B-162293, SEP. 29, 1967

B-162293: Sep 29, 1967

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UNDER CONTRACTS DATED IN 1952 AND 1954 ARE BARRED BY STATUTE OF LIMITATIONS. WHERE CONTRACTOR AND CONTRACTING AGENCY WERE IN NEGOTIATIONS CONCERNING CLAIMS INCIDENT TO TERMINATION OF CONTRACTS FOR A LONG PERIOD OF TIME THE CONTRACTOR'S TERMINATION CLAIM MAY BE REGARDED AS FIRST OCCURRING ON THE DATE HE ELECTED NOT TO FILE AN APPEAL FROM THE CONTRACTING OFFICER'S DECISION OF SEPTEMBER 14. THEREFORE NO OBJECTION WILL BE MADE TO ADMINISTRATIVE ALLOWANCE OF THE CLAIM AND THE APPLICATION OF SUCH AMOUNT TO THE CREDIT OF THE CONTRACTOR'S TAX AND INDEBTEDNESS. SECRETARY: REFERENCE IS MADE TO A LETTER DATED AUGUST 16. THE AMOUNTS OF THE CLAIMS ARE NOT QUESTIONED BUT THERE IS INVOLVED THE QUESTION WHETHER THE CLAIMS ARE BARRED BY THE TEN-YEAR STATUTE OF LIMITATIONS AFFECTING THE CLAIMS SETTLEMENT JURISDICTION OF OUR OFFICE (31 U.S.C. 71A).

B-162293, SEP. 29, 1967

CONTRACTS - PAYMENTS - TERMINATION DECISION TO SECY. OF THE ARMY CONCERNING WHETHER CLAIMS OF UNITED AUTO PARTS CO., INC. UNDER CONTRACTS DATED IN 1952 AND 1954 ARE BARRED BY STATUTE OF LIMITATIONS. WHERE CONTRACTOR AND CONTRACTING AGENCY WERE IN NEGOTIATIONS CONCERNING CLAIMS INCIDENT TO TERMINATION OF CONTRACTS FOR A LONG PERIOD OF TIME THE CONTRACTOR'S TERMINATION CLAIM MAY BE REGARDED AS FIRST OCCURRING ON THE DATE HE ELECTED NOT TO FILE AN APPEAL FROM THE CONTRACTING OFFICER'S DECISION OF SEPTEMBER 14, 1965, AND TO REQUEST PAYMENT OF THE CLAIM (OCT. 4, 1965). THEREFORE NO OBJECTION WILL BE MADE TO ADMINISTRATIVE ALLOWANCE OF THE CLAIM AND THE APPLICATION OF SUCH AMOUNT TO THE CREDIT OF THE CONTRACTOR'S TAX AND INDEBTEDNESS.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER DATED AUGUST 16, 1967, AMCGC, WITH ENCLOSURES, FROM THE ACTING GENERAL COUNSEL, HEADQUARTERS ARMY MATERIEL COMMAND, RECEIVED IN OUR OFFICE ON AUGUST 17, 1967, CONCERNING THE CLAIMS OF UNITED AUTO PARTS COMPANY, INCORPORATED, KANSAS CITY, MISSOURI, IN THE AMOUNTS OF $13,095 AND $148.80, UNDER CONTRACTS NOS. DA 20-113-ORD-9181 AND DA 20-113-ORD-18345 DATED JUNE 13, 1952, AND JUNE 29, 1954, RESPECTIVELY.

THE AMOUNTS OF THE CLAIMS ARE NOT QUESTIONED BUT THERE IS INVOLVED THE QUESTION WHETHER THE CLAIMS ARE BARRED BY THE TEN-YEAR STATUTE OF LIMITATIONS AFFECTING THE CLAIMS SETTLEMENT JURISDICTION OF OUR OFFICE (31 U.S.C. 71A). OTHERWISE, IT IS REPORTED THAT THE ARMY MATERIEL COMMAND UNDERSTANDS THAT THE INTERNAL REVENUE SERVICE ISSUED A LEVYDATED DECEMBER 10, 1965, AGAINST THE CONTRACTOR IN THE AMOUNT OF $26,112.51, WHICH IS STILL OUTSTANDING.

