B-142740, MAY 11, 1960

B-142740: May 11, 1960

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TO SECRETARY OF THE ARMY: REFERENCE IS MADE TO A LETTER DATED MARCH 16. THE CONTRACTING OFFICER NOTIFIED THE CONTRACTOR THAT ITS RIGHT TO PROCEED UNDER THE CONTRACT WAS TERMINATED FOR DEFAULT. A REPLACEMENT CONTRACT WAS NEGOTIATED WITH ANOTHER FRENCH CONCERN WITH NO EXCESS COSTS. IT WAS. DETERMINED THAT THE DEFAULTING CONTRACTOR WAS LIABLE FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $7. WAS APPLIED AGAINST THE INDEBTEDNESS OF $6. IT WAS STATED IN THE ENDORSEMENT OF MARCH 5. THAT CERTAIN PROCEDURE IS BEING FOLLOWED BY THE FINANCE AND ACCOUNTING OFFICER. THAT THE GOVERNMENT'S CLAIM WILL RECEIVE CONSIDERATION EQUAL TO THAT OF ALL OTHER CREDITORS. THAT NO FURTHER ACTION IS NECESSARY AT THE PRESENT TIME TO ESTABLISH THE CLAIM.

B-142740, MAY 11, 1960

TO SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MARCH 16, 1960 (JAGL 1958/3139 P), FROM LIEUTENANT COLONEL MERLE C. RIDEOUT, JR., CHIEF, PROCUREMENT BRANCH, LITIGATION DIVISION, TRANSMITTING A COPY OF SECOND ENDORSEMENT DATED MARCH 5, 1960, WITH ENCLOSURES, FROM HEADQUARTERS, U.S. ARMY EUROPE (REAR) (COMZ, APO 58, U.S. FORCES, RELATING TO THE CLAIM OF THE UNITED STATES AGAINST TOUS REVETEMENTS MODERNES IN THE NET AMOUNT OF $5,451.03, ARISING OUT OF THE DEBTOR'S DEFAULT UNDER CONTRACT NO. DA 91-618-EUC-468, DATED JUNE 18, 1957, FOR REPAIR OF FLOORING AT THE U.S. MILITARY HOSPITAL LOCATED AT LA CHAPELLE ST-MESMIN, LOIRET, FRANCE.

THE RECORD INDICATES THAT UNDER DATE OF JANUARY 13, 1958, THE CONTRACTOR SIGNIFIED ITS INABILITY TO COMPLETE THE CONTRACT WORK BECAUSE OF BEING INVOLVED IN INSOLVENCY PROCEEDINGS AND REQUESTED DENUNCIATION OF THE CONTRACT. BY LETTER OF JANUARY 15, 1958, THE CONTRACTING OFFICER NOTIFIED THE CONTRACTOR THAT ITS RIGHT TO PROCEED UNDER THE CONTRACT WAS TERMINATED FOR DEFAULT. A REPLACEMENT CONTRACT WAS NEGOTIATED WITH ANOTHER FRENCH CONCERN WITH NO EXCESS COSTS. IT WAS, HOWEVER, DETERMINED THAT THE DEFAULTING CONTRACTOR WAS LIABLE FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $7,550. THE CONTRACTOR APPEALED FROM THE DECISION OF THE CONTRACTING OFFICER AND IN AN OPINION RENDERED FEBRUARY 25, 1959, THE U.S. ARMY BOARD OF CONTRACT APPEALS AT HEIDELBERG, GERMANY, HELD THAT THE GOVERNMENT'S CLAIM FOR LIQUIDATED DAMAGES SHOULD BE REDUCED TO $6,700. IT APPEARS THAT THE SUM OF $1,248.97, OTHERWISE PAYABLE TO THE DEBTOR UNDER THE CONTRACT, WAS APPLIED AGAINST THE INDEBTEDNESS OF $6,700, THEREBY REDUCING THE GOVERNMENT'S CLAIM TO $5,451.03.

