B-127657, JUL. 16, 1956

B-127657, JUL. 16, 1956

TO THE MERCANTILE NATIONAL BANK AT DALLAS:

REFERENCE IS MADE TO A LETTER DATED MAY 7, 1956, AND ENCLOSURES, FROM THE ABOVE-NAMED ATTORNEYS RELATIVE TO YOUR CLAIM IN THE AMOUNT OF $72,007.12, AS ASSIGNEE UNDER CONTRACT NO. GS-00P-2410/SCM), ENTERED INTO OCTOBER 20, 1951, BETWEEN THE GENERAL SERVICES ADMINISTRATION AT MINERA FERNANDEZ, S.A.

THE CONTRACTOR AGREED TO FURNISH THE GENERAL SERVICES ADMINISTRATION 100,000 LONG DRY TONS OF MANGANESE ORE FOR $0.93 PER LONG TON UNIT OF CONTAINED MANGANESE. ARTICLE 4/B) OF THE SPECIAL TERMS, CONDITIONS, AND SPECIFICATIONS OF THE CONTRACT PROVIDED THAT THE CONTRACT PRICE WAS BASED ON THE PRESENT OFFICIAL RATE OF EXCHANGE BETWEEN THE UNITED STATES DOLLAR AND THE MEXICAN PESO OF 8.65 PESOS TO ONE DOLLAR, AND MEXICAN FREIGHT RATES IN EXISTENCE ON OCTOBER 15, 1951, AND THAT ANY INCREASE OR DECREASE IN SUCH RATE OF EXCHANGE AND/OR MEXICAN FREIGHT RATES WOULD BE FOR THE ACCOUNT OF THE GOVERNMENT.

THE RECORD SHOWS THAT THE MEXICAN PESO WAS REVALUED APRIL 19, 1954, FROM 8.65 MEXICAN PESOS TO ONE DOLLAR UNITED STATES CURRENCY, TO 12.50 MEXICAN PESOS TO ONE DOLLAR UNITED STATES CURRENCY. THE GENERAL SERVICES ADMINISTRATION DID NOT BECOME AWARE OF THE FLUCTUATION IN THE VALUE OF THE PESO UNTIL MAY 13, 1955. IN THE MEANTIME, HOWEVER, IT CONTINUED TO PAY FOR ORE DELIVERED UNDER THE CONTRACT BASED ON THE EXCHANGE RATE OF 8.65 MEXICAN PESOS TO THE DOLLAR. THEREAFTER ALL PAYMENTS MADE FOR MATERIALS DELIVERED SUBSEQUENT TO APRIL 19, 1954, WERE RECOMPUTED ON THE BASIS OF THE REVALUED PESO, AND IT WAS DETERMINED THAT AN OVERPAYMENT HAD BEEN MADE IN THE TOTAL AMOUNT OF $164.264.27. FROM THE TOTAL INDEBTEDNESS, THE AMOUNT OF $73,645.49, REPRESENTING UNPAID INVOICES, WAS SET OFF BY THE ADMINISTRATION AGAINST THE INDEBTEDNESS.

IT IS CONTENDED THAT SINCE THE PROVISIONS OF THE CONTRACT WITH RESPECT TO UNIT PRICES AND CHANGES IN THE SAME WERE CONFUSING AND AMBIGUOUS, THE CONSTRUCTION THAT THE PARTIES TO THE CONTRACT PLACED ON THE PRICE PROVISIONS IN ACTUAL PRACTICE WAS BINDING AS SHOWING THE PROPER INTERPRETATION OF THE CONTRACT. IT IS ARGUED THAT SINCE AMENDMENT NO. 4 TO THE CONTRACT MADE ON JULY 16, 1954, SOME THREE MONTHS AFTER THE DEVALUATION OF THE PESO, ESTABLISHED A MAXIMUM PRICE OF $0.93 PER LONG TON UNIT OF CONTAINED MANGANESE, THE GENERAL SERVICES ADMINISTRATION CONCURRED AFFIRMATIVELY IN THE CONSTRUCTION OF THE PRICING PROVISIONS OF THE CONTRACT THAT HAD BEEN PREVIOUSLY MADE BY THE CONTRACTOR. THE QUESTION IS RAISED AS TO WHY THE GENERAL SERVICES ADMINISTRATION DID NOT PROVIDE THAT THE UNIT PRICE WOULD BE 69 PERCENT OF $0.93 IF THE $0.93 UNIT PRICE WAS INTENDED TO BE SCALED DOWN BECAUSE OF THE DEVALUATION OF THE PESO WHICH HAD TAKEN PLACE SOME THREE MONTHS BEFORE. THE ANSWER TO THIS IS THAT AT THE TIME THE AMENDMENT WAS MADE, THE GENERAL SERVICES ADMINISTRATION WAS NOT AWARE OF THE DEVALUATION OF THE PESO.

ALSO, IT IS CONTENDED THAT THE SETOFF WAS PROHIBITED BY PUBLIC LAW30, 82D CONGRESS, 65 STAT. 41. THIS STATUTE PROVIDES, AS FAR AS HERE PERTINENT, THAT ANY CONTRACT WITH THE GENERAL SERVICES ADMINISTRATION MAY, UNDER CERTAIN CONDITIONS, PROVIDE THAT PAYMENTS TO BE MADE TO THE ASSIGNEE SHOULD NOT BE SUBJECT TO REDUCTION OR SETOFF FOR ANY LIABILITY OF ANY NATURE OF THE ASSIGNOR TO THE UNITED STATES WHICH ARISES INDEPENDENTLY OF THE CONTRACT. OUR OFFICE HAS HELD THAT PAYMENTS DUE UNDER A GOVERNMENT CONTRACT CONTAINING A "NO SETOFF" CLAUSE WHICH HAVE BEEN ASSIGNED PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940 MAY NOT BE SET OFF AGAINST AN INDEBTEDNESS OF THE CONTRACTOR TO THE UNITED STATES ARISING INDEPENDENTLY OF THE CONTRACT. 31 COMP. GEN. 90. HERE THE INDEBTEDNESS OF THE CONTRACTOR DID NOT ARISE INDEPENDENTLY OF THE CONTRACT. FURTHERMORE, THE ASSIGNMENT OF OCTOBER 8, 1954, GIVEN BY THE CONTRACTOR TO YOU DOES NOT CONTAIN A "NO SETOFF" CLAUSE. HOWEVER, THE ASSIGNMENT CARRIED WITH IT THE RIGHT TO RECEIVE ONLY SUCH AMOUNTS AS WERE DUE AND OWING TO THE CONTRACTOR UNDER THE CONTRACT. IT CREATED NO OBLIGATION ON THE GOVERNMENT TO MAKE PAYMENTS TO YOU IN EXCESS OF THE AMOUNTS DUE AN PAYABLE UNDER THE CONTRACT. SINCE, UNDER THE PROVISIONS OF THE CONTRACT, THE GOVERNMENT WAS ENTITLED TO AN ADJUSTMENT IN THE CONTRACT PRICE DUE TO THE REVALUED PESO, THERE IS NO LEGAL BASIS FOR PAYMENT OF THE AMOUNTS INVOLVED.