SEPTEMBER 22, 1922, 2 COMP. GEN. 221

SEPTEMBER 22, 1922, 2 COMP. GEN. 221

TERMINATION CONTRACTS - ATTORNEYS' FEES AND COURT COSTS A PROVISION IN A TERMINATION CONTRACT UNDER WHICH THE GOVERNMENT ASSUMES AND AGREES TO PAY ANY AND ALL OBLIGATIONS COMMITMENTS, WITHIN SPECIFIED LIMITS, INCURRED IN THE PERFORMANCE OF THE ORIGINAL CONTRACT WITH A SUBCONTRACTOR, OBLIGATES THE GOVERNMENT OT PAY THE NET AMOUNT OF SUCH OBLIGATIONS OR COMMITMENTS, AND DOES NOT EXTEND TO ATTORNEYS' FEES, COURT COSTS, OR OTHER EXPENSES INCURRED BY THE CONTRACTOR IN DEFENDING SUITS BY THE SUBCONTRACTOR TO ESTABLISH THE AMOUNT DUE AND ITS RIGHT THERETO.

DECISION BY COMPTROLLER GENERAL MCCARL, SEPTEMBER 22, 1922:

THE EXCELSIOR MOTOR MANUFACTURING AND SUPPLY CO. APPLIED JANUARY 13, 1922, FOR A REVIEW OF SETTLEMENT NO. 128187, DATED DECEMBER 8, 1921, IN WHICH THERE WAS ALLOWED THE SUM OF ONLY $377.50 ON ITS CLAIM FOR REIMBURSEMENT OF AMOUNTS ALLEGED TO HAVE BEEN PAID BY IT ON ACCOUNT OF COMMITMENTS OR OBLIGATIONS TO THE ALLEGHENY FORGING CO.

IT APPEARS THAT BY CONTRACT NO. 5097, DATED OCTOBER 25, 1918, CONFIRMATORY OF ORDER 720753, DATED OCTOBER 23, 1918, THE EXCELSIOR MOTOR MANUFACTURING AND SUPPLY CO. UNDERTOOK TO FURNISH AND DELIVER TO THE UNITED STATES CERTAIN HINGED FORGINGS. AFTER THE ARMISTICE IT WAS FOUND TO BE IN THE INTEREST OF THE UNITED STATES TO TERMINATE SAID CONTRACT, AND ACCORDINGLY BY AN AGREEMENT ENTERED INTO APRIL 11,1919, SAID CONTRACT WAS TERMINATED AND A SETTLEMENT WAS MADE ADJUSTING ALL RIGHTS AND OBLIGATIONS THEREUNDER. ARTICLE V OF THE AGREEMENT OF APRIL 11, 1919, PROVIDED:

THE GOVERNMENT HEREBY ASSUMES AND AGREES TO PAY ANY AND ALL OBLIGATIONS AND COMMITMENTS, NOT TO EXCEED THE SUM OF THREE THOUSAND DOLLARS, $3,000, PROPERLY INCURRED BY THE CONTRACTOR IN THE PERFORMANCE OF THE ORIGINAL CONTRACT TO THE ALLEGHENY FORGING COMPANY. IN THE EVENT THAT SAID ALLEGHENY FORGING COMPANY SHALL AT ANY TIME MAKE ANY CLAIM OR DEMAND AGAINST THE CONTRACTOR ARISING OUT OF THE ORIGINAL CONTRACT, THE CONTRACTOR WILL IMMEDIATELY NOTIFY THE GOVERNMENT OF SUCH CLAIM, AND WILL RENDER TO THE GOVERNMENT ALL REASONABLE ASSISTANCE WITHOUT COST TO THE GOVERNMENT IN THE DEFENSE OR SETTLEMENT OF SUCH CLAIM.

THE ALLEGHENY FORGING CO. DID MAKE A CLAIM AGAINST THE EXCELSIOR MOTOR MANUFACTURING AND SUPPLY CO. IN THE SUM OF $2,064.51 ON ACCOUNT OF COMMITMENTS OR OBLIGATIONS UNDER THE ORIGINAL CONTRACT AND IN FEBRUARY, 1920, ENTERED SUIT IN THE MUNICIPAL COURTS OF CHICAGO FOR THE ENFORCEMENT OF SAID CLAIM. THEREUPON THE GOVERNMENT WAS ADVISED OF THE SUIT AND REQUESTED TO DEFEND SAME. AFTER CONSULTATION BETWEEN THE MILITARY AUTHORITIES AND REPRESENTATIVES OF THE DEPARTMENT OF JUSTICE CLAIMANT WAS ADVISED BY THE FORMER TO HAVE ITS ATTORNEYS DEFEND THE SUIT. CLAIMANT, THROUGH ITS ATTORNEY, DID DEFEND THE SUIT, AND ON JUNE 25, 1920, JUDGMENT WAS RENDERED AGAINST IT FOR $278.75, TOGETHER WITH COSTS. CLAIMANT PAID THE JUDGMENT AND COSTS AND PRESENTED ITS CLAIM AGAINST THE GOVERNMENT FOR $77.50, ITEMIZED AS FOLLOWS:

