A-78432, OCTOBER 14, 1936, 16 COMP. GEN. 377

A-78432: Oct 14, 1936

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OBJECTION WILL NOT BE MADE TO A PROPOSED LOAN FROM THE APPROPRIATION "EMERGENCY RELIEF. NOTWITHSTANDING THE APPLICANT IS ALSO POSSESSED OF SUFFICIENT TRUST LANDS TO MEET SECURITY REQUIREMENTS. AS FOLLOWS: WE ARE TRANSMITTING FOR THE PURPOSE OF OBTAINING A PREAUDIT. " READS AS FOLLOWS: "CLASS A: INDIANS OWNING TRUST OR RESTRICTED LAND THAT IS CAPABLE OF RETURNING SUFFICIENT INCOME FULLY TO ASSURE FINAL REPAYMENT OF THE LOAN. LOANS TO INDIANS OF THIS CLASS WILL STAND AS A CHARGE AND LIEN AGAINST THE TRUST OR RESTRICTED PROPERTY AND FUNDS OF. "CLASS B: INDIANS NOT OWNING SUFFICIENT TRUST OR RESTRICTED LAND WHICH IS CAPABLE OF RETURNING SUFFICIENT INCOME FULLY TO ASSURE FINAL REPAYMENT OF THE LOAN.

A-78432, OCTOBER 14, 1936, 16 COMP. GEN. 377

INDIAN AFFAIRS - LOANS TO INDIANS FOR REHABILITATION - SECURITY REQUIREMENTS THE PROVISIONS OF SECTIONS 4 (A) AND 4 (B), PART IV-A OF THE MANUAL OF INSTRUCTIONS, INDIAN RELIEF AND REHABILITATION FUND, RELATIVE TO SECURITY FOR LOANS, NOT BEING MUTUALLY EXCLUSIVE, OBJECTION WILL NOT BE MADE TO A PROPOSED LOAN FROM THE APPROPRIATION "EMERGENCY RELIEF, INTERIOR, INDIANS, LOANS AND GRANTS TO INDIANS FOR REHABILITATION, 1935 1937," ON THE BASIS OF LIVESTOCK AND OTHER PERSONAL PROPERTY AS SECURITY, NOTWITHSTANDING THE APPLICANT IS ALSO POSSESSED OF SUFFICIENT TRUST LANDS TO MEET SECURITY REQUIREMENTS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SUPERINTENDENT, PIMA INDIAN AGENCY, OCTOBER 14, 1936:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF JUNE 9, 1936, AS FOLLOWS:

WE ARE TRANSMITTING FOR THE PURPOSE OF OBTAINING A PREAUDIT, THE FOLLOWING COPIES OF SUPPORTING PAPERS TO A PROPOSED EXPENDITURE FROM THE APPROPRIATION, 005112-3 EMERGENCY RELIEF, INTERIOR, LOANS AND GRANTS TO INDIANS FOR REHABILITATION--- 1935 TO 1937:APPLICATION FOR LOAN ---------- ------------------ I.R. AND R. FORM 4A CASH LOAN AGREEMENT --------------- -------------- I.R. AND R. FORM 4B PUBLIC LOAN VOUCHER ------------------- ---------- I.R. AND R. FORM 4E

THE APPLICATION FOR LOAN SEEMS TO COMPLY WITH ALL THE PRESCRIBED RULES, BUT THE LOAN AGREEMENT OFFERS LIVESTOCK AND OTHER PERSONAL PROPERTY AS SECURITY, WHEREAS, PART 4-A, PAGE 2, OF THE REGULATIONS LAID DOWN BY THE INDIAN OFFICE, UNDER DATE OF MARCH 6, 1936, IN CONNECTION WITH THE INDIAN RELIEF AND REHABILITATION PROGRAM, UNDER THE TITLE "SECURITY FOR LOANS," READS AS FOLLOWS:

"CLASS A: INDIANS OWNING TRUST OR RESTRICTED LAND THAT IS CAPABLE OF RETURNING SUFFICIENT INCOME FULLY TO ASSURE FINAL REPAYMENT OF THE LOAN. LOANS TO INDIANS OF THIS CLASS WILL STAND AS A CHARGE AND LIEN AGAINST THE TRUST OR RESTRICTED PROPERTY AND FUNDS OF, AND ACCRUING TO, THE BORROWER OR HIS HEIRS, INCLUDING ANY SHARES IN TRIBAL ASSETS AND CROPS, LIVESTOCK, AND OTHER PRODUCTION.