IT WAS STATED IN THE ENDORSEMENT OF MARCH 5, 1960, THAT CERTAIN PROCEDURE IS BEING FOLLOWED BY THE FINANCE AND ACCOUNTING OFFICER, PARIS, TO OBTAIN PAYMENT OF THE AMOUNT DUE THE UNITED STATES; THAT THE GOVERNMENT'S CLAIM WILL RECEIVE CONSIDERATION EQUAL TO THAT OF ALL OTHER CREDITORS; AND THAT NO FURTHER ACTION IS NECESSARY AT THE PRESENT TIME TO ESTABLISH THE CLAIM. IT WAS STATED FURTHER, HOWEVER, THAT IN THE EVENT OF DEFAULT BY THE DEBTOR, THE CREDITORS WILL BE PERMITTED TO INSTITUTE PROCEEDINGS IN BANKRUPTCY UNDER WHICH THE COURT WOULD TAKE POSSESSION OF THE PROPERTY OF THE DEBTOR, AND THAT, AS A PREREQUISITE TO BENEFITING IN SUCH PROCEEDINGS, THE UNITED STATES WILL BE REQUIRED TO FILE WITH THE COURT DOCUMENTARY EVIDENCE OF ITS CLAIM SIMILAR TO A PROOF OF CLAIM UNDER UNITED STATES LAWS. RESPECTING THIS SITUATION, LIEUTENANT COLONEL RIDEOUT STATED IN HIS LETTER OF MARCH 16, 1960, THAT---

"THIS OFFICE WOULD APPRECIATE YOUR COMMENTS ON THE QUESTION RAISED IN PARAGRAPH 4 OF THE SECOND INDORSEMENT, I.E., THE POSITION OF THE UNITED STATES RELATIVE TO SUBMITTING ITSELF TO THE JURISDICTION OF A FOREIGN COURT, THROUGH FILING A PROOF OF CLAIM IN A BANKRUPTCY PROCEEDING. WHILE THIS OFFICE IS OF THE OPINION THAT NO PARTICULAR JURISDICTIONAL PROBLEM EXISTS, AND THAT THE GOVERNMENT WOULD NOT HESITATE TO ASSERT ITS JUST CLAIMS IN A FOREIGN COURT, IT WOULD BE HELPFUL TO HAVE CLARIFICATION OF THE PROCEDURES TO BE ADOPTED IN SUCH A PROCEEDING.'

THE PROCEDURE OBTAINING IN THE GENERAL ACCOUNTING OFFICE, RESPECTING THE FILING OF CLAIMS AGAINST FOREIGN DEBTORS, IS TO REFER THEM TO THE DEPARTMENT OF JUSTICE FOR APPROPRIATE ACTION. OUR RECORDS INDICATE THAT IT IS THE PRACTICE OF THAT DEPARTMENT TO SUBMIT SUCH CLAIMS TO THE JURISDICTION OF THE BANKRUPTCY COURTS IN THE COUNTRIES INVOLVED. IN A SOMEWHAT RECENT CASE INVOLVING A SUBSTANTIAL CLAIM AGAINST A DEFAULTING CONTRACTOR AT JOHANNESBURG, TRANSVAAL, SOUTH AFRICA, THE RECORDS SHOW THAT THE DEPARTMENT OF JUSTICE EMPLOYED A FIRM OF ATTORNEYS IN THAT CITY TO REPRESENT THE UNITED STATES IN THE LIQUIDATION PROCEEDINGS, PENDING IN THE HIGH COURT OF SOUTH WEST AFRICA, INVOLVING THE DEBTOR. IT MAY BE SAID GENERALLY THAT WE KNOW OF NO WAY, EXCEPT POSSIBLY DIPLOMATIC REPRESENTATIONS, IN WHICH RECOVERY OF SUCH CLAIMS MAY BE EFFECTED OTHER THAN SUBMITTING THEM TO THE JURISDICTION OF THE LOCAL BANKRUPTCY COURTS.