B-130491, APR. 9, 1957

B-130491: Apr 9, 1957

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SINCE THE RECEIPT OF THE LETTER WE HAVE RECEIVED FROM THE VETERANS ADMINISTRATION ITS ENTIRE FILE ON ITS CLAIM FOR $419.20 AGAINST YOU. THIS LETTER WAS ADDRESSED TO YOU AT NO. 1804 S. WAS NOT RETURNED. THERE IS NO RECORD THAT YOU. THIS WAS A GUARANTY OF A SECONDARY LOAN PURSUANT TO THE AFORESAID STATUTE. 700 WAS MADE BY THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND GUARANTEED BY THE FEDERAL HOUSING ADMINISTRATION. A. SIMMONS AND THE SAME WAS LATER CONVEYED TO HELEN R. SIMMONS WHO WAS UNABLE TO MEET THE MONTHLY INSTALLMENT PAYMENTS. THE PROPERTY WAS SOLD AT A TRUSTEE'S SALE ON DECEMBER 7. 591.79 WAS PAID TO PRUDENTIAL INSURANCE COMPANY OF AMERICA BY THE VETERANS ADMINISTRATION PURSUANT TO ITS GUARANTY OF THE SECONDARY LOAN IN THE PRINCIPAL AMOUNT OF $2.

B-130491, APR. 9, 1957

TO MAJOR JOHN F. BROWN, USAF:

LETTER OF DECEMBER 6, 1956, FROM HAYNSWORTH, PERRY, BRYANT, MARION AND JOHNSTONE, TO THE CLAIMS DIVISION OF OUR OFFICE, IN YOUR BEHALF, CONCERNS A DEFAULT ON GUARANTEED LOAN NO. LHG-78638, CALIF SF. SINCE THE RECEIPT OF THE LETTER WE HAVE RECEIVED FROM THE VETERANS ADMINISTRATION ITS ENTIRE FILE ON ITS CLAIM FOR $419.20 AGAINST YOU, ARISING OUT OF SAID DEFAULT.

ON THE QUESTION OF WHETHER YOU RECEIVED PROPER LEGAL NOTICE OF THE FORECLOSURE SALE, THE RECORD SHOWS THAT THE VETERANS ADMINISTRATION DULY MAILED A LETTER TO YOU ON APRIL 14, 1954, ADVISING YOU OF THE DEFAULT AND THE DANGER OF FORECLOSURE. THIS LETTER WAS ADDRESSED TO YOU AT NO. 1804 S. TUXEDO AVENUE" STOCKTON, CALIFORNIA, AND WAS NOT RETURNED, UNDELIVERED. THE LAW OF CALIFORNIA, SPECIFICALLY SECTION 2924B OF THE CIVIL CODE OF CALIFORNIA (1949), PERMITS ANY PERSON TO RECORD A REQUEST FOR NOTICES OF DEFAULT AND SALE. THERE IS NO RECORD THAT YOU, UPON SALE OF THE PROPERTY IN 1951, AVAILED YOURSELF OF THE PROVISIONS OF THIS SECTION OF THE LAW.

YOUR PRESENT INDEBTEDNESS ARISES OUT OF THE NECESSARY PAYMENTS MADE BY THE VETERANS ADMINISTRATION PURSUANT TO ITS LOAN GUARANTY ON LOAN NO. LHG 78638 CLAIF SF PURSUANT TO SECTION 505 OF THE SERVICEMEN'S READJUSTMENT ACT (58 STAT. 293). THIS WAS A GUARANTY OF A SECONDARY LOAN PURSUANT TO THE AFORESAID STATUTE. THE PRIMARY LOAN IN THE PRINCIPAL AMOUNT OF $7,700 WAS MADE BY THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND GUARANTEED BY THE FEDERAL HOUSING ADMINISTRATION. YOU, SUBSEQUENT TO THE AFORESAID LOANS, SOLD AND CONVEYED THIS PROPERTY TO ONE E. A. SIMMONS AND THE SAME WAS LATER CONVEYED TO HELEN R. SIMMONS WHO WAS UNABLE TO MEET THE MONTHLY INSTALLMENT PAYMENTS. AS A RESULT OF THIS DEFAULT, THE PROPERTY WAS SOLD AT A TRUSTEE'S SALE ON DECEMBER 7, 1954, UNDER THE FEDERAL HOUSING ADMINISTRATION'S PRIMARY LOAN AND A CLAIM OF $1,591.79 WAS PAID TO PRUDENTIAL INSURANCE COMPANY OF AMERICA BY THE VETERANS ADMINISTRATION PURSUANT TO ITS GUARANTY OF THE SECONDARY LOAN IN THE PRINCIPAL AMOUNT OF $2,000. UPON PAYMENT OF SAID SUM OF $1,591.79, THE VETERANS ADMINISTRATION BECAME SUBROGATED TO THE RIGHTS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA UNDER SECTION 506 OF THE VETERANS READJUSTMENT ACT (U.S.C. TITLE 38 SEC. 694G).

YOUR ATTENTION IS DIRECTED TO SECTION 580D OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. THAT SECTION MERELY BARS A DEFICIENCY JUDGMENT UPON A NOTE SECURED BY THE DEED OF TRUST WHERE THE REAL PROPERTY IS SOLD UNDER A POWER OF SALE IN SUCH DEED OR TRUST. IT DOES NOT HAVE THE EFFECT OF BARRING A JUDGMENT ON A NOTE NOT SECURED BY THE PARTICULAR DEED OF TRUST UNDER WHICH THE SALE TOOK PLACE. HERE, THE SALE TOOK PLACE PURSUANT TO THE DEFAULT UNDER THE PRIMARY LOAN IN THE PRINCIPAL AMOUNT OF $7,700.

