B-147063, OCTOBER 30, 1961, 41 COMP. GEN. 276

B-147063: Oct 30, 1961

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ETC. - AMOUNT LIMITATION A "SUITABLE BOND" WHICH PERSONS RECEIVING PAYMENTS ON BEHALF OF INCOMPETENT MEMBERS OF THE UNIFORMED SERVICES ARE REQUIRED TO FURNISH UNDER THE ACT OF JUNE 21. IS ONE WHICH IS SUFFICIENT IN AMOUNT FOR THE PROTECTION OF THE INCOMPETENT MEMBER AGAINST IMPROPER ACTION BY THE TRUSTEE IN CONNECTION WITH THE FUNDS. 000 BOND FURNISHED BY THE WIFE OF AN INCOMPETENT MEMBER WHO BY REASON OF A RECORD CORRECTION ACTION IS TO RECEIVE RETROACTIVE RETIRED PAY AGGREGATING $22. IS NOT A SUITABLE BOND TO SATISFY THE REQUIREMENTS OF 37 U.S.C. 353. THE LAW IS FOR APPLICATION IN ANY APPROPRIATE CASE REGARDLESS OF THE AMOUNT OF THE PAYMENT TO BE MADE TO THE TRUSTEE. YOUR REQUEST WAS ASSIGNED AIR FORCE REQUEST NO.

B-147063, OCTOBER 30, 1961, 41 COMP. GEN. 276

INSANE AND INCOMPETENTS - GUARDIANS AND COMMITTEES - SERVICEMAN'S PAY - ALLOWANCES, ETC. - BOND REQUIREMENT--- INSANE AND INCOMPETENTS - GUARDIANS AND COMMITTEES - SERVICEMAN'S PAY, ALLOWANCES, ETC. - AMOUNT LIMITATION A "SUITABLE BOND" WHICH PERSONS RECEIVING PAYMENTS ON BEHALF OF INCOMPETENT MEMBERS OF THE UNIFORMED SERVICES ARE REQUIRED TO FURNISH UNDER THE ACT OF JUNE 21, 1950, AS AMENDED, 37 U.S.C. 353, WHEN THE PAYMENTS MAY BE EXPECTED TO EXCEED $1,000, IS ONE WHICH IS SUFFICIENT IN AMOUNT FOR THE PROTECTION OF THE INCOMPETENT MEMBER AGAINST IMPROPER ACTION BY THE TRUSTEE IN CONNECTION WITH THE FUNDS; THEREFORE, A $1,000 BOND FURNISHED BY THE WIFE OF AN INCOMPETENT MEMBER WHO BY REASON OF A RECORD CORRECTION ACTION IS TO RECEIVE RETROACTIVE RETIRED PAY AGGREGATING $22,066, IS NOT A SUITABLE BOND TO SATISFY THE REQUIREMENTS OF 37 U.S.C. 353. IN VIEW OF THE ABSENCE OF ANY LIMITATION ON THE MAXIMUM AMOUNT THAT MAY BE PAID TO A TRUSTEE ON BEHALF OF AN INCOMPETENT MEMBER OF THE UNIFORMED SERVICES UNDER THE ACT OF JUNE 21, 1950, AS AMENDED, 37 U.S.C. 353, AND EVIDENCE OF A CONGRESSIONAL INTENT THAT THE ACT SHOULD APPLY WHERE SUBSTANTIAL AMOUNTS WOULD BE PAYABLE TO THE MEMBER SUBJECT TO THE REQUIREMENT THAT A SUITABLE BOND BE FURNISHED WHEN THE AMOUNT MAY BE EXPECTED TO EXCEED $1,000, THE LAW IS FOR APPLICATION IN ANY APPROPRIATE CASE REGARDLESS OF THE AMOUNT OF THE PAYMENT TO BE MADE TO THE TRUSTEE.

