A-57361, APRIL 22, 1935, 14 COMP. GEN. 770

A-57361: Apr 22, 1935

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

VETERANS' ADMINISTRATION - ADJUSTED COMPENSATION - LIABILITY UNDER A BOND OF INDEMNITY THERE IS LIABILITY UNDER THE BOND OF INDEMNITY FURNISHED PURSUANT TO SECTION 705 OF THE WORLD WAR ADJUSTED COMPENSATION ACT. AS FOLLOWS: REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 27. - 99128 RECLAMATION FROM THE ENDORSERS OF THE THREE CHECKS WAS DENIED SINCE THEY WERE ISSUED TO THE PERSON WHO MADE APPLICATION THEREFOR. THERE WAS NO FORGERY INVOLVED. THE MATTER WAS SUBMITTED BY YOU FOR CONSIDERATION BY THIS ADMINISTRATION AS TO WHETHER RECOVERY OF THE AMOUNT OF THE LOSS COULD NOT BE EFFECTED UNDER THE TERMS OF THE BOND OF INDEMNITY SUBMITTED IN CONNECTION WITH THE ISSUANCE OF THE DUPLICATE ADJUSTED- SERVICE CERTIFICATE.

A-57361, APRIL 22, 1935, 14 COMP. GEN. 770

VETERANS' ADMINISTRATION - ADJUSTED COMPENSATION - LIABILITY UNDER A BOND OF INDEMNITY THERE IS LIABILITY UNDER THE BOND OF INDEMNITY FURNISHED PURSUANT TO SECTION 705 OF THE WORLD WAR ADJUSTED COMPENSATION ACT, AS AMENDED BY THE ACT OF MARCH 4, 1929, 45 STAT. 1561, AS A BASIS FOR ISSUANCE OF A DUPLICATE ADJUSTED SERVICE CERTIFICATE, THE ORIGINAL OF WHICH HAS BEEN LOST OR DESTROYED.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, APRIL 22, 1935:

WITH REFERENCE TO THE WORLD WAR ADJUSTED COMPENSATION CASE OF THOMAS E. MATHEWS, A-4052947, THERE HAS BEEN RECEIVED YOUR LETTER OF OCTOBER 13, 1934, DBC-H, AS FOLLOWS:

REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 27, 1934, RELATIVE TO THE CHECKS LISTED BELOW ISSUED IN PAYMENT OF FRAUDULENT LOANS MADE BY THE LITTLE ROCK, ARKANSAS, REGIONAL OFFICE OF THIS ADMINISTRATION ON THE SECURITY OF THE ABOVE NAMED VETERAN'S ORIGINAL ADJUSTED SERVICE CERTIFICATE.

CHART

CHECK NO.

DATE (VOUCHER AMOUNT DISBURSING OFFICER SYMBOL

NO.) OCT. 15, 1929 12289 $138.00E. D. DUNCAN ------ 99128 SEPT. 10, 1930 1921442.53 ----- DO ---------- 99128 MAR. 10, 1931 29969 598.50 ----- DO - --------- 99128

RECLAMATION FROM THE ENDORSERS OF THE THREE CHECKS WAS DENIED SINCE THEY WERE ISSUED TO THE PERSON WHO MADE APPLICATION THEREFOR, CONSEQUENTLY, THERE WAS NO FORGERY INVOLVED. THE MATTER WAS SUBMITTED BY YOU FOR CONSIDERATION BY THIS ADMINISTRATION AS TO WHETHER RECOVERY OF THE AMOUNT OF THE LOSS COULD NOT BE EFFECTED UNDER THE TERMS OF THE BOND OF INDEMNITY SUBMITTED IN CONNECTION WITH THE ISSUANCE OF THE DUPLICATE ADJUSTED- SERVICE CERTIFICATE. IT IS NOTED THAT A CHARGE WILL BE RAISED IN YOUR OFFICE AGAINST THOMAS E. MATHEWS, ALIAS BLACKIE TEAGARDEN, ALIAS J. C. TEAGARDEN, THE PERPETRATOR OF THE FRAUD, BUT THAT NO ACTION WOULD BE TAKEN THEREON UNTIL A REPORT IS RECEIVED WHY THIS ADMINISTRATION MAY NOT PROCEED TO COLLECT UNDER THE BOND OF INDEMNITY.

