B-138838, SEP. 30, 1959

B-138838, SEP. 30, 1959

TO CITIZENS BANK:

REFERENCE IS MADE TO YOUR LETTER DATED MAY 22, 1959, WHICH, IN EFFECT, REQUEST REVIEW OF THAT PART OF OUR SETTLEMENT DATED APRIL 28, 1959, WHEREIN THERE WAS SET OFF $1,175 OF THE TOTAL AMOUNT ALLOWABLE IN LIQUIDATION OF A DEBT OWING TO THE UNITED STATES AND TO THE DEDUCTION OF $256.29 FROM THE CLAIMED AMOUNT WHICH REPRESENTED A ONE PERCENT TIME DISCOUNT.

THE SETTLEMENT COVERED CERTAIN AMOUNTS DUE UNDER PURCHASE ORDERS NOS. 8-1 -4735 AND 8-1-4738 WHICH WERE ISSUED ON OCTOBER 21, 1957, BY THE POST OFFICE DEPARTMENT TO THE KNOX-WARRENTON COMPANY, WARRENTON, GEORGIA, FOR FURNISHING TO THAT DEPARTMENT A QUANTITY OF MAIL STORAGE BOXES AND LARGE COLLECTION BOXES AT THE PRICES SET FORTH IN THE ORDERS. IN STATING THE SETTLEMENT THE AMOUNT OF $23,395.60 WAS CERTIFIED AS BEING DUE YOU AS THE ASSIGNEE OF THE KNOX-WARRENTON COMPANY UNDER THE PURCHASE ORDERS. HOWEVER, THERE WAS FORWARDED TO YOU A CHECK FOR $16,594.08 ONLY SINCE CERTAIN AMOUNTS OF THE TOTAL AMOUNT FOUND TO BE DUE WERE USED TO EFFECT COLLECTION OF INDEBTEDNESS-- ENUMERATED IN THE SETTLEMENT--- OWED BY THE KNOX-WARRENTON COMPANY TO THE UNITED STATES. INCLUDED IN THESE AMOUNTS WAS THE $1,175 WHICH WAS SET OFF IN LIQUIDATION OF A DEBT FOR REPAIR COSTS INCURRED BY THE POST OFFICE DEPARTMENT ON 250 OF THE BOXES BASED ON AN AVERAGE COST OF $4.70 A BOX WHICH WAS NECESSITATED BY POOR WORKMANSHIP. ALSO, INCLUDED WAS THE DISCOUNT DEDUCTIONS OF $256.29 WHICH WAS BASED ON THE GROSS AMOUNT OF $25,629.75, WHICH AMOUNT REPRESENTS THE BALANCE DUE INCLUDING AMOUNTS PREVIOUSLY WITHHELD UNDER PURCHASE ORDERS NOS. 8-1 4735 AND 8-1-4738. THE DISPOSITION OF THESE TWO AMOUNTS OF $1,175 AND $256.29 IS THE BASIS OF YOUR REQUEST FOR REVIEW.

IN YOUR LETTER OF MAY 22, 1959, YOU TAKE THE POSITION THAT THE BOXES WERE EXAMINED BY A POST OFFICE INSPECTOR AT THE PLANT OF THE KNOX WARRENTON COMPANY AND ACCEPTED AS BEING IN GOOD CONDITION AND ANY LATER DAMAGE OCCURRED IN TRANSIT FOR WHICH THE COMPANY WAS NOT RESPONSIBLE. ALSO, YOU CONTEND THAT SINCE THE GOVERNMENT WAS ENTITLED TO THE DISCOUNT ONLY IF THE INVOICES WERE PAID WITHIN 10 DAYS OF THE DATE OF SHIPMENT IT HAD NO RIGHT TO TAKE THE DISCOUNT ON A SHIPMENT MADE ON DECEMBER 24, 1958, AND NOT PAID UNTIL APRIL 30, 1959.

