United States v. Shimer (1961)
Citation: 367 U.S. 374 (1961) · Court: Supreme Court of the United States · Decided: 1961 · Author: Harlan, J. (Black, J., joined by Douglas, J., dissenting)
Case page. Legal information, not legal advice. Last verified: 2026-06-02.
Facts
A veteran obtained a home mortgage loan guaranteed by the Veterans’ Administration under the loan-guaranty program now codified at 38 U.S.C. ch. 37. The veteran defaulted; the lender foreclosed under Pennsylvania law and acquired the property at a sheriff’s sale for a nominal amount. The VA paid the lender the guaranteed portion of the loss and then sought indemnity from the veteran for the amount paid. Pennsylvania’s Deficiency Judgment Act would have required crediting the property’s fair market value against the debt — which, if applied, would have eliminated any deficiency and thus the veteran’s indemnity obligation. The issue was whether the VA’s federal regulatory scheme for fixing the guaranty and the veteran’s indemnity displaced the state deficiency statute.
Holding
The VA’s regulations — including the “upset price” valuation device by which the Administrator could fix a minimum value for the security and thereby protect the veteran — formed a comprehensive federal scheme intended as the exclusive source of the parties’ rights and obligations, and therefore superseded inconsistent state law, including Pennsylvania’s Deficiency Judgment Act. The veteran’s indemnity to the United States was governed by the federal regulations, not the state statute.
Reasoning
Congress authorized the Administrator to prescribe the terms of the guaranty and the incidents of default. The regulatory “upset price” mechanism already accounted for the fair-value concern that state deficiency statutes address, supplying the veteran equivalent protection within a uniform federal framework. Because the federal scheme was meant to “provide the whole and exclusive source of protection” and to displace inconsistent state law, applying the state deficiency act would frustrate the uniform federal program.
Practical impact
- Foundational preemption authority for the VA loan-guaranty program: VA’s servicing, valuation (today the net value computation under 38 U.S.C. § 3732(c)), and claim/indemnity regulations govern the government–holder–veteran relationship notwithstanding contrary state deficiency or valuation law (see anti-deficiency).
- For the veteran/owner, the practical stakes of the indemnity issue Shimer decided have shrunk: 38 U.S.C. § 3703(e) now eliminates veteran liability to the United States on most loans closed after 1989 absent fraud, misrepresentation, or bad faith. The preemption principle, however, endures and still controls how VA computes the guaranty and conveyance/no-bid outcomes.
- For an investor/operator, Shimer signals that where the United States is the foreclosing holder or assignee on a VA loan (e.g., after refunding), federal law — not state deficiency caps — frames the post-sale settlement.
Good-law status
Still good law. Not overruled; remains the leading authority on federal preemption within the VA loan-guaranty program. (Source: https://www.law.cornell.edu/supremecourt/text/367/374, Cornell LII, retrieved 2026-06-02. The supremecourt.gov U.S. Reports copy and Justia mirror returned HTTP 403 on direct fetch 2026-06-02; the LII text was the retrieved source.)