B-66501, JUNE 5, 1947, 26 COMP. GEN. 907

B-66501, JUNE 5, 1947, 26 COMP. GEN. 907

SET-OFF - COMPENSATION - FEDERAL TAX INDEBTEDNESS THE DECISION OF THE SUPREME COURT OF THE UNITED STATES IN FEDERAL HOUSING ADMINISTRATION V. BURR, 309 U.S. 242, TO THE EFFECT THAT THE FEDERAL HOUSING ADMINISTRATOR, HAVING BEEN AUTHORIZED BY LAW TO "SUE AND BE SUED," WAS AMENABLE TO CIVIL PROCESS IN THE FORM OF GARNISHMENT BY A THIRD PARTY FOR AN EMPLOYEE'S SALARY, HAS NO APPLICATION TO AUTHORIZE COLLECTION OF AN EMPLOYEE'S FEDERAL TAX INDEBTEDNESS BY DISTRAINT AND LEVY UNDER SECTIONS 3690, 3692 AND 3710 OF THE INTERNAL REVENUE CODE, CONTRARY TO THE RULE THAT THE CURRENT SALARY OF AN EMPLOYEE STILL IN SERVICE MAY NOT BE INVOLUNTARILY SET OFF AGAINST SUCH INDEBTEDNESS (23 COMP. GEN. 911).

COMPTROLLER GENERAL WARREN TO THE NATIONAL HOUSING ADMINISTRATOR, JUNE 5, 1947:

I HAVE YOUR LETTER OF MAY 21, 1947, AS FOLLOWS:

THREE NOTICES OF LEVY ( FORM 668-A, TREASURY DEPARTMENT, INTERNAL REVENUE SERVICE, REVISED OCTOBER 1944) HAVE BEEN ADDRESSED TO THE FEDERAL HOUSING ADMINISTRATION BY THE UNITED STATES COLLECTOR OF INTERNAL REVENUE, COLLECTION DISTRICT OF MARYLAND, PURPORTING TO SEIZE AND LEVY UPON ALL SUMS OF MONEY OWING BY THIS ADMINISTRATION TO THREE OF ITS EMPLOYEES, AND DEMANDING PAYMENT OF THE AMOUNTS SPECIFIED THEREIN TO BE APPLIED TO OVERDUE AND UNPAID TAXES OF THE EMPLOYEES. THE NOTICES OF LEVY WERE DELIVERED TO THE FEDERAL HOUSING ADMINISTRATION BY AGENTS OF THE COLLECTOR OF INTERNAL REVENUE, WASHINGTON DISTRICT, ON MAY 14, 1947, AND WERE, IN EACH INSTANCE, ACCOMPANIED BY A WARRANT FOR DISTRAINT ( FORM 69, TREASURY DEPARTMENT, INTERNAL REVENUE SERVICE, REVISED MAY 1939) DIRECTED BY THE COLLECTOR OF THE MARYLAND DISTRICT TO AN UNNAMED DEPUTY COLLECTOR.

THE FEDERAL HOUSING ADMINISTRATION IS INDEBTED TO EACH OF THE EMPLOYEES NAMED IN THE NOTICES OF LEVY FOR SALARIES COVERING THE PERIOD APRIL 20, 1947, TO MAY 3, 1947; SALARY CHECKS DUE ON MAY 16, 1947, HAVING BEEN WITHHELD FROM THE EMPLOYEES PENDING A DETERMINATION AS TO THE ACTION REQUIRED OF THIS ADMINISTRATION PURSUANT TO THE NOTICES OF LEVY, IF ANY. THE SERVICES OF NONE OF THE EMPLOYEES HAVE BEEN TERMINATED, AND THE AMOUNTS DUE FOR SALARIES REPRESENT THE ONLY INDEBTEDNESS OF THIS ADMINISTRATION TO ANY OF THEM.

AS THIS ADMINISTRATION WAS IN DOUBT AS TO ITS RESPONSIBILITIES PURSUANT TO THE NOTICES OF LEVY, AND WHETHER IT SHOULD COMPLY WITH THE DEMANDS CONTAINED THEREIN, THESE CASES WERE INFORMALLY DISCUSSED WITH MR. A. P. RASIN, ASSISTANT COLLECTOR OF INTERNAL REVENUE, WASHINGTON DISTRICT, WHO SUGGESTED THE MATTER BE PRESENTED TO THE COMPTROLLER GENERAL OF THE UNITED STATES FOR DECISION. IT IS UNDERSTOOD THAT THE PURPORTED LEVY IN EACH INSTANCE IS MADE PURSUANT TO THE STATUTORY AUTHORITY CONTAINED IN THE INTERNAL REVENUE CODE (53 STAT. 451 AND 456; TITLE 26 U.S.C.A., SECTIONS 3690 AND 3710).

