B-119179, JUL. 17, 1961

B-119179: Jul 17, 1961

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ESQUIRE: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 11. THE CONTRACT WAS TERMINATED IN 1951. THE AMOUNT NOW CLAIMED IS THE ONLY ITEM REMAINING UNSETTLED IN CONNECTION WITH THE TERMINATION SETTLEMENT. WHEREIN THE BOARD STATED THAT THERE IS SERIOUS DOUBT THAT THE BANK OF AMERICA WAS LEGALLY ENTITLED TO RECOVER INTEREST AT THE RATE OF SIX PERCENT FOR SEVEN YEARS WHILE AT THE SAME TIME HOLDING WITHOUT INTEREST AN EQUIVALENT AMOUNT OF APPELLANT'S FUNDS IN PHILIPPINE PESOS. THAT ACCEPTING AS CORRECT THE BANK'S STATEMENT THAT IT WAS PRECLUDED BY LAW FROM PAYING INTEREST ON APPELLANT'S FUNDS HELD ON DEMAND DEPOSIT. THERE WAS A DUTY ON THE BANK TO MITIGATE DAMAGES BY INVESTING THE FUNDS IN INTEREST-BEARING SECURITIES OR BY OTHER APPROPRIATE ACTION.

B-119179, JUL. 17, 1961

TO BEN BRUCE BLAKENEY, ESQUIRE:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 11, 1961, WITH ENCLOSURES, SUBMITTING ON BEHALF OF THE TUASON CONTRACTION COMPANY, INC., A CLAIM FOR THE SUM OF $72,644.02, REPRESENTING INTEREST PAID OR ACCRUED ON CERTAIN LOANS OBTAINED BY THE CLAIMANT FOR USE IN THE PERFORMANCE OF CONTRACT NO. DA-92-320-FEC-7, DATED JUNE 26, 1950, ENTERED INTO WITH THE CORPS OF ENGINEERS FOR CERTAIN WORK IN THE IMPROVEMENT OF NAHA HARBOR, MACHINATO POWER PLANT AREA, AND TOMARI BAY ON OKINAWA, RYUKYU ISLANDS. THE CONTRACT WAS TERMINATED IN 1951, AND THE AMOUNT NOW CLAIMED IS THE ONLY ITEM REMAINING UNSETTLED IN CONNECTION WITH THE TERMINATION SETTLEMENT. ALSO, THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 6, 1961, RELATING TO THIS CLAIM.

AS INDICATED IN OUR LETTER OF MARCH 23, 1961, WE TRANSMITTED COPIES OF YOUR LETTER AND THE ENCLOSURES THERETO (EXCLUDING THE OPINIONS BY THE BOARDS) TO THE DEPARTMENT OF THE ARMY WITH THE REQUEST THAT OUR OFFICE BE FURNISHED WITH THE VIEWS OF THAT DEPARTMENT ON THE MATTERS INVOLVED. VIEW OF THE NATURE OF THE CLAIM BEING ASSERTED IN THIS CASE WE FELT IT NECESSARY TO BRING TO THE ATTENTION OF THE DEPARTMENT CERTAIN STATEMENTS BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS AS WELL AS CERTAIN MATTERS SET FORTH IN YOUR LETTER OF JANUARY 11, 1961. AMONG OTHER THINGS, WE MADE SPECIFIC REFERENCE TO PAGE 16 OF THE OPINION DATED JUNE 29, 1959, ASBCA NO. 5106, WHEREIN THE BOARD STATED THAT THERE IS SERIOUS DOUBT THAT THE BANK OF AMERICA WAS LEGALLY ENTITLED TO RECOVER INTEREST AT THE RATE OF SIX PERCENT FOR SEVEN YEARS WHILE AT THE SAME TIME HOLDING WITHOUT INTEREST AN EQUIVALENT AMOUNT OF APPELLANT'S FUNDS IN PHILIPPINE PESOS; THAT ACCEPTING AS CORRECT THE BANK'S STATEMENT THAT IT WAS PRECLUDED BY LAW FROM PAYING INTEREST ON APPELLANT'S FUNDS HELD ON DEMAND DEPOSIT, THE RECORD INDICATES THAT THE BANK BENEFITED FROM THE USE OF SUCH FUNDS; AND THAT, FURTHERMORE, THERE WAS A DUTY ON THE BANK TO MITIGATE DAMAGES BY INVESTING THE FUNDS IN INTEREST-BEARING SECURITIES OR BY OTHER APPROPRIATE ACTION.

THESE MATTERS WERE DISCUSSED AT LENGTH IN YOUR LETTER OF JANUARY 11, IN WHICH YOU CONTENDED THAT THE BOARD'S FINDINGS LEADING TO THE CONCLUSION THAT THE CLAIMANT COULD IN SOME WAY HAVE STOPPED THE ACCRUAL OF INTEREST ARE PATENTLY ERRONEOUS; ALSO, YOU MADE REFERENCE TO THE AUTHORITY OF THE BANK OF AMERICA TO CREDIT INTEREST ON THE DEMAND DEPOSITS, AS WELL AS THE RELATIONSHIP OF THE TOKYO BRANCH AND THE MANILA BRANCH OF THAT BANK, ETC. IN OUR LETTER OF MARCH 23 WE REQUESTED THE COMMENTS OF THE DEPARTMENT OF THE ARMY ON THESE MATTERS.

