Operation of VA Housing Program and H.R. 7571

The subcommittee met, pursuant to notice, at 10 a.m. in room 356, Cannon House Office Building, Hon. Harris B. McDowell, Jr. (chairman of the subcommittee) presiding.

Mr. MCDOWELL. The subcommittee will come to order.

We are meeting this morning to continue what has been a practice in recent Congresses to present the Veterans' Administration with an opportunity to advise this subcommittee of the operations of its housing program during the past 12 months and its forecast for the fiscal year which has just begun. I have asked the Veterans' Administration to give us an overall picture of its operation as well as its forecast and also to discuss the question which was the subject of a hearing before the committee in November of 1963 on the cost of maintenance and management of properties acquired upon default of loans made under the loan guarantee and direct loan programs. will be recalled that the General Accounting Office had presented a report on this subject and the Veterans' Administration at that time came to testify in regard to its own operations and to comment on the allegations made in the General Accounting Office report.

The committee has recently been in receipt of numerous inquiries from Members of Congress based on complaints which have arisen and have been brought to their attention as a result of foreclosure action on loans made, guaranteed or insured by the Administrator of Veterans' Affairs. In many instances these foreclosures have been a result of military bases being closed and/or personnel transferred therefrom. It was because of the focusing of attention upon this procedure that the chairman of the full committee, Mr. Teague of Texas, introduced H.R. 7571 which is before the subcommittee and on which reports have been received.

Without objection, I will insert in the record at this point this bill together with the departmental reports thereon. I shall also place in the record at this point the decision of the U.S. Court of Appeals in U.S. v. Shimer, 276 Federal 2d 792, and the decision of the Supreme Court of the United States in the same case reported in 267 U.S. 374. Also, without objection, I will insert at this point a letter dated June 22, 1965, addressed to the chairman by the Administrator of Veterans' Affairs relative to investments of insurance funds by the Veterans' Administration, together with a brief history of investments of insurance trust funds which the Administrator forwarded with his letter.

2669

(The material referred to follows:)

[H.R. 7571, 89th Cong., 1st sess.]

A BILL To amend title 38 of the United States Code with respect to liability of individuals arising out of certain loans made, guaranteed, or insured by the Administrator of Veternas' Affairs

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) subchapter III of chapter 37 of title 38, United States Code, is amended by adding at the end thereof the following new section:

"§ 1826. Determination of liability; no setoff

"(a) No individual shall be liable to the Administrator as a result of any loan made to, assumed by, or guaranteed or insured on account of, such individual under this chapter unless such liability and the amount thereof is determined by a court of competent jurisdiction in a civil action to which such individual is a party.

"(b) The Administrator shall not set off against, or otherwise withhold from any individual any benefits payable to such individual pursuant to any law administered by the Veterans' Administration because of liability allegedly arising out of any loan made to, assumed by, or guaranteed or insured on account of, such individual under this chapter."

(b) The analysis of subchapter III of such chapter 37 is amended by adding at the end thereof the followin:

"1826. Determination of liability; no setoff."

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., June 7, 1965.

B-124692.

Hon. OLIN E. TEAGUE,

Chairman, Committee on Veterans' Affairs,

House of Representatives.

DEAR MR. CHAIRMAN: Your letter of May 17, 1965, transmitted a copy of H.R. 7571, entitled "A bill to amend title 38 of the United States Code with respect to liability of individuals arising out of certain loans made, guaranteed, or insured by the Administrator of Veterans' Affairs," and requested a report thereon reflecting our views and including an estimate of cost.

The bill, if enacted, would require the Veterans' Administration to obtain a court determination of liability and the amount thereof in any case involving any loan made to, assumed by, or guaranteed or insured on account of, an individual under the provisions of chapter 37 (home, farm, and business loans) of title 38, United States Code, before such individual may be held liable to the Veterans' Administration as a result of such loan. In addition, the bill would prevent the setoff or otherwise withholding of any veteran's benefits otherwise due an individual because of such liability unless and until such court determination is obtained.

The question as to whether the Veterans' Administration should be required to institute court proceedings in all cases involving indebtedness arising from its activities under chapter 37 of title 38, United States Code, before attempting to effect collection thereof is a policy matter for the consideration of the Congress. Hence, we have no comments with respect to the merits of the bill or recommendations regarding its enactment.

