A-67262, MARCH 4, 1936, 15 COMP. GEN. 752

A-67262: Mar 4, 1936

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CHECKS - IMPROPER INDORSEMENTS - RECLAMATION - LIABILITY OF TREASURER OF THE UNITED STATES WHERE A CHECK IS NEGOTIATED AFTER THE PAYEE'S DEATH ON AN INDORSEMENT AS ADMINISTRATRIX OF THE DECEDENT'S ESTATE WHEN IN FACT LETTERS OF ADMINISTRATION WERE NOT ISSUED. THE LIABILITY OF A SECOND INDORSING BANK GUARANTEEING ALL PRIOR INDORSEMENTS MAY NOT BE AVOIDED ON THE GROUNDS THAT SAID BANK IS UNABLE TO RECOVER FROM ITS PRIOR INDORSER BECAUSE OF GOVERNMENT DELAY IN PROSECUTION OF ITS CLAIM. THE LETTER OF AUTHORIZATION WAS FROM THE CLAIMS DIVISION OF THE GENERAL ACCOUNTING OFFICE AND GAVE THE REFERENCE CU-0386582-JHC. THE CASE WAS FORWARDED TO THE DEPARTMENT OF JUSTICE FOR SUCH ACTION AS WAS DEEMED INDICATED FOR THE PROTECTION OF THE INTERESTS OF THE UNITED STATES.

A-67262, MARCH 4, 1936, 15 COMP. GEN. 752

CHECKS - IMPROPER INDORSEMENTS - RECLAMATION - LIABILITY OF TREASURER OF THE UNITED STATES WHERE A CHECK IS NEGOTIATED AFTER THE PAYEE'S DEATH ON AN INDORSEMENT AS ADMINISTRATRIX OF THE DECEDENT'S ESTATE WHEN IN FACT LETTERS OF ADMINISTRATION WERE NOT ISSUED, THE LIABILITY OF A SECOND INDORSING BANK GUARANTEEING ALL PRIOR INDORSEMENTS MAY NOT BE AVOIDED ON THE GROUNDS THAT SAID BANK IS UNABLE TO RECOVER FROM ITS PRIOR INDORSER BECAUSE OF GOVERNMENT DELAY IN PROSECUTION OF ITS CLAIM, BUT IN THE EVENT OF UNSUCCESSFUL PROSECUTION OF RECLAMATION THERE REMAINS THE MATTER OF THE LIABILITY OF THE TREASURER OF THE UNITED STATES FOR HIS FAILURE TO DECLINE PAYMENT THEREON.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, MARCH 4, 1936:

CONSIDERATION HAS BEEN GIVEN TO LETTER FROM THE ACTING GENERAL COUNSEL OF YOUR DEPARTMENT DATED JUNE 15, 1935, AS FOLLOWS:

ON OCTOBER 4, 1933, YOUR OFFICE AUTHORIZED RECLAMATION FOR COMPENSATION CHECK NO. 876,688, DATED OCTOBER 1, 1925, FOR $100, DRAWN BY P. J. CARNEY, SYMBOL 11-253, TO THE ORDER OF LEO L. KRZYRANOWSKI. THE LETTER OF AUTHORIZATION WAS FROM THE CLAIMS DIVISION OF THE GENERAL ACCOUNTING OFFICE AND GAVE THE REFERENCE CU-0386582-JHC.

RECLAMATION HAS BEEN RESISTED BY THE PRESENTING BANK ON THE GROUND OF DELAY IN NOTIFYING THAT BANK (MARKET STREET NATIONAL BANK OF PHILADELPHIA) OF THE IMPROPER NEGOTIATION, WHICH DELAY RESULTED IN A LOSS TO THE BANK BY REASON OF THE INSOLVENCY OF A PRIOR ENDORSING BANK.

ON MAY 15, 1935, THE CASE WAS FORWARDED TO THE DEPARTMENT OF JUSTICE FOR SUCH ACTION AS WAS DEEMED INDICATED FOR THE PROTECTION OF THE INTERESTS OF THE UNITED STATES. I AM NOW IN RECEIPT OF A LETTER FROM ASSISTANT ATTORNEY GENERAL SWEENEY, A COPY OF WHICH IS INCLOSED HEREWITH. THE REFERENCE IN THAT LETTER TO THE CASE OF THE UNITED STATES V. LADD AND TILTON NATIONAL BANK SHOULD BE TO 43 FED./2ND) 665. IN VIEW OF THE ATTITUDE OF THE DEPARTMENT OF JUSTICE IT IS REQUESTED THAT I BE ADVISED WHETHER OR NOT RECLAMATION PROCEEDINGS MAY BE ABANDONED AND THE CHARGE REMOVED FROM THE TREASURER'S ACCOUNT.

THE ASSISTANT ATTORNEY GENERAL, IN THE LETTER REFERRED TO, STATES IN PART,"IT WOULD NOT APPEAR THAT THE GOVERNMENT CAN ESTABLISH ITS CLAIM IN THE INSTANT CASE. HOWEVER, BEFORE TREATING THIS MATTER AS CLOSED ON ITS RECORDS, THE DEPARTMENT WOULD APPRECIATE AN EXPRESSION OF YOUR VIEWS.'