"CLASS B: INDIANS NOT OWNING SUFFICIENT TRUST OR RESTRICTED LAND WHICH IS CAPABLE OF RETURNING SUFFICIENT INCOME FULLY TO ASSURE FINAL REPAYMENT OF THE LOAN. LOANS MADE TO INDIANS OF THIS CLASS SHALL BE FULLY SECURED BY FIRST LIEN OR CHATTEL MORTGAGE ON PROPERTY PURCHASED WITH THE PROCEEDS OF THE LOAN, FIRST LIEN ON OTHER PROPERTY OF THE BORROWER, INCLUDING CROP LIENS, ASSIGNMENTS OF INCOME, OR OTHER ACCEPTABLE SECURITY.'

IT WILL BE NOTED THAT THESE REGULATIONS ACCEPT SUCH SECURITY AS OFFERED ONLY WHEN THE INDIAN ,DOES NOT OWN SUFFICIENT TRUST OR RESTRICTED LANDS CAPABLE OF RETURNING SUFFICIENT INCOME FULLY TO ASSURE FINAL PAYMENT OF THE LOAN.' IN THE INSTANT CASE THE APPLICANT IS POSSESSED OF SUFFICIENT TRUST LANDS TO MEET THE SECURITY REQUIREMENTS, AND, AS WE INTERPRET THE REGULATIONS REFERRED TO, SUCH LANDS SHOULD BE PLEDGED IN PREFERENCE TO THE PERSONAL PROPERTY OFFERED. HOWEVER, WE HESITATE TO PROCEED FURTHER WITH THIS TRANSACTION IN VIEW OF THE FACTS RECITED BELOW:

THE LANDS THAT WOULD BE PLEDGED ARE THOSE LANDS COVERED BY TRUST PATENT NO. 387,179, ISSUED BY THE UNITED STATES ON FEBRUARY 25, 1914, TO WILLIAM GOODWIN, AN INDIAN. THIS TRUST PATENT HOLDS THE LANDS IN TRUST FOR A PERIOD OF 25 YEARS, AND AT THE EXPIRATION OF THE TRUST PERIOD GUARANTEES TO CONVEY A PATENT IN FEE DISCHARGED OF SAID TRUST AND FREE FROM ALL CHARGE AND ENCUMBRANCE WHATSOEVER. THE GENERAL ALLOTMENT ACT UNDER WHICH THESE LANDS WERE ALLOTTED AND TRUST PATENT ISSUED PROVIDED ALSO AS FOLLOWS:

"SECTION 354. NO LANDS ACQUIRED UNDER THE PROVISIONS OF SECTION 331 TO 334, INCLUSIVE, AND 336 SHALL, IN ANY EVENT, BECOME LIABLE TO THE SATISFACTION OF ANY DEBT CONTRACTED PRIOR TO THE ISSUING OF THE FINAL PATENT IN FEE THEREFOR. (JUNE 21, 1906, C. 3504, 34 STAT. 327.)"

IN OUR OPINION WE HAVE STATUTORY RESTRICTIONS AGAINST A PROCEDURE AUTHORIZED BY THE RULES AND REGULATIONS CITED. WHILE THE APPLICANT IN THIS CASE IS ONE WHO IN ALL RESPECTS MERITS THE LOAN HE SEEKS, AND WE WOULD LIKE TO PASS THIS TRANSACTION ON IN HIS FAVOR, BEFORE GOING FURTHER WE SEEK A PREAUDIT AND A PROPER RULING, IN ORDER THAT WE MAY BE CERTAIN OF LEGALLY HANDLING THIS AND OTHER SIMILAR CASES NOW CONTEMPLATED.

IF LEGISLATION SUBSEQUENT TO THE PASSAGE OF THE GENERAL ALLOTMENT ACT, PERMITTING ENCUMBRANCE OF TRUST PATENTED LANDS HAS BEEN ENACTED, PLEASE CITE REFERENCES THERETO.

ON ACCOUNT OF THE LIMITED TIME THAT THE FUNDS INVOLVED WILL BE AVAILABLE, IT IS REQUESTED THAT PROMPT ACTION BE TAKEN ON THIS LETTER.

