A-48778, SEPTEMBER 7, 1935, 15 COMP. GEN. 177

A-48778: Sep 7, 1935

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THE UNITED STATES IS JUSTIFIED IN DEDUCTING FROM SUCH PAYMENTS THE DISCOUNT PROVIDED FOR BY THE CONTRACT BEFORE APPLICATION OF THE BALANCE IN PART SETTLEMENT OF THE EXCESS COSTS OCCASIONED THE GOVERNMENT BECAUSE OF THE DEFAULT. AS FOLLOWS: A LETTER RELATING TO THIS CLAIM ADDRESSED TO THE DEPARTMENT BY THE UNITED STATES ATTORNEY AT NEW YORK CITY IS QUOTED IN PART AS FOLLOWS: "BOTH IN THE COMPUTATION MADE BY THE DISBURSING OFFICER (PAGE A 80 IN COMPTROLLER GENERAL (DATED AUGUST 24. THE SUM OF $73.88 IS DEDUCTED FROM THE AMOUNT DUE THE CORPORATION FOR COAL DELIVERED BY IT ON THE GROUND THAT THIS SUM REPRESENTS 5 CENTS PER TON ON 1. "I DO NOT BELIEVE THAT THIS SUM WAS PROPERLY DEDUCTED. 477.62 TONS WERE FROM FEBRUARY 9.

A-48778, SEPTEMBER 7, 1935, 15 COMP. GEN. 177

CONTRACTS - DISCOUNTS - DEFAULT OF CONTRACTOR WHERE A CONTRACTOR DEFAULTS AND THEREBY BECOMES INDEBTED TO THE UNITED STATES IN AN AMOUNT IN EXCESS OF PAYMENTS REMAINING TO BE MADE SAID CONTRACTOR UNDER THE CONTRACT, THE UNITED STATES IS JUSTIFIED IN DEDUCTING FROM SUCH PAYMENTS THE DISCOUNT PROVIDED FOR BY THE CONTRACT BEFORE APPLICATION OF THE BALANCE IN PART SETTLEMENT OF THE EXCESS COSTS OCCASIONED THE GOVERNMENT BECAUSE OF THE DEFAULT.

COMPTROLLER GENERAL MCCARL TO THE ATTORNEY GENERAL, SEPTEMBER 7, 1935:

THERE HAS BEEN RECEIVED, IN REFERENCE TO OFFICE LETTER OF SEPTEMBER 14, 1933, YOUR LETTER DATED JULY 26, 1935, FILE GCS:FBW:D-77-51-112, RELATIVE TO THE INDEBTEDNESS OF THE CHAPIN FUEL CO., NC., TO THE UNITED STATES, AS STATED IN SETTLEMENT NO. US-3330-VA, DATED AUGUST 3, 1933, IN THE SUM OF $195.98, BALANCE OF EXCESS COST TO THE UNITED STATES OF 475.22 TONS OF ANTHRACITE COAL PURCHASED IN THE OPEN MARKET UPON THE CONTRACTOR'S DEFAULT, TOGETHER WITH EXCESS FREIGHT COST ON COAL SHIPPED BY THE CONTRACTOR FROM A POINT OTHER THAN THAT SPECIFIED IN THE CONTRACT.

IN YOUR LETTER OF JULY 26, 1935, YOU STATE, IN PART, AS FOLLOWS:

A LETTER RELATING TO THIS CLAIM ADDRESSED TO THE DEPARTMENT BY THE UNITED STATES ATTORNEY AT NEW YORK CITY IS QUOTED IN PART AS FOLLOWS:

"BOTH IN THE COMPUTATION MADE BY THE DISBURSING OFFICER (PAGE A 80 IN COMPTROLLER GENERAL (DATED AUGUST 24, 1934, PAGE 9), THE SUM OF $73.88 IS DEDUCTED FROM THE AMOUNT DUE THE CORPORATION FOR COAL DELIVERED BY IT ON THE GROUND THAT THIS SUM REPRESENTS 5 CENTS PER TON ON 1,477.62 TONS, THE DISCOUNT FOR PROMPT PAYMENT UNDER THE TERMS OF THE CONTRACT.

