B-170454, AUG. 12, 1970

B-170454, AUG. 12, 1970

CONTRACTS -- PAYMENTS -- ASSIGNMENTS -- CONFLICTING CLAIMS DECISION HOLDING THAT GOVERNMENT'S CLAIM FOR UNPAID TAXES AGAINST GOVERNMENT CONTRACTOR, ACME COLOR ART PRINTING CO., INC., IS SUPERIOR TO THAT OF ASSIGNEE BANK TEXOMA NATIONAL BANK OF SHERMAN, TEXAS. WHERE UNDER A GOVERNMENT CONTRACT THAT DID NOT CONTAIN ANY "NO SET OFF" PROVISION, IRS HAS CLAIM FOR UNPAID TAXES AND THE ASSIGNEE-BANK CLAIMS AMOUNT DUE, THE GOVERNMENT'S TAX CLAIM MUST BE HELD TO BE SUPERIOR TO THE BANK'S CLAIM EVEN THOUGH NOTICE OF TAX CLAIM WAS NOT GIVEN UNTIL AFTER THE ASSIGNMENT.

TO MR. SPENCE:

REFERENCE IS MADE TO YOUR LETTER OF JULY 23, 1970, REQUESTING A DECISION ON WHETHER ASSIGNMENT OF MONEYS DUE UNDER SEVERAL CONTRACTS TO THE TEXOMA NATIONAL BANK OF SHERMAN, TEXAS, UNDER THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED 31 U.S.C. 203, 41 U.S.C. 15, IS SUPERIOR TO A CLAIM FOR UNPAID TAXES AGAINST THE CONTRACTOR, NAMELY THE ACME COLOR ART PRINTING COMPANY, INCORPORATED. BOTH THE BANK AND THE IRS ARE REQUESTING THE ASSIGNED MONEYS.

THE ASSIGNMENT TO THE BANK WAS MADE IN APRIL 1970. THEREAFTER, YOU RECEIVED A NOTICE OF LEVY DATED JUNE 18, 1970, FROM IRS FOR UNPAID WITHHOLDING TAXES IN THE AMOUNT OF $6,503.16 FOR THE PERIODS ENDING SEPTEMBER 30, AND DECEMBER 31, 1969.

THE SUPREME COURT CASE OF CENTRAL BANK V UNITED STATES, 345 U. S. 639 (1952), CITED IN YOUR LETTER DOES NOT APPLY HERE. THE ASSIGNEE-BANK PREVAILED AGAINST THE GOVERNMENT IN THE CASE BECAUSE THE CONTRACT IN QUESTION PROVIDED THAT ASSIGNMENTS TO A BANK WERE NOT TO BE "SUBJECT TO REDUCTION OR SET-OFF FOR ANY INDEBTEDNESS OF THE CONTRACTOR TO THE GOVERNMENT ARISING INDEPENDENT OF THIS CONTRACT." REPORTEDLY, THE IMMEDIATE CONTRACT DOES NOT CONTAIN SUCH A PROVISION. WHILE THE ASSIGNMENT OF CLAIMS ACT PROVIDES FOR THE INCLUSION OF A NO SET-OFF PROVISION IN THE CASE OF CONTRACTS MADE BY CERTAIN DESIGNATED AGENCIES, TO OUR KNOWLEDGE THE GOVERNMENT PRINTING OFFICE HAS NOT BEEN SO DESIGNATED.

IN THE ABSENCE OF A NO SET-OFF PROVISION IN THE CONTRACT, THE GOVERNMENT IS ENTITLED TO SET-OFF AGAINST THE ASSIGNEE-BANK ANY OF ITS CLAIMS AGAINST THE ASSIGNOR-CONTRACTOR WHICH HAD MATURED PRIOR TO THE ASSIGNMENT. SOUTH SIDE BANK & TRUST COMPANY V UNITED STATES, 221 FED. 813 (1955); 37 COMP. GEN. 318, 320 (1957). THE TAX CLAIM IN THIS CASE MATURED BEFORE THE ASSIGNMENT WAS MADE IN APRIL 1970. THE FACT THAT NOTICE OF THE TAX CLAIM WAS NOT GIVEN UNTIL JUNE 1970, OR AFTER THE ASSIGNMENT WAS MADE, DOES NOT DEFEAT THE GOVERNMENT'S ENTITLEMENT TO SET-OFF. SOUTH SIDE BANK & TRUST COMPANY, SUPRA. P. 814.

ACCORDINGLY, WE CONCLUDE THAT THE GOVERNMENT'S TAX CLAIM IS SUPERIOR TO THE BANK'S CLAIM.