THE CLAIM FOR $148.80 COVERS AN OVERRUN OF 30 UNITS IN DELIVERIES MADE BY THE CONTRACTOR UNDER CONTRACT NO. DA 20-113-ORD-18345. THE CONTRACT OVERRUN WAS APPROVED BY THE GOVERNMENT ON SEPTEMBER 23, 1954, AND THE OVERRUN WAS DELIVERED AND ACCEPTED ON JANUARY 12, 1955. WE ARE NOT ADVISED SPECIFICALLY OF THE REASON FOR THE DELAY IN THE PROSECUTION OF THAT CLAIM BUT IT APPEARS THAT, AS IN THE CASE OF THE CLAIM FOR $13,095 UNDER CONTRACT NO. DA 20-113-ORD-9181, THE DELAY WAS ATTRIBUTABLE PRIMARILY TO A REQUEST MADE BY THE DEPARTMENT OF JUSTICE DURING THE LATTER PART OF THE YEAR 1954 OR THE EARLY PART OF THE YEAR 1955 FOR THE WITHHOLDING OF AMOUNTS FOUND DUE THE CONTRACTOR. THE DEPARTMENT OF JUSTICE SUBSEQUENTLY INSTITUTED SUIT AGAINST THE CONTRACTOR AND THE CASE WAS DISMISSED WITH PREJUDICE ON FEBRUARY 17, 1965, PURSUANT TO A STIPULATION OF THE PARTIES TO THE SUIT.

THE CLAIM FOR $13,095 COVERS AN AGREED UPON AMOUNT AS A TERMINATION SETTLEMENT UNDER CONTRACT NO. DA 20-113-ORD-9181. THE CONTRACT WAS PARTIALLY TERMINATED FOR DEFAULT IN SEPTEMBER 1953, BUT THE TERMINATION WAS CHANGED IN JUNE 1954, TO A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT. NEGOTIATIONS WERE THEN CONDUCTED TO DETERMINE THE AMOUNT DUE THE CONTRACTOR AS A TERMINATION SETTLEMENT. ON NOVEMBER 16, 1954, THE CHIEF OF ORDNANCE DIRECTED THE ST. LOUIS ORDNANCE DISTRICT TO SUSPEND NEGOTIATIONS BUT IT APPEARS THAT NEGOTIATIONS WERE RESUMED SHORTLY THEREAFTER SINCE IN JANUARY 1955 THE PARTIES AGREED TO A TERMINATION SETTLEMENT OF $13,161. A PROPOSED MODIFICATION NO. 4 TO THE CONTRACT WHICH WOULD HAVE GIVEN EFFECT TO SUCH AGREEMENT WAS SIGNED BY THE CONTRACTOR BUT IT WAS NOT SIGNED ON BEHALF OF THE GOVERNMENT. APPARENTLY THE CONTRACTING OFFICER BELIEVED THAT HE SHOULD NOT SIGN THAT DOCUMENT BECAUSE HE HAD BEEN ADVISED BY HIGHER AUTHORITY OF THE REQUEST MADE BY THE DEPARTMENT OF JUSTICE THAT PAYMENTS DUE THE CONTRACTOR BE WITHHELD.

THE PROPOSED CONTRACT MODIFICATION SPECIFIED THAT ALL TERMINATION INVENTORY HAD BEEN RETAINED, SOLD, OR DISPOSED OF FOR THE ACCOUNT OF THE GOVERNMENT AND THE PROCEEDS THEREOF TAKEN INTO ACCOUNT IN THE NEGOTIATION OF THE TERMINATION SETTLEMENT AGREEMENT. THE FILE DOCUMENTATION PROVED SUCH RECITAL TO BE ERRONEOUS AND, BY LETTER OF JULY 10, 1956, THE GOVERNMENT DIRECTED THE CONTRACTOR TO SELL THE TERMINATION INVENTORY. ITS REPLY OF JULY 12, 1956, THE CONTRACTOR QUESTIONED THE GOVERNMENT'S AUTHORITY TO DIRECT A SALE SINCE THE CONTRACTING OFFICER HAD NOT SIGNED THE PROPOSED MODIFICATION NO. 4 TO THE CONTRACT. THE CONTRACTING OFFICER EVENTUALLY ADVISED THE CONTRACTOR BY LETTER DATED NOVEMBER 1, 1957, THAT THE GOVERNMENT HAD DECIDED NOT TO PROCEED FURTHER WITH THE APPROVAL OF THE PROPOSED MODIFICATION NO. 4 TO THE CONTRACT. APPARENTLY THE CONTRACTING OFFICER STILL BELIEVED THAT NO AMENDMENTS TO THE CONTRACT SHOULD BE MADE SO LONG AS THERE WAS ANY RESTRICTION ON THE PAYMENT OF AMOUNTS FOUND DUE UNDER THE CONTRACT.

