B-108755, MAY 5, 1952, 31 COMP. GEN. 562

B-108755, MAY 5, 1952, 31 COMP. GEN. 562

INTEREST - SAVINGS DEPOSITS - DISCHARGE BECAUSE OF FRAUDULENT ENLISTMENT WHILE A FRAUDULENT CONTRACT OF ENLISTMENT IS VOIDABLE AND WHEN AVOIDED BY THE GOVERNMENT IS VOID FROM THE BEGINNING, AN ENLISTED MAN IS A MEMBER OF THE SERVICE AND PRIMA FACIE ENTITLED TO THE BENEFITS OF THAT STATUS UNTIL THE CONTRACT IS AVOIDED UPON DISCOVERY OF THE FRAUD; THEREFORE, AN ENLISTED MEMBER WHO IS DISCHARGED BY REASON OF A FRAUDULENT ENLISTMENT IS NOT BARRED FROM RECEIVING SAVINGS DEPOSITS PLUS INTEREST ACCRUED THEREON.

ASSISTANT COMPTROLLER GENERAL YATES TO THE SECRETARY OF DEFENSE, MAY 5, 1952:

REFERENCE IS MADE TO LETTER OF MARCH 25, 1952, WITH ENCLOSURE, FROM THE ACTING SECRETARY OF DEFENSE, REQUESTING DECISION AS TO WHETHER AN ENLISTED MEMBER MAY BE PAID SAVINGS OR SOLDIER'S DEPOSITS PLUS INTEREST THEREON WHEN DISCHARGED BY REASON OF FRAUDULENT ENLISTMENT.

IT APPEARS THAT THE REQUEST FOR DECISION IS BASED UPON COMMITTEE ACTION NUMBER 23 OF THE MILITARY PAY AND ALLOWANCES COMMITTEE, DEPARTMENT OF DEFENSE, APPROVED ON FEBRUARY 29, 1952, EXCERPTS OF WHICH ARE SET FORTH IN A MEMORANDUM RECEIVED WITH THE LETTER OF MARCH 25, 1952. IT IS STATED IN THE SAID MEMORANDUM THAT ARMY AND AIR FORCE REGULATIONS PROVIDE FOR REPAYMENT OF DEPOSITS IN THE CASE OF MEMBERS DISCHARGED BY REASON OF FRAUDULENT ENLISTMENT AND ALTHOUGH NOT SPECIFICALLY PROVIDED FOR IN THE REGULATIONS, INTEREST IS ALSO PAID ON SUCH DEPOSITS WHEREAS THE NAVY AND MARINE CORPS REGULATIONS PROVIDE THAT DEPOSITS AND INTEREST THEREON WILL BE FORFEITED BY REASON OF A DISCHARGE FOR FRAUDULENT ENLISTMENT. ALSO, IT IS POINTED OUT IN THE MEMORANDUM THAT THE LAWS AUTHORIZING SAVINGS AND SOLDIERS' DEPOSITS REQUIRE FORFEITURE OF SUCH DEPOSITS ONLY IN THE CASE OF DESERTION. HOWEVER, IT IS FURTHER STATED THAT A DECISION OF THIS OFFICE DATED DECEMBER 19, 1922, AD-7358, LENDS SUPPORT TO THE VIEW THAT AMOUNTS DEPOSITED REPRESENT PAY AND ALLOWANCES ACCRUED BUT NOT PAID, AND THAT IF A MEMBER'S ENLISTMENT IS REPUDIATED AS FRAUDULENT THE AMOUNT DEPOSITED CANNOT BE PAID BECAUSE IT REPRESENTS PAY AND ALLOWANCES THAT WERE NEVER EARNED.

THE LAWS GOVERNING DEPOSITS OF SAVINGS OF ENLISTED MEN OF THE ARMY AND AIR FORCE ARE CODIFIED IN TITLE 10, U.S. CODE, AS FOLLOWS:

"906. DEPOSIT OF SOLDIERS' SAVINGS.