IN THE CASE OF THE FEDERAL HOUSING ADMINISTRATION V. BURR, 309 U.S. 242, IT WAS HELD BY THE SUPREME COURT OF THE UNITED STATES THAT THE GARNISHMENT OF THE FEDERAL HOUSING ADMINISTRATION FOR MONEYS DUE TO AN EMPLOYEE IS WITHIN THE CONSENT TO BE SUED GIVEN IN THE PROVISIONS OF THE NATIONAL HOUSING ACT, AS AMENDED, THAT THE FEDERAL HOUSING ADMINISTRATOR SHALL, IN CARRYING OUT THE PROVISIONS OF THE ACT, "BE AUTHORIZED IN HIS OFFICIAL CAPACITY TO SUE AND BE SUED IN ANY COURT OF COMPETENT JURISDICTION, STATE OR FEDERAL.' ON THE QUESTION AS TO WHETHER ANY FUNDS WERE AVAILABLE TO THE FEDERAL HOUSING ADMINISTRATOR WHICH MIGHT BE ATTACHED OR SUBJECTED TO THE GARNISHMENT, THE COURT SAID:

"THE RESULT IS THAT ONLY THOSE FUNDS WHICH HAVE BEEN PAID OVER TO THE FEDERAL HOUSING ADMINISTRATION IN ACCORDANCE WITH TITLE I, AND WHICH ARE IN ITS POSSESSION, SEVERED FROM TREASURY FUNDS AND TREASURY CONTROL, ARE SUBJECT TO EXECUTION. SINCE NO CONSENT TO REACH GOVERNMENT FUNDS HAS BEEN GIVEN, EXECUTION THEREON WOULD RUN COUNTER TO BUCHANAN V. ALEXANDER, 4 HOW. ( U.S.) 20, 11 L ED 857, SUPRA. TO CONCLUDE OTHERWISE WOULD BE TO ALLOW PROCEEDINGS AGAINST THE UNITED STATES WHERE IT HAD NOT WAIVED ITS IMMUNITY.'

IN THE CASE OF BUCHANAN V. ALEXANDER, TO WHICH THE ABOVE QUOTATION REFERS, THE COURT SAID:

"SO LONG AS MONEY REMAINS IN THE HANDS OF A DISBURSING OFFICER, IT IS AS MUCH THE MONEY OF THE UNITED STATES AS IF IT HAD NOT BEEN DRAWN FROM THE TREASURY.'

ON THE BASIS OF THE COURT'S DECISION IN THE BURR CASE, THIS ADMINISTRATION HAS CONSISTENTLY ACCEPTED SERVICE IN GARNISHMENT CASES, BUT HAS, IN EACH INSTANCE, FILED AN ANSWER CONTAINING THE FOLLOWING.

" . . . ALL MONEYS DUE THE DEFENDANT HEREIN, AS AN EMPLOYEE OF THE FEDERAL HOUSING ADMINISTRATION, AS SALARY FOR SAID PERIODS AND FOR ALL OTHER PERIODS, ARE PAYABLE EXCLUSIVELY FROM FUNDS DEPOSITED WITH THE TREASURER OF THE UNITED STATES; AND ALL SUCH PAYMENTS ARE MADE BY THE CHIEF DISBURSING OFFICER OF THE UNITED STATES THROUGH CHECKS DRAWN BY HIM UPON THE FEDERAL HOUSING ADMINISTRATION; AND IT IS BELIEVED THAT NEITHER THE FEDERAL HOUSING ADMINISTRATION NOR ANY OFFICER OR EMPLOYEE OF THE FEDERAL HOUSING ADMINISTRATION HAS ANY LAWFUL POWER OR AUTHORITY TO DELIVER SAID CHECKS TO ANY PERSON OTHER THAN THEIR PAYEES OR TO A LAWFUL REPRESENTATIVE OF SAID PAYEES AUTHORIZED TO RECEIVE THE SAME ON BEHALF OF THE SAID PAYEES.'