AFTER THE DISMISSAL OF THE GOVERNMENT'S SUIT ON FEBRUARY 17, 1965, THE CONTRACTOR DEMANDED PAYMENT ON ITS TERMINATION CLAIM, WITH INTEREST COMPUTED AT THE RATE OF SIX PERCENT PER YEAR. BY LETTER DATED SEPTEMBER 14, 1965, DESIGNATED AS HIS FINAL DECISION UNDER THE DISPUTES CLAUSE OF THE CONTRACT, THE CONTRACTING OFFICER DETERMINED THAT THE PREVIOUSLY AGREED UPON SETTLEMENT AMOUNT OF $13,161 SHOULD BE REDUCED TO $13,095, WITH THE DIFFERENCE OF $66 REPRESENTING THE SCRAP VALUE OF THE TERMINATION INVENTORY. HIS DECISION ALSO INDICATED THAT THE CONTRACTOR WOULD BE REQUIRED TO FURNISH A SCRAP WARRANTY. THE CONTRACTING OFFICER HAD BEEN ADVISED THAT THE TERMINATION INVENTORY HAD BEEN SOLD AS SCRAP AND IT APPEARS THAT THE SALE WAS MADE ON OR ABOUT APRIL 27, 1965, FOLLOWING THE CONTRACTOR'S RECEIPT OF A LETTER DATED APRIL 19, 1965, WHEREIN THE GOVERNMENT AFFIRMED ITS PREVIOUS POSITION THAT THE TERMINATION INVENTORY SHOULD BE SOLD.

BY LETTER DATED OCTOBER 4, 1965, THE CONTRACTOR ACCEPTED THE CONTRACTING OFFICER'S DECISION, SUBMITTED THE REQUIRED SCRAP WARRANTY AND REQUESTED PAYMENT OF THE AMOUNT OF $13,095. PAYMENT WAS AGAIN REQUESTED ON NOVEMBER 10, 1965, AND BY LETTER DATED NOVEMBER 23, 1966, TO THE ARMY TANK- AUTOMOTIVE CENTER, WARREN, MICHIGAN, THE CONTRACTOR STATED THAT PAYMENT OF THE SUM OF $13,095 MAY BE MADE DIRECTLY TO THE KANSAS CITY, MISSOURI, OFFICE OF THE INTERNAL REVENUE SERVICE,"WITH NOTIFICATION TO US, OR PAYMENT MAY BE MADE DIRECTLY TO US FOR TRANSMITTAL TO THE INTERNAL REVENUE SERVICE.' ON JANUARY 19, 1967, THE ARMY MATERIEL COMMAND AUTHORIZED THE EXECUTION OF A CONTRACT AMENDMENT ON THE BASIS OF THE CONTRACTING OFFICER'S DECISION AND ACCEPTANCE THEREOF BY THE CONTRACTOR WITHOUT MAKING A FURTHER DEMAND FOR INTEREST.

SUBSEQUENT TO THE APPROVAL OF THE EXECUTION OF A CONTRACT AMENDMENT CONCERNING THE CONTRACTOR'S TERMINATION CLAIM, ANOTHER CONTRACTING OFFICER FURNISHED AN ADMINISTRATIVE REPORT RECOMMENDING THAT THE CLAIMS OF THE CONTRACTOR UNDER THE TWO CONTRACTS BE DENIED ON THE BASIS THAT THEY ARE BARRED BY THE SIX-YEAR STATUTES OF LIMITATIONS WHICH AFFECT THE JURISDICTION OF THE UNITED STATES DISTRICT COURTS AND THE COURT OF CLAIMS TO CONSIDER CERTAIN TYPES OF ACTIONS WHICH ARE FILED AGAINST THE UNITED STATES (TITLE 28, U.S.C. SECTIONS 2401 AND 2501). A SIMILAR RECOMMENDATION WAS MADE IN A LEGAL ANALYSIS AND OPINION PREPARED BY THE CHIEF COUNSEL'S OFFICE, ARMY TANK-AUTOMOTIVE COMMAND. HOWEVER, THE ARMY MATERIEL COMMAND'S LETTER OF AUGUST 16, 1967, SUGGESTS THE POSSIBILITY THAT WE MIGHT CONSIDER THE CONTRACTOR'S TERMINATION CLAIM UNDER CONTRACT NO. DA 20-113-ORD-9181 AS HAVING FIRST ACCRUED AS LATE AS NOVEMBER 1, 1957, OR WITHIN THE 10-YEAR PERIOD ALLOWED UNDER 28 U.S.C. 71A FOR THE RECEIPT OF CLAIMS AGAINST THE UNITED STATES WHICH ARE PRESENTED TO OUR OFFICE FOR CONSIDERATION.

