B-159494, SEP. 2, 1966

B-159494: Sep 2, 1966

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

SMITH AND CARTER: REFERENCE IS MADE TO YOUR PETITION IN BEHALF OF MERCHANTS AND FARMERS BANK AND TRUST COMPANY. THE CIRCUMSTANCES GIVING RISE TO THE CLAIMS OF THE BANK AND LUMBER COMPANY AS STATED BY THE CLAIMANTS AND BY THE ADMINISTRATIVE OFFICE ARE NOT IN DISPUTE. DSA-4-074304 MN301 WAS AWARDED TO JET TOOL INDUSTRIES. THE CONTRACT WAS FOR 20. WERE ASSIGNED BY JET TOOL INDUSTRIES TO THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY. THE ASSIGNMENT WAS HAND CARRIED TO THE DEFENSE SUPPLY CENTER. THE ASSIGNMENT WAS ACKNOWLEDGED BY THE GOVERNMENT CONTRACTING OFFICER ON OCTOBER 29. FOR SOME UNEXPLICABLE REASON THE ASSIGNMENT INSTRUMENTS FORWARDED BY THE CONTRACTING OFFICER WERE NOT RECEIVED BY THE DISBURSING OFFICE UNTIL JANUARY 29.

B-159494, SEP. 2, 1966

TO WISE, SMITH AND CARTER:

REFERENCE IS MADE TO YOUR PETITION IN BEHALF OF MERCHANTS AND FARMERS BANK AND TRUST COMPANY, OF LEESVILLE, LOUISIANA, AND PRASSEL LUMBER COMPANY, OF JACKSON, MISSISSIPPI, DIRECTED TO OUR OFFICE THROUGH THE OFFICE OF THE DEPUTY DIRECTOR, CONTRACT ADMINISTRATION SERVICES, DEFENSE SUPPLY AGENCY.

ESSENTIALLY, EXCEPT FOR ONE MATTER, THE CIRCUMSTANCES GIVING RISE TO THE CLAIMS OF THE BANK AND LUMBER COMPANY AS STATED BY THE CLAIMANTS AND BY THE ADMINISTRATIVE OFFICE ARE NOT IN DISPUTE.

IT APPEARS THAT A FIXED-PRICE NEGOTIATED CONTRACT NO. DSA-4-074304 MN301 WAS AWARDED TO JET TOOL INDUSTRIES, ENTERPRISE, MISSISSIPPI, ON SEPTEMBER 29, 1965, BY THE DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA. THE CONTRACT WAS FOR 20,000 EACH HARDWOOD MATERIAL HANDLING PALLETS AT A UNIT PRICE OF $3.20 AND A TOTAL CONTRACT PRICE OF $64,000.

THE CONTRACT PROCEEDS, BY AN "ACT OF ASSIGNMENT" DATED OCTOBER 27, 1965, WERE ASSIGNED BY JET TOOL INDUSTRIES TO THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY. THE ASSIGNMENT WAS HAND CARRIED TO THE DEFENSE SUPPLY CENTER, RICHMOND, VIRGINIA, BY CAREY CARPENTER, PRESIDENT OF JET TOOL INDUSTRIES, ACCOMPANIED BY A REPRESENTATIVE OF THE DEPARTMENT OF COMMERCE AND INDUSTRY OF THE STATE OF LOUISIANA. THE ASSIGNMENT WAS ACKNOWLEDGED BY THE GOVERNMENT CONTRACTING OFFICER ON OCTOBER 29, 1965. THE GOVERNMENT CONTRACTING OFFICER, BY LETTER DATED NOVEMBER 2, 1965, AND PURSUANT TO ADMINISTRATIVE PROCEDURES, FORWARDED A COPY OF THE ASSIGNMENT AND NOTICE OF ASSIGNMENT TO THE DISBURSING OFFICE AT ATLANTA, GEORGIA. FOR SOME UNEXPLICABLE REASON THE ASSIGNMENT INSTRUMENTS FORWARDED BY THE CONTRACTING OFFICER WERE NOT RECEIVED BY THE DISBURSING OFFICE UNTIL JANUARY 29, 1966.

