A-9673, JUNE 22, 1925, 4 COMP. GEN. 1055

A-9673: Jun 22, 1925

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43 STAT. 860 WHERE A CONTRACT PROVIDED FOR THE EXECUTION OF A FINAL RELEASE IN FULL BEFORE FINAL PAYMENT COULD BE MADE THERE IS NO AUTHORITY FOR THE ACCEPTANCE OF A QUALIFIED RELEASE. DOES NOT AUTHORIZE THE REMOVAL OF THE STOPPAGES AGAINST THE CONTRACTOR UNLESS AND UNTIL THE RESERVED CLAIM IS FINALLY BARRED BY THE RUNNING OF THE STATUTE OF LIMITATIONS. OR IS CLOSED BY A FINAL ADJUDICATION WHEN THE RESERVED CLAIM IS ASSERTED IN COURT. WHEREIN WAS DISALLOWED CREDIT FOR FINAL PAYMENT OF $1. AS FOLLOWS: * * * UPON THE COMPLETION OF THE CONTRACT THE BALANCE DUE ON ACCOUNT THEREOF WILL BE COVERED BY SIMILAR VOUCHERS. WHEN THE WORK UNDER THE CONTRACTS WAS COMPLETED. THE RESPECTIVE CONTRACTORS ATTACHED TO THEIR FINAL VOUCHERS RELEASES FROM ALL CLAIMS EXCEPT CERTAIN ONES ARISING UNDER OR BY VIRTUE OF THEIR RESPECTIVE CONTRACTS AND THE VOUCHERS WERE PAID BY PAYMASTER SEIBELS.

A-9673, JUNE 22, 1925, 4 COMP. GEN. 1055

CONTRACTS, TERMINATION - DISBURSING OFFICERS, RELIEF UNDER THE ACT OF FEBRUARY 11, 1925, 43 STAT. 860 WHERE A CONTRACT PROVIDED FOR THE EXECUTION OF A FINAL RELEASE IN FULL BEFORE FINAL PAYMENT COULD BE MADE THERE IS NO AUTHORITY FOR THE ACCEPTANCE OF A QUALIFIED RELEASE. THE DISBURSING OFFICER CONCERNED SHOULD NOT MAKE PAYMENT UPON SUCH QUALIFIED RELEASE, BUT SHOULD FORWARD THE PAPERS TO THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT. THE GRANTING OF RELIEF TO A DISBURSING OFFICER UNDER THE ACT OF FEBRUARY 11, 1925, 43 STAT. 860, FOR PAYMENTS MADE TO A CONTRACTOR ON A QUALIFIED INSTEAD OF A FINAL RELEASE, DOES NOT AUTHORIZE THE REMOVAL OF THE STOPPAGES AGAINST THE CONTRACTOR UNLESS AND UNTIL THE RESERVED CLAIM IS FINALLY BARRED BY THE RUNNING OF THE STATUTE OF LIMITATIONS, OR IS CLOSED BY A FINAL ADJUDICATION WHEN THE RESERVED CLAIM IS ASSERTED IN COURT.

DECISION BY COMPTROLLER GENERAL MCCARL, JUNE 22, 1925:

GEORGE G. SEIBELS, SUPPLY CORPS, UNITED STATES NAVY, REQUESTED DECEMBER 6, 1924, REVIEW OF SETTLEMENT NO. M-6787-N, DATED APRIL 18, 1924, WHEREIN WAS DISALLOWED CREDIT FOR FINAL PAYMENT OF $1,338.40 MADE TO THE W. G. CORNELL CO. UNDER CONTRACT NO. 3129-C, DATED JULY 26, 1918, AND OF $1,709.60 MADE TO THE PENN BRIDGE CO. UNDER CONTRACT NO. 2666, DATED JANUARY 5, 1918, WITHOUT A FINAL RELEASE AS REQUIRED BY PARAGRAPH 29 OF THE GENERAL PROVISIONS OF THE RESPECTIVE CONTRACTS, AS FOLLOWS:

* * * UPON THE COMPLETION OF THE CONTRACT THE BALANCE DUE ON ACCOUNT THEREOF WILL BE COVERED BY SIMILAR VOUCHERS, SUBJECT TO ANY CREDITS IN FAVOR OF THE GOVERNMENT: PROVIDED, THAT THE CONTRACTOR SHALL FIRST EXECUTE AND DELIVER A FINAL RELEASE TO THE GOVERNMENT, IN SUCH FORM AND CONTAINING SUCH PROVISIONS AS SHALL BE APPROVED BY THE NAVY DEPARTMENT, OF CLAIMS AGAINST THE GOVERNMENT ARISING UNDER OR BY VIRTUE OF THE CONTRACT.

WHEN THE WORK UNDER THE CONTRACTS WAS COMPLETED, THE RESPECTIVE CONTRACTORS ATTACHED TO THEIR FINAL VOUCHERS RELEASES FROM ALL CLAIMS EXCEPT CERTAIN ONES ARISING UNDER OR BY VIRTUE OF THEIR RESPECTIVE CONTRACTS AND THE VOUCHERS WERE PAID BY PAYMASTER SEIBELS. IT IS NOW CONTENDED THAT DISALLOWANCE OF CREDIT THEREFOR IN HIS ACCOUNTS WAS IMPROPER BECAUSE THE UNITED STATES RECEIVED THE MATERIAL FOR WHICH THE PAYMENTS WERE MADE; THAT SUCH QUALIFIED RELEASE HAD BEEN ACCEPTED BY THE ACCOUNTING OFFICERS AND THAT THE CONTRACT PROVISION---

DOES NOT SPECIFY AN UNQUALIFIED RELEASE BUT ONLY A "FINAL RELEASE IN SUCH FORM AND CONTAINING SUCH PROVISION AS SHALL BE APPROVED BY THE NAVY DEPARTMENT.' CERTAIN AMOUNTS WERE WITHHELD BY THE GOVERNMENT AS LIQUIDATED DAMAGES IN EACH CASE. THE PROPRIETY OF WITHHOLDING SUCH AMOUNTS IS A MATTER OF CONTROVERSY BETWEEN THE REPRESENTATIVES OF THE GOVERNMENT AND THE CONTRACTORS, AND IS THEREFORE A PROPER SUBJECT FOR CONSIDERATION BY THE GENERAL ACCOUNTING OFFICE. THERE IS, HOWEVER, NO CONTROVERSY AS TO THE CORRECTNESS OF PAYMENTS WHICH HAVE BEEN MADE.

WHILE A FINAL UNQUALIFIED RELEASE WOULD HAVE THE EFFECT, NO DOUBT, OF PLACING THE BURDEN OF PROOF ON A CONTRACTOR SHOULD HE CLAIM ANY ADDITIONAL AMOUNT, IT CERTAINLY WOULD NOT INCREASE THE VALUE TO THE GOVERNMENT OF THE MATERIAL AND SERVICES WHICH IT HAD RECEIVED AND FOR WHICH A CONTRACTOR WAS PROPERLY PAID.

SHOULD ANY OR EACH OF THESE CONTRACTORS MAINTAIN THAT FURTHER PAYMENTS ARE DUE, IT WILL BE WITHIN THE POWER OF THE GENERAL ACCOUNTING OFFICE TO DETERMINE FROM THE FACTS OR RECORD WHETHER OR NOT A FURTHER ALLOWANCE SHALL BE MADE.

NOTWITHSTANDING THE ABOVE, THE ACCEPTANCE OF A QUALIFIED RELEASE BY THE NAVY DEPARTMENT WAS SUCH FORM OF RELEASE AS WAS APPROVED BY THAT DEPARTMENT FOR THE CASES IN QUESTION, AND, IN VIEW OF THE MATTERS AT ISSUE, SUCH FORM OF RELEASE WAS EQUITABLE, SINCE THE SUBSTANTIAL FACTS IN THE CASE WERE AND ARE A MATTER OF RECORD AND THE QUESTION OF FURTHER PAYMENT IS LARGELY ONE OF LAW, AND WHICH MAY PROPERLY BE LEFT TO THE GENERAL ACCOUNTING OFFICE AND THE COURTS.

