B-166302, DEC 28, 1970, 50 COMP GEN 434

B-166302: Dec 28, 1970

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THE GOVERNMENT IS NOT AN INSURER AS TO FRAUDULENT SCHEME DEVISED BY AN ASSIGNOR AGAINST AN ASSIGNEE. NOR IS THE GOVERNMENT REQUIRED TO INVOLVE AN ASSIGNEE IN MATTERS OF CONTRACT ADMINISTRATION. WHICH WERE RETRIEVED BY THE ASSIGNOR PRIOR TO PAYMENT. AS THE JURISDICTION OF THE GENERAL ACCOUNTING OFFICE TO PAY CLAIMS IS BASED UPON THE LEGAL LIABILITY OF THE UNITED STATES. THE ASSIGNEE'S RIGHT TO SEEK A JUDICIAL DETERMINATION OF ITS CLAIM IS NOT PREJUDICED. 1970: REFERENCE IS MADE TO YOUR LETTER OF JULY 10. ONE OF THE CONTRACTS (F28609-68-C-0215) WAS WITH MCGUIRE AIR FORCE BASE. THE PURCHASE ORDERS WERE ISSUED BY FORT DIX AS THE NEED AROSE. THE DEPARTMENT OF THE AIR FORCE AND THE DEPARTMENT OF THE ARMY REPORTS CONCERNING PRODUCE'S CLAIM SHOW THAT THE CIRCUMSTANCES INVOLVED IN BOTH SITUATIONS ARE SUBSTANTIALLY THE SAME AND.

B-166302, DEC 28, 1970, 50 COMP GEN 434

CLAIMS - ASSIGNMENT - FRAUD PERPETRATED BY ASSIGNOR - GOVERNMENT'S LIABILITY SINCE UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, THE GOVERNMENT IS NOT AN INSURER AS TO FRAUDULENT SCHEME DEVISED BY AN ASSIGNOR AGAINST AN ASSIGNEE, NOR IS THE GOVERNMENT REQUIRED TO INVOLVE AN ASSIGNEE IN MATTERS OF CONTRACT ADMINISTRATION, A CLAIM FOR THE AMOUNT OF FICTITIOUS INVOICES PRESENTED BY THE ASSIGNEE OF A DRAYAGE COMPANY PERFORMING SERVICES FOR THE GOVERNMENT, WHICH WERE RETRIEVED BY THE ASSIGNOR PRIOR TO PAYMENT, MAY NOT BE HONORED AS THE RECORD PRESENTS NO GROUNDS TO IMPUTE NEGLIGENCE TO OR ASSERT ESTOPPEL AGAINST THE GOVERNMENT, BUT INSTEAD RAISES DOUBT AS TO THE VALIDITY OF THE ASSIGNEE'S CLAIM. ALTHOUGH THE CLAIM MUST BE REJECTED, AS THE JURISDICTION OF THE GENERAL ACCOUNTING OFFICE TO PAY CLAIMS IS BASED UPON THE LEGAL LIABILITY OF THE UNITED STATES, THE ASSIGNEE'S RIGHT TO SEEK A JUDICIAL DETERMINATION OF ITS CLAIM IS NOT PREJUDICED.

TO ORLOW AND ORLOW, DECEMBER 28, 1970:

REFERENCE IS MADE TO YOUR LETTER OF JULY 10, 1970, AND PRIOR CORRESPONDENCE, WHEREIN YOU ASSERT ON BEHALF OF PRODUCE FACTORS CORPORATION (PRODUCE) A CLAIM IN THE AMOUNT OF $77,272.60, SUBJECT TO ADJUSTMENT, DEPENDING UPON THE METHOD OF COMPUTING FURTHER DAMAGES.

THE CLAIMS ARISE OUT OF THE ASSIGNMENT TO PRODUCE OF THE PROCEEDS OF GOVERNMENT CONTRACTS HELD BY TERMINAL WAREHOUSES, INC. (TERMINAL). ONE OF THE CONTRACTS (F28609-68-C-0215) WAS WITH MCGUIRE AIR FORCE BASE, NEW JERSEY, AND COVERED THAT INSTALLATION'S REQUIREMENTS FOR LOCAL DRAYAGE OF HOUSEHOLD GOODS OF SERVICE MEMBERS IN A TOTAL ESTIMATED AMOUNT OF $13,519.50, FOR THE PERIOD OF FEBRUARY 20, 1968, THROUGH DECEMBER 31, 1968.

