B-101126, JUNE 24, 1957, 36 COMP. GEN. 825

B-101126, JUNE 24, 1957, 36 COMP. GEN. 825

VETERANS - INSURANCE - LAPSED COMMERCIAL POLICIES - REFUND LIABILITY - REVOLVING FUND AVAILABILITY THE REVOLVING FUND WHICH WAS ESTABLISHED FOR PAYMENT TO INSURANCE COMPANIES OF DEFAULTED PREMIUMS GUARANTEED UNDER ARTICLE IV OF THE SOLDIERS' AND SAILORS' CIVIL RELIEF ACT AMENDMENTS OF 1942, AND WHICH INCLUDES APPROPRIATED MONIES AND FUNDS COLLECTED FROM SERVICEMEN FOR LOSSES ON LAPSED COMMERCIAL INSURANCE POLICIES UNDER THE SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940 AND UNDER THE 1942 ACT, MUST BE TREATED AS GOVERNMENT FUNDS AND, IN THE ABSENCE OF A DETERMINATION BY THE CONGRESS, THE REVOLVING FUND MAY NOT BE USED TO REFUND COLLECTIONS UNDER THE 1940 ACT IN ACCORDANCE WITH THE DECISION OF THE UNITED STATES SUPREME COURT IN UNITED STATES V. PLESHA ET AL., 352 U.S. 202.

TO THE ADMINISTRATOR, VETERANS ADMINISTRATION, JUNE 24, 1957:

ON APRIL 22, 1957, YOU SUBMITTED FOR OUR CONSIDERATION THE ACTION CONTEMPLATED BY THE VETERANS ADMINISTRATION FOR THE ADMINISTRATIVE IMPLEMENTATION OF THE DECISION OF THE UNITED STATES SUPREME COURT, IN UNITED STATES V. PLESHA ET AL., 352 U.S. 202, DECIDED JANUARY 14, 1957.

ARTICLE IV OF THE SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940, 54 STAT. 1183, 50 U.S.C. 540, PROVIDED A PLAN TO PREVENT THE LAPSE, FOR NONPAYMENT OF PREMIUMS, OF COMMERCIAL LIFE INSURANCE HELD BY MEMBERS OF THE ARMED FORCES. THE PROTECTION, GRANTED UPON APPLICATION OF THE SERVICEMAN, EXTENDED OVER THE PERIOD OF HIS MILITARY SERVICE AND ONE YEAR THEREAFTER. PROMISSORY CERTIFICATES OF THE UNITED STATES WERE ISSUED TO INSURANCE COMPANIES AS SECURITY FOR THE PAYMENT OF DEFAULTED PREMIUMS AND INTEREST THEREON. THE ACT, PRIOR TO THE PASSAGE OF THE SOLDIERS' AND SAILORS' CIVIL RELIEF ACT AMENDMENTS OF 1942, 56 STAT. 769, 50 U.S.C. 501 NOTE, DID NOT SPECIFICALLY PROVIDE FOR THE REIMBURSEMENT OF THE GOVERNMENT BY THE SERVICEMAN FOR ANY LOSS IT SUSTAINED BUT WAS ADMINISTRATIVELY SO CONSTRUED, AND COLLECTIONS WERE MADE IN CERTAIN CASES UPON THE SUPPOSED INDEBTEDNESS. THE SUPREME COURT HOWEVER, IN THE PLESHA CASE, TOOK A DIFFERENT VIEW OF THE ORIGINAL ACT. IT HELD THAT ARTICLE IV OF THE RELIEF ACT OF 1940, PRIOR TO ITS AMENDMENT IN 1942, DID NOT IMPOSE AN OBLIGATION UPON THE SERVICEMAN TO REIMBURSE THE GOVERNMENT FOR PREMIUMS AND INTEREST IT WAS CALLED UPON TO PAY INSURANCE COMPANIES WHERE THE SERVICEMAN PERMITTED HIS POLICY TO LAPSE.

IN THE LIGHT OF THE PLESHA DECISION YOUR LETTER PROPOSES, IN CASES WHERE THE PROTECTION OF THE ACT WAS OBTAINED PRIOR TO THE 1942 AMENDMENTS, TO ADMINISTRATIVELY REFUND, WITHOUT AWAITING CLAIMS THEREFOR FROM THE VETERAN, MONEYS COLLECTED OR WITHHELD FROM FORMER SERVICEMEN AS REPAYMENT OF THE GOVERNMENT'S LOSSES. YOU PROPOSE FOR THAT PURPOSE TO USE THE BALANCE IN THE SOLDIER'S AND SAILORS' CIVIL RELIEF REVOLVING FUND.

