B-25679, MAY 26, 1942, 21 COMP. GEN. 1059

B-25679: May 26, 1942

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CONTRACTS - RENTAL-PURCHASE - DISCHARGE OF LIENS WHERE IT IS ADMINISTRATIVELY DETERMINED TO BE IN THE GOVERNMENT'S INTEREST TO EXERCISE THE RIGHT OF RECAPTURE RESERVED FOR ITS BENEFIT IN A COST-PLUS-A-FIXED-FEE CONTRACTOR'S AGREEMENT WITH ITS EQUIPMENT LESSOR. IT IS NECESSARY TO PAY A LIENHOLDER A SUM WHICH EXCEEDS THE REMAINING UNPAID BALANCE NECESSARY FOR RECAPTURE UNDER THE RENTAL AGREEMENT. NO OBJECTION IS REQUIRED TO AN ADMINISTRATIVE DETERMINATION TO MAKE SUCH PAYMENT TO THE LIENHOLDER. WHERE A MOTOR VEHICLE ACQUIRED BY THE GOVERNMENT PURSUANT TO A RENTAL- PURCHASE CONTRACT IS SUBJECT TO A PRIOR LIEN IN SUCH AMOUNT THAT THE GOVERNMENT. THE LESSOR IS LIABLE TO THE GOVERNMENT FOR SUCH EXCESS.

B-25679, MAY 26, 1942, 21 COMP. GEN. 1059

CONTRACTS - RENTAL-PURCHASE - DISCHARGE OF LIENS WHERE IT IS ADMINISTRATIVELY DETERMINED TO BE IN THE GOVERNMENT'S INTEREST TO EXERCISE THE RIGHT OF RECAPTURE RESERVED FOR ITS BENEFIT IN A COST-PLUS-A-FIXED-FEE CONTRACTOR'S AGREEMENT WITH ITS EQUIPMENT LESSOR, AND, TO OBTAIN CLEAR TITLE, IT IS NECESSARY TO PAY A LIENHOLDER A SUM WHICH EXCEEDS THE REMAINING UNPAID BALANCE NECESSARY FOR RECAPTURE UNDER THE RENTAL AGREEMENT, NO OBJECTION IS REQUIRED TO AN ADMINISTRATIVE DETERMINATION TO MAKE SUCH PAYMENT TO THE LIENHOLDER. WHERE A MOTOR VEHICLE ACQUIRED BY THE GOVERNMENT PURSUANT TO A RENTAL- PURCHASE CONTRACT IS SUBJECT TO A PRIOR LIEN IN SUCH AMOUNT THAT THE GOVERNMENT, TO OBTAIN CLEAR TITLE, MUST PAY TO THE LIENHOLDER A SUM WHICH EXCEEDS THE REMAINING UNPAID BALANCE NECESSARY FOR RECAPTURE UNDER THE RENTAL-PURCHASE CONTRACT, THE LESSOR IS LIABLE TO THE GOVERNMENT FOR SUCH EXCESS; AND IN THE FUTURE IT WOULD BE ADVISABLE THAT SUCH LIABILITY BE PROVIDED FOR IN THE CONTRACT, WITH A FURTHER PROVISION FOR THE APPLICATION OF RENTAL PAYMENTS FIRST TOWARD THE DISCHARGE OF LIENS.

COMPTROLLER GENERAL WARREN TO LT. COL. R. K. LEBROU, U.S. ARMY, MAY 26, 1942:

THERE HAS BEEN RECEIVED YOUR LETTER OF FEBRUARY 25, 1942 ).016), AS FOLLOWS:

1. THERE ARE ENCLOSED BUREAU VOUCHER NO. CRP-100, IN THE AMOUNT OF $857.25 COVERING CLAIM OF GENERAL MOTORS ACCEPTANCE CORPORATION, 210 BARONNE STREET, NEW ORLEANS, LOUISIANA, AND BUREAU VOUCHER NO. CP-6 1550, IN THE AMOUNT OF $719.55 COVERING CLAIM OF COMMERCIAL CREDIT COMPANY, 126 WEST STREET, JACKSON, MISSISSIPPI. THESE VOUCHERS WERE SUBMITTED TO THE UNDERSIGNED, A DULY AUTHORIZED DISBURSING OFFICER, AND ARE BEING FORWARDED TO YOUR OFFICE FOR AN ADVANCE DECISION PRIOR TO PAYMENT.