YOUR CLAIM ALSO COVERS MISCELLANEOUS PURCHASE ORDERS ISSUED BY THE UNITED STATES ARMY TRAINING CENTER, FORT DIX, NEW JERSEY, FOR LOCAL DRAYAGE PROVIDED SERVICE MEMBERS UNDER PARAGRAPH 8309-2 OF THE JOINT TRAVEL REGULATIONS. THE PURCHASE ORDERS WERE ISSUED BY FORT DIX AS THE NEED AROSE, RATHER THAN PURSUANT TO A BLANKET CONTRACT COVERING THE INSTALLATION'S ESTIMATED NEEDS FOR A DEFINITE PERIOD. THE DEPARTMENT OF THE AIR FORCE AND THE DEPARTMENT OF THE ARMY REPORTS CONCERNING PRODUCE'S CLAIM SHOW THAT THE CIRCUMSTANCES INVOLVED IN BOTH SITUATIONS ARE SUBSTANTIALLY THE SAME AND, ACCORDINGLY, WE WILL INDICATE ONLY FACTUAL VARIANCES DEEMED IMPORTANT.

YOU ASSERT, AND WE WILL ASSUME, THAT PRODUCE IS ENGAGED PRIMARILY IN CREDIT EXTENSION AND LENDING OPERATIONS. SEE 43 COMP. GEN. 138, 139 (1963), AND CASES CITED THEREIN, WHICH CONSIDERED THE TERM "FINANCING INSTITUTION" AS USED IN THE ASSIGNMENT OF CLAIMS ACT. SEE, ALSO, 22 COMP. GEN. 44 (1942). IT APPEARS THAT PRODUCE INITIALLY MADE A LOAN TO TERMINAL IN FEBRUARY 1968 ON THE SECURITY OF A JUDGMENT NOTE. SHORTLY THEREAFTER, TERMINAL'S PRESIDENT REQUESTED ADDITIONAL FUNDS FROM PRODUCE AND OFFERED AS SECURITY THE ASSIGNMENT OF PROCEEDS OF GOVERNMENT CONTRACTS. AFTER PRODUCE SATISFIED ITSELF AS TO THE EXISTENCE OF TERMINAL'S CONTRACTUAL RELATIONSHIPS WITH THE GOVERNMENT, THE ASSIGNMENTS WERE EXECUTED. YOU HAVE ADVISED US THAT PRODUCE'S INVESTIGATION CONSISTED OF A PERSONAL VISIT TO FORT DIX AND MCGUIRE AIR FORCE BASE TO VERIFY TERMINAL'S CONTRACTS AND TO ASCERTAIN IF THEY WERE ASSIGNABLE. AT THESE INSTALLATIONS, PRODUCE INQUIRED AS TO THE PROCEDURE NECESSARY TO COMPLY WITH THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, 41 U.S.C. 15.

IN CONNECTION WITH THE FOREGOING, SECTION 3477 OF THE REVISED STATUTES (31 U.S.C. 203) PROVIDES THAT -

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, *** SHALL BE ABSOLUTELY NULL AND VOID *** .

AN EXCEPTION TO THIS RULE WAS MADE BY THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, WHICH PERMITS THE ASSIGNMENT TO A "BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION," OF MONEYS DUE OR TO BECOME DUE UNDER CERTAIN CONTRACTS AGGREGATING $1,000 OR MORE. THE ACT REQUIRES THAT NOTICE OF AN ASSIGNMENT, TOGETHER WITH A TRUE COPY OF THE INSTRUMENT OF ASSIGNMENT, MUST BE FURNISHED TO THE GOVERNMENT CONTRACTING AND DISBURSING OFFICERS.

THE RECORD SHOWS THAT MCGUIRE AIR FORCE BASE RECEIVED AND ACKNOWLEDGED THE NOTICE OF ASSIGNMENT TO PRODUCE UNDER CONTRACT NO. 0215 ON MARCH 15, 1968. SIMILAR NOTICE WAS GIVEN TO FORT DIX TO HAVE MONEYS DUE TERMINAL TO BE MAILED TO PRODUCE. IN ACCORDANCE WITH THE ARRANGEMENT BETWEEN TERMINAL AND PRODUCE, TERMINAL WOULD PRESENT INVOICES (IN DUPLICATE) TO PRODUCE FOR SERVICES PERFORMED BY TERMINAL FOR THE GOVERNMENT, TOGETHER WITH A PERSONAL RECEIPT OF SERVICE SIGNED BY THE SERVICE MEMBER FOR WHOM THE INVOICED SERVICES WERE PERFORMED. AT THE SAME TIME, PRODUCE WAS PROVIDED WITH A SCHEDULE LISTING THE INVOICES TO BE DISCOUNTED. PRODUCE WOULD THEN IMMEDIATELY PAY BY CHECK 38 PERCENT OF THE AMOUNT SHOWN IN THE SCHEDULED INVOICES TO TERMINAL. THEREAFTER, EACH INVOICE WAS STAMPED WITH THE FOLLOWING LEGEND:

THIS BILL IS ASSIGNED TO AND PAYABLE IN PHILADELPHIA FUNDS ONLY TO OUR FACTORS: TO WHOM NOTICE MUST BE GIVEN OF ANY MERCHANDISE RETURNS OR CLAIMS FOR SHORTAGE, NON-DELIVERY, OR FOR OTHER GROUNDS.

