
    436 F. 2d 425
    WEBSTER FACTORS, INC., PLAINTIFF, AND ALTER MILBERG AND LAWRENCE MILBERG, PLAINTIFF-INTERVENORS v. THE UNITED STATES
    [No. 49-66.
    Decided January 22, 1971]
    
      
      Lawrence Milberg, attorney of record, for plaintiff and for plaintiff-intervenors.
    
      Dmid W. Miller, with whom was Assislcmt Attorney General SJwro Eashiwa, for defendant. Bembert A. Gaddy, of counsel.
    Before CoweN, Chief Judge, Laramore, Dtjreee, Davis, Collins and Skeltoet, Judges.
    
   Per Ctjeiam: :

This case was referred to Chief Trial Commissioner Marion T. Bennett with directions to .make findings of fact and recommendation for conclusions of law under the order of reference and Rule 134(h). The commissioner has done so in an opinion and report filed on March 16, 1970. Exceptions to the commissioner’s opinion, findings and recommended conclusion of law were filed by plaintiff and plaintiff-intervenors. Defendant urged that the court adopt the commissioner’s opinion, and recommended conclusion of law. The case has been submitted to the court on oral argument of counsel and the briefs of the parties. Since the court agrees with the commissioner’s opinion, findings and recommended conclusion of law it hereby adopts the same, as hereinafter set forth, as the basis for its judgment in this case. Therefore, it is concluded that plaintiff-intervenors are entitled to recover in the sum of $592.46 and judgment is entered for them against defendant in that amount. The claim of the plaintiff Webster Factors, Inc., and defendant’s claims for setoff against plaintiff and plaintiff-intervenors are dismissed.

OPINION OE COMMISSIONER

Bennett, Ohief Commissioner:

This is a contract case involving a dispute over payment of real estate taxes and applicability of the Assignment of Claims Act of 1940, 31 U.S.C. ,§ 203 (1964), hereafter sometimes referred to as the Anti-Assignment of Claims Act. Defendant, acting through the Assistant Postmaster General, entered into a lease on July 13, 1961, with certain persons named Leventhal for a building in Brooklyn, New York, to be used for postal purposes. It was a 30-year lease, commencing May 15,1961. Rent was set at $37,500 per year. The lease required the lessor to pay all taxes and to keep the property in good repair and tenantable condition.

The lease contained a tax escalation clause rider, the text of which is quoted in the findings. In summary, it provided that, if the lessor paid real property taxes on the property in excess of $9,800 during any year, the defendant would pay the lessor an amount equal to the excess. If the taxes fell below $9,800 in any given year, the rent due would be decreased by the amount of the difference. These adjustments were to be made annually after the lessor submitted satisfactory proof of the taxes paid.

After the lease was entered into, the property changed ownership several times within a few years. On July 25, 1961, the Leventhals conveyed it to Tillie Feldman who put a first mortgage of $350,000 on it with the Lincoln Savings Bank, located in Brooklyn, New York, and, as additional security for the loan, also assigned the lease to the bank. On the same day, Ms. Feldman reconveyed it to the Leventhals. This maneuver was made known to defendant which accepted the notice and assignment as complying with the Anti-Assignment of Claims Act.

On August 14,1961, the Leventhals conveyed the property to Glenex Construction Corporation of New York, subject to the first mortgage and assignment held by the bank. The required formalities of notice were complied with and defendant was told that, as Glenex was now owner and the lease had been assigned to it, defendant should pay the rent to the new owner. Defendant did so from and after August 1,1961.

On or about August 25, 1961, plaintiff here, Webster Factors, Inc., of New York, loaned Glenex the sum of $75,-000 on the security of a second mortgage on the property and an assignment of defendant’s lease thereon, subject to the previous assignment to the bank. Defendant was not notified of this until November 20,1963, when a letter arrived from attorney Lawrence Milberg with the information that his law firm represented Webster Factors, Inc., holder of a second mortgage and a second assignment from Glenex, and expressing intent to make certain claims under the lease.