THE SUCCESSOR CONTRACTING OFFICER'S REPORT IN THE CASE STATES THAT THE CONTRACTOR'S RIGHT TO PAYMENT ON CONTRACT NO. DA 20-113-ORD-18345 ACCRUED ON JANUARY 12, 1955 (THE DATE ON WHICH THE CONTRACT OVERRUN WAS DELIVERED AND ACCEPTED BY THE GOVERNMENT). HIS REPORT FURTHER STATES THAT THE STATUTE OF LIMITATIONS COMMENCED TO RUN ON CONTRACT NO. DA 20 113-ORD-9181 NO LATER THAN NOVEMBER 1, 1957, AND THAT "THERE IS NO DOUBT, HOWEVER, THAT UNITED AUTO'S AWARENESS OF THE GOVERNMENT'S INTENTION TO WITHHOLD PAYMENT ANTEDATED THE LETTER NOTIFICATION BY AT LEAST ONE R.' WE ASSUME THAT THE LATTER STATEMENT WAS BASED UPON THE LETTER OF JULY 10, 1956, WHICH DIRECTED THE CONTRACTOR TO SELL THE TERMINATION INVENTORY.

THE ABOVE LEGAL ANALYSIS AND OPINION SETS FORTH THE FACT THAT ON NOVEMBER 16, 1954, THE CHIEF OF ORDNANCE DIRECTED THE SUSPENSION OF NEGOTIATIONS TO DETERMINE THE AMOUNT DUE THE CONTRACTOR AS TERMINATION SETTLEMENT UNDER CONTRACT NO. DA 20-113-ORD-9181, THAT NEGOTIATIONS WERE RESUMED ON JANUARY 7, 1955, THAT THE CONTRACTOR SIGNED THE PROPOSED MODIFICATION NO. 4 TO THE CONTRACT ON MARCH 9, 1955, THAT THE GOVERNMENT'S ACTION ON THE SETTLEMENT WAS DEFERRED PENDING A DECISION AS TO THE DISPOSITION OF THE TERMINATION INVENTORY, THAT ON JULY 10, 1956, THE GOVERNMENT DIRECTED THE CONTRACTOR TO SELL THE INVENTORY AND THAT, BY LETTER DATED JULY 12, 1956, THE CONTRACTOR REFUSED TO SELL THE INVENTORY. THE DOCUMENT FURTHER STATES THAT THE SUIT AGAINST THE CONTRACTOR DID NOT CONCERN THE RIGHTS, DUTIES OR OBLIGATIONS OF EITHER PARTY UNDER CONTRACTS NOS. DA 20-113-ORD-18345 OR DA 20-113-ORD-9181.

IT IS RECOGNIZED IN THE SAID DOCUMENT THAT, WHATEVER THE LEGAL CONSEQUENCES OF THE PARTIES' ACTIONS IN THE MATTER MIGHT BE, THEY CONTINUED NEGOTIATIONS AND CORRESPONDENCE, TREATING THE CONDUCT OF THE OTHER AS A MERELY TEMPORARY OBSTACLE TO SETTLEMENT. THE OPINION IS EXPRESSED THAT, AS OF NOVEMBER 16, 1954, THE CONTRACTOR COULD HAVE SOUGHT ADMINISTRATIVE REDRESS UNDER THE DISPUTES CLAUSE OF THE CONTRACT OR FILED AN ACTION AT LAW FOR BREACH OF CONTRACT. APPARENTLY IT WAS ALSO CONSIDERED THAT AN ACTION AT LAW FOR BREACH OF CONTRACT COULD HAVE BEEN FILED BY THE CONTRACTOR WITHIN A REASONABLE TIME AFTER MARCH 9, 1955, WHEN THE CONTRACTOR SIGNED THE PROPOSED MODIFICATION NO. 4 TO THE CONTRACT, OR WITHIN REASONABLE TIME AFTER RECEIPT OF THE LETTER DATED JULY 10, 1956, WHEN THE GOVERNMENT DIRECTED THE SALE OF THE TERMINATION INVENTORY, OR WITHIN A REASONABLE TIME AFTER NOVEMBER 1, 1957, WHEN THE CONTRACTOR WAS ADVISED THAT THE GOVERNMENT HAD DECIDED NOT TO PROCEED FURTHER WITH THE APPROVAL OF THE PROPOSED MODIFICATION NO. 4 TO THE CONTRACT.

