B-136946, MAY 20, 1960

TO MR. LAVERN R. DILWEG:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 14, 1960, REQUESTING THAT WE RECONSIDER OUR DIRECTIVE TO HOLD IN SUSPENSE AMOUNTS POSSIBLY DUE YOU IN CONNECTION WITH PAYMENTS UNDER THE MISSING PERSONS ACT, AS AMENDED, TO CERTAIN LIVE FILIPINO CLAIMANTS, PENDING THE OUTCOME OF YOUR ACTION AGAINST THE COMPTROLLER GENERAL OF THE UNITED STATES, ET AL., WITH RESPECT TO SIMILAR CLAIMS OF DECEASED BENEFICIARIES. AS WE ADVISED YOU BY LETTER OF APRIL 8, 1960, THAT DECISION WAS LARGELY PREDICATED UPON OUR CONCLUSION THAT THE PROVISIONS OF 31 U.S.C. 203 RENDER THE POWERS OF ATTORNEY UPON WHICH YOU RELY IN REQUESTING CONTINUANCE OF PAST PAYMENT PROCEDURES NULL AND VOID SO FAR AS THE GOVERNMENT IS CONCERNED BUT THAT SINCE THE ISSUES INVOLVED IN YOUR PENDING ACTION REGARDING DECEASED BENEFICIARIES ARE SIMILAR TO THOSE THAT ARE FOR CONSIDERATION HERE, WE WOULD AWAIT THE OUTCOME OF THE PENDING LITIGATION RATHER THAN TO SUMMARILY MAKE PAYMENT DIRECTLY TO THE CLAIMANTS INVOLVED.

YOU POINT OUT THAT THE POWERS OF ATTORNEY WHICH YOU HOLD ARE BROAD AND THAT READING THE PROVISIONS THEREOF TOGETHER WITH THOSE OF THE CONTRACTS OF EMPLOYMENT BETWEEN YOU AND YOUR CLIENTS AND CERTAIN DIRECTIVES FROM YOUR CLIENTS, THE COURT DECISIONS SUPPORT THE PROPRIETY OF THE PROCEDURES EMPLOYED IN THE PAST UNDER WHICH PAYMENTS WERE MADE TO THE CLAIMANTS IN YOUR CARE. YOU FURTHER POINT OUT THAT YOU HAVE DEVOTED CONSIDERABLE EFFORT IN THE PAST 10 YEARS IN THE INTERESTS OF YOUR CLIENTS AND THAT IT WAS SUBSTANTIALLY THROUGH YOUR EFFORTS THAT THE CONGRESS ENACTED LEGISLATION WHICH AUTHORIZED PAYMENT OF THE CLAIMS INVOLVED.

WE WISH TO MAKE CLEAR AGAIN THAT THIS OFFICE IS NOT QUESTIONING YOUR RIGHT TO COLLECT FEES FROM YOUR CLIENTS; THAT IS A MATTER FOR DETERMINATION BETWEEN YOU AND YOUR CLIENTS AND ONE IN WHICH WE HAVE NO CONCERN. OUR CONCERN IS ONLY AS TO WHOM THE GOVERNMENT SHOULD MAKE PAYMENT OF THE AMOUNTS DUE IN ORDER TO ASSURE A FINAL ACQUITTANCE AND OBVIATE THE POSSIBILITY THAT THE GOVERNMENT WILL BECOME FURTHER INVOLVED AFTER PAYMENT IS MADE. YOU RECOGNIZE IN YOUR LETTER THAT IN SEVERAL CASES IT HAS BEEN NECESSARY FOR THE GOVERNMENT TO TAKE FURTHER ACTION AFTER PAYMENT WAS MADE, IN ORDER TO OBTAIN ITS FULL ACQUITTANCE. IT WAS TO PRECLUDE JUST SUCH A SITUATION THAT THE PROVISIONS OF 31 U.S.C. 203 WERE ENACTED. AS RECOGNIZED IN UNITED STATES V. AETNA CASUALTY AND SURETY CO., 338 U.S. 366, 373, ONE OF THE PURPOSES OF THE STATUTE WAS "* * * TO PREVENT POSSIBLE MULTIPLE PAYMENT OF CLAIMS, TO MAKE UNNECESSARY THE INVESTIGATION OF ALLEGED ASSIGNMENTS, AND TO ENABLE THE GOVERNMENT TO DEAL ONLY WITH THE ORIGINAL CLAIMANT.'