"I DO NOT BELIEVE THAT THIS SUM WAS PROPERLY DEDUCTED, IN VIEW OF THE FACT THAT THE GOVERNMENT DID NOT PAY WITHIN TEN CALENDAR DAYS PROVIDED FOR IN THE CONTRACT (PAGE A 9 IN DOCUMENTS CERTIFIED ON AUGUST 15, 1934). THE DATES OF DELIVERY OF THE COAL CONSTITUTING THE AFORESAID 1,477.62 TONS WERE FROM FEBRUARY 9, 1932, TO APRIL 7, 1932 (PAGE A 80 AND A 81 IN DOCUMENTS CERTIFIED ON AUGUST 15, 1934). DURING THE MONTH OF FEBRUARY, AND IN ONE INSTANCE IN THE MONTH OF APRIL, PURCHASES FROM OUTSIDE SOURCES WERE MADE BECAUSE OF THE INABILITY OF THE CORPORATION TO MAKE DELIVERIES. IN VIEW OF THESE DEFAULTS, NO PAYMENTS WERE MADE DURING THIS TIME, ALTHOUGH THE ABOVE DELIVERIES WERE MADE AS AFORESAID. ON APRIL 30, 1932, AN ACCOUNTING WAS HAD AND THE DISBURSING OFFICER PAID THE CHAPIN FUEL COMPANY $848.68 (PAGE A 80 IN DOCUMENTS CERTIFIED ON AUGUST 15, 1934).

"AS THE PAYMENT WAS MADE ON APRIL 30, 1932, AND THE DELIVERIES WERE MADE PRIOR TO APRIL 7, 1932, AND THE INVOICES APPARENTLY WERE SENT ON OR BEFORE APRIL 7, 1932 (PAGES A 88 TO A 112 IN DOCUMENTS CERTIFIED ON AUGUST 15, 1934), I DO NOT BELIEVE THAT ANY DEDUCTION FOR PROMPT PAYMENT WAS WARRANTED WHEN THE PAYMENT HAD NOT BEEN MADE WITHIN THE TIME LIMITED UNDER THE CONTRACT. THOUGH I FIND NO AUTHORITY DIRECTLY IN POINT, I AM INCLINED TO BELIEVE THAT WHERE THERE IS AN INSTALLMENT CONTRACT, IF THE SELLER DEFAULTS IN ONE DELIVERY, THE BUYER IS NOT JUSTIFIED IN POSTPONING PAYMENT FOR OTHER DELIVERIES AND THEN CLAIMING THE BENEFIT OF DISCOUNTS FOR PROMPT PAYMENTS WHICH WERE NOT MADE.

"BEFORE I DRAW THE COMPLAINT IN THIS MATTER, I WOULD APPRECIATE YOUR ADVICE AS TO WHETHER I SHOULD SEEK DAMAGES IN THE SUM OF $195.98, OR IN THAT SUM LESS THE AFORESAID $73.88.'

THE DEPARTMENT WILL APPRECIATE YOUR VIEWS ON THE POINT MENTIONED IN THIS LETTER.

AS STATED IN MY LETTER OF AUGUST 24, 1934, CONTRACT NO. VAM-52, DATED AUGUST 16, 1931 (PAGES A-2 TO A-23 OF THE TRANSCRIPT), REQUIRED THE CHAPIN FUEL CO., INC., TO FURNISH AND DELIVER ANTHRACITE BUCKWHEAT NO. 3 COAL TO THE UNITED STATES VETERANS' HOSPITAL, VETERANS' ADMINISTRATION, LYONS, N.J., DURING THE FISCAL YEAR ENDED JUNE 30, 1932, AT $1.34 PER TON, LESS A DISCOUNT OF 5 CENTS PER TON FOR PAYMENT WITHIN 10 CALENDAR DAYS, F.O.B. MINES, THE SHIPPING POINT BEING WINTON, PA.

