ACT OF MARCH 28, 1934.
See Overtime Pay V, VI, VII, VIII, IX, X, XI, XII. ADMINISTRATIVE ORDER.
See Suit For Salary IX, XI. ADMINISTRATIVE PROCEDURE.
See Suit For Salary XIII, XIV, XV, XVI, XVII. ALASKA RAILROAD, EMPLOYEES OF.
See Overtime Pay V, VI, VII, VIII, IX, X, XI, XII. AMBIGUITY.
See Contracts XIII.
ANTIAIRCRAFT GUN.
See Eminent Domain XLII, XLIII, XLIV, XLV. ASSIGNEE AND CREDITORS, RIGHTS OF.
I. In a case referred to the United States Court of Claims by the Comptroller General pursuant to Section 148 of the Judicial Code, 28 U. S. C. 254 (1940 Edition), where the claimants are the Somerset Shipyards, Inc., its assignee, the Rhode Island Discount Com- pany, and several creditors of the Somerset Ship- yards who supplied materials to the Somerset con- cern for the completion of a contract with the Gov- ernment and for which they have not been paid; it is held that neither the assignee nor any of the claimants is entitled to recover, and the Govern- ment, on its counterclaim, is entitled to a judgment against Somerset Shipyards, Inc., for the net balance of $52,578.55, after the deduction of the sum of $27,441.49 owing to Somerset on the contract from the sum of $80,020.04, the amount of the Govern ment's counterclaim. Rhode Island Discount Co., 262. United States
II. In 1942 the Government, acting through the Trans- portation Corps, entered into a contract with Somer- set Shipyards, Inc., for the construction of seven steel barges at a lump sum price, reduced by change orders to $247,737.74. On October 13, 1942, the contract was amended by Supplemental Agree- ment No. 1, under which the Government agreed to advance, and did advance, $79,800 to Somerset. On May 12, 1943, Somerset made an assignment of
ASSIGNEE AND CREDITORS, RIGHTS OF-Continued
all amounts payable under the contract to Rhode Island Discount Company, which had full knowledge of the terms of the contract and of Supplemental Agreement No. 1, and under this assignment the discount company loaned to Somerset $100,967.52, of which amount there remains unpaid the sum of $51,679.10. In order to facilitate the completion of the contract and enable Somerset to complete the barges, which were considered essential to the war effort, in September 1943, pursuant to the provisions of the First War Powers Act and Executive Order No. 9001, issued thereunder, Supplemental Con- tract No. 2 was entered into by which Somerset was permitted to retain all payments theretofore made in the sum of $121,892, and the Government agreed to advance additional sums to pay Somerset's outstanding obligations for labor and material as of August 24, 1943, and that the Government would pay certain other costs incurred after that date and Somerset would be given an additional credit. The balance owed to Rhode Island Discount by Somerset was not included in this agreement because the pay- ment of this amount would not facilitate the com- pletion of the barges. Id.
III. Under Supplemental Contract No. 2, the Government agreed to pay Somerset's outstanding liabilities for labor and materials on August 24, 1943, in the stated amount of $45,618.10, whereas the actual amount of such liabilities was later found to be $46,956.66, a difference of $1,338.50, for which Somerset makes claim, which is denied. The agree- ment was to pay debts in a fixed amount, and it cannot be expanded to include after discovered debts. Id.
IV. Somerset is not entitled to recover on its claim, as additional costs of completion after August 24, 1943, depreciation on its plant and facilities. Under Supplemental Contract No. 2, the Government agreed to advance funds necessary for the comple- tion of the contract. There is nothing in the agree- ment nor in the conduct of the parties under it to show that Somerset was to be paid depreciation as an element of the costs of completing the barges. Id. United States
ASSIGNEE AND CREDITORS, RIGHTS OF-Continued
V. On Somerset's claim for reimbursement of a propor- tionate part of the launching costs of the seven barges, which part Somerset claims is attributable to the last three barges completed and is therefore a cost of the completion of the barges incurred after August 24, Somerset is not entitled to recover where it is shown that all launching costs were in fact incurred and paid by Somerset prior to August 24. Id.
