B-152267, JAN. 2, 1964

B-152267: Jan 2, 1964

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THE PROCEEDS OF WHICH ARE FOR DEPOSIT AS MISCELLANEOUS RECEIPTS IN THE GENERAL FUND OF THE TREASURY. THE PROCEEDS OF WHICH ARE FOR DEPOSIT IN THE FEDERAL SHIP MORTGAGE INSURANCE FUND. THE VESSELS UPON RESALE WERE INDIVIDUALLY DISPOSED OF FOR LESS THAN THE OUTSTANDING OBLIGATION TO THE GOVERNMENT UNDER THE FIRST AND SECOND MORTGAGES. A DOWN PAYMENT OF 25 PERCENT OF THE PURCHASE PRICE WAS RECEIVED FROM THE PURCHASER AND THE BALANCE SECURED BY A PURCHASE-MONEY MORTGAGE. THE DOWN PAYMENTS AND COLLECTIONS ON ACCOUNT OF PRINCIPAL UNDER THE NEW MORTGAGES HAVE BEEN CREDITED TO THE GOVERNMENT'S INTERESTS UNDER THE EARLIER FIRST MORTGAGES. THE PROPER DISPOSITION OF THE INTEREST COLLECTED UNDER THE NEW MORTGAGES IS THE SUBJECT OF DOUBT IN VIEW OF DIVERGENT ADMINISTRATIVE OPINIONS REFLECTED IN VARIOUS ENCLOSURES WITH YOUR LETTER.

B-152267, JAN. 2, 1964

TO MR. N. K. SCHNYDER, AUTHORIZED CERTIFYING OFFICER, MARITIME ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE:

YOUR LETTER OF AUGUST 12, 1963, BEARING REFERENCE NUMBER 423, FORWARDED FOR OUR APPROVAL A VOUCHER, STANDARD FORM NO. 1081, TO EFFECT A TRANSFER OF $263,225 FROM THE FEDERAL SHIP MORTGAGE INSURANCE FUND TO THE GENERAL FUND OF THE U. S. TREASURY.

THE SUM COVERED BY THE VOUCHER, $263,225, REPRESENTS INTEREST DERIVED FROM PURCHASE-MONEY MORTGAGES ACCEPTED UPON THE RESALE OF TWO VESSELS, THE SS LEILANI AND THE SS COAST PROGRESS, BOTH OF WHICH HAD BEEN ACQUIRED BY THE MARITIME ADMINISTRATION AT FORECLOSURE SALES TO PROTECT THE INTERESTS OF THE UNITED STATES. EACH OF THE FORECLOSURES INVOLVED A FIRST MORTGAGE HELD BY THE MARITIME ADMINISTRATION, THE PROCEEDS OF WHICH ARE FOR DEPOSIT AS MISCELLANEOUS RECEIPTS IN THE GENERAL FUND OF THE TREASURY, AND A SECOND MORTGAGE INSURED BY THE ADMINISTRATION UNDER TITLE XI, MERCHANT MARINE ACT, 1936, AS AMENDED (46 U.S.C. 1271 ET SEQ. (, THE PROCEEDS OF WHICH ARE FOR DEPOSIT IN THE FEDERAL SHIP MORTGAGE INSURANCE FUND, A REVOLVING FUND CREATED FOR THE PURPOSE OF CARRYING OUT THE SHIP MORTGAGE INSURANCE PROGRAM. DEPARTMENT OF COMMERCE APPROPRIATION ACT, 1963, 76 STAT. 1089, 1094, MERCHANT MARINE ACT, 1936, AS AMENDED, SECTION 1104/F) , 46 U.S.C. 1274/F) .

THE VESSELS UPON RESALE WERE INDIVIDUALLY DISPOSED OF FOR LESS THAN THE OUTSTANDING OBLIGATION TO THE GOVERNMENT UNDER THE FIRST AND SECOND MORTGAGES. A DOWN PAYMENT OF 25 PERCENT OF THE PURCHASE PRICE WAS RECEIVED FROM THE PURCHASER AND THE BALANCE SECURED BY A PURCHASE-MONEY MORTGAGE. THE DOWN PAYMENTS AND COLLECTIONS ON ACCOUNT OF PRINCIPAL UNDER THE NEW MORTGAGES HAVE BEEN CREDITED TO THE GOVERNMENT'S INTERESTS UNDER THE EARLIER FIRST MORTGAGES, AND DEPOSITED AS MISCELLANEOUS RECEIPTS IN THE GENERAL FUND OF THE TREASURY. THE PROPER DISPOSITION OF THE INTEREST COLLECTED UNDER THE NEW MORTGAGES IS THE SUBJECT OF DOUBT IN VIEW OF DIVERGENT ADMINISTRATIVE OPINIONS REFLECTED IN VARIOUS ENCLOSURES WITH YOUR LETTER.

