B-126235, I-17000-2598, FEB. 29, 1956

B-126235: Feb 29, 1956

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TO HONORABLE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED NOVEMBER 29. WERE QUESTIONED IN A REPORT OF INVESTIGATION TRANSMITTED TO YOUR DEPARTMENT WITH OUR LETTER OF SEPTEMBER 15. THAT DURING THE PERIODS THERE INVOLVED THE MOTHER WAS GAINFULLY EMPLOYED AND THAT SHE HAD AN AVERAGE INCOME OF $147 A MONTH IN 1947. WHO WAS MARRIED ON MARCH 18. WAS STATED TO HAVE CONTRIBUTED $125 A MONTH TO THE SUPPORT OF HIS MOTHER BY A $50 MONTHLY ALLOTMENT FROM HIS PAY AND ADDITIONAL REMITTANCES BY MONEY ORDER AVERAGING $75 A MONTH. WAS MORE THAN HALF OF HER AVERAGE MONTHLY LIVING EXPENSES IT WAS CONCLUDED THAT SHE DERIVED HER CHIEF SUPPORT FROM SOURCES OTHER THAN THE OFFICER DURING THAT PERIOD.

B-126235, I-17000-2598, FEB. 29, 1956

TO HONORABLE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED NOVEMBER 29, 1955, FROM THE ACTING CHIEF OF FINANCE, WITH ENCLOSURES, CONCERNING INCREASED RENTAL AND SUBSISTENCE ALLOWANCE PAYMENTS MADE TO CAPTAIN KEITH L. WARREN, 02039165, ORDNANCE CORPS, AS FOR AN OFFICER WITH A DEPENDENT MOTHER DURING THE PERIODS JULY 29 TO DECEMBER 5, 1945, AND JULY 27, 1946, TO SEPTEMBER 30, 1949. THE PAYMENTS FOR THE PERIOD JANUARY 1, 1947, TO SEPTEMBER 30, 1949, WERE QUESTIONED IN A REPORT OF INVESTIGATION TRANSMITTED TO YOUR DEPARTMENT WITH OUR LETTER OF SEPTEMBER 15, 1953.

IT APPEARED FROM THE INVESTIGATION, INCLUDING PERSONAL INTERVIEWS WITH THE OFFICER'S MOTHER, THAT DURING THE PERIODS THERE INVOLVED THE MOTHER WAS GAINFULLY EMPLOYED AND THAT SHE HAD AN AVERAGE INCOME OF $147 A MONTH IN 1947, $155 A MONTH IN 1948, AND $161 A MONTH IN 1949, INCLUDING NATIONAL SERVICE LIFE INSURANCE PAYMENT IN THE AMOUNT OF $26.25 A MONTH; AND THAT HER LIVING EXPENSES AVERAGED $233 A MONTH. THE OFFICER, WHO WAS MARRIED ON MARCH 18, 1949, WAS STATED TO HAVE CONTRIBUTED $125 A MONTH TO THE SUPPORT OF HIS MOTHER BY A $50 MONTHLY ALLOTMENT FROM HIS PAY AND ADDITIONAL REMITTANCES BY MONEY ORDER AVERAGING $75 A MONTH. SINCE THE MOTHER'S AVERAGE MONTHLY INCOME, INCLUDING THE NATIONAL SERVICE LIFE INSURANCE PAYMENTS FOR THE PERIOD JANUARY 1, 1947, TO SEPTEMBER 30, 1949, WAS MORE THAN HALF OF HER AVERAGE MONTHLY LIVING EXPENSES IT WAS CONCLUDED THAT SHE DERIVED HER CHIEF SUPPORT FROM SOURCES OTHER THAN THE OFFICER DURING THAT PERIOD.

