B-116942, JUL 19, 1954

B-116942, JUL 19, 1954

PRECIS-UNAVAILABLE

THE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 1, 1953, AFAFN-2D-123.7 AND SUBSEQUENT CORRESPONDENCE, FROM THE CHIEF, PLANS AND POLICY DIVISION, OFFICE, DIRECTOR OF FINANCE, DEPARTMENT OF THE AIR FORCE, REGARDING CERTAIN PROBLEMS CONNECTED WITH THE ISSUANCE OF SUBSTITUTE CHECKS WHERE ORIGINAL CHECKS DRAWN IN FRENCH MOROCCAN FRANCS ON DEPOSITS MAINTAINED BY AIR FORCE FINANCE OFFICERS IN THE BANK OF MOROCCO ARE LOST OR NOT RECEIVED BY THE PAYEE.

THE SAID LETTER STATES THAT WHEN SUCH CHECKS ARE LOST OR ARE NOT RECEIVED BY THE PAYEE, REGULATIONS OF THE DEPARTMENT OF THE AIR FORCE REQUIRE A GUARANTEE BY THE BANK CONCERNED THAT STOP PAYMENT HAS BEEN PLACED AGAINST THE CHECK BEFORE A SUBSTITUTE CAN BE ISSUED, BUT THAT THE BANK OF MOROCCO REQUESTS RELIEF FROM RESPONSIBILITY FOR STOPPING PAYMENT ON THE ORIGINAL CHECK FOR A PERIOD OF THREE YEARS AFTER ISSUANCE OF THE CHECK TO PROTECT ITSELF AGAINST LEGAL ACTION WHICH MAY BE TAKEN WITHIN THAT PERIOD UNDER THE LAWS OF FRENCH MOROCCO BY A HOLDER IN GOOD FAITH OF THE CHECK TO OBTAIN REMOVAL OF THE STOPPAGE OF PAYMENT. IT IS STATED THAT UNDER THE LAWS IN FORCE IN FRENCH MOROCCO, FUNDS ON WHICH A CHECK IS DRAWN, UPON THE ISSUANCE OF THE CHECK, BELONG TO THE PAYEE AND THAT AN INDORSEE OF THE PAYEE HAS A RIGHT TO PAYMENT FREE OF DEFENSES WHICH MIGHT HAVE BEEN ASSERTED AGAINST THE PAYEE AND THAT ACCORDINGLY THE BANK LEGALLY COULD BE REQUIRED TO PAY THE CHECK REGARDLESS OF THE STOPPAGE OF PAYMENT AND THAT ACCORDINGLY THE POSITION OF THE BANK APPEARS PROPER AND FURTHER NEGOTIATION WITH THE BANK OFFICIALS WOULD NOT APPEAR WARRANTED.

IT FURTHER APPEARS FROM THE LETTER THAT UNDER THE STATEMENT REQUESTED BY THE BANK OF MOROCCO, THE BANK WOULD BE RESPONSIBLE FOR CASHING CHECKS ON WHICH A STOP PAYMENT HAD BEEN PLACED EXCEPT WHERE THE HOLDER HAS RECEIVED THE CHECK IN GOOD FAITH AND THAT, BY VIRTUE OF THE "UNDERTAKING OF INDEMNITY" EXECUTED BY THE PAYEE, THE GOVERNMENT WOULD HAVE RECOURSE AGAINST THE PAYEE FOR FRAUDULENT ACTS ON HIS PART. HOWEVER, IT IS STATED THAT BECAUSE OF FRAUDULENT ACTS ON THE PART OF THE PAYEE OR SOME OTHER PERSON WHO MAY COME INTO POSSESSION OF THE CHECK, THERE IS A POSSIBILITY OF DUPLICATE PAYMENT OF THE CHECK AND OF LOSS TO THE UNITED STATES. IT IS FURTHER STATED THAT, UNDER SUCH PROCEDURES, THE FINANCE OFFICERS BY ISSUING SUBSTITUTE CHECKS MIGHT PLACE THEMSELVES IN A POSITION WHERE THEY WOULD BECOME PERSONALLY LIABLE FOR CHECKS WHICH MIGHT BE NEGOTIATED FRAUDULENTLY OR WITHOUT DUE REGARD TO STOP PAYMENT NOTICES AND THEY HAVE BEEN INSTRUCTED TO CEASE ISSUANCE OF SUBSTITUTE DEPOSITARY CHECKS UNTIL FURTHER CLARIFICATION AND INSTRUCTIONS CAN BE FURNISHED THEM.

