B-179971, FEB 20, 1974, 53 COMP GEN 607

B-179971: Feb 20, 1974

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PAYABLE TO THE ORDER OF THE GENERAL SERVICES ADMINISTRATION (GSA) AND SUBMITTED AS A BID DEPOSIT INCIDENT TO THE SALE OF REAL PROPERTY AND WHICH WAS LOST IN THE MAIL WHEN RETURNED AFTER ALL BIDS WERE REJECTED IS DENIED BECAUSE GSA. IS ONLY OBLIGATED TO USE ORDINARY CARE AND ITS USE OF CERTIFIED MAIL. UNITED STATES - CLAIMS - LOSSES IN THE MAILS SINCE UNDER 39 U.S.C. 401 (8) THE POSTAL SERVICE IS AUTHORIZED TO SETTLE AND COMPROMISE CLAIMS AGAINST ITSELF. THE GENERAL ACCOUNTING OFFICE DOES NOT HAVE JURISDICTION TO CONSIDER THE POSSIBLE LIABILITY OF THE POSTAL SERVICE FOR A LOST CHECK. A DEPOSIT OF 10 PERCENT OF THE AMOUNT BID WAS REQUIRED TO BE SUBMITTED WITH THE BID. WAS INCLUDED IN THE INVITATION FOR BIDS AND CONTAINED THE FOLLOWING PROVISION REGARDING BID DEPOSITS: 5.

B-179971, FEB 20, 1974, 53 COMP GEN 607

SALES - BIDS - DEPOSITS - CHECKS LOST - GOVERNMENT LIABILITY BIDDER'S CLAIM FOR THE INCIDENTAL EXPENSES THAT RESULTED FROM THE LOSS OF AN UNENDORSED CASHIER'S CHECK, PAYABLE TO THE ORDER OF THE GENERAL SERVICES ADMINISTRATION (GSA) AND SUBMITTED AS A BID DEPOSIT INCIDENT TO THE SALE OF REAL PROPERTY AND WHICH WAS LOST IN THE MAIL WHEN RETURNED AFTER ALL BIDS WERE REJECTED IS DENIED BECAUSE GSA, AS PLEDGEE, IS ONLY OBLIGATED TO USE ORDINARY CARE AND ITS USE OF CERTIFIED MAIL, RETURN RECEIPT REQUESTED, CONFORMS WITH CUSTOMARY PRACTICE AND PLEDGEES NEED NOT INSURE PLEDGED PROPERTY. POSTAL SERVICE, UNITED STATES - CLAIMS - LOSSES IN THE MAILS SINCE UNDER 39 U.S.C. 401 (8) THE POSTAL SERVICE IS AUTHORIZED TO SETTLE AND COMPROMISE CLAIMS AGAINST ITSELF, THE GENERAL ACCOUNTING OFFICE DOES NOT HAVE JURISDICTION TO CONSIDER THE POSSIBLE LIABILITY OF THE POSTAL SERVICE FOR A LOST CHECK.

IN THE MATTER OF CUSTER DEVELOPMENT CORPORATION, FEBRUARY 20, 1974:

THE GENERAL SERVICES ADMINISTRATION (GSA) HAS REQUESTED OUR DECISION REGARDING THE LIABILITY OF THE GOVERNMENT FOR CERTAIN EXPENSES ALLEGEDLY INCURRED BY CUSTER DEVELOPMENT CORPORATION (CUSTER) AS A RESULT OF THE LOSS OF A BID DEPOSIT WHICH GSA ATTEMPTED TO RETURN TO CUSTER BY CERTIFIED MAIL.

IN JANUARY 1973, THE GENERAL SERVICES ADMINISTRATION, PROPERTY MANAGEMENT AND DISPOSAL SERVICE, REGION 5, SOLICITED SEALED BIDS ON THE SALE OF REAL PROPERTY DESCRIBED AS HOUSING ANNEX, CUSTER AIR FORCE STATION, SPRINGFIELD, MICHIGAN, D-MICH-4181. A DEPOSIT OF 10 PERCENT OF THE AMOUNT BID WAS REQUIRED TO BE SUBMITTED WITH THE BID. GSA FORM 1741, INSTRUCTION TO BIDDERS, WAS INCLUDED IN THE INVITATION FOR BIDS AND CONTAINED THE FOLLOWING PROVISION REGARDING BID DEPOSITS:

5. BID DEPOSIT. EACH BID MUST BE ACCOMPANIED BY A BID DEPOSIT ***. FAILURE TO SO PROVIDE SUCH DEPOSIT SHALL REQUIRE REJECTION OF THE BID. UPON ACCEPTANCE OF A BID, THE APPROPRIATE BID DEPOSIT OF THE SUCCESSFUL BIDDER SHALL BE APPLIED TOWARD PAYMENT OF THE SUCCESSFUL BIDDER'S OBLIGATION TO THE GOVERNMENT. APPROPRIATE BID DEPOSITS ACCOMPANYING BIDS WHICH ARE REJECTED WILL BE RETURNED TO BIDDERS, WITHOUT INTEREST, AS PROMPTLY AS POSSIBLE AFTER REJECTION OF THE BIDS.

CUSTER'S BID DEPOSIT WAS IN THE FORM OF A CASHIER'S CHECK, NO. CR 489126, DRAWN BY AND ON THE CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO AND PAYABLE TO THE ORDER OF GSA IN THE AMOUNT OF $84,100.10.

ALL BIDS, INCLUDING CUSTER'S, WERE SUBSEQUENTLY REJECTED, AND ON FEBRUARY 12, 1973, THE BIDDERS WERE SO NOTIFIED WITH THE RETURN OF THEIR BID DEPOSITS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED. NONE OF THE BID DEPOSITS HAD BEEN ENDORSED BY GSA.

THE CERTIFIED MAIL LOG KEPT BY GSA AT THE CENTRAL MAILROOM OF THE CHICAGO REGIONAL OFFICE INDICATES THAT ON FEBRUARY 12, SEVEN PIECES OF CERTIFIED MAIL WERE PICKED UP BY THE POSTAL SERVICE FOR DEPOSIT AT THE MAIN POST OFFICE, CHICAGO, ILLINOIS. AMONG THESE LETTERS WERE THE BID DEPOSITS OF THE FIVE BIDDERS ON THE SALE, INCLUDING THE UNENDORSED CASHIER'S CHECK SUBMITTED BY CUSTER. DELIVERY RECEIPTS FROM THE FOUR OTHER BIDDERS REFLECT DELIVERY DATES OF EITHER FEBRUARY 14 OR 15. HOWEVER, CUSTER'S BID DEPOSIT WAS NEVER RECEIVED AT ITS OFFICE IN BATTLE CREEK, MICHIGAN, THE ADDRESS RECORDED ON THE CERTIFIED MAIL LOG.

GSA, AFTER RECEIVING INFORMATION FROM CUSTER THAT IT HAD NOT RECEIVED THE CERTIFIED LETTER CONTAINING THE BID DEPOSIT, PROMPTLY NOTIFIED THE BANK WHICH HAD ISSUED THE CASHIER'S CHECK TO STOP PAYMENT ON THE CHECK, AND IT REQUESTED THE UNITED STATES POSTAL SERVICE TO INVESTIGATE THE LOSS. MARCH 29, THE POSTAL SERVICE INFORMED GSA THAT THE CERTIFIED LETTER (NO. 09992) CONTAINING CUSTER'S BID DEPOSIT COULD NOT BE LOCATED. AFTER FURTHER INVESTIGATION BY THE CONTRACTING OFFICER, GSA CONCLUDED THAT THE BID DEPOSIT HAD BEEN LOST IN THE MAIL AND CUSTER WAS NOTIFIED OF THIS CONCLUSION.

CUSTER BELIEVES THAT GSA WAS RESPONSIBLE FOR THE LOSS OF THE CHECK, PARTICULARLY BECAUSE IT FAILED TO UTILIZE REGISTERED MAIL IN RETURNING THE CHECK. VARIOUS INCIDENTAL EXPENSES, TOTALING $4,490, WERE ALLEGEDLY INCURRED BY CUSTER AS A RESULT OF THE LOSS, "IN AN EFFORT TO RECOVER THE CHECK AND IN REDUCING THE CORPORATION'S LIABILITY ON THE CHECK." INCLUDED IN THIS AMOUNT IS THE COST OF THE INDEMNIFICATION BOND WHICH CUSTER WAS REQUIRED TO FURNISH THE BANK. TO DATE, THE MISSING CHECK HAS NOT BEEN PRESENTED AT ANY BANK FOR PAYMENT, DEPOSIT OR COLLECTION.