THE CONTRACT SPECIFICALLY CALLS FOR A "FINAL" RELEASE. THE STIPULATION THAT IT SHALL BE "IN SUCH FORM AND CONTAINING SUCH PROVISIONS AS SHALL BE APPROVED BY THE NAVY DEPARTMENT" MEANS, AT THE MOST, APPROVAL OF FORM AND PROVISIONS WHICH WILL EXPRESS A "FINAL" RELEASE AND NOT FORM AND PROVISIONS WHICH BASICALLY EXPRESS OTHERWISE THAN A "FINAL" RELEASE. MAY ALSO BE SAID THAT IF OTHER THAN A "FINAL" RELEASE IS AUTHORIZED, THEN THERE WAS NO NEED FOR STIPULATING FOR A RELEASE. IN A FINDING BY THE COURT OF CLAIMS, DECISION OF MAY 11, 1925, PAWLING V. UNITED STATES, THE CUSTOM OF ACCEPTING A QUALIFIED RELEASE WAS REFERRED TO AS NOT AUTHORIZED BY ANY STATUTORY AUTHORITY. SEE 3 COMP. GEN. 901 TO THE SAME EFFECT.

IN MY DECISION OF MAY 23, 1924, A-617, TO THE SECRETARY OF THE NAVY WITH REFERENCE TO A SIMILAR PAYMENT, IT WAS SAID:

IT IS OBVIOUS THAT UNDER SUCH A CONDITION THE PROPER PROCEDURE WAS TO NOT MAKE THE FINAL PAYMENT THROUGH A DISBURSING OFFICER, AS THE QUESTIONS INVOLVED COULD NOT BE PROPERLY DETERMINED BY SUCH DISBURSING OFFICER, AND HENCE THE PAYMENT OF THE FULL AMOUNT OF THE CONTRACT SHOULD NOT HAVE BEEN MADE UNTIL THE LIABILITY FOR THE ADDITIONAL SUM CLAIMED BY THE CONTRACTOR WAS SETTLED. THE MATTER SHOULD THEREFORE HAVE BEEN PRESENTED TO THIS OFFICE FOR SETTLEMENT OF THE CLAIMS OF THE CONTRACTOR TO THE FINAL PAYMENT UNDER THE CONTRACT WITH SUCH RECOMMENDATION THEREON AS THE NAVY DEPARTMENT MIGHT DEEM PROPER.

THE MATTER IS OF A CLASS WHICH YOU HAVE BY YOUR LETTER OF MAY 12, 1924, UNDERTAKEN TO ADOPT A PROCEDURE WHICH WILL RESULT IN THE PRESENTATION TO THIS OFFICE FOR SETTLEMENT OF FINAL PAYMENTS UNDER CONTRACT WHEREVER THERE IS A DOUBT AS TO THE AMOUNT FINALLY PAYABLE. THE PRESENT MATTER BEING ONE IN WHICH A QUALIFIED RELEASE WAS TAKEN, I BELIEVE THAT WITH THE CORRECTION OF THE PRACTICE SO THAT SUCH MATTERS WILL NOT HEREAFTER BE FOR PAYMENT BY DISBURSING OFFICERS, THE PAYMENT AS MADE NEED NOT BE FURTHER QUESTIONED IN THE ACCOUNTS OF COMMANDER IRWIN, AND CREDIT THEREFOR WILL BE ALLOWED ACCORDINGLY.

