A-12109, JANUARY 15, 1926, 5 COMP. GEN. 480

A-12109: Jan 15, 1926

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IF THEY HAVE DULY QUALIFIED. 1926: I HAVE YOUR LETTER OF NOVEMBER 28. WHICH IT IS REPORTED HAVE BEEN DISSOLVED. THE CHECKS WERE RETURNED TO THIS OFFICE BY LETTER OF THE COMMISSIONER OF INTERNAL REVENUE DATED DECEMBER 23. DISPOSITION THEREOF WILL BE MADE UPON RECEIPT OF PROPER CLAIMS AND PRESENTATION OF SUCH PROOF AS WILL PERMIT THIS OFFICE TO AUTHORIZE THEIR NEGOTIATION BY THOSE ENTITLED TO THE PROCEEDS THEREOF. IT APPEARS THE PROCEDURE IN REGARD TO THE DELIVERY OF INCOME TAX REFUND CHECKS IS THAT SUCH CHECKS SHALL BE DELIVERED TO THE PERSONS ENTITLED THERETO BY COLLECTORS OF INTERNAL REVENUE. UNDER WHAT CIRCUMSTANCES MAY CHECKS DRAWN AS PAYABLE TO PERSONS WHO HAVE SINCE DIED OR BECOME DISQUALIFIED TO ADMINISTER THEIR AFFAIRS BE DELIVERED TO ANOTHER PERSON?

A-12109, JANUARY 15, 1926, 5 COMP. GEN. 480

CHECKS - INDORSEMENT CHECKS DRAWN AS PAYABLE TO A MERGED, DISSOLVED, OR LIQUIDATED CORPORATION OR OTHER PAYEE NO LONGER IN EXISTENCE OR BEING SHOULD NOT BE DELIVERED BUT SHOULD BE FORWARDED TO THE GENERAL ACCOUNTING OFFICE FOR ACTION UNDER BULLETINS NOS. 2 OR 3 OF THAT OFFICE. CHECKS DRAWN PAYABLE ON THE INDORSEMENT OF THE LEGAL REPRESENTATIVE OF THE PERSON OR CORPORATION ENTITLED, SUCH AS THE APPOINTED RECEIVER, TRUSTEE IN BANKRUPTCY OR LIQUIDATION, OR ADMINISTRATOR OF THE ESTATE, SHOULD BE DELIVERED TO SUCH REPRESENTATIVES, IF THEY HAVE DULY QUALIFIED, NO PRIOR NECESSITY EXISTING FOR SPECIFICALLY AUTHORIZING NEGOTIATION BY SUCH REPRESENTATIVES BEYOND THE AUTHORITY SHOWN BY THEIR APPOINTMENT AND QUALIFICATION. THE FIRST CHECK NEGOTIATED BY SUCH REPRESENTATIVES SHOULD BE ACCOMPANIED BY A SHORT CERTIFICATE OF THE ORDER OR DECREE OF THE COURT SHOWING THE APPOINTMENT AND QUALIFICATION OF THE REPRESENTATIVE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE TREASURY, JANUARY 15, 1926:

I HAVE YOUR LETTER OF NOVEMBER 28, 1925, WITH REFERENCE TO CHECKS NOS. 620939, 662903, 666499, AND 682544 DRAWN UNDER SYMBOL 14342 BY J. L. SUMMERS, DISBURSING CLERK, TREASURY DEPARTMENT, TO THE ORDER OF CERTAIN CORPORATIONS, WHICH IT IS REPORTED HAVE BEEN DISSOLVED, AND TO LETTER OF NOVEMBER 18, 1925, ERRONEOUSLY RETURNING SAID CHECKS TO THE COMMISSIONER OF INTERNAL REVENUE WITHOUT SUCH ACTION THEREON AS WOULD PERMIT PROPER DELIVERY AND NEGOTIATION OF THE CHECKS. THE CHECKS WERE RETURNED TO THIS OFFICE BY LETTER OF THE COMMISSIONER OF INTERNAL REVENUE DATED DECEMBER 23, 1925, AND DISPOSITION THEREOF WILL BE MADE UPON RECEIPT OF PROPER CLAIMS AND PRESENTATION OF SUCH PROOF AS WILL PERMIT THIS OFFICE TO AUTHORIZE THEIR NEGOTIATION BY THOSE ENTITLED TO THE PROCEEDS THEREOF. (SEE BULLETINS NOS. 2, 1922, AND 3, 1923, OF THIS OFFICE AND INTERNAL REVENUE A AND C MIMEOGRAPH COLL. NO. 3338, DATED AUGUST 29, 1925, REGARDING DISPOSITION OF CHECKS.)