THE LETTER POINTS OUT THAT THE FINANCE OFFICERS INVOLVED ARE DEPENDENT UPON THE FRENCH MOROCCAN MAIL FACILITIES FOR DELIVERY OF THE CHECKS; THAT WHERE SUCH A CHECK IS NOT NEGOTIATED BY THE PAYEE, THE LIABILITY OF THE UNITED STATES FOR WHICH IT IS ISSUED HAS NOT BEEN DISCHARGED; AND, AUTHORITY IS REQUESTED FOR THE FINANCE OFFICERS TO RESUME ISSUANCE OF SUBSTITUTE CHECKS AND FOR SUCH OFFICERS TO FURNISH TO THE BANK OF MOROCCO, A STATEMENT RELIEVING IT FROM FINANCIAL RESPONSIBILITY IN EVENT IT IS REQUIRED TO REMOVE THE STOPPAGE OF PAYMENT WITHIN THREE YEARS OF ISSUANCE OF THE CHECKS. ALSO, THE LETTER REQUESTS ADVICE AS TO THE PROPER ACTION TO BE TAKEN TO RELIEVE THE FINANCE OFFICERS SHOULD BOTH THE ORIGINAL AND SUBSTITUTE CHECKS BE CASHED BY THE BANK NOTWITHSTANDING PRECAUTIONS TAKEN BY THE FINANCE OFFICERS TO PRECLUDE SUCH ACTION.

INFORMATION INFORMALLY OBTAINED IS TO THE EFFECT THAT THE MAJORITY OF CHECKS ISSUED BY THE FINANCE OFFICERS INVOLVED ARE ISSUED IN PAYMENT OF NORMAL COMMERCIAL ACCOUNT PAYMENTS TO INDIVIDUALS OR FIRMS FOR SERVICES AND SUPPLIES; THAT SINCE THE PAYEES ARE LOCATED IN VARIOUS PARTS OF MOROCCO, DELIVERIES, EXCEPT BY MAIL, ARE FOR THE MOST PART IMPRACTICABLE; THAT CHECKS ARE TRANSMITTED BY REGISTERED MAIL; THAT PAYMENTS BY CHECK ARE KEPT TO A MINIMUM; AND THAT IN ONLY A SMALL NUMBER OF CASES AS COMPARED WITH THE CHECKS ISSUED ARE THEY LOST AND SUBSTITUTES REQUESTED.

HAVING IN MIND THE RELATIVELY FEW CASES IN WHICH THE INVOLVED CHECKS BECOME LOST AND SUBSTITUTES ARE REQUESTED; THAT THE BANK WOULD BE RESPONSIBLE FOR PAYMENT AFTER ENTERING OF A STOP PAYMENT ORDER IS ACKNOWLEDGED EXCEPT IN THE LIMITED NUMBER OF CASES WHERE THE CHECK WOULD BE PRESENTED BY A HOLDER IN GOOD FAITH; AND THAT, THE UNITED STATES IN SUCH EVENT, IN SOME CASES AT LEAST, WOULD HAVE RECOURSE AGAINST THE PAYEE AND HIS SURETIES, IF ANY, UNDER THE UNDERTAKING OF INDEMNITY, THIS OFFICE HAS NO OBJECTION TO THE SAID FINANCE OFFICERS RESUMING THE ISSUANCE OF SUBSTITUTES IN LIEU OF LOST CHECKS WHERE PROPER TO DO SO UNDER AIR FORCE MANUAL 173-50, JUNE 30, 1951, PARAGRAPHS 60723-60731 AND 60734. NOR HAS IT ANY OBJECTION TO THE INVOLVED OFFICERS FURNISHING, TO THE BANK OF MOROCCO, A STATEMENT RELIEVING IT FROM RESPONSIBILITY FOR PAYMENT, OVER A STOP PAYMENT ORDER, OF THE AMOUNT OF A CHECK DRAWN ON IT BY THE INVOLVED OFFICERS WHERE IN ACCORDANCE WITH THE LAW OF FRENCH MOROCCO, IT IS REQUIRED TO PAY SUCH AMOUNT TO THE HOLDER WHO BECAME A BEARER IN GOOD FAITH.

SHOULD ANY LOSS OCCUR BY REASON OF PAYMENT OF BOTH ORIGINAL AND SUBSTITUTE DEPOSITARY CHECKS FOR WHICH THE BANK IS NOT RESPONSIBLE AND WHICH CANNOT BE RECOVERED UNDER THE UNDERTAKING OF INDEMNITY OR OTHERWISE AND WHICH RESULTS IN A DUPLICATE CHARGE IN THE FINANCE OFFICER'S ACCOUNT, A FULL REPORT IN THE MATTER SHOULD BE MADE TO THE CLAIMS DIVISION, GENERAL ACCOUNTING OFFICE, SO THAT THE NECESSARY ADJUSTMENT MAY BE MADE IN THE ACCOUNTS INVOLVED.

THE FISCAL ASSISTANT SECRETARY OF THE TREASURY, WHOSE DEPARTMENT HAS CERTAIN JURISDICTION, UNDER THE ACT OF DECEMBER 3, 1945, 59 STAT. 593, AS AMENDED, REGARDING THE ISSUANCE OF SUBSTITUTE DEPOSITARY CHECKS, HAS ADVISED THAT IN VIEW OF THE PRACTICAL SITUATION WITH WHICH THE DEPARTMENT OF THE AIR FORCE IS CONFRONTED, THE TREASURY WOULD HAVE NO OBJECTION TO THE RESUMPTION OF THE ISSUANCE OF SUBSTITUTE CHECKS IN FRENCH MOROCCO PROVIDED THAT AN APPROPRIATE UNDERTAKING OF INDEMNITY IS OBTAINED IN EACH CASE.