Document: 345 U.S. 639 73 S.Ct. 917 97 L.Ed. 1312 CENTRAL BANKv.UNITED STATES. No. 521. Argued April 29, 1953. Decided June 1, Mr. George H. Koster, San Francisco, Cal., for petitioner. Lester S. Jayson, New York City, respondent. Justice REED delivered the opinion of Court. 1 This grant certiorari requires us to construe provision Assignment Claims Act 1940, 54 Stat. 1029, 31 U.S.C. § 203, U.S.C.A. which provides: 2 'Any contract entered into by War Department or Navy may provide that payments an assignee any claim arising under such shall not be subject reduction set-off, and if it is so provided in contract, set-off indebtedness assignor United States independently contract.'1 3 The facts case are dispute. Graham Ship Repair Company, a California partnership, ship repair work with on December 30, 1944. As permitted authorized Company assign proceeds bank were 'subject set off Contractor Government this contract.' 4 After had been made, arranged petitioner, banking corporation, financing work. security funds advanced, assigned payable assignment was made January 31, 1945. Contracting Officer, Bureau Ships, Department, Disbursing Officer General Accounting Office duly notified as required Act. 5 Pursuant assignment, received substantial sums money from petitioner use performing contract. During course performance failed remit Collector Internal Revenue $453,469.55 withholding taxes, $11,462.91 federal unemployment withheld, pursuant §§ 1401 1622 Code, 26 1401, 1622, salaries wages its employees who engaged called Instead remitting these Collector, converted them own use. Because dereliction terminated March 1946, individuals partnership pleaded guilty indictment willful attempt evade payment withheld taxes. 6 At time terminated, Graham's obligation unpaid interest penalties, aggregated $616,750.95. sum $110,966.08 due performed Also at indebted amount excess advances assignment. 7 Petitioner, assignee, filed balance Commissioner also claimed amount. Comptroller ruled proper against tax accordingly reduced $415,018.17. 8 Thereafter brought suit Court Claims. That court held because deductions 'not entirely independent contract', Central Bank v. States, Ct.Cl., 105 F.Supp. 992, 994, therefore entitled recover 9 Prior would have no effect States. Under Anti-Assignment Statutes, R.S. 3477 3737, while might some circumstances good between Martin National Surety Co., 300 588, 57 531, 81 822, could operate detriment rights Any effective assignee. 10 amending Statutes,2 validated moneys become government institution. Departments limit Government's previous set-off. See 3477, amended 41 15. It provided, see supra, p. 'that set-off'. 11 1940 evidently designed assist national defense program through facilitating contracts limiting power reduce properly payments.3 Borrowers penalized one contracting party Government. Contractors well obligations imposed flowed, example contractor's income prior earnings taxes here involved another illustration dangers lenders. 12 clause question prohibits set-offs 'any contract,' embodied amendment introduced Senator Barkley during debate Act.4 In proposing amendment, stated: 13 'Mr. President, merely provides when contractor, order obtain he perform his program, assigns trust company get proceed work, permissible offset later contractor owe account other situation. * *' 14 Otherwise, 15 '* come assert something else relationship whatever program.' decision below said: 16 'The knew withhold pay defendant. arose before partners their directly associated 17 'In independent, we think term used intended Act, must arise irrespective of, exclusive separate direct relation contract.'5 18 To support position, words Munsey Trust Co. relied upon: 19 '(One) compelled lessen chance recovering what him setting up fund undiminished claim, others share him.' 332 234, 240, 67 1599, 1602, 91 2022. 20 inapplicable. turns ability reimburse itself ahead surety expended laborers out surety's principal. No problem surety. 21 requirement 'payment wages' same over did squarely Code.6 Without statutory duty due, just profits earned. embezzlement lay neither execution nor breach conversion trustee 3661 code.7 Assignor arose, think, 'independently' 22 Finally urged should construed protect short answer carry purpose Congress encourage private contracts.8 sought-for case, defeat Congress. require police assignor's accounting system. increase risk difficulty performance, ultimate cost 23 Reversed. 24 CHIEF JUSTICE, BURTON CLARK dissent. 25 BLACK JACKSON took part consideration case. Amended include Air Force July 26, 1947, 61 501, 508, (Supp. III) 203. issue has prospectively settled 1951 65 41, 42, V) rephrasing subsection bar specific liability (1) renegotiation (2) fines, (3) penalties *, (4) social contributions, nonwithholding whether 'Except herein otherwise nothing amended, deemed affect impair heretofore accrued.' 42. caused uneasiness among lenders rulings General: dated May 17, 1949, that, event price revision revised either 'or recovered already paid.' Generally, bank, immediately applied loan, released borrower. several instances, long after full bank's loan claims recovery previously 'It understanding banks statute protected outside terms However, 15, 1950, social-security contributions S.Rep. 217, 82d Cong., 1st Sess., 2. Hearings Senate Committee Banking Currency 4340, 76th 3d et seq.; 86 Cong.Rec. 12803; H.R.Rep. 2925, 2; 2136, 12803. 994. '§ 1400. Rate tax. addition there levied, collected, paid upon every individual equal following percentages *. 1401. Deduction wages—(a) Requirement. section 1400 collected employer taxpayer, deducting paid. '(b) Indemnification employer. 'Every deduct liable tax, indemnified demands person 1622. Income source—(a) Requirement withholding. making following: *.' 3661. Enforcement collected. 'Whenever collect internal-revenue special assessed, manner provisions limitations (including penalties) applicable respect arose.' Guaranty 280 478, 483, 50 212, 213, 74 566. sought priority 3466 debts embarrassed railroads. Transportation 1920, Tit. II, 207, 209, 210, 456, 457—469. Although waiver 3466, similar right claimed, held: 'To given title defeated only prevented re-e stablishment railroad credit bankers investors, but even seriously impaired market value outstanding securities. deprived carriers commonly enjoyed supplymen others; daily operations; necessary great enlargement working capital. loans 210 frustrated. For, ill afford voluntarily new thereunder displace, pro tanto, existing bonded indebtedness. entire spirit act makes clear rule leading consequences applied.' page 485, 214.

Category: 11