THE SOLDIERS' AND SAILORS' CIVIL RELIEF REVOLVING FUND WAS INITIALLY ESTABLISHED BY THE INDEPENDENT OFFICES APPROPRIATION ACT, 1944, APPROVED JUNE 26, 1943, 57 STAT. 194, WHICH, UNDER THE HEADING " SOLDIERS' AND SAILORS' CIVIL RELIEF," APPROPRIATED $70,000 OUT OF THE TREASURY TO BE IMMEDIATELY AND CONTINUOUSLY AVAILABLE UNTIL EXPENDED," FOR PAYMENT OF CLAIMS AS AUTHORIZED BY ARTICLE IV OF THE SOLDIERS' AND SAILORS' CIVIL RELIEF ACT AMENDMENTS OF 1942.' THE ACT FURTHER PROVIDES THAT ANY MONEY RECEIVED UNDER SAID ARTICLE IV SHALL BE CREDITED TO THE APPROPRIATION. SUBSEQUENT YEARS ADDITIONAL SUMS WERE APPROPRIATED OUT OF THE TREASURY TO THE REVOLVING FUND BY VARIOUS ACTS, THE MOST RECENT APPROPRIATION BEING THAT MADE BY THE FIRST DEFICIENCY APPROPRIATION ACT, 1949, APPROVED MAY 24, 1949, 63 STAT. 80. A TOTAL OF $2,203,000 WAS APPROPRIATED OUT OF THE TREASURY BUT THAT AMOUNT WAS AUGMENTED WITH THE MONEYS COLLECTED FROM FORMER SERVICEMEN WHO HAD RECEIVED THE PROTECTION OF THE 1940 ACT AND THE 1942 AMENDMENTS. THE GRADUAL DECREASE IN THE NUMBER OF CLAIMS RECEIVED FROM INSURANCE COMPANIES AND THE COLLECTIONS FROM THE VETERANS CAUSED THE FUND TO BECOME GREATER THAN WAS CONSIDERED NECESSARY; HENCE, $1,500,000 IN THE FUND WAS CARRIED TO THE SURPLUS FUND OF THE TREASURY PURSUANT TO THE SECOND SUPPLEMENTAL APPROPRIATION ACT, 1953, APPROVED MARCH 28, 1953, 67 STAT. 16, AND THE INDEPENDENT OFFICES APPROPRIATION ACT, 1955, APPROVED JUNE 24, 1954, 68 STAT. 292. THE PRESENT BALANCE IN THE FUND IS APPROXIMATELY $445,000 AND WE UNDERSTAND THAT A MUCH LARGER SUM WOULD BE REQUIRED TO CARRY OUT THE PROPOSED ADMINISTRATIVE PROGRAM OF GENERALLY REFUNDING, WITHOUT AWAITING CLAIM, ALL COLLECTIONS MADE IN CASES UNDER THE 1940 ACT, EXCEPT WHERE THE COLLECTION WAS THE RESULT OF A FINAL JUDGMENT ADVERSE TO THE PARTICULAR SERVICEMAN INVOLVED.

THE SOLDIERS' AND SAILORS' CIVIL RELIEF REVOLVING FUND WAS ESTABLISHED FOR THE PAYMENT OF CLAIMS AS AUTHORIZED BY ARTICLE IV OF THE SOLDIERS' AND SAILORS' CIVIL RELIEF ACT AMENDMENTS OF 1942. THE 1942 AMENDMENTS CLEARLY DISCLOSE THAT THE CLAIMS REFERRED TO ARE THOSE OF INSURANCE COMPANIES FOR UNPAID PREMIUMS AND INTEREST WHICH THE GOVERNMENT PROMISED TO PAY. SEE SECTION 406 OF THE ACT, (50 U.S.C. APP. 546). THE JUSTIFICATION FOR THE USE OF THE FUND FOR THE REFUNDS CONTEMPLATED--- THE PRESENT BALANCE OF WHICH IS LESS THAN THE NET AMOUNT APPROPRIATED OUT OF THE TREASURY AND LESS THAN THE TOTAL COLLECTIONS PROPOSED TO BE REFUNDED--- IS APPARENTLY UPON THE PREMISE THAT THE FUND IS CHARGEABLE WITH THE COLLECTIONS NOW DEEMED TO HAVE BEEN IMPROPER. 17 COMP. GEN. 859. HOWEVER, THE ACTS APPROPRIATING, OUT OF THE TREASURY, FUNDS FOR CREDIT TO THE REVOLVING FUND ALSO MADE AVAILABLE FOR PAYMENT OF THE INSURERS' CLAIMS THE AMOUNTS COLLECTED FROM THE SERVICEMEN. MOREOVER, SECTION 6 OF THE ACT OF APRIL 3, 1948, 62 STAT. 160, 5 U.S.C. 546, SPECIFICALLY AMENDED SECTION 406 OF THE SOLDIERS' AND SAILORS' RELIEF ACT BY PROVIDING THAT "ANY MONEYS RECEIVED AS REPAYMENT OF DEBTS INCURRED UNDER THIS ARTICLE, AS ORIGINALLY ENACTED AND AS AMENDED, SHALL BE CREDITED TO THE APPROPRIATION FOR THE PAYMENT OF CLAIMS UNDER THIS ARTICLE.' THE FUNDS COLLECTED FROM THE SERVICEMEN UNDER BOTH THE 1940 ACT AND THE 1942 AMENDMENT WERE THUS MERGED WITH THE APPROPRIATED MONEYS, WERE INCREASED AND RESCINDED BY THE CONGRESS, WERE TREATED GENERALLY BY IT AS GOVERNMENT FUNDS, AND WERE MADE AVAILABLE FOR PAYMENT OF INSURER'S CLAIMS. THE REVOLVING FUND THUS HAVING BEEN SO TREATED, THE BALANCE THEREIN CANNOT BE DETERMINED TO CONSIST OF THE AMOUNTS COLLECTED UNDER THE 1940 ACT WHICH ARE PROPOSED TO BE REFUNDED. MOREOVER, THAT BALANCE IS APPROPRIATED FOR PAYMENT OF THE INSURER'S CLAIMS, AND IN VIEW OF 31 U.S.C. 628, IS NOT AVAILABLE FOR OTHER OBJECTS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AMOUNT IN THE REVOLVING FUND IS GENERALLY UNAVAILABLE FOR MAKING THE REFUNDS PROPOSED. MOREOVER, AS A PRACTICAL MATTER WE DO NOT SEE HOW A LARGER AMOUNT OF REFUNDS COULD BE PAID OUT OF THE FUND THAN THE SUM TOTAL IN THE FUND. NOR, SINCE THE SUM IN THE FUND IS INADEQUATE TO UNIFORMLY REFUND THE COLLECTIONS DO WE SEE HOW, UNLESS CLAIMS ARE REQUIRED, ANY ORDER OF PRECEDENCE COULD BE ESTABLISHED BY WHICH A DETERMINATION COULD BE MADE AS TO WHICH REFUNDS SHOULD BE SATISFIED THEREFROM AND WHICH COULD NOT. THEREFORE, THE USE OF THE REVOLVING FUND FOR THE PURPOSE PROPOSED, AND THE SECURING OF SUFFICIENT ADDITIONAL FUNDS TO MAKE THE REFUNDS APPEAR TO BE MATTERS FOR PRESENTATION TO THE CONGRESS. SEE REESIDE V. WALKER, 11 HOW. 272.

