B-58182, JULY 25, 1946, 26 COMP. GEN. 60

B-58182: Jul 25, 1946

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CONTRACTS - RELEASES - FINALITY OF AN ABSOLUTE RELEASE OF THE GOVERNMENT BY A LUMP-SUM CONTRACTOR WHICH WAS EXECUTED AND DELIVERED ON THE VERBAL UNDERSTANDING AND CONDITION THAT IT WOULD BECOME OPERATIVE ONLY AFTER PAYMENT BY THE GOVERNMENT OF A CLAIM FOR REIMBURSEMENT OF OVERTIME PREMIUM COSTS INCURRED IN THE PERFORMANCE OF THE CONTRACT DOES NOT OPERATE AS A BAR TO THE PAYMENT OF THE OVERTIME COMPENSATION CLAIMED. THE SOLE QUESTION PRESENTED IS WHETHER THE RELEASE EXECUTED AND DELIVERED BY THE CONTRACTOR TO THE GOVERNMENT EXTINGUISHES THE GOVERNMENT'S LIABILITY FOR OTHERWISE PROPERLY REIMBURSABLE OVERTIME PREMIUM COSTS INCURRED BY THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT WORK. THE FACTS PERTINENT TO THE MATTER ARE SET FORTH IN A LETTER DATED MAY 9.

B-58182, JULY 25, 1946, 26 COMP. GEN. 60

CONTRACTS - RELEASES - FINALITY OF AN ABSOLUTE RELEASE OF THE GOVERNMENT BY A LUMP-SUM CONTRACTOR WHICH WAS EXECUTED AND DELIVERED ON THE VERBAL UNDERSTANDING AND CONDITION THAT IT WOULD BECOME OPERATIVE ONLY AFTER PAYMENT BY THE GOVERNMENT OF A CLAIM FOR REIMBURSEMENT OF OVERTIME PREMIUM COSTS INCURRED IN THE PERFORMANCE OF THE CONTRACT DOES NOT OPERATE AS A BAR TO THE PAYMENT OF THE OVERTIME COMPENSATION CLAIMED.

COMPTROLLER GENERAL WARREN TO LT. (JG) J. W. VEAZEY, U.S. NAVAL RESERVE, JULY 25, 1946:

THERE HAS BEEN RECEIVED YOUR LETTER OF MAY 16, 1946, FILE REFERENCE L6- 2/JWV:EAS/JBM), FORWARDING BUREAU VOUCHER NO. 1 AND OTHER PAPERS RELATING TO CLAIM OF HARRIS AND PARSONS, INC., EAST GREENWICH, RHODE ISLAND, FOR REIMBURSEMENT OF OVERTIME PREMIUM COSTS AMOUNTING TO $1,651.20, INCURRED BY IT AND ONE OF ITS SUBCONTRACTORS, THE IPSWICH ELECTRIC COMPANY, DURING THE PERIOD NOVEMBER 13, 1944, TO APRIL 8, 1945, IN THE MANUFACTURE AND CONSTRUCTION OF THREE 72-FOOT HARBOR DEFENSE MOTOR LAUNCHES UNDER CONTRACT NO. NOBS-13943, DATED MARCH 25, 1944, AS AMENDED, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO THE PROPRIETY OF MAKING PAYMENT THEREON.

THE SOLE QUESTION PRESENTED IS WHETHER THE RELEASE EXECUTED AND DELIVERED BY THE CONTRACTOR TO THE GOVERNMENT EXTINGUISHES THE GOVERNMENT'S LIABILITY FOR OTHERWISE PROPERLY REIMBURSABLE OVERTIME PREMIUM COSTS INCURRED BY THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT WORK. THE FACTS PERTINENT TO THE MATTER ARE SET FORTH IN A LETTER DATED MAY 9, 1946, FROM THE BUREAU OF SHIPS TO THE CENTRAL NAVY DISBURSING OFFICE, FIRST NAVAL DISTRICT, BOSTON, MASSACHUSETTS, IN PERTINENT PART, AS FOLLOWS:

1. REFERENCES (A), (B) AND (C) REQUEST AUTHORIZATION FROM THE BUREAU OF SHIPS TO REIMBURSE HARRIS AND PARSONS, INC., FOR CERTAIN OVERTIME CLAIMS UNDER CONTRACT NOBS-13943, NOTWITHSTANDING THAT A FINAL RELEASE UNDER THIS CONTRACT HAS BEEN SIGNED BY THE CONTRACTOR AND IS NOW IN THE PHYSICAL POSSESSION OF THE BUREAU OF SHIPS.

