B-125205, MAR. 19, 1956

B-125205, MAR. 19, 1956

TO COASTAL COMMERCIAL CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 22, 1955, ACKNOWLEDGING RECEIPT OF CHECK IN THE SUM OF $13,250, ISSUED IN SETTLEMENT OF YOUR CLAIM, AS ASSIGNEE OF CARTERET WORK UNIFORMS, CARTERET, NEW JERSEY, UNDER CONTRACT NO. DA-30-280-QM-13068. YOU STATE THAT THE GOVERNMENT'S FAILURE TO PAY YOU THE ENTIRE BALANCE DUE UNDER THE CONTRACT WAS IN ERROR, AND THAT THE SAID CHECK WAS BEING ACCEPTED ONLY ON CONDITION THAT IT WOULD NOT PREJUDICE YOUR RIGHT TO SEEK PAYMENT OF THE BALANCE OTHERWISE PAYABLE UNDER THE CONTRACT.

YOUR ASSUMPTION AS TO YOUR RIGHTS UNDER WHICH YOU ACCEPTED THE FOREGOING CHECK IS CORRECT; HOWEVER, WITH RESPECT TO YOUR PROTEST REGARDING THE DISPOSITION OF THE GROSS AMOUNT OF THE PROCEEDS OF THE CLAIM YOU ARE ADVISED THAT SUCH ACTION WAS TAKEN PURSUANT TO THE DUTIES IMPOSED BY LAW UPON THE GENERAL ACCOUNTING OFFICE. SEE 31 U.S.C. 71, ET SEQ. SPECIFICALLY, YOU CONTEND THAT NO RIGHT OF SETOFF MAY BE EXERCISED AGAINST YOU AS ASSIGNEE OF THE CARTERET WORK UNIFORMS, AND THAT THE ORDER OF THE NEW JERSEY COURT DID NOT PURPORT TO LIMIT THE AMOUNT TO WHICH YOU WERE ENTITLED UNDER THE AWARD MADE BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS IN FAVOR OF YOUR ASSIGNOR.

ORDINARILY, WHERE THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, 31 U.S.C.A. 203, HAVE BEEN MET, ALL PAYMENTS DUE IN ACCORDANCE THEREWITH ARE MADE TO THE ASSIGNEE UNTIL NOTICE OF REVOCATION OF THE ASSIGNMENT HAS BEEN RECEIVED. HOWEVER, WHERE, AS IN THIS CASE THE CONTRACTOR-ASSIGNOR IS INDEBTED TO THE GOVERNMENT, THE UNITED STATES IS NO LONGER A MERE STAKEHOLDER, BUT RATHER IS BOTH DEBTOR AND CREDITOR OF THE CONTRACTOR. IN A MATTER BEFORE THIS OFFICE INVOLVING SIMILAR CIRCUMSTANCES IT WAS HELD THAT THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT, SUPRA, MAY NOT BE USED TO IMMUNIZE CONTRACT PROCEEDS AGAINST COLLECTION OF THE CONTRACTOR'S JUST DEBTS TO THE GOVERNMENT THROUGH THE DEVICE OF AN ASSIGNMENT. SEE 35 COMP. GEN. 104, AND THE SUPPORTING COURT CASES CITED THEREIN. ACCORDINGLY, THE BALANCE IN EXCESS OF THE AMOUNT OF $13,250 CERTIFIED FOR PAYMENT TO YOU UNDER THE ASSIGNMENT, WAS APPLIED IN PARTIAL LIQUIDATION OF THE GOVERNMENT'S PREFERRED CLAIMS AGAINST THE INSOLVENT CONTRACTOR PURSUANT TO 31 U.S.C. 191.

WITH REGARD TO THE AMOUNT ALLOWED YOU AS ASSIGNEE UNDER THE SETTLEMENT, THE NEW JERSEY CHANCERY COURT ORDER DATED DECEMBER 23, 1954, TO WHICH YOU REFER, WAS NOT CONSIDERED BY US AS AN ADJUDICATION OF THE RIGHTS OF THE PARTIES INVOLVED. THE SAID ORDER MERELY APPROVED AN AGREEMENT PREVIOUSLY ENTERED INTO BETWEEN THE SEVERAL PARTIES IDENTIFIED THEREIN, WHO WERE FINANCIALLY INTERESTED IN THE PROCEEDS OF THE FOREGOING AWARD OTHERWISE DUE THE CONTRACTOR. IN YOUR LETTER OF MARCH 11, 1955, TO THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, YOU STATED THAT YOU HAD ENTERED INTO A STIPULATION WITH THE LEGALLY APPOINTED REPRESENTATIVE OF THE CONTRACTOR, WHICH HAD BEEN APPROVED BY THE COURT AUTHORIZING YOU TO RECEIVE PAYMENT OF THE AMOUNT FOUND TO BE DUE. THE LETTER DOES NOT DISCLOSE ANY OTHER TERMS OF THE STIPULATION, BUT UNDER THE PROVISIONS OF THE COURT ORDER WHICH CONSTITUTED SUCH APPROVAL YOU APPARENTLY HAD AGREED WITH THE CONTRACTOR'S TRUSTEES TO ACCEPT THE SUM OF $13,250 IN FULL SATISFACTION OF YOUR DEMAND AGAINST THE CONTRACTOR FOR REPAYMENT OF THE ADVANCE OF $10,000, PLUS INTEREST, AND TO DISTRIBUTE THE BALANCE TO THE OTHER TWO PARTIES NAMED IN THE AGREEMENT. IN VIEW OF THOSE FACTS AND CIRCUMSTANCES, AND THE STATUTORY PRIORITY OF THE GOVERNMENT'S CLAIMS, THE SAID BALANCE OF $8,350.40, WAS APPLIED IN PARTIAL LIQUIDATION OF THE ESTABLISHED INDEBTEDNESS OF CARTERET WORK UNIFORMS.

SINCE THE ACTION TAKEN BY THE CLAIMS DIVISION OF OUR OFFICE APPEARS PROPER ON THE BASIS OF THE PRESENT RECORD, THE SETTLEMENT MUST BE AFFIRMED.