B-131150, JUN. 3, 1957

B-131150, JUN. 3, 1957

TO ZIMMERMAN AND KELLY:

YOUR LETTER OF FEBRUARY 25, 1957, CONCERNS THE INDEBTEDNESS TO THE UNITED STATES OF JOHN SCIALLA, IN THE AMOUNT OF $3,392.88, PLUS INTEREST, BY REASON OF HIS DEFAULT ON GUARANTY LOAN NO. LH6 290-73 CALIF-LA., WHICH WAS GUARANTEED BY THE VETERANS ADMINISTRATION UNDER THE PROVISIONS OF THE SERVICEMEN'S READJUSTMENT ACT OF 1944, AS AMENDED.

PURSUANT TO YOUR EARLIER REQUEST THE MATTER WAS SUBMITTED TO THE LOAN GUARANTY COMMITTEE ON WAIVERS AND COMPROMISES, VETERANS ADMINISTRATION, WASHINGTON, D.C., AND IT WAS DETERMINED THAT THERE IS NO LEGAL BASIS FOR A GENERAL WAIVER OF THE DEBT. YOU WERE SO ADVISED BY OUR LETTER OF FEBRUARY 17, 1957.

IN YOUR LETTER YOU SAY YOU ARE "PUZZLED ON TWO POINTS.' FIRST, YOU RAISE A QUESTION AS TO THE SPECIFIC BASIS USED BY THE COMMITTEE IN DENYING MR. SCIALLA'S PETITION, AND SAY THAT IT APPEARS ON GENERAL EQUITABLE PRINCIPLES HE WAS ENTITLED TO CONSIDERATION. YOU ALSO SAY THAT THE ADVERSE DECISION COULD WELL HAVE BEEN BASED UPON SOME MISCONCEPTION OF THE SITUATION WHICH YOU COULD HAVE CORRECTED HAD YOU BEEN ADVISED.

THE SECOND POINT YOU RAISE CONCERNS THE MODE AND MANNER SELECTED TO GIVE YOU NOTIFICATION OF THE COMMITTEE'S DECISION IN THE MATTER. YOU SAY THAT IT APPEARS THAT THE COMMITTEE HAS NOT ONLY COME TO A DECISION BUT THAT IT HAS CLOSED ITS FILES IN THE MATTER, THUS DENYING YOU AN OPPORTUNITY "TO URGE AGAIN THAT FACTORS HAVE BEEN OVERLOOKED OR DENIED PROPER WEIGHT.'

YOUR LETTER CONTINUES IN PART:

"INSOFAR AS THE MERITS OF THE MATTER ARE CONCERNED, WHILE WE HAVE ALWAYS RECOGNIZED THAT THE GOVERNMENT IS PROCEEDING IN ABSOLUTE GOOD FAITH, WE HAVE NEVER RECOGNIZED THAT THERE IS A LEGAL LIABILITY FOR THE AMOUNT OF CLAIM IN QUESTION. AT ALL TIMES INVOLVED, THE CODES OF CALIFORNIA HAVE PROVIDED THAT THERE SHALL BE NO DEFICIENCY AFTER THE FORECLOSURE OF A PURCHASE MONEY MORTGAGE OR TRUST DEED. IF THIS BECOMES A MATTER OF SUIT TO ENFORCE COLLECTION WE WOULD, OF COURSE, BE REQUIRED TO URGE LEGAL DEFENSES TO THE GOVERNMENT'S CLAIM.'

YOUR LETTER WAS REFERRED TO THE VETERANS ADMINISTRATION, AND CONCERNING THE FIRST POINT RAISED BY YOU, THE VETERANS ADMINISTRATION BY LETTER DATED MAY 9, 1957, ADVISED AS FOLLOWS:

"UPON THE VETERAN DEBTOR'S "REQUEST FOR WAIVER OR COMPROMISE," THE LOAN GUARANTY COMMITTEE ON WAIVERS AND COMPROMISES REFUSED TO GRANT WAIVER AND RECOMMENDED COLLECTION AS OUTLINED IN PARAGRAPH 3 (H) OF VA TECHNICAL BULLETIN, TB 4A-60; STATING THAT THIS DECISION DOES NOT PRECLUDE CONSIDERATION OF ANY OFFER OF SETTLEMENT WHICH THE OBLIGOR MAY CARE TO SUBMIT. IN REFUSING WAIVER, THE COMMITTEE DECIDED THERE IS NO LEGAL BASIS FOR A GENERAL WAIVER IN VIEW OF ADMINISTRATOR'S DECISION OF NOVEMBER 7, 1951, A.D. 887. CERTIFICATION THEREOF WAS MADE BY THE CENTRAL OFFICE LOAN GUARANTY COMMITTEE ON WAIVERS AND COMPROMISES, AND SIGNED BY THE CHAIRMAN ON JANUARY 9, 1957.'

