B-108528 December 3, 1952

B-108528 December 3, 1952

Mr. Holvins L. Thompson c/o John T. Laycock, Attorney at law 610 Raymond Building 253 North Third Baton Rouge 1, Louisiana

Dear Mr. Thompson:

Reference is made to letter dated November 3, 1952, written on your behalf by Mr. John T. Laycock, Attorney at Law, relative to your indebtedness to the United States in the amount of $1,754.09, plus interest, on account of your default on loan No. LHG-1073-LA-8 held by the Reconstruction Finance Corporation, New Orleans, Louisiana. The amount of the indebtedness represents that sum required to be paid by the Government to the landing agency pursuant to its guarantee under the provisions of Title III of the Serviceman's readjustment Act of 1944, as amended, 38 U.S.C. 694, upon the default in the payments by one Chester Price whom you obtained to purchase the premises and to resume the obligations of the loan.

In the letter of Novenber 3, 1952, Mr. Laycock quotes from a letter from attorneys in Alexandria, Louisiana, who were employed to examine the regularity and validity of the foreclosure proceedings. said letter states the well-established rule of law, involving the transfer of interests in mortgaged property, that an extension of time entered into between the mortgages and the martgagor's grantee who has assumed the mortgage will discharge the mortgagor where he had not assented to such an extension and where the mortgages had notice of the conveyance from the mortgagor to the grantee and the assumption of the mortgage. Certain decisions of the Louisiana court were cited by Mr. Laycock in support of this rule.

This rule rests upon the conclusive presumption of injury to the mortgager as a surety for the payment of the mortgaged debt, since the protection of the grantee under his agreement with the mortgagee would preclude the mortgagor from paying the deby at its maturity and enforce his right of subrogation. This extension of time, however, refers only to an extension of the maturity date of the debt and a mere extension of the date of an installment payment does not discharge the mortgagor of his liability. See in this connection the discussion contained in 59. C.J.S., Morggages, Section 401 b. However, be that as it may, the record before this Office fails to show that any extension of time was granted to the veteran, Chester Price, who assumed the obligation of the mortgage, but rather the payments were made under the load agreement from April 1, 1947 through February 1, 1948, after which the default occurred resutling in the foreclosure suit. It must be concluded therefore that no extension was granted, and therefore there is for application the rule that the conveyance by a mortgagor of mortgaged property does not of itself exonerate him from personal liability for the debt. this is true although the grantee personally assumes and agrees to pay the mortgage debt and there is no novation in such case unless the mortgagee releases the original mortgagor and extinguishes the old debt. See 37 Am.Jur., Mortgages, Section 991.

The letter of November 3, 1952, also states that there should be considered the equities of the matter in that no effort was made to advise you of the foreclosure proceedings in order to afford you of the pooprtunity to protect your rights. You are advised that the matter of the equities in the case was before the Veterans Administration at the time of your request for waiver of the indebtedness by that agency, and you were advised in Office letter to you of October 6, 1952, that a decision was rendered to the effect that no amount of the indebtedness could be waived.

In view of the above, it must be concluded that a proper legal basis exists for hokding you responsible for the repayment of this indebtedness in the proncipal sum of $1,754.09, plus interest. Accordingly, you are requested to remi this amount or make arrangement for its payment with this Office within 30 days of the receipt of this letter, otherwise, more firmal collection proceedings will be taken against you.

Very truly yours,

Lindsay G. Warren Comptroller General of the United States