A-60467, APRIL 10, 1935, 14 COMP. GEN. 755

A-60467: Apr 10, 1935

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HOME OWNER'S LOAN CORPORATION - EMPLOYMENT OF ATTORNEYS IN DUAL CAPACITY THERE IS NOTHING IN THE ACT OF JUNE 13. RATHER THERE IS IMPOSED A RESPONSIBILITY SPECIFICALLY TO DETERMINE AS NECESSARY TO THE CARRYING OUT OF ITS PUBLIC DUTY ANY EXPENDITURE NOT IN CONFORMITY WITH LAW. IN ADVANCE OF THE INCURRING OF THE OBLIGATION AS THE AUTHORITY IS NOT TO CONDONE AN UNLAWFUL USE BUT RATHER TO DETERMINE THAT A CONTEMPLATED USE IS NECESSARY TO THE DISCHARGE OF THE PUBLIC DUTY. AS FOLLOWS: I ATTACH AN OPINION OF THE GENERAL COUNSEL OF HOME OWNERS' LOAN CORPORATION WHICH STATES THE FACTS UPON WHICH IT IS GIVEN AND RESPECTFULLY REQUEST YOUR OPINION AS TO WHETHER OR NOT THE PAYMENTS REFERRED TO WERE LEGALLY MADE.

A-60467, APRIL 10, 1935, 14 COMP. GEN. 755

HOME OWNER'S LOAN CORPORATION - EMPLOYMENT OF ATTORNEYS IN DUAL CAPACITY THERE IS NOTHING IN THE ACT OF JUNE 13, 1933, 48 STAT. 131, AUTHORIZING AN ATTORNEY-EMPLOYEE OF THE HOME OWNERS' LOAN CORPORATION TO ACCEPT EMPLOYMENT, TO EXAMINE TITLES, MAKE REPORTS THEREON, ETC., FOR APPLICANTS TO THE HOME OWNERS' LOAN CORPORATION FOR LOANS. SERVING AS AN ATTORNEY IN PREPARING PAPERS IN CONNECTION WITH AN APPLICATION FOR A LOAN FROM THE CORPORATION BY WHICH EMPLOYED WOULD OR MIGHT BE ANTAGONISTIC TO DUTIES UNDER THE CORPORATION. AUTHORITY GIVEN BY LAW TO A PUBLIC AGENCY, SUCH AS THAT GIVEN TO THE HOME OWNERS' LOAN CORPORATION BY THE ACT OF JUNE 13, 1933, 48 STAT. 132, TO "DETERMINE ITS NECESSARY EXPENDITURES" DOES NOT PLACE SUCH AGENCY BEYOND ALL LAW OR ACCOUNTABILITY WITH RESPECT TO ITS EXPENDITURES, RATHER THERE IS IMPOSED A RESPONSIBILITY SPECIFICALLY TO DETERMINE AS NECESSARY TO THE CARRYING OUT OF ITS PUBLIC DUTY ANY EXPENDITURE NOT IN CONFORMITY WITH LAW, SOUND PUBLIC POLICY, OR ESTABLISHED ACCOUNTING REQUIREMENTS, AND NECESSARILY, IN ADVANCE OF THE INCURRING OF THE OBLIGATION AS THE AUTHORITY IS NOT TO CONDONE AN UNLAWFUL USE BUT RATHER TO DETERMINE THAT A CONTEMPLATED USE IS NECESSARY TO THE DISCHARGE OF THE PUBLIC DUTY.

COMPTROLLER GENERAL MCCARL TO THE CHAIRMAN, FEDERAL HOME LOAN BANK BOARD, APRIL 10, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF FEBRUARY 18, 1935, AS FOLLOWS:

I ATTACH AN OPINION OF THE GENERAL COUNSEL OF HOME OWNERS' LOAN CORPORATION WHICH STATES THE FACTS UPON WHICH IT IS GIVEN AND RESPECTFULLY REQUEST YOUR OPINION AS TO WHETHER OR NOT THE PAYMENTS REFERRED TO WERE LEGALLY MADE.