In the meantime, beginning in March 1962, defendant had been making numerous requests of Glenex and the bank for copies of paid tax receipts so that the required annual adjustments pursuant to the tax escalation clause could be made. The receipts were not submitted. After the November 20,1963 notice from Mr. Milberg, defendant requested receipts from Webster Factors, Inc. The receipts were not firrnisbp.fi until March. 1965 after a series of intervening events.

On February 25,1968, the Lincoln Savings Bank notified defendant that the first mortgage was in default and demanded that rent be paid to the bank under the assignment it held. Defendant complied and the unadjusted rents were paid to Lincoln Savings Bank for the period beginning February 1, 1963 and until March 31, 1965. Defendant notified Glenex which had been receiving the rents since its purchase of the property in August 1961.

Maintenance and repair of the premises became a problem with Glenex. Defendant made some repairs and billed Glenex for them. Finally, Glenex, which sometime before November 23, 1963, had defaulted in its payments on the second mortgage to plaintiff Webster Factors, Inc., refused outright to make needed repairs. At this point, plaintiff, with defendant’s knowledge and approval, made the repairs at its own expense as an alternative to having defendant make them -and deduct the cost thereof from the rent. In 1964 and 1965 plaintiff spent approximately $2,700 on such repairs. Plaintiff contends that on November 23, 1963, upon the default of Glenex, it entered into possession as lessor under the second mortgage and as holder of the second assignment, and that from that date all rents were payable to plaintiff. Plaintiff took a deed to the subject property from the referee in foreclosure proceedings on the second mortgage on December 30,1964, on which day plaintiff conveyed the property to Alter I. Milberg (president of Webster Factors, Inc.) and to attorney Lawrence Milberg (stockholder in plaintiff and counsel for plaintiff) who are plaintiff-intervenors in this case.

Foreclosure of the second mortgage came after plaintiff entered into a letter agreement with the bank, holder of the first mortgage, on January 14, 1964. Pursuant to this agreement, the bank refrained from foreclosing the first mortgage and applied rentals paid 'by defendant after said date, as required by the agreement, to payments due the bank on its mortgage, the taxes, and other necessary bills. Plaintiff put up $12,971.61 to be held by the bank in escrow to assure payments sufficient to pay the 1962-63 real estate taxes and penalties. It was agreed that any rentals insufficient to keep up all payments and charges due would be paid by plaintiff and any rentals in excess of these requirements would be turned over to plaintiff. Defendant was advised by letter from the bank on April 13,1965, that payments on the first mortgage were current and that rents could be paid to the landlord which had received a deed to the property on December 30,1964.

On March 4, 1965, Alter I. Milberg furnished the long-awaited tax receipts to defendant — with one exception later provided — and requested that defendant pay the tax refunds claimed due, under the escalation clause of the lease, either to plaintiff or to the Milbergs, or to both. Defendant, on October 18, 1965, advised that after setting off the amounts due it against the amounts due the lessor under the clause, a balance of $41.38 was due lessor.

This news left plaintiff dissatisfied because it claims no responsibility for any taxes prior to the tax year beginning July 1, 1963. Taxes prior to said date are said to be the responsibility of Glenex. The net due defendant is computed at $4,375.92. The sum claimed by plaintiff and plaintiff-intervenors is $4,417.30, said not to be subject to a setoff as asserted by defendant. The stipulation of the parties admitting payment of the $41.38 adjusts the net claim to $4,375.92. Interest is claimed on this amount. The claim broken down as between plaintiff and the intervenors is $3,221.58 for the former and $1,154.34 for the latter.

The main thrust of plaintiff’s claim is that when Glenex left the picture by default and on November 23, 1963, plaintiff took peaceful possession as second mortgagee and assignee and assumed responsibility for maintenance and repairs, it became the owner of an estate in land which created a landlord and tenant relationship between it and defendant to which the Assignment of Claims Act of 1940 had no relevance. From this premise it argues that it was entitled to all rents and that defendant may not set off against defendant’s liability for additional rentals (excess taxes) to plaintiff and plaintiff-intervenors as its landlords a claim for a refund in rents (deficiency in taxes) for prior years against its previous landlord, Glenex.

