Ritchey Flying Service, Inc. v. United States

delivered the opinion of the court:

This is a strange case. The plaintiff operated a flying school which was originally established about 1928 by Edwin W. Eitchey, and later incorporated. It was one of the first schools approved for the training of World War II veterans under the Servicemen’s Eeadjustment Act of 1944, 58 Stat. 284. It had several contracts which were carried out after approval in the regular way between 1947 and 1948, and payments were made thereon.

In 1950, some two years after the purported services were rendered, plaintiff made application for payment for the training of an additional 50 veterans.

The claim arose in this way: in 1950 Edwin W. Eitchey discovered in the school files or in the desk of his manager these applications for training which, had never been forwarded to the Veterans Administration. During the period in which the services had been rendered a Mr. Thomas was office manager of the school and agent of the plaintiff. He had been doing considerable drinking and also, it later developed, had embezzled some of the funds of the school. Through oversight or carelessness Mr. Thomas had failed to send these applications by veteran students to the Veterans Administration for approval. Consequently no approvals had been had and no payments had been made to cover the training of those particular students.

*736Mr. Thomas testified to these facts at the hearing before the trial commissioner. It also developed that he was gradually repaying the money which he had taken from the school.

The Veterans Administration was not apprised of the fact that these veterans had been in training until 1950 when vouchers for the payment of tuition were received by the regional office. Payment was refused. The refusal was based on the failure of plaintiff to furnish the information for the proper processing of its claim and the failure of an employee of plaintiff to perform his routine duties, and the fact that the Government was not at fault.

Plaintiff concedes that the failure to process in the regular way was the fault of its own organization. It says, nevertheless, that it gave honest and regular training to these students and that the whole purpose of the training program was accomplished; that under the other contracts all the applications had been approved, and that the Government was not injured by the failure of the plaintiff to submit the veterans’ applications for approval during the time when the services were rendered or within a reasonable time thereafter.

A veteran desiring training was required to file a formal application. If found eligible for training he was issued a certificate of eligibility which he filed with the training school.

Prior to 1948 the regulations did not provide that the certificate of eligibility should be obtained before training began; in fact, often the student began training and the certificate would be issued later. There were many millions to be trained. In the rush many of them went directly to the school of their choice and began training. The approved schools were furnished the forms and they had the veterans fill out the applications and these were sent to the Veterans Administration for approval after the training had begun. The regulations which were issued in 1945 and which are set out in finding 3 provided that the applications were to be forwarded to the Veterans Administration promptly, but they did not set out any particular time within which the applications must be approved. In fact, payment was fre*737quently not made until after the training had been completed.

On November 27, 1948, supplemental section 21.2 to the regulations was issued. Subdivision (e) of this particular supplement stipulated that if formal application was not presented prior to the cessation of a course, benefits should not be allowed, and that benefits should be allowed only for the course pursued in the period immediately preceding the date of the formal application and then only if a valid informal application had been established to cover the course. One or two of the trainees involved in this suit came under the ban of this particular supplemental regulation, and therefore plaintiff can in no event recover for such training.

Plaintiff’s original claim was for 50 trainees. Its books were audited by a representative of the Veterans Administration. The audit established that plaintiff provided instruction, training and essential text books for authorized courses of study and that the school provided such instruction and training to numerous veterans besides those involved in the case at bar. Altogether 178 of such veterans were ultimately licensed and given ratings as pilots by the Civil Aeronautics Board.

The books of the plaintiff showed that the school furnished flying training and instruction to the veterans named in our finding 8.

It is the defendant’s position that none of these claims should be paid; that the Veterans Administration had no chance to check the authenticity of the work nor the identity of the students named; that it was wholly the fault of the plaintiff that the opportunity was not afforded the Veterans Administration to check on these matters, and that therefore payment should not be made regardless of whether the service was actually rendered.

If this were a fly-by-night school or one that was organized originally for the training of veterans, or if there had been any question at any time as to the standing of the school or the character of the training which this particular school had been giving, we would accept defendant’s position without question. But this school was established many years before the call for veterans’ training. We have no doubt *738that regular training was given to a number of these veterans on which plaintiff’s claim is based. However, since the books were kept under the supervision of a man who was at least to some degree discredited, we do not believe that they should be accepted as final proof, even though it is probable that they reflect the training that was actually given. At the same time the school undoubtedly furnished training, including books, supplies and other equipment, to several of the students that were shown to be eligible. The Government accomplished the full purpose of this training program and in view of its previous experience with the school it undoubtedly would have approved the applications and issued the certificates had they been filed during the period of training or soon thereafter.

We have gone through the list of names set out in finding 8 to determine whether or not the Civil Aeronautics Board issued private or commercial licenses to the individuals named in the list. Several on this list did not indicate where they had received their training. In one or two instances the claims are barred by the statute of limitations. One or two others had received training after the regulations of 1948 had been issued and therefore cannot be included. Some of them appear to have been ineligible for training under the Servicemen’s Readjustment Act, supra.