2. THE TWO VOUCHERS ARE BEING SUBMITTED TOGETHER INASMUCH AS THE PRIME QUESTION TO BE ANSWERED APPEARS TO BE THE SAME IN EACH CASE WITH THE EXCEPTION THAT IN THE CLAIM OF THE GENERAL MOTORS ACCEPTANCE CORPORATION, A LIEN WAS KNOWN TO EXIST AT THE TIME RENTAL AGREEMENT NO. 111, DATED NOVEMBER 14, 1940, WAS ENTERED INTO BETWEEN C. R. BOSSIER OF FOLSOM, LOUISIANA, AND THE W. HORACE WILLIAMS COMPANY, NEW ORLEANS, LOUISIANA, THE CONTRACTOR UNDER PRIME CONTRACT NO. W-6134-QM 2, DATED SEPTEMBER 16, 1940, WHILE ON THE CLAIM OF THE COMMERCIAL CREDIT COMPANY, NO MENTION IS MADE OF EXISTENT LIEN ON RENTAL AGREEMENT NO. 216, DATED NOVEMBER 21, 1940, BETWEEN J. R. MAYNARD, HATTIESBURG, MISSISSIPPI, AND THE S. AND W. CONSTRUCTION COMPANY, MEMPHIS, TENNESSEE, CONTRACTORS UNDER PRIME CONTRACT NO. W-6134-QM-4, DATED SEPTEMBER 17, 1940. BOTH RENTAL AGREEMENTS ARE SILENT AS TO PAYMENTS OTHER THAN TO THE LESSOR.

3. A DOUBT HAS ARISEN AS TO THE LEGALITY OF THESE PAYMENTS DUE TO THE FACT THAT IN THE FIRST INSTANCE IN CONNECTION WITH THE CLAIM OF THE GENERAL MOTORS ACCEPTANCE CORPORATION, THE AMOUNT CLAIMED, $857.25, IS $344.75 IN EXCESS OF THE RECAPTURE VALUATION OF THE EQUIPMENT IN QUESTION. THESE FIGURES ARE SUBSTANTIATED BY SCHEDULE ATTACHED TO THIS CLAIM. THE DISBURSING OFFICER'S VOUCHER NUMBERS SHOWN ON THIS SCHEDULE HAVE BEEN VERIFIED AS TO NUMBERS AND AMOUNTS AND ARE FOUND TO BE CORRECT. IN THE CASE OF THE CLAIM OF THE COMMERCIAL CREDIT COMPANY, THE COST OF RECAPTURING THE EQUIPMENT IS $145.55 IN EXCESS OF THE RECAPTURE VALUATION. THIS AMOUNT IS ALSO SUBSTANTIATED BY A SCHEDULE ATTACHED TO THE CLAIM IN QUESTION. THE DISBURSING OFFICER'S VOUCHER NUMBERS AND AMOUNTS, AS PERTAIN TO THE ACCOUNTS OF THE UNDERSIGNED ONLY, HAVE BEEN CHECKED AND ARE FOUND TO BE CORRECT.

4. IN SUBMITTING THESE VOUCHERS FOR YOUR DECISION, FULL CONSIDERATION HAS BEEN GIVEN TO TENTH INDORSEMENT OF THE OFFICE OF THE QUARTERMASTER GENERAL, WASHINGTON, D.C., DATED OCTOBER 2, 1942 (1941), ATTACHED TO THE CLAIM OF THE GENERAL MOTORS ACCEPTANCE CORPORATION AND SECOND INDORSEMENT OF THE SAME OFFICE, DATED OCTOBER 8, 1941, ATTACHED TO THE CLAIM OF THE COMMERCIAL CREDIT COMPANY. BOTH INDORSEMENTS RECOMMENDED PAYMENT OF THE CLAIMS AS PRESENTED, APPARENTLY BASING THE RECOMMENDATION ON YOUR DECISION AS QUOTED IN VOLUME 19, PAGE 768. AFTER A CAREFUL STUDY OF THE CITED DECISION, THIS OFFICE IS DOUBTFUL AS TO ITS APPLICATION IN THE INSTANT CASES.

