B-158361, FEB. 9, 1966

B-158361: Feb 9, 1966

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KOEGEL AND ROGERS: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 8. APPARENTLY YOUR LETTER WAS PROMPTED BY A LETTER OF AUGUST 16. A COPY OF WHICH IS ENCLOSED FOR YOUR INFORMATION. IN THIS LETTER WE REPORTED THE THEN EXISTING DEBTS OF THE COMPANIES TO THE UNITED STATES BECAUSE OF OVERCHARGES WERE AS FOLLOWS: CHART REPUBLIC CARLOADING AND DISTRIBUTING CO. 310.22 YOU STATE THAT IT IS YOUR BELIEF THAT THE GOVERNMENT NOW HAS BEEN PAID FOR ALL SUCH OVERCHARGES AND THAT THE UNITED STATES OWES REPUBLIC IN EXCESS OF $281. WE HAVE NO RECORD OF SUCH OVERCHARGES BEING SATISFIED. IF THESE OVERCHARGES HAVE BEEN PAID. TO WHOM SUCH PAYMENT WAS MADE SO THAT OUR RECORDS CAN BE RECONCILED WITH YOURS. ARRANGEMENTS WERE BEING MADE TO PAY BILLS FOR TRANSPORTATION SERVICES ACCOMPLISHED ON AND SUBSEQUENT TO THE DATE THE TRUSTEE QUALIFIED.

B-158361, FEB. 9, 1966

ROYALL, KOEGEL AND ROGERS:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 8, 1965, WITH ENCLOSURE, RELATIVE TO PROMPT SETTLEMENT OF THE CLAIMS AGAINST THE UNITED STATES OF REPUBLIC CARLOADING AND DISTRIBUTING COMPANY, INC., AND OTHER SUBSIDIARIES INVOLVED IN THE REORGANIZATION OF YALE EXPRESS SYSTEM, INC.

APPARENTLY YOUR LETTER WAS PROMPTED BY A LETTER OF AUGUST 16, 1965, FROM OUR TRANSPORTATION DIVISION, A COPY OF WHICH IS ENCLOSED FOR YOUR INFORMATION. IN THIS LETTER WE REPORTED THE THEN EXISTING DEBTS OF THE COMPANIES TO THE UNITED STATES BECAUSE OF OVERCHARGES WERE AS FOLLOWS:

CHART

REPUBLIC CARLOADING AND DISTRIBUTING CO., INC. $46,586.14

GULF CARLOADING CO., INC. 1,388.86

YALE EXPRESS SYSTEM, INC. 149.25

YALE TRANSPORT CORP. 185.97

$48,310.22

YOU STATE THAT IT IS YOUR BELIEF THAT THE GOVERNMENT NOW HAS BEEN PAID FOR ALL SUCH OVERCHARGES AND THAT THE UNITED STATES OWES REPUBLIC IN EXCESS OF $281,000 IN UNPAID FREIGHT TRANSPORTATION BILLS. WE HAVE NO RECORD OF SUCH OVERCHARGES BEING SATISFIED. HOWEVER, IF THESE OVERCHARGES HAVE BEEN PAID, PLEASE FURNISH OUR OFFICE WITH BILL OF LADING AND VOUCHER REFERENCES TOGETHER WITH ADVICE AS TO THE CHECK NUMBER, DATE OF PAYMENT, AND TO WHOM SUCH PAYMENT WAS MADE SO THAT OUR RECORDS CAN BE RECONCILED WITH YOURS.

AS INDICATED IN OUR LETTER OF AUGUST 16, 1965, ARRANGEMENTS WERE BEING MADE TO PAY BILLS FOR TRANSPORTATION SERVICES ACCOMPLISHED ON AND SUBSEQUENT TO THE DATE THE TRUSTEE QUALIFIED. UNPAID BILLS IN THIS CATEGORY WHICH WERE FORWARDED TO THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT WERE RETURNED TO THE ADMINISTRATIVE OFFICES FOR PAYMENT AND THE MILITARY AGENCIES WERE INFORMED TO RESUME PAYMENT OF LIKE BILLS FOR SERVICES ACCOMPLISHED ON AND AFTER THE DATE OF QUALIFICATION OF THE TRUSTEE. AS FAR AS OUR RECORDS SHOW THE ADMINISTRATIVE AGENCIES ARE PAYING AND PROCESSING IN THE NORMAL MANNER BILLS FOR TRANSPORTATION SERVICES RENDERED SUBSEQUENT TO THE DATE THE TRUSTEE QUALIFIED. IF THE CORPORATIONS IN REORGANIZATION HAVE NOT RECEIVED OR DO NOT RECEIVE PAYMENT OF SUCH BILLS WITHIN A REASONABLE PERIOD AFTER THE BILLS ARE PRESENTED, IT IS SUGGESTED THAT THEY TRACE WITH THE AGENCIES WITH WHICH THE BILLS ARE FILED THE CURRENT STATUS OF THE HANDLING OF SUCH BILLS.

