B-118993, SEP. 18, 1957

B-118993: Sep 18, 1957

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GALLAGHER: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 19. THE GROUNDS FOR THE WITHHOLDING WERE FULLY STATED IN OUR DECISION DATED OCTOBER 18. WITH WHICH WE ASSUME YOU ARE FAMILIAR. WE UNDERSTAND THAT THE ACTION IS STILL PENDING BEFORE THAT COURT. THERE WAS ENCLOSED WITH YOUR LETTER A COPY OF A DECISION RENDERED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS UNDER DATE OF JUNE 28. WHEREIN THE CONTRACTOR WAS ADVISED THAT "THE CONTRACT CONSIDERATION IS HEREBY REDUCED IN THE AMOUNT OF $91. IN CONNECTION WITH THE STATEMENTS MADE IN YOUR LETTER TO THE EFFECT THAT IT IS YOUR UNDERSTANDING THAT A VOUCHER PROPOSING PAYMENT OF THE SUM WITHHELD WOULD BE SUBMITTED HERE FOR CONSIDERATION. YOU ARE ADVISED THAT NO SUCH VOUCHER HAS YET BEEN RECEIVED.

B-118993, SEP. 18, 1957

TO MR. BERNARD J. GALLAGHER:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 19, 1957, RELATIVE TO A CLAIM OF DELTA TANK MANUFACTURING COMPANY, INC., FOR $91,470.25, WITHHELD BY THE DEPARTMENT OF THE ARMY FROM AMOUNTS OTHERWISE DUE THE CORPORATION UNDER CONTRACT NO. DA-01-009-ORD-16 DATED MAY 4, 1951.

THE GROUNDS FOR THE WITHHOLDING WERE FULLY STATED IN OUR DECISION DATED OCTOBER 18, 1954, B-118993, TO DELTA TANK MANUFACTURING COMPANY, INC., WITH WHICH WE ASSUME YOU ARE FAMILIAR. ON APRIL 3, 1956, YOU FILED IN THE UNITED STATES COURT OF CLAIMS A PETITION SEEKING THE RECOVERY OF THE AMOUNT WITHHELD (C.CLS. NO. 150-56), AND WE UNDERSTAND THAT THE ACTION IS STILL PENDING BEFORE THAT COURT.

THERE WAS ENCLOSED WITH YOUR LETTER A COPY OF A DECISION RENDERED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS UNDER DATE OF JUNE 28, 1957, ASBCA NO. 3699, WHICH VACATED A DECISION OF THE CONTRACTING OFFICER DATED JUNE 6, 1956, WHEREIN THE CONTRACTOR WAS ADVISED THAT "THE CONTRACT CONSIDERATION IS HEREBY REDUCED IN THE AMOUNT OF $91,470.25 IN ACCORDANCE WITH COMPTROLLER GENERAL'S DECISION NO. B 118993.'

IN CONNECTION WITH THE STATEMENTS MADE IN YOUR LETTER TO THE EFFECT THAT IT IS YOUR UNDERSTANDING THAT A VOUCHER PROPOSING PAYMENT OF THE SUM WITHHELD WOULD BE SUBMITTED HERE FOR CONSIDERATION, AND YOUR CONTENTION THAT THE SUM OF $91,470.25 SHOULD BE PAID IN ACCORDANCE WITH THE BOARD'S DECISION, YOU ARE ADVISED THAT NO SUCH VOUCHER HAS YET BEEN RECEIVED, BUT THAT, IN ANY EVENT, IT IS NOT GENERALLY OUR POLICY TO TAKE FURTHER ACTION ON CLAIMS AGAINST THE GOVERNMENT WHICH HAVE BEEN SUBMITTED TO COURTS OF COMPETENT JURISDICTION. WE DO NOT, HOWEVER, AGREE WITH YOUR INTERPRETATION OF THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS, OR WITH YOUR CONCLUSION THAT THE RESULT OF THAT DECISION IS THAT THE CONTRACTING OFFICER IS UNDER A DUTY TO PAY THE CONTRACTOR FORTHWITH THE AMOUNT WITHHELD. THE CONCLUDING PARAGRAPH OF THE DECISION CLEARLY STATES THAT THE APPEAL IS DISMISSED, NOT FOR THE REASON STATED IN THE GOVERNMENT'S MOTION TO DISMISS, THAT THE LEGAL AND FACTUAL ISSUES HAD BEEN SETTLED BY OUR DECISION, BUT "UPON THE GROUND THAT THE BOARD IS WITHOUT JURISDICTION TO GRANT THE RELIEF REQUESTED.' THE RELIEF REQUESTED WAS THE RECOVERY OF THE MONEY WITHHELD. IT WOULD BE A STRANGE ANOMALY IF SUCH A DECISION WERE TO BE HELD NEVERTHELESS TO HAVE THE EFFECT OF MAKING OBLIGATORY THE DOING OF THE VERY THING WHICH THE BOARD DECIDED IT COULD NOT DO.