WITH RESPECT TO THE VOUCHER IN THE AMOUNT OF $857.25, IT APPEARS THAT ON NOVEMBER 14, 1940, THE W. HORACE WILLIAMS COMPANY REFERRED TO IN THE SUBMISSION, AND HEREINAFTER CALLED THE LESSEE, ENTERED INTO EQUIPMENT RENTAL AGREEMENT NO. 111, WITH C. R. BOSSIER, HEREINAFTER CALLED THE LESSOR, FOR A 1941 CHEVROLET DUMP TRUCK ( MOTOR NO. AF19524- - LICENSE NO. 54-940) FOR USE FOR A PERIOD ESTIMATED AS 90 DAYS IN CONNECTION WITH THE CONSTRUCTION OF AN ARMY CAMP AT DIVISION CANTONMENT, AREA 18, KISATCHIE NATIONAL FOREST, AT OR NEAR BRINGHURST, LA.

ARTICLE VII OF THE RENTAL AGREEMENT PROVIDES, AS FOLLOWS:

WHEN THE EQUIPMENT RENTED HEREUNDER SHALL ARRIVE AT THE SITE OF THE WORK THE LESSOR SHALL FILE WITH THE LESSEE A SCHEDULE SETTING FORTH,(1) THE FAIR VALUATION OF EACH PIECE OF EQUIPMENT AT THE TIME OF ITS ARRIVAL AND (2) THE NAMES AND ADDRESSES OF ANY AND ALL PERSONS HOLDING ANY LIEN OR ENCUMBRANCE OF ANY NATURE WHATSOEVER AGAINST SUCH PIECE OF EQUIPMENT TOGETHER WITH THE AMOUNT OF THE INDEBTEDNESS SECURED BY SUCH LIEN OR ENCUMBRANCE. SUCH VALUATION SHALL BE DEEMED FINAL UNLESS WITHIN TEN DAYS (10) AFTER THE EQUIPMENT HAS BEEN SET UP AND OPERATING, THE LESSEE OR THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE SHALL MODIFY SUCH VALUATION. WHEN AND IF THE TOTAL RENTAL PAID TO THE LESSOR FOR ANY PIECE OF EQUIPMENT SHALL EQUAL THE VALUE THEREOF, PLUS ONE PERCENT PER MONTH FOR EACH MONTH OR FRACTION THEREOF SUCH PIECE OF EQUIPMENT SHALL HAVE BEEN IN USE, NO FURTHER RENTAL SHALL BE PAID TO THE LESSOR AND TITLE SHALL VEST IN THE GOVERNMENT. AT THE COMPLETION OF THE WORK OR UPON TERMINATION OF THE PRINCIPAL CONTRACT AS PROVIDED IN ARTICLE VI OF THE PRINCIPAL CONTRACT, THE GOVERNMENT MAY AT ITS OPTION PURCHASE ANY PIECE OF SUCH EQUIPMENT BY PAYING THE LESSOR THE DIFFERENCE BETWEEN THE VALUATION OF SUCH EQUIPMENT PLUS 1 PERCENT PER MONTH FOR EACH MONTH OR PART THEREOF SUCH PIECE OF EQUIPMENT SHALL HAVE BEEN IN USE AND THE TOTAL RENTAL THEREFOR PAID FOR SUCH PIECE OF EQUIPMENT.

ARTICLE VIII OF THE CONTRACT PROVIDES THAT---

NEITHER THIS CONTRACT NOR ANY INTEREST THEREIN SHALL BE ASSIGNED OR TRANSFERRED, EXCEPT THAT THE WHOLE OR ANY PART IS ASSIGNABLE TO THE GOVERNMENT.

ON SCHEDULE "A" ATTACHED TO THE RENTAL AGREEMENT THE " ESTIMATED PRESENT ACTUAL OR INSURABLE VALUE" OF THE TRUCK IS STATED AS $1,650 AND THE COST OR REPLACEMENT VALUE, NEW, AS $1,650.

ON SCHEDULE "B" ATTACHED TO THE RENTAL AGREEMENT, THE DELIVERY DATE IS SHOWN AS NOVEMBER 14, 1940; THE RENTAL RATE AS $300 PER MONTH; AND IT IS STATED THAT THE SMITH CHEVROLET COMPANY, COVINGTON, LA., IS THE HOLDER OF A MORTGAGE OR LIEN DATED MARCH 29, 1941, AS SECURITY FOR THE PAYMENT OF $1,000.