REGRADING THE SET-OFF OF $1,175 THERE ARE FIVE DIFFERENT INSPECTION REPORTS IN THE RECORD BEFORE US SETTING FORTH FROM THREE TO SIX DIFFERENT TYPES OF WORKMANSHIP DEFECTS IN THE BOXES. THESE DEFECTS INVOLVED AMONG OTHERS, FAULTY RIVETS OR RIVETING, POOR FITTING DOORS AND NAIL DROPS, THUS EXPOSING BOXES TO LEAKAGE, INFERIOR PAINTING, LETTERING, ETC. HENCE, THERE CAN BE NO DOUBT THAT POOR WORKMANSHIP RATHER THAN DAMAGE IN TRANSIT WAS THE CAUSE OF THE CONDITION OF THE BOXES. MOREOVER, WHILE IT MAY BE TRUE THAT THE POSTMASTER AT WARRENTON, GEORGIA, SIGNED FOR THE BOXES FOR DELIVERY INTO THE HANDS OF THE POST OFFICE DEPARTMENT FOR SHIPMENTS ON GOVERNMENT BILLS OF LADING, IT WAS NOT THE DUTY OF THE POSTMASTER TO EXAMINE EACH AND EVERY BOX FOR CONFORMANCE TO THE REQUIREMENTS OF THE SPECIFICATIONS BUT MERELY TO MAKE SPOT CHECKS FROM TIME TO TIME TO ASCERTAIN THAT THE KNOX-WARRENTON COMPANY'S QUALITY CONTROL WAS ADEQUATE. AS TO THE AMOUNT ACTUALLY SET OFF IN THIS REGARD THE $1,175 RESULTED WHEN THERE WAS USED AN AVERAGE COST OF $4.70 A BOX FOR REPAIRING 250 BOXES AT ONE LOCATION. SUBSEQUENT AND MORE DETAILED INFORMATION RECENTLY RECEIVED FROM THE POST OFFICE DEPARTMENT, HOWEVER, SHOWS THAT THE ACTUAL COST, RATHER THAN AN AVERAGE COST, OF REPAIRING ONLY 221 DEFECTIVE BOXES RESULTS IN THE LESSER AMOUNT FOR SUCH REPAIRS OF $587.52. IN VIEW OF THIS, THERE APPEARS TO BE FOR ALLOWANCE THE DIFFERENCE BETWEEN THE AMOUNT OF $1,175 ORIGINALLY SET OFF AND $587.52, THE ACTUAL COST OF THE REPAIR WORK, OR $587.48.

WITH RESPECT TO THE DISCOUNT DEDUCTION OF $256.29, SINCE THE RECORD SHOWS THAT THE KNOX-WARRENTON COMPANY WAS IN RECEIVERSHIP PRIOR TO THE TIME THAT SETTLEMENT COULD BE MADE BY THE POST OFFICE DEPARTMENT UNDER THE SUBJECT PURCHASE ORDERS, THEREBY NECESSITATING SUBMISSION OF THE FINAL INVOICE TO OUR OFFICE FOR SETTLEMENT, AND SINCE THERE ALSO WAS INVOLVED IN THE FINAL SETTLEMENT AMOUNTS WHICH HAD BEEN WITHHELD BY REASON OF THE DELIVERY OF THE DEFECTIVE EQUIPMENT; ALSO, SINCE THE GOVERNMENT IN NO WAY CONTRIBUTED TO ANY OF THESE CONDITIONS, WHICH NECESSARILY DELAYED PAYMENT, IT ONLY REASONABLY MAY BE CONCLUDED THAT THE DISCOUNT PROPERLY WAS TAKEN. ACCORDINGLY, OUR SETTLEMENT OF APRIL 28, 1959, MUST BE SUSTAINED IN THIS REGARD.

