B-145068, NOV. 5, 1964

B-145068, NOV. 5, 1964

TO THE HONORABLE SECRETARY OF STATE:

BY LETTER DATED OCTOBER 9, 1964, THE ASSISTANT SECRETARY FOR ADMINISTRATION HAS REQUESTED THAT WE RECONSIDER THE MATTER OF PAYMENT OF THE BALANCE DUE UNDER CONTRACT NO. SCC-25072, DATED JANUARY 2, 1958, WHICH WAS THE SUBJECT OF OUR DECISION OF AUGUST 18, 1961, COPY ENCLOSED. WE ARE ALSO REQUESTED TO FURNISH ADVICE CONCERNING THE DISPOSITION OF THE PROCEEDS OF THE SALE OF CERTAIN PROPERTY USED IN THE PERFORMANCE OF THE CONTRACT.

THE OFFICE OF FOREIGN BUILDINGS ENTERED INTO THE CONTRACT WITH THE UNITED CONSTRUCTION AND INDUSTRIAL COMPANY, LIMITED (UCIC) OF SEOUL, KOREA, FOR THE CONSTRUCTION OF NINE STAFF APARTMENT BUILDINGS ON THE AMERICAN EMBASSY COMPOUND IN SEOUL. IN JUNE 1959, AFTER COMPLETION OF ABOUT 97 PERCENT OF THE CONTRACT WORK, YOUR DEPARTMENT APPROVED AN ASSIGNMENT BY UCIC OF ITS CONTRACT RIGHTS AND RESPONSIBILITIES TO THE AMERICAN ENGINEERING AND EQUIPMENT COMPANY, LIMITED (AEEC). IN OCTOBER 1959, UCIC REVOKED THE ASSIGNMENT ON THE BASIS THAT AEEC HAD NOT COMPLIED WITH THE TERMS OF THE ASSIGNMENT AGREEMENT. THEREAFTER, UCIC "REASSIGNED" THE CONTRACT TO EASTERN ENGINEERS, INCORPORATED, BUT SUCH ASSIGNMENT WAS NOT APPROVED BY YOUR DEPARTMENT. ULTIMATELY THE CONTRACT WORK WAS COMPLETED, AND THE FINAL BALANCE AMOUNTING TO APPROXIMATELY $19,000 WAS CLAIMED BY ALL THREE FIRMS.

IN 1961 UCIC OBTAINED A JUDGMENT IN A SEOUL COURT AGAINST AEEC'S REPRESENTATIVE IN KOREA, BUT THE UNITED STATES WAS NOT A PARTY TO THE SUIT AND COULD NOT BE BOUND BY SUCH JUDGMENT. HOWEVER, THE FACT THAT THE DEPARTMENT OF STATE DEALT WITH UCIC AFTER TERMINATION OF AEEC'S RIGHT TO PROCEED WITH THE CONTRACT WORK LENT SUPPORT TO THE CLAIM OF UCIC. THEREFORE, THE MATTER WAS SUBMITTED TO OUR OFFICE FOR DECISION CONCERNING PAYMENT OF THE CLAIMS BY LETTER DATED JUNE 22, 1961, FROM THE ASSISTANT SECRETARY.

IN OUR DECISION OF AUGUST 18, 1961, TO YOU, WE STATED THAT IN VIEW OF THE SERIOUS FACTUAL DISPUTES AND THE UNCERTAINTY AS TO THE APPLICABLE LAW, WE HAD NO ALTERNATIVE BUT TO APPLY THE LONG-ESTABLISHED RULE THAT WHEN THE FACTS INVOLVED RAISE A QUESTION REGARDING THE PROPRIETY OR VALIDITY OF A CLAIM, IT IS THE UNDOUBTED RIGHT AND DUTY OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT TO REJECT THE CLAIM IN WHOLE OR IN PART AND TO LEAVE THE CLAIMANTS TO PRESENT THEIR CASES IN A COURT OF LAW.

IN THE PRESENT SUBMISSION OF THE MATTER, THE ASSISTANT SECRETARY REPORTS THAT DUE TO OPERATIONAL REQUIREMENTS, DISPOSITION OF MATERIALS LEFT AT THE CONTRACT SITE BECAME NECESSARY. THEREFORE, THE MATERIAL WAS SOLD AT PUBLIC AUCTION AFTER NOTICE TO ALL INTERESTED PARTIES, AND THE PROCEEDS OF THE SALE IN THE AMOUNT OF $10,010.35 ARE NOW HELD BY THE DEPARTMENT IN A SPECIAL DEPOSIT ACCOUNT.

