B-175060, APR 25, 1972

B-175060, APR 25, 1972

MILITARY PERSONNEL - READJUSTMENT PAY - DELAY IN PAYMENT - ALLEGED INTEREST DUE DECISION DENYING THE CLAIM OF JOHN R. KENNY FOR INTEREST ON PAYMENT OF READJUSTMENT PAY INCIDENT TO HIS RELEASE FROM ACTIVE DUTY WITH THE ARMY RESERVE. ALTHOUGH THE UNITED STATES MAY BE HELD ENTITLED TO INTEREST ON ITS CREDITS, THE SUPREME COURT HAS CONSISTENTLY HELD THAT INTEREST ON CLAIMS AGAINST THE GOVERNMENT MAY NOT BE ALLOWED UNLESS PROVIDED FOR BY CONTRACT OR STATUTE. UNITED STATES V NORTH AMERICAN TRANSPORTATION AND TRADING COMPANY, 253 U.S. 330, 40 S. CT. 518 (1920). ACCORDINGLY, THE CLAIM MUST BE DENIED.

TO MR. JOHN R. KENNY:

YOUR LETTER DATED NOVEMBER 8, 1971, ADDRESSED TO PRESIDENT RICHARD M. NIXON PERTAINING TO YOUR CLAIM FOR INTEREST ON PAYMENT OF READJUSTMENT PAY WAS TRANSMITTED TO US ON NOVEMBER 29, 1971, BY THE OFFICE OF THE COMPTROLLER OF THE ARMY, DEPARTMENT OF THE ARMY, FOR REPLY.

OUR FILE SHOWS THAT BY ORDERS DATED MARCH 8, 1969, YOU WERE RELIEVED FROM ACTIVE DUTY AS A CAPTAIN, UNITED STATES ARMY RESERVE, EFFECTIVE MARCH 12, 1969. PURSUANT TO THE AUTHORITY CONTAINED IN 10 U.S.C. 687 YOU WERE ENTITLED TO RECEIVE A READJUSTMENT PAYMENT IN THE GROSS AMOUNT OF $14,580, LESS MUSTERING-OUT PAYMENT ($300) AND 20 PERCENT FEDERAL WITHHOLDING TAX ($2,856) OR A NET AMOUNT OF $11,424. ON OCTOBER 22, 1969, YOU RECEIVED A PARTIAL PAYMENT OF $5,000 AND ON JUNE 18, 1970, YOU RECEIVED THE BALANCE OF $6,424.

BY LETTER DATED APRIL 30, 1971, YOU PRESENTED A CLAIM TO OUR CLAIMS DIVISION FOR INTEREST IN THE AMOUNT OF $721 WHICH YOU ASSERT TO BE DUE FROM THE UNITED STATES IN CONNECTION WITH THE ABOVE PAYMENTS. IN THAT LETTER YOU SAID THAT YOU WERE ENTITLED TO FULL PAYMENT OF THE READJUSTMENT PAY UPON YOUR RELEASE FROM MILITARY SERVICE PURSUANT TO THE ABOVE ORDERS OF MARCH 8, 1969, AND THAT YOUR APPLICATION THEREFOR SHOULD HAVE BEEN PROCESSED WITHIN A WEEK'S TIME. YOU ALSO SAID THAT YOU WERE INFORMED THAT THE DELAY WAS DUE TO THE UNAVAILABILITY OF CERTAIN RECORDS - RECORDS WHICH YOU ASSERT WERE ON FILE AND AVAILABLE IN THE ARMY ADMINISTRATION CENTER, SAINT LOUIS, MISSOURI - AND THAT AFTER RECEIVING $5000 ON OCTOBER 22, 1969, YOU WROTE TO THE INSPECTOR GENERAL, DEPARTMENT OF THE ARMY, WASHINGTON, D.C., AND CONSEQUENTLY YOU RECEIVED THE BALANCE OF $6,424 ON JUNE 18, 1970. YOU ADDED THAT THE DELAY - IN EXCESS OF 15 MONTHS - RESULTED IN A LOSS OF A "SIZEABLE INTEREST ACCRUAL" IN YOUR SAVINGS ACCOUNT.