IT APPEARS THE PROCEDURE IN REGARD TO THE DELIVERY OF INCOME TAX REFUND CHECKS IS THAT SUCH CHECKS SHALL BE DELIVERED TO THE PERSONS ENTITLED THERETO BY COLLECTORS OF INTERNAL REVENUE, AND IN ORDER THAT THE COLLECTOR MAY BE FULLY ADVISED IN REGARD TO THE DELIVERY THEREOF YOU REQUEST INFORMATION UPON WHICH TO BASE THE NECESSARY INSTRUCTIONS, PROPOUNDING FOUR QUESTIONS, SUMMARIZED AS FOLLOWS:

UNDER WHAT CIRCUMSTANCES, IF ANY, MAY CHECKS DRAWN AS PAYABLE TO A DISSOLVED, BANKRUPT, OR LIQUIDATED CORPORATION BE DELIVERED TO A RECEIVER, TRUSTEE IN LIQUIDATION, STOCKHOLDER, FORMER OFFICER OF SUCH CORPORATION, A SUCCESSOR CORPORATION, OR OTHER PERSON CLAIMING THEREUNDER; ALSO, UNDER WHAT CIRCUMSTANCES MAY CHECKS DRAWN AS PAYABLE TO PERSONS WHO HAVE SINCE DIED OR BECOME DISQUALIFIED TO ADMINISTER THEIR AFFAIRS BE DELIVERED TO ANOTHER PERSON?

YOU STATE THAT IT IS THE PURPOSE OF THE BUREAU OF INTERNAL REVENUE TO SECURE THE NECESSARY DOCUMENTARY EVIDENCE IN CASES OF DISSOLVED, LIQUIDATED, AND BANKRUPT CORPORATIONS, OR DECEASED OR INCOMPETENT INDIVIDUALS, PRIOR TO THE DRAWING OF THE CHECK AND HAVE SAME DRAWN IN THE NAME OF THE PERSON ENTITLED THERETO, BUT THAT IN SOME INSTANCES THE STATUS OF THE INDIVIDUAL OR CORPORATION ENTITLED TO THE REFUND CHANGES BETWEEN THE DATE OF ALLOWANCE AND THE DATE THE CHECK IS ACTUALLY DRAWN.

IT IS ASSUMED THAT WITH REFERENCE TO EACH CHECK FORWARDED TO THIS OFFICE FOR SAFE-KEEPING AND LAWFUL DISPOSITION (BULLETINS NO. 2 AND 3), THERE HAS BEEN DETERMINED PURSUANT TO THE STATUTORY AUTHORITY UNDER WHICH THE PROPOSED PAYMENT IS BEING ALLOWED, WHETHER OR NOT UNDER THE PARTICULAR CIRCUMSTANCES THE AMOUNT OF THE CHECK IS STILL PAYABLE, NOTWITHSTANDING THE REASON FOR NONDELIVERY TO THE PAYEE; THAT THERE IS NO DOUBT AS TO THE VESTING OF SUCH RIGHT IN THE NAMED PAYEE AS WILL PASS TO ANOTHER, LAWFUL SUCCESSOR IN INTEREST; THAT, IN SO FAR AS THE FACTS APPEAR, THE CHECK SHOULD NOT BE VOIDED OR CANCELED AS HAVING BEEN ERRONEOUSLY ISSUED OR BECAUSE THE AMOUNT THEREOF IS NO LONGER LAWFULLY PAYABLE TO THE NAMED PAYEE OR HIS SUCCESSOR, AND THAT THE PROCEDURE OF THE BUREAU OF INTERNAL REVENUE IS SUCH AS WILL CAUSE INQUIRY TO BE MADE AS TO THE STATUS OF A TAXPAYER JUST PRIOR TO SCHEDULING A PROPOSED REFUND OR ALLOWANCE, WHEN THE RECORD DOES NOT DISCLOSE INFORMATION OF RECENT DATE SHOWING THAT THE TAXPAYER'S EARLIER STATUS CONTINUES.