THE LETTER OF DECEMBER 6, RAISES THE QUESTION AS TO WHETHER PROPER STEPS WERE TAKEN TO PROTECT YOUR RIGHTS AS A SERVICEMAN UNDER THE SOLDIERS AND SAILORS CIVIL RELIEF ACT. AS YOU KNOW, YOU SOLD AND CONVEYED THIS PROPERTY IN 1951. AN EXAMINATION OF SECTION 532 OF TITLE 50 APPENDIX OF THE U.S.C. ANNOTATED, THE PURPOSE OF WHICH IS TO PROTECT THE INTERESTS OF PERSONS IN MILITARY SERVICE, REVEALS THAT SUBSECTION 1 THEREOF LIMITS THE APPLICATION OF SECTION 532 TO OBLIGATIONS SECURED BY PROPERTY OWNED BY THE PERSON IN MILITARY SERVICE. CLEARLY, THE BENEFITS OF SECTION 532 DO NOT ACCRUE TO YOU IN VIEW OF YOUR FORMER CONVEYANCE OF THIS PROPERTY WHICH WAS THE SUBJECT OF THE FORECLOSURE ACTION.

WE HAVE CAREFULLY EXAMINED THE FILE OF THE VETERANS ADMINISTRATION IN THIS CASE AND IT IS OUR OPINION THAT ITS POSITION IN THIS MATTER IS AMPLY SUPPORTED BY THE LAW AND THE FACTS. THE PROPERTY WAS BID IN BY THE VETERANS ADMINISTRATION AT THE TRUSTEE'S SALE UNDER THE FEDERAL HOUSING ADMINISTRATION'S PRIMARY LOAN FOR $7,077.41 MAKING THE TOTAL COST OF ACQUIRING THE PROPERTY BY THE VETERANS ADMINISTRATION $8,669.20. THIS FIGURE IS ARRIVED AT BY ADDING $7,077.41 AND $1,591.79, THE CLAIM PAID BY THE VETERANS ADMINISTRATION ON ITS GUARANTEE OF THE SECONDARY LOAN. $8,250 WAS ALLOWED AS A CREDIT TO THE TOTAL INDEBTEDNESS BASED ON AN INDEPENDENT APPRAISAL AT THE TIME. YOU ARE FURTHER ADVISED THAT YOUR INDEBTEDNESS DID NOT ARISE SOLELY BY VIRTUE OF THE SALE OF THE PROPERTY INVOLVED, NOR IS THE GOVERNMENT'S CLAIM NECESSARILY FOUNDED IN THE JUDGMENT GROWING OUT OF THE FORECLOSURE. IN SECURING THE GUARANTEE OF THE LOAN, YOU EXECUTED A VETERANS ADMINISTRATION LOAN FORM AND THEREBY AGREED THAT THE REGULATIONS ISSUE UNDER THE SERVICEMAN'S READJUSTMENT ACT OF 1944, AS AMENDED, WOULD GOVERN THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO THE LOAN. THE APPLICABLE VETERANS ADMINISTRATION REGULATIONS (TITLE 38 36.4323 (E), CODE OF FEDERAL REGULATIONS), PROVIDED THAT:

"ANY AMOUNTS PAID BY THE ADMINISTRATOR ON ACCOUNT OF THE LIABILITIES OF ANY VETERAN GUARANTEED OR INSURED UNDER THE PROVISIONS OF THE ACT SHALL CONSTITUTE A DEBT OWING TO THE UNITED STATES BY SUCH VETERAN.'

IT IS THUS CLEAR THAT THE CLAIM AGAINST YOU REPRESENTS AN INDEPENDENT DEBT WHICH IS DUE AND OWING TO THE UNITED STATES UNDER THE PROVISIONS OF THE STATUTE AND REGULATIONS. SEE UNITED STATES V. HENDERSON, 121 F.SUPP. 343.

THE AGREEMENT ENTERED INTO BETWEEN YOU AND THE VETERANS ADMINISTRATION IS IN EFFECT ONE TO INDEMNIFY THE UNITED STATES AGAINST LOSS. IT IS UPON THIS AGREEMENT THAT THE GOVERNMENT BASES ITS CLAIM RATHER THAN UPON ITS RIGHT OF SUBROGATION TO THE LENDER'S RIGHTS. THE RULE IS FIRMLY ESTABLISHED THAT WHERE THE UNITED STATES ACTS WITHIN THE PERMITTED SCOPE OF ITS GOVERNMENTAL AUTHORITY, THE QUESTION OF THE CREATION OR NEGATION OF AN EXPRESS OR IMPLIED LIABILITY OF AN INDIVIDUAL TO THE UNITED STATES IS TO BE DETERMINED BY FEDERAL LAW. FURTHER, IN THE ABSENCE OF A FEDERAL STATUTE TO THE CONTRARY, THE RIGHT OF THE UNITED STATES TO ENFORCE IN A FEDERAL COURT SUCH A LIABILITY MAY NOT BE DEFEATED OR LIMITED BY STATE LAW. SEE CLEAR FIELD TRUST CO. V. UNITED STATES, 318 U.S. 363; UNITED STATES V. STANDARD OIL CO., 332 U.S. 301; UNITED STATES V. INDEPENDENT SCHOOL DISTRICT NO. 1 OF OKMULGEE COUNTRY, OKLAHOMA, 209, F.2D 578.

IN VIEW OF THE FOREGOING, IT IS REQUESTED THAT YOU MAKE PROMPT PAYMENT OF YOUR INDEBTEDNESS, IN ORDER TO AVOID THE NECESSITY OF INSTITUTING FORMAL COLLECTION PROCEEDINGS.