U.S. Supreme Court
United States v. Munsey Trust Co., 332 U.S. 234 (1947)
United States v. Munsey Trust Co.
Argued May 6, 1947
Decided June 23, 1947
332 U.S. 234
1. Notwithstanding claims of a surety on a statutory payment bond (given under 40 U.S.C. § 270a) for reimbursement for sums paid to laborers and materialmen, the Government may set off, against unappropriated percentages of progress payments withheld by it and due to the contractor on the construction contract, a debt owed to it by the contractor as a result of a separate and independent transaction. Pp. 332 U. S. 236-244.
2. When a receiver is appointed for a contractor with instructions to collect money owing to the contractor by the Government and to hold it for reimbursement of a surety on a payment bond for payments made to laborers and materialmen, a suit in the Court of Claims by the receiver against the Government for money due the contractor is in the right of the contractor, but the receiver may assert the surety's rights also. P. 332 U. S. 239. chanroblesvirtualawlibrary
3. Under Judicial Code § 145, 28 U.S.C. § 250, when a receiver asserts in the Court of Claims a contractor's title to a sum owing to him by the Government, that Court is under statutory duty to recognize an undisputed claim of the Government against the contractor. Pp. 332 U. S. 239-240.
4. With reference to withheld and unappropriated percentages of progress payments on a construction contract, performance of which has been completed and accepted, the Government is not a mere general creditor, but a secured creditor entitled to withhold what it owes the contractor until it is paid whatever the contractor owes the Government. P. 332 U. S. 240.
5. A surety on a payment bond who has paid laborers and materialmen for labor and material furnished under a Government construction contract is not entitled, by subrogation to their rights, to a lien on unappropriated percentages of progress payments retained by the Government for its own protection. Pp. 332 U. S. 241-242.
6. The right of the Government to retained percentages of progress payments on a construction contract does not devolve on a surety who has paid laborers and materialmen, so as to prevent the Government from applying the unappropriated sum to the satisfaction of its own claim growing out of a separate and independent transaction. Pp. 332 U. S. 242-243.
7. The provisions of 40 U.S.C. § 270a requiring a separate bond for payment of laborers and materialmen were enacted for their benefit, and do not give sureties who have paid them rights to the detriment of the Government. Pp. 332 U. S. 243-244.
8. When the work to be done under a Government construction contract has been completed at the contract price and accepted by the Government, the law of damages is not pertinent to the rights of a surety on a payment bond given under 40 U.S.C. § 270a who has paid laborers and materialmen. P. 332 U. S. 244.
107 Ct.Cl. 131, 67 F.Supp. 976, reversed.
Notwithstanding the existence of a claim by the Government against the contractor growing out of another transaction, the Court of Claims gave judgment against the Government to a receiver for a contractor for withheld and unappropriated percentages of progress payments on a construction contract, to be used by the receiver in reimbursing a surety on a payment bond for payments made chanroblesvirtualawlibrary
to laborers and materialmen. 107 Ct.Cl. 131, 67 F.Supp. 976. This Court granted certiorari. 330 U.S. 814. Reversed, p. 332 U. S. 244.