104). In view of the conclusions hereinafter stated, it is unnecessary to here consider the question of whether the above-mentioned insurance dividend was "declared"; or when it was declared if at all.

It now becomes necessary to determine to what extent, if at all, the opinions heretofore released by the Solicitor in respect to the effect of a discharge in bankruptcy on the right of the United States to collect by set-off, or otherwise, from the former bankrupt are legally applicable when the amount due the United States (Veterans' Administration) became due because of improper receipt of money disbursed in the nature of a gratuity by the Veterans' Administration to the former bankrupt and prior to his bankruptcy.

For convenience, the disbursements in question (here subsistence allowance), which were made at a time when or in an amount which the payee was not entitled to, will be denominated "overpayments." The discussion applies equally to "illegal payments" of amounts in the same categories, viz, gratuities. What is said herein does not relate to payments on account of guaranty or insurance of loans, notwithstanding that for certain purposes, those disbursements likewise are viewed as "overpayments" as they are not gratuities but are debts arising out of payments under laws relating to veterans. (See A. D. No. 607.) It would apply to overpayment or illegal payment of the 4 percent gratuity.

Extensive research and consideration fails to disclose any judicial decisions precisely in point, but a close analogy exists between the situation now being considered and the situations involving a doctrine sometimes, and hereinafter, referred to as the doctrine of "retainer." In substance, this doctrine, which is generally recognized in most and probably all of the States, is that the executor or administrator of a decedent's estate is entitled and obligated to "retain" from the amount otherwise payable from the estate of the decedent to a legatee or a distributee thereof the amounts, if any, in which said legatee or distributee was indebted to the decedent. For present purposes, there will be disregarded certain related questions arising when the indebtedness came into existence after the decedent's death. Necessarily, a question was very early presented as to whether this right of "retainer" by the executor or the administrator was available with respect to a debt owed by a legatee or distributee to the decedent, but recovery on such indebtedness was barred by the statute of limitations or by reason of the debtor's discharge in bankruptcy (a) during the lifetime of the decedent (creditor), and (b) after decedent's death

but before final distribution in the probate proceedings. For present purposes, there will be obviated a discussion of certain actual or potential variations dependent upon whether the discharge in bankruptcy was before or after the creditor's death. Likewise, discussion is omitted of certain variations because of different periods of limitations provided by the statute in, say, the State where the administration is pending as compared with the different State where the distributee resides. The subject is discussed at considerable length in several annotations with many cases cited, classified according to sundry variations in the facts. See 1 A. L. R. 992 at 1010; 75 A. L. R. at 889; 110 A. L. R. 1389; 164 A. L. R. 750. An early case, where the decedent died intestate and the debtor was discharged in bankruptcy before the death of the decedent and happened to be a distributee of his estate, is the South Carolina case of Sartor v. Beaty, 25 S. C. 293, which often has been cited in later cases. The same result with the use of different verbiage was reached by the Louisiana Court in Cucullu's Succession, 9 La. Ann. 96. Apparently, in that case the assets consisted of land, but with few exceptions the cases examined do not seem to draw a distinction between heirs on the one hand (entitled to the realty), and distributees on the other, who are entitled to the personalty. In some instances, there may exist certain rights of recoupment as between those two groups but that question is not material to the present problem. In Lester v. Toole, 93 S. E. 55, the court held that the administrator of the decedent's estate is liable to the distributees if he fails to collect the amount due by an insolvent heir out of the proceeds of land which the administrator sold. Apparently, the personalty was insufficient to pay debts. In Shomberg v. Colton, 283 N. W. 267, the court pointed out the distinction between the right of "retainer" and what is commonly viewed as a right of set-off in actions between debtors and creditors. The opinion pertinently points out that the discharge in bankruptcy affects only the remedy otherwise available against the debtor (indeed, the discharge in bankruptcy is no bar to recovery unless the defendent pleads and proves it). Thus, the debt remains in existence, constituting an asset of the decedent's estate. If it happens also that the debtor is a distributee, the amount otherwise to be distributed to such distributee is reduced by the amount he owes to the decedent. In general, to the same effect are Re Jackson, 93 Pac. (2d) 349; Mullen v. Moore, 144 At. 342 and the early Texas case of Oxsheer v. Nave, 40 S. W. 7, frequently cited in later cases. Sawin's Estate, 19 N. Y. Supp. (2d) 465 (Adjudication as bankrupt was subsequent to decedent's death and his legacy was

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scheduled as an asset. Nevertheless, the executor was entitled to "retain" the amount due on the judgment procured by the decedent prior to her death). Leach v. Armstrong, 156 S. W. (2d) 959 (partition suit by heirs of intestate. Apparently before death decedent filed claim and received dividend. Nevertheless, the bankrupt debtor, one of the heirs was held not entitled to any share in the realty). The opinion in the case reported as Re Ferris' Estate, 14 N. W. (2d) 889, discusses a number of problems, including the fact that the recovery on the note was barred by limitations and cites many cases. Sheridan v. Riley, 32 At. (2d) 93, held the right to "retainer" existed as against a legatee who was indebted, the will being silent in respect to such indebtedness. Manifestly, if the testator were to direct in his will that no "retainer" would be exercised, such direction, no doubt, would be enforceable. In Sheridan v. Riley, 32 At. (2d) 93, the New Jersey Court pointed out that "giving away anything for nothing is not a prudent transaction on the part of those acting in a fiduciary capacity. Essentially such an operation is not a compromise"; hence, the court refused to approve an agreement presented by the executor which would have the effect of leaving the son of testator, who also was a legatee and devisee, in the position of receiving the bequests and devises without the burden resulting from the executor's exercise of his right of "retainer." The court pointed to certain provisions in the will indicating that testator had no intention of forgiving the debt. The son was insolvent. Other insolvency cases-Thomas' Estate, 73 Pac. 1059 and Webb v. Fuller, 27 At. 346; 22 L. R. A. 177; Noble v. Tait, 37 So. 278 and Holmes v. McPheeters, 49 N. E. 452 illustrate the cases involving statute of limitations.