It is clear that the tax escalation clause is an integral part of the rent provision, and that the rent due for any one year in dispute amounted to the $87,500 base, plus or minus the tax adjustment for that year. To determine the identity of parties who should receive the benefit, or bear the burden of the tax adjustments, it is first necessary, at the expense of some repetition of the facts, to determine which parties were to be paid rents for the tax years in question.

It is undisputed that the original lessor, the Leventhals, duly received rents for the period from May 15, 1961 until July 31, 1961. During this period, a $350,000 loan was secured both by a first mortgage on the property and by an assignment of the lessor’s rights under the lease. Under the latter recourse, the mortgagee, Lincoln Savings Bank, would receive all rents from the property for the period necessary to make current the mortgage in the event of default, but would not be responsible for any of the lessor’s obligations under the lease.

On August 14,1961, the Leventhals conveyed the property to Glenex Construction Corporation, subject to the first mortgage and the assignment held by Lincoln Savings Bank. Although the deed was dated August 28, 1961, the Government was notified and agreed to pay rents due after August 1, 1961, to Glenex. On February 25, 1963, Lincoln Savings Bank notified the Government that the first mortgage was in default. Rather than foreclose the mortgage or take rents as a mortgagee in possession, Lincoln Savings Bank chose to exercise its rights under the assignment and thereupon demanded the payment of rents, leaving Glenex with the obligations of lessor. The Government recognized the assignment as complying with the Assigmnent of Claims Act of 1940, as amended, 31 U.S.C. §203 (1964), and paid rents to Lincoln Savings Bank from February 1,1963 until March 31, 1965. See, Freedman's Saving & Trust Co. v. Shepherd, 127 U.S. 494 (1888).

For plaintiff and plaintiff-intervenors to recover any share of the tax 'adjustment portion of the rent for the period February 1, 1963 until March 31, 1965, they must show that they are not barred by the Anti-Assignment of Claims Act. More specifically, they must show either (1) that they were the recipients of a valid assignment from Lincoln Savings Bank, or (2) that they received rights to the rents from the lessor voluntarily by being its “duly authorized agent” or involuntarily by becoming a mortgagee in possession.

The statute reads in relevant part, as follows:

All transfers and assignments made of any claim upon the United States, or of any part or share thereof, or interest therein, whether absolute or conditional, and whatever may be the consideration therefor, and all powers of attorney, orders, or other authorities for receiving payment of any such claim, or of any part or share thereof, * * * shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof. * * * The provisions of this section shall not apply to payments for rent of post office quarters made by postmasters to duly authorized agents of the lessors. [31 U.S.C. .§ 203.]

The purposes of this statute were recently reiterated in Patterson v. United, States, 173 Ct. Cl. 819, 354 F. 2d 327 (1965). They are “primarily, to prevent fraud; and secondarily, to avoid multiple litigation.” 173 Ct. Cl. at 823, 354 F. 2d at 329. The court went on to explain, as follows:

* * * Congress is said to have had as its major objective the prohibiting of trafficking in claims against the Government such as by persons who would be in a position to exert political pressure or improper influence in prosecuting claims before the departments, the courts, or the legislature. United States v. Aetna Casualty & Surety Co., 338 U.S. 366 (1949) ; Spofford v. Kirk, 97 U.S. 484 (1878); Goodman v. Niblack, 102 U.S. 556 (1880); Price v. Forrest, 173 U.S. 410 (1899). Secondarily, the courts have ascribed to Congress the motive of enabling the United States to deal exclusively with the original claimant instead of with several parties, thus obviating the necessity of having to inquire into the validity of specific transfers or assignments of the claim, mi ni mining subjection to successive litigation upon the same claim, and eliminating the risk of double payment or multiple liability. United States v. Aetna Casualty & Surety Co., supra; Spofford v. Kirk, supra; Seaboard Air Line Ry. v. United States, 256 U.S. 655 (1921); Singer v. United States, 126 Ct. Cl. 417, 115 F. Supp. 166 (1953).
Although the statute was strictly construed for a period of time following its original enactment to invalidate virtually all assignments, the development of case law in succeeding years indicates a gradual broadening of the types of transfers excluded from the prohibitory mandate of the act. Thus, the courts have held the following assignments or transfers to be by “operation of law,” and exempt from the relevant statutory provision: transfers by intestate succession or testamentary disposition, Erwin v. United States, 97 U.S. 392 (1878); by consolidation or merger to the successor of a claimant corporation, Seaboard Air Line Ry. v. United States, supra; by judicial sale, Western Pacific RR. Co. v. United States, 268 U.S. 271 (1925); by subrogation to an insurer, United States v. Aetna Casualty & Surety Co., supra; by statutory provision to a trustee in bankruptcy, McKay v. United States, 27 Ct. Cl. 422 (1892), Accord, Erwin v. United States, supra; and by voluntary assignment of all the assets of an insolvent debtor for the benefit of creditors, Goodman v. Niblack, supra. [173 Ct. Cl. at 823-24, 354 F.2d at 329-30.]

