B-157664, NOV. 4, 1965

B-157664: Nov 4, 1965

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BUHR: FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 25. HAS ADVISED YOU THAT YOUR RETIRED PAY WAS ADJUSTED UNDER METHOD (B) OF SECTION 511 OF THE CAREER COMPENSATION ACT OF 1949. THAT SUCH AMOUNT IS WHOLLY TAXABLE. YOU ASSERT THAT YOU WERE RETIRED FOR PHYSICAL DISABILITY INCURRED WHILE IN RECEIPT OF BASIC PAY AND REQUEST THAT ACTION BE TAKEN TO PLACE YOUR RETIRED PAY "BACK IN THE INCOME TAX EXEMPT CATEGORY.'. ADVISED YOU THAT YOUR MEDICAL RECORD ON FILE IN THAT BUREAU SHOWED THAT YOU WERE PLACED ON THE RETIRED LIST ON APRIL 1. THE DEPARTMENT OF THE NAVY HAS REPORTED TO US THAT WHEN YOU WERE TRANSFERRED TO THE FLEET RESERVE ON AUGUST 31. WERE RETIRED FOR PHYSICAL DISABILITY ON APRIL 1.

B-157664, NOV. 4, 1965

TO MR. FREDERICK G. BUHR:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 25, 1965, IN WHICH YOU SAY THAT THE U.S. NAVY FINANCE CENTER, CLEVELAND, OHIO, HAS ADVISED YOU THAT YOUR RETIRED PAY WAS ADJUSTED UNDER METHOD (B) OF SECTION 511 OF THE CAREER COMPENSATION ACT OF 1949, APPROVED OCTOBER 12, 1949, CH. 681, 63 STAT. 829, 37 U.S.C. 311 (1952 ED.), EFFECTIVE FROM NOVEMBER 1, 1963, AT $195.76 A MONTH, AND THAT SUCH AMOUNT IS WHOLLY TAXABLE. YOU ASSERT THAT YOU WERE RETIRED FOR PHYSICAL DISABILITY INCURRED WHILE IN RECEIPT OF BASIC PAY AND REQUEST THAT ACTION BE TAKEN TO PLACE YOUR RETIRED PAY "BACK IN THE INCOME TAX EXEMPT CATEGORY.' THE ENCLOSURES WHICH ACCOMPANIED YOUR LETTER INCLUDED A COPY OF A LETTER DATED FEBRUARY 25, 1947, IN WHICH THE BUREAU OF MEDICINE AND SURGERY, DEPARTMENT OF THE NAVY, ADVISED YOU THAT YOUR MEDICAL RECORD ON FILE IN THAT BUREAU SHOWED THAT YOU WERE PLACED ON THE RETIRED LIST ON APRIL 1, 1941, BY REASON OF PHYSICAL DISABILITY INCURRED IN LINE OF DUTY.

THE DEPARTMENT OF THE NAVY HAS REPORTED TO US THAT WHEN YOU WERE TRANSFERRED TO THE FLEET RESERVE ON AUGUST 31, 1934, YOU HAD COMPLETED MORE THAN 20 YEARS OF SERVICE. YOU SUBSEQUENTLY SERVED ON ACTIVE DUTY FROM JUNE 26, 1940, TO MARCH 10, 1941, AND WERE RETIRED FOR PHYSICAL DISABILITY ON APRIL 1, 1941. YOU WERE RECALLED TO ACTIVE DUTY ON MARCH 1, 1944, AND SERVED UNTIL FEBRUARY 9, 1945, WHEN YOU WERE RETURNED TO THE RETIRED LIST. IT APPEARS THAT YOUR RETIREMENT WAS EFFECTED UNDER THE PROVISIONS OF TITLE II OF THE NAVAL RESERVE ACT OF 1938, APPROVED JUNE 25, 1938, CH. 690, 52 STAT. 1178, AND THAT YOUR RETIRED PAY WAS COMPUTED AS THERE PROVIDED.

YOUR LETTER OF MAY 31, 1963, ADDRESSED TO THE CHIEF OF NAVAL PERSONNEL, CONTAINED THE OLLOWING:

"1. I RESPECTFULLY REQUEST THAT I BE FURNISHED A COMPLETE STATEMENT OF SERVICE.

