B-45813, FEBRUARY 22, 1945, 24 COMP. GEN. 628

B-45813: Feb 22, 1945

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CHECKS - EXCHANGE FEES WHERE CHECKS RECEIVED BY THE GOVERNMENT IN REPAYMENT OF LOANS AND DEPOSITED WITH A GENERAL UNITED STATES DEPOSITARY FOR COLLECTION WERE STAMPED WITH THE NOTATION REQUIRED BY TREASURY CIRCULAR NO. 176. 1945: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 16. THE VOUCHER STATES THAT THE FEES ARE CHARGEABLE TO THE CLAIMANT BANK UNDER FEDERAL RESERVE BANK REGULATIONS Q. ATTACHED TO THE VOUCHER IS THE SCHEDULE SHOWING THE ITEMS INVOLVED. THE TREASURY DEPARTMENT ARRANGED TO HAVE THE SOUTH CAROLINA NATIONAL BANK. ALL OF THE CHECKS AND OTHER NEGOTIABLE INSTRUMENTS DEPOSITED WITH THE CLAIMANT BANK PURSUANT TO THE FOREGOING ARRANGEMENTS BEAR THE NOTATION "THIS CHECK IS IN PAYMENT OF AN OBLIGATION TO THE UNITED STATES AND MUST BE PAID AT PAR.

B-45813, FEBRUARY 22, 1945, 24 COMP. GEN. 628

CHECKS - EXCHANGE FEES WHERE CHECKS RECEIVED BY THE GOVERNMENT IN REPAYMENT OF LOANS AND DEPOSITED WITH A GENERAL UNITED STATES DEPOSITARY FOR COLLECTION WERE STAMPED WITH THE NOTATION REQUIRED BY TREASURY CIRCULAR NO. 176, AS AMENDED AND SUPPLEMENTED, TO THE EFFECT THAT THEY MUST BE PAID AT PAR OR, IF NOT SO PAID FOR ANY REASON, THAT THEY BE RETURNED TO THE DEPOSITOR, THE DEPOSITARY BANK MAY NOT BE REIMBURSED EXCHANGE FEES CHARGED IT BY THE DRAWEE BANK--- NOT A MEMBER OF THE FEDERAL RESERVE SYSTEM--- THERE BEING NO REASON APPARENT FOR FAILURE TO FOLLOW THE PRESCRIBED PROCEDURE OF EITHER PAYING THE CHECKS AT PAR OR RETURNING THEM.

COMPTROLLER GENERAL WARREN TO J. L. WILKINSON, DEPARTMENT OF AGRICULTURE, FEBRUARY 22, 1945:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 16, 1944, AS FOLLOWS:

THERE HAS BEEN SUBMITTED TO ME FOR CERTIFICATION, THE ENCLOSED VOUCHER IN FAVOR OF THE SOUTH CAROLINA NATIONAL BANK, COLUMBIA, SOUTH CAROLINA, IN THE AMOUNT OF $5.00 COVERING EXCHANGE FEES AT 1/8 OF PERCENT, CHARGED THE CLAIMANT BY THE TRUST COMPANY OF GEORGIA, ON CHECKS DEPOSITED BY THE EMERGENCY CROP AND FEED LOAN OFFICE WITH THE CLAIMANT FOR APPLICATION TOWARD THE PAYMENT OF LOANS DUE THE EMERGENCY CROP AND FEED LOAN OFFICE, COLUMBIA, DURING THE PERIOD OCTOBER 13 TO OCTOBER 21, 1944, INCLUSIVE. THE VOUCHER STATES THAT THE FEES ARE CHARGEABLE TO THE CLAIMANT BANK UNDER FEDERAL RESERVE BANK REGULATIONS Q. ATTACHED TO THE VOUCHER IS THE SCHEDULE SHOWING THE ITEMS INVOLVED, THE BANKS UPON WHICH DRAWN, AND THE DATES OF DEPOSIT WITH THE CLAIMANT BANK FOR COLLECTION.

