United States v. Shimer, No. 392

CourtUnited States Supreme Court
Writing for the CourtHARLAN
Citation367 U.S. 374,6 L.Ed.2d 908,81 S.Ct. 1554
PartiesUNITED STATES, Petitioner, v. George E. SHIMER
Decision Date12 June 1961
Docket NumberNo. 392

367 U.S. 374
81 S.Ct. 1554
6 L.Ed.2d 908
UNITED STATES, Petitioner,

v.

George E. SHIMER.

No. 392.
Argued April 27, 1961.
Decided June 12, 1961.

Page 375

Mr. Wayne G. Barnett, Washington, D.C., for petitioner.

Mr. Edward Davis, Philadelphia, Pa., submitted on brief, for respondent.

Mr. Justice HARLAN delivered the opinion of the Court.

The United States brought this action in the Eastern District of Pennsylvania to recover from Shimer, on theories of subrogation and indemnity, an amount of $4,000 which the Veterans' Administration, as guarantor of a loan made to him by Excelsior Saving Fund and Loan Association, had paid to that institution.

The relevant facts, as stipulated by the parties, are these: In 1948 Shimer, a World War II veteran, borrowed $13,000 from Excelsior secured by a mortgage upon residential realty which Shimer purchased with the proceeds. At Shimer's request the Veterans' Administration, pursuant to Title III of the Servicemen's Readjustment Act of 1944, as amended in 1945,1 granted a maximum guarantee of the loan—that is, the lesser of $4,000 or 4/13 of the indebtedness outstanding at any particular time.2 Both

Page 376

the 'Home (now 38 U.S.C.A. § 1801 et seq.). Administration certificate of guaranty, specified that the rights of the parties would be governed by Regulations of the Administration in effect at the date of the loan and guaranty. Shimer defaulted in 1948, and in 1949 Excelsior, as mortgagee, notified the Veterans' Administration of his default and obtained a Pennsylvania judgment foreclosing the mortgage which then secured a debt in excess of $13,000.3 After the property was purchased by Excelsior at a sheriff's sale for $250, the Veterans' Administration paid it the entire guaranty of $4,000 and brought the present action against Shimer.

In the Court of Appeals, the United States chose to rely exclusively on the Administration's alleged right of indemnity against Shimer, and accordingly does not press its claim here upon a theory of subrogation. The Court of Appeals held that the United States was not entitled to recover, reaching this result by applying a well-established principle of surety law which both parties agree was recognized by Congress when it passed Title III: The Veterans' Administration, as guarantor, could not recover from its principal, Shimer, any amount it was not obli-

Page 377

gated to pay the mortgagee, Excelsior, on his behalf. Turning to state law to determine the extent of the Administration's obligation to Excelsior, the court below considered that under Pennsylvania law both Shimer and the Veterans' Administration had been released 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 deficiency judgment unless and until the mortgagee obtains a court determination of the fair market value of the mortgaged property and credits that amount to the unsatisfied liability. When, as eventuated in this case, the mortgagee fails to bring a proceeding for this purpose within six months after the foreclosure sale, the debtor and guarantor are permanently discharged.

We granted certiorari, 364 U.S. 889, 81 S.Ct. 221, 5 L.Ed.2d 186, to pass upon the contentions of the United States that: (1) the application of state law to determine the Administration's obligation to Excelsior is inconsistent with the Regulations prescribed by the agency charged with administering the Servicemen's Readjustment Act; (2) these Regulations are authorized by the federal enactment; and (3) a right of indemnity under federal law arises in favor of the Veterans' Administration upon proper payment of its obligations as guarantor.

I.

The Regulations promulgated by the Veterans' Administration make clear that they were intended to create a uniform system for determining the Administration's obligation as guarantor, which in its operation would displace state law. Section 36.4321, 12 Fed.Reg. 8344, in

Page 378

subsection (a)5 implements the 'pro rata' requirements of § 500(b) of the statute, Note 2, supra, and establishes the procedure for computing the amount of the guaranty which the mortgagee can, under § 506 of the statute, demand to have applied against his unpaid claim on the date of default.6 In this instance it is agreed that such amount is $4,000. However, we are informed by the Solicitor General that the mortgagee is both allowed and encouraged to delay collecting on the guaranty until after all events which may lead to a government offset have taken place. The Administration's potential right as subrogee to some portion of the proceeds of a foreclosure sale is such a possible offset. Accordingly, Excelsior waited until after the foreclosure sale to collect on the guaranty. This brought Excelsior within subsection (b) of § 36.4321 which provides that 'Credits accruing from the proceeds of a sale * * * of the security subsequent to the date of computation (pursuant to subsection (a) supra), and prior to the submission of the (guaranty) claim' shall be applied in reduction of the outstanding debt and 'the amount payable on the claim shall in no event exceed the remaining balance of the indebtedness.'

Page 379

It was at this point that the Court of Appeals applied the Pennsylvania Deficiency Judgment Act to determine the 'Credits accruing from the proceeds of * * * (the foreclosure) sale.' However, the method of determining these credits is also specified in the Regulations, indeed spelled out in § 36.4320, 13 Fed.Reg. 7739—7741, in such great detail that there can be little doubt of an administrative intent that such method should provide the exclusive procedure.7 In substance, that section provides that in every case at least the amount realized at the foreclosure sale is to be credited. It also specifies the way in which the Veterans' Administration can require the mortgagee to credit more than the amount received at the foreclosure sale and thereby protect itself against the very risk the Pennsylvania Deficiency Judgment Act was designed to alleviate—the risk of having to make good its guaranty simply because the mortgaged property is sold for an inadequate price at a judicial sale. The Administrator is authorized to 'specify in advance of such sale the minimum amount which shall be credited to the indebtedness of the borrower on account of the value of the security to be sold.' The mortgagee must then reduce the balance of the unpaid debt by at least this minimum amount before collecting on the guaranty.

