B-129412, OCTOBER 9, 1956, 36 COMP. GEN. 290

B-129412: Oct 9, 1956

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CLAIMS - ASSIGNMENTS - CONTRACT PAYMENTS - PENSION TRUST FUNDS USED FOR LOANS SECURED BY ASSIGNMENTS ALTHOUGH A PENSION TRUST WHICH IS USED TO PURCHASE AND HOLD SECURITY OF A GOVERNMENT CONTRACTOR WHO ASSIGNS HIS LEASE-PURCHASE CONTRACT TO A BANK AS TRUSTEE MAY NOT BE REGARDED AS A FINANCING INSTITUTION UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940. THE VALIDITY OF THE ASSIGNMENT IS NOT IMPAIRED BY THE FACT THAT THE INDEBTEDNESS SECURED BY THE ASSIGNMENT REPRESENTS TRUST FUNDS. PROVIDED LEGAL TITLE TO AND CONTROL OVER SUCH FUNDS ARE VESTED IN A BANK OR TRUST COMPANY. 1956: REFERENCE IS MADE TO LETTER OF OCTOBER 3. FROM THE DEPUTY ADMINISTRATOR REQUESTING OUR OPINION WHETHER A PENSION TRUST FOR WHICH A BANK IS ACTING AS TRUSTEE MAY BE REGARDED AS A .

B-129412, OCTOBER 9, 1956, 36 COMP. GEN. 290

CLAIMS - ASSIGNMENTS - CONTRACT PAYMENTS - PENSION TRUST FUNDS USED FOR LOANS SECURED BY ASSIGNMENTS ALTHOUGH A PENSION TRUST WHICH IS USED TO PURCHASE AND HOLD SECURITY OF A GOVERNMENT CONTRACTOR WHO ASSIGNS HIS LEASE-PURCHASE CONTRACT TO A BANK AS TRUSTEE MAY NOT BE REGARDED AS A FINANCING INSTITUTION UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940, THE VALIDITY OF THE ASSIGNMENT IS NOT IMPAIRED BY THE FACT THAT THE INDEBTEDNESS SECURED BY THE ASSIGNMENT REPRESENTS TRUST FUNDS, PROVIDED LEGAL TITLE TO AND CONTROL OVER SUCH FUNDS ARE VESTED IN A BANK OR TRUST COMPANY.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, OCTOBER 9, 1956:

REFERENCE IS MADE TO LETTER OF OCTOBER 3, 1956, FROM THE DEPUTY ADMINISTRATOR REQUESTING OUR OPINION WHETHER A PENSION TRUST FOR WHICH A BANK IS ACTING AS TRUSTEE MAY BE REGARDED AS A ,FINANCING INSTITUTION" WITHIN THE MEANING OF THAT TERM AS USED IN THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED.

THE QUESTION ARISES IN CONNECTION WITH FINANCING ARRANGEMENTS CONTEMPLATED BY SECOND AVENUE AND NINETEENTH STREET, INC., UNDER LEASE PURCHASE CONTRACT NO. GS-00B-2736, DATED JUNE 26, 1956, FOR THE CONSTRUCTION OF A UNITED STATES POST OFFICE AND COURT HOUSE AT ROCK ISLAND, ILLINOIS, AND ITS SALE TO THE UNITED STATES OVER A PERIOD OF 25 YEARS. THE METHOD OF FINANCING PROPOSED, WHICH IS SET FORTH IN A LETTER OF OCTOBER 2, 1956, FROM THE LAW FIRM REPRESENTING THE INTERESTED PARTIES IS TO HAVE THE MOLINE NATIONAL BANK OF MOLINE, ILLINOIS, ACT AS MORTGAGE TRUSTEE. THE CONTRACTOR, SECOND AVENUE AND NINETEENTH STREET, INC., WOULD ASSIGN TO THIS BANK (1) MONEYS TO BECOME DUE UNDER THE LEASE-PURCHASE CONTRACT WITH THE GOVERNMENT, (2) THE CONTRACTOR'S INTEREST IN THE IMPROVEMENTS TO BE ERECTED UPON THE PROPERTY IN ROCK ISLAND, AND (3) THE CONTRACTOR'S INTEREST IN THE GROUND LEASE OF THE PROPERTY, ALL AS SECURITY FOR OBLIGATIONS OF THE CONTRACTOR WHICH WILL BE PURCHASED AND HELD BY VARIOUS PENSION TRUSTS FOR WHICH A COMMERCIAL BANK OR TRUST COMPANY IS ACTING AS TRUSTEE.