IN MY DECISION OF MAY 19, 1924, A-2163, WITH REFERENCE TO A CORPORATION CHARTERED UNDER THE LAWS OF THE STATE OF NEW YORK, DISSOLVED OCTOBER 1, 1918, AND IN WHICH STATE THE LAWS PROVIDED FOR CONTINUED EXISTENCE OF THE CORPORATION FOR THE PURPOSE OF PAYING, SATISFYING, AND DISCHARGING ANY EXISTING DEBTS OR OBLIGATIONS, COLLECTING AND DISTRIBUTING ITS ASSETS, ETC., IT WAS HELD THAT THERE BEING NO ONE LEGALLY AUTHORIZED TO EXECUTE AN ACQUITTANCE TO THE UNITED STATES THE CHECK SHOULD BE HELD HERE PENDING CLAIM THEREFOR BY AN AUTHORIZED PERSON, CITING DECISION OF NOVEMBER 8, 1923, 27 MS. COMP. GEN. 355, WHEREIN IT WAS SAID:

THE MATTER OF MAKING PAYMENTS TO REPRESENTATIVES OF DISSOLVED CORPORATIONS INVOLVES INTRICACIES OF SUCH A NATURE AS TO MAKE IMPOSSIBLE THE ESTABLISHMENT OF A DEFINITE PROCEDURE APPLICABLE TO ALL CASES. INVOLVES THE DIFFERENT LAWS AND ARTICLES OF INCORPORATION AND DISSOLUTION AS WELL AS THE CAUSES AND METHODS OF DISSOLUTION IN EACH CASE.

THE FACTS IN THE INSTANT CASE ARE SUCH AS TO INDICATE THAT THERE IS NOW NO LEGAL ENTITY REPRESENTING THE COMPANY, IT NOT APPEARING THAT THE POWER TO LIQUIDATE THE AFFAIRS OF THE COMPANY AFTER DISSOLUTION WAS RESERVED OR PROVIDED. IF, HOWEVER, A REPRESENTATIVE WAS LAWFULLY DESIGNATED IN THE PROCEEDINGS TO DISSOLVE, TO RECEIVE, AND DISTRIBUTE FUNDS OWING TO THE COMPANY, IT WOULD SEEM PROPER TO RECOGNIZE SUCH REPRESENTATIVE.

THE EVIDENCE TO BE REQUIRED TO PROVE THE RIGHT TO RECEIVE REFUNDS DEPENDS ALSO UPON THE CIRCUMSTANCES IN EACH CASE. A CHECK SHOULD ISSUE ONLY IN THE NAME OF THE DISSOLVED CORPORATION AND DELIVERED TO SUCH REPRESENTATIVE, WHO MUST SATISFY THE PAYER AS TO HIS AUTHORITY TO ENDORSE; OTHERWISE, THE CHECKS SHOULD BE FORWARDED HERE BY SUCH REPRESENTATIVE, ACCOMPANIED BY REQUIRED PROOF, FOR AUTHORIZATION OF PAYMENT ON HIS ENDORSEMENT.

WHERE A CHECK HAS NOT BEEN ISSUED AND THERE IS NO KNOWN REPRESENTATIVE OF THE CORPORATION, ACTION WITH A VIEW TO MAKING REFUND SHOULD BE SUSPENDED UNTIL A REPRESENTATIVE OF THE DISSOLVED CORPORATION IS LEGALLY DESIGNATED.

CHECKS RETURNED UNDELIVERED SHOULD BE FORWARDED IN ACCORDANCE WITH BULLETIN NO. 3, 1923, OF THIS OFFICE.

