B-39254 February 10, 1944

B-39254: Feb 10, 1944

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Chairman: There have been considered two letters dated December 21 and 24. In which it is stated that the Board has a claim in the amount of $5. That moneys are due the said form under a contract with the National Capital Housing Authority. A decision is requested as to whether there can be set off from the moneys payable by the Authority such amount as will liquidate the indebtedness to the District Unemployment Compensation Board. The jurisdiction of this office to render decisions is predicated upon section 8 of the set of July 31. You will observe that under the law this office may render decisions to the heads of departments or establishments only with respect to questions which involve payments to be made by them or under them.

B-39254 February 10, 1944

Chairman, District Unemployment Compensation Board

My Dear Mr. Chairman:

There have been considered two letters dated December 21 and 24, 1943, with enclosure, form James A. Purcell, Jr., acting attorney, in which it is stated that the Board has a claim in the amount of $5,428.56, arising under section 4(f) of the District of Columbia Unemployment Compensation Act, as amended, 57 Stat. 100, 110 against the C.A. Bose Company, Inc., and that moneys are due the said form under a contract with the National Capital Housing Authority. A decision is requested as to whether there can be set off from the moneys payable by the Authority such amount as will liquidate the indebtedness to the District Unemployment Compensation Board.

The jurisdiction of this office to render decisions is predicated upon section 8 of the set of July 31, 1894, 28 Stat. 207, as amended (31 U.S.C. 74), which provides:

"Disbursing officers, or the head of any executive department, or other establishment not under any of the executive departments, may apply for and the Comptroller General shall render his decision upon any question involving a payment to be made by them or under them, which decision, when rendered, shall govern the General Accounting Office in passing upon the account containing said disbursement."

You will observe that under the law this office may render decisions to the heads of departments or establishments only with respect to questions which involve payments to be made by them or under them. See 18 Comp. Gen. 217. The question presented does not involve a payment to be made by your Board, but rather one to be made by the National Capital Housing Authority from funds under its administrative control. However, since it is understood informally that the latter agency is withholding payment to the contractor pending a decision of this office, and in order not to delay action in the case, consideration will be given to the matter as now submitted.

Succinctly stated, the question presented is whether the United States, in making payment to one of its creditors, may deduct an amount sufficient to satisfy a claim asserted against said creditor by the District of Columbia.

The United States has the right to set off against an amount due a claimant any sum the same person owes to the Government either under the same or other contracts or obligations. The common-law right of every creditor to apply the moneys of his debtor in his hands is extinguishment of claims due him from the debtor is applicable to the Government. 1 Comp. Gen. 605; 7 id 576; 16 id. 161; O'Leary v. United States. 82 C. Cls. 305; Taggart v. United States, 17 C. Cls. 322. But it logically follows that the right of the United States to make set-off may not be exercised unless it has a present right of action against its creditor; that is to say, the United States must have an interest in the amount of the proposed set-off and, hence, a right to sue its creditor therefor. Thus, if the set-off proposed in the instant case may be made, it must be upon the basis that a claim of the District of Columbia is sin fact a claim of the United States.

As to the statue of the District of Columbia, the act of June 11, 1878, 20 Stat. 102, Sec. 1, provides for a permanent form of Government for said District and directs that it "shall remain and continue a municipal corporation, as provided in section two of the Revised Statutes relating to said District, and the Commissioners herein provided for shall be deemed and taken as officers of said corporation." Section 1-102, Title 1, District of Columbia Code, 1940 Edition, provides as follows:

"The District is created a government by the name of the 'District of Columbia', by which name it is constituted a body-corporate for municipal purposes, and may contract and be contracted with, sue and be sued, plead and be impleaded, have a seal, and exercise all other powers of a municipal corporation not inconsistent with the Constitution and laws of the United States and the provisions of this code."

