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![handle is hein.gao/gaobadmhu0001 and id is 1 raw text is:
OWCIUION
FILE: B-221717
THE COMPT9IOLLIPI EINIUAL
OP THE UNIT8O ITATE
WASHINGTON, C.0. 2054l
DATE: May 5, 1986
MATTER OF: Priority to Contract Proceeds
DIGEST:-
Assignee bank has priority over the Internal
Revenue Service for payment of contract
proceeds even though tax debt matured before
assignee satisfied requirements of Assignment
of Claims Act, 31 U.S.C. S 3727, since con-
tract included a no setoff clause, the assign-
ment was made to finance the contract, and the
assignor still owes the assignee bank more
than the amount of the contract proceeds.
An Army Corps of Engineers disbursing officer asks
about priority between the Internal Revenue Service (IRS)
and the--assignee, Security State Bank of Aitkin, Minnesota,
(Bank) for distribution of $7,068.55 proceeds due under a
purchase order contract between the Corps of Engineers and>i-1--
Ray Kullhem, and the proper amount to be paid to each. For
the reasons given below, assuming the Bank's factual
assertions are correct, the proceeds should all be paid to
the Bank.
On January 4, 1984, an assignment under the Uniform
Commercial-Code of all the accounts receivable of
Ray Kullhem in favor of the Security State Bank of Aitkin
was recorded in the Office of the County Recorder for Aitkin
County, Minnesota. On August 6, 1985 an IRS tax lien was
issued against Ray Kullhem in the assessed amount of
$5,529.64. The dates of the assessments were March 5, 1984
and March 18, 1985.
In September 1985, Mr. Kullhem entered into a purchase
order contract with the Corps of Engineers for construction
of a swimming pool for $9,983. Subsequently, the contract
amount was increased to $13,123. The contract permitted
assignments under the Assignment of Claims Act, 31 U.S.C.
S 3727, and contained a no setoff clause. The clause
stated: [P]ayments to an assignee of any amounts due or to
become due under this contract shall not to the extent
specified in the Act, be subject to reduction or setoff.
- On November 7, 1985, Mr. Kullhem executed an assignment
of the described purchase order contract to the Security
State Bank of Aitkin. The assignment provided that all sums](ViewImageLocal?handle=hein.gao/gaobadmhu0001&div=1&collection=&method=preview&ext=.png&size=3)