THE ACTING CHIEF OF FINANCE REQUESTS RECONSIDERATION OF THE MATTER IN VIEW OF THE INFORMATION CONTAINED IN THE ENCLOSURES WITH HIS LETTER. AMONG THE ENCLOSURES ARE THE OFFICER'S STATEMENTS OF MAY 4 AND 25, 1955, AND A MEMORANDUM DATED MAY 4, 1955, WRITTEN BY JESSE H. BROOKS, LEGAL ADVISOR, MOUNT RAINIER ORDNANCE DEPOT, TACOMA, WASHINGTON. THE GIST OF THE OFFICER'S STATEMENTS IS (1) THAT IN ADDITION TO A CHECKING ACCOUNT IN THE NAME OF HIS MOTHER, MRS. E. LEO WARREN (BANK LEDGER SHEETS EXAMINED AT THE TIME OF OUR INVESTIGATION), SHE HAD ANOTHER CHECKING ACCOUNT IN THE NAME OF MRS. EFFIE L. WARREN AND A SAVINGS ACCOUNT IN THE NAME OF MRS. LEO WARREN; (2) THAT THE FUNDS DEPOSITED IN THE SAVINGS ACCOUNT BELONGED TO HIM; (3) THAT WHEN THE SAVINGS ACCOUNT WAS CLOSED, $663 OF THE FUNDS DEPOSITED WERE RETAINED AND USED BY HIS MOTHER; (4) THAT THE $663 SHOULD BE CONSIDERED AS AN ADDITIONAL CONTRIBUTION TO THE SUPPORT OF HIS MOTHER AND BE AVERAGED OVER THE YEARS 1947 AND 1948; (5) THAT HIS MOTHER'S NET EARNINGS RATHER THAN HER GROSS EARNINGS SHOULD HAVE BEEN USED IN COMPUTING HER AVERAGE MONTHLY INCOME; AND (6) THAT WHEN HE CLAIMED THE ALLOWANCES HE WAS UNDER THE IMPRESSION THAT INSTALLMENT PAYMENTS OF LIFE INSURANCE WOULD NOT BE CONSIDERED AS INCOME FOR DEPENDENCY ALLOWANCE PURPOSES. THE MOTHER'S CHECKING AND SAVINGS ACCOUNT BOOKS AS WELL AS HER INCOME TAX WITHHOLDING STATEMENTS FOR THE YEARS 1947, 1948, AND 1949, WERE SUBMITTED WITH THE OFFICER'S LETTER OF MAY 25, 1955. AN EXAMINATION OF THE BANK BOOKS SHOWS THAT THE CHECKING ACCOUNT IN THE NAME OF MRS. E. LEO WARREN, WAS OPENED ON JULY 3, 1945, AND THAT THE LAST DEPOSIT WAS MADE ON JANUARY 18, 1950. PHOTOSTATIC COPIES OF THE BANK LEDGER SHEETS PERTAINING TO THAT ACCOUNT THROUGH JUNE 18, 1949, SHOW NUMEROUS DEPOSITS OF $50 AND $26.25 AND THAT MRS. WARREN MAINTAINED AN AVERAGE BALANCE OF LESS THAN $100. THE CHECKING ACCOUNT IN THE NAME OF MRS. EFFIE L. WARREN WAS OPENED ON MAY 12, 1947, WITH A DEPOSIT OF $90, THE LAST DEPOSIT IN THE AMOUNT OF $300 BEING MADE ON SEPTEMBER 21, 1948. INTERIM DEPOSITS OF FROM $10 TO $150, AVERAGED ABOUT $138. NO OTHER INFORMATION PERTAINING TO THAT ACCOUNT HAS BEEN FURNISHED. THE SAVINGS ACCOUNT WAS OPENED ON OCTOBER 5, 1946, AND CLOSED ON MAY 7, 1947, BY THE WITHDRAWAL OF $1,513, THE OFFICER ADMITTING THAT HE RECEIVED $850 OF THE AMOUNT WITHDRAWN. THE INCOME TAX WITHHOLDING STATEMENTS SHOW THAT MRS. WARREN'S TOTAL WAGES (BEFORE PAYROLL DEDUCTIONS) WERE $1,451.97 IN 1947, $1,535.83 IN 1948, AND $1,614.49 IN 1949, AND THAT THE INCOME TAX WITHHELD WAS $156.70 IN 1947, $142.90 IN 1948, AND $144.90 IN 1949.