AT THE REQUEST OF THE FARM CREDIT ADMINISTRATION, THE TREASURY DEPARTMENT ARRANGED TO HAVE THE SOUTH CAROLINA NATIONAL BANK, COLUMBIA, A GENERAL UNITED STATES DEPOSITARY, RECEIVE NOT ONLY CASH, BUT CHECKS AND DRAFTS DEPOSITED BY OUR COLUMBIA OFFICE, THUS MAKING AN EXCEPTION TO THE USUAL PROCEDURE PRESCRIBED BY PARAGRAPHS 4 AND 5, SECTION 1, OF TREASURY DEPARTMENT CIRCULAR NO. 176, AS AMENDED," REGULATIONS GOVERNING DEPOSIT OF PUBLIC MONEYS IN PAYMENT OF GOVERNMENT CHECKS AND WARRANTS.' ALL OF THE CHECKS AND OTHER NEGOTIABLE INSTRUMENTS DEPOSITED WITH THE CLAIMANT BANK PURSUANT TO THE FOREGOING ARRANGEMENTS BEAR THE NOTATION "THIS CHECK IS IN PAYMENT OF AN OBLIGATION TO THE UNITED STATES AND MUST BE PAID AT PAR. N.P., " AS REQUIRED BY PARAGRAPH 11, SECTION 1, OF TREASURY DEPARTMENT CIRCULAR NO. 176. UNTIL RECENTLY, ALL SUCH CHECKS HAVE EITHER BEEN REMITTED AT PAR, OR RETURNED TO OUR COLUMBIA OFFICE. CERTAIN BANKS, NOT MEMBERS OF THE FEDERAL RESERVE SYSTEM, HAVE RECENTLY ADOPTED THE PRACTICE OF MAKING A CHARGE FOR EXCHANGE BY DEDUCTING THE EXCHANGE FEES FROM THE AMOUNTS REQUIRING PAYMENT AT PAR, PLACED THEREON BY OTHER THAN THE MAKERS OF THE CHECKS, OR OF ACCUMULATING TRANSACTIONS OF THIS KIND OVER A PERIOD OF TIME AND MAKING A LUMP SUM EXCHANGE CHARGE AS INDICATED BY THE ENCLOSED VOUCHER.

IN THE ABSENCE OF A FEDERAL RESERVE BANK OR BRANCH AT OR NEAR COLUMBIA, THE USE OF THIS GENERAL DEPOSITARY AIDS OUR COLUMBIA OFFICE VERY MATERIALLY IN HANDLING CHECKS FOR COLLECTION.

THERE IS ATTACHED TO THE VOUCHER A COPY OF A LETTER DATED SEPTEMBER 27, 1944, ADDRESSED TO J. C. BEASLEY, SUPERINTENDENT OF BANKS, ATLANTA, GEORGIA, BY T. GRADY HEAD, ATTORNEY GENERAL, IN WHICH THE PERTINENT BANKING LAWS OF THE STATE OF GEORGIA ARE DISCUSSED, AND THE VIEW IS TAKEN THAT THE PAYEE OF A CHECK DOES NOT HAVE ANY RIGHT TO ATTACHANY CONDITION OTHER THAN THAT CONTAINED IN THE CHECK AND THE CONTRACT EXISTING BETWEEN THE BANK AND THE DEPOSITOR; THAT THE PAYEE OF A CHECK COULD NOT REQUIRE THE DRAWEE BANK TO MAKE REMITTANCE TO A FOREIGN LOCALITY AND DEPRIVE THE BANK OF THE EXCHANGE WHICH IT WAS GRANTED BY SECTION 13-2027 OF THE GEORGIA CODE, AND THAT SUCH DRAWEE BANKS WHO ARE NOT MEMBERS OF THE FEDERAL RESERVE SYSTEM ARE WITHIN THEIR RIGHTS WHEN THEY NOTIFY CLEARING HOUSES OR OTHER BANKS THAT THEY WILL NOT REMIT FOR CHECKS DRAWN ON THEM WITHOUT DEDUCTING THE EXCHANGE, AS PROVIDED BY THE GEORGIA STATUTE.

IN VIEW OF THE FOREGOING, IT IS MY VIEW THAT THERE IS A SUBSTANTIAL DOUBT THAT THIS CLAIM IS A PROPER CHARGE AGAINST THE UNITED STATES. ACCORDINGLY, I AM REQUESTING THAT YOU ADVISE ME, PURSUANT TO TITLE 31, SECTION 82D, U.S.C. WHETHER THE VOUCHER MAY BE PROPERLY CERTIFIED FOR PAYMENT FROM THE APPROPRIATION " SALARIES AND EXPENSES, FARM CREDIT ADMINISTRATION, DEPARTMENT OF AGRICULTURE, 1945" AS AN ADMINISTRATIVE EXPENSE INVOLVED IN THE COLLECTION OF LOANS.