DURING NOVEMBER AND DECEMBER 1965 INVOICES TOTALLING $25,401.60 WERE RECEIVED BY THE DISBURSING OFFICE. THESE INVOICES REPRESENTED THE DELIVERY OF APPROXIMATELY 7,938 PALLETS. EACH OF THE INVOICES CONTAINED A STATEMENT REQUESTING THAT PAYMENT BE MADE JOINTLY TO THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY AND JET TOOL INDUSTRIES.

IT IS REPORTED THAT BETWEEN THE 14TH AND 20TH OF JANUARY, 1966, CARPENTER, AS PRESIDENT OF JET TOOL INDUSTRIES, CONTACTED THE DISBURSING OFFICE AT ATLANTA, GEORGIA, BY TELEPHONE AND IN PERSON, REQUESTING PAYMENT OF THE ABOVE-MENTIONED INVOICES. IT ALSO IS REPORTED THAT ASSIGNMENT OF THE PROCEEDS OF THE CONTRACT AS INDICATED BY THE STATEMENT ON THE INVOICES WAS DISCUSSED WITH CARPENTER BY THE ACCOUNTING AND FINANCE OFFICER (DISBURSING OFFICER), WHEREUPON CARPENTER ADVISED THAT THE INVOICES WERE IN ERROR. IN VIEW OF THE CONTRACTOR'S STATEMENTS AND IN THE ABSENCE OF NOTICE OF THE ASSIGNMENT, PAYMENT WAS MADE ON JANUARY 20, 1966 IN THE AMOUNT OF $25,134.91 TO JET TOOL INDUSTRIES.

AS INDICATED ABOVE, THE CONTRACTING OFFICER'S LETTER TRANSMITTING THE NOTICE OF ASSIGNMENT WAS RECEIVED BY THE DISBURSING OFFICE ON JANUARY 29, 1966, AND THE ASSIGNEE'S NOTICE OF ASSIGNMENT WAS NOT RECEIVED BY THE DISBURSING OFFICE UNTIL FEBRUARY 8, 1966--- BOTH DATES BEING AFTER PAYMENT HAD BEEN MADE TO THE CONTRACTOR.

IT IS ALLEGED IN THE PETITION THAT THE CONTRACTING OFFICER ASSURED CARPENTER, PRESIDENT OF JET TOOLS, AND THE STATE REPRESENTATIVE, WHO ACCOMPANIED HIM, THAT HE, THE CONTRACTING OFFICER,"WOULD TAKE CARE OF THE MATTER OF NOTIFYING THE GOVERNMENT'S DISBURSING OFFICER AT ATLANTA, GEORGIA, OF THE ASSIGNMENT AND THAT THEY," CARPENTER AND THE STATE REPRESENTATIVE,"SHOULD NOT CONCERN THEMSELVES WITH THAT DETAIL ANY MORE.' IN SUPPORT OF THE ALLEGATION THERE IS SUBMITTED THE AFFIDAVIT OF THE STATE REPRESENTATIVE WHEREIN IT IS STATED, IN PART, THAT " * * * HE, ROGERS, WOULD CALL BIRMINGHAM, ALABAMA, THE OFFICE HE THOUGHT WOULD SUPERVISE THE CONTRACT, TO ADVISE THAT THE PROCEEDS OF THE CONTRACT HAD BEEN ASSIGNED * * *.' IT IS FURTHER ALLEGED THAT THE BANK, RELYING ON THE CONTRACTING OFFICER'S ALLEGED STATEMENT THAT HE WOULD NOTIFY THE DISBURSING OFFICER OF THE ASSIGNMENT, ADVANCED CREDIT TO CARPENTER EXPECTING CHECKS IN PAYMENT OF DELIVERED PALLETS TO BE SENT TO IT.

IT IS ALSO ALLEGED THAT THE LUMBER COMPANY RELYING ON THE ASSIGNMENT TO THE BANK AND UPON AN ASSIGNMENT TO IT BY THE JET TOOL COMPANY OF 22/64 OF THE PAYMENTS PREVIOUSLY ASSIGNED TO THE BANK, EXTENDED CREDIT TO THE JET TOOL COMPANY FOR MATERIAL TO FABRICATE THE CONTRACT PALLETS.