THERE IS ATTACHED TO THE VOUCHER A DUPLICATE OF THE ORIGINAL SALE AND CHATTEL MORTGAGE DATED NOVEMBER 11, 1940, BETWEEN THE SMITH CHEVROLET COMPANY, THE VENDOR AND MORTGAGEE, AND THE LESSOR, SHOWING THE TOTAL TIME PRICE AS $1,648.20 PAYABLE $505.20 ON OR BEFORE DELIVERY LEAVING A DEFERRED BALANCE OF $1,143 FOR WHICH THE LESSOR EXECUTED A PROMISSORY NOTE PAYABLE IN 12 MONTHLY INSTALLMENTS OF $95.25, TO THE ORDER OF THE MORTGAGEE AT THE OFFICES OF THE GENERAL MOTORS ACCEPTANCE CORPORATION. THE TRUCK WAS MORTGAGED TO THE VENDOR AS SECURITY FOR PAYMENT OF THE NOTE. UNDER THE MORTGAGE AGREEMENT THE LESSOR AND MORTGAGOR AGREED, AMONG OTHER THINGS, NOT TO SELL, ALIENATE, MORTGAGE, OR OTHERWISE ENCUMBER THE TRUCK. THE MORTGAGE CONTAINED A PROVISION FOR CONFESSION OF JUDGMENT BY THE MORTGAGOR AND LESSOR IN FAVOR OF THE VENDOR OR ANY SUBSEQUENT HOLDER OF NOTE FOR PRINCIPAL AND INTEREST, ATTORNEY'S FEES AND COSTS AND PROVIDES THAT UPON ANY DEFAULT BY THE MORTGAGOR THE NOTE SHALL BE IMMEDIATELY PAYABLE IN ITS ENTIRETY AND THE TRUCK SUBJECT TO SEIZURE BY THE MORTGAGEE WITHOUT PROCESS OF LAW AND FOR SALE OF SAID TRUCK WITHOUT RIGHT OF REDEMPTION EITHER AT PUBLIC OR PRIVATE SALE WITHOUT DEMAND FOR PERFORMANCE AND WITHOUT NOTICE TO THE MORTGAGOR.

A STATEMENT OF RENTALS PAID TO THE LESSOR UNDER THE RENTAL AGREEMENT SHOWS PAYMENTS TOTALING $1,220 THROUGH MARCH 16, 1941. ALSO, IT IS STATED IN TENTH INDORSEMENT FROM THE OFFICE OF QUARTERMASTER GENERAL TO THE CONSTRUCTING QUARTERMASTER AT CAMP CLAIBORNE THAT ON MARCH 15, 1941, THE GENERAL MOTORS ACCEPTANCE CORPORATION, THE CLAIMANT ON VOUCHER 3837 (CRP- 100), NOTIFIED THE OFFICE OF THE CONSTRUCTING QUARTERMASTER THAT THE LESSOR WAS DELINQUENT IN HIS PAYMENTS ON THE MORTGAGE ON THE TRUCK; THAT RENTAL PAYMENTS TO THE LESSOR WERE SUSPENDED; THAT A DRAFT FOR THE FINAL PAYMENT NECESSARY FOR RECAPTURE UNDER THE RENTAL AGREEMENT, IN THE AMOUNT OF $512.50 WAS DRAWN IN FAVOR OF THE LESSOR AND THE MORTGAGEE AND DELIVERED TO SAID MORTGAGEE BY THE PRINCIPAL CONTRACTORS ( NO. W-6134-QM- 2) ON JUNE 11, 1941; THAT THE MORTGAGEE HAS ADVISED THAT THE LESSOR REFUSES TO SIGN OVER THE DRAFT TO IT; AND THAT THE LESSOR HAS SINCE REFUSED TO TAKE ANY ACTION ON REQUESTS MADE TO HIM TO CLEAR TITLE ON THE TRUCK OR CALL AT THE OFFICE OF THE CONSTRUCTING QUARTERMASTER AND DISCUSS A SETTLEMENT OF THE MATTER.

IN AN ITEMIZED STATEMENT DATED NOVEMBER 26, 1941, CERTIFIED BY THE MORTGAGEE AS A TRUE AND CORRECT COPY, IT IS STATED THAT THE AMOUNT OF THE NOTE EXECUTED BY THE LESSOR IS $1,143; THAT THE PRINCIPAL PAID IS $285.75; AND THAT THE BALANCE DUE ON SAID NOTE IS $857.25.

