A-10512, A-56821, SEPTEMBER 28, 1936, 16 COMP. GEN. 316

A-10512,A-56821: Sep 28, 1936

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YOUR ATTENTION IS AGAIN INVITED TO THE SECOND PARAGRAPH OF THE TREASURY'S LETTER. THOSE HAVING PAPERS ATTACHED TO THEM WHEN THEY ARE RECEIVED BY THE TREASURER FOR PAYMENT. IT HAS NOT BEEN CONSIDERED FEASIBLE FOR THE TREASURER TO UNDERTAKE TO EXAMINE ENDORSEMENTS OF CHECKS GENERALLY BECAUSE OF THE GREAT EXPENSE INVOLVED WHICH IS FELT TO BE ENTIRELY OUT OF PROPORTION TO THE AMOUNT OF THE LOSSES TO THE GOVERNMENT UNDER THE PRESENT PROCEDURE. THE TREASURER'S PRACTICE IN THIS RESPECT WAS REFERRED TO IN YOUR LETTER OF SEPTEMBER 19. THERE IS A LIMITED NUMBER OF ACCOUNTS IN WHICH THE TREASURER EXAMINES ENDORSEMENTS FOR SPECIAL REASONS BUT THE NUMBER OF CHECKS SO EXAMINED IS COMPARATIVELY SMALL. WHICH ARE LISTED IN THE CLOSING PARAGRAPHS OF YOUR LAST LETTER.

A-10512, A-56821, SEPTEMBER 28, 1936, 16 COMP. GEN. 316

CHECKS - DECEASED OR INCOMPETENT PAYEES - PROCEDURE FOR PAYMENT CHECKS, NOT NEGOTIATED BEFORE THE DEATH OR INCOMPETENCY OF THE PAYEES, COMING TO THE ATTENTION OF THE TREASURER OF THE UNITED STATES FOR EXAMINATION OF ENDORSEMENTS, MAY NOT BE PAID BY HIM WITHOUT REFERENCE TO THE GENERAL ACCOUNTING OFFICE FOR CONSIDERATION UNDER SECTION 305 OF THE ACT OF JUNE 10, 1921, 42 STAT. 24.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, SEPTEMBER 28, 1936:

THERE HAS BEEN CONSIDERED THE MATTER PRESENTED IN YOUR LETTER OF AUGUST 6, 1936, AS FOLLOWS:

WITH FURTHER REFERENCE TO YOUR LETTERS OF AUGUST 29, 1934, AND JUNE 8, 1935 (A-10512 AND A-56821), AND TO THE TREASURY'S LETTER DATED APRIL 8, 1935, YOUR ATTENTION IS AGAIN INVITED TO THE SECOND PARAGRAPH OF THE TREASURY'S LETTER, THE FIRST SENTENCE OF WHICH DESCRIBES THE CLASSES OF CHECKS OF WHICH THE ENDORSEMENTS COME TO THE ATTENTION OF THE TREASURER, AS, FIRST, THOSE CHECKS SPECIFICALLY INQUIRED ABOUT IN LETTERS, AND, SECOND, THOSE HAVING PAPERS ATTACHED TO THEM WHEN THEY ARE RECEIVED BY THE TREASURER FOR PAYMENT. IT HAS NOT BEEN CONSIDERED FEASIBLE FOR THE TREASURER TO UNDERTAKE TO EXAMINE ENDORSEMENTS OF CHECKS GENERALLY BECAUSE OF THE GREAT EXPENSE INVOLVED WHICH IS FELT TO BE ENTIRELY OUT OF PROPORTION TO THE AMOUNT OF THE LOSSES TO THE GOVERNMENT UNDER THE PRESENT PROCEDURE. THE TREASURER'S PRACTICE IN THIS RESPECT WAS REFERRED TO IN YOUR LETTER OF SEPTEMBER 19, 1928, COPY ATTACHED. THERE IS A LIMITED NUMBER OF ACCOUNTS IN WHICH THE TREASURER EXAMINES ENDORSEMENTS FOR SPECIAL REASONS BUT THE NUMBER OF CHECKS SO EXAMINED IS COMPARATIVELY SMALL. HOWEVER, THE TREASURY, IN DEPARTMENT CIRCULAR 176, REQUIRES BANKS PRESENTING CHECKS ON THE TREASURER TO FEDERAL RESERVE BANKS AND TO MEMBER BANK DEPOSITARIES, TO GUARANTEE ALL PRIOR ENDORSEMENTS THEREON.

AFTER CONSIDERATION OF THE CASES INVOLVING LOSS TO THE GOVERNMENT, WHICH ARE LISTED IN THE CLOSING PARAGRAPHS OF YOUR LAST LETTER, IT IS FOUND THAT NONE OF THE CHECKS WHICH YOU DESCRIBE CAME TO THE ATTENTION OF THE TREASURER AS TO ENDORSEMENT BEFORE THEY WERE PAID.

AS STATED IN OUR LETTER OF APRIL 8, 1935, NO IMPROPER PAYMENT IS KNOWN TO HAVE BEEN MADE ON A CHECK AFTER EXAMINATION BY THE TREASURER OF THE ENDORSEMENTS THEREON.

