B-172059, AUG 24, 1971

B-172059, AUG 24, 1971

CONTRACTS - ASSIGNMENT - PARTIAL REAFFIRMING PRIOR DECISION OF JUNE 29, 1971 HOLDING THAT THE ASSIGNMENT TO THE CITIZENS NATIONAL BANK OF DALLAS FROM THE FARRIS & COMPANY OF AN AMOUNT PAYABLE UNDER AN ARMY CONTRACT FOR 700 CABLE REELING MACHINES WAS INVALID BECAUSE IT WAS A PARTIAL RATHER THAN A FULL ASSIGNMENT OF THE MONEYS DUE. THE DECISION IS AFFIRMED, EVEN THOUGH CLAIMANT CONTENDS THAT THE ORIGINAL DETERMINATION BY GAO WAS BASED ON A CLERICAL ERROR IN THE ASSIGNMENT CONTRACT, AS THE EVIDENCE EQUALLY SUPPORTS THE CONTRARY POSITION.

TO LOCKE, PURNELL, BOREN, LANEY & NEELY:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 7, 1971, REQUESTING RECONSIDERATION OF OUR DECISION, B-172059, JUNE 29, 1971, TO MR. R. F. BENJAMIN, ARMY FINANCE CENTER, INDIANAPOLIS, INDIANA, CONCERNING AN ASSIGNMENT TO THE CITIZENS NATIONAL BANK OF DALLAS, DALLAS, TEXAS, FROM FARRIS & COMPANY, SURCON DIVISION, DALLAS, TEXAS, OF AN AMOUNT PAYABLE UNDER ARMY CONTRACT NO. DA-36-039-AMC-10691(E), DATED JUNE 28, 1966, FOR THE PRODUCTION OF 700 ENGINE DRIVEN, CABLE REELING MACHINES, TOGETHER WITH ANCILLARY ITEMS.

ON SEPTEMBER 6, 1967, A NOTICE OF ASSIGNMENT WAS FURNISHED BY THE CITIZENS NATIONAL BANK TO THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGIONAL OFFICE IN DALLAS, TEXAS, TOGETHER WITH A COPY OF THE INSTRUMENT OF ASSIGNMENT WHICH DESCRIBED THE CONTRACT INVOLVED AS "CONTRACT NUMBER DA -36-039-AMC-10691-C FOR $39,896.82." (THE CONTRACT CITATION SHOULD HAVE INCLUDED AN E RATHER THAN A C DESIGNATION.) THE AMOUNT INCLUDED IN THE DESCRIPTION WAS THE AMOUNT OF THE CONTRACTOR'S PREVIOUS REQUEST FOR A PROGRESS PAYMENT (PROGRESS PAYMENT NO. 3). HOWEVER, WHEN THE PROGRESS PAYMENT REQUEST WAS MADE, THE UNPAID BALANCE OF THE CONTRACT PRICE WAS $348,566.38. WE DETERMINED THAT THE ASSIGNMENT WAS INVALID BECAUSE IT DID NOT MEET THE STANDARD OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, THAT, UNLESS OTHERWISE EXPRESSLY PERMITTED BY THE CONTRACT, "ANY SUCH ASSIGNMENT SHALL COVER ALL AMOUNTS PAYABLE UNDER SUCH CONTRACT AND NOT ALREADY PAID."

THE VALIDITY OF THE ASSIGNMENT WAS QUESTIONED BY THE ARMY MATERIEL COMMAND IN CONNECTION WITH AN ATTEMPT TO SETTLE A CLAIM OF THE CONTRACTOR AND A CLAIM OF THE GOVERNMENT WHICH WERE INVOLVED IN AN APPEAL PENDING BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS, ASBCA NO. 13275. THE APPEAL WAS BASED UPON A CONTENTION OF THE CONTRACTOR THAT THE CONTRACT WAS IMPROPERLY TERMINATED FOR DEFAULT AND AN EFFORT WAS BEING MADE TO SETTLE THE CASE WITHOUT FURTHER PROCEEDINGS BEFORE THE BOARD. IT WAS TENTATIVELY AGREED THAT THE MUTUAL CLAIMS COULD BE SETTLED ON THE BASIS THAT THE GOVERNMENT WOULD PAY THE NET AMOUNT OF $28,000 TO THE CONTRACTOR. HOWEVER, IN THE MEANTIME, THE CONTRACTOR FILED A PETITION FOR AN ARRANGEMENT UNDER CHAPTER XI OF THE BANKRUPTCY ACT AND THE ARMED SERVICES BOARD OF CONTRACT APPEALS TRIAL ATTORNEY WAS INFORMED OF A CLAIM AGAINST THE CONTRACTOR BY THE INTERNAL REVENUE SERVICE IN THE AMOUNT OF $52,722.65.