NO PAYMENTS ARE MADE EXCEPT IN SATISFACTION OF A CONDEMNATION JUDGMENT RENDERED AGAINST THE FEDERAL HOUSING ADMINISTRATION PURSUANT TO SUCH ANSWER. SALARY PAYMENTS OF THE THREE EMPLOYEES NAMED IN THE NOTICES OF LEVY ARE MADE BY THE CHIEF DISBURSING OFFICER OF THE UNITED STATES, AND ALL FUNDS FOR THE PAYMENT OF SALARIES TO EMPLOYEES OF THIS ADMINISTRATION ARE APPROPRIATED BY THE CONGRESS. IT IS NOT CLEAR WHETHER THE FUNDS REPRESENTED BY THE TREASURY CHECKS HAVE BEEN SEVERED FROM TREASURY CONTROL, NOR WHETHER ANY OFFICER OR EMPLOYEE OF THE FEDERAL HOUSING ADMINISTRATION HAS ANY POWER OR AUTHORITY TO DELIVER THE CHECKS, OR THE FUNDS REPRESENTED THEREBY, TO ANY PERSON OTHER THAN THE PAYEES OR TO A LAWFUL REPRESENTATIVE OF THE PAYEES AUTHORIZED TO RECEIVE THE SAME ON THEIR BEHALF.

WHILE THIS ADMINISTRATION DESIRES TO COOPERATE WITH THE COLLECTOR OF INTERNAL REVENUE IN EVERY LAWFUL MANNER, AND TO ASSIST IN THE ENFORCEMENT OF TAX OBLIGATIONS DUE THE GOVERNMENT BY ITS EMPLOYEES, THERE IS CONSIDERABLE DOUBT AS TO WHETHER A PAYMENT BY THE FEDERAL HOUSING ADMINISTRATION TO THE COLLECTOR OF INTERNAL REVENUE, OF THE AMOUNTS DUE THE EMPLOYEES FOR SALARY, WOULD RELEASE THE FEDERAL HOUSING ADMINISTRATION FROM ALL OBLIGATIONS TO THE EMPLOYEES ON ACCOUNT OF SALARY, IN THE ABSENCE OF A CONSENT OR AUTHORIZATION BY THE EMPLOYEES. YOUR ADVICE IN REGARD TO THIS QUESTION, AND YOUR EARLY REPLY WOULD BE APPRECIATED SINCE, AS STATED HEREINABOVE, THE SALARY CHECKS DUE THE EMPLOYEES AT THE TIME OF THE DELIVERY OF THE NOTICES OF LEVY ARE BEING RETAINED IN THIS OFFICE.

BEFORE ANSWERING THE SPECIFIC QUESTION PRESENTED IN YOUR LETTER, IT IS DEEMED ADVISABLE TO REFER BRIEFLY TO THE LEGAL PRECEDENTS GOVERNING MATTERS OF THE NATURE HERE INVOLVED. THE RIGHT OF SET-OFF IS INHERENT IN THE UNITED STATES GOVERNMENT AND IS GROUNDED IN THE COMMON-LAW RIGHT OF EVERY CREDITOR TO APPLY THE MONEYS OF HIS DEBTOR IN HIS HANDS TO THE EXTINGUISHMENT OF CLAIMS DUE HIM FROM THE DEBTOR. SEE GRATIOT V. UNITED STATES, 40 U.S. 336; MCKNIGHT V. UNITED STATES, 98 U.S. 178; BARRY V. UNITED STATES, 229 U.S. 47. HOWEVER, IT IS SETTLED THAT SUCH RIGHT OF SET -OFF IS NOT ENFORCEABLE SO FAR AS CONCERNS THE WITHHOLDING OF CURRENT SALARY PAYMENTS TO OFFICERS AND EMPLOYEES STILL IN THE FEDERAL SERVICE. SEE SMITH V. JACKSON, 246 U.S. 388; MCCARL V. COX, 8 F.2D 669; MCCARL V. PENCE, 18 F.2D 809.