IN URGING THAT SECTION 203 DOES NOT APPLY TO YOUR CASE, YOU STATE THAT:

"THE CASES I HAVE EXAMINED MAKE A DISTINCTION, IN CONSTRUING SECTION 203, BETWEEN CASES WHERE THERE HAVE BEEN ASSIGNMENTS MADE OF A PART OF A CLAIM IN A FIXED AMOUNT AGAINST THE GOVERNMENT, AND WHERE, AS IN MY CASE, THERE WAS NO ASSIGNMENT UNDER MY POWER OF ATTORNEY AND CONTRACT, UNTIL PUBLIC LAW 85-217 WAS IN FORCE, AND THE ARMY MADE A REDETERMINATION AS DIRECTED, NO INTEREST IN THE PAYMENTS TO THE SCOUTS HAD ACCRUED IN MY FAVOR, SINCE NO PART OF THEIR CLAIM AGAINST THE GOVERNMENT HAD BEEN ASSIGNED TO THEM. BUT WHEN THE AMOUNTS TO BE PAID HAD BEEN ASCERTAINED, AND ALL THAT REMAINED TO BE DONE WAS THE DELIVERY OF A DRAFT TO THE SCOUTS FOR THE MONEY FOUND TO BE DUE, THEN MY LIEN ATTACHED AGAINST THE FUND, WHICH STILL REMAINS IN THE HANDS OF THE GOVERNMENT. ONE OF THE LEADING CASES IN MY FAVOR IS WARDMAN V. LEOPOLD, 66 APP.D.C. 111, 85 FED.2D 277, WHERE SIMILAR FACTS WERE CONSIDERED, AND THE COURT HELD,

" "IT IS GENERALLY HELD, WHERE AN ATTORNEY CONTRACTS FOR PROSECUTION OF A CASE FOR A CONTINGENT FEE, PAYABLE OUT OF THE FUND RECOVERED, THAT AN EQUITABLE LIEN IS CREATED AGAINST THE FUND AND ATTACHES TO IT WHEN IT IS RECOVERED.'

"THE WARDMAN CASE HAS BEEN CITED WITH APPROVAL IN SUBSEQUENT CASES IN THE UNITED STATES COURT OF APPEALS AND THE UNITED STATES SUPREME COURT. FURTHERMORE, THE COURTS HELD THAT ALL ASSIGNMENTS BY OPERATION OF LAW ARE EXEMPT FROM PROHIBITION OF SECTION 203, INCLUDING CASES WHICH MAY INVOLVE THE GOVERNMENT IN PROCEDURAL AND ADMINISTRATIVE DIFFICULTIES. U.S. V. AETNA CAS. AND SUR. CO. 338 U.S. 366, 94 L.ED. 171, 12 AIR 2D 444.

"THE CASES FURTHER HOLD THAT AN EQUITABLE LIEN FOR ATTORNEY FEES ON FUNDS ALLEGEDLY DUE THE CLIENT FROM THE UNITED STATES WAS IN THE NATURE OF AN ASSIGNMENT BY OPERATION OF LAW. (MALMAN V. U.S. 202 FED.2D 483). IT IS OBVIOUS THAT SECTION 203 DOES NOT APPLY IN MY CASE, WHERE THERE WAS NO ASSIGNMENT BY THE CLIENTS AT THE TIME THE POWERS OF ATTORNEY AND CONTRACTS WERE EXECUTED, OF A FIXED AMOUNT, BUT WERE BASED UPON A CONTINGENT INTEREST IN WHICH INTEREST IN THE FUND IN QUESTION ACCRUED IN MY FAVOR ONLY AFTER CONGRESS HAD ENACTED PUBLIC LAW 85-217. BUT WHEN CONGRESS DECIDED THAT THE SCOUTS WERE ENTITLED TO BE PAID UNDER THIS LAW, MY ATTORNEY'S LIEN ON THE FUNDS DUE MY CLIENTS FROM THE UNITED STATES BECAME EFFECTIVE AND WAS IN THE NATURE OF AN ASSIGNMENT BY OPERATION OF LAW.'

