### The Honorable Ronald E. Longstaff, United States Distric t 1 

### Judge for the Southern District of Iowa. _____________ No. 95-1102

_____________ United States of America, * * Plaintiff - Appellee, * Appeal from the United States * District Court for the v. * Southern District of Iowa. * John W. Peckham, * * Defendant - Appellant,* * M. Louise Peckham, * * Victor Edwards, * * Defendants. *

_____________ Submitted: September 15, 1995 Filed: December 27, 1995

_____________ Before RICHARD S. ARNOLD, Chief Judge, McMILLIAN and HANSEN, Circui t Judges.

_____________ HANSEN, Circuit Judge.
Joh n W. Peckham appeals from the district court's denial of hi s 1 motion to alter or amend an order directing the United States Marshal to reimburse the governm ent from the proceeds of a foreclosure sale for real est ate taxes the government had advanced prior to the entry of th e foreclosure judgment. Peckham argues that the district court erred becaus e the foreclosure judgment did not specifically pr ovide for reimbursement of prior paid taxes. We affirm the order of the district court.

### 2 I.

The foll owing facts are undisputed. The United States of America , acting through the Farmers Home Administration, made several loans to John W. and M. Louise Peckham which were secured by a mortgage on the Peckhams' real estate. When the Peckhams defaulted on the loans, the governmen t filed a complaint for foreclosure on the propert y. The parties negotiated a settlement, which t he district court finalized in a judgment and decree of foreclosure on May 25, 1994. The judgment provided for the payment fro m the proceeds of the ordered sale of the unpaid principal, accrued interest , and costs of the litigation and of the execution sale.

A writ of execution was issued pursuant to the judgment, and th e United States Marshal sold the property. When the property sold for more than the value of the encumbrances against it, J ohn Peckham filed a motion to compel the government to pay him the overplus . The government replied, stating that Peckham was entitled to a lesser amount than he sought after the go vernment calculated its costs and interest, which included th e delinquent real estate taxes which the government had advanced the da y before the foreclosure judgment was entered. The district court entered
an or der requiring payment to Peckham of an overplus of $34,138.53, a s calculated by the government.

Peckhamthen filed a motion to alter or amend the order, assertin g that he was entitled to a $65,541.96 overplus. Peckham contended that the government was not entitled to the amount it hadpaid in real estate taxes
one da y before the district court entered the foreclosure judgment

. Specif ically, Peckham argued that the judgment did not provide fo r reimbursement of real estate taxes paid prior to the judgment. He furthe r argued that the mortgage agreement itself, which did provide fo r reimbursement of tax payments advanced by the mortgagee to protect it s interests, did

### 3

not provide the court any authority, because under Iowa law the agreement had merge d into the judgment. The district court held a hearing o n Peckham's motion to alter or amend the order and found that the real estat e taxes were costs to which the government was entitled pursuant to th e foreclosure judgment and denied Peckham relief. Peckham appeals.

II.

We revie w a motion to alter or amend a judgment for an abuse o f discretion. See Creative Cookware, Inc. v. Nort hland Aluminum Prods. , 678 F.2d 746, 751 n.12 (8 th Cir. 1982) (citing 6A Moore's Federal Practice at 59.15(4)).

As a preliminary matter, we observe that "federal law govern s questi ons involving the rights of the United States arising unde r nationwide federal programs." United States v. Kimbell Foods, Inc. , 440 U.S. 715, 726 (1979). Under 28 U.S.C. § 2410(c), we apply "the local law of the p lace where the court is situated" to determine the effect of a foreclosure judgment on a mortgage held by the United States. Cf. Donovan
v. Farmers Home Admin. , 19 F.3d 1267, 1268-70 (8th Cir. 1994) (applyin g state law under § 2410(c) to determine the status of the government' s lien).

Peckham r elies on the doctrine of merger, which is well-settled law in Iowa. Under this doctrine, a mortgagee who obtains an in rem judgment is limited to the terms of that judgment and can not subsequently pursue an in personam judgment on the underlying obligation. Farm Credit Bank o f Omaha v. Faught , 492 N.W.2d 422, 424 (Iowa 1992) . "The doctrine of merger is a n aspect of res judicata which prevents relitigation of existin g judgments. . . . It s erves to prevent the splitting of causes of action." Brenton State Bank of Jefferson v. Tiffany , 440 N.W.2d 583, 585 (Iowa 1989 ) (citations omitted).