Since the enactment of the act of June 7, 1924, 43 Stat. 539, appropriations made for the expenditures of the Government of the District of Columbia, while made by the Congress of the United States, are made form the revenue of the District of Columbia supplemented by Federal contributions. See in this connection the District of Columbia Appropriation Act, 1944, 57 Stat. 312, which provides:

"That in order to defray the expenses of the District of Columbia for the fiscal year ending June 30, 1944, any revenue (not including the proportionate share of the United States in any revenue arising as the result of the expenditure of appropriations made for the fiscal year 1924 and prior fiscal years) now required by law to be credited to the District of Columbia and the United States in the same proportion that each contributed to the activity or sources from whence such revenue was derived shall be credited wholly to the District of Columbia, an, in addition, 16,000,000 is appropriated, out of any money in the Treasury not otherwise appropriated, to be advanced July 1, 1943, and all of the remainder out of the combined revenues of the District of Columbia, namely:"

It has long been recognized that, except as otherwise provided in particular statutes, the District of Columbia is a municipal corporation with its own powers and functions, its own funds, and its own obligations and liabilities, separate and distinct from those of the Federal Government. See 1 Comp. Gen. 451; also, 10 Comp. Gen. 524; 19 id. 16. That the Governments of the District of Columbia and the United States are distinct entities was recognized in a decision of a former Comptroller of the Treasury dated May 22, 1909 (49 U.S. H.R. 895), which involved facts paralleling those in the present matter. In that case the Secretary of the Treasury inquired as to whether there could be withheld form a contractor with the United States the amount of a claim of the District of Columbia for repairs to District streets damaged by the said contractor. It was held that:

"The appropriation made by Congress for repairs to the streets of the District of Columbia is the specific appropriation for payment of such repairs. The District has no claim against the United States for making the repairs to the street, and the appropriations to the Treasury Department, supra, are not available for reimbursement of the District appropriation.***

"Under the contract dated April 26, 1907, Edwin Gilbert and Co. covenanted to be responsible 'for all damages to person or property which may occur in connection with the prosecution of the work.' Under this covenant the contractors assumed the ultimate responsibility for such damages as might be asserted against the United States. The District has no claim against the United States for the repairs to the street. The claim is a matter for adjustment primarily between the District and the contractors. You are not authorized to withhold the amount of the claim from the contract with Edwin Gilbert and Co. for the purpose of reimbursing the District of Columbia."

That the District of Columbia has liabilities which must be enforced against the District has been settled by several decisions of the Supreme Court of the United States and the Court of Claims. See Barnes v. District of Columbia. 132 U.S. 9; District of Columbia v. Woodbury, 136 U.S. 456. In the last named case the court said:

"That streets, avenues, pavements, sidewalks, and sewers in Washington are established, repaired, and maintained, in part, by appropriations made by Congress, and in part, by taxation upon private property, does not change the fact that, by an express declaration of Congress, the District is created a body corporate for municipal purposes. Because it was a municipal corporation proper, as distinguished from a corporation established as an agency of the Government creating it, this court held in the Barnes Case that it was responsible for such negligence of its officers having the care of streets, avenues, and sidewalks, as resulted in personal injuries to individuals. The source from which the District obtains the means of maintaining public highways in the city is of no consequence, so long as Congress has made it, and permits it to remain, a more municipal corporation, with such functions as pertain to municipal corporations proper. ***"

Also, see the case of Bundy v. United States, 21 C. Cls 429, wherein the court, at page 433, stated:

"From this recital it appears that the District of Columbia is a municipal corporation having revenues and subject to liabilities distinct from those of the United States, whose contributions for the payment of one-half of the estimated expenses of the District to be disbursed 'only on requisition of the Commissioners of the District' (22 Stat. L. 144), creates no privity of contract directly with the creditors of the corporation over which they have exclusive control, and which can create no debts not authorized by the laws of Congress. Upon the latter obligation, if there be any, it is not for us to express a opinion. (Fendall's Case, 16 C. Cls. R., 119.)"

The foregoing authorities would appear to establish conclusively that the municipal corporation of the District of Columbia is a distinct legal entity, and that while it is a creature of the Congress, its rights must be enforced by the District and not by the United States. As was said by the court in the Woodbury case, supra, it is not established as an agency of the United States, and as there is no privity of contract between the creditors of the District of Columbia and the United States, the latter is not liable for the debts of the District of Columbia, except where the Congress has so provided. Bundy v. United States, supra. Therefore, it follows as a corollary of these principles that the rights of the Government of the District of Columbia are not those of the United States and such rights may not be asserted or maintained by the Federal Government in its own behalf.

Such being the case, there appears to be no legal basis for deducting from the moneys due the contractor by the National Capital Housing Authority, the amount of the claim of the District Unemployment Compensation Board.

Respectfully,

Frank L. Yates Acting Comptroller General of the United States