A-30461, JUNE 10, 1930, 9 COMP. GEN. 509

A-30461: Jun 10, 1930

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TO PERSONS NONE OF WHOM WAS ENTITLED. THAT YOU HAVE CONCLUDED THAT THE CASE IS NOT A PROPER ONE TO BE HANDLED BY A SUIT IN THE NATURE OF AN INTERPLEADER. THE FACTS WILL BE RESTATED BY QUOTING FROM LETTER TO YOU OF MARCH 12. AS FOLLOWS: THERE IS BEFORE THIS OFFICE FOR CONSIDERATION IN PREAUDIT OF THE WAR-RISK INSURANCE CASE OF ROBERT L. WHILE IN THE SERVICE APPLIED FOR AND WAS GRANTED $5. THEREAFTER MONTHLY INSTALLMENTS OF INSURANCE WERE PAID TO THE BENEFICIARY UNTIL HER DEATH ON JULY 10. AFTER THE WIDOW'S DEATH THE INSURANCE WAS DISTRIBUTED EQUALLY BETWEEN THE FATHER AND THE MOTHER OF THE VETERAN UNDER THE PROVISIONS OF SECTION 15 OF THE ACT OF DECEMBER 24. OR HIS RIGHTS ARE OTHERWISE TERMINATED AFTER THE DEATH OF THE INSURED.

A-30461, JUNE 10, 1930, 9 COMP. GEN. 509

VETERANS' BUREAU - INSURANCE - AWARDS IN COURSE OF PAYMENT AWARDS OF TERM INSURANCE MADE PRIOR TO, AND IN COURSE OF PAYMENT ON, MARCH 4, 1925, TO PERSONS NONE OF WHOM WAS ENTITLED, UNDER AN ENTIRELY ILLEGAL DISTRIBUTION OF AN ESTATE, MAY NOT BE CONSIDERED AS "IN COURSE OF PAYMENT" WITHIN THE MEANING OF THE SAVING CLAUSE IN THE PROVISO TO SECTION 303 OF THE WORLD WAR VETERANS' ACT, AS AMENDED BY THE ACT OF MARCH 4, 1925, 43 STAT. 1310, BUT PAYMENT SHOULD BE MADE TO THE ESTATE OF THE INSURED IN A LUMP SUM OF THE PRESENT VALUE OF THE REMAINING UNPAID MONTHLY INSTALLMENTS UNDER THE TERMS OF THE FIRST SENTENCE OF SAID SECTION 303 OF THE STATUTE. 8 COMP. GEN. 337 DISTINGUISHED.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, JUNE 10, 1930:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 14, 1930, ADVISING THAT PURSUANT TO THE SUGGESTION CONTAINED IN THE LAST PORTION OF MY LETTER TO YOU DATED MARCH 12, 1930, A-30461, WAR-RISK INSURANCE CASE OF ROBERT L. HUGHES, XC-101733, THE VETERANS' BUREAU HAS REVIEWED THE CASE WITH SPECIAL REFERENCE TO THE POSSIBILITY OF FILING A BILL IN THE NATURE OF AN INTERPLEADER TO DETERMINE THE LAWFUL BENEFICIARY TO THE INSURANCE, THERE BEING THREE POSSIBLE CONTENDERS, AND THAT YOU HAVE CONCLUDED THAT THE CASE IS NOT A PROPER ONE TO BE HANDLED BY A SUIT IN THE NATURE OF AN INTERPLEADER. YOU REQUEST FURTHER CONSIDERATION OF THE CASE BY THIS OFFICE ON ITS MERITS.

