A-44832, OCTOBER 5, 1932, 12 COMP. GEN. 390

A-44832: Oct 5, 1932

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THERE IS NO AUTHORITY FOR THE SECRETARY OF AGRICULTURE TO EXECUTE BONDS BINDING THE UNITED STATES TO INDEMNIFY WAREHOUSES AGAINST LOSSES ARISING FROM THE ISSUING OF DUPLICATE WAREHOUSE RECEIPTS. AS SAID APPROPRIATION IS NOT AVAILABLE TO PAY EITHER FOR LOSSES UNDER SUCH BONDS OF INDEMNITY OR FOR THE PREMIUMS THEREON. CERTAIN CROPS COVERED BY FIRST LIENS OF THE GOVERNMENT ACQUIRED IN ACCORDANCE WITH THE PROVISIONS OF THE LAW HAVE BEEN ACCEPTED AS COLLATERAL SECURITY TO LOANS OF BORROWERS. WILL BE FIRST UTILIZED IN LIQUIDATING THE GOVERNMENT'S LIEN THEREON. THE PROCEDURE FOLLOWED IN PRESENTING THE MORTGAGED PRODUCE AS COLLATERAL IS TO DEPOSIT IT IN WAREHOUSE AND TO DELIVER TO THIS DEPARTMENT THE RECEIPT ISSUED BY THE WAREHOUSE TO THE DEPOSITOR.

A-44832, OCTOBER 5, 1932, 12 COMP. GEN. 390

INDEMNITY BONDS UNDER THE APPROPRIATION MADE TO CARRY OUT THE PROVISIONS OF PUBLIC RESOLUTION NO. 112 OF DECEMBER 20, 1930, 46 STAT. 1032, AS AMENDED, THERE IS NO AUTHORITY FOR THE SECRETARY OF AGRICULTURE TO EXECUTE BONDS BINDING THE UNITED STATES TO INDEMNIFY WAREHOUSES AGAINST LOSSES ARISING FROM THE ISSUING OF DUPLICATE WAREHOUSE RECEIPTS, AS SAID APPROPRIATION IS NOT AVAILABLE TO PAY EITHER FOR LOSSES UNDER SUCH BONDS OF INDEMNITY OR FOR THE PREMIUMS THEREON.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, OCTOBER 5, 1932:

THERE HAS BEEN RECEIVED YOUR LETTER OF SEPTEMBER 21, 1932, AS FOLLOWS:

IN CONNECTION WITH CROP PRODUCTION LOANS MADE BY THIS DEPARTMENT PURSUANT TO THE JOINT RESOLUTION OF CONGRESS OF DECEMBER 20, 1930 (46 STAT. 1032), AS AMENDED BY THE ACT OF FEBRUARY 14, 1931 (46 STAT. 1160), CERTAIN CROPS COVERED BY FIRST LIENS OF THE GOVERNMENT ACQUIRED IN ACCORDANCE WITH THE PROVISIONS OF THE LAW HAVE BEEN ACCEPTED AS COLLATERAL SECURITY TO LOANS OF BORROWERS. THIS OPERATION ENABLES A BORROWER TO CONTROL THE SALE OF HIS MORTGAGED PRODUCE, TO ANTICIPATE AN INCREASE IN THE VALUE THEREOF AND AT THE SAME TIME TO ASSURE THIS DEPARTMENT THAT THE PROCEEDS DERIVED FROM THE SAME, WHEN SOLD, WILL BE FIRST UTILIZED IN LIQUIDATING THE GOVERNMENT'S LIEN THEREON. THE PROCEDURE FOLLOWED IN PRESENTING THE MORTGAGED PRODUCE AS COLLATERAL IS TO DEPOSIT IT IN WAREHOUSE AND TO DELIVER TO THIS DEPARTMENT THE RECEIPT ISSUED BY THE WAREHOUSE TO THE DEPOSITOR. IN MANY INSTANCES BORROWERS SURRENDERING WAREHOUSE RECEIPTS FOR SUCH A PURPOSE HAVE AUTHORIZED THE SECRETARY OF AGRICULTURE TO SELL AND DISPOSE OF THE CROPS REPRESENTED THEREBY AND TO APPLY THE PROCEEDS, FIRST, TO THE PAYMENT OF THE GOVERNMENT'S LIEN, AND, SECOND, TO DISBURSE THE REMAINDER TO THE BORROWER OR THOSE PROPERLY CLAIMING UNDER HIM. IT IS NOW DEEMED DESIRABLE TO DISPOSE OF CERTAIN COTTON HELD AS COLLATERAL AND IN ORDER TO DO SO IT IS, OF COURSE, NECESSARY TO SURRENDER TO A PURCHASER THE WAREHOUSE RECEIPT REPRESENTING THE SAME. UNFORTUNATELY SOME OF THESE RECEIPTS HAVE BEEN LOST OR MISLAID AND THERE IS FOR DETERMINATION THE PROPER METHOD TO BE FOLLOWED IN OBTAINING DUPLICATE RECEIPTS WHICH MAY BE USED IN LIEU OF THE ORIGINALS WHEN SALES ARE MADE.

