B-145836, JUN. 14, 1961

B-145836, JUN. 14, 1961

TO LIEUTENANT COLONEL J. WILSON, FC:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 2, 1961, AND ENCLOSURES, FORWARDED HERE BY LETTER OF MAY 5 FROM THE ASSISTANT COMPTROLLER, FOREIGN FINANCIAL AFFAIRS, IN WHICH YOU REQUEST A DECISION CONCERNING A CLAIM PRESENTED BY THE KOREAN NATIONAL RAILWAY FOR PAYMENT FOR SERVICES PERFORMED DURING THE LATTER PART OF 1960. WHILE THE VOUCHER TRANSMITTED THEREWITH INVOLVES THE SUM OF $11.94, IT IS STATED THAT SIMILAR CLAIMS MAY TOTAL APPROXIMATELY $375,000.

DURING THE TIME THE SERVICES IN QUESTION WERE PERFORMED THE OFFICIAL RATE OF EXCHANGE BETWEEN THE KOREAN HWAN AND THE UNITED STATES DOLLAR WAS 650 HWAN TO THE DOLLAR. HOWEVER, BEFORE BILLING WAS MADE THE RATE OF EXCHANGE HAD CHANGED TO 1,000 TO 1, EFFECTIVE JANUARY 1, 1961. PAYMENT FOR THE SERVICES HAS BEEN MADE IN DOLLARS AT THE RATE OF 1,000 TO 1 AND THE VOUCHER HERE INVOLVED REPRESENTS A CLAIM BY THE KOREAN NATIONAL RAILWAY FOR THE DIFFERENCE BETWEEN THE 1,000 TO 1 RATE IN EFFECT AT THE TIME PAYMENT WAS MADE AND THE 650 TO 1 RATE IN EFFECT AT THE TIME THE SERVICES WERE RENDERED.

THE SERVICES WERE RENDERED BY THE KOREAN NATIONAL RAILWAY PURSUANT TO A CONTRACT COVERING THE CALENDAR YEAR 1960. ARTICLE III OF THIS CONTRACT IS ENTITLED "PAYMENT" AND READS AS FOLLOWS:

"PARTY B SHALL BE PAID PROMPTLY FOR SERVICES RENDERED, ON THE SUBMITTAL OF INVOICES, PROLERLY SUPPORTED BY THE DOCUMENTS ENUMERATED HEREIN, BY THE APPROPRIATE DISBURSING OFFICER INDICATED ON THE COVER PAGE HEREOF. PAYMENTS SHALL BE MADE IN THE AMOUNT SHOWN IN PARTY B'S INVOICES, PROVIDED, THAT PARTY A CAN DEDUCT THE AMOUNT OF ANY OVERPAYMENT TO PARTY B FROM AMOUNTS SUBSEQUENTLY FOUND TO BE DUE TO PARTY B.'

THE CONTRACT DOES NOT SPECIFICALLY STATE WHETHER PAYMENT WILL BE MADE IN DOLLARS OR IN HWAN NOR DOES IT STATE WHETHER PAYMENT WILL BE MADE AT THE RATE OF EXCHANGE PREVAILING AT THE TIME SERVICES ARE RENDERED OR AT THE TIME PAYMENT IS MADE.

CONTRASTED TO SUCH PROVISION, ARTICLE VII, WHICH DEALS WITH THE LIABILITY OF THE KOREAN NATIONAL RAILWAY FOR DAMAGE OR INJURY TO CARGO OR PERSONNEL, PROVIDES THAT---

"THE MONETARY VALUE OF CLAIMS WILL BE EXPRESSED IN DOLLARS AND PAYMENT, WHEN MADE, WILL BE IN HWAN AT THE OFFICIAL CONVERSION RATE OF EXCHANGE PREVAILING AT THE TIME PAYMENT IS MADE.'

IN VIEW OF THESE TWO CONTRASTING PROVISIONS, THERE EXISTS A REASONABLE BASIS FOR THE VIEW THAT ARTICLE III CONTEMPLATES THAT PAYMENT FOR SERVICES WILL BE MADE ON A BASIS DIFFERENT FROM THAT PRESCRIBED FOR THE SETTLEMENT OF CLAIMS UNDER ARTICLE VII.