OUR CLAIMS DIVISION DISALLOWED YOUR CLAIM BY SETTLEMENT DATED MAY 25, 1971, ON THE GROUND THAT NO CONTRACT OR STATUTE PROVIDES FOR PAYMENT OF INTEREST. SUBSEQUENTLY, THE HONORABLE JAMES J. HOWARD, HOUSE OF REPRESENTATIVES, INQUIRED IN THE MATTER BY A COMMUNICATION DATED MAY 12, 1971. IN LETTER OF MAY 27, 1971, WE ADVISED HIM THAT WE CAREFULLY CONSIDERED YOUR CLAIM AND FOUND NO PROPER BASIS UPON WHICH IT COULD BE ALLOWED.

YOU SUGGEST THAT IN GOOD CONSCIENCE AND EQUITY THE CLAIM SHOULD BE ALLOWED, THAT IN A REVERSE SITUATION YOU WOULD HAVE BEEN REQUIRED TO PAY INTEREST UNDER PENALTY OF LAW AND SUBJECT TO IMPRISONMENT, AND THAT PRECEDENT FOR PAYMENT OF YOUR CLAIM IS THE STATUTE UNDER WHICH THE INTERNAL REVENUE SERVICE PAYS INTEREST AT THE RATE OF 6 PERCENT IN TAX REFUND CASES.

THE UNITED STATES SUPREME COURT HAS CONSISTENTLY HELD THAT INTEREST ON CLAIMS AGAINST THE UNITED STATES MAY NOT BE ALLOWED UNLESS INTEREST IS PROVIDED FOR BY CONTRACT OR STATUTE.

THUS IN THE CASE OF UNITED STATES V NORTH AMERICAN TRANSPORTATION AND TRADING COMPANY, 253 U.S. 330, 40 S. CT. 518 (1920) THE UNITED STATES SUPREME COURT SAID -

" *** CONGRESS, IN THUS DENYING TO THE COURT POWER TO AWARD INTEREST, ADOPTED THE COMMON-LAW RULE THAT DELAY OR DEFAULT IN PAYMENT (UPON WHICH, IN THE ABSENCE OF EXPRESS AGREEMENT, THE RIGHT TO RECOVER INTEREST RESTS), CANNOT BE ATTRIBUTED TO THE SOVEREIGN. UNITED STATES V NORTH CAROLINA, 136 U.S. 211, 216. THAT RULE HAD THERETOFORE BEEN UNIFORMLY APPLIED IN OUR EXECUTIVE DEPARTMENTS EXCEPT WHERE STATUTES PROVIDED OTHERWISE. UNITED STATES V SHERMAN, 98 U.S. 565, 567-8. SO RIGOROUSLY IS THE RULE APPLIED, THAT, IN THE ADJUSTMENT OF MUTUAL CLAIMS BETWEEN AN INDIVIDUAL AND THE GOVERNMENT, THE LATTER HAS BEEN HELD ENTITLED TO INTEREST ON ITS CREDITS ALTHOUGH RELIEVED FROM THE PAYMENT OF INTEREST ON THE CHARGES AGAINST IT. UNITED STATES V VERDIER, 164 U.S. 213, 218-219. *** "

WE FIND NOTHING IN THE STATUTE WHICH PROVIDES FOR THE READJUSTMENT PAYMENT OR IN ANY OTHER LAW AUTHORIZING PAYMENT OF INTEREST IN A SITUATION, SUCH AS IN YOUR CASE, WHERE THE PAYMENT IS DELAYED OR WHERE NO PAYMENT IS MADE AT TIME OF SEPARATION AND PRIOR TO THE DATE AN ADMINISTRATIVE OR JUDICIAL DETERMINATION IS MADE OF THE MEMBER'S ENTITLEMENT THERETO.

WHILE IT IS REGRETTED THAT THERE MAY HAVE BEEN A DELAY IN PAYMENT TO YOU BY THE DEPARTMENT OF THE ARMY, SINCE THERE IS NO CONTRACT OR STATUTE AUTHORIZING THE PAYMENT OF INTEREST IN YOUR CASE WE ARE WITHOUT AUTHORITY TO ALLOW YOUR CLAIM FOR INTEREST.

ACCORDINGLY, THE SETTLEMENT OF MAY 25, 1971, IS SUSTAINED.