B-160232, NOVEMBER 4, 1966, 46 COMP. GEN. 389

B-160232: Nov 4, 1966

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CONTRACTS - PAYMENTS - RELEASES - CONFLICTING CLAIMS - JUDICIAL DETERMINATION PAYMENT OF THE BALANCE DUE UNDER A CONSTRUCTION CONTRACT THAT IS CLAIMED BY THE ASSIGNEE BANK. IF AN ACTION TO OBTAIN PAYMENT IS BROUGHT AGAINST THE UNITED STATES. 1966: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 1. AN INSTRUMENT OF ASSIGNMENT "OF ALL MONEY DUE OR HEREINAFTER TO BECOME DUE" UNDER THE ABOVE CONTRACT WAS EXECUTED ON AUGUST 20. ALSO ENCLOSED WAS A LETTER FROM THE SURETY WITH INFORMATION THAT THE SURETY REFUSED TO SIGN THE NOTICE OF ASSIGNMENT. IT IS REPORTED THAT SINCE THE NOTICE OF ASSIGNMENT HAD NOT BEEN HONORED BY ALL PARTIES CONCERNED. AT THE REQUEST OF THE CONTRACTOR SUBSEQUENT PARTIAL PAYMENTS WERE FORWARDED TO THE CONTRACTOR IN CARE OF AN OFFICER OF THE ASSIGNEE BANK.

B-160232, NOVEMBER 4, 1966, 46 COMP. GEN. 389

CONTRACTS - PAYMENTS - RELEASES - CONFLICTING CLAIMS - JUDICIAL DETERMINATION PAYMENT OF THE BALANCE DUE UNDER A CONSTRUCTION CONTRACT THAT IS CLAIMED BY THE ASSIGNEE BANK, THE SURETY, AND THE ADMINISTRATOR AND ANCILLARY ADMINISTRATOR OF THE TWO PARTNER CONTRACTORS KILLED IN AN AIRPLANE ACCIDENT SHOULD BE WITHHELD PENDING JUDICIAL DETERMINATION OF THE RIGHTS OF THE CLAIMANTS, EACH CLAIMANT ALLEGING PRIORITY ENTITLEMENT, NO CLAIMANT CAN GIVE THE UNITED STATES A GOOD AND VALID ACQUITTANCE. IF AN ACTION TO OBTAIN PAYMENT IS BROUGHT AGAINST THE UNITED STATES, THE CLAIMANTS NOT INVOLVED IN THE SUIT COULD BE INTERPLEADED AND THE AMOUNT DUE UNDER THE CONTRACT DEPOSITED WITH THE COURT.

TO THE SECRETARY OF AGRICULTURE, NOVEMBER 4, 1966:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 1, 1966, WITH ENCLOSURES, FROM THE CHIEF, DIVISION OF FISCAL CONTROL, FOREST SERVICE, ALBUQUERQUE, NEW MEXICO, ADDRESSED TO OUR CLAIMS DIVISION, REQUESTING OUR DECISION AS TO WHOM FINAL PAYMENT SHOULD BE MADE ON CONTRACT NO. 15-534, DOME ROAD NO. 10289, CONTRACTOR VAN WINKLE CONSTRUCTION COMPANY.

THE VAN WINKLE CONSTRUCTION COMPANY, A PARTNERSHIP CONSISTING OF DOROTHY E. VAN WINKLE AND F. VAN WINKLE, ENTERED INTO CONTRACT NO. 15 534, DATED JUNE 7, 1965, WITH THE DEPARTMENT OF AGRICULTURE, FOREST SERVICE, ALBUQUERQUE, NEW MEXICO, TO CLEAR, GRADE, DRAIN AND SURFACE APPROXIMATELY 2.1 MILES OF DOME ROAD NO. 10289, SITUATED ABOUT 11 MILES SOUTHWEST OF LOS ALAMOS, NEW MEXICO. THE GREAT AMERICAN INSURANCE COMPANY ISSUED TO THE CONTRACTOR PERFORMANCE AND PAYMENT BONDS COVERING THE CONTRACT.