It is believed the reasons relied upon by the courts in support of the above-discussed doctrine of "retainer" are equally applicable to the present question, viz, the right of the donor (Government), to "retain" from disbursements that otherwise would be made as additional donations, those sums, if any, theretofore disbursed to the same payee, and notwithstanding that intervening such earlier erroneous or excessive disbursements of such donations, the donee shall have been discharged in bankruptcy, under circumstances which would result in the discharge being available to him as a defense in a legal action on a contract. This is true notwithstanding that it is quite accurate, legally speaking, to also view the situation under certain other circumstances as one in which an "implied contract" arises by operation of law in consequence of which the person erroneously paid is obligated to repay the excessive sums to the Government. There is no legal principle

which requires that in any and all circumstances the legal duty to repay money improperly received must be viewed as a contract obligation. Moreover, if it be viewed as a contract obligation or analogous obligation created by statute, nevertheless it will be seen under the authorities hereinbefore cited, the "right of retainer" exists in respect to amounts due by virtue of a contract obligation. For the reasons hereinbefore indicated, the conclusion is that the Veterans' Administration is entitled to "retain" out of benefits otherwise payable, the amount due the Veterans' Administration by the proposed payee as a consequence of overpayments or illegal payments of gratuities theretofore made to him by the Veterans' Administration. (Obviously, the same statement is applicable to his executor or administrator in the event of the veteran's death.) It will be observed that the foregoing relates only to gratuities and, hence, does not embrace loans made to an insured on the security of his insurance policy. Generally speaking, and with reference to ultimate results, the security of the secured creditor (or Cash in lieu thereof) remains available to the secured creditor notwithstanding bankruptcy. See, generally, 11 U. S. C. 93 (e) and (h); 110; 75; Remington on Bankruptcy (5th ed.) 3443; Prebyl v. Prudential Life Ins. Co., 98 F. (2d) 199, cert. den., 305 U. S. 641, reh. den. 305 U. S. 673, motion for written opinion denied 305 U. S. 577 (this was a mortgage case). See also Pace v. Berry, 195 S. W. 131 and Bisby v. Walker, 169 N. W. 467. Specifically, therefore, this principle is applicable to an indebtedness secured by a National Service Life Insurance (or other) policy issued by the Government. See also 38 U. S. C. 454 (A) and A. D. No. 804.

The conclusion follows that it is proper to retain and apply as in other situations any amounts payable by the Veterans' Administration against overpayments, or illegal payments, of gratuities theretofore made to such proposed payee. Likewise, it is proper to retain and apply to the indebtedness secured by a life-insurance contract (of any type) issued by the Veterans' Administration, the amounts due the Veterans' Administration under said contract and otherwise properly collectible out of the proceeds of such policy, i. e., constituting a lien on said policy-and this notwithstanding an intervening discharge in bankruptcy of the debtor (the insured). The conclusions are equally applicable if the debtor is deceased and the proposed payment is to be made to his estate or beneficiary. Notwithstanding the rights indicated, the Veterans' Administration should file claims in the bankruptcy proceedings if there are assets, and claim the proper classification of priority (11 U. S. C. 104). Such does not impair the right of "retainer."

HELD: The Veterans' Administration is entitled to "retain" out of benefits otherwise payable, the amount due the Veterans' Administration by the proposed payee as a consequence of overpayments or illegal payments of gratuities theretofore made to him by the Veterans' Administration-and this notwithstanding an intervening discharge in bankruptcy of the proposed payee.

HELD FURTHER: It is proper to "retain" and apply to the indebtedness secured by a life-insurance contract (of any type) issued by the Veterans' Administration, the amounts due the Veterans' Administration under said contract and otherwise properly collectible out of the proceeds of such policy, i. e., constituting a lien on said policyand this notwithstanding an intervening discharge in bankrupety of the debtor. (Opinion of the Solicitor dated May 25, 1950, approved June 14, 1950, C-5 239 743.)

ADMINISTRATOR'S DECISION, VETERANS' ADMINISTRATION, NO. 850–A NOVEMBER 3, 1950.

Subject: Rescission of Administrator's Decision No. 850.

QUESTION PRESENTED: (1) Is Administrator's Decision No. 850 applicable to the indebtedness of the veteran resulting from guaranty of loan by the Administrator of Veterans' Affairs pursuant to Servicemen's Readjustment Act, as amended, 38 U. S. C. A., section 694, et seq?

(2) Upon reconsideration thereof, should Administrator's Decision No. 850 be rescinded?

FACTS: Subsequent to default on a loan guaranteed, in part, by the Veterans' Administration pursuant to the Servicemen's Readjustment Act, the debtor (veteran), after appropriate proceedings, received a discharge in bankruptcy of his debt to the Administrator as a result of the payment by the Administrator of the guaranty, the net unpaid indebtedness on said loan having been duly scheduled therein. The veteran is entitled to certain disability compensation and urges that said disability compensation accruing subsequent to the date of his petition in bankruptcy is properly payable to him, notwithstanding that his debt to the Administrator on account of the guaranty of said loan has not been paid. It has been urged that the analogy relied on in Administrator's Decision No. 850 is inapplicable in such a case in that the doctrine of "retainer" therein discussed applies equally in decedents' estates regardless of whether the decedent died testate or intestate and necessarily in the latter event his intentions are immaterial and there cannot be any question of construing a will, i. e. there is no gift involved. In other words, it is asserted that the analogy drawn between certain veterans' rights arising out of donations or