B-129596, NOV. 29, 1956

B-129596: Nov 29, 1956

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MCPHARLIN AND CONNERS: REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 27. 401.50 WAS EXECUTED BY THE CONTRACTOR ON JANUARY 5. THE DEPARTMENT OF THE INTERIOR WAS ALLEGING FIRE DAMAGES RESULTING FROM THE CONTRACTOR'S OPERATIONS. THE VOUCHER WAS FORWARDED TO THIS OFFICE FOR SETTLEMENT. THE CLAIM OF THE DEPARTMENT OF THE INTERIOR WAS SUBSEQUENTLY ABANDONED AND THE AMOUNT OF $1. OUR RECORDS FURTHER INDICATE THE SMITH-WILSON COMPANY WAS A PARTNERSHIP AND THAT PARKER SMITH AS SURVIVING PARTNER FILED A PETITION IN BANKRUPTCY ON OR ABOUT FEBRUARY 5. THE CLAIM OF ANCHOR CASUALTY COMPANY TO THE ABOVE AMOUNT WAS BASED UPON THE FACT THAT IT WAS THE SURETY ON THE CONTRACTOR'S PAYMENT BOND. THAT THE SURETY WAS OBLIGED.

B-129596, NOV. 29, 1956

TO ANDERSON, MCPHARLIN AND CONNERS:

REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 27, 1956, WRITTEN IN BEHALF OF ANCHOR CASUALTY COMPANY AND QUESTIONING THE CORRECTNESS OF THE DISALLOWANCE ON AUGUST 14, 1956, BY THIS OFFICE OF YOUR CLIENT'S CLAIM TO THE SUM OF $1,813.75, WHICH REPRESENTS THE BALANCE DUE THE SMITH-WILSON COMPANY FOR CONDITIONING A VOR RADIO RANGE SITE NEAR RENO, NEVADA, UNDER CONTRACT NO. C6CA-4075.

THE RECORDS OF THIS OFFICE INDICATE THAT THE SMITH-WILSON COMPANY COMPLETED ALL WORK UNDER THE CONTRACT IN QUESTION ON AUGUST 31, 1951, AND THAT THE SUM OF $5,201.50 REMAINED DUE THE CONTRACTOR UPON COMPLETION. THE DEPARTMENT OF COMMERCE DEDUCTED $800 FROM SUCH SUM AS AN ASSESSMENT FOR LIQUIDATED DAMAGES, AND A VOUCHER IN THE RESULTING AMOUNT OF $4,401.50 WAS EXECUTED BY THE CONTRACTOR ON JANUARY 5, 1953. HOWEVER, SINCE THE DEPARTMENT OF COMMERCE HAD INCURRED EXCESS COSTS AMOUNTING TO $2,587.75 AS A RESULT OF THE CONTRACTOR'S DEFAULT IN THE PERFORMANCE OF ANOTHER CONTRACT, AND THE DEPARTMENT OF THE INTERIOR WAS ALLEGING FIRE DAMAGES RESULTING FROM THE CONTRACTOR'S OPERATIONS, THE VOUCHER WAS FORWARDED TO THIS OFFICE FOR SETTLEMENT. THE CLAIM OF THE DEPARTMENT OF THE INTERIOR WAS SUBSEQUENTLY ABANDONED AND THE AMOUNT OF $1,813.75 CURRENTLY STANDING TO THE CREDIT OF THE CONTRACTOR REPRESENTS THE VOUCHER AMOUNT OF $4,401.50 LESS EXCESS COSTS IN THE AMOUNT OF $2,587.75 AS OUTLINED ABOVE. OUR RECORDS FURTHER INDICATE THE SMITH-WILSON COMPANY WAS A PARTNERSHIP AND THAT PARKER SMITH AS SURVIVING PARTNER FILED A PETITION IN BANKRUPTCY ON OR ABOUT FEBRUARY 5, 1954, IN WHICH HE LISTED A CLAIM VALUED AT $3,000 UNDER CONTRACT NO. C6CA-4075 AGAINST THE CIVIL AERONAUTICS AUTHORITY, UNITED STATES DEPARTMENT OF COMMERCE, AMONG HIS ASSETS, WHICH CLAIM APPARENTLY REFERS TO THE SUM OF $1,813.75 PRESENTLY STANDING TO THE ACCOUNT OF SMITH-WILSON COMPANY.

THE CLAIM OF ANCHOR CASUALTY COMPANY TO THE ABOVE AMOUNT WAS BASED UPON THE FACT THAT IT WAS THE SURETY ON THE CONTRACTOR'S PAYMENT BOND, THAT ON SEPTEMBER 6, 1951, PARKER SMITH EXECUTED AN ASSIGNMENT TO ANCHOR CASUALTY COMPANY TO SECURE AND PROTECT THE SURETY AGAINST LOSS, AND THAT THE SURETY WAS OBLIGED, BY REASON OF THE FAILURE OF SMITH WILSON COMPANY TO PAY LABOR AND MATERIALS CLAIMS UNDER CONTRACT NO. C6CA-4075, TO PAY SUCH CLAIMS IN THE AMOUNT OF $7,900. THE DISALLOWANCE OF THE SURETY'S CLAIM BY THIS OFFICE ON AUGUST 14, 1956, WAS BASED UPON THE FACT THAT THE ASSIGNMENT WAS INVALID UNDER THE PROVISIONS 31 U.S.C. 203 INSOFAR AS THE UNITED STATES WAS CONCERNED, THAT ANY RIGHT OF SUBROGATION IN THE SURETY MUST BE ESTABLISHED BY JUDICIAL PROCEEDINGS, AND THAT THE RECORD BEFORE THIS OFFICE THEREFORE FAILED TO ESTABLISH A SUPERIOR RIGHT IN THE SURETY TO THE REMAINING CONTRACT BALANCE.