THE OPINION OF YOUR GENERAL COUNSEL IS AS FOLLOWS:

I AM INFORMED THAT MESSRS. B. L. KESSINGER AND M. CARLISLE MINOR WERE EMPLOYED BY HOME OWNERS' LOAN CORPORATION ON A MONTHLY SALARY BASIS AND THAT THEY HAVE PERFORMED THE SERVICES FOR WHICH THEY WERE EMPLOYED AND THAT THEY HAVE EXPENDED THE USUAL HOURS REQUIRED BY THE CORPORATION IN ITS EMPLOYMENT TO EARN THEIR SALARIES. I AM INFORMED THAT, AT THE SAME TIME, THE CORPORATION, KNOWING THAT THESE GENTLEMEN WERE EMPLOYED BY THE CORPORATION ON A SALARIED BASIS, APPROVED THEM AS FEE ATTORNEYS ACCEPTABLE TO THE CORPORATION, TO BE EMPLOYED BY A HOME OWNER TO EXAMINE AND REPORT UPON TITLES AND CLOSE LOANS AT THE EXPENSE OF THE HOME OWNER. THIS METHOD OF OPERATION BY WHICH A LAWYER IS EMPLOYED BY THE CORPORATION AND IS PERMITTED TO DO ANY PRIVATE PRACTICE ON THE OUTSIDE IS CONTRARY TO THE POLICY OF THE CORPORATION AND THE ARRANGEMENT IN THESE CASES HAS BEEN DISCONTINUED. THE ARRANGEMENT IN THE CASES REFERRED TO, HOWEVER, WAS APPROVED BY THE BOARD OF DIRECTORS OF THE CORPORATION.

UPON THIS STATEMENT OF FACTS, I AM REQUESTED TO GIVE AN OPINION AS TO WHETHER OR NOT SUCH ARRANGEMENT WAS ILLEGAL.

HOME OWNERS' LOAN ACT OF 1933 PROVIDES IN REFERENCE TO THE CORPORATION "AND SHALL DETERMINE ITS NECESSARY EXPENDITURES UNDER THIS ACT AND THE MANNER IN WHICH THEY SHALL BE INCURRED, ALLOWED, AND PAID, WITHOUT REGARD TO THE PROVISIONS OF ANY OTHER LAW GOVERNING THE EXPENDITURE OF PUBLIC DS.' IT IS MY OPINION, THEREFORE, THAT THE EMPLOYMENTS ABOVE REFERRED TO AND WHICH WERE APPROVED BY THE CORPORATION WERE LEGAL.

SECTION 4 (E) AND (F) OF THE HOME OWNERS' LOAN ACT OF 1933, DATED JUNE 13, 1933, 48 STAT. 131, REQUIRES THAT LOANS "SHALL BE SECURED BY A DULY RECORDED HOME MORTGAGE.' THERE IS IMPOSED ON THE HOME OWNERS' LOAN CORPORATION THE RESPONSIBILITY OF APPROVING THE TITLE TO THE PROPERTY PRIOR TO GRANTING OF LOANS THEREON.

SECTION 4 (J) AND (K) OF THE SAME ACT PROVIDES, IN PART, AS FOLLOWS:

(J) THE CORPORATION SHALL HAVE POWER TO SELECT, EMPLOY, AND FIX THE COMPENSATION OF SUCH OFFICERS, EMPLOYEES, ATTORNEYS, OR AGENTS AS SHALL BE NECESSARY FOR THE PERFORMANCE OF ITS DUTIES UNDER THIS ACT, WITHOUT REGARD TO THE PROVISIONS OF OTHER LAWS APPLICABLE TO THE EMPLOYMENT OR COMPENSATION OF OFFICERS, EMPLOYEES, ATTORNEYS, OR AGENTS OF THE UNITED STATES. NO SUCH OFFICER, EMPLOYEE, ATTORNEY, OR AGENT SHALL BE PAID COMPENSATION AT A RATE IN EXCESS OF THE RATE PROVIDED BY LAW IN THE CASE OF THE MEMBERS OF THE BOARD. * * *

(K) THE BOARD IS AUTHORIZED TO MAKE SUCH BYLAWS, RULES, AND REGULATIONS, NOT INCONSISTENT WITH THE PROVISIONS OF THIS SECTION, AS MAY BE NECESSARY FOR THE PROPER CONDUCT OF THE AFFAIRS OF THE CORPORATION. * * *

THE MANUAL OF RULES AND REGULATIONS OF THE HOME OWNERS' LOAN CORPORATION VI-1-D (1), (2), AND (7) AND VI-16 (AS AMENDED BY BULLETIN A-35, DATED JANUARY 8, 1935), PROVIDE, IN PART, AS FOLLOWS:

(1) SELECTION OF FEE ATTORNEYS AND TITLE COMPANIES.--- THE STATE MANAGER AND STATE COUNSEL SHALL SELECT AND RECOMMEND RESPONSIBLE TITLE COMPANIES FOR TITLE EXAMINATIONS AND OTHER PURPOSES REQUIRED IN CONNECTION WITH MAKING LOANS, AND SHALL SELECT ALSO ALL NECESSARY FEEATTORNEYS, WHO SHALL BE THE BEST QUALIFIED ATTORNEYS AVAILABLE IN THE TERRITORY. BOTH INDIVIDUAL ATTORNEYS AND FIRMS OF ATTORNEYS SHALL BE SELECTED ON THE BASIS OF THE BEST INTERESTS OF THE CORPORATION. ALL FEE ATTORNEYS AND TITLE COMPANIES SHALL BE SELECTED SUBJECT TO THE APPROVAL OF THE GENERAL COUNSEL.

