B-131809, SEP. 6, 1957

B-131809, SEP. 6, 1957

TO MR. DAVID BRADY:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 14, 1957, RELATIVE TO OUR DECISION TO YOU OF JULY 22, 1957, IN WHICH THERE WAS CONSIDERED A REPORTED INDEBTEDNESS TO THE UNITED STATES OF THE PENN-OHIO STEEL CORPORATION IN THE PRINCIPAL AMOUNT OF $209,249.79, ARISING OUT OF THE USE AND OCCUPANCY BY THE CORPORATION OF A MAJOR PORTION OF THE NAVAL INDUSTRIAL RESERVE FOUNDRY AT BIRDSBORO, PENNSYLVANIA, DURING THE PERIOD JULY 8, 1948, THROUGH APRIL 28, 1952, UNDER LEASE AGREEMENT NOY/R/-60049, WHICH ORIGINALLY CONSISTED OF LETTER OF INTENT DATED JUNE 29, 1948, AND THE CORPORATION'S ACCEPTANCE OF ITS TERMS AND CONDITIONS ON JUNE 30, 1948.

YOU AGAIN REFER TO AN ALLEGED AGREEMENT OF COMPROMISE AND SETTLEMENT WHICH ACTUALLY REPRESENTS NO MORE THAN A TENTATIVE AGREEMENT WHICH WAS REACHED AT A CONFERENCE HELD IN THE BUREAU OF SHIPS ON JANUARY 8, 1952. IT IS TRUE THAT AT THIS CONFERENCE THE GOVERNMENT OFFICIALS AGREED AS A PART OF A TENTATIVE PROGRAM OF THE STEPS TO BE TAKEN THAT THE BUREAU OF YARDS AND DOCKS WOULD PREPARE A SUPPLEMENTAL AGREEMENT GIVING PENN-OHIO THE RIGHT TO "RE-LEASE" THE PLANT A REASONABLE TIME AFTER THE TERMINATION OF ITS USE BY THE DEPARTMENT OF THE ARMY FOR THE PRODUCTION OF STEEL CASTINGS FOR ARMORED TANKS. HOWEVER, IT IS APPARENT THAT THERE WAS NO UNDERSTANDING TO THE EFFECT THAT SUCH ACTION WOULD BE REQUIRED AS A PART OF A COMPROMISE AND SETTLEMENT OF THE GOVERNMENT'S CLAIM FOR RENT IN ADDITION TO THAT PAID BY THE CORPORATION OR THAT CERTAIN OF THE TERMINATION PROVISIONS OF THE ORIGINAL LEASE COULD BE CHANGED WITHOUT THE SPECIFIC APPROVAL OF THE SECRETARY OF THE NAVY.

WITH RESPECT TO YOUR PRESENT CONTENTIONS, THE FUNDAMENTAL QUESTIONS AS TO THE PURPOSE OF THE TENTATIVE AGREEMENT, AS TO WHETHER IT WAS MADE AND PERFORMED IN GOOD FAITH AND AS TO WHETHER ALL PROPER SETOFFS HAD BEEN MADE IN THE COMPUTATION OF THE GOVERNMENT'S CLAIM, WERE FULLY CONSIDERED IN OUR DECISION OF JULY 22, 1957.

THE LEASE AGREEMENT DOES NOT PROVIDE FOR A REDUCTION OF RENT FOR ANY PERIOD OF OCCUPANCY, INCLUDING THE TIME NECESSARY TO COMPLY WITH A 120 DAY NOTICE OF TERMINATION. HOWEVER, FOR THE REASON THAT A FORMAL NOTICE OF TERMINATION WAS NOT GIVEN AS OF DECEMBER 28, 1951, AND CERTAIN PORTIONS OF THE PLANT WERE TURNED OVER TO THE DEPARTMENT OF THE ARMY BEFORE THE CORPORATION COMPLETELY ABANDONED THE PLANT, WE ARE OF THE OPINION THAT THE DEPARTMENT OF THE NAVY WAS JUSTIFIED IN GRANTING SOME CONCESSIONS TO THE CORPORATION. THERE WAS ALLOWED IN THE DEPARTMENT'S STATEMENT OF ACCOUNT A CLAIMED ADJUSTMENT IN THE AMOUNT OF $92,000 "FOR RENT AND MAINTENANCE, DECEMBER 28, 1951, TO APRIL 28, 1952," AND IT WAS REPORTED THAT A CLAIM FOR $50,000 ALLEGEDLY EXPENDED FOR INSURANCE, WAS NOT FAVORABLY CONSIDERED BECAUSE "FULL CREDIT FOR ACCRUED RENT AND MAINTENANCE FOR THAT PERIOD WAS ALLOWED AS A SETOFF.' IT IS TO BE NOTED IN THIS CONNECTION THAT THE TOTAL SUM FOUND DUE THE GOVERNMENT IS $1,000 LESS THAN THE BALANCE OF $210,249.79 WHICH WAS PROPOSED TO BE PAID BY THE CORPORATION AT A CONFERENCE HELD IN THE BUREAU OF YARDS AND DOCKS ON DECEMBER 4, 1952.

IN THE CIRCUMSTANCES, YOU ARE ADVISED THAT, SINCE IT IS APPARENT THAT THE CORPORATION HAS NO INTENTION OF COMPLYING WITH THE REQUEST FOR PAYMENT AS MADE IN OUR DECISION OF JULY 22, 1957, THE CASE WILL BE PROMPTLY REFERRED TO THE DEPARTMENT OF JUSTICE FOR THE INSTITUTION OF APPROPRIATE ..END :