Page 380

The mortgagee has the option, however, of selling any property it purchased at or below this minimum amount to the Veterans' Administration for the specified minimum amount. If, as in the present case, the Administrator does not specify a minimum amount 'the holder (mortgagee) shall credit against the indebtedness the net proceeds of the sale * * *.'

In effect, then, the scheme set up by the Regulations provides the Veterans' Administration with a measure of assurance that there shall be credited against the unpaid debt at least what the Administrator regards as the fair value of the mortgaged property. In terms of the present case: With an unpaid balance of indebtedness of $13,000, the Veterans' Administration should not have to pay its full guaranty of $4,000 unless the property which Excelsior may retain is worth less than $9,000. If Excelsior purchased property worth $10,000 for $250 at the foreclosure sale, the Administration should not have to pay more than $3,000 on its $4,000 guaranty, or, to state the matter more precisely, the Administration should realize a $1,000 credit as set off against its $4,000 guaranty which Excelsior could have claimed at the time of default. Accordingly, if the Administrator regarded the mortgaged property as worth $10,000 he could have specified (which he did not) a minimum credit (or 'upset price') of that amount which Excelsior would then have had to credit against the $13,000 unpaid debt. If Excelsior had purchased the property for $10,000 or less, it would have had an option to reconvey the property at a valuation of $10,000 to the Veterans' Administration.

This scheme of protection, while intended to remedy the same abuses at which the Pennsylvania Deficiency Judgment Act is directed, is, of course, inconsistent with the Pennsylvania procedures which provide for a judicial determination of the amount to be credited against an

Page 381

outstanding debt and do not obligate the guarantor to purchase the mortgaged property at its judicially determined value. We have no doubt that this regulatory scheme, complete as it is in every detail, was intended to provide the whole and exclusive source of protection of the interests of the Veterans' Administration as guarantor and was, to this extent, meant to displace inconsistent state law.8

II.

We think that the Servicemen's...

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390 practice notes
  • State of Wash., Dept. of Ecology v. U.S. E.P.A., No. 83-7763
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • February 6, 1985
    ...knowledge respecting the matters subjected to agency regulations." Chevron, U.S.A., 104 S.Ct. at 2783, quoting United States v. Shimer, 367 U.S. 374, 382, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 Applying this deferential standard of review, we hold that EPA reasonably has interpreted RCRA not to......
  • Association of Accredited Cosmetology Schools v. Alexander, No. 91-5332
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • November 24, 1992
    ...or its legislative history that the accommodation is not one that Congress would have sanctioned." Id. (quoting United States v. Shimer, 367 U.S. 374, 383, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 (1961)). Where the agency's reading is the most natural one, it is obviously reasonable, and the par......
  • Gulf Fishermens Ass'n v. Nat'l Marine Fisheries Serv., No. 19-30006
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 3, 2020
    ...that were committed to the agency's care by the statute." Chevron , 467 U.S. at 845, 104 S.Ct. 2778 (quoting United States v. Shimer , 367 U.S. 374, 382, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961) ).III.We first ask whether the Magnuson-Stevens Act unambiguously precludes the agency from creating ......
  • Humane Society of U.S. v. Kempthorne, No. CIV.A. 06-1279(CKK).
    • United States
    • U.S. District Court — District of Columbia
    • August 9, 2006
    ...or its legislative history that the accommodation is not one that Congress would have sanctioned.") (quoting United States v. Shimer, 367 U.S. 374, 382, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961)); Common Cause v. Fed. Election Comm'n, 692 F.Supp. 1391, 1396 (D.D.C.1987) ("[W]here the agency inter......
  • Request a trial to view additional results
389 cases
  • State of Wash., Dept. of Ecology v. U.S. E.P.A., No. 83-7763
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • February 6, 1985
    ...knowledge respecting the matters subjected to agency regulations." Chevron, U.S.A., 104 S.Ct. at 2783, quoting United States v. Shimer, 367 U.S. 374, 382, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 Applying this deferential standard of review, we hold that EPA reasonably has interpreted RCRA not to......
  • Association of Accredited Cosmetology Schools v. Alexander, No. 91-5332
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • November 24, 1992
    ...or its legislative history that the accommodation is not one that Congress would have sanctioned." Id. (quoting United States v. Shimer, 367 U.S. 374, 383, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 (1961)). Where the agency's reading is the most natural one, it is obviously reasonable, and the par......
  • Gulf Fishermens Ass'n v. Nat'l Marine Fisheries Serv., No. 19-30006
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 3, 2020
    ...that were committed to the agency's care by the statute." Chevron , 467 U.S. at 845, 104 S.Ct. 2778 (quoting United States v. Shimer , 367 U.S. 374, 382, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961) ).III.We first ask whether the Magnuson-Stevens Act unambiguously precludes the agency from creating ......
  • Humane Society of U.S. v. Kempthorne, No. CIV.A. 06-1279(CKK).
    • United States
    • U.S. District Court — District of Columbia
    • August 9, 2006
    ...or its legislative history that the accommodation is not one that Congress would have sanctioned.") (quoting United States v. Shimer, 367 U.S. 374, 382, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961)); Common Cause v. Fed. Election Comm'n, 692 F.Supp. 1391, 1396 (D.D.C.1987) ("[W]here the agency inter......
  • Request a trial to view additional results

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