TO MAJOR J. J. VANYA, DEPARTMENT OF THE AIR FORCE, OCTOBER 30, 1961:

BY LETTER OF SEPTEMBER 26, 1961, THE DEPUTY DIRECTOR OF ACCOUNTING AND FINANCE, UNITED STATES AIR FORCE, FORWARDED YOUR LETTER OF AUGUST 25, 1961, REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF MAKING PAYMENT OF ACTIVE DUTY PAY AND ALLOWANCES AND RETROACTIVE RETIRED PAY, AGGREGATING $$22,066, ON A VOUCHER STATED IN FAVOR OF MRS. MARY E. G. LYNN, DESIGNATED TRUSTEE OF LIEUTENANT COLONEL LLOYD L. L. LYNN, AO 402328, A MENTALLY INCOMPETENT RETIRED OFFICER. YOUR REQUEST WAS ASSIGNED AIR FORCE REQUEST NO. DO-AF-609 BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE.

IT IS SHOWN IN YOUR LETTER AND THE PAPERS ACCOMPANYING THE VOUCHER THAT UNDER THE AUTHORITY OF 10 U.S.C. 1552 THE MILITARY RECORDS OF LIEUTENANT COLONEL LYNN WERE CORRECTED TO SHOW THAT HE WAS NOT RELEASED FROM ACTIVE DUTY ON JANUARY 16, 1953, BUT THAT HE REMAINED ON ACTIVE DUTY UNTIL JANUARY 31, 1953, ON WHICH DATE HIS NAME WAS PLACED ON THE PERMANENT DISABILITY RETIRED LIST WITH ENTITLEMENT TO DISABILITY PAY EFFECTIVE FEBRUARY 1, 1953. HIS MILITARY RECORDS WERE CORRECTED TO ALSO SHOW THAT HE WAS NOT DISCHARGED FROM HIS RESERVE COMMISSION ON JANUARY 12, 1955, BUT THAT HE WAS TRANSFERRED TO THE RETIRED RESERVE EFFECTIVE FEBRUARY 1, 1953. A DETERMINATION WAS THEREFORE MADE BY YOUR DEPARTMENT THAT THERE IS DUE THE MEMBER ACTIVE DUTY PAY AND ALLOWANCES ($299.51) AS A MAJOR FOR THE PERIOD JANUARY 17 TO 31, 1953, AND RETROACTIVE RETIRED PAY ($21,766.49), BASED ON HIS GRADE OF LIEUTENANT COLONEL, AIR FORCE RESERVE, FOR THE PERIOD FEBRUARY 1, 1953, TO APRIL 30, 1961. IT IS FURTHER SHOWN THAT MRS. MARY E. G. LYNN, THE MEMBER'S WIFE, WHO WAS DESIGNATED AS TRUSTEE AND BONDED FOR $1,000 UNDER THE ACT OF JUNE 21, 1950, 64 STAT. 249, 37 U.S.C. 351-354, AND PARAGRAPH 40970, AIR FORCE MANUAL 177-105, HAS BEEN RECEIVING THE MONTHLY RETIRED PAY OF $194.87 ($458.87 LESS VETERANS ADMINISTRATION COMPENSATION OF $264 PER MONTH).

YOU STATE THAT DOUBT REGARDING THE PROPRIETY OF THE PROPOSED PAYMENT ARISES BY VIRTUE OF THE SUBSTANTIAL AMOUNT THEREOF IN CONTRAST TO THE AMOUNT OF THE TRUSTEESHIP BOND. IN ADDITION, YOU QUESTION WHETHER THE ACT OF JUNE 21, 1950, CONTEMPLATED SINGLE PAYMENTS OF THIS SIZE TO TRUSTEES DESIGNATED UNDER THAT ACT.

