B-119555, JULY 28, 1954, 34 COMP. GEN. 47

B-119555: Jul 28, 1954

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PROVIDED THE SECRETARY DETERMINED THE ACTION IS PROPER TO CARRY OUT THE PROVISIONS OF THE ACT. 1954: REFERENCE IS MADE TO A LETTER OF APRIL 1. IS THE SECRETARY OF AGRICULTURE AUTHORIZED TO BID AT A PRIOR LIENHOLDER'S FORECLOSURE SALE TO PROTECT THE GOVERNMENT'S JUNIOR WATER FACILITIES MORTGAGE? 2. IS THE SECRETARY OF AGRICULTURE AUTHORIZED TO REDEEM UNDER STATE LAW TO PROTECT THE GOVERNMENT'S JUNIOR WATER FACILITIES MORTGAGE INTEREST? IT APPEARS THAT THE LOANS INVOLVED ARE MADE IN THE SEVENTEEN WESTERN ARID AND SEMI-ARID STATES UNDER THE WATER FACILITIES ACT OF AUGUST 28. IT IS STATED IN THE SAID LETTER THAT THE LOANS ARE SECURED. IT IS FURTHER STATED THAT INSOFAR AS THE DEPARTMENT HAS BEEN ABLE TO DETERMINE.

B-119555, JULY 28, 1954, 34 COMP. GEN. 47

WATER FACILITIES LOANS - PRIOR LIENHOLDER'S FORECLOSURE SALE - BID BY GOVERNMENT TO PROTECT JUNIOR WATER FACILITIES MORTGAGE IN VIEW OF THE BROAD AUTHORITY VESTED IN THE SECRETARY OF AGRICULTURE BY THE WATER FACILITIES ACT THE SECRETARY MAY BID ON PROPERTY AT A PRIOR LIENHOLDER'S FORECLOSURE SALE OR REDEEM THE PROPERTY UNDER STATE LAW TO PROTECT THE GOVERNMENT'S JUNIOR WATER FACILITIES LIEN IF THE PRIOR LIENHOLDER FORECLOSES UNDER POWER OF SALE, PROVIDED THE SECRETARY DETERMINED THE ACTION IS PROPER TO CARRY OUT THE PROVISIONS OF THE ACT.

ACTING COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF AGRICULTURE, JULY 28, 1954:

REFERENCE IS MADE TO A LETTER OF APRIL 1, 1954, FROM THE ACTING SECRETARY OF AGRICULTURE, REQUESTING IN CONNECTION WITH THE SERVICING AND COLLECTION OF WATER FACILITIES LOANS BY YOUR DEPARTMENT, A DECISION AS TO THE FOLLOWING TWO QUESTIONS:

1. IS THE SECRETARY OF AGRICULTURE AUTHORIZED TO BID AT A PRIOR LIENHOLDER'S FORECLOSURE SALE TO PROTECT THE GOVERNMENT'S JUNIOR WATER FACILITIES MORTGAGE?

2. IF THE PRIOR LIENHOLDER FORECLOSES UNDER POWER OF SALE, IS THE SECRETARY OF AGRICULTURE AUTHORIZED TO REDEEM UNDER STATE LAW TO PROTECT THE GOVERNMENT'S JUNIOR WATER FACILITIES MORTGAGE INTEREST?

