telephoned the Correspondence and Claims Branch and spoke with Nancy Faucett, a Claims Analyst, who advised Malone that it would be necessary for written notification of the theft to be sent to that Branch. Mr. Malone so informed Boyd.
In a letter dated Saturday, January 7, 1978, Boyd notified the Correspondence and Claims Branch of the Bureau of Public Debt in writing of the theft of Treasury Note No. 10890 and requested information and instructions regarding its replacement. Boyd's letter was postmarked January 9, 1978 and was received at the Division of Securities Operations on Friday, January 13, 1978. It was received at the Correspondence and Claims Branch on Monday, January 16, 1978.
On Monday, January 16, 1978, Boyd telephoned Ms. Faucett to inquire about the status of his letter of January 7th. He was told that his letter had been received and was being processed.
On January 31, 1978, forms and information were sent to Boyd in response to his January 7th letter. Boyd subsequently submitted a duly completed Form PD 1022-1, "Report/Application for Relief on Account of Loss, Theft, or Destruction of United States Bearer Securities (Individuals)," executed on February 20, 1978. Upon receipt of this form, Treasury Note 10890 was placed on the Federal Reserve Bank Checklist of U. S. Government and Agency Securities Reported as Stolen or Missing, on February 24, 1978.
While all this correspondence was taking place, on Wednesday, January 11, 1978, Treasury Note 10890, with 17 coupons attached, was presented for sale at the Bellevue Branch of the Pittsburgh National Bank, by a customer of the bank, James Miller. John Rihs, Manager of the Branch, contacted Charles Sullivan, Safety and Security Officer, at Pittsburgh National's downtown office. Sullivan in turn, telephoned the Securities Department of the FRB Pittsburgh to inquire whether the security was listed on the Federal Reserve Bank Checklist. Mr. Sullivan was advised by the clerk in the Securities Department that the Note was not listed on the checklist.
The Note was then sold on wire transfer to a purchaser in New York. In connection with this sale, Pittsburgh National forwarded the Note to FRB Pittsburgh on January 18, 1978, and FRB Pittsburgh, in turn, forwarded the Note to the Bureau of Public Debt on January 25, 1978.
By letter dated March 8, 1978, the Bureau of Public Debt furnished to Boyd Form PD 4087 (Bond of Indemnity) with instructions and Circular 570 (Surety Companies Acceptable on Federal Bonds), relative to his obtaining replacement of the Note. This form has never been returned by Boyd.
On March 24, 1978, Boyd and Tom Rice, a U. S. Secret Service Agent assisting him to locate the Note, visited the Pittsburgh Branch of the Federal Reserve Bank, and spoke with Dan Robinson, who informed them that the Note had not as yet been reported by the Bureau of Public Debt as having been received.
On or about May 17, 1978, the Correspondence and Claims Branch of the Bureau of Public Debt was advised by the Records Branch that Treasury Note 10890 had been received and honored. Accordingly, by letter dated May 23, 1978, Boyd was informed that because the stolen Note had been received and honored, his February 20, 1978 Report/Application could not be further considered.
This lawsuit was initiated in May of 1979 for statutorily provided relief on account of the loss through theft of the Treasury Note with coupons attached and for damages caused by the negligence of the United States through its employees which resulted in the loss. The plaintiff brought this action under the Tucker Act, 28 U.S.C. § 1346(a)(2), pursuant to 31 U.S.C. § 738a, and under the Federal Tort Claims Act, 28 U.S.C. § 2671 et seq. The defendant's Motion to Dismiss for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted was denied by this court, and the parties have now filed Cross Motions for Summary Judgment.
The type of security involved in this lawsuit is a coupon form Treasury Note. A coupon note is one for which the ownership of the security is not recorded on the books of the Treasury Department. Both the note and attached coupons are payable to bearer which means that title to the security passes by delivery alone, without endorsement and without notice. 31 C.F.R. § 306.2(b). Bearer securities are easily negotiable and for many purchasers that is one of their salient characteristics. The Government's policy and practices are designed to promote the ready negotiability of these notes.
Treasury notes represent federal contracts, and Treasury Regulations are considered an implied part of the contract between the United States and the purchaser of its bonds. United States v. Chandler, 410 U.S. 257, 259-62, 93 S. Ct. 880, 881-882, 35 L. Ed. 2d 247 (1973); Bodek v. Department of Treasury, 532 F.2d 277, 279 n. 7 (2nd Cir. 1976); Wolak v. United States, 366 F. Supp. 1106, 1112 (D.Conn.1973). The regulations which are part of the terms and conditions of the contract, and which are relevant here, are found at 31 C.F.R. § 306.1 et seq.
Plaintiff's claim under the Federal Tort Claims Act is based on the theory that the government was negligent in failing to halt the transaction between Pittsburgh National Bank and James Miller, which resulted in the sale of the stolen security after plaintiff had given notice to the government of the theft of the Note. But under the terms of the contract, the government owed no duty to plaintiff to effectuate a "stop payment" order after notice of the theft.
Under Section 306.106 of the regulations which govern United States securities, neither the Department nor any of its agents will accept notice of any claim for the purpose of suspending transactions in bearer securities which are not overdue. Footnote 11 to this regulation explains the government's reasons for not suspending transactions:
It has been the long-standing policy of the Department to assume no responsibility for the protection of bearer securities not in the possession of persons claiming rights therein and to give no effect to any notice of such claims. This policy was formalized on April 27, 1867, when the Secretary of the Treasury issued the following statement:
"In consequence of the increasing trouble, wholly without practical benefit, arising from notices which are constantly received at the Department respecting the loss of coupon bonds, which are payable to bearer, and of Treasury notes issued and remaining in blank at the time of loss, it has become necessary to give this public notice, that the Government cannot protect and will not undertake to protect owners of such bonds and notes against the consequences of their own fault or misfortune.