B-27882, FEBRUARY 9, 1943, 22 COMP. GEN. 772

B-27882: Feb 9, 1943

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WHICH RULES AND REGULATIONS CONTAIN A PROVISION REQUIRING CODE MEMBER COAL DEALERS TO CHARGE PURCHASERS INTEREST WHERE PAYMENT IS DELAYED BEYOND THE DUE DATE FIXED THEREIN. 1943: I HAVE YOUR LETTER OF JANUARY 15. WHICH IS AS FOLLOWS: THE JACKSON. HUNTER AND GOULD COAL COMPANY STATED: "OUR BID IS MADE SUBJECT TO THE RULES AND REGULATIONS OF THE U.S. HIS SALES AGENT OR A DISTRIBUTOR SHALL ENTER INTO OR PERFORM ANY AGREEMENT MADE UPON A PENALTY OR A PREMIUM AND PENALTY BASIS WHICH WILL PERMIT THE SALE OF COAL AT AN AGGREGATE CONTRACT PRICE BELOW THE APPLICABLE MINIMUM PRICE OR PRICES ESTABLISHED BY THE DIVISION FOR THE COAL SOLD AND DELIVERED UPON SUCH AGREEMENT SUBSEQUENT TO SAID EFFECTIVE DATE.'.

B-27882, FEBRUARY 9, 1943, 22 COMP. GEN. 772

INTEREST - PAYMENT DELAYS - COAL PURCHASES IN THE ABSENCE OF A STATUTE AUTHORIZING THE ALLOWANCE OF INTEREST FOR DELAY BY THE GOVERNMENT IN MAKING PAYMENT FOR COAL OR OTHER SUPPLIES, OR OF A STATUTE AUTHORIZING PURCHASING OFFICERS TO OBLIGATE THE GOVERNMENT TO PAY SUCH INTEREST, THE INCLUSION OF THE MARKETING RULES AND REGULATIONS, ISSUED PURSUANT TO THE BITUMINOUS COAL ACT OF 1937, IN A CONTRACT FOR THE PURCHASE OF COAL, WHICH RULES AND REGULATIONS CONTAIN A PROVISION REQUIRING CODE MEMBER COAL DEALERS TO CHARGE PURCHASERS INTEREST WHERE PAYMENT IS DELAYED BEYOND THE DUE DATE FIXED THEREIN, MAY NOT BE VIEWED AS LAWFULLY OBLIGATING THE GOVERNMENT TO PAY INTEREST FOR DELAY IN MAKING PAYMENT.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, FEBRUARY 9, 1943:

I HAVE YOUR LETTER OF JANUARY 15, 1943, WITH REFERENCE TO YOUR LETTER OF AUGUST 20, 1942, WHICH IS AS FOLLOWS:

THE JACKSON, HUNTER AND GOULD COAL COMPANY, CONTRACTORS FOR SUPPLYING COAL TO THE VETERANS ADMINISTRATION FACILITY, EXCELSIOR SPRINGS, MISSOURI, DURING THE 1942 FISCAL YEAR, UNDER CONTRACT VAM 16346, HAS SUBMITTED A CLAIM TO THE VETERANS ADMINISTRATION IN THE AMOUNT OF $1.00 REPRESENTING INTEREST ALLEGED TO BE DUE BECAUSE OF FAILURE TO MAKE SETTLEMENTS WITHIN THE TIME PRESCRIBED BY THE MARKETING RULES AND REGULATIONS OF THE BITUMINOUS COAL DIVISION FOR CERTAIN COAL DELIVERED TO EXCELSIOR SPRINGS DURING THE MONTH OF APRIL, 1942.

IN A LETTER DATED JUNE 10, 1941, SUBMITTED WITH THE BID WHICH RESULTED IN CONTRACT VAM-16346, THE JACKSON, HUNTER AND GOULD COAL COMPANY STATED:

"OUR BID IS MADE SUBJECT TO THE RULES AND REGULATIONS OF THE U.S. DEPARTMENT OF THE INTERIOR, BITUMINOUS COAL DIVISION WHICH REGULATIONS UNDER SECTION 8," USE OF COAL ANALYSES," RULE 6 READS AS FOLLOWS:

"FROM AND AFTER THE EFFECTIVE DATE OF THESE MARKETING RULES AND REGULATIONS, NO CODE MEMBER, HIS SALES AGENT OR A DISTRIBUTOR SHALL ENTER INTO OR PERFORM ANY AGREEMENT MADE UPON A PENALTY OR A PREMIUM AND PENALTY BASIS WHICH WILL PERMIT THE SALE OF COAL AT AN AGGREGATE CONTRACT PRICE BELOW THE APPLICABLE MINIMUM PRICE OR PRICES ESTABLISHED BY THE DIVISION FOR THE COAL SOLD AND DELIVERED UPON SUCH AGREEMENT SUBSEQUENT TO SAID EFFECTIVE DATE.' AND ALSO MADE THE FOLLOWING NOTATION ON ITS BID:

"THIS QUOTATION, ORDER, OR CONTRACT IS SUBJECT TO THE RULES AND REGULATIONS OF THE U.S. DEPARTMENT OF THE INTERIOR, BITUMINOUS COAL DIVISION, AND TO ANY REVISION REQUIRED UNDER THE BITUMINOUS COAL ACT OF 1937.'

CORRESPONDENCE BETWEEN THE VETERANS ADMINISTRATION AND THE JACKSON, HUNTER AND GOULD COAL COMPANY RELATIVE TO THE CLAIM IN QUESTION IS ENCLOSED AND IT WILL BE APPRECIATED IF YOU WILL ADVISE WHETHER ITS CLAIM MAY BE APPROVED FOR SETTLEMENT.

A REPLY TO YOUR QUESTION HAS BEEN DELAYED IN THE EXPECTATION OF ACTION BY THE BITUMINOUS COAL DIVISION, DEPARTMENT OF THE INTERIOR, ON THE FORMAL REPORT OF ITS EXAMINER SUBMITTED SEPTEMBER 11, 1942, DOCKET NO. A-1452, AFTER NOTICE AND HEARINGS, ON A PROCEEDING INSTITUTED MAY 13, 1942, BY THE BITUMINOUS COAL CONSUMERS' COUNSEL. THE REPORT RECOMMENDED A REVISION OF THE MARKETING RULES AND REGULATIONS WHICH WOULD GO FAR TOWARD CLARIFYING THE SITUATION BY ELIMINATING ANY REQUIREMENT THAT CODE MEMBER COAL DEALERS CHARGE THE GOVERNMENT INTEREST WHERE PAYMENT MAY BE DELAYED BEYOND THE DUE DATE FIXED BY THE MARKETING RULES AND REGULATIONS. HOWEVER, AS IT DOES NOT APPEAR THAT ACTION HAS BEEN TAKEN ON THE REPORT, I HAVE TO ADVISE THAT, IRRESPECTIVE OF THE SAID MARKETING RULES AND REGULATIONS, I DO NOT FIND SUFFICIENT AUTHORITY OF LAW TO PAY THE INTEREST CLAIMED BY THE COAL CONTRACTOR IN THIS CASE.

IT IS SETTLED, OF COURSE, THAT THE UNITED STATES IS NOT LIABLE FOR INTEREST EXCEPT AS EXPRESSLY PROVIDED BY STATUTE OR LAWFULLY ASSUMED BY CONTRACT. ANGARICA V. BAYARD, 127 U.S. 251; UNITED STATES V. NORTH CAROLINA, 136 U.S. 211; UNITED STATES V. VERDIER, 164 U.S. 213; SHECKLES V. DISTRICT OF COLUMBIA, 246 U.S. 338; UNITED STATES V. NORTH AMERICAN TRANSPORTATION AND TRADING COMPANY, 253 U.S. 330; SEABOARD AIR LINE RY. CO. V. UNITED STATES, 261 U.S. 299; BOSTON SAND COMPANY V. UNITED STATES, 278 U.S. 41; UNITED STATES V. WORLEY, 281 U.S. 339; SMYTH V. UNITED STATES, 302 U.S. 329. THERE IS FOUND NO STATUTE AUTHORIZING THE ALLOWANCE OF INTEREST FOR DELAY IN PAYMENT FOR COAL OR OTHER SUPPLIES PURCHASED BY THE GOVERNMENT. HENCE, IF THERE BE ANY LIABILITY ON THE GOVERNMENT TO PAY INTEREST IN THIS CASE, IT ARISES UNDER THE PURCHASE CONTRACT; AND THE QUESTION IS WHETHER THAT CONTRACT LAWFULLY OBLIGATED THE GOVERNMENT TO PAY INTEREST.

