B-125205, NOV. 14, 1955

B-125205, NOV. 14, 1955

TO MR. H. D. LEHRICH, ATTORNEY AT LAW:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 25, 1955, RELATIVE TO CERTAIN CONFLICTING CLAIMS FILED IN THIS OFFICE AGAINST THE PROCEEDS OF THE AWARD MADE BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS IN THE AMOUNT OF $22,441.86, IN FAVOR OF CARTERET WORK UNIFORMS, IN CONNECTION WITH THE PERFORMANCE OF CONTRACT NO. DA 30-380-QM-13068. YOU CONTEND THAT THE ASSIGNMENT OF RECORD IN THE CASE WAS EXECUTED AFTER THE CONTRACT WAS COMPLETED, AND THAT YOU WERE INFORMALLY ADVISED THAT UNDER THOSE CIRCUMSTANCES THE NO SETOFF PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, 31 U.S.C.A. 203, ARE NOT AVAILABLE TO THE ASSIGNEE. VIEW THEREOF YOU STATE THAT ANY AVAILABLE PROCEEDS FROM THE ABOVE AWARD SHOULD BE PAID TO THE TRUSTEE OF THE BANKRUPT CONTRACTOR'S ESTATE.

FROM THE TENOR OF YOUR LETTER IT WOULD APPEAR THAT YOU ARE ATTEMPTING TO ASSERT A CLAIM AS AGENT OR ATTORNEY FOR THE RECEIVER, MAX J. MAREINISS APPOINTED IN CERTAIN STATE BANKRUPT PROCEEDINGS, WHEREAS THE CHANCERY COURT'S ORDER OF MARCH 7, 1955, ENTERED IN THE CASE, SHOWS THE RECEIVER'S ATTORNEY TO BE ONE LEO YANOFF. WHILE THERE IS NO POWER OF ATTORNEY ON FILE HERE AUTHORIZING YOU TO ACT IN SUCH CAPACITY IN THIS MATTER, IT IS NOTED THAT YOU WERE THE ATTORNEY OF RECORD IN THE CONTRACTOR'S PETITION BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS, AND THEREFORE YOU MAY BE ADVISED AS FOLLOWS REGARDING THE STATUS OF THE CASE.

INITIALLY, THE RECORD DISCLOSES THAT THE BANKRUPT CONTRACTOR INCURRED A CONTRACTUAL INDEBTEDNESS OF $841.46, TO THE UNITED STATES, IN THE PERFORMANCE OF THE SUBJECT CONTRACT AND CONTRACT NO. DA-30-280 QM7726. ADDITION, THIS OFFICE HAS BEEN ADVISED BY THE INTERNAL REVENUE SERVICE OF A FEDERAL TAX LIABILITY OF THE CONTRACTOR, PLUS STATUTORY PENALTIES AND INTEREST, IN THE SUM OF $21,663.86, THE AGGREGATE OF WHICH EXCEEDS THE AMOUNT OF THE REFERRED-TO AWARD. HENCE, BEING PREFERRED CLAIMS, THE ENTIRE AMOUNT OF $22,441.86 WOULD BE PROPER FOR APPLICATION AGAINST THE DEBTOR'S OBLIGATIONS TO THE GOVERNMENT PURSUANT TO THE PROVISIONS OF 31 U.S.C. 191, IN THE ABSENCE OF ANY STATUTORY PROHIBITION.

HOWEVER, AS STATED IN YOUR LETTER OF OCTOBER 25, 1955, THE CONTRACTOR, UNDER DATE OF AUGUST 19, 1952, EXECUTED AN ASSIGNMENT OF ALL MONEYS DUE UNDER THE INVOLVED CONTRACT INCLUDING THE PROCEEDS OF ANY CLAIMED AWARDS. WHILE IT APPEARS THAT THE WORK UNDER THE CONTRACT WAS COMPLETED PRIOR TO THE DATE OF THE ASSIGNMENT, MODIFICATION NO. 2 OF THE CONTRACT WAS ISSUED ON SEPTEMBER 5, 1952. ALSO, AT THE TIME OF THE ASSIGNMENT CLAIMS BY THE GOVERNMENT AGAINST THE CONTRACTOR WERE THEN PENDING, ALL OF WHICH INDICATES THAT THE PARTIES CONSIDERED THE CONTRACT TO BE OPEN.

MOREOVER, THERE IS NOTHING IN THE LANGUAGE OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, 54 STAT. 1029, OR IN THE AMENDATORY ACT OF MAY 15, 1951, 65 STAT. 41, LIMITING THE PERIOD DURING WHICH AN OTHERWISE VALID ASSIGNMENT MAY BE EXECUTED, AND NO DECISIONS HAVE COME TO THE ATTENTION OF THIS OFFICE WHEREIN SUCH QUESTION HAS BEEN CONSIDERED. HOWEVER, IN OFFICE DECISION OF JUNE 27, 1952, 31 COMP. GEN. 685, INVOLVING CLAIMS FILED PURSUANT TO THE PROVISIONS OF THE FIRST WAR POWERS ACT, AS AMENDED, 64 STAT. 1257, IT WAS STATED THAT SO LONG AS SOME RIGHT OR OBLIGATION UNDER A CONTRACT REMAINS UNSETTLED, THE CONTRACT ITSELF CONTINUES TO EXIST. WAS STATED FURTHER THEREIN THAT A CONTRACTOR HAS A RIGHT TO MAKE A REQUEST FOR RELIEF UNDER THAT ACT AND TO HAVE HIS REQUEST ACTED UPON BEFORE THE CONTRACT CONCERNED MAY BE CONSIDERED AT AN END. WHILE THAT ACT RECOGNIZES NO CONTRACTUAL RIGHT IN FAVOR OF A CONTRACTOR, CLEARLY THE REASONING USED IN REACHING THE CONCLUSION STATED IN THAT DECISION WOULD BE FOR APPLICATION IN CONSTRUING THE TERMS OF THE ASSIGNMENT OF CLAIMS ACT, WHICH DOES CREATE A STATUTORY RIGHT IN AN ASSIGNEE. THE PRIMARY PURPOSE OF THE BASIC ASSIGNMENT OF CLAIMS ACT WAS FOR THE PROTECTION OF THE UNITED STATES (COCONUT GROVE EXCHANGE BANK V. NEW AMSTERDAM CAS. CO., 149 F.2D 73), HOWEVER, THE NO SETOFF PROVISION IN THE AMENDMENT OF MAY 15, 1951, 65 STAT. 41, APPEARS TO HAVE BEEN ENACTED FOR THE BENEFIT OF ASSIGNEES. SEE GENERALLY, CENTRAL BANK V. UNITED STATES, 345 U.S. 639.

IN VIEW OF THE FOREGOING WE HAVE NO ALTERNATIVE BUT TO RECOGNIZE THE STATUTORY RIGHTS OF THE ASSIGNEE OF RECORD AND THE GOVERNMENT, UNDER APPLICABLE LAW, AS A CONSEQUENCE OF WHICH NO BALANCE OF THE PROCEEDS OF THE SUBJECT AWARD REMAINS AVAILABLE FOR PAYMENT TO THE TRUSTEE OF THE BANKRUPT'S ESTATE, FOR THE BENEFIT OF GENERAL CREDITORS.