B-68587 November 10, 1949

B-68587 November 10, 1949

Raichle, Tucker and More, Attorneys at Law 806 Genesse Building Buffalo 2, New York

Gentleman:

Receipt is acknowledge of your letter dated July 22, 1949, with further reference to your claim for $10,292.61, representing an alleged attorneys' lien against sums which were allowed American Foods Inc., a bankrupt, in Proceeding #86 before the Appeal Board of the office of Contract Settlement, wherein your client recovered a judgement in the amount of $43,368.91. Your communication was in reply to office letter dated July 14, 1949, wherein you were informed that since American Foods, Inc., was indebted to the United States in the sum of $125,000, plus interest, representing the amount determined to be due under Order No. WC FAB-78, dated May 23, 1947, as a refund of excessive profits realized by the debtor under August 31, 1946, the amount allowed in the above judgment would be applied as a set-off against the indebtedness of said company to the United States.

With reference to your contention that the attorney's lien created by section 475 of the New York Judiciary Law is paramount to the Government's right of set-off under 31 U.S.C. 71 and is enforceable within the provisions of section 3477, Revised Statutes, attention is invited that no statute has been found which authorizes an attorney's lien on public funds in the Treasury of the United States, nor is understood that an attorney's lien created by enacted-Penn Dairies, Inc. v. Milk Control Commission of Pennsylvania, 318 U.S. 257, and the cases therein cited. On the contrary, many decisions have been found to hold that an attorney's retainer agreement based on a percentage of the amount to be recovered in a particular action is void as in violation of section 3477, revised statutes, and that, in the case of required to set off the one indebtedness against the other- Taggart v. United States, 17 C. Cls. 322, 327; Cherry Cotton Mills, Inc. v. United States, 103 C. Cls 243, affirmed 327 U.S. 536; McKnight v. United States, 98 U.S. 179; Bailey v. United States, 109 U.S. 4321; Freedman's Savings and Trust Co. v. Shephard, Justice Strong, with reference to the purposed and intent of section 3477, Revised Statutes, said: "We are brought, then, to the inquiry whether such an assignment of a claim against the United states, made before the claim has been allowed, and before a warrant has been issued for its payment, has any validity, either in law or in equity. The act of Congress approved Feb. 26, 1853 (10 Stat. 170), entitled. An Act to prevent frauds upon the treasury of the United States, re-enacted in act. 3477 of the Revised Statutes, declares that all transfers and assignments thereafter made of any claim upon the United states, or any part or share thereof or interest therein, whether absolute or conditional, and all powers of attorney, orders, or other authorities *** shall be absolutely null and void, unless the same shall be freely made and executed in the allowance of such claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof." (Underscoring supplied.)

The court then added:

"*** It would seem to be impossible to use language more comprehensive than this. It embraces alike legal and equitable assignments. It includes powers of attorney, orders, or other authorities for receiving payment of any such claim, or any part or share thereof. It strikes at every derivative claimant in any other than himself."

Also, see National Bank of Commerce v. Downie, 218 U.S. 345; McGowan v. Parish, 237 U.S. 285: Nutt v. Knut 200 U.S. 13, 50 L. Ed. 348; Prist v. Child, 21 Wall, 441; Sheffield v. Preacher, et al., 165 S.X. 742, 84 A.L.B. 1159; The Creek Nation v. United States, 79 C.Cls. 778; and Bolivar Cotton Oil Company v. United States, 95 C. Cls. 182.

Also, with respect to your contention that the act of October 9, 1940, 31 U.S.C. 2037 renders inapplicable 31 U.S.C. 72 , your attention is invited to the fact that the statute to which you refer provides, in pertinent part, as follows:

"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 $1,00 or more, are assigned to a bank, trust company, or other financing institution, including any Federal landing agency ***." (underscoring supplied.)

Furthermore, the above statute, which is popularly known as 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; and it has been held that an assignee under the above act who does not substantially comply with the requirement respecting the filing of such notice has no enforceable right against the Government under the assignment.

By certificate of settlement No. 1767807, date August 19, 1949, the aforementioned sum of $43,368.91 was set off against the indebtedness of the bankrupt, leaving a basic balance due the United States of $81,631.09; and since collection of the subject indebtedness has been referred to the Attorney General of the United States, it is suggested that any future inquiries with respect to this matter be addressed to that official.

Very truly yours,

(Signed) Frank L. Yates Assistant Comptroller General of the United States