[Claim for Moneys Improperly Paid to Assignor]

An individual claimed the payment made to a firm under a National Institutes of Health (NIH) contract. The claimant asserted that the money was improperly paid to the firm after an assignment of contract proceeds had been made to a bank. The claimant argued that he had become subrogated to the bank's claim against NIH by virtue of having paid the bank in full as endorser of a note which the bank was unable to collect from the firm. When the contract was awarded to the firm, the claimant was president of the company. After contract award, the firm presented to NIH an assignment of claims under the contract in favor of the bank. The contract was modified to provide that payment of money due under the contract would be made to the bank, rather than to the firm in question. NIH conceded that this constituted a valid and binding assignment under the Assignment of Claims Act. Later, in consideration of the assignment, the bank made a loan to the firm to finance its performance under the NIH contract. The claimant guaranteed payment of this loan by endorsing the firm's promissory note to the bank. Thereafter, NIH made a payment under the contract directly to the firm. After failing to collect the funds owed to it under the assignment from NIH or the firm, the bank sought and received payment from the claimant as endorser of the note. In consideration of his payment for the note, the bank assigned its interest, without recourse, to the claimant. The individual's claim was based on his rights arising from payment of this debt. GAO stated that, where the government had received notice of a valid assignment, but thereafter erroneously paid the assignor, it remains liable to the assignee for the erroneous payment. Therefore, either the claimant or the bank had a valid claim. GAO concluded that NIH should request instruction regarding which party should be issued a check for the amount in question, with whichever party not appearing on the check also providing a waiver of claim against the government.