"2. I HAVE BEEN PAID UNDER THE SAVED PAY CLAUSE NOW FOR A NUMBER OF YEARS. IT IS NOW ($180.28) PER MONTH, GROSS.

"3. SEVERAL OF MY SHIPMATES HAVE PUT IN CLAIMS AND HAVE RECEIVED SEVERAL HUNDRED DOLLARS BACK PAY.'

THE DEPARTMENT OF THE NAVY CONSIDERED YOUR LETTER AS A CLAIM FOR ADDITIONAL RETIRED PAY AND ADVISED YOU THAT BEFORE TAKING ANY ACTION ON SUCH CLAIM IT WOULD BE NECESSARY FOR YOU TO FURNISH A CERTIFICATION, OVER YOUR PERSONAL SIGNATURE, STATING WHETHER OR NOT YOU WERE, OR EVER HAD BEEN, A PETITIONER BEFORE THE COURT OF CLAIMS FOR AN INCREASE IN RETIRED PAY. AFTER THE RECEIPT OF YOUR CERTIFICATION, DATED SEPTEMBER 25, 1963, THAT YOU WERE NOT THEN, AND HAD NEVER BEEN, A PETITIONER BEFORE THE COURT OF CLAIMS, THE CASE WAS FORWARDED TO THE CLAIMS DIVISION OF OUR OFFICE FOR CONSIDERATION.

SUBSEQUENTLY, OUR CLAIMS DIVISION OBTAINED FROM THE BUREAU OF MEDICINE AND SURGERY, DEPARTMENT OF THE NAVY, A REPORT, DATED FEBRUARY 18, 1964, WHICH READS, IN PERTINENT PART, AS FOLLOWS:

"A REVIEW OF BUHR'S SERVICE MEDICAL RECORD REVEALS THAT ON 31 AUGUST 1934 HE WAS GIVEN A PHYSICAL EXAMINATION INCIDENT TO HIS TRANSFER TO THE FLEET NAVAL RESERVE AND RELEASE FROM ACTIVE DUTY. AT THE TIME OF THIS EXAMINATION NO DISQUALIFYING DEFECTS WERE NOTED. IN 1940 BUHR WAS GIVEN A PHYSICAL EXAMINATION TO DETERMINE HIS FITNESS FOR RECALL TO ACTIVE DUTY. A HISTORY OF CHRONIC CHOLECYSTITIS WAS NOTED ON THE REPORT OF PHYSICAL EXAMINATION. NOTWITHSTANDING, HE WAS RECALLED TO ACTIVE DUTY. SUBSEQUENT TO HIS RECALL TO ACTIVE DUTY, SYMPTOMATOLOGY OF CHOLECYSTITIS RECURRED AND ON 22 JANUARY 1941 BUHR WAS GIVEN A PHYSICAL EXAMINATION TO DETERMINE HIS FITNESS FOR RETENTION ON ACTIVE DUTY. AS A RESULT OF THAT EXAMINATION, THIS BUREAU ON 17 FEBRUARY 1941 RECOMMENDED THAT BUHR BE RELEASED FROM ACTIVE DUTY AND THAT HIS NAME BE PLACED ON THE RETIRED LIST. THE RECOMMENDATION WAS APPROVED AND ON 1 APRIL 1941 BUHR'S RETIREMENT WAS EFFECTED. IN NOVEMBER BUHR WAS RECALLED TO ACTIVE DUTY AND SERVED CONTINUALLY UNTIL FEBRUARY 1945 AT WHICH TIME HE WAS RELEASED TO INACTIVE DUTY.

"IN VIEW OF THE ABOVE INFORMATION, IT IS THE OPINION OF THIS BUREAU THAT THE DISABILITY FOR WHICH BUHR WAS RETIRED WAS NOT INCURRED WHILE HE WAS ENTITLED TO RECEIVE BASIC PAY.'

