United States v. Trinity Universal Insurance Co., 16605.

• Decision Date: 18 November 1957
• Docket Number: No. 16605.,16605.
• Citation: 249 F.2d 350
• Parties: UNITED STATES of America, Intervenor, Appellant, v. TRINITY UNIVERSAL INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

249 F.2d 350 (1957)

UNITED STATES of America, Intervenor, Appellant, v. TRINITY UNIVERSAL INSURANCE COMPANY, Appellee.

No. 16605.

United States Court of Appeals Fifth Circuit.

November 18, 1957.

Charles K. Rice, Asst. Atty. Gen., Ellis N. Slack, John N. Stull, George F. Lynch, A. F. Prescott, Attys., Dept. of Justice, Washington, D. C., Frank O. Evans, U. S. Atty., J. Sewell Elliott, Asst. U. S. Atty., Macon, Ga., for appellant.

Vance Custer, Charles H. Kirbo, Bainbridge, Ga., for appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and WISDOM, Circuit Judges.

HUTCHESON, Chief Judge.

This appeal is from a judgment,¹ based on a stipulation of facts² with exhibits attached, in favor of appellee, the surety on a government construction contract awarding it custody, control and payment of a treasury check for $5259.31, payable to Harry B. Gay, the contractor, and representing the balance due under the contract.

Appellant, insisting that the judgment was wrong and must be reversed, presents two questions for decision.³

In support of its contention that the first question requires an affirmative answer, the United States, invoking the rule prevailing in Georgia and generally elsewhere, that the issuance of a check by a debtor for the amount of his indebtedness to the payee is not in the absence of agreement to that effect a payment or discharge of the debt, points to the stipulation showing that there was no such agreement in this case and no circumstances from which one could be inferred, and to the fact that in law the attempted assignment by taxpayer to the surety of sums due and to become due under the government contract was invalid and ineffective as against the United States under the Anti-Assignment Statutes, Sec. 3477 of the Revised Statutes, 31 U.S.C.A. § 203.

Marshalling authorities, particularly United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022 and South Side Bank & Trust Co. v. United States, 7 Cir., 221 F.2d 813, and pointing out that in Central Bank v. United States, 345 U.S. 639, 73 S.Ct. 917, 97 L.Ed. 1312, relied on by appellee, the assignment was to a bank under a special statute, the Assignment of Claims Act of 1940, the United States, insisting that appellee's arguments on exoneration, subrogation and equitable lien are wholly beside the mark, urges upon us that the fund evidenced by the check remained legally in the possession and control of the United States and subject to being set off against the tax indebtedness owed by the taxpayer.

We agree. If the United States had not issued the check, we believe no one would claim that it was not entitled, under the Munsey case and the generally controlling principles, to protect itself.

As to debts owed it by the contractor, no reason is presented and no authorities cited to support the view that the issuance of the check in any manner changed or affected the government's right to set-off under applicable law. The cases cited by appellee, while good enough law for their facts, do not at all support its contention in this case. None of those cases dealt with a situation like this, where the United States, not having paid the contractor, seeks to assert, against the surety's claim, its right of off-set against the contractor. In this situation, the United States is the best secured of creditors; its security is its own justified refusal to pay what it owes until it is paid what is due it. United States v. Munsey Trust Co., 322 U.S. at page 240, 67 S.Ct. at page 1602.

We think it plain that the district judge was wrong and that his judgment must be reversed with directions to cause return of the check to the government so that it may cancel it and effect the set-off to which it is entitled.

Because of the above set out answer to the first question, it is unnecessary to, and we will not, consider appellant's second question.

The judgment is reversed and the cause is remanded with directions.

1 "It appearing that by stipulation entered herein the check of the United States in the amount of $5259.31 drawn upon the Treasury of the United States and payable to Harry B. Gay doing business as Gay-Smith Roofing & Supply Co. was deposited with the Clerk of this Court and should be held by said Clerk until the determination by the court of the rights to said check and its proceeds and based upon its findings of fact and conclusions of law herein, the court having found that the plaintiff, Trinity Universal Insurance Co. is entitled to the possession of the check and that the defendant, Harry B. Gay, should endorse the check to the plaintiff and that the plaintiff should be paid by the United States when presented, whereupon

"It is by the court considered, ordered, adjudged and decreed:

"1. That the Defendant, Harry B. Gay, doing business as Gay-Smith Roofing & Supply Co. be and he is hereby required to endorse said check over to the plaintiff.

"2. The Clerk of this Court is directed to deliver said check to plaintiff's attorneys 60 days after date of this judgment.

"3. When presented in due course, the intervenor, United States of America, is required to pay said check according to its tenor."

2 "It is hereby stipulated and agreed between the...