B-126390, JANUARY 16, 1956, 35 COMP. GEN. 401

B-126390, JANUARY 16, 1956, 35 COMP. GEN. 401

UNIFORMED SERVICES CONTINGENCY OPTION ACT - WAIVER OF RECOVERY OF ERRONEOUS PAYMENTS UNDER THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, WHICH PERMITS WAIVER OF ERRONEOUS PAYMENTS WHEN THE RECIPIENT HAS BEEN DETERMINED TO BE WITHOUT FAULT AND THE RECOVERY WOULD BE AGAINST EQUITY AND GOOD CONSCIENCE, OVERPAYMENTS ARISING FROM AN ERRONEOUS COMPUTATION MAY NOT BE WAIVED WHEN THERE IS NO SHOWING THAT COLLECTION OVER A REASONABLE PERIOD WOULD WORK UNDUE HARDSHIP.

TO THE SECRETARY OF THE NAVY, JANUARY 16, 1956:

REFERENCE IS MADE TO LETTER OF DECEMBER 15, 1955, FROM THE ASSISTANT SECRETARY OF THE NAVY ( PERSONNEL AND RESERVE FORCES), REQUESTING THAT WE CONCUR IN THE WAIVER OF RECOVERY OF CERTAIN ANNUITY OVERPAYMENTS MADE TO THE WIDOW OF CAPTAIN ALVA A. SHADDAY, U.S. NAVY, RETIRED (DECEASED).

IT APPEARS THAT CAPTAIN SHADDAY WAS RETIRED PRIOR TO HIS DEATH AND THAT HE ELECTED OPTIONS (1) AND (4) UNDER SECTION 4 OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, 67 STAT. 502, 37 U.S.C. 373, IN ORDER TO PROVIDE AN ANNUITY FOR HIS WIFE AT THE RATE OF ONE-EIGHTH OF HIS REDUCED RETIRED PAY, IN THE EVENT SHE SURVIVED HIM. FOLLOWING HIS DEATH IN DECEMBER 1954, ANNUITY PAYMENTS WERE MADE TO HER AT THE RATE OF $63.32 PER MONTH FOR THE PERIOD DECEMBER 1, 1954, TO AUGUST 31, 1955, WHEN IT WAS DISCOVERED THAT IN COMPUTING THE AMOUNT OF THE RETIRED PAY ON WHICH THE ANNUITY WAS BASED, CREDIT HAD BEEN GIVEN FOR CERTAIN NATIONAL GUARD SERVICE WHICH WAS NOT COUNTABLE FOR PERCENTAGE MULTIPLE PURPOSES IN DETERMINING THE AMOUNT OF RETIRED PAY DUE CAPTAIN SHADDAY UNDER THE CAREER COMPENSATION ACT OF 1949, 63 STAT. 802, 37 U.S.C. 231. IT IS STATED THAT ON THE BASIS OF THE CORRECT AMOUNT OF RETIRED PAY TO WHICH CAPTAIN SHADDAY WAS ENTITLED AT THE TIME OF HIS DEATH, THE ANNUITY PAYMENTS SHOULD HAVE BEEN MADE TO HIS WIDOW AT THE RATE OF $61.20 PER MONTH DURING THE PERIOD INVOLVED.

SECTION 7 (B) OF THE CONTINGENCY OPTION ACT PROVIDES THAT THERE NEED BE NO RECOVERY OF AMOUNTS ERRONEOUSLY PAID UNDER THAT ACT WHEN, IN THE JUDGMENT OF THE HEAD OF THE DEPARTMENT CONCERNED AND THE COMPTROLLER GENERAL OF THE UNITED STATES,"THE INDIVIDUAL TO WHOM THE ERRONEOUS PAYMENT HAS BEEN MADE IS WITHOUT FAULT AND RECOVERY WOULD BE CONTRARY TO THE PURPOSE OF THIS ACT OR WOULD BE AGAINST EQUITY AND GOOD CONSCIENCE.'

TO BE ELIGIBLE FOR RELIEF UNDER THAT SECTION, THE PERSON CONCERNED MUST NOT ONLY BE WITHOUT FAULT, BUT RECOVERY MUST EITHER BE CONTRARY TO THE PURPOSE OF THE ACT OR BE AGAINST EQUITY AND GOOD CONSCIENCE. THE COURTS HAVE HELD THAT THERE IS NO EQUITABLE RIGHT TO RETAIN MONEY ERRONEOUSLY PAID BY THE GOVERNMENT. SEE CASES COLLECTED AND DISCUSSED IN SECTION II OF AN ANNOTATION IN 63 A.L.R. 1346. THE COURT STATED IN UNITED STATES V. NORTHWESTERN NATIONAL BANK AND TRUST COMPANY OF MINNEAPOLIS, 35 F.1SUPP. 484, 486, THAT THE RECIPIENT OF AN ERRONEOUS PAYMENT RESULTING FROM A MISTAKE BY A PUBLIC OFFICIAL, MUST IN EQUITY MAKE RESTITUTION, SINCE RESTITUTION RESULTS IN NO LOSS TO HIM, HE HAVING RECEIVED SOMETHING FOR NOTHING. IN WISCONSIN CENTRAL RAILROAD V. UNITED STATES, 164 U.S. 190, IT WAS HELD THAT PERSONS WHO RECEIVE ERRONEOUS PAYMENTS FROM THE UNITED STATES THROUGH ADMINISTRATIVE ERROR OF ITS OFFICERS, ARE BOUND IN EQUITY AND GOOD CONSCIENCE TO MAKE RESTITUTION. EVEN FINANCIAL HARDSHIP WHICH MIGHT RESULT FROM COLLECTION FROM THE RECIPIENT OR THE FACT THAT THE PAYMENT MAY HAVE BEEN RECEIVED IN GOOD FAITH "CANNOT STAND AGAINST THE INJUSTICE OF KEEPING WHAT NEVER RIGHTFULLY BELONGED TO HIM AT ALL.' UNITED STATES V. BENTLEY, 107 F.2D 382, 384.