2. THE OVERTIME CLAIMS ARE BASED ON REFERENCE (D), AMENDMENT NO. 4, IN WHICH OVERTIME WAS AUTHORIZED AND REIMBURSEMENT FOR PREMIUM OVERTIME IN EXCESS OF 48 HOURS PER WEEK WAS CONFIRMED.

3. THE FACTS, AS THEY APPEAR FROM REFERENCES (A), (B) AND (C), INDICATE THAT CONTRACTOR'S INVOICES, DATED 20 NOVEMBER 1945, COVERING THE OVERTIME PREMIUM CLAIMS IN QUESTION, WERE FORWARDED TO THE SUPERVISORY COST INSPECTOR, FIRST NAVAL DISTRICT, BY THE SUPERVISOR OF SHIPBUILDING, USN, QUINCY, ENDORSEMENT DATED 26 NOVEMBER 1945. THESE INVOICES WERE MADE UP AFTER THE SUPERVISORY COST INSPECTOR HAD MADE AN AUDIT OF THE CONTRACTOR'S OVERTIME PREMIUM RECORDS, WHICH WAS REQUESTED BY THE SUPERVISOR OF SHIPBUILDING, USN, QUINCY, ON 24 OCTOBER 1945. A LETTER DATED 7 DECEMBER 1945 FROM SCI, FIRST NAVAL DISTRICT, TO SUPSHIP, QUINCY, ENCLOSED THE ORIGINAL PUBLIC VOUCHERS FOR $1,651.20, TOGETHER WITH CONTRACTOR'S STATEMENT OF CLAIM, DATED 20 NOVEMBER 1945, IN THE AMOUNT OF $1,553.00AND THE CONTRACTOR'S STATEMENT OF CLAIM, DATED 20 NOVEMBER 1945, IN THE AMOUNT OF $98.20, WITH A REQUEST TO FORWARD THEM, TOGETHER WITH REFERENCE (D), TO THE CONTRACTING OFFICER, BUREAU OF SHIPS, WHICH WAS DONE ON 19 DECEMBER 1945 BY REFERENCE (E).

4. ON OR ABOUT 2 JANUARY 1946, SUPSHIP, QUINCY, WAS ADVISED, THROUGH A CONVERSATION BETWEEN COMMANDER H. B. CONVERSE, OF SUPSHIP, AND LIEUTENANT CORNELIUS, OF THE BUREAU OF SHIPS, THAT THE INVOICE AND PUBLIC VOUCHERS HAD BEEN RECEIVED AND PAYMENT PUT IN MOTION, AND THAT THE FINAL RELEASE OF THE CONTRACTOR SHOULD BE OBTAINED WITHOUT FURTHER DELAY. HOWEVER, THE INVOICE AND PUBLIC VOUCHERS WERE PLACED IN THE CONTRACTOR'S FILE IN THE BUREAU OF SHIPS INSTEAD OF BEING FORWARDED FOR PAYMENT.

5. ACTING ON THE CONVERSATION DESCRIBED IN PARAGRAPH 4, SUPSHIP, QUINCY, ADVISED THE CONTRACTOR TO EXECUTE A RELEASE, WHICH WAS EXECUTED AND PRESENTED TO SUPSHIP, QUINCY, ON THE UNDERSTANDING AND CONDITION THAT IT WOULD BECOME OPERATIVE ONLY AFTER PAYMENT OF THE OVERTIME CLAIM WAS MADE. ON THE ASSUMPTION, CONTRARY TO THE FACT, THAT THE INVOICES FOR OVERTIME IN THE AMOUNT OF $1,651.20 HAD BEEN PAID, SUPSHIP, QUINCY, ON 8 JANUARY 1946, FORWARDED TO SCI, FIRST NAVAL DISTRICT, THE CONTRACTOR'S FINAL RELEASE, DATED 3 JANUARY 1946, NOTWITHSTANDING THAT THE CONDITION UPON WHICH PHYSICAL DELIVERY OF THE RELEASE HAD BEEN MADE WAS NOT FULFILLED.

