[Protest of DLA Contract Award for Surplus Aircraft Parts Sale]

A-95282, JUNE 29, 1938, 17 COMP. GEN. 1119

VETERANS' ADMINISTRATION - JURISDICTION - WAR RISK INSURANCE JUDGMENT PAYMENTS THE PROPRIETY OF PAYMENTS OF WAR RISK INSURANCE OR ATTORNEY'S FEES PROPOSED TO BE MADE BY THE VETERANS' ADMINISTRATION IN CONNECTION WITH JUDGMENTS ENTERED AGAINST THE UNITED STATES IN CASES OF SUITS ON WAR RISK INSURANCE CONTRACTS FILED PURSUANT TO THE PROVISIONS OF SECTION 19 OF THE WORLD WAR VETERANS' ACT, 1924, AS AMENDED BY THE ACT OF JULY 3, 1930, 46 STAT. 992, IS NOT WITHIN THE EXCLUSIVE JURISDICTION CONFERRED UPON THE ADMINISTRATOR OF VETERANS' AFFAIRS BY SECTION 5 OF THE SAID ACT AS SO AMENDED, AND ACCORDINGLY THE GENERAL ACCOUNTING OFFICE WILL CONTINUE TO DETERMINE WHETHER SUCH PAYMENTS, MADE OR PROPOSED, ARE STRICTLY IN ACCORDANCE WITH THE TERMS OF THE COURT JUDGMENTS. WHERE IN CONNECTION WITH A SUIT BROUGHT BY A VETERAN FOR PERMANENT TOTAL DISABILITY BENEFITS UNDER THE DISABILITY PROVISIONS OF A WAR RISK INSURANCE CONTRACT PURSUANT TO THE PROVISIONS OF SECTION 19 OF THE WORLD WAR VETERANS' ACT, 1924, AS AMENDED, THE JUDGMENT SPECIFICALLY ALLOWED ATTORNEYS' FEES OF "TEN PERCENTUM OF ALL FUTURE INSTALLMENTS PAID TO THE PLAINTIFF BECAUSE OF AND AS A RESULT OF THIS JUDGMENT," THE GENERAL ACCOUNTING OFFICE MAY NOT APPROVE PROPOSED PAYMENTS OF ATTORNEYS' FEES ON INSTALLMENTS OF INSURANCE DUE AND PAYABLE TO THE DEATH BENEFICIARY AFTER THE DEATH OF THE INSURED, THE INSURANCE INSTALLMENTS BEING DUE THE BENEFICIARY NOT BECAUSE OR AS A RESULT OF THE JUDGMENT AS IN CASES WHERE THE SUIT IS TO ESTABLISH THE VALIDITY OR EXISTENCE OF THE INSURANCE, BUT BECAUSE OF THE TERMS OF THE POLICY AND AS A RESULT OF THE DEATH OF THE INSURED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, JUNE 29, 1938:

YOUR LETTER OF MAY 25, 1938, QUESTIONS THE AUTHORITY OF THIS OFFICE IN DETERMINING IN THE AUDIT THE PROPRIETY OF PAYMENTS PROPOSED TO BE MADE BY THE VETERANS' ADMINISTRATION OF JUDGMENTS ENTERED AGAINST THE UNITED STATES IN CASES OF SUITS ON WAR RISK INSURANCE CONTRACTS FILED PURSUANT TO THE PROVISIONS OF SECTION 19 OF THE WORLD WAR VETERANS' ACT, 1924, AS AMENDED BY THE ACT OF JULY 3, 1930, 46 STAT. 992.

THE PARTICULAR CASE PRESENTED IS THAT OF JESSE MCCAMPBELL REED, XC 223,368, IN WHICH THIS OFFICE RETURNED TO THE VETERANS' ADMINISTRATION WITHOUT CERTIFICATION FOR PAYMENT THE ADMINISTRATIVE AWARD OF ATTORNEYS' FEES ON INSTALLMENTS OF INSURANCE DUE AND PAYABLE TO THE DEATH BENEFICIARY AFTER THE DEATH OF THE INSURED. THE ESSENTIAL FACTS IN THAT CASE APPEAR TO BE AS FOLLOWS:

