B-142279, NOV. 16, 1961

B-142279, NOV. 16, 1961

TO JAMES D. ST. CLAIR, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTERS OF MAY 15 AND JULY 5, 1961, CONCERNING A CLAIM BY THE DEPARTMENT OF AGRICULTURE AGAINST YOUR CLIENT, MORSE BROS., INC., ON ACCOUNT OF AN OVERPAYMENT UNDER THE DEPARTMENT'S CRANBERRY PAYMENT PROGRAM AMM 181A. THE PERTINENT FACTS IN THE MATTER MAY BE SUMMARIZED AS FOLLOWS:

MORSE BROS. FILED AN APPLICATION FOR ADVANCE PAYMENT UNDER THE PROGRAM AND WAS PAID THEREUNDER THE SUM OF $3,044.87. THE AMOUNT OF THE ADVANCE PAYMENT WAS DERIVED ON THE BASIS OF A TOTAL CROP OF 1,858 BARRELS OF CRANBERRIES OF WHICH 1,425 1/2 BARRELS WERE SOLD AT $13 PER BARREL OR A TOTAL OF $18,531.50. THE PROGRAM TARGET PRICES OF $10.34 PER BARREL OF SCREENED BERRIES AND $9.74 PER BARREL OF UNSCREENED BERRIES WHEN APPLIED TO THE TOTAL CROP OF 1,858 BARRELS RESULTED IN A TOTAL CROP VALUATION FOR PROGRAM PURPOSES OF $18,952.22. AGAINST THIS VALUATION, MORSE BROS. DEDUCTED THE $18,531.50 OF COMMERCIAL SALES LESS $2,624.15 IN MARKETING AND OPERATING COSTS LEAVING THE DEFICIT OF $3,044.87 APPLIED FOR UNDER THE PROGRAM. THE CALCULATION IS SHOWN IN SCHEDULE FORM AS FOLLOWS:

CHART

BARRELS VALUE

------- ------ SCREENED BERRIES 1,425.50 AT $10.34 $14,739.67 UNSCREENED BERRIES 432.50 AT 9.74 4,212.55

TOTAL CROP 1,858.00 $18,952.22

------------------ ------------- COMMERCIAL SALES 1,425.50 AT $13.00 $18,531.50 LESS MARKETING AND OPERATING COSTS -

2,624.15

NET SALES $15,907.35

------------- EXCESS OF CROP VALUE OVER NET SALES $ 3,044.87

AN ADMINISTRATIVE AUDIT OF MORSE BROS. ACCOUNTS DISCLOSED THAT ON JULY 1, 1959, MORSE BROS. ENTERED INTO A WRITTEN AGREEMENT TO SELL ARISTAN CANNING COMPANY 3,000 BARRELS OF 1959 CROP CRANBERRIES AT $13 PER BARREL, ARISTAN TO MAKE AN ADVANCE PAYMENT OF $5 PER BARREL OR $15,000 UPON SIGNING OF THE AGREEMENT. ARISTAN HAS IN FACT PAID MORSE BROS., FROM JULY 1 THROUGH OCTOBER 19, 1959, A TOTAL OF $22,500 UNDER THE AGREEMENT. THE AUDIT ALSO DISCLOSED THAT OF THE 1,858 BARRELS SHOWN IN THE CLAIM BASE, 158 BARRELS HAD BEEN PURCHASED BY MORSE BROS. FROM INLAND CRANBERRY COMPANY LEAVING ONLY 1700 BARRELS GROWN BY MORSE BROS. AND ELIGIBLE FOR CONSIDERATION UNDER THE PROGRAM. IN ADDITION MARKETING AND OPERATING COSTS WERE FOUND TO HAVE BEEN OVERSTATED. THE CLAIM, ADJUSTED ON THE BASIS OF THESE AUDIT FINDINGS WAS RECOMPUTED AS FOLLOWS:

CHART

BARRELS VALUE

------- ----- TOTAL CROP 1,700

$17,318.50

------- ----------- COMMERCIAL SALES 1,700 AT 13- $22,100.00 LESS MARKETING AND OPERATING COSTS -

1,566.94

------------- NET SALES $20,533.06

------------- EXCESS OF NET

SALES OVER CROP

VALUE $ 3,214.56

------------- OVERPAYMENT

$3,044.87

AS A RESULT OF THESE AUDIT FINDINGS, THE DEPARTMENT OF AGRICULTURE NOTIFIED MORSE BROS. BY LETTER DATED MARCH 17, 1961, THAT THE CRANBERRIES COVERED BY ITS APPLICATION AND INVOICES ARE NOT ELIGIBLE UNDER THE TERMS AND CONDITIONS OF THE PROGRAM, AS AMENDED, AND THE COMPANY WAS REQUESTED TO REFUND THE ADVANCE PAYMENT OF $3,044.87 MADE TO IT. SECTION 517.489 OF AMENDMENT NO. 2 TO THE PROGRAM, EFFECTIVE JUNE 21, 1960, PROVIDES THAT:

"NOTWITHSTANDING ANY OTHER PROVISION OF THIS SUBPART, ANY GROWER WHO, ON OR BEFORE NOVEMBER 9, 1959, SOLD ALL OF HIS 1959-CROP CRANBERRIES AT A FIXED PRICE SHALL NOT BE ELIGIBLE FOR ANY PAYMENT UNDER THIS PROGRAM, EVEN THOUGH HE MAY NOT HAVE RECEIVED ALL OR PART OF THE SALES PRICE EREFOR.'

