B-14415, JANUARY 28, 1941, 20 COMP. GEN. 415

B-14415, JANUARY 28, 1941, 20 COMP. GEN. 415

ASSIGNMENT OF CONTRACT PAYMENTS A "COMPANY" REGULARLY ENGAGED IN THE FINANCING BUSINESS IS NOT DISQUALIFIED FROM ACCEPTING ASSIGNMENTS UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940 AS A "FINANCING INSTITUTION" SOLELY BECAUSE IT CONSISTS OF AN INDIVIDUAL OR A PARTNERSHIP.

COMPTROLLER GENERAL WARREN TO LT. COL. A. J. MAXWELL, UNITED STATES ARMY, JANUARY 28, 1941:

THERE HAS BEEN RECEIVED, BY REFERENCE FROM THE CHIEF OF FINANCE, YOUR LETTER OF JANUARY 8, 1941, REQUESTING DECISION AS TO WHETHER PAYMENT IS AUTHORIZED ON VOUCHER IN FAVOR OF HAROLD TAGER, DOING BUSINESS AS MUNICIPAL FACTORS CO., AS ASSIGNEE OF WOLF X-RAY PRODUCTS, INC., NEW YORK, N.Y., UNDER CONTRACT NO. W-603-MD-12402, DATED OCTOBER 30, 1940.

YOUR LETTER OF JANUARY 8, 1941, IS AS FOLLOWS:

1. UNDER AUTHORITY CONTAINED IN SECTION 8, ACT OF JULY 31, 1894 (28 STAT. 208) U.S.C. 31:74, THERE IS TRANSMITTED HEREWITH STANDARD FM. 1034 IN FAVOR OF HAROLD TAGER, DOING BUSINESS AS MUNICIPAL FACTORS COMPANY, 1440 BROADWAY, NEW YORK CITY, AS ASSIGNEE OF WOLF X-RAY PRODUCTS, INC. THIS VOUCHER IS SUPPORTED BY INVOICE DATED DECEMBER 14, 1940, IN AMOUNT OF $793.52, AND AN INSTRUMENT DATED NOVEMBER 26, 1940, UNDER WHICH THE WOLF X -RAY PRODUCTS, INC., 116 WEST 14TH ST., NEW YORK CITY, PURPORTS TO ASSIGN TO HAROLD TAGER, DOING BUSINESS AT MUNICIPAL FACTORS COMPANY, 1440 BROADWAY, NEW YORK CITY, $4,227.20 OUT OF ALL MONEYS DUE OR TO BECOME DUE UNDER CONTRACT W 603 MD-12402 AND P.O. 49919.

2. THIS VOUCHER HAS BEEN PRESENTED TO THE UNDERSIGNED, A DISBURSING OFFICER, FOR PAYMENT.

3. REVISED STATUTES 3477 AND 3737, AS AMENDED BY THE ASSIGNMENT OF CLAIMS ACT OF 1940 ( PUBLIC, NO. 811, APPROVED OCTOBER 9, 1940) PERMITS, UNDER CERTAIN CONDITIONS, THE ASSIGNMENT OF CONTRACTS AGGREGATING $1,000 OR MORE TO A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION, INCLUDING ANY FEDERAL LENDING AGENCY.

4. DUN AND BRADSTREET LISTS NEITHER HAROLD TAGER NOR MUNICIPAL FACTORS CO. THE MANHATTAN TELEPHONE DIRECTORY LISTS BOTH " TAGER, HAROLD, FINANCING AND COLLECTIONS," AND " MUNICIPAL FACTORS COMPANY" AT THE 1440 BROADWAY ADDRESS. THE CLASSIFIED DIRECTORY LISTS NEITHER UNDER BANKS, TRUST COMPANIES, OR FINANCE COMPANIES, BUT DOES LIST " MUNICIPAL FACTORS COMPANY" UNDER " TORS.' MR. TAGER HAS INFORMALLY ADVISED THIS OFFICE THAT THE MUNICIPAL FACTORS IS A PARTNERSHIP, THE PARTNERS BEING MR. TAGER AND HIS WIFE; THAT THE COMPANY IS NOT INCORPORATED; AND THAT THE PARTNERSHIP, DOING BUSINESS AS " MUNICIPAL FACTORS COMPANY" OPERATES A FINANCING BUSINESS.

5. THERE IS DOUBT AS TO WHETHER OR NOT THE ASSIGNMENT OF CLAIMS ACT OF 1940 AUTHORIZES THE ASSIGNMENT OF A CONTRACT TO AN INDIVIDUAL OR PARTNERSHIP OPERATING A FINANCING BUSINESS UNDER AN ADOPTED STYLE, THOUGH UNINCORPORATED. IN OTHER WORDS, MAY AN INDIVIDUAL OR A PARTNERSHIP BE REGARDED AS A "FINANCING INSTITUTION" WITHIN THE MEANING OF THE ASSIGNMENT OF CLAIMS ACT OF 1940?