The assignment to Lincoln Savings Bank, effective upon the default of Glenex, may be deemed a proper assignment since it included all rights to rents during the period necessary to bring the mortgage up to date. Against the claims of the bank-assignee, however, defendant is entitled to offset overpayments under the same rental agreement made to the assignor, Glenex. McKnight v. United States, 98 U.S. 179 (1878); see, 3 Williston, Contracts § 432 (3d ed. 1960). On the other hand, ithe voluntary assignment of a portion of the rents made by Lincoln Savings Bank to plaintiff by way of the January 14,1964 agreement was void, being vio-lative of the Anti-Assignment of Claims Act. If enforced, the latter assignment would require the Government to pay rent to two different parties, and it would deny the Government the right to set off certain downward tax adjustments from the upward tax adjustments in rent. See, Grace, v. United States, 76 F. Supp. 174 (1948); United States v. Shannon, 342 U.S. 288, 291-92 (1952).

Although plaintiff undertook certain obligations required of the lessor, Glenex, plaintiff could not have received any rights to rents as its agent during the period February 1, 1963 to December 30, 1964, since the lessor retained no such rights which it could assign. For the same reason, plaintiff could not acquire such rights to rents from Glenex, involuntarily, by becoming a mortgagee in possession. Neither did plaintiff nor plaintiff-intervenors receive immediate rights to rents when they acquired title to the property December 30, 1964, since such title remained subject to the rights of the first mortgagee who was protected by a valid assignment in effect through March 31,1965.

Accordingly, plaintiff is not entitled to any rent, and plaintiff-intervenors are entitled to only that portion of the rent computed as tax adjustment for the period April 1, 1965 to June 30,1965, or $592.46. Interest is not allowable. Poorvu v. United States, 190 Ct. Cl. 640, 420 F. 2d 993 (1970). Defendant’s claims for setoff against plaintiff and plaintiff-intervenors are dismissed.

FINDINGS oe Fact

1. The defendant, acting through the Assistant Postmaster General, Bureau of Facilities, entered into a lease on July 13, 1961, with Norman B. Leventhal and Robert Lev-enthal, of certain premises in Brooklyn, Kings County, New York, to be used for postal purposes, for a term commencing May 15, 1961 and ending May 14, 1991, with options for renewal and purchase. The rent was specified to be $37,500 per year. The lease also required that the lessor should pay all taxes and keep the property in good repair and tenantable condition.

2. A tax escalation clause rider to the lease provided in pertinent part:

19. It is mutually understood and agreed that the rent herein reserved is based in part upon the payment by the lessor of general real estate taxes upon the land and the building appurtenant thereto in the sum of $9,800.00 per annum. It, therefore, is agreed that there shall be a readjustment of the rent hereby reserved in each year of the term hereby demised on the following basis:
(a) In the event that the amount of the general real estate taxes levied on said land and building for any tax year or part thereof within the term hereby demised shall be levied at a rate greater than the sum last-above mentioned, then after the lessor has paid such taxes the Government shall pay the lessor upon demand, accompanied by satisfactory proof as to correctness of the claim as additional rent due hereunder a sum equal to such excess; or in the event that the amount of general real estate taxes levied on said land and building for any tax year or part thereof within the term hereby demised shall be levied at a rate less than the sum last-above mentioned, the rent due hereunder shall be decreased by the amount of such decrease, it being understood that said readjustment of rent shall be made in each year of the term hereby demised including the terms of any renewal options. * * *. The lessor shall pay the general real estate taxes levied hereunder before any fine, penalty, interest or cost may be added thereto for the non-payment thereof and at such time and manner and amount as to obtain any discount allowed by the taxing authority.

