B-162869, NOV. 30, 1967

B-162869, NOV. 30, 1967

CONTRACTS - PAYMENTS - SURETY V CONTRACTOR DECISION TO V.A. CONCERNING NEGOTIATED SETTLEMENT OF CLAIM INCIDENT TO COMPLETION OF CONSTRUCTION OF V.A. HOSPITAL PROJECT AT CLEVELAND AND PAYMENT IN CARE OF SURETY. WHERE CLAIM FOR PAYMENT FOR CHANGE FROM COAL BURNING EQUIPMENT TO GAS HEATING UNDER CONSTRUCTION CONTRACT WAS SUBJECT OF NEGOTIATED SETTLEMENT AFTER APPEAL OF OTHER CLAIMS UNDER CONTRACTS DISPUTES PROCEDURE PAYMENT MAY BE MADE TO CONTRACTOR WITH DELIVERY OF CHECK TO SURETY UPON RECEIPT FROM CONTRACTOR OF AGREEMENT.

TO MR. DRIVER:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 6, 1967 (086D), WITH ENCLOSURES, FROM THE CONSTRUCTION CONTRACTING OFFICER, OFFICE OF THE ASSISTANT ADMINISTRATOR FOR CONSTRUCTION, REQUESTING A DECISION AS TO WHETHER PAYMENT ON A VOUCHER FOR $64,136.87 MAY BE MADE TO THE UNICON MANAGEMENT CORPORATION, NEW YORK, NEW YORK, IN CARE OF THE CONTINENTAL CASUALTY COMPANY, CHICAGO, ILLINOIS.

THE AMOUNT OF THE VOUCHER REPRESENTS A NEGOTIATED SETTLEMENT OF A CLAIM UNDER CONTRACT NO. V1006C-479 DATED MAY 29, 1961, WITH THE UNICON MANAGEMENT CORPORATION, FOR THE COMPLETION OF A VETERANS ADMINISTRATION HOSPITAL PROJECT AT CLEVELAND (WADE PARK), OHIO. THE CONTINENTAL CASUALTY COMPANY IS THE SURETY ON THE CONTRACT PERFORMANCE AND PAYMENT BONDS. APPEARS THAT VARIOUS CLAIMS UNDER THE CONTRACT WERE MADE THE SUBJECT OF AN APPEAL BY THE CONTRACTOR UNDER THE DISPUTES CLAUSE OF THE CONTRACT TO THE VETERANS ADMINISTRATION CONTRACT APPEALS BOARD (DOCKET NO. VACAB-482), AND THAT THE CLAIM HERE INVOLVED CONCERNS A CHANGE IN THE ORIGINALLY SPECIFIED COAL BURNING EQUIPMENT TO GAS HEATING EQUIPMENT. IT ALSO APPEARS THAT A SETTLEMENT OF THAT CLAIM WAS NEGOTIATED AFTER THE CONTRACTOR'S APPEAL WAS FILED.

AN OFFICER OF THE CONTINENTAL CASUALTY COMPANY SIGNED THE VOUCHER FOR $64,136.87 ON BEHALF OF THE UNICON MANAGEMENT CORPORATION AND THE VOUCHER IS STATED IN FAVOR OF "UNICON MANAGEMENT CORP. C/O CONTINENTAL CASUALTY COMPANY.' WHEN THE VOUCHER WAS SIGNED, CONTINENTAL SUBMITTED AN INDEMNITY AGREEMENT OF OCTOBER 6, 1967, UNDER WHICH CONTINENTAL AGREED TO HOLD HARMLESS AND FULLY INDEMNIFY THE UNITED STATES AGAINST ANY CLAIM MADE BY ANYONE, INCLUDING UNICON, BASED UPON THE COMPROMISE SETTLEMENT OF THE PARTICULAR CLAIM AND MAILING OF THE CHECK IN PAYMENT OF THE CLAIM TO UNICON IN CARE OF CONTINENTAL.

WE HAVE NOT BEEN FURNISHED THE DETAILS CONCERNING THE NEGOTIATED SETTLEMENT AGREEMENT AND NO DETERMINATION BY OUR OFFICE WITH RESPECT TO THE AMOUNT OF THE PROPOSED SETTLEMENT APPEARS TO BE REQUIRED AT THIS TIME INASMUCH AS A DECISION HAS BEEN REQUESTED SOLELY ON THE QUESTION AS TO THE PROPRIETY OF MAKING PAYMENT TO THE CONTRACTOR IN CARE OF THE SURETY.

