Free Supplemental Brief - District Court of Federal Claims - federal

Case 1:03-cv-00623-LSM

Document 26

Filed 01/30/2004

Page 1 of 6

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

s. FINANCIAL CORP.

Plaintiff

No. 03- 623C

(Senior Judge Margolis)

THE UNITED STATES,

Defendant.

PLAINTIFF' S SUPPLEMENTAL REPLY
COMES NOW Plaintiff U. S. Financial Corporation (" and for its Supplemental Reply states as follows:
The cases relied upon by the Government are not applicable to this case. In

S. Financial"), through counsel

First

National City Bank v. United States 548 F. 2d 928 (1977), the Court found that a bank which had

loaned money to a government contractor after the contractor had fully completed the

government contract was not a party "participating in such financing" within the meaning of the
Assignment of Claims Act. !d.

548 F.2d at 934. The Court held that the concept of

participating in such financing " applied to lenders whose loans were used or were available for
use in financing the government contract.

ld.

Similarly, in

Manufacturers Hanover Trust Company v. United States 590 F. 2d 893

(1978), the Court found that the bank claiming rights of assignment "had not been assigned any
of the proceeds in question during the time those contracts were in performance. ld. 590 F.
at 896. Further, the Court held that the " loans on the contracts in question were repaid long
before the assignments in question came into being.
ld.,

590 F. 2d 897.

Case 1:03-cv-00623-LSM

Document 26

Filed 01/30/2004

Page 2 of 6

Finally, in

American National Bank and Trust Company of Chicago 22 Cl.Ct. 7 (1990),

the Court found that the bank had been repaid the outstanding balance of its loan to the
government contractor by another lending institution so the debt to the bank " was reduced to
zero.

ld. 22 Cl.Ct. at 13. Moreover , the Court held that the bank " did not loan any money or

make any of its funds available for the performance of the (government) contract."

ld. 22 Cl.Ct.

at 16.

The facts of this case are far different from those relied upon by the Government. Here,
the Government admits:

On or about September 29 , 1997 , the United States Air Force entered into a contract with The WINN Group, Inc. (" WINN") to Replace Electrical Distribution System and Main Substation , Building 18 , at Bolling Air Force Base, Contract No. F49642- 97- 0030 (hereinafter the " Contract"). See Response to Plaintiffs Proposed Findings of Uncontroverted Facts (" Defendant's Response ), Paragraph 1.
On or about February 17 , 1999 , WINN assigned all proceeds from the Contract to U. Financial Corporation. See Defendant' s Response , Paragraph 2.
On or about March 8 , 1999 , the Air Force issued Modification POOOOI to the Contract which incorporated the assignment of funds between WINN, as assignor, and V. Financial , as assignee , and assigned all funds for future payments under the Contract to S. Financial. See Defendant' s Response , Paragraph 3.

From March 1999 through June 2002 , the Air Force made payments under the Contract to U. S. Financial in accordance with the assignment of funds. See Defendant' Response , Paragraph 4.
On July 3 2002 , the Air Force erroneously paid WINN $42 686. 53. Response , Paragraph 5.
See Defendant'

On September 30 2002 , the Air Force erroneously paid WINN $10 000. 00. Defendant's Response , Paragraph 6.

See

The Air Force has not paid u.S. Financial the $52 686 it has demanded pursuant to the assignment of funds. See Defendant's Response , Paragraph 7.

Case 1:03-cv-00623-LSM

Document 26

Filed 01/30/2004

Page 3 of 6

Further , the assignment specifically states that "FOR VALUABLE CONSIDERATION

the receipt of which is hereby acknowledged , the undersigned (WINN) . . . hereby assigns
transfers and sets over unto (U. S. FINANCIAL) . . .
all moneys due and to become due under

Contract No. F49642- 97- CO030 for Replace Electrical Distribution System and Main Substation
Facility 18 . . .
See

Plaintiffs Complaint , Exhibit A , Attachment 1 , at p. 3 (emphasis added).

In addition , the assignment "UNDERWENT LEGAL REVIEW ON 5 MAR 99 AND WAS
FOUND TO BE LEGALLY SUFFICIENT" by the Government.

ld.

Attachment 1 ,

at p. 2. The

Government then modified the subject contract on March 8 , 1999 to incorporate the assignment.
ld.
Attachment 1 , at p. 1.