IF THE GOVERNMENT SHOULD ASSUME PAYMENT OF THE BALANCE DUE ON THE MORTGAGE AS CLAIMED BY THE MORTGAGEE ON VOUCHER 3837 (CRP-100), SUCH PAYMENT WHEN ADDED TO THE RENTAL PAYMENTS TOTALING $1,220 WOULD AGGREGATE $2,077.25 OR $328.25 IN EXCESS OF THE AMOUNT REQUIRED FOR RECAPTURE AS PROVIDED FOR UNDER ARTICLE 7 OF THE LEASE AGREEMENT.

AS TO VOUCHER NO. 3836 (CP-6-1550), IT APPEARS THAT ON NOVEMBER 21, 1940, THE S. AND W. CONSTRUCTION COMPANY REFERRED TO IN THE SUBMISSION AND HEREINAFTER REFERRED TO AS LESSEE NO. 2, ENTERED AN EQUIPMENT RENTAL AGREEMENT, SERIAL NO. 216, WITH J. R. MAYNARD, HEREINAFTER REFERRED TO AS LESSOR NO. 2, FOR THE RENTAL OF A NEW 1941 FORD V-8, MOTOR NO. 295303 FOR USE FOR AN ESTIMATED PERIOD OF ABOUT 60 DAYS IN CONNECTION WITH CERTAIN CONSTRUCTION WORK AT CAMP LIVINGSTON, LA., UNDER CONTRACT NO. W-6134-QM-4 WITH THE S. AND W. CONSTRUCTION COMPANY. THE RENTAL AGREEMENT CONTAINED PROVISIONS IDENTICAL WITH THOSE IN THE RENTAL AGREEMENT BETWEEN THE W. HORACE WILLIAMS COMPANY AND C. R. BOSSIER, WHICH ARE QUOTED ABOVE. UNDER SCHEDULE "A" OF RENTAL AGREEMENT ( R.A. 216) THE COST OR REPLACEMENT VALUE, NEW, OF THE FORD TRUCK IS STATED AS $1,250 AND THE ESTIMATED PRESENT ACTUAL OR INSURABLE VALUE IS STATED AS $1,110. UNDER SCHEDULE "B" OF SAID RENTAL AGREEMENT, IT IS STATED THAT DELIVERY OF THE TRUCK WAS MADE ON NOVEMBER 21, 1940. THE RENTAL RATE IS STATED AS $190 PER MONTH AND THE VALUATION OF THE TRUCK AT THE TIME OF ARRIVAL ON THE JOB IS STATED AS $1,100. THE WORD "NONE" IS TYPED UNDER THE HEADINGS REQUESTING THE NAMES AND ADDRESSES OF HOLDERS OF MORTGAGES OR LIENS AND UNDER THE NAME AND ADDRESS OF HOLDER AND THE AMOUNT SECURED. ALSO, IT IS STATED ON THE FORM THAT IN SIX MONTHS, OR IN MAY 1941, THE RENT WOULD EQUAL THE VALUE OF THE TRUCK.

IN SECOND INDORSEMENT OF OCTOBER 7, 1941, FROM THE OFFICE OF QUARTERMASTER GENERAL TO THE CONSTRUCTING QUARTERMASTER, CAMP LIVINGSTON, IT IS STATED AS FOLLOWS:

2. ON NOVEMBER 21, 1940, THE CONTRACTORS LEASED FROM J. R. MAYNARD, AMONG OTHER EQUIPMENT, TWO FORD 1 1/2-TON TRUCKS, ONE A 1940 MODEL AND THE OTHER A 1941 MODEL, TO WHICH WERE ASSIGNED GOVERNMENT EQUIPMENT NUMBERS 378 AND 375, RESPECTIVELY. THE VALUATION STIPULATED FOR TRUCK NO. 378 WAS $850.00, AND THE VALUE OF TRUCK NO. 375, $1,100.00. WHEN IT BECAME EVIDENT THAT THE GOVERNMENT WOULD EXERCISE ITS OPTION TO RECAPTURE THESE PIECES OF EQUIPMENT, MR. MAYNARD ADVISED THE CONTRACTORS THAT THE RECAPTURE VALUATIONS WOULD NOT BE ACCEPTABLE TO HIM AND ALLEGED THAT THE VALUATIONS SHOULD HAVE BEEN $1,450.00 AND $1,500.00, RESPECTIVELY. AT THE SAME TIME HE BROUGHT TO THE ATTENTION OF THE CONTRACTORS THE FACT THAT THE UNIVERSAL CREDIT COMPANY OF JACKSON, MISSISSIPPI, HELD A VENDOR'S LIEN SECURED BY MORTGAGE ON TRUCK NO. 378 IN THE AMOUNT OF $992.16. HE POINTED OUT ALSO THAT THE COMMERCIAL CREDIT COMPANY OF HATTIESBURG, MISSISSIPPI, HELD A VENDOR'S LIEN AND MORTGAGE ON TRUCK NO. 375 IN THE AMOUNT OF $709.91 ($719.55). NEITHER MORTGAGE WAS INDICATED IN SCHEDULE B OF THE RENTAL AGREEMENT, WHICH SCHEDULE PROVIDES FOR A SHOWING OF THE NAMES AND ADDRESSES OF HOLDERS OF MORTGAGES ON THE EQUIPMENT COVERED BY THE AGREEMENT. AT THE TIME THE EXISTENCE OF THE LIENS WAS DISCLOSED, ONLY $314.00 RENTAL REMAINED TO BE PAID IN ORDER TO SECURE TITLE TO TRUCK NO. 378, AND $574.00 TO SECURE TITLE TO TRUCK NO. 375; IN EACH CASE THE AMOUNT WAS LESS THAN THE UNPAID BALANCE OF THE MORTGAGE. THE CONTRACTORS HAVE REQUESTED, IN ORDER TO PERMIT A FINAL SETTLEMENT OF THEIR AFFAIRS, THAT THE GOVERNMENT TAKE ADVANTAGE OF THE RIGHT RESERVED TO IT IN ARTICLE VIII OF THE RENTAL AGREEMENT AND AUTHORIZE THE CONTRACTOR TO ASSIGN THE RENTAL AGREEMENT, AND RIGHTS AND LIABILITIES OF THE CONTRACTOR THEREUNDER, TO THE GOVERNMENT, INDICATING IN CONNECTION THEREWITH THAT NOTHING FURTHER CAN BE DONE BY THEM UNTIL THE GOVERNMENT HAS DETERMINED THE COURSE OF ACTION THAT IT DESIRES TO HAVE FOLLOWED IN THIS MATTER.

IN SUPPORT OF THE AMOUNT CLAIMED ON THE VOUCHER THERE IS A CERTIFIED COPY OF A CONDITIONAL SALES AGREEMENT DATED NOVEMBER 12, 1940, EXECUTED BY LESSOR NO. 2 IN FAVOR OF M. L. BREWER, SHOWING THE PURCHASE PRICE OF FORD TRUCK NO. 295303 AS $1,291; THE ALLOWANCE ON CAR TRADED IN AS $320, LEAVING AN UNPAID BALANCE OF $971. A PROMISSORY NOTE IS ATTACHED TO THE CONDITIONAL SALES AGREEMENT UNDER WHICH LESSOR NO. 2 AGREED TO PAY 12 MONTHLY INSTALLMENTS, TWO AT $143.95 AND 10 AT $79.95. THE REVERSE SIDE OF THE PROMISSORY NOTE SHOWS THAT IT WAS TRANSFERRED TO THE COMMERCIAL CREDIT CORPORATION BY AN INDORSEMENT WITHOUT RECOURSE FROM THE NEWMAN MOTOR COMPANY BY J. J. NEWMAN, JR. THE CONDITIONAL SALES AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT TITLE TO THE CAR (TRUCK) SHALL REMAIN IN THE SELLER UNTIL ALL AMOUNTS DUE UNDER SUCH AGREEMENT OR REARRANGEMENTS THEREOF ARE FULLY PAID IN CASH; THAT IF THE PURCHASER SHOULD FAIL TO PAY THE NOTE OR ANY INSTALLMENT THEREON, OR BREACH THE CONDITIONAL SALES AGREEMENT OR IF FOR ANY OTHER REASON THE SELLER SHOULD DEEM ITSELF INSECURE, THE FULL AMOUNT OF THE PURCHASE PRICE THEN UNPAID SHALL BECOME IMMEDIATELY DUE AND PAYABLE AT SELLER'S OPTION, TOGETHER WITH A REASONABLE ATTORNEY'S FEE, AND SELLER OR HIS REPRESENTATIVE MAY TAKE POSSESSION OF SAID CAR, EQUIPMENT, ACCESSORIES, ETC., WHEREVER IT MAY BE FOUND WITHOUT NOTICE OR DEMAND TO THE PURCHASER AND THAT THE PURCHASER WAIVES ALL CLAIMS FOR DAMAGES CAUSED THEREBY. SAID AGREEMENT PROVIDES FURTHER THAT THE CAR MAY BE RETAINED BY THE SELLER IF SELLER IS HOLDER OF THE NOTE, TOGETHER WITH ANY AND ALL AMOUNTS PAID THEREON WHICH SHALL BE CONSIDERED FOR THE REASONABLE USE OF THE CAR; THAT SAID CAR MAY BE SOLD AT PRIVATE OR PUBLIC SALE WITHOUT BEING AT THE PLACE OF SALE AND WITH OR WITHOUT NOTICE TO THE PURCHASER.

