B-131131, MAY 3, 1957

B-131131: May 3, 1957

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TO AMERICAN GENERAL SUPPLY COMPANY: REFERENCE IS MADE TO LETTERS DATED MARCH 6. WAS WITHHELD AND APPLIED IN PARTIAL LIQUIDATION OF THE INDEBTEDNESS OF THE CADILLAC ELECTRONIC CORPORATION TO THE UNITED STATES IN THE TOTAL AMOUNT OF $1. WHICH ARE REFERRED TO IN SAID SETTLEMENT CERTIFICATE. IT IS CONTENDED THAT OUR ACTION IN IMPOSING UPON AN INDIVIDUAL (THE AMERICAN GENERAL SUPPLY COMPANY IS SHOWN TO BE OPERATED BY I. R. ROSS AS A SOLE PROPRIETORSHIP) THE DEBTS OF A CORPORATION IS CONTRARY TO LAW IN THAT NO STATUTORY AUTHORITY EXISTS WHEREBY THE GENERAL ACCOUNTING OFFICE. IS AUTHORIZED TO SET OFF. AS FOLLOWS: "CADILLAC ELECTRONIC CORPORATION IS A DOMESTIC CORPORATION ORGANIZED IN 1950 UNDER THE LAWS OF THE STATE OF NEW YORK AGAINST WHICH THE UNITED STATES HAS ASSERTED A CLAIM FOR ALLEGED BREACH OF CONTRACT OF SALE.

B-131131, MAY 3, 1957

TO AMERICAN GENERAL SUPPLY COMPANY:

REFERENCE IS MADE TO LETTERS DATED MARCH 6, MARCH 18, AND APRIL 17, 1957, FROM I. H. WACHTEL, ESQUIRE, IN YOUR BEHALF, REQUESTING REVIEW OF THE ACTION TAKEN WITH RESPECT TO SETTLEMENT CERTIFICATE NO. 2280112, DATED JANUARY 2, 1957, WHEREIN THE AMOUNT OF $875.60 ($880 LESS ONE HALF PERCENT DISCOUNT FOR PROMPT PAYMENT) OTHERWISE FOUND DUE THE AMERICAN GENERAL SUPPLY COMPANY FOR A QUANTITY OF COAXIAL CABLE FURNISHED TO THE NATIONAL BUREAU OF STANDARDS PURSUANT TO CONTRACT DATED AUGUST 20, 1956, PURCHASE ORDER NO. S-2037-57, DATED AUGUST 22, 1956, WAS WITHHELD AND APPLIED IN PARTIAL LIQUIDATION OF THE INDEBTEDNESS OF THE CADILLAC ELECTRONIC CORPORATION TO THE UNITED STATES IN THE TOTAL AMOUNT OF $1,068.08 ARISING UNDER VARIOUS CONTRACTS, WHICH ARE REFERRED TO IN SAID SETTLEMENT CERTIFICATE.

IN THE LETTER OF MARCH 6, 1957, IT IS CONTENDED THAT OUR ACTION IN IMPOSING UPON AN INDIVIDUAL (THE AMERICAN GENERAL SUPPLY COMPANY IS SHOWN TO BE OPERATED BY I. R. ROSS AS A SOLE PROPRIETORSHIP) THE DEBTS OF A CORPORATION IS CONTRARY TO LAW IN THAT NO STATUTORY AUTHORITY EXISTS WHEREBY THE GENERAL ACCOUNTING OFFICE, OR THE COMPTROLLER GENERAL, IS AUTHORIZED TO SET OFF, WITHOUT JUDICIAL DETERMINATION, A "CLAIM" WHICH THE GOVERNMENT HOLDS AGAINST ONE "LEGAL PERSON" AGAINST ITS LIQUIDATED OBLIGATION TO ANOTHER. THE LETTER STATES, IN PERTINENT PART, AS FOLLOWS:

"CADILLAC ELECTRONIC CORPORATION IS A DOMESTIC CORPORATION ORGANIZED IN 1950 UNDER THE LAWS OF THE STATE OF NEW YORK AGAINST WHICH THE UNITED STATES HAS ASSERTED A CLAIM FOR ALLEGED BREACH OF CONTRACT OF SALE. THE UNITED STATES OF AMERICA IS INDEBTED TO AMERICAN GENERAL SUPPLY COMPANY FOR GOODS FURNISHED PURSUANT TO PURCHASE ORDER NO. S 2037-57 OF THE U.S. DEPARTMENT OF COMMERCE, NATIONAL BUREAU OF STANDARDS. I. R. ROSS IS AN INDIVIDUAL AUTHORIZED UNDER THE LAWS OF THE STATE OF NEW YORK TO DO BUSINESS UNDER THE TRADE NAME OF AMERICAN GENERAL SUPPLY COMPANY (A SOLE PROPRIETORSHIP) PURSUANT TO THE TERMS OF THE CERTIFICATE OF DOING BUSINESS FILED IN SEPTEMBER, 1955, IN THE OFFICE OF THE COUNTY CLERK OF NEW YORK COUNTY, STATE OF NEW YORK. MR. I. R. ROSS IS ONE OF THREE OFFICERS, DIRECTORS AND STOCKHOLDERS OF ONE OF THREE OFFICERS, DIRECTORS AND STOCKHOLDERS OF CADILLAC ELECTRONIC CORPORATION. BOTH THE CORPORATION AND I. R. ROSS MAINTAIN THE SAME OFFICES AT 53 WORTH STREET, NEW YORK CITY. THE SAID CORPORATION, ALTHOUGH IN FINANCIAL DIFFICULTIES, HAS NEITHER BEEN DISSOLVED NOR ADJUDICATED A BANKRUPT. NO JUDICIAL DETERMINATION HAS BEEN MADE THAT EITHER THE OFFICERS OR STOCKHOLDERS OF THE CORPORATION OR MR. I. R. ROSS HAVE PERPETRATED OR COMMITTED ANY ACTS OF FRAUD OR DISSIPATED ANY OF THE ASSETS TO THE DETRIMENT OF CREDITORS OR OTHER STOCKHOLDERS.'

NOT ONLY DOES IT APPEAR, AS ADMITTED IN THE LETTER FROM YOUR ATTORNEY, THAT I. R. ROSS, THE SOLE PROPRIETOR OF AMERICAN GENERAL SUPPLY COMPANY, IS ONE OF THREE OFFICERS (THE PRESIDENT), DIRECTORS AND STOCKHOLDERS OF CADILLAC ELECTRONIC CORPORATION, AND THAT BOTH THE CORPORATION AND MR. ROSS MAINTAIN THE SAME OFFICES AT 53 WORTH STREET, NEW YORK CITY, BUT IT ALSO APPEARS FROM OUR INVESTIGATION THAT THE CORPORATION AND MR. ROSS, D/B/A THE AMERICAN GENERAL SUPPLY COMPANY, HAVE THE SAME TELEPHONE NUMBER. IT IS ALSO NOTED THAT ON CADILLAC ELECTRONIC CORPORATION'S INVOICE NO. 8119, DATED OCTOBER 14, 1955, IN THE AMOUNT OF $40.80, WHICH WAS SUBMITTED TO E. I. DUPONT DE NEMOURS AND CO., INC., FOR 51 ELECTRON TUBES SHIPPED TO THE COMPANY UNDER ORDER NO. AXC103183, AMERICAN GENERAL SUPPLY COMPANY IS SET FORTH AS BEING A SUBSIDIARY OF CADILLAC ELECTRONIC CORPORATION.

FURTHERMORE, UNDER DATE OF SEPTEMBER 21, 1956, THE CADILLAC ELECTRONIC CORPORATION ADDRESSED THE FOLLOWING LETTER TO THE BUREAU OF STANDARDS RELATIVE TO PAYMENT OF THE AMOUNT DUE FOR THE SUPPLIES INVOLVED:

"AS OF THIS DATE WE HAVE NOT RECEIVED YOUR REMITTANCE IN THE AMOUNT LISTED BELOW ON YOUR PAST-DUE ACCOUNT.

