B-141051, DEC. 18, 1959

B-141051: Dec 18, 1959

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COUNSELORS AT LAW: FURTHER REFERENCE IS MADE TO YOUR ATTORNEYS' LETTER OF OCTOBER 13. IT IS STATED IN PART THAT IN OCTOBER 1956 YOU SOLD YOUR KROYDON DIVISION TO NATIONAL ASSOCIATES. DA 36-039-SC- 68714 * * * AND * * * THAT SUBSEQUENT TO THE CLOSING OF THE SALE WHICH WAS OCTOBER 1. THE BUYER DID CONTINUE TO PERFORM AND THAT PAYMENTS WERE MADE DIRECTLY TO EITHER THE KROYDON COMPANY. WHICH WAS A WHOLLY OWNED SUBSIDIARY OF NATIONAL ASSOCIATES. OR NATIONAL ASSOCIATES PRIOR TO THE JULY 25TH DATE WHEN THE CONTRACT IN QUESTION WAS TERMINATED.'. IT IS CONTENDED. THAT YOUR CORPORATION IS NOT LIABLE FOR THE EXCESS COSTS INCURRED UNDER CONTRACT NO. IS AS FOLLOWS: "13. THE SELLER WILL FORWARD ALL PAYMENTS RECEIVED ON ACCOUNT OF THE PERFORMANCE OF SAID CONTRACTS TO THE BUYER IN THE FORM RECEIVED FORTHWITH UPON THE RECEIPT THEREOF.

B-141051, DEC. 18, 1959

TO KRAEUTER AND COMPANY, INC., COUNSELORS AT LAW:

FURTHER REFERENCE IS MADE TO YOUR ATTORNEYS' LETTER OF OCTOBER 13, 1959, REQUESTING REVIEW OF GENERAL ACCOUNTING OFFICE SETTLEMENT DATED JULY 16, 1959, WHICH DISALLOWED YOUR CLAIM IN THE AMOUNT OF $4,373.72 REPRESENTING AN AMOUNT WITHHELD FROM PAYMENT TO YOU UNDER CONTRACT NO. N600 (MIS) 49563 DATED SEPTEMBER 18, 1958, AND SET OFF AGAINST AN INDEBTEDNESS IN THE SAME AMOUNT FOUND TO BE DUE FROM YOU TO THE UNITED STATES AN EXCESS COSTS RESULTING FROM YOUR DEFAULT UNDER CONTRACT NO. DA-36-039-SC-68714 DATED MARCH 31, 1955.

IN THE LETTER OF OCTOBER 13, 1959, IT IS STATED IN PART THAT IN OCTOBER 1956 YOU SOLD YOUR KROYDON DIVISION TO NATIONAL ASSOCIATES, A MASSACHUSETTS BUSINESS TRUST OF BOSTON, THAT "BY THE TERMS OF THE CONTRACT OF SALE THE BUYER ASSUMED THE PERFORMANCE OF CONTRACT NO. DA 36-039-SC- 68714 * * * AND * * * THAT SUBSEQUENT TO THE CLOSING OF THE SALE WHICH WAS OCTOBER 1, 1956, THE BUYER DID CONTINUE TO PERFORM AND THAT PAYMENTS WERE MADE DIRECTLY TO EITHER THE KROYDON COMPANY, WHICH WAS A WHOLLY OWNED SUBSIDIARY OF NATIONAL ASSOCIATES, OR NATIONAL ASSOCIATES PRIOR TO THE JULY 25TH DATE WHEN THE CONTRACT IN QUESTION WAS TERMINATED.' IT IS CONTENDED, THEREFORE, THAT YOUR CORPORATION IS NOT LIABLE FOR THE EXCESS COSTS INCURRED UNDER CONTRACT NO. DA-36-039 SC-68714.

