A-46249, JANUARY 17, 1933, 12 COMP. GEN. 491

A-46249: Jan 17, 1933

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THERE IS NO AUTHORITY TO PAY TO SAID SURETY THE FUNDS ON DEPOSIT TO THE CREDIT OF THE EMPLOYEE IN THE "CIVIL SERVICE RETIREMENT AND DISABILITY FUND" UNDER THE DOCTRINE OF SUBROGATION. BY WHICH WAS DISALLOWED ITS CLAIM FOR THE $114.77 DUE TO SAID ELLIOTT W. THE RECORD SHOWS THAT THERE IS DUE SAID ELLIOTT W. THE SUM OF $48.42 FOR WHICH HAVE BEEN ISSUED TO HIM TWO TREASURY CUSTOMS SALARY CHECKS AS FOLLOWS: CHECK NO. 234. THAT SAID UNPAID SALARY CHECKS WERE TRANSMITTED TO THIS OFFICE ON MAY 4. THAT THERE IS DUE SAID ELLIOTT W. THE BONDING COMPANY CONTENDS THAT UNDER THE DOCTRINE OF SUBROGATION IT IS ENTITLED TO THE SAID UNPAID $114.77 DUE TO ELLIOTT W. IT APPEARS THAT INASMUCH AS THE SUM WAS IN POSSESSION OF THE UNITED STATES AT THE TIME THE SAID SURETY ON THE EMPLOYEE'S BOND LIQUIDATED THE GOVERNMENT'S LOSS RESULTING FROM HIS EMBEZZLEMENT OF ITS FUNDS.

A-46249, JANUARY 17, 1933, 12 COMP. GEN. 491

EMBEZZLEMENT - GOVERNMENT EMPLOYEE - ACCRUED SALARY - RETIREMENT DEDUCTIONS - SUBROGATION OF SURETY WHERE A SURETY ON THE BOND OF A DEFAULTING GOVERNMENT EMPLOYEE SUBSEQUENTLY LIQUIDATES THE GOVERNMENT'S LOSS RESULTING FROM THE UNPAID SALARY DUE THE EMPLOYEE UNDER THE DOCTRINE OF SUBROGATION. WHERE A SURETY ON THE BOND OF A DEFAULTING GOVERNMENT EMPLOYEE SUBSEQUENTLY LIQUIDATES THE GOVERNMENT'S LOSS RESULTING FROM THE EMPLOYEE'S EMBEZZLEMENT OF ITS FUNDS, THERE IS NO AUTHORITY TO PAY TO SAID SURETY THE FUNDS ON DEPOSIT TO THE CREDIT OF THE EMPLOYEE IN THE "CIVIL SERVICE RETIREMENT AND DISABILITY FUND" UNDER THE DOCTRINE OF SUBROGATION.

DECISION BY COMPTROLLER GENERAL MCCARL, JANUARY 17, 1933:

THE UNITED STATES FIDELITY AND GUARANTY COMPANY, AS SURETY ON THE BOND OF ELLIOTT W. MACDONALD, FORMERLY ASSISTANT CASHIER IN THE OFFICE OF THE COLLECTOR OF CUSTOMS, TREASURY DEPARTMENT, HONOLULU, TERRITORY OF HAWAII, APPLIED NOVEMBER 14, 1932, FOR REVIEW OF SETTLEMENT DATED SEPTEMBER 24, 1932, BY WHICH WAS DISALLOWED ITS CLAIM FOR THE $114.77 DUE TO SAID ELLIOTT W. MACDONALD, REPRESENTING UNPAID SALARY FOR SERVICES, $48.42, AND THE SUM OF $66.35 TO HIS CREDIT IN THE RETIREMENT FUND.

IT APPEARS THAT THE UNITED STATES FIDELITY AND GUARANTY COMPANY ON AUGUST 2, 1930, BECAME SURETY ON THE $5,000 BOND GIVEN BY SAID ELLIOTT W. MACDONALD TO THE COLLECTOR OF CUSTOMS, PORT OF HONOLULU, TERRITORY OF HAWAII, FOR THE FAITHFUL PERFORMANCE OF HIS DUTIES AS ASSISTANT CASHIER IN THE OFFICE OF THE COLLECTOR OF CUSTOMS, HONOLULU, HAWAII; THAT SAID ELLIOTT W. MACDONALD WHILE HOLDING SUCH POSITION EMBEZZLED GOVERNMENT FUNDS TO THE AMOUNT OF $2,074.20; THAT SUBSEQUENTLY THE SURETY ON THE OFFICER'S SAID BOND MADE GOOD THE GOVERNMENT'S LOSS BY PAYMENTS AS FOLLOWS: $2,063.05 ON NOVEMBER 21, 1931, AND $11.15 ON MAY 14, 1932.

