Skip to Highlights
Highlights

WHICH WERE FORWARDED HERE BY YOUR BANK ON FEBRUARY 8. IT IS CONTENDED THAT THE DECREE OF THE COUNTY COURT IS BINDING UPON THE UNITED STATES BECAUSE THE GOVERNMENT SUBMITTED TO THE JURISDICTION OF THE COURT BY FILING A CLAIM FOR THE NEW TAX INDEBTEDNESS. THE QUESTION OF WHETHER THE GOVERNMENT IS AUTHORIZED TO OFFSET THE AMOUNT OF THE TWO CHECKS IS MATERIALLY SIGNIFICANT IN VIEW OF THE INSOLVENCY OF THE ESTATE. IN THE POSSESSION OF THE PAYEE OR HIS REPRESENTATIVE THE CHECKS MERELY ARE EVIDENCE OF A LIQUIDATED INDEBTEDNESS OF THE UNITED STATES. THE ACCOUNTING OFFICERS OF THE GOVERNMENT HAVE CONSISTENTLY APPLIED THE RULE THAT THE RECEIPT OF A CHECK DOES NOT CONSTITUTE PAYMENT WHERE IT IS NOT NEGOTIATED BY THE PAYEE PRIOR TO HIS DEATH. 24 COMP.

View Decision

B-124972, DEC. 8, 1955

TO UNITED STATES NATIONAL BANK OF OMAHA:

THERE HAS BEEN CAREFULLY CONSIDERED THE MATTER OF THE TWO TAX REFUND CHECKS, NOS. 58,462,260 AND 58,462,261, DATED OCTOBER 6, 1947, WHICH WERE FORWARDED HERE BY YOUR BANK ON FEBRUARY 8, 1955, WITH A CLAIM FOR PAYMENT BY THE ESTATE OF LELAND B. COFFEY, THE PAYEE, NOW DECEASED.

IN A SETTLEMENT OF APRIL 8, 1955, THIS OFFICE RECOGNIZED THE CLAIM OF THE ESTATE BUT APPLIED THE PROCEEDS OF THE CHECKS, $3,720.72, TO A TAX INDEBTEDNESS OF MR. COFFEY, IN THE AMOUNT OF $8,928.67, FOR THE YEARS 1944, 1945 AND 1946.

THE ATTORNEYS FOR THE ESTATE, IN A LETTER TO YOU, QUESTION THE PROPRIETY OF THE SET-OFF IN VIEW OF THE FINAL DECREE OF THE COUNTY COURT OF DOUGLAS COUNTY, STATE OF NEBRASKA, THE COURT HAVING PROBATE JURISDICTION OF THE ESTATE. IT IS CONTENDED THAT THE DECREE OF THE COUNTY COURT IS BINDING UPON THE UNITED STATES BECAUSE THE GOVERNMENT SUBMITTED TO THE JURISDICTION OF THE COURT BY FILING A CLAIM FOR THE NEW TAX INDEBTEDNESS.

THE FINAL DECREE OF THE COUNTY COURT OF DOUGLAS COUNTY, DATED DECEMBER 13, 1954, TOOK COGNIZANCE OF THE GOVERNMENT'S TAX CLAIM FOR $8,928.67; BUT, INSTEAD OF APPLYING THE AMOUNT OF THE TWO TAX REFUND CHECKS AS A CREDIT, SOLELY TO THE CLAIM OF THE UNITED STATES AND RECOGNIZING THE GOVERNMENT'S CLAIM IN THE REDUCED AMOUNT, THE COURT AUTHORIZED THE EXECUTRIX OF THE ESTATE TO APPLY THE PROCEEDS OF THE TWO CHECKS TO THE PAYMENT OF ALL RECOGNIZED CLAIMS, INCLUDING THAT OF THE UNITED STATES. THE QUESTION OF WHETHER THE GOVERNMENT IS AUTHORIZED TO OFFSET THE AMOUNT OF THE TWO CHECKS IS MATERIALLY SIGNIFICANT IN VIEW OF THE INSOLVENCY OF THE ESTATE.