ASSIGNMENT ACKNOWLEDGED

S/ JOEL DREER

AUTHORIZED SIGNATURE

THE SUBJECT INVOICES AND THE EVIDENCES OF RECEIPT OF SERVICE WERE THEN SENT BY PRODUCE TO EITHER THE COMMERCIAL TRANSPORTATION OFFICE, MCGUIRE AIR FORCE BASE, OR THE HOUSEHOLD GOODS SECTION, FORT DIX. THE ADMINISTRATIVE REPORTS INDICATE THAT WHEN INVOICES FOR LOCAL DRAYAGE WERE RECEIVED, OFFICE PERSONNEL WOULD EXAMINE THE INVOICES AND SUPPORTING DOCUMENTATION TO DETERMINE WHETHER THE SERVICES WERE PERFORMED. VERIFIED INVOICES WOULD THEN BE FORWARDED TO THE INSTALLATION'S FINANCE OFFICE FOR FINAL PROCESSING AND PAYMENT IN ACCORDANCE WITH THE ASSIGNMENT.

IT APPEARS THAT COMMENCING SOME TIME IN APRIL OF 1968, TERMINAL BEGAN SUBMITTING FICTITIOUS INVOICES TO PRODUCE WHICH, IN ACCORDANCE WITH THE PROCEDURE DESCRIBED ABOVE, WERE DISCOUNTED AND FORWARDED FOR COLLECTION. HOWEVER, THE PRESIDENT OF TERMINAL MANAGED TO RETRIEVE THESE FICTITIOUS INVOICES BEFORE THEY COULD BE PROCESSED BY THE INSTALLATION TO WHICH THEY WERE SENT. THIS WAS ACCOMPLISHED BY TELEPHONE CALLS TO THE HOUSEHOLD GOODS SECTION OR THE COMMERCIAL TRANSPORTATION OFFICE ADVISING THAT THERE WERE ERRORS IN THE INVOICES SUBMITTED TO THE INSTALLATION, OR THAT THE INVOICES HAD BEEN FORWARDED TO THE WRONG INSTALLATION. THE TELEPHONE CALLS WOULD THEN BE FOLLOWED BY PERSONAL VISITS TO THE OFFICE INVOLVED TO PICK UP THE INVOICES. THIS PRACTICE WENT UNDETECTED UNTIL JUNE 17, 1968, WHEN THE SCHEME WAS ADMITTED TO PRODUCE BY TERMINAL'S PRESIDENT.

YOU ADVISE THAT DURING THE TERM OF PRODUCE'S RELATIONSHIP WITH TERMINAL, A TOTAL OF $79,975.38 WAS ADVANCED TO TERMINAL AS AGAINST INVOICES TOTALING $89,636.64 ASSIGNED TO THE CLAIMANT. OF THESE INVOICES, MCGUIRE PAID $2,964.96 AND FORT DIX PAID $9,355.68 AND, WITH ADJUSTMENTS FOR CERTAIN CREDITS DUE MCGUIRE, PAYMENTS TO PRODUCE TOTAL $12,364.04. THE DIFFERENCE BETWEEN THE INVOICES SUBMITTED AND THE AMOUNT PAID YIELDS THE BASIC AMOUNT OF THE CLAIM. WITH RESPECT TO FORT DIX, $274.05 HAS NOT BEEN PAID BECAUSE REQUIRED EVIDENCE OF PERFORMANCE HAS NOT BEEN SUBMITTED. ALSO, MCGUIRE HAS WITHHELD $1,032 FOR REPROCUREMENT COST INCIDENT TO TERMINATION OF TERMINAL'S CONTRACT.

GENERALLY, THE POSITION OF BOTH THE ARMY AND THE AIR FORCE IS THAT PRODUCE AS AN ASSIGNEE ACCEDES TO NO GREATER RIGHTS THAN THOSE POSSESSED BY THE ASSIGNOR. IT IS URGED THAT PRODUCE "STANDS IN THE SHOES" OF TERMINAL INSOFAR AS THE UNITED STATES IS CONCERNED AND, SINCE NO SERVICES WERE PERFORMED BY TERMINAL FOR THE BENEFIT OF THE UNITED STATES UNDER THE FICTITIOUS INVOICES, PRODUCE HAS NO VALID CLAIM AGAINST THE UNITED STATES. SPECIFIC ATTENTION IS DRAWN TO ARLINGTON TRUST CO. V UNITED STATES, 100 F. SUPP. 817 (CT. CL. 1951), WHICH INVOLVED THE QUESTION OF WHETHER AN INNOCENT ASSIGNEE HAD ANY RIGHT TO RECOVER ON NONFRAUDULENT ELEMENTS OF THE CONTRACTOR-ASSIGNOR'S TERMINATION CLAIM, WHICH CLAIM HAD BEEN FORFEITED PURSUANT TO THE FALSE CLAIMS ACT, 28 U.S.C. 2514. THE COURT CONCLUDED THAT THE ASSIGNEE COULD RECOVER, TO THE EXTENT OF ITS INTEREST, UPON PROOF OF THE AMOUNT TO WHICH THE CONTRACTOR WOULD HAVE BEEN ENTITLED BUT FOR ITS FRAUD. SEE, ALSO, CHELSEA FACTORS, INC. V UNITED STATES, 149 CT. CL. 202, 181 F. SUPP. 685. IT IS SUGGESTED THAT THE IMPLICATION OF THE COURT'S DECISION IS THAT AS TO THE FRAUDULENT ELEMENTS THERE COULD BE NO RECOVERY BY THE ASSIGNEE UNDER ANY CIRCUMSTANCES.