UPON DENIAL BY THE VETERANS' ADMINISTRATION OF A CLAIM FILED BY THE VETERAN FOR PERMANENT TOTAL DISABILITY BENEFITS UNDER THE DISABILITY PROVISIONS OF THE POLICY, THE VETERAN, ON OCTOBER 29, 1932, FILED SUIT UNDER THE PROVISIONS OF SECTION 19 OF THE WORLD WAR VETERANS' ACT, 1924, AS AMENDED, CLAIMING SUCH BENEFITS FROM AUGUST 1930. BY JUDGMENT ENTERED DECEMBER 18, 1933, IN THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF ALABAMA, SOUTHERN DIVISION, THE VETERAN WAS DECLARED PERMANENTLY AND TOTALLY DISABLED FROM AND AFTER NOVEMBER 4, 1930, AND WAS AWARDED PERMANENT AND TOTAL DISABILITY BENEFITS OF $57.50 MONTHLY FROM THAT DAY, TOGETHER WITH THE SUM OF $1,280 FOR UNEARNED PREMIUMS PAID ON THE CONVERTED INSURANCE AT THE RATE OF $33.70 PER MONTH FROM THE DATE OF DISABILITY, NOVEMBER 4, 1930, THROUGH FEBRUARY 1934. THE ATTORNEYS FOR THE VETERAN, H. H. MCKEE AND B. F. MCMILLAN, WERE AWARDED BY THE JUDGMENT ATTORNEYS' FEES AS FOLLOWS:

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED THAT TEN PERCENTUM OF THE AMOUNT OF THIS JUDGMENT AND TEN PERCENTUM OF ALL FUTURE INSTALLMENTS PAID TO THE PLAINTIFF BECAUSE OF AND AS A RESULT OF THIS JUDGMENT ARE REASONABLE ATTORNEYS' FEES TO BE ALLOWED SAID H. H. MCKEE AND B. F. MCMILLAN AS ATTORNEYS OF RECORD FOR THE PLAINTIFF HEREIN, SAID ATTORNEYS' FEES TO BE DEDUCTED BY THE VETERANS' ADMINISTRATION OUT OF THE PAYMENTS TO BE MADE TO PLAINTIFF UNDER THIS JUDGMENT AND PAYMENTS TO BE MADE TO THE PLAINTIFF IN FUTURE INSTALLMENTS, AND TO BE PAID BY SAID VETERANS' ADMINISTRATION TO SAID H. H. MCKEE AND B. F. MCMILLAN, ATTORNEYS OF RECORD, AS PROVIDED BY LAW.

THE VETERAN DIED SEPTEMBER 20, 1937, AFTER HAVING RECEIVED PAYMENT OF 83 MONTHLY INSTALLMENTS OF $57.50 AND THE $1,280 PREMIUM REFUND, MAKING A TOTAL OF $6,052.50 OF WHICH 10 PERCENTUM OR $605.25 HAS BEEN PAID TO THE ATTORNEYS AS PROVIDED BY THE JUDGMENT. UNDER THE TERMS OF THE POLICY THE REMAINING UNPAID INSURANCE WAS PAYABLE TO THE DESIGNATED BENEFICIARY IN MONTHLY INSTALLMENTS OF $34.43, AND IT IS IN CONNECTION WITH THE PAYMENT OF THESE INSTALLMENTS THAT A QUESTION OF THE PROPRIETY OF A DEDUCTION THEREFROM OF 10 PERCENTUM FOR ATTORNEYS' FEES AND THE PAYMENT OF THAT AMOUNT TO THE ATTORNEYS HAS ARISEN.

THIS OFFICE HAS TAKEN THE POSITION IN THIS AND ALL OTHER JUDGMENT CASES THAT THIS OFFICE IS AUTHORIZED AND REQUIRED TO DETERMINE IN THE AUDIT WHETHER THE PAYMENT PROPOSED TO BE MADE BY THE VETERANS' ADMINISTRATION IS STRICTLY IN ACCORDANCE WITH THE TERMS OF THE JUDGMENT. SEE, FOR INSTANCE, ACTION TAKEN BY THE VETERANS' ADMINISTRATION AMENDING AWARDS AFTER AUDIT ACTION BY THIS OFFICE IN THE CASES OF MOSES ALEX. DICKSON, C-600299; EUGENE C. MCAULIFFE, C 382412; STANLEY J. PATRYAS, C-1195204; AND JOHN C. TAPP, C-1114390.

