A-71918, APRIL 1, 1936, 15 COMP. GEN. 871

A-71918, APRIL 1, 1936, 15 COMP. GEN. 871

INTEREST - COMPUTATION - LEAP YEAR THE AMOUNT OF INTEREST PAYABLE ON SEMIANNUAL INTEREST NOTES GIVEN THE UNITED STATES IN CONNECTION WITH LOANS TO PRIVATE STEAMSHIP CORPORATIONS FOR ANY PART OF THE INTEREST PERIOD IN THE EVENT OF PREPAYMENT OF THE PRINCIPAL IN A NOTE YEAR OF 366 DAYS (LEAP YEAR) WOULD BE THAT FRACTION OF THE INTEREST FOR THE SEMIANNUAL PERIOD WHOSE NUMERATOR WOULD CONSIST OF THE ACTUAL NUMBER OF DAYS ACCRUED, AND WHOSE DENOMINATOR WOULD BE THE ACTUAL NUMBER OF DAYS INVOLVED IN THE SEMIANNUAL PERIOD.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF COMMERCE, APRIL 1, 1936:

REFERENCE IS HAD TO YOUR LETTER OF MARCH 3, 1936, AS FOLLOWS:

THE CHEROKEE-SEMINOLE STEAMSHIP CORPORATION AND THE NEW YORK AND MIAMI STEAMSHIP CORPORATION, TWO AFFILIATED BORROWERS FROM THE CONSTRUCTION LOAN FUND (U.S.C., TITLE 46, SECTION 870, ETC.), RECENTLY PREPAID ALL OF THE NOTES REPRESENTING THE BALANCES OF THEIR LOANS, WITH INTEREST TO DATE OF PAYMENT, FEBRUARY 20, 1936. THERE WERE SEVERAL SERIES OF NOTES COVERING THESE BALANCES, BUT THE NOTES IN EACH SERIES WERE SUBSTANTIALLY IN THE FOLLOWING FORM:

"ON OR BEFORE THE 7TH DAY OF NOVEMBER 19--, FOR VALUE RECEIVED, THE NEW YORK AND MIAMI STEAMSHIP CORPORATION AND THE CLYDE STEAMSHIP COMPANY, CORPORATIONS DULY ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF MAINE, RESPECTIVELY, JOINTLY AND SEVERALLY PROMISE TO PAY TO THE UNITED STATES OF AMERICA, OR ORDER, AT THE OFFICE OF THE UNITED STATES SHIPPING BOARD, WASHINGTON, D.C., IN GOLD COIN OR ITS EQUIVALENT IN FUNDS CURRENT IN NEW YORK CITY, THE SUM OF THIRTY-NINE THOUSAND NINE HUNDRED THIRTY- THREE DOLLARS ($39,933) AND TO PAY INTEREST THEREON AT THE RATE OF FIVE AND ONE-QUARTER PERCENTUM (5 1/4 PERCENT) PER ANNUM, PAYABLE SEMIANNUALLY, IN LIKE COIN OR SUCH EQUIVALENT AT SAID OFFICE ON THE --- DAY OF NOVEMBER AND THE --- DAY OF MAY IN EACH YEAR UNTIL THE PRINCIPAL HEREOF IS PAID.

"THIS NOTE IS ONE OF A SERIES OF FIFTEEN NOTES, AGGREGATING FIVE HUNDRED NINETY-NINE THOUSAND DOLLARS ($599,000), PRINCIPAL AMOUNT, OF LIKE FORM AND TENOR SAVE FOR THEIR RESPECTIVE NUMBERS, AMOUNTS, AND DATES OF MATURITY, ALL GIVEN TO SECURE REPAYMENT OF A LOAN MADE THE NEW YORK AND MIAMI STEAMSHIP CORPORATION, AT THE REQUEST OF THE CLYDE STEAMSHIP COMPANY, FOR USE IN AID OF THE CONSTRUCTION OF THE AMERICAN STEEL VESSELS OR STEAMSHIP IROQUOIS AND SHAWNEE.

"THIS NOTE IS SECURED BY A FIRST PREFERRED MORTGAGE ON SAID STEAMSHIPS IROQUOIS AND SHAWNEE DATED JULY --, 1927, AND HAS BEEN NEGOTIATED AND RECEIVED BY THE HOLDER HEREOF SUBJECT TO ALL THE TERMS AND CONDITIONS OF SAID MORTGAGE, AND IS SECURED THEREBY TO THE SAME EXTENT AS IF SAID MORTGAGE WERE SET OUT HEREIN IN FULL. IN CASE OF ANY DEFAULT ON THE PART OF THE NEW YORK AND MIAMI STEAMSHIP CORPORATION IN THE OBSERVANCE OR PERFORMANCE OF ANY PROVISION, AGREEMENT, OR COVENANT CONTAINED IN SAID MORTGAGE, THIS NOTE MAY, AT THE OPTION OF THE HOLDER, BE DECLARED AND BECOME IMMEDIATELY DUE AND PAYABLE. IT MAY BE REDEEMED AT ANY TIME, BY PAYMENT OF THE PRINCIPAL AMOUNT HEREOF WITH INTEREST THEREON COMPUTED TO THE DATE OF PAYMENT.