SECTION 203 OF TITLE 30 U.S.C. CONCERNING THE ASSIGNMENT OF CLAIMS AGAINST THE GOVERNMENT, PROVIDES IN PERTINENT PART AS FOLLOWS:

"ALL TRANSFERS AND ASSIGNMENTS MADE OF ANY CLAIM UPON THE UNITED STATES, OR OF ANY PART OR SHARE THEREOF, OR INTERESTED THEREIN, WHETHER ABSOLUTE OR CONDITIONAL, AND WHATEVER MAY BE THE CONSIDERATION THEREFOR, AND ALL POWERS OF ATTORNEY, ORDERS, OR OTHER AUTHORITIES FOR RECEIVING PAYMENT OF ANY SUCH CLAIM, OR OF ANY PART OR SHARE THEREOF, EXCEPT AS HEREINAFTER PROVIDED, SHALL BE ABSOLUTELY NULL AND VOID, UNLESS THEY ARE FREELY MADE AND EXECUTED IN THE PRESENCE OF AT LEAST TWO ATTESTING WITNESSES, AFTER THE ALLOWANCE OF SUCH A CLAIM, THE ASCERTAINMENT OF THE AMOUNT DUE, AND THE ISSUING OF A WARRANT FOR THE, PAYMENT THEREOF. * * *

"THE PROVISIONS OF THE PRECEDING PARAGRAPH SHALL NOT APPLY IN ANY CASE IN WHICH THE MONEYS DUE OR TO BECOME DUE FROM THE UNITED STATES OR FROM ANY AGENCY OR DEPARTMENT THEREOF, UNDER A CONTRACT PROVIDING FOR PAYMENTS AGGREGATING $1,000 OR MORE, ARE ASSIGNED TO A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION, INCLUDING ANY FEDERAL LENDING AGENCY: PROVIDED

"3. THAT UNLESS OTHERWISE EXPRESSLY PERMITTED BY SUCH CONTRACT ANY SUCH ASSIGNMENT SHALL COVER ALL AMOUNTS PAYABLE UNDER SUCH CONTRACT AND NOT ALREADY PAID, SHALL NOT BE MADE TO MORE THAN ONE PARTY, AND SHALL NOT BE SUBJECT TO FURTHER ASSIGNMENT EXCEPT THAT ANY SUCH ASSIGNMENT MAY BE MADE TO ONE PARTY AS AGENT OR TRUSTEE FOR TWO OR MORE PARTIES PARTICIPATING IN SUCH FINANCING; * * *.

"4. THAT IN THE EVENT OF ANY SUCH ASSIGNMENT, THE ASSIGNEE THEREOF SHALL FILE WRITTEN NOTICE OF THE ASSIGNMENT TOGETHER WITH A TRUE COPY OF THE INSTRUMENT OF ASSIGNMENT WITH (A) THE CONTRACTING OFFICER OR THE HEAD OF HIS DEPARTMENT OR AGENCY; (B) THE SURETY OR SURETIES UPON THE BOND OR BONDS, IF ANY, IN CONNECTION WITH SUCH CONTRACT; AND (C) THE DISBURSING OFFICER, IF ANY, DESIGNATED IN SUCH CONTRACT TO MAKE PAYMENT.'

THE CLAIM OF THE PRASSEL LUMBER COMPANY, PREDICATED AS IT IS ON AN ASSIGNMENT TO IT OF AN INTEREST IN THE ASSIGNMENT TO THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY, IS WITHOUT MERIT INSOFAR AS IT CONCERNS THE UNITED STATES, SINCE THE LUMBER COMPANY IS NOT ONE OF THE EXCEPTED FINANCIAL INSTITUTIONS NAMED IN THE STATUTE.

NOR CAN WE VIEW WITH FAVOR THE CLAIM OF THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY. IT IS ALLEGED BY THE BANK THAT IT RELIED ON STATEMENTS OF THE CONTRACTING OFFICER TO ITS DETRIMENT. THIS ALLEGATION IS NOT EXACTLY TRUE, SINCE THE AFFIDAVITS IN SUPPORT OF THE BANK'S CLAIM CLEARLY STATE THAT THE STATEMENTS WERE MADE TO IT BY THE CONTRACTOR AND ANOTHER PERSON. IT IS NOT ALLEGED OR SHOWN THAT THE CONTRACTING OFFICER MADE THE STATEMENTS DIRECTLY TO THE CLAIMANT BANK. IN FACT, THE CONTRACTING OFFICER CATEGORICALLY DENIES STATING THAT HE WOULD TAKE CARE OF NOTIFYING THE DISBURSING OFFICE, BUT STATES THAT HE SAID HE WOULD NOTIFY THE CONTRACTING OFFICE AT BIRMINGHAM, ALABAMA, WHO WOULD ADMINISTER THE CONTRACT.

