B-150897, MAY 6, 1963

B-150897, MAY 6, 1963

TO MR. J. M. KEUSSEFF:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 13, 1962, (R5-63- 4), WITH ENCLOSURES, REFERRING TO OUR CLAIMS DIVISION FOR APPROPRIATE SETTLEMENT ACTION THE MATTER OF THE APPLICATION OF THE SUMS OF $600 AND $260 IN REDUCTION OF THE INDEBTEDNESS TO THE UNITED STATES OF THE SIERRA CHRISTMAS TREE COMPANY IN THE AMOUNT OF $7,600.20, ARISING OUT OF THE COMPANY'S DEFAULT UNDER CONTRACT NO. 12-11-0035-55, DATED OCTOBER 17, 1961.

UNDER THE TERMS OF THE INDICATED CONTRACT THE FOREST SERVICE AGREED TO SELL AND THE CONTRACTOR AGREED TO PURCHASE FOR THE TOTAL AMOUNT OF $7,600.20 AN ESTIMATED 33,120 LINEAR FEET OF WHITE AND RED FIR CHRISTMAS TREES MARKED OR DESIGNATED FOR CUTTING BY THE FOREST SERVICE WITHIN CERTAIN DESIGNATED AREAS. IT WAS STATED IN YOUR LETTER OF DECEMBER 13, 1962, THAT THE CONTRACTOR SUBMITTED A "$600 DEPOSIT" WITH ITS BID AND IN THE ENCLOSURES IT WAS INDICATED THAT A SURETY BOND WAS FURNISHED IN THE AMOUNT OF $1,100. BY OUR LETTER OF APRIL 3, 1963, WE INQUIRED WHETHER THE INDICATED DEPOSIT WAS A "BID DEPOSIT" OR WAS IN THE NATURE OF "MONEYS ADVANCED" UNDER THE CONTRACT AS THAT TERM IS USED IN PARAGRAPH 25 THEREOF. YOU REPLIED BY LETTER OF APRIL 8, 1963, TO THE EFFECT THAT THE DEPOSIT OF $600 WAS TO APPLY AS A PAYMENT ON THE CHRISTMAS TREES, AND YOU EXPRESSED THE VIEW THAT THE PROVISIONS OF "CLAUSE 25" DEFINITELY APPLY TO THIS DEPOSIT.

IT APPEARS FROM THE ENCLOSURES TO YOUR LETTER OF DECEMBER 13, 1962, THAT NO CHRISTMAS TREES WERE CUT OR REMOVED UNDER THE CONTRACT. IT WAS STATED ALSO THAT IT COULD NOT HAVE BEEN DETERMINED PRIOR TO NOVEMBER 10, 1961, THAT THE CONTRACTOR DID NOT INTEND TO COMPLETE THE CONTRACT AND THAT BY THAT DATE IT WAS NO LONGER POSSIBLE TO READVERTISE, SELL AND HAVE THE TREES REMOVED DURING THE CURRENT SEASON AND THAT, CONSEQUENTLY, THE TREES HAD NO RESALE VALUE TO THE FOREST SERVICE DURING THE CURRENT SEASON. WAS REPORTED FURTHER THAT SINCE THE RESERVOIR CLEARING OPERATIONS BEGAN IN THE SUMMER OF 1962, THE TREES HAD NO SALE VALUE AS CHRISTMAS TREES THEREAFTER INCLUDING THE SPRING OF 1962 AND UP TO THE TIME THE AREA WAS CLEARED FOR RESERVOIR CONSTRUCTION. THE CONTRACTOR WAS BILLED FOR THE CONTRACT PRICE ON THE BASIS OF AN ADMINISTRATIVE DETERMINATION THAT THE GOVERNMENT WAS DAMAGED TO THE EXTENT OF THE CONTRACT PRICE, HOWEVER, NO PAYMENT WAS MADE.