IN A LEGAL OPINION DATED AUGUST 17, 1962, ENCLOSED WITH YOUR LETTER, THE THEN ACTING GENERAL COUNSEL OF THE MARITIME ADMINISTRATION STATED:

"* * * IT IS OUR OPINION THAT SINCE NO PAYMENT OF CASH WAS INVOLVED IN THE FORECLOSURE OF THE MORTGAGES THE VESSELS SHOULD BE REGARDED AS HAVING BEEN ACQUIRED BY THE UNITED STATES AT FORECLOSURE THROUGH THE ASSERTION OF ITS VARIOUS INTERESTS AND, ACCORDINGLY, THE PROCEEDS OF RESALE OF THE VESSELS SHOULD BE ACCOUNTED FOR AND DISPOSED OF SO AS TO SATISFY SUCH INTERESTS ACCORDING TO THEIR PRIORITIES; IN OTHER WORDS, EACH OF THE INTERESTS UTILIZED HAS A CLAIM UPON THE PROCEEDS OF RESALE OR THE EVIDENCE OF INDEBTEDNESS OF ANY DEFERRED PAYMENTS ACCORDING TO THE RESPECTIVE PRIORITY OF SUCH INTEREST AT THE TIME OF FORECLOSURE. THUS, THE PROCEEDS AS AND WHEN REALIZED IN CASH, SHOULD BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS UNTIL THE INTEREST OF THE GOVERNMENT UNDER THE FIRST MORTGAGE IS SATISFIED, AND THEN ANY BALANCE REMAINING SHOULD BE DEPOSITED INTO THE FEDERAL SHIP MORTGAGE INSURANCE FUND IN SATISFACTION OF THE INTEREST OF THE GOVERNMENT UNDER THE SECOND MORTGAGE * * *.

"AS TO THE INTEREST RECEIVED ON DEFERRED PAYMENTS OF PURCHASE PRICE OF THE VESSELS ON RESALE, IT IS OUR OPINION THAT THE DEPOSIT REQUIREMENTS IN RESPECT OF SUCH INTEREST SHOULD CORRESPOND WITH THE DEPOSIT REQUIREMENTS OF THE PRINCIPAL ON WHICH THE INTEREST ACCRUES; IN OTHER WORDS, INTEREST EARNED ON PRINCIPAL AMOUNTS REPRESENTING THE UNSATISFIED INTEREST OF THE GOVERNMENT UNDER THE FIRST MORTGAGE SHOULD BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, AND INTEREST EARNED ON PRINCIPAL AMOUNTS REPRESENTING THE UNSATISFIED INTEREST OF THE GOVERNMENT UNDER THE SECOND MORTGAGE SHOULD BE DEPOSITED INTO THE FEDERAL SHIP MORTGAGE INSURANCE FUND.'

WE PERCEIVE NO VALID OBJECTION TO THE ABOVE-QUOTED POSITION OF THE ACTING GENERAL COUNSEL, IN CONFORMITY WITH WHICH THE SUBMITTED VOUCHER WAS DRAWN. SUCH IS NOT THE CASE WITH THE ALTERNATIVE ADVANCED IN OTHER ENCLOSURES WITH YOUR LETTER, THAT THE FUND BE CONSIDERED TO HAVE ASSUMED THE OBLIGATION OF THE EARLIER FIRST MORTGAGES WITHOUT ANY OBLIGATION TO PAY INTEREST THEREON, AND, CONSEQUENTLY, ALL INTEREST PAYMENTS RECEIVED FROM THE PURCHASE-MONEY MORTGAGES WOULD BE FOR DEPOSIT TO THE CREDIT OF THE FEDERAL SHIP MORTGAGE INSURANCE FUND. THE ADOPTION OF THE ALTERNATIVE SUGGESTED WOULD BE TANTAMOUNT TO BORROWING MONEY FROM THE TREASURY WITHOUT INTEREST, AUTHORITY FOR WHICH IS NOT APPARENT, AND RESULT IN AN UNWARRANTED AUGMENTATION OF THE FUND AT THE EXPENSE OF THE GENERAL FUND OF THE TREASURY. SEE SECTION 1105/B), AS AMENDED (46 U.S.C. 1275/B) ; 46 U.S.C. 1280. CF. 40 COMP. GEN. 356; 23 ID. 986.

THE VOUCHER, RETURNED HEREWITH, MAY BE CERTIFIED FOR PAYMENT TO EFFECT A TRANSFER FROM THE FEDERAL SHIP MORTGAGE INSURANCE FUND TO THE GENERAL FUND OF THE U.S. TREASURY OF THE INTEREST COLLECTED AND ATTRIBUTABLE TO THE GOVERNMENT'S INTERESTS UNDER THE ORIGINAL FIRST MORTGAGES. IT IS UNDERSTOOD THE PRESENT VOUCHER DOES NOT REFLECT THE PRECISE AMOUNT DUE BUT THAT IT WILL BE ..END :