AN INVESTIGATION HAS BEEN MADE TO DETERMINE THE IDENTITY AND NATURE OF THE LOST RECEIPTS. THE DEPARTMENT'S RECORDS ARE CLEAR AND SPECIFIC IN THIS REGARD. THE WAREHOUSES THAT ISSUED THE LOST RECEIPTS FALL IN TWO GENERAL CLASSES:

(1) THOSE LICENSED AND BONDED UNDER THE PROVISIONS OF THE UNITED STATES WAREHOUSE ACT OF AUGUST 11, 1916 (39 STAT. 446), AS AMENDED BY ACTS OF CONGRESS APPROVED JULY 24, 1919, FEBRUARY 23, 1923, AND MARCH 2, 1931, AND THE REGULATIONS OF THE SECRETARY OF AGRICULTURE ISSUED THEREUNDER.

(2) THOSE OPERATING UNDER STATUTES OF THE STATES OF FLORIDA, GEORGIA, SOUTH CAROLINA, AND TENNESSEE.

REFERENCE TO BOTH THE FEDERAL AND STATE STATUTES INVOLVED DISCLOSES THAT ONE OF THE NECESSARY STEPS TO BE EMPLOYED BY THE HOLDER OF A LOST WAREHOUSE RECEIPT IN ORDER TO HAVE A DUPLICATE ISSUED BY THE WAREHOUSE THAT ISSUED THE LOST ORIGINAL IS TO SECURE THE WAREHOUSE AGAINST LOSS ARISING FROM THE ISSUANCE OF A DUPLICATE RECEIPT BY THE GIVING OF A BOND.

THE UNITED STATES WAREHOUSE ACT OF AUGUST 11, 1916, AS AMENDED, WHICH IS ADMINISTERED BY THE SECRETARY OF AGRICULTURE, CONTAINS THE FOLLOWING PROVISIONS:

SEC. 20. "THAT WHILE AN ORIGINAL RECEIPT ISSUED UNDER THIS ACT IS OUTSTANDING AND UNCANCELED BY THE WAREHOUSEMAN ISSUING THE SAME NO OTHER OR FURTHER RECEIPT SHALL BE ISSUED FOR THE AGRICULTURAL PRODUCT COVERED THEREBY OR FOR ANY PART THEREOF, EXCEPT THAT IN THE CASE OF A LOST OR DESTROYED RECEIPT A NEW RECEIPT, UPON THE SAME TERMS AND SUBJECT TO THE SAME CONDITIONS AND BEARING ON ITS FACE THE NUMBER AND DATE OF THE RECEIPT IN LIEU OF WHICH IT IS ISSUED, MAY BE ISSUED UPON COMPLIANCE WITH THE STATUTES OF THE UNITED STATES APPLICABLE THERETO IN PLACES UNDER THE EXCLUSIVE JURISDICTION OF THE UNITED STATES OR UPON COMPLIANCE WITH THE LAWS OF ANY STATE APPLICABLE THERETO IN ANY PLACE NOT UNDER THE EXCLUSIVE JURISDICTION OF THE UNITED STATES: PROVIDED, THAT IF THERE BE IN SUCH CASE NO STATUTE OF THE UNITED STATES OR LAW OF A STATE APPLICABLE THERETO SUCH NEW RECEIPTS MAY BE ISSUED UPON THE GIVING OF SATISFACTORY SECURITY IN COMPLIANCE WITH THE RULES AND REGULATIONS MADE PURSUANT TO THIS ACT.'

THE EXISTING REGULATIONS FOR COTTON WAREHOUSES APPROVED BY THE SECRETARY OF AGRICULTURE ON APRIL 27, 1931, CONTAINS THE FOLLOWING PROVISIONS:

"SEC. 3. PARAGRAPH 1. IN THE CASE OF A LOST OR DESTROYED RECEIPT, A NEW RECEIPT UPON THE SAME TERMS, SUBJECT TO THE SAME CONDITIONS, AND BEARING ON ITS FACE THE NUMBER AND THE DATE OF THE RECEIPT IN LIEU OF WHICH IT IS ISSUED AND A PLAIN AND CONSPICUOUS STATEMENT THAT IT IS A DUPLICATE ISSUED IN LIEU OF A LOST OR DESTROYED RECEIPT, MAY BE ISSUED UPON COMPLIANCE WITH THE CONDITIONS SET OUT IN PARAGRAPH 2 OF THIS SECTION.

