B-125888, MAY 24, 1956

B-125888: May 24, 1956

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INC.: REFERENCE IS MADE TO A LETTER DATED FEBRUARY 23. WAS SET OFF AGAINST THE INDEBTEDNESS OF THE JERSEY INSTITUTE. WAS INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY ON JULY 18. WAS INCORPORATED ON JUNE 14. 127.61 WERE APPLIED TO REDUCE THE LATTER OVERPAYMENT TO $1. NEW JERSEY WILL BE KNOWN AS THE PASSAIC TECHNICAL INSTITUTE. THERE IS NO CHANGE IN MANAGEMENT OR OPERATION OF THIS PROGRAM. WERE TRANSFERRED TO THE PASSAIC TECHNICAL INSTITUTE. THE COMMUNITY OF INTEREST AND THE ASSOCIATION OF THE PARTIES IN ACQUIRING ALL ASSETS AND LIABILITIES UNDER THE PROGRAMS OF EACH SCHOOL ARE SUCH THAT THE PASSAIC TECHNICAL INSTITUTE. MERELY BECAUSE FULL KNOWLEDGE OF SAID OVERPAYMENTS WAS NOT DEVELOPED UNTIL AFTER THE TRANSFER WAS EFFECTED.

B-125888, MAY 24, 1956

TO PASSAIC TECHNICAL INSTITUTE, INC.:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 23, 1956, FROM LEVY AND LEVY REQUESTING, IN YOUR BEHALF, RECONSIDERATION OF THE ACTION TAKEN BY OUR OFFICE IN SETTLEMENT DATED JANUARY 30, 1956, WHERE A CERTAIN AMOUNT OF MONEY DUE THE PASSAIC TECHNICAL INSTITUTE, INC., UNDER CONTRACT NO. V3009V -588, WAS SET OFF AGAINST THE INDEBTEDNESS OF THE JERSEY INSTITUTE, INC., TO THE UNITED STATES.

THE RECORD SHOWS THAT THE JERSEY INSTITUTE, INC., WAS INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY ON JULY 18, 1946. THE SCHOOL OPERATED AT 39 PARK AVENUE AND 54 PARK AVENUE, RUTHERFORD, NEW JERSEY, UNDER STATE APPROVAL AS A TRADE SCHOOL WHERE VETERANS RECEIVED TRAINING FROM SEPTEMBER 16, 1946, TO JUNE 1, 1948, WITHOUT CONTRACTS BEING EXECUTED BY THE SCHOOL AND THE VETERANS ADMINISTRATION FOR THE TRAINING. THE SCHOOL CHANGED ITS ADDRESS TO 684 MAIN AVENUE, PASSAIC, NEW JERSEY, ON JUNE 1, 1948, AND DISCONTINUED OPERATION ON JUNE 30, 1948.

ALSO, THE RECORD SHOWS THAT THE PASSAIC TECHNICAL INSTITUTE,INC., WAS INCORPORATED ON JUNE 14, 1948 AND TRAINED VETERANS AT 684 MAIN AVENUE, PASSAIC, NEW JERSEY, UNDER CONTRACTS WITH THE VETERANS ADMINISTRATION FROM JULY 1, 1948, UNTIL DECEMBER 21, 1951, WHEN IT CEASED OPERATIONS. AUDIT CONDUCTED BY THE VETERANS ADMINISTRATION ESTABLISHED, AS OF DECEMBER 10, 1952, OVERPAYMENTS OF $7,443.85 AGAINST THE JERSEY INSTITUTE, INC., AND $2,220.33 AGAINST THE PASSAIC TECHNICAL INSTITUTE, INC. UNPAID VOUCHERS AMOUNTING TO $1,127.61 WERE APPLIED TO REDUCE THE LATTER OVERPAYMENT TO $1,092.72.

IN HIS LETTER DATED JUNE 30, 1948, THE ASSISTANT COMMISSIONER OF EDUCATION, DEPARTMENT OF EDUCATION, STATE OF NEW JERSEY, ADVISED THE VETERANS ADMINISTRATION THAT:

"ON AND AFTER JULY 1, 1948 THE NEW JERSEY INSTITUTE, A PROPRIETARY SCHOOL OPERATED AT 684-686 MAIN AVENUE, PASSAIC, NEW JERSEY WILL BE KNOWN AS THE PASSAIC TECHNICAL INSTITUTE. THERE IS NO CHANGE IN MANAGEMENT OR OPERATION OF THIS PROGRAM. THE CHANGE IN NAME HAS BEEN NECESSARY IN ORDER TO COMPLY WITH A STATE LAW FORBIDDING THE USE OF NEW JERSEY OR JERSEY AS APPLIED TO ANY KIND OF AN EDUCATIONAL INSTITUTION.'