HOWEVER, IT MAY BE SAID THAT CHECKS DRAWN AS PAYABLE TO A DISSOLVED OR LIQUIDATED CORPORATION SHOULD NOT BE DELIVERED BUT SHOULD BE FORWARDED TO THIS OFFICE FOR APPROPRIATE ACTION EITHER UNDER BULLETIN NO. 2 OR BULLETIN NO. 3, ACCORDING TO WHETHER OR NOT A BONA FIDE CLAIM HAS BEEN MADE THEREFOR. THE RULE GOVERNING SUCH MATTERS TURNS UPON THE QUESTION AS TO WHETHER A CHECK IS NEGOTIABLE WITHOUT AUTHORIZING A CHANGE IN THE DESIGNATION OF THE PAYEE SUBSTANTIALLY IN THE MANNER PROVIDED IN BULLETIN NO. 2.

WHERE THE PAYEE IS NO LONGER IN EXISTENCE OR IN BEING, INDORSEMENT OF A CHECK DRAWN IN HIS FAVOR INVOLVES SUCH DOUBTFUL QUESTIONS AS TO REQUIRE PRIOR AUTHORIZATION THEREOF BY DESIGNATING THE PERSON ENTITLED TO THE PROCEEDS OR QUALIFIED TO GIVE AN ACQUITTANCE TO THE UNITED STATES ON ACCOUNT OF THE MATTER FOR WHICH PAYMENT IS BEING MADE.

WHERE A CHECK IS DRAWN AS PAYABLE ON THE INDORSEMENT OF THE LEGAL REPRESENTATIVE OF THE PERSON OR CORPORATION ENTITLED, SUCH AS THE APPOINTED RECEIVER, TRUSTEE IN BANKRUPTCY OR LIQUIDATION, OR ADMINISTRATOR OF THE ESTATE, THERE IS NO QUESTION AS TO DELIVERY SO LONG AS THE APPOINTMENT OF SUCH REPRESENTATIVE CONTINUES IN LEGAL EFFECT, BUT UPON THE TERMINATION OF HIS OFFICE THE STATUS OF THE MATTER PRIMA FACIE IS AS THOUGH THE CHECK WERE DRAWN AS PAYABLE TO THE BENEFICIARY. IN THOSE CASES WHERE CHECKS HAVE BEEN DRAWN AS PAYABLE ON THE INDORSEMENT OF INDIVIDUALS OR CORPORATIONS WHO THROUGH LEGAL PROCEEDINGS HAVE BEEN DISQUALIFIED TO HANDLE THEIR OWN AFFAIRS, SUCH AS INDIVIDUALS AND CORPORATIONS IN THE HANDS OF RECEIVERS, TRUSTEES IN BANKRUPTCY, ETC., AND COURTS OF COMPETENT JURISDICTION HAVE SINCE DESIGNATED AND APPOINTED REPRESENTATIVES TO HANDLE THEIR AFFAIRS TO THE EXTENT THAT THE PROCEEDS OF SUCH CHECKS WOULD BE COMPREHENDED, SUCH CHECKS SHOULD BE DELIVERED TO SUCH REPRESENTATIVES, IF THEY HAVE DULY QUALIFIED, THERE BEING NO NECESSITY FOR SPECIFICALLY AUTHORIZING NEGOTIATION BY SUCH REPRESENTATIVES, THE ORDER OF APPOINTMENT AND QUALIFICATION BEING SUFFICIENT SHOWING OF THEIR AUTHORITY. WHEN CHECKS ARE NEGOTIATED BY SUCH REPRESENTATIVES WITHOUT PREVIOUS ACTION BY THIS OFFICE A SHORT CERTIFICATE OF THE ORDER OR DECREE OF THE COURT APPOINTING SUCH REPRESENTATIVES AND THAT THEY HAVE QUALIFIED PURSUANT THERETO SHOULD ACCOMPANY THE FIRST CHECK NEGOTIATED BY EACH REPRESENTATIVE, IT BEING NECESSARY TO MAKE A SHOWING THAT THE TERMS OF THE ORDER OR DECREE AUTHORIZE SUCH REPRESENTATIVE TO RECEIVE AND GIVE ACQUITTANCE FOR THE PAYMENT TO THE PAYEE.

