AC Davenport & Son Co. v. United States

• Decision Date: 28 April 1982
• Docket Number: No. 81 C 1440.,81 C 1440.
• Citation: 538 F. Supp. 730
• Court: U.S. District Court — Northern District of Illinois
• Parties: A. C. DAVENPORT & SON CO., Plaintiff, v. UNITED STATES of America, Defendant.

538 F. Supp. 730

A. C. DAVENPORT & SON CO., Plaintiff, v. UNITED STATES of America, Defendant.

No. 81 C 1440.

United States District Court, N. D. Illinois, E. D.

April 28, 1982.

Clifford E. Yuknis, Martin M. Lucente, Jr., Shefsky, Saitlin & Froelich, Richard A. Sugar, Richard A. Sugar & Associates, Chicago, Ill., for plaintiff.

Eileen M. Marutzky, Asst. U.S. Atty., Chicago, Ill., Andrea J. Salloom, General Services Administration, Washington, D.C., for defendant.

MEMORANDUM OPINION AND ORDER

GETZENDANNER, District Judge.

Plaintiff A. C. Davenport & Son Co. ("Davenport")^* brings this action for the purchase price of products delivered to the General Services Administration ("GSA"), an agency of defendant United States. The matter is before the court on the Government's motion to dismiss for lack of jurisdiction and on the parties' cross motions for summary judgment. The court denies defendant's motions to dismiss and for summary judgment and grants plaintiff's motion for summary judgment.

Factual Background

The parties agree that there is no genuine dispute as to any material fact and that the following facts are undisputed.

In December, 1975, the GSA contracted with Almark, Inc., of Arlington, Virginia, for the purchase of bulletin boards. In early 1976, Almark agreed with Davenport that the latter was to supply the bulletin boards that Almark was obligated to deliver under its contract with the GSA. Later that year, Davenport had reason to question Almark's ability to meet its payments under the subcontracting agreement and Davenport insisted on some arrangement to secure these payments. (See Affidavit of Duane Conwell and Plaintiff's Ex. #2.)

As a result, Almark modified its contract with the GSA, changing the payment address from "Almark, Inc., 542 South 23rd Street, Arlington, Virginia 22202" to "Almark, Inc., c/o Davson, 306 East Helensic Road, Palatine, IL 60067." A Government Contracting Officer approved and signed this modification. A few days later, Almark executed a corporate resolution authorizing the First National Bank to accept for deposit in a special account checks that were endorsed "Almark, Inc., c/o Dav-son." The resolution further authorized the Bank to pay out funds from this account only in the name of Davenport by its president, Frank A. Davenport.

Almark executed the contract modification and corporate resolution pursuant to an agreement with Davenport. The parties intended that the combined effect of the modification and resolution would be that Davenport would receive Almark's checks directly from the Government, that it could then deposit them in the special account, and that only Davenport, through its president, could withdraw the proceeds from the account.^** The purpose of this arrangement was to secure Almark's payment to Davenport under the subcontracting agreement.

Between February and April, 1977, the GSA issued checks pursuant to its contract with Almark. Despite the contract modification in effect, the GSA sent these checks to Almark's Virginia address. On April 4, 1977, Davenport's Account Manager wrote the Government informing it that Davenport had not received checks for shipments made in January and February, 1977, under Almark's contract as modified. Plaintiff's Ex. #3. The second sheet of this letter bears the following handwritten note:

"Called.

(1) All payment gone to Almark by Alton Franklin

(2) Carol Dameron put stop payment on all Almark checks 4/13/77."

The record is not clear on this point, but apparently the stop order was ineffective as to one or more of the checks sent to Almark's Virginia address for a total of $11,822.89.

On April 28, 1977, the GSA issued what it terms a "duplicate" check for the same amount and sent this check to "Almark, Inc., c/o A. C. Davenport & Son Co." in Palatine, Illinois. Davenport endorsed and deposited this check in the special account and withdrew the funds, according to its agreement with Almark.

For some reason,¹ the Government did nothing more until November, 1977, when it wrote Davenport questioning the propriety of the latter's endorsement and deposit of the second Almark check. In July, 1978, the Government sent a formal demand to Davenport for the $11,822 and indicated that it would offset amounts due Davenport on totally unrelated contracts. Portions of this letter are significant:

"It is the GSA's opinion that a duplicate payment was made to Almark, Inc. The first series of payments totalling $11,822.89 was made to Almark, Inc. between the period February 2, 1977, and April 4, 1977.... The payment of $11,822.89 made to Almark, Inc., c/o A. C. Davenport and Son on April 28, 1977, by Treasury check No. 1400521, was a duplicate payment to Almark, Inc. of previously paid invoices." (emphasis added).