IT APPEARS THAT ALL THE ASSETS AND LIABILITIES OF THE JERSEY INSTITUTE, INC., WERE TRANSFERRED TO THE PASSAIC TECHNICAL INSTITUTE, INC.

UNDER SUCH CIRCUMSTANCES, IT MAY NOT BE CONCLUDED THAT THE BILL OF SALE BETWEEN THE TWO SCHOOLS, PURPORTING TO TRANSFER ALL THE ASSETS WITH THE ASSUMPTION BY THE TRANSFEREE OF THE ONLY REPORTED LIABILITY OF THE TRANSFEROR HAS THE LEGAL EFFECT OF LIMITING THE LIABILITY OF THE FORMER TO THE INDEBTEDNESS MENTIONED IN THE BILL OF SALE. SEE CANCEL V. GOODYEAR SHOE MACHINERY CO., 137 F. 157, AFFIRMED 144 F. 679, CERTIORARI DENIED, 202 U.S. 619. THE COMMUNITY OF INTEREST AND THE ASSOCIATION OF THE PARTIES IN ACQUIRING ALL ASSETS AND LIABILITIES UNDER THE PROGRAMS OF EACH SCHOOL ARE SUCH THAT THE PASSAIC TECHNICAL INSTITUTE, INC., CANNOT BE PERMITTED TO ESCAPE LIABILITY FOR THE OVERPAYMENTS MADE BY THE VETERANS ADMINISTRATION UNDER THE INFORMAL AGREEMENT WITH THE JERSEY INSTITUTE, INC., MERELY BECAUSE FULL KNOWLEDGE OF SAID OVERPAYMENTS WAS NOT DEVELOPED UNTIL AFTER THE TRANSFER WAS EFFECTED. SEE LANDERS, FRARY AND CLARK V. VISCHER PRODUCTS CO. ET AL., 201 F.2D 319.

IT IS CONTENDED IN THE LETTER OF FEBRUARY 23, 1956, THAT UNDER THE NEW JERSEY STATUTES THE CLAIMS OF THE CREDITORS OF THE SCHOOL, CLAIMS FOR SALARIES OF CERTAIN PROFESSORS, AND THE CLAIM FOR ATTORNEY'S FEES ARE SUPERIOR TO ANY RIGHT THE UNITED STATES MAY HAVE IN THE MATTER AND THAT NO SETOFF SHOULD HAVE BEEN MADE. THE ACTION OF OUR OFFICE IN WITHHOLDING THE AMOUNTS OTHERWISE DUE UNDER THE CONTRACT WAS IN STRICT ACCORDANCE WITH THE STATUTORY DUTY OF THE GENERAL ACCOUNTING OFFICE UNDER THE PROVISIONS OF SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE ACT OF JUNE 10, 1921, 42 STAT. 24, 31 U.S.C. 71. WHEN THERE IS INVOLVED ANY CLAIM OR DEMAND WHATEVER BY THE UNITED STATES AGAINST A PERSON WHO HAS A CLAIM OR DEMAND AGAINST THE GOVERNMENT, THE GENERAL ACCOUNTING OFFICE NOT ONLY HAS THE AUTHORITY, BUT IS REQUIRED IN THE PROPER DISCHARGE OF ITS DUTY TO SETTLE AND ADJUST SUCH OPPOSING CLAIMS OR DEMANDS, TO SET OFF ONE INDEBTEDNESS AGAINST THE OTHER AND TO CERTIFY FOR PAYMENT OF COLLECTION, AS THE CASE MAY BE, ONLY THE NET BALANCE. AS YOU WILL NOTE BY THE SETTLEMENT OF JANUARY 30, 1956, THERE IS STILL DUE THE UNITED STATES FROM THE JERSEY INSTITUTE, INC., A BALANCE OF $5,363.39. IN A SIMILAR CASE INVOLVING THE QUESTION OF WHETHER AN ATTORNEY'S LIEN UNDER A STATE STATUTE WAS SUPERIOR TO THE GOVERNMENT'S RIGHT OF SETOFF, IT WAS HELD IN EDWARD MORGAN V. UNITED STATES, 131 F.SUPP. 783, THAT WHERE THE FUNDS INVOLVED HAVE AT ALL TIMES BEEN IN THE POSSESSION OF THE GOVERNMENT, THE RIGHT OF SETOFF COULD NOT BE DEFEATED. THE CONCLUSION REACHED IN THAT CASE IS APPLICABLE HERE. THE COURT CASE CITED IN YOUR LETTER DID NOT INVOLVE THE GOVERNMENT'S RIGHT OF SETOFF.

ON THE BASIS OF THE FOREGOING, THE SETOFF ACTION TAKEN IN THE SETTLEMENT OF JANUARY 30, 1956, ..END :