A-88030, AUGUST 10, 1937, 17 COMP. GEN. 128

A-88030, AUGUST 10, 1937, 17 COMP. GEN. 128

SET-OFF - RETIREMENT DEDUCTIONS - BONDED OFFICER'S INDEBTEDNESS FORMER GOVERNMENT OFFICER MAY NOT BE PAID AMOUNT TO HIS CREDIT IN THE RETIREMENT FUND UNTIL HIS DISBURSING ACCOUNTS HAVE BEEN FINALLY SETTLED AND FULL AMOUNT OF HIS INDEBTEDNESS DETERMINED, NOTWITHSTANDING EXISTENCE OF SURETY BOND, IT BEING WELL ESTABLISHED THAT THE GOVERNMENT MAY FIRST APPLY ALL AVAILABLE ASSETS IN ITS POSSESSION, INCLUDING BOTH UNPAID SALARY AND THE AMOUNT IN THE RETIREMENT FUND TO CREDIT OF A DEFAULTING OFFICER OR EMPLOYEE, TOWARD LIQUIDATION OF HIS INDEBTEDNESS BEFORE RESORTING TO ITS REMEDY UNDER HIS BOND. THE PROHIBITION CONTAINED IN SECTION 1766, REVISED STATUTES, AGAINST PAYMENT OF COMPENSATION TO ANY PERSON IN ARREARS TO THE UNITED STATES UNTIL HE HAS ACCOUNTED FOR AND PAID INTO THE TREASURY ALL SUMS FOR WHICH HE MAY BE LIABLE, IS APPLICABLE ALIKE TO UNPAID COMPENSATION AND RETIREMENT DEDUCTIONS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, AUGUST 10, 1937:

YOUR LETTER OF JULY 29, 1937, IS AS FOLLOWS:

REFERENCE IS MADE TO DECISION A-79134 ADDRESSED TO THE SECRETARY OF AGRICULTURE, BASED ON HIS LETTER OF APRIL 9, 1937, WHICH DECISION IS BRIEFED AS FOLLOWS:

"COMPENSATION AND RETIREMENT DEDUCTIONS--- SET-OFF PRIOR TO

DEBTOR'S APPLICATION FOR AMOUNTS DUE

"THE EXERCISING OF THE COMMON-LAW RIGHT OF THE GOVERNMENT TO APPLY MONEYS DUE A DEBTOR FROM THE GOVERNMENT IN LIQUIDATION OF A GOVERNMENT INDEBTEDNESS IS NOT DEPENDENT UPON THE DEBTOR FILING A CLAIM FOR THE THE MONEYS OTHERWISE DUE, AND, SHOULD THE DEBTOR'S FINAL SALARY AS A FORMER GOVERNMENT EMPLOYEE NOT BE SUFFICIENT FOR COMPLETE LIQUIDATION, REQUEST SHOULD BE MADE UPON THE CIVIL SERVICE COMMISSION FOR APPLICATION OF THE AMOUNT TO HIS CREDIT IN THE RETIREMENT FUND, IN WHOLE OR IN PART AS THE CASE MIGHT BE, IN FURTHER LIQUIDATION OF THE INDEBTEDNESS.'

IN A DECISION DATED MARCH 31, 1934 (A-53939), ADDRESSED TO THIS DEPARTMENT IN THE CASE OF BENTON D. WOLFINGER, AN EMPLOYEE AT THEFLATHEAD AGENCY, MONTANA, YOUR OFFICE USED THE FOLLOWING WORDING:

"IT IS A WELL SETTLED PRINCIPLE OF LAW WITH REFERENCE TO THE LIABILITY OF SURETIES, THAT IN THE ABSENCE OF EXPRESS TERMS STIPULATING OTHERWISE THEIR LIABILITY IS CO-EXTENSIVE WITH THAT OF THE PRINCIPAL, THE SURETY BEING ANSWERABLE ABSOLUTELY FOR THE DEFAULT OF THE PRINCIPAL. WHITTAKER V. UNITED STATES FIDELITY AND GUARANTY CO., 300 FED. 129. IT HAS BEEN HELD, HOWEVER, THAT IT IS LEGAL AND PROPER FOR THE GOVERNMENT TO APPLY ALL AVAILABLE ASSETS OF A DEFAULTING OFFICER OR EMPLOYEE WHICH ARE THEN IN THE POSSESSION OR CONTROL OF THE GOVERNMENT AGAINST ANY INDEBTEDNESS OF SAID OFFICER OR EMPLOYEE TO THE UNITED STATES BEFORE RESORTING TO ITS REMEDY UNDER A SURETY BOND. BUT THIS RIGHT OF SET-OFF IS INHERENT IN AND CONFINED SOLELY TO THE GOVERNMENT AND CANNOT BE CLAIMED AS A MATTER OF RIGHT BY THE SURETY TO RELIEF FROM ITS RESPONSIBILITY UNDER THE BOND EXECUTED FOR THE PROTECTION OF THE GOVERNMENT. 2 COMP. GEN. 579; 4 ID. 112; 7 ID. 305.

"* * * YOU ARE ADVISED, THEREFORE THAT THE AETNA CASUALTY AND SURETY COMPANY SHOULD BE REQUIRED TO PAY IMMEDIATELY THE FULL AMOUNT OF THE OFFICER'S INDEBTEDNESS TO THE UNITED STATES, LESS THE AMOUNT OF ACCRUED AND UNPAID ANNUITY INSTALLMENTS, OR OTHER CREDITS, THAT MAY BE DUE AND PAYABLE AT THE TIME DEMAND IS MADE ON THE SURETY.'

