819

LIBBY, MCNEIL & LIBBY, A CORPORATION, PETITIONER, v. THE UNITED STATES

[No. 46984]

[115 C. Cls. 290; 340 U. S. 71]

On writ of certiorari (339 U. S. 977) to review a judgment of the Court of Claims holding that on the evidence adduced and in the circumstances the casualty which befell plaintiff's vessel while chartered to the United States was not the consequence of a warlike operation and that the Government, under the terms of the charter and the applicable decisions, was not under any contractual liability to compensate the plaintiff for the loss incurred.

The decision of the Court of Claims was affirmed by the Supreme Court November 27, 1950, in an opinion by Mr. Justice Black, as follows:

This is a companion case to Standard Oil Company of New Jersey v. United States, 340 U. S. 54, decided this day. Here, as there, the Government insured petitioner's ship against war risks including "all consequences of hostilities or warlike operations." The ordinary marine risks were covered by a Lloyd's policy. The_vessel, United States Army Transport David W. Branch, stranded on January 13, 1942, when an inexperienced helmsman made a mistake in steering. The Government admits that the Branch was engaged in warlike operation of transporting military supplies and personnel between war bases, but denies that the warlike phases of the operation caused the stranding. The Court of Claims found as a fact that there was no causal connection between the "warlike operation" and the stranding, and accordingly gave judgment for the United States. Petitioner's contentions for reversal here are substantially the same as those advanced in Standard Oil of New Jersey v. United States, supra. The reasons given for our holding there require affirmance in this case.

Mr. Justice Douglas dissented for the reasons set forth in his dissent in Standard Oil Company of New Jersey v. The United States, supra.

Mr. Justice Frankfurter, joined by Mr. Justice Jackson, filed a dissenting opinion.

Rehearing denied January 8, 1951.

INDEX DIGEST

APPEAL.

See Contracts XXVII, XXVIII, XXIX.
ASSIGNMENT OF CLAIMS ACT

I. Where a contractor with the Government made a
proper and valid assignment of the contract to the
plaintiff bank, under the provisions of the Assign-
ment of Claims Act (31 U. S. C. 203) and in accord-
ance with the provisions of the contract; and where
notice of such assignment was duly given to the
proper officials of the Government, as required by
the Act; and where, after receipt of the notice,
payment of an amount due under the contract was
paid direct to the contractor, upon a voucher sub-
mitted by him, notwithstanding the assignment; it
is held that plaintiff is entitled to recover.
Central
National Bank of Richmond, 389.

II. The purpose of the Assignment of Claims Act (54 Stat.
1029), amending Sections 3477 and 3737 of the
Revised Statutes, was to facilitate emergency financ-
ing of the vast war program so as to permit estab-
lished lending institutions to provide immediate
funds for contracts incident to the war effort. Id.
United States

111.

III. The effect of the Assignment of Claims Act was to
place the Government in the same position as that
of any ordinary debtor. With respect to assign-
ments under the Act, the general law of assignments
governs. Generally, notice of an assignment is
effective as of the time of its receipt. Id.
United States

111.

IV. In the instant case it is shown that plaintiff's notices
to the proper Government officials were all received
prior to the date of the disbursement made to the
contractor, Kent, on December 20, 1945. Having
received timely notice of plaintiff's assignment, the
Government paid Kent at its peril. Id.

V. Under the provisions of Section 14 (b) of the Contract
Settlement Act of 1944 (58 Stat. 649, 663; 41 U. S. C.

117 C. Cls.

ASSIGNMENT OF CLAIMS ACT-Continued

114b) the Government has a claim against the
contractor, Kent, for the amount wrongfully paid
to him and converted to his own use, and judgment
is given in favor of defendant and against Kent for
$11,193.55. (See 114 C. Cls. 390). Id.

VI. In the instant case the plaintiff is the surety upon a
contract with the Government under which the con-
tractor defaulted, leaving unpaid various laborers
and suppliers to whom the plaintiff became liable
under its bond and was forced to pay out $2,276.02
to these creditors of the contractor. The plaintiff
seeks to recover from the United States the amount
held by the Government and admittedly due upon
the contract. The bank has intervened and claims
the same amount under an assignment from the con-
tractor for money loaned, under the Assignment of
Claims Act of 1940, for the completion of the con-
tract. The United States, nominally the defendant,
considers itself merely a stakeholder. It is held that
the plaintiff, surety, is entitled to recover. Royal
Indemnity Company (No. 48690), 736.
Subrogation

36.

VII. On or about March 19, 1945, the partnership of Foote
and Russell entered into a construction contract
with the Government containing the customary pro-
vision that monthly payments would be made to
the contractor upon proper estimates and, further,
that in computing payments 10 percent of the ap-
proved estimates would be retained until completion
and acceptance. As required by the statute (40
U.S. C. 270a) the contractor furnished performance
and payment bonds, with the plaintiff as surety, and
as part of the consideration for the bonds the con-
tractors assigned to the surety the deferred payments
and retained percentages. After having completed
99 percent of the contract, the contractors, in 1947,
defaulted and the Government completed the con-
tract, and after deducting the cost of completion
from the funds remaining in its hands the United
States still holds $1,223.85 admittedly due upon the
contract, which is the sum sued for in the instant

117 C. Cls.

ASSIGNMENT OF CLAIMS ACT-Continued

VIII. The contractor, upon default, left unpaid various labor-
ers and suppliers, and under its bond the surety paid
out to such creditors the sum of $2,276.02. What-
ever rights the surety possesses attached from the
date of the contract, which in the instant case was
March 19, 1945. Prairie State Bank v. United
States, 164 U. S. 227, cited, affirming 27 C. Cls.
185. Id.

Subrogation — 36.

IX. The assignment to the surety by the contractor of de-
ferred payments and retained percentages was not
within the terms of the Assignment of Claims Act of
1940, which provides that a valid assignment may
be made only to a bank, trust company or other
financing institution for moneys advanced to a con-
tractor for the completion of a Government contract,
but comes within the scope of Section 3477, R. S.
(31 U. S. C. 203) which provides that such assign-
ment "shall be absolutely null and void" as against
the United States but the courts have held that such
assignment is enforceable between the parties and
equities created thereby will be recognized. Id.
United States

111.

X. Under the provisions of the Assignment of Claims Act
of 1940, on May 7, 1945, the contractor, by one of the
partners, executed and delivered to the bank, the
intervenor in the instant suit, an assignment of
claims under the contract in suit, notice of such
assignment having been at that time given to the
proper Government agencies and to the surety.
Thereafter, on and after September 5, 1945, the bank
in reliance upon such assignment advanced funds,
from time to time, for the completion of the contract,
and the evidence shows that there is still due to the
bank a balance on these advances of $2,215.49, with
interest, and under its assignment the bank makes
claim to the balance due on the contract, which the
United States holds. Where the bank is charged
with the knowledge of the statute which requires
payment and performance bonds of all Government
contractors; and where the bank took its assignment
and advanced its funds after the contract had been
entered into and knew, or should have known, that
the surety, as a condition of furnishing the bond, had