THE BROAD IMPORT OF THE DECISION IN THE CASE OF SMITH V. JACKSON, SUPRA, HAS BEEN RESTRICTED SOMEWHAT BY THE PROVISIONS OF THE ACT OF MAY 26, 1936, 49 STAT. 1374, WHICH AUTHORIZES THE WITHHOLDING OF CURRENT SALARY "WHENEVER UPON THE STATEMENT OF ACCOUNT OF ANY DISBURSING OFFICER OF THE UNITED STATES IN THE GENERAL ACCOUNTING OFFICE CREDIT SHALL HAVE BEEN DISALLOWED FOR ANY PAYMENT TO ANY PEN IN THE EXECUTIVE BRANCH OF THE GOVERNMENT.' FURTHER, IT CONSISTENTLY HAS BEEN HELD THAT THE PROHIBITION AGAINST THE WITHHOLDING OF CURRENT SALARY DOES NOT APPLY TO FINAL SALARY PAYMENTS IN THE EVENT OF SEPARATION FROM THE FEDERAL SERVICE. SEE 16 COMP. GEN. 161; ID. 547. COMPARE O-LEARY V. UNITED STATES, 82 C.1CLS. 305.

WHILE NONE OF THE ABOVE-CITED DECISIONS INVOLVE THE MATTER OF SET OFF ON ACCOUNT OF A FEDERAL TAX INDEBTEDNESS, THERE IS PERCEIVED NO LEGAL BASIS UPON WHICH THAT PARTICULAR TYPE OF INDEBTEDNESS MAY BE DISTINGUISHED FROM ANY OTHER TYPE OF DEBT DUE THE UNITED STATES. AND NEITHER HAS THERE BEEN FOUND ANYTHING IN THE LANGUAGE OF THE COURTS' DECISIONS IN THOSE CASES WHICH FAIRLY MAY BE VIEWED AS COUNTENANCING ANY SUCH DISTINCTION. FURTHER, THE EXPRESS STATUTORY AUTHORITY CONTAINED IN THE SAID ACT OF MAY 26, 1936, TO WITHHOLD CURRENT SALARY IN THOSE CASES FALLING WITHIN THE NARROW CATEGORY THEREIN DEFINED WITH SUCH PARTICULARITY, WHEN VIEWED IN THE LIGHT OF THE HOLDING IN THE CASE OF SMITH V. JACKSON, SUPRA, WELL MIGHT BE CONSIDERED AS AN EXPRESSION OF CONGRESSIONAL INTENT TO DENY TO THE UNITED STATES THE RIGHT OF SET OFF AGAINST THE CURRENT SALARY OF EMPLOYEES STILL IN THE SERVICE UNDER ANY CIRCUMSTANCE OTHER THAN THAT SPECIFICALLY MENTIONED IN THAT ACT. MOREOVER, WITH RESPECT TO THE EFFECT OF A NOTICE OF LEVY BY THE COLLECTOR OF INTERNAL REVENUE, BALTIMORE, MARYLAND--- SIMILAR TO THE NOTICES OF LEVY HERE INVOLVED--- IN DECISION OF JUNE 2, 1944, 23 COMP. GEN. 911, TO THE DIRECTOR, DIVISION OF CENTRAL ADMINISTRATIVE SERVICES, OFFICE FOR EMERGENCY MANAGEMENT, IT WAS HELD (QUOTING THE SYLLABUS):

THE SERVING OF A NOTICE OF LEVY PURPORTING TO SEIZE MONEYS, ETC., IN THE HANDS OF THE GOVERNMENT BELONGING TO AN EMPLOYEE, PURSUANT TO THE RIGHT PROVIDED BY SECTIONS 3690, 3692 AND 3710 OF THE INTERNAL REVENUE CODE TO EFFECT COLLECTION OF UNPAID TAXES BY DISTRAINT AND LEVY, DOES NOT AUTHORIZE THE INVOLUNTARY SET-OFF OF CURRENT SALARY PAYMENTS DUE THE EMPLOYEE AGAINST HIS FEDERAL TAX INDEBTEDNESS, CONTRARY TO THE RULE THAT CURRENT SALARY PAYMENTS--- AS DISTINGUISHED FROM AMOUNTS DUE UPON SEPARATION--- ARE IMMUNE FROM SET-OFF EXCEPT, AS PROVIDED BY THE ACT OF MAY 26, 1936, IN THE CASE OF INDEBTEDNESS ARISING BY REASON OF DISALLOWANCES IN DISBURSING OFFICERS' ACCOUNTS.