THE FACTS WILL BE RESTATED BY QUOTING FROM LETTER TO YOU OF MARCH 12, 1930, AS FOLLOWS:

THERE IS BEFORE THIS OFFICE FOR CONSIDERATION IN PREAUDIT OF THE WAR-RISK INSURANCE CASE OF ROBERT L. HUGHES, C-101733. THE VETERAN, WHILE IN THE SERVICE APPLIED FOR AND WAS GRANTED $5,000 TERM INSURANCE FOR WHICH HE DESIGNATED HIS WIFE, ELLA HUGHES, AS BENEFICIARY. HE DIED IN THE SERVICE ON NOVEMBER 6, 1918, AND THEREAFTER MONTHLY INSTALLMENTS OF INSURANCE WERE PAID TO THE BENEFICIARY UNTIL HER DEATH ON JULY 10, 1921. AFTER THE WIDOW'S DEATH THE INSURANCE WAS DISTRIBUTED EQUALLY BETWEEN THE FATHER AND THE MOTHER OF THE VETERAN UNDER THE PROVISIONS OF SECTION 15 OF THE ACT OF DECEMBER 24, 1919, 41 STAT. 376, PROVIDING IN PART AS FOLLOWS:

"THAT IF ANY PERSON TO WHOM SUCH YEARLY RENEWABLE TERM INSURANCE HAS BEEN AWARDED DIES, OR HIS RIGHTS ARE OTHERWISE TERMINATED AFTER THE DEATH OF THE INSURED, BUT BEFORE ALL OF THE TWO HUNDRED AND FORTY MONTHLY INSTALLMENTS HAVE BEEN PAID, THEN THE MONTHLY INSTALLMENTS PAYABLE AND APPLICABLE SHALL BE PAYABLE TO SUCH PERSON OR PERSONS WITHIN THE PERMITTED CLASS OF BENEFICIARIES AS WOULD, UNDER THE LAWS OF THE STATE OF RESIDENCE OF THE INSURED, BE ENTITLED TO HIS PERSONAL PROPERTY IN CASE OF INTESTACY;

PAYMENTS TO THE PARENTS WERE THEREAFTER MADE UNTIL THE FATHER'S DEATH ON JANUARY 20, 1928. AFTER THE FATHER'S DEATH ACTION WAS TAKEN BY THE VETERANS' BUREAU TO PAY THE PRESENT VALUE OF THE REMAINING INSTALLMENTS PAYABLE ON HIS SHARE OF THE INSURANCE, IN A LUMP SUM TO THE VETERAN'S ESTATE, UNDER THE PROVISIONS OF SECTION 303 OF THE WORLD WAR VETERANS' ACT, AS AMENDED BY THE ACT OF MARCH 4, 1925, 43 STAT. 1310, PROVIDING, IN SO FAR AS HERE MATERIAL, AS FOLLOWS:

"* * * IF THE DESIGNATED BENEFICIARY * * * SURVIVES THE INSURED AND DIES PRIOR TO RECEIVING ALL OF THE TWO HUNDRED AND FORTY INSTALLMENTS OR ALL SUCH AS ARE PAYABLE AND APPLICABLE, THERE SHALL BE PAID TO THE ESTATE OF THE INSURED THE PRESENT VALUE OF THE MONTHLY INSTALLMENTS THEREAFTER PAYABLE, SAID VALUE TO BE COMPUTED AS OF DATE OF LAST PAYMENT MADE UNDER ANY EXISTING AWARD: PROVIDED, THAT ALL AWARDS OF YEARLY RENEWABLE TERM INSURANCE WHICH ARE IN COURSE OF PAYMENT ON THE DATE OF THE APPROVAL OF THIS ACT SHALL CONTINUE UNTIL THE DEATH OF THE PERSON RECEIVING SUCH PAYMENTS, OR UNTIL HE FORFEITS SAME UNDER THE PROVISIONS OF THIS ACT. WHEN ANY PERSON TO WHOM SUCH INSURANCE IS NOW AWARDED DIES OR FORFEITS HIS RIGHTS TO SUCH INSURANCE THEN THERE SHALL BE PAID TO THE ESTATE OF THE INSURED THE PRESENT VALUE OF THE REMAINING UNPAID MONTHLY INSTALLMENTS OF THE INSURANCE SO AWARDED TO SUCH PERSON: * * *"