IT IS MY UNDERSTANDING THAT THE FARM CREDIT ADMINISTRATION HAS MADE LOANS FOR WHICH IT HOLDS NOTES AGAINST THE BORROWERS, AND THAT THE NOTES ARE PAYABLE IN LAWFUL MONEY. HENCE, THE FARM CREDIT ADMINISTRATION IS ENTITLED TO RECEIVE THE FULL AMOUNT DUE. SO FAR AS I AM AWARE, IT IS NOT AUTHORIZED BY LAW TO ACCEPT LESS THAN THE FACE VALUE OF THE NOTES. AS A CONVENIENCE TO BORROWERS IT APPEARS TO HAVE BEEN THE PRACTICE TO ACCEPT BANK CHECKS WHICH EITHER WERE PAID AT PAR, OR RETURNED TO THE PAYEE. CERTAIN BANKS, NOT MEMBERS OF THE FEDERAL RESERVE SYSTEM, NOW ARE PAYING THE CHECKS AFTER DEDUCTING EXCHANGE FEES. IF THE EXCHANGE FEES ARE PAID BY THE FARM CREDIT ADMINISTRATION, THE PRACTICAL RESULT IS THAT THE NOTES ARE RELEASED AS PAID UPON RECEIPT OF AN AMOUNT LESS THAN FACE VALUE. UNDER EXISTING LAW, THAT CANNOT BE DONE.

SOME OF THE BANKS WHICH ARE FAILING TO RETURN THEIR CUSTOMER'S CHECKS AND, INSTEAD, ARE MAKING PAYMENTS AFTER DEDUCTING EXCHANGE FEES, ARE LOCATED IN GEORGIA WHERE STATE BANKING LAWS AUTHORIZE SUCH BANKS TO DEDUCT AN EXCHANGE FEE. IN LETTER OF SEPTEMBER 27, 1944, TO THE STATE SUPERINTENDENT OF BANKS, THE ATTORNEY GENERAL OF GEORGIA ADVISED THAT IN HIS OPINION BANKS NOT MEMBERS OF THE FEDERAL RESERVE SYSTEM ARE WITHIN THEIR RIGHTS WHEN THEY NOTIFY CLEARING HOUSES OR OTHER BANKS THAT THEY WILL NOT REMIT FOR CHECKS DRAWN ON THEM WITHOUT DEDUCTING THE EXCHANGE AS PROVIDED BY THE STATE STATUTE. THIS OPINION IS BASED UPON THE THEORY THAT ONLY THE DRAWER OF A CHECK HAS AUTHORITY TO ATTACH CONDITIONS OF PAYMENT AND THAT THE PAYEE, OR HOLDER, HAS, IN THE ABSENCE OF ACCEPTANCE BY THE DRAWEE BANK, NO INDEPENDENT RIGHT TO REQUIRE PAYMENT UNDER THE GENERAL LAW. BANK OF THE REPUBLIC V. MILLARD, 10 WALL. 152. STATE BANKS ARE WITHIN THEIR RIGHTS WHEN THEY REFUSE TO RECOGNIZE CONDITIONS OF PAYMENT STAMPED UPON CHECKS BY PAYEES, OR OTHER HOLDERS. AMERICAN BANK AND TRUST CO. V. FEDERAL RESERVE RESERVE BANK OF ATLANTA, 256 U.S. 350; FARMERS' AND MERCHANTS' BANK OF CATLETTSBURG V. FEDERAL RESERVE BANK OF CLEVELAND, 286 F. 610; AND FIRST STATE BANK OF HUGO V. FEDERAL RESERVE BANK OF MINNEAPOLIS, 219 N.W. 908, 61 A.L.R. 467. A STATE STATUTE PROVIDING FOR EXCHANGE FEES WAS HELD TO BE CONSISTENT WITH THE FEDERAL RESERVE ACT AND WITH THE FEDERAL CONSTITUTION. FARMERS AND MERCHANTS BANK OF MONROE, N.C. V. FEDERAL RESERVE BANK OF RICHMOND, VA., 262 U.S. 649.

