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NEW YORK GUARDIAN MORTGAGEE CORP. v. CLELAND

UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK


May 8, 1979

The NEW YORK GUARDIAN MORTGAGEE CORP., Plaintiff,
v.
Max CLELAND, Administrator of the Veterans Administration, and the Government National Mortgage Association, Defendants

The opinion of the court was delivered by: LASKER

ON AWARD OF INTEREST

On May 8, 1979 this Court concluded by summary judgment (1) that the Veterans Administration had not discharged its obligations as guarantor of the home mortgage loans involved in this suit, either by "set-off" or by settlement of fraud claims the government asserted against the party who through mesne assignments assigned the loans to the New York Guardian Mortgagee Corp. (Guardian); and (2) that Guardian was the proper party to assert the claims against the undischarged guaranty obligations, even though the assignments by which Guardian had asserted its entitlement to the claims did not conform to the Assignment of Claims Act, 31 U.S.C. § 203.

Guardian has submitted for the Court's approval and signature a proposed judgment and certification pursuant to Rule 54(b), Fed.R.Civ.P., awarding it $ 96,779.37 plus interest on eight of the claims it sued upon, and the VA has submitted a counter-proposed judgment which, however, makes no award of interest. The government claims that the general rule that the doctrine of sovereign immunity bars an award of interest against the United States unless it is expressly authorized by statute or contract, E.g., United States v. Alcea Band of Tillamooks, 341 U.S. 48, 49, 71 S. Ct. 552, 95 L. Ed. 738 (1951), bars an award of interest against the VA in this case, too.

 The government's position is mistaken.

 First, Congress in 38 U.S.C. § 1820(a)(1) (1976), as amended by the Veterans Disability Compensation and Survivor Benefits Act of 1977, Pub.L.No. 95-117, § 403, 91 Stat. 1066, has empowered the Administrator to "sue and be sued" in his official capacity with respect to matters arising, Inter alia, by reason of his guaranteeing home mortgage loans like those involved here, pursuant to 38 U.S.C. § 1801 Et seq.

 Second, there is a well defined exception to the general rule, that when the government embarks on business ventures such as issuing insurance policies or, presumably, guaranteeing home mortgage loans with Congressional authorization to "sue and be sued" in relation to such business, it thereby accepts equal footing with private parties as to the usual incidents of suit, including the award of interest on sums recovered. E.g, National Home for Disabled Volunteer Soldiers v. Parrish, 229 U.S. 494, 496-97, 33 S. Ct. 944, 57 L. Ed. 1296 (1913) (interest allowed on sums found due contractor with the Home, an agency which later was merged into the VA, see 38 U.S.C.A., History of Legislation, 28-29); Standard Oil Co. v. United States, 267 U.S. 76, 79, 45 S. Ct. 211, 69 L. Ed. 519 (1925) (war risk insurance policies); also see Reconstruction Finance Corp. v. J. G. Menihan Corp., 312 U.S. 81, 85-86, 61 S. Ct. 485, 85 L. Ed. 595 (1941) (allowance of costs). In Bituminous Casualty Corp. v. Lynn, 503 F.2d 636, 643-46 (6th Cir. 1974) the court awarded pre- and post-judgment interest even in the absence of "broad "sue and be sued' powers," (See Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 388-89, 59 S. Ct. 516, 83 L. Ed. 784 (1941) (absence of "sue and be sued" clause not decisive)), observing that the Supreme Court had indirectly approved the continued vitality of the above cited cases in NLRB v. Nash-Finch Co., 404 U.S. 138, 143 n.2, 92 S. Ct. 373, 30 L. Ed. 2d 328 (1971).

 Finally, the cases the government has cited are inapposite. In two, May Department Stores Co. v. Smith, 572 F.2d 1275 (8th Cir.), Cert. denied, 439 U.S. 837, 99 S. Ct. 122, 58 L. Ed. 2d 134 (1978), and DePaul Community Health Center v. Campbell, 445 F. Supp. 484 (E.D.Mo.1977), the courts held that the Administrator was immune to garnishment procedures to effectuate judgments against VA employees in state courts. In May Department Stores Co. v. Smith, Supra, 572 F.2d at 1277-78, the court included in its discussion of the legislative history of the 1977 amendment to 38 U.S.C. § 1820(a)(1) (not applicable to that case) language reaffirming Congress' intent that the "waiver of sovereign immunity in section 1820 extends only to home-loan guaranty matters." S.Rep.No. 412, 95th Cong., 1st Sess., 22-23 reprinted (1977) U.S. Code Cong. & Admin. News pp. 2636, 2652-53.

 Neither the garnishment cases the government has cited nor the amendment to 38 U.S.C. § 1820(a)(1) suggests that Congress or the courts have limited the extent of the waiver of sovereign immunity in suits relating to home-loan guarantees to exclude an award of interest where appropriate. Indeed, Congress' continued failure to prohibit the award of interest in such suits suggests at least Congressional acquiescence in such awards.

 A third case the government has cited, Fischer v. Department of Transportation, 430 F. Supp. 1349 (D.Mass.1977), Mod. on other grounds Sub nom. Fischer v. Adams, 572 F.2d 406 (1st Cir. 1978), involved a claim for prejudgment interest on a back-pay award in a Title VII action. In this case, the Administrator was of course not sued in a matter related to home-loan guarantees.

 For the above reasons the doctrine of sovereign immunity does not bar the award of interest on sums recoverable from the Administrator on home-loan mortgages the VA has guaranteed and accordingly the judgment will include such interest.

19790508

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