YOUR ATTENTION IS INVITED TO THE ANALOGOUS CASE OF ALBERT JOSEPH MATHIEU, A-14614, WHEREIN A DUPLICATE ADJUSTED-SERVICE CERTIFICATE WAS PASSED TO THE VETERAN UPON THE SUBMISSION OF SATISFACTORY EVIDENCE AS TO THE LOSS OF HIS ORIGINAL ADJUSTED-SERVICE CERTIFICATE AND AN EXECUTED BOND OF INDEMNITY. THE ORIGINAL CERTIFICATE WAS HYPOTHECATED THROUGH THE CHARLOTTE, NORTH CAROLINA, REGIONAL OFFICE OF THIS ADMINISTRATION FOR A LOAN OF $237.00 MADE JANUARY 6, 1930, PAID BY CHECK NO. 41316 UNDER SYMBOL 99111. IT WAS DETERMINED AS A RESULT OF AN INVESTIGATION CONDUCTED BY THE SECRET SERVICE DIVISION, U.S. TREASURY DEPARTMENT IN CONNECTION WITH THE HYPOTHECATION OF BOTH THE ORIGINAL AND DUPLICATE-ADJUSTED SERVICE CERTIFICATES THAT THE LOAN ON THE ORIGINAL CERTIFICATE WAS PROCURED BY AN IMPOSTOR, ALBERT NIELSON, WHO WAS NEVER APPREHENDED BY THE SECRET SERVICE OPERATIVES.

RECLAMATION PROCEEDINGS WERE INITIATED TO RECOVER FROM THE ENDORSERS OF THE CHECK FRAUDULENTLY NEGOTIATED. RECLAMATION, HOWEVER, WAS DENIED BY YOU IN ACCORDANCE WITH 9 COMP. GEN. 476. IN VIEW OF THE FACT THAT THE BOND OF INDEMNITY WAS TO PROTECT THE UNITED STATES AGAINST THE PAYMENT OF ANY SUM ON ACCOUNT OF THE ISSUANCE OF THE ORIGINAL CERTIFICATE, THE AMOUNT OF THE FRAUDULENT LOAN WAS PLACED AS A CHARGE AGAINST THE ACCOUNT OF MR. MATHIEU BUT WAS LATER REMOVED.

THE MATTER WAS REFERRED TO THE SOLICITOR OF THIS ADMINISTRATION WHO, IN HIS OPINION OF SEPTEMBER 18, 1931, STATED THAT WHILE THE BOND WAS TO SECURE THE UNITED STATES AGAINST PAYMENT OF ANY SUM WHATSOEVER ON ACCOUNT OF THE ISSUANCE OF THE ORIGINAL CERTIFICATE, THE OBLIGATION OF THE BOND WAS TO PAY TO THE UNITED STATES ANY AND ALL SUMS WHATEVER WHICH THE UNITED STATES MIGHT BE CALLED UPON TO PAY, INCLUDING INTEREST AND COSTS, ON ACCOUNT OF THE ESTABLISHMENT OF ANY VALID ADVERSE CLAIM TO THE PROCEEDS OF THE CERTIFICATE OR ANY PART THEREOF. IT WAS STATED FURTHER BY THE SOLICITOR THAT, IN HIS OPINION, THE CLAIM OF AN IMPOSTER IS NOT A VALID CLAIM AND THAT AS A RESULT THEREOF THE OBLIGATION OF THE BOND DID NOT COVER SUCH PAYMENTS. THE OPINION OF THE SOLICITOR WAS APPROVED BY THE ADMINISTRATOR ON SEPTEMBER 18, 1931. IN VIEW OF THE FACT THAT THE VETERAN AS PRINCIPAL WAS NOT LIABLE FOR THE AMOUNT OF THE LOSS OCCASIONED BY THE FRAUDULENT LOAN, NO ACTION WAS INITIATED TO RECOVER FROM THE CORPORATE SURETY ON THE BOND OF INDEMNITY.