PARAGRAPH 13 OF THE CONTRACT OF SALE REFERRED TO IN YOUR ATTORNEYS' LETTER OF OCTOBER 13, 1959, IS AS FOLLOWS:

"13. THE BUYER SHALL ASSUME THE PERFORMANCE OF TWO CERTAIN CONTRACTS, MORE SPECIFICALLY DENOTED AS NO. DA-36-039-SC-67220 DATED JANUARY 4TH, 1955, BETWEEN KROYDON COMPANY DIVISION OF KRAEUTER AND COMPANY CO. INC. AND THE UNITED STATES OF AMERICA, AND NO. DA-36-039-SC 68714, DATED MARCH 31ST, 1955, BETWEEN KRAEUTER AND CO. INC. AND THE UNITED STATES OF AMERICA; THE SELLER SHALL ASSIGN SAID CONTRACTS TO THE BUYER IF IT CAN LEGALLY DO SO. IF THE SELLER CANNOT ASSIGN SAID CONTRACTS, THE BUYER SHALL PERFORM SAID CONTRACTS IN THE SELLER'S NAME AND ALL PAYMENTS ARISING UNDER SAID CONTRACTS, INCLUDING ACCOUNTS RECEIVABLE AS OF OCTOBER 1ST, 1956, SHALL BE THE PROPERTY OF THE BUYER. THE SELLER WILL FORWARD ALL PAYMENTS RECEIVED ON ACCOUNT OF THE PERFORMANCE OF SAID CONTRACTS TO THE BUYER IN THE FORM RECEIVED FORTHWITH UPON THE RECEIPT THEREOF. THE SELLER WILL EXECUTE ALL DOCUMENTS AND DO ALL OTHER THINGS NECESSARY OR DESIRABLE TO ENABLE THE BUYER TO PERFORM SAID CONTRACTS IN THE SELLER'S NAME. SHOULD THE SELLER SUCCEED IN OBTAINING AN INCREASE IN THE PRICE TO BE PAID BY THE UNITED STATES UNDER SAID CONTRACTS, THE ENTIRE AMOUNT OF SUCH INCREASE, WITHOUT PRORATION BUT LESS THE OUT-OF-POCKET EXPENSE OF OBTAINING SUCH INCREASE, SHALL BE THE BUYER'S PROPERTY. THE SELLER WARRANTS AND REPRESENTS THAT IT IS NOT IN DEFAULT IN THE PERFORMANCE OF THE AFORESAID CONTRACTS.'

CONTRACT NO. DA-36-039-SC-68714 DATED MARCH 31, 1955, WAS ENTERED INTO BY THE SIGNAL CORPS SUPPLY AGENCY, CHICAGO REGIONAL OFFICE, WITH "KRAUETER AND CO., INC., THE KROYDON COMPANY DIVISION, 228 BURNETT AVENUE, MAPLEWOOD, NEW JERSEY.' IN MODIFICATION NO. 1 DATED NOVEMBER 10, 1955, THE CONTRACTOR IS DESIGNATED AS "KRAUETER AND CO., INC., THE KROYDON COMPANY DIVISION" AND IT IS SIGNED "KRAUETER AND CO., INC., THE KROYDON COMPANY DIVISION BY MARIE LOUISE GAIROARD, PRESIDENT.' CHANGE ORDER NO. 2 DATED JANUARY 12, 1956, IS DIRECTED TO "KRAUETER AND COMPANY, INCORPORATED, THE KROYDON CO. DIVISION 228 BURNETT AVENUE MAPLEWOOD, NEW JERSEY.' IN MODIFICATION NO. 3 DATED JUNE 19, 1956, THE CONTRACTOR WAS DESIGNATED AS "KRAUETER AND COMPANY, INCORPORATED" AND THAT BY MARIE LOUISE GAIROARD, PRESIDENT.' THE FILE DOES NOT CONTAIN ANY OTHER MODIFICATIONS OF THIS CONTRACT.