WE AGREE THAT DECISIONS OF THE COURTS LEND CONSIDERABLE, ALTHOUGH NOT CONCLUSIVE, SUPPORT TO YOUR VIEW THAT 31 U.S.C. 203 WOULD NOT OPERATE AS A BAR TO RECOVERY OF YOUR FEES OUT OF THE FUND ESTABLISHED FOR PAYMENT OF THE CLAIMS INVOLVED. CF. PITTMAN V. UNITED STATES, 116 F.SUPP. 576, WHEREIN THE COURT CITED TWO OF THE THREE CASES UPON WHICH YOU RELY AND REACHED THE CONCLUSION THAT AN AGREEMENT GIVING AN ATTORNEY AN EQUITABLE LIEN AGAINST THE PROCEEDS OF A CLAIM AGAINST THE UNITED STATES WAS NULL AND VOID UNDER THE PROVISIONS OF 31 U.S.C. 203. AND IN KLEIGER V. MCMAHON, 128 F.SUPP. 741, THE COURT RECOGNIZED, ALTHOUGH NOT DECIDING THE ISSUE, THAT THE QUESTION OF WHETHER AN EQUITABLE LIEN ENFORCEABLE AGAINST THE GOVERNMENT HAD BEEN ESTABLISHED WOULD REQUIRE THE RECONCILIATION OF A NUMBER OF CASES. IT, THEREFORE, IS NOT ENTIRELY CLEAR THAT ANY LIEN YOU MAY HAVE IS CONCLUSIVELY WITHOUT THE SCOPE OF SECTION 203. SEE ALSO ANNOTATIONS AT 64 ALR 611, 143 ID. 204. HOWEVER, EVEN IF WE SHOULD ASSUME THAT YOUR POSITION IS SOUND, WE BELIEVE A DISTINCTION MUST BE MADE BETWEEN WHETHER SECTION 203 OPERATES AS A BAR TO RECOVERY BY YOU AND WHETHER THE GOVERNMENT MAY RELY UPON THAT SECTION TO MAKE PAYMENT DIRECTLY TO THE CLAIMANTS INVOLVED AFTER GIVING YOU DUE NOTICE OF ITS INTENTIONS. ANY INTEREST YOU MIGHT HAVE MUST REST UPON THE THEORY THAT THE AGREEMENTS WITH YOUR CLIENTS TOGETHER WITH YOUR SERVICES RENDERED ARE TO BE CONSTRUED AS GIVING RISE TO AN EQUITABLE LIEN IN YOUR FAVOR AGAINST A FUND RECOVERED AS A RESULT OF YOUR SERVICES. AND IF SUCH CONSTRUCTION IS PROPER THEN IT MAY WELL BE THAT THE RIGHT TO RECOVERY OF YOUR FEES FROM THE FUND CAN BE MAINTAINED NOTWITHSTANDING THE PROVISION OF 31 U.S.C. 203. BUT UNTIL YOUR RIGHT TO RECOVERY IS COMPETENTLY ESTABLISHED, IT IS CLEAR THAT THERE IS NOWHERE PRESENT ANYTHING WHICH WOULD BIND THE GOVERNMENT TO MAKE PAYMENT OTHERWISE THAN DIRECTLY TO THE CLAIMANTS INVOLVED. THE PROVISIONS OF 31 U.S.C. 203 OBVIATE CONSIDERATION OF YOUR AGREEMENTS AS GIVING RISE TO VOLUNTARY ASSIGNMENTS WHICH MUST BE RECOGNIZED BY THE GOVERNMENT; AND WE DO NOT CONSIDER IT NECESSARY OR ADVISABLE FOR THE GOVERNMENT TO MAKE THE DETERMINATION AS TO WHETHER THOSE AGREEMENTS GIVE RISE TO AN EQUITABLE LIEN IN YOUR