B-137607, JANUARY 6, 1959, 38 COMP. GEN. 476

B-137607: Jan 6, 1959

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SALES - BIDS - DEPOSITS - RETENTION AGAINST OTHER DEBTS DUE UNITED STATES A BID DEPOSIT WHICH IS SUBMITTED BY AN UNSUCCESSFUL BIDDER WHO IS OTHERWISE INDEBTED TO THE UNITE STATES SHOULD. 1959: REFERENCE IS MADE TO YOUR LETTER DATED OCTOBER 3. THIS BID WAS NOT ACCEPTED BY BLM. ALTHOUGH IT WAS THE ONLY BID RECEIVED. THE REASON FOR THE REJECTION OF THE BID WAS THAT THE AVEY BROTHERS LUMBER COMPANY WAS CONSIDERED TO BE A "TRESPASSER" WITHIN THE DEFINITION OF 43 C.F.R. 288.12 (A). BEFORE IT WAS CONTROLLED BY THE EFFORTS OF THE FOREST SERVICE OF THE DEPARTMENT OF AGRICULTURE AND THE STATE OF WASHINGTON. 145.70 DEMAND WAS MADE UPON AVEY BROTHERS LUMBER CO. COPIES OF THAT DEMAND LETTER AND OF THE PERTINENT PORTIONS OF THE CONTRACT ARE ATTACHED.

B-137607, JANUARY 6, 1959, 38 COMP. GEN. 476

SALES - BIDS - DEPOSITS - RETENTION AGAINST OTHER DEBTS DUE UNITED STATES A BID DEPOSIT WHICH IS SUBMITTED BY AN UNSUCCESSFUL BIDDER WHO IS OTHERWISE INDEBTED TO THE UNITE STATES SHOULD, IN THE BEST INTERESTS OF THE GOVERNMENT BE RETAINED PENDING JUDICIAL DETERMINATION OF THE BIDDER'S INDEBTEDNESS. 33 COMP. GEN. 262, OVERRULED.

TO THE AREA ADMINISTRATOR, BUREAU OF LAND MANAGEMENT, JANUARY 6, 1959:

REFERENCE IS MADE TO YOUR LETTER DATED OCTOBER 3, 1958 (YOUR REFERENCE 1.04), REQUESTING A DECISION AS TO THE LEGALITY OF RETAINING A CHECK IN THE AMOUNT OF $2,400, REPRESENTING A BID DEPOSIT OF THE AVEY BROTHERS LUMBER COMPANY, KETTLE FALLS, WASHINGTON, WHICH THAT COMPANY SUBMITTED WITH THEIR BID OF $23,814.25, ON MAY 6, 1958, UPON A PROPOSED BLM TIMBER SALE. THIS BID WAS NOT ACCEPTED BY BLM, ALTHOUGH IT WAS THE ONLY BID RECEIVED. THE REASON FOR THE REJECTION OF THE BID WAS THAT THE AVEY BROTHERS LUMBER COMPANY WAS CONSIDERED TO BE A "TRESPASSER" WITHIN THE DEFINITION OF 43 C.F.R. 288.12 (A).

YOUR LETTER FURTHER STATES THAT:

PRIOR TO THE SUBMISSION OF THIS BID BY AVEY BROTHERS LUMBER COMPANY, THEY HAD ENTERED INTO A CONTRACT DATED MARCH 30, 1955, NO. 14-11 001/16/-2 FOR THE PURCHASE OF TIMER FROM THE BUREAU OF LAND MANAGEMENT ON PARTS OF SECTIONS 13 AND 14, TOWNSHIP 39 N., RANGE 37 EAST, W. M., STEVENS COUNTY, WASHINGTON. AS A PART OF THIS LOGGING OPERATION AVEY BROTHERS HIRED TWO MEN TO CUT POSTS FROM A PORTION OF THE CONTRACT AREA. ON AUGUST 14, 1955, A FIRE STARTED AT THE SITE OF THE POST CUTTERS' CAMP ON THE CONTRACT AREA AND SPREAD OVER PORTIONS OF SECTIONS 11, 12, 13 AND 14, BEFORE IT WAS CONTROLLED BY THE EFFORTS OF THE FOREST SERVICE OF THE DEPARTMENT OF AGRICULTURE AND THE STATE OF WASHINGTON. THE AMOUNT OF THE FOREST SERVICE CLAIM AGAINST AVEY BROTHERS LUMBER COMPANY AS A RESULT OF THIS FIRE HAS BEEN REPORTED TO US TO BE $12,288.04, WHICH INCLUDES $88.20 FOR PROPERTY DAMAGES AND THE REMAINDER FOR FIRE SUPPRESSION COSTS. THE BUREAU OF LAND MANAGEMENT, WHICH HAD TIMBER BURNED, APPRAISED THEIR CLAIM AGAINST AVEY BROTHERS LUMBER COMPANY ARISING FROM THE FIRE AS:

CHART RESEEDING COSTS---------------------------------------------- -- $259.20 SINGLE STUMPAGE VALUE OF DAMAGED AND DESTROYED TIMBER-- $6,681.20 LESS SALVAGE------------------------------------------- 794.70

5,886.50

TOTAL CLAIM-------------------------------------------- 6,145.70

DEMAND WAS MADE UPON AVEY BROTHERS LUMBER CO. FOR THIS DAMAGE UNDER THE PROVISIONS OF CONTRACT NO. 14-11-001/16/-2, SECTION 14. COPIES OF THAT DEMAND LETTER AND OF THE PERTINENT PORTIONS OF THE CONTRACT ARE ATTACHED.

THE QUESTION RAISED BY YOUR LETTER IS WHETHER THE INDEBTEDNESS ARISING UNDER A PREVIOUS CONTRACT MAY BE PARTIALLY LIQUIDATED BY SET OFF FROM THE BIDDER'S BID DEPOSIT SUBMITTED ON A SUBSEQUENT CONTRACT ON WHICH HE WAS AN UNSUCCESSFUL BIDDER.

IN OUR DECISION OF DECEMBER 11, 1953, B-116430, 33 COMP. GEN. 262, WE HELD THAT A PLEDGE TO SECURE A SPECIFIC DEBT OR OBLIGATION MAY NOT BE HELD BY THE PLEDGEE AS SECURITY FOR ANY OTHER OBLIGATION, AND A REFUSAL TO RETURN THE PLEDGE AFTER THE OBLIGATION IT SECURES HAS BEEN PERFORMED IS PRIMA FACIE EVIDENCE OF A CONVERSION.

IT APPEARS FROM YOUR LETTER THAT THE PLEDGOR HAS NO INTENTION OF PAYING THE AMOUNT OF ITS INDEBTEDNESS TO THE GOVERNMENT. IN SUCH CIRCUMSTANCES, IT CLEARLY WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT TO RETURN THE MONEY IT NOW HOLDS. IT MAY BE NOTED THAT EVEN IF AVEY BROTHERS LUMBER COMPANY NOW HELD A JUDGMENT AGAINST THE UNITED STATES FOR THE $2,400, SECTION 13 OF THE ACT OF MARCH 3, 1933, 47 STAT. 1516, 31 U.S.C. 227, WOULD REQUIRE WITHHOLDING OF THE AMOUNT FOR POSSIBLE PARTIAL LIQUIDATION OF THEIR INDEBTEDNESS TO THE GOVERNMENT.

ACCORDINGLY, AND NOTWITHSTANDING THE DECISION IN 33 COMP. GEN. 262, IF THE INDEBTEDNESS OF THE AVEY BROTHERS LUMBER COMPANY IS ADMINISTRATIVELY DETERMINED TO BE UNCOLLECTIBLE, IT SHOULD BE SO REPORTED TO THIS OFFICE, AND THE DEPOSIT INVOLVED SHOULD BE FORWARDED HERE TO BE HELD PENDING JUDICIAL DETERMINATION OF THE COMPANY'S INDEBTEDNESS TO THE UNITED STATES.