A QUESTION HAS ARISEN AS TO WHETHER, WHERE AN EMPLOYEE IS BONDED TO THE GOVERNMENT, IT IS PROPER IMMEDIATELY TO IMPOUND ALL MONEY TO HIS CREDIT IN THE RETIREMENT FUND OR TO WAIT UNTIL FINAL SETTLEMENT OF HIS ACCOUNTS HAS BEEN MADE BY THE GENERAL ACCOUNTING OFFICE AND THEN CALL UPON THE BONDING COMPANY FOR REIMBURSEMENT FOR ANY INDEBTEDNESS AGAINST THE UNITED STATES.

IT WOULD SEEM FROM THE LANGUAGE EMPLOYED IN THE DECISION OF MARCH 31, 1934, SUPRA., THAT WHERE A FINAL SETTLEMENT OF A BONDED DISBURSING OFFICER'S ACCOUNTS HAS NOT BEEN EFFECTED AND IT IS NOT THEREFORE POSSIBLE TO FILE A CLAIM WITH HIS SURETY, THE AMOUNT TO HIS CREDIT IN THE RETIREMENT FUND SHOULD BE RELEASED UPON RECEIPT OF HIS APPLICATION FOR THE WITHDRAWAL THEREOF. AS A CASE IN POINT: WADE CRAWFORD, SUPERINTENDENT OF THE KLAMATH INDIAN AGENCY, OREGON, WAS SEPARATED FROM THE SERVICE EFFECTIVE MAY 15, 1937. HE CARRIED A BOND TO THE UNITED STATES IN THE AMOUNT OF $75,000.00, EXECUTED BY THE MARYLAND CASUALTY COMPANY. THERE ARE NOW PENDING IN THE GENERAL ACCOUNTING OFFICE CERTAIN EXCEPTIONS TO HIS ACCOUNTS AND FINAL SETTLEMENT OF HIS ACCOUNTS BY THAT OFFICE HAS NOT BEEN MADE, NOR DOES IT SEEM PROBABLE THAT IT WILL BE MADE FOR SOME TIME. IMMEDIATELY UPON MR. CRAWFORD'S SEPARATION HE MADE APPLICATION FOR A REFUND OF RETIREMENT DEDUCTIONS DUE HIM, BUT ACTING UPON NOTICE FROM THIS DEPARTMENT OF POSSIBLE INDEBTEDNESS TO THE UNITED STATES IT IS UNDERSTOOD THAT THE CIVIL SERVICE COMMISSION IS NOT TAKING ANY ACTION ON HIS REQUEST. HIS BOND IS SUFFICIENT TO COVER ANY INDEBTEDNESS NOW APPARENT AND IN VIEW OF THIS FACT AND IN LIGHT OF THE DECISION IN THE CASE OF BENTON D. WOLFINGER, PREVIOUSLY CITED, IT IS REQUESTED THAT THIS DEPARTMENT BE ADVISED AS TO WHETHER THE CIVIL SERVICE COMMISSION MAY BE ASKED TO RELEASE THE RETIREMENT MONEY DUE MR. CRAWFORD.

THE RULE IS WELL ESTABLISHED THAT THE GOVERNMENT MAY FIRST APPLY ALL AVAILABLE ASSETS IN ITS POSSESSION, INCLUDING BOTH UNPAID SALARY AND THE AMOUNT IN THE RETIREMENT FUND BELONGING TO A DEFAULTING OFFICER OR EMPLOYEE TOWARD LIQUIDATION OF THE INDEBTEDNESS, BEFORE RESORTING TO ITS REMEDY UNDER THE BOND OF THE OFFICER OR EMPLOYEE. ON THIS BASIS ALONE, IT IS PROPER FOR THE CIVIL SERVICE COMMISSION TO SUSPEND ACTION ON THE CLAIM OF THIS DEFAULTING EMPLOYEE FOR REFUND OF THE RETIREMENT DEDUCTIONS UNTIL HIS ACCOUNTS HAVE BEEN FINALLY SETTLED AND THE FULL AMOUNT OF HIS INDEBTEDNESS HAS BEEN DETERMINED.

FURTHER, SECTION 1766, REVISED STATUTES, PROVIDES IN PART AS FOLLOWS:

NO MONEY SHALL BE PAID TO ANY PERSON FOR HIS COMPENSATION WHO IS IN ARREARS TO THE UNITED STATES, UNTIL HE HAS ACCOUNTED FOR AND PAID INTO THE TREASURY ALL SUMS FOR WHICH HE MAY BE LIABLE. * * *

IN APPLYING THIS STATUTE NO DISTINCTION HAS BEEN MADE BETWEEN UNPAID COMPENSATION AND RETIREMENT DEDUCTIONS TO THE CREDIT OF A DEFAULTING OFFICER OR EMPLOYEE IN THE RETIREMENT FUND. DECISION OF APRIL 5, 1937, A- 84524. ASIDE FROM THE GENERAL RULE ABOVE STATED THE QUOTED SECTION OF THE REVISED STATUTES WOULD PRECLUDE PAYMENT TO WADE CRAWFORD OF THE AMOUNT TO HIS CREDIT IN THE RETIREMENT FUNDS UNDER THE CIRCUMSTANCES STATED IN YOUR LETTER.

YOU ARE ADVISED, THEREFORE, THAT NOTWITHSTANDING THE BOND MAY BE SUFFICIENT TO COVER ANY INDEBTEDNESS NOW APPARENT, THE CIVIL SERVICE COMMISSION MAY NOT BE REQUESTED TO RELEASE THE AMOUNT TO THE CREDIT OF MR. CRAWFORD IN THE RETIREMENT FUND. THE CIVIL SERVICE COMMISSION IS BEING FURNISHED A COPY OF THIS DECISION.