BY LETTER DATED JULY 9, 1959, THE SEATTLE REGIONAL OFFICE, GENERAL SERVICES ADMINISTRATION, FORWARDED TO OUR OFFICE A MATTER WHICH MUST BE HERE CONSIDERED IN CONNECTION WITH THE REVIEW OF THE SUBJECT SETTLEMENT, I.E., A DEBT OF THE KNOX-WARRENTON COMPANY IN THE AMOUNT OF $586.96 WHICH AROSE UNDER GENERAL SERVICES ADMINISTRATION PURCHASE ORDER NO. SE 1-1514, DATED MAY 24, 1957. IT APPEARS THAT UNDER THE PURCHASE ORDER THE KNOX- WARRENTON COMPANY SHIPPED TO SEATTLE, WASHINGTON, TWO ITEMS OF WEARING APPAREL RACKS COVERING A TOTAL OF 70 UNITS AT $20.97 EACH, OR FOR A TOTAL PRICE OF $1,467.90. UPON INSPECTION AT DESTINATION IT WAS FOUND ONE LOT OF 21 RACKS WAS OF INFERIOR QUALITY AND WORKMANSHIP AND, THEREFORE, NOT SUITABLE FOR ISSUING TO GOVERNMENT AGENCIES. IN VIEW OF THIS, THE KNOX- WARRENTON COMPANY WAS ADVISED THAT THE LOT WAS REJECTED AND REQUESTED TO MAKE REPLACEMENT. SUBSEQUENT ARRANGEMENTS WITH THE COMPANY RESULTED IN THE GENERAL SERVICES ADMINISTRATION SELLING THE REJECTED RACKS TO THE UNIVERSITY OF WASHINGTON AS A CONVENIENCE TO THE COMPANY. PAYMENT HAVING BEEN MADE ON SEPTEMBER 5, 1957, FOR THE 21 RACKS AT THE PURCHASE ORDER PRICE OF $20.97 EACH, LESS ONE PERCENT DISCOUNT, PLUS A SUBSEQUENT PAYMENT OF THE FREIGHT CHARGE OF $150.89 RESULTS IN THE CLAIM OF THE GENERAL SERVICES ADMINISTRATION IN THE TOTAL AMOUNT OF $586.86.

AN EXAMINATION OF PURCHASE ORDER NO. SE1-1514 CLEARLY SHOWS, ON THE FACE THEREOF, THE NOTATION ,INSPECTION AT DESTINATION.' SUCH AN INSPECTION WAS MADE WHICH SHOWED THE RACKS TO BE DEFECTIVE IN WORKMANSHIP AND THE MATTER WAS BROUGHT TO THE ATTENTION OF THE KNOX WARRENTON COMPANY BY LETTER FROM THE GENERAL SERVICES ADMINISTRATION. THIS BEING THE CASE, AND SINCE THE DEBT OF $586.86 AROSE PRIOR TO THE DATE OF THE ASSIGNMENTS BY THE KNOX- WARRENTON COMPANY TO YOU OF PURCHASE ORDERS NOS. 8-1-4735 AND 8-1-4738, IT APPEARS THAT THE DEBT NOT ONLY HAS BEEN LEGALLY ESTABLISHED BUT IS FOR COLLECTION FROM ANY OTHER AMOUNTS WHICH PROPERLY MAY BE FOUND DUE YOU.

IN VIEW OF THE FOREGOING, $586.86 OF THE $587.48 HEREIN ALLOWED US AN ADJUSTMENT OF THE COSTS FOR REPAIRING THE 221 DEFECTIVE BOXES, IS BEING SET OFF IN FULL LIQUIDATION OF THE DEBT UNDER PURCHASE ORDER NO. SE1-1514 LEAVING A BALANCE DUE AND PAYABLE TO YOU OF $0.62 UNDER ALL TRANSACTIONS HERE CONSIDERED.

THE CLAIMS DIVISION OF OUR OFFICE IS TODAY BEING INSTRUCTED TO MAKE SETTLEMENT ACCORDINGLY.