THE ATTORNEY GENERAL FOR THE STATE OF GEORGIA DECLINED TO EXPRESS AN OPINION AS TO THE PROPER ACTION TO BE TAKEN BY A DRAWEE BANK WHEN A CHECK IS PRESENTED FOR PAYMENT UPON CONDITION THAT THE AMOUNT SHOULD BE REMITTED AT PAR. GENERALLY, THE PRACTICE HAS BEEN TO RETURN SUCH CHECKS UNPAID WHEN THE DRAWEE BANK WAS UNWILLING TO MAKE PAYMENT AT PAR. SEE BROOKINGS STATE BANK V. FEDERAL RESERVE BANK OF SAN FRANCISCO, 277 F. 430, 281 F. 222. WHILE THE PAYEE OR OTHER HOLDER OF A CHECK MAY NOT IMPOSE CONDITIONS OF PAYMENT AT PAR THAT ARE ENFORCEABLE AGAINST THE BANK ON WHICH THE CHECK IS DRAWN, IT SEEMS CLEAR THAT THE DRAWEE IS OBLIGATED EITHER TO PAY AT PAR OR RETURN TO THE PREVIOUS HOLDER. THE HOLDER OF A CHECK IS PRESUMED TO BE THE OWNER THEREOF AND THE OWNER HAS CERTAIN RIGHTS THEREIN. HE HAS A RIGHT TO PRESENT THE CHECK FOR PAYMENT OVER THE COUNTER IN WHICH CASE NO EXCHANGE IS DEDUCTED, OR HE MAY PRESENT IT BY MAIL OR THROUGH REGULAR BANKING CHANNELS. IN THE LATTER CASE, HE MAY ATTACH A CONDITION THAT THE CHECK BE RETURNED TO HIM WITHOUT EXPENSE TO THE DRAWEE BANK UNLESS THE PROCEEDS ARE REMITTED AT PAR.

THE DEPOSIT OF PUBLIC MONEYS AND COLLECTION OF CHECKS PAYABLE TO THE UNITED STATES ARE MATTERS GOVERNED BY REGULATIONS ISSUED BY THE SECRETARY OF THE TREASURY. TREASURY DEPARTMENT CIRCULAR NO. 176, ISSUED SEPTEMBER 2, 1930, AS AMENDED AND SUPPLEMENTED, PROVIDES IN PART AS FOLLOWS:

11. INDORSEMENT AND TRANSMISSION OF CHECKS FOR COLLECTION.--- THE DEPOSITOR SHOULD STAMP ON THE FACE OF EACH CHECK DEPOSITED THE WORDS: "THIS CHECK IS IN PAYMENT OF AN OBLIGATION TO THE UNITED STATES AND MUST BE PAID AT PAR. N.P., " FOLLOWED BY THE TRANSIT NUMBER OF THE FEDERAL RESERVE BANK OF BRANCH IN WHICH THE CHECKS ARE DEPOSITED AND HIS NAME AND TITLE. THE FEDERAL RESERVE BANK WILL MAKE AN EFFORT TO COLLECT EVERY CHECK ON THESE TERMS. IF THE BANK ON WHICH A CHECK IS DRAWN FOR ANY REASON DOES NOT PAY IT AT PAR, IT WILL BE RETURNED TO THE DEPOSITOR IN THE SAME MANNER AS A BAD CHECK. * * *

THE CHECKS FROM WHICH EXCHANGE FEES WERE DEDUCTED BORE THE NOTATION REQUIRED BY THE REGULATION. THE REGULATION DOES NOT PURPORT TO REQUIRE DRAWEE BANKS TO MAKE PAYMENT AT PAR, BUT PROVIDES THAT WHERE DRAWEE BANK FOR ANY REASON DOES NOT PAY AN ITEM AT PAR, IT WILL BE RETURNED TO THE DEPOSITOR. NO REASON IS APPARENT FOR FAILURE TO FOLLOW THE PROCEDURE PRESCRIBED BY THE TREASURY DEPARTMENT AND RETURN ALL CHECKS NOT PAID AT PAR,.

ACCORDINGLY, UPON THE PRESENT RECORD, AND IN VIEW OF TREASURY DEPARTMENT REGULATIONS PROVIDING THAT SUCH CHECKS WILL BE PAID AT PAR, OR RETURNED TO THE DEPOSITOR, YOU ARE ADVISED THAT THE VOUCHER MAY NOT BE CERTIFIED FOR PAYMENT. THE VOUCHER IS RETURNED HEREWITH.