34 Opinion of the Court balance of $903.86 and, also, $937.38 of the $2,800, retained percentage remaining in the hands of the Government upon completion and acceptance of the contract work. The balance of $1,862.62 of the $2,800, retained percentage, was applied by defendant through the Comptroller General on February 9, 1939, as an offset in satisfaction of that amount due the Government by Peterson for accrued taxes, penalties and interest representing capital stock tax for the fiscal year ending June 30, 1937, and Social Security tax for the calendar year 1937 and the first quarter of 1938. After payment by plaintiff of labor and materialmen claims against Peterson and after completion of the contract Peterson made a general assignment on May 10, 1938, for the benefit of creditors, and the properties and assets of Peterson Company thereupon passed into the hands of the trustees. Upon the making of this general assignment there arose a statutory preference or priority under R. S. 3466, 31 U. S. C. 191, in favor of the Government in respect of the debt due it by Peterson for the taxes above mentioned. In addition to the statutory priority the Government, by giving notice and demand on October 20, 1937, and April 26, 1938, had acquired a lien under the act of March 4, 1913, 37 Stat. 1016, as to a part of this tax debt, and by further notice and demand acquired such lien as to the balance of the debt on May 17 and June 30, 1938, after the general assignment by Peterson. However, if, as plaintiff contends, the surety, by reason of its having paid the claims of laborers and materialmen under the payment bond, acquired an equitable lien on the retained percentage of $2,800 due under the contract prior to the dates on which the Government's lien attached and also prior to the general assignment of May 10, 1938, such lien of plaintiff would be superior to that of the Government and also superior to the Government's claim of priority. Robert Y. Brent, surviving Executor of Robert Brent, for the Use of the United States v. The President and Directors of the Bank of Washington, 10 Peters 596. The right of the Government to preference or priority in payment of debts due it is purely statutory. United States v. The State Bank of North Carolina, 6 Peters 29. Such priority does not arise until there is a legal and known insolvency manifested by Opinion of the Court 107 C. Cls. some notorious act by the debtor pursuant to law. Prince v. Bartlett, 8 Cranch 431; George Beaston, Garnishee of the Elkton Bank of Maryland v. The Farmers' Bank of Delaware, 12 Peters 102; United States v. Oklahoma, 261 U. S. 253. The statute (3466, R. S.) giving the United States priority creates no lien in favor of the United States (George Beaston v. The Farmers' Bank of Delaware, supra.) The United States possesses the general as well as the statutory right (R. S. 236) to apply any sum due by it to the extinguishment, in whole or in part, of any debt due to the United States on any other account by a person to whom the United States is indebted, but this is only the exercise of the common right which belongs to every creditor to apply the unappropriated monies of his debtor, in his hands, in the extinguishment of the debts due to him. Charles Gratiot, 15 Pet. 336. The right of offset does not give the Government a superior legal or equitable claim to the funds in its hands, nor does such right of offset give the administrative settlement finality, and, "whether the amount so [administratively] fixed is due, in law and in fact, undoubtedly remains a question to be adjudicated, if properly raised in judicial proceedings, *" Illinois Surety Company v. United States to the Use of Peeler et al. trading as Faith Granite Company, 240 U. S. 214, 219. * In view of the facts in this case we are of opinion, as held in Dewey Schmoll, Successor Assignee for the benefit of creditors of Murch Brothers Construction Company, Inc., and National Surety Corporation, v. The United States, 105 C. Cls. 415, that plaintiff, as surety on the payment bond, did not acquire an equitable lien on the $2,800 retained percentage under the contract either by reason of the assignment of July 21, 1936, from Peterson to plaintiff, or by reason of payment by plaintiff of the claims of laborers and materialmen. The assignment of July 21, 1936, under the payment and performance bonds of any amounts becoming due under the contract as security to plaintiff, in event of default by Peterson, would, if valid, have given plaintiff an equitable lien upon the retained percentage, but this assignment cannot be held valid in the circumstances of this case under the decision of the court in Martin v. National Surety 34 Opinion of the Court Co. et al., 300 U. S. 588, 594–598. The decisions of the U. S. Circuit Courts of Appeal as to the question whether in the absence of a valid assignment or statute, the proceeds of a contract with the Government are chargeable with an equitable lien in favor of laborers and materialmen and a surety who pays such claims, are conflicting. Martin v. National Surety Co., supra, page 593. See, also, Farmers' Bank v. Hayes et al., 58 Fed. (2d) 34, 37; American Bonding Company v. Central Trust Co., 240 Fed. 400; Lyttle v. National Surety Co., 43 App. D. C. 136; National Surety Co. v. Lane, 45 App. D. C. 176; Philadelphia National Bank v. McKinlay, 63 App. D. C. 296, 72 Fed. (2d) 89; Moran v. Guardian Casualty Co., 64 App. D. C. 188, 76 Fed. (2d) 438; and Pratt Lumber Co., Inc. v. T. H. Gill Co., 278 Fed. 783. But we are of opinion after examining all the authorities on the subject that the rule announced and applied in Schmoll, etc., v. United States, supra, that the surety does not acquire such an equitable lien under its payment bond, is the correct rule. No case has been