Defendant's Ex. #9. Notwithstanding its clear admission that the duplicate payment was made to Almark, the Government proceeded to withhold payments due Davenport on the unrelated contracts, as setoffs of the amount the Government claimed Davenport owed it under the Almark contract. Davenport brought this action to recover some $5,000 owed on one of the unrelated contracts.

Jurisdictional Amount

The Government argues that it has offset sums totalling more than $10,000. As a result, it contends that the amount in controversy between it and Davenport exceeds the jurisdictional limit provided by 28 U.S.C. § 1346(a), and that the case properly belongs in the Court of Claims.² Davenport contends that separate and distinct contracts constitute separate and distinct causes of action, United States v. Louisville & Nashville Railroad Co., 221 F.2d 698, 702 (6th Cir. 1955), and that it may sue on one contract involving less than $10,000 even though the aggregate of all the sums involved in all the contracts exceeds $10,000. See Fitzgerald v. Staats, 429 F.Supp. 933, 935 (D.D.C.), aff'd, 578 F.2d 435 (D.C.Cir. 1977), cert. denied, 439 U.S. 1004, 99 S.Ct. 616, 58 L.Ed.2d 680 (1978), where the court stated that the fact that a party has two or more claims for $10,000 or less, but aggregating more than $10,000, does not deprive the district court of jurisdiction.

The court agrees with Davenport's position and denies defendant's motion to dismiss.

Assignment of Claims Act

In their briefs, the parties concentrate on arguing whether or not the agreement between Davenport and Almark, which resulted in the contract modification and corporate resolution giving Davenport the exclusive right to withdraw funds deposited in the special account, amounted to an assignment in violation of the Assignment of Claims Act, 31 U.S.C. § 203, and if so, whether or not the Government waived compliance with the Act.³ Frankly, the court considers that these issues are nothing more than "red herrings." Either the agreement between Davenport and Almark was not an assignment or, if an assignment was attempted, it failed. In either case, it is clear that there is no valid assignment here. This conclusion, however, does not aid the court in resolving the crucial issue in this case, which is, can the Government compel Davenport to refund a duplicate payment that it made to Almark?

The Government seems to assume that the lack of a valid assignment between Almark and Davenport necessitates a decision in its favor. Even without a valid assignment, however, the Government must establish some legal basis for claiming the $11,822 that Almark turned over to Davenport. The Government cannot claim a contractual basis, as there was no privity of contract between the GSA and Davenport with regard to the $11,822; the contract ran between the GSA and Almark.

Because there was neither a contractual relationship nor an assignment, Davenport could not have sued the Government had it refused to pay the $11,822, nor could Davenport have sued the Government had it sent only one check and that to Almark in Virginia. See United States v. Smith, 393 F.2d 318 (5th Cir. 1968). In Smith, a wife was awarded one-half of her serviceman husband's pay as property settlement in a divorce action. The husband then wrote an "irrevocable" letter directing his pay be deposited in an escrow for division, which letter, however, he later revoked. The court held that the wife had no claim against the United States for her share of the pay, in part because the "irrevocable" letter was not a valid assignment.

The Government analogizes Davenport's position to that of the wife in Smith. From this, the Government argues that it is entitled to compel Davenport to refund the amount of the second check. Because Davenport could not force the GSA to pay it, the Government reasons, it has no right to the proceeds of the second check, and therefore the Government can compel Davenport to refund it by imposing setoffs.

The flaw in the Government's reasoning is its conclusion that, because Davenport could not compel the GSA to issue the check in the first instance, it had no right to the proceeds of the check. This ignores the indisputable fact that Davenport's right to the check did not originate from the Government, but from Almark. Davenport, in essence, received the check from Almark. The Government has admitted as much, as it has consistently taken the position that the contract modification was no more than a change in the payee's address and not a change in the payee.

Even though Almark did not assign its contact with the GSA to Davenport, this would not automatically render the agreement between Almark and Davenport null and void. In Segal v. Rochelle, 382 U.S. 375, 384, 86 S.Ct. 511, 517, 15 L.Ed.2d 428 (1966), the Supreme Court stated that despite the broad language of the Assignment of Claims Act, it "`must be interpreted in the light of its purpose to give protection to the Government' so that between the parties effect might still be given to an assignment that failed to comply with the statute," quoting Martin v. National Surety Co., 300 U.S. 588, 596, 57 S.Ct. 531, 534, 81 L.Ed....