CONTRACT NO. DA-36-039-SC-67220 DATED JANUARY 4, 1955, REFERRED TO IN YOUR ATTORNEYS' LETTER OF OCTOBER 13, 1959, AND IN ABOVE-QUOTED PARAGRAPH 13 OF THE CONTRACT OF SALE, WAS ENTERED INTO BY THE SIGNAL CORPS SUPPLY AGENCY, PHILADELPHIA, PENNSYLVANIA, WITH "KROYDON COMPANY 228 BURNETT AVENUE, MAPLEWOOD, NEW JERSEY.' IN MODIFICATION NO. 1 DATED MAY 6, 1955, THE CONTRACTOR IS DESIGNATED AS "KROYDON CO.' BUT IT IS SIGNED BY "KRAEUTER AND CO., INC., KROYDON CO. DIVISION, BY F. E. MCCUDDEN, ASS-T. TREASURER.' IN MODIFICATION NO. 2 DATED NOVEMBER 9, 1955, THE CONTRACTOR IS DESIGNATED AS "KROYDON COMPANY" BUT IT IS SIGNED BY "KRAUETER AND CO., INC., THE KROYDON COMPANY DIVISION BY MARIE LOUISE GAILROARD, PRESIDENT.' CHANGE ORDER NO. 3 DATED DECEMBER 20, 1955, IS DIRECTED TO "KROYDON COMPANY, 228 BURNETT AVENUE, MAPLEWOOD, NEW JERSEY.' IN MODIFICATION NO. 4 DATED JULY 17, 1956, THE CONTRACTOR IS DESIGNATED AS "KROYDON COMPANY DIVISION OF KRAEUTER AND O., INC.' AND IT IS SIGNED BY "KROYDON COMPANY, DIVISION OF KRAEUTER AND CO., INC. BY MARIE LOUISE GAIROARD, PRESIDENT.' IN MODIFICATION NO. 5 DATED MAY 14, 1957, THE CONTRACTOR IS DESIGNATED AS "THE KROYDON COMPANY, DIVISION OF KRAEUTER AND CO., INC.' AND IS SIGNED BY "THE KROYDON COMPANY BY HUBERT H. WOLFERT VICE PRESIDENT.'

THE LETTER OF JULY 25, 1957, FROM THE CONTRACTING OFFICER, TERMINATING CONTRACT NO. DA-36-039-SC-68714, WAS ADDRESSED TO "KRAUETER AND CO., INC. THE KROYDON CO. DIVISION, 228 BURNETT AVENUE MAPLEWOOD, NEW JERSEY, ATTN: MR. H. H. WOLFERT" AND THE SAME NAME AND ADDRESS WERE USED IN SENDING LETTERS DATED MAY 13, 1958, AND JUNE 18, 1958, REQUESTING PAYMENT OF THE EXCESS COSTS. SINCE BOTH YOUR COMPETITION AND THE KROYDON COMPANY DECLINED TO MAKE PAYMENT OF THE AMOUNT OF THE EXCESS COSTS ($4,373.72), THAT AMOUNT WAS DEDUCTED FROM D.O. VOUCHER NO. 11193 DATED MARCH 11, 1959, COVERING AN AMOUNT OTHERWISE DUE YOU UNDER CONTRACT NO. N600 (MIS) 49563 DATED SEPTEMBER 18, 1958.

SECTION 3737, REVISED STATUTES (41 U.S.C. 15), PROVIDES:

"NO CONTRACT OR ORDER, OR ANY INTEREST THEREIN, SHALL BE TRANSFERRED BY THE PARTY TO WHOM SUCH CONTRACT OR ORDER IS GIVEN TO ANY OTHER PARTY, AND ANY SUCH TRANSFER SHALL CAUSE THE ANNULMENT OF THE CONTRACT OR ORDER TRANSFERRED, SO FAR AS THE UNITED STATES ARE CONCERNED. ALL RIGHTS OF ACTION, HOWEVER, FOR ANY BREACH OF SUCH CONTRACT BY THE CONTRACTING PARTIES, ARE RESERVED TO THE UNITED STATES.'

IT HAS BEEN HELD UNIFORMLY THAT THE PURPOSE OF THE QUOTED STATUTE IS THE PROTECTION OF THE UNITED STATES. SEE DULANEY V. SCUDDER, 94 F. 6, AND AUTHORITIES THERE CITED.

