Court Opinion

ID: 8595616
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:02:46.996157+00
Date Added: 2024-06-11T16:54:54.720223
License: Public Domain

Davis, Judge,
concurring in part and dissenting in part:
I slice this case differently. Although my result in figures is not too far from the court’s, I reject the over-broad reading of “participating in such financing” in the Assignment of Claims Act of 1940 (see Part VI of the court’s opinion), and would confine that concept to a lender whose loan was used, or was available for use, in financing the particular government contract under which suit is brought. Admittedly, the plaintiff’s loan to Trilon was not used and was not available — and could not be — for the technical manuals contract on which this suit is founded since that agreement was fully performed about a year (1968) before First National City Bank even undertook to finance Trilon (1969).1
T reach this interpretation on both the text and the purpose of the statute. The 1940 Assignment of Claims Act is entirely written in terms of a single government contract which is being financed by a lender or group of lenders, not in the government-wide terms of which the court speaks. The statutory concept is that of financing a specific government contract, not of the financing of government contracts in general or across-the-board, or the financing of all of a con*407tractor’s contracts as a lump. The immediate context of the phrase “participating in such financing” relates to the financing of the particular contract on which the statutory provision centers; grammatically and naturally, “such” refers back to the financing of that particular contract and “financing”' likewise refers to the financing of that individual contract,not other contracts of the same contractor or contracts generally. It is, of course, too much of a strain to think of plaintiff ■as financing the technical manuals contract, all the work on. which was done and finished a year before First National came into Trilon’s world.2
The objective of the 1940 Act was to authorize the financing of individual government contracts in the sense that Congress wished the holder of such a pact to be free to receive financial help in performing his agreement in reliance on the security of the expected government payments from that contract. At the same time Congress did not, I think, wish to eat into the Covemment’s normal right of setoff against the assignor more than would be necessary to induce such monetary aid in performing. Where a contract has been fully completed, further aid is not needed for that contract and there is no occasion to give up the right of setoff. “The Act was designed to make funds available to a contractor with which he could complete Ms government contract. If the loan is used for another purpose [here, that must be so since Trilon had already completed the technical manuals contract], the objectives of the Act are not satisfied.” Coleman v. United States, 158 Ct. Cl. 490, 496 (1962) (emphasis added).
This view does not mean that loans must be tied to particular contracts nor does it go counter to the endorsement of the revolving-credit plan in Continental Bank & Trust Co. v. United States, 189 Ct. Cl. 99, 416 F. 2d 1296 (1969). In all of our prior cases, including Continental Barde, which have upheld the financing institutions’ right to recover free of setoffs, the loans were made before the completion of the particular contract and were available to help in the performance of that work — even though the loans may not have *408been tied to, or designated as directed to, a or the specific contract. The same is true of the “five-chambered house of horrors” plaintiff has included in its brief; with the exception of one-half of one of the five examples, in all those situations the loan is and can be available for all non-completed government contracts of that contractor-borrower, and therefore the financial institution can avail itself of the right of recovery free of setoff. It is only where the contract has been fully performed before the loan is made3 that the institution cannot call upon that right under that particular contract. The reach of that rule would thus not be nearly as wide as the court and plaintiff assert. On the other hand, it should be noted that the court’s broader view would allow a setoff-free recovery by plaintiff under the technical manuals contract even though that bank had refused to pay Franklin off in 1971, and although the contract had been fully performed a decade before First National had any dealings with Trilon.4
For these reasons, I would hold that plaintiff does not belong within the class of those “participating in such financing” under the 1940 Act. Nor is the First National Bank a proper reassignee under the Act and the contract clause. Franklin refused in 1971 to release its own prior assignment and on that ground the Government would not accept the attempted reassignment to First National. If one tiling is clear under the statute and the clause, it is that, with respect to any individual contract, there can be only one assignee at a túne (with the exception, which as shown above I consider inapplicable, of other parties “participating in such financing”). Since Franklin insisted on retaining its own assignment, plaintiff could not take over directly under the Act.
All this leads me to conclude that First National has no claim under the Assignment of Claims Act of 1940. But plaintiff also puts itself forward, apart from that statute, as the subrogee of Franklin which it paid off in 1971. To the extent *409of the payments made by plaintiff to Franklin at that time, I agree with the court, partly for the reasons it gives, that First National was subrogated to Franklin’s rights under the latter’s assignment. Plaintiff was not a volunteer and it succeeded to those rights Franklin would have had if it had not been paid off. As the court shows, the general principles of “common-law subrogation” are met.
Defendant’s response is that to recognize subrogation here would subvert the limitations of the old anti-assignment part of the Assignment of Claims Act. The majority counter this suggestion by finding that the conditions of the 1940 Act are themselves satisfied. I cannot take that road since I believe, as discussed above, that plaintiff is unable to shield itself under the coverage of the 1940 legislation. But I find my answer in the proposition that, on the facts here, there is no contradiction of the aims of the original, historic anti-assignment law in allowing this plaintiff to recover as subro-gee. The statutory purposes of that old legislation are to prevent fraud, control multiple litigation, and confine the government’s dealings to a very limited number of persons or entities. In this particular instance, the Government, before the suit was brought, had already elected to deal with plaintiff with respect to the technical manuals contract. As the court’s opinion points out, defendant sent a copy of the agreement resolving the dispute (over additional compensation on the technical manuals contract) not to Franklin or the Small Business Administration but to plaintiff; the defendant also haggled with plaintiff over whether the latter should have priority before any setoff; and the GAO appears in effect to have determined that First National was at least entitled to $7,812 without any setoff. Thus, by its own choice defendant treated First National as an interested party. Where that has happened it seems to me an unwholesome technical rigidity to apply the principles underlying the pre-1940 anti-assignment statute to lock the bam after the horse has deliberately been let out by the Government’s own officials.
I would therefore allow plaintiff to recover that part of the monies it paid to Franklin in 1971 which it has not yet recovered. On the interest issue, I agree with the court.

 First National Rad nothing to do with the technical manuals contract until September 1971 when it paid off Franklin which had an assignment of the proceeds of the contract.

 The contract clause In the technical manuals agreement and the ASPR regulations do not deviate from the statute.

 And perhaps where the loan agreement explicitly forbids use of the loan on a specific contract.

 unfortunately, it is not unknown that claims under a contract take ten years or more to proceed through the administrative and judicial processes.