THE SECOND PRECEDING PARAGRAPH OF THE DECISION STATED THE GROUND FOR THE CONCLUSION THAT THE BOARD LACKED JURISDICTION, NAMELY THAT "THE AUTHORITY OF THIS BOARD IS TO BE FOUND WITHIN THE CONTRACT AND THEREFORE SINCE THE ACTS COMPLAINED OF ARE OUTSIDE THE CONTRACT, THE QUERY OF THE APPELLANT MUST BE ANSWERED IN THE NEGATIVE.' THIS FOLLOWED THE STATEMENT OF THE PREMISE: ,NEITHER THE SALE, THE REALIZATION OF PROFIT NOR THE ORDER OF THE COMPTROLLER GENERAL WAS PURSUANT TO PROVISIONS OF THE INSTANT CONTRACT.' WE READ IN THAT STATEMENT NO EXPRESSION OR INTIMATION OF AN OPINION THAT THE GOVERNMENT HAD NO INTEREST IN OR CONCERN WITH THE SALE AND THE PROFIT, OR THAT THE ORDER WAS IMPROPER OR UNAUTHORIZED, AND WE DO NOT BELIEVE THAT IT WAS SO INTENDED. IF IT WERE, IT WOULD STILL BE MERELY AN EXPRESSION OF OPINION AS TO A MATTER WITH RESPECT TO WHICH THE BOARD HAD NO AUTHORITY TO ACT, AND WOULD BE WHOLLY INEFFECTIVE AS A BASIS FOR ANY ADMINISTRATIVE ACTION.

YOUR STATEMENT THAT THE HEAD OF THE DEPARTMENT, THROUGH THE BOARD, HAS HELD THAT THE ACTION OF THE CONTRACTING OFFICER IN WITHHOLDING PAYMENT IS "WITHOUT LEGAL EFFECT AND THE DECISION IS VACATED" ALSO APPEARS TO BE UNWARRANTED. THE ACTUAL STATEMENT OF THE BOARD WAS AS FOLLOWS:

"THE CONTRACTING OFFICER ATTEMPTED TO BRING THE SALE, PROFIT AND WITHHOLDING WITHIN THE CONTRACT BY REDUCING THE CONTRACT CONSIDERATION TO THE EXTENT OF THE PROFIT. SUCH ATTEMPT IS WITHOUT LEGAL EFFECT AND THE DECISION IS VACATED.'

AS WE READ IT, THIS IS A PLAIN AND UNAMBIGUOUS STATEMENT OF THE PROPOSITION THAT A CONTRACTING OFFICER CANNOT, BY MAKING PURPORTED "FINDINGS OF FACT," BRING WITHIN THE AMBIT OF THE DISPUTES CLAUSE A QUESTION WHICH IS NOT IN ITS ESSENCE A DISPUTE ARISING UNDER THE CONTRACT. WE ARE IN COMPLETE AGREEMENT BOTH WITH THE ABSTRACT PROPOSITION AND WITH THE BOARD'S VIEW THAT THE SUBJECT CONTROVERSY WAS NOT "A DISPUTE CONCERNING A QUESTION OF FACT ARISING UNDER THIS CONTRACT.'