IN VIEW OF THE OPINION OF THE SOLICITOR OF THIS ADMINISTRATION AND OF ITS APPROVAL BY THE ADMINISTRATOR AND THE FACT THAT THE LLOYDS INSURANCE COMPANY OF AMERICA, THE CORPORATE SURETY, HAS BEEN LIQUIDATED, NO ACTION WILL BE INITIATED IN THE INSTANT CASE TO RECOVER FROM THE CORPORATE SURETY ON THE BOND OF INDEMNITY. THE AMOUNT INVOLVED IS BEING REPORTED TO YOUR OFFICE AS AN UNCOLLECTIBLE INDEBTEDNESS TO THE UNITED STATES.

THE AUTHORITY FOR ISSUING DUPLICATE ADJUSTED-SERVICE CERTIFICATES IS CONTAINED IN SECTION 705 OF THE WORLD WAR ADJUSTED COMPENSATION ACT, AS AMENDED, 45 STAT. 1561, WHICH PROVIDES AS FOLLOWS:

WHENEVER IT APPEARS TO THE DIRECTOR, BY EVIDENCE CLEAR AND SATISFACTORY TO HIM, THAT ANY ADJUSTED-SERVICE CERTIFICATE HAS, WITHOUT BAD FAITH UPON THE PART OF THE PERSON ENTITLED TO PAYMENT THEREON, BEEN LOST OR DESTROYED, AND SUCH ADJUSTED-SERVICE CERTIFICATE IS IDENTIFIED BY NUMBER AND DESCRIPTION, HE SHALL, UNDER SUCH REGULATIONS AND WITH SUCH RESTRICTIONS AS TO TIME AND RETENTION FOR SECURITY OR OTHERWISE AS HE MAY PRESCRIBE, ISSUE A DUPLICATE THEREOF OF LIKE VALUE IN ALL RESPECTS TO THE ORIGINAL CERTIFICATE AND SO MARKED AS TO SHOW THE ORIGINAL NUMBER OF THE CERTIFICATE LOST OR DESTROYED AND THE DATE THEREOF. THE LAWFUL HOLDER OF SUCH CERTIFICATE WHO MAKES APPLICATION FOR A DUPLICATE SHALL FILE IN THE UNITED STATES VETERANS' BUREAU A BOND IN A PENAL SUM OF THE FACE VALUE OF SUCH LOST OR DESTROYED CERTIFICATE, WITH TWO GOOD AND SUFFICIENT SURETIES, RESIDENTS OF THE UNITED STATES, TO BE APPROVED BY THE DIRECTOR, WITH CONDITION TO INDEMNIFY AND SAVE HARMLESS THE UNITED STATES FROM ANY CLAIM UPON SUCH LOST OR DESTROYED CERTIFICATE; EXCEPT THAT A DUPLICATE CERTIFICATE SHALL BE ISSUED WITHOUT THE REQUIREMENT OF A BOND WHEN IT IS SHOWN TO THE SATISFACTION OF THE DIRECTOR THAT THE ORIGINAL CERTIFICATE, (1) BEFORE DELIVERY TO THE VETERAN, HAS BEEN LOST, DESTROYED, WHOLLY OR IN PART, OR SO DEFACED AS TO IMPAIR ITS VALUE, AND (2) AFTER DELIVERY TO THE VETERAN, HAS, WITHOUT BAD FAITH UPON THE PART OF THE PERSON ENTITLED TO PAYMENT THEREON, BEEN PARTIALLY DESTROYED OR DEFACED SO AS TO IMPAIR ITS VALUE, IS CAPABLE OF IDENTIFICATION, AND IS SURRENDERED BY SUCH PERSON TO THE VETERANS' BUREAU.