" ANY ENLISTED MAN OF THE ARMY MAY DEPOSIT HIS SAVINGS, IN SUMS NOT LESS THAN $5, WITH ANY BRANCH, OFFICE, OR OFFICES OF THE ARMY THE SECRETARY OF THE ARMY MAY FROM TIME TO TIME DESIGNATE, WHO SHALL FURNISH HIM A DEPOSIT BOOK, IN WHICH SHALL BE ENTERED THE NAME OF THE FINANCE OFFICER AND OF THE SOLDIER, AND THE AMOUNT, DATE, AND PLACE OF SUCH DEPOSIT. ANY AMOUNT HERETOFORE OR HEREAFTER SO DEPOSITED SHALL BE HELD DURING SUCH PERIOD OF HIS SERVICE AS MAY BE PRESCRIBED BY THE SECRETARY OF THE ARMY; SHALL BE ACCOUNTED FOR IN THE SAME MANNER AS OTHER PUBLIC FUNDS; SHALL BE DEPOSITED IN THE TREASURY OF THE UNITED STATES AND KEPT AS A SEPARATE FUND, KNOWN AS PAY OF THE ARMY DEPOSIT FUND, REPAYMENT OF WHICH TO THE ENLISTED MAN, OR TO HIS HEIRS REPRESENTATIVES, SHALL BE MADE OUT OF THE FUND CREATED BY SAID DEPOSITS; SHALL NOT BE SUBJECT TO FORFEITURE BY SENTENCE OF COURT MARTIAL, BUT SHALL BE FORFEITED BY DESERTION; AND SHALL BE EXEMPT FROM LIABILITY FOR SUCH SOLDIER'S DEBTS: PROVIDED, THAT THE GOVERNMENT SHALL BE LIABLE FOR THE AMOUNT DEPOSITED TO THE PERSON SO DEPOSITING THE SAME.'

"906A. DEPOSITS AS SUBJECT TO CLAIMS OF UNITED STATES.

" NO PART OF SECTION 906 OF THIS TITLE, OF SECTIONS 933, 934, OR 935 OF TITLE 34, OR OF SECTION 975 OF TITLE 34, OR OF ANY OTHER LAW, SHALL BE SO CONSTRUED AS TO AUTHORIZE THE RECOVERY IN ANY MANNER OF ANY INDEBTEDNESS TO THE UNITED STATES OR TO ANY OF ITS INSTRUMENTALITIES FROM EITHER THE AMOUNTS DEPOSITED WITH THE GOVERNMENT PURSUANT TO LAW BY ANY DEPOSITOR IN THE MILITARY SERVICE, OR FROM THE INTEREST THEREON.'

"907. INTEREST ON DEPOSITS.

" FOR ANY SUMS NOT LESS THAN $5 SO DEPOSITED FOR THE PERIOD OF SIX MONTHS, OR LONGER, THE SOLDIER, ON HIS FINAL DISCHARGE OR AT SUCH TIME OR TIMES PRIOR THERETO AS MAY BE PRESCRIBED BY THE SECRETARY OF WAR, SHALL BE PAID INTEREST AT THE RATE OF 4 PERCENTUM PER ANNUM.'

"908. REGULATIONS GOVERNING DEPOSITS.

" THE SYSTEM OF DEPOSITS HEREIN ESTABLISHED SHALL BE CARRIED INTO EXECUTION UNDER SUCH REGULATIONS AS MAY BE ESTABLISHED BY THE SECRETARY OF WAR.'

SIMILAR PROVISIONS GOVERNING SAVINGS DEPOSITS OF ENLISTED MEN OF THE NAVY AND MARINE CORPS ARE SET FORTH IN TITLE 34, U.S. CODE, SECTIONS 933 TO 936, INCLUSIVE, AND 975.

SAVINGS DEPOSITS MADE UNDER THE AFOREMENTIONED STATUTORY PROVISIONS ARE NOT PLACED TO THE CREDIT OF THE UNITED STATES, BUT ARE DEPOSITED IN THE TREASURY IN A SEPARATE TRUST FUND FOR THE BENEFIT OF THE DEPOSITOR AND THE LAWS PROVIDE THAT THE GOVERNMENT SHALL BE LIABLE TO THE DEPOSITOR FOR SUCH AMOUNTS DEPOSITED. AS POINTED OUT BY THE MILITARY PAY AND ALLOWANCE COMMITTEE, THE ONLY PROVISION CONTAINED IN THE STATUTES FOR FORFEITURE OF DEPOSITS IS IN CASE OF THE DESERTION OF THE DEPOSITOR. DEPOSITS SPECIFICALLY ARE EXEMPT FROM LIABILITY ON ACCOUNT OF THE DEBTS OF THE DEPOSITOR WHETHER TO THE UNITED STATES OR OTHERWISE.

