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February 7, 1955


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.

The case was set for a pre-trial conference on December 7, 1954, and at that time the defendant Adams was in default. However, he was present in the court room and, when the case was reached on the call of the calendar, he stated in open court that he had no defense to the claim of plaintiff and, accordingly, a judgment was rendered in favor of plaintiff against the defendant Adams in the sum of $7,961.76, with interest thereon from the date of the judgment.

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, separately stated.

Findings of Fact

No. 1.

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.

No. 2.

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.

No. 3.

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 assignee."

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.

No. 4.

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 ...

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