THE SUBJECT CHECK WAS ISSUED TO COVER DISABILITY COMPENSATION PURSUANT TO THE PROVISIONS OF THE WORLD WAR VETERANS' ACT OF 1924, AS AMENDED, AND WAS RECEIVED AND NEGOTIATED SUBSEQUENT TO THE PAYEE'S DEATH ON SEPTEMBER 21, 1925, BY HIS WIDOW WHO ENDORSED THE CHECK AS ADMINISTRATRIX OF THE DECEDENT'S ESTATE. IT LATER DEVELOPED THAT THE PAYEE DIED INTESTATE AND, AS HE LEFT NO ESTATE, LETTERS OF ADMINISTRATION WERE NOT ISSUED. IT IS THUS APPARENT THAT THE CASHING BANK--- THE BOZAK STATE BANK OF SCRANTON, PENNSYLVANIA--- HONORED THE CHECK ON AN IMPROPER ENDORSEMENT WITHOUT ASCERTAINING THE AUTHORITY OF THE PERSON ENDORSING THE CHECK, AND IN SUCH CIRCUMSTANCES IT BECAME LIABLE FORTHWITH ON THE BREACH OF ITS ENDORSEMENT CONTRACT GUARANTEEING THE GENUINENESS OF ALL PRIOR ENDORSEMENTS. UNITED STATES V. NATIONAL BANK OF COMMERCE, 205 FED.REP. 533. SEE ALSO, 11 COMP. GEN. 48; ID. 447; 14 ID. 221.

HOWEVER, IT NOW APPEARS THE CASHING BANK IS INSOLVENT AND THE SECOND INDORSING BANK--- THE MARKET STREET NATIONAL BANK OF PHILADELPHIA, PENNSYLVANIA--- ALSO REFERRED TO AS THE PRESENTING BANK, IS RESISTING RECLAMATION ON THE GROUNDS THAT DELAY IN INSTITUTING RECLAMATION PROCEEDINGS HAS JEOPARDIZED ITS POSITION INASMUCH AS IT CANNOT SEEK RECOURSE FROM ITS IMMEDIATE INSOLVENT INDORSER. THE INDORSEMENT OF THE MARKET STREET NATIONAL BANK GUARANTEED ALL PRIOR INDORSEMENTS, AND BY SUCH INDORSEMENT A LIABILITY WAS ASSUMED BY IT WHICH CANNOT BE AVOIDED OR EVADED MERELY BECAUSE THE BANK IS UNABLE TO RECOVER FROM ITS PRIOR INDORSER.

WITH RESPECT TO THE BANK'S CONTENTION THAT THE GOVERNMENT UNDULY DELAYED THE PROSECUTION OF ITS CLAIM ON THE CHECK, IT IS A WELL SETTLED PRINCIPLE OF LAW THAT LACHES MAY NOT BE IMPUTED TO THE GOVERNMENT IN ITS CHARACTER AS SOVEREIGN AND THAT THE GOVERNMENT IS NOT LIABLE FOR THE NONFEASANCE, MISFEASANCE, OR NEGLIGENCE OF ITS OFFICERS.

IN VIEW OF THE FOREGOING, THE STATEMENT OF THE DEPARTMENT OF JUSTICE THAT IT DOES NOT APPEAR THE GOVERNMENT CAN ESTABLISH ITS CLAIM IN THE INSTANT CASE IS NOT UNDERSTOOD.

WHILE ON THE BASIS HEREIN SHOWN THERE APPEARS NO QUESTION OF THE LIABILITY OF THE PRESENTING BANK, IT APPEARS, ALSO, THAT THE TREASURER OF THE UNITED STATES HONORED THE CHECK IN QUESTION UPON AN IMPROPER INDORSEMENT, THE CHECK NOT BEING INDORSED AS DRAWN AND APPARENTLY NO SHOWING WAS MADE THAT THE FIRST INDORSER OF SAID CHECK WAS ENTITLED TO PAYMENT. THEREFORE, I HAVE TO ADVISE THAT UPON THE FACTS APPEARING AND IN SPECIFIC ANSWER TO THE SUBMISSION, RECLAMATION PROCEEDINGS SHOULD NOT BE ABANDONED. IT MAY BE ADDED, HOWEVER, THAT IN THE EVENT OF AN UNSUCCESSFUL PROSECUTION OF RECLAMATION THERE WILL BE FOR CONSIDERATION WHETHER THERE SHALL REMAIN THE CHARGE WHICH HAS BEEN RAISED IN THE TREASURER'S ACCOUNT FOR THE AMOUNT OF THE CHECK IN VIEW OF THE FAILURE OF THAT OFFICIAL TO DECLINE PAYMENT WHEN THE CHECK WAS PRESENTED.

THE RECLAMATION FILE IS RETURNED FOR FURTHER ACTION AS HEREIN INDICATED.