OUR RECORDS DO NOT DISCLOSE ANY INDEBTEDNESS OF THE UNICON MANAGEMENT CORPORATION TO THE UNITED STATES AND WE HAVE BEEN ADVISED INFORMALLY BY THE INTERNAL REVENUE SERVICE THAT IT HAS NO RECORD OF ANY OUTSTANDING FEDERAL TAX CLAIM AGAINST THAT FIRM. ALSO, WE ARE ADVISED THAT YOUR ADMINISTRATION HAS NOT RECEIVED NOTICE OF ANY ASSIGNMENT OF AMOUNTS DUE OR TO BECOME DUE UNDER THE CONTRACT TO A BANK, TRUST COMPANY OR OTHER FINANCIAL INSTITUTION PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, 31 U.S.C. 203, 41 U.S.C. 15. THUS, IT APPEARS THAT THE GOVERNMENT IN THIS CASE IS A MERE STAKEHOLDER OF AN AMOUNT DUE EITHER THE CONTRACTOR OR THE SURETY AND THAT THE GOVERNMENT WOULD OBTAIN A VALID ACQUITTANCE BY MAKING PAYMENT OF THE AMOUNT OF $64,136.87 IN ACCORDANCE WITH AN AGREEMENT BETWEEN THE CONTRACTOR AND THE SURETY.

IN THE INDEMNITY AGREEMENT OF OCTOBER 6, 1967, THE CONTINENTAL CASUALTY COMPANY WARRANTS AND REPRESENTS THAT IT HAS EXPENDED A SUBSTANTIAL AMOUNT IN CONNECTION WITH THE PERFORMANCE OF CONTRACT NO. V1006C-479, FOR WHICH IT HAS NOT BEEN REIMBURSED, AND THAT, PURSUANT TO WRITTEN AGREEMENTS BETWEEN CONTINENTAL AND THE UNICON MANAGEMENT CORPORATION, IT HAS FULL AUTHORITY TO COMPROMISE AND SETTLE ALL CLAIMS ARISING OUT OF THE CONTRACT, TO SIGN THE VOUCHER FOR $64,136.87 AND TO BIND UNICON FULLY THEREBY.

OUR EXAMINATION OF AN AGREEMENT DATED APRIL 1, 1965, AMONG CONTINENTAL, UNICON, TWO OTHER CORPORATIONS NAMED AS PRINCIPALS AND FOUR INDIVIDUALS REFERRED TO AS INDEMNITORS, HAS DISCLOSED THAT CONTINENTAL AND UNICON AGREED TO A PROCEDURE WHEREBY CONTRACT PAYMENTS WOULD BE MAILED FOR DEPOSIT IN A SPECIAL BANK ACCOUNT FROM WHICH WITHDRAWALS WERE TO BE MADE BY TWO SIGNATURES, ONE OF WHICH WOULD BE THE SIGNATURE OF A DESIGNEE OF CONTINENTAL AND THE OTHER OF WHICH WOULD BE THE SIGNATURE OF AN EMPLOYEE OR OFFICER OF UNICON. HOWEVER, THE CONTRACTOR'S ATTORNEY OF RECORD HAS INDICATED THAT THE PROPOSED METHOD OF MAKING PAYMENT OF THE AMOUNT OF $64,136.87 MEETS WITH THE CONTRACTOR'S APPROVAL AND, IN OUR OPINION, THE VOUCHER IN THAT AMOUNT, WHICH IS RETURNED HEREWITH, PROPERLY MAY BE PAID BY ISSUANCE OF A CHECK IN FAVOR OF THE CONTRACTOR MAILED TO THE SURETY UPON RECEIPT FROM THE CONTRACTOR OF A STATEMENT IN WRITING THAT IT AGREES TO SUCH PROCEDURE. WE UNDERSTAND THAT THE CONTRACTOR'S ATTORNEY HAS INDICATED INFORMALLY THAT SUCH STATEMENT MAY BE OBTAINED READILY.

WE ARE ALSO RETURNING THE INDEMNITY AGREEMENT OF OCTOBER 6, 1967, AND OTHER DOCUMENTS SUBMITTED WITH THE VOUCHER.