BY ITS BID ACCEPTED JUNE 28, 1941, CONTRACT NO. VAM-16346, THE CLAIMANT AGREED TO FURNISH 2,500 TONS OF COAL FOR THE VETERANS' ADMINISTRATION FACILITY AT EXCELSIOR SPRINGS, MISSOURI, DURING THE PERIOD JULY 1, 1941, TO JUNE 30, 1942, FOR THE PRICE OF $3.64 A TON, DELIVERED AND STORED. THE BID DID NOT MENTION INTEREST, BUT, AS STATED IN YOUR LETTER, THERE WAS STAMPED THEREON A NOTATION THAT ,THIS QUOTATION, ORDER, OR CONTRACT IS SUBJECT TO THE RULES AND REGULATIONS OF THE U.S. DEPARTMENT OF THE INTERIOR, BITUMINOUS COAL DIVISION, AND TO ANY REVISION REQUIRED UNDER THE BITUMINOUS COAL ACT OF 1937.' THE CLAIMANT URGES THAT BY VIRTUE OF THIS NOTATION THE GOVERNMENT IS OBLIGATED TO PAY INTEREST IN THE AMOUNT OF ONE DOLLAR FOR ELEVEN DAYS' DELAY IN THE PAYMENT OF CERTAIN INVOICES FOR COAL DELIVERED UNDER THE CONTRACT IN APRIL, 1942, CITING RULE 1 (I) OF SECTION VII OF SAID MARKETING RULES AND REGULATIONS, AS REVISED BY THE BITUMINOUS COAL DIVISION APRIL 1, 1942, TO READ AS FOLLOWS:

(I) UNLESS PAYMENT OF AN ACCOUNT FOR THE SALE OF COAL IS RECEIVED BY THE SELLER WITHIN TEN (10) DAYS AFTER THE DUE DATE OF SUCH AN ACCOUNT AS PROVIDED IN THESE MARKETING RULES AND REGULATIONS, THE SELLER SHALL CHARGE AND THE BUYER SHALL PAY INTEREST FROM AND AFTER THE DUE DATE OF THE ACCOUNT AT THE RATE OF NOT LESS THAN FIVE (5 PERCENT) PERCENTUM PER ANNUM ON THE INVOICE PRICE OF THE COAL SOLD: PROVIDED, HOWEVER THAT NO INTEREST NEED BE CHARGED ON THE ACCOUNT BY THE SELLER UNLESS SUCH INTEREST EXCEEDS FIFTY (50 CENTS) CENTS ON THE TOTAL PURCHASES FOR ANY ONE MONTH, EXCEPT WHERE AN ACCOUNT REMAINS UNPAID THIRTY (30) DAYS AFTER THE DUE DATE THEREOF INTEREST MUST BE CHARGED FROM THE DUE DATE, REGARDLESS OF THE AMOUNT OF SUCH INTEREST; AND PROVIDED FURTHER, THAT IN THE CASE OF SALES MADE TO FEDERAL, STATE OR LOCAL GOVERNMENTS, OR ANY AGENCY THEREOF, INTEREST NEED NOT BE PAID AT A RATE IN EXCESS OF, BUT SHALL BE PAID AT A RATE OF NOT LESS THAN THAT PRESCRIBED BY APPLICABLE STATUTES OR RULES AS THE MAXIMUM RATE OF INTEREST GOVERNING SUCH PAYMENTS, WHERE THAT PRESCRIBED MAXIMUM IS LESS THAN FIVE (5 PERCENT) PERCENTUM PER ANNUM.

TO THE EXTENT THAT THE SAID NOTATION ON THE BID WOULD PURPORT TO RESULT IN MAKING THIS RULE APPLICABLE TO THE PURCHASE, ITS INCLUSION IN THE CONTRACT MAY NOT BE TREATED AS AUTHORIZED BY LAW. THERE IS NO STATUTE AUTHORIZING PURCHASING OFFICERS TO OBLIGATE THE GOVERNMENT TO PAY INTEREST FOR DELAY IN PAYING FOR SUPPLIES OR MATERIALS. THE AUTHORITY OF THE BITUMINOUS COAL DIVISION UNDER THE BITUMINOUS COAL ACT OF 1937, 50 STAT. 72, TO PROMULGATE MARKETING RULES AND REGULATIONS GOVERNING CODE MEMBERS IS NOT VIEWED AS EXTENDING TO THE PRESCRIPTION OF TERMS FOR THE SALE OF COAL BY SUCH CODE MEMBERS TO THE GOVERNMENT. 19 COMP. GEN. 453. AND IT MAY BE OBSERVED THAT AS THE REASON FOR THE RULE REQUIRING CODE MEMBERS TO CHARGE INTEREST IS TO PREVENT DISCRIMINATION AND UNFAIR COMPETITION IN EXTENDING CREDIT TO THEIR CUSTOMERS, IT HAS NO REASONABLE APPLICATION TO THE GOVERNMENT, WHICH, OF COURSE, DOES NOT BUY ITS COAL OR AWARD ITS CONTRACTS ON THE BASIS OF OFFERED FAVORABLE CREDIT TERMS. HOWEVER THAT MAY BE, THE AUTHORITY FOR THE CONTRACT HERE INVOLVED IS THE APPROPRIATION MADE IN THE INDEPENDENT OFFICES APPROPRIATION ACT, 1942, 55 STAT. 120, FOR THE SALARIES AND EXPENSES OF THE VETERANS' ADMINISTRATION,"INCLUDING THE EXPENSES OF MAINTENANCE AND OPERATION OF MEDICAL, HOSPITAL, AND DOMICILIARY SERVICES OF THE VETERANS' ADMINISTRATION," FOR THE FISCAL YEAR ENDED JUNE 30, 1942, AND NO PROVISION IS CONTAINED THEREIN FOR THE PAYMENT OF INTEREST. AN APPROPRIATION MADE FOR THE PURCHASE OF COAL AND OTHER SUPPLIES IS NOT AN APPROPRIATION TO PAY INTEREST FOR DELAY IN PAYING FOR SUCH SUPPLIES. COMPARE DISTRICT OF COLUMBIA V. BAILEY, 171 U.S. 161, 177, WHERE IT WAS SAID:

* * * THE APPROPRIATION OF MONEY TO IMPROVE STREETS WAS IN NO SENSE THE APPROPRIATION OF MONEY TO PAY A CLAIM FOR UNLIQUIDATED DAMAGES ARISING, NOT FOR WORK AND LABOR PERFORMED AND MATERIALS FURNISHED, BUT FROM THE REFUSAL TO PERMIT THE PERFORMANCE OF WORK AND LABOR AND THE FURNISHING OF MATERIALS.

SECTION 3678, REVISED STATUTES, 31 U.S.C. 628, PROVIDES:

ALL SUMS APPROPRIATED FOR THE VARIOUS BRANCHES OF EXPENDITURE IN THE PUBLIC SERVICE SHALL BE APPLIED SOLELY TO THE OBJECTS FOR WHICH THEY ARE RESPECTIVELY MADE, AND FOR NO OTHERS.

SECTION 3679, REVISED STATUTES, AS AMENDED, 31 U.S.C. 665, PROVIDES:

NO EXECUTIVE DEPARTMENT OR OTHER GOVERNMENT ESTABLISHMENT OF THE UNITED STATES SHALL EXPEND, IN ANY ONE FISCAL YEAR, ANY SUM IN EXCESS OF APPROPRIATIONS MADE BY CONGRESS FOR THAT FISCAL YEAR, OR INVOLVE THE GOVERNMENT IN ANY CONTRACT OR OTHER OBLIGATION FOR THE FUTURE PAYMENT OF MONEY IN EXCESS OF SUCH APPROPRIATIONS UNLESS SUCH CONTRACT OR OBLIGATION IS AUTHORIZED BY LAW. * * *

SECTION 3732, REVISED STATUTES, 41 U.S.C. 11, PROVIDES:

NO CONTRACT OR PURCHASE ON BEHALF OF THE UNITED STATES SHALL BE MADE UNLESS THE SAME IS AUTHORIZED BY LAW OR IS UNDER AN APPROPRIATION ADEQUATE TO ITS FULFILLMENT. * * *

THESE STATUTORY PROVISIONS HAVE BEEN HELD TO PROHIBIT STIPULATIONS FOR THE PAYMENT OF INTEREST IN CONTRACTS FOR THE PURCHASE OF SUPPLIES UNDER ANNUAL APPROPRIATIONS, UNLESS THE PAYMENT OF INTEREST WAS SPECIFICALLY AUTHORIZED BY STATUTE. IN DECISION OF FEBRUARY 1, 1926, A 12671, TO THE SECRETARY OF THE TREASURY, IT WAS SAID:

* * * THESE THREE CONTRACTS ARE DEFINITE IN AMOUNT TO BE PAID FROM THE APPROPRIATION FOR THE LEAD BUT THEY ARE INDEFINITE AS TO THE AMOUNT THAT MAY BE CHARGEABLE TO THE APPROPRIATION ON ACCOUNT OF INTEREST ON DELAYED PAYMENTS AND THEREIN THEY ARE OBJECTIONABLE AND TO THAT EXTENT UNLAWFUL.

IN DECISION OF FEBRUARY 20, 1926, 5 COMP. GEN. 649, IT WAS HELD, QUOTING FROM THE SYLLABUS, THAT---

IN THE ABSENCE OF SPECIFIC AUTHORITY THEREFOR, THE UNITED STATES MAY NOT BE OBLIGATED TO PAY INTEREST ON THE AMOUNT OF AN INVOICE NOT PAID WITHIN A SPECIFIED TIME. SEE, ALSO, 2 COMP. GEN. 181.