CHART AMOUNT OF JUDGMENT ---------------------------------------- $278.75 PLAINTIFF'S COURT COSTS ------------------------------------ 9.75 PAID BY CLAIMANT IN CONNECTION WITH TAKING DEPOSITIONS AT

PITTSBURGH ------------------------------------------------ 60.00 PAID BY CLAIMANT AS FILING COSTS --------------------------- 11.00 PAID BY CLAIMANT TO COURT REPORTER ------------------------- 18.00 PAID BY CLAIMANT TO ATTORNEY FOR CONDUCTING DEFENSE -------- 400.00

TOTAL ----------------------------------------------- 777.50

ALL ITEMS CLAIMED HAVE BEEN ALLOWED AND PAID EXCEPT THE ITEM OF $400, REPRESENTING AMOUNT PAID BY CLAIMANT TO ATTORNEY FOR SERVICES IN CONDUCTING ITS DEFENSE TO SAID SUIT, WHICH WAS DISALLOWED, PRESUMABLY BECAUSE OF SECTION 189, REVISED STATUTES, WHICH PROVIDES:

NO HEAD OF A DEPARTMENT SHALL EMPLOY ATTORNEYS OR COUNSEL AT THE EXPENSE OF THE UNITED STATES; BUT WHEN IN NEED OF COUNSEL OR ADVICE SHALL CALL UPON THE DEPARTMENT OF JUSTICE, THE OFFICERS OF WHICH SHALL ATTEND TO THE SAME.

THE CASE HERE PRESENTED DOES NOT INVOLVE THE EMPLOYMENT OF AN ATTORNEY OR COUNSEL BY THE HEAD OF THE DEPARTMENT. THE SUIT WAS NOT AGAINST THE UNITED STATES OR ANY OFFICER THEREOF, BUT AGAINST THE CLAIMANT. THE GOVERNMENT'S ONLY INTEREST IN THE MATTER AROSE FROM THE OBLIGATION WHICH IT ASSUMED BY CONTRACTING TO PAY ANY AND ALL OBLIGATIONS AND COMMITMENTS, NOT TO EXCEED THE SUM OF $3,000, PROPERLY INCURRED BY THE CONTRACTOR TO THE ALLEGHENY FORGING CO. IN CONNECTION WITH THE PERFORMANCE OF THE ORIGINAL CONTRACT, AND ITS LIABILITY IS LIMITED TO THE AMOUNT OF SUCH OBLIGATIONS OR COMMITMENTS DEFINITELY ASCERTAINED.

THE PROVISION HEREINAFTER QUOTED FROM ARTICLE V OF THE AGREEMENT OF APRIL 11, 1919, CAN NOT BE CONSTRUED AS REQUIRING THE GOVERNMENT TO DEFEND THE SUIT OF THE ALLEGHENY FORGING CO. AGAINST THE EXCELSIOR MOTOR MANUFACTURING AND SUPPLY CO. BECAUSE IT WAS NOT WITHIN THE POWER OR AUTHORITY OF THE CONTRACTING OFFICER WHO SIGNED THAT AGREEMENT ON BEHALF OF THE UNITED STATES TO BIND THE UNITED STATES TO SUCH A STIPULATION. NEITHER WAS IT WITHIN THE POWER OR AUTHORITY OF THE OFFICER OF THE GOVERNMENT WHO THEREAFTER ADVISED CLAIMANT TO DEFEND THE SUIT TO OBLIGATE THE UNITED STATES TO BEAR ANY OF THE EXPENSE OF SUCH DEFENSE. IN VIEW OF THESE FACTS AND THE FURTHER FACT THAT THE AGREEMENT OF APRIL 11, 1919, DID NOT OBLIGATE THE GOVERNMENT TO PAY ANY CLAIM WHICH MIGHT BE PRESENTED BY THE ALLEGHENY FORGING CO., BUT ONLY SUCH OBLIGATIONS AND COMMITMENTS AS WERE INCURRED IN CONNECTION WITH THE PERFORMANCE OF THE ORIGINAL CONTRACT, THEREBY MAKING IT THE DUTY OF CLAIMANT AT ITS OWN EXPENSE TO ESTABLISH TO THE SATISFACTION OF THE GOVERNMENT THE EXISTENCE AND AMOUNT OF SAID OBLIGATION OR COMMITMENT, IT MUST BE HELD THAT THE PROVISIONS OF ARTICE V AND THE ACTION OF THE GOVERNMENT OFFICERS IN ADVISING CLAIMANT TO DEFEND THE SUIT CAN BE CONSTRUED AS NOTHING MORE THAN AN ANNOUNCEMENT OF WILLINGNESS ON THE PART OF THE UNITED STATES TO ACCEPT THE DETERMINATION OF THE COURT AS TO THE VALIDITY OF THE ALLEGHENY FORGING CO.'S CLAIM AS AN OBLIGATION OR COMMITMENT OF CLAIMANT MADE IN CONNECTION WITH THE PERFORMANCE OF THE ORIGINAL CONTRACT. THEREFORE NO PART OF THE EXPENSES INCURRED BY CLAIMANT IN DEFENDING THE SUIT SHOULD HAVE BEEN ALLOWED IN THE SETTLEMENT OF DECEMBER 8, 1921.