IT APPEARS THAT IN CONNECTION WITH THE TERMINATION SETTLEMENT THE CONTRACTING OFFICER FORMALLY REFUSED TO ALLOW ANY PART OF THE CLAIM FOR INTEREST. THEREAFTER THE CONTRACTOR FILED AN APPEAL WITH THE UNITED STATES ARMY JAPAN BOARD OF CONTRACT APPEALS, AND IN AN OPINION DATED JULY 3, 1958--- USARJ BCA NO. 42--- THE BOARD AFFIRMED THE CONTRACTING OFFICER'S RULING. ON APPEAL FROM THAT DECISION, THE ARMED SERVICES BOARD OF CONTRACT APPEALS UNDER DATE OF JUNE 29, 1959, RENDERED AN OPINION--- ASBCA NO. 5106--- IN WHICH THE APPEAL WAS SUSTAINED IN THE AMOUNT OF $6,398.57, REPRESENTING (1) INTEREST EXPENSES INCURRED PRIOR TO TERMINATION AND PAID BY THE APPELLANT, AND (2) INTEREST EXPENSE ACCRUING FROM THE DATE OF TERMINATION TO SEPTEMBER 20, 1951, WHICH WAS PAID BY THE APPELLANT. THE APPEAL WAS DENIED AS TO THE BALANCE OF $72,654.02.

WE ARE NOW IN RECEIPT OF A REPORT FROM THE DEPARTMENT OF THE ARMY IN THIS CASE, STATING THAT UNDER PRIOR DECISIONS OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS AND THE PRIOR POLICY OF THE DEPARTMENT AS ENUNCIATED IN PARTICULAR CASES, THE CLAIM INVOLVED HEREIN IS NO LONGER REVIEWABLE UNDER THE PROCEDURE SET FORTH IN THE "DISPUTES" ARTICLE OF THE CONTRACT. THE DEPARTMENT POINTED OUT THAT THE "DISPUTES" ARTICLE PROVIDES THAT THE DECISIONS ON APPEAL SHALL BE FINAL AND CONCLUSIVE, AND THAT THE WUNDERLICH ACT (41 U.S.C. 321) REITERATES THIS FINALITY, SUBJECT TO CERTAIN TESTS THEREIN STATED. IT WAS STATED FURTHER THAT PUBLISHED RULES OF THE BOARD PERMIT THE FILING OF A MOTION FOR RECONSIDERATION BY EITHER PARTY WITHIN THIRTY DAYS FROM THE DATE OF THE RECEIPT OF THE BOARD'S OPINION. THE DEPARTMENT TAKES THE VIEW THAT UPON FAILURE OF THE CONTRACTOR TO FILE SUCH A MOTION, OR UPON RECEIPT OF A DECISION ON SUCH A MOTION TIMELY FILED, RIGHTS VEST IN THE DECISION RENDERED JUST AS, FOR EXAMPLE, IN THE CASE OF AN UNAPPEALED CONTRACTING OFFICER'S OPINION. IN SUPPORT OF SUCH VIEW THE DEPARTMENT CITED THE APPEALS OF THE ATLAS CAN CORPORATION, ASBCA NOS. 1957, 1958, AND 2121, SEPTEMBER 10, 1959, 59-2 BCA PAR. 2354, AND NO. 3381, SEPTEMBER 25, 1959, 59-2 BCA PAR. 2361; AND THE APPEAL OF THE ADAMS MANUFACTURING COMPANY, DECEMBER 18, 1959, 59-2 BCA PAR. 2454.

THE RECORD IN THIS CASE DOES NOT SHOW THAT THE TUASON CONSTRUCTION COMPANY EVER REQUESTED--- WITHIN THE SPECIFIED THIRTY DAYS--- RECONSIDERATION OF THE BOARD'S HOLDING IN THE CITED DECISION OF JUNE 29, 1959. INDEED, IT APPEARS THAT IT WAS NOT UNTIL YOUR LETTER OF JANUARY 11, 1961, THAT THE CONTRACTOR TOOK ANY ACTION TO PURSUE THE MATTER FURTHER. THE DECISION OF THE BOARD MUST THEREFORE BE REGARDED AS FINAL AND CONCLUSIVE AS TO THE FACTS, UNLESS IT CAN BE DETERMINED TO BE FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. YOUR BASIC CONTENTION IS THAT THE BOARD'S CONCLUSION THAT THE CONTRACTOR COULD HAVE FOUND SOME MEANS OF TERMINATING ITS INTEREST OBLIGATIONS, OR OF DIMINISHING THEM BY OBTAINING AN EQUIVALENT RETURN ON ITS PHILIPPINE DEPOSITS, IS UNSUPPORTED BY SUBSTANTIAL EVIDENCE AND IS IN FACT CONTRARY TO THE EVIDENCE. HOWEVER, EVEN IF WE SHOULD ACCEPT THAT PROPOSITION, THERE WOULD REMAIN THE LEGAL QUESTION, ALSO DEALT WITH IN THE DECISION, WHETHER INTEREST BEYOND A REASONABLE TIME AFTER TERMINATION SHOULD BE ALLOWED AS AN ITEM OF COST IN THE TERMINATION SETTLEMENT. WHILE THE BOARD'S CONCLUSIONS OF LAW ARE NOT FINAL AND BINDING, WE DO NOT FEEL THAT THE LAW ON THE POINT IS SO CLEAR AS TO JUSTIFY ALLOWANCE BY OUR OFFICE OF ANY ADDITIONAL AMOUNT ON YOUR CLIENT'S CLAIM, WHICH, THEREFORE IS HEREBY DENIED.