WE ALSO INDICATED IN OUR LETTER OF AUGUST 16 THAT ARRANGEMENTS WERE BEING MADE FOR AN ACCELERATED AUDIT OF THE PRE-REORGANIZATION BILLS. ALTHOUGH SUCH AUDIT IS NOT 100 PERCENT COMPLETED, NEVERTHELESS OUR RECORDS OF DECEMBER 20, 1965, DISCLOSE THE FOLLOWING:

CHART

DUE CARRIER OR

CARRIER'S CLAIMS OF RECORD AVAILABLE FOR SETOFF CARRIER NO.

AMOUNT NO. AUDITED AMOUNT REPUBLIC CARLOADING

AND DISTRIBUTING

CO. 128 $116,605 123 $106,756 YALE EXPRESS SYSTEM 16

1,871 16 1,599 YALE TRANSPORT CORP. 19 2,693 19 2,693 GULF CARLOADING AND

DISTRIBUTING CO. 22 15,886 17 5,151

185 $137,055 175 $116,199

THUS, WITH ONLY 10 CLAIMS OF RECORD UNAUDITED THERE IS APPARENTLY DUE THE CARRIERS EXCEPT FOR THEIR UNSATISFIED DEBTS TO THE UNITED STATES AND THE REORGANIZATION PROCEEDINGS THE AMOUNT OF $116,199 FOR SERVICES RENDERED PRIOR TO THE DATE OF REORGANIZATION. THIS AMOUNT IS SUBSTANTIALLY LESS THAN THE $281,000 YOU REPORT AND WE ASSUME THE DIFFERENCE REPRESENTS BILLS WHICH ACCRUED SUBSEQUENT TO THE TRUSTEE QUALIFYING AND WHICH WE INDICATED WOULD BE PAID IN DUE COURSE. ON THE OTHER HAND, AS OF DECEMBER 31, 1965, WE HAVE ACCOUNTS RECEIVABLE AS FOLLOWS:

CHART CARRIER FREIGHT OVERCHARGE LOSS AND DAMAGE TOTAL REPUBLIC CARLOADING

AND DISTRIBUTING CO. $60,656.15 $9,992.62 $70,648.77 YALE EXPRESS SYSTEM 142.50 142.50 YALE TRANSPORT CORP. 430.37

430.37 GULF CARLOADING AND

DISTRIBUTING CO. 2,455.23 138.85 2,594.08

$63,684.25 $10,131.47 $73,815.72

IN ADDITION TO THIS $73,815.72 DUE THE UNITED STATES FROM THE DEBTORS, WE HAVE BEEN INFORMED THAT THE FINANCE CENTER, U.S. ARMY, HAS DEBTS IN THE APPROXIMATE AMOUNT OF $3,500 WHICH ARE BEING REFERRED TO OUR OFFICE FOR COLLECTION. THUS THERE ARE DEBTS IN THE AMOUNT OF AT LEAST APPROXIMATELY $77,315.72 DUE THE UNITED STATES WHICH IS A SUBSTANTIAL INCREASE IN THE INDEBTEDNESS OF RECORD IN AUGUST 1965.

SUBTRACTING THE AMOUNT OWED TO THE UNITED STATES BY THE DEBTOR COMPANIES OF $77,315.72 FROM THE AMOUNT WHICH OUR RECORDS SHOW AS BEING DUE THE DEBTOR COMPANIES FROM THE UNITED STATES OF $116,199, THERE IS A NET CREDIT OF $38,883.28 REMAINING DUE THE DEBTOR COMPANIES WHICH THE GOVERNMENT IS PRESENTLY HOLDING. ON JULY 31, 1965, THE TRUSTEE IN THE REORGANIZATION WAS QUALIFIED AND APPOINTED TRUSTEE OF THE ESTATES FOR THE DEBTORS AND WE HAVE DETERMINED THE MUTUALITY OF THE AFOREMENTIONED DEBTS AND CREDITS FOR SETOFF PURPOSES AS OF THAT DATE. DEBTS AND CREDITS ARISING OUT OF TRANSACTIONS WHICH ACCRUED BEFORE SUCH DATE ARE MUTUAL AND PROPER FOR SETOFF BY THE GOVERNMENT PURSUANT TO 11 U.S.C. 108 (A) AND 11 U.S.C. 601.

YOU STATE THAT JUDGE TYLER'S OPINION OF OCTOBER 8, 1965, IN THE MATTER OF YALE EXPRESS SYSTEM, INC. (APPLICATION OF BOSTON INSURANCE COMPANY), U.S.D.C., S.D. OF NEW YORK, CIVIL ACTION NO. 65 B 404, HELD THAT THE INSURANCE COMPANY MUST PAY ALL CARGO LOSS AND DAMAGE CLAIMS FILED AGAINST IT, NOTWITHSTANDING THAT SOME CLAIMANTS MIGHT OWE PRE REORGANIZATION FREIGHT CHARGES TO THE DEBTORS. IT SEEMS TO BE YOUR OPINION THAT SUCH DECISION PRECLUDES THE GOVERNMENT FROM SETTING OFF ITS CARGO LOSS AND DAMAGE CLAIMS AGAINST PRE-REORGANIZATION FREIGHT CHARGES OWED BY IT.

