A-6195, DECEMBER 9, 1924, 4 COMP. GEN. 522

A-6195: Dec 9, 1924

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FOR DRAFTS ON ITS CORRESPONDENT AND WHICH DRAFTS WERE DISHONORED BY THE CORRESPONDENT. FOR EXCHANGE DRAFTS WHICH WERE NOT PAID BY THE DRAWEE BANK FOR THE REASON THAT THE BANK OF DUCHESNE HAD BEEN PLACED IN THE HANDS OF A STATE EXAMINER BECAUSE OF ITS INSOLVENT CONDITION. CONTENDS THAT: THE FUNDS PAID THE REVENUE DEPARTMENT WERE CREDITOR'S FUNDS PAID BY THE RECEIVER AND THE CLAIM WAS FILED BY THE RECEIVER IN CHARGE. THE DEPOSIT WAS IN THE BANK OF DUCHESNE AND THE DEPOSITOR IS ONLY ENTITLED TO HIS PRO RATA SHARE IN ALL THE ASSETS OF THE FAILED BANK AND THIS REFUND OF TAXES SHOULD GO TO ALL THE DEPOSITORS INSTEAD OF JUST THE ONE. THE SITUATION HERE IS SIMPLY ONE WHERE THE INSOLVENT BANK IS INDEBTED TO THE UNITED STATES IN THE SUM OF $514.41 AND THE UNITED STATES IS INDEBTED TO THE INSOLVENT BANK IN THE SUM OF $468.61.

A-6195, DECEMBER 9, 1924, 4 COMP. GEN. 522

ACCOUNTING - SET-OFF THE AMOUNT OF POSTAL MONEY-ORDER FUNDS PAID TO THE STATE BANK, IMMEDIATELY PRIOR TO THE CLOSING OF ITS DOORS, FOR DRAFTS ON ITS CORRESPONDENT AND WHICH DRAFTS WERE DISHONORED BY THE CORRESPONDENT, BECAUSE OF THE CLOSING OF THE DRAWER BANK, MAY BE SET OFF AGAINST THE AMOUNT OF TAXES ERRONEOUSLY PAID TO THE UNITED STATES BY THE RECEIVER OF THE DRAWER BANK.

DECISION BY COMPTROLLER GENERAL MCCARL, DECEMBER 9, 1924:

THE BANK OF DUCHESNE, THROUGH ITS RECEIVER, REQUESTED PAYMENT OF ITS CLAIM FOR $468.61 ON ACCOUNT OF $400.24 TAXES ILLEGALLY ASSESSED AND COLLECTED FOR THE YEARS 1918 AND 1919, WITH $68.37 INTEREST THEREON, NOTWITHSTANDING THE GOVERNMENT'S CLAIM OF $514.41 AGAINST SAID BANK ON ACCOUNT OF POSTAL MONEY-ORDER FUNDS PAID TO IT BY THE POSTMASTER AT TABIONA, UTAH, FOR EXCHANGE DRAFTS WHICH WERE NOT PAID BY THE DRAWEE BANK FOR THE REASON THAT THE BANK OF DUCHESNE HAD BEEN PLACED IN THE HANDS OF A STATE EXAMINER BECAUSE OF ITS INSOLVENT CONDITION.

THE STATE EXAMINER, WHO UNDER THE STATE LAW APPEARS TO BE THE RECEIVER, CONTENDS THAT:

THE FUNDS PAID THE REVENUE DEPARTMENT WERE CREDITOR'S FUNDS PAID BY THE RECEIVER AND THE CLAIM WAS FILED BY THE RECEIVER IN CHARGE. THE DEPOSIT WAS IN THE BANK OF DUCHESNE AND THE DEPOSITOR IS ONLY ENTITLED TO HIS PRO RATA SHARE IN ALL THE ASSETS OF THE FAILED BANK AND THIS REFUND OF TAXES SHOULD GO TO ALL THE DEPOSITORS INSTEAD OF JUST THE ONE.

THE SUM OF $514.41 HAD BEEN EXCHANGED AT THE POST OFFICE IN TABIONA FOR POSTAL MONEY ORDERS AND HAD BECOME THE MONEY OF THE UNITED STATES. THE SITUATION HERE IS SIMPLY ONE WHERE THE INSOLVENT BANK IS INDEBTED TO THE UNITED STATES IN THE SUM OF $514.41 AND THE UNITED STATES IS INDEBTED TO THE INSOLVENT BANK IN THE SUM OF $468.61. IT IS ONE OF DEBITS AND CREDITS AND THE LANGUAGE OF THE COURT IN TAGGART V. UNITED STATES, 17 CT.CLS. 322, AT PAGE 327, IS PECULIARLY APROPOS. THE COURT THERE SAID THAT:

WHERE A PERSON IS BOTH DEBTOR AND CREDITOR OF THE UNITED STATES, IN ANY FORM, THE OFFICERS OF THE TREASURY DEPARTMENT (NOW OF THE GENERAL ACCOUNTING OFFICE), IN SETTLING THE ACCOUNTS, NOT ONLY HAVE THE POWER, BUT ARE REQUIRED IN THE PROPER DISCHARGE OF THEIR DUTIES, TO SET OFF THE ONE INDEBTEDNESS AGAINST THE OTHER, AND TO ALLOW AND CERTIFY FOR PAYMENT ONLY THE BALANCE FOUND DUE ON ONE SIDE OR THE OTHER. * * *