IT LONG HAS BEEN THE RULE IN THE CASE OF AN ENLISTED PERSON WHO ON ENTRY INTO THE SERVICE FRAUDULENTLY CONCEALED OR MISREPRESENTED A MATERIAL FACT DISQUALIFYING HIM FROM ENLISTMENT, AND WHO IS DISCHARGED UPON DISCOVERY BY THE GOVERNMENT OF THE FRAUD, THAT HIS DISCHARGE CONSTITUTES AN AVOIDANCE OF THE CONTRACT OF ENLISTMENT; AND THE MAN IS NOT ENTITLED TO PAY OR ALLOWANCES FOR ANY PERIOD SERVED UNDER THE FRAUDULENT ENLISTMENT. HOWEVER, BY ANALOGY TO A DE FACTO OFFICER, HE IS PERMITTED TO RETAIN THE PAY PAID HIM CURRENTLY WHILE SERVING, IF THE PAYMENTS OTHERWISE WERE PROPER. 4 COMP. DEC. 151; 5 ID. 543; 8 ID. 679; 12 ID. 326; 17 ID. 122; 22 ID. 538. WHILE A FRAUDULENT CONTRACT OF ENLISTMENT IS VOIDABLE AND WHEN AVOIDED BY THE GOVERNMENT IS VOID FROM THE BEGINNING, NEVERTHELESS, UNTIL THE CONTRACT IS AVOIDED UPON DISCOVERY OF THE FRAUD, THE PERSON IS AN ENLISTED MEMBER OF THE SERVICE INVOLVED AND PRIMA FACIE ENTITLED TO THE BENEFITS AND SUBJECT TO THE DISABILITIES OF THAT STATUS. CONSEQUENTLY A SAVINGS DEPOSIT MADE PRIOR TO THE DATE OF AVOIDANCE OF THE CONTRACT OF ENLISTMENT IS MADE BY THE DEPOSITOR AS AN ENLISTED MEMBER OF THE SERVICE WITHIN THE MEANING OF THE STATUTES AUTHORIZING SUCH DEPOSITS.

IT IS TO BE NOTED THAT THE STATUTES DO NOT PROVIDE THAT DEPOSITS BE MADE FROM PAY BUT RATHER THAT THEY BE MADE FROM SAVINGS. HOWEVER, WHETHER THE SOURCE OF THE DEPOSIT BE FROM PAY ACTUALLY RECEIVED OR FROM PAY TRANSFERRED TO THE MEMBER'S SAVINGS ACCOUNT UNDER AN AUTHORIZED CHECK AGE, SINCE SUCH FUNDS ARE HELD IN TRUST FOR THE DEPOSITOR, THEY APPEAR TO CONSTITUTE PAY RECEIVED BY HIM OR FOR HIS BENEFITS WHICH AMOUNT HE IS NOT REQUIRED TO REFUND UPON TERMINATION OF HIS ENLISTMENT. THE FACTS CONSIDERED IN DECISION OF DECEMBER 19, 1922, SUPRA, ARE TO BE DISTINGUISHED FROM THE SITUATION HERE UNDER CONSIDERATION SINCE THE FUNDS THERE INVOLVED WERE NOT HELD IN TRUST FOR THE BENEFIT OF THE MEMBER WHO WAS DISCHARGED BY REASON FRAUDULENT ENLISTMENT. ACCORDINGLY, ANSWERING THE QUESTION PRESENTED, YOU ARE ADVISED THAT AN ENLISTED MEMBER IS NOT BARRED, BECAUSE OF DISCHARGE BY REASON OF FRAUDULENT ENLISTMENT, FROM RECEIVING HIS SAVINGS DEPOSITS PLUS INTEREST ACCRUED THEREON AS PROVIDED BY THE STATUTES. SEE 22 COMP. GEN. DEC. 538, SUPRA. ..END :