A-87819, JULY 28, 1937, 17 COMP. GEN. 77

A-87819: Jul 28, 1937

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IS AS FOLLOWS: PURSUANT TO CERTIFICATION BY THE WAR DEPARTMENT. IN WHICH HE STATED HIS ADJUSTED-SERVICE CERTIFICATE WAS DESTROYED BY FIRE. UPON SUBMISSION OF A BOND OF INDEMNITY ON WHICH THE VETERAN WAS NAMED AS PRINCIPAL AND THE ASSOCIATED INDEMNITY CORPORATION. DUPLICATE ADJUSTED-SERVICE CERTIFICATE NO. 3621671 WAS ISSUED AND MAILED TO THE VETERAN ON MAY 4. THE DUPLICATE CERTIFICATE NO. 3621671 WAS PLEDGED WITH THE VETERANS' ADMINISTRATION. WAS DRAWN BY FORMER DISBURSING OFFICER. DUPLICATE ADJUSTED-SERVICE CERTIFICATE NO. 3621671 WAS CANCELED AND. DUPLICATE CERTIFICATE NO. 3703099 WAS ISSUED IN LIEU THEREOF AND HELD AS SECURITY FOR THE LOAN DESCRIBED ABOVE. ORIGINAL ADJUSTED-SERVICE CERTIFICATE NO. 461870 WAS PLEDGED WITH THE VETERANS' ADMINISTRATION.

A-87819, JULY 28, 1937, 17 COMP. GEN. 77

BONDS - SURETY'S LIABILITY - DEMAND DELAYS BECAUSE OF ANTICIPATED SET OFFS DEMAND UPON SURETY FOR PAYMENT UNDER ITS BONDS TO INDEMNIFY THE GOVERNMENT AGAINST LOSS FROM ISSUANCE OF A DUPLICATE ADJUSTED-SERVICE CERTIFICATE TO A WORLD WAR VETERAN SHOULD NOT BE DELAYED BECAUSE OF ANTICIPATED ACCRUALS OF DISABILITY COMPENSATION TO THE VETERAN, NOTWITHSTANDING IT MAY BE PROPER IN SOME CIRCUMSTANCES FOR THE GOVERNMENT TO FIRST APPLY ALL IMMEDIATELY AVAILABLE ASSETS OF A DEBTOR TOWARD LIQUIDATION OF AN INDEBTEDNESS BEFORE RESORTING TO ITS REMEDY UNDER A BOND.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, JULY 28, 1937:

YOUR LETTER OF JULY 19, 1937, IS AS FOLLOWS:

PURSUANT TO CERTIFICATION BY THE WAR DEPARTMENT, THE VETERANS' ADMINISTRATION ISSUED ADJUSTED-SERVICE CERTIFICATE NO. 461870, DATED JANUARY 1, 1925, IN THE AMOUNT OF $1,577.00, TO THE VETERAN, JACK H. LIPSCHULTZ, A-1066028.

ON MARCH 6, 1931, THE VETERAN EXECUTED FORM 6920, AFFIDAVIT--- SUBMITTED AS EVIDENCE OF LOSS, DESTRUCTION, OR DEFACEMENT OF ADJUSTED SERVICE CERTIFICATE, IN WHICH HE STATED HIS ADJUSTED-SERVICE CERTIFICATE WAS DESTROYED BY FIRE. UPON SUBMISSION OF A BOND OF INDEMNITY ON WHICH THE VETERAN WAS NAMED AS PRINCIPAL AND THE ASSOCIATED INDEMNITY CORPORATION, SAN FRANCISCO, CALIFORNIA, AS SURETY, DUPLICATE ADJUSTED-SERVICE CERTIFICATE NO. 3621671 WAS ISSUED AND MAILED TO THE VETERAN ON MAY 4, 1931.

THE DUPLICATE CERTIFICATE NO. 3621671 WAS PLEDGED WITH THE VETERANS' ADMINISTRATION, ST. LOUIS, MISSOURI, AS SECURITY FOR A LOAN OF $788.50 GRANTED ON MAY 9, 1931. CHECK NO. 95615, COVERING THE LOAN, WAS DRAWN BY FORMER DISBURSING OFFICER, E. L. HLINAK, SYMBOL 99-152, AND MAILED TO THE VETERAN AT 1469 CLARA AVENUE, ST. LOUIS, MISSOURI.