6. YOUR DECISION IN THE PREMISES IS RESPECTFULLY REQUESTED.

IN A LETTER OF DECEMBER 3, 1940, FROM A. ALAN REICH, ATTORNEY FOR THE ASSIGNEE, TO THE CHIEF OF FINANCE, THE NATURE OF THE BUSINESS OF MUNICIPAL FACTORS CO., AND THE POSITION OF SAID COMPANY WITH RESPECT TO THE ASSIGNMENT IN QUESTION, IS SET FORTH, IN PART, AS FOLLOWS:

WE REPRESENT THE MUNICIPAL FACTORS CO. OF THIS CITY. MUNICIPAL FACTORS CO. HAS BEEN IN OPERATION FOR A NUMBER OF YEARS AND HAS PURCHASED THOUSANDS OF RECEIVABLES OF THE CITY OF NEW YORK. IT NOW PROPOSES TO EXTEND ITS ACTIVITIES TO THE FIELD OF GOVERNMENTAL FINANCING. ITS REPUTATION CAN, OF COURSE, BE EASILY ASCERTAINED FROM THE FINANCE DEPARTMENT OF THE CITY OF NEW YORK.

THERE IS NOTHING MALUM PER SE IN THE TAKING OF AN ASSIGNMENT OF A FEDERAL CONTRACT. THE ONLY MANNER IN WHICH IT CAN BE DENIED TO THE INDIVIDUAL IS BE PROHIBITION THEREOF. THIS WAS ACCOMPLISHED BY SECTIONS 3477 AND 3737 OF THE REVISED STATUTES AND THIS PROHIBITION WAS REMOVED BY THE ASSIGNMENT OF CLAIMS ACT OF 1940. THIS ACT PERMITS THE ASSIGNMENT UNDER CERTAIN CONDITIONS TO "A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTIONS.' MUNICIPAL FACTORS CO. DEFINITELY DOES NOT COME WITHIN THE CLASSIFICATION OF BANK OR TRUST COMPANY, BUT IT IS OUR BELIEF THAT WE DEFINITELY COME FOURSQUARE WITHIN THE TERM "FINANCING INSTITUTION.'

IT IS CONCEDED IN THE LETTER OF COLONEL MAXWELL THAT MUNICIPAL FACTORS CO. IS LISTED IN THE PHONE BOOK UNDER "FACTORS.' THIS SPECIFICALLY DEFINES THE SCOPE OF THE ACTIVITIES OF MUNICIPAL FACTORS CO.

THE INTENT OF CONGRESS IN THE PASSAGE OF THE ASSIGNMENT OF CLAIMS ACT OF 1940 WAS CLEAR. IT INTENDED TO MAKE AVAILABLE A SHARE OF THE DEFENSE PROGRAM NOT ONLY TO THE LARGE CORPORATIONS, BUT ALSO TO THE AVERAGE MANUFACTURER WHO MIGHT NOT OTHERWISE BE IN A POSITION TO FINANCE THE HANDLING OF WORK OF THIS MAGNITUDE. THERE WAS NO INTENT TO LIMIT THE FINANCING TO BANKS AND TRUST COMPANIES AND FOR THAT REASON THE WORDS "FINANCING INSTITUTION" WERE ADDED. THIS INTENT APPEARS TO BE CLEARLY TO COVER ANYBODY NOT WITHIN THE CLASSIFICATION OF BANKS OR TRUST COMPANIES WHICH FINANCE WORK OF THIS TYPE. TO ARGUE THAT THIS WOULD APPLY SOLELY TO A CORPORATION AND NOT TO AN INDIVIDUAL WOULD, IN OUR OPINION, BE SPECIOUS.

THE FACT THAT MUNICIPAL FACTORS CO. IS NOT LISTED IN DUN AND BRADSTREET IS UNIMPORTANT. IT SELLS NO MERCHANDISE AND WOULD HAVE NO BASIS FOR LISTING WITH THEM. MUNICIPAL FACTORS CO. WAS CREATED FOR FINANCING IN CONNECTION WITH ACCOUNTS RECEIVABLE. ITS ACTIVITIES ARE RESTRICTED TO FINANCING IN RELATION TO ACCOUNTS RECEIVABLE AND TO HOLD THAT BECAUSE IT IS NOT A CORPORATION, IT IS NOT A "FINANCING INSTITUTION," WOULD BE, IN OUR OPINION, MERELY JURISTIC GYMNASTICS. THE WORD " INSTITUTION" AS CONTAINED IN THE ACT, SHOULD BE USED INTERCHANGEABLY WITH THE WORD GANIZATION.'

AS POINTED OUT IN YOUR LETTER, THE DOUBT IN THE MATTER IS AS TO WHETHER THE MUNICIPAL FACTORS CO. MAY BE CONSIDERED AS A "FINANCING INSTITUTION" WITHIN THE MEANING OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, PUBLIC, NO. 811, APPROVED OCTOBER 9, 1940, 54 STAT. 1029.