IN THE PARTICULAR CASE HERE INVOLVED THE VETERAN'S INSURANCE POLICY WAS IN FULL FORCE AND EFFECT AT THE TIME THE VETERAN FILED SUIT FOR PERMANENT TOTAL DISABILITY BENEFITS, HE HAVING PAID PREMIUMS ON THE POLICY CONTINUOUSLY FROM THE DATE OF CONVERSION DECEMBER 1, 1922, THROUGH FEBRUARY 1934, WHICH WAS SUBSEQUENT TO THE DATE THE JUDGMENT WAS ENTERED. THE SUIT DID NOT INVOLVE THE VALIDITY OF THE INSURANCE AND DID NOT AFFECT THE EXISTENCE OR LIFE OF THE INSURANCE POLICY. THE ONLY QUESTION BEFORE THE COURT WAS WITH RESPECT TO THE VETERAN'S ENTITLEMENT TO PERMANENT TOTAL DISABILITY BENEFITS UNDER THE DISABILITY PROVISIONS OF THE POLICY. THE COURT FOUND THAT THE VETERAN WAS PERMANENTLY AND TOTALLY DISABLED FROM NOVEMBER 4, 1930, AND THE JUDGMENT PROVIDED ONLY FOR THE RETURN OF PREMIUMS AND PAYMENT OF PERMANENT TOTAL DISABILITY BENEFITS.

THE RIGHT OF THE DESIGNATED BENEFICIARY TO DEATH BENEFITS IS IN NOWISE DEPENDENT UPON THAT JUDGMENT, THE ONLY EFFECT OF THE JUDGMENT ON SUCH BENEFITS BEING THE REDUCTION OF THE AMOUNT OF INSURANCE TO THE EXTENT OF THE NUMBER OF DISABILITY INSTALLMENTS PAID TO THE VETERAN.

THE JUDGMENT SPECIFICALLY ALLOWED ATTORNEYS' FEES OF "TEN PERCENTUM OF ALL FUTURE INSTALLMENTS PAID TO THE PLAINTIFF BECAUSE OF AND AS A RESULT OF THIS JUDGMENT.' IT DID NOT ALLOW OR PURPORT TO ALLOW ATTORNEYS' FEES OF TEN PERCENTUM OF INSTALLMENTS DUE AND PAYABLE TO THE DEATH BENEFICIARY AFTER THE DEATH OF THE INSURED NOT BECAUSE OF OR AS RESULT OF THE JUDGMENT BUT BECAUSE OF THE TERMS OF THE POLICY AND AS A RESULT OF THE DEATH OF THE VETERAN.

THIS CASE IS CLEARLY DISTINGUISHABLE FROM THE CASES CITED BY YOU AND OTHERS IN WHICH THE QUESTION DETERMINED BY THE COURT WAS THE VALIDITY OR EXISTENCE OF THE INSURANCE WHERE THE RIGHT OF THE DEATH BENEFICIARY TO INSTALLMENTS DUE AND PAYABLE AFTER THE DEATH OF THE INSURED DEPENDED ENTIRELY ON THE JUDGMENT OF THE COURT. ACCORDINGLY, THE AUDIT ACTION IN THE REED CASE IS SUSTAINED.

IT IS UNDERSTOOD TO BE YOUR PRESENT POSITION THAT THE ACTION OF THE VETERANS' ADMINISTRATION IN JUDGMENT CASES ARISING UNDER SECTION 19 OF THE WORLD WAR VETERANS' ACT AS AMENDED, IS FINAL AND CONCLUSIVE BY REASON OF THE PROVISIONS OF SECTION 5 OF THE SAME ACT, AS AMENDED BY THE ACT OF JULY 3, 1930, 46 STAT. 991, PROVIDING IN PART AS FOLLOWS:

THE DIRECTOR, SUBJECT TO THE GENERAL DIRECTION OF THE PRESIDENT, SHALL ADMINISTER, EXECUTE, AND ENFORCE THE PROVISIONS OF THIS ACT, AND FOR THAT PURPOSE SHALL HAVE FULL POWER AND AUTHORITY TO MAKE RULES AND REGULATIONS, NOT INCONSISTENT WITH THE PROVISIONS OF THIS ACT, WHICH ARE NECESSARY OR APPROPRIATE TO CARRY OUT ITS PURPOSES, AND SHALL DECIDE ALL QUESTIONS ARISING UNDER THIS ACT; AND ALL DECISIONS OF QUESTIONS OF FACT AND LAW AFFECTING ANY CLAIMANT TO THE BENEFITS OF TITLES II, 111, OR IV OF THIS ACT SHALL BE CONCLUSIVE EXCEPT AS OTHERWISE PROVIDED HEREIN. * * *

EVIDENTLY, YOU HAVE OVERLOOKED THE FACT THAT ATTORNEYS' FEES ARE PAYABLE ONLY AS PROVIDED FOR IN SECTION 500, TITLE V, OF THE WORLD WAR VETERANS' ACT, AS AMENDED BY THE ACT OF MARCH 4, 1925, 43 STAT. 1311. WITH RESPECT TO JUDGMENT CASES THAT SECTION READS AS FOLLOWS:* * * PROVIDED, HOWEVER, THAT WHEREVER A JUDGMENT OR DECREE SHALL BE RENDERED IN AN ACTION BROUGHT PURSUANT TO SECTION 19 OF TITLE I OF THIS ACT THE COURT, AS A PART OF ITS JUDGMENT OR DECREE, SHALL DETERMINE AND ALLOW REASONABLE FEES FOR THE ATTORNEYS OF THE SUCCESSFUL PARTY OR PARTIES AND APPORTION SAME IF PROPER, SAID FEES NOT TO EXCEED 10 PERCENTUM OF THE AMOUNT RECOVERED AND TO BE PAID BY THE BUREAU OUT OF THE PAYMENTS TO BE MADE UNDER THE JUDGMENT OR DECREE AT A RATE NOT EXCEEDING ONE-TENTH OF EACH OF SUCH PAYMENTS UNTIL PAID. * * *

YOU WILL NOTE THAT NEITHER TITLE I NOR TITLE V IS MENTIONED IN SECTION 5 OF THE WORLD WAR VETERANS' ACT, AS AMENDED, SUPRA.

IN CASES OF SUITS DULY FILED UNDER SECTION 19 OF THE ACT, SUPRA, THE AUTHORITY VESTED IN THE ADMINISTRATOR OF VETERANS' AFFAIRS UNDER SECTION 5 OF THE ACT TO MAKE FINAL DECISIONS OF QUESTIONS OF FACT AND LAW WITH RESPECT TO CLAIMANTS' ENTITLEMENT TO PAYMENTS OF BENEFITS UNDER INSURANCE CONTRACTS, IS TAKEN OUT OF THE ADMINISTRATOR'S JURISDICTION AND PLACED IN THE JURISDICTION OF THE COURTS. AND THE RIGHT TO ATTORNEYS' FEES IN SUCH CASES IS DEPENDENT UPON THE JUDGMENT OF THE COURT AND NOT UPON ANY FINAL DECISION BY THE ADMINISTRATOR UNDER AUTHORITY OF THE PROVISIONS OF THE SAID SECTION 5.

IN SUPPORT OF YOUR POSITION IN THIS MATTER YOU QUOTE EXTENSIVELY FROM THE PLEADINGS AND BRIEF FILED BY THIS OFFICE IN THE CASE OF JAMES S. CATHCARD NOW PENDING BEFORE THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA, IN WHICH A PETITION WAS FILED IN THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF COLUMBIA SEEKING A WRIT OF MANDAMUS TO THE ADMINISTRATOR OF VETERANS' AFFAIRS AND IN WHICH THE DISTRICT COURT DETERMINED THAT THE ACTING COMPTROLLER GENERAL OF THE UNITED STATES SHOULD BE JOINED. THE PERTINENCE OF YOUR REFERENCE TO THAT CASE IN CONNECTION WITH THE PRESENT MATTER IS NOT APPARENT. THERE IS NOT BEFORE THE COURT IN THAT CASE ANY QUESTION OF INSURANCE, OR OF ATTORNEYS' FEES, OR OF ANY AUDIT ACTION OF THIS OFFICE IN QUESTIONING THE PAYMENT OF THE JUDGMENT AS PROPOSED BY THE VETERANS' ADMINISTRATION--- THE FINALITY OF DECISION THERE ASSERTED RELATING SOLELY TO DETERMINATIONS RESPECTING COMPENSATION AND VOCATIONAL TRAINING PAY BENEFITS. THEREFORE, NEITHER THE CATHCARD CASE NOR THE BRIEF FILED THEREIN BY THIS OFFICE HAS ANY BEARING WHATEVER ON THE PRESENT CASE.

