B-136421, JUN. 20, 1958

B-136421, JUN. 20, 1958

TO J. M. GARNER:

REFERENCE IS MADE TO YOUR LETTERS DATED MARCH 18, 1958, AND MAY 22, 1058, REGARDING YOUR CLAIM FOR $1,360.92 UNDER DEPARTMENT OF THE NAVY CONTRACT NO. N424S-2275, DATED JUNE 20, 1956.

ON JUNE 22, 1956, THE U.S. NAVY FUEL SUPPLY OFFICE ENTERED INTO CONTRACT NO. N424S-2285 WITH THE OLD COLONY COAL COMPANY, WHEREBY THE COMPANY AGREED TO DELIVER CERTAIN QUANTITIES OF ANTHRACITE COAL TO FORT MONMOUTH, NEW JERSEY, AT A TOTAL CONTRACT PRICE OF $65,100. IT APPEARS THAT THE OLD COLONY COAL COMPANY FAILED TO DELIVER THE SPECIFIED QUANTITIES OF COAL FOR JULY AND AUGUST 1956 AND, THEREFORE, BY LETTER DATED MARCH 20, 1957, THE COMPANY WAS ADVISED THAT BECAUSE OF THE UNDELIVERED BALANCES OF COAL FOR THOSE MONTHS THE CONTRACT WAS TERMINATED FOR DEFAULT. SUBSEQUENTLY, A REPLACEMENT CONTRACT WAS ENTERED INTO WHICH RESULTED IN EXCESS COSTS OF $5,357.92. THE OLD COLONY COAL COMPANY HAS MADE NO PAYMENT ON THIS INDEBTEDNESS, HOWEVER, THERE HAS BEEN APPLIED, FROM PAYMENTS OTHERWISE PROPERLY DUE UNDER CONTRACT NO. N424S-2275, DATED JUNE 20, 1956, THE INVOICED AMOUNT OF $1,360.92--- LESS $233.31 DEDUCTED THEREFROM--- IN PARTIAL LIQUIDATION OF THE DEBT, LEAVING A BALANCE OF $4,230.31.

IT APPEARS FROM YOUR LETTERS OF MARCH 18, 1958, AND MAY 22, 1958, AS WELL AS OTHER CORRESPONDENCE IN THE RECORD BEFORE US, THAT YOU TAKE THE BASIC POSITION THAT THE CORPORATION, THE OLD COLONY COAL COMPANY, WENT OUT OF BUSINESS AS EVIDENCED BY AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS DATED AUGUST 29, 1956, AND THAT YOU, AS PRESIDENT OF THE CORPORATION, PURCHASED THE ASSETS THEREOF AND STARTED OPERATING THE BUSINESS AS A PROPRIETORSHIP UNDER THE SAME NAME. THEREFORE, SINCE YOU WERE SHIPPING ALL COAL AFTER AUGUST 29, 1956, AS AN INDIVIDUAL UNDER THE PROPRIETORSHIP YOU CANNOT BE HELD LIABLE FOR THE DEBTS OF THE OLD COLONY COAL COMPANY AS A CORPORATION.