THE GOVERNMENT'S OBLIGATION IN THE MATTER WAS TO PAY THE AMOUNT, WHEN DEFINITELY ASCERTAINED, OF CLAIMANT'S COMMITMENT TO THE ALLEGHENY FORGING CO. MADE IN CONNECTION WITH THE PERFORMANCE OF THE ORIGINAL CONTRACT, AND AS A PREREQUISITE TO SUCH PAYMENT IT WAS INCUMBENT UPON CLAIMANT, AS ITS OWN EXPENSE, TO ESTABLISH THE EXISTENCE AND AMOUNT OF SUCH COMMITMENT.

IT APPEARS, ALSO, THAT THERE WAS A SHORTAGE TO THE AMOUNT OF $415.69 IN THE MATERIAL WHICH BECAME THE PROPERTY OF THE UNITED STATES UNDER SETTLEMENT AGREEMENTS. THE MATERIAL WAS INVENTORIED AND LEFT AT CLAIMANT'S PLANT FOR SOME TIME THEREAFTER. WHEN IT WAS REMOVED BY THE GOVERNMENT THERE WAS FOUND TO BE A SHORTAGE AMOUNTING TO $415.69. CLAIMANT CONTENDS THAT IT DID NOT UNDERTAKE TO BECOME RESPONSIBLE FOR THE MATERIAL LEFT IN ITS CUSTODY AND STATES THAT THE GOVERNMENT PLACED AN ARMED GUARD OVER THE PROPERTY FOR A FEW WEEKS AFTER THE INVENTORY WAS MADE.

THERE APPEARS TO BE NO DOUBT THAT THE MATERIAL WAS LEFT IN CLAIMANT'S CUSTODY AND, REGARDLESS OF ANY EXPRESS AGREEMENT TO THAT EFFECT, IT THEREBY ASSUMED CERTAIN LIABILITIES AS BAILEE WITH RESPECT TO SAID MATERIAL. THE FACT THAT THE GOVERNMENT FOR A PART OF THE TIME FURNISHED AN ARMED GUARD TO WATCH THE PROPERTY CAN NOT RELIEVE THE CLAIMANT OF ITS RESPONSIBILITY IN THE MATTER.

IN THE TERMINATION SETTLEMENTS MADE WITH CLAIMANT CREDIT WAS GIVEN TO IT FOR THE FULL AMOUNT OF THE INVENTORY, AND SINCE THE ENTIRE AMOUNT OF THE PROPERTY COVERED BY THE INVENTORY WAS NOT THEREAFTER TURNED OVER TO THE GOVERNMENT THE AMOUNT OF THE SHORTAGE IS PRIMARILY CHARGEABLE TO CLAIMANT REGARDLESS OF WHETHER SAID SHORTAGE WAS DUE TO AN ERROR IN THE INVENTORY OR TO LOSSES OCCURRING THEREAFTER. IT IS TRUE THAT CLAIMANT DID NOT BECOME AN ABSOLUTE INSURER OF THE PROPERTY, BUT AS THE LOSS OCCURRED WHILE THE PROPERTY WAS IN ITS CUSTODY AND IT HAS FAILED TO SHOW HOW THE LOSS OCCURRED, IT MUST BE HELD RESPONSIBLE THEREFOR.

UPON A REVIEW OF THE MATTER A DIFFERENCE OF $514.44 IS CERTIFIED DUE THE UNITED STATES, BEING THE AMOUNT ERRONEOUSLY ALLOWED AND PAID AS EXPENSES INCIDENT TO THE SUIT OF THE ALLEGHENY FORGING CO. ($98.75) PLUS THE AMOUNT ($415.69) OF THE PROPERTY SHORTAGE AS HEREINBEFORE INDICATED.