3. On July 25, 1961, the property and lease thereon were conveyed by the Leventhals to Tillie Feldman and defendant was notified thereof on Post Office Department Form 1461 carrying the same date and the signatures of the Leventhals.

4. On July 25,1961, the lease was assigned by Tillie Feld-man to the Lincoln Savings Bank, located in Brooklyn, New York, as security for a first mortgage on the property in the amount of $350,000. This was the first assignment of defendant’s lease. Defendant’s position on the assignment was reflected in a letter to the Lincoln Savings Bank received on or about November 24, 1961, wherein it was stated, in part:

Our legal staff has examined the Assignment instruments and advises that they are essentially instruments for further security. The documents will be retained in the Department’s files and if such instruments constitute a valid assignment under the laws of the State of New York and if the Department is notified of a default, the instruments will 'be accorded recognition as an assignment pursuant to the Assignment of Claims Act of 1940, as amended.
Please accept this letter as our final acceptance of the assignment * * *.

5. On July 25, 1961, the property was reconveyed by Tillie Feldman to Norman and Robert Leventhal and the defendant was notified thereof on Post Office Department Form 1461 of the same date. On September 29, 1961, defendant was advised by counsel for the Leventhals that Tillie Feldman had been used as a straw in order to avoid a personal liability of the Leventhals on the mortgage note.

6. By indenture dated August 14,1961, Norman B. Leven-thal and Robert Leventhal conveyed the property to Glenex Construction Corporation of New York, subject to the first mortgage and the assignment of defendant’s lease held by Lincoln Savings Bank. On Post Office Department Form 1461 dated September 5, 1961, defendant was advised that the premises had been sold to Glenex by the Leventhals by a deed dated August 28,1961, that the lease had been assigned to Glenex, the grantee, and that all rents for the premises which became due from and after August 1, 1961, should be paid to Glenex, the new owner. Defendant thereupon authorized payment of rent to Glenex.

7. On or about August 25,1961, the plaintiff here, Webster Factors, Inc., loaned Glenex $75,000 on security of a second mortgage on the property and an assignment of defendant’s lease thereon, subject to the previous assignment to the bank.

8. On February 25,1963, the Lincoln Savings Bank notified defendant that the first mortgage was in default and demanded that rent be paid to the bank under the assignment held by it dated July 25,1961. Defendant complied with the demand and authorized the rent due from and after February 1, 1963, to be paid to the bank as assignee instead of to the owner, Glenex Construction Corporation, as had been done subsequent to the purchase by Glenex in August 1961. Glenex was notified by defendant of its action pursuant to the terms of the July 25, 1961 assignment which provided for such notice in case of default on the first mortgage and formal notice of the default by the bank. Defendant paid rent to the bank from February 1, 1963 to March 31, 1965.

9. Although, as previously found, the Lincoln Savings Bank notified defendant of its first mortgage and assignment of the lease to it under the Assignment of Claims Act of 1940, 31 U.S.C. §203 (1964), hereafter sometimes referred to as the Anti-Assignment of Claims Act, plaintiff did not notify defendant of the second mortgage and assignment held by it at the time of execution thereof in August 1961. The latter was recorded, however.

10. Beginning on March 13, 1962, and continuing until October 23, 1963, defendant made numerous requests of Glenex and the Lincoln Savings Bank, assignee of its lease, for copies of paid tax receipts so that adjustments required, if any, pursuant to the tax escalation clause in the lease, could be made. The receipts were not furnished during this interval.

11. By letter dated November 20, 1963, defendant was advised by attorney Lawrence Milberg that his firm, Milberg & Levy, represented plaintiff Webster Factors, Inc., and that claim would be made on behalf of Webster, second mortgagee, pursuant to its lease assignment and pursuant to the lease between Glenex and defendant, for an excess of New York City real estate taxes over and above the $9,800 to be paid by the owner-landlord under the lease. It was stated that the necessary tax receipts for the periods in question would be obtained and forwarded as soon as possible. Defendant acknowledged the notice.