VI. A change in contractual arrangements prejudicial to an assignee of a contract must have a real relation to the object of obtaining completion of performance. In the circumstances of the instant case the decision of the Government's agents that the payment of $45,618.10 to the unsecured creditors who had furnished labor and materials was reasonable, and was sufficiently related to obtain completion of the contract to be valid against the assignee. United States
VII. Although the Government, in Supplemental Contract No. 2, promised Somerset, the contractor, that it would place $45,618.10 in a special deposit for the contractor's creditors or would pay them directly, the Government in fact did not do so except to the amount of $18,076.63. Somerset itself, with funds from other sources, paid all except $17,926.05 of the rest of these debts. After notice to all the re- maining creditors to appear and assert their claims in the instant suit, only five creditors filed claims and four of these five presented evidence in support of their claims, which are based upon two grounds. Id.
VIII. The creditor's first ground is that they are third party beneficiaries of the Government's promise to Somer- set in Supplemental Contract No. 2, either to place money in a special deposit from which the creditors would be paid or at the option of the Government to pay them directly. The court does not sustain this contention since the contract in suit was a Massachusetts contract, and the law of Massachu- setts, contrary to the weight of American authority, does not recognize any right in a third party bene-
ASSIGNEE AND CREDITORS, RIGHTS OF-Continued ficiary against the promisor in a contract made for his benefit. Id.
IX. The second asserted ground of the creditor's claims is that the Government promised them directly that it would either see them paid or pay them. It is held that such promises have not been proved. There was no novation, whereby the creditors re- leased Somerset and looked only to the United States for payment. Id.
X. As shown by the evidence, the Government has paid to the contractor and its assignee $287,874.14 on the contract and has received only the seven barges originally contracted for at a lump sum of $247,- 737.74. In spite of this overpayment of more than $40,000, due to the changes made in the contract by Supplemental Contract No. 2, it still owes $27,441.49. It is held that the rights of the assignee, including its right under the contract to have no set-off made against payments to it, do not apply to the excess payments and the Government's unpaid liability to the contractor, to which the contractor was not en- titled at the time it made its assignment and bor- rowed the money thereunder. Id.
XI. In taking its assignment and lending its money to the contractor the assignee did not rely on the addi- tional amounts which were advanced under the Supplemental Contract No. 2, which was entered into subsequent to the assignment. Since the $27,441.49 in question represents a sum in addition to the payments already made, which exceeded the original contract price by $40,000, the assignee ob- tained no right in this sum superior to the Govern- ment's primary right to set off its claims against Somerset. It would be highly inequitable to re- quire the Government not only to pay an amount greatly in excess of the price agreed upon in the contract as it was when assigned but in addition to forego in favor of the assignee its right to collect by set-off a part of what the assignor owes the Govern- ment on other accounts.
ASSIGNEE AND CREDITORS, RIGHTS OF-Continued
XII. Where it is shown by the evidence and reported in the findings that Somerset Shipyards, Inc., is indebted to the Government for unrepaid advances in the sum of $3,001.60 and $39,034.71, respectively, on two other contracts, and for taxes in the amount of $27,479.95 in addition to its indebtedness of $10,- 503.78 for taxes in connection with performance of the contract in suit, a total indebteness to the Gov- ernment of $80,020.04; and where Somerset is en- titled to a credit of $27,441.49 for amounts earned by it under Supplemental Contract No. 2 but not paid; judgment is entered against Somerset Ship- yards, Inc., and in favor of the Government for the difference, which is $52,578.55. Id.
See Indian Claims XVII, XVIII, XIX, XX, XXI, XXII. BOARD OF CONTRACT APPEALS.
See Contracts VI.
CEILING PRICES.
See Eminent Domain III, IV, V, VI, VII.
CIVIL SERVICE REGULATIONS.
See Suit for Salary V, VI, VII, VIII, IX, X, XI, XIII, XIV, XV, XVI, XVII.
See Transportation of Government Property I, II, III, IV. CONTRACT SETTLEMENT ACT.
See Eminent Domain XLV. CONTRACTING OFFICER.
Where the contracting officer gave the plaintiff a suffi- cient extension of time to cover the whole period of delay and stated that the delay was caused by tardiness of the Government in delivering equipment as agreed, this decision, while excusing the plain- tiff from any assessment of liquidated damages for late completion, was not a decision that the plain- tiff could have completed the work on time except for the delays caused by the Government. Tuller, 509. United States 73 (9).
See also Contracts III, IV, V, VI. CONTRACTS.
I. Where the plaintiff entered into a contract with the United States, through the War Department, to lease the plaintiff's dredge, the George A. McWilliams, with all necessary operating personnel and attendant
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