B-137201, SEP. 12, 1960

B-137201, SEP. 12, 1960

TO THE ATTORNEY GENERAL:

BY LETTER DATED MAY 24, 1960, THE DEPARTMENT OF THE ARMY REPORTED TO OUR CLAIMS DIVISION AS UNCOLLECTIBLE THE MATTER OF THE INDEBTEDNESS TO THE UNITED STATES OF SPERRY WAREHOUSES, INC., 1 MONROE STREET, TROY, NEW YORK, IN THE AMOUNT OF $2,877.80, REPRESENTING THE NET COST INCURRED BY THE UNITED STATES INCIDENT TO THE RESALE OF SURPLUS PROPERTY SOLD TO THE DEBTOR UNDER CONTRACT NO. 30-115-58-156 (S), DATED APRIL 25, 1958.

UNDER DATE OF JULY 18, 1960, THE OFFICE OF THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, TRANSMITTED TO OUR CLAIMS DIVISION FOR SET-OFF AGAINST THE REPORTED INDEBTEDNESS CHECK NO. 125,205, DATED JULY 13, 1960, IN THE AMOUNT OF $1,983.48, PAYABLE TO SPERRY WAREHOUSES, INC., OR THE TREASURER OF THE UNITED STATES. THE INDICATED AMOUNT OF $1,983.48 IS AVAILABLE FOR APPLICATION IN REDUCTION OF THE REPORTED INDEBTEDNESS, BUT, IN VIEW OF THE FACTS IN THIS CASE, AS REPORTED BY THE DEPARTMENT OF THE ARMY, WE HAVE CONCLUDED NOT TO MAKE ANY SET-OFF AT THIS TIME BUT RATHER TO REFER THE TOTAL CLAIM TO YOUR DEPARTMENT FOR CONSIDERATION.

THE RECORD SHOWS THAT IN RESPONSE TO A DEMAND FOR PAYMENT OF THE AMOUNT OF $2,877.80, THERE WAS RECEIVED FROM THE DEBTOR A LETTER DATED JULY 11, 1960, REQUESTING THAT FUTURE CORRESPONDENCE RELATING TO THE MATTER OF THE GOVERNMENT'S CLAIM BE ADDRESSED TO I. H. WACHTEL,ESQUIRE, 1000 CONNECTICUT AVENUE, THIS CITY. THEREAFTER, MR. WACHTEL CONTACTED THE OFFICE OF OUR GENERAL COUNSEL, REQUESTING THAT THE MATTER BE REVIEWED ON THE BASIS THAT THE ALLEGED INDEBTEDNESS RESULTED FROM A MUTUAL MISUNDERSTANDING, BOTH ON THE PART OF THE GOVERNMENT AND ON THE PART OF THE DEBTOR, AS TO THE WEIGHT OF THE PROPERTY COVERED BY THE INDICATED CONTRACT. IN VIEW OF OUR PREVIOUS ACTION IN THIS CASE WE CONCLUDED THAT A FURTHER REVIEW ON THE BASIS OF A MUTUAL MISTAKE WOULD SERVE NO USEFUL PURPOSE. BY LETTER OF TODAY WE ARE ADVISING MR. WACHTEL OF THE REFERENCE OF THE CLAIM TO YOUR DEPARTMENT; ALSO, THAT WE ARE HOLDING A CHECK IN THE AMOUNT OF $1,983.48.

BY LETTER DATED AUGUST 22, 1958, THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS) REQUESTED OUR DECISION CONCERNING AN ERROR WHICH THE DEBTOR ALLEGED IT MADE IN ITS BID UPON WHICH THE CONTRACT OF APRIL 25, 1958, WAS BASED. BY DECISION DATED OCTOBER 24, 1958, B-137201, WE ADVISED THE SECRETARY OF THE ARMY THAT IN VIEW OF THE RECORD IN THIS CASE THERE APPEARED TO BE NO LEGAL BASIS FOR AUTHORIZING ANY ADJUSTMENT IN THE PRICES FIXED IN THE CONTRACT OR FOR RESCISSION OF THE CONTRACT. THAT ACTION WAS SUSTAINED IN LETTERS DATED MAY 4, JULY 14, AND AUGUST 4, 1959, TO HONORABLE DEAN P. TAYLOR, HOUSE OF REPRESENTATIVES. TWO COPIES OF THE DECISION OF OCTOBER 24, 1958, ARE ENCLOSED FOR YOUR INFORMATION.

BY CERTIFICATE OF INDEBTEDNESS DATED AUGUST 17, 1960 (TWO COPIES ENCLOSED), OUR CLAIMS DIVISION CERTIFIED SPERRY WAREHOUSES, INC., TO BE INDEBTED TO THE UNITED STATES IN THE AMOUNT OF $2,877.80, COVERING THE CONTRACTOR'S INDEBTEDNESS AS REPORTED BY THE DEPARTMENT OF THE ARMY. ALSO ENCLOSED ARE TWO COPIES OF CERTAIN SUPPORTING DOCUMENTS, INCLUDING A DRAFT OF LETTER OF DEMAND FOR THE USE OF THE UNITED STATES ATTORNEY.