GSA CONTENDS THAT THE RELATIONSHIP CREATED BY THE SUBMISSION OF A BID DEPOSIT IS A BAILMENT FOR THE MUTUAL BENEFIT OF BOTH THE BAILOR (CUSTER) AND THE BAILEE (GOVERNMENT), AND PURSUANT TO THIS RELATIONSHIP IT WAS OBLIGATED TO RETURN THE DEPOSIT "WITHOUT INTEREST, AS PROMPTLY AS POSSIBLE AFTER REJECTION OF THE BIDS." (SEE ABOVE-QUOTED INSTRUCTIONS TO BIDDERS.) IN ADDITION GSA HAS REFERRED TO ITS MAILING REGULATIONS WHICH PROVIDE FOR THE USE OF CERTIFIED MAIL WHERE PROOF OF RECEIPT IS NEEDED AND THE MATERIAL IS OF NO MONETARY VALUE. THE REGULATIONS ALSO PROVIDE FOR THE USE OF REGISTERED MAIL FOR MATERIALS OF MONETARY VALUE THAT REQUIRE THE SECURITY AND PROTECTION PROVIDED BY THE REGISTERED MAIL SERVICE. IS GSA'S POSITION THAT THE CHECK HAD NO MONETARY VALUE UNTIL LAWFULLY ENDORSED BY GSA AND THAT THE USE OF CERTIFIED MAIL IN RETURNING IT UNENDORSED WAS JUSTIFIED AND IN CONFORMITY WITH GSA'S OBLIGATION TO EXERCISE THE DEGREE OF CARE IMPOSED BY THE CONTRACT OF BAILMENT.

A BAILOR-BAILEE RELATIONSHIP ARISES WHEN THE OWNER, WHILE RETAINING LEGAL TITLE, DELIVERS PERSONAL PROPERTY TO ANOTHER FOR SOME PARTICULAR PURPOSE UPON AN EXPRESS OR IMPLIED CONTRACT TO REDELIVER THE GOODS WHEN THE PURPOSE OF THE BAILMENT HAS BEEN FULFILLED, OR TO OTHERWISE DEAL WITH THE GOODS ACCORDING TO THE BAILOR'S INSTRUCTIONS. LIONBERGER V. UNITED STATES, 371 F.2D 831, 840 (1967), 178 CT. CL. 151,; MAULDING V. UNITED STATES, 257 F.2D 56, 60 (1953). WHERE THE BAILMENT IS MOTIVATED BY THE BAILOR'S DESIRE TO PROMOTE A SALE IT IS A BAILMENT FOR MUTUAL BENEFIT. C.J.C. SEC 8B.

MORE SPECIFICALLY A BID DEPOSIT IS IN THE NATURE OF A PLEDGE, THAT IS, A SPECIAL TYPE OF BAILMENT IN WHICH THE PROPERTY PLEDGED IS USED FOR THE PURPOSE OF SECURING AN OBLIGATION OWED BY THE PLEDGOR TO THE PLEDGEE. KOCH V. HAN-SHIRE INVESTMENTS, INC., 140 N.W. 2D 55, 62 (1966); GRACE V. STERLING GRACE & CO., 289 N.Y.S. 2D 632, 637 (1968); 38 COMP. GEN. 476, 477 (1959); 72 C.J.S. PLEDGES SEC. 1. WHILE LEGAL TITLE REMAINS IN THE PLEDGOR, THE RIGHT TO POSSESSION PASSES TO THE PLEDGEE WHO HAS A SPECIAL INTEREST OR PROPERTY RIGHT IN THE PLEDGE UNTIL THE SECURED OBLIGATION HAS BEEN SATISFIED. NELSON V. COMMISSIONER OF INTERNAL REVENUE, 101 F.2D 568, 571 N.3 (1939); 72 C.J.S. PLEDGES SEC 2. FURTHERMORE, A PLEDGE IS LIKE A BAILMENT IN THAT BOTH BAILEES AND PLEDGEES ARE UNDER A SIMILAR DUTY TO EXERCISE REASONABLE OR ORDINARY PRUDENCE IN CARING FOR PROPERTY DELIVERED INTO THEIR POSSESSION. SEE E.G., COMMERCIAL MOLASSES CORP. V. NEW YORK TANK BARGE CORP., 314 U.S. 104, 110 (1941); MARINE SALES & SERVICES, INC. V. GREER STEEL CO., 312 F. SUPP. 718, 722 (1970); 72 C.J.S. PLEDGES SEC 33 B (1).

