B-141359, JANUARY 20, 1960, 39 COMP. GEN. 533

B-141359: Jan 20, 1960

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WHEN SUCH SECOND ASSIGNMENT WAS WITHOUT LEGAL EFFECT TO GIVE THE SECOND ASSIGNEE ANY RIGHT TO PAYMENT. THE AMOUNT DUE UNDER THE CONTRACT IS NOT SUBJECT TO LEVY FOR TAXES DUE THE UNITED STATES BUT IS FOR PAYMENT TO THE SECOND ASSIGNEE. 1960: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 8. BOTH ASSIGNMENTS WERE MADE AND NOTICE GIVEN IN CONFORMITY WITH THE ASSIGNMENT OF CLAIMS ACT OF 1940. IT IS REPORTED THAT JOHN WISE CALMES DIED IN APRIL 1958. THE CONTRACT WORK WAS COMPLETED ON APRIL 13. FINAL PAYMENT HAS BEEN WITHHELD PENDING DETERMINATION AS TO WHETHER CERTAIN DELAYS WERE EXCUSABLE. COMPLETION DATES ON SOME OF THE BARGES WERE EXTENDED A TOTAL OF 208 DAYS. THE ATTORNEYS FOR THE REPUBLIC NATIONAL BANK OF DALLAS STATED IN PART THAT DURING FEBRUARY 1958 THE NATIONAL BANK OF COMMERCE IN NEW ORLEANS DEMANDED PAYMENT OF ITS NOTE AND THAT PAYMENT WAS MADE BY THE REPUBLIC NATIONAL BANK OF DALLAS.

B-141359, JANUARY 20, 1960, 39 COMP. GEN. 533

CONTRACTS - ASSIGNMENTS - SECOND ASSIGNMENT PRIOR TO RELEASE FROM FIRST ASSIGNEE - VALIDITY A SECOND ASSIGNMENT OF AN AMOUNT DUE UNDER A GOVERNMENT CONTRACT MADE A SHORT TIME PRIOR TO THE EXECUTION OF A RELEASE BY THE ASSIGNEE UNDER THE FIRST ASSIGNMENT--- BOTH ASSIGNMENTS BEING MADE PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940, 41 U.S.C. 15--- MAY BE REGARDED AS A VALID ASSIGNMENT, THE TECHNICAL DEFICIENCY WITH RESPECT TO THE PERIOD BETWEEN THE SECOND ASSIGNMENT AND THE RELEASE, WHEN SUCH SECOND ASSIGNMENT WAS WITHOUT LEGAL EFFECT TO GIVE THE SECOND ASSIGNEE ANY RIGHT TO PAYMENT, HAVING BEEN CURED BY THE RELEASE OF THE FIRST ASSIGNMENT; THEREFORE, THE AMOUNT DUE UNDER THE CONTRACT IS NOT SUBJECT TO LEVY FOR TAXES DUE THE UNITED STATES BUT IS FOR PAYMENT TO THE SECOND ASSIGNEE.

TO HALL E. MOSHER, DEPARTMENT OF THE ARMY, JANUARY 20, 1960:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 8, 1959, FILE LMSCF, WITH ITS ENCLOSURES, TRANSMITTED HERE WITH ST ENDORSEMENT DATED NOVEMBER 12, 1959, BY THE OFFICE OF THE CHIEF OF ENGINEERS, FILE ENGCR 260/6, CLAIMS ENGINEERING COMPANY, SUBMITTING A FINAL PAYMENT VOUCHER DRAWN IN FAVOR OF SUCCESSION OF JOHN WISE CALMES, D/B/A CALMES ENGINEERING COMPANY, IN THE AMOUNT OF $4,260 UNDER CONTRACT NO. DA-40 041-ENG-1535 DATED JUNE 30, 1955. YOU REQUEST A DECISION AS TO THE PARTY OR PARTIES PROPERLY ENTITLED TO PAYMENT OF THE AMOUNT DUE.