WHILE OUR DECISIONS WERE TO THE EFFECT THAT THE DEBTOR IS LEGALLY LIABLE TO THE UNITED STATES FOR THE AMOUNT OF $2,877.80, THERE ARE CERTAIN FACTS OF RECORD TO WHICH WE DESIRE TO INVITE YOUR ATTENTION AND WHICH WE FEEL MERIT CONSIDERATION. A DESCRIPTION OF THE PROPERTY OFFERED FOR SALE IS CONTAINED IN THE DECISION OF OCTOBER 24, 1958. IT WILL BE NOTED THAT THE PROPERTY IN QUESTION CONSISTED OF SIX LOTS OF FIVE FLATCARS EACH, EACH LOT COMPRISING A SEPARATE ITEM OF THE INVITATION FOR BIDS. UNDER THE DESCRIPTION COLUMN FOR THE ITEMS IT WILL BE SEEN THAT TWO WEIGHTS WERE STATED--- 100,000 POUNDS AND 20,000 POUNDS. THE DEBTOR SEEMS TO HAVE UNDERSTOOD THIS DESCRIPTION TO MEAN THAT EACH FLATCAR WEIGHED 20,000 POUNDS, AND THAT THE WEIGHT OF EACH ITEM, OR LOT OF FIVE CARS, WAS 100,000 POUNDS. IN FACT, THE MENTIONED 100,000 POUNDS REFERRED TO THE CAPACITY OF ONE CAR--- ALTHOUGH THE WORD "CAPACITY" WAS OMITTED--- AND THE 20,000 POUNDS ACTUALLY REFERRED TO THE WEIGHT OF FIVE CARS RATHER THAN ONE.

THE OFFICE OF THE CHIEF OF ORDNANCE EXPRESSED THE OPINION THAT THE DESCRIPTION OF THE ITEMS WAS AMBIGUOUS AND MISLEADING, PARTICULARLY IN VIEW OF THE FACT THAT THERE WERE FIVE CARS IN EACH LOT AND THE LARGER WEIGHT GIVEN IN THE DESCRIPTION WAS EXACTLY FIVE TIMES THE OTHER WEIGHT GIVEN. ONLY THREE BIDS WERE RECEIVED FOR THE CARS, THE LOWEST BID AVERAGING $13.68 EACH FOR 20 CARS, THE NEXT BID AVERAGING $35 EACH FOR 30 CARS, AND THE DEBTOR'S BID OF $159 EACH FOR 30 CARS. ACCORDING TO THE CONTRACTING OFFICER THE SCRAP VALUE OF THE CARS WAS ABOUT $43 EACH. THE RESALE THE CARS BROUGHT A PRICE OF $31.10 EACH, WHICH, TOGETHER WITH THE APPLICATION OF THE DEBTOR'S BID DEPOSIT, RESULTED IN A GROSS RETURN TO THE GOVERNMENT OF ABOUT $63.07 PER CAR. THE GOVERNMENT DID, HOWEVER, INCUR EXPENSES IN AN UNDETERMINED AMOUNT INCIDENT TO THE DELAY IN DISPOSING OF THE PROPERTY AND ITS RESALE.

THE CONTRACTING OFFICER STATED IN EFFECT THAT HE REALIZED THE DEBTOR'S BID WAS CONSIDERABLY HIGHER THAN THE SCRAP VALUE OF THE PROPERTY, BUT HE CONTENDED, HOWEVER, THAT HE HAD NO WAY OF KNOWING THAT THE BID WAS NOT BASED ON SOME USE FOR THE CARS OTHER THAN SCRAP. IT HAS NOT BEEN DISPUTED THAT THE CARS IN QUESTION WERE BUILT FOR A SPECIAL PURPOSE AND WERE NOT SUITABLE FOR USE AS ORDINARY FLATCARS, A FACT WHICH MINIMIZES THE POSSIBILITY THAT BIDS WERE MADE ON OTHER THAN A SCRAP VALUE BASIS. UNDER THE FACTS REPORTED, IT SEEMS TO US THAT THERE IS CONSIDERABLE DOUBT A COURT WOULD HOLD IN FAVOR OF THE VALIDITY OF THE GOVERNMENT'S CLAIM. ACCORDINGLY, IT IS OUR VIEW THAT IF A REASONABLE OFFER IN COMPROMISE IS MADE BY THE DEBTOR, IT SHOULD RECEIVE FAVORABLE CONSIDERATION BY YOUR DEPARTMENT. THE MATTER OF THIS INDEBTEDNESS IS SUBMITTED TO YOUR DEPARTMENT FOR APPROPRIATE ACTION.