IN HIS MEMORANDUM MR. BROOKS REFERS TO OUR DECISION OF AUGUST 10, 1951, B -86001 (B), TO THE SECRETARY OF THE ARMY, HOLDING THAT INSTALLMENT PAYMENTS OF INSURANCE ARE TO BE REGARDED AS INCOME NORMALLY AVAILABLE FOR SUPPORT IN DETERMINING WHETHER AN ALLEGED DEPENDENT WAS, OR IS, IN FACT DEPENDENT ON A MEMBER FOR OVER HALF OF HIS OR HER SUPPORT, AND, AFTER NOTING THAT THE DECISION IS NOT REPORTED IN ANY PRINTED VOLUME OF THE DECISIONS OF THE COMPTROLLER GENERAL, HE SAYS "THIS RAISES AT LEAST THE PRESUMPTION THAT THE RULING REFERRED TO IS AN ADVANCE DECISION OR A MEMORANDUM DECISION ON AN INDIVIDUAL CASE, AND AS SUCH WOULD NOT NECESSARILY BE CONTROLLING OR A PRECEDENT STATING A GENERAL RULE OF LAW.' HE THEN, IN EFFECT, INDICATES THE BELIEF THAT NATIONAL SERVICE LIFE INSURANCE INSTALLMENT PAYMENTS SHOULD NOT BE REGARDED AS INCOME SAYING, INSOFAR AS HERE MATERIAL,---

"WHILE INFERENTIALLY THE COURT OF CLAIMS HAS CONSIDERED LIFE INSURANCE PAID IN INSTALLMENTS A FACTOR OF INCOME RATHER THAN CAPITAL, IT WOULD APPEAR TO THE WRITER THAT THE SAME REASONING WOULD NOT NECESSARILY FOLLOW AS TO INSURANCE PAYMENTS UNDER THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940, AS AMENDED. THE COURTS HAVE HELD REPEATEDLY, THOUGH NOT ON MATTERS GERMANE TO THIS PARTICULAR QUESTION, THAT NATIONAL SERVICE LIFE INSURANCE CREATED BY STATUTE FOR THE BENEFIT OF SERVICEMEN AND THEIR FAMILIES IS NOT NECESSARILY TO BE CONSIGNED IN THE LIGHT OF CASE LAW APPLICABLE TO COMMERCIAL LIFE INSURANCE TRANSACTIONS. IT IS TO BE POINTED OUT THAT AN INDIVIDUAL TAKING OUT ORDINARY LIFE INSURANCE CAN AT HIS SELECTION PROVIDE FOR MONTHLY INSTALLMENTS OR FOR A LUMP SUM SETTLEMENT, DEPENDING ON WHAT HE CONSIDERS TO BE IN THE BEST INTERESTS OF THE BENEFICIARY. HOWEVER, THE SERVICEMEN DYING IN LINE OF DUTY PRIOR TO AUGUST 1, 1946 HAD NO SUCH OPTION UNDER THE NATIONAL SERVICE LIFE INSURANCE ACT, FOR BY ITS PROVISIONS THE INSURANCE COULD ONLY BE PAID OUT IN MONTHLY INSTALLMENTS, ALTHOUGH HIS WISHES MIGHT HAVE BEEN TO PROVIDE A CAPITAL INVESTMENT. THEN THERE IS ALSO THE MORE OR LESS INTANGIBLE BUT REAL QUESTION TO BE CONSIDERED OF WHETHER THIS INSURANCE IS NOT REALLY MORE IN THE NATURE OF A DEATH PAYMENT RATHER THAN INSURANCE AS IT IS ORDINARILY UNDERSTOOD.'

THE DECISION OF AUGUST 10, 1951, WAS RENDERED IN RESPONSE TO A REQUEST BY A FORMER SECRETARY OF THE ARMY AS TO WHETHER MONTHLY PAYMENTS UNDER A LIFE INSURANCE POLICY CONSTITUTED A CAPITAL ASSET RATHER THAN CURRENT INCOME AND, WHILE THE DECISION WAS NOT INCLUDED AMONG THE SELECTED DECISIONS CONTAINED IN THE PRINTED VOLUME OF COMPTROLLER GENERAL'S DECISIONS FOR THAT FISCAL YEAR, IT HAS THE SAME STATUS SO FAR AS ITS SUBJECT MATTER IS CONCERNED AS IF PUBLISHED. THE DECISION DID NOT CHANGE THE RULE OF LAW APPLICABLE TO SUCH CASES AND THE PRINCIPLE THAT INSURANCE INSTALLMENT PAYMENTS ARE TO BE REGARDED AS INCOME FOR SUPPORT PURPOSES APPLIES EQUALLY TO CASES ARISING BEFORE AS WELL AS AFTER THE DECISION WAS RENDERED.