(2) FEE ATTORNEYS ARE NOT EMPLOYEES.--- FEE ATTORNEYS ARE NOT EMPLOYEES OF THIS CORPORATION AND SHALL BE PAID UPON A FEE BASIS. ALL SUCH ATTORNEYS SHOULD BE DIRECTED TO EXECUTE THE FORM ,STATEMENT OF FEE ATTORNEY.' SUCH STATEMENT SHALL BEAR THE APPROVAL OF THE STATE COUNSEL AND THE STATE MANAGER, WHERE SUBMITTED BY THE RETAIL DEPARTMENT, AND THAT OF THE SPECIAL REPRESENTATIVE AND CHIEF COUNSEL WHERE SUBMITTED BY THE WHOLESALE DEPARTMENT. * * *

(7) ATTORNEYS WHO ARE HOLDING PUBLIC OFFICE.--- TITLE WORK SHALL NOT BE GIVEN TO A FEE ATTORNEY ACTIVELY ENGAGED IN RUNNING FOR PUBLIC OFFICE, BUT HE SHALL BE ALLOWED TO COMPLETE WORK PREVIOUSLY GIVEN HIM BEFORE HE SOUGHT SUCH OFFICE. IF A FEE ATTORNEY IS HOLDING ANY PUBLIC OFFICE, WHICH MAKES IT IMPOSSIBLE FOR HIM PROPERLY TO HANDLE TITLE WORK FOR THIS CORPORATION, THEN DURING SUCH PERIOD OF OFFICE NO TITLE WORK SHALL BE REFERRED TO HIM. THE HOLDING OF PUBLIC OFFICE SHALL NOT DISQUALIFY A FEE ATTORNEY, IF THE DUTIES OF SUCH OFFICE DO NOT INTERFERE WITH PROPER HANDLING OF THE TITLE WORK OF THE CORPORATION. NO PERSON MAY BE EMPLOYED AS A SALARIED ATTORNEY WHILE ENGAGED IN RUNNING FOR PUBLIC OFFICE OR WHILE HOLDING PUBLIC OFFICE.

16. FEES, CHARGES, AND EXPENSES---

ORDINARY CHARGES AUTHORIZED AND REQUIRED FOR SERVICES RENDERED FOR EXAMINATION OF ABSTRACTS, EXAMINATION OF TITLE, AND APPRAISAL, AND LIKE NECESSARY SERVICES SHALL CONSIST OF THE FOLLOWING:

NECESSARY RECORDING, AND SIMILAR FEES CHARGED BY PUBLIC OFFICIALS;

NECESSARY CHARGES FOR PERFECTING TITLE AS APPROVED BY THE STATE COUNSEL OF THE CORPORATION IN A SUM NOT EXCEEDING $75.00 IN ANY CASE UNLESS SPECIFICALLY APPROVED BY THE BOARD OF DIRECTORS;

NECESSARY AND USUAL FEES, NOT EXCEEDING THE CUSTOMARY FEES FOR SUCH SERVICES, FOR ABSTRACTS, EXAMINATIONS OF ABSTRACTS, CERTIFICATE OF TITLE OR TITLE INSURANCE AS RECOMMENDED BY THE STATE MANAGER AND STATE COUNSEL WITH THE APPROVAL OF THE GENERAL COUNSEL;

CHARGES OF ATTORNEYS OR TITLE COMPANIES FOR ESCROW SERVICES OR FOR CLOSING LOANS AS RECOMMENDED BY THE STATE MANAGER AND STATE COUNSEL AND APPROVED BY THE GENERAL COUNSEL, AND

ANY OTHER NECESSARY CHARGE FOR LIKE NECESSARY SERVICES AS SPECIFICALLY APPROVED BY THE BOARD OF DIRECTORS.