IT APPEARS THAT THE LOANS INVOLVED ARE MADE IN THE SEVENTEEN WESTERN ARID AND SEMI-ARID STATES UNDER THE WATER FACILITIES ACT OF AUGUST 28, 1937, 50 STAT. 869, AS AMENDED, 16 U.S.C.A. 590R-590X AND 590Z-5, AND DEPARTMENTAL REGULATIONS THEREUNDER, 6 C.F.R. 351 AND FOLLOWING SECTIONS. IT IS STATED IN THE SAID LETTER THAT THE LOANS ARE SECURED, IN SOME INSTANCES, BY FIRST LIENS AND IN OTHERS, BY JUNIOR LIENS. IT IS FURTHER STATED THAT INSOFAR AS THE DEPARTMENT HAS BEEN ABLE TO DETERMINE, THERE IS NO FEDERAL LAW WHICH SPECIFICALLY AUTHORIZES ANYONE TO BID AT A FORECLOSURE SALE TO PROTECT THE GOVERNMENT'S INTERESTS UNDER EITHER A FIRST OR A JUNIOR MORTGAGE SECURING A WATER FACILITIES LOAN, EXCEPT SUCH AS IS GIVEN BY 28 U.S.C. 2410 (C) AS TO FIRST LIENS, BY 31 U.S.C. 195 AS TO EXECUTION SALES, AND BIDS AT EXECUTION SALES IN CASES HANDLED BY THE DEPARTMENT OF JUSTICE; HOWEVER, THAT IN VIEW OF THE BROAD PROVISIONS OF THE WATER FACILITIES ACT- -- ESPECIALLY SECTIONS 590S (3) AND 590W (3/--- AND PARTICULARLY IN VIEW OF THE ATTORNEY GENERAL'S OPINION TO THE SECRETARY OF WAR, DATED SEPTEMBER 18, 1928. 35 OP. ATTY. GEN. 474--- YOUR DEPARTMENT HAS TAKEN THE POSITION THAT THE SECRETARY OF AGRICULTURE HAS IMPLIED AUTHORITY TO BID TO PROTECT THE GOVERNMENT'S INTEREST AT FORECLOSURE SALES IN WHICH THE GOVERNMENT IS FORECLOSING (1) ITS OWN WATER FACILITIES FIRST MORTGAGE OR (2) ITS OWN WATER FACILITIES JUNIOR MORTGAGE SUBJECT TO AN OUTSTANDING PRIOR MORTGAGE. IT IS POINTED OUT THAT NO ADVANCE OF FUNDS OTHER THAN FORECLOSURE COSTS IS INVOLVED IN CASES OF EITHER OF THESE TYPES, SINCE THE GOVERNMENT'S BID IS LIMITED TO THE BALANCE OF THE WATER FACILITIES DEBT, PLUS FORECLOSURE COSTS, OR THE VALUE OF THE PROPERTY--- MINUS, IN SECOND MORTGAGE CASES, PRIOR ENCUMBRANCES--- WHICHEVER IS THE LESSER. IT IS FURTHER STATED THAT YOUR DEPARTMENT HAS ALSO TAKEN THE POSITION THAT REDEMPTION MAY BE MADE UNDER 28 U.S.C. 2410 (C), EVEN THOUGH SUCH ACTION INVOLVES AN ADVANCE OF FUNDS TO PAY OFF THE PRIOR LIEN AND RELATED COSTS. BUT IT IS POINTED OUT THAT SUCH LIMITED AUTHORITIES DO NOT CLEAR THE WAY FOR THE GOVERNMENT TO PROTECT ITS INTERESTS AS JUNIOR MORTGAGEE BY (1) BIDDING AT A PRIOR LIENHOLDER'S FORECLOSURE SALE AND ADVANCING FUNDS TO PAY OFF THE PRIOR LIEN IF THE GOVERNMENT BECOMES THE SUCCESSFUL BIDDER, OR (2) BY REDEEMING UNDER STATE LAW AND ADVANCING FUNDS NECESSARY TO MAKE REDEMPTION IN CASES IN WHICH THE PRIOR LIENHOLDER FORECLOSES UNDER POWER OF SALE.

THE ACTING SECRETARY'S LETTER EXPRESSES THE VIEW THAT UNDER THE REASONING OF THE CITED OPINION OF THE ATTORNEY GENERAL, IT WOULD APPEAR PROPER FOR THE SECRETARY OF AGRICULTURE TO BID AT A PRIOR LIENHOLDER'S FORECLOSURE SALE TO PROTECT A JUNIOR WATER FACILITIES LIEN WITH THE OBJECTIVE OF PROTECTING THE GOVERNMENT'S SECURITY INTERESTS, BUT THAT SINCE THE ATTORNEY GENERAL'S OPINION WAS DEALING WITH A FIRST LIEN CASE AND SINCE THE ACQUISITION OF THE PROPERTY AT A PRIOR LIENHOLDER'S SALE WOULD INVOLVE AN ADVANCE OF FUNDS TO PAY OFF THE PRIOR LIEN, YOUR DEPARTMENT HAS NOT FELT AT LIBERTY TO GO THAT FAR WITHOUT THE CONCURRENCE OF THIS OFFICE. IS FURTHER STATED THAT YOUR DEPARTMENT HAS BEEN CONSTRAINED TO SOME EXTENT BY THE DECISIONS OF THIS OFFICE REPORTED IN 16 COMP. GEN. 1034 AND IN 17 COMP. GEN. 205, BUT REFERENCE IS MADE TO DECISION OF JANUARY 26, 1945, B- 46548, AS LENDING SUPPORT FOR THE PROPOSITION THAT THE SECRETARY HAS AUTHORITY TO BID AT A PRIOR LIENHOLDER'S FORECLOSURE SALE AND TO REDEEM UNDER STATE LAW PROPERTY FORECLOSED UNDER A POWER OF SALE.