"PAR. 2. BEFORE ISSUING SUCH NEW OR DUPLICATE RECEIPT THE WAREHOUSEMAN SHALL REQUIRE THE DEPOSITOR OR OTHER PERSON APPLYING THEREFOR TO MAKE AND FILE WITH THE WAREHOUSEMAN (A) AN AFFIDAVIT SHOWING THAT HE IS LAWFULLY ENTITLED TO THE POSSESSION OF THE ORIGINAL RECEIPT, THAT HE HAS NOT NEGOTIATED OR ASSIGNED IT, HOW THE ORIGINAL RECEIPT WAS LOST OR DESTROYED, AND, IF LOST, THAT DILIGENT EFFORT HAS BEEN MADE TO FIND THE RECEIPT WITHOUT SUCCESS, AND (B) A BOND IN AN AMOUNT DOUBLE THE VALUE, AT THE TIME THE BOND IS GIVEN, OF THE COTTON REPRESENTED BY THE LOST OR DESTROYED RECEIPT. SUCH BOND SHALL BE IN A FORM APPROVED FOR THE PURPOSE BY THE SECRETARY, OR HIS DESIGNATED REPRESENTATIVE, SHALL BE CONDITIONED TO INDEMNIFY THE WAREHOUSEMAN AGAINST ANY LOSS SUSTAINED BY REASON OF THE ISSUANCE OF SUCH RECEIPT, AND SHALL HAVE AS SURETY THEREON PREFERABLY A SURETY COMPANY WHICH IS AUTHORIZED TO DO BUSINESS, AND IS SUBJECT TO SERVICE OF PROCESS IN A SUIT ON THE BOND, IN THE STATE IN WHICH THE WAREHOUSE IS LOCATED OR AT LEAST TWO INDIVIDUALS WHO ARE RESIDENTS OF SUCH STATE AND EACH OF WHOM OWNS REAL PROPERTY THEREIN HAVING A VALUE, IN EXCESS OF ALL EXEMPTIONS AND ENCUMBRANCES, EQUAL TO THE AMOUNT OF THE BOND.'

THE STATE LAWS IMPOSE SIMILAR REQUIREMENTS. DECISION IS, THEREFORE, DESIRED WITH RESPECT TO THE FOLLOWING MATTERS WHICH ARISE IN CONNECTION WITH OBTAINING DUPLICATE RECEIPTS FROM WAREHOUSES OPERATING UNDER EITHER THE UNITED STATES WAREHOUSE ACT OR THE LAWS OF THE ABOVE ENUMERATED STATES.

(1) IN SUCH CASES DOES THE SECRETARY OF AGRICULTURE HAVE AUTHORITY TO EXECUTE BONDS THAT WILL PROTECT WAREHOUSES FROM LOSS ARISING FROM THE ISSUANCE OF DUPLICATE WAREHOUSE RECEIPTS?

(2) IF SO, MAY A BOND WITHOUT SURETY BE GIVEN FOR WHICH THE APPROPRIATIONS ADMINISTERED UNDER SAID JOINT RESOLUTION OF DECEMBER 20, 1930, AS AMENDED, WILL BE RESPONSIBLE IN THE EVENT OF LOSS BY THE WAREHOUSE?

(3) IF A BOND MAY BE GIVEN AND A CORPORATE SURETY IS REQUIRED, CAN THE BOND PREMIUMS BE PAID FROM SAID APPROPRIATIONS?

THE GENERAL RULE IS THAT BONDS EXECUTED IN A REPRESENTATIVE CAPACITY TO BE VALID MUST NOT BE IN EXCESS OF THE AUTHORITY GRANTED THE AGENT OR THE PRINCIPAL WILL NOT BE BOUND THEREUNDER. IN A CASE WHERE THE OBLIGATION COVERED BY THE BOND MUST DEPEND UPON MONEY APPROPRIATED FROM PUBLIC FUNDS, AS WOULD BE THE CASE IN THE TRANSACTIONS REFERRED TO IN YOUR SUBMISSION, YOUR AUTHORITY TO EXECUTE BONDS OF INDEMNITY IN SUCH CASES MUST, OF NECESSITY, DEPEND UPON WHETHER PUBLIC FUNDS HAVE BEEN APPROPRIATED BY THE CONGRESS UNDER YOUR JURISDICTION FOR THE PURPOSE.