THE LEGAL ANALYSIS AND OPINION DISCUSSES VARIOUS COURT DECISIONS, INCLUDING THE CASE OF CROWN POINT FRONT CO. V. UNITED STATES, 386 U.S. 503, WHEREIN THE SUPREME COURT HELD THAT, WHEN ADMINISTRATIVE PROCEEDINGS WITH RESPECT TO A CONTRACTOR'S CLAIM SUBJECT TO A DISPUTES CLAUSE IN A GOVERNMENT CONTRACT EXTENDS BEYOND THE COMPLETION OF THE CONTRACT, THE CONTRACTOR'S RIGHT OF ACTION "FIRST ACCRUES" WITHIN THE MEANING OF 28 U.S.C. 2401 (A) WHEN THE ADMINISTRATIVE ACTION IS FINAL AND NOT BEFORE. ON SUCH BASIS, IT APPEARS THAT, SO FAR AS CONCERNS THE 10-YEAR STATUTE OF LIMITATIONS AFFECTING OUR SETTLEMENT JURISDICTION, THE CONTRACTOR'S TERMINATION CLAIM, FIRST ACCRUED ON OCTOBER 4, 1965, WHEN THE CONTRACTOR ELECTED NOT TO FILE AN APPEAL FROM THE CONTRACTING OFFICER'S DECISION OF SEPTEMBER 14, 1965, AND TO REQUEST PAYMENT OF THE SUM OF $13,095 ALLOWED IN THAT DECISION ON THE TERMINATION CLAIM. SEE 44 COMP. GEN. 1.

NEGOTIATIONS CONTINUED DURING THE 10-YEAR PERIOD SUBSEQUENT TO NOVEMBER 1, 1957, AND IT SEEMS TO BE IMMATERIAL WHETHER THE SUSPENSION OF NEGOTIATIONS AT ANY TIME PRIOR TO THAT DATE WOULD HAVE BEEN CONSIDERED BY THE FEDERAL COURTS AS SUFFICIENT GROUNDS FOR THE FILING OF AN ACTION AGAINST THE UNITED STATES FOR BREACH OF CONTRACT. IN SUCH CONNECTION, SEE NEW YORK SHIPBUILDING CORPORATION V. UNITED STATES, CT. CL. NO. 97-66, DECIDED JUNE 9, 1967, WHEREIN THE COURT OF CLAIMS DETERMINED THAT THE MERITS OF THE CASE SHOULD BE CONSIDERED IN VIEW OF THE LONG DELAY IN TAKING ADMINISTRATIVE ACTION PURSUANT TO THE DISPUTES CLAUSE OF THE PLAINTIFF'S CONTRACT.

ACCORDINGLY, YOU ARE ADVISED THAT WE FIND NO OBJECTION TO AN ADMINISTRATIVE ALLOWANCE OF THE CLAIM FOR $13,095 AND THE APPLICATION OF SUCH AMOUNT AS A CREDIT AGAINST THE TAX INDEBTEDNESS OF THE CONTRACTOR. WE EXPRESS NO OPINION IN REGARD TO THE CONTRACTOR'S CLAIM FOR $148.80 SINCE NO INFORMATION HAS BEEN FURNISHED AS TO WHETHER AT ANY TIME SUBSEQUENT TO AUGUST 17, 1967, THE GOVERNMENT ACKNOWLEDGED THAT SUCH AMOUNT WAS DUE THE CONTRACTOR AND WAS BEING WITHHELD ONLY BECAUSE OF THE SUIT WHICH HAD BEEN FILED BY THE DEPARTMENT OF JUSTICE.

HOWEVER, IN REGARD TO THE CLAIM FOR $148.80, YOUR ATTENTION IS INVITED TO THE FACT THAT THE COURT OF CLAIMS HAS ADOPTED THE RULE THAT THE BAR OF THE STATUTE OF LIMITATIONS "IS REMOVED BY THE ACKNOWLEDGEMENT OF THE DEBT COUPLED WITH THE PROMISE, EVEN WITHOUT ANY NEW CONSIDERATION, TO PAY THE DEBT.' ELLIOTT V. UNITED STATES, 134 CT. CL. 197, 138 F.SUPP. 873; ALSO, SEE MARR V. UNITED STATES, 123 CT. CL. 474, 106 F.SUPP. 204, CERTIORARI DENIED, 345 U.S. 956. IN THE ELLIOTT CASE, THE PLAINTIFFS WERE HELD NOT ENTITLED TO RECOVER BY REASON OF THE COURT'S DETERMINATION THAT ACKNOWLEDGEMENT OF DEBT BY THE DEPARTMENT CONCERNED WAS NOT APPARENT AND WOULD HAVE BEEN IMPROPER IN THE PARTICULAR CIRCUMSTANCES.