YOU, NEVERTHELESS, CONTEND THAT IN GENERAL COMMERCIAL LAW IT HAS ALSO BEEN HELD IN CERTAIN CIRCUMSTANCES THAT THE CONDUCT OF THE DEBTOR OR OBLIGOR MAY GIVE RISE TO AN EQUITABLE ESTOPPEL IN FAVOR OF THE ASSIGNEE, CITING 3 WILLISTON ON CONTRACTS, THIRD EDITION, SECTION 432 (1960), AND CASES NOTED THEREIN, PARTICULARLY SIMMONS V SMITH COUNTY BANK, 83 SO. 2D 441 (1955).

ALTERNATIVELY, YOU URGE THAT PRODUCE IS ENTITLED TO RECOVER ON A THEORY OF "PROMISSORY ESTOPPEL." 1 WILLISTON, SUPRA, SECTION 140; 1A CORBIN ON CONTRACTS SECTION 204 (1963); RESTATEMENT (SECOND), CONTRACTS SECTION 90. AS OUTLINED IN YOUR LETTER OF FEBRUARY 24, 1969, THE "PROMISSORY ESTOPPEL" ARISES SINCE -

THE ACCEPTANCE OF THE ASSIGNMENT UNDER 41 U.S.C. SEC 15*** WAS THE GOVERNMENT'S PROMISE TO PAY CLAIMANT ON THE BASIS OF WHICH IT SHOULD REASONABLY EXPECT PRODUCE FACTORS TO ACT BY ADVANCING FUNDS TO TERMINAL, AND TO FOREBEAR BY NOT SEEKING PAYMENT FROM TERMINAL DIRECTLY. CLAIMANT'S RELIANCE WAS SUBSTANTIAL *** . INJUSTICE CAN BE AVOIDED ONLY IF THE PROMISOR MAKES THE PROMISED PAYMENT. SINCE THERE WAS BENEFIT TO THE GOVERNMENT THIS RESULT IS FAIR AND EQUITABLE. 1A CORBIN ON CONTRACTS SEC 203.

IN THE SIMMONS CASE, SUPRA, THE COURT APPLIED THE DOCTRINE OF EQUITABLE ESTOPPEL IN VIEW OF A DELIBERATE CONCEALMENT FROM A BANK OF THE OPERATING CIRCUMSTANCES OF AN ASSIGNMENT. HOWEVER, THE SIMMONS CASE INVOLVED TWO SIGNIFICANT ELEMENTS NOT PRESENT HERE; NAMELY, KNOWLEDGE OF THE PARTICULAR CIRCUMSTANCES OF THE UNDERLYING AGREEMENT BETWEEN THE ASSIGNOR AND ASSIGNEE LENDER AND A WILLFUL NONDISCLOSURE OF CRITICAL INFORMATION IN LIGHT OF THIS KNOWLEDGE.

WITH RESPECT TO THE ESTOPPEL THEORY, YOU HAVE ALSO CITED TRAVELERS INSURANCE COMPANY V TALLAHASSEE BANK AND TRUST CO., 133 SO. 2D 463 (1961), CERT. DEN., 138 SO. 2D 332 (1962), AND EXCHANGE AND SAVINGS BANK OF BERLIN V UNITED STATES, 226 F. SUPP. 56 (1964). HOWEVER, IN TRAVELERS, THE INSURANCE COMPANY WAS ESTOPPED TO DENY ITS LIABILITY SINCE THE ASSIGNEE CREDITOR ACQUIRED FULL TITLE TO THE SECURITY INVOLVED AND A GREATER DUTY WAS IMPOSED ON THE INSURANCE COMPANY THAN ON THE GOVERNMENT IN THE CIRCUMSTANCES OF THIS CLAIM. IN THE EXCHANGE CASE, THE ISSUE WAS WHETHER THE GOVERNMENT COULD VALIDLY ASSERT A STATUTE OF LIMITATIONS, NOT IN ISSUE HERE, AS AN ABSOLUTE DEFENSE.