12. On February 12 and May 14,1964, defendant requested that Milberg & Levy furnish the paid tax receipts so that a tax 'adjustment could be made. On May 19, 1964, plaintiff advised defendant that the tax bills would be forwarded sometime during the next 2 months and requested that action be held up thereon as plaintiff was in the process of foreclosing the second mortgage. Mention was also made that plaintiff held a secondary assignment of rent after the first mortgagee, Lincoln Savings Bank. Sometime before November 23,1963, Glenex had defaulted in its payments under the second mortgage to plaintiff.

13. Between October 23,1963 and September 22, 1964, defendant addressed several requests to Glenex Construction Corporation to perform maintenance and repairs on the property. Copies thereof were sent to the Lincoln Savings Bank and to Webster Factors, Inc. When the work was not performed, defendant had some of it done and billed Glenex. When Mr. Milberg of plaintiff Webster Factors, Inc. spoke to Mr. Fuchs, president of Glenex, about making repairs, Mr. Fuchs said he no longer had any interest in the property and that plaintiff should do what it wanted to do with it. Because some of the repair estimates received by defendant seemed too high, defendant approved letting plaintiff make the repairs at its own expense as an alternative to having them made and deducting the cost from the rent. From September 22, 1964 to December 30, 1964, defendant addressed requests for maintenance and repairs to plaintiff Webster Factors, Inc. In 1964 plaintiff paid over $500 and in 1965 over $2,200 for such purposes.

14. On January 14, 1964, plaintiff addressed a letter of agreement to the Lincoln Savings Bank, which the bank approved. Plaintiff’s letter stated:

1. Undersigned shall deliver to Bank an amount sufficient to pay New York City Beal Estate Tax 1962/63 plus penalties, which sum shall be held in escrow by bank without interest.
2. The undersigned shall proceed expeditiously to foreclose its second mortgage. After judgment Bank shall at the request of the undersigned discontinue its pending action to foreclose its first mortgage covering premises.
3. Within thirty days after Referee’s Sale in the foreclosure action undersigned shall submit to Bank receipted bills for said taxes or direct bank to draw check or checks, payable to the order of the City Collector, in payment of same to the extent of funds held in escrow, any difference to be paid by the undersigned. In the event receipted bills are exhibited Bank shall return escrow referred to in paragraph 1 to undersigned.
4. Bank presently is receiving pursuant to assignment of lease rentals from premises which shall be applied by bank to: 1. payments due bank on bond and mortgage; 2. payments of taxes and other charges; 3. any other payments required to be paid by Landlord, or its representatives; and 4. any excess of monies resulting shall be turned over by bank to Webster Factors, Inc. as second assignee of the lease; in the event rentals not sufficient to keep all payments, taxes and other charges current undersigned will pay same.
5. Bank will execute such document, or documents, as may be required, and approved by its attorneys, in order to permit undersigned to obtain from U.S.A., tenant, the excess paid over and above $9,800.00, as provided in lease.

15. The agreement between the Lincoln Savings Bank and plaintiff Webster Factors, Inc., resulted in the bank holding in abeyance a foreclosure proceeding it had started against Glenex Construction Corporation on the first mortgage, and plaintiff put up $12,971.61 for the 1962-63 real estate taxes, which sum the bank held in escrow. Rentals paid by defendant to the bank after the January 14, 1964 agreement were applied by the bank pursuant to the agreement.

16. On December 30,1964, plaintiff Webster Factors, Inc., took a deed to the subject property from the referee in the foreclosure proceedings and, on the same day, conveyed the property to Alter I. Milberg and Lawrence Milberg, the plaintiff-intervenors in this case. Alter I. Milberg is president and treasurer of Webster Factors, Inc., and Lawrence Milberg is a stockholder.

17. Defendant received a letter dated April 13,1965, from the Lincoln Savings Bank notifying defendant that the first mortgage was current and that rents which defendant had been paying to the bank, as noted in finding 8, could now be paid to the landlord. Defendant was further advised that plaintiff had received a deed to the property dated December 30, 1964, and that on the same date plaintiff had given a deed on the property to Alter I. Milberg and Lawrence Milberg.