THE STATEMENT OF RENTALS AND ACCOUNT ATTACHED TO THE VOUCHER SHOWS PAYMENTS TOTALING $570 FOR THE PERIOD FROM NOVEMBER 21, 1940, TO AND INCLUDING FEBRUARY 21, 1941; AND IT IS STATED THAT THE RENTAL FROM FEBRUARY 21 ( FEBRUARY 22) TO MARCH 15, 1941, HAS BEEN EARNED BUT NO INVOICE HAS BEEN SUBMITTED BY LESSOR NO. 2 DUE TO A CONTROVERSY OVER THE VALUATION OF THE TRUCK AND FURTHER THAT OTHER INVOICES FOR $434.67 HAVE NOT BEEN SUBMITTED BY LESSOR NO. 2 FOR THE SAME REASON. COMPUTATIONS INTENDED TO SHOW THE BALANCE OF RENTAL NECESSARY FOR PAYMENT BY THE GOVERNMENT TO RECAPTURE THE TRUCK LESS RENTALS EARNED AND THE COST TO RECAPTURE IN EXCESS OF VALUATION ARE COMPUTED IN THE STATEMENT BUT, ON THE BASIS OF THE RECORD SUBMITTED, SUCH COMPUTATIONS APPEAR ERRONEOUS.

A CORRECT COMPUTATION SHOWS THAT ON THE BASIS OF RENTAL PAYMENTS OF $570 MADE TO THE LESSOR, THE GOVERNMENT, BY ASSUMING PAYMENT OF THE OUTSTANDING MORTGAGE INDEBTEDNESS AGAINST THE TRUCK, WILL HAVE EXPENDED A TOTAL OF $1,289.55 OR $123.55 (1289.55 - 1166) IN EXCESS OF THE AMOUNT NECESSARY FOR PAYMENT IF THE OPTION TO RECAPTURE HAD BEEN EXERCISED UNDER THE RENTAL AGREEMENT. IN THIS CONNECTION IT IS STATED IN THE THIRD PARAGRAPH OF THE INDORSEMENT OF OCTOBER 7, 1941, FROM THE OFFICE OF THE QUARTERMASTER GENERAL, QUOTED IN PART ABOVE, THAT IT IS "ASSUMED THAT, AFTER NOTICE OF THE EXISTENCE OF THE LIENS WAS RECEIVED, BOTH PIECES OF EQUIPMENT CONTINUED IN USE ON THE GOVERNMENT PROJECT UNDER THE EQUIPMENT RENTAL AGREEMENT, BUT THAT NO FURTHER RENTALS WERE PAID OVER TO MR. MAYNARD.'

IN 19 COMP. GEN. 768, REFERRED TO IN LETTER OF FEBRUARY 25, 1942, QUOTED ABOVE, IT WAS HELD THAT WHERE PROPERTY ACQUIRED BY THE GOVERNMENT IS SUBJECT TO A PRIOR LIEN, IT IS FOR THE ADMINISTRATIVE AGENCY CONCERNED, AND NOT THE GENERAL ACCOUNTING OFFICE, TO DETERMINE WHETHER THE LIEN SHOULD BE DISCHARGED.