AS TO YOUR SECOND POINT, THE VETERANS ADMINISTRATION INFORMS US THAT THE LOAN GUARANTY COMMITTEE ON WAIVERS AND COMPROMISES DOES NOT OPERATE AS A HEARING BOARD. IT FURTHER ADVISES THAT THE REPRESENTATIONS AND RECOMMENDATIONS THERETOFORE MADE BY YOU WERE CONSIDERED BY THE COMMITTEE.

CONCERNING THE MERITS OF THE MATTER, WHILE CALIFORNIA LAW PROVIDES THAT THERE SHALL BE NO DEFICIENCY JUDGMENT AFTER FORECLOSURE OF A PURCHASE MONEY MORTGAGE OR DEED OF TRUST OR AFTER SALE OF THE REAL PROPERTY UNDER POWER OF SALE (CALIFORNIA CODE OF CIVIL PROCEDURE SEC. 580B. AND 580D.), MR. SCIALLA'S INDEBTEDNESS IN THE INSTANT CASE IS NOT FOUNDED UPON A PAYMENT MADE BY THE VETERANS ADMINISTRATION AS A RESULT OF MR. SCIALLA'S DEFAULT ON THE LOAN. HENCE, THE VETERANS ADMINISTRATION'S CLAIM IS BASED UPON THE ADMINISTRATOR'S COMMON LAW RIGHT OF INDEMNITY AS RESTATED IN THE APPLICABLE VETERANS ADMINISTRATION REGULATION (38 C.F.R. 36.4323 (E) (, ISSUED PURSUANT TO SECTION 504 OF THE SERVICEMEN'S READJUSTMENT ACT OF 1944, AS AMENDED, 38 U.S.C. 694D, WHICH PROVIDES:

"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.'

THE CITED ACT AND REGULATION FORM AN ESSENTIAL PART OF THE CONTRACT BETWEEN THE VETERAN AND THE VETERANS ADMINISTRATION WHEN THE LOAN IS GUARANTEED. IT IS THUS CLEAR THAT THE CLAIM AGAINST MR. SCIALLA REPRESENTS A DEBT WHICH IS DUE AND OWING THE UNITED STATES UNDER THE ABOVE CITED STATUTE AND REGULATIONS AND THE CALIFORNIA LAW AGAINST DEFICIENCY JUDGMENTS WOULD NOT BE FOR APPLICATION TO THE GOVERNMENT'S CLAIM.

AS INDICATED ABOVE, THE DECISION OF THE LOAN GUARANTY COMMITTEE ON WAIVERS AND COMPROMISES DOES NOT PRECLUDE A COMPROMISE OF THE INDEBTEDNESS SHOULD MR. SCIALLA SEE FIT TO SUBMIT AN OFFER. SUCH AN OFFER, IF ACCEPTED, WOULD OPERATE IN FULL SATISFACTION OF THE DEBT. WE REQUEST, THEREFORE, THAT YOU ADVISE US WHETHER THE DEBTOR DESIRES TO MAKE SUCH AN OFFER AND THE AMOUNT HE IS WILLING TO PAY IN A LUMP SUM OR ON THE BASIS OF INSTALLMENTS. UPON RECEIPT OF SUCH AN OFFER, WE SHALL REFER THE MATTER TO THE VETERANS ADMINISTRATION FOR CONSIDERATION.

INTEREST AT THE RATE OF FOUR PERCENT CONTINUES TO ACCRUE ON THE INDEBTEDNESS, AND ACCORDINGLY ARRANGEMENTS FOR SETTLEMENT SHOULD BE MADE WITHOUT FURTHER DELAY.