THE REFERRED-TO DECISIONS--- BOTH OF THE COURTS AND OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT--- WOULD APPEAR TO SETTLE THE MATTER RESPECTING THE RIGHT OF THE UNITED STATES TO WITHHOLD CURRENT SALARY PAYMENTS FOR APPLICATION AGAINST DEBTS DUE THE UNITED STATES--- WHETHER SUCH DEBTS ARISE BY VIRTUE OF UNPAID FEDERAL TAXES OR OTHERWISE -- AND ARE DETERMINATIVE OF THE QUESTION PRESENTED IN YOUR LETTER. HOWEVER, SINCE IT APPEARS THAT THE INSTANT MATTER WAS SUBMITTED BECAUSE OF DOUBT AS TO THE EFFECT OF THE DECISION OF THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF FEDERAL HOUSING ADMINISTRATION V. BURR, 309 U.S. 242, UPON THE SETTLED RULES GOVERNING THE MATTER OF SET-OFF WITH RESPECT NOT ONLY TO THE FEDERAL HOUSING ADMINISTRATION, BUT, ALSO, TO GOVERNMENT DEPARTMENTS AND AGENCIES IN GENERAL, A DISCUSSION HERE OF THAT DECISION APPEARS PROPER. IN THAT CASE, THERE WAS FOR CONSIDERATION BY THE COURT THE QUESTION WHETHER THE FEDERAL HOUSING ADMINISTRATOR IS SUBJECT TO GARNISHMENT BY A THIRD PARTY FOR THE SALARY DUE AN EMPLOYEE OF THAT ADMINISTRATION. AND, IN ANSWERING THAT SPECIFIC QUESTION IN THE AFFIRMATIVE, THE COURT STATED: THE PROBLEM HERE IS UNLIKE THAT IN BUCHANAN V. ALEXANDER, 4 HOW. 20, WHERE CREDITORS OF SEAMEN OF THE FRIGATE CONSTITUTION WERE NOT ALLOWED TO ATTACH THEIR WAGES IN THE HANDS OF A DISBURSING OFFICER OF THE FEDERAL GOVERNMENT. THAT RULING WAS DERIVED FROM THE PRINCIPLE THAT THE UNITED STATES CANNOT BE SUED WITHOUT ITS CONSENT. THERE IS NO CONSENT WHATSOEVER TO "SUE AND BE SUED" HAD BEEN GIVEN. HERE THE SITUATION IS DIFFERENT. SEC. 1 OF TITLE I OF THE NATIONAL HOUSING ACT ( ACT OF JUNE 27, 1934, C. 847; 48 STAT. 1246) AUTHORIZED THE PRESIDENT "TO CREATE A FEDERAL HOUSING ADMINISTRATION, ALL OF THE POWER OF WHICH SHALL BE EXERCISED BY A FEDERAL HOUSING ADMINISTRATOR.' THAT SECTION WAS AMENDED IN 1935 ( ACT OF AUGUST 23, 1935, C. 614; 49 STAT. 684, 722) BY ADDING THERETO THE PROVISION THAT " THE ADMINISTRATOR SHALL, IN CARRYING OUT THE PROVISIONS OF THIS TITLE AND TITLES II AND III, BE AUTHORIZED, IN HIS OFFICIAL CAPACITY, TO SUE AND BE SUED IN ANY COURT OF COMPETENT JURISDICTION, STATE OR FEDERAL.'

SINCE CONSENT TO "SUE AND BE SUED" HAS BEEN GIVEN BY CONGRESS, THE PROBLEM HERE MERELY INVOLVES A DETERMINATION OF WHETHER OR NOT GARNISHMENT COMES WITHIN THE SCOPE OF THAT AUTHORIZATION. NO QUESTION AS TO THE POWER OF CONGRESS TO WAIVE THE GOVERNMENTAL IMMUNITY IS PRESENT. FOR THERE CAN BE NO DOUBT THAT CONGRESS HAS FULL POWER TO ENDOW THE FEDERAL HOUSING ADMINISTRATION WITH THE GOVERNMENT'S IMMUNITY FROM SUIT OR TO DETERMINE THE EXTENT TO WHICH IT MAY BE SUBJECTED TO THE JUDICIAL PROCESS. FEDERAL LAND BANK V. PRIDDY, 295 U.S. 229; KEIFER AND KEIFER V. RECONSTRUCTION FINANCE CORP., 306 U.S. 381.