UNDER THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, 31 U.S.C. 203, 41 U.S.C. 15, MONEYS DUE UNDER A GOVERNMENT CONTRACT MAY BE ASSIGNED TO A "BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION.' OUR OPINION, A PENSION OR OTHER TYPE OF TRUST MAY NOT BE REGARDED AS AN "INSTITUTION" OF ANY KIND. AN "INSTITUTION" HAS BEEN DEFINED AS "AN ESTABLISHED OR ORGANIZED SOCIETY OR CORPORATION.' WORDS AND PHRASES, PERMANENT EDITION, VOLUME 21, PP. 666-671. IT MAY MEAN A CONCERN ENGAGED IN SOME ACTIVITY, AS A RETAIL STORE, A BROKER, OR AN INSURANCE COMPANY. TRUST IS NOT A SOCIETY, ORGANIZATION, CORPORATION, OR CONCERN; IT IS A FIDUCIARY RELATIONSHIP OR, IN A LOOSE SENSE, THE TRUST PROPERTY ITSELF. IN EITHER SENSE IT HAS NO ABILITY TO ENGAGE IN ACTIVITIES, FINANCING OR OTHERWISE. A TRUST IS ADMINISTERED ONLY THROUGH A TRUSTEE OR TRUSTEES, IN WHOM IS VESTED LEGAL TITLE TO THE TRUST PROPERTY AND THE POWER, ORDINARILY, TO INVEST AND MANAGE THE FUNDS AND PROPERTY ENTRUSTED TO IT.

HOWEVER, THE ASSIGNMENT OF CLAIMS ACT PERMITS THE ASSIGNMENT OF MONEYS DUE UNDER A GOVERNMENT CONTRACT TO A "TRUST COMPANY.' THE PRIMARY AND ORDINARY CONCEPTION OF A TRUST COMPANY IS A COMPANY OR CORPORATION ORGANIZED FOR THE PURPOSE OF TAKING AND ADMINISTERING TRUSTS. PEOPLE V. NATIONAL SECURITY CO., 177 N.Y.S. 838; GOSS AND HAMLYN HOME V. STATE EX REL. MILLS ( OKLA.), 285 P.2D 428. IF IT HAS NO OTHER POWERS, THE FUNDS AVAILABLE TO A TRUST COMPANY FOR FINANCING OPERATIONS WILL NORMALLY CONSIST PRINCIPALLY, IF NOT ENTIRELY, OF TRUST FUNDS. SINCE THE ACT EXPRESSLY AUTHORIZES ASSIGNMENTS TO A "TRUST COMPANY," WE BELIEVE IT MUST HAVE BEEN CONTEMPLATED THAT TRUST FUNDS UNDER THE CONTROL OF SUCH INSTITUTIONS MIGHT BE USED FOR LOANS SECURED BY SUCH ASSIGNMENTS.

ACCORDINGLY, IN OUR OPINION THE VALIDITY OF AN ASSIGNMENT OF THE PROCEEDS OF A GOVERNMENT CONTRACT IS NOT IMPAIRED BY THE FACT THAT THE INDEBTEDNESS SECURED BY THE ASSIGNMENT REPRESENTS AN INVESTMENT OF TRUST FUNDS, WHERE LEGAL TITLE TO AND CONTROL OVER SUCH FUNDS ARE VESTED IN A BANK OR TRUST COMPANY.