AN INSTRUMENT OF ASSIGNMENT "OF ALL MONEY DUE OR HEREINAFTER TO BECOME DUE" UNDER THE ABOVE CONTRACT WAS EXECUTED ON AUGUST 20, 1965, IN FAVOR OF THE NORTH DENVER BANK, DENVER, COLORADO, BY THE CONTRACTOR. ALSO ON AUGUST 20, 1965, THE BANK ASSIGNEE EXECUTED A NOTICE OF ASSIGNMENT, AND FORWARDED IT WITH A COPY OF THE INSTRUMENT OF ASSIGNMENT TO THE CONTRACTING OFFICER WHO ACKNOWLEDGED RECEIPT THEREOF ON AUGUST 23, 1965.

ON SEPTEMBER 22, 1965, THE CONTRACTING OFFICER RECEIVED A LETTER FROM THE ASSIGNEE BANK WITH A NOTICE OF ASSIGNMENT SIGNED BY AN OFFICER OF THE BANK. ALSO ENCLOSED WAS A LETTER FROM THE SURETY WITH INFORMATION THAT THE SURETY REFUSED TO SIGN THE NOTICE OF ASSIGNMENT. IT IS REPORTED THAT SINCE THE NOTICE OF ASSIGNMENT HAD NOT BEEN HONORED BY ALL PARTIES CONCERNED, THE CONTRACTING OFFICER MARKED THE ASSIGNMENT DOCUMENTS VOID. THEREAFTER, AT THE REQUEST OF THE CONTRACTOR SUBSEQUENT PARTIAL PAYMENTS WERE FORWARDED TO THE CONTRACTOR IN CARE OF AN OFFICER OF THE ASSIGNEE BANK.

UPON COMPLETION OF THE CONTRACT, A FINAL INSPECTION WAS MADE AND THE PROJECT ACCEPTED BY THE GOVERNMENT. A PARTNER OF THE CONTRACTING FIRM SIGNED THE NECESSARY RELEASE AND OTHER FORMS AND REQUESTED FINAL PAYMENT IN THE AMOUNT OF $34,080.50 ON NOVEMBER 17, 1965. ON NOVEMBER 20, 1965, BOTH PARTNERS OF THE VAN WINKLE CONSTRUCTION COMPANY WERE KILLED IN AN AIRPLANE ACCIDENT.

CLAIMS TO THE BALANCE DUE THE VAN WINKLE CONSTRUCTION COMPANY UNDER THE CONTRACT HAVE BEEN PRESENTED IN BEHALF OF THE GREAT AMERICAN INSURANCE COMPANY, THE SURETY, THE NORTH DENVER BANK, AS ASSIGNEE, THE ADMINISTRATOR OF THE ESTATES OF THE PARTNERS, IN DENVER, COLORADO, AND THE ANCILLARY ADMINISTRATOR OF THE ESTATES OF THE PARTNERS, IN ALBUQUERQUE, NEW MEXICO.

THE SURETY STATES THAT IT HAS ALREADY BEEN ADVISED OF CLAIMS AGAINST THE CONTRACTOR IN EXCESS OF $30,000 FOR WHICH IT WILL BE LIABLE UNDER ITS BONDS, AND THAT THERE MAY BE OTHER CLAIMS ASSERTED TO RAISE THEIR LIABILITY TO AN AMOUNT IN EXCESS OF THE AMOUNT YET DUE UNDER THE CONTRACT.

THE ASSIGNEE BANK ASSERTS THAT IT LENT TO THE CONTRACTOR APPROXIMATELY $47,000 ON THE STRENGTH OF THE ASSIGNMENT.

IT IS REPORTED THAT THE GOVERNMENT, AFTER DEDUCTING AMOUNTS DUE IT, HAS IN ITS HANDS THE AMOUNT OF $34,080.50. IT THUS APPEARS THAT INSOFAR AS THIS AMOUNT IS CONCERNED, THE GOVERNMENT IS A STAKEHOLDER.

SECTION 203 OF TITLE 31, U.S. CODE, 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 INTEREST 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.