In the table below are set out the names of students shown by plaintiff’s books to have received training, the period of such training, and the charge therefor. This training was given before the issuance of the 1948 regulations which required the approval of the application and the furnishing of the eligibility certificate before the training period was completed. These 7 men were each granted a pilot’s license by the Civil Aeronautics Board following their training. The records of the Civil Aeronautics Board show that they received their training at Ritchey Flying Service. This it seems to us completely establishes the fact that plaintiff’s books, at least as to these 7 students, are accurate.

*739

We are inclined to believe that the other students who are shown on plaintiff’s books were each given some sort of training at plaintiff’s school and probably in most instances the amount and character of training claimed, but in the circumstances we do not feel that plaintiff should be given full credit for the records that were made in the manner indicated heretofore and under the circumstances that have been described.

As to the 7 men listed above, however, we have not the slightest doubt that the training was given by the school in the manner indicated. When the records of the school are laid alongside the pilots’ licenses and certificates issued by the Civil Aeronautics Board following such training the record becomes complete. We think in good conscience the plaintiff should be allowed to recover these amounts. The facts are firmly established as to these 7 students as to their eligibility, as to the training they received and as to the issuance of pilots’ licenses, and therefore we do not think that to allow recovery in a case as clear as this would in any sense open the door for the establishment of unjustified claims on the part of other schools.

Plaintiff is entitled to recover the sum of $4,614.06.

It is so ordered.

dissenting:

I respectfully dissent for the following reasons: I do not think recovery in this case depends upon the fact that the school was not a “fly-by-night” school, or that its agent was *740a drunkard. The only question, in my opinion, is whether or not the plaintiff is bound by the contracts, law, and regulations pertaining to education of veterans.

The contracts between plaintiff and the Veterans Administration were to provide training for veterans under the provision of Public Law 346, 58 Stat. 284, 287. The regulations promulgated thereunder by the Veterans Administration, required approval of the veteran’s application before payment, and provided that payment begin on the date the veteran was authorized for training.

The reasons for the regulations are quite apparent. During the period in question thousands of veterans were receiving training in hundreds of schools. It appears that most of the schools bore a splendid reputation for honesty in presentment of claims and quality of training. However, some schools did not enjoy such a savory reputation. This made it quite necessary that something be done to protect the Govermnent and taxpayers from paying costs of training when in truth and in fact the veterans were not enrolled, or had withdrawn from school thereafter. Thus the regulations as set out in the findings of fact were promulgated, giving the Govermnent an opportunity to check the records against the claims made by the various institutions. I can find nothing unreasonable about the regulations; on the contrary, they are not only reasonable and necessary, but are strictly in conformity with the statute. Moreover, I can see no reason for not applying the regulations to “good” schools and applying them only to “bad” schools.

The only excuse offered by plaintiff for not complying with the regulations was that during the period in question plaintiff’s office manager was doing a bit of drinking and was embezzling some of the funds of the school. I know of no statute or rule of law by which the bad habits of plaintiff’s employees can be imputed to the Government.

None of the veterans for whom claim is made ever received authorization for training as required by the contracts and applicable regulations.

I would dismiss plaintiff’s petition.

*741FINDINGS OF FACT

The court having considered the evidence, the report of Commissioner Paul H. McMurray, and the briefs and argument of counsel, makes findings of fact as follows:

1. Plaintiff, Eitchey Flying Service, Inc., organized under the laws of the State of Texas was, during the period April 17, 1948, to December 30, 1950, engaged in operating a school for instruction and training in aviation to veterans of World War II. Originally a sole proprietor ship owned by Edwin W. Eitchey, the business was incorporated in April 1948 and all the assets of the Eitchey Flying Service were transferred to the corporation. During the period February 3,1947, to December 30,1950, the corporation and its predecessor provided training for veterans pursuant to a series of contracts with the Veterans Administration, under the provisions of Public Law 346, 78th Congress, enacted June 22, 1944, 58 Stat. 287, Veterans Administration Eegu-lation 1 (a), Part VIII, 38 U. S. C., Chapter 12A (p. 725, 1952 Edition).

