Mot. As the Motion is fully briefed, the Court
addresses Plaintiff's requested relief.