IN RESPONSE TO REQUEST OF THIS OFFICE TO THE SECRETARY OF THE INTERIOR FOR HIS VIEWS AND RECOMMENDATION IN THE MATTER, THERE WAS RECEIVED A LETTER DATED OCTOBER 3, 1936, AS FOLLOWS:

THERE IS RETURNED HEREWITH A LETTER DATED JUNE 9, 1936, WITH ENCLOSURES FROM THE SUPERINTENDENT OF THE PIMA INDIAN AGENCY. THIS IS IN REPLY TO YOUR LETTER OF SEPTEMBER 19, FILE REFERENCE A-78432.

THE APPARENT CONFLICT BETWEEN THE MANUAL OF INSTRUCTIONS, INDIAN RELIEF AND REHABILITATION FUND, AND THE PROVISIONS OF THE ACT OF JUNE 21, 1906, 34 STAT. 327 (TITLE 25, SECTION 354, U.S. CODE), PROBABLY ARISES DUE TO AN AMBIGUITY IN THE LANGUAGE SET FORTH UNDER PART IV A, SECTIONS 4 (A) AND 4 (B).

ALTHOUGH IT IS STATED THAT "LOANS TO INDIANS OF THIS CLASS WILL STAND AS A CHARGE AND LIEN AGAINST THE TRUST OR RESTRICTED PROPERTY," IT WAS INTENDED THAT ONLY THE INCOME OR PROCEEDS FROM THE USE OF SUCH LAND WERE TO REPRESENT SECURITY FOR THE LOAN. IN FACT SUCH PROCEDURE IN CONNECTION WITH REGULAR REIMBURSABLE LOANS IS A PRACTICE OF LONG STANDING AND ONE WHICH HAS BEEN ACCEPTED BY YOUR OFFICE. IN DRAWING UP THE MANUAL OF INSTRUCTIONS FOR THE REHABILITATION FUND, IT WAS PRESUMED THAT PROCEDURE IN REGARD TO LOANS WOULD BE SIMILAR TO THAT IN CONNECTION WITH REGULAR REIMBURSABLE LOANS. WHEN VIEWED IN THIS LIGHT IT IS OUR OPINION THAT NO STATUTORY RESTRICTIONS REGARDING TRUST PATENTED LANDS HAVE BEEN OVERSTEPPED.

THE SUPERINTENDENT HAS ALSO APPARENTLY REGARDED THE PROVISIONS OF SECTIONS 4 (A) AND 4 (B) AS MUTUALLY EXCLUSIVE. SUCH IS NOT THE CASE. EVEN IF AN INDIAN DOES OWN SUFFICIENT TRUST OR RESTRICTED LANDS CAPABLE OF RETURNING SUFFICIENT INCOME TO ASSURE FINAL PAYMENT OF THE LOAN, THAT DOES NOT PRECLUDE THE POSSIBILITY OF FURTHER SECURITY IN A FIRST LIEN OR CHATTEL MORTGAGE ON OTHER PROPERTY OF THE BORROWER SUCH AS CROP LIENS, ASSIGNMENTS OF INCOME, OR FIRST LIENS ON PROPERTY PURCHASED WITH THE PROCEEDS OF THE LOAN. THE CLASSIFICATION OF PROSPECTIVE BORROWERS AS TO THOSE OWNING AND THOSE NOT OWNING TRUST LAND WAS MADE IN ORDER TO MORE CLOSELY ALIGN THE REHABILITATION LOANS WITH THE PRACTICE FOLLOWED IN THE PAST IN REGARD TO REGULAR REIMBURSABLE LOANS WHICH HAVE ALWAYS HAD THE ACCEPTANCE OF YOUR OFFICE.

THE APPLICATION FOR A LOAN OF $250.00 TO WILLIAM GOODWIN, A COPY OF WHICH WAS ATTACHED, INDICATES THAT THE APPLICANT IS APPARENTLY A GOOD RISK AND THE PROPOSED LOAN IS DIRECTLY IN LINE WITH THE PURPOSES OF THE REHABILITATION ALLOTMENT AND IS HEREBY APPROVED.

AS STATED IN LETTER OF OCTOBER 3, SUPRA, THE PROVISIONS OF SECTIONS 4 (A) AND 4 (B), PART IV A OF THE MANUAL OF INSTRUCTIONS, INDIAN RELIEF AND REHABILITATION FUND ARE NOT MUTUALLY EXCLUSIVE. ACCORDINGLY, IN THE AUDIT OF YOUR ACCOUNTS THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO THE PROPOSED EXPENDITURE UNDER THE APPROPRIATION IN QUESTION, IF OTHERWISE CORRECT.