IT DOES NOT, HOWEVER, FOLLOW THAT OUR OFFICE WAS WITHOUT JURISDICTION TO REQUIRE THE WITHHOLDING. PURSUANT TO THE REQUIREMENT OF THE CONSTITUTION (ACT I, SECT. 9, CL. 7) THAT "NO MONEY SHALL BE DRAWN FROM THE TREASURY, BUT IN CONSEQUENCE OF APPROPRIATIONS MADE BY LAW," THE CONGRESS HAS PROVIDED A FISCAL SYSTEM UNDER WHICH FUNDS APPROPRIATED BY IT ARE PASSED TO THE CREDIT OF DISBURSING OFFICERS DESIGNATED BY THE SEVERAL DEPARTMENTS AND AGENCIES, AND ONLY THOSE OFFICERS HAVE POWER TO DISBURSE SUCH FUNDS. THEY ARE REQUIRED TO FURNISH BOND FOR THE FAITHFUL DISCHARGE OF THEIR RESPONSIBILITIES, AND TO SUBMIT THEIR ACCOUNTS FOR SETTLEMENT BY THIS OFFICE, WHICH ACTS AS AN AGENCY OF THE CONGRESS AND IS RESPONSIBLE TO IT RATHER THAN TO ANY OFFICIAL OF THE EXECUTIVE BRANCH OF THE GOVERNMENT. THE SETTLEMENT OF THE ACCOUNTS OF DISBURSING OFFICERS THERE IS NECESSARILY INVOLVED THE DUTY OF DETERMINING THE LEGALITY OF EVERY EXPENDITURE FOR WHICH CREDIT IS CLAIMED--- THAT IS, WHETHER IT WAS PURSUANT TO AN APPROPRIATION MADE BY LAW, AND NOT IN VIOLATION OF ANY SETTLEMENT OF OBLIGATIONS ON BEHALF OF THE UNITED STATES. OUR AUTHORITY TO SETTLE AND ADJUST CLAIMS BY AND AGAINST THE UNITED STATES, DERIVED FROM SECTION 236, REVISED STATUTES (31 U.S.C. 71), IS IN A SENSE ANCILLARY TO THE BASIC AUTHORITY TO SETTLE THE ACCOUNTS OF THE OFFICERS OF THE GOVERNMENT, SERVING AS A SAFEGUARD AGAINST ADMINISTRATIVE DISBURSEMENTS WHICH MIGHT BE DISALLOWED AS CREDITS IN THE ACCOUNTS OF THE RESPONSIBLE OFFICERS. THIS AUTHORITY OPERATES ALSO TO PREVENT PAYMENTS TO CREDITORS OF THE GOVERNMENT WHO ARE AT THE SAME TIME ITS DEBTORS, BY EXERCISE OF THE RIGHT OF SET-OFF WHICH HAS BEEN UNIFORMLY RECOGNIZED BY THE COURTS. SEE UNITED STATES V. MUNSEY TRUST CO., 332 U.S. 234; TAGGART V. UNITED STATES, 17 C.CLS. 322; UNITED STATES V. AMERICAN SURETY CO. OF N.Y., 158 F.2D 12. THE PURPOSE OF THE STATUTORY JURISDICTION OF THE COURT OF CLAIMS TO HEAR AND DETERMINE SET-OFFS AND COUNTERCLAIMS OF THE GOVERNMENT, WHICH HAS BEEN HELD BY THE SUPREME COURT TO BE TO PERMIT THE GOVERNMENT TO HAVE DETERMINED IN A SINGLE SUIT ALL QUESTIONS WHICH INVOLVE MUTUAL OBLIGATIONS BETWEEN THE GOVERNMENT AND A CLAIMANT AGAINST IT (CHERRY COTTON MILLS V. UNITED STATES, 327 U.S. 536), WOULD BE TO A LARGE DEGREE NULLIFIED IF EVERY CLAIM AS TO WHICH THERE WAS NO DISPUTE WERE REQUIRED OR PERMITTED TO BE PAID WITHOUT REGARD TO THE EXISTENCE OF CLAIMS BY THE GOVERNMENT AGAINST THE CLAIMANT. ONLY THROUGH THE EXERCISE OF OUR AUTHORITY TO SET OFF OR WITHHOLD IN SUCH CASES CAN THE GOVERNMENT'S RIGHT, AS DECLARED BY THE SUPREME COURT, BE MAINTAINED.

IN THE INSTANT CASE IT IS OUR CONSIDERED VIEW THAT THE CLAIMANT IS AS A MATTER OF LAW ACCOUNTABLE TO THE GOVERNMENT FOR THE PROFIT IN QUESTION, AND THAT IT IS THEREFORE OUR DUTY TO REQUIRE THAT AN AMOUNT EQUAL TO THAT FOR WHICH IT IS ACCOUNTABLE BE WITHHELD FROM ANY AMOUNTS DUE IT BY THE GOVERNMENT UNTIL THE QUESTION OF ITS LIABILITY IS DETERMINED JUDICIALLY. OUR CONCLUSION IS NOT IN ANY WAY DEPENDENT UPON WHETHER SUCH LIABILITY IS A MATTER ARISING UNDER THE CONTRACT OR WHOLLY INDEPENDENT OF IT, AND THE FACT THAT OUR DECISION DOES NOT CONSTITUTE A PRIMA FACIE CASE IN COURT SEEMS TO BE WHOLLY IRRELEVANT. IT IS BY STATUTE BINDING UPON THE ADMINISTRATIVE BRANCH OF THE GOVERNMENT, AND A DISBURSING OFFICER MAKING A PAYMENT CONTRARY TO IT WOULD, UPON CONSEQUENT DISALLOWANCE OF CREDIT THEREFOR IN HIS ACCOUNT BE LIABLE THEREFOR. THAT IT HAS NO BINDING EFFECT IN A SUIT BY THE CLAIMANT, BUT LEAVES HIM FREE TO PURSUE ANY AND ALL JUDICIAL REMEDIES PROVIDED BY LAW--- AS IN THE CASE OF ADMINISTRATIVE ACTION GENERALLY, EXCEPT AS MODIFIED BY FINALITY PROVISIONS OF PARTICULAR STATUTES OR CONTRACTUAL STIPULATIONS--- IS, WE BELIEVE, A WHOLLY PROPER SITUATION, FULLY IN HARMONY WITH THE DIVISION OF POWERS FUNDAMENTAL IN THIS GOVERNMENT.