WE HAVE RECEIVED A COPY OF A LETTER DATED JULY 31, 1971, FROM THE LAW FIRM OF GARDERE, PORTER & DEHAY, DALLAS, TEXAS, ADDRESSED TO MR. R. F. BENJAMIN, ARMY FINANCE CENTER, ENCLOSING A COPY OF AN ASSIGNMENT DATED DECEMBER 27, 1967, FROM FARRIS & COMPANY TO THE REPUBLIC NATIONAL BANK OF DALLAS. IT IS CONTENDED THAT THE PROCEEDS OF ANY SETTLEMENT OR OF ANY AWARD IN THE APPEAL CASE OF ASBCA NO. 13275 SHOULD BE FORWARDED TO THE REPUBLIC NATIONAL BANK.

YOU REQUESTED RECONSIDERATION OF THE DECISION OF JUNE 29, 1971, ON THE BASIS THAT INCOMPLETE INFORMATION IN REGARD TO THE ASSIGNMENT TO THE CITIZENS NATIONAL BANK WAS FURNISHED TO OUR OFFICE BY THE ARMY FINANCE CENTER. YOU SUBMITTED COPIES OF THE INSTRUMENT OF ASSIGNMENT AND NOTICE OF ASSIGNMENT BUT COPIES OF THOSE DOCUMENTS WERE INCLUDED IN THE ADMINISTRATIVE FILE OF THE CASE WHICH WAS RETURNED TO THE ARMY FINANCE CENTER WITH OUR DECISION. AS CONTENDED BY YOU, THE PRINTED FORM OF THE INSTRUMENT OF ASSIGNMENT CONTAINS PROVISIONS WHICH TEND TO SHOW THAT THE PARTIES INTENDED THAT ALL MONEYS DUE OR TO BECOME DUE UNDER THE CONTRACT WERE TO BE ASSIGNED TO THE CITIZENS NATIONAL BANK. HOWEVER, THE CONTRACT INVOLVED IN THE ASSIGNMENT WAS DESCRIBED AS BEING FOR $39,896.82 AND, ALTHOUGH YOU CONTEND THAT THE PHRASE "FOR $39,896.82" WAS ADDED AS THE RESULT OF A CLERICAL ERROR, WE REMAIN OF THE OPINION THAT THE ASSIGNMENT MUST BE REGARDED AS A PARTIAL RATHER THAN A FULL ASSIGNMENT OF THE MONEYS DUE OR TO BECOME DUE UNDER THE CONTRACT. IN ANY EVENT, THAT APPEARS TO HAVE BEEN THE UNDERSTANDING OF FARRIS & COMPANY SINCE, OTHERWISE, IT COULD NOT HAVE IN GOOD FAITH MADE AN ASSIGNMENT TO THE REPUBLIC NATIONAL BANK ON DECEMBER 27, 1967.

WITH RESPECT TO YOUR REFERENCE TO THE ADMINISTRATIVE CONTRACTING OFFICER'S ACKNOWLEDGMENT OF THE RECEIPT OF THE NOTICE OF ASSIGNMENT, IT IS OUR OPINION THAT SUCH AN ACKNOWLEDGMENT OF RECEIPT IMPLIES NOTHING MORE THAN THAT THE DOCUMENT REFERRED TO HAS BEEN RECEIVED. SEE 22 COMP. GEN. 161 (1942). THE ADMINISTRATIVE CONTRACTING OFFICER'S ACKNOWLEDGMENT OF THE RECEIPT OF THE NOTICE OF ASSIGNMENT FROM FARRIS & COMPANY TO THE CITIZENS NATIONAL BANK COULD NOT CONSTITUTE A VALIDATION OF THE ASSIGNMENT.

YOU SUGGEST THAT OUR OFFICE SHOULD AUTHORIZE PAYMENT INTO THE REGISTRY OF THE BANKRUPTCY COURT OF THE NET SETTLEMENT PROCEEDS, $28,000, FOR THE PURPOSE OF OBTAINING A JUDICIAL DETERMINATION ON THE VALIDITY OF THE ASSIGNMENT TO THE CITIZENS NATIONAL BANK AND WHETHER THE ASSIGNMENT TAKES PRECEDENCE OVER THE LIEN OF THE INTERNAL REVENUE SERVICE. YOU STATE THAT, WITHOUT SUCH A JUDICIAL DETERMINATION, THE CITIZENS NATIONAL BANK HAS INDICATED THAT IT IS DETERMINED TO FILE SUIT AGAINST THE UNITED STATES.

IN VIEW OF THE CONFLICTING CLAIMS OF THE CITIZENS NATIONAL BANK AND THE REPUBLIC NATIONAL BANK, AND THE FACT THAT THE GOVERNMENT HAS A TAX CLAIM AGAINST THE CONTRACTOR, IT IS POSSIBLE THAT A JUDICIAL DETERMINATION OF THE RESPECTIVE RIGHTS OF THE PARTIES IN THIS CASE WILL EVENTUALLY BECOME NECESSARY. HOWEVER, WE BELIEVE THIS IS A MATTER TO BE CONSIDERED BY TRIAL COUNSEL FOR THE GOVERNMENT BEFORE THE BOARD.

ACCORDINGLY, WE AFFIRM OUR PRIOR DECISION.