IT SHOULD BE NOTED THAT THE ASSIGNMENT OF CLAIMS STATURE, ABOVE, DOES NOT REQUIRE THE APPROVAL OF THE SURETY IN ORDER TO VALIDATE THE ASSIGNMENT AS FAR AS THE UNITED STATES IS CONCERNED. NOTICE OF ASSIGNMENT IS ALL THAT IS REQUIRED. THE REPORTED "VOIDANCE" OF THE ASSIGNMENT DOCUMENTS BY THE CONTRACTING OFFICER WAS THEREFORE IMPROPER, AND PROBABLY OF NO LEGAL EFFECT.

IT ALSO MAY BE OBSERVED THAT INSOFAR AS THE SURETY IS CONCERNED, WE HAVE CONSISTENTLY TAKEN THE POSITION THAT A PAYMENT BOND SURETY'S RIGHT OF PRIORITY OVER OTHER CLAIMANTS CANNOT OTHERWISE BE RECOGNIZED UNTIL THE SURETY HAS SATISFIED ALL CLAIMS FOR LABOR AND MATERIALS FURNISHED IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT WORK. SEE UNITED STATES V. NATIONAL SURETY COMPANY, 254 U.S. 73, AND AMERICAN SURETY V. WESTINGHOUSE ELECTRIC MANUFACTURING COMPANY, ET AL; 296 U.S. 133. AND, AS YOU MAY KNOW, THERE IS A CONFLICT OF AUTHORITY CONCERNING THE RELATIVE RIGHTS OF AN ASSIGNEE AND SURETY IN CASES OF THIS TYPE. SEE COCONUT GROVE EXCHANGE BANK V. NEW AMSTERDAM CASUALTY CO. 149 F. 2D 73; GENERAL CASUALTY CO. V. SECOND NATIONAL BANK OF HOUSTON, 178 F. 2D 679; AND HARDIN COUNTY SAVINGS BANK V. UNITED STATES, 106 CT. CL. 577; ROYAL INDEMNITY CO. V. UNITED STATES, 117 CT. CL. 736.

THE CLAIMS OF THE ADMINISTRATOR AND ANCILLARY ADMINISTRATOR OF THE ESTATE OF EACH OF THE PARTNERS ARE NOT TO BE OVERLOOKED, SINCE EACH ADMINISTRATOR, IN HIS OWN JURISDICTION, IS CONSIDERED THE ALTER EGOOF THE DECEASED PARTNER.

IN THE CIRCUMSTANCES, THE GOVERNMENT IS SOLELY CONCERNED WITH OBTAINING A GOOD AND VALID ACQUITTANCE FOR THE MONEY IN ITS POSSESSION DUE THE CONTRACTOR AS A FINAL PAYMENT. OBVIOUSLY PAYMENT TO ANY ONE OF THE CLAIMANTS WILL NOT PREVENT ANY ONE OR ALL OF THE OTHER CLAIMANTS FROM BRINGING A COURT ACTION AGAINST THE GOVERNMENT. SINCE OUR OFFICE IS AN ADMINISTRATIVE AGENCY AND NOT A JUDICIAL BODY, OUR DECISION WOULD NOT RENDER THE MATTER RES JUDICATA, AND THE GOVERNMENT COULD BE REQUIRED TO MAKE A DUPLICATE PAYMENT.

SINCE IN THIS CASE EACH OF THE CLAIMANTS BELIEVES IT IS ENTITLED TO PRIORITY, AND NO ONE CAN GIVE THE UNITED STATES A GOOD AND VALID ACQUITTANCE, WE DO NOT FEEL THAT WE CAN PROPERLY AUTHORIZE PAYMENT TO ANY OF THE CLAIMANTS EXCEPT PURSUANT TO AN ORDER OF A COURT OF APPROPRIATE JURISDICTION. ACCORDINGLY, IN THE ABSENCE OF AGREEMENT BETWEEN THE PARTIES, PAYMENT SHOULD BE WITHHELD PENDING JUDICIAL DETERMINATION OF THEIR RIGHTS IN SUCH PROCEEDINGS AS THEY, OR EITHER OF THEM, MAY CHOOSE TO INSTITUTE, SHOULD AN ACTION BE BROUGHT AGAINST THE UNITED STATES, THE UNITED STATES COULD INTERPLEAD THE OTHER CLAIMANTS, DEPOSIT THE AMOUNT DUE THE CONTRACTOR WITH THE COURT AND BE RELIEVED OF ANY FURTHER LIABILITY IN THE MATTER.