B-156271, JUL. 22, 1965

B-156271, JUL. 22, 1965

TO ARNOLD M. SCHWARTZ, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 11, 1965, ENCLOSING AN AFFIDAVIT OF BARRY H. BOVEE, AND A CERTIFIED COPY OF AN ORDER OF THE REFEREE IN BANKRUPTCY, UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF CALIFORNIA, CENTRAL DIVISION, TRANSFERRING AND ASSIGNING TO BARUCH INVESTMENT COMPANY THE GOVERNMENT CONTRACT CLAIMS OF THE TRUSTEE IN BANKRUPTCY OF FACILITIES MAINTENANCE CORPORATION, INCLUDING THE CLAIM ARISING UNDER CONTRACT NO. DA -04-197-AMC-16 (M), HERETOFORE ASSERTED AND PRESENTED BY THE TRUSTEE.' YOU REQUEST ADVICE AS TO WHETHER THE UNITED STATES ACCEPTS AND RECOGNIZES THE ASSIGNMENT SINCE, OTHERWISE, YOU WOULD BE OBLIGED TO MAKE ARRANGEMENTS TO AGAIN PROSECUTE THE MATTER IN THE NAME OF THE TRUSTEE.

THE CLAIM PRESENTED UNDER CONTRACT NO. DA-04-197-AMC-16 (M) IN BEHALF OF THE TRUSTEE IN BANKRUPTCY HAS BEEN CONSIDERED IN A DECISION RENDERED ON DECEMBER 31, 1964, BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS, ASBCA NO. 8950, AND IN OUR DECISIONS TO YOU OF APRIL 20 AND JUNE 9, 1965. EACH OF THOSE DECISIONS IT WAS CONCLUDED THAT THE FACILITIES MAINTENANCE CORPORATION IS LIABLE TO THE UNITED STATES FOR THE EXCESS COST OF APPROXIMATELY $30,772.97, INCURRED BY THE GOVERNMENT AS THE RESULT OF THE CONTRACTOR'S DEFAULT. WE REQUESTED THE DEPARTMENT OF THE ARMY TO TAKE APPROPRIATE ACTION WITH RESPECT TO THE DIFFERENCE BETWEEN THE ACTUAL EXCESS COST LIABILITY AND THE SUM WITHHELD FROM PAYMENT TO THE CONTRACTOR FOR SERVICES RENDERED UNDER THE CONTRACT PRIOR TO THE DEFAULT. THE TRUSTEE HAD CLAIMED THE AMOUNT OF $30,783.17 FOR THE SERVICES RENDERED AND IT APPEARED THAT THERE WOULD BE REQUIRED ONLY A RELATIVELY SMALL ADJUSTMENT IN FAVOR OF EITHER THE TRUSTEE OR THE GOVERNMENT.

MR. BOVEE'S AFFIDAVIT SETS FORTH THAT HE AND HIS FATHER, HARTSON E. BOVEE, SIGNED THE CONTRACTOR'S BID BOND AS INDIVIDUAL SURETIES BUT DID NOT EXECUTE STANDARD FORMS 28, EVIDENCING THEIR FINANCIAL RESPONSIBILITY. THE AFFIDAVIT ALSO INDICATES THE PROBABILITY THAT NEITHER OF THE INDIVIDUAL SURETIES WAS FINANCIALLY IN A POSITION TO SUBMIT A SATISFACTORY STATEMENT ON STANDARD FORM 28 RESPECTING THE AMOUNT WHICH EACH SURETY WAS REQUIRED TO SHOW AS HIS "WORTH, OVER AND ABOVE JUST DEBTS AND LIABILITIES," ETC.

IT IS OUR POSITION THAT THE CONTRACTING OFFICER MIGHT REASONABLY HAVE REJECTED THE BID OF THE FACILITIES MAINTENANCE CORPORATION AS NONRESPONSIVE BECAUSE THERE WAS NO COMPLIANCE WITH THE REQUIREMENT OF THE EXECUTED BID BOND ON STANDARD FORM 24, WHICH FORM STATES: "WHERE INDIVIDUAL SURETIES ARE USED, THIS BOND MUST BE ACCOMPANIED BY A COMPLETE AFFIDAVIT OF INDIVIDUAL SURETY FOR EACH INDIVIDUAL SURETY (STANDARD FORM 28).' HOWEVER, FOR THE REASONS STATED IN OUR DECISIONS OF APRIL 20 AND JUNE 9, 1965, IT REMAINS OUR OPINION THAT ACCEPTANCE OF THE BID OF THE FACILITIES MAINTENANCE CORPORATION RESULTED IN A CONTRACT WHICH WAS LEGALLY ENFORCEABLE AGAINST THE CORPORATION. MR. BOVEE'S AFFIDAVIT IS NOT CONSIDERED SUFFICIENT TO WARRANT ANY CHANGE IN THE CONCLUSIONS PREVIOUSLY REACHED IN THE MATTER.

SINCE THE REFEREE'S ORDER AUTHORIZES THE BARUCH INVESTMENT COMPANY TO ASSERT AND PROSECUTE CERTAIN CLAIMS AGAINST THE GOVERNMENT, INCLUDING THE CLAIM ARISING OUT OF CONTRACT NO. DA-04-197-AMC-16 (M),"AS ASSIGNEE AND TRANSFEREE BY OPERATION OF LAW," THE ASSIGNMENT WOULD BE ACCEPTED AND RECOGNIZED BY OUR OFFICE IN CONNECTION WITH ANY FURTHER ACTION WHICH WE MIGHT BE REQUIRED TO TAKE ON THE CLAIM HERE INVOLVED. HOWEVER, AS IN THE USUAL CASE OF AN ASSIGNMENT OF CLAIM PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED, WE BELIEVE THAT, UNDER AN ASSIGNMENT OF CLAIM AGAINST THE GOVERNMENT BY OPERATION OF LAW, THE ASSIGNEE MAY NOT RECOVER ANY MORE THAN THE ASSIGNOR COULD HAVE RECOVERED IN THE ABSENCE OF THE ASSIGNMENT. SEE MODERN INDUSTRIAL BANK V. UNITED STATES, 101 CT.CL. 808. WE MAY NOT PROPERLY ADVISE YOU WHETHER THE ASSIGNMENT TO THE BARUCH INVESTMENT COMPANY WOULD BE ACCEPTED AND RECOGNIZED BY THE COURTS IN CONNECTION WITH ANY SUIT FILED AGAINST THE UNITED STATES FOR RECOVERY OF THE AMOUNT ALLEGEDLY DUE THE FACILITIES MAINTENANCE CORPORATION FOR SERVICES RENDERED UNDER CONTRACT NO. DA-04-197-AMC-16 (M) PRIOR TO THE TERMINATION OF THAT CONTRACT FOR DEFAULT.