"IN WITNESS WHEREOF THE UNDERSIGNED HAVE EXECUTED THIS NOTE ON THE - DAY OF JULY 1927.'

PERTINENT INFORMATION WITH REGARD TO THE SEVERAL SERIES OF NOTES INVOLVED IN THIS TRANSACTION IS SHOWN BELOW:

TABLE VESSELS UNDER MORTGAGE DATE OF MATURITY DATE TO INTEREST

SECURING NOTES NOTES DATE OF WHICH INTEREST RATE PER

NEXT NOTE PAID ANNUM

PERCENT S.S. CHEROKEE --------- 6) 5/25 6) 5/36 12) 5/35 4 1/4 S.S. CHEROKEE AND

SEMINOLE ------------ 8/18/25 8/18/36 2/18/36 4 1/4 S.S. CHEROKEE AND

SEMINOLE ------------ 9) 8/25 9) 8/36 9) 8/35 4 1/4 S.S. ALGONQUIN ------ -- 12/10/26 12/10/36 12/10/35 5 1/4 S.S. IROQUOIS --------- 5/12/27 11) 7/36 11) 7/35 5 1/4 S.S. IROQUOIS AND

SHAWNEE ------------- 7/21/27 11) 7/36 11) 7/35 5 1/4

ON FEBRUARY 20, 1936, THESE COMPANIES PAID UNDER PROTEST THE AMOUNTS OF ACCRUED INTEREST BILLED BY THE UNITED STATES SHIPPING BOARD BUREAU ON EACH SERIES OF NOTES COMPUTED IN EACH CASE FOR THE NUMBER OF ELAPSED DAYS FROM DATE OF LAST NOTE PAYMENT, WITH CREDIT FOR SUCH INTEREST AS MAY HAVE BEEN PAID ON SEMIANNUAL DATES, AS IN THE CASE OF THE FIRST AND SECOND SERIES OF NOTES INDICATED ABOVE. IN COMPUTING ACCRUED INTEREST TO FEBRUARY 20, 1936, THE DAILY RATE WAS BASED ON A 365 DAY YEAR.

THE COMPANIES PROTESTED THIS BASIS OF BILLING, POINTING OUT THAT DUE TO LEAP YEAR THE NOTE YEAR IN EACH CASE WOULD HAVE 366 DAYS AND THAT THE ACCRUAL SHOULD, THEREFORE, HAVE BEEN MADE ON THE BASIS OF A DAILY RATE REPRESENTING 1/366TH OF A YEAR'S INTEREST. ON THIS BASIS THE CHEROKEE- SEMINOLE STEAMSHIP CORPORATION AND THE NEW YORK AND MIAMI STEAMSHIP CORPORATION CLAIM TO HAVE BEEN OVERCHARGED $73.72 AND $39.55, RESPECTIVELY, AND REQUEST REFUND OF THESE AMOUNTS.

INTEREST PAYMENTS ON LOANS FROM THE CONSTRUCTION LOAN FUND ARE ORDINARILY DEPOSITED AS ,MISCELLANEOUS RECEIPTS" OF THE UNITED STATES TREASURY AS SOON AS RECEIVED, BUT IN VIEW OF THE PROTEST MADE BY THESE COMPANIES, THESE INTEREST PAYMENTS ARE BEING HELD IN SUSPENSE PENDING YOUR DECISION AS TO WHETHER INTEREST SHOULD BE COMPUTED ON A 365 OR A 366 DAY YEAR IN THESE INSTANCES.

IT IS UNDERSTOOD FROM YOUR SUBMISSION THAT THE INTEREST RATE ON THE INVOLVED NOTES IS THE PER-ANNUM RATE AND THAT THE INTEREST IS PAYABLE SEMIANNUALLY. SUCH BEING THE CASE THE NOTE YEAR HERE INVOLVED CONSISTS OF 366 DAYS. HENCE, THE COMPUTATION OF ACCRUED INTEREST FOR ANY PART OF THE SEMIANNUAL PERIOD WOULD BE THAT FRACTION OF THE INTEREST FOR SAID SEMIANNUAL PERIOD WHOSE NUMERATOR WOULD CONSIST OF THE ACTUAL NUMBER OF DAYS ACCRUED, AND WHOSE DENOMINATOR WOULD BE THE ACTUAL NUMBER OF DAYS INVOLVED IN THE SEMIANNUAL PERIOD.