ALL THE ABOVE INCIDENTAL COSTS SHOULD BE PAID BY THE APPLICANT AT THE TIME OF CLOSING. IF THE APPLICANT IS UNABLE TO PAY THESE COSTS, THE AMOUNT MAY BE ADVANCED TO HIM AND INCORPORATED IN THE MORTGAGE DEBT, PROVIDED THE WHOLE IS WITHIN THE PERCENTAGE OF PROPERTY VALUE PROVIDED IN THE ACT. IF THE LOAN IS NOT CLOSED, THE STATE MANAGERS ARE AUTHORIZED AND DIRECTED TO COLLECT ALL EXPENSES INCURRED IN CASES WHERE (1) THE APPLICANT VOLUNTARILY WITHDRAWS HIS APPLICATION, (2) THE LOAN IS NOT MADE ON ACCOUNT OF DEFECTS IN TITLE, OR (3) THE APPLICANT HAS MISREPRESENTED OR CONCEALED SUCH FACTS AS WOULD HAVE CAUSED THE REJECTION OF HIS APPLICATION. ORDINARY AND NECESSARY CHARGES MADE BY AGENTS, BROKERS, BANKS, OR OTHER CORPORATIONS OR ATTORNEYS AGAINST MORTGAGEES FOR SERVICES RENDERED TO THEM ARE NOT CONSIDERED BY THE HOME OWNERS' LOAN CORPORATION TO BE CONDEMNED BY THE HOME OWNERS' LOAN ACT OF 1933, AS AMENDED. THE CORPORATION WILL NOT GO FORWARD WITH THE REFUNDING OF INDEBTEDNESS, HOWEVER, IN CASES WHERE APPLICANTS EMPLOY REPRESENTATIVES UPON THE REPRESENTATION THAT SUCH REPRESENTATIVE IS ABLE TO SECURE MORE OR BETTER SERVICE OR TREATMENT FROM THE CORPORATION THAN THE MORTGAGOR HIMSELF COULD RECEIVE, OR WHERE CHARGES MADE BY SUCH REPRESENTATIVES IN ANY WAY, DIRECTLY OR INDIRECTLY, ADVERSELY AFFECTANY MORTGAGOR INVOLVED.

THERE IS NOTHING IN THE ACT OF JUNE 13, 1933, 48 STAT. 131, WHICH WOULD AUTHORIZE AN ATTORNEY-EMPLOYEE OF THE HOME OWNERS' LOAN CORPORATION TO ACCEPT EMPLOYMENT TO EXAMINE TITLES, MAKE REPORTS THEREON, ETC., FOR APPLICANTS TO THE HOME OWNERS' LOAN CORPORATION FOR LOANS, AND IT IS READILY APPARENT THAT SERVING AS ATTORNEY IN PREPARING PAPERS IN CONNECTION WITH AN APPLICATION FOR A LOAN FROM THE CORPORATION BY WHICH HE IS EMPLOYED WOULD OR MIGHT BE ANTAGONISTIC TO HIS DUTIES TO SUCH CORPORATION.

IT IS UNDERSTOOD FROM THE FACTS AS STATED IN THE OPINION OF YOUR GENERAL COUNSEL THAT THE QUESTION CONSIDERED BY HIM WAS WHETHER THE ACTION OF THE CORPORATION IN APPROVING THE ATTORNEY-EMPLOYEES AS FEE ATTORNEYS TO ACT ALSO AS PRIVATE ATTORNEYS AND FOR PAY, FOR APPLICANTS IN TITLE MATTERS FOR SUBMISSION TO THE CORPORATION AS BASIS FOR LOANS, RENDERED SUCH ATTORNEY- EMPLOYEES INELIGIBLE TO COMPENSATION AS EMPLOYEES OF THE CORPORATION. IS NOT STATED THAT THE ATTORNEY EMPLOYEES EVER ACTED AS FEE ATTORNEYS FOR APPLICANTS, AND IT IS ASSUMED THEY HAD NOT, AS OTHERWISE THE REAL QUESTION IN THE MATTER UNDOUBTEDLY WOULD HAVE BEEN SUBMITTED FOR THE VIEWS OF YOUR GENERAL COUNSEL RATHER THAN THE ONE STATED BY HIM AS HAVING BEEN SUBMITTED.

