Appeal of
ROBERT F. SMITH, II
VIOLET E. SMITH
Under Contract No. HCR 97734
PSBCA No. 3692

APPEARANCE FOR APPELLANT:
Bruce A. Bishop

APPEARANCE FOR RESPONDENT:
Robyn M.A. Sembenini, Esq.

OPINION OF THE BOARD

            Appellants, Robert F. and Violet E. Smith,^[1] have appealed from the denial of their claim for costs, primarily in the form of bank service charges, allegedly caused by the failure of Respondent, United States Postal Service, to make timely payment under Appellants' mail transportation contract.  This appeal is being decided on the record in accordance with §955.12 of the Board's Rules of Procedure, 39 C.F.R. §955.12.

FINDINGS OF FACT

            1.  In 1991, Appellants were awarded a contract for the transportation of mail between Bend and Warm Springs, Oregon.  The contract term was from July 1, 1991, through June 30, 1995, at an initial annual rate of $26,241.99.  (Appeal File Tab (AF) 1).

            2.  The contract contained the "Basic Surface Transportation Services Contract General Provisions," PS Form 7407T (March 1989).  Clause 10 of the general provisions, entitled "Payment," provided that Appellant was to be paid at the close of each four-week Postal Service accounting period.  The method of payment was not specified.  The general provisions also contained the usual Claims and Disputes clause, providing that all disputes "arising under or related to" the contract were to be resolved under that clause.  (Id.).

            3.  In August 1993, Appellants filed a Postal Service form to have payments under their contract deposited directly into their checking account with a bank identified as Washington Mutual, effective October 1993.  Respondent's Accounting Technician, who processed Appellants' request, had some initial difficulty getting correct information into the system to authorize the payments.   However, Appellants' payments were received by the bank and credited to their account without incident from October 1993 through March 1994. (AF 5,7; Declaration of Mary Tayan, dated March 23, 1995; Letters, dated December 19, 1994, and April 17, 1995, from Jenifer L. Escher, Direct Deposit Coordinator for Washington Mutual).

            4.  On or about April 1, 1994, a change was noted at Respondent's Minneapolis Postal Data Center (PDC) in the "EFT" data related to Appellants' account.  What appear to be both computer generated data and handwritten notes indicate that a change of some sort was made in the data.  The exact nature of the change is unclear.  (AF 10).

            5.  The payment due on April 28, 1994, was not received by the bank.  Respondent issued a check to cover the April 28 payment on or about that date and mailed it to Appellants.  Direct deposits resumed in May 1994, and continued without problem. (Escher letters (finding 6); AF 7)

            6.  In late April and early May Appellants wrote checks against their account, unaware that the April 28 deposit had not been made on that date.  A number of those checks were returned for insufficient funds and Appellants incurred overdraft charges.  (AF 8)

            7.  On or about June 10, 1994, Appellants, through their representative, filed a claim that included the overdraft charges, mileage for trips to the bank by Appellants and their representative, and payment for their representative's time.  (AF 9).

            8.  In a final decision dated July 8, 1994, the Contracting Officer denied Appellants' claim on the basis that the bank routing number on Appellants' direct deposit form had been in error and had been the cause of the failure to transmit the April payment.  Appellants filed a timely appeal.  (AF 12, 13).

DECISION

            Appellants argue that they were entitled to be paid on a timely basis; that their April 1994 payment was not made by Respondent directly to the bank as had been done before that month; and that they incurred overdraft fees because of Respondent's failure to make the timely payment, when they wrote checks against the payment that they assumed had been deposited.  Respondent argues that Appellants have not shown that Respondent caused the failure of the electronic transfer of the April 1994 payment, and that, even if Respondent was the cause, Appellants' claim is for costs that are in the nature of consequential damages that are too remote or indirect to have been contemplated by the parties at the time they contracted.  Respondent also argues that Appellants should bear responsibility for the overdraft charges because they did not check with the bank to ensure that the April payment had been deposited before they wrote checks against those funds.

            Having considered the record, we conclude that even if Appellants could show that Respondent was the cause of the failure to make the April 28 payment via direct deposit and that such failure was a material breach of the contract, they may not recover.  Therefore, we deny the appeal, but not for the reasons urged by Respondent.

In Ramsey et al. v. United States, 121 Ct.Cl. 426, 431, 101 F.Supp. 353, 356 (1951), cert. denied   343 U.S. 977, 72  S.Ct. 1072, 96 L.Ed. 1369 (1952), the Court of Claims held:

"The law is well-settled that, as a general rule, special  damages, beyond the amount recognized as legal interest, cannot be recovered  for a breach of contract to pay money which results only in a delay in payment.  Loudon v. Taxing District, 104 U.S. 771, 26 L.Ed. 923; Kendall v. Stokes, 3 How. 87, 44 U.S. 87, 11 L.Ed. 506, 833.  . . . Therefore, the only measure of  damages which plaintiffs could recover for the delay would be legal interest on the principal amount withheld.

However, the common law rule that delay or default in payment of money  gives rise to a right to recover interest has been held not to be applicable to  the sovereign government on grounds of public convenience, unless the  sovereign's consent to pay interest has been exhibited by an act of the  Congress, or by a lawful contract of its executive officers. [Citations omitted]"

See also, Esprit Corp., Inc. v. United States, 6 Cl.Ct. 546 (1984); Security Associates International, Inc., DOTCAB No. 1340, 84-2 BCA ¶ 17,444; Gould Defense Systems, Inc., ASBCA No. 24881, 83-2 BCA ¶ 16,676; Arapahoe Merchant Police & Guard Service, Inc., GSBCA No. 4788, 77-2 BCA ¶ 12,571.

            In this appeal, Appellants seek only costs they incurred as a result of the late payment of the amount due them under the contract.  The situation here falls squarely under the holding in Ramsey and, therefore, Appellants would be limited in any event to the payment of interest on the amount due, with the further condition that the payment of such interest must be specifically provided by contract or by statute.  Appellants have not cited any contract provision or statute that would entitle them to recover interest for the late payment, and we know of none.  Accordingly, Appellants may not recover their costs.

            The appeal is denied.

David I. Brochstein
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
James A. Finn, Jr.
Administrative Judge
Vice Chairman

^[1]  The caption in this appeal has been changed to reflect the fact that the contract was awarded to both Robert and Violet Smith.