B-14686, FEBRUARY 4, 1941, 20 COMP. GEN. 424

B-14686: Feb 4, 1941

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WHERE A COPY OF AN ASSIGNMENT IS RECEIVED AND THERE IS ANY DOUBT WHETHER THERE HAS BEEN A STRICT COMPLIANCE WITH THE "WRITTEN NOTICE" PROVISION OF THE STATUTE. A DISBURSING OFFICER SHOULD NOT MAKE PAYMENT TO AN "ASSIGNEE" UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940 WHEN THERE IS ANY DOUBT AS TO COMPLIANCE WITH THE STATUTORY REQUIREMENT REGARDING WRITTEN NOTICES WITHOUT FIRST SUBMITTING THE MATTER TO THE GENERAL ACCOUNTING OFFICE FOR DECISION. WHERE CONTRACT PAYMENTS ARE CLAIMED UNDER CONFLICTING ASSIGNMENTS. AN ASSIGNOR'S TAX LIABILITY IS AN "INDEBTEDNESS" SUCH AS. 1941: I HAVE YOUR LETTER OF JANUARY 28. ARE ASSIGNED TO A BANK. IF IT IS SO PROVIDED IN SUCH CONTRACT. QUESTIONS HAVE ARISEN IN THE WAR DEPARTMENT WITH REFERENCE TO THE APPLICATION OF THE PROVISIONS OF THE FOREGOING ACT.

B-14686, FEBRUARY 4, 1941, 20 COMP. GEN. 424

ASSIGNMENTS OF CONTRACT PAYMENTS AN "ASSIGNEE" UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940 WHO DOES NOT SUBSTANTIALLY COMPLY WITH THE REQUIREMENT RESPECTING THE FILING OF "WRITTEN NOTICE OF THE ASSIGNMENT TOGETHER WITH A TRUE COPY OF THE INSTRUMENT OF ASSIGNMENT" HAS NO ENFORCEABLE RIGHT AGAINST THE GOVERNMENT UNDER THE ASSIGNMENT, BUT WHERE A COPY OF AN ASSIGNMENT IS RECEIVED AND THERE IS ANY DOUBT WHETHER THERE HAS BEEN A STRICT COMPLIANCE WITH THE "WRITTEN NOTICE" PROVISION OF THE STATUTE, THE REQUIRED WRITTEN NOTICE SHOULD BE OBTAINED FROM THE ASSIGNEE. A DISBURSING OFFICER SHOULD NOT MAKE PAYMENT TO AN "ASSIGNEE" UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940 WHEN THERE IS ANY DOUBT AS TO COMPLIANCE WITH THE STATUTORY REQUIREMENT REGARDING WRITTEN NOTICES WITHOUT FIRST SUBMITTING THE MATTER TO THE GENERAL ACCOUNTING OFFICE FOR DECISION. WHERE CONTRACT PAYMENTS ARE CLAIMED UNDER CONFLICTING ASSIGNMENTS, PAYMENT SHOULD NOT BE MADE UNDER EITHER ASSIGNMENT WITHOUT FIRST SUBMITTING THE VOUCHER OR VOUCHERS TO THE GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY A COMPLETE STATEMENT OF THE FACTS, FOR DECISION AS TO WHICH, IF EITHER, OF THE ASSIGNMENTS SHOULD BE RECOGNIZED. AN ASSIGNOR'S TAX LIABILITY IS AN "INDEBTEDNESS" SUCH AS, UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940, MAY BE EXEMPTED IN WAR AND NAVY DEPARTMENT CONTRACTS FROM SET-OFF AGAINST PAYMENTS DUE ASSIGNEES UNDER SUCH CONTRACTS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, FEBRUARY 4, 1941:

I HAVE YOUR LETTER OF JANUARY 28, 1941, AS FOLLOWS:

THE ACT OF OCTOBER 9, 1940 ( PUBLIC NO. 811, 76TH CONG.), PROVIDES IN PART AS FOLLOWS:

"* * * THAT SECTIONS 3477 AND 3737 OF THE REVISED STATUTES BE AMENDED BY ADDING AT THE END OF EACH SUCH SECTION THE FOLLOWING NEW PARAGRAPH:

"THE PROVISIONS OF THE PRECEDING PARAGRAPH SHALL NOT APPLY IN ANY CASE IN WHICH THE MONEYS DUE OR TO BECOME DUE FROM THE UNITED STATES OR FROM ANY AGENCY OR DEPARTMENT THEREOF, UNDER A CONTRACT PROVIDING FOR PAYMENTS AGGREGATING $1,000 OR MORE, ARE ASSIGNED TO A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION, INCLUDING ANY FEDERAL LENDING AGENCY: PROVIDED,

"4. THAT IN THE EVENT OF ANY SUCH ASSIGNMENT, THE ASSIGNEE THEREOF SHALL FILE WRITTEN NOTICE OF THE ASSIGNMENT TOGETHER WITH A TRUE COPY OF THE INSTRUMENT OF ASSIGNMENT WITH---

"/A) THE GENERAL ACCOUNTING OFFICE,

"/B) THE CONTRACTING OFFICER OR THE HEAD OF HIS DEPARTMENT OR AGENCY,

"/C) THE SURETY OR SURETIES UPON THE BOND OR BONDS, IF ANY, IN CONNECTION WITH SUCH CONTRACT, AND

"/D) THE DISBURSING OFFICER, IF ANY, DESIGNATED IN SUCH CONTRACT TO MAKE PAYMENT. NOTWITHSTANDING ANY LAW TO THE CONTRARY GOVERNING THE VALIDITY OF ASSIGNMENTS, ANY ASSIGNMENT PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940 SHALL CONSTITUTE A VALID ASSIGNMENT FOR ALL PURPOSES.

"ANY CONTRACT ENTERED INTO BY THE WAR DEPARTMENT OR THE NAVY DEPARTMENT MAY PROVIDE THAT PAYMENTS TO AN ASSIGNEE OF ANY CLAIM ARISING UNDER SUCH CONTRACT SHALL NOT BE SUBJECT TO REDUCTION OR SET OFF, AND IF IT IS SO PROVIDED IN SUCH CONTRACT, SUCH PAYMENTS SHALL NOT BE SUBJECT TO REDUCTION OR SET-OFF FOR ANY INDEBTEDNESS OF THE ASSIGNOR TO THE UNITED STATES ARISING INDEPENDENTLY OF SUCH CONTRACT.'

QUESTIONS HAVE ARISEN IN THE WAR DEPARTMENT WITH REFERENCE TO THE APPLICATION OF THE PROVISIONS OF THE FOREGOING ACT. THE WAR DEPARTMENT IS CONTEMPLATING ISSUING CERTAIN INSTRUCTIONS TO FINANCE OFFICERS RELATIVE TO THE REQUIREMENTS THAT WILL HAVE TO BE MET BEFORE AN ASSIGNMENT IS RECOGNIZED AS VALID AND BEFORE ANY PAYMENTS MAY BE MADE TO THE ASSIGNEE. CONSEQUENTLY AN EXPRESSION OF YOUR VIEWS WILL BE APPRECIATED ON THE FOLLOWING TWO QUESTIONS:

1. IS THE FILING OF THE WRITTEN NOTICE OF ASSIGNMENT TOGETHER WITH A TRUE COPY OF THE INSTRUMENT OF ASSIGNMENT IN ACCORDANCE WITH THE PROVISIONS OF PROVISO 4 OF THE ACT, SUCH AS ESSENTIAL PART OF THE ASSIGNMENT THAT THE ASSIGNMENT IS NOT VALID UNTIL THESE DOCUMENTS HAVE BEEN FILED?

THE ANSWER TO THIS QUESTION IS OF SPECIAL IMPORTANCE IN THE CASE WHERE THERE ARE CONFLICTING ASSIGNMENTS ON THE SAME CONTRACT, THE ASSIGNMENT FIRST MADE NOT BEING PERFECTED BY FILING OF ALL THE NOTICES PRESCRIBED BY PROVISO 4 OF THE ACT UNTIL AFTER ALL THE STATUTORY NOTICES OF AN ASSIGNMENT LATER IN DATE HAVE BEEN FILED. THE USE OF AN ASSIGNMENT OF A GOVERNMENT CONTRACT AS COLLATERAL IS GREATLY IMPAIRED IF, THOUGH, IT IS PROPERLY FILED ACCORDING TO PROVISO 4, IT IS SUBJECT TO BE MADE VOID BY OR SUBORDINATED TO AN ASSIGNMENT PRIOR IN TIME BUT STATUTORY NOTICE OF WHICH IS NOT FILED UNTIL A TIME LATER THAN THAT OF THE SECOND ASSIGNMENT.