BY THE TERMS OF THE CONTRACT, JOHN WISE CALMES, D/B/A CALMES ENGINEERING COMPANY, AGREED WITH MEMPHIS DISTRICT, CORPS OF ENGINEERS, U.S. ARMY, TO CONSTRUCT AND DELIVER TEN STEEL MATERIAL BARGES FOR A PRICE OF $34,500 EACH--- A TOTAL CONTRACT PRICE OF $345,000. BY AN ASSIGNMENT DATED JANUARY 27, 1956, THE CONTRACTOR ASSIGNED TO THE NATIONAL BANK OF COMMERCE IN NEW ORLEANS, LOUISIANA, ALL OF THE CONTRACTOR'S RIGHT TO ALL MONEYS DUE OR TO BECOME DUE UNDER THE CONTRACT. BY A RELEASE DATED FEBRUARY 20, 1958, THE ASSIGNEE RELEASED THE CONTRACTOR FROM THE ASSIGNMENT. MEANWHILE, BY AN ASSIGNMENT DATED FEBRUARY 7, 1958, THE CONTRACTOR ASSIGNED TO THE REPUBLIC NATIONAL BANK OF DALLAS, DALLAS, TEXAS, ALL OF THE CONTRACTOR'S RIGHT TO ALL MONEYS DUE OR TO BECOME DUE UNDER THE CONTRACT.

BOTH ASSIGNMENTS WERE MADE AND NOTICE GIVEN IN CONFORMITY WITH THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED (31 U.S.C. 203; 41 U.S.C. 15), AND IN ACCORDANCE WITH CLAUSE 27, OF THE GENERAL PROVISIONS OF THE CONTRACT, WHICH PROVIDES IN PART:

27. ASSIGNMENT OF CLAIMS.--- (A) PURSUANT TO THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, (31 U.S.C. 203, 41 U.S.C. 15), IF THIS CONTRACT PROVIDES FOR PAYMENTS AGGREGATING $1,000 OR MORE, CLAIMS FOR MONEYS DUE OR TO BECOME DUE THE CONTRACTOR FROM THE GOVERNMENT UNDER THIS CONTRACT MAY BE ASSIGNED TO A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION, INCLUDING ANY FEDERAL LENDING AGENCY, AND MAY THEREAFTER BE FURTHER ASSIGNED AND REASSIGNED TO ANY SUCH INSTITUTION. ANY SUCH ASSIGNMENT OR REASSIGNMENT SHALL COVER ALL AMOUNTS PAYABLE UNDER THIS CONTRACT AND NOT ALREADY PAID, AND SHALL NOT BE MADE TO MORE THAN ONE PARTY, EXCEPT THAT ANY SUCH ASSIGNMENT OR REASSIGNMENT MAY BE MADE TO ONE PARTY AS AGENT OR TRUSTEE FOR TWO OR MORE PARTIES PARTICIPATING IN SUCH FINANCING. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CONTRACT, PAYMENTS TO AN ASSIGNEE OF ANY MONEYS DUE OR TO BECOME DUE UNDER THIS CONTRACT SHALL NOT TO THE EXTENT PROVIDED IN SAID ACT, AS AMENDED, BE SUBJECT TO REDUCTION OR SET-OFF.

IT IS REPORTED THAT JOHN WISE CALMES DIED IN APRIL 1958. THE CONTRACT WORK WAS COMPLETED ON APRIL 13, 1956, BUT FINAL PAYMENT HAS BEEN WITHHELD PENDING DETERMINATION AS TO WHETHER CERTAIN DELAYS WERE EXCUSABLE. MODIFICATION NO. DATED AUGUST 21, 1959, COMPLETION DATES ON SOME OF THE BARGES WERE EXTENDED A TOTAL OF 208 DAYS, THEREBY REQUIRING PAYMENT OF THE AMOUNT OF THE SUBJECT VOUCHER AS FINAL PAYMENT BY THE UNITED STATES TO THE PARTY OR PARTIES PROPERLY ENTITLED THERETO.