IT IS CONCEDED THAT THE SUBSTANCE OF THE INSTANT CLAIM IS NOT A SUBJECT OF THE UNIFORM COMMERCIAL CODE. THE CODE COVERS SECURITY INTERESTS CREATED IN EXISTING TRANSACTIONS, AND NOT FRAUDS PERPETRATED ON LENDERS, SUCH AS THE PRODUCE-TERMINAL SITUATION HERE INVOLVED. HOWEVER, YOU CONTEND, IN ESSENCE, THAT WHERE ONE OF TWO INNOCENT PARTIES MUST SUFFER BY A FRAUD PERPETRATED BY ANOTHER, THE LAW IMPOSES THE LOSS UPON THE PARTY WHO, BY HIS MISPLACED CONFIDENCE, HAS ENABLED THE FRAUD TO BE COMMITTED. IN EFFECT, YOU ARE IMPUTING NEGLIGENCE IN CARRYING OUT AN EXPRESS DUTY TO THE GOVERNMENT. WE CANNOT AGREE WITH THIS ASSERTION.

IT IS A WELL-ESTABLISHED GENERAL PROPOSITION THAT THE UNITED STATES IS NOT ESTOPPED BY THE ACTS OF ITS AGENTS. SEE UTAH POWER & LIGHT CO. V UNITED STATES, 243 U.S. 389, 408-409 (1916). WE RECOGNIZE THAT EXCEPTIONS HAVE BEEN MADE IN CERTAIN CASES, NONE OF WHICH IS, IN OUR OPINION, DIRECTLY IN POINT. MOREOVER, WE BELIEVE THAT THE CIRCUMSTANCES OF RECORD DO NOT PRESENT GROUNDS FOR THE SUCCESSFUL ASSERTION OF AN ESTOPPEL. SEE UNITED STATES V HAL B. HAYES & ASSOCIATES, INC., 221 F. SUPP. 260, 264 (1963); UNITED STATES V STANDARD OIL COMPANY OF CALIFORNIA, 20 F. SUPP. 427, 452 (1937).

IT IS ADMINISTRATIVELY REPORTED THAT THE GOVERNMENT WAS NOT IN A POSITION TO DETERMINE THAT THE INVOICES SUBMITTED BY TERMINAL THROUGH PRODUCE WERE FICTITIOUS. IT IS STATED THAT AT BOTH INSTALLATIONS IT WAS NOT AN UNCOMMON PRACTICE FOR CONTRACTORS TO RETRIEVE INVOICES ON THE GROUND THAT SOME ERROR HAD BEEN COMMITTED IN THEIR PREPARATION. THUS, IT IS SUGGESTED THAT NO SUSPICIONS WERE AROUSED, NOR WOULD IT BE REASONABLE TO ASSUME THAT THEY SHOULD.

YOU FURTHER POINT OUT IN YOUR LETTER OF SEPTEMBER 16, 1969, THAT THE ADMINISTRATIVE POSITION DOES NOT ADDRESS ITSELF TO THE FACT THAT EVERY INVOICE WAS ENDORSED IN FAVOR OF PRODUCE, THEREBY CLEARLY INDICATING PRODUCE'S INTEREST, AND YOU URGE THAT, IN ANY EVENT:

EVEN HAD THERE NOT BEEN SUCH ENDORSEMENT, THE GOVERNMENT WOULD HAVE BEEN HELD RESPONSIBLE FOR KNOWLEDGE THAT CLAIMANT HAD AN INTEREST IN THOSE INVOICES. THE NATURE OF THE RELATIONSHIP ALSO MAKES KNOWN TO THE GOVERNMENT THAT, BASED UPON THE PROCESSING OF PRIOR INVOICES, THE CLAIMANT WOULD CONTINUE TO ADVANCE FUTURE FUNDS TO THE CONTRACTOR. THE CLAIMANT WOULD CONTINUE TO RELY UPON THE GOVERNMENT'S ADMINISTERING ITS BUSINESS IN AN ORDERLY FASHION TO THE EXTENT THAT IT WOULD ADVANCE CASH TO THE CONTRACTOR. THIS IS AN OBJECT SPECIFICALLY CONTEMPLATED BY STATUTE AND ENCOURAGED BY THE GOVERNMENT.