IN BOTH INSTANCES HERE INVOLVED IT IS REPORTED THAT IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT PAYMENTS OF THE AMOUNTS CLAIMED ON THE VOUCHERS IS DESIRABLE IN ORDER TO OBTAIN TITLE TO THE TRUCKS AND IN TWELFTH INDORSEMENT OF DECEMBER 27, 1941, FROM THE OFFICE PROJECT ENGINEER, CAMP CLAIBORNE, TO THE FINANCE OFFICE AT NEW ORLEANS, IT IS STATED WITH RESPECT TO THE CHEVROLET DUMP TRUCK NO. 19524 THAT PAYMENT OF THE AMOUNT CLAIMED ON VOUCHER NO. 3837 WOULD BE ADVANTAGEOUS TO THE GOVERNMENT, IN VIEW OF THE PRESENT NEEDS OF THE GOVERNMENT AND THE PRESENT CONDITION OF THE TRUCK.

APPARENTLY THE PAYMENTS TO THE ASSIGNEE UNDER THE CONDITIONAL SALES AGREEMENT AND THE MORTGAGEE, REFERRED TO ABOVE, OF THE REMAINING UNPAID BALANCES UNDER THE LEASE AGREEMENTS NECESSARY FOR RECAPTURE BY THE GOVERNMENT WOULD NOT BE SUFFICIENT TO SATISFY THE EXISTING LIENS ON THE TRUCKS AND, ACCORDINGLY, THE PAYMENT TO THE LIENHOLDERS OF SUCH ADDITIONAL AMOUNTS AS MAY BE NECESSARY TO VEST IN THE GOVERNMENT AN UNENCUMBERED TITLE TO SAID TRUCKS DOES NOT APPEAR TO REQUIRE OBJECTION BY THIS OFFICE IN THE EVENT IT IS ADMINISTRATIVELY DETERMINED AND SO CERTIFIED THAT THE PAYMENTS NECESSARY TO SATISFY SAID LIENS ARE IN THE INTEREST OF THE UNITED STATES.

IN THIS CONNECTION, HOWEVER, THE QUESTION ARISES AS TO THE RIGHT OF THE GOVERNMENT TO RECOVER FROM THE LESSORS THE ADDITIONAL AMOUNT REQUIRED TO BE PAID BY REASON OF THE LESSORS' DEFAULTS UPON THEIR OBLIGATIONS TO THE HOLDERS OF THE LIENS ON THE TRUCKS. IN VIEW OF THE POSSIBILITY THAT SUCH OCCURRENCES MAY BECOME FREQUENT IT IS SUGGESTED THAT APPROPRIATE CONSIDERATION BE GIVEN TO THE INCLUSION IN SUCH AGREEMENTS OF A PROVISION TO THE EFFECT THAT WHERE THE VEHICLE IS SUBJECT TO A LIEN, A MORTGAGE OR ANY OTHER ENCUMBRANCE, THE RENTAL PAYMENTS DUE UNDER SAID AGREEMENT SHALL FIRST BE APPLIED TO THE INDEBTEDNESS, AND A FURTHER PROVISION THAT IN THE EVENT THAT IT BECOMES NECESSARY FOR THE GOVERNMENT TO PAY SUCH INDEBTEDNESS OR ANY PART THEREOF, TO OBTAIN A VALID UNENCUMBERED TITLE UPON RECAPTURE AS PROVIDED FOR UNDER ARTICLE VII OF THE RENTAL AGREEMENT, THE LESSOR WILL BE LIABLE FOR ANY INCREASED COST TO THE GOVERNMENT NECESSARY TO OBTAIN SUCH TITLE.

WHERE, AS IN THE PRESENT CASES, THE PAYMENT BY THE UNITED STATES REQUIRED IN ORDER TO REMOVE ANY LIEN OR OTHER ENCUMBRANCE, TOGETHER WITH RENTAL PAYMENTS MADE TO THE LESSOR, RESULTS IN A TOTAL IN EXCESS OF THAT WHICH WOULD BE REQUIRED FOR RECAPTURE UNDER THE RENTAL AGREEMENT, THE ADDITIONAL AMOUNT SO PAID SHOULD BE COLLECTED FROM THE LESSOR AND APPROPRIATE NOTATION OF THE FACT SHOULD BE MADE ON THE VOUCHER MAKING PAYMENT OF THE LIEN OR MORTGAGE INDEBTEDNESS.