B-181466 November 19, 1974

B-181466 November 19, 1974

The Honorable Carla A. Hills Assistant Attorney General Civil Division Department of Justice

Dear Mrs. Hills:

Subject: United States v. Mary Glenn McKinney and Peerless Insurance Company (M.D. Fla., Orlando Division, Civil No. 73-215-Orl-Civ.-Y)

Your letter of October 10, 1974, reference CAN:MH:PB:fmm 77-17M-31, committed a copy of the adverse decision of the District Court dated August 13, 1974, in the captioned case and requested our comments as to whether an appeal shold be taken from such decision.

The suit constitutes an attempt by the Government to recover from the defendants the amount of a deficit in the accounts of Mary Glenn McKinney covering the period from April 1, 1965, through August 31, 1966, during which time she was a State Department Disbursing Officer in La Paz, Bolivia. By our letter of July 10, 1974, B-181466, in response to your letter of June 7, 1974, also involving the captioned case, we recommended that your Department should appeal the adverse decision of the court dated April 24, 1976, which decision granted a motion for summary judgment by defendant McKinney contending that the Government's claim is barred by 31 U.S.C. Sec. and for failure of the General Accounting Office to settle her accounts within the 3-year period stipulated by the cited statute.

The decision transmitted with your letter of October 10, 1974, denied the Government's motion to alter or amend the prior judgment, seeking an order of court vacating the judgment in favor of defendant, Peerless Emburance Company, and denying the latter's motion for summary judgment.

In the present decision, the court determined that it had jurisdiction to consider the motion, after disposing of several issues pertaining to that question. The regulations and decisions cited by the court in support of its jurisdiction seems adequate to sustain its view; moreover, inasmuch as it was the Government's motion in question, we do not believe you wish to contest the court's jurisdiction to consider such motion.

According to the decision, your motion to amend judgment contended that 31 U.S.C. Sec. 821 does not apply in favor of the surety, but rather that 6 U.S.C. Sec. 5 is the applicable Federal Staatute of limitations, and, further, that the liability of the surety is independent of any claim the Government has against the principal, or in the alternative, that a surety is not discharged merely because the claim against the principal is barred.

The court, after sustaining the Government's contention concerning 6 U.S.C. Sec. 5, held that the Government is nevertheless precluded from proceeding against the surety. The court stated that the basis for its conclusion is the provision of 31 U.S.C. Sec. 821 that after 3 years the settlement made by the General Accounting Office "shall be final and conclusive * * * [and] no further charges or debts shall be raised in such account thereafter, except as to monies which have been * * * lost * * * due to fraud or criminality on the part of the disbursing officer whose account was settled. The court construed this provision to mean that in the absence of an allegation of fraud or criminality on the part of defendant McKinney, section 821 extinguished the claim altogether as opposed to simply setting up a statutory period within which suit must be brought, which would merely eliminate the remedy while leaving the claim, though unenforceable, still in existence.

We concur with the court's construction of 31 U.S.C. Sec. 821 and its effect on the surety, as stated above. It seems clear that if no charges or debts may be raised in an accountable officer's account after the expiration of the 3-year period and no such charges or debts were raised during such period, there is no charge or debt against the officer. Hence, there is nothing which the surety may be required to pay. The distinction cited by the court between an ordinary statute of limitations which merely bars the remedy and leaves the debt intact, and 31 U.S.C. Sec. 821 which completely eliminates any debt, and the effect of this distinction upon the liability of the surety, is valid. Assuming that 31 U.S.C. Sec. 821 applies to defendant McKinney, as was decided by the court in its decision of April 24, 1974, we find no basis for an appeal of the court's decision of August 15, 1974.

Since the focal point of the current decision of the court is its prior decision to the effect that the Government's claim against defendant McKinney is procluded by 31 U.S.C. Sec. 821, we suggest that further consideration be given to appealing that prior decision, as we recommended in our letter of July 10, 1974, B-181466.

Sincerely yours,

Paul G. Dembling

Paul G. Dembling General Counsel