SECTION 3 OF THE ACT OF JUNE 21, 1950, AS AMENDED BY THE ACT OF AUGUST 7, 1959, 73 STAT. 297, 37 U.S.C. 353, READS AS FOLLOWS:

THE SECRETARY OF THE DEPARTMENT CONCERNED AND THE ADMINISTRATOR OF VETERANS' AFFAIRS SHALL PRESCRIBE SUCH REGULATIONS AS MAY BE NECESSARY TO CARRY OUT EFFECTIVELY THE PROVISIONS OF THIS ACT, INCLUDING A REQUIREMENT THAT SUCH PERSON OR PERSONS DESIGNATED TO RECEIVE PAYMENTS AS PROVIDED IN SECTION 2 ABOVE SHALL FURNISH SATISFACTORY ASSURANCES THAT AMOUNTS RECEIVED HAVE BEEN AND WILL BE APPLIED TO THE USE AND BENEFIT OF THE INCOMPETENT AND, IN CASES WHEREIN THE PAYMENTS MAY BE REASONABLY EXPECTED TO EXCEED $1,000, THAT A SUITABLE BOND SHALL BE PROVIDED BY SUCH PERSON OR PERSONS WHICH MAY BE PAID FOR OUT OF SUMS DUE THE INCOMPETENT. ( ITALICS SUPPLIED.)

THE PURPOSE OF THE ACT IS TO PERMIT THE SEVERAL SERVICES TO PAY AMOUNTS DUE INCOMPETENT MEMBERS TO A PERSON OTHER THAN A JUDICIALLY APPOINTED LEGAL REPRESENTATIVE IN ORDER TO AVOID THE EXPENSE AND DELAY INCIDENT TO REQUIRING SUCH PROCEEDINGS WHERE THERE ARE FURNISHED SATISFACTORY ASSURANCES THAT THE AMOUNTS RECEIVED BY THE DESIGNATED TRUSTEE WILL BE APPLIED TO THE USE AND BENEFIT OF THE INCOMPETENT. IN CASES WHERE THE PAYMENTS MAY BE EXPECTED TO EXCEED $1,000, THE ACT REQUIRES THAT THE DESIGNATED TRUSTEE SHALL PROVIDE "A SUITABLE BOND.'

AS ORIGINALLY INTRODUCED THE BILL ( H.R. 5920--- 81ST CONGRESS) WHICH BECAME THE ACT OF JUNE 21, 1950, DID NOT CONTAIN ANY REQUIREMENT THAT THE TRUSTEE FURNISH A BOND. THE HOUSE COMMITTEE ON ARMED SERVICES RECOMMENDED AN AMENDED REVISION OF THE BILL, WHICH INCLUDED A PROVISION STATED TO BE FOR THE PROTECTION OF THE MENTAL INCOMPETENT, REQUIRING THE TRUSTEE TO FURNISH A SUITABLE BOND IN THE PRESCRIBED CASES. SEE H. REPORT NO. 1877, 81ST CONGRESS, ON H.R. 5920. IT IS THE USUAL PRACTICE IN FIDUCIARY CASES TO REQUIRE A BOND IN AN AMOUNT COMMENSURATE WITH THE INCOME AND SIZE OF THE ESTATE OF THE INCOMPETENT, INFANT, OR DECEDENT. SEE 39 C.J.S., GUARDIAN AND WARD, SECTION 34B; SECTION 9 (1), UNIFORMED VETERANS' GUARDIANSHIP ACT; 33 C.J.S. EXECUTORS AND ADMINISTRATORS, SECTION 67B; 21 AM. JUR., EXECUTORS AND ADMINISTRATORS, SECTION 717; GEORGIA CODE ANNOTATED, TITLE 108, SECTIONS 304 AND 305.