HERE, THE GOVERNMENT'S OBLIGATION UNDER THE ASSIGNMENT OF CLAIMS ACT IS GENERALLY TO PAY THE ASSIGNEE ALL PROCEEDS DUE TO THE CONTRACTOR ASSIGNOR, AND FULFILLMENT OF THIS OBLIGATION REQUIRES THE EXISTENCE OF ADEQUATE PROCEDURES. CF. UNITED STATES V MAILET, 294 F. SUPP. 761, 767 768 (1968). THERE IS, THEN, AN INITIAL REPRESENTATION THAT PROCEDURES EXIST FOR PAYMENT, BUT THERE IS NO REPRESENTATION THAT ALL INVOICES, ETC., SUBMITTED ARE PROPERLY FOR PAYMENT. YOU APPARENTLY CONCEDE THIS POINT AND, IN ANY EVENT, REFERENCE TO ARLINGTON TRUST CO. AND CHELSEA FACTORS, INC., CITED ABOVE, CONFIRMS THIS LATTER POINT. MOREOVER, WE MUST NOTE THAT THE FINANCIAL INSTITUTION ADVANCING FUNDS ASSUMES A BUSINESS RISK THAT ITS SECURITY INTEREST MAY BE IMPAIRED. IN THIS CONNECTION, THERE CAN BE NO ARGUMENT THAT IF THE INVOICES HAD PROCESSED AND REJECTED, PRODUCE'S RECOURSE FOR ANY RESULTANT LOSS WOULD BE SOLELY AGAINST TERMINAL. THE THRUST OF YOUR ARGUMENT IS THAT THE CONDUCT OF THE ADMINISTRATIVE PERSONNEL IN HANDLING THE INVOICES WAS SO IMPROPER THAT THE RISK OF LOSS SHOULD FALL ON THE UNITED STATES. ESSENTIAL TO YOUR ARGUMENT IS THE SUGGESTION THAT THE PARTICULAR CIRCUMSTANCES OF YOUR UNDERLYING AGREEMENT WITH TERMINAL MAY BE IMPUTED TO THE GOVERNMENT PERSONNEL. IT MUST BE CONCEDED, OF COURSE, THAT AN ASSIGNMENT IN COMPLIANCE WITH THE ACT INDICATES AN UNDERLYING FINANCIAL ARRANGEMENT BETWEEN THE ASSIGNOR AND ASSIGNEE. BUT, FOR EXAMPLE, WHETHER THE ASSIGNEE ADVANCES TO THE CONTRACTOR THE ENTIRE AMOUNT AGREED UPON AT THE TIME OF THE ASSIGNMENT, OR WHETHER, AS OCCURRED HERE, SUMS ARE ADVANCED PERIODICALLY, IS A MATTER WITHIN THE CONTROL OF THE PARTIES. FURTHER, NOTHING IN THE ASSIGNMENT AGREEMENT PROVIDES A BASIS FOR DETERMINING WHICH OF THE ILLUSTRATIVE SITUATIONS IS PRESENT. IN OUR VIEW, THE QUESTION RESOLVES ITSELF INTO A CONSIDERATION OF WHETHER IT WAS PROPER TO PERMIT TERMINAL TO RECOVER THE INVOICES FOR ANY REPRESENTATION THAT MAY BE SUGGESTED FROM THE ADMINISTRATIVE SILENCE IN HANDLING THE INVOICES ASSUMES THAT RETURN THEREOF IS IMPROPER WITHOUT NOTIFYING PRODUCE AT THE SAME TIME. AS WE HAVE INDICATED, AN AFFIRMATIVE ANSWER TO THIS QUESTION IS MORE EASILY REACHED IF THE GOVERNMENT IS A GUARANTOR AND IS CHARGED WITH KNOWLEDGE OF THE UNDERLYING AGREEMENT BETWEEN THE PARTIES. BUT IT IS NOT, AND, AS A GENERAL MATTER, IN THE COURSE OF DEALING WITH A CONTRACTOR, WE FIND NOTHING IN THE ASSIGNMENT OF CLAIMS ACT WHICH REQUIRES THE GOVERNMENT TO INVOLVE THE ASSIGNEE IN MATTERS OF ITS CONTRACT ADMINISTRATION.

THE ADMINISTRATIVE REPORTS MAINTAIN THAT IT WAS NOT UNUSUAL FOR CONTRACTORS TO REQUEST RETURN OF INVOICES. FROM A PERSPECTIVE THAT INCLUDES KNOWLEDGE OF TERMINAL'S SCHEME, IT IS EASY TO OBSERVE THAT PRODUCE'S DAMAGE WOULD NOT HAVE BEEN AS GREAT IF THE INVOICES HAD NOT BEEN RETURNED, BUT THIS FACT IS NOT DETERMINATIVE OF THE QUESTION OF WHETHER THE RETURN WAS IMPROPER. THE INVOICES AND SUPPORTING DOCUMENTATION ARE THE CONTRACTOR'S EVIDENCE THAT THE SERVICES HAVE BEEN PERFORMED, AS WELL AS THE BASIS UPON WHICH THE ASSIGNEE WILL EVENTUALLY BE ENTITLED TO PAYMENT. THUS, AS A MATTER OF CONTRACT ADMINISTRATION, WE DO NOT BELIEVE THAT IT WAS UNREASONABLE FOR THE GOVERNMENT PERSONNEL TO HONOR THE CONTRACTOR'S REQUEST FOR RETURN. VIEWED IN THIS LIGHT, THE ASSIGNOR'S ENDORSEMENT ON THE INVOICES IS NOT INCONSISTENT WITH A RIGHT TO RETURN SUCH INVOICES, AND WE CANNOT SAY THAT THE ENDORSEMENT'S DEMAND THAT NOTICE BE GIVEN TO THE ASSIGNEE OF "ANY MERCHANDISE RETURNS OR CLAIMS FOR SHORTAGE, NONDELIVERY, OR FOR OTHER GROUNDS" WAS APPLICABLE TO THE SITUATION OR, IN ANY EVENT, REQUIRES MORE THAN SUCH NOTICE AS WOULD OCCUR IN THE NORMAL COURSE OF ADMINISTRATIVE PROCESSING.