FOLLOWING RECEIPT OF A CERTIFICATE FROM THE WAR DEPARTMENT THAT THE NAME OF THE VETERAN HAD BEEN LEGALLY CHANGED TO JACK H. LIPPS, DUPLICATE ADJUSTED-SERVICE CERTIFICATE NO. 3621671 WAS CANCELED AND, ON AUGUST 10, 1931, DUPLICATE CERTIFICATE NO. 3703099 WAS ISSUED IN LIEU THEREOF AND HELD AS SECURITY FOR THE LOAN DESCRIBED ABOVE.

ON FEBRUARY 7, 1936, ORIGINAL ADJUSTED-SERVICE CERTIFICATE NO. 461870 WAS PLEDGED WITH THE VETERANS' ADMINISTRATION, LOS ANGELES, CALIFORNIA, AS SECURITY FOR A LOAN OF $788.50. CHECK NO. 1701, COVERING THE LOAN WAS DRAWN BY G. F. ALLEN, CHIEF DISBURSING OFFICER, AND MAILED TO THE VETERAN AT 3091 WEST PICO BOULEVARD, LOS ANGELES, CALIFORNIA. UPON RECEIPT OF AN APPLICATION (FORM 1701) EXECUTED BY THE VETERAN ON FEBRUARY 4, 1936, SETTLEMENT OF THIS CERTIFICATE IN THE AMOUNT OF $788.50 WAS CERTIFIED BY THE VETERANS' ADMINISTRATION, LOS ANGELES, CALIFORNIA. INFORMATION HAS BEEN RECEIVED THAT TREASURER'S SETTLEMENT CHECK NO. 102633, SYMBOL NO. 99292, DATED JUNE 15, 1936, AMOUNT $38.50, AND CHECK NO. 44719, SYMBOL NO. 16610, AMOUNT $750.00, ISSUED JUNE 19, 1936, IN REDEMPTION OF THE ADJUSTED SERVICE BONDS HAVE BEEN CASHED.

THE VETERAN, WHEN CONTACTED ON APRIL 19, 1937, BY A FIELD EXAMINER OF THE VETERANS' ADMINISTRATION, LOS ANGELES, CALIFORNIA, IN REGARD TO THE OVERPAYMENT, DID NOT DENY RECEIVING THE LOAN AND SETTLEMENT ON THE ORIGINAL ADJUSTED-SERVICE CERTIFICATE. IN A LETTER DATED MAY 20, 1937, HE STATED,"I AM LOOKING FOR A NEW JOB AND JUST AS SOON AS I GET ONE WHICH WILL PAY ME A LITTLE MORE, I WILL BE MORE THAN GLAD TO MAKE ARRANGEMENTS TO PAY BACK THE MONEY.'

ON JUNE 9, 1937, THE VETERANS' ADMINISTRATION, LOS ANGELES, CALIFORNIA, WAS INSTRUCTED TO WITHHOLD THE MONTHLY PAYMENTS OF $34.00 WHICH THE VETERAN IS RECEIVING AS COMPENSATION FOR A NEUROPSYCHIATRIC DISABILITY, AND TO APPLY THEM TO THE OVERPAYMENT.

IN A LETTER DATED MAY 19, 1937, MESSRS. CAREY, DUNN, AND KING, WASHINGTON, D.C., WRITING ON BEHALF OF THE ASSOCIATED INDEMNITY CORPORATION, SAN FRANCISCO, CALIFORNIA, SURETY ON THE BOND OF INDEMNITY FURNISHED BY THE VETERAN PRIOR TO THE ISSUANCE OF HIS DUPLICATE CERTIFICATE, OUTLINED A PORTION OF THE FACTS IN THIS CASE AND STATED,"* * * THE CIRCUMSTANCES * * * ARE SUCH AS TO CONVINCE US THAT A DELIBERATE FRAUD WAS COMMITTED, AND, IN OUR OPINION, THE SURETY SHOULD BE RELIEVED OF ANY OBLIGATION TO REIMBURSE THE UNITED STATES AS LONG AS THE INDIVIDUAL WHO PERPETRATED THIS SCHEME IS MONTHLY IN RECEIPT OF ADDITIONAL ALLOWANCES FROM YOUR ADMINISTRATION," AND REQUESTED AN OPPORTUNITY TO APPEAR BEFORE A RESPONSIBLE OFFICER OF THE VETERANS' ADMINISTRATION BEFORE FINAL RULING IS MADE ON THIS MATTER.