IN PURSUANCE OF THE STATUTE, SUPRA, THERE WERE ISSUED BY YOUR ADMINISTRATION THE FOLLOWING REGULATIONS RELATIVE TO THE ISSUANCE OF DUPLICATE ADJUSTED-SERVICE CERTIFICATES WITH BOND, INCORPORATED AS SECTION R-3703, REGULATIONS AND PROCEDURE, VETERANS' ADMINISTRATION:

ISSUANCE OF DUPLICATE ADJUSTED SERVICE CERTIFICATE WITH BOND.---AN INDEMNITY BOND WILL BE REQUIRED AS A PREREQUISITE TO THE ISSUANCE OF A DUPLICATE ADJUSTED SERVICE CERTIFICATE IN ALL CASES WHERE THE CERTIFICATE WAS LOST AFTER RECEIPT BY THE VETERAN, OR AFTER RECEIPT BY THE VETERAN WAS DEFACED OR MUTILATED AND CANNOT BE IDENTIFIED TO THE SATISFACTION OF THE DMINISTRATOR; PROVIDED THE LOSS, DEFACEMENT, OR MUTILATION WAS WITHOUT BAD FAITH ON THE PART OF THE VETERAN OR THE PERSON ENTITLED TO THE PAYMENT THEREON. THE BOND MUST BE IN THE MANNER AND FORM PRESCRIBED BY THE VETERANS' ADMINISTRATION AND FOR AN AMOUNT EQUAL TO THE FACE VALUE OF THE CERTIFICATE WITH SURETY OR SURETIES RESIDENTS OF THE UNITED STATES AND SATISFACTORY TO THE ADMINISTRATOR, WITH CONDITION TO INDEMNIFY AND SAVE HARMLESS THE UNITED STATES FROM ANY CLAIM ON ACCOUNT OF SUCH CERTIFICATE. IF THE CERTIFICATE WAS DEFACED OR MUTILATED THE VETERAN OR PERSON ENTITLED TO PAYMENT THEREON WILL BE REQUIRED TO SURRENDER TO THE VETERANS' ADMINISTRATION THE CERTIFICATE OR SO MUCH THEREOF AS MAY REMAIN (JUNE 5, 1930).

IT IS UNDERSTOOD THAT INDEMNITY BONDS, WHEN REQUIRED TO SECURE THE ISSUANCE OF DUPLICATE ADJUSTED SERVICE CERTIFICATES, PURSUANT TO THE CONDITIONS OF THE STATUTE AND REGULATIONS ABOVE QUOTED, ARE PREPARED ON VETERANS' ADMINISTRATION INSURANCE FORM 764, ENTITLED,"BOND OF INDEMNITY TO THE UNITED STATES," WHICH FORM, AFTER SETTING FORTH THE NAMES OF THE PARTIES AND THE EXTENT OF THE OBLIGATION, STIPULATES THE FOLLOWING RECITALS AND CONDITIONS:

WHEREAS AN ADJUSTED SERVICE CERTIFICATE, NUMBER --------- , FURTHER IDENTIFIED BY NUMBER A- ------------- , DATED -------------- , 19 -- , WAS ISSUED, PURSUANT TO THE WORLD WAR ADJUSTED COMPENSATION ACT, TO -- ------- -------------------- , A VETERAN OF THE WORLD WAR;

WHEREAS EVIDENCE OF THE LOSS, THEFT, DEFACING, MUTILATION, OR DESTRUCTION OF SAID CERTIFICATE, TOGETHER WITH REQUEST FOR A DUPLICATE OF SAID CERTIFICATE BY THE LAWFUL HOLDER, HAS BEEN SUBMITTED TO THE ADMINISTRATOR OF VETERANS' AFFAIRS; AND

WHEREAS THE ADMINISTRATOR OF VETERANS' AFFAIRS, BY VIRTUE OF THE WORLD WAR ADJUSTED COMPENSATION ACT, AS AMENDED, REQUIRES THE PARTY THUS SITUATED TO GIVE A BOND OF INDEMNITY WITH SATISFACTORY SURETY TO THE UNITED STATES BEFORE THE RELIEF DESIRED WILL BE GRANTED, AND THE ADMINISTRATOR OF VETERANS' AFFAIRS HAVING ACCEPTED THE EVIDENCE SUBMITTED BY THE APPLICANT AS SUFFICIENT TO WARRANT ISSUANCE OF A DUPLICATE OF SAID CERTIFICATE UPON SAID APPLICANT GIVING A PROPER BOND OF INDEMNITY;

NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, THAT IF THE ABOVE-BOUNDED OBLIGORS, THEIR HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS, OR ASSIGNS, OR ANY OF THEM, SHALL PAY OR CAUSE TO BE PAID TO THE UNITED STATES ANY AND ALL SUMS WHATEVER WHICH THE UNITED STATES MAY BE CALLED UPON TO PAY, INCLUDING INTEREST AND COSTS, ON ACCOUNT OF THE ESTABLISHMENT OF ANY VALID ADVERSE CLAIM TO THE PROCEEDS OF THE ABOVE- DESCRIBED ADJUSTED-SERVICE CERTIFICATE OR ANY PART THEREOF, AND SHALL WELL AND TRULY INDEMNIFY AND SAVE HARMLESS THE UNITED STATES FROM ANY CLAIM ON ACCOUNT OF SAID ADJUSTED-SERVICE CERTIFICATE AND FROM ALL DAMAGE, LOSS, COSTS, CHARGES, AND EXPENSES WHICH THE UNITED STATES MAY SUSTAIN, INCUR, OR BE LIABLE FOR IN CONSEQUENCE OF ANY SUCH CLAIM OR OF THE GRANTING OF RELIEF ON ACCOUNT OF SAID ADJUSTED-SERVICE CERTIFICATE, WITH INTEREST FROM THE DATE OF SUCH PAYMENT, AND ANY AND ALL COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH, THEN THIS OBLIGATION TO BE VOID; OTHERWISE TO BE AND REMAIN IN FULL FORCE AND EFFECT.

THE VIEW OF YOUR ADMINISTRATION THAT THE OBLIGATION UNDER A BOND WORDED AS ABOVE MAY NOT COVER A LOSS SUSTAINED BY THE GOVERNMENT IN A CASE SUCH AS HERE, WHERE THE ORIGINAL CERTIFICATE IS HYPOTHECATED FOR A LOAN BY AN IMPOSTOR, RESTS SOLELY UPON THE MEANING AND EFFECT OF THE WORD ,VALID" AS APPEARING IN THE PHRASE,"ON ACCOUNT OF THE ESTABLISHMENT OF ANY VALID ADVERSE CLAIM TO THE PROCEEDS OF THE ABOVE DESCRIBED ADJUSTED-SERVICE CERTIFICATE OR ANY PART THEREOF," CONTAINED IN THE "CONDITION" SECTION OF THE BOND. IT IS TO BE NOTED IN SUCH CONNECTION THAT THE WORD VALID" DOES NOT APPEAR IN THE LAW PRESCRIBING THE BOND REQUIREMENTS AND THUS THE ADMINISTRATION VIEW SEEMS TO BE THAT INASMUCH AS THE VETERANS' ADMINISTRATION FAILED TO FOLLOW THE STATUTE IN DRAWING UP THE BOND THE SECURITY AGAINST LOSS REQUIRED THEREBY TO BE OBTAINED WAS NOT OBTAINED.

IN DECISION OF MARCH 9, 1934, TO THE ATTORNEY GENERAL, A-53960, INVOLVING THE ADJUSTED-COMPENSATION CASE OF LEVY CHEATWOOD A-2180165, THE FOLLOWING WAS SAID WITH RESPECT TO THE OBJECT FOR FURNISHING AN INDEMNITY BOND WHEN A DUPLICATE CERTIFICATE IS FOR ISSUANCE:

THE PRIMARY PURPOSE OF REQUIRING THE EXECUTION OF AN INDEMNITY BOND RUNNING TO THE UNITED STATES IN CASES SUCH AS HERE PRESENTED, IS TO INDEMNIFY THE GOVERNMENT IN THE CASE OF A LOSS SUSTAINED BY IT UPON MAKING LOANS ON THE BASIS OF THE ORIGINAL CERTIFICATE. * * *

ALSO, IN A LATER DECISION TO THE ATTORNEY GENERAL, A-55478, DATED MAY 26, 1934, INVOLVING THE CASE OF CLAY P. KIRKPATRICK, THERE WAS STATED THE FOLLOWING WITH RESPECT TO THE LEGAL STATUS OF A DUPLICATE CERTIFICATE AND THE PURPOSE FOR DEMANDING THE EXECUTION OF AN INDEMNITY BOND IN SUCH CASES:

WHEN A DUPLICATE ADJUSTED-SERVICE CERTIFICATE IS ISSUED PURSUANT TO THE PROVISIONS OF SECTION 705 OF THE WORLD WAR ADJUSTED COMPENSATION ACT, AS AMENDED, 44 STAT. 830; ID. 1390 (45 STAT. 1561), SUCH DUPLICATE CERTIFICATE SUPERSEDES THE ORIGINAL AND THUS BECOMES, IN FACT, THE LEGAL CERTIFICATE--- THE ORIGINAL THEREOF THEREBY CEASING TO BE THE LEGAL ONE. BONDS OF INDEMNITY, WHEN REQUIRED, IN CERTAIN CASES OF LOST OR DESTROYED CERTIFICATES, ARE FURNISHED FOR THE PURPOSE OF INDEMNIFYING THE UNITED STATES FOR ANY LOSS ARISING OUT OF THE ISSUANCE OF THE ORIGINAL CERTIFICATE. * * *

COPIES OF THESE DECISIONS ARE FORWARDED FOR YOUR INFORMATION.

IN ARRIVING AT THE CONCLUSION STATED IN THE LETTER, SUPRA, OF YOUR ADMINISTRATION, THERE SEEMS TO HAVE BEEN OVERLOOKED A VERY VITAL POINT INVOLVED IN CASES OF THE CLASS UNDER CONSIDERATION HERE, NAMELY, THE RIGHTS OF INNOCENT THIRD PARTIES. IT IS A RULE OF NEGOTIABLE INSTRUMENT LAW THAT WHEN A CHECK ISSUED BY A GOVERNMENT DISBURSING OFFICER PASSES INTO THE HANDS OF A BONA FIDE HOLDER FOR VALUE, PAYMENT THEREOF CANNOT BE WITHHELD OR DENIED BY THE GOVERNMENT ON THE GROUND THAT, THROUGH A MISTAKE OF FACT, THE CHECK WAS IMPROPERLY ISSUED. CF. 6 COMP. GEN. 532; 9 ID. 76; AND 12 ID 492. CONSEQUENTLY, WHILE AN IMPOSTOR, OR A VETERAN HIMSELF (WHERE HE OBTAINS LOANS ON BOTH THE ORIGINAL AND DUPLICATE CERTIFICATES AND WHO, IN FACT, IS IN NO DIFFERENT POSITION IN SUCH A CASE FROM THAT OF AN IMPOSTOR OR THIEF) MAY NOT ASSERT A VALID ADVERSE CLAIM AGAINST THE GOVERNMENT, THE TREASURER OF THE UNITED STATES, NEVERTHELESS, MUST HONOR GOVERNMENT CHECKS ISSUED UNDER THE CIRCUMSTANCES DESCRIBED WHEN THEY ARE PRESENTED FOR PAYMENT BY BONA FIDE HOLDERS, FOR VALUE, ETC. OBVIOUSLY, THEREFORE, SUCH CLAIMS ARE VALID ADVERSE CLAIMS WITHIN THE MEANING OF THE PROVISIONS OF THE INDEMNITY BOND, AND INDEMNITORS ON SUCH A BOND CERTAINLY MAY NOT GROUND A DEFENSE SIMPLY ON THAT AN IMPOSTOR OR ANY OTHER PERSON OCCUPYING A SIMILAR POSITION HAS NO DIRECT VALID CLAIM AGAINST THE UNITED STATES IN THE FIRST INSTANCE.