AS INDICATED IN KEIFER AND KEIFER V. RECONSTRUCTION FINANCE CORP., SUPRA, WE START FROM THE PREMISE THAT SUCH WAIVERS BY CONGRESS OF GOVERNMENTAL IMMUNITY IN CASE OF SUCH FEDERAL INSTRUMENTALITIES SHOULD BE LIBERALLY CONSTRUED. THIS POLICY IS IN LINE WITH THE CURRENT DISFAVOR OF THE DOCTRINE OF GOVERNMENTAL IMMUNITY FROM SUIT, AS EVIDENCED BY THE INCREASING TENDENCY OF CONGRESS TO WAIVE THE IMMUNITY WHERE FEDERAL GOVERNMENTAL CORPORATIONS ARE CONCERNED. KEIFER AND KEIFER V. RECONSTRUCTION FINANCE CORP., SUPRA. HENCE, WHEN CONGRESS ESTABLISHES SUCH AN AGENCY, AUTHORIZES IT TO ENGAGE IN COMMERCIAL AND BUSINESS TRANSACTIONS WITH THE PUBLIC, AND PERMITS IT TO "SUE AND BE SUED," IT CANNOT BE LIGHTLY ASSUMED THAT RESTRICTIONS ON THAT AUTHORITY ARE TO BE IMPLIED. RATHER IF THE GENERAL AUTHORITY TO "SUE AND BE SUED" IS TO BE DELIMITED BY IMPLIED EXCEPTIONS, IT MUST BE CLEARLY SHOWN THAT CERTAIN TYPES OF SUITS ARE NOT CONSISTENT WITH THE STATUTORY OR CONSTITUTIONAL SCHEME, THAN AN IMPLIED RESTRICTION OF THE GENERAL AUTHORITY IS NECESSARY TO AVOID GRAVE INTERFERENCE WITH THE PERFORMANCE OF A GOVERNMENTAL FUNCTION, OR THAT FOR OTHER REASONS IT WAS PLAINLY THE PURPOSE OF CONGRESS TO USE THE "SUE AND BE SUED" CLAUSE IN A NARROW SENSE. IN THE ABSENCE OF SUCH SHOWING, IT MUST BE PRESUMED THAT WHEN CONGRESS LAUNCHED A GOVERNMENTAL AGENCY INTO THE COMMERCIAL WORLD AND ENDOWED IT WITH AUTHORITY TO "SUE OR BE SUED," THAT AGENCY IS NOT LESS AMENABLE TO JUDICIAL PROCESS THAN A PRIVATE ENTERPRISE UNDER LIKE CIRCUMSTANCES WOULD BE.

CLEARLY THE WORDS "SUE AND BE SUED" IN THEIR NORMAL CONNOTATION EMBRACE ALL CIVIL PROCESS INCIDENT TO THE COMMENCEMENT OR CONTINUANCE OF LEGAL PROCEEDINGS. GARNISHMENT AND ATTACHMENT COMMONLY ARE PART AND PARCEL OF THE PROCESS, PROVIDED BY STATUTE, FOR THE COLLECTION OF DEBTS. MICHIGAN A WRIT OF GARNISHMENT IS A CIVIL PROCESS AT LAW, IN THE NATURE OF AN EQUITABLE ATTACHMENT. SEE POSSELIUS V. FIRST NATIONAL BANK, 264 MICH. 687; 251 1 N.W. 429. BUT HOWEVER IT MAY BE DENOMINATED, WHETHER LEGAL OR EQUITABLE, AND WHENEVER IT MAY BE AVAILABLE, WHETHER PRIOR TO OR AFTER FINAL JUDGMENT, GARNISHMENT IS A WELL-KNOWN REMEDY AVAILABLE TO SUITORS. TO SAY THAT CONGRESS DID NOT INTEND TO INCLUDE SUCH CIVIL PROCESS IN THE WORDS "SUE AND BE SUED" WOULD IN GENERAL DEPRIVE SUITS OF SOME OF THEIR EFFICACY. HENCE, IN ABSENCE OF SPECIAL CIRCUMSTANCES, WE ASSUME THAT WHEN CONGRESS AUTHORIZED FEDERAL INSTRUMENTALITIES OF THE TYPE HERE INVOLVED TO "SUE AND BE SUED" IT USED THOSE WORDS IN THEIR USUAL AND ORDINARY SENSE.