2. WHEN A CONTRACT IS ASSIGNED WHICH CONTAINS A PROVISION THAT PAYMENTS TO AN ASSIGNEE OF ANY CLAIM ARISING UNDER SUCH CONTRACT SHALL NOT BE SUBJECT TO REDUCTION OR SET-OFF, AS PROVIDED IN THE ACT, IS A TAX LIABILITY ON THE PART OF THE ASSIGNOR AN INDEBTEDNESS OF THE ASSIGNOR TO THE UNITED STATES WITHIN THE TERMS OF THE ACT?

THE ASSIGNMENT OF CLAIMS ACT OF 1940, 54 STAT. 1029, SPECIFICALLY STATES THAT IN THE EVENT OF AN ASSIGNMENT THEREUNDER THE ASSIGNEE "SHALL FILE WRITTEN NOTICE OF THE ASSIGNMENT TOGETHER WITH A TRUE COPY OF THE INSTRUMENT OF ASSIGNMENT" AS PROVIDED THEREIN. HENCE, AN ASSIGNEE WHO DOES NOT COMPLY--- AT LEAST SUBSTANTIALLY--- WITH THAT REQUIREMENT WOULD APPEAR TO HAVE NO ENFORCEABLE RIGHT AGAINST THE GOVERNMENT UNDER THE ASSIGNMENT. HOWEVER, AS A GENERAL PROPOSITION IT WOULD SEEM THAT IN THE EVENT A TRUE COPY OF AN ASSIGNMENT IS RECEIVED, BUT IT IS ADMINISTRATIVELY CONSIDERED ,WRITTEN NOTICE" THEREOF HAS NOT BEEN RECEIVED, THE MATTER SHOULD BE CALLED TO THE ASSIGNEE'S ATTENTION IN ORDER TO DISPEL ANY DOUBT AS TO WHETHER THERE HAS BEEN COMPLIANCE WITH THE STATUTE. OF COURSE A DISBURSING OFFICER SHOULD NOT RECOGNIZE AND MAKE PAYMENT UNDER AN ASSIGNMENT WHEN THERE IS ANY DOUBT AS TO WHETHER THE ASSIGNEE HAS COMPLIED WITH THE STATUTORY REQUIREMENTS AS TO WRITTEN NOTICES, WITHOUT FIRST SUBMITTING THE MATTER TO THIS OFFICE FOR DECISION.

IN ANY CASE IN WHICH THERE IS BUT ONE ASSIGNMENT, AND NOT CONFLICTING ASSIGNMENTS, THE FACT THERE IS NOT A STRICT COMPLIANCE WITH THE STATUTE WITH RESPECT TO "WRITTEN NOTICE" SHOULD NOT GIVE RISE TO ANY SERIOUS QUESTION, SINCE IT HAS BEEN HELD THAT SECTIONS 3477 AND 3737 WERE ENACTED FOR THE BENEFIT OF THE GOVERNMENT AND MAY BE WAIVED BY IT. SEE MCGOWAN V. PARISH, 237 U.S. 285, AND CASES CITED THEREIN. HOWEVER, IF THERE BE ANY DOUBT AS TO WHETHER THERE HAS BEEN A STRICT COMPLIANCE WITH THE "WRITTEN NOTICE" PROVISION OF THE STATUTE SUCH WRITTEN NOTICE SHOULD BE OBTAINED, AS SUGGESTED ABOVE, IN ORDER THAT THE RIGHTS OF THE PARTIES BE NOT JEOPARDIZED.

IT IS TO BE PRESUMED, AND HOPED, THAT SITUATIONS WHEREIN THERE ARE CONFLICTING ASSIGNMENTS AND CONFLICTING CLAIMS WILL NOT FREQUENTLY ARISE. HOWEVER, SHOULD A SITUATION ARISE, SUCH AS THE HYPOTHETICAL CASE PRESENTED IN YOUR LETTER, FOR EXAMPLE, PAYMENT SHOULD NOT BE MADE UNDER EITHER ASSIGNMENT WITHOUT FIRST SUBMITTING THE VOUCHER OR VOUCHERS TO THIS OFFICE, ACCOMPANIED BY A COMPLETE STATEMENT OF THE FACTS, FOR DECISION AS TO WHICH, IF EITHER, OF THE ASSIGNMENTS SHOULD BE RECOGNIZED.

