A-72913, MAY 5, 1936, 15 COMP. GEN. 960

A-72913: May 5, 1936

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ALTHOUGH THERE WAS A FAILURE OF THE SECURITY. AS FOLLOWS: RECEIPT IS ACKNOWLEDGED OF LETTER DATED JANUARY 14. ACTION WILL BE TAKEN TO SECURE A REFUND OF THE BALANCE OF THE OVERPAYMENT FROM THE VETERAN. WITH RESPECT TO THE BALANCE DUE TO THE UNITED STATES FROM THE VETERAN IT IS DESIRED TO BRING TO YOUR ATTENTION THE PROVISIONS OF PUBLIC ACT NO. 425. THEN THE ADMINISTRATOR SHALL (1) PAY OR DISCHARGE SUCH UNPAID PRINCIPAL AND INTEREST AS IS NECESSARY TO MAKE THE CERTIFICATE AVAILABLE FOR PAYMENT UNDER THIS ACT. IN THE INSTANT CASE THE REDUCTION IN THE AMOUNT OF SERVICE CREDIT DUE TO THE VETERAN WAS BROUGHT TO THE ATTENTION OF THE VETERANS' ADMINISTRATION BY A COMMUNICATION FROM THE WAR DEPARTMENT UNDER DATE OF DECEMBER 4.

A-72913, MAY 5, 1936, 15 COMP. GEN. 960

INTEREST - ADJUSTED COMPENSATION CERTIFICATE LOANS THE ADJUSTED COMPENSATION PAYMENT ACT OF 1936, 49 STAT. 1099, DOES NOT JUSTIFY MODIFICATION OF THE RULE OF CHARGING INTEREST UNTIL PAID ON A LOAN SECURED BY A WORLD WAR ADJUSTED COMPENSATION CERTIFICATE, ALTHOUGH THERE WAS A FAILURE OF THE SECURITY, THE CERTIFICATE WHICH APPEARED LEGAL WHEN ISSUED HAVING LATER BEEN CANCELED BECAUSE OF SUBSEQUENTLY DISCLOSED FACTS.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, MAY 5, 1936:

THERE HAS BEEN CONSIDERED THE MATTER PRESENTED IN YOUR LETTER OF MARCH 25, 1936, AS FOLLOWS:

RECEIPT IS ACKNOWLEDGED OF LETTER DATED JANUARY 14, 1936, MAKING REFERENCE TO ADMINISTRATIVE VOUCHER NO. 1913, SUBMITTED TO YOUR OFFICE FOR PREAUDIT. THIS VOUCHER INCLUDED, AMONG OTHER ITEMS, A PAYMENT TO THE TREASURER OF THE UNITED STATES IN THE AMOUNT OF $31.00 TO BE CREDITED TO THE INDEBTEDNESS OF THE VETERAN, JAMES G. CARR, A-1201253, BECAUSE OF A LOAN OF $497.50 OBTAINED BY HIM ON AN ADJUSTED SERVICE CERTIFICATE ERRONEOUSLY ISSUED TO HIM. THE AMOUNT OF THE PAYMENT, $31.00, HAS BEEN CREDITED TO THE INDEBTEDNESS OF THE VETERAN. ACTION WILL BE TAKEN TO SECURE A REFUND OF THE BALANCE OF THE OVERPAYMENT FROM THE VETERAN.

WITH RESPECT TO THE BALANCE DUE TO THE UNITED STATES FROM THE VETERAN IT IS DESIRED TO BRING TO YOUR ATTENTION THE PROVISIONS OF PUBLIC ACT NO. 425, 74TH CONGRESS, CITED AS THE ADJUSTED COMPENSATION PAYMENT ACT, 1936. THIS ACT PROVIDES IN SECTION 1 THEREOF FOR CERTAIN ACTION:

"* * * PAYMENTS ON ACCOUNT OF SUCH CERTIFICATES SHALL BE MADE IN THE MANNER HEREINAFTER PROVIDED UPON APPLICATION THEREFOR TO THE ADMINISTRATOR OF VETERANS' AFFAIRS * * *. THE PAYMENT IN EACH CASE SHALL BE IN AN AMOUNT EQUAL TO THE FACE VALUE OF THE CERTIFICATE, EXCEPT THAT IF, AT THE TIME OF APPLICATION FOR PAYMENT UNDER THIS ACT, THE PRINCIPAL AND UNPAID INTEREST ACCRUED PRIOR TO OCTOBER 1, 1931, WITH RESPECT TO ANY LOAN UPON ANY SUCH CERTIFICATE HAS NOT BEEN PAID IN FULL BY THE VETERAN (WHETHER OR NOT THE LOAN HAS MATURED), THEN THE ADMINISTRATOR SHALL (1) PAY OR DISCHARGE SUCH UNPAID PRINCIPAL AND INTEREST AS IS NECESSARY TO MAKE THE CERTIFICATE AVAILABLE FOR PAYMENT UNDER THIS ACT, (2) DEDUCT SUCH UNPAID PRINCIPAL AND SO MUCH OF SUCH UNPAID INTEREST AS ACCRUED PRIOR TO OCTOBER 1, 1931, FROM THE AMOUNT OF THE FACE VALUE OF THE CERTIFICATE, AND (3) CERTIFY TO THE SECRETARY OF THE TREASURY AS PAYABLE AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE FACE VALUE OF THE CERTIFICATE AND THE AMOUNT SO DEDUCTED.'

