United States v. Shimer, No. 13067.

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Writing for the CourtBIGGS, , and STALEY and HASTIE, Circuit
Citation276 F.2d 792
PartiesUNITED STATES of America, Appellant, v. George E. SHIMER.
Decision Date08 April 1960
Docket NumberNo. 13067.

276 F.2d 792 (1960)

UNITED STATES of America, Appellant,
v.
George E. SHIMER.

No. 13067.

United States Court of Appeals Third Circuit.

Argued February 18, 1960.

Decided April 8, 1960.


276 F.2d 793

Anthony L. Mondello, Washington, D. C. (George Cochran Doub, Asst. Atty. Gen., Walter E. Alessandroni, U. S. Atty., Philadelphia, Pa., Samuel D. Slade, Attorney, Department of Justice, Washington, D. C., on the brief), for appellant.

Edward Davis, Philadelphia, Pa., for appellee.

Before BIGGS, Chief Judge, and STALEY and HASTIE, Circuit Judges.

STALEY, Circuit Judge.

Is the amount the Veterans Administration can recover on its contract of indemnity with a Pennsylvania veteran limited to the amount which the veteran owes his mortgagee at foreclosure, and must that amount be computed in accordance with Pennsylvania law, including the Pennsylvania Deficiency Judgment Act?1

The facts as taken from the stipulation entered into by the parties are as follows: Appellee, George E. Shimer, obtained a loan of $13,000 from the Excelsior Saving Fund and Loan Association (Association) on January 12, 1948, to purchase residential realty in Whitemarsh Township, Montgomery County, Pennsylvania. The loan was evidenced by a bond and secured by a mortgage on the property issued to the Association on the same date, January 12, 1948, both having been executed by George E. and Mildred F. Shimer, his wife. The loan was to be repaid with interest at 4 per cent per annum in monthly installments of $78.78 over a term of twenty years. Within a month appellee, an eligible veteran, applied to the Veterans Administration (V.A.) for guaranty of said loan pursuant to the provisions of Title III of the Servicemen's Readjustment Act of 1944, as amended, 59 Stat. 626, 38 U.S.C. § 694 et seq. (now 38 U.S.C. § 1801 et seq.), on V.A. Form 4-1820, "Home Loan Report." Shortly thereafter, on February 11, 1948, the V.A. approved the application and issued V.A. Form 4-1899, "Loan Guaranty Certificate," guaranteeing "subject to the Servicemen's Readjustment Act of 1944, as amended, Public Law 268, 79th Congress, and the regulations issued thereunder to the date of this certificate, 37.38 per cent of the indebtedness outstanding from time to time under the loan identified above." Pursuant to the provisions as applied to this $13,000 loan, the guaranty amounted to $4,000. Appellee defaulted on May 12, 1948, and continued in default. On April 12, 1949, the Association filed a Notice of Intention to Foreclose with the V.A., and on May 12, 1949, entered judgment in the Court of Common Pleas of Montgomery County, Pennsylvania, at No. 351, April Term, 1949, to foreclose the mortgage on the property purchased with the loan.

276 F.2d 794
Sheriff's sale followed on June 29, 1949, where the property was purchased for $250 by the Association. The Association thereupon filed a claim with the V.A. for payment of the $4,000 loan guaranty on July 8, 1949, and the V.A. paid this amount on October 7, 1949. While this claim was pending before the V.A., the Association sold the property to third parties for $10,500. At no time did the Association comply with the provisions of the Pennsylvania Deficiency Judgment Act

This action was initiated in the District Court for the Eastern District of Pennsylvania by the United States to recover the sums paid by the V.A. to the Association. The government asserted it was entitled to recover under either of two counts. The first count was based on its rights as a subrogee of the Association,2 and the second count was based on a right of indemnity. An answer was filed by the appellee alleging that no obligation existed under either theory inasmuch as the mortgagee after it purchased the property at judicial sale had failed to file a petition to fix the fair market value of the property pursuant to the Pennsylvania Deficiency Judgment Act. The government thereafter filed a motion for judgment on the pleadings which was denied by the district judge in an opinion issued December 17, 1958. The parties entered into a stipulation of facts, and the district court thereafter granted appellee's motion for summary judgment on June 24, 1959, under Rule 56(b), Fed.Rules Civ. Proc. 28 U.S.C.

On appeal the government contends that it is entitled to indemnity for the loss which it suffered as guarantor of the loan on the basis of a valid regulation binding upon the appellee that is not impaired or limited in any way by the provisions of Pennsylvania law concerning deficiency judgments. The government asserts that "the court below has grafted onto the rights and liabilities running between the United States and defendant appellee in their independent contract of indemnity, state law considerations which have point only respecting the relationship between defendant and the bank in the first instance, or secondarily between the defendant and the bank's subrogee. We think it clear that state law control of this latter relationship can affect only those rights which the subrogee takes through the bank, and can not affect other rights independently transacted." (Emphasis supplied.)

We agree with the government that an independent indemnity relationship was created by the veteran's application for guaranty of his loan. We further agree that the terms of that guaranty are governed by the Servicemen's Readjustment Act of 1944, as amended, (Veterans Act) and the regulations promulgated pursuant thereto. Although Section 506 of the Act, 38 U.S.C. (1952 ed.) § 694g, entitled "Procedure on default," authorizes payment of the guaranty by the V.A. in the case of each and every default, it does not purport to spell out the amount which is to be paid; it merely refers to the guaranty. The House Report of the Committee of Conference, dated December 17, 1945, U.S.Code Cong.Serv., 79th Cong., 1st Sess. (1945) 938-939, in considering the procedure on default, stated that "In the event the veteran defaulted in payment of his loan and after suit on foreclosure and sale the deficiency was determined, then upon notification from the lender, the Administrator would pay to the lender its guaranty not in excess of $2,000 and not in excess of the deficiency, and be subrogated to the rights of the lender to the extent of the amount paid on the guaranty." (Emphasis supplied.)3

276 F.2d 795

An examination of the Act fails to disclose any attempt on the part of Congress to supplant state law for determining the amount of the deficiency on the loan between the mortgagor and the mortgagee, which deficiency, up to the statutory limit, is the...

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2 practice notes
  • U.S. v. Davis, No. 91-1678
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • May 18, 1992
    ...not recover from its principal, Shimer, any amount it was not obligated to pay the lender on his behalf. See United States v. Shimer, 276 F.2d 792 (3d The Supreme Court reversed the Third Circuit's decision, holding that the application of state law to determine the VA's obligation to the l......
  • United States v. Shimer, No. 392
    • United States
    • United States Supreme Court
    • June 12, 1961
    ...from any further liability to Excelsior at the time the Administration paid its $4,000 guarantee, that is, after the foreclosure sale. 276 F.2d 792. Under the Pennsylvania Deficiency Judgment Act4 a mortgagee who purchases the mortgaged property in execution proceedings cannot recover a def......
2 cases
  • U.S. v. Davis, No. 91-1678
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • May 18, 1992
    ...not recover from its principal, Shimer, any amount it was not obligated to pay the lender on his behalf. See United States v. Shimer, 276 F.2d 792 (3d The Supreme Court reversed the Third Circuit's decision, holding that the application of state law to determine the VA's obligation to the l......
  • United States v. Shimer, No. 392
    • United States
    • United States Supreme Court
    • June 12, 1961
    ...from any further liability to Excelsior at the time the Administration paid its $4,000 guarantee, that is, after the foreclosure sale. 276 F.2d 792. Under the Pennsylvania Deficiency Judgment Act4 a mortgagee who purchases the mortgaged property in execution proceedings cannot recover a def......

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