WITH RESPECT TO YOUR SECOND QUESTION, IT IS ASSUMED THE DOUBT AS TO WHETHER A TAX LIABILITY IS AN INDEBTEDNESS, WITHIN THE MEANING OF THE SUBJECT ACT, HAS ARISEN BY REASON OF THE GENERAL RULE THAT AS THE OBLIGATION TO PAY TAXES DOES NOT REST UPON ANY CONTRACT, EXPRESS OR IMPLIED, OR UPON THE CONSENT OF THE TAXPAYER, A TAX IS NOT A DEBT IN THE ORDINARY SENSE OF THAT WORD. 61 CORPUS JURIS 70, 71, AND CASES THERE CITED. HOWEVER, THE WORD "DEBT"--- OR "INDEBTEDNESS"--- HAS NO FIXED LEGAL SIGNIFICATION BUT IS USED IN DIFFERENT STATUTES IN SENSES VARYING FROM A VERY RESTRICTED TO A VERY GENERAL ONE, AND A TAX MAY OR MAY NOT BE A DEBT WITHIN THE MEANING OF A PARTICULAR STATUTE. UNITED STATES V. CHAMBERLIN, 219 U.S. 250, 262; TEVANDER V. RUYSDAEL, 299 F. 746, 753; FARBO V. SCHOOL DISTRICT, 28 P. (2D) 455, 458. THUS, IN PENROSE V. UNITED STATES, 18 F.1SUPP. 413, IT WAS HELD THAT AN ESTATE TAX LIABILITY WAS AN "INDEBTEDNESS.' ALSO, SEE UNITED STATES V. JAFFRAY, 97 F./2D) 488, AFFIRMED 306 U.S. 276. IN CENTRAL FARMERS' TRUST COMPANY V. LARSON, 7 F.1SUPP. 728, IT WAS HELD THAT LIABILITY FOR INCOME TAXES IS A DEBT AGAINST AN ESTATE, AND IN FOULKE V. C. PARDEE WORKS, 35 F.1SUPP. 734, THE COURT CONSTRUED THE WORD "DEBTS" IN A STATUTE PROVIDING THAT DEBTS DUE THE UNITED STATES SHALL BE FIRST SATISFIED, IN CASE OF INSOLVENCY, AS INCLUDING INCOME TAXES. SEE ALSO NATIONAL ICE AND COLD STORAGE COMPANY V. PACIFIC FRUIT EXPRESS COMPANY, 79 P. (2D) 380, 384; UNITED STATES V. PROCTOR, 286 F. 272, 274; AND UNITED STATES V. BILLINGS, 232 U.S. 261, 288. IN THE BILLINGS CASE THE SUPREME COURT EXPRESSLY REJECTED THE DOCTRINE APPLIED IN STATE CASES THAT ,WHERE THERE IS A STATUTE PROVIDING FOR INTEREST ON ALL DEBTS, SUCH STATUTE IS NOT APPLICABLE TO TAXES BECAUSE THEY ARE NOT DEBTS.'

I FIND NOTHING IN THE ASSIGNMENT OF CLAIMS ACT OF 1940 MAKING IT NECESSARY TO CONSTRUE THE WORD ,INDEBTEDNESS," AS USED THEREIN, IN ITS RESTRICTED SENSE IN ORDER MORE FULLY TO EFFECTUATE THE PURPOSES OF THE ACT. ON THE CONTRARY, SUCH A CONSTRUCTION UNDOUBTEDLY WOULD HAVE THE EFFECT OF SERIOUSLY INTERFERING WITH THE OBJECT WHICH THE PROVISION WITH RESPECT TO SET-OFF WAS INTENDED TO ACCOMPLISH. ACCORDINGLY, HAVING REGARD FOR THE PURPOSES OF THE ACT, AND THE AUTHORITIES HEREINBEFORE CITED, IT MUST BE CONCLUDED THAT THE CONGRESS USED THE WORD "INDEBTEDNESS" IN THE STATUTE IN ITS BROAD, GENERAL SENSE, AND THAT THE INDEBTEDNESS OF AN ASSIGNOR, AS REFERRED TO THEREIN, INCLUDES AN ASSIGNOR'S TAX LIABILITY.