AND SECTION 517.490 (A) OF THE SAME AMENDMENT PROVIDES THAT:

"IF A GROWER HAS SOLD HIS CRANBERRIES FOR A FIXED PRICE TO A HANDLER OR PROCESSOR AND TITLE TO THE CRANBERRIES HAS PASSED, THIS TRANSACTION HAS BEEN COMPLETED. IT IS IMMATERIAL WHETHER OR NOT THE HANDLER OR PROCESSOR HAS DISPOSED OF THE CRANBERRIES. IF THE GROWER RECEIVED TOTAL PAYMENTS OF $10.34 OR MORE A BARREL FOR SCREENED BERRIES OR $9.74 OR MORE A BARREL FOR UNSCREENED BERRIES, HE IS NOT ELIGIBLE FOR PAYMENT UNDER THE CRANBERRY PROGRAM, IF HE RECEIVED TOTAL PAYMENTS AMOUNTING TO LESS THAN $10.34 PER BARREL FOR SCREENED BERRIES OR $9.74 PER BARREL FOR UNSCREENED BERRIES, HE MAY APPLY FOR PAYMENT UNDER THE PROGRAM. IF HE RECEIVED ONLY A PART PAYMENT IN CASH AND HAS AN ACCOUNT RECEIVABLE FOR THE BALANCE OF THE SALES PRICE, HE IS NOT ELIGIBLE TO APPLY FOR PAYMENT UNDER THE PROGRAM, UNLESS THE TOTAL OF THE CASH PAYMENT RECEIVED AND THE ACCOUNT RECEIVABLE IS LESS THAN $10.34 PER BARREL FOR SCREENED BERRIES AND $9.74 FOR UNSCREENED BERRIES.'

MORSE BROS. WAS DETERMINED NOT ENTITLED TO PAYMENT UNDER THE PROGRAM BECAUSE IT DID NOT SUFFER A COMPENSABLE LOSS, AS SHOWN BY RECOMPUTATION OF ITS CLAIM AFTER AUDIT, THE DEPARTMENT, VIEWING THE SALES AGREEMENT OF JULY 1, 1959, WITH ARISTAN SETTING FORTH A FIXED PRICE OF $13 PER BARREL AS BRINGING THE CLAIM WITHIN THE PURVIEW OF THE SECTION 517.490 (A). HOWEVER, IN YOUR LETTER OF JULY 5, YOU REFER TO AMENDMENT NO. 3 TO THE PROGRAM, ADOPTED AFTER THE DEPARTMENT'S DETERMINATION OF OVERPAYMENT, AND STATE THAT THIS AMENDMENT "COMPLETELY DISPOSES OF THE SUBJECT MATTER OF THIS CLAIM AND THAT MORSE BROS., INC., IS ENTITLED TO RETAIN THE PAYMENT HERETOFORE MADE BY THE UNITED STATES DEPARTMENT OF AGRICULTURE.' AMENDMENT NO. 3, EFFECTIVE JUNE 30, 1961, PROVIDES, IN PERTINENT PART, THAT:

"THE GROWER OR THE GROWER'S REPRESENTATIVE WHO SOLD CRANBERRIES AT A FIXED PRICE OR OTHERWISE TO A HANDLER OR PROCESSOR, AND SUBSEQUENTLY REPOSSESSED SUCH CRANBERRIES DUE TO CANCELLATION OF THE SALE OR OTHER CAUSE UNDER CIRCUMSTANCES IN WHICH HE COULD NOT REASONABLY HAVE EXPECTED TO RECEIVE PAYMENT FROM THE PURCHASER, SHALL NOT BE CONSIDERED TO HAVE SOLD SUCH BERRIES FOR THE PURPOSES OF THIS SUBPART, AS AMENDED; AND SUCH GROWER OR GROWER'S REPRESENTATIVE SHALL BE ELIGIBLE TO RECEIVE PAYMENT ON SUCH REPOSSESSED BERRIES, PROVIDED THEY WERE THEREAFTER DISPOSED OF IN ACCORDANCE WITH THE PROVISIONS OF THE PROGRAM.

"NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS SUBPART, IF THE GROWER OR GROWER'S REPRESENTATIVE MADE AN ADJUSTMENT IN THE SALES PRICE OF CRANBERRIES SOLD TO A HANDLER OR PROCESSOR, THE ADJUSTED SALES PRICE WILL BE ACCEPTED AS THE BASIS UPON WHICH PAYMENT WILL BE MADE UNDER THE PROGRAM: PROVIDED, THAT IT IS A BONA FIDE ADJUSTMENT, THAT IT WAS MADE UNDER CIRCUMSTANCES WHICH CONSTITUTED AN INVOLUNTARY LOSS, AND THAT THERE WAS NO REASONABLE ALTERNATIVE THERETO. THE BURDEN OF PROOF THAT IT IS A BONA FIDE ADJUSTMENT, MADE UNDER CIRCUMSTANCES WHICH CONSTITUTED AN INVOLUNTARY LOSS, AND THAT THERE WAS NO REASONABLE ALTERNATIVE, SHALL BE ON THE GROWER OR GROWER'S REPRESENTATIVE. ANY GROWER OR GROWER'S REPRESENTATIVE WHO DESIRES TO CLAIM HIS PRICE ADJUSTMENT AS A BASIS FOR PAYMENT UNDER THE PROGRAM SHALL SUBMIT HIS EVIDENCE TO THE DIRECTOR AND SHALL CERTIFY THAT SUCH ADJUSTMENT WAS BONA FIDE AND MADE UNDER CIRCUMSTANCES CONSTITUTING AN INVOLUNTARY LOSS AND THAT THERE WAS NO REASONABLE ALTERNATIVE TO SUCH ADJUSTMENT.' 26 FR 6013.

THE PURPOSE UNDERLYING THESE AMENDMENTS WAS TO RECOGNIZE THOSE SITUATIONS WHERE CRANBERRY GROWERS SUFFERED LOSSES NOTWITHSTANDING THEY MAY HAVE HAD, TECHNICALLY, A LEGAL OBLIGATION OWED THEM FOR CRANBERRIES SOLD. BUT THE BASIC PREREQUISITE INVOLVED IS THAT THEY MUST HAVE SUFFERED A LOSS. THE RECORD SHOWS THAT MORSE BROS., INC., DID NOT SUFFER ANY LOSS ON ITS CRANBERRIES ALL OF WHICH WERE SOLD TO ARISTAN CANNING COMPANY, AND AMENDMENT NO. 3 IS, THEREFORE, NOT APPLICABLE.

AS STATED ABOVE, MORSE BROS. AGREED TO SELL ARISTAN 3,000 BARRELS OF CRANBERRIES AT $13 PER BARREL. FOR THE 1959 SEASON, MORSE BROS. WAS A GROWER OF 1700 BARRELS OF BERRIES. AT THE $13 PER BARREL SALES PRICE, THESE 1700 BARRELS SHOULD HAVE BROUGHT IN TO MORSE BROS. $22,100. DEPARTMENT OF AGRICULTURE REPRESENTATIVES REPORT THAT ARISTAN HAS, IN FACT, PAID MORSE BROS., AS ADVANCES AGAINST THE 3,000 BARREL COMMITMENT, A TOTAL OF $22,500 AND THAT MORSE BROS. HAS NO INTENTION OF REFUNDING ANY PORTION OF THESE ADVANCES. NOR IS THERE ANY INDICATION THAT ARISTAN HAS DEMANDED REFUND. AND IN VIEW OF THE CONTRACT OF SALE INVOLVED AND THE FACT THAT CRANBERRIES WERE ACTUALLY OFFERED FOR DELIVERY THEREUNDER. THERE DOES NOT APPEAR TO BE ANY LEGAL OBLIGATION ON THE PART OF MORSE BROS. TO MAKE REFUND. IT APPEARS THAT THE FIGURES PRESENTED BY MORSE BROS. AS CONSTITUTING ITS MARKETING AND OPERATING COSTS ARE TOO HIGH; BUT EVEN USING THOSE FIGURES WITHOUT QUESTION, WE FIND THAT THE COMPANY'S NET RECEIPTS ARE $19,876 FOR THE 1700 BARRELS OF CRANBERRIES GROWN BY IT ($22,500 LESS $2,624). ON A PER BARREL BASIS THIS CALCULATES TO $11.69; AND SINCE UNDER THE TERMS OF THE PROGRAM PAYMENTS WERE TO BE COMPUTED TO GIVE A MAXIMUM AVERAGE RETURN OF ONLY $10.34 PER BARREL, IT IS CLEAR THAT MORSE BROS. HAS NOT SUFFERED A LOSS COMPENSABLE UNDER THE PROGRAM. SEE SECTION 517.475 OF THE PROGRAM TERMS AND CONDITIONS. (IN CONSIDERING MORSE BROS. ELIGIBILITY UNDER THE PROGRAM WE HAVE EXCLUDED AS IRRELEVANT 236 BARRELS OF CRANBERRIES PURCHASED BY THE FIRM FOR WHICH IT RECEIVED $3,068 IN CASH PAYMENTS.)

ACCORDINGLY, THE DENIAL OF YOUR CLAIM BY THE DEPARTMENT OF AGRICULTURE IS SUSTAINED AND YOU ARE HEREBY ADVISED THAT MORSE BROS., INC., IS INDEBTED TO THE UNITED STATES IN THE AMOUNT OF $3,044.87. REMITTANCE OF THE AMOUNT DUE MAY BE MADE BY CHECK MADE PAYABLE TO THE TREASURER OF THE UNITED STATES AND SHOULD BE MAILED TO THE FOLLOWING ADDRESS:

CLAIMS DIVISION

UNITED STATES GENERAL ACCOUNTING OFFICE ..END :