THE ONLY INFORMATION FOUND IN THE LEGISLATIVE HISTORY OF THE CONTINGENCY OPTION ACT AS TO THE MEANING OF SECTION 7, APPEARS ON PAGE 923 OF THE HEARINGS ON SUCH LEGISLATION BEFORE THE HOUSE COMMITTEE ON ARMED SERVICES. A REPRESENTATIVE OF THE UNIFORMED SERVICES THERE STATED WITH RESPECT TO SECTION 7 THAT:

NOW THAT IS JUST THE USUAL LANGUAGE THAT GOES IN, IN ALL OF THESE THINGS. IT GIVES THE SECRETARY A CHANCE TO GO AFTER SOMEBODY WHO HAS MADE A FRAUDULENT CLAIM AND AT THE SAME TIME IF WE HAVE MADE A MISTAKE, AS OCCASIONALLY WE DO, IT DOESN-T MEAN THE SECRETARY HAS TO HOUND SOME POOR WIDOW.

THE LANGUAGE OF SECTION 7 (B) IS SOMEWHAT UNUSUAL. THE TERM "EQUITY AND GOOD CONSCIENCE" MUST HAVE BEEN USED IN A DIFFERENT SENSE THAN IT IS UNDERSTOOD BY THE COURTS, SINCE EQUITY AND GOOD CONSCIENCE REQUIRES THAT ERRONEOUS PAYMENTS OF PUBLIC FUNDS BE REFUNDED BY THE RECIPIENTS. ALSO, IT SEEMS OBVIOUS THAT THE PROVISION PERMITTING WAIVER WHERE THE RECIPIENT IS WITHOUT FAULT AND RECOVERY WOULD BE CONTRARY TO THE PURPOSE OF THE ACT OR WOULD BE AGAINST EQUITY AND GOOD CONSCIENCE, DOES NOT REFER TO ALL ERRONEOUS PAYMENTS WHERE THE BENEFICIARY IS WITHOUT FAULT, SINCE THE CONGRESS THEN WOULD HAVE MADE THE WAIVER MANDATORY WHERE NO FAULT IS SHOWN. HOWEVER, THE MATTER OF WAIVER WAS LEFT TO THE JUDGMENT OF THE NAMED OFFICERS OF THE GOVERNMENT.

OBVIOUSLY THEN, SOMETHING MORE THAN FREEDOM FROM FAULT MUST BE SHOWN BEFORE A BASIS EXISTS FOR EXERCISING A JUDGMENT AS TO WHETHER COLLECTION OF A PARTICULAR OVERPAYMENT OR OVERPAYMENTS SHOULD BE WAIVED. A STATEMENT SUCH AS IS MADE HERE, THAT THE WIDOW HAS COME TO EXPECT THE FULL AMOUNT OF THE MONTHLY PAYMENTS, IS NOT SUFFICIENT SINCE IT MAY BE PRESUMED THAT ALL BENEFICIARIES UNDER THE ACT HAVE THE SAME EXPECTATION. UNLESS IT CAN BE ESTABLISHED THAT COLLECTION OF THE OVERPAYMENTS WOULD WORK AN UNDUE HARDSHIP, OR SOME OTHER REASON WHICH DOES NOT NOW COME TO MIND, CAN BE AS TO WHY COLLECTION SHOULD NOT BE MADE, IT IS BELIEVED THAT NO PROPER BASIS EXISTS FOR EXERCISE OF THE WAIVER AUTHORITY.

IN THIS CONNECTION IT EVEN MIGHT BE REASONABLE TO ASSUME IN THE VAST MAJORITY OF INSTANCES SUCH AS THIS, THAT WHEN THE MATTER IS EXPLAINED TO THE DEBTOR, SHE NOT ONLY WOULD ACQUIESCE, BUT WOULD FEEL REQUIRED AND OBLIGATED IN EQUITY AND GOOD CONSCIENCE TO INSIST UPON MAKING RESTITUTION OF BENEFITS WHICH DID NOT LEGALLY BELONG TO HER IN THE FIRST PLACE. BUT IN ANY EVENT, IT IS NOT BELIEVED THAT THE PERIODIC CHECK AGE OVER A REASONABLE PERIOD TO LIQUIDATE THE DEBT, AS IN THIS CASE, IS SO HARSH AS TO CONSTITUTE A BURDEN BEYOND THE INTENT AND PURPOSE OF THE LAW.

IN VIEW OF THE FACT THAT THE RECORD CONTAINS NO INFORMATION FROM WHICH IT COULD BE CONCLUDED THAT THE ADMINISTRATIVELY SUGGESTED CHECK AGE OF $2.12 PER MONTH FOR A PERIOD OF 9 MONTHS WOULD WORK A FINANCIAL HARDSHIP ON MRS. SHADDAY, WE FEEL SUCH RECORD DOES NOT JUSTIFY WAIVING RECOVERY OF THE OVERPAYMENTS.