FAVOR SUPERIOR TO THE RIGHTS OF YOUR CLIENTS. WHILE WE CONCEDE THAT THERE IS MERIT IN THE ARGUMENTS PRESENTED IN YOUR LETTER, WE CANNOT OVERLOOK THE FACT THAT QUESTION HAS ARISEN CONCERNING THE RESPECTIVE RIGHTS BETWEEN YOU AND SEVERAL OF YOUR CLIENTS UNDER THE AGREEMENTS AND THAT IT HAS BEEN NECESSARY FOR THE GOVERNMENT TO TAKE ADDITIONAL STEPS AFTER PAYMENT OF THESE CLAIMS TO OBTAIN ITS FINAL ACQUITTANCE. IN SHORT, THE GOVERNMENT IS HERE IN THE POSITION OF HAVING IN ITS POSSESSION FUNDS WHICH MIGHT PROPERLY BE PAYABLE TO EITHER OF TWO PARTIES, BEING CERTAIN THAT PAYMENT TO ONE WILL RESULT IN FULL ACQUITTANCE OF ITS OBLIGATION BUT NOT CERTAIN OF ITS ACQUITTANCE IF PAYMENT IS MADE TO THE OTHER. UNDER THE CIRCUMSTANCES, WE BELIEVE OUR ACTION IN DIRECTING THE HOLDING OF SUCH FUNDS AS MIGHT PROPERLY BE DUE YOU IN SUSPENSE PENDING THE OUTCOME OF A RELATED CASE IS REASONABLE. WE DO NOT, IN ANY EVENT, CONSIDER THE GOVERNMENT AS BEING UNDER ANY AFFIRMATIVE DUTY TO PROTECT SUCH LIEN AS YOU MIGHT HAVE BEYOND ADVISING YOU OF THE PROPOSED PAYMENTS THEREBY SERVING NOTICE UPON YOU TO TAKE STEPS TO PROTECT YOUR LIEN. SEE 5 AM.JUR., ATTORNEYS AT LAW, SEC. 246. HAVING NOTICE OF OUR PROPOSAL TO MAKE PAYMENT DIRECTLY TO YOUR CLIENTS IN THE CASES HERE INVOLVED IF YOU ARE NOT SUCCESSFUL IN YOUR PENDING ACTION, IT WOULD APPEAR THAT YOU HAVE ADEQUATE MEANS FOR PROTECTING YOUR INTEREST. SEE HOUSTON V. ORMES, 252 U.S. 469, WHEREIN THE COURT RECOGNIZES THE CONVENIENCE OF THE PRACTICE WHEREBY PERSONS HAVING AN EQUITABLE INTEREST IN FUNDS IN THE TREASURY OBTAIN RELIEF AGAINST OFFICIALS OF THE TREASURY THROUGH A MANDATORY WRIT OF INJUNCTION, OR RECEIVERSHIP. THE HOUSTON CASE WAS CONFINED TO CASES WHERE THE OFFICIALS OF THE GOVERNMENT HAVE ONLY A MINISTERIAL DUTY TO PERFORM AND ONE IN WHICH THE PARTY COMPLAINANT HAS A PARTICULAR INTEREST; BUT IT WOULD APPEAR THAT IF THE BASIS UPON WHICH YOU ASSERT THE RIGHT TO PAYMENT IS PROPER, YOUR CLAIM WOULD FALL WITHIN THE PURVIEW OF THAT DECISION.

ACCORDINGLY, WE FEEL THAT WE MUST CONCLUDE THAT WE CANNOT, IN THE INTEREST OF THE GOVERNMENT, MODIFY OUR PRIOR INSTRUCTIONS WITH RESPECT TO THE WITHHOLDING OF MONEYS POSSIBLY DUE YOU UNTIL YOUR PRESENT ACTION INVOLVING DECEASED BENEFICIARIES IS DECIDED.