AN EXAMINATION OF THE LEGISLATIVE HISTORY OF THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940, AS AMENDED, 38 U.S.C.A. 801-818, SHOWS THAT THE PROVISIONS OF THE ACT WERE PATTERNED AFTER WAR RISK INSURANCE AND UNITED STATES GOVERNMENT INSURANCE AND, AS INDICATED BY MR. BROOKS, THE COURTS HAVE HELD THAT IN PROVIDING SUCH INSURANCE BENEFITS FOR ITS ARMED FORCES, THE UNITED STATES DOES NOT HAVE THE SAME RELATIONSHIP TO THE INSURED AS THAT OF A PRIVATE INSURANCE COMPANY, AND THE SAME PRINCIPLES DO NOT NECESSARILY APPLY. UNITED STATES V. HOLLEY, C.A., GA., 199 F.2D 575; KAUFFMAN V. KAUFFMAN, 1949, 210 P.2D 29, 93 CAL.APP.2D 808. IT HAS BEEN HELD, HOWEVER, THAT THE INTENT OF CONGRESS IN AUTHORIZING NATIONAL SERVICE LIFE INSURANCE WAS TO PROVIDE FINANCIAL ASSISTANCE TO THE DEPENDENTS OF SERVICE PERSONNEL AFTER DEATH. UNITED STATES V. HENNING, 344 U.S. 66, REHEARING DENIED 344 U.S. 910; TRATHEN V. UNITED STATES, D.C., PA., 1951, 96 F.SUPP. 809; RICHARDS V. UNITED STATES, D.C., W.VA., 1950, 93 F.SUPP. 208; UNITED STATES V. KWASNIEWSKI, D.C., 91 F.SUPP. 847, 853; MCDONALD V. UNITED STATES, D.C., 91 F.SUPP. 163, 170; NEUHARD V. UNITED STATES, D.C., 83 F.SUPP. 911, 914. IT SEEMS CLEAR, THEREFORE, THAT INSTALLMENT PAYMENTS OF SUCH INSURANCE WERE PROVIDED FOR SUPPORT PURPOSES, AND THAT SUCH INSTALLMENT PAYMENTS, AS IN THE CASE OF INSTALLMENT PAYMENTS OF COMMERCIAL LIFE INSURANCE, MUST BE REGARDED AS INCOME IN DETERMINING WHETHER AN ALLEGED DEPENDENT WAS OR IS IN FACT A "DEPENDENT" AS DEFINED IN THE DEPENDENCY ALLOWANCE STATUTES.

ON THAT BASIS IT APPEARS THAT THE MOTHER'S AVERAGE MONTHLY INCOME (NET EARNINGS PLUS NATIONAL SERVICE LIFE INSURANCE PAYMENTS) AMOUNTED TO AT LEAST $134.19 IN 1947, $142.33 IN 1948, AND $148.72 IN 1949. SINCE SUCH INCOME WAS MORE THAN HALF OF HER AVERAGE MONTHLY LIVING EXPENSES, THE RECORD WOULD STILL SHOW THAT THE MOTHER WAS NOT DEPENDENT ON THE OFFICER FOR CHIEF SUPPORT DURING THE PERIOD JANUARY 1, 1947, UNTIL THE DATE OF HIS MARRIAGE, EVEN IF, WITHOUT FURTHER ACCEPTABLE SUPPORTING EVIDENCE, HE COULD BE GIVEN THE BENEFIT OF HIS CONTENTIONS RESPECTING CONTRIBUTIONS OVER AND ABOVE THE AMOUNT OF THE ALLOTMENT FROM HIS PAY.

WE WILL APPRECIATE INFORMATION AS TO THE AMOUNTS COLLECTED BY THE DEPARTMENT OF THE ARMY ON ACCOUNT OF THE IMPROPER PAYMENTS MADE TO CAPTAIN WARREN.