THE QUESTION FOR CONSIDERATION APPEARS TO BE WHETHER CHECKS WHICH DO COME TO THE TREASURER'S ATTENTION FOR EXAMINATION OF ENDORSEMENT MAY BE PAID WITHOUT REFERENCE TO YOUR OFFICE WHEN THE PAYEE OF THE CHECK IS DECEASED OR INCOMPETENT BUT THE CHARACTER OF THE PAYMENT IS SUCH THAT THE FUNDS BELONG TO THE ESTATE AND THE TREASURER DETERMINES BEFORE MAKING PAYMENT THAT THE ENDORSER HAS BEEN PROPERLY APPOINTED AND HAS QUALIFIED AS PERSONAL REPRESENTATIVE OF THE PAYEE. THE TREASURER HAS KNOWLEDGE OF THE CONDITIONS UNDER WHICH CHECKS MAY NOT PROPERLY BE PAID TO THE ESTATE OF A DECEDENT.

YOUR APPROVAL OF THIS PROCEDURE IS THEREFORE REQUESTED AS THE GOVERNMENT IS SAFEGUARDED BY THE CARE WITH WHICH THE TREASURER ACTS AND THE ENDORSERS ARE NOT SUBJECT TO THE DELAY AND INCONVENIENCE WHICH WOULD RESULT FROM THE RETURN OF SUCH CHECKS TO THE BANKS WHICH PRESENT THEM IN THE USUAL COURSE OF BUSINESS. IN THOSE CASES WHEREIN THE TREASURER FINDS THAT THE ESTATE OF A DECEDENT HAS NOT REQUIRED ADMINISTRATION AND THE APPOINTMENT OF A PERSONAL REPRESENTATIVE, THE MATTER IS REFERRED TO YOUR OFFICE.

WHEN THE PAYEE OF A GOVERNMENT CHECK DIES OR BECOMES INCOMPETENT BEFORE NEGOTIATING IT THERE AUTOMATICALLY ARISE RIGHTS OF THIRD PARTIES IN RESPECT OF SUCH CHECK AND SUCH RIGHTS ARE FOR ASSERTING AS CLAIMS AGAINST THE UNITED STATES. IN THIS CONNECTION, SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE ACT OF JUNE 10, 1921, 42 STAT. 24, PROVIDES:

ALL CLAIMS AND DEMANDS WHATEVER BY THE GOVERNMENT OF THE UNITED STATES OR AGAINST IT, AND ALL ACCOUNTS WHATEVER IN WHICH THE GOVERNMENT OF THE UNITED STATES IS CONCERNED, EITHER AS DEBTOR OR CREDITOR, SHALL BE SETTLED AND ADJUSTED IN THE GENERAL ACCOUNTING OFFICE.

THE QUESTION OF WHETHER PAYMENT IS TO BE MADE ON A CHECK TO OTHER THAN A NAMED PAYEE IS ONE OF LAW AND, THEREFORE, FOR THE CONSIDERATION OF THIS OFFICE PURSUANT TO THE ABOVE-QUOTED STATUTE. WHILE THIS OFFICE APPRECIATES THAT SOME DELAY IN PAYMENT OR OTHER INCONVENIENCE MAY OCCUR IN THE EVENT A CHECK OF THE CLASS IN QUESTION IS PRESENTED HERE FOR SETTLEMENT SUCH FACT MUST NOT BE THE CONTROLLING FACTOR IN THE DISPOSITION OF THIS CLASS OF CASES. INDORSING BANKS AND OTHER PERSONS ARE CHARGEABLE WITH KNOWLEDGE OF THE PUBLIC LAW IN RESPECT OF GOVERNMENT CHECKS WHICH MAY BE NEGOTIATED BY PERSONS OTHER THAN THE NAMED PAYEE, AND PERSONS ACCEPTING SUCH CHECKS MUST TAKE THE RISK OF ATTENDANT DELAYS AND INCONVENIENCES IN HAVING THEM PAID IN ACCORDANCE WITH CONTROLLING LAWS AND REGULATIONS. THE STATUTE, SUPRA, IS CLEAR AND UNAMBIGUOUS, AS WELL AS MANDATORY, AND ADMITS OF NO OTHER CONSTRUCTION OR INTERPRETATION.

SPECIFICALLY, THEREFORE, YOU ARE ADVISED THAT CHECKS WHICH COME TO THE TREASURER'S ATTENTION FOR EXAMINATION OF ENDORSEMENTS MAY NOT BE PAID BY HIM WITHOUT REFERENCE TO THIS OFFICE IN THOSE CASES WHERE THE PAYEE OF THE CHECK BE DECEASED OR INCOMPETENT. THE PROCEDURE HERETOFORE PRESCRIBED IN THIS CLASS OF CASES MUST BE INSISTED UPON. SEE, GENERALLY, CIRCULAR NO. 5, 1 COMP. GEN. 784; BULLETIN NO. 2, 1 COMP. GEN. 785; GENERAL REGULATIONS NO. 42, SUPPLEMENT NO. 1, 7 COMP. GEN. 848, ALSO, SUPPLEMENT NO. 3, 12 COMP. GEN. 673.