We are not in a position to furnish an estimate of the cost to the Government if H.R. 7571 is enacted. However, we have been informally advised that the Veterans' Administration is attempting to develop an estimate of cost for use in connection with its testimony on this bill. It seems apparent that the necessity of instituting court action in many cases of indebtedness which, under present law, would be collected without such action, will increase the cost of Veterans' Administration operations, as well as increasing the burden upon the Department of Justice and the courts. Also, there is for consideration the fact that there doubtless would be numbers of cases of indebtedness which could be collected under present law but which, because of the small size of the debt involved or for other valid reasons, would not be taken into court.

We were informally requested by Mr. Downer of your committee staff to include in our report on H.R. 7571 a discussion of the general question of the authority of the United States to set off payments due from one agency against

debts owed to another agency, together with citation to statutory authority. The right of the United States to set off amounts owed by the United States to a particular person against amounts owed to the United States by that person is not dependent upon statute. This right stems from the common law right which belongs to every creditor to apply moneys of his debtor in his hands in extinguishment of debts due him. This right of the United States has frequently been upheld by the Supreme Court of the United States. In Gratiot v. United States (15 Pet. 336 (40 U.S. 336)), in the January 1841 term of court, the Supreme Court held that the United States has the general right to apply all amounts due to a person to the extinguishment of any balances due to the United States from that person on any account. In speaking of that right, the court said, on page 370, that "it is but the exercise of the common right, which belongs to every creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the debts due to him." (See also McKnight v. United States, 98 U.S. 179, 186.) It is also well settled that this right may be applied where the United States owes money to a contractor under one contract and that contractor owes the United States under another contract (Taggart v. United States, 17 Ct. Cl. 322; Emory v. United States, 13 F. 2d 658; Barry v. United States, 229 U.S. 47). In the latter case, where the United States withheld the amount owed by a contractor for delivery of inferior coal under one contract from the amount due the contractor under another contract, the Supreme Court in upholding such action stated at page 53:

"The liability might have been asserted by the Government in an action; but it might, as it did, charge it up as a setoff against its own liability. It would be folly to require the Government to pay under the one contract what it must eventually recover for a breach of the other."

The General Accounting Office has authority to exercise the Government's inherent right of setoff in cases before it for action, by reason of section 236 of the Revised Statutes, as amended by section 305 of the Budget and Accounting Act, 1921 (approved June 10, 1921, ch. 18, 42 Stat. 24, 31 U.S.C. 71), which provides as follows:

"All claims and demands whatever by the Government of the United States or against it, and all accounts whatever in which the Government of the United States is concerned, either as debtor or creditor, shall be settled and adjusted in the General Accounting Office."

This authority of the General Accounting Office-as well as the right to set off money due from one agency of the Government to a particular party against a debt owed by that party to another Government agency-was recognized by the U.S. Court of Claims in the case of Cherry Cotton Mills, Inc. v. United States (103 Ct. Cl. 243). In that case the plaintiff sought to recover the sum of $3,104.87, representing its claim for refund of processing and floor stock taxes which had been allowed by the Commissioner of Internal Revenue and scheduled to the General Accounting Office for settlement. The said sum was applied by way of setoff to reduce the plaintiff's indebtedness to the Reconstruction Finance Corporation. It was alleged in the petition that the indebtedness of the plaintiff to the Reconstruction Finance Corporation, a body corporate, was not a claim or demand by the Government of the United States and that, consequently, the said sum of $3,104.87 was erroneously applied by the General Accounting Office in reduction of the indebtedness to that Corporation. However, the court stated at page 252

that:

"We do not regard as material the part which the General Accounting Office played in the transactions here in question. We think it was the duty of someone, on behalf of the Government, to see that this setoff was made. Whether the statute defining the functions of the Comptroller General lodged that duty there, or not, is a matter which would seem to be no concern of the plaintiff. It had no right to collect money from the United States when it owed a past-due debt to the United States. How the Government, inside its own organization, took care that its right of setoff should not be overlooked, in its multiplicity of transactions, is not material. In short, we think that the money for which the plaintiff sues is now where it rightfully and lawfully belongs, and should stay there."

The Supreme Court granted certiorari (326 U.S. 705), and the judgment of the Court of Claims was affirmed. (See Cherry Cotton Mills, Inc. v. United States, 327 U.S. 536.)

The Supreme Court of the United States again expressly recognized the authority of the General Accounting Office to exercise the Government's right of setoff in United States. v. Munsey Trust Co. (332 U.S. 234). The Court stated on page 239 that:

51-371 0-65 -2

« Anterior Continuar »

Livros

Operation of VA Housing Program and H.R. 7571: Hearing, 89-1, July 14, 15, 1965