SEE ALSO 2 COMP. GEN. 479, AND AUTHORITIES THERE CITED. SEE ALSO UNITED STATES V. HARRIS, 7 FED.REP. 821. THE FACT THAT THE DRAFTS WERE SOLD TO THE GOVERNMENT IMMEDIATELY PRECEDING THE EXAMINER TAKING CHARGE AND THE TAXES ILLEGALLY EXACTED WERE PAID THEREAFTER WHILE THE EXAMINER WAS IN CHARGE DOES NOT AFFECT THE GOVERNMENT'S RIGHT TO MAKE THE SET-OFF AND IS NOT SIGNIFICANT EXCEPT FOR THE PRIMA FACIE INFERENCE THAT THE BANK WAS INSOLVENT WHEN IT TOOK THE PUBLIC MONEY IN RETURN FOR THE DRAFTS. SUMS DUE TO THE UNITED STATES FROM A CORPORATION MAY BE SET OFF AGAINST SUMS DUE FROM THE UNITED STATES TO A RECEIVER. 3 COMP. GEN. 697; SCOTT V. ARMSTRONG, 146 U.S. 99; ALLEN ET AL. V. UNITED STATES, 17 WALL. 207.

THERE IS ALSO FOR CONSIDERATION ANOTHER PHASE OF THIS CASE. SECTION 3466, REVISED STATUTES, PROVIDES THAT:

WHENEVER ANY PERSON INDEBTED TO THE UNITED STATES IS INSOLVENT, OR WHENEVER THE ESTATE OF ANY DECEASED DEBTOR, IN THE HANDS OF THE EXECUTORS OR ADMINISTRATORS, IS INSUFFICIENT TO PAY ALL THE DEBTS DUE FROM THE DECEASED, THE DEBTS DUE TO THE UNITED STATES SHALL BE FIRST SATISFIED; AND THE PRIORITY HEREBY ESTABLISHED SHALL EXTEND AS WELL TO CASES IN WHICH A DEBTOR, NOT HAVING SUFFICIENT PROPERTY TO PAY ALL HIS DEBTS, MAKES A VOLUNTARY ASSIGNMENT THEREOF, OR IN WHICH THE ESTATE AND EFFECTS OF AN ABSCONDING, CONCEALED, OR ABSENT DEBTOR ARE ATTACHED BY PROCESS OF LAW, AS TO CASES IN WHICH AN ACT OF BANKRUPTCY IS COMMITTED.

HERE THE BANK OF DUCHESNE IS IN THE HANDS OF A RECEIVER AND INSOLVENT. THE LANGUAGE OF THE COURT IN ALLEN ET AL. V. UNITED STATES, SUPRA, WHERE THE DEBTOR WAS INSOLVENT AND THERE HAD BEEN AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS IS PERTINENT AND IS, IN PART, AS FOLLOWS:

* * * OF THE CREDITORS OF RUSSELL, MAJORS AND WADDELL (THE DEBTOR) THE UNITED STATES ARE THEREFORE ENTITLED TO BE PREFERRED IN THE PAYMENT OF THEIR DEMAND OUT OF THE PROCEEDS OF THE PROPERTY IN THE HANDS OF THE CLAIMANTS (THE ASSIGNEES), THE PROPERTY NOT BEING SUBJECT AT THE DATE OF THE ASSIGNMENTS TO ANY SPECIFIC CHARGE OR LIEN. THIS PREFERENCE THE CLAIMANTS CAN NOT DISREGARD IN THE DISTRIBUTION OF THE PROCEEDS WITHOUT MAKING THEMSELVES PERSONALLY LIABLE FOR THE AMOUNT PAYABLE ON THE DEMAND OF THE UNITED STATES (UNITED STATES V. CLARK, 1 PAINE, 629). IF THEY COULD RECOVER THE AMOUNT CLAIMED IN THE PRESENT SUIT, THEY WOULD BE REQUIRED IMMEDIATELY TO PAY IT OVER TO THE UNITED STATES ON THE DEBT OF THE ASSIGNORS, AFTER DEDUCTING THE EXPENSES OF ITS COLLECTION. * * * THE DEMAND IS THEREFORE THE PROPER SUBJECT OF SET-OFF IN A SUIT FOR THE RECOVERY BY THE CLAIMANTS OF THE AMOUNT DUE UPON A SALE TO THE UNITED STATES OF PROPERTY HELD BY THEM UNDER THE DEEDS OF ASSIGNMENT.

SO HERE, THE AMOUNT DUE THE UNITED STATES FOR POSTAL MONEYS PAID TO THE BANK OF DUCHESNE IMMEDIATELY PRIOR TO THE CLOSING OF ITS DOORS FOR DRAFTS ON ITS CORRESPONDENT AND WHICH WERE NOT PAID BY THE CORRESPONDENT BECAUSE OF THE CLOSING OF THE DOORS OF THE DRAWER BANK, IS A PROPER SET-OFF AGAINST AN AMOUNT ERRONEOUSLY PAID TO THE UNITED STATES AFTER THE CLOSING OF THE BANK AND DURING THE RECEIVERSHIP. THE SET-OFF WILL BE MADE AND THE DIFFERENCE OF $45.80 CERTIFIED DUE THE UNITED STATES.