IN ASSEMBLING THE EVIDENCE TO SUPPORT THE PROPOSED AWARD TO THE ESTATE UNDER THIS STATUTE IT WAS DISCOVERED THAT THE VETERAN HAD BEEN SURVIVED BY A SON, BORN JANUARY 23, 1914, BY A MARRIAGE WITH VELERIA JONES, PRIOR TO THE MARRIAGE WITH THE WOMAN ORIGINALLY DESIGNATED AS BENEFICIARY OF THE INSURANCE. UNDER THE INTESTATE LAWS OF WISCONSIN, THE STATE OF DOMICILE OF THE VETERAN, THIS MINOR SON, UNDER THE PROVISIONS OF THE 1919 STATUTE, SUPRA, WAS ENTITLED TO, AND SHOULD HAVE BEEN PAID, THE FULL AMOUNT OF THE INSURANCE AFTER THE DEATH OF THE DESIGNATED BENEFICIARY INSTEAD OF THE PARENTS OF THE INSURED TO WHOM THE INSURANCE WAS PAID.

ALTHOUGH AN ADMINISTRATOR OF THE ESTATE OF THE VETERAN APPOINTED IN WISCONSIN HAS DULY QUALIFIED, AND IS MAKING CLAIM, FURTHER ACTION TOWARD PAYMENT TO THE ESTATE OF THE INSURED OF THE LUMP SUM UNDER SECTION 303 ON THE PORTION PREVIOUSLY PAID TO THE FATHER WAS DISCONTINUED, AND THE AWARD IN FAVOR OF THE MOTHER WAS STOPPED. THE CASE IS NOW BEFORE THIS OFFICE FOR PREAUDIT IN CONNECTION WITH A TENTATIVE AWARD WHEREUNDER IT IS PROPOSED TO PAY THE FULL AMOUNT OF THE INSURANCE IN MONTHLY INSTALLMENTS TO A GUARDIAN TO BE APPOINTED FOR THE VETERAN'S MINOR CHILD, NOW UNDER THE CARE AND CUSTODY OF MRS. O. S. JONES, PIERCE CITY, MO., THE MATERNAL GRANDMOTHER, WHO, ALSO, APPARENTLY, IS MAKING CLAIM TO THE INSURANCE. THIS AWARD IS PROPOSED TO BE MADE EFFECTIVE FROM THE ANNIVERSARY DATE FOLLOWING THE DEATH OF THE DESIGNATED BENEFICIARY AND TO BE SUBJECT TO THE PAYMENTS MADE TO THE FATHER AND THE MOTHER OF THE VETERAN.

THE THEORY ON WHICH IT IS PROPOSED TO PAY THE UNPAID BALANCE OF THE INSURANCE IN INSTALLMENTS TO THE GUARDIAN OF THE MINOR CHILD INSTEAD OF IN A LUMP SUM TO THE ADMINISTRATOR OF THE VETERAN'S ESTATE APPEARS TO BE THAT THE INSURANCE AWARD WAS "IN COURSE OF PAYMENT" ON MARCH 4, 1925, WITHIN THE MEANING OF THE PROVISO TO SECTION 303, SUPRA.

UNQUESTIONABLY THE AWARDS OF INSURANCE TO THE PARENTS OF THE VETERAN FOLLOWING THE DEATH OF THE WIDOW WHO WAS THE DESIGNATED BENEFICIARY WERE ILLEGAL, IN VIEW OF THE FACT--- NOT DISCLOSED AT THAT TIME--- THAT THE VETERAN WAS SURVIVED BY A SON. IN THE EARLIER DECISIONS, THIS OFFICE ANNOUNCED THE DEFINITE RULE THAT INVALID OR ERRONEOUS AWARDS SHOULD NOT BE CONSIDERED AS IN COURSE OF PAYMENT ON MARCH 4, 1925, WITHIN THE MEANING OF THE PROVISO TO SECTION 303. SEE PARTICULARLY THE LAST PARAGRAPH OF DECISION DATED AUGUST 23, 1926, 6 COMP. GEN. 152, 154, AS FOLLOWS:

OBVIOUSLY THE PRINCIPLE OF THE MATCHETT CASE WOULD NOT BE APPLICABLE TO AN INVALID AWARD TO SEVERAL DISTRIBUTEES BASED ON AN ERROR IN THE DISTRIBUTION OF INSURANCE EITHER BECAUSE OF A MISTAKE OF LAW OR BECAUSE OF THE DISCOVERY OF SOME RELATIVE ENTITLED TO A SHARE OF WHOM THE BUREAU HAD NO PREVIOUS KNOWLEDGE. IN SUCH A CASE THERE WAS IN FACT NO VALID AWARD MADE PRIOR TO THE PASSAGE OF THE ACT. ACCORDINGLY, IN THE SECOND TYPE OF CASES DESCRIBED IN YOUR SUBMISSION THE AWARD MAY NOT BE CONSIDERED "IN COURSE OF PAYMENT" ON MARCH 4, 1925.

IN DECISION OF THIS OFFICE DATED JANUARY 5, 1929, 8 COMP. GEN. 337, 341, CASE OF MAURICE E. PETTY, THE DECISION OF THE COURT IN THE HATCH CASE, 29 FED.REP. (2D) 213, WAS CONSIDERED AND APPLIED AS FOLLOWS:

THE COURT SAID:

"THERE IS, OF COURSE, NO CONTENTION THAT THE AWARDS WERE NOT ACTUALLY IN COURSE OF PAYMENT ON MARCH 4, 1925. BUT THE ESSENCE OF THE ARGUMENT OF GOVERNMENT'S COUNSEL IS THAT WHEN CONGRESS IN CHANGING THE LAW BY THE AMENDMENT OF SAID SECTION 303 IN 1925 PROVIDED THAT THE SECTION SHOULD NOT APPLY TO AWARDS IN COURSE OF PAYMENT, IT MEANT IN COURSE OF LEGAL PAYMENT, AND THAT THEREFORE AWARDS NOT IN COURSE OF WHAT THE DEFENDANT CALLS LEGAL PAYMENTS WERE NOT WITHIN THE TERMS OF THE PROVISO. THIS SEEMS WITHOUT SUPPORT IN REASON OR JUDICIAL AUTHORITY. PUBLIC OFFICERS ARE PRESUMED TO KNOW THEIR DUTY. CONGRESS CAN NOT BE SAID TO HAVE CONTEMPLATED THAT THERE WOULD BE SUCH A THING AS FAILURE OF PUBLIC OFFICERS TO DO THEIR DUTY RESULTING IN ILLEGAL PAYMENTS, UNLESS SUCH CONTEMPLATION IS CLEARLY SHOWN IN THE STATUTE. IT DOES NOT APPEAR ANYWHERE THAT PRIOR TO MARCH 4, 1925, THERE WERE ANY ILLEGAL AWARDS OTHER THAN THIS SINGLE ONE IN THE CASE AT BAR, AND THE ILLEGALITY OF THIS AWARD WAS NOT KNOWN TO THE DEPARTMENT, MUCH LESS TO CONGRESS, UNTIL EIGHT MONTHS AFTER THE PASSAGE OF THE AMENDATORY ACT OF MARCH 4, 1925.

"THE LANGUAGE CHOSEN BY CONGRESS WAS TERSE AND CLEAR. CONGRESS COULD HAVE SAID, BUT DID NOT SAY,"IN COURSE OF DUE PAYMENT" OR "IN DUE COURSE OF PAYMENT," AND DID NOT USE ANY OTHER WORDS OF LIMITATION OR QUALIFICATION. IT MERELY USED THE WORDS "IN COURSE OF PAYMENT," AND THESE WORDS MUST BE TAKEN AT THEIR NATURAL AND NORMAL MEANING, VIZ, CASES IN WHICH AWARDS WERE ACTUALLY BEING PAID, WITHOUT REFERENCE TO ANY POTENTIAL OR POSSIBLE DISCOVERY AT A LATER DATE, BUT THE GOVERNMENT HAD MADE SOME KIND OF ERROR IN ITS AWARD OF YEARS BEFORE.'

