US SUPREME COURT DECISIONS

Under Title III of the Servicemen's Readjustment Act of 1944, as amended in 1945, the Veterans' Administration guaranteed up to $4,000 or 4/13 of the indebtedness outstanding at any time on a loan of $13,000 made by a lending institution to a World War II veteran and secured by a mortgage on a home in Pennsylvania purchased by him with the proceeds. The veteran soon defaulted, and the mortgagee notified the Administration, obtained a Pennsylvania judgment foreclosing the mortgage, and bought the property at a sheriff's sale for $250. The Veterans' Administration paid the entire guaranty of $4,000 and sued in a Federal District Court to recover that amount from the veteran as indemnity. The District Court held that the veteran was not liable on the ground that, under Pennsylvania law, the Administration had been released from liability as guarantor by the mortgagee's purchase of the property at the sheriff's sale, followed by its failure to petition for a judicial determination of its "fair market value," pursuant to a Pennsylvania Deficiency Judgment Act. The Court of Appeals affirmed.

Held: the judgment is reversed, since the courts below erred in applying a state statute which was in conflict with a valid Regulation of the Veterans' Administration issued pursuant to the Act and agreed to by the veteran when the loan was made. Pp. 367 U. S. 375-388.

(a) Application of state law to determine the Administration's obligation to the mortgagee was inconsistent with the applicable Regulations prescribed by the Administration. Pp. 367 U. S. 377-381.

(b) Section 504 of the Act authorized the Veterans' Administrator to displace state law by establishing the exclusive procedures prescribed by the Regulations and followed in this case. Pp. 367 U. S. 381-385.

(c) The Act affords an independent right of indemnity to the Administration. Pp. 367 U. S. 386-387.

(d) Under the applicable Regulations, the veteran cannot escape liability for indemnity on the theory that there was no debt due from him at the time of payment on the guaranty. Pp. 367 U. S. 387-388.

276 F.2d 792 reversed and case remanded. chanrobles.com-red

Page 367 U. S. 375