A-86913, JUNE 24, 1937, 16 COMP. GEN. 1110

A-86913: Jun 24, 1937

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IS AS FOLLOWS: THE FARM CREDIT ADMINISTRATION. THIS LOAN WAS SECURED BY A CHATTEL MORTGAGE ON CERTAIN LIVESTOCK ENUMERATED THEREIN AND THE INCREASE THEREOF SITUATED UPON A CERTAIN TRACT OF LAND DESCRIBED THEREIN. THE CHATTEL MORTGAGE WAS FILED FOR RECORD IN THE OFFICE OF THE REGISTER OF DEEDS. INTEREST TO MATURITY DATE WAS DEDUCTED FROM THE LOAN PROCEEDS AT THE TIME THE LOAN WAS MADE. NO PAYMENTS HAVE BEEN RECEIVED ON THIS LOAN AND THERE NOW REMAINS DUE THE PRINCIPAL SUM OF $197.00 PLUS SIMPLE INTEREST AT THE RATE OF 5 1/2 PERCENT PER ANNUM FROM NOVEMBER 1. THIS LOAN INDEBTEDNESS WAS REPORTED TO THE UNITED STATES ATTORNEY AT RAPID CITY. THE UNITED STATES ATTORNEY WAS ADVISED THAT THE BORROWER STILL OWNED TWO COWS SEVEN YEARS OLD.

A-86913, JUNE 24, 1937, 16 COMP. GEN. 1110

APPROPRIATIONS - FARM CREDIT ADMINISTRATION - AVAILABILITY FOR COSTS OF SALE OF LOAN SECURITY IN EXCESS OF PROCEEDS OF SALE THE APPROPRIATION FOR SALARIES AND EXPENSES OF THE FARM CREDIT ADMINISTRATION PROVIDING SPECIFICALLY FOR THE EXPENSES OF COLLECTION OF MONEYS DUE THE UNITED STATES ON ACCOUNT OF LOANS AUTHORIZED BY LAW, PAYMENT MAY BE MADE THEREUNDER OF THE COSTS OF CARE AND PRESERVATION OF LIVESTOCK MORTGAGED AS SECURITY FOR THE LOAN, AND FORECLOSURE PROCEEDINGS, ETC., SHOULD THEY BE NECESSARY, REMAINING UNPAID AFTER APPLICATION OF THE PROCEEDS FROM THE SALE OF THE MORTGAGED PROPERTY.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE GOVERNOR, FARM CREDIT ADMINISTRATION, JUNE 24, 1937:

YOUR LETTER OF JUNE 9, 1937, IS AS FOLLOWS:

THE FARM CREDIT ADMINISTRATION, ACTING PURSUANT TO THE ACT OF CONGRESS APPROVED FEBRUARY 23, 1934 (48 STAT. 354), GRANTED A LOAN (NUMBER 818-34) IN THE AMOUNT OF $197.00 TO WALTER SKILLINGSTAD OF MOBRIDGE, WALWORTH COUNTY, SOUTH DAKOTA. AS EVIDENCE OF THIS INDEBTEDNESS THE BORROWER GAVE A PROMISSORY NOTE PAYABLE TO THE GOVERNOR OF THE FARM CREDIT ADMINISTRATION ON OR BEFORE NOVEMBER 1, 1935, WITH INTEREST AT THE RATE OF 5 1/2 PERCENT PER ANNUM. THIS LOAN WAS SECURED BY A CHATTEL MORTGAGE ON CERTAIN LIVESTOCK ENUMERATED THEREIN AND THE INCREASE THEREOF SITUATED UPON A CERTAIN TRACT OF LAND DESCRIBED THEREIN. THE CHATTEL MORTGAGE WAS FILED FOR RECORD IN THE OFFICE OF THE REGISTER OF DEEDS, WALWORTH COUNTY, SOUTH DAKOTA, ON DECEMBER 17, 1934, AT 9 O-CLOCK A.M. I AM ENCLOSING HEREWITH A COPY OF THE FORM OF CHATTEL MORTGAGE (FORM 4-LS.--- 1934. E.C.L.) USED IN CONNECTION WITH THIS AND OTHER SIMILAR LOANS.