2. The contracts referred to in the preceding finding provided that the Eitchey Flying Service would accept for instruction veterans “who are approved by the Veterans Administration as entitled to training or education under Public Law 346.” Under the regulations, promulgated by the Veterans Administration, the entry of a veteran into training pursuant to Public Law 346 was usually accomplished by the following procedure:

A veteran desiring training was required to file a formal application on VA Form 7-1950. If the veteran was found to be eligible for training, he was issued a certificate of eligibility (VA Form 7-1953), which he filed with the school in which he planned to enroll, as evidence that he had been authorized by the Veterans Administration to receive training under the statute. The school completed the enrollment papers and submitted them to the Eegional Office of the Veterans Administration, which then issued an authorization to its Finance Division to pay the veteran’s tuition and subsistence allowances. Sometimes the veteran, instead of applying directly to the Veterans Administration for his *742certificate of eligibility, would first enroll in the school which he planned to attend. In that case the school would accomplish the paper work for the student and send to the Veterans Administration the student’s application for the Certificate of Eligibility. Letters of instruction were sent to all participating schools advising them that applications for eligibility certificates must be filed promptly and that enrollment of veterans before such certificates were issued, would be made at the school’s risk.

3. The Veterans Administration promulgated regulations, from which the following excerpts pertaining to payment of tuition and eligibility for education and training under Public Law 846, as follows:

§ 36.213. Filing of applications. The veteran may file his application with the Veterans Administration or through the approved educational or training institution which he has selected, in which event the institution should promptly forward his application to the regional office or facility having regional office activities in the territory in which the institution is located. Applications for this benefit shall be made through the execution of Veterans Administration Form 1950, Veterans’ Application for a Course of Education or Training or Refresher or Retraining Course under Part VIII, properly filled in and subscribed to and sworn before a person authorized to administer oaths. Any communication from or action by a claimant or his duly authorized representative which clearly indicates an intent to apply for benefits under this title may be considered an informal application thereunder if promptly followed by formal application, Form 1950. (The receipt of Form 1950 is a prerequisite to the finding of entitlement or the authorization of payments under this title.)

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§ 36.214. Determination of eligibility and notice to veteran. When Form 1950 is received in the office of the Veterans Administration that will determine eligibility, it will be attached to the claims folder in the event there is a C-f older on file or if indicated the C-f older is of record in another office, it will be obtained by transfer. In case a new C-folder is required, a red rope folder will be prepared. The Form 1950 is to be filed in the red rope folder. The folder will be routed in every case to the vocational rehabilitation and education division, *743where eligibility will be determined and the veteran notified of the decision.

(10 F. E. 1239, January 18,1945: 38 C. F. E. 1945 Supp. Sec. 36.213, 214)

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§ 36.247. Payments to traini/ng institutions. Payments for tuition, incidental fees, books, supplies and equipment will be made in arrears only, and will be prorated in installments over the school year or over the length of the course as provided herein.

(a) The period for which payment of charges may be made will be the period of the veteran’s actual enrollment in the institution and will be subject to the following:

(1) The effective beginning date will be the date of the veteran’s authorized entrance into training status as shown on Form 1907, except that payment will be made for an entire semester, quarter or term in institutions operating on that basis, if the veteran enters not later than the final date set by the institution for enrolling for full credit.

(10 F. E. 4502, April 17,1945: 38 C. F. E. 1945 Supp. 36.247)

§ 21.2. Application for a course of education or training. Applications for education or training under Part VIII, Veterans Eegulation 1 (a), as amended, (38 U. S. C. ch. 12 note), shall be made by submitting a properly executed VA Form 7-1950, Veterans’ Application for a Course of Education or Training. The original, a certified copy, or a photostatic copy of the appropriate discharge document should be submitted with VA Form 7-1950. The receipt of VA Form 7-1950 in the Veterans’ Administration is a prerequisite to the determination of eligibility and entitlement under this title, and in no instance will any action to authorize payment of subsistence allowance be completed prior to the filing of the formal application.

* * * * *

(c) The act of a veteran in enrolling in an approved institution does not, in itself, constitute an informal application, since there is no authority whereby the Veterans’ Administration may impute to a veteran an intention to become a beneficiary under the statute, merely because of his enrollment. There must be a clear and established action upon his part or a communication, identifiable in the record, showing an inten*744tion to claim education or training before it may be held that an informal application has been established. In addition, a valid informal application must be followed promptly by a formal application.

(d) The institution by receiving an application is acting as agent of the Veterans’ Administration solely for the purpose of transmitting it to the Veterans’ Administration office of jurisdiction. Therefore, the Veterans’ Administration will accept the date the application was received by the institution provided it is transmitted to and received by the Veterans’ Administration within a period of 30 days. Otherwise, the date of receipt by the Veterans’ Administration will be the governing date. Payments of monetary benefits are contingent upon an official finding as to eligibility in every case.

(e) If a formal application is not presented prior to cessation of a course, benefits shall not be allowed by virtue of such course without regard to any question of the prior existence of an informal application. Benefits shall be allowed only for the course pursued in the period immediately preceding the date of receipt of a formal application and then only if a valid informal application is established to cover the course.