THAT IT WAS THE INTENT OF THE CONGRESS THAT THE BOND REQUIRED BY THE STATUTE HERE INVOLVED SHOULD BE COMMENSURATE WITH THE AMOUNTS TO BE PAID IS ABUNDANTLY CLEAR FROM THE LEGISLATIVE HISTORY. IN THE COURSE OF THE HEARINGS ON THE BILL, MR. KILDAY, CHAIRMAN OF THE SUBCOMMITTEE OF THE COMMITTEE ON ARMED SERVICES, HOUSE OF REPRESENTATIVES, OBJECTED TO THE ABSENCE IN THE BILL OF A BONDING REQUIREMENT PROVIDING A MEANS OF RECOVERY OF THE INCOMPETENT'S PROPERTY IN THE EVENT OF DEFALCATION BY THE TRUSTEE TO WHOM THE SERVICES WOULD MAKE PAYMENT. SEE PAGES 4962 AND 4963 OF THE HEARINGS OF THAT SUBCOMMITTEE, IN PERTINENT PART AS FOLLOWS:

MR. KILDAY. NOW, OF COURSE, IN THE EVENT THAT HE IS DISCHARGED OR SEPARATED, I CAN SEE WHY FOR THE CONVENIENCE AND AVOIDING EXPENSE FOR ALL CONCERNED THAT THE DEPARTMENT SHOULD HAVE THE RIGHT TO SETTLE UP THE RELATIVELY SMALL AMOUNT THAT MIGHT BE DUE. BUT THIS GOES FURTHER TO PROVIDE THAT RETIRED PAY WOULD ALSO BE SO CONTROLLED.

CAPTAIN MCDILL. THAT IS CORRECT, SIR.

MR. KILDAY. SO THAT IT COULD CONTINUE ON OVER A PERIOD OF MANY YEARS.

CAPTAIN MCDILL. A LIFE TIME OF THE INCOMPETENT.

MR. KILDAY. AND COULD APPLY TO A PERSON DRAWING A RATHER LARGE RETIRED PAY?

CAPTAIN MCDILL. THAT IS CORRECT, SIR.

MR. KILDAY. AND THE SECRETARY COULD DETERMINE THAT BEING INCOMPETENT, THAT IT IS GOING TO BE PAID TO THE WIFE, CHILD, OR WHATEVER THEY DESIGNATE AS COMING WITHIN THIS DEFINITION. WHY SHOULD WE GO SO FAR AS TO PROVIDE FOR A SITUATION THAT MIGHT GO OVER A LONG PERIOD OF TIME AND AMOUNT TO A GREAT DEAL OF MONEY WHEN THE RECIPIENT RECEIVES IT TO BE APPLIED TO THE USE AND BENEFIT OF THE PERSON BUT IS NOT SUBJECT TO BOND TO SEE THAT THAT IS CARRIED OUT? AREN-T WE GETTING INTO A RATHER DANGEROUS TERRITORY?

CAPTAIN MCDILL. I DO NOT BELIEVE SO, SIR. THE SECRETARY'S DETERMINATION, AS IS VISUALIZED HERE, WOULD BE AN ATTEMPT TO SUBSTITUTE FOR THE INCOMPETENT'S INTELLECT; TO DETERMINE WHAT HE WOULD HAVE DONE HAD HE NOT BEEN INCOMPETENT.

MR. KILDAY. AND HE HAS DONE IT IN ALL GOOD FAITH, THE SECRETARY HAS, AND HE HAS DESIGNATED THE PERSON THAT HE IS CONVINCED WOULD USE THE FUNDS FOR THE USE AND BENEFIT OF THE INCOMPETENT, BUT IT DEVELOPS THAT THE PERSON SO DESIGNATED DOES NOT USE IT BUT DEFAULTS. THERE IS NO BOND OR ANY RECOURSE THEN FOR THE INCOMPETENT.

CAPTAIN MCDILL. IF THE SECRETARY PRESCRIBED NO BONDING REQUIREMENTS, THAT WOULD BE THE CASE, SIR.

