B-156846-0.M October 25, 1967
B-156846-0.M: Oct 25, 1967
Notice of exception No. 500292 was stated by our Office against said payment. The Defense Division was instructed by B-156846-O.M. Denial of relief was affirmed by B-156846-O.M. Minor was referred to tour Claims division by the Air Force. The Claims and Audit Divisions were advised that "the extinguishment of the indebtedness of a payee through the acceptance. Of an offer in compromise thereof not only extinguishes the indebtedness of the payee for the purposes of the removal of all indebtedness items embraced therein but is likewise authority for any items paid thereby to said payee which are embraced in the amount of the indebtedness extinguished by the accepted offer in compromise.". The two divisions were instructed to conform their procedures in such matters in accordance with this statement of principle.
B-156846-0.M October 25, 1967
Director, Defense Division Director, Civil Division Director, Claims Division Director, International Division Director, Transportation Division
Memorandum of June 13, 1967, from Assistant Director J. L. DiGuiseppi, Defense Division, transmitted a memorandum dated June 5, 1967, from the Regional Manager, Denver, raising a question as to the effect of a compromise settlement of the indebtedness of a recipient of an erroneous payment, effected by a United States Attorney, upon the denial of relief to the disbursing officer who made such erroneous payment.
The record indicates that Major J. H. Webb, symbol 5947, erroneously paid $846 to Mrs. Jennie L. Minor. Notice of exception No. 500292 was stated by our Office against said payment. Pursuant to request for relief of Major Webb under 31 U. S. C. 82a-2, the Defense Division was instructed by B-156846-O.M., August 5, 1965, to deny relief and to so advise the Air Force Accounting and Finance Center, Denial of relief was affirmed by B-156846-O.M., March 9, 1966.
Upon determination of uncollectibility, the indebtedness of Mrs. Minor was referred to tour Claims division by the Air Force, and subsequently that Division forward the debt to the Department of Justice for action. See Claims division File No. Z-2277384. By letter of March 8, 1967, the United States Attorney at Omaha, Nebraska, advised our Claims Division the he proposed to compromise the claim against Mrs. Minor on a 50 percent basis, and expressed his view that the responsible disbursing officer should be relieved of liability for the balance of the payment after the compromise payment of $423 has been received by the United States Attorney. Hence the question arises as to whether the compromise settlement constitutes a basis for granting relief to Major Webb for the balance of the erroneous payment.
The question of the effect upon an accountable officer's liability of a compromise of the liability of the person who benefited by the accountable officer's mistake has been with us for many years and has had varying treatment.
In A-21216, August 3, 1928, the Claims and Audit Divisions were advised that "the extinguishment of the indebtedness of a payee through the acceptance, with the consent of this Office, of an offer in compromise thereof not only extinguishes the indebtedness of the payee for the purposes of the removal of all indebtedness items embraced therein but is likewise authority for any items paid thereby to said payee which are embraced in the amount of the indebtedness extinguished by the accepted offer in compromise." The two divisions were instructed to conform their procedures in such matters in accordance with this statement of principle.
Decision of September 29, 1932, A-40436, to the Secretary of the Treasury, in connection with a compromise offer by an indorsing bank upon a check paid by the Treasurer offer by an endorsing bank upon a check paid by the Treasurer of the United States on a forged endorsement and on the specific question of whether acceptance of such offer would operate to relieve the Treasurer from further liability thereon, held that "the liability of the Treasurer of the United States is as an accountable officer and such accountability is not dependent upon what adjustment is made with one as to whom there may appear liability also in the particular transaction. Recoveries obtained through such an adjustment may be for credit in the accounts of the accountable officer, but the full amount of the item is not received, the liability of the accountable officer remains accordingly. Whether there be facts under which there would be no further reason for asserting liability against the Treasurer of the United States must be dependent upon each particular case." By A-21216, A-40436-O.M., September 29, 1932, the Claims and Audit Divisions were advised that "Upon further consideration" of the effect o compromise, it has been determined as stated above, and that such would be the general rule to be followed hereafter. Neither the decision of September 29, 1932, to the Secretary of the Treasury, nor the instruction memorandum of that date to the Claims and Audit Divisions has been expressly overruled of modified.