THE CASES IN 16 COMP. GEN. 1034 AND 17 ID. 205 DO NOT APPEAR TO BE PARTICULARLY IN POINT. IN THE FORMER, THERE WAS INVOLVED THE MATTER OF THE PURCHASE OR DISCHARGE OF SENIOR MORTGAGES ON REAL OR PERSONAL PROPERTY BY THE FEDERAL HOUSING ADMINISTRATION AS ASSIGNEE OF JUNIOR LIENS. THE LATTER CASE INVOLVED ONLY THE QUESTION OF WHETHER A PARTICULAR APPROPRIATION WAS AVAILABLE FOR THE PAYMENT OF DUE AND UNPAID TAXES AGAINST PRIVATE PROPERTY ON WHICH THERE WAS A MORTGAGE SENIOR TO A MORTGAGE HELD BY THE FARM CREDIT ADMINISTRATION. NEITHER INVOLVED THE ACQUISITION OF THE PROPERTY UNDER FORECLOSURE UNDER A SENIOR LOAN. NOR IS THE DECISION OF JANUARY 26, 1945, B-46548, IN POINT, SINCE IT RELATED ONLY TO THE DISPOSITION OF TAX LIENS ON PROPERTY UNDER CIRCUMSTANCES NOT COMPARABLE TO THE PRESENT SITUATION.

WHILE THE WATER FACILITIES ACT DOES NOT CONTAIN A PROVISION SPECIFICALLY AUTHORIZING BIDDING AT A FORECLOSURE SALE UNDER A FIRST MORTGAGE ON PROPERTY ON WHICH THE DEPARTMENT HOLDS A SECOND MORTGAGE TO SECURE A LOAN UNDER THE ACT, OR FOR THE REDEMPTION OF PROPERTY SOLD UNDER A FIRST MORTGAGE, A FORECLOSURE SALE UNDER A FIRST MORTGAGE FOR AN AMOUNT INSUFFICIENT TO SATISFY BOTH THE LIEN OF THE FIRST MORTGAGE AND THAT OF A SECOND WATER FACILITIES MORTGAGE UPON THE SAME PROPERTY NECESSARILY WOULD RESULT IN THE LOSS OF THE RIGHT OF THE GOVERNMENT TO RESORT TO THE SECURITY FOR SATISFACTION OF THE LOAN, AND THUS WOULD RESULT IN THE LOSS OF THE LOAN UNLESS THE BORROWER SHOULD HAVE SUFFICIENT FINANCIAL RESPONSIBILITY TO ENFORCE COLLECTION FROM HIM PERSONALLY--- WHICH IN SUCH CIRCUMSTANCES WOULD ORDINARILY SEEM IMPROBABLE. THE SAME WOULD BE TRUE IN SUCH A SALE WHERE A RIGHT OF REDEMPTION MAY BE GIVEN BY STATE LAW BUT SUCH RIGHT IS NOT EXERCISED. THUS, IT WOULD APPEAR THAT UNLESS THE DEPARTMENT MAY PROTECT ITS WATER FACILITIES LOANS SECURED BY SECOND MORTGAGE BY BIDDING AT A FIRST MORTGAGE SALE OR REDEEMING THEREFROM AFTER SALE, IT MAY LOSE THE BENEFIT OF THE SECURITY FOR A LOAN AND A LOSS TO THE GOVERNMENT MAY RESULT.

