A-21207, JANUARY 27, 1928, 7 COMP. GEN. 448

A-21207: Jan 27, 1928

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PAYMENT MAY BE DELAYED BY THE VETERANS' BUREAU AT THE REQUEST OF THE BANK UNTIL THE BEGINNING OF THE NEXT SUCCEEDING LOAN YEAR WHEN THE LOAN VALUE OF THE CERTIFICATE WILL EQUAL OR EXCEED THE AMOUNT OF THE PRINCIPAL OF THE LOAN PLUS ACCRUED INTEREST FROM DATE OF THE NOTE UNTIL SUCH DELAYED PAYMENT TO THE BANK. WHEREIN IT APPEARS THAT AT THE TIME THE LOAN WAS MADE BY THE BANK THE CERTIFICATE HAD NO LOAN VALUE AND THAT THE LOAN VALUE OF SUCH CERTIFICATE AT THE TIME THE NOTE IS PRESENTED FOR REDEMPTION DOES NOT EQUAL OR EXCEED THE LOAN MADE BY THE BANK PLUS ACCRUED INTEREST THEREON. WAS ISSUED TO EDWARD F. IT WAS PRESENTED ON OCTOBER 10. AS THE CERTIFICATE WAS DATED APRIL 1. IT SHOULD NOT HAVE BEEN ACCEPTED AS SECURITY FOR A LOAN PRIOR TO APRIL 1.

A-21207, JANUARY 27, 1928, 7 COMP. GEN. 448

VETERANS' BUREAU - ADJUSTED COMPENSATION - LOANS TO VETERANS A LOAN MADE BY A BANK THROUGH ERROR PRIOR TO THE TIME THE ADJUSTED SERVICE CERTIFICATE POSSESSED A LOAN VALUE MAY, IN THE ABSENCE OF FRAUD OR COLLUSION, BE REDEEMED, INCLUDING PRINCIPAL PLUS INTEREST FROM DATE OF NOTE, ONLY IN THE AMOUNT OF THE LOAN VALUE OF THE CERTIFICATE AT THE TIME OF REDEMPTION, UPON THE FILING BY THE BANK OF A RECEIPT IN FULL OR WAIVER OF FURTHER CLAIM AGAINST THE UNITED STATES. WHERE THE LOAN VALUE OF THE CERTIFICATE DOES NOT EQUAL OR EXCEED THE AMOUNT OF THE LOAN PLUS INTEREST AT THE TIME OF THE MATURITY OF THE NOTE, PAYMENT MAY BE DELAYED BY THE VETERANS' BUREAU AT THE REQUEST OF THE BANK UNTIL THE BEGINNING OF THE NEXT SUCCEEDING LOAN YEAR WHEN THE LOAN VALUE OF THE CERTIFICATE WILL EQUAL OR EXCEED THE AMOUNT OF THE PRINCIPAL OF THE LOAN PLUS ACCRUED INTEREST FROM DATE OF THE NOTE UNTIL SUCH DELAYED PAYMENT TO THE BANK.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, JANUARY 27, 1928:

THERE HAS BEEN BROUGHT TO MY ATTENTION THROUGH THE PREAUDIT OF ACCOUNTS A VOUCHER COVERING THE REDEMPTION OF A LOAN MADE BY THE FIRST NATIONAL BANK OF NEW BEDFORD, MASS., SECURED BY THE ADJUSTED SERVICE CERTIFICATE OF EDWARD F. SOUZA, WHEREIN IT APPEARS THAT AT THE TIME THE LOAN WAS MADE BY THE BANK THE CERTIFICATE HAD NO LOAN VALUE AND THAT THE LOAN VALUE OF SUCH CERTIFICATE AT THE TIME THE NOTE IS PRESENTED FOR REDEMPTION DOES NOT EQUAL OR EXCEED THE LOAN MADE BY THE BANK PLUS ACCRUED INTEREST THEREON.

IT APPEARS THAT ADJUSTED SERVICE CERTIFICATE NO. 2368780, WAS ISSUED TO EDWARD F. SOUZA ON APRIL 1, 1925, FOR A FACE VALUE OF $1,153; THAT ON JANUARY 5, 1927, THE VETERAN NEGOTIATED A LOAN FOR $101 WITH THE FIRST NATIONAL BANK OF NEW BEDFORD, MASS., GIVING A SIX MONTHS' NOTE THEREFOR SECURED BY HIS ADJUSTED SERVICE CERTIFICATE; AND THAT THE VETERAN HAVING DEFAULTED ON HIS NOTE, IT WAS PRESENTED ON OCTOBER 10, 1927, TO THE BUREAU FOR REDEMPTION.

AS THE CERTIFICATE WAS DATED APRIL 1, 1925, IT SHOULD NOT HAVE BEEN ACCEPTED AS SECURITY FOR A LOAN PRIOR TO APRIL 1, 1927, ON WHICH DATE IT WOULD HAVE HAD A LOAN VALUE OF $101.38. INASMUCH AS A LOAN WAS MADE ON SAID CERTIFICATE IN ADVANCE OF THE DATE ALLOWED BY LAW, THE NOTE AND THE CERTIFICATE WERE RETURNED BY THE BUREAU TO THE BANK FOR AN EXPLANATION, AND ON OCTOBER 31, 1927, THE BANK RESUBMITTED THE NOTE AND CERTIFICATE FOR REDEMPTION WITH THE FOLLOWING EXPLANATION AND STATEMENT:

WE DID NOT INTENTIONALLY MAKE THIS LOAN AND, OF COURSE, REALIZE NOW THAT IT WAS AN ERROR ON OUR PART.

