The opinion of the court was delivered by: John E. Miller, District Judge.
On October 23, 1954, the plaintiff filed its complaint against
defendants seeking to recover from the defendant Adams the sum of
$7,961.76 and from the defendant Bank the sum of $4,449.22.
Service of summons was had on defendant Bank on October 23,
1954, and on the defendant Adams on October 25, 1954.
On November 10, 1954, the defendant Bank filed its separate
answer in which it denied that it was indebted to plaintiff in
the sum of $4,449.22 or any other sum.
Prior to the entry of the default judgment against the
defendant Adams, the plaintiff had filed its first amendment to
the complaint and, subsequent to the entry of the default
judgment against Adams, the defendant Bank filed its first
amendment to its separate answer.
On January 17, 1955, the cause between the plaintiff and
defendant Bank was tried to the court and, upon the completion of
the introduction of the testimony by both parties, the cause was
submitted and taken under consideration. The attorneys for the
parties were allowed time in which to file written briefs in
support of their respective contentions. The briefs have been
received and considered along with the pleadings, the ore tenus
testimony, the stipulations and exhibits and the court now makes
and files herein its findings of fact and conclusions of law,
The plaintiff is a corporation incorporated under the laws of
the State of Alabama.
The defendant, Herman Adams, is a citizen of Arkansas and
resides within the Fort Smith Division of the Western District.
At all times material herein, he was trading or engaged in
business under the trade name of Adams Manufacturing Company.
The defendant, The First National Bank of Fort Smith, Arkansas,
is a corporation organized and existing under and by virtue of
the laws of the United States and maintains its sole place of
business in the City of Fort Smith, Arkansas.
The controversy involved herein exceeds the sum of $3,000,
exclusive of interest and costs.
The defendant, Herman Adams, will be hereinafter referred to as
Adams and the defendant, The First National Bank, will be
hereinafter referred to as the Bank.
On June 11, 1954, Adams was awarded Contract No. DA
11-009-QM-24050 for 920,350 pins, tent, wood, 16 inch, Type 1,
open tank treated, by the Contracting Officer, Chicago
Quartermaster Depot, United States Army, Quartermaster Purchasing
Division, and was to be paid for the pins furnished under the
contract at prices set forth in the contract.
At the time Adams was awarded the above named contract, he was
engaged in the business of manufacturing various articles of wood
required by the United States Army, and was performing several
other Government contracts. His place of business was at
Charleston, Arkansas. Apparently his finances were limited but
his business expanded rapidly. It was necessary for him to obtain
finances with which to operate and expand his business to perform
his contractual obligations. At the time the contract herein
involved was awarded him he had procured and was procuring money
from the Bank. The testimony does not show when the Bank first
began lending him money, but on May 21, 1954, Adams was indebted
to the Bank in the sum of $30,000 and at that time executed,
acknowledged and delivered two mortgages to the Bank, one on the
real estate and one on the equipment being used by him in the
operation of his business. Both mortgages secured the payment of
the then indebtedness to the Bank and future indebtedness that
might become due and owing from Adams to the Bank. On July 2,
1954, Adams assigned the contract herein involved to the Bank.
The assignment was made: "In accordance with the provisions of
the Act, Public No. 811, 76th Congress, 3d Session, approved
October 9, 1940, known as the Assignment of Claim Act of 1940, I
(we) this day, for
value received, do hereby assign to the First National Bank of
Fort Smith, Arkansas, all right, title and interest, to all
moneys now due, or to become due from the United States or from
any agency or department thereof, under the above cited contract.
"I (we) further stipulate and agree that no additional
assignments will be made under this contract; that payments
thereunder will be made by checks drawn to the order of the
The assignment was executed on the standard and uniform form
provided by the contracting agency of the United States. Notice
of said assignment was acknowledged in writing by the contracting
agency as having been received at 8 a.m. on July 16, 1954.
On July 6, 1954, Adams entered into a subcontract with the
plaintiff, Peterman Lumber Company. Apparently Adams and the
plaintiff were negotiating concerning a subcontract at the time
Adams assigned his contract to the Bank, but the testimony is
undisputed that the Bank did not know of such negotiations. The
subcontract was prepared by the attorney for Adams at Charleston,
Arkansas, and forwarded to the plaintiff at its place of business
at Peterman, Alabama. The plaintiff signed the subcontract in
Alabama and returned it to Adams where he completed the execution
of the subcontract in Charleston, Arkansas.
By the terms of the subcontract, the plaintiff agreed to
manufacture and ship Item 1h, being 147,200 tent pins, from
Peterman, Alabama, to Bellbluff, Virginia, and Item 1L, being
165,450 tent pins, from Peterman, Alabama, to New Cumberland,
Pennsylvania. The Contracting Officer, on August 11, 1954,
consented to the change in the place of origin of these items and
reduced the unit price because of the change in the ...