IN THE PRESENT CASE, THE QUALIFIED RELEASES ACCOMPANYING THE VOUCHERS ON WHICH THE PAYMENTS IN QUESTION WERE MADE, THE CONTRACTORS UNDERTOOK TO RESERVE TO THEMSELVES THE RIGHT TO PROSECUTE CERTAIN CLAIMS AS TO WHICH THE ACTION OF THE DEPARTMENT WAS NOT ACCEPTABLE. THE CLAIMED RIGHTS SO EXCEPTED FROM THE OPERATION OF THE RELEASES, IT APPEARS, AROSE, IF AT ALL, MORE THAN SIX YEARS AGO, AND UPON INQUIRY IT DOES NOT APPEAR THAT ANY CLAIMS HAVE BEEN PROSECUTED ON ACCOUNT THEREOF. THE FAILURE OF THE CONTRACTORS TO PRESENT AND PROSECUTE IN JUDICIAL PROCEEDINGS THE CLAIMS SO EXCEPTED WITHIN THE STATUTORY PERIOD OF LIMITATION MAY BE TAKEN AS AN ABANDONMENT THEREOF. ACCORDINGLY, IN THIS AND OTHER LIKE CASES THE FAILURE TO OBTAIN THE REQUIRED FINAL RELEASE BEFORE THE PAYMENTS IN QUESTION WERE MADE HAS BEEN CURED BY OPERATION OF TIME AND THE LACHES OF THE CLAIMANT CONTRACTORS, AND THE CHARGES AGAINST THE DISBURSING OFFICERS NEED NO LONGER BE MAINTAINED.

HOWEVER, THE CREDITING OF THE PAYMENTS IN THE ACCOUNTS OF THE DISBURSING OFFICERS SHALL NOT BE TAKEN AS RELIEVING THE CONTRACTORS, ALTHOUGH STOPPAGES AGAINST THEM MAY BE REMOVED. GENERALLY, THE LEGAL EFFECT OF A PAYMENT ON A QUALIFIED RELEASE WHEN A FINAL RELEASE IS REQUIRED IS THAT ACCEPTANCE THEREOF BY THE PERSON OF WHOM THE FINAL RELEASE IS REQUIRED CONCLUDES THE TRANSACTION IN THE MANNER STIPULATED AS THOUGH A FINAL RELEASE WERE GIVEN WITHOUT EXCEPTION OR RESERVATION. ,THE LAW JUDGES OF THINGS WHICH MUST NECESSARILY BE DONE, AS IF ACTUALLY DONE; " THEREFORE, A RELEASE AND PAYMENT THEREON REQUIRED TO BE FINAL WILL BE DEEMED TO BE FINAL IN THE CONSIDERATION AND SETTLEMENT OF CLAIMS WHICH SHOULD HAVE BEEN PRESENTED TO AND SETTLED BY THIS OFFICE BEFORE FINAL PAYMENT.

UPON THE ASSURANCES CONTAINED IN THE LETTER OF THE SECRETARY OF THE NAVY DATED MAY 12, 1924, AND SO LONG AS VOUCHERS COVERING FINAL PAYMENTS UNDER CONTRACTS WHEREVER THERE IS DOUBT AS TO THE AMOUNT FINALLY PAYABLE, CONTINUE TO BE FORWARDED HERE FOR DIRECT SETTLEMENT, AND UPON SUCH CONDITIONS, CREDIT HERETOFORE DENIED DISBURSING OFFICERS FOR FAILURE TO OBTAIN "FINAL" RELEASES WILL NOW BE ALLOWED; BUT IN SUCH CASES, IF SIX YEARS HAVE NOT ELAPSED SINCE THE CLAIMED RIGHT, EXCEPTED FROM THE OPERATIONS OF THE "QUALIFIED" RELEASE, ACCRUED, OR, IF THE EXCEPTED CLAIMS ARE BEING PROSECUTED IN ANY COURT, THE STOPPAGES AGAINST THE CONTRACTORS WILL BE MAINTAINED AND COUNTER-CLAIMS REPORTED IN ACCORDANCE WITH THE EXISTING PROCEDURE, UNTIL THE MATTERS ARE FINALLY CLOSED OR BARRED.

CREDIT FOR THE PAYMENTS IN THE PRESENT CASE WILL BE ALLOWED PURSUANT TO THE PROVISIONS OF THE ACT OF FEBRUARY 11, 1925, 43 STAT. 860.