IT WAS CONSIDERED BY OUR OFFICE THAT SUCH REPORT WAS MADE AFTER A THOROUGH STUDY OF YOUR MEDICAL HISTORY, INCLUDING THE EARLIER REPORT OF FEBRUARY 25, 1947, AND THE BASIS ON WHICH THE EARLIER REPORT WAS MADE. THIS CONNECTION, IT MAY BE STATED THAT OUR OFFICE DOES NOT HAVE AUTHORITY TO MAKE ANY DETERMINATION WITH RESPECT TO A MEMBER'SDISABILITY WHICH WOULD CONFLICT WITH THAT MADE BY THE ADMINISTRATIVE OFFICE. IN ANY EVENT THERE APPEARS TO BE NO BASIS TO QUESTION THE DETERMINATION THAT THE DISABILITY FOR WHICH YOU WERE RETIRED (CHOLECYSTITIS, INFLAMMATION OF THE GALL BLADDER) WAS NOT INCURRED WHILE YOU WERE ENTITLED TO RECEIVE BASIC PAY, SINCE THERE WAS NO RECORD OF ANY DISABILITY WHEN YOU WERE TRANSFERRED TO THE FLEET RESERVE IN 1934 AND THE HISTORY OF SUCH DISABILITY RELATED MAINLY TO THE PERIOD WHILE YOU WERE ON INACTIVE DUTY AS A FLEET RESERVIST. AS FAR AS THE MATTER OF INCOME TAX IS CONCERNED, IT APPEARS IMMATERIAL AT THE PRESENT TIME WHETHER OR NOT YOU WERE RETIRED FOR DISABILITY INCURRED IN LINE OF DUTY WHILE ENTITLED TO RECEIVE BASIC PAY. YOU MADE NO ELECTION IN 1951 UNDER SECTION 411 (A) OF THE 1949 ACT TO HAVE YOUR RETIRED PAY COMPUTED UNDER SECTION 402 (D) OF THAT ACT, EVEN THOUGH YOU WERE THEN ADVISED THAT YOUR DISABILITY WAS INCURRED ON ACTIVE DUTY, SINCE TAXWISE SUCH ELECTION WOULD NOT HAVE BEEN TO YOUR ADVANTAGE DUE TO THE FACT THAT YOUR DISABILITY WAS RATED AT ZERO PERCENT. SECTION 402 (H) OF THE 1949 ACT PROVIDED, IN EFFECT, THAT ONLY THAT PART OF DISABILITY PAY COMPUTED ON YEARS OF SERVICE WHICH IS NOT IN EXCESS OF THE AMOUNT PAYABLE IF COMPUTED ON PERCENTAGE OF DISABILITY IS EXEMPT FROM PAYMENT OF INCOME TAX. SEE 10 U.S.C. 1403 FOR PROVISIONS CURRENTLY IN EFFECT.

AFTER THE RECEIPT OF THE REPORT OF FEBRUARY 18, 1964, OUR CLAIMS DIVISION ISSUED A SETTLEMENT VOUCHER IN YOUR FAVOR ON APRIL 24, 1964, ON WHICH YOU WERE ALLOWED $621.49, REPRESENTING AN ADJUSTMENT OF RETIRED PAY FOR THE PERIOD APRIL 1, 1955, TO OCTOBER 31, 1963, INCLUSIVE. THE ALLOWANCE RESULTED FROM THE COMPUTATION OF YOUR RETIRED PAY FOR THAT PERIOD UNDER THE YEARS OF SERVICE FORMULA OF METHOD (B), SECTION 511 OF THE 1949 ACT, AND WAS BASED ON THE COURT OF CLAIMS DECISION OF MAY 4, 1960, IN THE CASE OF FAGAN, ET AL. (LEWIS L. GOVER, PLAINTIFF NO. 2) V. UNITED STATES, 149 CT.CL. 716, HOLDING THAT THE ACT OF MARCH 31, 1955, CH. 20, 69 STAT. 18, DID NOT TERMINATE THE RIGHT OF LONGEVITY RETIREES RETIRED PRIOR TO OCTOBER 1, 1949, TO HAVE THEIR RETIRED PAY COMPUTED UNDER EITHER METHOD (A) OR (B) OF SECTION 511, DEPENDING UPON WHICH METHOD, FROM TIME TO TIME, RESULTED IN THE HIGHER RETIRED PAY.