IT IS PERTINENT TO NOTE IN THIS CONNECTION THAT ONE OF THE RECITALS IN THE BOND IS TO THE EFFECT THAT THERE HAS BEEN EVIDENCE OF "LOSS" OR "THEFT" OF THE ORIGINAL CERTIFICATE. SUCH A RECITAL IS SUFFICIENT TO PUT INDEMNITORS ON NOTICE THAT THE GOVERNMENT MIGHT HAVE TO SUFFER A ,LOSS" BECAUSE OF SUCH ORIGINAL CERTIFICATE FALLING INTO THE HANDS OF PERSONS HAVING NO RIGHT, TITLE, OR INTEREST THEREIN BUT WHO, NEVERTHELESS, FRAUDULENTLY APPLY FOR AND RECEIVE LOAN CHECKS THEREUNDER, AND OF THE SUBSEQUENT RIGHT OF INNOCENT THIRD PERSONS INTERVENING IN RESPECT OF SUCH CHECKS, THUS CONVERTING AN OTHERWISE "INVALID CLAIM," AS BETWEEN IMMEDIATE PARTIES, INTO A "VALID ADVERSE CLAIM," AS BETWEEN A THIRD PARTY AND THE GOVERNMENT.

THE CONSTRUCTION PLACED BY YOUR ADMINISTRATION ON THE PROVISIONS OF AN INDEMNITY BOND GIVEN TO SECURE THE ISSUANCE OF A DUPLICATE ADJUSTED SERVICE CERTIFICATE WOULD IN EFFECT NULLIFY THE VERY PURPOSE FOR WHICH A BOND IS REQUIRED TO BE GIVEN, UNDER THE STATUTES AND REGULATIONS, NAMELY,"TO INDEMNIFY AND SAVE HARMLESS THE UNITED STATES FROM ANY CLAIM UPON SUCH LOST OR DESTROYED CERTIFICATE," AND, IF SUCH CONSTRUCTION WERE TO PREVAIL, IT IS CLEAR THAT THE FORM OF INDEMNITY BOND PRESCRIBED BY YOUR ADMINISTRATION WOULD BE INADEQUATE TO MEET THE REQUIREMENTS OF THE STATUTE AND REGULATIONS. FURTHERMORE, THERE IS NO AUTHORITY IN YOUR ADMINISTRATION TO PRESCRIBE A FORM OF BOND THAT AFFORDS THE UNITED STATES LESS PROTECTION THAN THAT SPECIFICALLY PRESCRIBED IN THE STATUTES AND REGULATIONS AND THERE WOULD BE FOR IMMEDIATE CONSIDERATION IN THAT CONNECTION, IF YOUR VIEWS WERE TO PREVAIL, THE QUESTION OF WHETHER THE FORM OF THE BOND SHOULD NOT BE REVISED SO AS TO AFFORD THE UNITED STATES THE MAXIMUM PROTECTION SOUGHT TO BE GIVEN BY THE STATUTE. IN VIEW OF WHAT HAS BEEN STATED ABOVE, I AM CONSTRAINED TO HOLD THAT, UNLESS AND UNTIL THERE BE A JUDICIAL DETERMINATION OTHERWISE, THERE IS LIABILITY UNDER THE FORM OF BOND FURNISHED HERE, AND IN OTHER LIKE CASES, AND THAT APPROPRIATE ACTION SHOULD BE TAKEN BY YOUR ADMINISTRATION TO RECOVER FROM THE INDEMNITORS THE LOSS SUSTAINED BY THE UNITED STATES IN SUCH CASES.

IN YOUR LETTER, SUPRA, IT IS STATED "THE LLOYDS INSURANCE CO. OF AMERICA, THE CORPORATE SURETY, HAS BEEN LIQUIDATED" AND THAT "NO ACTION WILL BE INITIATED IN THE INSTANT CASE TO RECOVER FROM THE CORPORATE SURETY ON THE BOND OF INDEMNITY.' IN THIS CONNECTION THE RECORDS OF THIS OFFICE SHOW THAT THE COMPANY REFERRED TO HAS NOT BEEN LIQUIDATED BUT THAT IT IS MERELY IN PROCESS OF LIQUIDATION. DEPARTMENT OF JUSTICE CIRCULAR NO. 2453, DATED AUGUST 30, 1933, ADVISES THAT ALL CLAIMS OF THE GOVERNMENT AGAINST THE LLOYDS INSURANCE CO. OF AMERICA SHOULD BE FORWARDED TO THE DEPARTMENT OF JUSTICE IN ORDER THAT THEY MAY BE TRANSMITTED TO THE UNITED STATES ATTORNEY AT NEW YORK, N.Y., WITH APPROPRIATE INSTRUCTIONS.