FROM THE ABOVE-QUOTED LANGUAGE OF THE COURT, IT IS APPARENT THE CONCLUSION THAT GARNISHMENT, AS AN INCIDENT TO CIVIL PROCESS, MAY ISSUE AGAINST THE FEDERAL HOUSING ADMINISTRATOR, WAS BASED UPON THE EXPRESS STATUTORY PROVISION IN TITLE I OF THE ACT OF JUNE 27, 1934, 48 STAT. 1246, AS AMENDED, 49 STAT. 722, THAT THE FEDERAL HOUSING ADMINISTRATOR, IN HIS OFFICIAL CAPACITY, SHALL "SUE AND BE SUED" IN ANY COURT OF COMPETENT JURISDICTION. THAT IS TO SAY, THE USUAL SOVEREIGN IMMUNITY FROM SUIT WHICH ATTACHES TO THE UNITED STATES AND ITS INSTRUMENTALITIES HAVING BEEN WITHDRAWN FROM THE FEDERAL HOUSING ADMINISTRATION BY SPECIFIC STATUTORY PROVISION, THAT ADMINISTRATION, LIKE ANY OTHER PRIVATE ENTERPRISE, WAS AMENABLE TO SUIT AND THE ORDINARY LEGAL PROCESSES ATTENDANT THERETO. WAS THIS AMENABILITY TO SUIT WHICH WAS THE SOLE DETERMINING FACTOR AS TO WHETHER GARNISHMENT IN FAVOR OF THE THIRD PARTY PROPERLY MAY ISSUE AGAINST THE FEDERAL HOUSING ADMINISTRATOR.

THE AUTHORITY OF A COLLECTOR OF INTERNAL REVENUE TO ISSUE NOTICES OF LEVY AND WRITS OF DISTRAINT IS DERIVED FROM CERTAIN PROVISIONS OF THE INTERNAL REVENUE CODE (26 U.S.C. 3660, ET SEQ.), WHICH READ AS FOLLOWS:

SEC. 3690. AUTHORITY TO DISTRAIN.

IF ANY PERSON LIABLE TO PAY ANY TAXES NEGLECTS OR REFUSES TO PAY THE SAME WITHIN TEN DAYS AFTER NOTICE AND DEMAND, IT SHALL BE LAWFUL FOR THE COLLECTOR OR HIS DEPUTY TO COLLECT THE SAID TAXES, WITH SUCH INTEREST AND OTHER ADDITIONAL AMOUNTS AS ARE REQUIRED BY LAW, BY DISTRAINT AND SALE, IN THE MANNER PROVIDED IN THIS SUBCHAPTER, OF THE GOODS, CHATTELS, OR EFFECTS, INCLUDING STOCKS, SECURITIES, BANK ACCOUNTS, AND EVIDENCES OF DEBT, OF THE PERSON DELINQUENT AS AFORESAID.

SEC. 3692. LEVY.

IN CASE OF NEGLECT OR REFUSAL UNDER SECTION 3690, THE COLLECTOR MAY LEVY, OR BY WARRANT MAY AUTHORIZE A DEPUTY COLLECTOR TO LEVY, UPON ALL PROPERTY AND RIGHTS TO PROPERTY, EXCEPT SUCH AS ARE EXEMPT BY THE PRECEDING SECTION, BELONGING TO SUCH PERSON, OR ON WHICH THE LIEN PROVIDED IN SECTION 3670 EXISTS, FOR THE PAYMENT OF THE SUM DUE, WITH INTEREST AND PENALTY FOR NONPAYMENT, AND ALSO OF SUCH FURTHER SUM AS SHALL BE SUFFICIENT FOR THE FEES, COSTS, AND EXPENSES OF SUCH LEVY.

SEC. 3710. SURRENDER OF PROPERTY SUBJECT TO DISTRAINT.

(A) REQUIREMENT.--- ANY PERSON IN POSSESSION OF PROPERTY, OR RIGHTS TO PROPERTY, SUBJECT TO DISTRAINT, UPON WHICH A LEVY HAS BEEN MADE, SHALL, UPON DEMAND BY THE COLLECTOR OR DEPUTY COLLECTOR MAKING SUCH LEVY, SURRENDER SUCH PROPERTY OR RIGHTS TO SUCH COLLECTOR OR DEPUTY, UNLESS SUCH PROPERTY OR RIGHT IS, AT THE TIME OF SUCH DEMAND, SUBJECT TO AN ATTACHMENT OR EXECUTION UNDER ANY JUDICIAL PROCESS.