IN THE INSTANT CASE THE REDUCTION IN THE AMOUNT OF SERVICE CREDIT DUE TO THE VETERAN WAS BROUGHT TO THE ATTENTION OF THE VETERANS' ADMINISTRATION BY A COMMUNICATION FROM THE WAR DEPARTMENT UNDER DATE OF DECEMBER 4, 1935, IN WHICH THIS ADMINISTRATION WAS ADVISED OF A REDUCTION IN THE AMOUNT OF SERVICE USED AS A BASIS FOR COMPUTING THE SERVICE CREDIT. REDUCTION IN THE AMOUNT OF SERVICE CREDIT WAS SUFFICIENT TO CAUSE THE CANCELLATION OF THE PREVIOUSLY ISSUED ADJUSTED SERVICE CERTIFICATE AND TO DEBAR THE VETERAN FROM ENTITLEMENT TO THE ISSUANCE OF ANY ADJUSTED SERVICE CERTIFICATE UNDER THE WORLD WAR ADJUSTED COMPENSATION ACT, AS AMENDED.

IN VIEW OF THE NOTICE RECEIVED FROM THE WAR DEPARTMENT WHICH REDUCED THE SERVICE CREDIT OF THE VETERAN IN THIS CASE TO A POINT WHICH DEBARRED HIM FROM ENTITLEMENT TO AN ADJUSTED SERVICE CERTIFICATE HE IS LIKEWISE DEBARRED FROM MAKING APPLICATION FOR THE BENEFITS UNDER THE ADJUSTED COMPENSATION PAYMENT ACT, 1936, INASMUCH AS UNDER THE PROVISIONS OF THIS ACT HE IS PRECLUDED FROM FILING AN APPLICATION DUE TO THE FACT THAT HE IS UNABLE, WHEN FILING HIS APPLICATION, TO SURRENDER HIS CERTIFICATE DUE TO PRIOR CANCELLATION OF THE CERTIFICATE BY THIS ADMINISTRATION.

IT IS DESIRED TO PRESENT THE SPECIFIC QUESTION OF THE APPLICATION OF THE ADJUSTED COMPENSATION PAYMENT ACT, 1936, TO THE AMOUNT OF OVERPAYMENT DUE FROM THIS VETERAN WITH PARTICULAR REFERENCE TO THAT PART OF THE ABOVE CITED ACT WHICH PROVIDES THAT INTEREST UNPAID WHICH ACCRUED SUBSEQUENT TO OCTOBER 1, 1931, MAY BE FORGIVEN IN MAKING SETTLEMENT UNDER THE ACT.

IN RAISING CHARGES OF INDEBTEDNESS CERTIFIED TO THIS OFFICE CONSISTING OF LOANS ON WORLD WAR ADJUSTED SERVICE CERTIFICATES, WHICH CERTIFICATES APPEARED LEGAL WHEN ISSUED AND WHEN LOANS WERE GRANTED THEREUNDER BUT WHICH ARE LATER CANCELED BECAUSE OF SUBSEQUENTLY DISCLOSED FACTS DISENTITLING THE VETERANS TO A CERTIFICATE, THE RULE HAS BEEN ADOPTED OF CHARGING INTEREST ON THE AMOUNT OF THE LOANS UNTIL PAID ON THE BASIS THAT THE NOTES UPON WHICH THE LOANS WERE MADE CONSTITUTE BINDING CONTRACTS UPON THE VETERANS, IRRESPECTIVE OF THE CANCELATION OF THE ADJUSTED SERVICE CERTIFICATE GIVEN AS COLLATERAL SECURITY THEREFOR.

THE VETERAN HERE RECEIVED A LOAN FROM THE GOVERNMENT FOR WHICH HE EXECUTED A NOTE BEARING INTEREST. FAILURE OF THE COLLATERAL GIVEN TO SECURE THE NOTE, NAMELY, THE ADJUSTED SERVICE CERTIFICATE, DID NOT AFFECT THE VALIDITY OF THE AGREEMENT (THE NOTE) OF THE VETERAN TO PAY INTEREST ON BORROWED MONEY.

NOTHING APPEARS IN THE ADJUSTED COMPENSATION PAYMENT ACT OF 1936 (49 STAT. 1099), TO JUSTIFY ANY MODIFICATION IN THE STATED RULE. SAID STATUTE HAS NO APPLICATION IN A CASE IN WHICH THE ADJUSTED SERVICE CERTIFICATE HAS BEEN CANCELED BECAUSE OF SUBSEQUENTLY DISCLOSED FACTS SHOWING THE VETERAN NOT TO BE ENTITLED TO AN ADJUSTED SERVICE CERTIFICATE, AS IN THE INSTANT CASE. THERE BEING NO CERTIFICATE THERE IS NOTHING UPON WHICH THE STATUTE MAY OPERATE.