"OUR TERMS ARE STRICTLY TEN DAYS. NO DOUBT THIS WAS AN OVERSIGHT ON THE PART OF YOUR BOOKKEEPER AND WE SHALL APPRECIATE YOUR PROMPT REMITTANCE.

"IF WE CAN BE OF FURTHER SERVICE TO YOU ON ANY OF YOUR TUBE OR WIRE REQUIREMENTS, PLEASE LET US KNOW.

"INV. NO. DATE AMOUNT YOUR ORDER NO.

8713 AUGUST 31/56 $880.00 S-2037-57"

THE BUREAU OF STANDARDS, IN REPLYING TO THE ABOVE LETTER BY LETTER OF SEPTEMBER 27, 1956, ADVISED THE CADILLAC ELECTRONIC CORPORATION THAT THE AGENCY'S RECORDS DISCLOSED THAT THE ORDER FOR THE COAXIAL CABLE HAD BEEN PLACED WITH THE AMERICAN GENERAL SUPPLY COMPANY AND THAT PAYMENT FOR THE SUPPLIES COULD NOT BE MADE TO THE CADILLAC ELECTRONIC CORPORATION IN THE ABSENCE OF EVIDENCE THAT THE FIRM NAME HAD BEEN CHANGED. IT IS ADMINISTRATIVELY REPORTED THAT, FOLLOWING THE RECEIPT OF THIS LETTER, MR. ROSS CALLED THE AGENCY OVER LONG DISTANCE TELEPHONE AND REQUESTED PAYMENT OF THE "AMERICAN GENERAL SUPPLY COMPANY INVOICE," AND WHEN HE WAS QUERIED RELATIVE TO THE FACT THAT THE INQUIRY CONCERNING PAYMENT HAD COME FROM THE CADILLAC ELECTRONIC CORPORATION, WHICH WAS INDEBTED TO THE GOVERNMENT, MR. ROSS STATED THAT THEY HAD MADE AN ERROR IN USING THAT PARTICULAR FORM LETTER.

THE BUREAU OF STANDARDS FURTHER REPORTS THAT SOME TIME EARLY IN SEPTEMBER, 1956, IT RECEIVED A CONFIRMATION OF ACCOUNTS RECEIVABLE FROM AN ACCOUNTING FIRM IN NEW YORK CITY PURPORTING TO SHOW THAT THE AGENCY OWED THE CADILLAC ELECTRONIC CORPORATION THE AMOUNT HERE INVOLVED. ALL OF THESE FACTS INDICATE TO US THAT THE REAL PARTIES IN INTEREST WITH RESPECT TO THE CORPORATION AND THE PROPRIETORSHIP ARE SUBSTANTIALLY THE SAME, IF NOT IDENTICAL. MOREOVER, IT SEEMS OBVIOUS FROM THE NATURE OF THE SEVERAL CLAIMS WHICH THE GOVERNMENT HELD AGAINST THE CADILLAC ELECTRONIC CORPORATION--- THE SET OFF OF THE AMOUNT OF WHICH IS HERE IN QUESTION AND WHICH WERE UNCOLLECTIBLE AGAINST THE CORPORATION--- THAT YOU WOULD NOT HAVE BEEN AWARDED THE INSTANT CONTRACT IF THE BUREAU OF STANDARDS HAD BEEN AWARE THAT THE AMERICAN GENERAL SUPPLY COMPANY AND THE CADILLAC ELECTRONIC CORPORATION WERE ONE AND THE SAME. AT THE LEAST, THE CONTRACTING AGENCY WOULD HAVE INSISTED UPON AN ACKNOWLEDGEMENT FROM YOU OF THE GOVERNMENT'S RIGHT TO SET OFF THE AMOUNT INVOLVED. HENCE, IT CAN ONLY BE ASSUMED THAT, IN SUBMITTING YOUR BID FOR THE CONTRACT UNDER THE NAME OF AMERICAN GENERAL SUPPLY COMPANY, YOU WERE SEEKING TO MISLEAD THE GOVERNMENT AND AVOID THE PAYMENT OF YOUR JUST DEBTS.