WE HEREWITH RESUBMIT THE CERTIFICATE AND NOTE, FOR REDEMPTION, AND IF YOU ARE ONLY ALLOWED TO PAY INTEREST FROM APRIL 1ST, 1927, WILL YOU KINDLY REMIT ON THAT BASIS.

IT IS UNDERSTOOD THE BUREAU NOW PROPOSES TO REDEEM THE NOTE AND PAY INTEREST THEREON AT THE RATE OF 6 PERCENT FROM THE DATE OF THE NOTE TO THE DATE OF REDEMPTION.

IT WAS STATED IN DECISION OF OCTOBER 3, 1927, 7 COMP. GEN. 253, 254, AS FOLLOWS:

* * * IT IS OBVIOUS THEREFORE THAT NO GREATER AMOUNT MAY BE PAID TO A BANK THAN IS AUTHORIZED TO BE LOANED ON THE BASIS OF THE CERTIFICATE. THAT IS, THE ERROR OF A VETERAN, A BANK, OR GOVERNMENT OFFICIALS IN NEGOTIATING A LOAN IN EXCESS OF THE LOAN VALUE MAY NEVER OBLIGATE THE GOVERNMENT TO PAY A GREATER AMOUNT THAN IS ACTUALLY SECURED BY THE CERTIFICATE. BUT IT IS NOT BELIEVED THAT A LOAN--- OTHERWISE PROPER AND NOT TAINTED WITH FRAUD--- IN EXCESS OF THE LOAN VALUE OF THE CERTIFICATE, NEGOTIATED THROUGH ERROR OR MISTAKE OF LAW, NECESSARILY INVALIDATES THE LOAN IN TOTO. ONLY THE EXCESS AMOUNT WOULD BE A "LOAN MADE IN VIOLATION" OF THE CONTROLLING STATUTE, SECTION 503. * * *

WHILE THE LOAN IN THIS CASE NEED NOT BE CONSIDERED AS VOID BECAUSE MADE BY THE BANK, THROUGH ERROR AND IN THE ABSENCE OF FRAUD OR COLLUSION, PRIOR TO THE TIME THE ADJUSTED SERVICE CERTIFICATE USED AS SECURITY POSSESSED A LOAN VALUE, PAYMENT BY THE BUREAU, IN REDEMPTION OF THE LOAN, OF AN AMOUNT IN EXCESS OF THE LOAN VALUE OF THE CERTIFICATE AT THE TIME OF SUCH PAYMENT, IS NOT AUTHORIZED. IF THE BANK REQUESTS IMMEDIATE SETTLEMENT, ITS CLAIM FOR THE PRINCIPAL OF THE NOTE, PLUS ACCRUED INTEREST FROM DATE THEREOF, JANUARY 5, 1927, MAY BE FINALLY SETTLED IN AN AMOUNT UP TO THE PRESENT LOAN VALUE OF THE CERTIFICATE, VIZ., $101.38,UPON THE FILING OF A RECEIPT IN FULL OR WAIVER OF FURTHER CLAIM AGAINST THE UNITED STATES.

IN THE CASE INVOLVED IN DECISION OF AUGUST 26, 1927, 7 COMP. GEN. 148, 150, RELATIVE TO A LOAN MADE PRIOR TO THE TIME THE ADJUSTED SERVICE CERTIFICATE POSSESSED A LOAN VALUE, IT WAS UNDERSTOOD THAT INTEREST ON THE LOAN WAS COMPUTED FROM THE DATE OF THE NOTE, NOT FROM THE DATE THE CERTIFICATE POSSESSED A LOAN VALUE, BUT IN THAT CASE PAYMENT TO THE BANK WAS NOT MADE UNTIL AFTER THE CERTIFICATE HAD MATURED BY DEATH OF THE VETERAN.

IN THE CASE HERE PRESENTED INTEREST MAY BE COMPUTED FROM THE DATE OF THE NOTE, JANUARY 5, 1927, PROVIDED THE FULL AMOUNT OF PAYMENT TO THE BANK, INCLUDING PRINCIPAL PLUS ACCRUED INTEREST, DOES NOT EXCEED THE LOAN VALUE OF THE CERTIFICATE AT THE TIME THE PAYMENT IS MADE, WHICH IS NOW UNDERSTOOD TO BE $101.38. THE INTEREST NEED NOT BE COMPUTED ONLY FROM APRIL 1, 1927, AS SUGGESTED BY THE BANK, WHICH IS THE DATE THE ADJUSTED SERVICE CERTIFICATE FIRST HAD A LOAN VALUE. THE INTEREST IS COMPUTED ON THE NOTE, NOT ON THE CERTIFICATE, AND IT WOULD BE ONLY THE AMOUNT OF PRINCIPAL AND INTEREST IN EXCESS OF THE LOAN VALUE OF THE CERTIFICATE THAT WOULD BE CONSIDERED AS AN UNLAWFUL PAYMENT UNDER SECTION 503 OF THE STATUTE.

IF THE BANK PREFERS, PAYMENT MAY BE DELAYED BY THE BUREAU UNTIL APRIL 1, 1928, WHEN, IT IS UNDERSTOOD, THE CERTIFICATE WILL POSSESS A LOAN VALUE SUFFICIENT IN AMOUNT TO COVER THE PRINCIPAL OF THE NOTE PLUS ACCRUED INTEREST FROM THE DATE THEREOF, JANUARY 5, 1927, TO APRIL 1, 1928, AND THE AMOUNT OF SUCH NOTE AND INTEREST THEN PAID IN FULL.

UPON THE FACTS NOW APPEARING, PAYMENT ON THE VOUCHER AS PRESENTED IS NOT AUTHORIZED, AND ACTION ON THE PREAUDIT WILL BE TAKEN ACCORDINGLY.