SECTION 2, PARAGRAPH 3, OF THE WATER FACILITIES ACT, 50 STAT. 869, 16 U.S.C. 590S (3), AUTHORIZES THE SECRETARY OF AGRICULTURE TO FURNISH FINANCIAL OR OTHER AID TO ANY AGENCY, GOVERNMENTAL OR OTHERWISE, OR ANY PERSON, SUBJECT TO SUCH CONDITIONS AS HE MAY DEEM NECESSARY FOR THE PURPOSES OF THE ACT. SECTION 6, PARAGRAPH 3, 50 STAT. 869, 16 U.S.C. 590W (3), AUTHORIZES HIM TO PERFORM SUCH ACTS AND PRESCRIBE SUCH RULES AND REGULATIONS AS HE MAY DEEM PROPER TO CARRY OUT ITS PROVISIONS. FUNDS ARE CURRENTLY APPROPRIATED, 67 STAT. 219, 68 STAT. 311, FOR NECESSARY EXPENSES OF CARRYING OUT THE PROVISIONS OF THE WATER FACILITIES ACT. UNDER THE GENERAL RULE OF APPROPRIATION CONSTRUCTION, AN EXPRESS STATUTORY PROVISION IS NOT REQUIRED FOR EVERY ITEM OF EXPENDITURE BUT AN APPROPRIATION IN GENERAL TERMS IS AVAILABLE FOR EXPENSES NECESSARY TO ACCOMPLISH THE PURPOSE EXCEPT AS TO EXPENDITURES IN CONTRAVENTION OF SOME STATUTORY PROVISION OR FOR WHICH OTHER APPROPRIATION IS MORE SPECIFICALLY AVAILABLE. 17 COMP. GEN. 636; 29 ID. 419; 32 ID. 360. NO MORE SPECIFIC APPROPRIATIONS APPEARS AVAILABLE FOR THE EXPENDITURES WHICH WOULD HERE BE MADE. ALSO, WHILE THE ACQUISITION OF THE PROPERTY THROUGH BIDDING AT THE FORECLOSURE SALE OR BY REDEMPTION AFTER FORECLOSURE OF A PRIOR LIEN UNDER A POWER OF SALE WILL RESULT IN THE LANDS BEING ACQUIRED BY THE GOVERNMENT AND HENCE SOME QUESTION ARISES AS TO WHETHER SUCH ACQUISITIONS WOULD NOT CONTRAVENE SECTION 3736 OF THE REVISED STATUTES, 41 U.S.C. 14, WHICH FORBIDS THE PURCHASE OF LAND ON ACCOUNT OF THE UNITED STATES EXCEPT UNDER A LAW AUTHORIZING SUCH A PURCHASE, THAT SECTION HAS BEEN HELD NOT TO PREVENT THE ACQUISITION OF LANDS OR INTERESTS IN LANDS WHERE ACQUIRED AS SECURITY FOR A DEBT HELD BY THE GOVERNMENT OR THE USUAL MEANS OF EFFECTING COLLECTION BY RESORT TO SECURITY. NEILSON V. LAGOW, 12 HOW. 98, 35 OP. ATTY. GEN. 474. ALSO, IT IS UNDERSTOOD THAT JUNIOR LIENHOLDERS GENERALLY BID OR HAVE THE RIGHT TO BID AT FORECLOSURE SALES OF PRIOR MORTGAGEES AND, WHERE PRIVILEGED TO REDEEM UNDER STATE LAW AFTER A PRIOR LIENHOLDER FORECLOSES UNDER A POWER OF SALE, OFTEN DO SO AND THAT THEREFORE SUCH ACTIONS PROPERLY MAY BE REGARDED AS A MEANS OF EFFECTING COLLECTIONS THROUGH SUCH SECURITY.

ACCORDINGLY, IN VIEW OF THE BROAD AUTHORITY VESTED IN THE SECRETARY OF AGRICULTURE TO PERFORM SUCH ACTS AS HE MAY DEEM PROPER TO CARRY OUT THE WATER FACILITIES ACT AND SINCE APPROPRIATED FUNDS APPEAR TO BE AVAILABLE FOR CARRYING OUT SUCH ACT, THIS OFFICE PERCEIVES NO LEGAL OBJECTION TO HIS BIDDING AT A PRIOR LIENHOLDER'S FORECLOSURES UNDER POWER OF SALE, TO PROTECT THE GOVERNMENT'S JUNIOR WATER FACILITIES LIEN PROVIDED HE DETERMINES SUCH ACTION IS PROPER TO CARRY OUT THE WATER FACILITIES ACT. THEREFORE, THE TWO QUESTIONS SET FORTH IN THE ACTING SECRETARY'S LETTER ARE ANSWERED IN THE AFFIRMATIVE.