IN THIS CONNECTION, ATTENTION IS INVITED TO THE PROVISIONS OF SECTION 3679, REVISED STATUTES, AS AMENDED BY THE ACT OF FEBRUARY 27, 1906, 34 STAT. 48, TO THE EFFECT THAT NO EXECUTIVE DEPARTMENT OR OTHER GOVERNMENT ESTABLISHMENT OF THE UNITED STATES SHALL INVOLVE THE GOVERNMENT IN ANY CONTRACT OR OTHER OBLIGATION FOR THE FUTURE PAYMENT OF MONEY IN EXCESS OF APPROPRIATIONS MADE THEREFOR UNLESS SUCH CONTRACT OR OBLIGATION IS AUTHORIZED BY LAW, AND TO THE PROVISIONS OF SECTION 3678, REVISED STATUTES, TO THE EFFECT THAT MONEYS APPROPRIATED FOR THE VARIOUS BRANCHES OF EXPENDITURE IN THE PUBLIC SERVICE SHALL BE APPLIED SOLELY FOR THE OBJECTS FOR WHICH MADE AND FOR NO OTHERS.

THE APPROPRIATION MADE BY PUBLIC RESOLUTION NO. 114 OF JANUARY 15, 1931, 46 STAT. 1039, TO CARRY OUT THE PROVISIONS OF PUBLIC RESOLUTION NO. 112 OF DECEMBER 20, 1930, 46 STAT. 1032, AS AMENDED BY THE ACT OF FEBRUARY 14, 1931, 46 STAT. 1160, AND THE AUTHORIZING RESOLUTION, CONTAIN NO PROVISIONS, EITHER IN SPECIFIC TERMS OR BY NECESSARY IMPLICATION, INDICATING THAT THE FUNDS APPROPRIATED MAY BE USED IN MAKING PAYMENT OF PREMIUMS ON BONDS SUCH AS REFERRED TO IN YOUR SUBMISSION, OR FOR THE PAYMENT OF THE OBLIGATIONS UNDERTAKEN UNDER SUCH BONDS OF INDEMNITY. FURTHER, THE OBLIGATION OF THE BOND WOULD INVOLVE THE GOVERNMENT IN AN OBLIGATION INDEFINITE IN AMOUNT. SAID APPROPRIATION IS MADE AVAILABLE AS PROVIDED FOR IN THE RESOLUTION OF DECEMBER 20, 1930, AS AMENDED, FOR LOANS, ADVANCES, AND SALES WITH RESPECT TO SEED, FERTILIZER, FEED FOR WORK AND OTHER LIVE STOCK AND FUEL AND OIL FOR TRACTORS USED IN CROP PRODUCTION AND WHILE THERE ARE PROVIDED ALSO, IN THE APPROPRIATION FUNDS FOR THE ADMINISTRATIVE EXPENSES IN CONNECTION WITH THE CARRYING OUT OF THE PROVISIONS OF THE RESOLUTION AS AMENDED, THE SAID APPROPRIATION CAN NOT BE CONSTRUED AS INCLUDING EXPENSES SUCH AS THOSE REFERRED TO IN YOUR SUBMISSION.

IN SPECIFIC ANSWER TO THE QUESTION SUBMITTED, I HAVE TO ADVISE THAT THERE IS NO AUTHORITY IN THE SECRETARY OF AGRICULTURE TO EXECUTE BONDS BINDING THE UNITED STATES TO INDEMNIFY WAREHOUSES AGAINST LOSSES ARISING FROM THE ISSUING OF DUPLICATE WAREHOUSE RECEIPTS, AND THAT THE APPROPRIATION MADE TO CARRY OUT THE PROVISIONS OF THE RESOLUTION OF DECEMBER 20, 1930, AS AMENDED, IS NOT AVAILABLE, EITHER TO PAY FOR LOSSES UNDER SUCH BONDS OF INDEMNITY, OR FOR THE PREMIUMS THEREON.

THERE IS NOTED IN YOUR LETTER THE STATEMENT THAT AN INVESTIGATION HAD BEEN MADE TO DETERMINE THE IDENTITY AND NATURE OF THE LOST RECEIPTS AND THAT THE DEPARTMENT RECORDS ARE CLEAR IN THAT RESPECT. IT IS SUGGESTED THE INVESTIGATION SHOULD HAVE GONE FURTHER WITH A VIEW TO A DETERMINATION OF THE RESPONSIBILITY FOR THE LOSS OF THE RECEIPTS. IF AND WHEN SUCH RESPONSIBILITY BE ESTABLISHED, IT MAY THEN BE POSSIBLE TO REQUIRE THE PERSON RESPONSIBLE TO POST, AS AN INDIVIDUAL, A SURETY BOND FOR THE RELEASE OF THE COTTON, THE PREMIUMS UPON SUCH BOND TO BE PAID FROM HIS PERSONAL FUNDS.