Westover, Collector of Internal Revenue v. William Simpson Const. Co.

This is an appeal by the Collector from a judgment directing the refund of income withholding taxes on wages and kindred taxes on employers, exacted of appellees as prime contractors after default in payment thereof by their subcontractor.

The facts, in part stipulated, are not materially in dispute, although the inferences the parties draw from them are at variance. In April of 1944 appellees, who will generally be referred to as Simpson-Kier, jointly contracted with the Navy Department for certain construction work at Seal Beach, California. As required by the Miller Act, Simpson-Kier furnished a payment bond to the United States for the protection of persons supplying labor or materials for the job. In furtherance of the enterprise they entered into various subcontracts one of which was with United Concrete Form Products Company. United, in order to finance the subcontract, negotiated a loan from the Aetna Bank in Chicago, as security for which the latter required that the subcontract be assigned to it and that amounts becoming due thereunder be paid through the bank.

In August 1944 United notified Simpson-Kier that Aetna would not make further advances, and it requested Simp…