THE WORD "INSTITUTION" HAS BEEN DEFINED AS AN "ESTABLISHED OR ORGANIZED SOCIETY OR CORPORATION" AND IT HAS BEEN CONSTRUED AS NOT INCLUDING AN INDIVIDUAL OR NATURAL PERSON BUT AS RELATING TO AN ASSOCIATION SIMILAR TO A CORPORATION. SEE WORDS AND PHRASES, PERMANENT EDITION, VOLUME 21, PAGES 666-671. SUCH CONSTRUCTION, OF COURSE, IS NOT NECESSARILY CONCLUSIVE OF THE MATTER HERE INVOLVED. IT IS NECESSARY IN EACH CASE TO ASCERTAIN THE LEGISLATIVE INTENT AND THEN SO TO CONSTRUE THE WORD AS TO EFFECTUATE THAT INTENTION PROVIDED SUCH A CONSTRUCTION IS REASONABLE. THUS, IN JACKSON V. PRESTON ( MISS.) 21 LRA ( N.S.) 164, IT WAS HELD THAT PROPERTY OWNED BY AN INDIVIDUAL, AND USED BY HIM FOR THE EDUCATION OF YOUTH, WAS EXEMPT FROM TAXATION UNDER A STATUTE EXEMPTING ALL PROPERTY BELONGING TO ANY COLLEGE OR INSTITUTION FOR THE EDUCATION OF YOUTH. SO, TOO, IT HAS BEEN HELD THAT A PARTNERSHIP WHOSE CHIEF BUSINESS WAS BUYING AND DISCOUNTING COMMERCIAL PAPER AND RETENTION OF TITLE CONTRACTS GIVEN FOR MOTOR VEHICLES SOLD BY AUTOMOBILES DEALERS WAS A "FINANCIAL INSTITUTION" WITHIN THE MEANING OF A STATUTE IMPOSING AN EXCISE TAX ON FINANCIAL INSTITUTIONS COMPETING WITH BUSINESS OF NATIONAL BANKS. STATE V. NATIONAL CREDIT COMPANY, 181 SO. 769.

IT APPEARS IN THE PRESENT CASE THAT MUNICIPAL FACTORS CO. CONSISTS EITHER OF AN INDIVIDUAL OR A PARTNERSHIP, AND THAT IT IS REGULARLY ENGAGED IN THE FINANCING BUSINESS. WHILE THE INTENT OF THE CONGRESS IN USING THE TERM "FINANCING INSTITUTION" IS NOT ENTIRELY CLEAR, ONE OF THE PURPOSES OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, WAS TO "ASSIST IN THE NATIONAL-DEFENSE PROGRAM" BY MAKING IT POSSIBLE FOR PERSONS TO OBTAIN FINANCIAL ASSISTANCE IN THE PERFORMANCE OF GOVERNMENT CONTRACTS. HENCE, IN DETERMINING WHETHER A PARTICULAR ASSIGNMENT MAY BE RECOGNIZED UNDER THE SAID ACT THE PURPOSE FOR WHICH THE ASSIGNMENT IS MADE WOULD APPEAR TO BE ENTITLED TO MORE CONSIDERATION THAN THE CHARACTER OR DESIGNATION OF THE CONCERN TO WHICH THE ASSIGNMENT IS GIVEN. CONSEQUENTLY, AND HAVING REGARD FOR THE FACT, THAT ASSIGNMENTS OTHERWISE PROHIBITED BY SECTIONS 3477 AND 3737, REVISED STATUTES, MAY BE BINDING AS BETWEEN THE ASSIGNORS AND THE ASSIGNEES WHEN RECOGNIZED BY THE GOVERNMENT, THE CONCLUSION APPEARS JUSTIFIED, ON THE RECORD AS IT NOW APPEARS, THAT NO FURTHER QUESTION NEED BE RAISED AS TO THE QUALIFICATIONS OF MUNICIPAL FACTORS CO. TO ACCEPT ASSIGNMENTS AS ,FINANCING INSTITUTION" UNDER THE TERMS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940. BURCK V. TAYLOR, 152 U.S. 634; MCKNIGHT V. UNITED STATES, 98 U.S. 179; DULANEY V. SCUDDER, 94 FED. 6; AND LOPEZ V. UNITED STATES, 24 CT.1CLS. 84.

ACCORDINGLY, THE VOUCHER IS RETURNED HEREWITH AND PAYMENT THEREON IS AUTHORIZED, PROVIDED, OF COURSE, THE ASSIGNEE OTHERWISE HAS COMPLIED WITH THE CONDITIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940. IN THIS CONNECTION, ATTENTION IS INVITED TO MY DECISION OF DECEMBER 10, 1940, B 13852, 20 COMP. GEN. 306, TO THE SECRETARY OF WAR.