SECTION 511 OF THE 1949 ACT PROVIDED (QUOTING FROM 37 U.S.C. 311 (1952 ED.) ( THAT A RETIRED MEMBER WITHIN ITS PROVISIONS---

"* * * SHALL BE ENTITLED TO RECEIVE RETIRED PAY * * * IN THE AMOUNT WHICHEVER IS THE GREATER, COMPUTED BY ONE OF THE FOLLOWING METHODS: (A) THE MONTHLY RETIRED PAY * * * IN THE AMOUNT AUTHORIZED * * * BY PROVISIONS OF LAW IN EFFECT ON THE DAY IMMEDIATELY PRECEDING OCTOBER 12, 1949, OR (B) MONTHLY RETIRED PAY * * * EQUAL TO 2 1/2 PERCENTUM OF THE MONTHLY BASIC PAY OF THE HIGHEST FEDERALLY RECOGNIZED RANK, GRADE, OR RATING, WHETHER UNDER A PERMANENT OR TEMPORARY APPOINTMENT, SATISFACTORILY HELD, BY SUCH MEMBER * * *, AS DETERMINED BY THE SECRETARY CONCERNED, AND WHICH SUCH MEMBER * * * WOULD BE ENTITLED TO RECEIVE IF SERVING ON ACTIVE DUTY IN SUCH RANK, GRADE, OR RATING, MULTIPLIED BY THE NUMBER OF YEARS OF ACTIVE SERVICE CREDITABLE TO HIM * * *.'

THE COURT OF CLAIMS IN THE CASE OF CLIFFORD MAURICE SHATTUCK, PLAINTIFF NO. 8 IN BENSON, ET AL. V. UNITED STATES, CT.CL. NO. 372-59, DECIDED JULY 17, 1964, HELD THAT PERSONS WHOSE RETIREMENTS BEFORE THE PASSAGE OF THE CAREER COMPENSATION ACT WERE OCCASIONED BY DISABILITIES WHICH WERE NOT ,SERVICE-INCURRED" WERE ENTITLED, JUST AS ANY LONGEVITY RETIREE WOULD HAVE BEEN, TO HAVE THEIR RETIRED PAY RECOMPUTED AUTOMATICALLY UNDER WHICHEVER OF THE TWO METHODS CONTAINED IN SECTION 511 THAT PRODUCED THE HIGHER RATE.

IN OUR DECISION OF JULY 17, 1957, B-131700, 37 COMP. GEN. 31, IT WAS POINTED OUT ON PAGE 34 THAT:

"SECTION 511 * * * DOES NOT PROVIDE FOR AN ELECTION WITH RESPECT TO RETIRED PAY. TWO METHODS OF COMPUTING RETIRED PAY ARE THERE PROVIDED AND RETIRED MEMBERS WHOSE RIGHTS ARE GOVERNED BY SUCH PROVISIONS OF LAW ARE ENTITLED TO HAVE THEIR RETIRED PAY COMPUTED BY THE METHOD, WHICH PRODUCES THE GREATER AMOUNT OF RETIRED PAY. AFTER RECEIVING RETIRED PAY COMPUTED BY ONE METHOD, IF CONDITIONS CHANGE IN SUCH A MANNER THAT A RETIRED MEMBER'S PAY WOULD INCREASE BY COMPUTING HIS RETIRED PAY UNDER THE OTHER METHOD, SUCH RECOMPUTATION WAS AUTHORIZED AND REQUIRED UNDER SECTION 511 WITHOUT ANY ELECTION ON HIS PART.'

THE COURT OF CLAIMS IN THE FAGAN DECISION APPROVED THE INTERPRETATION PLACED BY OUR OFFICE ON SECTION 511 RETIRED PAY--- AUTOMATIC RECOMPUTATION AND NO ELECTION REQUIRED OR PERMITTED BETWEEN METHODS (A) AND (B) THEREUNDER. WE FIND NOTHING IN THE SHATTUCK DECISION WHICH SUGGESTS THAT AN INDIVIDUAL IN SUCH CIRCUMSTANCES HAS ANY RIGHT OF ELECTION BETWEEN METHODS (A) AND (B) OF SECTION 511.

THE ACTION TAKEN BY OUR OFFICE ON YOUR CLAIM ON APRIL 24, 1964, WAS IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF LAW AS CONSTRUED BY THE COURT OF CLAIMS IN THE FAGAN AND SHATTUCK CASES, AND WE FIND NO AUTHORITY FOR ALTERING OR CANCELING SUCH ACTION SO AS TO PLACE YOUR RETIRED PAY ,BACK IN THE INCOME TAX EXEMPT CATEGORY.'