B-153100, OCT. 27, 1965

B-153100, OCT. 27, 1965

TO SURPLUS TIRE SALES:

THIS REFERS TO YOUR LETTER OF OCTOBER 3, 1965, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE ACTION OF THE DEFENSE SUPPLY AGENCY (DSA) IN WITHHOLDING BID DEPOSITS SUBMITTED BY YOU IN CONNECTION WITH DSA SURPLUS SALES TO SATISFY PRIOR CLAIMS AGAINST YOUR COMPANY.

YOU ADVISE THAT OVER THE PAST FEW YEARS THE DEFENSE SUPPLY AGENCY HAS WITHHELD BID DEPOSITS WHICH YOU HAVE SUBMITTED ON SURPLUS SALES TO SATISFY PRE-EXISTING CLAIMS WHICH THE AGENCY HAD PREVIOUSLY ASSERTED AGAINST YOUR FIRM. YOU QUESTION WHETHER THE AGENCY HAS AUTHORITY TO RETAIN YOUR DEPOSITS FOR CLAIMS WHICH HAVE NOT BEEN JUDICIALLY DETERMINED. PARTICULAR, YOU REFER TO INVITATIONS FOR BIDS NOS. AVI 04-513-S-61-38 AND 27, BOTH ISSUED IN 1960, AT THE SHARPE GENERAL DEPOT, UNITED STATES ARMY, LATHROP, CALIFORNIA, WHERE DEPOSITS OF $619.85 AND $1,800 WERE RETAINED.

IN UNITED STATES V. MUNSEY TRUST CO., 332 U.S. 234, 239, (1947), THE SUPREME COURT STATED THAT THE GOVERNMENT HAS THE SAME RIGHT AS ANY CREDITOR TO APPLY THE UNAPPROPRIATED MONIES OF ITS DEBTOR WHICH IT HOLDS TO EXTINGUISH THE DEBTS DUE TO IT. IN ADDITION TO THIS COMMON LAW RIGHT OF A CREDITOR, THE GOVERNMENT THROUGH THE GENERAL ACCOUNTING OFFICE HAS A STATUTORY RIGHT, UNDER 31 U.S.C. 71, TO SETTLE AND ADJUST CLAIMS FOR AND AGAINST THE GOVERNMENT AND STRIKE A BALANCE. SEE MUNSEY TRUST, SUPRA., PAGE 240. IN BARRY V. UNITED STATES, 229 U.S. 47, 53 (1913) INVOLVING OFFSET OF AN AMOUNT DUE UNDER A CONTRACT AGAINST THE CONTRACTOR'S INDEBTEDNESS UNDER ANOTHER CONTRACT, THE SUPREME COURT STATED THE MATTER AS FOLLOWS:

"* * * THE LIABILITY MIGHT HAVE BEEN ASSERTED BY THE GOVERNMENT IN AN ACTION; BUT IT MIGHT, AS IT DID, CHARGE IT UP AS A SET-OFF AGAINST ITS OWN LIABILITY. IT WOULD BE FOLLY TO REQUIRE THE GOVERNMENT TO PAY UNDER THE ONE CONTRACT WHAT IT MUST EVENTUALLY RECOVER FOR A BREACH OF THE OTHER.'

SEE ALSO 43 COMP. GEN. 772, 775-76.

ON SEPTEMBER 29, 1964, OUR CLAIMS DIVISION SENT YOUR ATTORNEY, MR. BERNARD R. SCHULHOF, A LATTER REGARDING THE WITHHOLDING OF DEPOSITS UNDER INVITATIONS FOR BIDS NOS. AVI-04-513-S-61-27 AND 38 FOR DEBTS OF CENTRAL TIRE AND SALVAGE COMPANY, SURPLUS TIRE SALES AND MR. FRED SCHWARTZ. COPY OF THIS LETTER IS ENCLOSED HEREWITH. YOU WILL NOTE THAT THE BALANCE OF $503.76 REMAINED DUE. THIS BALANCE WAS LATER REDUCED FROM FUNDS REPRESENTING BID DEPOSITS SUBMITTED WITH UNSUCCESSFUL BIDS BY YOUR FIRM UNDER VARIOUS SURPLUS SALES CONDUCTED BY THE DEFENSE SUPPLY AGENCY (DSA). ON JULY 23, 1965, DSA REPORTED TO US THAT IT HAD WITHHELD THE FOLLOWING BID DEPOSITS FROM YOUR FIRM:

CHART

"/1) THE MEMPHIS SURPLUS SALES OFFICE WITHHELD THE

UNSUCCESSFUL BID DEPOSIT SUBMITTED UNDER SALE

NO. 31-S-65-15 ON OR ABOUT 6 OCTOBER 1964 450.00

"/2) THE OGDEN SURPLUS SALES OFFICE WITHHELD AN

UNSUCCESSFUL BID DEPOSIT SUBMITTED UNDER SALE

NO. 41-S-65-13 ON OR ABOUT 6 OCTOBER 1964300.00

"/3) THE TUCSON SURPLUS SALES OFFICE WITHHELD AN

UNSUCCESSFUL BID DEPOSIT SUBMITTED UNDER IFB

49-S-65-10 ON 4 SEPTEMBER 1964 52.49

TOTAL AMOUNT WITHHELD BY DSA $ 802.49"

THIS AMOUNT WAS APPLIED BY THIS OFFICE AGAINST THE $503.76 DEBT NOTED ABOVE. THE REMAINING BALANCE ($298.73) WAS APPLIED BY DSA AGAINST A DEBT OF $435 ARISING FROM AN ERRONEOUS REFUND TO YOUR FIRM BY THE SAN DIEGO SURPLUS SALES OFFICE UNDER CONTRACT NO. DSA 46-S 2443. INCLUDING INTEREST (6 PERCENT PER ANNUM FROM JUNE 6, 1964, THROUGH OCTOBER 5, 1964), THERE REMAINED DUE TO DSA A BALANCE OF $144.79.

THE BID DEPOSITS WERE WITHHELD PURSUANT TO THE "SET-OFF OF REFUNDS" CLAUSE USED IN DSA SALES INVITATIONS, PROVIDING AS FOLLOWS:

"THE BIDDER OR PURCHASER HEREBY AGREES THAT THE DEFENSE SUPPLY AGENCY MAY USE ALL OR ANY PORTION OF ANY REFUND DUE HIM TO SATISFY, IN WHOLE OR IN PART, ANY DEBT ARISING OUT OF PRIOR TRANSACTIONS WITH THE DEFENSE SUPPLY AGENCY.'

THIS CLAUSE IS DESIGNED TO PROTECT THE INTERESTS OF THE GOVERNMENT WHERE BUYERS OF GOVERNMENT SURPLUS MATERIALS HAVE NOT SHOWN ANY INTENTION OF PAYING AMOUNTS OWED TO THE GOVERNMENT, AND YOUR DEPOSITS WERE SUBMITTED IN ACCORDANCE WITH THE TERMS OF THIS CLAUSE.

ON AUGUST 13, 1965, DSA FURTHER REPORTED TO US AN UNCOLLECTIBLE DEBT AGAINST YOUR FIRM OF $1,099.62. THIS AROSE UNDER CONTRACT NO. DSA-44 S- 8884, DATED SEPTEMBER 29, 1964, FOR ITEMS 42 AND 87 OF SALES INVITATION NO. 44-S-65-27, ISSUED AT BAYSHORE STATION, OAKLAND, CALIFORNIA. IT IS REPORTED BY DSA THAT YOU REMOVED THE ITEMS AWARDED (DURING OCTOBER 1964), BUT STOPPED PAYMENT ON YOUR BID DEPOSIT CHECK OF $1,114.25. THE AMOUNT OF THE CONTRACT (ITEMS 42 AND 87) WAS $1,080.06, AND PRIOR TO THE TIME NOTICE WAS RECEIVED THAT YOU HAD STOPPED PAYMENT, THE AMOUNT OF $19.56 HAD BEEN REFUNDED TO YOU. THUS YOU NOW OWE THE CONTRACT PRICE OF $1,080.06 PLUS $19.56, OR $1,099.62. IN ADDITION, THERE REMAINS THE BALANCE OF $144.79, PLUS INTEREST (6 PERCENT PER ANNUM ON $1,099.62 FROM SEPTEMBER 29, 1964, AND ON $144.79 FROM OCTOBER 6, 1964).

ALSO, ON MAY 18, 1965, DSA FORWARDED US A REPORT OF AN ADMINISTRATIVELY UNCOLLECTIBLE DEBT IN THE AMOUNT OF $421.21 UNDER INVITATION FOR BIDS NO. 37-S-65-22 ISSUED BY THE FORTH WORTH SURPLUS SALES OFFICE, CONTRACT NO. DSA 37-S-3998, OF F. L. HARBAUGH, P.O. BOX 3006, COMPTON, CALIFORNIA. IS REPORTED THAT MR. HARBAUGH DID NOT DENY THE DEBT BUT IN EFFECT STATED THAT HE WOULD NOT PAY IT UNTIL CERTAIN MONIES BELONGING TO THE SURPLUS TIRE SALES BEING WITHHELD BY THE U.S. GOVERNMENT WERE RETURNED TO THE COMPANY. SINCE AS SHOWN ABOVE, THERE ARE NO FUNDS DUE SURPLUS TIRE SALES FROM THE GOVERNMENT BUT RATHER THAT THAT FIRM IS INDEBTED TO THE GOVERNMENT, MR. HARBAUGH SHOULD SETTLE HIS INDEBTEDNESS TO THE GOVERNMENT.