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B-158212, JAN. 31, 1967

B-158212 Jan 31, 1967
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TO AUTHORIZED CERTIFYING OFFICER: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 22. THE VOUCHERS ARE DRAWN TO THE ORDER OF THE FIRST NATIONAL BANK OF ALBUQUERQUE AS ASSIGNEE FOR TCO. IT IS STATED THAT DOUBT HAS ARISEN CONCERNING THE PROPRIETY OF PAYING THESE VOUCHERS BECAUSE OF CERTAIN CIRCUMSTANCES. BUREAU OF RECLAMATION) WAS NOTIFIED BY TELEGRAM ON OCTOBER 11. THAT WORK WAS SUBSTANTIALLY COMPLETED ON OCTOBER 18. THE PRESENT MATTER IS NOT UNLIKE THE MATTERS CONSIDERED IN OUR DECISION OF NOVEMBER 4. WHEREIN THE CLAIMANTS WERE THE SURETY. IN THIS DECISION WE HELD: "IT * * * 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.

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B-158212, JAN. 31, 1967

TO AUTHORIZED CERTIFYING OFFICER:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 22, 1966, WITH ENCLOSURES, SUBMITTING FOR ADVANCE DECISION TWO VOUCHERS FOR THE PAYMENT OF THE LAST AND NEXT TO THE LAST PROGRESS PAYMENTS (ESTIMATES NOS. 12 AND 13 FOR THE MONTHS OF SEPTEMBER AND OCTOBER 1966) UNDER CONTRACT NO. 14-06-500-1163, SPECIFICATIONS 500C-209 FOR THE CONSTRUCTION OF PUBLIC USE FACILITIES, SANFORD RESERVOIR (LAKE MEREDITH), CANADIAN RIVER PROJECT, TEXAS. THE VOUCHERS ARE DRAWN TO THE ORDER OF THE FIRST NATIONAL BANK OF ALBUQUERQUE AS ASSIGNEE FOR TCO, INCORPORATED, CONTRACTOR. IT IS STATED THAT DOUBT HAS ARISEN CONCERNING THE PROPRIETY OF PAYING THESE VOUCHERS BECAUSE OF CERTAIN CIRCUMSTANCES, SET FORTH BELOW:

(1) THE OFFICE OF THE CONTRACTING OFFICER (REGIONAL DIRECTOR, REGION 5, BUREAU OF RECLAMATION) WAS NOTIFIED BY TELEGRAM ON OCTOBER 11, 1966, FROM MR. L. L. LOUNSBURY, CLAIMS DEPARTMENT, GENERAL INSURANCE COMPANY OF AMERICA, REPRESENTING THE SURETY FOR TCO, INC., THE CONTRACTOR, THAT THE SURETY HAD KNOWLEDGE OF A NUMBER OF UNPAID BILLS IN CONNECTION WITH THE PROJECT.

(2) THE SURETY'S REPRESENTATIVE CONFIRMED HIS TELEGRAM OF OCTOBER 11, 1966, BY LETTER DATED OCTOBER 14, 1966, AND THE OFFICE OF THE CONTRACTING OFFICER ANSWERED BY LETTER DATED OCTOBER 21, 1966, SIGNED BY THE ACTING REGIONAL DIRECTOR.

(3) SURETY'S REPRESENTATIVE RESTATED HIS REQUEST THAT NO FUNDS BE DISBURSED UNDER THE CONTRACT BY LETTER OF OCTOBER 27, 1966, VIA CERTIFIED MAIL.

(4) THE ASSIGNEE-BANK (THE FIRST NATIONAL BANK, ALBUQUERQUE, NEW MEXICO) REQUESTED FURTHER PAYMENT UNDER THE CONTRACT BY ITS LETTER OF NOVEMBER 14, 1966.

(5) HARRIS AND BALL, ATTORNEYS AT LAW, REPRESENTING THE SURETY, NOTIFIED THE OFFICE OF THE CONTRACTING OFFICER BY LETTER DATED NOVEMBER 28, 1966, THAT THE CONTRACTOR HAS BEEN PLACED IN BANKRUPTCY.

(6) THE PROJECT CONSTRUCTION ENGINEER NOTIFIED THE CONTRACTOR ON NOVEMBER 29, 1966, THAT WORK WAS SUBSTANTIALLY COMPLETED ON OCTOBER 18, 1966, AND FINALLY COMPLETED ON OCTOBER 23, 1966.

(7) THE TEMPORARY RECEIVER OF TCO, INC., DIRECTED THE OFFICE OF THE CONTRACTING OFFICER BY LETTER DATED NOVEMBER 29, 1966, TO "FORWARD ANY PROCEEDS PAYABLE BY REASON OF THE CONTRACTS BETWEEN YOUR AGENCY AND TCO, INC., DIRECT TO THE UNDERSIGNED AS TEMPORARY RECEIVER SO THAT THEY MAY BE PROPERLY DISPOSED OF UNDER THE JURISDICTION OF THE BANKRUPTCY COURT.

THE PRESENT MATTER IS NOT UNLIKE THE MATTERS CONSIDERED IN OUR DECISION OF NOVEMBER 4, 1966, B-160232, WHEREIN THE CLAIMANTS WERE THE SURETY, THE ASSIGNEE AND THE ADMINISTRATORS OF THE ESTATES OF THE DECEASED PARTNER CONTRACTORS. IN THIS DECISION WE HELD:

"IT * * * 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 COMPANY 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.CLS. 577; ROYAL INDEMNITY CO. V. UNITED STATES, 117 CT.CLS. 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 EGO OF 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 NOR 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.'

ACCORDINGLY, IN THE ABSENCE OF AN AGREEMENT BETWEEN ALL THE CLAIMANTS AS TO DISPOSITION OF THE AMOUNTS DUE, PAYMENT OF THE VOUCHERS SHOULD BE WITHHELD PENDING JUDICIAL DETERMINATION OF THEIR RIGHTS IN SUCH PROCEEDING AS THEY, OR EITHER OF THEM, MAY CHOOSE TO INSTITUTE. WE ASSUME IT HAS OR WILL BE ASCERTAINED WHETHER THE CONTRACTOR IS INDEBTED TO THE UNITED STATES ON ACCOUNT OF TAXES OR OTHERWISE.

THE ORIGINAL CONTRACT AND OTHER DOCUMENTS ACCOMPANYING YOUR LETTER ARE RETURNED HEREWITH. THE VOUCHERS ARE RETAINED HERE.

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