IT IS WELL SETTLED THAT WHERE, AS HERE, THE RECOGNITION OF A CORPORATION AS A DISTINCT LEGAL ENTITY WOULD DEFEAT PUBLIC CONVENIENCE OR JUSTIFY A WRONG, AMONG OTHER ABUSES, THE LAW WILL DISREGARD THE ORGANIZATION AS A SEPARATE ENTITY. MCCASKILL CO. V. UNITED STATES, 216 U.S. 504. COURTS WILL LOOK BEYOND A CORPORATE ENTITY WHENEVER JUSTICE REQUIRES, HAMILTON RIDGE LUMBER SALES CORPORATION V. WILSON, 25 F.2D 592, AND WILL GO BEHIND SUCH ENTITY TO DETERMINE AN ATTEMPTED EVASION OF FEDERAL LIABILITY. SEE PALMOLIVE CO. V. CONWAY, 43 F.2D 226. MOREOVER, IN INSTANCES WHERE THE FACTS INVOLVED RAISE A QUESTION AS TO THE PROPRIETY OR VALIDITY OF A CLAIM "IT IS THE UNDOUBTED RIGHT AND DUTY" OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT TO REJECT A CLAIM IN WHOLE OR IN PART "AS THEIR JUDGMENT DICTATES"--- LONGWILL V. UNITED STATES, 17 C.CLS. 288, 291--- LEAVING THE CLAIMANTS TO PROSECUTE THEIR CASES IN A COURT OF LAW, FOR "THAT IS THE MAIN PROTECTION WHICH THE ACCOUNTING OFFICERS CAN SECURE FOR THEMSELVES AND FOR THE GOVERNMENT IN THE CASE OF CLAIMS OF DOUBTFUL VALIDITY IN FACT OR IN LAW, AND ESPECIALLY OF CLAIMS AS TO WHICH THERE IS A REASONABLE SUSPICION OF FRAUD, IRREGULARITY, OR ERROR.' CHARLES V. UNITED STATES, 19 C.CLS. 316, 319. ALSO, SEE UNITED STATES V. MUNSEY TRUST CO., 332 U.S. 234, 239-240, WHEREIN THE SUPREME COURT STATED:

"THE GOVERNMENT HAS THE SAME RIGHT "WHICH BELONGS TO EVERY CREDITOR, TO APPLY THE UNAPPROPRIATED MONEYS OF HIS DEBTOR, IN HIS HANDS, IN EXTINGUISHMENT OF THE DEBTS DUE HIM.' GRATIOT V. UNITED STATES, 15 PET. 336, 370; MCKNIGHT V. UNITED STATES, 98 U.S. 179, 186. MORE THAN THAT, FEDERAL STATUTE GIVES JURISDICTION TO THE COURT OF CLAIMS TO HEAR AND DETERMINE "ALL SET-OFFS, COUNTERCLAIMS, CLAIMS FOR DAMAGES, WHETHER LIQUIDATE OR UNLIQUIDATED, OR OTHER DEMANDS WHATSOEVER ON THE PART OF THE GOVERNMENT OF THE UNITED STATES AGAINST ANY CLAIMANT AGAINST THE GOVERNMENT IN SAID COURT . . . .' JUDICIAL CODE SEC. 145, 28 U.S.C. SEC. 250/2). THIS POWER GIVEN TO THE COURT OF CLAIMS TO STRIKE A BALANCE BETWEEN THE DEBTS AND CREDITS OF THE GOVERNMENT, BY LOGICAL IMPLICATION, GIVES POWER TO THE COMPTROLLER GENERAL TO DO THE SAME, SUBJECT TO REVIEW BY THAT COURT. * * * " ..END :