THE ADMINISTRATIVE REPORTS MAINTAIN THAT GOVERNMENT PERSONNEL WERE NOT AWARE OF TERMINAL'S SCHEME, NOR IS IT INDICATED THAT THEY BECAME SUSPICIOUS OF THE SCHEME BECAUSE OF TERMINAL'S REPETITIOUS ALLEGATIONS OF ERROR. IN VIEW OF THIS ADVICE, NO BASIS IS PRESENTED FOR CONCLUDING THAT THEIR SUBSEQUENT CONDUCT GAVE RISE TO AN ESTOPPEL AND, IN OUR OPINION, SUCH A DETERMINATION WOULD REQUIRE A TRIAL-TYPE INVESTIGATION, WHICH WE ARE NOT EQUIPPED TO CONDUCT.

MOREOVER, WHILE OUR DISCUSSION HAS BEEN CONFINED SOLELY TO A CONSIDERATION OF THE ACTIONS OF GOVERNMENT PERSONNEL DURING THE PERIOD IN QUESTION, WE CANNOT IGNORE THE CONDUCT OF PRODUCE DURING THAT PERIOD, AND WE MUST ALSO ACKNOWLEDGE A DOUBT AS TO WHETHER SUCH CONDUCT EVIDENCES A REASONABLE DILIGENCE IN ASCERTAINING THE TRUE FACTS AND CIRCUMSTANCES. DOES NOT APPEAR THAT PRODUCE ATTEMPTED TO DETERMINE THE SCOPE OF TERMINAL'S CONTRACTUAL RELATIONSHIPS WITH THE GOVERNMENT, AND THERE IS NO SHOWING THAT SUCH INFORMATION WAS NOT REASONABLY ACCESSIBLE. THE IMPACT OF SUCH CONDUCT IS ILLUSTRATED BY THE AIR FORCE ARGUMENT THAT A CONSIDERATION OF THE ESTIMATED ANNUAL VALUE OF MCGUIRE'S CONTRACT WITH TERMINAL IN LIGHT OF THE DOLLAR VOLUME OF THE INVOICES DISCOUNTED BY TERMINAL WOULD GIVE RISE TO THE QUESTION OF "WHY HE, THE FACTOR, WOULD BE PAYING INVOICES AMOUNTING TO $50 OR $60,000 IN A PERIOD OF A FEW SHORT MONTHS ON A CONTRACT WITH AN ESTIMATED ANNUAL REQUIREMENT AMOUNTING TO $13,000 WITH AN EXPECTED OUTLAY OF APPROXIMATELY $1,200 A MONTH."

IN VIEW OF THE FAILURE TO INVESTIGATE, RELIANCE BY PRODUCE ON THE GOVERNMENT'S NORMAL BILLING PERIOD AS JUSTIFICATION FOR CONTINUING TO ADVANCE FUNDS TO PRODUCE IS NOT CONTROLLING. IN THIS CONNECTION, YOU HAVE MAINTAINED THAT NORMALLY PAYMENT FOR ALL UNDISPUTED INVOICES WAS RECEIVED WITHIN 30 TO 45 DAYS. THE AIR FORCE REPORT TAKES EXCEPTION TO THIS POINT AND MAINTAINS THAT IN EACH INSTANCE MCGUIRE TOOK ADVANTAGE OF THE DISCOUNT PROVIDED IN ITS CONTRACT WITH TERMINAL FOR PAYMENT WITHIN 20 CALENDAR DAYS.

