B-166531, NOV. 10, 1969

B-166531, NOV. 10, 1969

SET-OFF--CONTRACT PAYMENTS--ASSIGNMENTS--"NO SET-OFF" PROVISION MONIES DUE UNDER ARMY CONTRACT, TERMINATED BY DEFAULT OF BANKRUPT CONTRACTOR, WHICH HAD BEEN ASSIGNED TO BANK TO OBTAIN FUNDS FOR CONTRACT PERFORMANCE AND AGAINST WHICH INTERNAL REVENUE SERVICE (IRS) HAD FILED NOTICE OF LEVY FOR CONTRACTOR'S UNPAID TAXES, MAY BE PAID TO BANK ASSIGNEE SINCE CONTRACT INCLUDED NO SET-OFF PROVISION WHICH, WHEN APPLICABLE, DEFEATS OPERATION OF IRS LIEN FOR TAXES AND REDUCES GOVERNMENT'S COMMON LAW RIGHT OF SET-OFF TO EXTENT ASSIGNOR IS INDEBTED TO ASSIGNEE; NO SET- OFF PROVISIONS WERE HERE APPLICABLE SINCE NATIONAL EMERGENCY DECLARED BY PRESIDENT IN 1950 IS STILL IN EFFECT AND ARMY IS SPECIFICALLY COVERED BY NO SET-OFF PROVISION IN SUBJECT CONTRACT. SEE 37 COMP. GEN. 318 (1957).

TO COLONEL MCCABE:

REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 17, AND JUNE 12, 1969, REQUESTING AN ADVANCE DECISION OF THIS OFFICE AS TO THE PROPER PAYEE OF THE AMOUNT WITHHELD UNDER CONTRACT NO. DABG-03-68-C-0042. THIS CONTRACT WAS ENTERED INTO BY THE CAMERON STATION, ALEXANDRIA, VIRGINIA, WITH AMERICANA VAN LINES, INCORPORATED, AND SUBSEQUENTLY WAS TERMINATED FOR DEFAULT ON AUGUST 15, 1968. AFTER DISCOUNTS, $5,055.56 WAS DEDUCTED AS EXCESS REPROCUREMENT COSTS FROM THE $8,776.64 IN PAYMENTS WITHHELD UNDER THE CONTRACT. THE SUM OF $3,721.08 REMAINS DUE UNDER THIS CONTRACT.

YOUR DOUBT AS TO THE PROPER PAYEE FOR DISBURSEMENT OF THE REMAINING CONTRACT FUNDS AROSE AS A RESULT OF A NOTICE OF LEVY FILED BY THE INTERNAL REVENUE SERVICE ON DECEMBER 5, 1968, FOR UNPAID TAXES OF THE CONTRACTOR IN THE AMOUNT OF $5,351.78. THE OTHER CLAIMANT TO THE FUNDS IS THE STATE NATIONAL BANK OF BETHESDA, ROCKVILLE, MARYLAND, PURSUANT TO AN ASSIGNMENT MADE BY THE CONTRACTOR ON JUNE 24, 1968. THIS OFFICE HAS BEEN ADVISED BY THE ASSIGNEE BANK THAT THIS ASSIGNMENT WAS MADE TO OBTAIN FUNDS TO PERFORM CONTRACT NO. DABG-03-68-C-0042 AND THAT AMERICANA VAN LINES' PRESENT INDEBTEDNESS IS $7,916.08 PLUS INTEREST. NOTICE OF THE ASSIGNMENT WAS GIVEN THE GOVERNMENT ON JUNE 24, 1968. ACCORDINGLY, THE ASSIGNMENT APPEARS TO HAVE BEEN VALIDLY MADE PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940. 41 U.S.C. 15.

THE CONTRACT AWARDED AMERICANA VAN LINES CONTAINED THE GENERAL PROVISIONS OF STANDARD FORM 32. PARAGRAPH 8 (A) OF THOSE PROVISIONS STATES:

"8. ASSIGNMENT OF CLAIMS

(A) PURSUANT TO THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED (31 U.S.C. 203, 41 U.S.C. 15). IF THIS CONTRACT PROVIDES FOR PAYMENT AGGREGATING $1,000 OR MORE, CLAIMS FOR MONEYS DUE OR TO BECOME DUE THE CONTRACTOR FROM THE GOVERNMENT UNDER THIS CONTRACT MAY BE ASSIGNED TO A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION, INCLUDING ANY FEDERAL LENDING AGENCY, AND MAY THEREAFTER BE FURTHER ASSIGNED AND REASSIGNED TO ANY SUCH INSTITUTION. ANY SUCH ASSIGNMENT OR REASSIGNMENT SHALL COVER ALL AMOUNTS PAYABLE UNDER THIS CONTRACT AND NOT ALREADY PAID, AND SHALL NOT BE MADE TO MORE THAN ONE PARTY, EXCEPT THAT ANY SUCH ASSIGNMENT OR REASSIGNMENT MAY BE MADE TO ONE PARTY AS AGENT OR TRUSTEE FOR TWO OR MORE PARTIES PARTICIPATING IN SUCH FINANCING. UNLESS OTHERWISE PROVIDED IN THIS CONTRACT PAYMENTS TO AN ASSIGNEE OF ANY MONEYS DUE OR TO BECOME DUE UNDER THIS CONTRACT SHALL NOT TO THE EXTENT PROVIDED IN SAID ACT, AS AMENDED, BE SUBJECT TO REDUCTION OR SETOFF. (THE PRECEDING SENTENCE APPLIES ONLY IF THIS CONTRACT IS MADE IN TIME OF WAR OR NATIONAL EMERGENCY AS DEFINED IN SAID ACT AND IS WITH THE DEPARTMENT OF DEFENSE, THE GENERAL SERVICES ADMINISTRATION, THE ATOMIC ENERGY COMMISSION, THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, THE FEDERAL AVIATION AGENCY, OR ANY OTHER DEPARTMENT OR AGENCY OF THE UNITED STATES DESIGNATED BY THE PRESIDENT PURSUANT TO CLAUSE 4 OF THE PROVISO OF SECTION 1 OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED BY THE ACT OF MAY 15, 1951, 65 STAT. 41.)" CONCERNING THE NO SET-OFF PROVISION THIS OFFICE HAS PREVIOUSLY STATED THAT, WHEN APPLICABLE, IT DEFEATS THE OPERATION OF THE INTERNAL REVENUE SERVICE LIEN FOR TAXES AND REDUCES THE GOVERNMENT'S COMMON LAW RIGHT OF SET-OFF TO THE EXTENT THE ASSIGNOR IS INDEBTED TO THE ASSIGNEE. 37 COMP. GEN. 318 (1957). SINCE THE NATIONAL EMERGENCY DECLARED BY THE PRESIDENT IN 1950, 15 FEDERAL REGISTER 9029, IS STILL IN EFFECT AND SINCE THE DEPARTMENT OF THE ARMY IS SPECIFICALLY COVERED BY THE NO SET-OFF PROVISION, THE NO SET-OFF PROVISIONS ARE APPLICABLE IN THIS INSTANCE.

THEREFORE, THE SUM OF $3,721.08 REMAINING DUE UNDER CONTRACT DABG-03 68-C -0042 MAY BE PAID TO STATE NATIONAL BANK, THE ASSIGNEE. RETURNED HEREWITH ARE THE ENCLOSURES TO THE LETTER OF SEPTEMBER 24, 1969.