By decision of July 8, 1943, B-34179, we advised the Chief Disbursing Officer that "the liability of an accountable officer is not dependent upon what adjustment is made with another person as to whom there may also be liability in the same transaction. The payment here involved appears to have been clearly erroneous and any recovery effected through compromise or otherwise from the payee may be for credit in your account but if such recovery is less than the full amount of the erroneous payment, there would be no authority of law to relieve you of your liability as an accountable officer for the difference." By O.M. of the same number and date, the Audit Division was instructed to reduce the exception against the Chief Disbursing Officer by the amount of the compromise payment and to disallow credit for the balance of the erroneous payment. See also A-44019, May 13, 1942, page 4.
B-135302-O.M., April 2, 1958, in response to a request from Claims Division for clarification of and uniformity in the authority and responsibility of that Division respecting offers in compromise, stated "Even if the accountable officer *** raised as a defense that the compromise with the payee curtailed his recourse against the payee and relieved him of liability of the payee and accountable officer are not joint but disparate, the one stemming from fault or negligence in improperly disbursing or causing to be disbursed Government funds, while the other results from receipt of funds to which not entitled and which in equity and good conscience ought to be returned.""
Thus, the position of our Office for many years has been that a compromise of the indebtedness of a person who benefited from an accountable officer's mistake did not affect the liability of such officer other than by reducing his liability to the extent of the amount recovered.
Nevertheless, we have on several occasions accepted a compromise with such a beneficiary as totally eliminating the liability of the accountable officer. The Government's compromise with the beneficiary of the error effectively bars the accountable officer from effecting recovery from the beneficiary. Even though the accountable officer was not a party to the compromise, it must be remembered that the accountable officer has no direct claim in his own right against the beneficiary, but can only collect for the Government or through subrogation to the Government's right if he (the accountable officer) himself pays the Government. Hence, when the Government settles its claim against the beneficiary, by compromise or otherwise, the accountable officer is effectively prevented from asserting a claim against the beneficiary. While we have frequently held that inability of the accountable officer to collect from the beneficiary does not affect the accountable officer's liability to the Government for his error, there is considerable equity in the accountable officer's favor in these compromise cases, since his inability to collect from the beneficiary is due directly and solely to the Government's action in compromising its claim. On this basis, together with the existence of other extenuating circumstances, the accountable officer has been relieved of all liability upon acceptance of a compromise offer from the beneficiary in B-135749-O.M., May 1, 1958, B-158415-O.M., May 19, 1966; and B-159637-O.M., August 26, 1966.
Moreover, there is for consideration the fact that subsection 3(c) of the Federal Claims Collection Act of 1966, approved July 19, 1966, Pub. L. 89-508, 80 Stat. 309, provides in pertinent part that "No accountable officer shall be liable for any amount paid or for the value of property lost, damaged, or destroyed, where the recovery of such amount or value may not be had because of a compromise with a person primarily responsible under subsection (b)." This provision applies only to compromises effected under the authority granted by the cited act. The department of Justice (and its United States Attorneys), of course effects compromises under its general authority over Federal Litigation, and not under the Federal Claims Collection Act of 1966. Nevertheless, that act clearly reflects the policy of the Congress concerning the effect of a compromise with the "person primarily responsible" upon the liability of the accountable officer. No valid reason is discernible to warrant treating a compromise effected under the general authority of the Department of Justice in a different manner than one effected under the authority of the Federal Claims Collection Act of 1966. Hence, the accountable officer in this and in other similar cases not involving fraud or criminality in the part of the accountable officer, where compromise with the "person primarily responsible" is effected by the Department of Justice or a United States Attorney, should be relieved of liability for the uncollected balance. The instructions contained in A-21216, A-40436-O.M., September 29, 1932, are modified accordingly. Cf. B-154400-O.M., September 1, 1967.
FRANK H. WEITZEL
Assistant Comptroller General of the United States