A-71152, JUNE 15, 1936, 15 COMP. GEN. 1089

A-71152: Jun 15, 1936

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SALE OF CATTLE MORTGAGED TO THE UNITED STATES - PAYMENTS TO PRIOR LIEN HOLDERS - STATE OF NORTH DAKOTA MONEYS REALIZED FROM THE SALE OF CATTLE MORTGAGED TO THE UNITED STATES IN THE STATE OF NORTH DAKOTA AS SECURITY FOR LOANS MADE ARE FOR APPLICATION TO A PRIOR LIEN TO THE EXTENT NOT WAIVED BY THE LIEN HOLDER. NOTWITHSTANDING THE PRIOR MORTGAGE WAS NOT RENEWED AS REQUIRED BY STATE LAW. THAT NO RENEWAL OF THIS MORTGAGE LIEN WAS FILED WITHIN THE PERIOD OF 3 YEARS AS REQUIRED BY SECTION 3762. EXECUTED A SECOND MORTGAGE TO THE GOVERNMENT COVERING A PART OF THE LIVESTOCK UPON WHICH CLAIMANT WAS THE HOLDER OF A PRIOR AND SUPERIOR LIEN. A PART OF THE HERD OF MORTGAGED CATTLE WAS SOLD. WAS CASHED AND THE AMOUNT CREDITED ON HER INDEBTEDNESS TO THE UNITED STATES ARISING FROM THE FEED LOAN.

A-71152, JUNE 15, 1936, 15 COMP. GEN. 1089

SALE OF CATTLE MORTGAGED TO THE UNITED STATES - PAYMENTS TO PRIOR LIEN HOLDERS - STATE OF NORTH DAKOTA MONEYS REALIZED FROM THE SALE OF CATTLE MORTGAGED TO THE UNITED STATES IN THE STATE OF NORTH DAKOTA AS SECURITY FOR LOANS MADE ARE FOR APPLICATION TO A PRIOR LIEN TO THE EXTENT NOT WAIVED BY THE LIEN HOLDER, NOTWITHSTANDING THE PRIOR MORTGAGE WAS NOT RENEWED AS REQUIRED BY STATE LAW, WHERE THE UNITED STATES EXTENDED CREDIT AND SECURED ITS MORTGAGE PRIOR TO THE EXPIRATION OF THE STATUTORY RENEWAL PERIOD AND WITH ACTUAL NOTICE OF THE PRIOR LIEN OF RECORD.

COMPTROLLER GENERAL MCCARL TO THE GOVERNOR, FARM CREDIT ADMINISTRATION, JUNE 15, 1936:

CONSIDERATION HAS BEEN GIVEN THE LETTER OF DECEMBER 12, 1935, FROM THE COMPTROLLER OF YOUR ADMINISTRATION, WITH REFERENCE TO SETTLEMENT DATED DECEMBER 7, 1935, WHICH DISALLOWED THE CLAIM OF THE BANK OF BERTHOLD, BERTHOLD, N.DAK., FOR $75 REPRESENTING A PORTION OF THE PROCEEDS FROM THE SALE OF MORTGAGE CATTLE OF MARGARET WHITTY.

IT APPEARS THAT BY MORTGAGE DATED APRIL 17, 1931, FILED FOR RECORD APRIL 25, 1931, EXECUTED AND DELIVERED BY THOMAS W. WHITTY, NOW DECEASED, THE CLAIMANT, THE BANK OF BERTHOLD, BERTHOLD, N.DAK., SECURED A LIEN UPON CERTAIN LIVESTOCK AND OTHER PERSONAL PROPERTY OF MR. WHITTY IN NORTH DAKOTA; THAT NO RENEWAL OF THIS MORTGAGE LIEN WAS FILED WITHIN THE PERIOD OF 3 YEARS AS REQUIRED BY SECTION 3762, COMPILED LAWS OF THE STATE OF NORTH DAKOTA (1913), AS AMENDED BY THE LAWS OF NORTH DAKOTA (1927); THAT AFTER THE DEATH OF THE SAID THOMAS W. WHITTY, AND DURING THE YEARS 1931 AND 1932, MARGARET WHITTY, WIDOW OF THE DECEASED, HAVING ACQUIRED POSSESSION OF THE MORTGAGED PROPERTY, OBTAINED THREE FEED LOANS AND, AS SECURITY THEREFOR, EXECUTED A SECOND MORTGAGE TO THE GOVERNMENT COVERING A PART OF THE LIVESTOCK UPON WHICH CLAIMANT WAS THE HOLDER OF A PRIOR AND SUPERIOR LIEN; AND THAT CLAIMANT EXECUTED A RESTRICTED WAIVER IN THE FORM APPEARING ON THE BACK OF FORM NO. L.S. 4B-REV., UNITED STATES DEPARTMENT OF AGRICULTURE, WHICH WAIVED THE PRIOR LIEN IN FAVOR OF THE UNITED STATES ON THE PROCEEDS FROM SUCH LIVESTOCK IN EXCESS OF CERTAIN FIXED AMOUNTS THEREIN STATED FOR THE VARIOUS CLASSES OF THE LIVESTOCK NAMED. PURSUANT TO AN AGREEMENT BETWEEN THE MORTGAGOR AND THE SECRETARY OF AGRICULTURE ON JULY 30, 1934, A PART OF THE HERD OF MORTGAGED CATTLE WAS SOLD, THE CHECK IN PAYMENT THEREFOR BEING MADE PAYABLE TO MARGARET WHITTY AND THE FARM CREDIT ADMINISTRATION JOINTLY, AND WHICH, AFTER INDORSEMENT BY MRS. WHITTY, WAS CASHED AND THE AMOUNT CREDITED ON HER INDEBTEDNESS TO THE UNITED STATES ARISING FROM THE FEED LOAN--- THE PRIOR MORTGAGE TO THE BANK OF BERTHOLD NOTWITHSTANDING. IT APPEARS ADMITTED THAT AT THE TIME THIS COLLECTION WAS MADE, CLAIMANT'S PRIOR MORTGAGE WAS NOT CONSIDERED, BECAUSE ITS EXISTENCE WAS OVERLOOKED. THE AMOUNT COLLECTED HAS BEEN COVERED INTO THE TREASURY OF THE UNITED STATES, FROM WHICH IT CANNOT BE WITHDRAWN EXCEPT PURSUANT TO AN APPROPRIATION MADE BY LAW.