THE RECORD SHOWS THAT THERE IS DUE SAID ELLIOTT W. MACDONALD, AS UNPAID SALARY, THE SUM OF $48.42 FOR WHICH HAVE BEEN ISSUED TO HIM TWO TREASURY CUSTOMS SALARY CHECKS AS FOLLOWS: CHECK NO. 234, DATED SEPTEMBER 30, 1931, FOR $43.42, AND CHECK NO. 136, DATED OCTOBER 6, 1931, FOR $5; AND THAT SAID UNPAID SALARY CHECKS WERE TRANSMITTED TO THIS OFFICE ON MAY 4, 1932, BY THE COMMISSIONER OF CUSTOMS FOR DISPOSITION. THE RECORD SHOWS, ALSO, THAT THERE IS DUE SAID ELLIOTT W. MACDONALD THE SUM OF $66.35 ON DEPOSIT TO HIS CREDIT IN THE "CIVIL SERVICE RETIREMENT AND DISABILITY FUND," REPRESENTING THE RETIREMENT DEDUCTIONS MADE FROM THE SALARY OF SAID GOVERNMENT EMPLOYEE UNDER THE CIVIL-SERVICE EMPLOYEES' RETIREMENT ACT OF MAY 22, 1920, 41 STAT. 614, AND AMENDMENTS.

THE BONDING COMPANY CONTENDS THAT UNDER THE DOCTRINE OF SUBROGATION IT IS ENTITLED TO THE SAID UNPAID $114.77 DUE TO ELLIOTT W. MACDONALD.

WITH REFERENCE TO THE $48.42 UNPAID SALARY DUE THE DEFAULTING EMPLOYEE, IT APPEARS THAT INASMUCH AS THE SUM WAS IN POSSESSION OF THE UNITED STATES AT THE TIME THE SAID SURETY ON THE EMPLOYEE'S BOND LIQUIDATED THE GOVERNMENT'S LOSS RESULTING FROM HIS EMBEZZLEMENT OF ITS FUNDS, SUCH AMOUNT COULD PROPERLY HAVE BEEN ALLOWED AS A CREDIT IN THE SETTLEMENT WITH THE SURETY, IT NOT BEING REQUIRED TO OFFSET ANY OTHER INDEBTEDNESS TO THE UNITED STATES. IT NOW APPEARING THAT THE ACCOUNTS OF THE PRINCIPAL HAVE BEEN BALANCED AND CLOSED, THE $48.42 SHOULD BE PAID TO THE SURETY UNDER THE DOCTRINE OF SUBROGATION. SEE IN THIS CONNECTION 4 COMP. GEN. 10; 7 ID. 305; AND 7 ID. 757.

WITH REFERENCE TO THE $66.35 ON DEPOSIT TO THE CREDIT OF SAID ELLIOTT W. MACDONALD IN THE ,CIVIL SERVICE RETIREMENT AND DISABILITY FUND" THIS OFFICE HAS HELD THAT THE PRINCIPLE OF SUBROGATION IS NOT APPLICABLE TO REFUNDS OF CIVIL SERVICE RETIREMENT DEDUCTIONS WHICH ARE DUE TO A DEFAULTING EMPLOYEE OF THE UNITED STATES, IN FAVOR OF A SURETY WHICH MADE GOOD THE LOSS SUSTAINED BY THE GOVERNMENT ON ACCOUNT OF THE DEFAULT OF SUCH EMPLOYEE. SEE 7 COMP. GEN. 136; AND 7 ID. 335. IN VIEW OF THE FACTS AND CIRCUMSTANCES IN INSTANT MATTER, AS ABOVE SET FORTH, THERE WOULD APPEAR TO BE NO AUTHORITY TO PAY THE $66.35 RETIREMENT FUNDS OF ELLIOTT W. MACDONALD TO HIS SURETY UNDER THE DOCTRINE OF SUBROGATION, AND THE DISALLOWANCE OF SAID ITEM OF SURETY'S CLAIM, UPON REVIEW, IS SUSTAINED.