THE RULE SEEMS CLEARLY SOUND. A STIPULATION TO PAY INTEREST FOR DELAY IN PAYMENT FOR SUPPLIES IS PROHIBITED BECAUSE THE DELAY MAY EXTEND BEYOND THE PERIOD FOR WHICH THE APPROPRIATION IS MADE AND THUS INVOLVE THE GOVERNMENT IN AN OBLIGATION FOR THE FUTURE PAYMENT OF MONEY FOR WHICH NO APPROPRIATION HAS BEEN MADE, CONTRARY TO SECTIONS 3679 AND 3732, REVISED STATUTES. IT IS PROHIBITED, ALSO, BECAUSE AN APPROPRIATION MADE TO PURCHASE SUPPLIES IS NOT MADE TO PAY INTEREST AND THE PAYMENT OF INTEREST WOULD BE A DIVERSION OF THE APPROPRIATION, CONTRARY TO SECTION 3678, REVISED STATUTES. IN THIS CONNECTION, SEE DECISION OF SEPTEMBER 30, 1938, 18 COMP. GEN. 285, WHERE IT WAS SAID:

IN THE SETTLEMENT AND ADJUSTMENT OF ALL ACCOUNTS AND CLAIMS IN WHICH THE UNITED STATES IS CONCERNED, AND IN CERTIFYING THE BALANCES THEREON WHICH THE LAW MAKES FINAL AND CONCLUSIVE UPON THE EXECUTIVE BRANCH OF THE GOVERNMENT, THIS OFFICE NECESSARILY HAS THE DUTY OF DECIDING UNDER THESE CITED PROVISIONS WHETHER AN APPROPRIATION IS AVAILABLE FOR MAKING PAYMENT ON THE BASIS OF THE RECORD PRESENTED. SECTIONS 304 AND 305, BUDGET AND ACCOUNTING ACT, 42 STAT. 24. GENERALLY, THE CONGRESS IN MAKING APPROPRIATIONS LEAVES LARGELY TO ADMINISTRATIVE DISCRETION THE CHOICE OF WAYS AND MEANS TO ACCOMPLISH THE OBJECTS OF THE APPROPRIATION, BUT, OF COURSE, ADMINISTRATIVE DISCRETION MAY NOT TRANSCEND THE STATUTES, NOR BE EXERCISED IN CONFLICT WITH LAW, NOR FOR THE ACCOMPLISHMENT OF PURPOSES UNAUTHORIZED BY THE APPROPRIATION; AND, JUST AS CLEARLY, SUCH UNAUTHORIZED OBJECTIVES MAY LEGALLY NO MORE BE REACHED INDIRECTLY BY STIPULATIONS IN CONTRACTS CHARGEABLE TO THE APPROPRIATION THAN BY DIRECT EXPENDITURE. MAY BE REMARKED HERE THAT THE QUESTION WITH THE ACCOUNTING OFFICERS IS NOT THE APPARENT GENERAL MERIT OF A PROPOSED EXPENDITURE, BUT WHETHER THE CONGRESS, CONTROLLING THE PURSE, HAS BY LAW AUTHORIZED THE EXPENDITURE--- AND THIS OFFICE HAS BEEN AS QUICK TO QUESTION THE ADMINISTRATIVE OMISSION FROM CONTRACTS OF PROVISIONS REQUIRED BY LAW TO BE INCLUDED THEREIN FOR THE BENEFIT AND PROTECTION OF EMPLOYEES AND THE PUBLIC, AS IT HAS TO QUESTION THE INCLUSION OF PROVISIONS NOT AUTHORIZED BY LAW AND OUTSIDE OF APPROPRIATIONS; ALL ON THE FUNDAMENTAL BASIS THAT IT IS FOR THE CONGRESS TO SAY HOW AND ON WHAT CONDITIONS PUBLIC MONEYS SHALL BE SPENT.

I FIND NO AUTHORITY IN THE GENERAL STATUTES OR IN THE APPROPRIATION HERE INVOLVED FOR THE PAYMENT OF THE INTEREST CLAIMED, OR FOR THE CONTRACT STIPULATION RELIED ON, IF THAT BE VIEWED AS PURPORTING TO OBLIGATE THE GOVERNMENT TO PAY INTEREST. ACCORDINGLY, THE QUESTION SUBMITTED IS ANSWERED IN THE NEGATIVE.

THE ENCLOSURES WITH YOUR LETTER ARE RETURNED HEREWITH, AS REQUESTED BY YOU.