18. Under date of March 4, 1965, Alter I. Milberg, president of plaintiff, responded to defendant’s several requests set forth in finding 12 for copies of the tax receipts. He furnished copies of the deeds to plaintiff and the Milbergs dated December 30, 1964, and copies of tax receipts except for the one due October 1, 1964, and paid in January 1965, which was promised when available. Request was made that defendant pay the tax refunds claimed due under the escalation clause of the lease either to plaintiff Webster Factors, Inc., or to Alter I. and Lawrence Milberg, or both.

19. Defendant advised the Milbergs under date of October 18,1965, that its recapitulation of taxes showed the following amounts due either defendant or plaintiff under the escalation clause of the lease:

Period Due Due Government Lessor
5/15/61-6/30/61... $1,069.33 .
7/1/61-6/30/62. 5,004.81 .
7/1/62-6/30/63. $1,698.22
7/1/63-6/30/64. 2,047.46
7/1/64-6/30/65. 2,369.84
6,074.14 6,115.52

Defendant offset the two totals and advised that the net sum of $41.38 was due the lessor and that a check therefor would be issued. The totals represented, as to the first 2 tax years, the amounts due the defendant and, as to the last 3 tax years, the amounts owed by defendant to the lessor under defendant’s interpretation of the application of the escalation clause of the lease.

20. Plaintiff Webster Factors, Inc., and plaintiff-inter-venors, the Milbergs, claim no responsibility for any taxes prior to the tax year beginning July 1, 1963, and allege that the net tax refund of $4,375.92 due defendant prior to this period is not their concern but that of the Glenex Construction Corporation, the prior owner. The sum total claimed by plaintiff and plaintiff-intervenors is $4,417.30. This figure represents $2,047.46 for the tax year of July 1,1963 to June 30, 1964, and $2,369.84 for the tax year of July 1, 1964 to June 30, 1965. Plaintiff claims the entire tax refund for the first tax year just mentioned and for the first half-year of the following tax year. The intervenors’ claim is for the last half of the tax year ending June 30, 1965. This is illustrated as follows:

Tax year Claimant ended Amount
Webster Factors, Inc_ 6/30/64 $2,047.46
Webster Factors, Inc. (6 months)..... 12/30/64 1,215.50
Plaintiff-intervenors (6 months). 6/30/65 1,154.34
4,417.30

21. In addition to the amounts claimed, plaintiff and plaintiff-intervenors claim interest thereon.

CONCLUSION OE LAW

Upon the foregoing findings of fact and opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiff-intervenors are entitled to recover of and from the United States, and judgment is entered for them in the amount of $592.46. The claim of plaintiff Webster Factors, Inc., is dismissed. Defendant’s claims for setoff against plaintiff and plaintiff-intervenors are also dismissed. 
      
       Tlie petition admitted payment of $41.58. The parties subsequently stipulated that $41.38 was the correct figure.
     
      
       The tax year in New York City runs from July 1 of one year to Juno 30 of the following year. New York City allows a 1 percent discount if the tax is paid in full by October 1 of the tax year. Defend ant's figures in evidence reflect this discount but plaintiff’s do not. However, plaintiff’s claim as finalized makes allowance for, and apparently agrees to, this discount taken by defendant, pursuant to the tax escalation clause of the lease.
     
      
      The petition admitted payment of $41.88. The parties subsequently stipulated that $41,3S was the correct figure.
     
      
       Plaintiff’s petition, paragraph 28, admits receipt of payment by defendant of $41.58 — corrected by stipulation to $41.38 — representing the difference between the amount due the Government and what was due lessor under the escalation clause as interpreted by defendant. This sum taken from plaintiff’s claim of $2,047.46 adjusts it to $2,006.08 and corrects the total claimed by plaintiff and the intervenors to $4,375.92, broken down as follows: $3,221.53 for plaintiff and $1,154.34 for plaintiff-intervenors.
     
      
       One-half of the $2,369.84 would be $1,184.92 instead of the figures shown. The figures relied upon by plaintiff, however, reflect the fact that plaintiff here claims the amount actually paid without regard to the 1 percent discount, whereas plaintiff-intervenors have included the discount for the entire year against their claim.
     