THE RECORD NOW BEFORE US CLEARLY INDICATES THAT GSA DELIVERED CUSTER'S BID DEPOSIT TO THE POSTAL SERVICE. THE CERTIFIED MAIL LOG LISTS CUSTER'S BID DEPOSIT AMONG THE OTHER PIECES OF CERTIFIED MAIL WHICH LEFT GSA ON FEBRUARY 12, 1973. WE HAVE BEEN ADVISED THAT THE COMMON PRACTICE AT THE CHICAGO REGIONAL OFFICE IS TO PLACE MAIL THAT HAS BEEN RECORDED IN THE CERTIFIED MAIL LOG INTO A LOCKED, GREEN NYLON CONTAINER. THE CONTAINER IS THEN PICKED UP BY THE POSTAL SERVICE AT THE REGIONAL OFFICE AND DEPOSITED AT THE MAIN POST OFFICE. GSA HAS ALSO PROVIDED US WITH COPIES OF THE DELIVERY RECEIPTS FROM THE OTHER PIECES OF CERTIFIED MAIL WHICH WERE RECORDED IN THE MAIL LOG WITH CUSTER'S BID DEPOSIT. THUS, WE MUST CONCLUDE THAT GSA DID IN FACT MAIL CUSTER'S CASHIER'S CHECK BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, AND THAT THE CHECK WAS LOST AFTER IT HAD BEEN PLACED INTO THE POSSESSION OF THE POSTAL SERVICE.

UNDER THESE CIRCUMSTANCES, WE DO NOT BELIEVE THAT THE MANNER EMPLOYED BY GSA TO RETURN THE CASHIER'S CHECK VIOLATED ITS DUTY TO EXERCISE REASONABLE OR ORDINARY CARE. GSA HAS STATED THAT CERTIFIED MAIL, RETURN RECEIPT REQUESTED, IS THE CUSTOMARY METHOD UTILIZED BY GOVERNMENT PROCURING AGENCIES TO RETURN BID DEPOSITS, AND THIS OFFICE HAS HELD THAT ABSENT A SPECIFIC CONTRACT PROVISION, THE MANNER OF DELIVERY OF BAILED PROPERTY IS GOVERNED BY THE CUSTOMARY PRACTICES EMPLOYED IN THE CIRCUMSTANCES. 168616, FEBRUARY 9, 1970; 8 C.J.S. BAILMENTS SEC 37(B) (1). BAILEES ARE NOT NORMALLY UNDER A DUTY TO INSURE BAILED GOODS ON DELIVERY OF THE PROPERTY TO A CARRIER FOR RETURN TO THE BAILOR. SEE 8 C.J.S. BAILMENTS SEC 23. MOREOVER, COURTS HAVE APPROVED BAILEES' USE OF LESS SECURE TYPES OF MAIL THAN REGISTERED MAIL IN RETURNING BAILED PROPERTY. SEE R.C. READ & CO. V. BARNES, 252 S.W. 224 (1923); LEHMAN V. FISCHZANG, 274 N.Y.S. 2D 971 (1966); B-168616, FEBRUARY 9, 1970, SUPRA.

WITH REGARD TO WHETHER GSA'S MAILING REGULATIONS MAY HAVE CALLED FOR THE USE OF REGISTERED MAIL, WE THINK THAT GSA FULLFILLED ITS OBLIGATION TO CUSTER BY DELIVERING THE UNENDORSED CHECK TO THE POSTAL SERVICE AND, UPON NOTICE FROM CUSTER OF ITS NONRECEIPT, PROMPTLY NOTIFYING THE BANK TO STOP PAYMENT AND REQUESTING AN INVESTIGATION OF THE LOSS BY THE POSTAL SERVICE.

INSOFAR AS CUSTER CONTENDS THAT THE POSTAL SERVICE MAY HAVE BEEN AT FAULT, THIS IS NOT A MATTER FOR OUR DETERMINATION. THE LAW WHICH CREATED THE UNITED STATES POSTAL SERVICE, EFFECTIVE JULY 1, 1971, GIVES IT THE AUTHORITY TO SETTLE AND COMPROMISE CLAIMS AGAINST IT. 39 U.S.C. 401(8).

ACCORDINGLY, THE CLAIM IS DENIED.