6. THERE WOULD APPEAR TO BE LITTLE QUESTION BUT THAT, BY ITS TERMS, IF IT MAY BE CONSIDERED AS HAVING BEEN DELIVERED AND IN EFFECT, THE RELEASE COVERS THE SUBJECT CLAIMS FOR OVERTIME. HOWEVER, IT IS BELIEVED THAT THE FACTS OF THIS CASE BRING IT WITHIN THE SCOPE OF THE RULE STATED AS FOLLOWS IN 10 CORPUS JURIS SECUNDUM PAGE 517: "INSTRUMENTS DELIVERED ON CONDITIONS ARE, AS BETWEEN THE IMMEDIATE PARTIES THERETO * * * INVALID UNTIL THE HAPPENING OF THE EVENT OR THE PERFORMANCE OF THE CONDITION ON WHICH INCEPTION OF THE INSTRUMENT IS MADE TO DEPEND, AND WHERE THE EVENT DOES NOT OCCUR, OR THE CONDITION IS NOT PERFORMED, THERE IS NO BINDING DELIVERY.' ( BOSWORTH VS CODY, 72 F.2D 62; CLARK VS. SPERRY, 25 S.E. 2D 870; RESTATEMENT OF THE LAW OF CONTRACTS SECTION 103; WILLISTON ON CONTRACTS, REVISED EDITION, SECTION 1824). THE FACTS STATED ABOVE INDICATE THAT THE RELEASE WAS PHYSICALLY DELIVERED UPON THE UNDERSTANDING AND CONDITION THAT IT WOULD NOT BECOME OPERATIVE UNTIL PAYMENT OF THE OVERTIME CLAIM, THAT SUCH CONDITION PRECEDENT HAS NOT BEEN FULFILLED, AND THAT, IN THE WORDS OF THE QUOTED RULE, THERE HAS BEEN "NO BINDING DELIVERY.'

NEITHER THE ORIGINAL NOR A COPY OF THE RELEASE IS PRESENTLY AVAILABLE TO THIS OFFICE, BUT IS IS ASSUMED FROM THE FACTS CONTAINED IN THE RECORD THAT THE INSTRUMENT INVOLVED WAS GENERAL IN NATURE AND EMBRACED ANY AND ALL CLAIMS ARISING UNDER OR BY VIRTUE OF THE SUBJECT CONTRACT.

WHILE IT IS GENERALLY HELD THAT AN UNQUALIFIED RELEASE OF ANY AND ALL CLAIMS PRECLUDES A CONTRACTOR THEREAFTER FROM PRESENTING ANY CLAIM ARISING OUT OF THE TRANSACTION INVOLVED ( UNITED STATES V. WILLIAM CRAMP AND SONS SHIP AND ENGINE BUILDING COMPANY, 206 U.S. 118; ST. LOUIS, KENNETT AND SOUTHEASTERN RAILROAD COMPANY V. UNITED STATES, 267 U.S. 346; B-56990, JUNE 19, 1946, 25 COMP. GEN. 893; 23 ID. 632), AND WHILE THE INTENTION OF THE PARTIES TO A WRITTEN RELEASE MUST BE ASCERTAINED FROM THE WORDING OF THE INSTRUMENT AND NOT FROM MATTERS DEHORS THE WRITING ( IN RE ATWATER, ET AL., 266 F. 278, AFFIRMED 254 U.S. 423; HOUSTON V. TROWER, 297 F. 558; RADOVSKY V. WEXLER ET AL., 173 N.E. 409; B-56990, SUPRA; B-56286, APRIL 12, 1946, AND B-37372, NOVEMBER 3, 1943), AND WHILE THE PAROL EVIDENCE RULE IS APPLICABLE TO RELEASES IN WRITING JUST AS TO OTHER CONTRACTS AND PREVENTS THE PRESENTATION OF ORAL OR EXTRINSIC EVIDENCE TO VARY THE TERMS OF THE WRITTEN INSTRUMENT ( JENSEN V. MCCONNELL BROTHERS, ET AL., 169 P. 292; BERRYMAN V. DORE, ET AL., 251 P. 757, AND 45 AM. JUR. 706), SUCH RULES ARE NOT FOR APPLICATION TO THE FACTS HERE INVOLVED.

IN THE PRESENT SITUATION, THE RELEASE WAS EXECUTED AND DELIVERED "ON THE UNDERSTANDING AND CONDITION THAT IT WOULD BECOME OPERATIVE ONLY AFTER PAYMENT OF THE OVERTIME CLAIM WAS MADE.' THERE IS NO QUESTION AS TO THE SCOPE AND COVERAGE OF SAID RELEASE AFTER ITS EFFECTIVE DATE OR AS TO THE INTENTION OF THE PARTIES IN THIS REGARD, NEITHER IS THERE INVOLVED THE INTRODUCING OF PAROL OR EXTRINSIC EVIDENCE TO VARY THE TERMS OF THE WRITTEN INSTRUMENT. THE QUESTION IS SIMPLY ONE AS TO THE TIME WHEN SUCH RELEASE BECOMES OPERATIVE OR EFFECTIVE.

