B-125703, OCT. 21, 1955

B-125703: Oct 21, 1955

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ESQUIRE: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 12. WAS ALLOWED BY SETTLEMENT DATED SEPTEMBER 6. THE FULL AMOUNT SO ALLOWED WAS APPLIED IN PARTIAL LIQUIDATION OF THE CORPORATION'S INDEBTEDNESS TO THE UNITED STATES IN THE AMOUNT OF $237. IT IS ALLEGED THAT YOU REPRESENTED THE CORPORATION AND. KEOGH INDICATES THAT YOUR CLAIM IS ASSERTED ON THE BASIS THAT YOUR ARRANGEMENT WITH THE ASSIGNEE WITH RESPECT TO YOUR FEE CREATED AN ATTORNEY'S LIEN AGAINST THE AMOUNT ALLOWED ON THE CORPORATION'S CLAIM PURSUANT TO SECTION 475 OF THE NEW YORK JUDICIARY LAW AND THAT SUCH LIEN IS PARAMOUNT TO THE GOVERNMENT'S RIGHT OF SETOFF. 131 F.SUPP. 783 (IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK) THE COURT STATED: "THE NEW YORK STATUTE PROVIDING FOR THE PROTECTION OF CHARGING LIENS OF ATTORNEYS IS NOT ONE WHICH TAKES SUPERIORITY TO THE FEDERAL SET-OFF ACT.

B-125703, OCT. 21, 1955

TO EDWARD S. ST. JOHN, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 12, 1955, RELATIVE TO THE CLAIM OF SEACOAST STEVEDORING AND TRANSPORTATION CORPORATION, FOR PAYMENT OF ADDITIONAL AMOUNTS FOR SERVICES RENDERED UNDER CONTRACT NO. DA 30-182- TC-165, DATED DECEMBER 23, 1949.

THE AMOUNT OF $41,067.37, APPROVED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS ON APPEAL BY THE CORPORATION FROM FINDINGS OF FACT BY THE CONTRACTING OFFICER PURSUANT TO THE PROVISION THEREFOR IN THE CONTRACT, WAS ALLOWED BY SETTLEMENT DATED SEPTEMBER 6, 1955, PURSUANT TO OUR AUTHORITY RESPECTING THE PAYMENT OF CLAIMS INVOLVING LAPSED APPROPRIATIONS. THE FULL AMOUNT SO ALLOWED WAS APPLIED IN PARTIAL LIQUIDATION OF THE CORPORATION'S INDEBTEDNESS TO THE UNITED STATES IN THE AMOUNT OF $237,552.09, PLUS INTEREST FROM SEPTEMBER 1, 1955, FOR DELINQUENT TAXES. YOU ASSERT A CLAIM FOR ONE-THIRD OF THE AMOUNT SO ALLOWED, PLUS OUT-OF-POCKET EXPENSES IN AN UNSTATED AMOUNT, AS ATTORNEY'S FEES FOR SERVICES RENDERED. IT IS ALLEGED THAT YOU REPRESENTED THE CORPORATION AND, AFTER THE ASSIGNMENT FOR THE BENEFIT OF CREDITORS, YOU ALSO REPRESENTED THE ASSIGNEE IN THE PROSECUTION OF THE CORPORATION'S CLAIM UNDER AN AGREEMENT THAT YOUR FEE FOR THE SERVICES WOULD BE FIXED ON SUCH BASIS.

AN INFORMAL INQUIRY BY THE HONORABLE EUGENE J. KEOGH INDICATES THAT YOUR CLAIM IS ASSERTED ON THE BASIS THAT YOUR ARRANGEMENT WITH THE ASSIGNEE WITH RESPECT TO YOUR FEE CREATED AN ATTORNEY'S LIEN AGAINST THE AMOUNT ALLOWED ON THE CORPORATION'S CLAIM PURSUANT TO SECTION 475 OF THE NEW YORK JUDICIARY LAW AND THAT SUCH LIEN IS PARAMOUNT TO THE GOVERNMENT'S RIGHT OF SETOFF.

IN THE CASE OF EDWARD MORGAN V. UNITED STATES, 131 F.SUPP. 783 (IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK) THE COURT STATED:

"THE NEW YORK STATUTE PROVIDING FOR THE PROTECTION OF CHARGING LIENS OF ATTORNEYS IS NOT ONE WHICH TAKES SUPERIORITY TO THE FEDERAL SET-OFF ACT, INASMUCH AS THE GOVERNMENT'S CONSENT TO BE SUED AS A SOVEREIGN, AS EMBODIED IN THE TUCKER ACT, 28 U.S.C. 1346, IS COUPLED WITH THE GOVERNMENT'S RIGHT TO A SET-OFF UNDER THE SET-OFF ACT, 31 U.S.C. 227; MALMAN V. UNITED STATES, 207 F.2D 897 (2 C.A. 1953).

"IN THE INSTANT CASE, THE MONEY, WHICH IS THE SUBJECT OF THE JUDGMENT, HAS AT ALL TIMES BEEN IN THE POSSESSION OF THE GOVERNMENT. THE PLAINTIFF IS ENTITLED TO RECOVER NOTHING ON THE JUDGMENT, FOR THE GOVERNMENT SET-OFF DESTROYED ANY RECOVERY. THEREFORE, THERE WAS NOTHING TO WHICH THE ATTORNEYS' LIEN COULD ATTACH. THE SITUATION MIGHT BE DIFFERENT WHEN A PLAINTIFF, THROUGH ATTORNEYS' EFFORTS, SECURED A RECOVERY FROM A THIRD PRT AND THE GOVERNMENT THEN SOUGHT TO ASSERT A TAX LIEN AGAINST SUCH FUND AS SUPERIOR TO THE LIEN OF THE ATTORNEYS. IN THAT CASE, THE AMOUNT RECOVERED FROM THE THIRD PARTY WAS ALREADY SUBJECT TO THE ATTORNEYS' LIEN AT THE TIME THE FUND CAME INTO EXISTENCE, AND NOT UNTIL THE FUND CAME INTO EXISTENCE DID THE TAX LIEN HAVE A FUND UPON WHICH TO ATTACH. SEE HERLIHY V. PHOENIX ASSUR. CO.,274 APP.DIV. 342, 83 N.Y.S. 2D 707 (3RD DEPT. 1948).'

WHILE THE PRESENT CASE DOES NOT INVOLVE A JUDGMENT THE FUNDS IN QUESTION HAVE AT ALL TIMES BEEN IN THE POSSESSION OF THE GOVERNMENT AND THE CONCLUSIONS STATED IN THE ABOVE-QUOTED DECISION APPEAR EQUALLY APPLICABLE HERE.

ACCORDINGLY, THERE IS NO LEGAL AUTHORITY FOR ALLOWING YOUR CLAIM OR ANY PART THEREOF.