WE DO NOT CONSTRUE JUDGE TYLER'S OPINION AS BARRING THE GOVERNMENT FROM OFFSETTING THE LOSS AND DAMAGE CLAIMS. ALL THE OPINION SEEMS TO HOLD, AS FAR AS OUR PROBLEM IS CONCERNED, IS THAT THE INSURER IS NOT SUBROGATED TO THE RIGHTS OF THE INSURED UNDER THE LAW AND ITS INDORSEMENTS, AND THEREFORE THE INSURER CANNOT SET OFF FREIGHT CHARGES DUE FROM SHIPPERS AGAINST PAYMENTS REQUIRED TO BE MADE UNDER THE POLICIES. THERE SEEMS TO BE NOTHING IN JUDGE TYLER'S OPINION THAT WOULD PRECLUDE US FROM OFFSETTING THE MUTUAL ITEMS OF INDEBTEDNESS OR REQUIRE THE GOVERNMENT TO FIRST FILE CLAIMS WITH THE INSURANCE COMPANY -- ALTHOUGH WE AGREE WE WOULD HAVE THE RIGHT TO DO SO--- SINCE SUCH ACTION WOULD ONLY RESULT IN OUR INCURRING ADDITIONAL AND NEEDLESS EXPENSE. THE DEBTOR ESTATES ARE INDEBTED UNDER 49 U.S.C. 20 (11) AND 1013 FOR LOSS AND DAMAGE TO SHIPPERS' PROPERTY AND TO THE EXTENT OF SUCH LOSS AND DAMAGE, IT IS BELIEVED WE HAVE THE RIGHT TO SET OFF CREDITS IN OUR HANDS OTHERWISE DUE THE DEBTOR ESTATE WITHOUT REGARD TO ANY POLICIES OF INSURANCE. SINCE WE DON-T PURPORT TO RELY ON ANY INSURANCE OR INDORSEMENTS THEREON, THE ONLY STATEMENT IN JUDGE TYLER'S OPINION THAT SEEMS TO US TO BE MATERIAL THAT

"IN THE FIRST PLACE, NEITHER THE PLAIN LANGUAGE OF THE ENDORSEMENTS NOR THE APPARENT PURPOSE OF THE UNDERLYING SECTIONS OF THE MOTOR CARRIERS ACT AND THE NEW YORK PUBLIC SERVICE LAW CAN BE REASONABLY CONSTRUED TO AUTHORIZE SHIPPERS TO MAKE SET-OFFS UNDER THE PROVISIONS OF SECTION 68 (A) OF THE ACT.' DOES NOT APPEAR TO AFFECT THE GOVERNMENT'S RIGHTS IN THE MATTER. OUR OFFICE IS NOT AND DOES NOT PROPOSE, ON THE PRESENT RECORD, TO RELY ON THE INDORSEMENTS ON THE INSURANCE POLICY OR THE SECTIONS OF THE MOTOR CARRIERS ACTS OR THE NEW YORK PUBLIC SERVICE LAW PERTINENT THERETO, HENCE, ANY RIGHTS AS BETWEEN THE INSURANCE COMPANY AND THE DEBTOR ESTATES IS A MATTER IN WHICH WE DO NOT PROPOSE TO BECOME INVOLVED.

IN A LETTER OF OCTOBER 25, 1965, COPY ENCLOSED, FROM OUR TRANSPORTATION DIVISION TO REPUBLIC CARLOADING AND DISTRIBUTING COMPANY, INC., WE ADVISED REPUBLIC THAT SINCE NO REPLY HAD BEEN RECEIVED TO THE LETTER OF AUGUST 16, 1965, AND ASSUMING THAT NO ANSWER WAS RECEIVED WITHIN 60 DAYS, WE WOULD PROCEED TO EFFECT COLLECTION OF THE DEBT BY SETOFF. HOWEVER, IN VIEW OF YOUR LETTER OF DECEMBER 8, 1965, INDICATING YOUR BELIEF THAT THE OVERCHARGES HAVE BEEN PAID AND THE EXISTENCE OF SOME $281,000 IN UNPAID FREIGHT BILLS OF REPUBLIC, WE WILL SUSPEND ANY DEDUCTION ACTION FOR A REASONABLE TIME PENDING THE VERIFICATION AND RECONCILIATION OF YOUR FIGURES WITH THOSE DISCLOSED IN OUR RECORDS. YOU MAY BE ASSURED THAT WHILE, IN CARRYING OUT OUR STATUTORY DUTIES, WE FEEL CONSTRAINED NOT TO RELEASE FUNDS OTHERWISE DUE THE BANKRUPT COMPANIES FROM THE UNITED STATES UNTIL THEIR DEBTS TO THE GOVERNMENT HAVE BEEN SATISFIED, WE PROPOSE TO DO OUR UTMOST TO SPEEDILY RESOLVE THE MUTUAL DEBTS AND TO RELEASE ANY EXCESS TO THE PROPER CLAIMANT.