* * * THE PRINCIPLE OF THE HATCH CASE IS NOT TO BE EXTENDED BEYOND THE FACTS OF THAT CASE. WHERE A BENEFICIARY OR DISTRIBUTEE OF INSURANCE HAD BEEN OVERLOOKED AND PAYMENTS ON MARCH 4, 1925, WERE NOT BEING MADE TO SUCH DISTRIBUTEE AND THE DISTRIBUTEE HAS NOT FILED WITH THE UNITED STATES A RELEASE FROM LIABILITY FOR THE SHARE ERRONEOUSLY INCLUDED IN THE AWARDS TO THE OTHER DISTRIBUTEES, THERE SHOULD BE COLLECTED FROM THE OTHER DISTRIBUTEES THE ERRONEOUS AMOUNT RECEIVED BY THEM UNLESS WAIVED FOR GOOD CAUSE AS PROVIDED FOR UNDER SECTION 28 OF THE WORLD WAR VETERANS' ACT.

IN THE PETTY CASE AND IN THE CASE DECIDED BY THE COURT, AND ALL OTHER CASES WHICH HERETOFORE HAVE COME BEFORE THIS OFFICE FOR CONSIDERATION, THERE WERE SOME OF THE DISTRIBUTEES LAWFULLY RECEIVING A SHARE OF THE INSURANCE ON MARCH 4, 1925, AND TO THE EXTENT OF THOSE SHARES THE AWARDS WERE VALID, BUT IN THIS CASE, THE ENTIRE AMOUNT OF THE INSURANCE, WHILE IN COURSE OF PAYMENT ON THE DATE IN QUESTION, WAS BEING UNLAWFULLY OR ERRONEOUSLY PAID. THEREFORE, THERE IS RAISED THE QUESTION WHETHER THE PRINCIPLES ANNOUNCED BY THE COURT IN THE HATCH CASE, AND AS ACCEPTED BY THIS OFFICE IN THE PETTY CASE, SHOULD BE EXTENDED TO THE INSTANT CASE.

THE PARTICULAR CASE CONSIDERED BY THE COURT WAS BASED ON FACTS SHOWING ONLY PARTIAL ILLEGALITY IN THE ORIGINAL DISTRIBUTION, ALTHOUGH THE COURT HAS MADE CERTAIN COMMENTS WHICH MIGHT BE CONSIDERED AS HAVING A BROADER APPLICATION. THIS OFFICE HAS ACCEPTED THE CONCLUSION OF THE COURT ONLY TO THE EXTENT OF ITS APPLICATION TO THE PARTICULAR CASE UNDER CONSIDERATION, AND TO SIMILAR CASES WHICH MAY ARISE; THAT IS, THOSE INVOLVING ONLY PARTIAL ILLEGALITY UNDER THE ORIGINAL DISTRIBUTION. IN THE ABSENCE OF A COURT DECISION ON THE SPECIFIC POINT, THE PRINCIPLE MAY NOT BE APPLIED, ALSO, TO CASES WHEREIN THE ORIGINAL DISTRIBUTION, THAT IS, THE AWARD UNDER WHICH PAYMENTS WERE BEING MADE ON MARCH 4, 1925, WAS ENTIRELY ILLEGAL. SUCH CASES THE AWARD WILL NOT BE CONSIDERED AS HAVING BEEN IN COURSE OF PAYMENT ON MARCH 4, 1925, AND, ACCORDINGLY, PAYMENT OF THE PRESENT VALUE OF THE REMAINING UNPAID INSTALLMENTS IN THIS CASE IS AUTHORIZED ONLY TO THE ESTATE OF THE INSURED UNDER THE PROVISIONS OF THE FIRST SENTENCE OF SECTION 303 OF THE WORLD WAR VETERANS' ACT AS AMENDED BY SECTION 14 OF THE ACT OF MARCH 4, 1925, 43 STAT. 1310.

YOU ARE ADVISED, THEREFORE, THAT THE PROPOSED AWARD IN FAVOR OF THE MINOR CHILD OF THE INSURED IS NOT APPROVED.