THAT PART OF PRODUCE'S CLAIM INVOLVING THE ASSIGNMENT OF "MISCELLANEOUS PURCHASE ORDERS" AT FORT DIX RAISES THE QUESTION OF THE VALIDITY OF THE PURPORTED BLANKET ASSIGNMENT OF PURCHASE ORDERS UNDER $1,000 IN AMOUNT. IT IS RECOGNIZED THAT THE GOVERNMENT MAY ELECT TO HONOR THE ASSIGNMENT OF A PURCHASE ORDER BY PAYING THE PROCEEDS TO THE PURPORTED ASSIGNEE. MAFFIA V UNITED STATES, 143 CT. CL. 198, 163 F. SUPP. 859, 862 (CT. CL. 1958); BENJAMIN V UNITED STATES, UNION MINERALS & ALLOYS CORP., 162 CT. CL. 47, 318 F. 2D 728 (CT. CL. 1963). HOWEVER, IN VIEW OF THE EXPRESS LANGUAGE OF THE ASSIGNMENT OF CLAIMS ACT, THERE MUST BE DEFINITE COMMITMENT ON THE PART OF THE GOVERNMENT TO ORDER SERVICES REQUIRING A MINIMUM EXPENDITURE OF $1,000 IN ORDER FOR PAYMENTS UNDER THE CONTRACT TO BE ASSIGNABLE. COMP. GEN. 989 (1944). THEREFORE, EACH PURCHASE ORDER AT FORT DIX MUST BE VIEWED AS A SEPARATE CONTRACT SUBJECT TO THE REQUIREMENTS OF THE ACT. THE ABSENCE OF A VALID ASSIGNMENT WOULD NEGATE THE INITIAL SUGGESTION THAT THE CONDUCT OF THE GOVERNMENT IN IMPLEMENTING THE ASSIGNMENT OF CLAIMS ACT GIVES RISE TO AN ESTOPPEL.

IN SUMMARY, ANY RIGHTS WHICH PRODUCE MAY HAVE MUST COME FROM THE ASSIGNMENT OF CLAIMS ACT OF 1940 WHICH REMOVED THE BAR AGAINST ASSIGNMENT OF CLAIMS EMBODIED IN SECTIONS 3477 AND 3737 OF THE REVISED STATUTES AND AUTHORIZED ASSIGNMENTS TO A FINANCING INSTITUTION OF "MONEYS DUE OR TO BECOME DUE FROM THE UNITED STATES." THERE IS NO PROVISION OF THE ASSIGNMENT OF CLAIMS ACT, OR ANY REGULATION PROMULGATED THEREUNDER, WHICH WOULD IMPOSE AN OBLIGATION UPON THE GOVERNMENT TO KEEP AN ASSIGNEE CURRENTLY APPRISED OF THE ASSIGNOR'S PERFORMANCE OR MANAGEMENT PROCEDURES UNDER ITS CONTRACT, AND WE ARE UNABLE TO CONCLUDE THAT GOVERNMENT PERSONNEL WERE TORTIOUSLY NEGLIGENT IN THEIR RELATIONSHIPS WITH PRODUCE.

CONVERSELY, THE HISTORY OF THE ASSIGNMENT OF CLAIMS ACT PRIOR TO ITS AMENDMENT BY THE ACT OF MAY 15, 1951, 65 STAT. 41, INDICATES THAT THE CONGRESS INTENDED NOTHING MORE THAN THAT AN ASSIGNEE SHOULD "STAND IN THE SHOES" OF THE ASSIGNOR; THAT AN ASSIGNMENT COULD NOT CONVEY ANY GREATER RIGHTS TO THE AMOUNTS DUE UNDER THE CONTRACT THAN THE CONTRACTOR POSSESSED; AND THAT AN ASSIGNEE MAKING ADVANCES ON THE STRENGTH OF THE ASSIGNMENT ASSUMED THE RISK OF FAILURE OF THE CONTRACTOR TO FULFILL HIS CONTRACTUAL OBLIGATIONS. HARDIN COUNTY SAVINGS BANK ET AL. V UNITED STATES, 106 CT. CL. 577 (1946); 35 COMP. GEN. (1955). NOTHING IN THE ACT INDICATES AN INTENT TO MAKE THE GOVERNMENT AN INSURER AS TO FRAUDULENT SCHEMES DEVISED BY AN ASSIGNOR AS AGAINST AN ASSIGNEE.

AS ITS BEST, THE RECORD RAISES SUBSTANTIAL LEGAL DOUBTS AS TO THE VALIDITY OF PRODUCE'S CLAIM. THE JURISDICTION OF OUR OFFICE IN THE PAYMENT OF CLAIMS IS LIMITED TO THOSE CLAIMS WHICH ARE CLEARLY BASED UPON LEGAL LIABILITY OF THE UNITED STATES. LONGWILL V UNITED STATES, 17 CT. CL. 288, 291 (1881); CHARLES V UNITED STATES, 19 CT. CL. 316, 319 (1884).

WE SEE NO SUCH LIABILITY IN THE INSTANT CASE AND, IN THE CIRCUMSTANCES, OUR OFFICE MUST REJECT PRODUCE'S CLAIM. 33 COMP. GEN. 394 (1954); 46 ID. 409 (1966). OUR ACTION IS, HOWEVER, IN NO WAY PREJUDICIAL TO PRODUCE'S RIGHT TO SEEK A JUDICIAL DETERMINATION OF ITS CLAIM.