IN 9 COMP. GEN. 72 IT WAS STATED:

"* * * WHERE EITHER AN INDIVIDUAL OR A CORPORATION HAVING A CONTRACT WITH, OR A VALID CLAIM AGAINST, THE GOVERNMENT SELLS HIS OR ITS ENTIRE BUSINESS TO ANOTHER INDIVIDUAL OR CORPORATION, AS DISTINGUISHED FROM MERELY AN ASSIGNMENT OF THE GOVERNMENT CONTRACT, THE TRANSFEREE MAY BE RECOGNIZED BY THE UNITED STATES AS THE LAWFUL SUCCESSOR IN INTEREST OF THE CONTRACTOR OR CLAIMANT PROVIDED DEFINITE EVIDENCE OF THE SALE OR TRANSFER OF THE BUSINESS IS FILED, TOGETHER WITH A STATEMENT OR OTHER SHOWING BY THE TRANSFEREE IN CASE OF AN UNCOMPLETED CONTRACT THAT HE OR IT UNDERTAKES TO FURNISH THE SERVICE OR SUPPLIES IN ACCORDANCE WITH THE CONTRACT PROVISIONS AND A STATEMENT OR OTHER SHOWING BY THE ORIGINAL CONTRACTOR OR CLAIMANT WAIVING ALL RIGHTS THEREUNDER AS AGAINST THE UNITED STATES. NEW PERFORMANCE BOND, ALSO, SHOULD BE REQUIRED TO COVER PERFORMANCE BY THE NEW PRINCIPAL, IF THERE WAS A BOND UNDER THE ORIGINAL CONTRACT.'

THE FILE SHOWS THAT AFTER THE SALE OF YOUR KROYDON DIVISION TO NATIONAL ASSOCIATES, PERFORMANCE UNDER CONTRACTS NOS. DA-36-039-SC 68714 AND DA-36- 039-SC-67220 WAS CARRIED ON BY THE KROYDON COMPANY (WHICH APPARENTLY WAS DISTINCT FROM THE KROYDON DIVISION AND ALSO HAS BEEN PURCHASED BY NATIONAL ASSOCIATES) UNTIL CONTRACT NO. DA-36-039-SC 68714 WAS TERMINATED BY THE GOVERNMENT. HOWEVER, THERE APPEARS TO HAVE BEEN NO ASSIGNMENT OR ATTEMPTED ASSIGNMENT OF THE CONTRACT TO NATIONAL ASSOCIATES OR TO THE KROYDON COMPANY AND NO WRITTEN NOTICE OF THE SALE OF YOUR KROYDON DIVISION TO NATIONAL ASSOCIATES WAS RECEIVED BY THE GOVERNMENT. THE FACT APPEARS TO BE THAT THE ACTION OF THE KROYDON COMPANY IN PARTIALLY PERFORMING UNDER THE CONTRACT WAS A MATTER BETWEEN THAT COMPANY AND YOUR CORPORATION AS CONTEMPLATED BY SECTION 13 OF THE AGREEMENT OF SALE ABOVE QUOTED. NEITHER EXPRESSLY NOR BY IMPLICATION HAS THE GOVERNMENT SURRENDERED ITS CONTRACT RIGHTS AGAINST YOUR CORPORATION. THE USE OF THE VARIOUS NAMES OF THE CONTRACTOR OR CONTRACTORS IN CONNECTION WITH CONTRACTS NOS. DA-36-039 SC- 68714 AND DA-36-039-SC-67220 AND THE SEVERAL MODIFICATIONS AS ABOVE SET OUT WAS CONDUCIVE TO CONFUSION AS TO THE RELATION BETWEEN YOUR CORPORATION AND KROYDON COMPANY AND SUPPORTS THE BELIEF THAT THE GOVERNMENT AGENTS HAD NO INTENTION OF RELEASING YOUR CORPORATION FROM LIABILITY UNDER CONTRACT NO. DA-36-039-SC-68714 BUT REGARDED KROYDON COMPANY AS A PART OF THE ORIGINAL CONTRACTING CORPORATION OR AS ITS AGENT.

FOR THE REASONS ABOVE SET FORTH, THE CONCLUSION STATED IN THE SETTLEMENT OF JULY 16, 1959, DISALLOWING THE CLAIM, APPEARS CORRECT AND HEREBY IS SUSTAINED.