MR. KILDAY. I AM CONSCIOUS OF THIS BECAUSE WHEN I WAS PROSECUTING I SENT A MAN TO THE PENITENTIARY FOR EXACTLY THIS, WITH REFERENCE TO SEVERAL INCOMPETENTS OF THE FIRST WORLD WAR. HE HAD BEEN DESIGNATED GUARDIAN FOR THEM BY A LOCAL COURT AND HE WAS UNDER BOND. WE WERE ABLE TO COLLECT BACK FOR THE INCOMPETENT TO THE EXTENT OF THE BOND, WHEREAS, HAD THIS SITUATION EXISTED, THERE WOULD HAVE BEEN NO RECOURSE FOR THE BENEFIT OF THE INCOMPETENT.

CAPTAIN MCDILL. I DOUBT VERY MUCH IF A PARALLEL CASE WOULD OCCUR IN THE SERVICES SINCE, UNLESS ONE DEPENDENT HAD SEVERAL MENTAL INCOMPETENTS, IT WOULD BE UNLIKELY THAT ONE PERSON WOULD BE DESIGNATED AS THE PROPER ONE TO RECEIVE THE MONEY.

MR. KILDAY. * * * IT WAS OF GREAT IMPORTANCE TO THE INCOMPETENT BECAUSE THE CORPUS OF THE ESTATE HAD BEEN DISSIPATED AND BECAUSE OF THE EXISTENCE OF THE BOND * * * WE WERE ABLE TO RECOVER FOR THE INCOMPETENT. ( ITALICS SUPPLIED.)

IT IS OUR VIEW, THEREFORE, THAT THE CONGRESS INTENDED THAT A "SUITABLE BOND" SHALL CONSTITUTE ONE WHICH IS SUFFICIENT IN AMOUNT FOR THE PROTECTION OF THE INCOMPETENT AGAINST IMPROPER ACTION ON THE PART OF AN ADMINISTRATIVELY APPOINTED TRUSTEE IN CONNECTION WITH FUNDS RECEIVED FROM THE GOVERNMENT FOR WHICH HE IS ACCOUNTABLE, SO THAT THE INCOMPETENT'S ESTATE CAN BE MADE WHOLE IF THE TRUSTEE MISAPPROPRIATES HIS FUNDS. HENCE, WE MUST CONCLUDE THAT THE BOND IN THE AMOUNT OF $1,000 FURNISHED BY MRS. LYNN IS NOT "A SUITABLE BOND" SO AS TO SATISFY THE REQUIREMENTS OF THE LAW.

WITH RESPECT TO YOUR QUESTION AS TO WHETHER THE ACT OF JUNE 21, 1950, CONTEMPLATES THE PAYMENT OF A SINGLE SUM AS LARGE AS THAT HERE INVOLVED TO AN ADMINISTRATIVELY APPOINTED TRUSTEE, NOWHERE IN THAT ACT IS THERE A LIMITATION AS TO THE MAXIMUM AMOUNT THAT MAY BE PAID THEREUNDER. IN VIEW OF THE ABSENCE OF SUCH LIMITATION AND THE INTENT OF THE CONGRESS, AS INDICATED BY THE ABOVE QUOTED SUBCOMMITTEE DISCUSSION, THAT IT SHOULD APPLY IN CASES WHERE SUBSTANTIAL AMOUNTS WOULD BE PAYABLE SUBJECT TO THE REQUIREMENT THAT A SUITABLE BOND BE PROVIDED, IT APPEARS REASONABLY CLEAR THAT SUCH LAW IS FOR APPLICATION IN ANY APPROPRIATE CASE REGARDLESS OF THE AMOUNT OF THE PAYMENT TO BE MADE TO THE DESIGNATED TRUSTEE OR TRUSTEES.

ACCORDINGLY, PAYMENT ON THE VOUCHER IN FAVOR OF MRS. LYNN MAY BE EFFECTED ONLY AT SUCH TIME AS SHE SHALL FURNISH YOUR DEPARTMENT WITH AN ACCEPTABLE SURETY BOND IN AN AMOUNT COMMENSURATE WITH THE AMOUNT SHOWN IN THE VOUCHER. THE VOUCHER AND SUPPORTING PAPERS ARE RETURNED HEREWITH.