WHILE THIS OFFICE CANNOT AGREE WITH YOUR GENERAL COUNSEL THAT THE AUTHORITY GRANTED THE CORPORATION BY THE HOME OWNERS' LOAN ACT OF 1933, TO "DETERMINE ITS NECESSARY EXPENDITURES" RESOLVES THE DOUBT IN THE MATTER, APPARENTLY THE APPROVING OF SUCH ATTORNEY-EMPLOYEES AS FEE ATTORNEYS WAS IN ERROR AS YOUR GENERAL COUNSEL STATES SUCH PRACTICE IS CONTRARY TO THE CORPORATION'S POLICY--- IT WOULD CLEARLY BE CONTRARY TO SOUND PUBLIC POLICY--- AND IF THERE IS NO MORE INVOLVED THAN SUCH ERROR IN THE CORPORATION'S ACTION IN APPROVING SUCH ATTORNEY-EMPLOYEES AS FEE ATTORNEYS IT IS NOT BELIEVED THE ERROR ON THE PART OF THE CORPORATION IN MERELY APPROVING NEED BRING INTO QUESTION THE STATUS OF THE EMPLOYEES OR THEIR RIGHT TO COMPENSATION AS SUCH. HOWEVER, IF SUCH ATTORNEY-EMPLOYEES ACTUALLY PRACTICED AS ATTORNEYS FOR APPLICANTS FOR LOANS THERE APPEARS INVOLVED NOT ONLY THEIR EMPLOYMENT STATUS AND RIGHT TO COMPENSATION FROM PUBLIC FUNDS BUT ALL ACTIONS TAKEN BY THEM ON BEHALF OF THE CORPORATION RESPECTING OR HAVING ANY RELATION TO APPLICATIONS FOR LOANS BY THEIR CLIENTS.

WITH RESPECT TO THE AUTHORITY OF THE CORPORATION IN THE USES OF THE PUBLIC MONEYS ENTRUSTED TO IT, IT SEEMS APPROPRIATE TO POINT OUT THAT AUTHORITY GIVEN BY LAW TO A PUBLIC AGENCY TO "DETERMINE ITS NECESSARY EXPENDITURES" DOES NOT PLACE SUCH AGENCY BEYOND ALL LAW OR ACCOUNTABILITY WITH RESPECT TO ITS EXPENDITURES, RATHER THERE IS IMPOSED A RESPONSIBILITY TO SPECIFICALLY DETERMINE AS NECESSARY TO THE CARRYING OUT OF ITS PUBLIC DUTY ANY EXPENDITURE NOT IN CONFORMITY WITH LAW, SOUND PUBLIC POLICY, OR ESTABLISHED ACCOUNTING REQUIREMENTS, AND NECESSARILY, IN ADVANCE OF THE INCURRING OF THE OBLIGATION AS THE AUTHORITY IS NOT TO CONDONE AN UNLAWFUL USE BUT RATHER TO DETERMINE THAT A CONTEMPLATED USE IS NECESSARY TO THE DISCHARGE OF THE PUBLIC DUTY.

THE PERMITTING OF EMPLOYEES TO PRACTICE BEFORE THE PUBLIC AGENCY BY WHICH EMPLOYED WOULD SEEM SO IMPROPER AND SO OUT OF LINE WITH SOUND PUBLIC POLICY AS TO SUGGEST NO NEED FOR A PROHIBITING STATUTE TO INSURE AVOIDANCE, YET, WITH RESPECT TO FAR LESS SERIOUS MATTERS SEE THE ACT OF MARCH 3, 1917, 39 STAT. 1106; SECTION 6, ACT MAY 10, 1916, 39 STAT. 120, AS AMENDED, PROHIBITING PAYMENT OF COMPENSATION IN DUAL EMPLOYMENTS; SECTION 190, REVISED STATUTES OF THE UNITED STATES, PROHIBITING FORMER EMPLOYEES FROM APPEARING AS ATTORNEYS IN THE PROSECUTION OF CLAIMS AGAINST THE GOVERNMENT; AND, ALSO, SECTION 109, ACT MARCH 4, 1909, 35 STAT. 1107, PROHIBITING OFFICERS AND EMPLOYEES FROM AIDING OR ASSISTING IN CLAIMS AGAINST THE UNITED STATES. AND IN ADDITION IT APPEARS VIOLENTLY IN CONFLICT WITH THE YEARLY APPROPRIATING OF BILLIONS OF DOLLARS OF PUBLIC MONEYS TO PROVIDE EMPLOYMENT FOR THOSE OUT OF WORK, FOR THOSE SUPPLIED REGULAR EMPLOYMENT BY THE GOVERNMENT TO FURTHER INCREASE THEIR INCOME AT THE EXPENSE OF THOSE NOT SO EMPLOYED, WHO NEED THE WORK, AND WHO NO DOUBT ARE EQUALLY COMPETENT.

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