cited, and we have been unable to find one in which the Supreme Court has held that an equitable lien accrues in favor of laborers and materialmen or to a surety in the event he pays such claims on the balance due under a contract. Cf. Mankin v. United States for the use of Ludowici-Celadon Co., 215 U. S. 533; Title Guaranty & Trust Company of Scranton, Pennsylvania, v. Crane Company, 219 U. S. 24; United States v. Ansonia Brass and Copper Company, 218 U. S. 452; Illinois Surety Company v. United States to the use of Peeler, et al., 240 U. S. 214; United States Fidelity and Guaranty Company v. United States for the use and benefit of Struthers Wells Company, 209 U. S. 306; U. S. Fidelity & Guaranty Co. v. United States for the use and benefit of Pressed Brick Co., 191 U. S. 416; American Surety Co. v. Westinghouse Electric Mfg. Company, 296 U. S. 133, 138. As between laborers and materialmen or a surety on a payment bond, and general creditors, including the Government, of the defaulting contractor, the equity of such laborers and materialmen, or the surety, in the balance due under the contract, including the retained percentage, upon completion thereof, would be superior to the equity of such Syllabus 107 C. Cls. general creditors to such balance. However, we are of opinion that the Government's statutory right of preference or priority for payment of debts due it when there is a legal insolvency, and also the tax liens acquired by the Government for such debt of the defaulting contractor, supersede the equities of laborers and materialmen and the surety in respect of any balance due under the contract. On the facts in this case and under the authorities cited, the action of the defendant in applying $1,862.62 of the retained percentage due under the contract upon completion thereof by plaintiff, as surety, in liquidation of the tax indebtedness of the Peterson Construction Company to the United States was a legal and proper offset, and plaintiff is not entitled to recover. The petition must, therefore, be dismissed, and it is so ordered. JONES, Judge; WHITAKER, Judge; and WHALEY, Chief Justice, concur. MADDEN, Judge, took no part in the decision of this case. UNITED STATES CASUALTY COMPANY v. THE UNITED STATES [No. 45093. Decided October 7, 1946] On the Proofs Government contract; accidental death of contractor construed as an unforeseen cause of delay in the instant case; waiver by defendant. The accidental death of the contractor, in view of all the circumstances of the instant case and the wording of the contract in suit, is construed as an unforeseen cause, which directly caused a delay of at least 40 days in completion of the contract, but even if this construction of the contract should be in error, the fact that the defendant agreed, without notifying the surety, that contractor's administratrix should undertake the completion of the contract and granted that privilege to her without any further action as between the defendant and the surety constituted a waiver on the part of the defendant of any claim for liquidated damages during that period; and the plaintiff is entitled to recover liquidated damages assessed and collected or withheld for that particular delay of 40 days. Same; delay due to failure of defendant's chief architect to approve 46 Reporter's Statement of the Case blueprints.—The blueprints of the plans were delivered to the chief architect 4 days prior to the contractor's accidental death. Since this was a routine matter, the blueprints might well have been approved in 4 days but approval was not given for 45 days after submission, of which 40 days were concurrent with the delay found to be due to the contractor's death. The plaintiff is entitled to recover for the liquidated damages assessed for this additional period of 5 days. Same; failure to make progress payments to surety not a breach of the contract in the circumstances.-Defendant's failure to make progress payments to the surety, after the surety took over the completion of the contract, did not constitute a breach of the contract on the part of the defendant, in view of the necessity for making audits and the determination of the legal rights of the contractor's estate, and other circumstances, especially since it is shown that the progress of the work was not affected in any way by the delay in payment during the period in question. Same; Comptroller General without authority, under the contract, to make decision which should have been made by the contracting officer.-Under the terms of the contract in suit, all disputes were to be settled by the contracting officer, whose decision was to be final. However, the record shows that the contracting officer did not make a decision on the question whether an extension of time should be allowed on account of the death of the contractor or on account of the delay in approving the shop plans, which delay was closely linked with the same incident. These questions both involved a construction of the contract which the Comptroller General, to whom the questions were referred, had no authority to decide, according to the terms of the contract. In all these circumstances, the court holds that the decision in the form in which it was presented did not constitute a final decision or final action on the question of delay during the period for which recovery is allowed by the court. The Reporter's statement of the case: Mr. Kahl K. Spriggs for the plaintiff. Messrs. Challen B. Ellis and Stanley E. Hartman were on the briefs. Mr. James J. Sweeney, with whom was Mr. Assistant Attorney General John F. Sonnett, for the defendant. The court made special findings of fact as follows: 1. Plaintiff is a New York corporation engaged in the surety business. 2. On August 12, 1936, plaintiff, as surety, executed a per |