B-143922, SEPTEMBER 16, 1960, 40 COMP. GEN. 174

B-143922, SEPTEMBER 16, 1960, 40 COMP. GEN. 174

CONTRACTS - ASSIGNMENTS - PENSION TRUSTS - VALIDITY ALTHOUGH NEITHER THE TRUSTEES OF A PENSION TRUST NOT THE TRUST CAN BE REGARDED AS AN INSTITUTION FOR PURPOSES OF AN ASSIGNMENT OF A GOVERNMENT CONTRACT, THE TRUST CORPUS, TOGETHER WITH THE TRUSTEES, WHETHER INDIVIDUAL, CORPORATE OR OTHERWISE, HAVING AS A PRIMARY FUNCTION THE INVESTING OF THE ASSETS OF PENSION TRUSTS MAY BE REGARDED AS A FINANCING INSTITUTION WITHIN THE MEANING OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, 31 U.S.C. 203, SO THAT THE ASSIGNMENT OF A GOVERNMENT CONTRACT FOR THE CONSTRUCTION AND LEASING OF A POSTAL FACILITY TO THE TRUSTEES OF A PENSION TRUST MAY BE CONSIDERED A VALID ASSIGNMENT.

TO THE POSTMASTER GENERAL, SEPTEMBER 16, 1960:

BY LETTER OF SEPTEMBER 8, 1960, WITH ENCLOSURES, YOU HAVE REQUESTED OUR VIEWS AS TO WHETHER THE TRUSTEES OF THE GENERAL ELECTRIC PENSION TRUST TRUST QUALIFY AS A "FINANCING INSTITUTION" WITHIN THE MEANING OF THAT TERM AS EMPLOYED IN THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, 31 U.S.C. 203.

IT IS REPORTED THAT YOUR DEPARTMENT HAS AWARDED A CONTRACT FOR THE CONSTRUCTION OF A MAJOR POSTAL FACILITY AT PORTLAND, OREGON, AND FOR THE LEASING OF SUCH FACILITY TO THE GOVERNMENT FOR A TERM OF 30 YEARS WITH CERTAIN RENEWAL OPTIONS. THE CONTRACTORS PROPOSED TO OBTAIN FINANCING FROM THE GENERAL ELECTRIC PENSION TRUST, AND AS SECURITY FOR THE LOAN WOULD ASSIGN THE CONTRACT RENTAL PAYMENTS TO THE PENSION TRUSTEE PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT.

THE CITED STATUTORY PROVISION PROVIDES THAT MONEYS DUE OR TO BECOME DUE FROM THE UNITED STATES UNDER A CONTRACT PROVIDING FOR PAYMENTS OF $1,000 OR MORE MAY BE ASSIGNED TO A "BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION" IF CERTAIN CONDITIONS NOT HERE IN QUESTION ARE MET.

THE ASSETS OF PENSION TRUSTS, AS WITH INSURANCE COMPANIES, ARE INCREASINGLY BEING INVESTED IN LONG TERM SECURED LOANS. NOTHING APPEARS IN THE LEGISLATIVE HISTORY OF THE ACT INDICATING ANY CONGRESSIONAL INTENT THAT PENSION TRUST FUNDS SHOULD BE EXCLUDED; NOR DOES ANY REASON APPEAR, EITHER FROM THE PURPOSE OF THE ACT OR THE INTERESTS OF ANY OF THE PARTIES TO THE TRANSACTION, FOR EXCLUDING THEM. IN THIS INSTANCE, ARTICLE V OF THE TRUST AGREEMENT SETS OUT AS A PRIMARY DUTY OF THE TRUSTEES THE INVESTMENT AND REINVESTMENT OF PENSION PRINCIPAL AND INCOME IN LOANS, SECURITIES AND PROPERTY. WE HELD IN 36 COMP. GEN. 290 THAT PENSION TRUST FUNDS MAY BE USED FOR LOANS SECURED BY AN ASSIGNMENT PURSUANT TO 31 U.S.C. 203. WE CONCLUDE, THEREFORE, THAT THE ASSIGNMENT MAY NOT BE REGARDED AS INVALID BY REASON OF THE SOURCE OF FUNDS FOR THE LOAN IN CONSIDERATION FOR WHICH THE ASSIGNMENT IS MADE PROVIDING THE ASSIGNEE QUALIFIES AS A "FINANCING INSTITUTION" UNDER THE ACT. ,T" A FINANCING INSTITUTION IS ONE WHICH DEALS IN MONEY AS DISTINGUISH FROM OTHER COMMODITIES AS THE PRIMARY FUNCTION OF ITS BUSINESS ACTIVITY. 22 COMP. GEN. 44. SUCH INSTITUTION MAY BE AN INDIVIDUAL OR A PARTNERSHIP AS WELL AS A CORPORATE ORGANIZATION. 20 COMP. GEN. 415.

THE TRUSTEES ARE SEVEN INDIVIDUALS. UNDER THE LAW OF TRUSTS THEY HOLD THE CORPUS OF THE TRUST AS JOINT TENANTS. RESTATEMENT OF THE LAW 2D, TRUST 2D, SECTION 103. THEY MUST, WITH RESPECT TO DISCRETIONARY ACTIONS SUCH AS THE LENDING OF LARGE SUMS OF MONEY, ACT IN UNISON. WHEN THE ADMINISTRATION OF A TRUST IS VESTED IN CO-TRUSTEES, THEY FORM ONE COLLECTIVE TRUSTEE. VANDEVER'S APPEAL, 42 AM.DEC. 305.

WHILE THE TRUSTEES IN THIS INSTANCE CANNOT BE SAID TO BE FORMED INTO THE KIND OF ENTITY NORMALLY REGARDED AS AN INSTITUTION, THEIR RELATIONSHIP TO EACH OTHER AND TO THE TRUST IS SUCH AS TO PERMIT EQUATING THEM AS AN INDIVIDUAL FOR PURPOSES OF DETERMINING WHETHER THEY QUALIFY AS A FINANCIAL INSTITUTION. A TRUST ITSELF IS NOT AN INSTITUTION. 36 COMP. GEN. 290. HOWEVER, THE TRUST CORPUS, TOGETHER WITH THE TRUSTEES, WHETHER INDIVIDUAL, CORPORATE OR OTHERWISE, HAVING AS A PRIMARY FUNCTION THE INVESTING OF ASSETS OF THE TRUST, MAY BE REGARDED AS A FINANCING INSTITUTION WITHIN THE MEANING OF THE ASSIGNMENT OF CLAIMS ACT. SEE TAX COMMISSION V. PAXSON, 160, N.E. 468, 469, AND IN RE OGLEBAY'S ESTATE, 120 N.E.2D 437. IN OUR VIEW, THEREFORE, THE PROPOSED ASSIGNMENT IS A PROPER ONE UNDER 31 U.S.C. 203.