B-135246, DEC. 29, 1959

B-135246: Dec 29, 1959

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LAW OFFICES: FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 20. 609.60 WERE DISCOVERED IN OUR 1954 AUDIT OF THE CHARGES PAID NATIONWIDE FOR TRANSPORTING FOUR SHIPMENTS OF GOVERNMENT PROPERTY DURING THE PERIOD DECEMBER 6 TO 8. THIS AMOUNT WAS REDUCED TO $910. YOU CONTEND THAT THERE WAS NEVER A MERGER BETWEEN RESORT AND NATIONWIDE AND. IN DISCHARGING THE DUTY IMPOSED UPON US BY CONGRESS (31 U.S.C. 71) WE ARE REQUIRED TO RESOLVE CLAIMS OF DOUBTFUL VALIDITY IN FAVOR OF THE GOVERNMENT. IT IS OUR UNDERSTANDING THAT FIDUCIARY MANAGEMENT. IT APPEARS FROM THE HISTORY OF THE FINANCIAL TRANSACTIONS AND THE CORPORATE REORGANIZATIONS SURROUNDING THE OPERATION OF THESE AIR CARRIERS THAT THEY ALL WERE CLOSELY INTERRELATED.

B-135246, DEC. 29, 1959

TO KOTEEN AND BURT, LAW OFFICES:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 20, 1959, IN WHICH YOU REQUEST ON BEHALF OF YOUR CLIENT, RESORT AIR LINES, INC., REVIEW OF OUR ACTION WHICH RESULTED IN DEDUCTION OF $910 FROM THE ACCOUNTS OF RESORT TO SATISFY THE INDEBTEDNESS OF NATIONWIDE AIR TRANSPORT SERVICE, INC.

OVERCHARGES TOTALING $9,609.60 WERE DISCOVERED IN OUR 1954 AUDIT OF THE CHARGES PAID NATIONWIDE FOR TRANSPORTING FOUR SHIPMENTS OF GOVERNMENT PROPERTY DURING THE PERIOD DECEMBER 6 TO 8, 1950. LATER, UPON RECONSIDERATION, THIS AMOUNT WAS REDUCED TO $910. SINCE NATIONWIDE HAD BEEN DISSOLVED PURSUANT TO DELAWARE CORPORATE LAW IN MAY 1953, WE LOOKED TO RESORT FOR REPAYMENT AS THERE APPEARED TO BE SUCH A COMMUNITY OF INTEREST BETWEEN THE TWO CARRIERS AS TO MAKE RESORT LIABLE FOR NATIONWIDE'S DEBTS. YOU CONTEND THAT THERE WAS NEVER A MERGER BETWEEN RESORT AND NATIONWIDE AND, FURTHER, THAT THE TRANSACTIONS BETWEEN THEM DID NOT GIVE RISE TO ANY LIABILITY ON THE PART OF RESORT FOR THE DEBT OF NATIONWIDE UNDER THE EQUITY DOCTRINE OF A DE FACTO MERGER.

IN DISCHARGING THE DUTY IMPOSED UPON US BY CONGRESS (31 U.S.C. 71) WE ARE REQUIRED TO RESOLVE CLAIMS OF DOUBTFUL VALIDITY IN FAVOR OF THE GOVERNMENT, AND THE BURDEN OF PROVING THE VALIDITY OF SUCH CLAIMS RESTS UPON THE CLAIMANT THROUGH THE PRESENTATION OF PROPER AND CONVINCING DOCUMENTARY EVIDENCE. LONGWILL AND JOHNSON'S CASES, 17 C.CLS. 288, 291; CHARLES V. UNITED STATES, 19 C.CLS. 316, 319; AND NEW YORK, NEW HAVEN AND HARTFORD RAILROAD CO. V. UNITED STATES, 355 U.S. 253, 255-56, FOOTNOTE 4.

IT IS OUR UNDERSTANDING THAT FIDUCIARY MANAGEMENT, INC. (DELAWARE) ACQUIRED CONTROL OF RESORT AIR LINES, INC. (NORTH CAROLINA) IN SEPTEMBER 1950. UNDER AN AGREEMENT OF DECEMBER 1950, RESORT (NORTH CAROLINA) PURCHASED ALL PROPERTIES OF NATIONWIDE (DELAWARE) AND GAVE AS CONSIDERATION TWO MILLION SHARES OF RESORT'S (NORTH CAROLINA) STOCK. JANUARY 1951, FIDUCIARY OBTAINED TWO MILLION SHARES OF STOCK OF RESORT (NORTH CAROLINA). LATER, FIDUCIARY ACQUIRED TWO MILLION SHARES OF RESORT (NORTH CAROLINA) FROM NATIONWIDE IN EXCHANGE FOR STOCK IN FIDUCIARY. FIDUCIARY CHANGED ITS NAME TO RESORT AIR LINES, INC. (DELAWARE) IN 1953. AFTER NATIONWIDE'S DISSOLUTION IN 1953, ALL OF ITS OFFICERS BECAME ACTIVE IN THE MANAGEMENT OF RESORT (NORTH CAROLINA) EITHER AS OFFICERS OR BOARD MEMBERS. THUS, IT APPEARS FROM THE HISTORY OF THE FINANCIAL TRANSACTIONS AND THE CORPORATE REORGANIZATIONS SURROUNDING THE OPERATION OF THESE AIR CARRIERS THAT THEY ALL WERE CLOSELY INTERRELATED.

YOU ALSO ASSERT THAT IN THE PERIOD BETWEEN THE SALE OF NATIONWIDE'S ASSETS TO RESORT (NORTH CAROLINA) AND THE DISSOLUTION OF NATIONWIDE, NATIONWIDE WAS A FUNCTIONING, INDEPENDENT, AND SOLVENT CORPORATION. HOWEVER, THE CIVIL AERONAUTICS BOARD REPORTS THAT THE REASON THE CORPORATE EXISTENCE OF NATIONWIDE WAS NOT DISSOLVED IN 1950 WAS FOR TAX CONSIDERATIONS, AND THAT IT CONTINUED IN EXISTENCE ONLY AS ANON OPERATING COMPANY.

ON THE BASIS OF THE LIMITED EVIDENCE THAT WE NOW HAVE BEFORE US, WE ARE NOT CONVINCED THAT THE CARRIER HAS MET THE BURDEN OF PROVING THE VALIDITY OF ITS CLAIM. ACCORDINGLY, SINCE ANY DOUBTS MUST BE RESOLVED TO THE GOVERNMENT'S BENEFIT, WE WOULD NOT BE WARRANTED IN AUTHORIZING ALLOWANCE OF THE CARRIER'S CLAIM.