THE CHECKS, DRAWN ON THE TREASURER OF THE UNITED STATES TO THE ORDER OF LELAND B. COFFEY, DID NOT CONFER UPON THE PAYEE OR HIS REPRESENTATIVE ANY PROPERTY OR LIEN UPON SPECIFIC MONEYS IN THE TREASURY OF THE UNITED STATES WHICH COULD BE CONSIDERED A PART OF THE ESTATE. IN THE POSSESSION OF THE PAYEE OR HIS REPRESENTATIVE THE CHECKS MERELY ARE EVIDENCE OF A LIQUIDATED INDEBTEDNESS OF THE UNITED STATES. THE ACCOUNTING OFFICERS OF THE GOVERNMENT HAVE CONSISTENTLY APPLIED THE RULE THAT THE RECEIPT OF A CHECK DOES NOT CONSTITUTE PAYMENT WHERE IT IS NOT NEGOTIATED BY THE PAYEE PRIOR TO HIS DEATH. 24 COMP. GEN. 61. IN A DECISION OF MARCH 22, 1940, 19 COMP. GEN. 811, ADDRESSED TO THE CHAIRMAN, RAILROAD RETIREMENT BOARD, IT WAS SAID:

"IT IS WELL SETTLED THAT IN THE ABSENCE OF A SPECIAL AGREEMENT TO THAT EFFECT, THE DELIVERY AND ACCEPTANCE OF A CHECK DOES NOT OPERATE AS PAYMENT OF A DEBT UNLESS THE CHECK IS PAID. CLEVE V. CRAVEN CHEMICAL CO., 18 FED. (2D) 711, 712; DOW V. COWAN, 23 FED. (2D) 646, 647; JEFFERSON STANDARD LIFE INSURANCE CO. V. WISDOM, 58 FED. (2D) 565, 566; CARCABA V. MCNAIR, 68 FED. (2D) 795, 796; MITTRY BROTHERS CONSTRUCTION CO. V. UNITED STATES, 75 FED. (2D) 79, 82; STANDARD INVESTMENT CO. V. TOWN OF SNOWHILL, NORTH CAROLINA, 78 FED. (2D) 33, 35-6; MANUFACTURERS FINANCE CO. V. ARMSTRONG, 78 FED. (2D) 289, 290; HAMILTON V. R. S. DICKSON AND CO., 85 FED. (2D) 107.'

THAT THE UNITED STATES MAY RESPOND TO A DEMAND UPON IT WITH AN ACTION OF SET-OFF IS WELL ESTABLISHED. SEE CHERRY COTTON MILLS, INC. V. UNITED STATES, 327 U.S. 536. THE GOVERNMENT HAS THE SAME RIGHT "WHICH BELONGS TO EVERY CREDITOR, TO APPLY THE UNAPPROPRIATED MONEYS OF HIS DEBTOR, IN HIS HANDS, IN EXTINGUISHMENT OF THE DEBTS DUE HIM.' GRATIOT V. UNITED STATES, 15 PET. 336, 370; UNITED STATES V. MUNSEY TRUST CO., 332 U.S. 234, 239. AND IN THE PRESENT CASE, THE FACT THAT THE ESTATE IS INSOLVENT WOULD NOT PRECLUDE THE EXERCISE BY THE GOVERNMENT OF ITS RIGHT OF SET-OFF. SEE, GENERALLY, SCOTT V. ARMSTRONG, 146 U.S. 499; 28 AM.JUR., INSOLVENCY, SECTION 42.

INSOFAR AS THE UNITED STATES WAS A PARTY TO THE PROBATE PROCEEDINGS OF THE ESTATE OF MR. COFFEY, THE COURT HAD BEFORE IT ONLY THE CLAIM OF THE GOVERNMENT AND SUCH CREDITS AS MAY BE ASSERTED BY THE ESTATE. THE COURT WAS WITHOUT JURISDICTION TO ENTERTAIN A CLAIM OR CROSS-CLAIM AGAINST THE UNITED STATES BECAUSE SUCH CLAIMS ARE JUSTICIABLE ONLY IN THOSE COURTS WHERE CONGRESS HAS CONSENTED TO THEIR CONSIDERATION. UNITED STATES V. SHAW, 309 U.S. 495; UNITED STATES V. U.S. FIDELITY CO. 309 U.S. 506. THUS, THE DECREE OF THE COUNTY COURT CANNOT BE GIVEN THE EFFECT ATTRIBUTED TO IT BY THE ATTORNEYS FOR THE ESTATE, THAT OF REQUIRING THE UNITED STATES TO RECOGNIZE THE CLAIM OF THE ESTATE WITHOUT THE EXERCISE OF A RIGHT OF SET-OFF.

UPON RECONSIDERATION, THE SET-OFF EFFECTED BY THE SETTLEMENT OF APRIL 8, 1955, IS FOUND TO BE PROPER AND THE TWO CHECKS WILL BE RETAINED IN THIS OFFICE AS A MATTER OF OFFICIAL RECORD.

GAO Contacts