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UNITED STATES v. MERRICK SPONSOR CORP.

December 20, 1968

UNITED STATES of America, Plaintiff,
v.
MERRICK SPONSOR CORP. et al., Defendants



The opinion of the court was delivered by: TRAVIA

MEMORANDUM AND ORDER

 TRAVIA, District Judge.

 MERRICK SPONSOR CORP. (MERRICK), the mortgagor of certain premises located in New York, New York, defaulted on its note and mortgage, which mortgage was insured by the Federal Housing Commissioner. The mortgagee assigned its rights in the mortgage and note to the Federal Housing Commissioner, and the UNITED STATES brought a foreclosure action. A default judgment was entered which provided that

 
if the proceeds of such sale be insufficient to pay the amount due to plaintiff with interest and costs * * *, the Master shall specify the amount of such deficiency in his report of sale, and the plaintiff recover of the defendant MERRICK SPONSOR CORP. the whole deficiency, or so much thereof as the Court may determine is just and equitable of the residue of the mortgage debt remaining after a sale of the mortgaged premises and the application of the proceeds thereof, provided a motion for a deficiency judgment shall be made * * *.

 The property was sold at public auction to the Secretary of Housing and Urban Development, and the Master's deed to the premises was delivered to the purchaser on July 31, 1967. By a notice of motion filed in this Court on December 11, 1967, plaintiff applied for an order confirming the Master's report of sale and granting leave to plaintiff to enter a deficiency judgment against MERRICK. The motion was granted by default, and a judgment in the amount of $1,202,694.48 was entered on January 8, 1968.

 More than ten months later, by a notice of motion filed October 25, 1968, returnable October 30, 1968, MERRICK moved for an order vacating both the deficiency judgment and a subpoena served thereunder, arguing that the deed of conveyance was delivered to the purchaser on July 31, 1967, and that more than 90 days later, to wit, on December 11, 1967, plaintiff moved to enter the deficiency judgment, in violation of Section 1371 of the Real Property Actions and Proceedings Law of the State of New York, McKinney's Consol.Laws, c. 81, which provides in part:

 
2. Simultaneously with the making of a motion for an order confirming the sale, provided such motion is made within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser, the party to whom such residue shall be owing may make a motion in the action for leave to enter a deficiency judgment * * *.
 
3. If no motion for a deficiency judgment shall be made as herein prescribed the proceeds of the sale regardless of amount shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist.

 I.

 The government's first argument, amply supported by authority, is that "federal law applies in an action by the United States to foreclose a mortgage insured by and assigned to the FHA", United States v. Walker Park Realty, Inc., 383 F.2d 732, 733 (2d Cir. 1967); accord, United States v. View Crest Garden Apts., Inc., 268 F.2d 380 (9th Cir. 1959), cert. denied 361 U.S. 884, 80 S. Ct. 156, 4 L. Ed. 2d 120; United States v. Sylacauga Properties, Inc., 323 F.2d 487 (5th Cir. 1963). Public policy would seem to require this, for when the United States, pursuant to constitutional acts of Congress, enters into large transactions requiring uniform administration, questions of rights and liabilities must be uniformly determined by federal law, and the rule of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), does not apply to actions to enforce rights of the United States acting under its constitutional powers. United States v. Standard Oil Co., 332 U.S. 301, 67 S. Ct. 1604, 91 L. Ed. 2067 (1947); Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S. Ct. 573, 87 L. Ed. 838 (1943); N.Y., N.H. & H.R. Co. v. Reconstruction Finance Corp., 180 F.2d 241 (2d Cir. 1950); United States v. McCabe Co., 261 F.2d 539 (8th Cir. 1958). These principles certainly would apply to the Federal Housing Administration, an agency governed by the National Housing Act, that is national in scope, and deals in government money and credit. United States v. Helz, 314 F.2d 301 (6th Cir. 1963); United States v. View Crest Garden Apts., Inc., 268 F.2d 380 (9th Cir. 1959), cert. denied 361 U.S. 884, 80 S. Ct. 156, 4 L. Ed. 2d 120.

 There is no doubt but that a deficiency judgment is a remedy afforded to the United States to recover any portion of its debt that was not satisfied by the proceeds from a foreclosure sale. See United States v. Walker Park Realty, Inc., supra; United States v. Flower Manor, Inc., 344 F.2d 958 (3d Cir. 1965); Herlong-Sierra Homes Inc. v. United States, 358 F.2d 300 (9th Cir. 1966), cert. denied 385 U.S. 919, 87 S. Ct. 229, 17 L. Ed. 2d 143; United States v. Woodland Terrace, Inc., 293 F.2d 505 (4th Cir. 1961), cert. denied 368 U.S. 940, 82 S. Ct. 381, 7 L. Ed. 2d 338, all of which cases involved deficiency judgments following foreclosure of FHA mortgages. It has, therefore, often been held that when the FHA seeks to foreclose a mortgage, the various aspects of the procedure should be governed by federal, and not state, law. United States v. Flower Manor, Inc., supra (the fact that the order fixing hearing as to value of property said "'in accordance with the Deficiency Judgment Act of Pennsylvania'" did not make the order subject to Pennsylvania statute of limitations); United States v. View Crest Garden Apts., Inc., supra (appointment of a receiver); United States v. Walker Park Realty, Inc., supra (entry of a deficiency judgment where original judgment of foreclosure and sale did not expressly provide for subsequent entry of a deficiency judgment).

 The Federal Rules authorize a deficiency judgment to be obtained in a foreclosure action, Fed.R.Civ.Proc. 2, 2 Moore's Federal Practice, ┬ž 2.06[8], such judgment was authorized in the order of foreclosure and sale in the instant case, and no provision of the applicable federal foreclosure law mitigates against the granting of such judgment.

 II.

 Nevertheless, defendant argues that state law applies, for Rule 69 of the Federal Rules of Civil Procedure is included in the body of ...


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