YOUR ATTENTION IS INVITED TO THAT PART OF THE BOND OF INDEMNITY OUTLINING THE LIABILITY OF THE SURETY AS FOLLOWS:

"NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, THAT IF THE ABOVE-BOUNDEN 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 CLAIMS 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.'

WHILE THE TERMS OF THE BOND DO NOT INDICATE THE DATE ON WHICH REQUEST FOR REIMBURSEMENT SHALL BE MADE, IT HAS BEEN THE PRACTICE OF THE VETERANS' ADMINISTRATION TO MAKE DEMAND ON THE SURETY IMMEDIATELY FOLLOWING DETERMINATION OF THE AMOUNT OF THE LOSS. IF ANY AMOUNT IS RECOVERED AFTER DEMAND IS MADE AND BEFORE REMITTANCE IS RECEIVED FROM THE SURETY REFUND IS MADE TO THE SURETY OF ANY AMOUNT RECEIVED IN EXCESS OF AMOUNT THEN DUE.

IT IS REQUESTED, THEREFORE, THAT THE QUESTION RAISED IN THE LETTER FROM MESSRS. CAREY, DUNN, AND KING BE CONSIDERED AND INFORMATION FURNISHED AS TO WHETHER OR NOT RECOVERY OF THE AMOUNT OF THE LOSS SUSTAINED BY THE UNITED STATES MAY BE EFFECTED THROUGH DEDUCTIONS FROM THE MONTHLY PAYMENT OF THE VETERAN'S DISABILITY COMPENSATION AND DEMAND ON THE SURETY DEFERRED UNLESS AND UNTIL THE AWARD OF DISABILITY COMPENSATION IS TERMINATED BY DEATH OF THE VETERAN, OR OTHERWISE, BEFORE RECOVERY IS COMPLETELY ACCOMPLISHED.

LIABILITY OF THE SURETY IS FIXED BY THE TERMS OF ITS BOND AND THE LAW, SECTION 705 OF THE WORLD WAR ADJUSTED COMPENSATION ACT, AS AMENDED BY THE ACT OF MARCH 4, 1929, 45 STAT. 1561, 38 U.S.C. 649. IN THE ABSENCE OF ANY PROVISION IN THE LAW TO THE CONTRARY THE OBLIGATION OF THE SURETY TO INDEMNIFY UNDER ITS BOND APPARENTLY BECOMES ENFORCEABLE IMMEDIATELY WHEN THE GOVERNMENT SUSTAINS A LOSS BY REASON OF THE ISSUANCE OF A DUPLICATE ADJUSTED-SERVICE CERTIFICATE.

WHILE IT MAY BE PROPER IN SOME CIRCUMSTANCES FOR THE GOVERNMENT, THROUGH ADMINISTRATIVE OFFICERS, TO FIRST APPLY ALL AVAILABLE ASSETS IN ITS POSSESSION BELONGING TO A DEBTOR, TOWARD LIQUIDATION OF AN INDEBTEDNESS BEFORE RESORTING TO ITS REMEDY UNDER THE BOND (7 COMP.GEN. 305), THIS PROCEDURE APPLIES ONLY TO ASSETS IMMEDIATELY AVAILABLE AND NOT TO ANTICIPATED CREDITS WHICH MAY OR MAY NOT ACCRUE IN THE FUTURE. COMPENSATED CORPORATE SURETY ON A BOND OF INDEMNITY SUPPORTING THE ISSUANCE OF A DUPLICATE ADJUSTED-SERVICE CERTIFICATE IS NOT ENTITLED TO DEFER PAYMENT OF ITS OBLIGATIONS UNDER THE BOND BECAUSE OF ANY DISABILITY COMPENSATION WHICH IT ANTICIPATES MAY ACCRUE IN THE FUTURE TO THE VETERAN.

THE PRACTICE WHICH YOU STATE HAS BEEN OBSERVED BY THE VETERANS' ADMINISTRATION DOES NOT APPEAR TO REQUIRE OBJECTION BY THIS OFFICE AND THE REQUEST OF COUNSEL REPRESENTING THE SURETY ACCORDINGLY SHOULD BE DENIED.