B-155908, MAY 14, 1965
Highlights
BOTH CONTRACTS WERE COMPLETED AND THE WORK WAS ACCEPTED. THE CONTRACTOR WAS ADJUDGED A BANKRUPT IN APRIL OF 1964. WE HAVE BEEN ADVISED BY THE INTERNAL REVENUE SERVICE THAT FLAGG CONSTRUCTION. WE ARE INSTRUCTING OUR CLAIMS DIVISION TO DETERMINE THE TOTAL RETAINED AMOUNTS AVAILABLE FOR SET-OFF UNDER THE TWO CONTRACTS. OUR CLAIMS DIVISION WILL ASK THE INTERNAL REVENUE SERVICE TO RECOMPUTE THE TAXES INCLUDING INTEREST AND PENALTIES PROPERLY FOR SET-OFF UNDER THE CIRCUMSTANCES AGAINST THE RETAINED PERCENTAGES. OUR CLAIMS DIVISION WILL ALSO REQUIRE A POWER OF ATTORNEY FROM THE SURETY STATING THAT YOU ARE AUTHORIZED TO RECEIVE PAYMENT ON THE CLAIM IN BEHALF OF YOUR CLIENT.
B-155908, MAY 14, 1965
TO SAMUEL H. COHEN, ESQUIRE:
WE REFER TO YOUR LETTERS OF MARCH 12 AND APRIL 26, 1965, REFERENCE: 3089, RELATIVE TO THE CLAIM OF THE NEW AMSTERDAM CASUALTY COMPANY, AS SURETY, FOR THE UNPAID CONTRACT BALANCES RETAINED BY THE GOVERNMENT UNDER CONTRACT NO.S DA-08-123-ENG-4696 AND 4764 BETWEEN THE DEPARTMENT OF THE ARMY AND FLAGG CONSTRUCTION COMPANY.
BOTH CONTRACTS WERE COMPLETED AND THE WORK WAS ACCEPTED. THE CONTRACTOR WAS ADJUDGED A BANKRUPT IN APRIL OF 1964. YOU STATE THAT THE SURETY HAS PAID OUT THE SUM OF $43,665.27 TO SUPPLIERS FOR LABOR AND MATERIAL.
WE HAVE BEEN ADVISED BY THE INTERNAL REVENUE SERVICE THAT FLAGG CONSTRUCTION, INCORPORATED, MAIN STREET, NEW CASTLE, NEW HAMPSHIRE, OWES OUTSTANDING TAXES AS FOLLOWS: UNPAID WITHHOLDING AND FICA TAXES AND PENALTIES FOR THE FOURTH QUARTER OF 1963 AND THE FIRST QUARTER OF 1964, IN THE AMOUNT OF $7,161.68, AND UNPAID FUTA TAXES AND PENALTIES FOR YEARS 1962 AND 1963, IN THE AMOUNT OF $2,539.57. (THE INTERNAL REVENUE SERVICE HAS ALSO COMPUTED INTEREST TO APRIL 6, 1965, IN THE AMOUNTS OF $493.65 AND $124.89, RESPECTIVELY.)
IN UNITED STATES V. MUNSEY TRUST, 332 U.S. 234, (1947), THE SUPREME COURT HELD THAT, NOTWITHSTANDING THE CLAIM OF A SURETY ON A STATUTORY PAYMENT BOND, THE GOVERNMENT MAY SET-OFF, AGAINST UNAPPROPRIATED PERCENTAGES OF PROGRESS PAYMENTS WITHHELD BY IT AND DUE TO THE CONTRACTOR ON THE CONTRACT, A DEBT UNRELATED TO THE CONTRACT OWED TO IT BY THE CONTRACTOR. THEREFORE, WE ARE INSTRUCTING OUR CLAIMS DIVISION TO DETERMINE THE TOTAL RETAINED AMOUNTS AVAILABLE FOR SET-OFF UNDER THE TWO CONTRACTS. FURTHER, OUR CLAIMS DIVISION WILL ASK THE INTERNAL REVENUE SERVICE TO RECOMPUTE THE TAXES INCLUDING INTEREST AND PENALTIES PROPERLY FOR SET-OFF UNDER THE CIRCUMSTANCES AGAINST THE RETAINED PERCENTAGES. ANY REMAINING BALANCE OF THE RETAINED FUNDS WOULD PROPERLY BE FOR PAYMENT.
YOU ASK US TO FURNISH YOU WITH A RELEASE SUCH AS WE WOULD REQUIRE THE TRUSTEE-IN-BANKRUPTCY TO EXECUTE. THIS OFFICE DOES NOT PROVIDE SUCH FORMS AND WOULD EXPECT THE TRUSTEE TO PREPARE ITS OWN RELEASE. OUR CLAIMS DIVISION WILL ALSO REQUIRE A POWER OF ATTORNEY FROM THE SURETY STATING THAT YOU ARE AUTHORIZED TO RECEIVE PAYMENT ON THE CLAIM IN BEHALF OF YOUR CLIENT.