INDEX DIGEST

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

130.

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

118 C. Cls.

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.

United States 70 (1).

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.

United States 70 (1).

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

70 (1).

118 C. Cls.

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.

United States 70 (1).

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

111.

Id.

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.

United States 742.

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-

118 C. Cls.

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.

Id.

118 C. Cls.

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.

COMMON CARRIER.

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