RELATIVE TO ARTICLE III IT IS STATED THAT WHEN NEGOTIATIONS BETWEEN THE PARTIES WERE FIRST ENTERED INTO DURING NOVEMBER 1956, THE KOREAN NATIONAL RAILWAY DEMANDED THAT THE SERVICES BE PREPAID IN ACCORDANCE WITH ITS EXISTING REGULATIONS. THIS DEMAND WAS REFUSED APPARENTLY ON THE BASIS THAT SUCH PREPAYMENT WAS PRECLUDED BY REASON OF THE PROHIBITION AGAINST ADVANCE PAYMENTS CONTAINED IN SECTION 3648, REVISED STATUTES, 31 U.S.C. 529. THE KOREAN NATIONAL RAILWAY THEN SUBMITTED TO THE ARMY'S REFUSAL TO MAKE PREPAYMENT AND THE PAYMENT ARTICLE IN QUESTION WAS AGREED TO.

THE KOREAN NATIONAL RAILWAY URGES THAT HAD THIS SPECIAL DISPENSATION REGARDING PREPAYMENT NOT BEEN GRANTED, PAYMENT TO THE KOREAN NATIONAL RAILWAY FOR THE SERVICES RENDERED WOULD HAVE BEEN REQUIRED IN HWAN BASED ON THE EXCHANGE RATE IN EFFECT AT THE TIME SERVICES WERE RENDERED AND, CONSEQUENTLY, REIMBURSEMENT SHOULD BE MADE ACCORDINGLY.

IT IS REPORTED THAT ALL RATES FOR SERVICES RENDERED ARE STATED IN TERMS OF HWAN AND THAT ALL BILLINGS ARE ACCOMPLISHED IN TERMS OF HWAN. HOWEVER, IN ACCORDANCE WITH AGREEMENTS BETWEEN THE TWO GOVERNMENTS CONCERNED AND EVIDENCED BY A PRACTICE ADOPTED IN 1956, ALL PAYMENTS FOR SERVICES RENDERED HAVE BEEN MADE IN DOLLARS.

IT IS CLEAR, OF COURSE, AS URGED BY THE KOREAN NATIONAL RAILWAY, THAT IF PREPAYMENT WERE REQUIRED, PAYMENT WOULD BE MADE AT THE RATE OF EXCHANGE IN EFFECT AT THE TIME OF DELIVERY AND THE RECORD CONTAINS NOTHING TO INDICATE THAT THE PARTIES IN AGREEING TO REIMBURSEMENT RATHER THAN PREPAYMENT FOR SERVICES RENDERED CONTEMPLATED THAT ONE OR THE OTHER WOULD STAND TO LOSE OR GAIN BY A CHANGE IN THE EXCHANGE RATE OCCURRING AFTER DELIVERY BUT PRIOR TO PAYMENT. FURTHERMORE, IT IS REPORTED THAT A SIMILAR QUESTION TO THAT NOW PRESENTED AROSE WHEN ON JANUARY 20, 1960, THE OFFICIAL RATE OF EXCHANGE WAS CHANGED FROM 500 HWAN TO 1 DOLLAR TO 650 HWAN TO 1 DOLLAR. IN THE SETTLEMENT OF THAT QUESTION INVOICES SUBMITTED SUBSEQUENT TO JANUARY 20, 1960, BUT COVERING SERVICES RENDERED PRIOR TO THAT DATE WERE PAID IN DOLLARS AT THE EXCHANGE RATE IN EFFECT AT THE TIME THE SERVICES WERE FURNISHED. THIS WAS ACCOMPLISHED AFTER AGREEMENT BY REPRESENTATIVES OF THE UNITED STATES EMBASSY AND THE KOREAN MINISTRY OF FINANCE.

SUCH PAYMENT DOES NOT APPEAR TO HAVE BEEN CONTRARY TO THE CONTRACT PROVISIONS AND THE COURTS IN CONSTRUING AMBIGUOUS PROVISIONS OF A CONTRACT HAVE GIVEN GREAT WEIGHT TO THE INTERPRETATION PLACED THEREON BY THE CONDUCT OF THE CONTRACTING PARTIES. SEE WILLISTON ON CONTRACTS, VOL. 3 SEC. 623, AND NEW YORK AND PENNSYLVANIA CO. V. DAVIS, DIRECTOR GENERAL OF RAILROADS AND AGENT, 9 F.2D 911.

ACCORDINGLY, THE INSTANT AND SIMILAR CLAIMS PRESENTED UNDER THIS CONTRACT MAY BE SETTLED ON THE BASIS OF THE RATE OF EXCHANGE IN EFFECT ON THE DATE SERVICES WERE RENDERED.