B-150897, APR. 15, 1963

B-150897, APR. 15, 1963

TO MR. L. P. WILSEY, FOREST SERVICE, DEPARTMENT OF AGRICULTURE:

REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 23, 1963 (R5-63-8), WITH ENCLOSURES, REFERRING TO OUR CLAIMS DIVISION FOR SETTLEMENT A CLAIM SUBMITTED BY MR. JOSEPH CEDAR, 12807 1/2 SHERMAN WAY, NORTH HOLLYWOOD, CALIFORNIA, FOR REFUND OF THE SUM OF $200 DEPOSITED BY HIM UNDER CONTRACT NO. 12-11-115-34, DATED OCTOBER 3, 1960.

UNDER THE TERMS OF THE INDICATED CONTRACT THE FOREST SERVICE AGREED TO SELL AND THE CONTRACTOR AGREED TO PURCHASE FOR THE CONTRACT PRICE OF $2,150 ALL OF THE CHRISTMAS TREES MARKED OR DESIGNATED FOR CUTTING BY THE FOREST SERVICE WITHIN CERTAIN DESIGNATED AREAS. IT WAS REPORTED THAT A $200 DEPOSIT ACCOMPANIED THE CONTRACTOR'S BID. IT WAS A CONDITION OF THE CONTRACT THAT NO TREES WERE TO BE CUT UNTIL PAID FOR. THE CONTRACT PROVIDED FURTHER THAT THE CUTTING AND REMOVAL OF THE CHRISTMAS TREES SHOULD BEGIN NOT LATER THAN OCTOBER 10, 1960, AND THAT UNLESS AN EXTENSION OF TIME WAS GRANTED, ALL TREES SHOULD BE CUT AND REMOVED AND THE REQUIREMENTS OF THE CONTRACT SATISFIED ON OR BEFORE NOVEMBER 15, 1960.

IT WAS REPORTED THAT AT THE EXPIRATION DATE OF THE CONTRACT NO TREESHAD BEEN CUT OR REMOVED. IN OTHER WORDS, IT APPEARS THAT NO EFFORT WAS MADE BY THE CONTRACTOR TO COMPLY WITH THE TERMS OF THE CONTRACT. THE CONTRACTOR WAS BILLED FOR THE BALANCE OF $1,950 DUE UNDER THE CONTRACT, AND BY LETTER OF NOVEMBER 20, 1960, HE REQUESTED A REFUND OF THE DEPOSIT AND LISTED THE REASONS WHY NONE OF THE TREES WAS CUT. IT WAS ADMINISTRATIVELY DETERMINED THAT NONE OF THE REASONS ADVANCED BY THE CONTRACTOR COULD BE CONSIDERED AS VALID.

THE BASIS FOR THE ADMINISTRATIVE DETERMINATION THAT THE CONTRACTOR IS LIABLE TO THE UNITED STATES IN THE NET AMOUNT OF $1,950 APPEARS TO ARISE OUT OF THE FACT THAT FOLLOWING THE CONTRACTOR'S DEFAULT UNDER THE CONTRACT IT WAS IMPOSSIBLE FOR THE GOVERNMENT TO MITIGATE THE LOSS THROUGH READVERTISEMENT AND RESALE OF THE CHRISTMAS TREES. IN THIS CONNECTION, WE HAVE NOTED A PARAGRAPH IN A LETTER DATED NOVEMBER 21, 1962, FROM THE ACTING REGIONAL ATTORNEY TO THE CONTRACTOR, AS FOLLOWS:

"THE FOREST SERVICE ATTEMPTED TO MITIGATE ITS DAMAGES RESULTING FROM YOUR DEFAULT BY READVERTISING THE PROPOSED SALE DURING THE 1961 CHRISTMAS TREE SEASON. THE ADVERTISEMENT WAS CONDUCTED IN THE SAME MANNER AS IN 1960 BUT THERE WERE NO BIDDERS. THE FOREST SERVICE INTENDED TO MAKE ANOTHER ATTEMPT TO MITIGATE ITS DAMAGES THIS YEAR BUT SINCE THE CONTRACT AREA IS WITHIN THE BOUNDARIES OF A TIMBER SALE, WHICH IS NOW UNDER WAY, READVERTISEMENT OF THE CHRISTMAS TREES WILL NOT BE POSSIBLE.'

IT APPEARS THAT THE INDICATED DEPOSIT WAS INTENDED BY THE CONTRACTOR TO BE IN LIEU OF A SURETY BOND AS PERMITTED BY THE PROVISION OF PARAGRAPH 19 OF THE CONTRACT. THAT PARAGRAPH ALSO PROVIDED THAT AS SOON AS SECURITY FOR THE PERFORMANCE OF THE CONTRACT OR THE SETTLEMENT OF CLAIMS INCIDENT THERETO IS NO LONGER NECESSARY, DEPOSITS IN LIEU OF SURETY BOND WOULD, SUBJECT TO THE CONDITIONS SET FORTH IN PARAGRAPH 20 OF THE CONTRACT, BE RETURNED TO THE CONTRACTOR. IT SEEMS CLEAR THAT UNDER THOSE PROVISIONS THE DEPOSIT OF $200 IS NOT REFUNDABLE SINCE THERE ARE FOR SETTLEMENT ,CLAIMS INCIDENT" TO THE CONTRACT. IF ADDITIONAL AUTHORITY IS CONSIDERED NECESSARY TO THE WITHHOLDING OF THE DEPOSIT, IT APPEARS TO BE FOUND IN PARAGRAPH 26 OF THE DEFAULTED CONTRACT, AS FOLLOWS:

"UPON FAILURE ON THE PART OF THE PURCHASER TO FULFILL ALL AND SINGULAR THE REQUIREMENTS HEREIN SET FORTH, OR ATTACHED AND MADE A PART HEREOF, ALL MONEYS ADVANCED OR DEPOSITED UNDER THIS CONTRACT MAY BE RETAINED BY THE FOREST SERVICE TO BE APPLIED TOWARD THE SATISFACTION OF THE PURCHASER'S OBLIGATIONS HEREUNDER WITHOUT PREJUDICE WHATEVER TO ANY OTHER RIGHTS AND REMEDIES OF THE FOREST SERVICE.'

UNDER DATE OF OCTOBER 2, 1962, CONTRACT NO. 11-18 WAS ENTERED INTO WITH MR. CEDAR UNDER WHICH THE FOREST SERVICE AGREED TO SELL AND THE CONTRACTOR AGREED TO PURCHASE ALL OF THE CHRISTMAS TREES MARKED OR DESIGNATED FOR CUTTING BY THE FOREST SERVICE WITHIN CERTAIN DESIGNATED AREAS (PARCEL 7). IT WAS REPORTED THAT THE CONTRACTOR CUT AND REMOVED TREES PRICED AT $4,841.76, AND THAT WHEN THE CONTRACT EXPIRED ON NOVEMBER 30, 1962, A BALANCE OF $1,878.24 REMAINED ON DEPOSIT. OUR APPROVAL IS REQUESTED TO APPLY THE AMOUNTS OF $200 AND $1,878.24 AGAINST THE CONTRACTOR'S INDEBTEDNESS OF $2,150 ARISING OUT OF HIS DEFAULT UNDER CONTRACT NO. 12-11 -115-34, DATED OCTOBER 3, 1960. IT IS ASSUMED THAT THE TREES CUT AND REMOVED BY THE CONTRACTOR AT THE REPORTED PRICE OF $4,841.76, REPRESENTED ALL OF THE TREES MARKED OR DESIGNATED FOR CUTTING BY THE FOREST SERVICE, THUS JUSTIFYING A REFUND OF $1,878.24--- THE BALANCE OF THE DEPOSIT.

UNDER THE CONTRACT PROVISIONS HEREINBEFORE REFERRED TO AND ACCEPTING THE ADMINISTRATIVE DETERMINATION THAT THE CONTRACTOR DEFAULTED UNDER THE CONTRACT OF OCTOBER 3, 1960, THERE APPEARS TO BE NO QUESTION AS TO THE RIGHT OF THE UNITED STATES TO APPLY THE AMOUNT OF $200 IN PARTIAL LIQUIDATION OF THE CONTRACTOR'S INDEBTEDNESS.

THE FIRST PAYMENT UNDER CONTRACT NO. 11-18 WAS REQUIRED TO COVER THE TOTAL ESTIMATED NUMBER OF TREES AT THE BID PRICE--- 6,000 TREES AT $1.12 EACH. THE AMOUNT OF $1,878.24 THUS REPRESENTS THE BALANCE OF THE CONTRACT PAYMENT ($6,720) AFTER DEDUCTION FOR THE TREES ACTUALLY CUT AND REMOVED. CONTRACT NO. 11-18 CONTAINS PROVISIONS SIMILAR TO THOSE QUOTED ABOVE FROM THE CONTRACT DATED OCTOBER 3, 1960. HOWEVER, THOSE PROVISIONS WERE TO BECOME EFFECTIVE ONLY IN THE EVENT OF THE CONTRACTOR'S DEFAULT. THERE IS NO SHOWING THAT MR. CEDAR DEFAULTED UNDER CONTRACT NO. 11-18, IT APPEARING PROBABLE THAT THE CUTTING OF LESS THAN THE STATED CONTRACT QUANTITY COVERED ONLY THOSE TREES MARKED FOR CUTTING BY THE FOREST SERVICE. WE DO NOT FIND ANY CONTRACT PROVISION COVERING THE DISPOSITION OF AMOUNTS REMAINING ON DEPOSIT AS A BALANCE OF THE CONTRACT PRICE. THUS, THERE COMES INTO OPERATION THE RIGHT OF THE UNITED STATES, AS CONSTRUED BY THE COURTS, TO APPLY SUMS IN ITS HANDS TO THE EXTINGUISHMENT OF DEBTS DUE THE UNITED STATES. SEE SEABOARD SURETY COMPANY V. UNITED STATES, 67 F.SUPP. 969, 971, AND BARRY V. UNITED STATES, 229 U.S. 47. IT IS OUR VIEW THAT UNDER THE AUTHORITY OF THE CITED DECISIONS THE AMOUNT OF $1,878.24 MAY ALSO BE APPLIED IN REDUCTION OF THE CONTRACTOR'S INDEBTEDNESS.