YOUR LETTER OF SEPTEMBER 27, 1956, STATES THAT NEITHER THE ASSIGNMENT OF CLAIMS ACT NOR THE JUDICIAL DECISIONS RENDERED THEREUNDER PREVENT THE UNITED STATES FROM HONORING THE ASSIGNMENT, THAT IN YOUR OPINION IT WOULD BE PROPER TO ISSUE A CHECK PAYABLE TO SMITH-WILSON COMPANY FOR THE BALANCE REMAINING DUE UNDER THE CONTRACT, AND IF SUCH CHECK IS DELIVERED TO YOUR FIRM AS ATTORNEYS FOR ANCHOR CASUALTY COMPANY YOU WILL OBTAIN THE ENDORSEMENT OF PARKER SMITH, THE SURVIVING PARTNER, PURSUANT TO HIS AGREEMENT WITH YOUR CLIENT.

WHILE SUCH ARRANGEMENT BETWEEN AN ASSIGNOR AND ASSIGNEE WOULD NOT IN ITSELF BE OBJECTIONABLE TO THIS OFFICE, YOUR SUGGESTION PRESUPPOSES THAT PAYMENT OF THE REMAINING BALANCE TO THE CONTRACTOR AT TIME WOULD BE JUSTIFIED. HOWEVER, AS SET OUT ABOVE, THE RECORDS OF THIS OFFICE INDICATE THAT THE CLAIM OF SMITH-WILSON COMPANY AGAINST THE UNITED STATES UNDER CONTRACT NO. C6CA-4075 WAS LISTED AS AN ASSET IN THIS TIME WOULD BE JUSTIFIED. HOWEVER, AS SET OUT ABOVE, THE RECORDS OF THE PETITION OF BANKRUPTCY FILED BY PARKER SMITH, AND THE RULE IS WELL ESTABLISHED THAT WHERE AN ASSIGNMENT OF CLAIM IS INVALID AT THE TIME THE ASSIGNOR IS ADJUDGED BANKRUPT THE ASSIGNOR IS STILL IN LAW THE ACT. NATIONAL BANK OF COMMERCE V. DOWNIE, 218 U.S. 345, 356-357; MAY V. HENDERSON, 268 U.S. 111, 117; STREET V. PACIFIC INDEMNITY CO., 61 F.2D 106, 109. UNDER THE CIRCUMSTANCES, IT WOULD THEREFORE APPEAR THAT WHILE SMITH-WILSON COMPANY WAS THE OWNER OF THE CLAIM FOR THE BALANCE DUE UNDER CONTRACT C6CA-4075 PRIOR TO FILING OF THE PETITION IN BANKRUPTCY, SUCH PETITION EFFECTED A TRANSFER OF THE CLAIM TO THE TRUSTEE IN BANKRUPTCY BY OPERATION OF LAW. NATIONAL BANK OF COMMERCE V. DOWNIE, SUPRA. OUR RECORDS DO NOT INDICATE THAT THE TRUSTEE HAS EVER REQUESTED PAYMENT OF SUCH CLAIM, NOR DO THEY INDICATE THE PRESENT STATUS OF THE BANKRUPTCY PROCEEDINGS. HOWEVER, EVEN IF SUCH PROCEEDINGS ARE CLOSED, IT SHOULD BE NOTED THAT SECTION 2 (A) (8) OF THE BANKRUPTCY ACT, 11 U.S.C. 11 (A) (8), AUTHORIZES COURTS OF BANKRUPTCY TO REOPEN ESTATES FOR CAUSE SHOWN. ADDITIONALLY, THE RECOVERY OF PREVIOUSLY UNADMINISTERED ASSETS OF AN ESTATE CONSTITUTES THE "CAUSE SHOWN" REQUIRED BY THE ACT AS A PREREQUISITE FOR REOPENING AND IS NOT FORECLOSED BY THE STATUTORY PERIOD OF TWO YEARS TO WHICH SUIT BY THE TRUSTEE IS LIMITED. TUFFY V. NICHOLS, 120 F.2D 906, CERTIORARI DENIED, 314 U.S. 660; CORN EXCHANGE BANK TRUST CO. V. EMPIRE TRUST CO., 206 F.2D 30. AND UPON BEING INFORMED THAT THERE ARE ASSETS OF THE ESTATE WHICH HAVE NOT BEEN ADMINISTERED IT IS THE DUTY OF THE BANKRUPTCY COURT TO REOPEN THE ESTATE. DOYLE V. PONSFORD, 136 F.2D 401.

IT WOULD THEREFORE APPEAR THAT THE UNITED STATES HOLDS THE BALANCE REMAINING DUE UNDER CONTRACT NO. C6CA-4075 SUBJECT TO CLAIM BY THE TRUSTEE IN BANKRUPTCY AND, IN THE INTEREST OF SECURING A VALID ACQUITTANCE TO THE UNITED STATES, THIS OFFICE WOULD ONLY BY JUSTIFIED IN PAYING SUCH BALANCE TO THE TRUSTEE OR TO SUCH OTHER CLAIMANT AS MAY BE DESIGNATED IN A RELEASE EXECUTED BY THE TRUSTEE AND APPROVED BY THE COURT. ACCORDINGLY, ON THE BASIS OF THE PRESENT RECORD, THE DISALLOWANCE OF THE CLAIM OF ANCHOR CASULATY COMPANY ON AUGUST 14, 1956, IS SUSTAINED AND YOUR REQUEST THAT PAYMENT BE MADE TO SMITH WILSON COMPANY MUST BE DENIED.