IN A LETTER DATED APRIL 16, 1959, TO THE MEMPHIS DISTRICT, CORPS OF ENGINEERS, THE ATTORNEYS FOR THE REPUBLIC NATIONAL BANK OF DALLAS STATED IN PART THAT DURING FEBRUARY 1958 THE NATIONAL BANK OF COMMERCE IN NEW ORLEANS DEMANDED PAYMENT OF ITS NOTE AND THAT PAYMENT WAS MADE BY THE REPUBLIC NATIONAL BANK OF DALLAS, WHICH THEN TOOK OVER ALL OF THE COLLATERAL SECURITY AND WAS GIVEN THE NEW ASSIGNMENT DATED FEBRUARY 7, 1958. WITH REFERENCE TO THAT TRANSACTION, IT IS STATED IN THE REFERRED-TO LETTER OF APRIL 16, 1959:

DURING THE CLOSING OUT OF THE TRANSFER OF THIS LOAN, WE WERE UNDER THE IMPRESSION THAT THE ORIGINAL ASSIGNMENT TO THE NATIONAL BANK OF COMMERCE IN NEW ORLEANS COULD NOT BE REASSIGNED TO THE REPUBLIC NATIONAL BANK OF DALLAS UNDER THE ASSIGNMENT OF CLAIMS ACT, SO WE THEREFORE HAD THE NATIONAL BANK OF COMMERCE IN NEW ORLEANS EXECUTE A RELEASE WHICH IT DID NOT SIGN UNTIL IT RECEIVED THE FUNDS FROM DALLAS. THAT IS WHY THE RELEASE WAS DELAYED UNTIL FEBRUARY 20. IN THE MEANTIME, THE BANK IN DALLAS WANTED TO GET ALL OF ITS SECURITY TOGETHER BEFORE MAKING PAYMENT TO THE DALLAS BANK, SO WE HAD MR. CALMES COME IN AN SIGN THE NEW ASSIGNMENT ON FEBRUARY 7. CONSEQUENTLY, THE NEW ASSIGNMENT WAS EXECUTED PRIOR TO THE DATE OF THE RELEASE OF THE FIRST ASSIGNMENT. THE INTENTION THROUGHOUT THESE NEGOTIATIONS WAS FOR THE REPUBLIC NATIONAL BANK OF DALLAS TO HAVE AN ASSIGNMENT OF THE GOVERNMENT'S CONTRACT. * * *

WITH YOUR LETTER OF OCTOBER 8, 1959, THERE WAS ENCLOSED A COPY OF A NOTICE OF LEVY, ISSUED BY THE INTERNAL REVENUE SERVICE AT NEW ORLEANS ON JANUARY 9, 1959, AGAINST JOHN WISE CALMES IN THE AMOUNT OF $19,994.62 COVERING TAXES DUE THE UNITED STATES.

THE ASSIGNEE UNDER THE FIRST ASSIGNMENT HAS RELEASED ALL RIGHTS ACQUIRED UNDER THE ASSIGNMENT AND THE RELEASE APPEARS ADEQUATE TO PROTECT THE UNITED STATES, INSOFAR AS THAT ASSIGNEE IS CONCERNED. THUS, WHILE TECHNICALLY IT MAY WELL BE THAT DURING THE INTERVAL BETWEEN THE EXECUTION OF THE SECOND ASSIGNMENT ( FEBRUARY 7, 1958), AND THE RELEASE OF THE FIRST ASSIGNMENT ( FEBRUARY 20, 1958), SUCH SECOND ASSIGNMENT WAS WITHOUT LEGAL EFFECT TO CONFER UPON THE SECOND ASSIGNEE THE RIGHT TO PAYMENT UNDER THE CONTRACT, ANY TECHNICAL DEFICIENCY WOULD APPEAR TO HAVE BEEN CURED BY THE SUBSEQUENT RELEASE OF THE FIRST ASSIGNMENT. THEREFORE, PAYMENT OF THE AMOUNT REMAINING UNPAID UNDER THE CONTRACT SHOULD BE MADE TO THE SECOND ASSIGNEE, THE REPUBLIC NATIONAL BANK OF DALLAS. CENTRAL NATIONAL BANK OF RICHMOND V. UNITED STATES, 91 F.1SUPP. 738.

AS REQUESTED, THE PAPERS TRANSMITTED WITH YOUR LETTER ARE RETURNED HEREWITH.