B-161644, JUN. 20, 1967

B-161644, JUN. 20, 1967

TO COMMERCIAL BANK IN PANAMA CITY:

THE AUTHORIZED CERTIFYING OFFICER OF THE FEDERAL AVIATION ADMINISTRATION HAS SUBMITTED TO OUR OFFICE A VOUCHER IN THE AMOUNT OF $29,823.50, COVERING A PROPOSED NINTH PARTIAL PAYMENT UNDER GOVERNMENT CONTRACT NO. FA66SO-4249, DATED NOVEMBER 26, 1965, WITH ROBERT A. FLEMING CONTRACTORS, INC., PANAMA CITY, FLORIDA, FOR THE PERFORMANCE OF CERTAIN WORK IN CONNECTION WITH AN AIR TRAFFIC CONTROL TOWER PROJECT AT FANNIN FIELD, PANAMA CITY, FLORIDA.

THE VOUCHER WAS NOT CERTIFIED FOR PAYMENT BECAUSE OF CONFLICTING CLAIMS OF YOUR COMPANY AND THE CONTINENTAL INSURANCE COMPANIES, NEW YORK, NEW YORK, THE SURETY ON THE CONTRACT PERFORMANCE AND PAYMENT BONDS, RESPECTING ANY AMOUNTS REMAINING DUE UNDER THE CONTRACT.

YOU CONTENDED THAT YOU ARE ENTITLED TO PRIORITY OF CLAIMS AS TO MONIES DUE UNDER THE CONTRACT SINCE THE CONTRACTOR EXECUTED AN ASSIGNMENT ON DECEMBER 30, 1966, WHEREIN ALL MONIES DUE OR TO BECOME DUE UNDER THE CONTRACT WERE ASSIGNED TO YOUR COMPANY. NOTICE OF SUCH ASSIGNMENT WAS FURNISHED TO THE GOVERNMENT BY LETTER DATED JANUARY 9, 1967.

THE CONTINENTAL INSURANCE COMPANIES CONTENDED THAT ITS RIGHTS IN THE CONTRACT FUNDS ARE SUPERIOR TO THOSE OF YOUR COMPANY BECAUSE A PRIOR ASSIGNMENT OF CONTRACT FUNDS HAD BEEN MADE UNDER THE CONTRACT OF INDEMNITY AND THE SURETY OTHERWISE HAS CERTAIN EQUITABLE RIGHTS AS THE SUBROGEE OF JOB CREDITORS.

OUR RECORDS DO NOT DISCLOSE ANY INDEBTEDNESS OF THE CONTRACTOR TO THE UNITED STATES AND WE ARE ADVISED BY THE INTERNAL REVENUE SERVICE THAT IT HAS NO RECORD OF ANY OUTSTANDING FEDERAL TAX CLAIM AGAINST THE CONTRACTOR. THE GOVERNMENT IS THEREFORE CONCERNED ONLY WITH THE MATTER OF OBTAINING A GOOD ACQUITTANCE FOR ANY PAYMENTS OF AMOUNTS REMAINING DUE UNDER THE CONTRACT.

WE WOULD NOT UNDERTAKE TO DETERMINE THE RESPECTIVE RIGHTS OF THE SURETY AND YOUR COMPANY IN THE CONTRACT FUNDS SINCE THE DECISIONS OF THE FEDERAL COURTS IN CASES OF THIS NATURE ARE NOT IN AGREEMENT. THUS, IN NATIONAL SURETY CORPORATION V. UNITED STATES, 133 F.SUPP. 381, CERTIORARI DENIED, 350 U.S. 902 (1955), THE COURT OF CLAIMS HELD THAT THE SURETIES INVOLVED WERE ENTITLED TO PRIORITY OF CLAIMS BUT STATED:

"WE RECOGNIZE THAT THE FIFTH CIRCUIT TAKES THE CONTRARY VIEW IN COCONUT GROVE EXCHANGE BANK V. NEW AMSTERDAM CAS. CO., 149 F.2D 73, AND GENERAL CAS. CO. OF AMERICA V. SECOND NAT. BANK OF HOUSTON, 178 F.2D 679.'

ACCORDINGLY, IN THE ABSENCE OF AN AGREEMENT BETWEEN YOUR COMPANY AND THE SURETY AS TO THE DISPOSITION OF THE AMOUNTS REMAINING DUE UNDER THE CONTRACT, THE SUM STATED AS DUE ON THE PROPOSED NINTH PARTIAL PAYMENT VOUCHER, AND ANY OTHER AMOUNT WHICH MAY SUBSEQUENTLY BE DETERMINED AS DUE UNDER THE CONTRACT, WILL BE WITHHELD PENDING A JUDICIAL DETERMINATION OF THE RIGHTS OF THE PARTIES IN SUCH PROCEEDINGS AS THEY, OR EITHER OF THEM, MAY CHOOSE TO INSTITUTE. SEE 33 COMP. GEN. 608.