THERE HAVE ALSO BEEN FORWARDED FOR OUR CONSIDERATION COPIES OF TWO JUDGMENTS REPORTEDLY RENDERED IN KOREAN COURTS RELATING TO THE AMOUNTS DUE UNDER THE CONTRACT. ONE JUDGMENT RENDERED IN 1964 IN A SUIT BY EASTERN ENGINEERS AGAINST UCIC DETERMINES THE AMOUNTS EACH PARTY IS ENTITLED TO RECEIVE UNDER THE CONTRACT. THE OTHER JUDGMENT RENDERED IN 1960 IN A SUIT BY UCIC AGAINST AEEC AND ITS KOREAN REPRESENTATIVE JOINTLY IS, LIKE THE 1961 JUDGMENT CONSIDERED IN OUR EARLIER DECISION, A DEFAULT JUDGMENT IN FAVOR OF UCIC. IN NEITHER CASE WAS THE UNITED STATES MADE A PARTY TO THE COURT PROCEEDINGS.

IN A LETTER DATED AUGUST 25, 1964, THE PRESIDENT OF EASTERN ENGINEERS, WHO HAS ALSO BEEN AFFILIATED WITH BOTH UCIC AND AEEC, REQUESTS PAYMENT WITH INTEREST OF THE AMOUNTS RETAINED BY THE UNITED STATES UNDER THE CONTRACT.

IN VIEW OF THE DOUBT WHETHER THE KOREAN COURT JUDGMENTS WOULD AFFORD THE UNITED STATES A VALID ACQUITTANCE, OUR DECISION IS REQUESTED CONCERNING THE LEGALITY OF PAYMENT OF THE CLAIM THEREUNDER. ALSO, OUR ADVICE IS SOLICITED CONCERNING ANY ALTERNATIVE DISTRIBUTION OF THE FUNDS AMONG THE INTERESTED PARTIES IN ORDER TO PROTECT THE INTERESTS OF THE UNITED STATES AND THE CLAIMANTS.

THE 1964 JUDGMENT IN EASTERN ENGINEERS' SUIT AGAINST UCIC IS DETERMINATIVE ONLY OF THE RIGHTS OF THE PARTIES IN RELATION TO EACH OTHER. SINCE NEITHER THE UNITED STATES NOR AEEC WAS PARTY TO THE SUIT, THE JUDGMENT IS NOT BINDING ON EITHER THE UNITED STATES OR AEEC. ACCORDINGLY, PAYMENT OF THE BALANCE DUE UNDER THE CONTRACT ON THE BASIS OF SUCH JUDGMENT WOULD NOT AFFORD THE UNITED STATES ANY PROTECTION AGAINST A CLAIM BY AEEC.

AS TO THE DEFAULT JUDGMENT OBTAINED BY UCIC IN 1960 AGAINST AEEC AND ITS KOREAN REPRESENTATIVE, THE UNITED STATES NOT HAVING BEEN MADE PARTY TO THE SUIT IS NOT BOUND THEREBY.

IN VIEW OF THE FOREGOING, WE MUST CONCLUDE THAT NEITHER JUDGMENT AFFORDS A BASIS FOR PAYMENT OF THE CONTRACT BALANCE. THEREFORE, PENDING ADJUDICATION BY A COURT OF COMPETENT JURISDICTION OF THE RIGHTS OF ALL OF THE PARTIES TO THE FINAL PAYMENT UNDER THE CONTRACT, OR WRITTEN AGREEMENT OR CONSENTS OF ALL PARTIES, WE HAVE NO ALTERNATIVE BUT TO ADHERE TO OUR PRIOR DECISION DIRECTING THE WITHHOLDING OF SUCH BALANCE. SINCE THERE IS DOUBT AS TO WHO IS ENTITLED TO THE PROCEEDS REALIZED FROM THE SALE OF THE UNUSED CONTRACT MATERIAL, DISPOSITION THEREOF SHOULD ALSO AWAIT SUCH ADJUDICATION OR AGREEMENT.

WHILE OUR CONCLUSION RENDERS UNNECESSARY ANY DECISION REGARDING THE PAYMENT OF INTEREST ON THE CONTRACT BALANCE, THE RULE IS WELL ESTABLISHED THAT INTEREST ON CLAIMS AGAINST THE UNITED STATES MAY BE PAID ONLY UNDER A CONTRACT OR ACT OF CONGRESS EXPRESSLY PROVIDING THEREFOR, NEITHER OF WHICH CONDITONS EXISTS IN THIS CASE. 22 COMP. GEN. 772.. ..END :