YOU REFER, ALSO, TO THE DECISION OF THIS OFFICE DATED JULY 6, 1937, A- 27645, 17 COMP. GEN. 4, WHEREIN THIS OFFICE STATED THAT IT WOULD NOT BE REQUIRED TO OBJECT TO RECOGNITION BY THE VETERANS' ADMINISTRATION OF ASSIGNMENT OF ATTORNEYS' FEES ALLOWED BY THE COURT. THAT STATEMENT WAS MADE NOT BECAUSE OF ANY FINALITY OF THE ADMINISTRATION'S ACTION BUT BECAUSE THE GOVERNMENT WOULD OBTAIN A FULL ACQUITTANCE UNDER SUCH AN ASSIGNMENT. IN THE REED CASE HERE INVOLVED I AM NOT CONVINCED THAT THE PAYMENT TO THE ATTORNEYS WOULD BE A GOOD ACQUITTANCE AGAINST THE DEATH BENEFICIARY'S CLAIM FOR THE AMOUNT OF DEATH BENEFITS SO WITHHELD FROM HER AND PAID TO THE ATTORNEYS. I FIND NOTHING IN THE DECISION OF JULY 6, 1937, SUPRA, TO SUPPORT YOUR VIEW IN THE PRESENT MATTER. ON THE CONTRARY, IT WAS SPECIFICALLY STATED THEREIN AS FOLLOWS:

SECTION 500 OF THE STATUTE CONTAINING THE AUTHORITY FOR FIXING AND PAYING ATTORNEYS' FEES IN TITLE V OF THE ACT, AND SECTION 19 OF THE STATUTE CONTAINING THE AUTHORITY FOR THE LITIGATION INVOLVING WAR-RISK INSURANCE POLICIES IS IN TITLE I OF THE ACT. THE DECISIONS OF THE ADMINISTRATOR OF VETERANS' AFFAIRS WHICH ARE MADE FINAL AND CONCLUSIVE BY SECTION 5 OF THE STATUTE, SUPRA, ARE THOSE "AFFECTING ANY CLAIMANT TO THE BENEFITS OF TITLES II, III, OR IV OF THIS ACT.' SINCE A CLAIM FOR ATTORNEYS' FEES IN A SITUATION SUCH AS HERE INVOLVED IS BASED UPON A COURT JUDGMENT OR DECREE AS DISTINGUISHED FROM A DETERMINATION BY THE ADMINISTRATOR OF VETERANS' AFFAIRS, AND FURTHER, SINCE SUCH CLAIM ARISES UNDER TITLE I AND V OF THE ACT, AS DISTINGUISHED FROM TITLES II, III, OR IV OF THE ACT, THERE IS CONSIDERABLE ROOM FOR DOUBT WHETHER YOUR DETERMINATION IN THIS MATTER WOULD BE FINAL AND CONCLUSIVE, AS SEEMS TO HAVE BEEN ASSUMED BY YOU IN THE SECOND PARAGRAPH OF YOUR LETTER.

I CANNOT AGREE WITH THE VIEW THAT THE ACTION OF THE VETERANS' ADMINISTRATION IN MAKING PAYMENTS OF WAR RISK INSURANCE OR ATTORNEYS' FEES PURSUANT TO COURT JUDGMENTS IS FINAL AND CONCLUSIVE. ACCORDINGLY, IN THE AUDIT OF ACCOUNTS OR CLAIMS INVOLVING SUCH PAYMENTS, THIS OFFICE WILL CONTINUE TO DETERMINE WHETHER SUCH PAYMENTS, MADE OR PROPOSED, ARE STRICTLY IN ACCORDANCE WITH THE TERMS OF THE JUDGMENTS OF THE COURTS.