ALSO, WE THINK THAT CERTAIN OF THE SERVICEMEN, WHILE NOT LEGALLY LIABLE UNDER THE SUPREME COURT DECISION FOR THE AMOUNTS WHICH WERE COLLECTED FROM THEM, POSSIBLY MAY RECOGNIZE A MORAL OR EQUITABLE OBLIGATION TO MAKE GOOD THE GOVERNMENT'S LOSS AND REFRAIN FROM MAKING CLAIMS FOR REFUNDS APPARENTLY DUE THEM UNDER THE COURT'S DECISION. ALSO, BECAUSE OF OPERATION OF THE TEN-YEAR STATUTE OF LIMITATION SET OUT IN 31 U.S.C. 71A, BECAUSE CERTAIN OF THE GOVERNMENT'S COLLECTIONS WERE MADE AS THE RESULT OF COMPROMISE, OF AN UNAPPEALED DECISION OF AN INFERIOR COURT, OR BECAUSE THE PAYMENTS WERE VOLUNTARILY RECEIVED UNDER A MUTUAL MISTAKE OF LAW, THERE MAY BE SUBSTANTIAL DEFENSES TO CERTAIN CLAIMS FOR REFUND WHICH MIGHT BE RECEIVED. SUCH DEFENSES, OF COURSE, COULD NOT PROPERLY BE WAIVED BY US OR YOUR ADMINISTRATION. SEE, IN THAT CONNECTION, COMPAGNIE GENERALE TRANSATLANTIQUE V. UNITED STATES, 51 F. 2D 1053; MAHONING COAL R. CO., ET AL. V. UNITED STATES, 28 F. 2D 917; 53 C.J.S. LIMITATIONS OF ACTIONS SECTION 24. HOWEVER, IT MAY BE THAT THE CONGRESS HAVING REGARD FOR THE WARTIME SERVICE RENDERED BY THE VETERANS TO THE UNITED STATES AND THAT ANY CLAIM FOR SUCH A REFUND PRIOR TO THE SUPREME COURT'S DECISION WOULD UNDOUBTEDLY HAVE BEEN REJECTED, MIGHT NOT WISH TO RAISE SUCH TECHNICAL DEFENSES AGAINST THEM. IT WOULD APPEAR THAT SUCH MATTERS MIGHT WELL BE PRESENTED TO THE CONGRESS FOR ITS CONSIDERATION IN CONNECTION WITH A REQUEST FOR AN APPROPRIATION TO MAKE THE REFUNDS WITH THE SUGGESTION THAT THE CONGRESS MAY WISH TO AUTHORIZE SUCH REFUNDS OF AMOUNTS HELD TO HAVE BEEN COLLECTED IMPROPERLY BY THE DECISION OF THE SUPREME COURT IN THE PLESHA CASE WITHOUT REGARD TO TECHNICAL DEFENSES WHICH MIGHT BE INTERPOSED THERETO PROVIDED CLAIM FOR REFUND IS MADE TO YOUR ADMINISTRATION WITHIN A YEAR OR SUCH OTHER PERIOD OF TIME AS IT SEES FIT.