THE ESTIMATED QUANTITY REQUIRED WAS 5,000 NET TONS, OF 2,000 POUNDS, AS SHOWN IN THE SCHEDULE, PAGE A-10 OF THE TRANSCRIPT, ATTACHED TO AND MADE A PART OF THE CONTRACT WHICH PROVIDED, ALSO, THAT DELIVERIES WOULD CHAPIN FUEL CO., INC., MADE DELIVERIES AS ORDERED DURING THE PERIOD FROM JULY 1931 TO FEBRUARY 1, 1932, AND BEGINNING WITH THE LATTER DATE THE SAID COMPANY ADMITTED INABILITY TO FURNISH ALL COAL REQUIRED. THERE WERE PURCHASED IN THE OPEN MARKET 475.22 NET TONS, 433.52 OF WHICH WERE PURCHASED AND DELIVERED DURING THE MONTH OF FEBRUARY 1932, AND THE REMAINING 41.70 NET TONS WERE PURCHASED AND DELIVERED DURING APRIL 1932. ALSO, THE SAID COMPANY MADE 4 DELIVERIES DURING THE MONTH OF MARCH AND 2 DURING APRIL 1932. PAYMENT FOR THE DELIVERIES MADE BY THE CHAPIN FUEL CO., INC., WAS NOT MADE, HOWEVER, UNTIL APRIL 30, 1932, AT WHICH TIME THE EXCESS COST TO THE UNITED STATES BY REASON OF THE OPEN-MARKET PURCHASES HAD BEEN DETERMINED BY THE VETERANS' ADMINISTRATION AND WAS DEDUCTED FROM THE AMOUNT OTHERWISE FOUND DUE THE DEFAULTING CONTRACTOR FOR THE SAID DELIVERIES DURING MARCH AND APRIL 1932. SEE BARRY V. UNITED STATES, 229 U.S. 47; BERNHARDT LUMBER CO. V. METZLOFF, 184 N.Y.S. 289.

UNDER THE TERMS OF THE CONTRACT WITH THE CHAPIN FUEL CO., INC., THE UNITED STATES WAS ENTITLED TO A DISCOUNT OF 5 CENTS PER TON FOR PAYMENT WITHIN 10 CALENDAR DAYS. THERE WAS NO PAYMENT TO BE MADE TO THE CONTRACTOR UNTIL SUFFICIENT DELIVERIES WERE MADE TO EXCEED IN COST THE AMOUNT OF ITS INDEBTEDNESS TO THE UNITED STATES. THE CHAPIN FUEL CO., INC., WAS SOLELY RESPONSIBLE FOR ANY DELAY IN THIS MATTER AND AS IT WAS INDEBTED TO THE GOVERNMENT IN EXCESS OF THE PAYMENT TO BE MADE FOR THE COAL DELIVERED BY SAID COMPANY, THE UNITED STATES WAS JUSTIFIED IN DEDUCTING THE DISCOUNT PRIOR TO THE APPLICATION OF THE BALANCE IN PART SETTLEMENT OF THE EXCESS COSTS DUE TO THE DEFAULT OF SUCH CONTRACTOR. OTHERWISE, THE CONTRACTOR, THROUGH ITS OWN DEFAULT, COULD DEPRIVE THE GOVERNMENT OF ITS CONTRACT RIGHT TO THE DISCOUNT WHICH WOULD HAVE BEEN DEDUCTED HAD THERE NOT EXISTED THE INDEBTEDNESS TO THE UNITED STATES RESULTING FROM THE DEFAULT. THE CONTRACTOR SHOULD NOT BE PERMITTED TO TAKE ADVANTAGE OF ITS OWN DEFAULT UNDER THE CONTRACT IN ORDER TO DEPRIVE THE UNITED STATES OF ITS RIGHT TO DISCOUNT UNDER THE CONTRACT. SEE IN THIS CONNECTION OFFICE LETTER DATED NOVEMBER 2, 1929, A-28733, A-27994, IN REGARD TO THE CASE OF JAMES F. WATERS, INC., V. UNITED STATES, COURT OF CLAIMS NO. K-353, DECIDED MAY 31, 1932, 75 CT.CLS. 126. ..END :