(13 F. R. 7166, November 27, 1948; 38 C. F. R. 1949 Supp. Sec. 21.2 (c) (d) (e))

As of June 23,1949, Section 21.2 was redesignated as Section 21.6 with the following pertinent change (e) :

The institution by receiving an application is acting as agent of the Veterans’ Administration solely for the purpose of transmitting it to the Veterans’ Administration office of jurisdiction. However, in those cases where eligibility for education or training is found to exist the Veterans’ Administration will accept the date the application was received by the institution as the date of receipt in Veterans’ Administration provided it is transmitted to and received by the Veterans’ Administration within a period of 90 days from the date of commencement of education or training.

(14 F. R. 3403, June 23, 1949 ; 38 C. F. R. 1951 Supp. Sec. 21.6(e))

§ 21.185. Application of the provisions of the Independent Offices Appropriations Acts prohibiting expenditure of Government funds for courses avocational or recreational in character — (a) Purpose.

*745(7) Elementary flight, private pilot, and commercial pilot flight courses. Effective August 24, 1949, an elementary flight or private pilot course or a commercial pilot course elected by a veteran in an approved school shall not be considered avocational or recreational in character if the veteran submits to the regional office a certificate showing that he is physically qualified in accordance with the standards of the Civil Aeronautics Administration to obtain the type of license which will enable him to attain his employment objective together with (i) complete justification that such course is in connection with his present or contemplated business or occupation or (ii) a certificate in the form of an affidavit by the veteran supported by corroborating affidavits by two competent disinterested persons that such flight training will be useful to him in connection with earning a livelihood, which affidavits, in the absence of substantial evidence to the contrary, will be accepted as constituting compliance with proviso.

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No payments for subsistence allowance or tuition may be authorized for any period prior to the date of such approval.

(14 F. E. 6196, October 18,1949: 38 C. F. E. 1949 Supp. 21.185 (7))

4. During the rush period following the passage of Public Law No. 346 approved veterans’ schools in the Dallas Eegion were allowed to enroll apparently eligible and entitled veterans and provide them instruction and training without waiting for formal approval of individual eligibility by the Veterans Administration. This practice was permitted by regional officers of the Veterans Administration when it appeared that the veteran had an honorable discharge from military service and had not exhausted his eligibility period.

5. The enrollment and training of these veterans was never formally approved by the Veterans Administration. The necessary papers were completed at the school but through oversight, carelessness or neglect, were never forwarded to the Veterans Administration. After completion such papers were placed in the school files or in the desk of one Charles F. Thomas, Office Manager of the school and an agent of plaintiff. They were discovered by Mr. Edwin W. Eitchey in 1950. Mr. Thomas admitted, as a witness *746during the trial, that he not only failed to perform the duties of his office, with respect to submitting appropriate data to the Veterans Administration concerning many students of the school, but also embezzled funds from his principal, the plaintiff school.-

6. The Veterans Administration was not apprised of the fact that these veterans had been in training, until the latter part of 1950, when vouchers for payment of tuition were received by the Regional Office. The Veterans Administration refused payment on the ground that no authorization for training had been obtained by the veterans or the school, as required by the regulations.

Plaintiff submitted a claim to the General Accounting Office for the sum of $15,601.07 covering tuition, fees and books furnished certain veteran-trainees during the period from October 19, 1944, to February 25, 1951. In denying the claim in its entirety the Comptroller General concluded as follows:

Since it was your responsibility to furnish the information necessary for the proper processing of what comprises your claim and since it appears an employee of your organization failed in his office routine duties, it cannot be imputed that the Government was at fault in any manner for the failure in the timely issuance of the authorizations required for services of this nature.

7. Lyle F. White, Finance Officer of the Veterans Administration, testified in great detail concerning the report made by defendant’s auditor, Randolph D. Wallis. White, a finance accountant and auditor, was a member of the audit team which made a complete audit of plaintiff’s books and records, as well as the records maintained by the Veterans Administration, relating to 334 veterans and two non-veterans, who were all trainees at plaintiff’s school in addition to the veterans involved in this case.

8. Annually from 1947 through 1951 the plaintiff, Ritchey Flying Service, before and after incorporation, entered into a contract with the Veterans Administration to provide instruction, training, and essential text books to veterans who should be approved by the Veterans Administration for authorized courses of study. The school did provide such *747instruction and training to numerous veterans besides those hereinafter named. Many veterans, a total of 178, were afterward licensed and given ratings as pilots by the Civil Aeronautics Authority. No evidence was produced to establish that the instruction and training by Bitchey Flying Service was other than excellent. '

The books of plaintiff show that the plaintiff school rendered flying training and instruction to the following named veterans, who had not exhausted their entitlement to training, during the times and for the monetary values shown in the following tabulation:

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover, and it is therefore adjudged and ordered that it recover of and from the United States four thousand six hundred fourteen dollars and six cents ($4,614.06).