WHENEVER THERE IS DOUBT AS TO THE AUTHORITY OF A REPRESENTATIVE TO RECEIVE OR INDORSE A CHECK, THE CHECK AND SUCH DATA ON THE QUESTION AS MAY BE AVAILABLE SHOULD BE FORWARDED FOR ACTION SUBSTANTIALLY IN ACCORDANCE WITH BULLETIN NO. 2, AND IN OTHER CASES WHERE THE AUTHORITY IS ON FILE IN THIS OFFICE CHECKS MAY BE FORWARDED FOR APPROPRIATE ACTION PURSUANT THERETO. IN THE ABSENCE OF ANY MATERIAL DOUBT THIS OFFICE WILL NOT SPECIFICALLY AUTHORIZE ATTORNEYS, OFFICERS OF CORPORATIONS AND OTHERS TO INDORSE CHECKS OF THEIR PRINCIPALS WHEN THE PRINCIPALS ARE QUALIFIED TO INDORSE OR TO EMPOWER OTHERS SO TO DO.

WHILE QUESTIONS AS TO INDORSEMENT OF GOVERNMENT CHECKS ARE FOR CONSIDERATION BY THE TREASURER OF THE UNITED STATES IN THE FIRST INSTANCE, AND IT WOULD BE PRACTICABLE TO DELIVER CHECKS TO THE OWNERS FOR INDORSEMENT UPON SUBMISSION OF SATISFACTORY PROOF OF OWNERSHIP, SUCH MATTERS ARE FOR FINAL ACTION HERE AND IT WOULD BE THE BETTER PROCEDURE TO HAVE THE SPECIFIC AUTHORITY THEREFOR APPEAR ON A PARTICULAR CHECK THE INDORSEMENT OF WHICH DIRECTLY DIFFERS FROM THE NAMED PAYEE. THEREFORE CHECKS DRAWN IN FAVOR OF A CORPORATION THAT HAS MERGED WITH OR BEEN ABSORBED BY ANOTHER SHOULD BE FORWARDED IN ACCORDANCE WITH BULLETIN NO. 2, ACCOMPANIED BY THE CLAIM AND SUCH PROOF OF OWNERSHIP AS MAY BE AVAILABLE. SUCH CHECKS SHOULD NOT BE DELIVERED TO THE SUCCESSOR CORPORATION; NOR SHOULD CHECKS DRAWN AS PAYABLE TO DECEASED OR INCOMPETENT INDIVIDUALS BE DELIVERED TO ANY ONE OTHER THAN THE PERSON SPECIFICALLY AUTHORIZED TO INDORSE SAME AFTER ACTION THEREON BY THIS OFFICE UNDER THE PROVISIONS OF BULLETIN NO. 2.

IN ORDER THAT THERE MAY BE NO MISUNDERSTANDING IN REGARD TO WHAT HAS BEEN STATED ABOVE IT SHOULD BE ADDED THAT IT IS THE PRACTICE OF THIS OFFICE TO ACCEPT THE FINDINGS OF THE COMMISSIONER OF INTERNAL REVENUE AS TO THE AMOUNT OF AN OVERASSESSMENT OR ERRONEOUS COLLECTION OF A TAX AND AS TO WHEN AND FROM WHOM SUCH ERRONEOUS COLLECTION WAS MADE BUT THE QUESTION AS TO WHO IS ENTITLED TO RECEIVE PAYMENT OF THE AMOUNT ERRONEOUSLY COLLECTED, WHETHER MADE BY A DISBURSING OFFICER OR BY A DIRECT SETTLEMENT IS FOR FINAL DETERMINATION BY THIS OFFICE AND ANY SUCH PAYMENTS SHOULD BE SUPPORTED BY SUFFICIENT EVIDENCE UPON WHICH TO BASE A DETERMINATION BY THIS OFFICE AS TO WHOM PAYMENT IS AUTHORIZED UNDER THE LAW.