### 4 We disagree with Peckham's assertion that the doctrine of merge r applies to this case. This case does not involve a creditor splittin g
causes of action. The government did not pursue a separate, in personam suit against the Peck hams after obtaining an in rem judgment; rather, the government contested the Peckhams' calculations on the amount of overplus due to them under the foreclosure judgment from the sale of the property. The district court did not render a second judgm ent on the underlying debt after entering an in rem judgment on the mortgage; rather, it interpreted th e original in rem judgment to include the real estate taxes a s reimbursable costs of the Marshal's sale. Thus, the question here is not whether the debt merged into the judgment, thus precluding a secon d judgme nt, but whether the district court abused its discretion i n determ ining that the advanced real estate taxes were costs reimbursabl e under the foreclosure judgment. See United States v. Heasley , 283 F.2 d 422, 426-27 (8th Cir. 1960) ("[T]he rule in fede ral courts is well settled that the matter of co nfirming a judicial sale rests in the sound judicial discretion of the trial court and this discretio n will not be disturbed on appeal except in cases of its abuse.").
After carefully reviewing the record and the parties' briefs, w e find
no abuse of discretion. Peckham contends that the language of the judgmen t did not grant the cou rt authority to order reimbursement, noting that the judgment does not specifically provide for the reimbursement of prejudgmen t costs and that the it emized award does not include real estate taxes. We be lieve, however, that the judgment contains language supporting th e district court's decision. The judgment states that the Marshal's Service is to deduct the costs of the sale and then bring the remaining proceeds into court to satisfy the interest and the plaintiff's judgment. In our vie w, the government paid the real estate taxes as a cost incurred i n preparation for the Marshal's sale. Because the Marshal had authority per the judgment to pay

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these as costs of sale, the district court did n ot abuse its discretion in ordering payment.
Furthermore, the record indicates that neither the government n or the Peckhams intended the settlement--which was finalized in the judgment--to preclude the government from recovering all of its costs. In fact, Peckha m concedes that at the time the judgment was entered, he had no idea th e government had already paid the delinquent taxes. Thus, he assumed that the govern ment would incur any costs to facilitate the sale after th e judgm ent was entered and that those costs would be reimbursed from th e proceed s of the sale. It was, of course, reasonable for the parties t o believe the settlement provided for the government's reimbursement o f costs, because the parties had explicitly agreed to this in the mortgage agreement. Looking a t this record, the district court had ample evidence from which to conclude that the settlement which became the final judgment contem plated distribution of sale proceeds only after all of th e government's costs of sale had been reimbursed.
Peckham argues that to affirm the di strict court's decision would be to circumvent Iowa's merger doctrine by effectively granting an in persona m judgment to the government after it had formerly obtained an in re m judgment

. As explained above, we view the court's decision as a n applicati on of the original judgment, not a grant of a separate, i n perso namjudgment. However, even if we were to accept Peckham's view , Peckham's argument would not carry the day.

The application of the merger doctrine "is limited to equitabl e concerns" and "will not be carried any further than the ends of justic e require ." Brenton State Bank of Jefferson , 440 N.W.2d at 586. In thi s case, the Peckhams re ceived under the district court's order exactly what was due to them. Hadthe government not advanced the taxes, the Peckhams would not have received any more than the court's order allowed them i n this case,

### Peckham contends that in Faught , 492 N.W.2d at 425, th e 2 

### Suprem e Court of Iowa was unimpressed by a mortgagee's argumen t that application of the merger doctrine would result in a windfall to the m ortgagor. A close reading of the case reveals, however , that the court was unimpressedbecause the alleged windfall was an illusion. 6 because potential buyers would have reduced thei r bids to reflect that the propertywas being sold subject to the taxes. Thus, a reduced amount of initial overplus would have been available for d istribution, but the final amount due the Peckhams would have been the same amount as the cour t finallyordered to be distributed to them. Simply stated, applying th e merger doctrine to preclude the government from recapturing its advanced costs and thereby bes towing on the Peckhams a real windfall to which they
are not entitled would not further the ends of justice. Accordingly, we do not believe the Supreme Court of Iowa would extend the doctrine o f merger to th e facts of this case. Cf. id. at 587-88 (noting that a n application of the merger doctrine would result in the debtors receiving a considerable windfall at the expense of creditors). 2

We have considered Peckham's remaini ng arguments and find them to be wit hout merit. For the reasons stated above, we find no abuse o f discretion in the district court's determinationthat the taxes were costs of the sale under the foreclosure judgment. Accordingly, we affirm th e order of the district court.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.