IT IS STATED IN 53 C.J. 1245 THAT "A RELEASE MAY BE MADE SUBJECT TO THE OCCURRENCE OF A CONDITION PRECEDENT, AND IF IT IS, IT CANNOT BE PLEADED IN BAR OF THE CLAIM UNTIL THE HAPPENING OF THE EVENT SPECIFIED.' IN 45 AM. JUR. 707, IT IS STATED THAT:

PAROL EVIDENCE IS ADMISSIBLE FOR THE PURPOSE OF PROVING THAT A RELEASE WAS * * * DELIVERED TO TAKE EFFECT ON A CONDITION THAT HAD NOT HAPPENED *

IN THE CASE OF STIEBEL ET AL. V. GROSBERG, 95 N.E. 692, THE COURT STATED, WITH REFERENCE TO THE INTRODUCTION OF PAROL EVIDENCE TO SHOW THAT A RELEASE WAS EFFECTIVE ONLY ON THE HAPPENING OF A CONTINGENCY, THAT "WHILE PAROL EVIDENCE IS INCOMPETENT FOR THE PURPOSE OF CHANGING OR EXPLAINING THE MEANING OF THE WRITTEN INSTRUMENT, WE INCLINE TO THE VIEW THAT ORAL EVIDENCE MAY BE GIVEN FOR THE PURPOSE OF SHOWING WHETHER THE DELIVERY OF THE INSTRUMENT WAS INTENDED TO BE ABSOLUTE OR CONDITION.' IN THE CASE OF WARE V. ALLEN, 128 U.S. 590, THE COURT STATED ON PAGES 595 AND 596 HAT:

* * * THE CONTRACT UPON WHICH THIS SUIT IS BROUGHT NEVER WENT INTO EFFECT; THAT THE CONDITION UPON WHICH IT WAS TO BECOME OPERATIVE NEVER OCCURRED, AND THAT IT IS NOT A QUESTION OF CONTRADICTING OR VARYING A WRITTEN INSTRUMENT BY PAROL TESTIMONY, BUT THAT IT IS ONE OF THAT CLASS OF CASES, WELL RECOGNIZED IN THE LAW, BY WHICH AN INSTRUMENT, WHETHER DELIVERED TO A THIRD PERSON AS AN ESCROW OR TO THE OBLIGEE IN IT, IS MADE TO DEPEND, AS TO ITS GOING INTO OPERATION, UPON EVENTS TO OCCUR OR BE ASCERTAINED THEREAFTER.

IT WAS ALSO HELD IN THE CASE OF NATIONAL BANK OF KENTUCKY ET AL. V. LOUISVILLE TRUST COMPANY, 67 F.2D 97:

* * * IT WAS LONG AGO ESTABLISHED THAT, NOTWITHSTANDING THE PARTIES MAY HAVE GONE THROUGH THE FORM OF EXECUTING A FORMAL WRITTEN CONTRACT, YET IF IT ALSO HAD BEEN AGREED, BE IT ONLY BY PAROL, THAT SUCH CONTRACT WAS NOT TO TAKE EFFECT UNTIL THE HAPPENING OF SOME OTHER EVENT, AND SUCH SUBSEQUENT EVENT DID NOT HAPPEN, THE WRITTEN CONTRACT WILL NOT BE ENFORCED EVEN THOUGH IT HAD BEEN DELIVERED TO THE OBLIGEE AT THE TIME OF EXECUTION. * * *

SEE ALSO, THE CASES BLEWITT V. BOORUM ET AL., 37 N.E. 119; REYNOLDS V. ROBINSON ET AL., 18 N.E. 127; LOUISVILLE AND N.R. COMPANY ET AL. V. COX, 66 S.E. 1088.

IN VIEW OF THE AUTHORITIES CITED, SUPRA, AND SINCE THE PAYMENT OF THE OVERTIME INVOLVED WAS VERBALLY STIPULATED AND UNDERSTOOD BY THE PARTIES TO BE THE VERY CONDITION PRECEDENT UPON WHICH AN ABSOLUTE RELEASE OF THE GOVERNMENT WAS MADE TO DEPEND, THERE APPEARS NO LEGAL BASIS FOR HOLDING THAT SUCH CONDITIONAL RELEASE OPERATES AS A BAR TO THE PAYMENT OF THE OVERTIME COMPENSATION CLAIMED.

ACCORDINGLY, THE VOUCHER, TOGETHER WITH RELATED PAPERS, IS RETURNED HEREWITH, AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED IF OTHERWISE CORRECT.