PARAGRAPH 25 OF THE DEFAULTED CONTRACT PROVIDES AS FOLLOWS:

"UPON FAILURE ON THE PART OF THE PURCHASER TO FULFILL ALL AND SINGULAR THE REQUIREMENTS HEREIN SET FORTH, OR ATTACHED AND MADE A PART HEREOF, ALL MONEYS ADVANCED OR DEPOSITED UNDER THIS CONTRACT MAY BE RETAINED BY THE FOREST SERVICE TO BE APPLIED TOWARD THE SATISFACTION OF THE PURCHASER'S OBLIGATIONS HEREUNDER WITHOUT PREJUDICE WHATEVER TO ANY OTHER RIGHTS AND REMEDIES OF THE FOREST SERVICE.'

IN VIEW OF YOUR REPORT THAT THE DEPOSIT OF $600 WAS TO APPLY TOWARD PAYMENT FOR THE CHRISTMAS TREES, IT APPEARS THAT THAT AMOUNT CLEARLY REPRESENTS "MONEYS ADVANCED OR DEPOSITED" UNDER THE CONTRACT AND THAT, THEREFORE, THE AMOUNT MAY BE RETAINED BY THE FOREST SERVICE AND APPLIED IN PARTIAL LIQUIDATION OF THE CONTRACTOR'S INDEBTEDNESS ARISING OUT OF ITS DEFAULT.

THERE REMAINS FOR CONSIDERATION YOUR REQUEST FOR PERMISSION TO APPLY THE SUM OF $260, REPRESENTING A CASH BOND DEPOSITED BY THE SIERRA CHRISTMAS TREE COMPANY UNDER CONTRACT NO. 12-11-0035-57, DATED OCTOBER 17, 1961, AGAINST THE CONTRACTOR'S INDEBTEDNESS UNDER CONTRACT NO. 12 11-0035-55. UNDER THE FIRST-MENTIONED CONTRACT THE FOREST SERVICE AGREED TO SELL AND THE CONTRACTOR AGREED TO PURCHASE AN ESTIMATED QUANTITY OF CHRISTMAS TREES AT $1,129.50. PERFORMANCE UNDER THE CONTRACT APPEARS TO HAVE BEEN COMPLETED AND WHILE NOT SO STATED IN THE ENCLOSURES TO YOUR LETTER IT IS ASSUMED THAT PAYMENT OF THE CONTRACT PRICE HAS BEEN MADE. THIS IS BASED UPON A STATEMENT IN THE MEMORANDUM DATED AUGUST 14, 1962, BY THE ACTING REGIONAL ATTORNEY, TO THE EFFECT THAT THE CONTRACT WAS FULLY PERFORMED.

UNDER PARAGRAPH 18 OF THE CONTRACT THE CONTRACTOR WAS PERMITTED TO FURNISH A SURETY BOND IN THE AMOUNT OF $260, OR, IN LIEU OF A SURETY BOND, TO MAKE A CASH DEPOSIT OF THE SAME AMOUNT. THE CONTRACT THEN PROVIDED FURTHER THAT AS SOON AS SECURITY FOR THE TERMS OF THE CONTRACT OR THE SETTLEMENT OF CLAIMS INCIDENT THERETO IS NO LONGER NECESSARY, DEPOSITS IN LIEU OF SURETY BONDS WOULD, SUBJECT TO THE CONDITIONS SET FORTH IN "SECTION 19" OF THE CONTRACT, BE RETURNED TO THE PURCHASER. IN A MEMORANDUM DATED JULY 31, 1962, THE REGIONAL FORESTER WAS ADVISED THAT OPERATIONS UNDER THE CONTRACT HAD BEEN COMPLETED AND THAT THE "LOPPING AND CLEAN UP SPECIFICATIONS" HAD BEEN TAKEN CARE OF. CLOSURE OF THE CONTRACT WAS RECOMMENDED.

IT IS OUR VIEW THAT UNDER THE TERMS OF THE CONTRACT REFERRED TO ABOVE THE CASH DEPOSIT OF $260 IN LIEU OF A SURETY BOND IS REQUIRED TO BE RETURNED TO THE CONTRACTOR. IN OTHER WORDS WE FIND NO LEGAL BASIS UPON WHICH THE DEPOSIT MAY BE APPLIED IN PART IN SATISFACTION OF THE CONTRACTOR'S LIABILITY UNDER CONTRACT NO. 12-11-0035-55.