(B) PENALTY FOR VIOLATION.--- ANY PERSON WHO FAILS OR REFUSES TO SO SURRENDER ANY OF SUCH PROPERTY OR RIGHTS SHALL BE LIABLE IN HIS OWN PERSON AND ESTATE TO THE UNITED STATES IN A SUM EQUAL TO THE VALUE OF THE PROPERTY OR RIGHTS NOT SO SURRENDERED, BUT NOT EXCEEDING THE AMOUNT OF THE TAXES (INCLUDING PENALTIES AND INTEREST) FOR THE COLLECTION OF WHICH SUCH LEVY HAS BEEN MADE, TOGETHER WITH COSTS AND INTEREST FROM THE DATE OF SUCH LEVY.

(C) PERSON DEFINED.--- THE TERM "PERSON" AS USED IN THIS SECTION INCLUDES AN OFFICER OR EMPLOYEE OF A CORPORATION OR A MEMBER OR EMPLOYEE OF A PARTNERSHIP, WHO, AS SUCH OFFICER, EMPLOYEE, OR MEMBER IS UNDER DUTY TO PERFORM THE ACT IN RESPECT OF WHICH THE VIOLATION OCCURS.

UNDER THE ABOVE-QUOTED STATUTORY PROVISIONS, THE ISSUANCE OF NOTICES OF LEVY AND WARRANTS OF DISTRAINTS ARE MATTERS PLACED SQUARELY WITHIN THE JURISDICTION OF THE COLLECTOR OF INTERNAL REVENUE AND ARE A PROPER EXERCISE OF THE FUNCTIONS OF HIS OFFICE AS A PART OF THE EXECUTIVE BRANCH OF THE GOVERNMENT. HENCE, THE FACT THAT AN INSTRUMENTALITY OF THE GOVERNMENT DOES OR DOES NOT HAVE THE CAPACITY TO "SUE AND BE SUED" IS IMMATERIAL TO A DETERMINATION OF ITS SUSCEPTIBILITY TO SERVICE OF NOTICE OF LEVY AND DISTRAINT BY A COLLECTOR OF INTERNAL REVENUE WHICH, UNLIKE GARNISHMENTS, ARE NOT FOUNDED UPON JUDICIAL DECREE OR PROCESS. CONSEQUENTLY, THE HOLDING OF THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF FEDERAL HOUSING ADMINISTRATOR V. BURR, SUPRA, SO FAR AS IT PERTAINS TO THE ISSUANCE OF GARNISHMENT AGAINST THE ADMINISTRATOR, IS NOT CONTROLLING IN THE INSTANT MATTER.

THE ISSUANCE OF NOTICES OF LEVY AND DISTRAINT IS NOT A "SUIT" AS THAT WORD IS USED IN STATUTES, AND NEITHER IS IT NECESSARILY FOUNDED UPON JUDICIAL PROCEEDINGS. INSOFAR AS THE ISSUANCE OF SUCH NOTICES TO OFFICIALS OR AGENCIES OF THE FEDERAL GOVERNMENT IS CONCERNED, IT PARTAKES OF THE NATURE OF A DEMAND BY ONE ARM OF THE GOVERNMENT UPON ANOTHER SUCH ARM FOR THE APPLICATION OF MONEYS OR PROPERTY BELONGING TO THE TAX DEBTOR IN SATISFACTION OF HIS DEBT. ACCORDINGLY, IN SUCH MATTERS, NO QUESTION OF SOVEREIGN IMMUNITY ARISES. CLEARLY, SUCH ACTIONS ARE, IN EFFECT, ATTEMPTS TO SET OFF THE TAX INDEBTEDNESS DUE TO THE UNITED STATES AGAINST MONEYS DUE FROM THE UNITED STATES TO THE DEBTOR. CONSEQUENTLY, WHERE, AS IN THE CASES MENTIONED IN YOUR LETTER, SUCH LEVY AND DISTRAINT ARE DIRECTED AGAINST THE CURRENT SALARY OF AN OFFICER OR EMPLOYEE STILL IN THE FEDERAL SERVICE, THERE WOULD APPEAR TO BE FOR APPLICATION THE RULE APPLIED IN THE CASE OF SMITH V. JACKSON, SUPRA, AND THE ADMINISTRATIVE OFFICIAL SERVED WITH SUCH NOTICE WOULD BE WITHOUT AUTHORITY TO WITHHOLD ANY PORTION OF THE CURRENT SALARY OF SUCH EMPLOYEE IN SATISFACTION OF THE NOTICES OF LEVY AND DISTRAINT.