The Government has also filed a Third Party Complaint against WINN in which the Government asserts that WINN assigned all of its rights to receive monies under the contract at
issue to U. S. Financial , that the Government modified the subject contract "naming U.

Financial as the Payee , after the assignment had been found to be properly executed and legally
sufficient " that subsequently the Government erroneously paid WINN $52 686 instead of paying
S. Financial , and that WINN is liable to the Government for the amounts recovered by V.
Financial. See

Defendant's Third Party Complaint , Paragraphs 1 through 14.

The present case is almost identical to

Florida National Bank of Miami v. United States

5 Cl.Ct. 396 (1984). There , the bank moved for summary judgment "because defendant paid
proceeds from a government contract to a third party defendant. . . after defendant had
acknowledged and agreed to assignment of the proceeds to plaintiff." ld.

The defendant

Government conceded that payment was erroneously made to the third-party defendant and

argued that it was entitled to be reimbursed to the full extent of any judgment entered in the
plaintiffs favor. !d.

The Court held that because the plaintiffs assignment was made in

Case 1:03-cv-00623-LSM

Document 26

Filed 01/30/2004

Page 4 of 6

accordance with the Assignment of Claims Act and the defendant admitted the improper
payment, that the plaintiff was entitled to recovery, including its costs.

ld.

5 Cl.Ct. at 397.

See

also, Central Nat. Bank of Richmond, Va. v. United States 91 F. Supp. 738 (1950). There , the

plaintiffs assignment was made pursuant to the Assignment of Claims Act. and notice of the
assignment was given to the Government. The Court held that "having so complied with the
Act , Plaintiff is entitled to that degree of protection ordinarily given to an innocent assignee who

acts in good faith.

ld. 91 F. Supp. at 740. The Court concluded that "the Government having

received timely notice of plaintiffs assignment paid Kent at its peril. . . where an erroneous
payment is made by the Government it is no bar to the rightful claimant. . . A ministerial officer
such as the Central Disbursing Officer could not arbitrarily, without notice to the legal holder of

the claim , pay money over to a third party -

in this case ,

Kent."

ld. 91 F. Supp. at 741.

Furthermore , in Tuftco Corp. v. United States 614 F. 2d 740 (1980), the Court held that

the requirements of the Act may be waived by the Government. The Court developed a totality
of the circumstances test based on three factors: the Government' s knowledge of, assent to , and
actions in accordance with the assignment.

!d. 614 F.2d at 746.

Here , the assignment was made by WINN to u.S. Financial "FOR VALUABLE

CONSIDERATION , the receipt of which is hereby acknowledged" for " all monies due and to
become due "

under the contract to replace the electrical distribution system and main substation.

The assignment was made several years before the performance of the subject contract was
complete , the assignment was reviewed for legal sufficiency by the Government , was accepted

and incorporated into the contract , and the Government made payments in accordance with the
assignment to U. S. Financial for more than three years.

Case 1:03-cv-00623-LSM

Document 26

Filed 01/30/2004

Page 5 of 6

The Government erroneously made two contract payments to WINN instead ofto U.

Financial in the amount of$52 686. 53. As a result , the Government owes U. S. Financial
$52 686. 53. The Government cannot avoid it obligations to u.S. Financial by now creating

after- the- fact arguments that contradict the terms ofthe assignment. Further, the Government

has waived any objections to the assignment as a result of the Government' s knowledge of
assent to ,

and actions in accordance with the assignment.

For the foregoing reasons , the Plaintiff respectfully requests that summary judgment be
granted in its favor against the Defendant in the amount of $52 , 686.

, plus costs ofthis action.

Respectfully submitted
Dated: January 29

2004

Isl Paul V. Waters SPRIGGS & HOLLINGSWORTH 1350 I Street , N. Washington, D. c. 20005 (202) 898- 5800
Attorneys for
S.

Financial Corporation

Case 1:03-cv-00623-LSM

Document 26

Filed 01/30/2004

Page 6 of 6

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this the 29th day of January 2004 , a copy of the foregoing Supplemental Reply was filed electronically. I understand that notice of this filing will be sent to all parties by operation ofthe Court' s electronic filing system and that Parties may access this filing through the Court' s electronic filing system.
Isl Paul V. Waters