IN THIS CONNECTION THE CONTRACT CLEARLY STATES THAT THE OFFICER IN CHARGE OF ADMINISTERING THE CONTRACT, THAT IS, INSPECTION AND ACCEPTANCE OF ITEMS, IS THE CHIEF, DCASD, 908 SOUTH 20TH STREET, BIRMINGHAM, ALABAMA 32205, AND THAT THE PAYING OFFICE IS THE DISBURSING OFFICER, DCASR, 3100 MAPLE DRIVE, N.E., ATLANTA, GEORGIA 30305. IN HIS STATEMENT THE PROCURING CONTRACTING OFFICER, AT RICHMOND, VIRGINIA, STATES THAT HE ADVISED THE STATE REPRESENTATIVE AND MR. CARPENTER THAT HE WOULD FORWARD A COPY OF THE ASSIGNMENT TO THE DCASR OFFICE IN BIRMINGHAM, ALABAMA, WHERE THE CONTRACT WOULD BE ADMINISTERED. IT IS NOT INCONCEIVABLE THAT A MISUNDERSTANDING AROSE AT THIS POINT, IN THAT THE STATE REPRESENTATIVE AND MR. CARPENTER MAY HAVE BELIEVED THAT PAYMENTS WOULD BE ISSUED FROM THE BIRMINGHAM ADMINISTERING OFFICE, RATHER THAN THE ATLANTA PAYING OFFICE. IN ANY EVENT THE BANK WAS CHARGED WITH NOTICE THAT PAYMENTS WOULD ISSUE FROM ATLANTA, GEORGIA.

WE ARE AWARE THAT THE CONTRACTING OFFICER IS REQUIRED BY ADMINISTRATIVE REGULATIONS TO NOTIFY THE DISBURSING OFFICER OF THE RECEIPT OF A NOTICE OF ASSIGNMENT, BUT WE CANNOT VIEW THIS NOTICE AS A SUBSTITUTE FOR THE PLAIN AND UNAMBIGUOUS DIRECTIVE OF THE STATUTE THAT THE ASSIGNEE FORWARD A TRUE COPY OF THE ASSIGNMENT AS WELL AS A NOTICE OF ASSIGNMENT DIRECTLY TO THE DISBURSING OFFICER NAMED IN THE CONTRACT. WHERE, AS HERE, THE ASSIGNEE CHOSE TO RELY ON SECOND-HAND STATEMENTS RATHER THAN COMPLY STRICTLY WITH THE LAW, IT MUST BE CONSIDERED THAT THE ASSIGNEE ASSUMES THE RISK OF AN UNFORESEEN DELAY IN DELIVERY OF THE DOCUMENTS TO THE DISBURSING OFFICER. NOR CAN WE VIEW THE LEGEND ON THE INVOICES TO MAKE CHECKS PAYABLE TO THE CONTRACTOR AND THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY AS A SUBSTITUTE FOR THE STATUTORY REQUIREMENTS. THE DISBURSING OFFICER QUESTIONED THE MEANING OF THE LEGEND AND WAS ASSURED BY THE CONTRACTOR THAT IT WAS AN ERROR AND THAT NO ASSIGNMENT EXISTED. THUS, THE DISBURSING OFFICER RELIED ON THE STATEMENT OF THE SAME PERSON THE ASSIGNEE RELIED ON, AND IN ADDITION THE DISBURSING OFFICER WAS WITHOUT THE REQUIRED STATUTORY NOTICE FROM THE ASSIGNEE.

IN VIEW OF THE ABOVE WE MUST DENY THE CLAIMS NOT ONLY OF PRASSEL LUMBER COMPANY BUT ALSO OF THE MERCHANTS AND FARMERS BANK AND TRUST COMPANY.