THE RECORD BEFORE US AFFIRMS YOUR CONTENTION THAT THE OLD COLONY COAL COMPANY WENT OUT OF BUSINESS AS A CORPORATION WITH THE EXECUTION OF THE ASSIGNMENT FOR THE BENEFIT OF CREDITORS DATED AUGUST 29, 1956. HOWEVER, IT APPEARS THAT THE DEPARTMENT OF THE NAVY WAS NOT NOTIFIED OF THE ASSIGNMENT UNTIL RECEIPT OF A LETTER FROM YOU DATED DECEMBER 27, 1957. FURTHER, AFTER PURCHASING THE ASSETS OF THE OLD COLONY COAL COMPANY AS A CORPORATION AND OPERATING THE BUSINESS AS A PROPRIETORSHIP -- WITHOUT THE KNOWLEDGE OF THE DEPARTMENT OF THE NAVY--- YOU DID CONTINUE TO MAKE SHIPMENTS OF COAL UNDER CONTRACT NO. N424S-2285, AS WELL AS UNDER CONTRACT NO. N424S-2275. MOREOVER, AMONG OTHERS, YOU SIGNED AMENDMENT NO. 1 TO CONTRACT NO. N424S-2285 AND, IN CERTAIN CORRESPONDENCE WHICH YOU EXCHANGED WITH THE DEPARTMENT OF THE NAVY REGARDING THIS CONTRACT, SUCH REFERENCES WERE MADE BY YOU AS "THIS IS IN REFERENCE TO OUR CONTRACT NUMBER 2285 * * *.' "WE AS CONTRACTORS, * * *.' AND "WE HEREBY MAKE FORMAL REQUEST FOR AN AMENDMENT TO OUR CONTRACT, * * *.' HENCE, THERE CAN BE NO DOUBT BUT THAT YOU ELECTED TO ASSUME, IN ITS ENTIRETY, CONTRACT NO. N424S-2285, WHICH THE OLD COLONY COAL COMPANY PREVIOUSLY HAD ENTERED INTO WITH THE DEPARTMENT OF THE NAVY AND, THIS BEING THE CASE, IT WOULD APPEAR UNNECESSARY TO STRESS HERE THAT UNDER SUCH CIRCUMSTANCES YOU COULD NOT RECEIVE THE BENEFITS WHICH NORMALLY WOULD FLOW FROM THE COMPLETION OF PERFORMANCE UNDER SUCH A CONTRACT WITHOUT, OF COURSE, ASSUMING THE ATTENDANT BURDENS AND OBLIGATIONS THEREOF. THE ONLY AUTHORITY FOR DELIVERY OF COAL BY YOU AND FOR PAYMENT THEREFOR BY THE GOVERNMENT WAS THE CONTRACT MADE BY THE CORPORATION, AND BY YOUR ACTIONS YOU HAVE CLEARLY ESTOPPED YOURSELF FROM CLAIMING THAT YOU ARE NOT BOUND BY ALL THE TERMS OF THE CONTRACT. THE STATUTORY PROHIBITION AGAINST ASSIGNMENT OF CONTRACTS WITH THE GOVERNMENT WAS INTENDED FOR THE PROTECTION OF THE GOVERNMENT AND MAY NOT BE INVOKED FOR THE PROTECTION OF AN ASSIGNEE OR OF A VOLUNTEER WHO SECRETLY ATTEMPTS TO AVAIL HIMSELF OF THE BENEFITS OF SUCH A CONTRACT.

IT APPEARS THAT THE OLD COLONY COAL COMPANY WAS A FAMILY-OWNED CORPORATION, ALL OF THE STOCK BEING HELD BY YOU AND YOUR FAMILY. FURTHER APPEARS THAT THE ASSETS OF THE CORPORATION WERE SOLD BY THE ASSIGNEE TO YOU PERSONALLY AND THAT THE OPERATION OF THE COMPANY REMAINED SUBSTANTIALLY THE SAME AFTER THE ASSIGNMENT FOR THE BENEFIT OF CREDITORS. IN VIEW OF THIS, IT ONLY REASONABLY MAY BE CONSIDERED THAT THERE IS SUGGESTED BY THE FACTS IN THIS CASE SUCH AN IDENTITY OF INTEREST BETWEEN THE OLD COLONY COAL COMPANY AS A CORPORATION AND THE OLD COLONY COAL COMPANY AS A PROPRIETORSHIP AS TO JUSTIFY DISREGARDING ANY THEORY OF SEPARATE ENTITIES IN ORDER TO BEST SERVE THE PUBLIC INTEREST IN THIS INSTANCE. SEE, IN THIS CONNECTION, THE RULE STATED IN NEW COLONIAL ICE COMPANY V. BELVERING, 292 U.S. 435, AT PAGE 442.

IF, AS YOU NOW SEEM TO SUGGEST, THERE WAS NO INTENTION TO CONSIDER THE CONTRACT AS ONE OF THE ASSETS PURCHASED BY YOU FROM THE ASSIGNEE, WE BELIEVE THAT IT WAS THE DUTY OF THE CORPORATION OR ITS ASSIGNEE TO NOTIFY THE GOVERNMENT, AS A POTENTIAL CREDITOR, OF THE ASSIGNMENT, AND THE FAILURE TO GIVE SUCH NOTICE RAISES A SUBSTANTIAL QUESTION AS TO THE VALIDITY OF THE TRANSFER OF THE CORPORATE ASSETS TO YOU, AS AGAINST THE GOVERNMENT'S CLAIM.

FOR THE REASONS STATED, WE FIND NO LEGAL BASIS FOR THE ALLOWANCE OF ANY PART OF YOUR CLAIM FOR THE AMOUNT WITHHELD. MOREOVER, ANY OTHER AMOUNTS NECESSARY TO LIQUIDATE THE BALANCE OF YOUR TOTAL INDEBTEDNESS OF $5,357.92 WILL BE WITHHELD FROM PAYMENTS OTHERWISE FOUND DUE YOU BY THE GOVERNMENT UNTIL YOUR LIABILITY SHALL HAVE BEEN SATISFIED.