INTEREST TO MATURITY DATE WAS DEDUCTED FROM THE LOAN PROCEEDS AT THE TIME THE LOAN WAS MADE. NO PAYMENTS HAVE BEEN RECEIVED ON THIS LOAN AND THERE NOW REMAINS DUE THE PRINCIPAL SUM OF $197.00 PLUS SIMPLE INTEREST AT THE RATE OF 5 1/2 PERCENT PER ANNUM FROM NOVEMBER 1, 1935, THE MATURITY DATE OF THE LOAN.

UNDER DATE OF OCTOBER 29, 1936, THIS LOAN INDEBTEDNESS WAS REPORTED TO THE UNITED STATES ATTORNEY AT RAPID CITY, SOUTH DAKOTA, WITH THE RECOMMENDATION THAT PROPER ACTION BE TAKEN AGAINST WALTER SKILLINGSTAD TO RECOVER THE AMOUNT DUE. THE UNITED STATES ATTORNEY WAS ADVISED THAT THE BORROWER STILL OWNED TWO COWS SEVEN YEARS OLD, ONE BUCKSKIN HORSE EIGHT YEARS OLD NAMED "DIAMOND," ONE BAY MARE EIGHT YEARS OLD NAMED "MAUDE," AND ONE FOUR-YEAR OLD BLUE ROAN MARE NAMED "QUEEN," ALL OF WHICH WERE LIVESTOCK DESCRIBED IN THE CHATTEL MORTGAGE, AND THAT THIS LIVESTOCK WAS THEN LOCATED ON THE FARM OF THE BORROWER'S FATHER IN CAMPBELL COUNTY, SOUTH DAKOTA.

THE UNITED STATES ATTORNEY EXPRESSED THE OPINION THAT THE FIRST STEP TO BE TAKEN WOULD BE TO FORECLOSE THE CHATTEL MORTGAGE AND THAT BEFORE HE COULD PROCEED WITH THE FORECLOSURE ACTION, IT WOULD BE NECESSARY FOR THE FARM CREDIT ADMINISTRATION TO HAVE POSSESSION OF THE PROPERTY. TO THAT END, HE SUGGESTED THAT OUR LOCAL FIELD SUPERVISOR IN THAT TERRITORY REPOSSESS THE MORTGAGED LIVESTOCK, PLACE IT IN SOME PLACE FOR SAFEKEEPING PENDING THE TIME OF FORECLOSURE AND ADVISE HIM SO THAT ARRANGEMENTS COULD BE MADE FOR ITS SALE.

THE FARM CREDIT ADMINISTRATION HAS HAD OTHER CASES WHERE LIVESTOCK OR OTHER PROPERTY COVERED BY CHATTEL MORTGAGES OF THIS TYPE HAVE BEEN SOLD UNDER FORECLOSURE PROCEEDINGS, BUT IN EACH CASE THE PROCEEDS FROM THE SALE HAVE BEEN ADEQUATE TO COVER THE COSTS INCURRED FOR CARE AND PRESERVATION OF THE PROPERTY DURING THE PENDENCY OF THE FORECLOSURE PROCEEDINGS, IN ACCORDANCE WITH THE SPECIFIC PROVISIONS OF THE MORTGAGE. HOWEVER, IN VIEW OF THE POSSIBILITY THAT IN A CASE OF THIS KIND THE PROCEEDS MAY BE INADEQUATE TO PAY THE COSTS INCLUDING THE EXPENSES INCURRED FOR CARE AND PRESERVATION, I SHALL APPRECIATE ADVICE FROM YOU AS TO WHETHER OR NOT A DEFICIENCY OF THIS KIND WOULD BE PROPERLY PAYABLE FROM THE APPROPRIATION FOR SALARIES AND EXPENSES, FARM CREDIT ADMINISTRATION, FOR THE YEAR IN WHICH THE INDEBTEDNESS IS INCURRED. THE GENERAL APPROPRIATION FOR SALARIES AND EXPENSES OF THE FARM CREDIT ADMINISTRATION FOR THE FISCAL YEAR 1937 WAS MADE BY THE ACT OF CONGRESS APPROVED JUNE 4, 1936 (49 STAT. 1457), AND PROVIDES SPECIFICALLY THAT IT MAY BE USED FOR THE COLLECTION OF MONEYS DUE THE UNITED STATES ON ACCOUNT OF LOANS MADE UNDER THE ACT OF FEBRUARY 23, 1934, AND OTHER SIMILAR ACTS. SINCE THE EXPENSE MUST BE INCURRED PRIOR TO THE INSTITUTION OF LEGAL PROCEEDINGS IN ORDER TO PROTECT THE INTEREST OF THE UNITED STATES, IT SEEMS ALSO THAT SUCH ITEMS ARE IN FACT A NECESSARY AND PROPER PART OF THE COST OF COLLECTION. IF THE GOVERNMENT IS NOT PERMITTED TO MAKE EXPENDITURES FOR THE PRESERVATION OF ITS SECURITY COLLECTIONS IN MANY CASES MAY NOT BE EFFECTED WHICH MIGHT OTHERWISE BE MADE. EXPENDITURES OF THIS CHARACTER WILL, OF COURSE, BE MADE IN RELATIVELY FEW CASES, AND ONLY AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES INVOLVED.