THE DISALLOWANCE OF THE CLAIM OF THE BANK OF BERTHOLD ON DECEMBER 7, 1935, WAS BASED UPON THE ADMINISTRATIVE RECOMMENDATION OF SEPTEMBER 27, 1935, AND SECTION 6762, COMPILED LAWS OF NORTH DAKOTA (1913), AS AMENDED, WHICH PROVIDES THAT A MORTGAGE OF PERSONAL PROPERTY CEASES TO BE VALID AS AGAINST CREDITORS OF THE MORTGAGOR, AND SUBSEQUENT PURCHASERS OR ENCUMBRANCERS IN GOOD FAITH AFTER THE EXPIRATION OF 3 YEARS FROM THE FILING THEREOF, UNLESS WITHIN 90 DAYS NEXT PRECEDING THE EXPIRATION OF SUCH TERM, THE SAME BE RENEWED BY FILING ANEW A STATEMENT OF THE LIEN.

IT APPEARS THAT THE SUPREME COURT OF THE STATE OF NORTH DAKOTA CONSTRUED THE STATUTE OF THAT STATE (SECTION 6762, C.L. 1913), IN THE CASE OF HANSON V. BLUM, 207 N.W. 144. IN THAT CASE THE COURT HELD THAT THE PRIOR MORTGAGE AFTER EXPIRATION OF THE 3-YEAR PERIOD AND WITHOUT RENEWAL WAS SUPERIOR TO THAT OF A SUBSEQUENT CREDITOR OR MORTGAGOR WITH NOTICE UNLESS, WHILE RELYING UPON THE PRESUMPTION OF PAYMENT, THERE HAD BEEN AN EXTENSION OF CREDIT, OR CHANGE IN POSITION TO THE DETRIMENT OF SUCH SUBSEQUENT PURCHASER OR ENCUMBRANCER. THAT CONSTRUCTION OF THE STATE STATUTE MAY BE ACCEPTED BY THIS OFFICE.

IN THE INSTANT CASE THE UNITED STATES EXTENDED CREDIT AND SECURED ITS MORTGAGE PRIOR TO EXPIRATION OF THE 3-YEAR PERIOD AND WITH ACTUAL NOTICE OF THE PRIOR LIEN OF RECORD. IT IS REPORTED THAT AFTER EXPIRATION OF THE 3-YEAR PERIOD THE BANK OF BERTHOLD FAILED TO RENEW ITS LIEN, BUT THEREAFTER THE GOVERNMENT EXTENDED NO FURTHER CREDIT AND MADE NO CHANGE IN POSITION TO ITS DETRIMENT. IN THE CIRCUMSTANCES THUS APPEARING COLLECTION BY THE GOVERNMENT OF THE AMOUNT IN QUESTION WAS MANIFESTLY IN ERROR.

ACCORDINGLY, THE SETTLEMENT OF DECEMBER 7, 1935, WILL BE REVISED, AND PAYMENT OF THE CLAIM WILL BE AUTHORIZED FROM SIMILAR FUNDS IN THE HANDS OF THE DISBURSING OFFICER RECEIVED BY HIM ON ACCOUNT OF COLLECTIONS ON OTHER LOANS MADE FROM THE SAME APPROPRIATION AS THE WHITTY LOAN WITH AN APPROPRIATION ADJUSTMENT IN THE LOAN ACCOUNT OF MARGARET WHITTY.

FUTURE COLLECTIONS IN SIMILAR CASES IN NORTH DAKOTA MAY BE CREDITED ON THE LOAN ACCOUNT OF THE BORROWERS ONLY AFTER PRIOR LIEN HOLDERS HAVE BEEN PAID SUCH AMOUNTS AS HAVE NOT BEEN WAIVED.