YOUR EARLY CONSIDERATION OF THIS MATTER WILL BE GREATLY APPRECIATED.

THE CHATTEL MORTGAGE FORM ENCLOSED WITH YOUR LETTER HAS A PARAGRAPH AS FOLLOWS:

IF THE MORTGAGOR SHALL FAIL TO MAKE PAYMENT AS IN SAID PROMISSORY NOTE PROVIDED, OR SHALL BREAK ANY OF THE TERMS AND CONDITIONS OF THIS MORTGAGE, OR SHALL MAKE ANY ATTEMPT TO DISPOSE OF SAID PROPERTY, THE MORTGAGEE OR HIS AGENTS MAY ENTER UPON THE PREMISES WHERE THE PROPERTY MAY BE, TAKE POSSESSION OF, AND/OR SELL SAID PROPERTY, OR SO MUCH THEREOF AS MAY BE NECESSARY, AT PRIVATE SALE, WITH OR WITHOUT NOTICE, IF PERMITTED BY LAW, OR AT PUBLIC AUCTION FOR CASH, TO SATISFY SAID DEBT AND INTEREST, AND ALL EXPENSES THAT MAY BECOME NECESSARY IN THE KEEPING, CARE, AND SALE OF SAID PROPERTY, AFTER GIVING NOTICE AS MAY BE REQUIRED BY LAW OF THE TIME AND PLACE OF SALE AND SHALL APPLY THE PROCEEDS OF SUCH SALE TO THE DISCHARGE OF SAID DEBT, INTEREST, AND EXPENSES, AND SHALL PAY ANY SURPLUS TO THE MORTGAGOR OR HIS ASSIGNS.

IN VIEW OF THIS PROVISION, ONCE THE FARM CREDIT ADMINISTRATION HAS TAKEN POSSESSION OF THE PROPERTY IT WOULD NOT APPEAR TO BE NECESSARY TO AWAIT FORMAL FORECLOSURE PROCEEDINGS BEFORE SELLING OR OTHERWISE DISPOSING OF THE PROPERTY AND BY THUS MAKING USE OF THE SUMMARY SALE PROVISIONS THE COST OF SAFEKEEPING THE PROPERTY WOULD BE REDUCED TO A MINIMUM WHICH IS AN ADMINISTRATIVE RESPONSIBILITY. HOWEVER, SHOULD THE PROCEEDS RECEIVED FROM THE SALE OF THE MORTGAGED PROPERTY NOT BE SUFFICIENT TO PAY THE COSTS OF WHATEVER PROCEEDINGS MAY BE NECESSARY, INCLUDING THE SAFEKEEPING OF THE PROPERTY, THE EXCESS APPEARS CHARGEABLE TO THE APPROPRIATION FOR THE SALARIES AND EXPENSES OF YOUR ADMINISTRATION FOR THE FISCAL YEAR IN WHICH INCURRED, SAID APPROPRIATION PROVIDING SPECIFICALLY FOR THE EXPENSES OF COLLECTION OF MONEYS DUE THE UNITED STATES ON ACCOUNT OF LOANS AUTHORIZED BY LAW.